There’s nothing quite like an 11th-hour twist. On Sunday evening, less than 48 hours before the National Association of Realtors’ (NAR) commission lawsuit settlement agreement is set to head for final approval, the Department of Justice (DOJ) filed its long-awaited statement of interest in the Sitzer/Burnett suit.
DOJ notes in the filing that it did not participate in the litigation or in the negotiation of the proposed settlement.
“The United States continues to scrutinize policies and practices in the residential real estate industry that may stifle competition. Competition in real estate is critical and homeownership is a key component of the wealth of American households,” the DOJ wrote.
While the DOJ had previously taken a stand against the practice of cooperative compensation, a practice the settlement still allows for, albeit off the MLS, this settlement term was not the one the DOJ took issue with. Instead, the DOJ challenged the settlement provision that requires buyers and their buyer’s agent to enter into a written agreement prior to touring a home.
“This provision itself raises independent concerns under the antitrust laws, which could be addressed in multiple ways,” the statement reads
The ways in which the DOJ suggests rectifying the perceived issue are to eliminate the buyer broker agreement requirement or to “disclaim that the settlement creates any immunity or defense under the antitrust law.” Additionally, the DOJ writes that the court could clarify “that approval of the settlement affords no immunity or defense for the buyer-agreement provision.”
The DOJ believes the buyer broker agreements have the potential to “limit how brokers compete for clients.”
“It bears a close resemblance to prior restrictions among competitors that courts have found to violate the antitrust laws in other proceedings and could limit — rather than enhance — competition for buyers among buyer brokers,” the DOJ wrote.
As the DOJ believes this could potentially cause antitrust issues in the future, they are asking Judge Stephen Bough, if he grants final approval of the settlement, to clarify “that such approval does not address whether the proposed settlement prevents and restrains current antitrust violations, remedies past violations, or contains revised policies and practices that comply with the antitrust laws.”
According to the statement of interest, in ruling on the commission lawsuit settlement, the Court’s job is to determine if the proposed settlement achieves “important concessions in the interests of the private actors” in the litigation, but the DOJ notes that an approval of the settlement does not prevent or restrain “ongoing antitrust violations or remedies past violations, or itself contemplates practices that fully comply with the antitrust laws.”
The DOJ notes that the approval of the settlement “does not preclude any future enforcement actions by the United States, and compliance with the proposed settlement or new NAR rules implementing that settlement affords no defense to any such enforcement actions.” However, the DOJ notes that if any brokerages, agents or NAR does find themselves in an antitrust suit moving forward, they “may attempt to use any findings in the Court’s decision as a shield against a future enforcement action by the United States.”
The final approval hearing for the NAR’s settlement, as well as the MLSs and brokerages who chose to opt-in to NAR’s settlement and HomeServices of America, is slated to take place on Tuesday afternoon in Missouri.
In a statement, NAR said that it “will continue to advocate for final approval of our settlement on November 26.”
In a motion filed on Thursday in support of the plaintiffs’ motion for final approval of the settlement, NAR called its settlement “hard fought.”
The trade group stated that it still believes its appeal of the jury’s verdict would have been strong, but it did not wish to “gamble its own existence” on an appeal and several more years of litigation.
“While the settlement was not what NAR wanted, it was the only path guaranteed to avoid a catastrophic outcome,” NAR’s motion states.
The DOJ previously intervened in the Nosalek commission lawsuit, and separately won a pivotal case that allows the department to resume investigating NAR.
Motion addresses buyer broker agreements
In their motion for final approval of NAR’s settlement, filed last Tuesday, the Sitzer/Burnett plaintiffs addressed some concerns surrounding buyer broker agreements. Among these clarifications is that brokers cannot amend a buyer broker agreement with a buyer once they know the compensation being offered by the seller on the property a buyer wishes to submit an offer on, that they cannot accept “seller-paid or builder-paid bonuses” in addition to the compensation agreed upon with their buyer, and that the amount the buyer’s broker is being paid must be specific and not a range or written as “whatever if being offered by the cooperating broker or seller.”
Additionally, the filing noted that if a buyer and their agent use a touring agreement prior to signing a full-fledged buyer representation agreement, the settlement does not “permit brokers to collect more in compensation than specified in the touring agreement for homes viewed during the scope of the agreement.”
Depending on how the Court considers the DOJ’s concerns in its statement of interest, these clarification may be for nothing.
