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The U.S. Department of Justice has proposed a settlement between New England’s largest multiple listing service and home sales plaintiffs, suggesting changes to commission rules in the deal may not go far enough. ing.
On Friday, lawyers from the Justice Department’s Antitrust Division asked Judge Patty Sarris of the U.S. District Court for the District of Massachusetts to review an agreement between the plaintiffs and the broker-owned multiple listing service MLS Property Information Network (MLS PIN). requested an extension of two months to the upcoming deadline. .
As part of the deal, MLS PIN overhauled its fee policy, paid $3 million and agreed to “cooperate” in litigation against the remaining defendants named in the lawsuit: real estate franchisor Anywhere ( (formerly Realogy), RE/MAX, Keller Williams and HomeServices of America.
“The United States has serious concerns about the proposed rule changes under the proposed settlement.” Department of Justice September 28 filing To read.
“Evidence from multiple other listing services shows that simply adjusting buyer-broker fee rules to allow zero percent commissions will do little to ‘free the market from anti-competitive behavior.’ It suggests…”
The lawsuit, known as “Nosarek” after the home seller plaintiff (formerly Bauman), was filed in December 2020. Like Mr. Mohr and Mr. Sitzer/Barnett in the Federal Commission case, it is seeking class action status and arguing for fee sharing between sellers and buyers. Brokers are driving up costs for sellers, colluding to restrain trade, and violating the Sherman Antitrust Act.
But Nosarek differs from other cases in important ways. MLS PIN is named as a defendant, but the National Association of Realtors is not. MLS employs his 60 full-time staff and boasts approximately 46,000 subscribers in six New England states and New York.
This Settlement Class applies to sellers, or sellers acting on their behalf, who paid a buyer brokerage commission on or after December 17, 2016, in connection with the sale of residential real estate listed on Pinagy, the MLS PIN multiple listing service system. It consists of sellers paid by a broker.
If the court ultimately approves the settlement as is, MLS PIN would remove the requirement that home sellers provide compensation to buyer brokers. Listing brokers will be required to notify sellers that they are not required to provide compensation to buyer brokers and may refuse compensation if requested by buyer brokers. And it clarifies that if a seller makes an offer to a buyer’s broker and the buyer makes a counter-offer, “the commission payable in that event will be negotiated between the seller, the buyer, the seller’s broker, and the buyer’s broker.” It’s planned. notification It is configured to be offered to members of the payment class.
But rather than opening up competition, a Justice Department lawyer said, “rules like the one proposed may only perpetuate antitrust violations by slightly modified means. The rule changes still establish elaborate protocols for regulating buyer-broker fees (subject to sanction penalties).” , this includes requiring listing brokers to initially set the “total compensation offered” (including the number zero) at the time of listing.
“Thus, MLS PIN will continue to organize and facilitate brokers’ comprehensive and unilateral compensation offers to buyer brokers.”
The antitrust enforcement official noted that while broker-owned Northwest MLS implemented similar changes, making the provision of indemnification optional for buyer brokers, virtually all sellers continue to provide indemnification, and nearly all noted that sellers are offering commission rates in excess of 2%.
“Plaintiffs also submitted the following evidence,” the Justice Department noted in the order from the judge in Sitzer/Barnett. [the buyer-broker commission rule] Create a system that rewards all buyer brokers alike, regardless of their skill as a broker or the effort they put into sourcing a buyer. ”
The agency told Saris that the Antitrust Division will “evaluate the competitive implications of the proposed settlement.”
Buyer-broker fee rules for multiple listing services could “suppress price competition among buyer-brokers through effective pricing.” seller’s intermediary what to control buyer Pay brokers,” Justice Department lawyers wrote.
“These effects may be exacerbated by the fact that buyer-brokers may steer clients towards properties with higher commissions or discourage seller-brokers from offering lower commissions. ” Rising real estate commissions are hurting both home sellers and home buyers, given that for many Americans, buying a home is often the most expensive transaction of their lives. This is particularly worrying. ”
“Increasing competition for the high fees faced by buyers and sellers could help return billions of dollars to the American people,” the filing added.
But on Saturday, plaintiffs’ lawyers fired back, saying the Justice Department had been able to learn the full terms of the settlement for more than three months but could not clearly explain them in any of its calls or requests to plaintiffs’ lawyers. I told Mr. Sallis. To Saris — what were the department’s specific concerns? Additionally, they argued that the deadline to challenge the settlement in court under the current schedule is Dec. 7, more than two months away.
“Plaintiffs respectfully submit that the Department has not provided any valid reason for this delay,” the plaintiffs’ attorney said. Objection filed on September 29th.
“The Department had (and still has) ample time to investigate and file an objection. The Department agreed that plaintiff’s attorneys needed to act before (or after) the Dec. 7 objection deadline. However, if the plaintiff has specific concerns that an extension is needed, the plaintiff will then ask the court for an appropriate extension.
“However, under the current circumstances, Plaintiffs respectfully ask this court to maintain the current schedule and deny the Department’s motion.”
Plaintiffs’ lawyers requested an extension because it would “extend the life of a rule that Plaintiffs managed to eliminate, exposing new homebuyers in Massachusetts to its anticompetitive effects.” opposed.
They suggested the Justice Department may not have understood the rule changes included in the deal, given that the department called it an “adjustment.”
“But this is not a ‘tweak’. The removal of the requirement that the seller provide a fee to the buyer’s broker, combined with the new requirement that the seller’s broker explicitly notify the seller of this fact, fundamentally eliminates the alleged anticompetitive restriction. ,” the plaintiffs’ attorneys wrote.
“Additionally, the rule change completely removes the prohibition on sellers negotiating the amount of their fees after a buyer has made an offer.”
If the Department of Justice is concerned about “other anticompetitive elements of the residential real estate market,” those concerns are outside the scope of this lawsuit and its settlement, so “the Department will address those elements.” “You can file another lawsuit to do so,” they added.
This is the second time this particular settlement has run into difficulties. At a hearing in August, Mr. Sallis expressed reservations about the structure of the original settlement agreement, but ultimately decided to tentatively approve the agreement after the plaintiffs and MLS PIN reorganized how the agreed funds would be disbursed. Became. At the same hearing, Sallis said she was “in love.”[d]” The proposed rules would change in the settlement, but it is unclear how she will respond to the Justice Department’s request.
The Justice Department said in its filing that this may not be the last time the court hears from the Justice Department.
“If the Antitrust Division continues to have concerns about the competitive effects of the settlement as the court approaches its final decision, the United States will consider that other filings may be helpful to the court and that there are laws protecting the settlement.” “The economic interests of the American public may be deemed consistent with the economic obligations of the United States,” the filing states.
MLS PIN declined to comment on the matter due to the pending litigation. The Justice Department’s Antitrust Division did not respond to a request for comment.
Email Andrea V. Brambilla.
