DOJ Intervention Violates Free Speech, MLS Argues

MLS PIN, the Massachusetts-based listing service that has become a focal point of the Department of Justice’s (DOJ) interest in real estate commission practices, yesterday filed its long-awaited response to antitrust regulators as it urged a federal judge to reject DOJ arguments that “fail on their own terms” in a proxy battle over compensation structure.

“(The) DOJ invites the Court to reject a private, arms-length settlement in a civil lawsuit by relying on statistical evidence and policy arguments of dubious credibility,” lawyers for MLS PIN wrote.

The filing comes in the wake of the National Association of REALTORS®’ (NAR) settlement as all eyes have turned toward federal law enforcement, who have for years taken a keen interest in various lawsuits accusing the real estate industry of engaging in price-fixing and other antitrust violations—while also pushing forward with a separate inquiry into NAR policies.

But while much of the NAR investigation has taken place behind closed doors, the DOJ has made many of its aims and arguments public after intervening in the MLS PIN case as it seeks to delay a previously agreed to settlement, with the lawsuit serving as a venue to debate policies that will likely affect the entire industry.

Specifically, DOJ lawyers have said they are seeking to effectively end the practice of cooperative compensation, where sellers can offer to pay buyer agents as part of a real estate sale.

The 29-page rebuttal represents the first time a party to the case has addressed the DOJ’s “statement of interest,” though other entities previously filed their own independent briefs in defense of real estate and the MLS industry.

“The hallmark of the MLS system is transparency. MLSs correct for market imperfections by allowing for maximum information to be exchanged between buyers and sellers,” MLS PIN wrote. “These services thus ensure that neither side will miss out on an ideal match based on geographical barriers or the time and expense that would otherwise be involved in driving every cul-de-sac or manually calling agents in search of the perfect home.”

More specifically, lawyers for MLS PIN pushed back on assertions made by the DOJ that the current structure of cooperative compensation inflates commissions, and that changes made by MLS PIN before and during the lawsuit will have no “practical effect” on competition or transparency.

“DOJ grounds its position that the (MLS PIN) settlement will not have a practical effect on secondary sources and a purported expert declaration,” the MLS PIN lawyers wrote. “The secondary sources include unpublished papers, blogs, podcasts, lobbyist press releases, and other materials of no demonstrated credibility…(n)one of DOJ’s sources offer rigorous or peer-reviewed analysis.”

Back in February, the DOJ argued to the judge that there is significant evidence that changes like what is proposed in the MLS PIN settlement do little to increase competition or lower costs for consumers, and that cooperative compensation creates broader anti-competitive issues in real estate markets.

Notably, the proposed MLS PIN settlement does not go as far as the NAR settlement, allowing compensation offers to continue being made on the MLS. The DOJ has so far indicated it is unsatisfied with these types of changes, which have been implemented by other MLSs not affiliated with NAR—though it has explicitly declined to weigh in on the NAR settlement, at least so far.

The case against

While the industry at large waits anxiously to see how much further the DOJ could push, either in its inquiry or intervening in settlements and class-action cases, MLS PIN accuses the department of overreaching and seeking to create a “mini trial” to decide the merits of a case that already has a proposed resolution.

“DOJ focuses entirely on the question of whether the proposed settlement would allow the alleged anticompetitive conduct to continue. But this is exactly the kind of question the Court need not entertain in evaluating a proposed antitrust settlement,” MLS PIN wrote.

Instead, the DOJ should use “rulemaking or legislative advocacy” to advance its “policy objectives,” MLS PIN argued.

The DOJ has statutory power to intervene in class-action settlements that are deemed “inequitable,” but also broad discretion on when to do so. It has intervened in a handful of other antitrust cases related to real estate over the past few years.

But lawyers for MLS PIN argue that attempting to stop any settlement that doesn’t proactively prohibit offers of compensation (with the MLSs themselves seemingly charged with enforcement) would constitute a violation of the First Amendment and free market principles.

“That MLS PIN is an intermediary between buyers and sellers does not make its speech any less worthy of protection,” the lawyers wrote. “DOJ cannot coerce a private party—like MLS PIN—to punish or suppress speech from third parties—like homesellers—simply because it disfavors that speech from a policy perspective.”

MLS PIN and plaintiffs in the case are scheduled to file a joint briefing with the DOJ in the lawsuit later this month, laying out how the case can proceed against the larger landscape of class-action litigation and settlements.

This is a developing story. Stay tuned to RISMedia for updates.

Source link

About The Author

Scroll to Top