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A New York City homeseller has filed a federal antitrust lawsuit against the Real Estate Board of New York and more than two dozen real estate companies as an ongoing wave of legal challenges to long-standing commission-sharing rules sweeps across the country.
Monty March filed suit in U.S. District Court in the Southern District of New York Wednesday, alleging REBNY rules governing the multiple listing service in Manhattan kept commissions high and violated state and federal antitrust laws.
The lawsuit, which does not target areas outside of Manhattan that REBNY typically governs, casts a wide net, covering real estate companies that provide the vast majority, “if not the entirety,” of broker services in that borough through the REBNY Listing Service, which was also named as a defendant.
“The inclusion of language concerning the commission to be paid by the Seller Broker to the Buyer Broker in the listing agreement, commonly known as the Buyers Broker Commission Rule, constitutes an antitrust violation under Section 1 of the Sherman Act and the Donnelly Act as there is no separate negotiation/competition concerning the commission paid to the Buyer Broker,” the complaint says.
“The REBNY Listing Service’s commission rule fosters an environment in which brokers work co-operatively to split a total commission instead of open and separate negotiation,” it continues. “The anti-competitive nature of commission rule is clear when compared to other countries with competitive markets for residential real estate brokerage services.”
The lawsuit is one of a growing list of challenges to the rules governing multiple listing services in regions throughout the country.
It comes in the wake of a bombshell verdict in an antitrust commission lawsuit known as Sitzer | Burnett last week, where a jury sided with homesellers who alleged the industry conspired to inflate broker commission rates paid by homesellers. The jury awarded the plaintiffs nearly $1.8 billion in damages, which will be tripled by law to nearly $5.4 billion.
Since that verdict, a string of new cases have been filed in various locations, including one within minutes of the Sitzer | Burnett ruling filed in Missouri, where jurors deliberated last month. Days later, an Illinois homeseller filed an even larger suit. The March lawsuit in New York followed another, similar, filing by homesellers in South Carolina this week.
In other words, the Sitzer verdict appears to have unleashed the floodgates for additional antitrust cases. And while some critics have denigrated such cases as “copycat lawsuits,” that does not mean they may not end up having an impact — the Sitzer verdict came in a case that was once called a copycat suit but which is now sending shockwaves through the industry.
According to the New York City complaint, March sold a home in Manhattan based on REBNY’s Universal Co-Brokerage Agreement, which he said forced him to pay an inflated commission fee to the buyer’s broker.
The complaint takes aim at a REBNY Listing Service rule called the Buyer Broker Commission Rule, which says the brokers “shall each be paid an equal share of the commission as specified in the Exclusive Listing.”
“This rule forces a Seller to pay the Buyer Broker’s commission, eliminates negotiation of the Buyer Broker’s compensation, artificially inflates the Buyer Broker’s commission, and substantially increases the transaction cost of the Seller,” the complaint says.
The New York lawsuit names Christie’s International Real Estate, Coldwell Banker, Compass, The Corcoran Group, SERHANT., and RE/MAX, among others. Inman reached out to all 26 defendants for comment.
The proposed class includes Manhattan homesellers between Nov. 8, 2019, and present.
“We are reviewing the complaint with our attorneys,” REBNY General Counsel Carl Hum told Inman in a statement. “In the meanwhile, we are confident that RLS practices and procedures abide by all relevant laws.”
Eric Benaim, CEO of Modern Spaces, told Inman he wasn’t aware his real estate team had been named in the complaint.
Representatives for Compass, Douglas Elliman, Nest Seekers International, The Corcoran Group and Brown Harris Stevens all declined to comment on the lawsuit.
REBNY announced last month that it would require sellers to pay buyer agents directly starting Jan. 1. The change will prevent listing agents from paying broker agents, a change known as “decoupling” commissions.
The complaint points to the upcoming real change, saying it implied “that the world that existed before the rule change was less transparent.”
The complaint alleges that REBNY and the franchises “have entered into an unlawful agreement and/or conspiracy to fix, raise, maintain, or stabilize Manhattan residential real estate commissions in restraint of trade.”
March asked the court to declare the rule illegal and seeks damages that would be determined at trial and an injunction prohibiting any action the court might deem illegal.
The full list of defendants:
Real Estate Board of New York
Real Estate Board of New York Listing Service
Brown Harris Stevens
Christie’s International Real Estate
Core Marketing Services
The Corcoran Group
Engel & Volkers
Fox Residential Group
Halstead Real Estate
Keller Williams NYC
Leslie J. Garfield & Co
M.N.S. Real Estate
The Modlin Group
Nest Seekers International
Oxford Property Group
R New York
Sotheby’s International Realty Affiliates