A new commission lawsuit filed Monday seeking class-action status alleges sellers encountered “illogical, harmful, irrational and anticompetitive effects” of NAR’s cooperative compensation rule.
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Now that a Missouri jury has sided with homesellers in a bombshell antitrust commission case that could upend the real estate industry, homesellers in South Carolina are the latest to step up to the trough.
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The complaint, hereafter referred to as Burton, alleges that certain NAR rules inflate costs for thousands of South Carolina homesellers to the tune of thousands of dollars.
“[T]he conspiracy herein complained of has multiple illogical, harmful, irrational, and anticompetitive effects, including that it: (a) requires sellers to pay supra-market rates for services provided by buyer brokers to the buyer, the seller’s adversary in the transaction; (b) raises, fixes, and maintains buyer broker compensation at levels that would not exist in a competitive marketplace; (c) encourages and facilitates steering and other agency costs that impede innovation and entry into the market by new and lower-cost real estate brokerage service providers,” the complaint says.
On Oct. 31, after less than two and a half hours of deliberations in a case known as Sitzer | Burnett, a Kansas City jury found NAR, KW, Anywhere (formerly, Realogy), RE/MAX, HomeServices of America and two of its subsidiaries BHH Affiliates and HSF Affiliates conspired to inflate broker commission rates paid by homesellers, awarding the plaintiffs nearly $1.8 billion in damages, which will be tripled by law to nearly $5.4 billion.
The Burton suit is one of multiple similar cases filed after that plaintiff’s victory. While critics tend to denigrate such suits as “copycat lawsuits,” that does not mean they may not end up having an impact. After all, when Sitzer was filed, NAR called it a “copycat” of another suit, Moehrl.
Like other, similar cases filed before and after the Sitzer/Burnett verdict — Gibson, Batton 1 and Batton 2 — the main rule the Burton suit challenges is NAR’s cooperative compensation rule, also known as the Participation Rule, which requires listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated MLS. The suit alleges the rule violates the Sherman Antitrust Act. The suit calls the rule “the Adversary Commission Rule.”
“Defendants use their control of the MLSs — which the Corporate Defendants control by and through their agreements with their local franchisees, their employee policy and procedures manuals, their training documents, and leadership roles in the NAR and its constituent local Realtor associations — to require brokers in local residential real estate markets to adhere to NAR’s rules, including the Adversary Commission Rule,” the complaint says.
“NAR further advances the conspiracy by re-issuing its Rules (including the Adversary Commission Rule) every year, reaffirming these rules even after being put on notice of their anticompetitive effect.”
The scope of Burton is considerably smaller than the other suits. The suit seeks class certification on behalf of “the South Carolina MLS Class,” defined as: “All persons who, from November 6, 2019 through the present, used a listing broker affiliated with Keller Williams Realty, Inc. in the sale of a home listed on one of the MLSs that comprise the real estate market of the District of South Carolina.”
The complaint seeks class certification, a jury trial, an award for damages and/or restitution, and a permanent injunction preventing the defendants from “(1) requiring that sellers pay the buyer broker, (2) continuing to restrict competition among buyer brokers and seller brokers, and (3) engaging in any conduct determined to be unlawful.”
“Absent Defendants’ conspiracy, Plaintiffs and the other Class members would have paid substantially lower commissions because the broker representing the buyer of their homes would have been paid by the buyer and, to the extent the seller obligated herself to pay the buyer broker, that price would have been the subject of negotiation between the seller and the buyer,” the complaint says.
The complaint lists multiple “co-conspirators,” including Keller Williams’ franchisees and brokers and “many other local Realtor associations and real estate brokers … Specifically, all who own, operate, and participate in MLSs within the District agree to, comply with, and implement the Adversary Commission Rule.”
“Defendants are jointly and severally liable for the acts of their co-conspirators whether named or not named as defendants in this Complaint,” the complaint says.
Keller Williams declined to comment. Inman reached out to NAR, which provided the following statement:
The cooperative compensation practice makes efficient, transparent, and accessible marketplaces possible. Sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation. The National Association of Realtors is reviewing this new filing and will respond to it in court.
Read the complaint here.
Email Andrea V. Brambila.
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