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The U.S. Department of Justice remains unsatisfied with a proposed settlement in the commission class-action lawsuit known as Nosalek, according to a statement of interest filed by the department on Monday.
Homesellers filed the lawsuit against MLS PIN and several other major real estate companies in 2020 for allegedly requiring sellers’ brokers to offer compensation to buyers’ brokers in order to submit a listing to the MLS. Many of those companies have since settled in other major commission-related lawsuits.
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MLS PIN also attempted to settle in 2023 for $3 million in damages and agreed to rule changes over buyer-broker agreements. But later, when damages were raised to $3.95 million, the parties involved agreed to a general proposal that would no longer require sellers to offer compensation to buyer brokers.
The DOJ also pushed back against the initial proposed settlement, and about one year ago filed a Statement of Interest in the case that argued “the proposed settlement perpetuates the very same competitive concerns that trouble the current rule.”
A Supplemental Statement of Interest filed by the DOJ on Monday argued that the current proposed settlement would only make “cosmetic changes” to MLS PIN’s rules regarding agent compensation and would “neither protect nor restore competition to this important market,” but rather, would encourage the steering of buyers away from listings with lower commission offers.
The DOJ also argued that the proposed monetary relief for an expanded class of plaintiffs is “similarly lacking,” and that the settlement should be denied preliminary approval by the court.
The statement by the DOJ comes just in time, as U.S. District Court Judge Patti Saris in January had set a date of April 1 for the settlement’s preliminary approval hearing.
A footnote in the Supplemental Statement of Interest also discusses NAR’s Clear Cooperation Policy (CCP) and how that policy can “interact” with the buyer-broker commission rule by including offers of compensation when posting a listing to the MLS. The footnote also criticizes “industry participants” who have commented on what they believe is the DOJ’s position on CCP — calling those characterizations “misleading” — and noting that the DOJ has not taken any position that CCP as a standalone policy is anticompetitive, for instance, if it were to be enforced on its own without MLS-mandated offers of compensation or any “exceptions benefitting primarily large brokerages” (a nod to the office exclusives loophole within CCP).
The Nosalek case is unique in that it did not include the National Association of Realtors as a defendant in the case, and MLS PIN (which had 44,600 subscribers as of 2023) declined to opt into NAR’s nationwide settlement of similar antitrust lawsuits.
The case also stands apart because its proposed settlement allows sellers to make pre-emptive offers of compensation to buyer brokers through the MLS (which goes against the NAR settlement terms) and the case is the only commission lawsuit in which the DOJ has called for pre-emptive offers of compensation from sellers or listing agents to buyer agents to be prohibited flat-out, regardless of whether its on- or off-MLS.
This latest move by the DOJ confirms that the agency continues to have its gaze fixed on the real estate industry even as a new presidential administration has taken office this year.
The agency also recently weighed in on an appeals case between REX Real Estate, NAR and Zillow over NAR’s no-commingling rule. In that case, the Ninth Circuit Court of Appeals upheld a ruling in favor of NAR and Zillow, denying REX a new trial against the portal giant.
The DOJ’s new supplemental statement highlights what it views as the lack of competitiveness between brokers, pointing out that commissions have largely hovered around 5 percent to 6 percent for decades, even though technology has significantly changed how consumers buy and sell homes.
“The United States has a strong interest in protecting American homesellers and buyers and ensuring that private class-action settlement agreements do not perpetuate serious competitive concerns,” the DOJ said.
“Like the previous proposed settlement, the latest proposed settlement is not ‘fair, reasonable and adequate,’ and therefore should not be approved.”
Read the full Supplemental Statement of Interest below:
Update: This story was updated after publishing to include information about comments the DOJ made on Clear Cooperation and industry comments on the agency’s supposed thoughts on the policy.
