The Regional Multiple Listing Service of Minnesota, citing potential consumer confusion over access to MLS data, has passed a rule that restricts members’ use of the terms “multiple listing service” and “MLS” in Web site addresses and company names.

“Fundamentally what we’re trying to do is reinforce the distinction between what is advertising and what is the contract between brokers for compensation. There is a branding issue here,” said John W. Mosey, president of the Regional MLS, which has about 21,500 members and operates in Minnesota and Western Wisconsin.

The Regional Multiple Listing Service of Minnesota, citing potential consumer confusion over access to MLS data, has passed a rule that restricts members’ use of the terms “multiple listing service” and “MLS” in Web site addresses and company names.

“Fundamentally what we’re trying to do is reinforce the distinction between what is advertising and what is the contract between brokers for compensation. There is a branding issue here,” said John W. Mosey, president of the Regional MLS, which has about 21,500 members and operates in Minnesota and Western Wisconsin. “The object of this is to make it quite clear that there is no inference whatsoever that consumers are gaining special access to the MLS — (or) that they can search the MLS.”

The new rule, which provides an exemption for those company names that were already in effect as of March 3, did not have unanimous support, Mosey said, though MLS board members were “overwhelmingly in favor.” Those companies that violate the rules must cease their use of “MLS” and “Multiple Listing Service” by Sept. 3 or face expulsion from MLS data feeds and from MLS membership.

Language in the new rule closely mirrors language in a rule that was passed last year by the Northwest Multiple Listing Service, a regional MLS in Washington with about 16,000 members. And Mosey said there are other MLSs, too, that are considering similar rules.

A handful of companies that had the term “MLS” in their company name were exempted from the rules because their company names were in place prior to the rule’s adoption, Mosey said. Those firms and agents who use “MLS” terms in their Web addresses must incorporate a disclaimer staying that they are not an MLS but are a member of Regional MLS Inc.

“There is no claim to a trademark of the term ‘MLS’ or ‘Multiple Listing Service.’ There is some strong sentiment that the communication of these identities … is really an ethical matter,” he said. For example, a consumer might be misled to think they are actually visiting an MLS site and searching the complete MLS database when they are actually just viewing portions of the MLS data at an MLS member’s Web site.

It is still under consideration whether agents who have invested money in advertising their Web sites and services that include “MLS” terms should be allowed to maintain those Web sites for a period of time for the purpose of redirecting traffic to new Web sites, he said. “We’re debating right now whether redirects should be permitted and for how long.”

Since the rule was passed in March, it has been a topic of discussion at every subsequent board and executive meeting, Mosey said. “There is no will in any quarter to change the overall direction of this rule. There is some strong sentiment that we shouldn’t have grandfathered the five (companies using MLS-related terms) — that we should have just made it across-the-board.”

Mosey said that brokers have brought examples to the attention of the MLS in which consumers brought printouts of property listings information they found online, which they believed was MLS information. And a local newspaper printed a company’s online property listings information as an example of MLS information online. Both examples displayed a misunderstanding of the MLS, he said.

Inman News was contacted by a member of the RMLS who opposes the new rule and said it could significantly harm businesses that use the term “MLS” in Web sites and advertising, though the member would not speak on the record.

The RMLS rule states, “Members shall not use the term ‘multiple listing service,’ the acronym ‘MLS,’ or derivatives thereof in member names,” unless the company names were in effect prior to the rule’s adoption and those companies have proper disclaimers in place. The restrictions also extend to members’ use of RMLS and related terms in company names and Web addresses. And “no member shall indicate or imply in any manner that the member is a multiple listing service or that the public has access to or may search the multiple listing service on the member’s Web site or otherwise.”

The Northwest MLS adopted a nearly identical rule on April 29, 2005.

John Roberti, a lawyer for Mayer, Brown, Rowe & Maw LLP who specializes in antitrust law and formerly worked for the U.S. Federal Trade Commission, said, “Protecting consumers from misleading advertising is a legitimate reason for adopting a rule.” But if a rule lacks justification or is overly broad it could raise some legal questions, he said. “From an antitrust perspective, care needs to be taken to ensure that the rule is no broader than it needs to be.”

Roberti also noted that most MLSs have an ethics policy that would prohibit false advertising. The National Association of Realtors addresses issues of false advertising in its Code of Ethics for members, and most local MLSs are affiliated with local Realtor associations.

Article 12 of the Realtor Code of Ethics requires that a “true picture” be presented in all public representations by Realtors, noted Iverson Moore, a spokesman for the National Association of Realtors. “If a Realtor engages in marketing that leads reasonable consumers to believe they’re dealing with an MLS, visiting an MLSs Web site, etc., when that isn’t the case, Article 12 would likely be violated.”

Also, in a December 2005 report, the Realtor trade group’s Joint Work Group of the Interpretations and Procedures Subcommittee and the Multiple Listing Issues and Policies Committee issued several recommendations relating to the use of “MLS” and related terms. Among the recommendations: “That professional standards policy or MLS policy (or both) be adopted prohibiting Realtors/MLS participants from creating the mistaken impression in the minds of consumers that consumers have direct, unlimited MLS access.”

Another recommendation: “That a work group … consider how best to ensure that representations MLS participants make to consumers about availability of MLS-provided information are accurate,” and “That assuring correct use of ‘MLS’ and ‘multiple listing service’ by MLSs, and by MLS participants and subscribers, be considered by (an) NAR work group charged with assessing the future of MLS.”

Russ Cofano, a Seattle-based real estate lawyer, speaker and consultant, said the passage of the new Northwest MLS rule was not a big issue in that market.

“Saying to your members that you will not also use the term that we go by … is a reasonable rule,” he said. “If you don’t like the rules, you don’t have to be a member.” The Northwest MLS rule, like the RMLS rule, provides an exemption to those companies that previously were using MLS-related terms in their names, which is an important clause, he said. “I think that was smart of them to do.”

Even so, Cofano said he expects that most consumers are aware that they are not accessing the complete and total MLS database when they search for property information at a site that uses the phrase “search the MLS,” for example.

“In the consumer’s mind, the MLS is listing data. I don’t believe they want nor do they think that they’re getting access to the entire MLS database. It seems like by doing this it’s another way that the industry is trying to maintain the historical perspective on listing data as opposed to looking into the future and seeing how it can leverage that data,” he said. “Instead of spending what brainpower is going into these rules … I think there are bigger issues to be dealt with.”

Northwest MLS president and CEO Jack Johnson said some companies “were advertising as if they were the MLS. Another thing that they would say or imply is that you could get all the MLS information. That’s not all the MLS information.”

He added, “We’re concerned about the MLS becoming a public utility, and this is one thing we thought we could do to move away from that.”

Three companies that are Northwest MLS members were exempted from the rule change because they had been using MLS-related names prior to the rule change.

While MLS administrators didn’t hear any input from the public about confusion surrounding the MLS terms used by MLS members, Johnson said, “Our concern was that it was deceptive to the public. The public was getting the idea that these people were the MLS. Just by observing the message that was going out to the public, it was pretty obvious to us that the public was being misled.”

***

Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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