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Two California homesellers have filed a lawsuit against a whopping 36 real estate companies and trade groups alleging they violated federal and state antitrust laws by conspiring to inflate broker commissions.
On Wednesday, Jan. 17, Gael Fierro, a French national and permanent resident of Los Angeles, and former California resident Patrick Thurber, filed a complaint seeking class-action status on behalf of anyone in the counties of Los Angeles, Madera, Fresno, Merced, and Mariposa who, from January 17, 2020, through the present, used any defendant or their affiliates as the listing broker in the sale of a property listed on a multiple listing service and who paid a commission to the buyer broker in connection with the sale. The complaint estimated the number of class members to be in the “many thousands.”
“The conspiracy has led to various illogical, harmful, and anticompetitive effects, including: (a) requiring sellers to pay overcharges for services provided by buyer brokers to the buyer; (b) maintaining, fixing, and stabilizing buyer broker compensation at levels that would not exist in a competitive market; and (c) promoting steering and actions that hinder innovation and entry by new, lower-cost real estate brokerage service providers,” the complaint says.
The suit was filed in the U.S. District Court for the Central District of California and the defendants include the National Association of Realtors, the California Association of Realtors, Greater Los Angeles Realtors, the California Regional MLS (CRMLS), Combined L.A./Westside (CLAW) MLS, eXp World Holdings, Compass, HomeServices subsidiary BHH Affiliates, and First Team Real Estate, among others.
“It’s a shame that greedy, unscrupulous lawyers are trying to shake down our industry,” First Team Real Estate CEO Michele Harrington told Inman in a statement.
“Real estate agents are not the problem in this country. Our agents often work 7 days a week and all hours of the day and night to walk people through the biggest financial decision of their lives and sometimes never get compensated. The problem we have in this country is there are people who will compromise their ethics, morals and values in an effort to enrich themselves by exploiting hard working people.”
The suit challenges a NAR rule that requires listing brokers to offer compensation to buyer brokers in order to submit a listing to a Realtor-affiliated MLS, known as the Participation Rule or the Cooperative Compensation Rule.
“The cooperative compensation practice makes efficient, transparent, and accessible marketplaces possible,” NAR spokesperson Mantill Williams told Inman in a statement.
“Sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation. The National Association of Realtors will respond to this complaint in court.”
According to the complaint, Fierro sold a home in Los Angeles in December 2020 and paid a total broker commission of 6 percent of the sale price, or $51,300, of which 3 percent went to the buyer broker and 3 percent went to the listing broker. Thurber sold a home in Madera County in July 2022 and paid a total broker commission of 6 percent of the sale price, or $27,000, of which 3 percent went to the buyer broker and 3 percent went to the listing broker.
This is the latest suit to generally attack the practice of requiring listing brokers to share commissions with buyer brokers in the wake of an Oct. 31 verdict in a case known as Sitzer | Burnett in which a Kansas City jury found NAR and major real estate franchisors conspired to inflate commissions and awarded damages that may end up costing the defendants nearly $5.4 billion.
“We believe these allegations are without merit for many reasons, and we look forward to presenting those arguments in court,” C.A.R. General Counsel June Barlow told Inman in a statement.
The Fierro complaint alleges the defendants violated the federal Sherman Antitrust Act, the California Cartwright Act and the California Unfair Competition Law. The complaint demands a jury trial and seeks awards for damages and/or restitution, costs of the suit, and a permanent injunction banning the defendants “from (1) requiring that sellers pay the buyer broker, (2) continuing to restrict competition among buyer brokers and seller brokers, and (3) engaging in any conduct determined to be unlawful.”
“While we do not comment on ongoing litigation, we will respond to this complaint and the many misconceptions that it contains in due course, and we disagree in the strongest possible terms with the allegations in the complaint,” Tessa Hultz, Greater Los Angeles Realtors CEO, told Inman in a statement.
In a statement, eXp Realty spokesperson Lisa Patrick told Inman, “While we are still studying the formal complaint, we have been closely observing the ongoing antitrust litigation against our competitors in recent years. We are committed to upholding fair and transparent practices compliant with law and we already have mechanisms and a plan in place that enables buyers and sellers to negotiate commissions. Our agile business model allows us to make adjustments seamlessly and effectively, no matter the jurisdiction.”
The full list of defendants include:
- The Agency Real Estate Franchising
- eXp World Holdings
- eXp Realty of California
- eXp Realty of Southern California
- eXp Realty of Greater Los Angeles
- eXp Realty of Northern California
- Berkshire Hathaway, Inc.
- BHH Affiliates, LLC
- First Team Real Estate – Orange County
- Rodeo Realty
- Pinnacle Estate Properties, Inc.
- California Regional Multiple Listing Service
- Combined L.A./Westside MLS, Inc.
- California Association of Realtors
- Greater Los Angeles Realtors
- Arcadia Association of Realtors
- Burbank Association of Realtors
- Citrus Valley Association of Realtors
- Glendale Association of Realtors
- Inglewood Board of Realtors
- Montebello District Association of Realtors
- Palos Verdes Peninsula Association of Realtors
- Pasadena-Foothills Association of Realtors
- Rancho Southeast Realtors
- South Bay Association of Realtors
- Southland Regional Association of Realtors
- Tri-Counties Association of Realtors
- West San Gabriel Valley Realtors
- Malibu Association of Realtors, Inc.
- Southwest Los Angeles Association of Realtors
- Madera Association of Realtors
- Fresno Board of Realtors
- Merced County Association of Realtors
- Mariposa County Board of Realtors
“Given this action was just filed in the past day, we are still reviewing the complaint and do not have a formal comment at this time,” HomeServices spokesperson Chris Kelly told Inman.
Inman has reached out to all of the defendants and will update this story with any responses they provide. As of Thursday evening, CRMLS, the Malibu Association of Realtors, the Palos Verdes Peninsula Association of Realtors, and The Agency declined to comment.