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An appellate court in Washington, D.C., heard oral arguments from the National Association of Realtors and the U.S. Department of Justice Friday in a case that will decide whether or not the federal agency will be able to reopen an investigation into a commission rule that is already under fire from ever-multiplying lawsuits across the country.
On Dec. 1, a three-judge panel for the U.S. Court of Appeals for the District of Columbia Circuit seemed inclined to allow the DOJ’s Antitrust Division to resume its probe, according to several news reports.
The DOJ began an investigation into NAR’s Cooperative Compensation Rule, also known as its Participation Rule, in April 2019, nearly five years ago. The rule requires listing brokers to offer compensation to buyer brokers in order to submit a listing to a Realtor-affiliated multiple listing service and has for decades underpinned the way real estate agents get paid nationwide.
In June 2020, after NAR adopted the Clear Cooperation Policy, which the trade group said was intended to curb pocket listings, the DOJ also began investigating that rule. The policy requires listing brokers to submit a listing to their MLS within one business day of marketing a property to the public.
In November 2020, the DOJ and NAR agreed to a proposed settlement of the investigations, and the DOJ sent NAR a letter saying it had closed its investigation of the two rules. However, after the presidential administration changed hands, the DOJ withdrew from the settlement in July 2021 and resumed its investigation into the rules. In September 2021, NAR filed suit and, in January 2023, a district court ultimately ruled in favor of NAR, quashing the probe. Subsequently, in March, the DOJ appealed that ruling.
The DOJ is asking the court to allow the CCP and Cooperative Compensation Rule to be evaluated on their merits and NAR is seeking to stop that probe, arguing that the DOJ agreed to close an investigation into the rules.
The appellate court judges seemed skeptical of NAR’s arguments, made by attorney Christopher Michel, on Friday.
“I’m looking at the language of this letter [the DOJ sent NAR], and I don’t see how you can read it to make any commitments about the future,” Judge Florence Y. Pan said, according to Politico.
“The plain and ordinary meaning of ‘closed’ does not imply ‘and will never reopen,’” she added.
In addition, Judge Justin R. Walker opined that NAR took a gamble when it agreed to a proposed settlement with the DOJ, according to Bloomberg.
“You gained the benefit of being pretty confident that if the personnel and the antitrust division didn’t change after the election, you’d be good to go,” Walker said. “You made that bet and you lost.”
Attorney Frederick Liu argued for the DOJ. The DOJ’s Antitrust Division declined to comment for this story.
In a statement to Inman, Mantill Williams, NAR’s vice president of communications, said, “The DOJ’s unprecedented attempt to reopen a closed investigation it settled years ago boils down to an apparent institutional change of heart under new DOJ appointees. The Justice Department is not free to ignore the principles of contract law and fair dealing that bind every other party before the courts. The district court’s decision that the government must be held to the terms of its 2020 settlement agreement is correct and should be affirmed.”
The DOJ’s probe has happened in tandem with multiple antitrust lawsuits challenging both rules. Those lawsuits are pending. The one that has gotten the farthest, known as as Sitzer | Burnett, was filed in the same month that the DOJ’s probe began, April 2019, and on Oct. 31 returned a verdict against NAR and major real estate franchisors Keller Williams, Anywhere (formerly Realogy), RE/MAX, HomeServices of America and two of its subsidiaries, BHH Affiliates and HSF Affiliates, that may end up costing them nearly $5.4 billion.
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