Editor’s note: In this three-part series we examine the real estate record on antitrust. Since realty professionals 24 years ago became subject to federal antitrust law, dozens of lawsuits and regulatory actions have been taken. Learn what some of those cases are, who’s behind them and how the industry has reacted. (See Part 1: Once free of the Sherman Act, it haunts business today and Part 2: David Barry takes on real estate antitrust.)
Laurie Janik, general counsel for the National Association of Realtors, and Ralph Holmen, associate general counsel for the group, responded to a series of Inman News questions about antitrust law and litigation. The association (NAR) is the largest trade association in the nation, with more than 1 million members.
The top lawyers for the association say that awareness of antitrust issues is especially important in the real estate industry because of the “highly competitive” nature of the business, and the degree of cooperative interaction that is necessary among competitors.
INMAN NEWS: What has NAR done, as an organization, to clarify antitrust issues for members?
NAR: NAR has been offering antitrust educational materials and programs for members and associations since the early 1980s, and before. The current materials were developed in the 1990s, and have been periodically revised and updated since then. NAR attorneys frequently address antitrust issues when speaking to groups of members, association executives, or attorneys that represent them, and in turn these attorneys and others offer information and training to members on antitrust issues, often based on the NAR-developed materials.
INMAN NEWS: What other types of training, information and education does NAR provide for members to help them to understand antitrust law? Why is it important to the association that members have a clear understanding of these issues?
NAR: Education of members as real estate professionals, and education of members and association leaders, staff and other association representatives, is essential to help them understand the kinds of conduct that may violate, or appear to violate, the antitrust laws. Antitrust concerns are raised primarily in two contexts in the real estate industry: with regard to competitive actions by and among members, and with regard to association rules and policies that may infringe the antitrust laws. Because real estate is a highly competitive business where competitors interact with one another to a great extent, and indeed regularly cooperate with one another in transactions involving the clients and customers of each, there are ready opportunities for unlawful “collective” action among groups of competitors. Likewise, by their very nature trade associations, including real estate associations, consist of groups of competitors joined together and bound to abide by certain membership and other rules, with the objective of improving business and regulatory conditions in the industry. In either case, there are ready opportunities for agreements or rules that adversely affect some competitors in ways that may violate, or may appear to violate, the antitrust laws.
INMAN NEWS: About what percentage of court cases that NAR is involved with each year relate to antitrust law?
NAR: NAR is a defendant in very few cases of any kind each year, and in most years is not a party or defendant in any antitrust litigation. NAR provides advice, information and other kinds of assistance, including in some cases financial assistance, to members as well as local and state associations that are subject to antitrust claims, but even these cases are relatively infrequent.
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INMAN NEWS: How much does NAR typically spend per year on legal costs relating to antitrust litigation? How much does NAR typically spend per year on overall legal costs?
NAR: These figures are confidential, but as noted above NAR is rarely a party-defendant to litigation raising antitrust claims. Even when NAR is providing financial assistance to a member or association involved in significant antitrust litigation, there is no “typical” annual figure. When cases do arise, though, the complexity of them, and the frequent need for expert input and testimony, often makes defense of such cases often extraordinarily expensive.
INMAN NEWS: Have NAR’s legal costs relating to antitrust cases generally risen, shrunk or stayed about the same?
NAR: While there are few antitrust cases, the expenses incurred by NAR and others in defending against such claims was large simply because, as noted above, antitrust cases are usually expensive to defend.
INMAN NEWS: What is the total legal cost, on average, for antitrust cases that NAR is involved with?
NAR: The varying and often unpredictable nature of such cases makes it impossible to offer a meaningful “average” figure for the legal expenses of those defending antitrust cases. It is not unusual, however, for such expenses to range well into the hundreds of thousands of dollars, and in some cases more.
INMAN NEWS: How many antitrust-related court cases has NAR won, settled and lost in the history of the organization?
NAR: As suggested above, antitrust cases more frequently involve members or local associations, rather than NAR, as defendants. Some cases involving those parties were not successfully defended, but the substantial majority of such cases are won or otherwise favorably resolved.
INMAN NEWS: What current litigation is NAR involved with that relates to antitrust law?
NAR: NAR is not currently a defendant in any action. The U.S. Department of Justice’s investigation of NAR’s VOW policy is the only matter in which NAR has direct involvement, and even that is presently only at the “investigation” stage. Current cases are pending against local associations of Realtors in Northern Kentucky and Spokane, Wash. In both those cases the primary claim is that it is unlawful to limit participation in a membership service created and operated by an association – in these cases a local MLS.
INMAN NEWS: Has NAR worked to change or introduce federal or state antitrust-related legislation? Explain.
NAR: No, NAR has not worked on or otherwise advocated to Congress, or to any state legislation antitrust-related legislation
INMAN NEWS: What are some of the most important, precedent-setting antitrust-related court cases for Realtors that NAR has initiated, and why?
NAR: The claim that the antitrust laws are violated unless MLS participation is made available to individuals who are not members of the association that owns and/or operates the MLS has been presented to numerous federal and state courts, and on at least nine different occasions the association’s right to limit MLS participation to association members has been upheld. To be sure, in 1977 in California under state antitrust law, and again in 1991 under Federal antitrust law as applied by the 11th Circuit Court of Appeals, the requirement of membership in an association as a condition of access to the MLS operated by the association was challenged and it was held to be unlawful under the antitrust laws. Those cases are by far the aberration, not the norm.
On another important issue raised in a number of cases is whether real estate professionals may unilaterally determine the extent to which they will cooperate in transactions with other real estate professionals, or whether they can offer to cooperate with some individuals or firms on certain terms and others on different, potentially less beneficial terms. The result in those cases has uniformly been that so long as there is no agreementamong a group of real estate professionals to collectively act in a less favorable manner towards one or more other competitors, the antitrust laws permit real estate professionals to deal with others on whatever terms they choose.
INMAN NEWS: Does NAR view antitrust litigation a continuing problem in the industry? Why or why not?
NAR: Litigation is always a problem and a financial burden. There does not appear to be, a proliferation of antitrust litigation that causes NAR any undue alarm. Moreover, and fortunately, almost all of the cases brought against members and associations alleging various kinds of antitrust violations are successfully resolved. NAR continues to make efforts to educate members, and to make resources available to members and associations to further that education. Compliance with the antitrust laws by members and associations is not difficult, and in that sense the potential for antitrust litigation should not be perceived to be, and is not, an industry-wide problem.
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