Can North Carolina's Residential Real Estate Contract Due Diligence Fees Survive Antitrust Scrutiny?
This article examines how antitrust enforcement in residential real estate, particularly after the cases Burnett v. National Association of Realtors (“Burnett”) and Moerhl v. National Association of Realtors (“Moerhl”), creates new competition law vulnerabilities for North Carolina's unique due diligence fee (“DDF”) system. The Burnett and Moerhl cases challenged the buyer broker compensation in real estate transactions as violating Section 1 of the Sherman Act due to a conspiracy by the National Association of Realtors (“NAR”) and its affiliates to unreasonably restrain trade causing injury to home sellers listing their homes on Multiple Listing Services associated with NAR. Even those these two cases were not formally consolidated under the rules of procedures and remained separate cases on their own dockets, the settlement of the Moerhl case was structured as a global resolution that ended both cases simultaneously with a settlement award of $208.4 million for Burnett plaintiffs and $418 million for Moerhl plaintiffs. North Carolina's DDF system exhibits characteristics that could attract antitrust scrutiny under Section 1 of the Sherman Act due to it being one of two states that require non-refundable fees paid directly to sellers. North Carolina being an outlier like Texas suggests potential market manipulation or artificial barriers to competition. The continued reliance of other states on refundable earnest money demonstrates that a viable and less restrictive competitive alternative exists and functions effectively. Under the Sherman Act antitrust doctrine, the availability of the less restrictive earnest money option that achieves the same procompetitive objective is probative of whether a challenged practice is unreasonable. This article delves into an analysis of the Burnett and Moerhl cases, the ripple effect of these real estate antitrust cases that could result in an antitrust challenge of DDFs in North Carolina, and the plausibility of a state-action immunity defense.