Central District Of California Forecloses Realtors’ Antitrust Suit
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  • Central District Of California Forecloses Realtors’ Antitrust Suit
     
    02/18/2021
    On February 3, 2021, Judge John W. Holcomb of the United States District Court for the Central District of California dismissed a complaint alleging that real estate listing services conspired with a national realtors association to exclude a competitor from the market.  The PLS.com, LLC v. The National Association of Realtors, et al., 2:20-cv-04790 (C.D. Ca.  Feb. 3, 2021).  Plaintiff, a listing service for off-market properties, alleged that three real estate listing services—Bright MLS, Inc. (“BrightMLS”), Midwest Real Estate Data, LLC (“Midwest RED”), and California Regional Multiple Listing Service, Inc. (“Cal Regional MLS”)—conspired with The National Association of Realtors (“NAR”) to eliminate them from the market in violation of Section 1 of the Sherman Act and California’s Cartwright Act.

    Across the United States, there are hundreds of multiple listing services (“MLS”) that centralize the real estate listings within particular markets.  Real estate professionals pay a fee to access each MLS and can add properties for sale or search listings that correspond to a home buyer’s preferences.  NAR is a trade association of realtors and real estate professionals that establishes and promulgates policies and professional standards for its members.

    Plaintiff specialized in a form of off-market listing known as a “pocket listing.”  Pocket listings serve sellers of residential property who want to avoid listing through an MLS for privacy or other reasons.  Beginning as early as November 2019, defendants began to consider a “Clear Cooperation Policy” to eliminate the use of pocket listings.  The policy mandated NAR members who marketed any property publicly to also list that property on the MLS within one business day.  The Clear Cooperation Policy became effective on January 1, 2020 and was enforced by encouraging NAR members to report violations.  Plaintiff alleged that, by promulgating and adopting the Clear Cooperation Policy, defendants had engaged in an unreasonable restraint of trade in violation of Section 1 of the Sherman Act and California’s Cartwright Act.

    The Court assessed the Clear Cooperation Policy under the rule of reason and began by analyzing whether the complaint plausibly alleged that the policy had harmed plaintiff’s business.  The Court concluded that plaintiff’s allegations of lost profits, equity and goodwill, and a diminished brand were sufficient to establish injury-in-fact to plaintiff.  However, the Court further noted that, in order to establish antitrust injury, plaintiff must also establish harm to consumers and to competition.  The Court held that the complaint failed to do so, finding that plaintiff had not pled sufficient facts to demonstrate that the output of real estate brokerage services or off-MLS listing services had decreased as a result of the challenged policy.  The Court found that plaintiff and defendants merely offered alternative platforms for pocket listings, and there was no evidence that brokerage services had decreased or that prices for home buyers increased as a result of the Clear Cooperation Policy.  The Court also found plaintiff’s theory of harm to competition to be fundamentally flawed in failing to account for the fact that real estate listing services operate in a two-sided market—i.e., the services must compete for both buyers and sellers—and plaintiff had not established harm to both sides of the market as required under the standard set forth by the Supreme Court in Ohio v. American Express, 138 S. Ct. 2274, 2280 (2018).

    Judge Holcomb also denied plaintiff’s request for leave to amend the complaint, concluding that the defects in the complaint’s allegations of antitrust injury were incurable.

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