Top Agent Network, Inc. v. Nat'l Ass'n of Realtors
| Decision Date | 16 August 2021 |
| Docket Number | Case No. 20-cv-03198-VC |
| Parties | TOP AGENT NETWORK, INC., Plaintiff, v. NATIONAL ASSOCIATION OF REALTORS, et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
Tobias George Snyder, Nicolas V. Saenz, Paul Timothy Llewellyn, Lewis & Llewellyn LLP San Francisco, CA, for Plaintiff.
Ethan Glass, Michael Domenic Bonanno, Pro Hac Vice, Peter Joseph Benson, Pro Hac Vice, William Anthony Burck, Pro Hac Vice, Samantha Zuba Scanlan, Quinn Emanuel Urquhart & Sullivan, LLP, Washington, DC, for Defendants.
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS WITH PREJUDICE
Re: Dkt. No. 81
The National Association of Realtors ("NAR") and its local chapters operate listing services through which people can buy and sell homes. The listings can be accessed by any licensed real estate agent who pays the subscription fee. NAR has adopted a rule to prevent its subscribers from withholding available properties from the listing service—if you are marketing a property in any way, you need to include it on the local listing service so that all other agents can see it. If you don't, you will lose access to the listing service.
A relatively new company called Top Agent Network ("TAN") offers a competing listing service. But it only makes the service available to a small minority of agents—ones that the company has deemed "top agents." These TAN members are also subscribers to NAR's listing service. TAN wants its members to be able to list properties on its own service without also being required to list them on NAR's service. It has sued NAR, claiming that NAR's policy violates the antitrust laws.
The lawsuit is dismissed with prejudice. It may well be that NAR's policy has anticompetitive effects. But it is not anticompetitive to the extent that it prevents members of an exclusive listing service like TAN from concealing listings from NAR's subscribers while simultaneously benefitting from access to NAR's service. Indeed, it is TAN's business model that would, if it succeeded, have anticompetitive effects on the real estate market. Thus, although the policy presumably causes real estate agents to be less interested in using TAN's service and becoming TAN members, this is not the type of harm that the antitrust laws are designed to prevent.
Unless otherwise noted, the facts described in this section come from the well-pled allegations in the complaint, materials incorporated by the complaint, or materials subject to judicial notice.
Selling a home requires finding the right match between an available home and a willing buyer. This involves a certain amount of cooperation: sellers’ agents and buyers’ agents need to be able to exchange information about what their clients are looking for in a given transaction. Since the 1800s, local realtors’ associations have organized forums for this kind of information exchange. While the process has evolved with time and technology—from in-person meetings to online data platforms—the basic concept remains the same. Real estate agents representing home sellers publish information about homes available for sale, and agents representing home buyers search through that information to find homes that might suit their clients’ needs.
Today, the vast majority of home sales occur on the local "multiple listing service" ("MLS") run under the purview of the National Association of Realtors. Founded in 1908, NAR is a trade association of licensed real estate agents that serves as a national umbrella organization for state and local chapters. Typically, the local chapter will run the MLS for that region. The MLS is essentially a subscription-based online database of properties listed for sale in a particular geographic region. Nearly all active licensed real estate agents in the country pay for access to the MLS in their region. They can either just pay a subscription fee or choose to join as a full-blown member—either way, they must also agree to abide by the rules and policies imposed by NAR and its local chapters. Although there are "independent" or non-NAR affiliated listing services, any given geographic market is typically dominated by the MLS.1 And in markets where the MLS dominates, around 90% of homes in that market will be sold on the MLS. It is therefore important for real estate agents to subscribe to their local MLS—it's how they are able to share listings with all the other agents in their market. As the complaint explains it, putting a home on the MLS "generally puts a listing before the most eyeballs the fastest." The San Francisco Association of Realtors, the second defendant in this case, operates the "SFARMLS" covering the San Francisco area.
While the local affiliates actually operate the MLS for their area, NAR promulgates rules and policies through a "Handbook" that all local chapters are required to enforce. Those rules control everything from the process for negotiating buyers’ agents’ commissions to how the MLS can share data with consumer-facing websites like Zillow, Trulia, and Redfin. Local chapters can, to some extent, also add their own rules. For example, a common requirement is that owners make listed properties available for showing to any subscribing buyers’ agent. The thrust of many of the rules is that they create and maintain an open marketplace: once a sellers’ agent posts a listing, it becomes publicly available to all subscribing agents (and, when listings are syndicated, anyone with a web browser), and any buyers’ agent has an opportunity to pursue that home for their client.
Founded in 2010, Top Agent Network is a for-profit company that describes itself as a "private, member-only community open to the top ten percent of agents by sales volume." For those members, TAN offers a competing listing service. While the MLS is available to any licensed agent willing to pay the subscription fee, TAN's model is to attract an "elite" membership by promising an opportunity to deal exclusively with other highly productive agents. TAN's current membership is approximately 10,000 agents (compared to 1.4 million NAR members), and those agents are involved in roughly $165 billion in home sales every year.
Specifically, TAN offers its member agents two avenues for engaging in home sales. The first is simply a service closely analogous to the NAR-affiliated MLS. For home sellers who want their home marketed to a fairly large pool of buyers without opening themselves to the completely public market of the MLS and without being required to follow NAR's various rules, listing on TAN might provide a more palatable alternative. In addition to having a significantly smaller and selective membership, TAN does not syndicate its listings data to consumer websites like Redfin.
Second, for sellers and buyers who want an even more private experience, TAN offers a "matchmaking" service. Through this service, a seller's agent can inform TAN that the agent has a client looking to sell a home in a given price range, while at the same time buyers’ agents let TAN know what range their clients are looking in. TAN then pairs off the seller's agent with a buyer's agent looking in the right range, and the two agents can negotiate a potential sale directly. That means sales can be made without ever listing the home at all.
The reason some home sellers might prefer using services like TAN's rather than listing their home on the MLS is the same as the reason many want to use the MLS: the publicity. Homeowners who prefer not to broadcast the fact that they are selling or don't wish to publicize pictures of their home might prefer to engage a seller's agent who will go about finding a buyer more quietly. Generally speaking, this can be done by circulating the listing only to other agents within the same real estate agency or brokerage, or by the agent reaching out informally to buyers’ agents in their personal network. Homes sold through these more private channels are referred to as "off-MLS sales." Essentially, TAN is offering a platform for a select group of agents to conduct off-MLS sales for their clients.
But not all of the $165 billion-worth of annual sales involving TAN's member agents occur on TAN's platform. In San Francisco and beyond, TAN's members also subscribe to their local NAR affiliate. As the complaint explains, the vast majority of home sellers still want their homes to be listed on the MLS where it can be readily viewed by the largest possible pool of potential buyers. That makes it nearly impossible for any agent to earn a living without access to the MLS, and TAN's member agents are no exception. Indeed, the way an agent becomes a "top agent" who can qualify for TAN is through success on the MLS. TAN's members are people who have leveraged access to the information on the MLS to drive a high volume of sales. Rather than giving up that access, TAN agents continue to view and post most listings on the MLS while selectively placing some homes exclusively on TAN's platform—out of reach of the vast majority of agents.
According to the complaint, NAR has long been wary of agents engaging in off-MLS sales. In 2015, the trade association commissioned a consulting firm to undertake a "threat assessment." This was the inception of "The D.A.N.G.E.R. Report: Definitive Analysis of Negative Game Changers Emerging in Real Estate." The Report zeroed in on a key feature of NAR's financial structure: the organization is almost entirely reliant on subscription fees and membership dues. To stay afloat, NAR needs to retain as many agents as it can by making sure its services are worth the annual fees. But that's difficult to do, because it turns out that the vast majority of licensed real estate agents are not terribly productive. The Report used a variety of unflattering terms to describe this mass of agents, ranging from "unproductive" to "technically unsophisticated" to "not so good." The upshot is that a disproportionately large...
To continue reading
Request your trial
-
Steve Ahn v. Stewart Title Guar. Co.
...a trade association policy preventing it from marketing exclusive homes privately off the multiple listing service (MLS). (Id. at pp. 1026-1027, 1029.) While the complaint plausibly alleged that the association's policy had anticompetitive effects in limiting competition for off-MLS sales, ......
- Top Agent Network, Inc. v. Nat'l Ass'n of Realtors