$1.8B penalty over commissions in landmark antitrust case

investmentnews.com:

In a groundbreaking decision that has sent shock waves through the real estate industry, the United States’ premier real estate brokerage firms have been held responsible for a staggering $1.8 billion in damages. This verdict comes after allegations of a seven-year conspiracy to compel homeowners to pay substantial commissions to the brokers representing buyers, resulting in a significant drop in related stock prices.

The National Association of Realtors, representing over 1.5 million agents, along with industry giants such as several subsidiaries of Berkshire Hathaway and Keller Williams Realty, were found liable on Tuesday. The trial, held in Missouri, scrutinized the industry’s adoption of anti-competitive regulations, which mandated sellers to allocate 3% of a property’s sale price to the buyer’s brokers. These rules were applied to listings on the Multiple Listing Service platform, a database for home sales managed by local NAR associations.

Legal representatives for sellers of upwards of 260,000 homes argued that without these regulations, buyer broker commissions would be the responsibility of home buyers, fostering a competitive environment for brokers to lower their commission rates. The complaint highlighted that broker fees in the U.S. typically range from 5% to 6% of the sale price, with about half of that going to the buyer’s broker.

“In competitive foreign markets, home buyers pay their brokers, if they choose to use one, and they pay less than half the rate paid to buyer brokers in the United States,” stated the plaintiffs’ lawyers.

The jury, consisting of eight members, sided with the plaintiffs, dealing a significant blow to the real estate sector. Following the verdict, shares in Zillow plummeted by