Lawsuit against Re/max focuses on competition in real estate industry

Nashville, TN – Large national real estate firm RE/MAX is going to have to settle millions of dollars worth of claims and alter certain problematic business practices [1].

Re/max was the focus of lawsuit for anti competition practices

RE/MAX, one of the defendants in the Sitzer/Burnett and Moehrl class-action lawsuits challenging real estate compensation fees, has reportedly reached a settlement with the plaintiffs. Under this agreement, RE/MAX is set to pay $55 million to resolve all claims against the company. This development follows a recent settlement by another defendant, Anywhere Real Estate (formerly Realogy Holdings Corp.), which agreed to pay $83.5 million.

The lawsuits in question also name the National Association of REALTORS® (NAR) as a defendant. NAR has stated its intention to continue advocating for pro-consumer and pro-competitive local Multiple Listing Service (MLS) broker marketplaces, emphasizing the importance of allowing listing brokers and their clients to determine buyer agent compensation tied to MLS listings.

RE/MAX has denied the allegations made against it but indicated that it chose to settle to eliminate uncertainties related to ongoing legal proceedings. In addition to the financial settlement, RE/MAX has agreed to implement changes in its business practices, including discontinuing the requirement for sellers to pay the buyer agent’s commission. Anywhere Real Estate, the parent company of prominent real estate brands such as Coldwell Banker, Century21, Sotheby’s International Realty, and Corcoran, has also committed to these new business practices.

NAR has affirmed its commitment to defending itself in the lawsuits, emphasizing its belief in the lawfulness of the rules under scrutiny. NAR argues that local MLS broker marketplaces foster equity, efficiency, transparency, and market-driven pricing for both home buyers and sellers. It points out that the practice of listing brokers paying buyer broker commissions attracts more participants to these marketplaces, benefiting sellers by creating a larger pool of potential buyers. For buyers, this model reduces closing costs, ensures professional representation, and broadens access to homeownership.

The core contention of the lawsuits is that NAR’s rules violate antitrust laws by inflating fees paid to buyer’s agents, mandating listing agents to compensate buyer’s agents for MLS property listings. NAR, however, asserts that these lawsuits misrepresent association rules as anticompetitive. The rules, according to NAR, guide listing brokers in determining compensation for buyer’s agents in consultation with their clients. Furthermore, buyer’s agents have the freedom to negotiate compensation with listing brokers independently, separate from MLS listings. NAR and MLS entities have no role in setting broker commissions.

NAR encourages its members to utilize clear and written buyer representation agreements, emphasizing the importance of explaining that commissions are established through negotiations between brokers and their clients. REALTORS® play a crucial role in guiding consumers through the legal, community, and financial aspects of property transactions.

NAR defends the U.S. model of independent, local broker marketplaces as the most efficient and transparent worldwide, devoid of hidden or extra costs, and offering comprehensive, verified information. The organization remains resolute in its commitment to presenting its case in court.

What kinds of illegal business practices may limit competition in the real estate market?

Illegal business practices that limit competition in the real estate market can have significant negative impacts on consumers, competitors, and the overall health of the industry. These practices often violate antitrust laws and are subject to enforcement by regulatory bodies. Here are several types of illegal business practices that can restrict competition in the real estate market:

• Price Fixing: Price fixing occurs when competitors agree to set specific prices for their services or products. In the context of real estate, this could involve real estate agents, brokers, or firms conspiring to set standardized commission rates for their services. This eliminates price competition and artificially inflates costs for consumers.
• Market Allocation: Market allocation schemes involve competitors dividing up markets or customers among themselves. In the real estate industry, this could manifest as firms or agents agreeing not to compete for clients in certain geographic areas or demographic segments. This practice limits consumer choice and stifles competition.
• Group Boycotts: Group boycotts occur when competitors collaborate to exclude a particular competitor from the market. In real estate, this could involve multiple firms or agents refusing to work with a specific brokerage or individual, preventing them from participating in transactions. Such actions can be anticompetitive and harm consumers.
• Tie-In Arrangements: Tie-in arrangements force consumers to purchase one product or service as a condition for obtaining another. In real estate, this might involve requiring clients to use affiliated services, such as mortgage financing or title insurance, in conjunction with buying or selling a property. These arrangements limit consumer choice and can lead to higher costs.
• Exclusive Dealing Contracts: Exclusive dealing contracts compel customers to exclusively use one particular supplier or service provider. In real estate, this could involve a seller or buyer being forced to work exclusively with a particular real estate agent or firm. This limits the ability of consumers to explore alternatives.
• Misrepresentation and Fraud: Engaging in fraudulent or deceptive practices, such as misrepresenting property values or withholding crucial information, can distort the market and harm both buyers and sellers. These actions undermine trust and confidence in the real estate market.
• Bid Rigging: Bid rigging occurs when competitors collude to manipulate the bidding process, ensuring that a specific participant wins contracts or listings. In the real estate context, this could involve conspiring to control the selection of brokers for properties. Bid rigging reduces competition and potentially inflates costs.
• Discriminatory Practices: Practices that discriminate against certain groups of consumers based on race, ethnicity, gender, or other protected characteristics are illegal and harmful. Discriminatory practices limit opportunities for minority populations and can perpetuate inequality in the real estate market.

These illegal business practices not only harm consumers by limiting their choices and potentially increasing costs but also undermine the principles of fair competition and market efficiency. Regulatory agencies and antitrust laws are in place to identify and penalize those engaging in such practices, with the aim of fostering a competitive and transparent real estate market that benefits both buyers and sellers. It is crucial for consumers and industry professionals to be aware of these issues and report any suspicious or illegal activities to the appropriate authorities.

Business attorneys are available in Nashville, Tennessee

The Law Office of George R. Fusner is a firm that handles various business matters for local clients in the Nashville area. 

USAttorneys.com is a service that works with people who need to find lawyers. Those who need assistance with a referral can call 800-672-3103

Firm contact info:

The Law Office of George R. Fusner

7104 Peach Court, Brentwood TN 37027

615-251-0005

gfusnerlaw.com

Sources:

1. https://www.nar.realtor/magazine/real-estate-news/remax-settles-claims-in-compensation-lawsuits