Last week, the Sixth Circuit issued its opinion affirming summary judgment for the defendants in Hyland v. Home Services of America, Inc., a class action by former clients of several large real estate firms, who alleged that the firms engaged in antitrust behavior by colluding to inflate their commission rates in violation of the Sherman Act.
In 2005, the Kentucky Real Estate Commission abolished its ban on realtors offering rebates to incentivize the use of their services after the U.S. government brought an antitrust suit against the KREC. The class members in Hyland alleged that during the four years prior to the end of the KREC ban, the defendant firms conspired to charge “supra-competitive” commissions of at least 6%, and that the ban helped all of the “defendant firms collude to keep commissions at an artificially inflated rate.” The defendants countered that as “full-service” brokerage firms in the “inelastic” real estate market (in which homeowners are not induced to sell homes based on a broker’s commission rate), the 6% fee was not only merited, but also made economic sense.
In affirming summary judgment for the real estate firms, the court quoted extensively from the district court’s order and its assessment of the plaintiffs’ evidence as insufficient to allege the existence of a conspiracy to fix real estate commissions in Kentucky. Unwilling to say that its precedent had established a “stringent” standard for summary judgment motions in antitrust cases, the panel held that the plaintiffs’ direct and circumstantial evidence of collusion “[fell] far short of the standard that it be ‘explicit and require no inferences,’” nor did the evidence rebut the conclusion that the firms’ conduct “was also consistent with permissible competition.”
The Circuit has been relatively busy with antitrust class actions lately, with the Supreme Court recently denying review in one of the Circuit’s significant decisions, which we covered here. Although in Hyland the court declined to label its antitrust class action precedent as “stringent,” the Sixth Circuit’s decision in this case does indicate that an abundance of circumstantial evidence will not be sufficient to allege an anticompetitive conspiracy when the evidence also indicates permissible and standard market behavior. We will of course continue to monitor any further developments in this case, as well as the Circuit’s general approach to antitrust cases and their class action counterpart.