The recent Sitzer/Burnett v. National Association of Realtors (NAR) case in the U.S. has led to significant changes in how buyer agents receive commissions. NAR settled the case to avoid a financial threat exceeding $5 billion and agreed to remove compensation fields from MLS listings among other adjustments.
Despite initial media hype suggesting a major shift, studies indicate that these changes have not had a measurable impact on buyer-side commissions in the U.S. The gradual decline in commissions over the years continues, with the absence of an explicit commission field on MLS databases potentially reducing “steering” behavior without fundamentally altering market dynamics.
What implications does this have for Canada’s Sunderland v. Toronto Regional Real Estate Board (TRREB) case?
Sunderland: The Canadian parallel
Sunderland v. TRREB is closely monitored as the Canadian equivalent of the U.S. litigation. While the case directly involves TRREB and its affiliated brokerages, the outcome could have nationwide ramifications, given the similarity in rules across real estate boards in Canada regarding cooperating commissions.
Under current TRREB regulations, listing brokerages must offer some form of commission to cooperating brokerages, even if it’s a nominal amount like $1. The lawsuit argues that these rules promote “steering” and constitute price-fixing. Chief Justice Paul Crampton ruled in late 2023 that the case should proceed to trial. Appeals were heard in October 2024, with a decision expected in early 2025.
What did TRREB argue at the appeal?
TRREB and the defendant brokerages aim for a complete dismissal. They argue that TRREB is not a competitor in the market and cannot be held liable for individual brokerages’ actions. The lawsuit’s suggestion that mere membership in TRREB makes an agent a price-fixer is deemed a baseless conspiracy by the defense.
What did the plaintiffs argue?
The plaintiffs counter that associations should not be exempt from competition laws, as it could lead to the creation of anti-competitive rules by businesses without consequences. They claim TRREB’s regulations artificially maintain high buyer-agent commissions, with data indicating very few commissions falling below the industry standard of 2.5%.
What happens next?
The court may overturn Justice Crampton’s ruling, potentially ending the case. Given Canada’s tendency to follow U.S. legal precedents, a dismissal seems unlikely. Even if Sunderland is halted, other similar lawsuits could persist.
If the case proceeds to trial, the plaintiffs face challenges in proving TRREB’s commission rules directly cause “steering.” While weaknesses in the case are acknowledged, further legal processes could reveal new evidence.
Could TRREB settle?
If TRREB and its affiliates fear the financial risk of losing at trial, they may opt for a settlement akin to NAR’s. However, the impact on Canadian real estate may not be significant, as changes to MLS systems may not heavily influence commission rates, which are predominantly driven by market forces.
In conclusion, if Sunderland results in changes resembling NAR’s, TRREB and other boards may face substantial financial penalties, while commission rates evolve at their own pace, unaffected by MLS modifications.
Ultimately, Sunderland may turn out to be much ado about nothing.
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