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The National Association of Realtors (NAR) last week agreed to a settlement after the Department of Justice (DOJ) filed a civil lawsuit alleging that some of the association’s policies were anticompetitive. The lawsuit and simultaneous settlement requires the NAR to modify its policies to provide more disclosure surrounding home buyers’ broker commissions, a percentage of a home’s sales price paid to the buyer’s real estate agent as compensation. The settlement also requires NAR to change some of its rules for multiple listing services (MLSs), which are regional membership organizations that gather and share property information and compensate agents who assist in selling properties.
The Justice Department named four allegedly anticompetitive policies in its suit, including: prohibiting NAR-affiliated MLSs from disclosing broker commissions to home buyers; allowing brokers to misrepresent their services to home buyers as free, despite earning a commission; allowing brokers to filter MLS listings by the level of commission offered, enabling them to discriminate against discount brokers that offer lower commissions; and only allowing licensed brokers that work for NAR-affiliated MLSs to access lockboxes to homes for sale.
As part of its settlement, NAR has agreed to change these rules and will come to an agreement with the Department of Justice on specific rule changes within 45 days.
This is a major step toward increasing competition in real estate, but the Justice Department should still do more, particularly to increase data sharing that would enable innovative business models to flourish. A number of companies, such as Redfin, Opendoor, and ListingSpark, have tried to disrupt the real estate industry by providing consumers direct access to real estate listings and other relevant information for home buyers and sellers. Alternatives to the traditional fixed-commission real estate broker business models, if enabled to work properly, could save U.S. consumers billions of dollars a year. These companies need accurate and timely data about real estate listings to provide these services, but the various MLSs, at the behest of the local brokers, put restrictions on this data to limit business models that threaten their commissions and compete with their agents.
This is not the first time NAR has been caught engaged in anticompetitive practices. In the 1990s, the DOJ pursued multiple cases against the NAR and MLSs for discriminating against online business models. The DOJ opposed NAR rules that inhibited competition from Internet brokers, MLS requirements for brokers to have a physical office within an MLS area, and state laws prohibiting brokers from offering rebates to consumers. In 2008, after the DOJ sued the NAR for unfairly discriminating against online brokers, the NAR entered into a 10-year agreement to rescind its anticompetitive policies preventing online brokers from accessing MLS listing data and guarantee that it would treat online brokers the same as traditional ones, but this agreement expired in 2018.
Now that the Justice Department is once again looking at the NAR and MLSs’ practices, and now that the NAR is no longer bound to its 2008 agreement, the DOJ should also keep pressure on these organizations to not use their control of real estate listing data to unfairly restrict competition. Doing so would enable increased innovation in the real estate sector and benefit home buyers and sellers.