A Michigan multiple listing service and the U.S. Federal Trade Commission are making progress in resolving some issues in an antitrust lawsuit filed in October, though there is still disagreement over restrictions on the distribution of property information to some public Web sites.
The FTC seeks in legal filings to block a Michigan multiple listing service from enforcing measures that prevent its members from entering into lawful types of listing agreements with consumers, while the MLS seeks to dismiss the complaint and argues that its policies “promote the cooperative objective of the MLS.”
MLS officials, though, have changed minimum-service requirements for a category of property listings and also changed an internal property-search default rule that also drew opposition from the federal antitrust agency, and are working toward an agreement with FTC officials on these policies, court documents state.
In October 2006, the FTC charged that Realcomp II Ltd., a Detroit-area Realtor-owned MLS with about 15,000 members, adopted anticompetitive rules that prevent the MLS from distributing some property listings information to public Web sites such as Realtor.com, the MLS’s public property-search Web site and a range of members’ Web sites that are a part of an online data exchange system.
A federal administrative law judge for the FTC heard witness testimony in the Realcomp case during a hearing that began June 19 and ended June 28, and a final decision in the case may still be months away. Realcomp and FTC representatives filed post-trial briefs and other court documents during the past two weeks.
The National Association of Realtors has approved a maximum $175,000 contribution to support Realcomp II’s legal defense — the MLS is owned by seven shareholder Realtor boards and associations and is Michigan’s largest Realtor-owned MLS.
The FTC has charged that the MLS adopted a Web site policy in 2001 that withheld property information from some public Web sites for homes in which sellers entered into exclusive agency, limited-service and MLS-entry-only service contracts with MLS members. The agency has charged that such a rule is anticompetitive because it impairs the ability of limited-service real estate brokers to market some types of property listings.
Exclusive agency contracts provide that home sellers can sell their home on their own or with assistance from a listing broker and are not obligated to pay full compensation to the broker if the seller secures a buyer through the seller’s own efforts. Similarly, sellers who use limited-service and MLS-entry-only real estate services can choose to take an expanded role in the transaction process in order to reduce the cost of real estate services.
The more-common exclusive-right-to-sell listing contract, which provides that home sellers must pay the broker a commission regardless of who secured a buyer in the transaction, was not affected by the Realcomp II policy, and Realcomp had required that all subscribers who use exclusive-right-to-sell listings were also required to provide a specified set of services in connection with this type of property listing.
The FTC also charges that Realcomp set up its MLS property search to default to exclusive-right-to-sell listings, so that users would have to take an extra step to view information for other types of listings, and that the MLS defined exclusive-right-to-sell listings to include only those listings agreements in which a specified set of services were performed for consumers.
A group of six other MLSs have entered into agreements with the FTC that prevent the MLSs from enforcing restrictions related to exclusive agency agreements, and Realcomp remains the lone holdout in a series of FTC actions announced in October 2006. The FTC had also filed a lawsuit against Michigan’s MiRealSource MLS, though that MLS agreed to settle the case and a final order was announced in March.
Both Realcomp II and broker-owned MiRealSource, which has about 7,000 members, face a separate lawsuit with antitrust allegations filed by Home Quarters Real Estate group, a company that formerly offered low-cost real estate brokerage services in Michigan. Home Quarters filed an amended complaint in that case on July 27.
Karen Kage, CEO for Realcomp II, could not be reached for comment.
In its post-trial brief, filed July 31, Realcomp stated that the MLS repealed its “Search Function Policy” relating to default searches of exclusive-right-to-sell listings in April 2007, and it also repealed a “requirement that (exclusive right to sell) listings be full-service brokerage agreements.”
In a separate court document, Realcomp stated that it is “agreeable to making the change in its search function policy part of a consent degree,” and that the MLS has signed a joint stipulation regarding this policy change on July 30 that has or will be submitted to the court.
Also, court documents state that the MLS is willing to enter into an agreement with the FTC over its former minimum-service requirements. “Realcomp passed a rule which eliminated the minimum-service requirements and has agreed to enter into a consent decree with the FTC on that issue,” court documents state.
In its post-trial brief, the FTC states that an agreement binding Realcomp to change its search-default policy is a positive step but “does not address Realcomp’s Web site policy” with regard to the distribution of property data to public Web sites.
“Realcomp therefore intends to continue to exclude exclusive agency listings from its feed of information to public Web sites and (participants’ Internet Data Exchange Web sites),” the FTC’s court filing states, adding that further relief by the court “is still needed.”
In a separate court document filed Aug. 3, the FTC contends that Realcomp’s leaders appear to be in the dark about why the MLS adopted the default-search and exclusive-agency Web distribution restrictions.
“None of the Realcomp governors knows why the Web site policy and search function policy were adopted in the first place,” according to the FTC’s court filing.
“Doug Hardy, the president of Realcomp, does not know from firsthand knowledge why the Realcomp board adopted the Web site policy”; “Mr. Hardy does not know why the Search Function Policy was adopted by Realcomp”; and “even after the Federal Trade Commission began its investigation, Mr. Hardy ‘never found out the purpose of the (Website Policy) rule,’ ” the FTC states.
Also, the FTC states that Robert Gleason, a Realcomp governor, “does not recall any discussions about the Website Policy or the Search Function Policy, and no one brought up the reasons behind the adoption of the Website Policy in 2001.”
And the FTC charges that the Realcomp board of governors in 2002 considered barring the entry of exclusive agency, limited-service and MLS-entry-only listings from its MLS database though it did not adopt this policy. “In 2004 Realcomp was advised by legal counsel and (the National Association of Realtors) not to bar exclusive agency and limited-service listings entirely from the MLS.”
Realcomp had issued a “Call to Action” after the FTC complaint stating that the changes sought by the FTC “could result in the sale of properties between buyers and sellers with no obligation to utilize of compensate Realtors, even when services are rendered,” and a change in the rules or structure of the MLS “compromises the purpose of the cooperative and the Realtor’s right to create governing rules for their own cooperative.”
In its July 31 legal filing, Realcomp stated that Realcomp’s policies “have had a net benefit to consumer,” that “exclusive agents have problems with the business model that are unrelated to Realcomp’s policies,” and that “exclusive agents are not growing nationally.”
Also, “There is no economic basis for believing that, if implemented, (the FTC’s) proposed relief would result in more socially optional pricing of MLS services than Realcomp’s current policy.” Agents who want to submit exclusive agency listings to other Web sites can participate in other MLSs and send property listings directly to Realtor.com, Realcomp also argue, and the “costs associated with joining a by-pass MLS are nominal.”
Albert Hepp, owner of flat-fee MLS-listing services company BuySelf Realty and president of a national group of flat-fee brokers, said Realcomp’s policies discouraged him from joining the MLS. “I’m not a member of Realcomp. I would like to be, but it is too difficult to operate” because of the policies relating to limited-service listings, he said. Hepp, who testified during the administrative hearing, said he felt that some property listings were essentially being hidden from other agents and the public because they did not appear on some popular property-search Web sites.
Meanwhile, Realcomp’s post-trial brief states that its policies, “by limiting distribution of (exclusive agency) listings to public Web sites, prevent free-riding on the MLS by (exclusive agency) home sellers who are not real estate agents and who compete with Realcomp members to procure buyers for the listed property.”
Changes proposed by the FTC “would force cooperating agents to subsidize the marketing expenses that sellers using (exclusive agency) contracts otherwise would incur to procure buyers themselves” and would be “detrimental to the public,” Realcomp charges.
Also, Realcomp concluded in a July 31 court filing that consumers benefit from the cooperation that MLSs facilitate between listing brokers and cooperating brokers. “An MLS is not a public utility and it is not a free information service for home sellers and buyers who choose to pursue transactions without a cooperating broker,” Realcomp stated in the court filing.
Realcomp and FTC officials are expected to file another round of documents related to the case by Aug. 17, and closing arguments in the federal administrative process are scheduled on Sept. 6.