It took several years. NAR refused to settle a 2019 class action case alleging anti-competitive conduct, which went to trial before a federal judge in Kansas City. In October, a jury awarded the plaintiffs
$1.8 billion in damages, just for home sellers in Missouri. (The sellers brought the case, saying that they shouldn’t be forced to pay out the buyers’ agents.) Because it’s an antitrust case, the judge was able to triple those damages to $5.4 billion if he wanted.
The same lawyers in the Missouri case quickly filed a national class action, and there were almost a dozen other lawsuits teed up. For context of the liability at play here, another case involving 20 large housing markets was set for trial shortly. If it were decided in the same manner as the Missouri case, damages could reach
$40 billion. NAR had no available funds to even pay the Missouri damages, let alone other ones.
So they decided to settle. The fine of $418 million is in many ways the trivial part; NAR also agreed to eliminate the cooperative commission rule, end the requirement that brokers subscribe to the MLS, and mandate that all fee arrangements between buyers and agents be put down in writing. This should end most lawsuits over commissions, and come into effect by this summer. (The broker HomeServices of America, which is a Warren Buffett company, is still fighting this out in court, which should tell you something about
America’s cuddliest billionaire.)
THIS WILL UNLOCK COMPETITION in a closed market. I’d expect services offering discounted rates or flat fees for real estate sales. And buyers may not have agents at all, simply someone to represent their interests at closing. You likely haven’t been to a travel agent in the last 20 years because you can do it yourself online. That’s what we could potentially see for homebuyers in the very near future.
Whatever results will require antitrust oversight. A large tech platform like Amazon or Google could undercut the entire market to gain share, and then recoup down the road when they’re the only option in town. Regulators will have to remain involved to ensure real estate agents don’t just shift from one cartel to another.
This will also likely lead to a mass exodus of agents from the real estate business, which for many was a side hustle of relatively easy money. Three million Americans have real estate licenses in America, compared to about 48,000 in the U.K., which has one-fifth the population. There are about 1.5 million active NAR realtors, and many of them will now have little reason to stay with the lobby shop. That’s good news for weakening the power of an organization that was influential enough in Washington to keep this collusive arrangement in place. And it means that other measures to improve the housing market for Americans, like incentives to add housing supply, won’t be subject to as powerful a lobby for the status quo.
(By the way, NAR’s past president, Kenny Parcell,
resigned amid sexual harassment allegations last August; his replacement, Tracy Kasper, spent about four months in the top slot before
resigning after being threatened with blackmail. It’s not exactly a tip-top operation poised to weather this storm.)
Nobody wants to see a million jobs or more incinerated. But an economy predicated on middlemen isn’t beneficial or stable. Real estate agents didn’t really get rich from the commission arrangement, because higher home prices lured more agents into the market. Fewer agents mean that the ones who are honest, hard-working, and good at their jobs will thrive, with lower rates but more activity. The brokers and NAR, who control the listing services, were the true beneficiaries of this cartel, and squeezing them out of the system will help everyone else.
An old settlement of a price-fixing case against NAR
blocked the newly aggressive leadership at the Justice Department’s Antitrust Division from bringing an unfair competition case. (DOJ has been
issuing strong briefs in private cases.) But “private attorneys general” helped right the wrongs in this market, thanks to the opportunity afforded under our antitrust laws. That will come in handy as even more hidden forms of price-fixing, embedded in algorithms and other forms of technology, proliferate.
We tend to think of inflation as the exclusive province of monetary policy, leaving it up to technocrats to twist dials on interest rates to manage prices. This settlement shows that cartel behavior is both rampant and often beyond the purview of central bankers. Strong oversight by the public, both through their elected representatives and through their own powers, is needed to counteract this growing area of overstuffed prices.
these dikkheads haven't earned that since Redfin took off
