In a significant legal development, a Missouri jury found that the National Association of Realtors (“NAR”), HomeServices of America, and Keller Williams Realty, Inc. conspired to inflate home sale commissions. In Sitzer v. The National Association of Realtors, No. 4:19-cv-00332-SRB (W.D. Mo.), the jury handed down a verdict of nearly $1.8 billion and sent shockwaves throughout the real estate industry.
The Jury Verdict
In essence, the overarching issue in this case was NAR’s rules obliging home sellers to agree to foreclose competition between sellers’ brokers negotiating commission rates or splitting with buyers’ brokers, which had the effect of allegedly raising or otherwise stabilizing the downward pressure on brokerage commissions. The jury found that these rules artificially limited competition, leading to staggering financial losses for home sellers over several years. The nearly $1.8 billion verdict marks a significant blow to real estate brokerages, which pride themselves on facilitating homeownership dreams. Other allegations concerned how open brokerages’ practices needed to be in disclosure to home sellers and buyers.
The financial repercussions may not end here. Under federal antitrust laws, this verdict may have broader implications beyond monetary penalties, potentially reshaping the practices and norms within the real estate sector through declaratory and injunctive relief. NAR’s rules and brokerages’ practices may need to change. There are other pending antitrust class actions concerning these very issues. And countless related class actions have been filed on behalf of home sellers throughout the country. Other antitrust actions have been launched against this arcane industry—that appears to have not leapt into the 21st century. Other actions concern alleged group boycotts of innovative platforms for listing and transacting in real estate, other NAR rules, and collusion over making it difficult for brokers to switch agencies.
Post-Verdict Developments
NAR and HomeServices requested a new trial. NAR argues that the jury instructions were prejudicial, and HomeServices argues that there was no direct evidence that it conspired with the association.
More recently, Keller Williams agreed to pay approximately $70 million to resolve all claims arising from the price-fixing allegations. On January 31, 2024, the proposed settlement was preliminarily approved.
Changing Business Practices: Pre-Trial Settlements
Before the trial, two other real estate giants, Realogy Holdings Corp. (now Anywhere Real Estate Inc.) and RE/MAX settled cases that involved agreements to change their business practices. In the suits, Anywhere Real Estate and Realogy settled for approximately $83.5 million, while RE/MAX agreed to pay approximately $55 million to resolve the claims against it.
These settlements foreshadowed the potential impact of the trial’s outcome, suggesting that the industry recognized the need for reform.
Broader Legal Challenges
This verdict connects to a broader context of legal challenges faced by NAR and real estate companies. Similar allegations have surfaced in a lawsuit in the United States District Court for the Northern District of Illinois and throughout the country, amplifying the industry’s potential legal woes. The settlements reached with Anywhere Real Estate and RE/MAX could shape the Illinois litigation. These settlements encompass significant changes in business practices, hinting at a potential shift in the industry’s status quo.
Per Se Liability and Horizontal Restrain
It is noteworthy that the per se rule applied to this alleged horizontal restraint during the litigation. Although NAR is a trade association, it is a combination of horizontal competitors. When those competitors agree to an alleged anticompetitive rule, such agreements can subject them to per se liability. For years, the public and innovative competitors have been arguing that despite technological advances that should make the lives of brokers easier and pass on some of the investigative work to sellers and buyers themselves, prices for brokerage services have not decreased—and they have been more expensive relative to brokerages across the globe. Disbanding such rules could also result in new brokerages entering the market under a strategy of offering lower commission rates.
The U.S. Department of Justice has also been investigating NAR’s rules for years. Whether an agreement between them to have resolved the investigation can be disbanded, reopening the investigation, remains to be seen.
Why This Matters
The verdict in Sitzer v. NAR marks a significant moment in the enforcement of antitrust laws within the real estate industry. It highlights the critical role of the legal system in upholding open market practices and protecting businesses and consumers from anticompetitive behaviors.
As this case progresses through the appeals process, its impact on the real estate industry and antitrust law will continue to unfold, potentially reshaping industry practices for years to come. At Nematzadeh PLLC, we remain committed to monitoring significant developments, in order to better represent our clients, and we will continue doing so. Contact Nematzadeh PLLC by calling (646) 799-6729 or emailing lawyer@nematlawyers.com for a confidential, free consultation.
