Appeals court reopens DOJ antitrust probe of Realtors
The investigation had focused on the way real estate agents have been compensated, a system that critics say inflates the cost of housing and amounts to illegal price-fixing.
A federal appeals court in Washington, D.C., sided with the Justice Department, allowing the agency to reopen an antitrust investigation of the National Association of Realtors that the trade group says is not allowed to go forward due to the terms reached in an earlier settlement.
In a 21-page opinion on Friday, Judge Florence Pan, writing for the majority of a three-judge panel on the D.C. Circuit Court of Appeals, said a prior closing letter from the government in the previous administration does not mean the probe could never be reopened. Judge Justin Walker dissented.
“We will not interpret a contract to cede a sovereign right of the United States unless the government waives that right unmistakably,” Pan wrote. “The closing letter contains no ‘unmistakable term’ ceding DOJ’s power to reopen its investigation: To the contrary, it includes a ‘no inference clause’ that explicitly disclaims any intent to include unstated terms.”
DOJ’s investigation had focused on the way real estate agents have been compensated, a system that critics say inflates the cost of housing and amounts to illegal price-fixing.
The ruling adds to the legal woes of the nation’s largest trade group, clearing the path for a wide-ranging DOJ investigation. NAR last month agreed to settle a barrage of lawsuits by paying $418 million in damages and eliminating a rule underpinning the lucrative commission system at the heart of the housing market.
NAR said Friday that it was “evaluating next steps” on the DOJ case.
“NAR believes that the government should be held to the terms of its contracts,” NAR spokesman Mantill Williams said. “We are reviewing today’s decision and evaluating next steps.”
The association’s “cooperative compensation” policy, which it has agreed to scrap this summer, requires sellers’ agents to provide a blanket offer of compensation to buyer brokers in order to show the home on the Realtors’ Multiple Listing Service, where 88 percent of sellers listed homes for purchase last year. Critics say the system effectively locks in high commissions — typically the agents for the seller and buyer split a commission of 5 percent to 6 percent — that inflate the cost of housing even as technology has allowed consumers to find homes online.
The Realtors had reached a settlement with the Trump-era DOJ to end a sweeping investigation in November 2020, but the Biden administration withdrew from the deal less than a year later — a move that was then rejected by a lower court. The DOJ challenged that ruling, appealing to the D.C. Circuit, which held a hearing in early December.
At issue in the appeal is whether in agreeing to close the investigation, DOJ lawyers at the time also committed to not reopen it, a promise the DOJ said it never made.
“We note that NAR should not have been misled by the words used in the closing letter because investigations are routinely ‘closed’ and then later ‘reopened,’” Pan wrote for the court Friday.
Walker, a Trump appointee, pointed out that the original settlement required the Realtors to repeal or modify a handful of policies – that the DOJ gained something after “bargain[ing] for a binding contract.”
“DOJ’s reading invests one side of the exchange with no real meaning at all,” Walker wrote in his dissent. “It says that the Realtors gave up something (a lot, actually) in exchange for nothing more than a promise by DOJ to close an investigation it could immediately reopen — in other words, for a promise ‘worth nothing but the paper on which it was written.’”
“After today, behind the facade of its promise to close an investigation, the government can lure a party into the false comfort of a settlement agreement, take what it can get, and then reopen the investigation seconds later,” Walker added.
DOJ cheered the decision.
“Real-estate commissions in the United States greatly exceed those in any other developed economy, and this decision restores the Antitrust Division’s ability to investigate potentially unlawful conduct by NAR that may be contributing to this problem,” Assistant Attorney General Jonathan Kanter said in a statement. “The Antitrust Division is committed to fighting to lower the cost of buying and selling a home. I would like to commend the staff of the Antitrust Division and our colleagues in the department for achieving this important result.”