Say your multiple listing service puts in place a policy that directly affects a small percentage of listings in your area. You may or may not agree with the policy, but you think it won’t affect you. Well, think again.
Michigan’s largest multiple listing service, Realcomp II Ltd., has reached a preliminary agreement to settle a class-action lawsuit against the MLS for $3.25 million.
Gavel image via Shutterstock.
The bulk of the settlement will be paid by the MLS’ 11,000 or so Detroit-area subscribers, who will fork over more than $200 each.
The lawsuit was prompted by Realcomp’s refusal to transmit “exclusive agency” property listings — a type of listing agreement sometimes employed by discount brokers — to realtor.com and other public-facing websites.
Realcomp had previously lost a fight with federal antitrust regulators over the policy, racking up more than $2.4 million in legal costs that were partially offset by $725,000 in assistance from the National Association of Realtors.
Realcomp’s battle with the Federal Trade Commission began in October 2006, when the FTC announced that it was taking action against seven MLSs, including Realcomp, over their refusal to transmit exclusive agency property listings to public websites such as realtor.com.
While the six other MLSs entered into consent agreements with the FTC, Realcomp chose to go head to head with the federal regulator, committing to a legal battle that ultimately lasted five years.
That case went all the way to the Sixth Circuit Court of Appeals, which in a 2011 ruling found that the Farmington Hills-based MLS had “unreasonably restrained competition” among real estate brokers, and upheld the FTC’s order that Realcomp rescind the disputed policy. The U.S. Supreme Court declined to grant Realcomp’s petition for review.
At their peak in October 2004, exclusive agency listings represented just 1.7 percent of Realcomp’s listings, according to an FTC expert witness.
But in an October 2010 class-action lawsuit, lawyers for three couples who sold homes in 2005 sought standing to represent thousands of home sellers who allegedly paid inflated commissions because Realcomp’s policies had protected full-service brokers from competition.
In March 2013, lawyers for the plaintiffs were granted class-action standing to represent all similarly situated homeowners who purchased real estate brokerage services in Realcomp’s service area from May 1, 2004, through April 27, 2007.
In their complaint, attorneys for the plaintiffs estimated that the number of affected homeowners could be in the “tens of thousands,” citing FTC estimates that at least 71,801 homes listed by Realcomp brokers were sold between November 2004 through October 2006.
Settlement talks began soon after the case was granted class-action standing.
“Opting for trial exposes us to a potential $46 million liability, if we are not successful,” MLS officials told members in a Feb. 5 FAQ. “It is in our best interests to settle the case and look toward the future of Realcomp and our subscribers.”
An attorney for the plaintiffs did not respond to a request for comment.
Under the terms of the agreement, which is subject to court approval, each Realcomp subscriber will be assessed a total of $255, to be paid over five quarters starting in second-quarter 2014, the FAQ said. That works out to $17 per month for 15 months.
Realcomp’s members will pay the vast majority of the settlement — roughly $2.81 million of the $3.25 million. The MLS and several shareholders also named in the suit — the Dearborn Board of Realtors, the Eastern Thumb Association of Realtors, the Greater Metropolitan Association of Realtors, Livingston Association of Realtors, and North Oakland County Board of Realtors — will also pay.
Realcomp members can’t avoid paying the charge by dropping their membership and rejoining in 2015.
“If subscribers quit and later rejoin just to avoid the fee, then Realcomp reserves the right to charge a re-entry fee,” Realcomp said.
“As a current Realcomp subscriber, you are receiving the benefits of a vibrant MLS. In order for Realcomp to continue to provide all of its services to all of its constituents, this case had to be settled on these terms,” Realcomp officials told members.
In the settlement FAQ, MLS officials said Realcomp had paid the bulk of the defense costs in the civil case, which amounted to “hundreds of thousands of dollars.” NAR and the Michigan Association of Realtors also contributed to defense costs.
“Realcomp will continue to cut operating costs wherever possible in order to contribute to the cost of the settlement. We will keep our subscribers updated on our progress as we go forward,” the MLS said.