On April 5, 2024, the D.C. Circuit ruled that the Justice Department’s Antitrust Division could reopen an investigation of allegedly anticompetitive practices of the National Association of Realtors (“NAR”). See Nat’l Ass’n of Realtors v. United States, 97 F.4th 951 (D.C. Cir. 2024) (“Op.”). This decision reversed the judgment of the district court, which set aside an administrative subpoena issued to NAR on the grounds that it contravened a binding settlement agreement between NAR and the Antitrust Division. The panel was sharply divided, with the dissent warning, “if you ever find yourself negotiating with the Antitrust Division of the Department of Justice, let today’s case be a lesson: Buyer Beware.”
NAR and the Antitrust Division
NAR is a trade organization with approximately 1.4 million members—called Realtors® —who work in real estate. It promulgates various policies that its members must follow when brokering transactions. It has faced allegations of anticompetitive conduct in recent years, both from the Antitrust Division and from home sellers, who claim that NAR’s longstanding policies on commissions to agents are anticompetitive and force sellers to pay excessive fees. Recently, a U.S. federal court in Missouri preliminarily approved NAR’s agreement to settle a series of private lawsuits by paying $418 million and eliminating key rules on commissions. That settlement followed a jury verdict finding NAR liable to pay $1.78 billion in damages for conspiring to artificially inflate commissions for home sales.
The Antitrust Division sued NAR in 2005, challenging NAR’s operation of multiple-listing services (“MLSs”), which are organized collections of properties on the market in certain regions. At that time, traditional brokers provided property listings to customers by hand at their offices, or by mail, fax, or email. However, some brokers began to offer services through Virtual Office Websites, password-protected sites allowing customers to search MLS databases on their own. The Antitrust Division claimed that NAR’s policies permitted traditional brokers to block their Internet-based competitors’ customers from having full online access to all listings on MLSs, thus inhibiting competition and discouraging lower commission rates for consumers. In 2008, the two sides reached a ten-year settlement requiring NAR to change several of its policies.
In 2018, after that settlement expired, the Antitrust Division again investigated NAR’s policies relating to MLSs. It issued two subpoenas, or Civil Investigation Demands (“CIDs”). One CID (“CID No. 1”) sought information related to NAR’s longstanding “Participation Rule,” which requires listing brokers to offer the same commission to all buyer-brokers when marketing a property on an MLS. Op. at 3. The Antitrust Division alleged that this rule restrains price competition among buyer-brokers and causes them to direct customers to higher-commission listings. Id. Another CID (“CID No. 2”) sought information about a more recently adopted rule called the “Clear Cooperation Policy,” which requires listing brokers to post a property on an MLS within one day of when they begin to market the property. Id. at 3–4. The Antitrust Division claimed this policy restricts home seller choices and precludes competition from services that seek to compete against MLSs for home listings. Id.
By 2020, the parties entered settlement negotiations. NAR asked the Antitrust Division to refrain from investigating the Participation Rule for ten years, and the Antitrust Division refused. Ultimately, the parties agreed to a Proposed Consent Judgment, which addressed four NAR policies other than the Participation Rule and the Clear Cooperation Policy. The Proposed Consent Judgment contained a reservation-of-rights clause, which stated that “[n]othing in this Final Judgment shall limit the right of the United States to investigate and bring actions to prevent or restrain violations of the antitrust laws concerning any Rule or practice adopted or enforced by NAR or any of its Member Boards.” Id. at 5. NAR agreed to that language on the condition that the Antitrust Division provide a letter closing its investigation and stating that NAR had no obligation to respond to the two outstanding CIDs.
On November 19, 2020, the Antitrust Division filed the signed Proposed Consent Judgment in the district court, along with the Complaint and a “Stipulation and Order.” None of these documents mentioned the Participation Rule or the Clear Cooperation Policy. Id. The Stipulation and Order provided that “[t]he United States may withdraw its consent at any time before the entry of the proposed Final Judgment.” Id. at 6. On that same day, the Antitrust Division also sent a closing letter (the “Closing Letter”) to NAR’s counsel. The letter noted that the Antitrust Division “closed its investigation” into the Participation Rule and the Clear Cooperation Policy and that NAR therefore had “no obligation” to respond to CID Nos. 1 and 2. Id. The letter also contained a no-inference clause, providing that “[n]o inference should be drawn . . . from the Division’s decision to close its investigation into these rules, policies, or practices not addressed by the consent decree.” Id.
In 2021, the Antitrust Division tried to renegotiate the reservation-of-rights clause. Nat’l Ass’n of Realtors v. United States, 2023 WL 387572, at *4 (D.D.C. Jan. 25, 2023), rev’d and remanded, 97 F.4th 951 (D.C. Cir. 2024). Following those unsuccessful efforts, in July of that year, it exercised its option to withdraw the Proposed Consent Judgment. Op. at 7. It voluntarily dismissed the Complaint and filed a notice informing the district court of the withdrawal of its consent. Id. Five days later, it issued a new CID (“CID No. 3”) seeking information about the Participation Rule, the Clear Cooperation Policy, and other policies addressed in the withdrawn Proposed Consent Judgment. Id.
NAR petitioned the district court to set aside CID No. 3 because it contravened the parties’ binding settlement agreement, which included the Closing Letter. The district court agreed. It held that “[o]pening an investigation is the opposite of closing one[, s]o by reopening the same investigation it had agreed to close, the Antitrust Division breached the settlement agreement.” Nat’l Ass’n of Realtors, 2023 WL 387572, at *4. The district court clarified that it was not holding that the Antitrust Division “ha[d] agreed to never investigate NAR or some future version or application of NAR’s Participation Rule or Clear Cooperation Policy.” Id. at *5. Instead, it explained that “in committing to close an investigation into these policies one year and then reopening it the next—when the only intervening change was that in presidential administrations—[the Antitrust Division] violated the parties’ agreement” and thus CID No. 3 should be set aside. Id.
The D.C. Circuit’s Divided Opinion
A two-judge majority of a D.C. Circuit panel reversed. On appeal, the parties did not “meaningfully brief[] the potential unenforceability of the closing letter due to the withdrawal of the Proposed Consent Judgment.” Op. at 9. The parties also agreed that the key question in the case was whether the Antitrust Division’s agreement to close its investigation and rescind CID Nos. 1 and 2 in the Closing Letter meant that it could not subsequently resume its investigation. Id. Therefore, accepting the parties’ “apparent assumption” that the Closing Letter is a binding agreement that remains enforceable notwithstanding the withdrawal of the Proposed Consent Judgment, the majority framed the issue narrowly: whether the plain language of that letter barred the Antitrust Division from reopening its investigation and issuing CID No. 3. Op. 10–11. The majority agreed with the Antitrust Division that it did not.
The majority began by interpreting the plain language of the Closing Letter and held that the Antitrust Division’s decision to close its investigation in November 2020 did not mean that it couldn’t reopen it later. Op. 12. NAR had analogized the Closing Letter to a parent instructing a child to “close the door when you leave for school,” contending that the parent “would surely feel misunderstood if the child closed the door and then immediately reopened it before departing for the day.” Id. at 15. But the majority was not persuaded, noting that such a parent would “not intend that the child never open the door again, and the approximately eight months that elapsed between the issuance of the closing letter and the investigation do not factually support a claim of ‘immediate’ reopening.” Id. at 15. Indeed, the majority held, investigations are routinely closed and then later reopened. Id. at 13–14.
The majority also relied on the no-inference clause of the Closing Letter and the “unmistakability” principle, which requires that courts refrain from interpreting a contract to cede a sovereign right of the United States unless the government waives that right unmistakably. Id. at 12. Here, not only did the Closing Letter lack such an unmistakable term, the no-inference clause “explicitly disclaims any intent to include unstated terms.” Id. at 12–13.
NAR urged the Court to consider “extrinsic evidence,” such as the parties’ negotiating history, the Antitrust Division’s course of performance, and NAR’s own priorities and incentives. Op. 15. Yet, the majority held that, (1) because the text of the relevant agreement was unambiguous, it does not consider such evidence, and (2) in any event, this evidence does not support NAR’s claims. Id. The majority was not convinced by NAR’s argument that, without the Antitrust Division’s commitment not to investigate the Participation Rule and the Clear Cooperation Policy in the future, the Closing Letter was “worth nothing but the paper on which it was written.” Id. at 17. That’s because NAR used the letter to bolster its position in private litigation stemming from the Clear Cooperation Policy. Id. at 18. NAR also was relieved of its responsibility to respond to CID Nos. 1 and 2 (and of the risk the Antitrust Division would publicize its responsive documents), and it gained value from the possibility that the Antitrust Division would not reopen its investigation at all (or for a substantial time period). Id. at 17–18.
The dissent disagreed. Referencing the DOJ’s framing of the case during oral argument, it contended that “the sole question is whether . . . the [Antitrust Division] could have immediately reopened its investigation of the Realtors’ two remaining policies after contracting to close that investigation.” Dissent at 4. Although in the “abstract” closing and reopening an investigation are “sometimes compatible,” id. at 7, here, NAR “gave up something (the four anticompetitive policies) to get something (non-illusory relief from DOJ’s investigation into the two remaining policies).” Id. at 10. Allowing the Antitrust Division to “immediately reopen” its investigation would render its promise “worth nothing but the paper on which it was written.” Id. In contrast to the majority, the dissent determined that the no-inference clause was “best read” to inform third parties that they could keep suing NAR if they wanted to, since the government had not found one way or another that the Participation Rule and the Clear Cooperation Policy were lawful. Id. at 12. However, the dissent concluded that clause was not relevant to whether the Antitrust Division promised to refrain from immediately opening its closed investigation. Id.
What’s Next?
Following the decision, the Antitrust Division announced that “[r]eal-estate commissions in the United States greatly exceed those in any other developed economy, and this decision restores the Antitrust Division’s ability to investigate potentially unlawful conduct by NAR that may be contributing to this problem.” It also referenced amicus briefs and statements of interest filed in several recent cases, including those challenging the Clear Cooperation Policy. NAR commented that it is “reviewing [the] decision and evaluating next steps” and that, “[a]s articulated by [the] dissenting opinion, NAR believes that the government should be held to the terms of its contracts.”
These developments signal continued scrutiny of NAR’s policies by the government. Although the recent ruling from the D.C. Circuit clears the way for the Antitrust Division to continue its investigation, it does not appear to reflect any particular view about whether those policies violate the antitrust laws—a question that may have to be answered in future litigation.
