The Supreme Court will decide within a week whether to revisit discount brokerage REX Real Estate’s case against Zillow and the National Association of Realtors over NAR’s rule allowing multiple listing services to segregate MLS listings from other properties.
Real Estate Exchange Inc. (REX) lost its 2021 challenge of NAR’s no-commingling rule, a decision that was upheld by the Ninth Circuit Court of Appeals in March.
Attorneys for the defunct brokerage petitioned the Supreme Court on Sept. 15 to review those cases, and the high court is scheduled to decide whether to take up the case by Oct. 20.
“This case is extraordinarily important to homeowners and the future of business associations,” attorneys for REX argued. “Transactions in residential real estate are one of the largest economic activities in the United States, totaling $2 trillion each year. NAR’s 1.4 million members handle the large majority of these home transactions, making it one of the nation’s most economically significant business associations.”
NAR repealed the optional no-commingling rule in June, and the Supreme Court typically declines to review cases unless there are Constitutional issues or differences of opinion among appeals courts.
Attorneys for REX maintain the high court must weigh in on conflicting appeals court decisions on whether an association’s optional rule can violate the Sherman Antitrust Act.
While the Ninth and Tenth Circuit Courts of Appeal have held that optional rules are immune from the Sherman Act, the First, Third, and Fifth circuits have held association rules can be a conspiracy, even if optional.
NAR and Zillow have indicated they do not intend to submit responses to REX’s petition unless requested by the court.
“Local MLSs play a key role in fostering transparent, competitive, and fair housing markets by delivering consumers the most accurate and up-to-date information on home listings,” NAR said in a statement to Inman. “As the district court and the Ninth Circuit Court of Appeals both affirmed, NAR’s optional no-commingling rule was not an antitrust violation. While the optional rule is no longer in effect, NAR remains committed to protecting the benefits MLSs provide agents, consumers, and the industry.”
But two groups have weighed in to provide support to REX in the form of “friend of the court” amicus briefs: Consumer Advocates in American Real Estate (CAARE) and the Antitrust Education Project.
CAARE, whose Executive Director, Douglas Miller, developed the legal theories behind the first bombshell commission lawsuit, Moehrl v.NAR, was critical of the Ninth Circuit’s ruling, saying it “invents a new defense to an unlawful conspiracy that appears nowhere in the statutory text.”
“Trade associations often are used to perpetrate antitrust violations,” CAARE attorneys argued. “Trade associations inherently are combinations among competitors and involve joint decision making among competitors. Any promulgation by a trade association of a rule or policy is inherently a product of concerted action by competitors. Any rule or policy so promulgated that adversely affects competition can be viewed as joint anticompetitive action.”
The Antitrust Education Project, a foundation staffed by lawyers and legal scholars, argues that there’s another bigger issue in play — a principle known as the consumer welfare standard.
Recognized by the Supreme Court since 1979, the consumer welfare standard has been used to weigh the costs and benefits of antitrust law, based on the assumption that the goal of such laws is to create a more efficient marketplace by fostering innovation and providing more choices for consumers at lower prices.
The Antitrust Education Project (AEP) argues that the Biden and Trump administrations have abandoned the consumer welfare standard by no longer using it as a principle in Federal Trade Commission regulatory actions.
“The standard’s simplicity is its virtue, based on calculable effects on consumers,” AEP President Robert H. Bork wrote in an Oct. 14 op-ed for American Greatness. “But it has long been resented by progressives because it restrains the scope of action by politicians and regulators, limiting their ambitions.”
In ruling against REX, the Ninth Circuit Court of Appeals found Zillow and NAR couldn’t be in violation of antitrust law because NAR’s no-commingling rule is optional.
“The court insisted on evidence of a binding agreement between Zillow and NAR, as if cartels would put collusion in writing,” Bork wrote.
“The Ninth Circuit ignored that for over a century, antitrust law has recognized informal agreements as conspiracies without specification that they are binding (handshakes, parallel conduct with plus factors, etc.),” Bork complained. “In short, the Ninth Circuit threatens the consumer welfare standard by legalizing tacit collusion against the consumer if it is labeled or considered optional.”
Zillow has moved on to other legal challenges, including Compass’s antitrust complaint over its listing ban, CoStar’s copyright infringement lawsuit, a class-action suit targeting its Premier Agent Flex referral program and an FTC suit.
Editor’s note: This story has been updated with a statement from the National Association of Realtors.
