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A proposed settlement between homesellers and a multiple listing service that has attracted opposition from the Department of Justice failed to receive preliminary approval Tuesday.
After an April 1 hearing, Judge Patti Saris of the U.S. District Court for the District of Massachusetts denied a request from the plaintiffs in a case known as Nosalek to notify class members of the deal but left them the chance to amend their filing.
According to Saris, the settlement’s scope should not have been expanded to cover all real estate listings, rather than just residential listings, in the service area for MLS Property Information Network (MLS PIN), a defendant in the suit.
“The Court finds that certification is not warranted for the proposed class that includes sellers of commercial real estate and mobile homes for the reasons stated at the hearing,” the case docket reads.
“Revised settlement approval papers are due on April 22.”
Saris indicated she was likely to preliminarily approve the deal after that change was made, but also suggested that granting final approval was far from certain, according to news reports of the hearing.
Saris told the parties present that she needed more information to make her decision, according to news outlets. Those parties included the DOJ, which was represented at the hearing by Katherine Clemons, a trial attorney at the DOJ’s Antitrust Division.
In a March 17 supplemental statement of interest in the case, the DOJ indicated it remained unsatisfied with the $3.95 million settlement, arguing that the deal 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, encourage agents to steer buyers away from listings with lower commission offers.
The proposed MLS PIN settlement continues to allow sellers to make offers of compensation to buyer brokers via the multiple listing service, in contrast to the National Association of Realtors’ nationwide settlement, which resolves similar commission-related antitrust claims.
At the hearing, Saris reportedly said it was a “red flag” that NAR and the court agreed to remove such commission offers from Realtor-affiliated MLSs, but MLS PIN did not. She asked MLS PIN attorney Matt Goodin why MLS PIN cared so much about keeping the offers in the MLS and Goodin replied that it would infringe on the First Amendment speech rights of sellers if they were prohibited from making the offers. Clemons countered that speech can be legally restricted if it is found to be anticompetitive.
But that prompted Saris to note that she did not feel she’d been presented any evidence that sharing cooperative compensation offers in the MLS is anticompetitive and that she had been particularly surprised to hear from MLS PIN that, since the MLS changed its rules in July to stop requiring such offers from sellers, that some 75 percent of them had chosen not to make them.
“I was completely in the government’s camp until I heard that 25 percent number,” Saris said, according to HousingWire.
The question of whether sellers who chose not to make offers via the MLS nonetheless chose to make them elsewhere, as the NAR settlement also allows, came up during the hearing.
Saris also suggested that if others who see the compensation in the MLS don’t know that it was negotiated down before a sale’s closing that that lower compensation would not appear in the MLS and other sellers might consequently inflate their offers to keep them in line with others listed in the MLS, according to HousingWire.
Still, she asked the DOJ to consult with economists and other experts to provide evidence of harm to consumers and submit an amicus brief before the final approval hearing for the deal, which she said would likely take place in August or September.
