Clear Cooperation plaintiff faces 'an uphill road'
A challenge to NAR's policy toward private listings will proceed in the courts, but claims of antitrust violations and consumer harm may be hard to prove.
Key points:
- Prior to the Clear Cooperation policy, which took effect three years ago, private listing companies were growing.
- NAR claims the policy protects consumers, while former private listing company PLS asserts its consumers — agents and brokers — were harmed by the policy.
Calling the Clear Cooperation policy a critical protection for consumers, the National Association of Realtors expressed confidence that it will succeed in a lawsuit challenging a mandate for property listings to be published on MLSs.
At issue is a decision earlier this month by the nation's highest court to send a lawsuit by ThePLS.com — a private pocket listings service — back to federal district court in California.
The suit alleges that NAR and a trio of large MLSs — California Regional MLS, Bright MLS and Midwest Real Estate Data — violated the federal Sherman Antitrust Act as well as state antitrust laws with the adoption and implementation of the Clear Cooperation policy.
PLS ran a website for agents that showcased listings sellers did not necessarily want published on the MLS. Historically, the MLS has served as the database of record for available properties. PLS claimed its business was stymied when NAR's Clear Cooperation policy was enacted.
Last April, NAR petitioned the Supreme Court after the Ninth Circuit Court of Appeals allowed antitrust claims by PLS, now known as TheNLS.com, to proceed. A U.S. district court in California previously dismissed the complaint. The Supreme Court remanded the suit back to the lower courts on Jan. 9.
Troy Green, director of media communications at NAR, said Wednesday that "as a leading advocate for homeownership, NAR determined the Clear Cooperation policy" is necessary for consumer protection.
"As was noted by the federal judge who initially dismissed this case, the [policy] provides consumers with 'access to more information regarding market conditions, enabling them to make better informed choices about the bundle of real estate brokerage services that will best serve their needs,'" said Green.
Consumer benefit — or consumer harm?
The NAR policy, which took effect in January 2020, requires that within one business day after a property is publicly marketed, it must be published on the MLS.
"NAR has taken the stance that the MLS has a great market distribution function, and to the extent it is not representative of the market, it loses some of its value and consumer benefit," said Russ Cofano, CEO of Collabra Technology. Cofano also has served as an attorney and industry legal counsel.
"What the other co-defendants argued is that antitrust laws are designed to prevent harm to consumers. And they argued that the consumers are buyers and sellers in this case," he said.
"And one of the reasons that the court had dismissed the case was because there's no showing that buyers and sellers themselves were harmed."
Calling antitrust law cases extremely complex, Cofano said that the bar is set high for PLS to win. "It is an uphill road for PLS to prove that they were a victim of a violation of federal and state antitrust laws," Cofano said.
But the Ninth Circuit Court had decided that consumers can be businesses. "This is a big change in the case," Cofano said. "So the question is not that buyers and sellers were necessarily harmed, but were the consumers of the allegedly boycotted services — that being brokers and agents who wanted to use these private networks — harmed by the Clear Cooperation policy?"
Prior to the policy, there was a lot of growth in private listing companies, especially as the real estate market heated up during the pandemic.
"Pocket listings have always been around," Cofano said. "Historically, they have been with sellers who do not want it known that they are selling their property. There was something distinctive about the property that they just did not want broad distribution."
The policy includes an exemption for so-called office exclusives. The exemption allows for a brokerage to market a listing within its firm and disseminate it to agents within that firm. Some argued that the exemption favored large companies with thousands of agents.
"There were a lot of agents that were in these networks, because they found some benefit to their business. They were able to market these properties to a smaller circle, and they felt that was beneficial," Cofano said.
But he added that he expects a key argument in the case will be whether the interests of a comparatively few agents who want pocket listing networks outweighs the interests of the MLSs representing the inventory of all available properties.