Update on DOJ Statement of Interest in MLS PIN Litigation

Last night (Thursday, February 14, 2024), the Department of Justice (DOJ) filed the attached Statement of Interest in the Nosalek v. MLS PIN, et al., which is a lawsuit challenging the rule and practice of cooperative compensation between listing and buyer brokers. MLS PIN is not wholly owned by REALTOR® associations and therefore is not required to follow NAR’s MLS guidelines. MLS PIN does, however, have a rule that requires listing brokers to make an offer of compensation to buyer brokers. To be clear, the DOJ does not have veto rights over class-action settlements, so the court can still approve the settlement over the DOJ’s objection.

The DOJ’s submission is a broadside attack on how homes have been bought and sold in the United States for decades. Specifically, the DOJ argues that listing brokers and sellers should be prohibited from offering compensation to buyer brokers, thereby seeking to eliminate the choice sellers and listing brokers currently have as to whether to offer compensation for buyer representation.

This shows, as NAR has long said, that the DOJ wants to regulate what sellers and their listing agents are allowed to do with their own money and homes. We believe the DOJ is wrong and that the government fundamentally misunderstands the market. Prohibiting offers of compensation will harm consumers, including by making it more costly for home buyers to access capable representation and by reducing fair access to housing. Notably, the DOJ does not provide any new or original analysis to support its opinion—it merely wants to substitute its own policy judgments for how the market has evolved through free market competition to best serve consumers. The DOJ’s proposal would also invalidate the numerous state statutes which explicitly permit offers of compensation to buyer brokers.

For years, NAR has advised members, MLSs, and corporate defendants that the DOJ seeks relief beyond the rule changes proposed in the MLS PIN settlement and summarized below. As illustrated in this Statement of Interest, the DOJ’s ideas are short-sighted and overly simplistic. They ignore harms that will result to homebuyers — especially first-time, low-income, minority, or veteran homebuyers — and gamble with the American economy.

These are challenging times, and NAR has the unique responsibility to consider these issues holistically, taking into account the complexities involved in how consumers buy and sell homes. The tough decisions NAR has made regarding the rule and litigation strategy are based on the insights we have concerning the views of all of stakeholders, and we remain steadfast in our resolve to protect free market competition and promote fair access to home ownership for all Americans.

I’ve provided high-level takeaways from DOJ’s submission below, but I encourage you to read the document in its entirety. As you will see, it shows that the DOJ’s focus is on the practice of how sellers and their brokers advertise their homes in the free-market — which goes beyond the scope of NAR and its model rule. Additionally, while NAR is not a party to this litigation, the DOJ’s position in this case is relevant to how NAR, MLSs, buyers, sellers, and brokers address cooperative compensation now and in the future. We will continue to work, in and out of court, toward the best possible outcome for property owners in America and the professionals who represent them.

High-level Takeaways from the DOJ’s Statement of Interest

• The proposed change to MLS PIN’s cooperative compensation rule included: (i) making the cooperative compensation rule optional, (ii) allowing the offer to be as little as zero-dollars, and (iii) having the offer made from the seller and not the listing broker. The DOJ calls these “cosmetic changes” that are inadequate because it “still gives sellers and their listing brokers a role in setting compensation for buyers’ brokers.”
•  The DOJ objects that the proposed modified rule “gives decision-making authority for setting buyer-broker commissions to sellers, and it rewards buyer brokers a fixed amount regardless of the services buyers actually receive.”
•  The DOJ uses the rule changes enacted by Northwest MLS (NWMLS) in 2019 and 2022 in support of its position that the settlement should be denied because NWMLS rule changes “mirror the proposed settlement here.”
• “Neither [NWMLS] revision appears to have led to a decrease in buyer-broker commissions.”
• “As NWMLS’s experience reflects, MLS PIN could voluntarily adopt the settlement’s proposed changes without meaningfully altering commission-setting practices or increasing competition.”
•  The DOJ objects to the proposed modified rule change allowing offers of compensation to be zero, rather than a penny because:
• “If virtually no sellers make one-cent offers of compensation to buyer brokers now, they are unlikely to make zero-cent offers under the new Rule.”
• Following Bright MLS’s announcement that it was allowing zero to be offered as compensation, ten other MLSs (listed in Appendix B) also announced that change to their MLS and “[t]hat many MLSs have recently allowed zero-compensation offers unilaterally—without receiving any release of claims from injured home sellers or buyers—confirms that the proposed injunction provides little benefit.”
•   “To address the competitive problem alleged by Plaintiffs, the Settling Parties could agree to an injunction that prohibits offers of buyer-broker compensation by MLS PIN participants. If MLS PIN rules prohibited sellers and listing brokers from deciding what buyer brokers would be paid, sellers would be responsible for determining only the compensation of their own broker in the listing contract, while buyers would be responsible for determining the compensation of their own broker in a buyer-broker representation contract.”
•  The DOJ objects that the proposed modified rule would be in effect for at least three years because such obligation “could unnecessarily interfere with the ability of the United States, or other government enforcers, and private parties” to take actions against the modified rule.