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Missouri Federal Court Denies Summary Judgment to Franchisors on Antitrust Claims
Posted in Antitrust

A federal court in Missouri recently ruled that antitrust claims against four real estate broker franchisors and a trade association may proceed to trial based on evidence that the association’s code of ethics may inflate broker commissions. Burnett v. Nat’l Ass’n Of Realtors, 2022 WL 17741708 (W.D. Mo. Dec. 16, 2022). The plaintiffs are a group of individuals who had sold their homes through a Multiple Listing Service and who believed that they had paid inflated commissions to their real estate brokers. Plaintiffs sued broker franchisors HomeServices, Keller Williams Realty, Realogy Holding Corp., and Re/Max, as well as the National Association of Realtors (NAR), a trade association that operates local, state, and national real estate associations. The plaintiffs allege that the broker defendants require their franchisees to become members of NAR and adhere to cooperative compensation agreements in the association’s code of ethics, thereby stifling competition in violation of Section 1 of the Sherman Act, the Missouri Merchandising Practices Act, and the Missouri Antitrust Law.  

The franchisors and NAR moved for summary judgment, arguing first that the plaintiffs did not have standing as direct purchasers under antitrust laws because of the structure of broker commissions between buyers and sellers. The court rejected this argument, noting that there was a material dispute of fact as to how the commissions are negotiated and agreed to between buyer and seller brokers. Defendants also argued that there was insufficient evidence of a conspiracy between them, but the court concluded that defendants’ requirement their franchisees adhere to NAR’s cooperative compensation agreement was direct evidence that created at least a material dispute of fact regarding conspiracy, even if independent business judgment was an alternative explanation for the decision. Because the court concluded that there was sufficient evidence to support a conclusion that the defendants implemented the cooperative compensation agreements with the purpose and effect of inflating or stabilizing broker commission rates, the claim would be tried as a horizontal price-fixing scheme under the per se antitrust rule.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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