The Supreme Court didn’t explain its reasoning for the decision, which will now allow the Department of Justice to reopen its investigation into the association’s cooperative compensation rule.
Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
The National Association of Realtors faced another legal blow on Monday when the U. S. Supreme Court declined to take its case against the Department of Justice.
The Supreme Court didn’t explain its reasoning for the decision, which now allows the Department of Justice to reopen its investigation into the association’s controversial commission and pocket listing rules.
“While the Supreme Court ultimately decided against reviewing the lower court’s decision, NAR remains committed to taking every possible step to fight for the interests of our members and the consumers they serve,” a NAR spokesperson told Inman in a statement.
How NAR will continue its fight is unclear. NAR’s loss of its appeal means that the case returns to the district court where NAR’s petition to either pause or modify the DOJ’s investigation was originally filed.
Now that NAR has failed in stopping the probe, the trade group may attempt to have the administrative subpoena the DOJ sent the trade group back in July 2021 cut back to make it less onerous.
The subpoena, also known as a civil investigative demand (CID), sought information on some of NAR’s rules, including:
- The now-defunct Participation Rule, which required listing brokers to offer blanket, unilateral offers of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated multiple listing service.
- The Clear Cooperation Policy, which requires listing brokers to submit a listing to their Realtor-affiliated MLS within one business day of marketing a property to the public.
Both rules have been the subject of multiple antitrust lawsuits, some of which are still ongoing.
NAR eliminated the Participation Rule, also known as the cooperative compensation rule, as part of its landmark $418 million nationwide settlement of commission-related cases last year. The deal also prohibited listing brokers from making pre-emptive offers of compensation to buyer brokers via the MLS.
However, the DOJ has indicated that that settlement did not go far enough and that the federal agency would prefer that listing brokers and sellers not be able to make pre-emptive offers of compensation to buyer brokers anywhere, including outside of the MLS.
NAR’s nationwide settlement in no way bound the DOJ and does not prevent the agency from going after the trade group over the same policies at issue in the commission cases. Resuming its probe into the Participation Rule may be an initial step for the DOJ in a road toward a lawsuit against NAR.
Similarly, the DOJ may also choose to target the Clear Cooperation Policy. The antitrust enforcer has weighed in in cases challenging the rule. The CCP has been hotly-debated in the real estate industry for several months and is currently being reviewed by NAR’s leadership team for possible changes.
The DOJ’s July 2021 CID asked for “all documents” covering a wide range of topics, including not only the commission and pocket listing rules, but also a no-commingling rule that allows MLSs to require that brokers display MLS and non-MLS listings separately, buyer steering based on the commission offered by listing brokers, buyer and seller rebates and the Moehrl and Sitzer/Burnett antitrust commission lawsuits.
Screenshot from July 6 DOJ CID relating to NAR’s commission rules
“Requests for ‘all documents’ are overbroad and seek privileged information,” NAR’s September 2021 petition to the district court read.
Screenshot from July 6 DOJ CID relating to NAR’s pocket listing policy
Discount brokerage REX Real Estate has sued NAR over its no-commingling rule. REX is currently asking for a retrial in that case and the DOJ has asked to speak at oral arguments at the appeals court in February.
In November, NAR’s Executive Committee passed a proposal requiring NAR to “make available an optional pool counsel for MLSs that are exclusively owned by Realtor associations desiring representation for complying with Civil Investigative Demands issued by the Department of Justice relating to an MLS’s commingling rule, and that the pool counsel expenses be paid from the Legal Action Program budget.”
The stated rationale for this move is to “create cost and time efficiencies in responding to multiple … CIDs based on the same topics.”
NAR said the representation would be available until the CID is satisfied but won’t cover any litigation expenses if the DOJ decides to sue an MLS.
NAR and the DOJ reached a proposed settlement in November 2020, which led to the association making several clarifications regarding the now-defunct cooperative compensation rule and lockbox access for agents who aren’t subscribed to the MLS.
However, in July 2021 the DOJ withdrew from the settlement, saying NAR refused to agree to a modification that would protect the Department’s right to investigate future anticompetitive claims. A few months later it was revealed that the DOJ resumed its investigation into NAR’s commission and pocket listing rules a few days after withdrawing from the settlement and dropping its initial complaint.
NAR jumped into action, hoping to force the DOJ to uphold the original agreement. NAR took its case before the U.S. Court of Appeals for the District of Columbia Circuit in December 2023, and when that failed, NAR filed a petition in October to hand the case over to the Supreme Court, saying the DOJ must keep “contractual promises just like other parties.”
“If left in place, the decision below will unsettle the interests of the diverse private parties who routinely contract with the government, from sophisticated firms vital to our nation’s economy to criminal defendants confronted with the government’s vast prosecutorial advantages,” NAR’s attorneys wrote in the October filing.
