A flat-fee brokerage in Washington contends that a new data exchange policy passed by a local multiple listing service is anticompetitive because it allows MLS participants to make individual decisions about which property listings to display — and not to display — on their Web sites based on a list of criteria, including compensation offered, the type of listing agreement, and the type of services offered.

The rule changes, enacted in August by the Tri-Cities Association of Realtors MLS, are modeled after revisions to a National Association of Realtors Internet Data Exchange (IDX) policy approved last year.

NAR policies related to the online sharing and display of property listings information are also at the center of an antitrust lawsuit filed by the U.S. Department of Justice in 2005 against the association — that litigation is ongoing. Also, the U.S. Federal Trade Commission has taken action against MLS rules related to IDX restrictions that prohibit the display of some types of property listings.

John Kelch, co-chair for the Tri-Cities Association of Realtors MLS, which has about 750 members, said the policy changes adopted by the MLS are “for the most part … patterned after what the national association had done,” and said he didn’t believe the new rules constitute “any big change” in policy.

NAR’s amended IDX policy provides that MLS participants “may select the listings they choose to display on their IDX sites based only on objective criteria” that can include factors such as “geography, location, list price, type of property, cooperative compensation offered by listing brokers, type of listing (exclusive right to sell, exclusive agency or open listing), or the level of service provided by the listing firm.”

The new rules adopted by the Tri-Cities MLS contain language that mirrors this MLS policy and represent an expansion of previous language, which stated that participants “shall determine which listings or the types of listings they will display on their Web sites. Examples include property type, price or location.”

Chris Nye, president of MLS4owners.com, a company that markets properties in the MLS and in other media for a flat fee of $595, this month complained to the Federal Trade Commission and U.S. Justice Department about the local MLS policy and NAR’s policy, which he charged are harmful to consumers.

Joseph G. Beitey, a lawyer for MLS4Owners.com, sent a letter in September to Larry Miller, the executive vice president for the Tri-City Association of Realtors, which charges that the new rules and regulations adopted by the association “may seem benign and legitimately useful at first blush,” but “unfortunately a closer look … shows potential antitrust violations.”

The rule changes adopted by the Tri-Cities MLS provide that MLS participants’ choices about which listings to display on their Web sites through the IDX system “must be independently made by each participant,” though Beitey stated that the policy would allow competitors “who didn’t like us personally and/or our business model” to exclude the company’s listings.

“Anyone precluding us from the Tri-City’s real estate market would be doing so not for any legitimate reason of their customer or client; but instead would be doing so for the illegal purpose of limiting their competition,” and that is what federal antitrust law is designed to defend against, he charged in the letter.

He noted that a group boycott or “concerted refusal to deal,” through which industry members agree or take action to drive a competitor from the industry, would constitute a violation of antitrust law.

Laurie Janik, general counsel for NAR, responded to the letter last month. She stated in her response that Beitey’s letter was brought to her attention “because the policy over which you express concern is one developed by the National Association of Realtors.”

Janik noted that NAR’s policy specifically allows individual choices by brokers. “While two or more brokers should never enter an agreement as to which listings they will or will not display on their Web sites, the policy does not contemplate group decision-making and is written to make clear that brokers must make independent business decisions in this regard.”

“Just because a broker has permission to display a listing on that broker’s Web site does not mean the broker must display a listing,” she stated in the letter.

Janik cited examples under which a broker may “not want to advertise listings for which the listing broker is providing no additional services other than submission of the listing to the MLS,” for example, as “the broker does not want to assume the additional liability and workload that comes from completing the entire transaction with no assistance from the listing broker.”

Similarly, she stated, “a broker may not want to advertise properties on her Web site for which the listing broker is offering $10 in cooperative compensation to the successful selling broker.”

Nye, though, takes issue with the statement about “additional liability and workload” associated with MLS-listing-only real estate services. He said that under Washington state law, “there is no more liability … you cannot have more liability” based on that type of business model.

“We felt basically very upset that the National Association of Realtors is giving a local association guidance that is misleading and that violates state licensing law,” Nye said.

Janik told Inman News that she is not an expert in Washington state law, and her letter was intended as correspondence with a Realtor member and not as legal advice to the local MLS. “The brokers who receive the IDX feeds don’t have to display all of the listings that go into the feeds,” she said.

While NAR’s IDX policy allows individual participants of MLSs to make independent decisions about the display of listings, the association last year eliminated language from the policy that allowed MLSs to exclude some properties from display at IDX participants’ Web sites based on the type of listing agreement.

That rule drew fire from the Federal Trade Commission, which announced a series of actions last year against MLSs that placed restrictions on a category of property listing agreement that the agency said were favored by low-fee real estate companies. The FTC filed lawsuits against two Michigan MLSs related to those actions, with a decision pending by a federal administrative judge in a complaint against Realtor association-owned Realcomp II.

Janik said during an NAR conference in November 2006 that there is no guarantee that federal antitrust enforcement agencies will take action against the revised IDX policy, though there were greater legal risks in leaving the policy unchanged.

Kelch, of the Tri-Cities MLS, said the MLS submitted its proposed changes to policies to the National Association of Realtors for review. “We made the changes we thought we’d like to see and sent them into the national (association) … to make sure we were in line with what the national association was doing.”

The revision of the rules has been an ongoing process for the past two years, he said. If the MLS restricted members from making individual choices about which properties to display, Kelch said, “You take away a privilege, right from everyone. Everybody has the same opportunity to do with the rule what they choose to do and what they think is best for their business.”

Kelch also said that flat-fee brokerage companies, just as companies with other compensation structures, “can discriminate just as much as anybody else can” about the types of listings to display through the IDX network.

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