Five days after the U.S. Department of Justice abruptly withdrew from a settlement agreement with the National Association of Realtors, the federal agency sent the trade organization a civil investigative demand seeking new information on rules regarding buyer broker commissions and pocket listings, according to an analysis of a petition filed in Washington D.C.’s district court.
That petition, filed Monday, is attempting to quash the DOJ’s demand or at least modify it to make it less onerous.
When the DOJ pulled out of the settlement on July 1, the agency said the move was necessary in order to broaden its investigation into the trade group’s rules, but did not specify which rules it would probe. The DOJ hinted in mid-July that it had re-opened an investigation into the Clear Cooperation Policy, which requires listing brokers to submit a listing to their MLS within one business day of marketing a property to the public.
Now, NAR is attempting to force the DOJ to comply with the settlement, which the trade group contends included an agreement to close investigations into its Clear Cooperation Policy and its Participation Rule, which requires listing brokers to offer commissions to buyer brokers in order to participate in Realtor-affiliated multiple listing services. Both rules have been the subject of multiple, ongoing antitrust lawsuits. The Participation Rule is called the Buyer Broker Commission Rule in some of those suits.
In an emailed statement, a NAR spokesperson told Inman that offers of compensation under the Participation Rule can be as little as $1.
“This broker cooperation keeps local marketplaces from fracturing, which would be paralyzing to small businesses,” the spokesperson said. “It incentivizes buyer and seller brokers to share their information in their local, independent broker data hub, enabling even the smallest brokers to compete with the largest brokers. Lack of complete, transparent and accessible data for all would mean smaller brokerages have to piecemeal information and couldn’t offer as many options to sellers and buyers.
“This payment approach also gives first-time and low/middle-income homebuyers a better shot at affording a home and professional representation. For many, saving for a down payment is difficult enough. If buyers had to pay commissions directly on top of their closing costs, it would increase their out-of-pocket expenses in a way that would freeze out many from an already competitive market.”
According to NAR’s petition, the DOJ sent the trade group a civil investigative demand regarding the Participation Rule on April 12, 2019 and another civil investigative demand regarding the Clear Cooperation Policy on June 29, 2020. Copies of both CIDs are included in the 418-page petition.
NAR said it only agreed to a settlement with the DOJ because the agency agreed to close those investigations, which the agency affirmed it had (via a letter to NAR) on the same day the settlement was announced and entered into the court, Nov. 19, 2020. Neither the complaint nor the settlement agreement filed that day mentioned the investigations or the agreement to close them, but correspondence between the two entities included in the petition does.
“In exchange for the Antitrust Division’s agreement to close those investigations and withdraw the related CIDs, NAR agreed to enter into a Consent Judgment, even though NAR had done nothing wrong,” NAR’s attorneys wrote.
“As NAR told the Antitrust Division during settlement negotiations, it was willing to undertake the burdens of the Consent Judgment, but only in return for the certainty provided by the Antitrust Division’s commitment to close the its investigations and withdraw the related CIDs.”
But NAR claims that on June 30, 2021, the DOJ “abruptly issued an ultimatum to NAR: If NAR did not agree to change the Consent Judgment and stipulate that the Antitrust Division could re-open the very same investigations it agreed to close as part of the settlement agreement, the Antitrust Division would withdraw from the Consent Judgment the next day.
“NAR refused to relinquish the benefits of its negotiated settlement.”
The DOJ then withdrew from the settlement — an action NAR said was “unprecedented” — and on July 6 issued a CID that re-opens the investigations that the DOJ had previously agreed to close, according to NAR.
“With few exceptions, the information requests in the newly issued CID are substantively identical (and in many places literally identical) to the CIDs the Antitrust Division agreed to withdraw as part of its agreement with NAR,” the petition said.
“[N]othing in the settlement agreement with NAR allowed the Antitrust Division to rescind its commitment to close its investigations of the Participation Rule and Clear Cooperation Policy and withdraw the related CIDs,” the petition added.
NAR’s attorneys are asking the court to set aside the July 6 CID because, they say, the DOJ’s Antitrust Division has exceeded its authority by re-opening investigations it had previously agreed to close as part of a binding settlement agreement and “making demands that are overly broad, unduly burdensome, and irrelevant to any permissible investigation.” In the alternative, NAR’s petition asks the court “to remove all of the overly broad, unduly burdensome, or harassing requests” from the CID.
“As numerous courts have held, ‘a settlement contract may not be unilaterally rescinded,’ and it may be enforced against a government agency over the agency’s objection,” the petition said.
The July 6 CID asked for “all documents” covering a wide range of topics, including not only the commission and pocket listing rules, but also a rule discount brokerage REX Real Estate has sued NAR over that allows MLSs to require that brokers display MLS and non-MLS listings separately, buyer steering based on the commission offered by listing brokers, buyer and seller rebates and the Moehrl and Sitzer antitrust commission lawsuits.
“Requests for ‘all documents’ are overbroad and seek privileged information,” the petition said.
NAR ‘s deadline to comply with the CID was Sept. 13, but the trade group filed its petition that day instead.
In an emailed statement, a DOJ spokesperson told Inman, “[W]hile we cannot comment on ongoing or future investigations or enforcement actions … the department’s decision to withdraw its consent to the proposed final judgment reflects our commitment to investigate potentially anticompetitive industry rules that may be causing significant harm to consumers.
“Americans spend tens of billions on Realtor commissions each year. We cannot agree with NAR to limit the department’s ability to conduct investigations here.”