For American industry trade groups, boycotts have proven to be an effective, if bellicose, strategy for influencing change.
But this clumsy strategy continues to put California’s largest real estate trading group in hot water.
This time, a three-judge panel reversed a district court’s previous dismissal of a lawsuit filed by PLS.com, LLC (please) against the National Association of Realtors (NAR) in a April 2022 Notice.
The PLS lawsuit claimed NAR, as a competitor in the list network services market, conspired to take anti-competitive action to prevent PLS from gaining a foothold in the market.
PLS operates a private multiple listing service (MLS) for exclusive listings (sometimes called pocket listings) for sellers who do not want their personal information widely distributed. High profile customers are very sensitive about sharing their home or identity details on a large scale platform such as NAR’s MLS which requires such information.
NAR Clear cooperation policywho took effect in 2020requires that NAR-affiliated MLS members who choose to list properties on competing real estate databases (such as the PLS) also list those properties on NAR’s MLS.
The court of first instance found no damage to consumer home buyers and sellers in February 2021 as a result of NAR policy, and therefore found no antitrust violations. Seeing no harm to consumers, the judge dismissed the lawsuit, expressed in the California Central District Notice.
However, a court of appeal relaunched the trial, noting the existence of harm to a particular category of consumers — the agent. The panel of the Court of Appeal agreed that the Clear cooperation policy hurt buyers and sellers real estate agents — as consumers of referral network service products.
The Court of Appeal held that the definition of the term “consumer” is not limited to one who purchases goods or services, but also includes a company using a product as a to input to create another product or service.
Thus, PLS was not required to allege harm to home buyers and sellers in order to allege antitrust harm. Their claim that the clear cooperation policy harms real estate agents of buyers and sellers as consumers of PLSs and MLSs list network services suffices as an argument.
NAR in itself group boycott, as one judge called it, prevented competitor PLS from gaining a foothold in the referral network services market. As a result, it left agents with fewer choices, less competitive prices, and lower quality products.
No stranger to the Sherman Act
The Sherman Antitrust Law is a federal law prohibiting businesses from engaging in unfair business practices, such as forming a monopoly.
The PLS lawsuit points to Section 1 of the Sherman Act, which defines and prohibits anti-competitive behaviours. It explicitly forbids conspiring to restrict trade or commercial.
Violations of the Sherman Act are deemed in itself violations when an individual proves that there has been unlawful conduct that restricts interstate commerce and prevents competitors from operating reasonably in a free and fair market.
These allegations – group boycotts and illegal trade restrictions – are nothing new to the NAR. The organization has been accused of antitrust behavior several times throughout its history.
As late as 2020, the United States Ministry of Justice (DOJ) reviewed NAR for anti-competitive rules on free trade restrictions, according to the DOJ Antitrust Division.
National Association of Realtors settles US Department of Justice antitrust lawsuit
Although the DOJ dropped its investigation in July 2021, it is still investigating other possible antitrust practices within the trade organization.
In fact, the DOJ is watching the PLS case closely. In an amicus brief, the DOJ also pointed out that home buyers and sellers are not the only harmed consumers by boycotting the group itself from NAR – a reiteration of the PLS argument.
A few decades ago, the NAR was steeped in similar antitrust claims. In an unlawful move, they blocked officers from accessing MLS when officers dared to deviate from uniform NAR practices.
A California Court of Appeals held that NAR’s conduct constituted a unlawful restriction of trade and illegal business activity by openly encouraging its members to maintain flat commission rates on residential sales (generally 6% or a 50/50 split). Additionally, the court found that the exclusion of non-Association of Realtors (AOR) board members from residential MLS was a group boycott. [People v. National Association of Realtors (1981) 120 CA3d 459]
NAR’s poor track record for enabling consumers (agents, buyers, and sellers) and other market players to compete deprives everyone in real estate of better quality services and more competitive prices.
It may be time for the largest organization of real estate agents to recognize the need for a significant overhaul of its enforcement practices, starting with its clear cooperation policy.
Brokerage reminder: CAR membership NOT required for MLS access