– The National Association of Realtors (NAR) is facing a growing number of antitrust commission lawsuits.
– NAR’s chief advocacy officer, Shannon McGahn, stated that there is no clear legislative solution to these lawsuits.
– NAR has been educating lawmakers about the lawsuits and has received positive feedback from them.
– The Sitzer | Burnett case, which recently went to trial, resulted in a historic verdict against NAR and major real estate franchisors.
– NAR believes that it is not violating the law and is confident in its appeal.
– Craig Cheatham, CEO of The Realty Alliance, questioned why NAR can’t use its political influence to address the lawsuits.
– McGahn explained that because the lawsuits are going through the court system, it’s unclear what legislative action can be taken.
– Cheatham suggested seeking a carveout of the Sherman Antitrust Act for real estate, but NAR does not believe a change is needed.
– NAR’s chief legal officer, Katie Johnson, stated that the way consumers have been served in the past is lawful and continues to be lawful.
– Attendees at the forum questioned how the cases would be analyzed and when NAR would try to move them from per se to rule of reason.
At a forum for reps of 50 large brokerage firms, The Realty Alliance CEO Craig Cheatham asked why the nearly 1.6 million-member trade group can’t use its political influence for an “existential threat.”
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The National Association of Realtors is a lobbying powerhouse, but there’s no clear “legislative fix” to the ever-rising pile of antitrust commission lawsuits launched against real estate organizations and brokerages.
That’s according to Shannon McGahn, NAR’s chief advocacy officer, who spoke at the 50 Large Firm Directors Forum at NAR’s annual conference, NAR NXT, in Anaheim, California, this week. The forum was put on by NAR’s Real Estate Services Advisory Group.
On Oct. 31, after less than two and a half hours of deliberations, a Kansas City jury found NAR, Keller Williams, Anywhere (formerly, Realogy), RE/MAX, HomeServices of America and two of its subsidiaries BHH Affiliates and HSF Affiliates conspired to inflate broker commission rates paid by homesellers, awarding the plaintiffs nearly $1.8 billion in damages, which will be tripled by law to nearly $5.4 billion.
McGahn said that NAR had been educating lawmakers about the suit.
“The No. 1 comment that we’re getting from folks on the Hill is ‘What is going on? Can you brief us on what is happening with the class action suit? How can we better understand the issues?’” McGahn told conference attendees.
“The second comment we get is ‘How can we help?’ The first and most important thing is that they’re educated on what the process looks like and that there’s an appeal that will be in the works and understanding the economic and consumer facts of the case.
“We’ve had incredibly positive feedback from everyone we have met with.”
“What is the conversation internally about a legislative solution to our lawsuit problem?” he asked.
According to McGahn, because Sitzer | Burnett and other, similar suits are going through the court system, it’s unclear what change can be made legislatively to affect them.
“With this being a class action suit before a jury there’s there’s not much that a federal official is going to do in that area,” McGahn said, noting that NAR had been providing lawmakers with information and resources to understand the ramifications of the suit and having discussions around financing buyer representation.
Still, Cheatham pressed. He pointed out that NAR’s political action committee, RPAC, is on track to meet its goals and “flush with money” from member donors.
“We went to the mat on banks and real estate,” Cheatham said. “We were ready to go the mat on mortgage interest deduction [and] the 2008 downturn tax credit. We’ve got this handy lever. I think brokers just want to know: Can we pull that lever in this situation? This is an existential threat for the organization. Is this not a time to try?”
But McGahn reiterated that she wasn’t sure what legislative action was needed “when this is going through a different process” and NAR feels “very confident” about its appeal and that what it is doing is lawful.
The NAR rule Sitzer | Burnett and other suits are challenging under the Sherman Antitrust Act is NAR’s cooperative compensation rule, also known as the Participation Rule, which requires listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated multiple listing service.
Cheatham asked: Why can’t NAR seek a carveout of the Sherman Antitrust Act for real estate?
McGahn repeated that NAR does not believe it is violating the law, so she wasn’t “sure exactly what change would be occurring there.”
Katie Johnson, NAR’s chief legal officer, also stopped by the forum briefly and said NAR would be proving that the “way that consumers have been served over the past 100 years is very lawful and continues to be lawful.”
She told attendees she would take “no questions” and “if you have questions you can call me” and she could address those questions “one-on-one.”
Attendees did end up insisting on a couple of questions, one from a Florida broker who asked if the fact that most brokers in that state were transaction brokers would matter to the cases (Johnson said no, because the cases were about the use of the MLS).
Cheatham also asked at what point NAR would try to move Sitzer | Burnett from being analyzed under per se to rule of reason. Johnson said that would be when the trade group appealed to the Eighth Circuit.
Property Chomp's Take:
The National Association of Realtors (NAR) is facing an "existential threat" as it grapples with a series of antitrust commission lawsuits. At a recent forum for representatives of 50 large brokerage firms, NAR's chief advocacy officer, Shannon McGahn, acknowledged that there is no clear legislative fix for the mounting lawsuits against the real estate organization and brokerages.
The lawsuits, including the Sitzer | Burnett case, have alleged that NAR and major real estate franchisors conspired to inflate broker commission rates paid by home sellers. In October, a Kansas City jury awarded the plaintiffs nearly $1.8 billion in damages, which will be tripled by law to nearly $5.4 billion.
McGahn stated that NAR has been educating lawmakers about the suit and has received positive feedback from them. However, she also noted that there is currently no legislative action that can be taken while the cases are still going through the court system.
Craig Cheatham, president and CEO of brokerage network The Realty Alliance, pressed McGahn on the possibility of a legislative solution. Cheatham highlighted NAR's political action committee, RPAC, which is "flush with money" from member donors and has been successful in lobbying for other issues in the past.
However, McGahn reiterated that NAR does not believe it is violating any laws and is confident in its appeal. The specific NAR rule being challenged under the Sherman Antitrust Act is the cooperative compensation rule, which requires listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated multiple listing service.
McGahn also mentioned that NAR has been discussing financing buyer representation with lawmakers, but Cheatham questioned why NAR couldn't seek a carveout of the Sherman Antitrust Act for real estate.
Katie Johnson, NAR's chief legal officer, briefly joined the forum and assured attendees that the organization would prove that the way consumers have been served over the past 100 years is lawful and continues to be lawful. However, she declined to take questions and directed attendees to contact her directly.
In conclusion, NAR is facing a significant challenge with the antitrust commission lawsuits, and there is no clear legislative solution at this time. The organization is confident in its appeal but will need to navigate the legal process to determine the outcome of these cases.