The heated debate in the Chicago area over a proposed joining of a large association-owned multiple listing service with a competing broker-owned MLS is now boiling over as an all-out war of words.

Five of the 10 Realtor associations that own the MLS of Northern Illinois — one of the largest MLSs in the nation with about 51,000 members — are opposing a proposed transaction that would combine MLSNI with smaller competitor MAP MLS (the MLS of Mount Prospect, Arlington Heights, Palatine and Prospect Heights) and create a new MLS entity dubbed Newco.

The debate over the proposed

The heated debate in the Chicago area over a proposed joining of a large association-owned multiple listing service with a competing broker-owned MLS is now boiling over as an all-out war of words.

Five of the 10 Realtor associations that own the MLS of Northern Illinois — one of the largest MLSs in the nation with about 51,000 members — are opposing a proposed transaction that would combine MLSNI with smaller competitor MAP MLS (the MLS of Mount Prospect, Arlington Heights, Palatine and Prospect Heights) and create a new MLS entity dubbed Newco.

The debate over the proposed MAP-MLSNI transaction has largely centered on proposed changes to the ownership and control of the combined MLS, and the financial benefits to MLSNI shareholders in pursuing the deal.

Across the country, some other MLSs, too, are pursuing MLS consolidations and structural changes as member companies seek to play a greater role in ownership and operations and curb costs associated with membership in multiple MLS organizations.

The five opposing MLSNI shareholders have threatened a lawsuit to block the transaction and have also set up a Web site at SaveOurMLS.info to promote their cause.

In response, lawyers for three large Realtor associations that are also MLSNI shareholders prepared a “rebuttal” statement, called “Truth and Lies behind ‘Save Our MLS,'” that refutes information provided at that Web site. The Chicago Association of Realtors has published the statement on its Web site, and the statement is also endorsed by the North Shore-Barrington Association of Realtors and the Realtor Association of West-South Suburban Chicagoland.

“A Web site called ‘Save Our MLS’ has been established by persons who are not willing to identify themselves, although the sponsors are probably related to one of the five boards that hired the lawyer who wrote an accusatory letter full of its own misinformation to the MLSNI board,” according to the “Truth and Lies” statement. “While discussion is healthy and everyone is entitled to his own opinion, the Web site is a fountain of misinformation that needs to be corrected.”

The “Save Our MLS” Web site charges that the MLSNI-MAP transaction was led by a “handful of large brokers” who “seek to control the MLS and would greatly restrict the ability of you and your firm to exist in the near future,” and also states that local MLS members “have been well-served through the operation of a stable, open MLS, and, at the present time, we see no need for you to pay for proposed wholesale changes in that system without open and complete discussions about who will ultimately benefit from those revisions.”

Meanwhile, the “Truth and Lies” rebuttal states that the MLSNI-MAP consolidation “may create economies of scale and a better technology platform, but the real threat is what will happen if brokerage firms representing a large subscriber base totally withdraw from MLSNI should the transaction with MAP not occur. Were significant withdrawals to occur, the viability of MLSNI and other broker access to listings would be threatened. The refusal of all of the boards to recognize this threat is a dangerous denial of reality. That is the threat to your future.”

A few large brokerage members of MLSNI had reportedly stopped submitting property listings to the MLS through the companies’ North Shore-area offices last year in a dispute with MLSNI over data-licensing issues, though this year restarted the practice of submitting listings through those offices as discussions progressed in forming a consolidated MLSNI-MAP MLS. That move was viewed by some as a threat that large brokerage companies might leave MLSNI in favor of MAP.

But some real estate professionals associated with the five dissenting MLSNI shareholders have said they view that as an empty threat, as the bulk of MLSNI’s members work for small and mid-sized brokerage companies and the MLSNI database of property listings is far more extensive than that of MAP, which has about 14,000 members. Most of MAP’s members are also members of MLSNI.

The “Save Our MLS” Web site raised questions about potential conflicts of interest among MLSNI board members who also have ties to MAP. “There has been a lack of disclosure from MAP concerning its assets and liabilities to be assumed, a lack of disclosure by some MLSNI board members about potential conflicts of interest from their, or their company’s, affiliation with MAP, and antitrust opinions have not been sought or, at the very least, been made available to MLSNI shareholders,” the Web site states.

Those statements are not true, according to the “Truth and Lies” statement. “MAP has made disclosure of its assets and liabilities. Each Director member of the MLSNI Board of Directors has completed a ‘Disclosure of Potential Conflict of Interest,’ and the antitrust opinion has been sought, received, discussed and delivered to the board of directors and their attorneys,” the rebuttal states.

While the “Save Our MLS” site suggests that the new operating structure for MLSNI and MAP is driven by a “select few who wish to give themselves an unfair competitive advantage,” the “Truth and Lies” letter states that the consolidation plan calls for a nominating committee “that is expressly tasked with the job of seeking diversity among geographical areas, small firms, large firms, franchise and non-franchise firms” to be represented in the new board of directors.

The verbal jousting in the MLSNI-MAP debacle is the latest in a series of troubles for MLSNI. In March, the MLS received a subpoena from the U.S. Department of Justice relating to an antitrust lawsuit that the agency filed last year against the National Association of Realtors, and that subpoena requested information related to online rules for exchanging property listings information, the pullout from MLSNI and subsequent return of several large brokerage companies, and the proposed MLSNI-MAP consolidation.

In December 2005, MLSNI had received a separate request from the U.S. Justice Department that reportedly sought information on rules related to limited-service real estate brokerage companies. And in October 2004, the MLSNI board fired its CEO, Jay Huffman, after a costly audit and the MLS’s investment in a company that was headed by Huffman’s wife.

Loretta Alonzo, MLSNI president, could not be reached for comment about the “Truth and Lies” statement.

Terese “Terry” Penza, president and chief operating officer for the North Shore-Barrington Association of Realtors, told Inman News that the “Truth and Lies” statement was prepared by lawyers for the three Realtor associations with input from those associations. She said that in the case of her association, an e-mail was sent to the board of directors about the rebuttal. “It was felt that there had to be a response to the inaccuracies posted,” she said.

Also, Penza said that the “Truth and Lies” statement has been sent by e-mail to members of the three associations, and a copy has also been sent to MLSNI and MAP officials. Besides the statement, she said there are no other plans to take action against the creators of the “Save Our MLS” Web site.

The three associations who endorsed the “Truth and Lies” statement did not ask MLSNI officials for their support of the statement, Penza said. “The longer there was no response, the longer misinformation was floating around.”

Ginger Downs, CEO for the Chicago Association of Realtors, said that her association “felt that a strong, accurate response was necessary, which is why we took this step with two of our fellow shareholder associations.”

It is the position of the Chicago association, she said, that the MLSNI-MAP transaction “best serves the needs of our 17,500 members. It will reduce double fees for many of our members, provide a better technology platform, and allow our broker members to have control over the destiny of the MLS in our area.” She added, “We look forward to the final deliberations by the MLSNI directors as they complete their due diligence process, and welcome the opportunity to vote in favor of the transaction at the annual shareholders meeting.”

The five shareholder groups that oppose the current proposal for the combined MLSNI-MAP MLS are: Realtor Association of the Fox Valley, McHenry County Association of Realtors, West Towns Board of Realtors Aurora Tri-County Association of Realtors and Oak Park Board of Realtors.

Nancy Sobol, president for the McHenry County Association of Realtors and a Realtor for RE/MAX Traditions, said she was surprised to read the “Truth and Lies” statement. “It was a little inflammatory,” she said.

The “Save Our MLS” Web site, she said, was part of a public relations campaign supported by the five shareholder groups. If there are inaccuracies at the Web site there will be changes made, she said.

“There are times when you have parties that just don’t agree,” she said, adding that there can be “different interpretations of the same information. I want to make sure that everybody gets the right information.”

While some associations may feel that the MLSNI-MAP proposal is in the best interest of their members, Sobol said that she has not reached that conclusion. “This does appear on the surface that it may not necessarily be a good business undertaking and is not necessarily in the best interest of the majority of the members,” Sobol said.

In a written statement today, officials for the McHenry County association notified broker-owners and managers of the association’s official position on the proposed joining of MLSNI and MAP. “The merger is going to cost money and you are going to finance it,” the letter states, adding that members who do not benefit from the MAP transaction shouldn’t be forced to pay to finance the deal.

Also, the deal “is going to require you as a brokerage firm to buy a share in order to have voting rights or the right to run for a seat on the board,” the letter states. “At MLSNI currently you are entitled to both of these rights simply by joining — no additional fee.” Also, the association is not in agreement with a plan to limit association representation on the board to two seats while there are 13 seats for brokers.

“Unfortunately too much clutter has been wrapped up into the deal which is simply not in the best interest of McHenry County brokers and/or agents,” according to the McHenry association’s letter, which does not reference the “Truth and Lies” statement but is intended as a response to that information.

Iver Johnson, a member of the McHenry association who said he is speaking as an individual and not as a representative for the MLS, wrote a personal response to the “Truth and Lies” rebuttal. Johnson said in his note, “Just because you put lipstick on the pig does not cause it to cease being a pig. The general ‘consolidation’ proposal has gone through many incarnations since the letter of intent, and there may be a structure which is rational and which might work. It has not yet been found.”

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