Above, from left, Bob Goldberg, Gino Blefari and Gary Keller
KANSAS CITY—Yesterday afternoon, attorneys for the plaintiffs in the Burnett v. National Association of REALTORS (NAR) trial introduced their first three witnesses to the jury via pre-recorded depositions: Keller Williams Founder Gary Keller; HomeServices of America CEO Gino Blefari; and NAR CEO Bob Goldberg.
Questioned by lead attorney for the plaintiffs, Michael Ketchmark, the three real estate power players withstood grilling on several topics, such as price fixing, steering, collusion among competitors and antitrust conspiracies.
The plaintiffs’ case hinges on convincing a jury that the major corporate brokerages conspired with NAR on rules that limited competition and harmed consumers, focused specifically on buyer agent compensation and the fact that sellers pay both agents. With three weeks scheduled for testimony, the trial is likely to delve deep into the intricacies of real estate governance, as well as the practices and opinions of its most powerful players.
On Tuesday, Keller Williams CEO Gary Keller appeared first via a filmed deposition that took place in 2021. Ketchmark asked Keller if he was aware of antitrust laws designed to prevent collusion on price, explaining that one of the central claims in the case is a challenge to the NAR unilateral offer of compensation rule, which plaintiffs contend is an illegal constraint of trade. Keller voiced confusion about the nature of the question.
Ketchmark took a different bent and asked if all Keller Williams affiliates were required to be part of NAR. “We want them to be a member of their local board. To do that they must be a member of NAR,” said Keller.
Ketchmark then confirmed that KW affiliates must be part of NAR in order to be part of the MLS.
Due to the mandatory offer of compensation rule, Ketchmark posited to Keller, “If a seller didn’t want to pay any commission to a buyer, they couldn’t be listed on the MLS.”
“I never thought about it,” replied Keller.
Ketchmark drove home the point that NAR is composed of agents and brokers who would otherwise be competitors, and that NAR and MLSs evolved into a system that promotes cooperation. The case is being made that this “co-opetition”, a phrase that Keller used in his book Shift, eliminated the competitive nature of a free market, which hurts consumers in terms of price.
Ketchmark also questioned Keller on his references to a 3% average commission on the sell side and 3% average commission on the buy side in his book. “Where in the book do I talk about commissions?” said Keller. “I used the word ‘average’—it matters.”
Keller also explained that he used the 3% commission references to “create an economic model” for the flow of money. “I have to choose some amount to show how the money works,” he said.
In reference to KW training, Keller told Ketchmark that “You would never train people to go out and ask for a specific amount of commission,” however, in Keller’s book, The Millionaire Real Estate Agent, he provides scripts agents can use when a client objects to a proposed commission.
If a seller seeks a lower commission, the script suggests saying, “When you reduce the commission, it reduces the motivation for buyer agents to bring buyers to your house.”
To Ketchmark’s allegations that this creates a scenario where clients are steered to see homes that offer a higher commission to the buyer’s agent, Keller responded, “I’ve never seen evidence of it,” adding that he didn’t see “anything wrong with (telling) a seller that there are agents in the market who might erroneously do this.”
Ketchmark claimed this is an attempt to “scare the seller into setting higher commissions for buyer’s agents.” Keller responded: “I object to that characterization. A professional real estate agent should explain all contingencies and scenarios that might happen.”
Blefari: Not price fixing, ‘negotiating’
Ketchmark began his deposition of HomeServices CEO Gino Blefari by focusing on the organization’s support of the Clear Cooperation Rule, which limits the availability of off-MLS listings, or pocket listings, and dictates that within 24 hours of of an agent or broker signing a listing that it must go into the MLS and offer compensation to the buyer’s agent.
This rule has also drawn scrutiny from the Department of Justice, and is the main target of at least one other lawsuit filed against NAR alleging antitrust violations.
Ketchmark alluded to collusion, positing to Blefari that sellers are “forced to pay the person on the other side of the deal” to which Blefari responded, “they are not forced.” Blefari asserted that the real estate agent informs the seller of all the options, but at the end of the day, the seller makes the decision, and can choose not to offer buyer agent commission. Ketchmark contends that this leads to steering, to which Blefari replied, “It might. It all depends on the ethics of the real estate agent.”
Blefari was also drilled by Ketchmark on training videos in which Blefari references his own days as a top-producing real estate agent who always received 6% commission. When asked, “shouldn’t commissions be negotiable?” in the video, he responded, “‘Yes, but I can only go up from 6%.” Blefari explained during the deposition that this was his personal way of operating as an agent, which he shared as an example at the brand level. “I was showing them what I did so that they can learn from that.”
When Ketchmark asked if Blefari felt this was an appropriate message to convey to a group of competitive firms, the independently owned HomeServices of America firms, he responded, “I certainly don’t believe that fixing commissions is appropriate. I do believe that training is essential. I always emphasize that commission is negotiable.”
Ketchmark described it as price fixing, to which Blefari replied, “No, it’s negotiating.”
Goldberg adamantly denies antitrust conspiracy
NAR CEO Bob Goldberg recorded his deposition on Nov. 11, 2022. Ketchmark began by investigating the NAR RES (Real Estate Services) Advisory Group, where written reports, or minutes, are banned in order to encourage a free flow of conversation among the group. While minutes are required for all NAR committees, Goldberg explained that the RES Group is not a committee but an advisory board.
The specific structures, functions and participants of the RES group promises to be a major focus of the trial, as the plaintiffs seek to prove that the defendant brokerages conspired with NAR to create or enforce allegedly anti-competitive rules. Sarah Young, a former director of RES for NAR, could be a key witness on both sides, with defendants saying her testimony will clear up misunderstandings about what RES is.
Ketchmark then asked Goldberg if he was aware that “trade association venues are common places for hatching unlawful antitrust conspiracies.” Goldberg responded, “Absolutely not.”
Goldberg emphasized that the “majority of members, as independent contractors, are by nature competitors, and by nature of their membership, are competitors working together.”
Ketchmark contended that this dual tradition of cooperation and competition is unique to real estate “and provides the opportunity for antitrust on almost a daily basis.”
Circling back to the RES Group, Ketchmark explained that NAR’s own antitrust compliance guidance for association and board leadership states that minutes must be kept.
“From its inception, RES has not been a standing committee but an advisory group,” said Goldberg. “In order for there to be open dialog of an advisory board, there’s not minutes. There are 35 other participants who can verify this.”
“I can attest as CEO, there are no conspiracies ever hatched in that group,” he strongly added.
“You made a conscious and deliberate decision not to keep minutes,” said Ketchmark. “You don’t think you can have an open conversation with minutes?”
“There are no nefarious conversations that happened in this group,” said Goldberg.
In his opening statement, Ketchmark promised to bring testimony from a “whistleblower” who was deposed in 2021—a member of NAR, who called the current structure of real estate “the ultimate form of price fixing,” he claimed.
Stay turned to RISMedia for more updates from the courtroom.
