The U.S. Department of Justice will speak at oral arguments in an appeal filed by a former pocket listing service in litigation against the National Association of Realtors and three of the nation’s largest multiple listing services.
In May 2020, The PLS, formerly a private listing network for real estate agents, filed a federal lawsuit against NAR and the California Regional MLS (CRMLS), Bright MLS and Midwest Real Estate Data (MRED) over a policy designed to curb pocket listings.
The suit alleged the defendants had violated the federal Sherman Antitrust Act and California’s Cartwright Act for adopting the controversial Clear Cooperation Policy, which requires listing brokers to submit a listing to their MLS within one business day of marketing a property to the public.
In a Feb. 3 opinion, U.S. District Judge John W. Holcomb in Central California dismissed The PLS’s case with prejudice, or permanently, and without leave to amend, finding that The PLS’s arguments were so flawed that the case could not be saved.
The DOJ, which is currently investigating the Clear Cooperation Policy, has appeared to have a keen interest in the case starting at least since June. On May 26, The PLS filed an opening brief appealing Holcomb’s decision, and on June 2, the DOJ Antitrust Division filed an amicus brief in support of neither party, but echoing the arguments in The PLS’s appeal.
In a legal filing on Monday, the antitrust regulator noted that each side would have 15 minutes to speak at oral arguments in the case on Friday, January 14 and asked the appellate court to grant the agency five minutes to speak.
“The United States believes that government participation at oral argument would be helpful to the Court,” attorneys for the DOJ wrote. “The United States enforces the federal antitrust laws, both criminally and civilly, and has a significant interest and expertise in both the substantive and procedural aspects of those laws. This interest includes the application of the antitrust laws to the real-estate industry.”
The DOJ’s lawyers added that participating in oral arguments would also allow the agency to explain how the alleged “legal errors” the lower court made could negatively affect antitrust enforcement “well beyond” this case.
In its filing, the agency said the defendants in the case had not opposed its request to speak at oral arguments, so long as they were given five additional minutes of argument time. On Tuesday, the appellate court granted the DOJ’s request.
A NAR spokesperson told Inman the DOJ’s request was routine in cases where the DOJ files an amicus brief and the request “does not reflect a change in the DOJ’s substantive arguments or represent a new DOJ position.” The spokesperson declined to comment further.
NAR and the DOJ are currently embroiled in litigation related to the DOJ’s abrupt withdrawal in July from a settlement agreement between the two announced a year ago related to some of NAR’s MLS rules. Days after its withdrawal, the DOJ sent NAR a civil investigative demand seeking new information on NAR rules, including the Clear Cooperation Policy.
NAR subsequently filed suit against the DOJ, alleging the agency had agreed to close investigations into the CCP and another NAR rule regarding buyer broker commissions as part of the settlement. In a response to NAR’s petition, the DOJ revealed its belief that the Clear Cooperation Policy restricts the choices sellers have to market their properties.
“Sellers may have many reasons to list a home off the MLS, including that doing so may allow them to avoid paying higher commission rates or to protect their privacy,” the filing said. “But under the Clear Cooperation Policy, real estate brokers often cannot market properties outside the MLS unless they leave the MLS entirely, which agents are reluctant to do.”
In its amicus brief in the PLS case, the DOJ said it took no position on the merits of the case or the truth of its allegations, “but file this brief because the district court appears to have committed several errors of law that could adversely affect antitrust enforcement well beyond the instant context.”
The agency argued that alleging harm to competition did not require alleging immediate harm to downstream, end-user consumers, as Holcomb indicated.
“An MLS’s business, and PLS’s ability to compete with MLSs, depends on brokers and agents choosing on behalf of sellers to list properties on the service,” the amicus brief said. “The relevant direct ‘consumers’ in this market therefore are brokers and agents — not home buyers and sellers.”
In its amicus brief, the DOJ stressed that, contrary to what the lower court seemed to indicate, reduced prices or fewer services are not the only recognized anticompetitive effects.
“That proposition is legally incorrect because there are more types of cognizable anticompetitive effects, including reductions in quality, consumer choice, innovation, and harm to the competitive process,” the amicus brief said.
The DOJ said PLS had plausibly alleged each of those effects. For instance, the agency noted that PLS alleged that NAR-affiliated MLSs have been “slow to innovate and unresponsive to consumer demand,” with “obsolete” software and “outdated technology.”
“PLS attributes this inefficiency in part to the regionally-fragmented nature of the NAR-MLS system,” the amicus brief said. “NAR’s Policy, by impeding the growth of national listing networks like PLS, perpetuates the fragmented and inefficient status quo.”
The PLS declined to comment for this story. The DOJ did not respond to a request for comment.
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