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If there’s anything that litigation against the National Association of Realtors has made clear in recent years, it’s that when agents and brokers join NAR, they become subject to both its reputation and whole host of rules.
A Pennsylvania real estate broker who is challenging a requirement that only members of NAR can access the multiple listing service amended his antitrust complaint against NAR, the Pennsylvania Association of Realtors and the Greater Lehigh Valley MLS (GLVMLS) on Feb. 23 to more fully detail his allegations against the trade groups and his objections to their rules.
“The National Association of Realtors (NAR) and its affiliates control access to critical real estate data through MLS systems, which are essential for real estate professionals to operate,” the amended complaint states.
“By requiring real estate agents to be NAR members to gain access to MLS data, defendants have created an artificial barrier to entry, limiting market participation to only those who comply with their monopolistic rules. And comply or get forced out of business.”
In the aftermath of a $418 million commission settlement, ongoing antitrust lawsuits against NAR rules and various misconduct allegations, agents and brokers are increasingly challenging a requirement that they become members in order to subscribe to the MLS.
They cite, in part, not wanting to be forced to support an organization rocked by scandal and whose rules allegedly violate the law.
Maurice Muhammad
Maurice Muhammad, broker of record for Progressive Realty in Allentown, originally filed the lawsuit in October in the U.S. District Court for Eastern Pennsylvania. He filed the suit “pro se,” which means he is representing himself.
“Defendants unlawfully tied access to MLS data and real estate transactions to mandatory membership fees, ethics compliance and affiliation with NAR, thereby preventing independent real estate professionals from competing fairly, eliminating competition by forcing real estate professionals into an NAR-controlled system, MLS, Forms, E-Key & Lockbox engaging in monopolistic behavior, restricting market entry, and driving up the cost of doing business …,” the amended complaint states.
A NAR policy known as “the three-way agreement” requires that agents and brokers join a local, state and the national association in order to be Realtors. NAR does not require Realtor membership for MLS access — that is left up to MLSs and the Realtor associations that own them.
Muhammad’s filing notes that the U.S. Department of Justice has previously investigated NAR for antitrust violations and alleges the defendants’ MLS practices “violate multiple principles established by the Department of Justice (DOJ) and Federal Trade Commission (FTC) regarding fair market competition” and substantially harm consumers.
“By preventing non-NAR members from accessing MLS data, Defendants have artificially inflated commission rates, limited consumer choice and maintained a system that prioritizes Realtor profits over consumer benefits,” the filing states.
“Homebuyers and sellers are forced to pay higher commissions due to the lack of market competition and price-fixing arrangements that benefit NAR-affiliated brokers.”
The amended suit adds claims under the Fair Housing Act and under state laws prohibiting unfair trade practices. It continues to allege federal civil rights violations, violation of due process under the U.S. Constitution and antitrust violations under the Sherman Act. A breach of contract claim from the original complaint has been removed.
When Muhammad first filed his suit, a NAR spokesperson told Inman, “NAR is an organization that represents a broad membership across the United States and deeply values diversity, equity and inclusion. We strongly advocate for fair housing practices and inclusive policies that enable home ownership, and our commitment extends to both the millions of consumers and the real estate professionals who work on their behalf.”
Much of Muhammad’s complaint centers around the “disparate enforcement of ethics complaints and penalties” he and other minority real estate professionals are allegedly subjected to. NAR touts its code of ethics, which all Realtor members must adhere to, as a primary distinguishing factor between Realtors and non-Realtor real estate professionals.
According to the filing, there was an ethics complaint filed against Muhammad but the complainant withdrew from the ethics hearing.
“Defendants charged Plaintiff with ethics violations even after the original complainant declined to appear or provide evidence,” the filing says.
“Despite this, Defendants proceeded with disciplinary actions without an independent review or basis for the charges.”
The details of the ethics complaint are not included in the filing. In 2020, NAR approved a policy requiring MLSs to process complaints anonymously when the complainant requests it in order to “eliminate the stigma of bringing questionable actions and business practices of other participants and subscribers to the attention of the MLS.”
Muhammad’s complaint alleges the continued processing of the ethics complaint violated his due process rights and that the defendants “selectively enforced their rules based on race” to drive him out of business.
“While white real estate professionals were given leniency for similar or more serious offenses, Plaintiff faced excessive penalties, unjust fees, and was eventually coerced into almost relinquishing agents license,” the filing says.
Muhammad alleges that the defendants “failed to act on documented steering” and that his “complaints against steering and discrimination were ignored, while fabricated complaints against him were aggressively pursued, creating a pattern of biased enforcement.”
“Plaintiff alleges that Defendants, through their policies, actions, and omissions, perpetuated systemic racial discrimination in real estate transactions by allowing, facilitating, and covering up steering practices that disproportionately harm minority real estate professionals and homebuyers,” the filing adds.
The amended complaint asks the court to declare the defendants’ actions violations of federal and state laws and prohibit the defendants “from restricting MLS access based on NAR membership, applying discriminatory penalties and fees and engaging in steering and anticompetitive practices.”
The filing also requests that the court “[o]rder the Department of Justice (DOJ), Federal Trade Commission (FTC), Pennsylvania Real Estate Commission (PA REC), and HUD [the U.S. Department of Housing and Urban Development] to file amicus briefs clarifying their positions.”
While the original complaint asked for compensatory damages of no less than $5.6 million, the amended complaint does not contain a specific monetary amount, but rather asks for “compensatory and punitive damages for lost income, emotional distress, and reputational harm.”
“As a direct result of these unfair and deceptive practices, Plaintiff suffered financial losses due to restricted MLS access and revoked license, severe reputational damage, making it difficult to re-enter the industry and emotional distress and economic hardship from being coerced out of his profession,” the filing says.
“[O]ther agents have been and are effected [sic].”
Muhammad is not the only broker to object to the requirement many MLSs have that they join NAR in order to access the MLS. In August, two Michigan real estate brokers and an agent filed a class-action antitrust lawsuit against NAR, their state and local Realtor associations, and the state’s largest MLS, Realcomp II, challenging the requirement. The suit is known as Hardy after its lead plaintiff.
On Friday, the Hardy plaintiffs clapped back at NAR’s attempt to have their antitrust suit tossed out of court, saying they want Michigan to join the few other states where Realtor membership cannot be a requirement to subscribe to an MLS.
“[T]he NAR has been the subject of much scrutiny over the last 12 months as several investigations into the practices of the NAR have yielded multiple examples of gross financial mismanagement, sexual misconduct by its leadership and other improprieties,” the filing says.
“These developments have furthered Plaintiffs’ dissatisfaction with the Boards and the required membership requirements.
“By bringing this action, Plaintiffs seek to have the same option as is being afforded those brokers and agents in Georgia, California, Florida and Arizona.”
Read the amended complaint (re-load page if document is not visible):
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