The Council of Multiple Listing Services panelists warned real estate leaders and MLS members, “It’s better to be part of the process … than having the rules written for you.”

Federal regulators have their sights set on changing the real estate industry, so the National Association of Realtors and the industry at large should try to work with them instead of antagonizing them, according to antitrust experts who spoke at the Council of Multiple Listing Services conference in September.

The Council of Multiple Listing Services hosted a panel featuring Alicia Batts and Dylan Carson, both antitrust partners at Faegre Drinker Biddle & Reath LLP. Batts was formerly an attorney adviser to a Federal Trade Commissioner and currently represents companies that come before the FTC and the Antitrust Division of the U.S. Department of Justice. Before joining Faegre Drinker in January, Carson worked for more than five years at the Department of Justice working with the people who both entered into the now-failed settlement with NAR and who withdrew from that deal.

The DOJ is currently investigating NAR’s rules, including rules having to do with buyer broker commissions and pocket listings. Earlier this year, President Joe Biden appointed Lina Khan, a champion of antitrust reform, as chair of the FTC and then encouraged the FTC, which shares responsibility over antitrust with the DOJ, to exercise its rule-making authority “in areas such as … unfair occupational licensing restrictions; unfair tying practices or exclusionary practices in the brokerage or listing of real estate; and any other unfair industry-specific practices that substantially inhibit competition.”

This attention is not just going to go away, according to the panelists.

“This is not a blip,” Batts told conference attendees. “Both [political] parties are concerned about consolidation and income inequality and helping consumers. I think the FTC is likely to make rules. The chair will want her control of the FTC to be successful and she’s got to report into the White House. So they’re going to do something.

“So you should prepare to do something, or to be active participants, whether it’s through an association, but you should work jointly. It’s more effective to come in and work jointly than to have MLSs doing different things and going in different directions. So I think that the industry needs to work together and have that voice.”

The FTC and the DOJ coordinate their antitrust efforts based on resources and both agencies are about to get an infusion of cash. While currently the two agencies have roughly the same number of attorneys and economists that they did in 1980, many industries, including real estate, have grown significantly since then, according to Carson.

“To remedy that, there’s bipartisan consensus that the budgets of both enforcement agencies should be significantly increased and there’s bills to essentially double the FTC budget and significantly increase the DOJ’s budget,” Carson said. “They have both passed in congressional committees, and may be voted on soon and signed into law, so they should be able to staff up soon, as soon as the next budgetary year.”

“The cavalry is coming, I guess, for the folks who are already there,” he added. “And with increased resources, we should expect increased enforcement, including in real estate.”

While many political issues get hung up in partisan politics, there’s bipartisan support for that funding because both progressive Democrats and Republicans feel that under-enforcement of antitrust laws has concentrated power among big technology companies and harmed consumers, according to Carson.

“Change is coming,” Carson said. “You can be a part of the change and affect the change, advocate for the rules that you want, the changes in antitrust enforcement that you want to see.

“With the increased resources, which will probably be the new normal and become more permanent, there will be increased scrutiny on lots of industries, including real estate, so now’s the time to get ahead of the curve and be proactive and show how the way that the business is structured and the way the rules are set up are pro-consumer, pro-competitive, pro-innovation and educate folks who don’t know as much about the industry and because they work in Washington D.C.”

NAR has sued the DOJ in an attempt to force the agency to abide by their proposed settlement and to quash the DOJ’s latest civil investigative demand related to its rules. Carson noted that the Tunney Act, a law that oversees consent decrees, means that “pretty much every consent decree that gets entered is just an agreement, until it becomes a final judgment where a federal court rules that it’s in the public interest. So until that court entry of the judgment, it’s really just a deal that could be rescinded, and in every decree, DOJ puts language that says ‘we reserve the right to withdraw at any time before it becomes a final judgment.'”

He said NAR is in for an “uphill battle” to convince the court to order the DOJ to refile its complaint and the proposed settlement, to then hold a public-interest hearing to determine whether the settlement is indeed in the public interest and then to finalize the deal. There have been similar cases in the past where a private party was able to compel the DOJ to uphold its agreement, though it was in the context of a criminal investigation, but there have also been cases that go the other way, according to Carson.

“It’s not very common for the DOJ to back out of a proposed deal, but the courts have rejected proposed deals that parties have come to the court with saying, ‘Hey, we have a consent decree to resolve our concerns about this practice,’ and the courts have said, ‘No I’m not buying it. You’re gonna have to go back and change that. That’s not in the public interest. Consumers will be harmed by this deal, so I’m not gonna agree to it unless you make changes,'” he said.

“So there’s plenty of precedent for government-private party deals to be submitted and never get finalized because courts have concerns with them.”

Even if NAR were to succeed, it would still have the FTC to contend with. Unlike the DOJ, which is part of the administration, the FTC is an independent commission with rule-making authority, so the agency will likely propose rules that impact the industry and that does present an opportunity for the industry to get involved, according to Batts.

“The FTC is likely to hold rule-making proceedings, which would allow the industry to participate,” she said. “They’ll have hearings, you’ll be able to do public comments, you’ll be able to go into staff, or maybe at the commission level, and talk to the FTC about any rules that they’re going to make involving the industry.”

“At this point, the FTC has been instructed to evaluate the real estate industry, which means that it’s likely to hold hearings, possibly issue subpoenas,” she added. “They’re likely to look at all transactions involving the real estate industry, unless they’re certain that there’s no anti-competitive effect.”

That means the industry has a choice, according to Batts.

“The regulators in their office in Washington can make a decision about what’s going on in the real estate industry based on interviews and people who submit information,” she said,” Or, the industry can take a position that we’re going to work together, we’re going to advocate, and we’re going to educate, so that any rules that come out, at least you’ve educated the federal government about how the industry works and what you see as the impact of rules and what rules the real estate industry would think would work best for you going forward.”

Real estate is not being singled out, she added.

“Your industry affects consumers’ pocketbook,” she said. “It’s hard to talk about how you’re going to improve things for people in America with pocketbook issues without looking at what affects their largest asset and how can it be more competitive.”

Those in the industry can send in public comments and ask for meetings with FTC staff or commissioners and bring, not their lobbyists, but their antitrust counsel and economists who can explain how the industry works and how it benefits consumers and how it’s pro-competitive, according Batts.

“They’re really very interested in working with industry to provide rules,” she said. “They have a duty to find out about the industry.”

Carson said the situation was similar on the DOJ side. “You can go in there and talk to the folks there,” he said. “The Antitrust Division is very responsive. They believe in transparency and good government.”

One caveat to that is that when meeting with agency staff, there’s no guarantee that they will respond quickly.

“They may not respond because they don’t really have the authority to respond,” Batts said. “They have a boss and their boss is going to report to either commissioners or the head of the Department of Justice, so they may need to run it up the flagpole before they respond.”

Regarding CIDs, the agencies are used to negotiating those, according to Batts.

“When you get a CID, the first thing that they expect me to do if they send one to my client, and the same thing with Dylan, is that you’re gonna call up and you’re gonna say, ‘OK, how are we going to narrow this down? What do you really need? What are you after? This is too much,'” she said. “There’s procedures for objecting to the burdensomeness, the volume, how difficult it is to get to the data. So when you get a CID you don’t just accept the whole thing.”

Carson said he spoke to Owen Kendler, who’s the head of the DOJ section that oversees real estate and withdrew the proposed settlement, before attending the CMLS conference to ask what he should tell the MLS executives attending. Kendler has worked for the DOJ for more than 18 years through multiple administrations.

“He said, ‘Think about consumers. Think about what are the things that you’re doing that are pro-competitive and pro-consumer, and how can you make what you do more consumer-friendly,'” Carson said.

Neither Batts nor Carson directly said that NAR should not have sued the DOJ, but other CMLS panelists didn’t hold back. Claude Szyfer, a partner at Stroock, and Chris Osborn, a partner at Stoel Rives, frequently counsel Realtor associations and MLSs, and both lamented the impact NAR’s lawsuit could have.

“What does this petition do to the future discussions between NAR and DOJ?” Szyfer told attendees.”The DOJ, I can tell you, they don’t like to get sued. Nobody likes to get sued. We know there’s going to be more, and you heard it from a former DOJ attorney and a former FTC attorney, this stuff is going to continue. You’ve got a motivated chair of the FTC, as well as a likely motivated chair of the DOJ Antitrust Division. What’s this going to do to relations? And how are you going to be able to build that trust to be able to resolve cases without having to go to trial?”

Both Szyfer and Osborn stressed that MLSs could no longer afford to not prioritize consumers.

“It’s better to be part of the process of writing the rules than having the rules written for you,” Szyfer said. “So thinking about consumers and thinking about what’s good for consumers to me has to start becoming, if not Priority 1, Priority 1A along with how do I work with my brokers.”

The industry has a real opportunity to find a way to engage with regulators, according to Osborn.

“I don’t recommend that we sue them, frankly,” he said, chuckling. “I think we find a way to communicate with them with the talent that we need to have to communicate with them. We need economists who speak our language, who truly know our industry or become informed, and we need antitrust lawyers, and we need industry lawyers to engage with the regulators and have a conversation.

“There is a way to do this if we learn how to talk their language. If we don’t get moving on it, then we’re going to lose the benefit of that communication, and what that might do to inform the direction we take to be successful and not divert resources to this kind of controversy.”

Email Andrea V. Brambila.

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commission | MLS | NAR | realtors
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