Key Details:
- A new ruling by the U.S. Appeals Court on Friday, April 5, 2024, allows the U.S. Department of Justice (DOJ) to reopen its investigations into the National Association of Realtors’ (NAR) commission rules.
The appeals court just gave the Department of Justice (DOJ) the green light to investigate the National Association of Realtors (NAR)—specifically its rules around commission sharing.
Just when it seemed like we were entering a calmer period in the real estate industry, a new ruling by the U.S. Court of Appeals for the District of Columbia just turned up the heat.
Timeline of DOJ vs. NAR Investigation
This is the latest development since the DOJ and NAR agreed to a proposed settlement in 2020. Here’s a quick summary of the DOJ Investigation of NAR Practices:
- 2018: DOJ’s Antitrust Division starts a civil investigation into specific policies of the National Association of Realtors (NAR) in response to a complaint from an industry participant.
- April 2019: DOJ issues the first Civil Investigative Demand (CID No. 29935), seeking information on commission-related NAR practices including the Participation Rule.
- June 2020: DOJ issues the second CID (CID No. 30360), seeking information on NAR’s newly adopted Clear Cooperation Policy, among other things.
- July 2020: Negotiations between NAR and DOJ begin for a possible settlement. NAR proposes that the DOJ hold off on investigating the Participation Rule for ten years; DOJ refuses.
- November 2020: DOJ and NAR reach a settlement, entering a Proposed Consent Judgment that addresses several NAR policies excluding the Participation Rule and Clear Cooperation Policy. DOJ sends a letter to NAR, closing the investigation into the Participation Rule and Clear Cooperation Policy. The Proposed Consent Judgment is filed in district court, along with a Complaint and Stipulation and Order.
- July 2021: DOJ withdraws the Proposed Consent Judgment after failed negotiation attempts. DOJ issues a new subpoena (CID No. 30729), seeking information on the Participation Rule, Clear Cooperation Policy, and other policies. NAR petitions the district court to set aside CID No. 30729, arguing it violates the settlement agreement.
- January 2023: The district court grants NAR’s petition, stating CID No. 30729 breaches the settlement agreement.
- April 5, 2024: DOJ appeals the district court’s decision.
From the court’s ruling:
“In our view, the plain language of the disputed 2020 letter permits DOJ to reopen its investigation. We therefore reverse the judgment of the district court.” Opinion for the Court filed by Circuit Judge PAN
Split Decision
After arguments were made in front of three judges, the lone dissenting opinion came from Judge Justin R. Walker, who insisted a reopening of the DOJ’s investigation would violate a contract they knowingly entered into.
“As in every contract, each side gained something, and each side gave something up. The Realtors agreed to give up four policies that DOJ considered anticompetitive. In exchange, DOJ promised that it had ‘closed’ its investigation into two other policies.”
In a statement, NAR spokesman Mantill Williams said, “As articulated by Judge Walker in his dissenting opinion, NAR believes that the government should be held to the terms of its contracts. We are reviewing today’s decision and evaluating next steps.”
With the DOJ now free to continue its investigations into NAR commission-sharing policies, stay tuned as we learn more about NAR’s response and what this could mean for the industry.
