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Federal antitrust prosecutors have asked the judge overseeing a lawsuit against Massachusetts’ main multiple-listings service to reject a proposed settlement in the case, arguing instead that buyers should be the only ones to pay their agents’ commissions.

A group of Massachusetts home-sellers sued MLS PIN and several national residential brokerages over industry-standard agent commission practices codified in the listing service’s rules in a case known as Nosalek v. MLS PIN et al., saying the commission rules, and the brokerages’ roles in upholding them, violated federal antitrust laws. The plaintiffs and MLS PIN inked a settlement agreement in July 2023 that would have seen the listings service modify its listing rules to no longer require that sellers pay the buyer’s agent’s commission and to require that listing agents formally notify their clients that they don’t have to pay the buyer’s agent commission, as is currently common industry practice.

But that settlement represents “insignificant and largely cosmetic changes…while perpetuating the existing structure,” Department of Justice antitrust attorney Jessica Leal wrote in a filing Friday.

“There is no reason to believe that the settlement will reduce broker commissions” for buyers and sellers, she added.

Citing other similar rule changes at other American listings services, including one in the state of Washington that a DOJ analysis found had no effect on agent commissions, and the lack of any MLS PIN rule prohibiting the negotiation of buyer-agent commissions, Leal said the proposed settlement would still let buyers’ agents steer their clients to listings that offer higher commissions – a practice she called “well-documented” in the real estate industry today.

“As a result, commissions on home sales will remain inflated, reducing the net amount the seller receives for the home and driving up the purchase price paid by the buyer. The proposed rule therefore raises serious antitrust concerns in its own right,” she said.

Instead, Leal said, a settlement that bans sellers from offering any buyer’s agent commission at all would be preferable, and could make more room in the industry for brokerages and agents that offer a different fee structure, like an hourly rate, “that does not reward their broker for helping them to pay more for a home.”

Leal also addressed many agent’s main defense of the current commission system – that current federal mortgage rules prohibit a cash-strapped buyer from paying the agent commission out of their mortgage loan – head-on.

“A change that makes it the buyer’s responsibility to negotiate broker commissions directly with her buyer broker would not force buyers to pay those commissions out of pocket. While some buyers might choose to pay their buyer brokers out of pocket, other buyers might request in an offer that the seller pay a specified amount to the buyer broker from the proceeds of the home sale,” she said. “This type of ‘conditional’ offer is already permitted under federal government lending programs. Those programs do not require buyers to come up with additional funds a closing in order to compensate their brokers in these types of ‘conditional’ offers. Buyers therefore would not need to come up with additional funds at closing in order to compensate their brokers. Instead, they and other buyers would benefit from increased competition between buyer brokers.”

The parties in the case are now expected to make counter-arguments to Leal’s finding.