The second of two lawsuits dealing with pocket listings has been allowed to proceed after a U.S. District Court judge in California granted the plaintiff’s motion for reconsideration on Monday.
Originally filed in 2020 by Top Agent Network (TAN), the suit takes aim at the National Association of Realtors’ (NAR) ban on pocket listings via its Clear Cooperation Policy. The plaintiff claimed that the ban takes away agents’ marketing choices, and they allege that the requirement for listing brokers to submit a listing to their MLS within one business day of marketing a property to the public violates the federal Sherman Antitrust Act.
The suit was dismissed with prejudice in 2021 as the lower court ruled that TAN failed to state a claim with prejudice in its third amended complaint. But the plaintiff appealed the ruling to the Ninth Circuit Court of Appeals, which decided in August 2023 to vacate the lower court’s ruling by arguing that the allegations made in TAN’s suit were nearly identical to those made in a suit filed by The PLS.com, which had been allowed to proceed. NAR, the only remaining defendant in the PLS.com suit, was dismissed from the suit in January 2024.
In December 2023, the TAN suit was reopened by District Court Judge Vince Chhabria, and the plaintiff filed its motion for reconsideration in May 2024.
In his ruling on Monday, Chhabria wrote that “Top Agent Network has adequately alleged that the Policy constitutes a per se group boycott in violation of the Sherman Act.
“In considering whether the plaintiff in PLS.com had done so, the Ninth Circuit noted that ‘PLS’s competitors coerced its suppliers (sellers’ agents) not to supply PLS with listings (or to do so only on highly unfavorable terms), and they did so for the express purpose of preventing PLS, a new entrant to the market after decades of little to no competition, from competing with the MLSs. … PLS also alleges that the effort succeeded.’ Substituting ‘Top Agent Network’ for ‘PLS,’ the same is true here,” the ruling stated.
In addition, Chhabria wrote that TAN had also “adequately alleged antitrust injury.”
“Its asserted injury stems from the Policy’s allegedly anticompetitive effects on the market for real estate listing services: by forcing Top Agent Network and other listing services to compete with the MLSs for listings on unfavorable terms, the Policy prevents Top Agent Network from ‘gaining a foothold in the market and makes it virtually impossible for new competitors to enter, leaving agents with fewer choices, supra-competitive prices, and lower quality products,’” Chhabria wrote.
While Chhabria is confident that TAN has clearly shown it has been harmed by the allegedly anticompetitive effects of the policy, he noted that it is currently unclear whether the litigation should be examined under per se or rule of reason analysis.
“It may be that the National Association of Realtors can eventually justify the Policy (at least as applied to exclusive listing services) with ‘plausible arguments that [it was] intended to enhance overall efficiency and make markets more competitive,’ in which case the rule of reason could apply,” Chhabria wrote.
“And if that happens, then under the rule of reason — which ‘requires courts to conduct a fact-specific assessment of market power and market structure’ to ‘assess the restraint’s actual effect on competition’ — it may be that the Policy’s net effect is procompetitive, not anticompetitive.”
According to the ruling, discovery in the suit is allowed to “proceed immediately” and a case management conference has been scheduled for Aug. 30.
The defendants in the suit originally consisted of NAR, the San Francisco Association of Realtors and the California Association of Realtors, which were dismissed from the suit in 2021. Neither NAR nor SFAR returned a request for comment.
