A federal antitrust lawsuit against a Michigan MLS “is not about competition between ‘traditional’ brokers and ‘discount’ brokers,” the MLS contends in a court filing — rather, it is all about whether the MLS can establish different rules for different types of real estate listings.

The U.S. Federal Trade Commission filed a lawsuit in October 2006 charging that Realcomp II Ltd., a Detroit-area Realtor-owned MLS with about 15,000 members, adopted anticompetitive rules that prevent the automatic distribution of a category of property listings to prominent public-facing Web sites such as Realtor.com and the MLS’s own public property-search Web site.

In their latest court brief, filed Aug. 17, lawyers for Realcomp II state that “competitive harm has not been proven” and request that the lawsuit be dismissed.

Closing arguments in the lawsuit are scheduled for Sept. 6 at the FTC Building in Washington, D.C.

Realcomp II is the lone holdout among a group of seven MLSs that the FTC took action against in October 2006 over policies that the federal agency deemed anticompetitive.

Most of the suspect policies identified by the FTC relate to MLS restrictions established for properties in which sellers opted for an exclusive listings contract — a type of contract under which sellers may pay zero commission or reduced commission if they secure a buyer themselves.

A more common listing agreement, known as an exclusive-right-to-sell agreement, provides that sellers are obligated to pay the full commission whether or not the seller is directly involved in bringing a buyer into the transaction.

The FTC has argued that exclusive agency contracts are favored by nontraditional real estate business models such as discount brokerage companies.

Karen Kage, executive director for Realcomp, testified during the FTC administrative hearing process that the MLS board imposed Web distribution restrictions “out of concern that homeowners using (exclusive agency) listings have an incentive to sell their homes without the assistance of a cooperating broker and avoid paying commission,” and “felt that it was not in the best interests of its members, the Realtors, to provide free advertising for home sellers who were negotiating their own deals.”

Realcomp had also established a default MLS-search tool that excluded exclusive-agency property listings from members’ searches unless members specifically opted to search for those properties under exclusive agency contracts, and the MLS explained in the court brief that this tool was created “because 98 percent to 99 percent of listings on the Realcomp MLS were for (exclusive-right-to-sell listings).”

Additionally, the MLS had approved a definition for exclusive-right-to-sell property listings agreements, known as the “minimum service requirement,” that excluded limited-service arrangements. But in its court brief Realcomp acknowledged that the MLS “has agreed to settle the search-function issue and change the minimum service definition,” based on a board decision in April 2007.

Realcomp stated in the brief that it has entered into a joint stipulation with the FTC that provides for an injunction “against the discontinued Search Function Policy and full-service definition. Thus, there will be an enforceable assurance of Realcomp’s intent to maintain the April 2007 act of the board in force.”

Realcomp maintains in the brief that no evidence was presented that supports the notion that Realcomp policies “have impaired competition between ‘traditional’ and ‘discount’ brokers.”

While Realcomp’s policy did make some public Web sites off limits to members’ exclusive-agency listings information, Realcomp said in its brief that “public Web sites are numerous, and listings reach those Web sites without regard to Realcomp’s policies. These other publicly available Web sites that are available for exclusive agents include Google and Trulia, each of which is gaining momentum.”

In an Aug. 20 court filing the FTC cited Realcomp testimony: “There is no way for a Realcomp member with an exclusive agency listing to get their listing onto MoveInMichigan.com or ClickonDetroit.com” public property-search Web sites, for example.

Realcomp stated in its brief that brokers in the Realcomp service area can opt to place their exclusive agency property information on Realtor.com through another MLS in the area. Also, the brief charges that the FTC has presented “no credible evidence that the Realcomp policies forced any broker to exit the market.”

The National Association of Realtors has supported Realcomp’s legal fight — the trade group’s board of directors in May approved a maximum $175,000 legal-defense contribution. Realcomp is owned by seven shareholder Realtor boards and associations and is Michigan’s largest Realtor-owned MLS.

In November 2006, the National Association of Realtors passed a policy that requires all Realtor association-owned MLSs “to include all property listings carried by MLSs in feeds distributed to MLS members and national aggregators like Realtor.com. That policy applies to all listings, regardless of the type of listing agreement.”

The NAR policy also includes an exception, which provides that MLSs are not required to transmit listing information for properties when: the listed property’s street address or a graphic display of a property’s location is displayed to the public and the seller displays a for-sale-by-owner sign on the property or another sign or notice that indicates that the seller is seeking direct contact from buyers.

Pat Vredevoogd Combs, NAR president, said in a statement at that time that the rule change was intended to “standardize distribution of MLS data to external Web sites for the first time and ensure that all listings are treated equally by MLSs.”

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