REX vs. Oregon Governor Kate Brown: Tackling Anti-Rebate Laws
REX filed a complaint against the state of Oregon on Nov 30, 2020 for its anti-rebate policies which prevent REX from rebating to its customers in the state and obstruct consumers from greater savings
|Dec 1, 2020|
REX's lawsuit against Oregon's rebate ban challenges a brazenly anti-consumer policy. While home prices continue to rise, Oregon's rebate bans prevent REX from reducing the cost of buying a home. Outside of Oregon, REX returns thousands of dollars to homeowners who purchase homes using REX. But the state’s policies make it impossible for its citizens to benefit from REX's consumer-first pricing.
The rebate ban harms consumers and electricians, plumbers, carpenters, movers and all of the tradespeople who earn a living when homes are bought and sold. It harms local municipalities, police and fire departments, and schools, each of which rely on property tax revenue. Rebate bans benefit only conventional real estate companies and the real estate trade groups who want higher fees and reduced service. Oregon citizens deserve better. REX is proudly challenging the state's rebate bans to deliver a fair, more affordable deal for Oregonians who aspire to buy a home.
REX vs. Oregon Governor Kate Brown
Quotes from the filing:
“While commission rebates are available to most U.S. home buyers, Oregon’s overt rejection of real estate rebates to preserve its traditional real estate conglomerate doubles as an unlawful surtax on Oregon home buyers. Oregon’s real estate syndicate is composed of the largest brokerage firms, including Redfin, Coldwell Banker, RE/MAX, Keller Williams, Compass, and Century 21. These conventional brokerage firms and their ilk are distinguished by their faithful support of the National Association of REALTORS® (“NAR”) and Oregon Association of REALTORS® (“OAR”), the trade groups responsible for the broker-centric real estate model that burdens consumers with outmoded restrictions and exorbitant fees. In stark contrast with the traditional brokerage firms that march in lockstep with the anticompetitive rules mandated by NAR and OAR, REX has always been independent from the greater real estate cartel.”
“Because of the rebate bans, real estate fees levitate far above the costs of providing these services and far above what hard-working Oregonians can afford to pay for them. Oregon’s policies provide an unfair advantage to high-fee, conventional businesses at the expense of new entrants like REX and the consumers they serve.”
REX’s Press Release Announcing Lawsuit
Oregon’s policy against real estate rebates leads REX to pursue litigation in Portland-based U.S. District Court against the state’s statute.
Austin, Texas, December 1, 2020 — REX, the technology company positioned as the full service, much lower-cost alternative to traditional real estate, today announced it has filed a lawsuit against the State of Oregon for antitrust practices. The lawsuit alleges that the state’s nefarious policy banning homebuyers from receiving discounted real estate fees harms consumers and stifles competition. REX demands an immediate end to the unfair policy that sabotages Oregon homebuyers.
“Oregon’s rebate ban is an affront to middle- and lower-income families struggling to pull together a down payment. Consumers lose $60 billion in excessive fees to the real estate cartel behind policies like Oregon’s prohibition on discounts. REX’s business model is founded on returning real estate fees to our customers. Through scalable technology and an honest approach to every consumer, my dedicated team is delivering tens of thousands of dollars in savings to consumers whom traditional real estate brokers have victimized for decades with hidden fees and predatory practices. Our lawsuit against Oregon is a major step toward putting real estate consumers first,” said Jack Ryan, REX’s CEO and co-founder.
Consumer Federation of America’s Press Release
The nation's largest pro-consumer group speaks plainly about REX’s lawsuit against the State of Oregon:
“The Oregon prohibition on rebates is blatantly anti-competitive, denies home buyers financial relief, and supports the charging of high and near-uniform commissions,” said Stephen Brobeck, a CFA senior fellow. “The U.S. Department of Justice has objected to anti-rebate laws and so, hopefully, will the Oregon District Court”…
…"Separating commissions would immediately reduce the commission expenses of sellers and, for the first time, would give buyers a real opportunity to negotiate buyer broker commissions. This uncoupling would also greatly free discounters and tech companies to offer an array of service options at lower prices. Anti-rebate statutes would then be irrelevant.”
Testimonials From Oregon Customers
“We decided to use REX homes to sell my home in Maryland and on the buy side when we moved to Oregon. The real estate experience was no different from any other realtor, maybe even better because they were not pressuring me with price and fast negotiating. They used all the same forms, same process, and same timelines. REX is a game changer and we had the best realtor in Ashley McClain. We bought virtually and knew we were in good hands.”
In Case You Missed It
Motley Fool: REX Takes Aim At Oregon's Buyer Rebate Rule -- Good News For Investors?
December 5, 2020 — The REX lawsuit comes just days after the Department of Justice filed a lawsuit and proposed settlement with the National Association of Realtors to clarify the role of the buyer's agent. The settlement is also designed to prevent agents from steering buyers away from listed homes that offer a lower buyer's agent commission.
Bloomberg Law: Oregon Home Commission Rebate Ban Targeted in Antitrust Lawsuit
December 1, 2020 — The residential brokerage industry, already facing a slew of cartel claims, was hit with a new challenge Tuesday, when an independent brokerage sued Oregon officials in federal court over rules there backed by the National Association of Realtors that ban commission rebates to home buyers.
“At a time when housing affordability is a matter of intense concern, Oregon’s anti-discount policies mandate higher home prices,” the complaint says.
The lawsuit was filed in the U.S. District Court for the District of Oregon by REX—Real Estate Exchange Inc., which says it uses artificial intelligence and machine learning to offer homebuyers 50% rebates on home commissions.
Law360: Tech Co. Sues Ore. Over Ban On Real Estate Fee Discounts
December 1, 2020 — A technology firm has accused Oregon regulators in federal court of favoring established real estate brokers with anti-competitive rules that ban rebates to home buyers for part of the commission paid on the sale of a house.
REX - Real Estate Exchange Inc. on Monday sued Oregon Gov. Kate Brown and the Oregon RealEstate Agency, along with the Oregon Real Estate Board and individual board members. REX claims that the agency's "nefarious policies" harm home purchasers by making them ultimately fork over more in commissions to traditional real estate brokers.
Anti-Discount Policies Persist Beyond Oregon
In addition to Oregon, eleven states have anti-discount policies restricting real estate brokers from rebating their commission to customers: Alabama, Alaska, Iowa, Kansas, Louisiana, Mississippi, Missouri, Nebraska, Oklahoma, Tennessee, and West Virginia.
These policies are generally decades old. When challenged because they require consumers to pay artificially high prices, defenders of rebate bans have asserted that these restrictions force consumers to “focus on the terms” of the real estate transaction, rather than the “size of the rebate.” As Michael Coburn, an associate at Cooley LLP, states, many companies “find these century-old anti-rebating laws to be out of date, hindering their ability to offer innovative, pro-consumer benefits to their customers.”
Real estate rebate bans are particularly unprepared to combat the practices of an industry whose practices, as the recent federal antitrust suit filed by the United States Department of Justice (DOJ) against the National Association of REALTORS© (NAR) demonstrates, have already resulted in “higher prices and lower quality service for American home buyers and sellers.” Under the rules set by the real estate brokerage cartel, and enforced through the Multiple Listing Services (MLSs) across the country, negotiating commissions down is a “practical impossibility,” according to the federal district court judge presiding in Moehrl v. NAR. Because of an absence of meaningful price competition, real estate commission fees are two to three times higher in the U.S. than other developed countries.
Rebating allows buyers a way to reduce the fees incurred on them by the NAR’s anticompetitive behavior. Rebate bans prohibit such competition and restore the anticompetitive fortress around buyer broker commission fees, driving up the cost of buying and transferring consumer savings to the pockets of the incumbent, market-dominant real estate brokerage firms.
DOJ’s views anti-rebate laws as incompatible with federal antitrust laws. “Rebate bans artificially inflate the cost of real estate services,” the DOJ website explains. “Consumers are forced to pay thousands of dollars more to buy a home than they would if rebates were allowed. In effect, rebate bans prohibit brokers from competing on price, forcing all brokers to charge — and all consumers to pay — the same inflated price.” In 2005, four states repealed their rebate bans — Kentucky, West Virginia, South Dakota, and Montana — after the DOJ filed lawsuits against them.
Outside of Oregon, state-level officials have narrowly interpreted commission-sharing prohibitions to allow real estate brokers to give customer rebates and thereby avoid DOJ scrutiny. New York officials noted that the intent of their anti-rebate laws were to prevent compensation from licensed to unlicensed individuals for services that require a license -- not to prevent rebates from attracting a new client or customer. The New York legislature later amended the statute to explicitly authorize customer rebates. Maryland officials express a similar sentiment: “A person who is simply a party to a real estate transaction,” the state attorney general’s office explains, “is not providing real estate brokerage services...and therefore may receive monies from a licensee.”
Whatever the intent of rebate bans, they are perniciously anti-consumer in effect. Their adverse effects are exacerbated by other anti-competitive practices widespread in the traditional real estate industry. Fortunately, DOJ has already addressed the policies in multiple states besides Oregon. REX is eager to provide Oregonians with a fairer real estate transaction, and dismantling these policies is a major step.
Other ongoing real estate litigation
REX’s filing against Oregon is not the first case against the institutional real estate industry — it’s one of many in an increasingly long list.
The most crucial ongoing case is also the most recently filed. On November 19, the Department of Justice filed an antitrust case against the National Association of Realtors (NAR), alleging that NAR “established and enforced illegal restraints” on competition. The DOJ’s Antitrust Division asks NAR to provide more transparency around commissions, stop representing their fees as free, eliminate realtors’ ability to filter home listings based on the expected commission, and stop limiting non-NAR realtors’ access to homes. As REX is the only brokerage to operate completely outside of the NAR, the last policy directly addresses the relationship between NAR and REX.
Four other cases filed by consumers in district courts in Illinois, Missouri, and Massachusetts allege that they paid inflated fees to their real estate brokers as a result of the industry’s anti-competitive regulations. The individuals used the NAR’s Multiple Listing Service (MLS), a national network of local databases through which most homes are listed for sale, and upon which most rely for marketing, as buyer agents use the resource to find available homes for their clients. Due to the monopolistic nature of the NAR and the MLS, consumers pay inflated fees to real estate brokers with virtually no opportunity to negotiate the fees down. These are the same fees which Oregon’s current policy prevents consumers from saving on via rebates. Two cases — Moehrl v. NAR (Illinois) and Sitzer v. NAR (Missouri) — are proceeding with parallel tracking; the judges in both cases denied NAR’s motions to dismiss. Each case will continue to the discovery stage, during which parties will present more deeply developed arguments and eventually move to trial. The two other cases await further action after their filing: the Massachusetts case, Bauman v. MLS, and the second Illinois case, Leeder v. NAR, filed in December and January respectively. Clearly, the unfair fees are finally facing recognition by consumers and the courts, and they will not be able to withstand scrutiny. Luck and corruption have allowed them to last this long.
Other cases have been brought against the NAR by realtors themselves. Two California-based organizations, Top Agent Network (TAN), an association of top-performing realtors, and PLS.com, which operates an off-MLS listing service, filed complaints against the NAR in May of this year, alleging violations of several antitrust laws. TAN and PLS criticize NAR for their policy against off-market listings, which stifles competition and prevents transparency in the market.
Litigation against the NAR and its affiliates grows at the national and state level, in cases filed by the DOJ and by individuals across states and district courts. The NAR’s decades-long reign was enabled by inertia resting in their favor — for the first time, that is changing.
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