Judge: FTC-challenged MLS rule is pro-competitive

A federal administrative law judge today found that a Detroit-area multiple listing service's rule, which had been challenged by the U.S. Federal Trade Commission as anticompetitive, actually may have a pro-competitive effect (see Inman News).

The FTC will appeal the matter for consideration by the agency's full commission.

At issue in the judge's opinion is an MLS policy that prevents the MLS from sharing property information about a certain category of property listings with an array of public Web sites, including Realtor.com, MoveInMichigan.com and other sites operates through data-exchange agreements among Realcomp members.

The Realcomp policy blocks the sharing of property information related to properties under exclusive-agency listing contracts, which provide that the home seller does not need to pay a listing broker in the transaction if the seller brings in the buyer without assistance from the listing broker.

This type of listing is more commonly used by brokerage companies that offer reduced or menu-based services -- such as those companies that offer to list a property in an MLS for a flat fee but provide few or no other services -- at a lower cost than traditional real estate companies.

Realcomp has no such restrictions for the more commonly used exclusive-right-to-sell listing agreement, under which sellers must pay the listing broker a commission regardless of who brings in the buyer.

Several other MLSs have settled FTC investigations of similar policies by withdrawing their policies and agreeing not to adopt similarly restrictive policies.

The administrative law judge found that Realcomp's restrictions on sharing exclusive-agency listings data with public-facing real estate sites "is plausibly pro-competitive" because it addresses "a free rider problem by exclusive-agency home sellers competing with Realcomp brokers for buyers," as sellers are not members of the MLS.

"Free riders" in economic terms are those who consume more than a fair share of a resource or do not pay a fair share of the cost to produce a resource.

Meanwhile, opponents of the Realcomp policy have said that companies that use exclusive-agency listings are a benefit to MLS participants because they typically offer compensation to cooperating brokers who bring a buyer into the transaction and they attract sellers who might otherwise sell on their own, without any assistance from a real estate agent.

The National Association of Realtors has supported Realcomp's legal battle, approving contributions of up to $300,000 for defense costs. Realcomp's contested policy is actually in violation of a National Association of Realtors MLS policy that was amended in November 2006, following the agency's actions against Realcomp and several other MLSs.

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