Multiple Listing Service of Northern Illinois has turned over hundreds of thousands of documents for a U.S. Department of Justice investigation that relates to limited-service real estate listings, and MLSNI has also responded to a subpoena that is linked to a federal antitrust lawsuit against the National Association of Realtors.
MLSNI, one of the largest MLSs in the country with about 51,000 members, in March received a subpoena from the Department of Justice that relates to ongoing antitrust litigation between the federal agency and the national Realtors trade group. The Justice Department charges in the lawsuit that the Realtor group’s MLS policies for the online display and sharing of real estate information are overly restrictive, while the trade group has held that its policies are legal and provide for ample sharing of information.
In a statement to members, MLSNI said it was one of about 20 MLSs across the country that received a “civil investigation demand” or subpoena from the Justice Department relating to the lawsuit.
The subpoena mostly related to MLSNI’s Virtual Office Web site (VOW) and Internet Data Exchange (IDX) policies for sharing property information online, though the Justice Department did request information related to the pullout and return of some real estate companies as members of the MLSNI, “as well as information regarding discussions MLSNI and MAP MLS have had and are having regarding (an MLS) consolidation or other transaction,” according to an MLSNI announcement to members.
Laurie Janik, general counsel for the National Association of Realtors, announced at a conference in May that at least 14 MLSs had been served subpoenas at that time, and all of those subpoenas related to the Justice Department’s lawsuit against the trade group, she said.
In December 2005, MLSNI had received an investigative demand from the Justice Department on a separate issue. This request for information related to “MLSNI rules regarding limited service brokerages,” the MLS told its members.
That information request called for “MLSNI rules and policies as they related to limited service listings, distribution of listings displayed in default searches of the MLSNI database, distribution of listings sent by the MLS to IDX Web sites and requirements that a broker be required to provide any specific real estate services.” Also, the Justice Department requested documents related to board of directors meetings, e-mails exchanged relating to limited-service listings, and a complete list of all inventory dating back to Jan. 1, 2003, among other items.
“With the assistance of our legal counsel, the staff at MLSNI was able to comply with the request, producing hundreds of thousands of documents. All documents requested … have been tendered to the DOJ,” MLSNI reported.
Illinois in August 2004 was one of the first states to enact a law, now commonly known as a minimum-services law, that mandates a set of duties for real estate agents, at least in certain situations. The Illinois law provides that all brokers who enter into a written contract to exclusively represent a clients must accept and present all offers and counteroffers on their client’s behalf, and must also “assist the client in developing, communicating, negotiating and presenting offers, counteroffers and notices,” and “answer the client’s questions” relating to offers, counteroffers, notices and contingencies.”
Justice Department and Federal Trade Commission officials have since objected to similar measures proposed in other states that they say can potentially restrict consumer choice and limit competition by making it difficult for some limited-service companies to do business. And they have investigated MLS policies relating to limited-service listings in other real estate markets.
Brad Tertell, vice president and general manager for MLSNI, said he doesn’t recall whether MLSNI changed any of its MLS policies related to the passage of the state minimum-services law. “We didn’t need to change anything because we do not identify limited-service listings” in the MLS database, he said. While some MLSs have excluded some types of limited-service listings from being forwarded for display at some property-search Web sites, such as Realtor.com, Tertell said MLSNI has no such restrictions in place.
Quin O’Brien, broker-owner of Chicago flat-fee company 4 Sale Realty Inc., said that MLSNI policies seem to be fair and have not hurt his business. “As far as I know, they treat (all listings) the same and fairly,” he said.
The state minimum-services law has affected his business, though, he said. “The only real change is that I must offer negotiating services. My day is consumed with phone calls and negotiations now. The new law has definitely caused me to work more hours. However, because my business has been growing exponentially each year, I could expect that anyway. It is the consumers that are upset about it. Many of my clients are professional negotiators. Many are lawyers. They are very comfortable with the (real estate transaction) process and don’t like that a middleman has been mandated upon them,” O’Brien said.
While O’Brien said he has not complained loudly about the minimum-services legislation in Illinois, he added, “I think as more consumers learn about this … they will put pressure on the lawmakers to overturn this law. Until then, I quietly keep on doing my job.”
MLSNI allows both exclusive agency listings and exclusive right to sell listings in its database, Tertell said. Under an exclusive right to sell agreement, the broker will earn a fee regardless of whether the owner sells the property or the broker sells the property. An exclusive agency agreement provides that the seller does not have to pay the broker if the seller personally finds a buyer for the property.
MLSNI hasn’t yet received a response from the Justice Department since responding to the limited-service information request, Tertell said.
As for the subpoena, he said that MLSNI did not adopt a “selective opt-out” provision of the National Association of Realtors MLS policy that is a key issue in the lawsuit. This provision of the now-defunct NAR policy (the group has withdrawn these MLS rules, known as Virtual Office Web site or VOW), provided that a listing broker could allow company listings to be made available for online display by some but not all of the other brokers in the MLS.
Opponents of this opt-out provision have said that large companies could use the policy to selectively withhold their listings from companies with alternative business models, for example, while freely sharing them with other traditional companies.
MLSNI hired an outside lawyer to assist in its response to the subpoena, according to the announcement. “There are relevancy concerns on MLSNI’s part that our legal counsels are negotiating with the DOJ.”
The legal requests by the Justice Department have led to legal costs at MLSNI, and Tertell said that some costs may be absorbed by members while others may be absorbed by insurance and/or the National Association of Realtors.
In its announcement to members, MLSNI stated that “MLSNI does have insurance coverage (for legal issues) … and once we met our deductible the rest of the expenses will be reimbursed from our insurance carrier,” and the MLS will be “asking for some relief” from the National Association of Realtors for costs stemming from the subpoena.