Northern District Of California Finds Exclusive Real Estate Service Is Improper Plaintiff To Enforce Antitrust Claims Against Competitor Trade Association
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  • Northern District Of California Finds Exclusive Real Estate Service Is Improper Plaintiff To Enforce Antitrust Claims Against Competitor Trade Association

    On August 16, 2021, Judge Vince Chhabria of the United States District Court for the Northern District of California dismissed, with prejudice, a complaint alleging that the dominant national real estate listing service violated Section 1 of the Sherman Act by prohibiting realtors from marketing a property to the public unless they also list the property on the service.  Top Agent Network, Inc. v. National Ass’n of Realtors, No. 20-cv-03198-VC (N.D. Cal. Aug. 16, 2021).  The Court found that, although plaintiff—a competing real estate listing service—may have alleged an antitrust violation, plaintiff did not have antitrust standing to bring the claim.

    Defendants are the National Association of Realtors (“NAR”) and its San Francisco affiliate.  NAR is a national trade association of realtors with chapters throughout the country that each run a regional “multiple listing service” (“MLS”), which is a subscription-based online database for realtors to advertise homes for sale.  Plaintiff is Top Agent Network (“TAN”), a company that operates a similar, but more exclusive, real estate listing service, as well as a matchmaking service that pairs a seller’s agent with a buyer’s agent.  While nearly all licensed realtors in the United States pay for subscriptions or membership to their local NAR-affiliated MLS, TAN makes its independent listing service available to only the top ten percent of agents by sales volume and has about 10,000 members.  This means that home sellers can use TAN to limit the publicity surrounding the sale of their home.  Due to NAR’s market-wide reach and the fact that agents typically must use an MLS to sell enough homes to become “top agents” and gain TAN access, nearly all TAN members are also MLS subscribers.

    In 2019, defendants implemented a policy that requires subscribers to list a home on their regional MLS if they publicly market the property elsewhere.  Agents who violate the policy risk being banned from the MLS and thus losing access to a major source of business.  Plaintiff alleged that defendants’ policy is explicitly intended to eliminate competition from alternative listing services and effectively coerces realtors to refrain from marketing properties on off-MLS services.  Plaintiff asserted that the policy also results in reduced consumer choice in the market for home sales because purchasers and sellers are less able to hire realtors who can help them buy or sell homes without using an MLS.

    Analyzing these claims at the motion to dismiss stage, the Court noted that plaintiff made a reasonable argument that the policy was anticompetitive.  However, Judge Chhabria found that, as a threshold matter, plaintiff did not have antitrust standing because it failed to show it had suffered antitrust injury flowing from that allegedly anticompetitive policy.  Specifically, plaintiff’s asserted harm was that NAR’s policy reduced the demand for its independent listing service, which caused TAN to lose members, particularly in markets dominated by a NAR-affiliated MLS.  However, the Court found that TAN “could never allege an antitrust injury from the Policy, because TAN’s business model is itself anticompetitive in a way that the Policy would tend to remedy.”  That is, TAN’s business model of providing an “exclusive listing service for elite real estate agents” reduces the information available to the public and, therefore, “when a seller’s agent lists a home on TAN without listing it on the local MLS, competition for that home is decreased.”

    In contrast, the Court reasoned that NAR’s policy actually increases competition and consumer choice with respect to its impact on exclusive listing services like plaintiff’s, because it ensures that homes listed by TAN members are available to buyers represented by both TAN and non-TAN realtors.  By increasing dissemination of information about available properties throughout the market for home sales when it would otherwise be available only to an exclusive subset of realtors, defendants’ policy produces some pro-competitive effects “even if its breadth may render it problematic overall from an antitrust standpoint.”  Thus, despite the fact that plaintiff suffered an alleged loss of membership due to the policy, plaintiff’s injury “flows from an aspect of the policy that is not anti-competitive.”

    Judge Chhabria indicated that a NAR competitor offering a non-exclusive listing service could have standing to bring antitrust claims that defendants’ policy and market dominance reduces consumer choice and causes it to lose members, and he suggested that defendants limit their policy to “exclusive listing services.”  Dismissing the case with prejudice, the Court highlighted that “one of the virtues of the antitrust standing analysis is that it prevents … a plaintiff [with an anticompetitive business model] from deploying antitrust law as a shield for its own anticompetitive activities.”

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