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The U.S. Department of Justice is hitting back against the National Association of Realtors’ attempt to dissuade an appeals court from letting the agency reopen an investigation into NAR’s commission and pocket listing policies.
The U.S. Court of Appeals for the District of Columbia Circuit is currently considering whether to overturn a lower district court ruling setting aside a July 2021 request from the DOJ for information from NAR on its Clear Cooperation Policy around pocket listings and Participation Rule on commissions.
At issue in the appeal are two documents, both dating from November 2020. One is a proposed settlement agreement between NAR and the DOJ that the DOJ ultimately withdrew from in July 2021, after a change in presidential administrations. Another is a three-sentence letter the DOJ sent NAR telling the trade group that it had closed its investigation into the pocket listing and commission rules and NAR had no obligation to comply with two previously-issued civil investigative demands (CIDs) requesting information on those rules. (CIDs are a type of administrative subpoena.)
Days after the DOJ withdrew from the proposed settlement agreement, the antitrust enforcer issued a new CID to NAR that was similar, but not exactly the same, as the previous CIDs. NAR sued to quash the new CID and the district court ruled in its favor.
On Friday, attorneys for the DOJ’s Antitrust Division told the appeals court the lower district court had misinterpreted the DOJ’s letter to NAR, which has given the association “almost three years of protection in the face of serious concerns of anticompetitive conduct.”
“It is well past time for NAR’s rules to be assessed on their merits, and the Division has an obligation to investigate potential antitrust violations that may cost American homebuyers billions of dollars each year,” they wrote in a reply brief.
“This Court should reverse the District Court’s Order and overrule NAR’s other objections to the CID.”
In an emailed statement, NAR reiterated that the district court’s ruling “is correct, and it should be affirmed.”
Mantill Williams
“After having signed an agreement previously, the Department of Justice’s (DOJ) argument that it can resume its investigation based solely on a change of leadership or change of heart lacks legal merit,” NAR spokesperson Mantill Williams told Inman.
“NAR has upheld our end of the agreement, and we expect the DOJ to do the same. It is alarming that the DOJ would try to resume an investigation that the Department committed to closing more than two years ago. NAR guidance for local MLS broker marketplaces has long been recognized to ensure fair, transparent and competitive real estate markets for consumers and businesses.”
The DOJ’s Antitrust Division declined to comment for this story.
The two NAR rules both sides are fighting over are these:
- The Participation Rule, which requires listing brokers to offer a blanket, unilateral offer of compensation to buyer brokers in order to submit a listing into 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 are the subject of multiple antitrust lawsuits filed against NAR filed by private parties, some in which the DOJ has intervened. No matter what happens with the DOJ’s investigation, those lawsuits are ongoing.
In their Friday brief, attorneys for the DOJ stressed that NAR, in its own appeal brief, had not disputed that the government had “properly exercised its unqualified right to withdraw” from the proposed settlement agreement before it became final and that that withdrawal had “released the parties from their respective rights and obligations thereunder, freeing NAR to resume its prior conduct.”
The agency has maintained that neither NAR nor the courts should read more into its November 2020 letter than what it says:
This letter is to inform you that the Antitrust Division has closed its investigation into the National Association of REALTORS’ Clear Cooperation Policy and Participation Rule. Accordingly, NAR will have no obligation to respond to CID Nos. 29935 and 30360 issued on April 12, 2019 and June 29, 2020, respectively.
No inference should be drawn, however, from the Division’s decision to close its investigation into these rules, policies or practices not addressed by the consent decree.
Those three sentences are the letter in full, according to the filing.
The “letter does not say, as NAR contends, that the Division cannot investigate the Participation Rule or Clear Cooperation Policy ‘absent a material change in circumstances’ … or only ‘if those policies change,'” the DOJ’s attorneys wrote.
“The letter simply memorializes that the Division ‘ha[d] closed’ its investigation and ‘[a]ccordingly’ NAR had no obligation to respond to two specifically enumerated CIDs that are not at issue in this case,” they added.
“It specifically warned NAR that ‘[n]o inference should be drawn . . . from the Division’s decision to close its investigation.’ NAR had also sought immunity from future investigation, but the Division repeatedly rejected that proposal.”
Just because the DOJ closed an investigation does not mean the agency could not reopen it, according to the filing.
“As NAR concedes, the sentence ‘confirm[s] that DOJ had reached no determination on the policies’ lawfulness,'” the filing said.
“But NAR ignores the obvious import: that the Division could determine such unlawfulness in the future, which it could not do without reopening the investigation.”
Moreover, the agency says its communications with NAR confirm the trade group knew “the difference between a commitment not to investigate and a letter confirming that the Division ‘has closed’ its investigation” because NAR had requested both the letter and a public statement from the DOJ committing to not investigate the Participation Rule and Clear Cooperation Policy in the future (the latter of which the DOJ did not acquiesce to).
That NAR asked for both “underscores that NAR did not believe that a letter memorializing the closing of an investigation would bar a future one and that the Division had no reason to ascribe such a belief to NAR,” the brief said.
The DOJ’s attorneys point out that the agency did not “reissue” the previous CIDs as NAR contends, but rather “a separate, new CID, triggering independent legal obligations and procedures” under federal law.
“NAR’s own comparison table reveals considerable differences between the 2020 CIDs and No. 30729, including eight additional specifications or sub-specifications in No. 30729, the omission of several prior specifications, and differences in scope in overlapping specifications,” the brief said.
The DOJ’s attorneys reiterate that, in order for the DOJ to waive its sovereign right as part of the country’s Executive Branch to investigate and prosecute potentially unlawful conduct, the law requires the DOJ to explicitly say it’s waiving that right.
“[O]nly unmistakable language in the November 2020 letter could effect a waiver of the United States’ right to investigate NAR,” the brief said.
The agency also contends that NAR and the U.S. Chamber of Commerce, which filed an amicus brief in support of NAR in this appeal, mischaracterize the DOJ’s argument saying that NAR should have expected the investigation to resume with the administration change.
“Not so,” the brief said. “The investigation gave NAR the benefit of repose in the short term, and the prospect that it could continue longer, but NAR should have expected the possibility of reopening because government resources and priorities are subject to change.”
Regarding NAR and the Chamber’s argument — which the DOJ characterized as “hyperbole” — that the DOJ’s reopening of the probe meant it was “repudiat[ing]” its contracts and therefore undermining the rule of law, the agency said there was nothing to repudiate.
“The Proposed Final Judgment contained a termination right that was properly exercised,” the brief said. “And the November 2020 letter simply contained no ongoing commitment not to investigate NAR.”
Finally, the DOJ’s attorneys urged the appeals court not to allow further delay of the investigation. NAR — “the largest trade association in the United States,” they note, echoing NAR’s own words — hadn’t shown why “enforcement of the CID would ‘unduly disrupt or seriously hinder normal operations.'”
Editor’s note: This story has been updated with a comment from NAR.
