NEW ORLEANS — The Justice Department, as a part of its antitrust lawsuit against the 1.3-million-member National Association of Realtors trade group, has identified 36 market areas in which association policy for the online display and sharing of property information has allegedly caused anticompetitive effects, said Laurie Janik, general counsel for the group.
Filed last year, the lawsuit charges that the Realtor group’s policies are illegal because they could potentially be used to squelch real estate competition, while the Realtor group has maintained that its policies provide for ample online information about properties.
“They’ve identified 36 markets to us where they intend to prove anticompetitive effects,” Janik said Friday during a meeting for multiple listing service executives at a Realtor conference in New Orleans.”We’ll be waiting to see just what types of proof they plan to advance from those marketplaces.”
Lawyers for the association, meanwhile, are conducting interviews with MLS officials in those markets to gather information for its defense.
Issues of data protection and control are at the core of the legal scuffle, as some brokers have pushed the association to better serve their interests by helping to safeguard control over property information that they say is a vital part of their business.
A major contention in the Justice Department lawsuit is on a policy provision that allows brokers who are members of Realtor-affiliated MLSs to block their listings from display on other MLS participants’ Web sites, Janik said. “We believe it’s a very justifiable position, but the government seems to think that once a broker has decided to participate in the MLS then you also must allow your listings to be displayed on a competitors’ … Web site.”
Also, Justice Department officials object to a Realtor policy which requires that Realtor MLS participants must “actually be engaged in listing or selling the type of property that’s listed in the MLS,” while the former policy simply required that an MLS participant possess a broker’s license.
“The reason for the rule change is largely driven by the Internet,” she said. “We all know there are plenty of people out there with brokers’ licenses — so you get the license, you get the valuable data feed, you get to display it on your Web site and make all sorts of money even though you never list or sell a property. We don’t think those people belong in the MLS and so that’s what I think will be the second biggest issue in the lawsuit.”
The association is also grappling with other legal issues, Janik noted, including eight Federal Trade Commission investigations and seven Justice Department investigations that have focused on a specific classification of property listings. The federal agencies are targeting MLS rules restricting the display of exclusive agency listings on some public property-search Web sites — exclusive agency listings provide that sellers do not have to pay a commission to a real estate broker if they locate a buyer without the assistance of the broker.
The MLSs’ restrictions did not affect exclusive right to sell listings, a more common form of listing in which the broker is guaranteed compensation whether or not the seller independently locates a buyer.
A group of Realtor-affiliated MLSs have eliminated the policies after the federal agencies began investigating their policies, while some of the investigations are still outstanding and the FTC has announced legal action against two MLSs in Michigan.
In July, the National Association of Realtors hosted a “fly-in” event in Chicago and invited all of the lawyers for MLSs involved in the investigations, Janik said. The participants of that meeting signed a joint defense agreement and a confidentiality agreement, she said.
After that meeting, Janik and an antitrust lawyer representing NAR met with FTC and Justice Department staff to discuss the issues surrounding exclusive agency listings.
“We wanted to make sure they understood that MLSs had a legitimate concern and a legitimate reason not to be advertising exclusive agency listings on the Internet … and that those MLSs that excluded these listings from (distribution to some public Web sites) were doing it because it is not consistent with the purpose of the MLSs to be helping home sellers sell their homes themselves and cut brokers out of commissions.”
In some cases, Janik said, sellers in exclusive agency listings contracts have displayed for-sale-by-owner signs on their properties.
In response, Janik said that the association is considering a proposal to change listings policy so that brokers — rather than MLSs — could make independent choices about whether or not to exclude exclusive agency listings from their Web sites.
“Brokers are always entitled to make independent business decisions. There’s no collusion, there’s nothing illegal about that,” she said. “The MLS as a group of competitors … would not be making a joint decision; there would be no agreement among competitors.” And that represents an important legal distinction, she said.
The association has shared its proposed changes to listings policy with the Justice Department and FTC, and Janik said she expects the association would be safe in adopting this policy change, though she added that the agencies have not provided written approval of the proposal.
The proposed changes would also provide that MLSs can choose to exclude exclusive agency or exclusive right to sell listings from being sent to public Web sites when the street address of the property is being shown on the Internet and when a for-sale-by-owner sign or other sign on the property indicates that the seller is soliciting direct contact from buyers.
This is intended to prevent situations in which sellers receive the benefit of MLS visibility but could potentially block MLS subscribers from participating in the real estate transaction, she said. This proposed change may be a tough sell to the federal agencies, she added.
“There is some disagreement with us and the FTC over that portion and no one is obviously promising this a clean bill of health,” Janik said. “And there are some risks of adopting this policy. The risk of doing nothing I think is far greater,” she said. “I think narrowing the policy — narrowing it or getting rid of it entirely … are probably the only two viable choices we get,” she said.
If the proposal is adopted by the association’s leadership, it will be an optional policy “for those who love to take risks,” she said.
MLSs that do not have the staff to actively visit MLS-listed properties to ensure that there are no for-sale-by-owner signs could rely on “the age-old MLS rules enforcement practice of ‘tattle-taling,'” she said. “And it seems to work pretty well.”
While the rule would prevent sellers from displaying a for-sale-by-owner sign on their properties when listing a home with an MLS, sellers could still use other non-MLS venues to market their homes, such bulletin boards, Web sites such as craigslist.org, and fliers at the local church, “because it has nothing to do with the resources of the MLS,” Janik said. “The only way the MLS connection can be made is with the address and the for-sale sign. It’s a very narrow exception.”
Also during her legal update, Janik said, “There is a movement among some states to put some definitions in the state law as to what constitutes an exclusive right to sell listing,” citing an example of one state that may be considering language stating that “any property that is marketed for sale by owner is not an exclusive right to sell listing.”
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