Two new amicus briefs—legal briefs filed by a party who is not part of a legal proceeding but is acting in support of one of the involved parties—were filed on April 4 in the Nosalek v. MLS Property Information Network, Inc. (MLS PIN) et al commission lawsuit, by the Council of Multiple Listing Services (CMLS) and Northwest Multiple Listing Service (NWMLS).
The amicus briefs filed were in response to the DOJ’s statement of interest (SOI). An excerpt from the statement read, “Broker-members of MLS PIN likely collected more than $2 billion in fees in 2022 for residential real estate in Massachusetts. These stubbornly high broker fees owe in large part to rules and practices perpetuated by multiple listing services like MLS PIN.”
The initial complaint, filed in Massachusetts District Court, is that big brokerages, NAR and MLS PIN, conspired to inflate commissions paid by sellers, mostly through the “participation rule,” requiring mandatory offers of compensation to buyer agents.
The case was partially settled in favor of plaintiffs who claimed to have worked with MLS PIN agents and paid inflated commissions, although the now proposed policy changes by MLS PIN are awaiting Department of Justice (DOJ) review and approval as DOJ considers reopening its investigation. The MLS PIN proposed policy changes in question include requiring participating brokers to obtain certifications ensuring that seller clients understand that they are not required to offer compensation to buyer brokers nor compensate buyer brokers. MLS PIN also agreed to change its rule regarding cooperative compensation so that the listing broker is not required to offer compensation on a listing; any offer made must come directly from the seller, at their discretion.
The SOI argues that the above settlement policies would not deliver value to real estate brokerage consumers, comparing them to similar policies adopted by NWMLS in Washington state in 2019 and 2022.
MLS PIN is one of CMLS’ 225 North American MLS members. The filing states that CMLS is taking “the extraordinary step of filing an amicus curiae brief” in order to oppose DOJ’s effort to “impose a policy preference on the U.S. residential real estate market that lacks empirical support, conflicts with principles of the Sherman Act, and has negative practical implications for consumers which DOJ has not taken into account.”
CMLS argues that its member MLSs—including MLS PIN—provide accurate information about current listings, “creating a real estate information resource of unmatched transparency,” and that the DOJ lacks evidence for their criticism of the proposed settlement policies, violating principles of the Sherman Act, an 1890 antitrust law which allows free competition between those engaged in commerce. CMLS also argues that offers of compensation to buyer brokers is lawful.
“MLS databases are complete in that each MLS compiles a list of practically every home for sale and previously for sale in the region; timely in that each MLS requires that brokers enter and update listings, often within twenty-four hours of any status change; accurate in that each MLS has rules imposing penalties on participating brokers who do not put accurate information into the service, creating a powerful incentive to share accurate information,” states CMLS in the brief.
Additionally, CMLS claims that the court should not credit the DOJ’s upcoming counters, which it claims suffer from “three critical flaws”:
- The timing of the NWMLS rule changes “exposes the inability of DOJ’s empirical evidence to evaluate the changes. Instead, data that is or could have been readily available to DOJ show that the NWMLS 2019 rule change caused commission offers in NWMLS to decrease faster than they had in the prior two decades.”
- The CMLS brief argues that the DOJ’s policy preference would undermine the competition-enhancing principles of the Sherman Act, stating that “the Statement of Interest (SOI) proposes that MLS PIN should prohibit a wide swath of brokerage business practices—offers of compensation from sellers and brokers to buyer brokers—that are lawful throughout the MLS PIN service area. MLSs have historically faced antitrust litigation when they have adopted restrictions on lawful brokerage practices.”
- The brief also argues that the DOJ’s policy preference will negatively impact “tens of thousands of consumer transactions” in the MLS PIN service area, as well as millions of transactions nationally. “DOJ incorrectly predicts a glitchless transition without accounting for the complexity of the real estate transaction (and without citing any sources).”
NWMLS fires back against DOJ critique in amicus brief
The NWMLS amicus brief strongly rebuts the DOJ’s “ill-informed, ill-supported critique” of the organization’s 2019 rule changes, which NWMLS claims “ushered in ahead-of-their-time enhancements to transparency, consumer choice, and opportunities for negotiation.”
The Washington-based NWMLS, which counts 2,200 brokerage firms among its membership, claims that the DOJ’s critique is “based on a highly flawed analysis of woefully incomplete data,” and asserts that the DOJ completely misunderstands the purpose of the MLS rule changes and their positive impacts.
According to the filing, the DOJ “also cynically mischaracterizes NWMLS’s description of its rule changes to eliminate mandatory compensation and permit publication of offers of compensation.” In an eight-minute video describing the 2019 rule changes, NWMLS tells members that their “business providing brokerage services will continue as usual,” a statement the DOJ is now leveraging against NWMLS.
As NWMLS states in the filing, “DOJ takes this comment out of context, without acknowledging the balance of the video explaining the purpose and significance of the rule changes for brokers and consumers alike, including greater flexibility, transparency, and innovation.”
NWMLS rule changes consist of the following, as stated in the amicus filing:
- The listing agreement separates the seller’s compensation of the listing firm from any compensation the seller might choose to offer to the buyer’s broker.
- Any compensation offered to the buyer’s broker is determined and offered solely by the seller, as opposed to “commission sharing” between the brokerage firms.
- Buyer broker compensation is paid as offered in the listing if accepted by the buyer on behalf of the broker in the purchase and sale agreement, or as modified by the parties in the purchase and sale agreement.
- The term “buyer broker compensation” is prominently displayed on the first page of the purchase and sale agreement, and is open to negotiation by the buyer and seller like any other contract term. NWMLS also prepared an addendum to the purchase and sale agreement giving the parties various options for negotiating any buyer broker compensation.
- NWMLS revised its buyer representation agreement to include alternatives for buyers and their brokers for compensation that depend on the terms of the listing.
According to the filing, NWMLS claims that the DOJ is basing its critique of the rule changes on the analysis of DOJ data scientist, Erik A. Schmalbach, who found that buyer broker compensation did not decrease faster within the NWMLS service area after the rule revisions, thereby finding the rule changes “ineffective.” NWMLS points to several flaws in Schmalbach’s analysis and draws attention to the fact that the findings were based on a single anonymous source.
“NWMLS cooperated with DOJ and provided all non-privileged information and documents requested by DOJ,” states the filing. “But, DOJ chose to use none of this information in connection with its SOI. Moreover, NWMLS understands that DOJ served CIDs to other real estate firms in NWMLS’s service area, but chose not to use information from these additional resources.”
The filing also claims that the analysis took place in too short a time frame to be viewed as accurate.
Closing out the brief, NWMLS referenced a recent statement from the Consumer Federation of America to support its argument. “…using limited data from a single brokerage firm in a very short time period, DOJ declares NWMLS’s changes to be ineffective. Evolution takes time. As the Consumer Federation of America observed regarding the recent settlement by the National Association of Realtors of claims similar to this case, the impact of significant rule changes takes time, ‘perhaps several years.'”
This is a developing story. Stay tuned for ongoing updates.
