The U.S. Federal Trade Commission today announced litigation against two multiple listing services and settlements with five other MLSs based on policies restricting a classification of property listings.
The five consent agreements resolve separate investigations against the MLSs over similar policies that prohibited the display of certain property listings on some home-search Web sites, and the litigation targets two MLSs in Michigan that have refused to withdraw similar policies.
Several other MLSs are also under investigation for similar policies, said Jeffrey Schmidt, director of the FTC’s Bureau of Competition. But he did not provide specifics about how many investigations are pending, and whether the FTC would take actions against those MLSs.
Today’s announcement marks the latest in a series of FTC and U.S. Justice Department actions against alleged anti-competitive practices in the real estate industry. The agencies have also opposed state measures that seek to establish a range of minimum service required for all real estate professionals, at least for some types of agreements for representation in a real estate transaction.
And the Justice Department is engaged in an antitrust lawsuit with the National Association of Realtors trade group over the association’s policies for the online display and sharing of property listings information.
For most of the FTC actions announced today, the agency took issue with policies that prevent the display of property information at some home-search Web sites when MLS members entered into “exclusive agency” agreements with home sellers.
Under an exclusive agency agreement, property owners have the right to sell a property without extensive help from the listing broker and are not required to pay the broker if they directly locate a buyer for the property. Meanwhile, the MLSs did not place similar restrictions on the more popularly used “exclusive right to sell” agreement, under which sellers must pay the broker a commission when the property is sold.
According to the FTC, exclusive agency agreements are “often used by home sellers who do not wish to purchase the full range of brokerage services. Under an exclusive agency listing agreement, the listing broker often charges an up-front fee, but may receive a reduced commission, or no commission at all if the owner sells the property without the broker’s further help.”
Officials at MLSs that have adopted such rules have said that the rules aim to prevent MLSs from hosting for-sale-by-owner transactions in which the MLS member has little or no involvement in the transaction. The MLS, they have said, is intended to facilitate cooperation among its members and not to assist with direct home sales between a buyer and seller who may not use the professional services of an MLS member.
The FTC filed administrative complaints against Realcomp II Ltd., a corporation owned by several Realtor boards and associations in Michigan that has about 14,800 members, and broker-owned MIRealSource Inc., which has about 7,000 members.
Karen Kage, CEO for Realcomp II Ltd., said today that the action “is not unexpected.” The MLS passed a rule in 2004 that prohibits exclusive agency listings from reaching popular property-search site Realtor.com, an MLS-owned property-search site at MoveInMichigan.com, and all of its members’ sites that feature property information through a data-sharing agreement with other brokers.
National Association of Realtors-affiliated Realtor.com consistently ranks among the top property-search sites for consumer traffic on the Web.
“I feel very firmly that consumers do have choices and we’re not taking away those choices. There are a lot of Web sites out there where listings can be published for free or for a fee, so we don’t feel we’re taking away consumers’ choices,” Kage said.
The FTC complaint against Realcomp II charges that the MLS has violated antitrust laws in adopting “policies that limit the publication and marketing of certain properties,” and states that “these policies discriminate against certain kinds of lawful contracts between listing real estate brokers and their customers, and lack any pro-competitive justification.”
Another complaint, against MiRealSource Inc., charges that the MLS adopted “a series of rules designed to thwart competition by firms using alternative business models,” including an August 2003 rule that prevents the MLS from accepting any listings to the MLS other than exclusive-right-to-sell listings.
The complaint also alleges that the MLS “was well aware that … alternative business models used exclusive agency listings to offer a menu of services that a home seller could choose from at a significantly lower price” and that the MLS “believed that these alternative business models were gaining ground with home sellers and home buyers during this time period and adopted rules in response to this additional competition.”
Officials at MiRealSource had no comment today about the complaint.
The complaints against the Michigan MLSs will by heard by administrative law judges for the commission unless the FTC reaches settlement with the MLSs prior to trial.
The FTC also announced complaints and consent orders with Information and Real Estate Services LLC of Loveland, Colo.; Northern New England Real Estate Network Inc. of Concord, N.H.; Williamsburg Area Association of Realtors Inc. of Williamsburg, Va.; Realtors Association of Northeast Wisconsin Inc. of Appleton, Wis.; and Monmouth County Association of Realtors Inc. of Tinton Falls, N.J.
Consent orders for these five MLSs are subject to a 30-day public comment period before the FTC can finalize the orders.
Schmidt, of the FTC, said that the FTC actions seek to stop abuse and discrimination by MLSs against some members. “This is not an attack against the real estate industry as a whole,” he said, and is intended “to protect consumers and the choices they have in a real estate transaction.”
He added, “There is no doubt about it — increased competition in every industry, including real estate, leads to more choices, better prices and increased services for consumers. This isn’t about the FTC saying that one form of brokerage is better than another — our point is that consumers should have a choice as to what they want, what they need.”
Charles Melidosian, vice president and chief information officer for the Baird & Warner real estate company in Chicago and a member of the MLS of Northern Illinois, one of the largest MLSs in the country, said of the FTC actions, “At times I think the FTC steps a little bit too far. I don’t like the fact that the FTC is stepping in and forcing lower-cost service providers to leverage the resources of higher-cost service providers.”
He also said, “If someone has a new business model, go for it. Develop your own Web site. Develop your own MLS for all practical purposes. But for the federal government to come in and say MLSs who have invested a significant amount of money and time to develop these services … to force it to accept anyone and everyone to market within the MLS, I think is unfair competition.
“The next step is then ‘Why can’t the consumer put their listings directly in the MLS and pay nothing?’ At some point you need to draw the line what is fair business practices versus healthy competition,” Melidosian said.
Derek Eisenberg, a real estate broker and creator of MultipleListingSystem.com in Hackensack, N.J., has opposed the exclusive agency restrictions. “The MLS position is without merit. Their assertions that they are doing it to avoid promoting FSBOs are absurd,” as addresses are typically not published for listings submitted through MLSs in his market area and there are typically no notations in the public property descriptions that suggest that a property is an exclusive agency listing, he said. “Buyers finding an (exclusive agency) owner would be like searching for a needle in a haystack.”
In a statement today, National Association of Realtors officials said they have “continued to reach out to the Federal Trade Commission in an attempt to address FTC concerns regarding the treatment of exclusive agency listings.”
“MLSs are a powerful force for competition,” said Laurie Janik, NAR general counsel, in a statement. The announcement states, “Janik has been attempting to work with the FTC for a number of months on the inquiries into the activities the FTC views as being in violation of antitrust laws.”
And NAR president Thomas M. Stevens said in a statement, “Working with the industry to develop constructive solutions is not something the FTC is accustomed to doing, and it is rewarding to see that our efforts to develop a cooperative relationship may be paying off. The result will be, we hope, the elimination of duplicative actions such as consent orders.”