AgentAgents/BrokersCaliforniaReal Estate

The DOJ weighs in on NAR pocket listing lawsuit

According to the DOJ, the lower court made three errors when deciding the Top Agent Network lawsuit

While the National Association of Realtors (NAR) may be free from the Department of Justice’s (DOJ) antitrust investigation, that doesn’t mean that the trade group is completely free from the antitrust enforcer.

On Monday, the DOJ filed an amicus brief in an antitrust lawsuit by Top Agent Network over NAR’s Clear Cooperation Policy, which requires brokers to submit listings to their multiple listing service within one business day of marketing a property to the public. The lawsuit alleges that NAR and the San Francisco Association of Realtors (SFAR) violated antitrust and unfair competition laws by adopting the Clear Cooperation Policy.  

Originally filed in May 2020 and tossed out in August 2021 by a U.S. District Court in Northern California, the lawsuit is currently being heard by the U.S. Court of Appeals for the Ninth District. Top Agent Network submitted its opening brief to the appeals court in January and the DOJ sought permission to file an amicus brief shortly thereafter.

In its brief the DOJ clarified that it is not weighing in on the case on the merits of Top Agent Network’s suit, but in order to correct what the department believes were legal errors made by the federal district court.

Top Agent Network said it is glad that the DOJ has voiced its opinion in the case.

“We are pleased that the Department of Justice agrees that the District Court applied the incorrect legal standard when dismissing TAN’s Complaint,” David Faudman, the CEO of the firm, wrote in an email. “We are confident the Ninth Circuit Court of Appeals will agree and that our lawsuit will be allowed to proceed on the merits. The NAR’s so-called Clear Cooperation Policy is both unlawful and anti-competitive, and its rollout has been a disaster. Rather than accept that reality, the NAR buries its head in the sand and keeps pressing forward with this ill-guided policy.”

According to the DOJ, the lower court made three errors in its initial ruling. First, the DOJ argues that the lower court focused its analysis of antitrust injury on the wrong product market.

“TAN alleged that the Policy’s deterrent effect on brokers’ and agents’ use of off-MLS listing services harms competition in the upstream market for listing services in two ways: (1) By depriving the relevant consumers (brokers and agents) of choice in how to serve their clients because ‘agents who are not members of a large brokerage will be unable to properly serve customers seeking to market off-MLS,’ … and (2) by impeding or eliminating listing networks that might compete with MLSs, resulting in ‘a single dominant MLS’ in most major markets,” attorneys for the DOJ wrote in the brief. “Restraints on consumer choice and exclusion of new market entrants are contrary to fundamental antitrust policy.”

In addition, the DOJ claims that by analyzing the wrong product market, the federal district court improperly disregarded Top Agent Network’s claims that the Clear Cooperation Policy has “has not forced more listings onto MLSs, but instead has forced off-MLS listings into ‘office exclusives’ at large brokerages.”

The second alleged error the DOJ identified was that the lower court improperly determined that Top Agent Network’s business model was inherently anticompetitive because the firm restricts its members to the top 10% of agents in a market.

“On this view, any practice that adds property listings to MLSs would be procompetitive, while any rival service that is not available to all agents and takes listings away from MLSs would be anticompetitive,” the brief states. “That premise and the District Court’s reasoning ignored market realities and the ways in which competition actually can work. Competition can include new rivals taking market share from a dominant provider, replacing the dominant provider altogether with a better product or service, or creating a niche product preferred by some segments of the market. The District Court’s reasoning, however, effectively precludes any off-MLS competitor not available to all agents from challenging MLSs in that upstream market — improperly entrenching the dominant market position of the NAR-affiliated MLS system.”

Finally, the DOJ also believes the lower court suggested that Top Agent Network’s alleged anticompetitive conduct prevented the firm from challenging the Clear Cooperation Policy.

“The Supreme Court made clear long ago that the purposes of the antitrust laws, including promoting competition and deterring anticompetitive behavior, support private lawsuits against antitrust violators regardless of whether the plaintiff also acted anticompetitively,” the brief reads. “[I]f TAN could be said to have violated the antitrust laws (which the District Court did not determine), it could be held responsible in another case. But TAN’s supposed anticompetitive conduct does not preclude it from challenging NAR’s Policy.”

NAR and SFAR have until April 20 to submit an answering brief.

NAR had not returned a request for comment at the time of publication.