Brief in Nosalek suit claims DOJ complaint isn’t taking buyer rebates into account

In its statement of interest, the DOJ claims that the changes MLS Property Information Network (MLS PIN) proposed for its commission rule “still gives sellers and their listing brokers a role in setting compensation for buyers’ brokers. … When sellers make such offers, buyer brokers need not compete on price to attract buyers.’”

According to Shkipin, this ignores the fact that buyer’s brokers in 40 states are allowed to negotiate buyer rebates with their client.

In an economic analysis paper published on the DOJ’s website and cited by Shkipin, the author states that “rebates are no different from simply charging a lower commission fee, and one should ask why the ability to rebate can mitigate the disincentive to compete through lower commission rates.”

According to the DOJ’s publication, rebates are banned in Alaska, Oregon, North Dakota, Kansas, Oklahoma, Missouri, Louisiana, Mississippi, Alabama, New Jersey and Tennessee, none of which are served by MLS PIN.

“In the states where rebates are permitted, buyer brokers are able to reduce the commissions paid by the buyer, even if commission is offered in ’blanket’ form on MLS. If MLS PIN operates in states without rebate bans, their policy of transmitting ’blanket’ offers is not, by itself, harmful to buyers,” Shkipin wrote.

Conversely, Shkipin claims that the rules the National Association of Realtors (NAR) had in place when the commission lawsuits were filed are anti-competitive for three reasons: They “allowed buyer brokers to advertise services as ’free’ when, in fact, they received compensation offered via NAR-affiliated MLS”; they “required listing brokers to offer blanket offers of compensation to buyer brokers in order to use NAR-affiliated MLS”; and “NAR allowed NAR-affiliated MLS to transmit blanket offers of compensation in Alaska, Oregon, North Dakota, Kansas, Oklahoma, Missouri, Louisiana, Mississippi, Alabama, New Jersey and Tennessee where buyer broker rebates are banned by state laws.”

Shkipin goes on to argues that if “the buyer agent fee is advanced in ’blanket’ form from a seller, it does not matter if it is 1 cent, or $100,000, because either amount is a ’blanket’ offer made to any broker able to bring in a buyer.

“What does matter is that it is also negotiable through a rebate, where buyers are able to choose between services multiple buyer brokers based on payment terms, that includes an option to receive an excess of the fees offered in ’blanket’ form (that same way it includes an out-of-pocket payment in the event that the offered amount is not enough to compensate the buyer broker.)”

According to Shkipin, the “rebate mechanism is price competition, but it is not recorded on MLS — it is paid to the buyer as a refund not taxable by the IRS.”

Shkipin also highlights the commission policy of his nationwide MLS startup Geodoma, which he claims allows brokers to “transmit transparent offers of Cooperative Buyer Agent Commission, lawfully.” According to the brief, Geodoma is able to do this in “full compliance with antitrust laws” by only allowing offers of cooperative compensation to be displayed in states where a homebuyer is able to “lawfully negotiate a buyer rebate with their buyer agent.”

Additionally, he notes that making an offer of cooperative compensation is optional and that “the amount must be established independently by each real estate professional with expressed consent from each individual real estate seller for each individual property listing.”

Shkipin is not the only party who has taken issue with the DOJ’s statement of interest. In late March, Northwest MLS filed a brief claiming that its analysis of NWMLS’ rule changes, which are similar to those proposed by MLS PIN, was “ill-informed“ and “ill-supported,” and that the statement of interest “obscures, or misses altogether, the purpose and impact of NWMLS’s changes.“ 

MLS PIN recently notified its members that it would move forward with its proposed rule changes, despite the settlement not having final approval and the objections from the DOJ.

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