U.S. Federal Trade Commission officials today announced a settlement agreement over policies adopted by Multiple Listing Service Inc., an MLS based in Wauwatosa, Wis., that the federal agency deemed anticompetitive.
The FTC charged that MLS Inc. withheld benefits from members of its Metro MLS from consumers who chose to enter into a nontraditional form of listing contract with real estate brokers, and that the MLS rules blocked these “nontraditional, less-than-full-service listings from being transmitted (by the) MLS to popular Internet Web sites, but provided this important benefit for traditional forms of listings.”
Inman News reported that Metro MLS last year withdrew its policy that prevented a category of property listings from display on popular public-facing property-search sites, such as Realtor.com and WiHomes.com, and the consent order would formalize the rule change and prevent the MLS from adopting similar rules in the future.
The FTC on Oct. 12, 2006, announced a series of actions targeting similar policies adopted by other MLSs across the country. In Wisconsin, those actions led to an FTC complaint and settlement agreement with the Realtors Association of Northeast Wisconsin Inc.
Of the seven MLSs targeted in the FTC sweep last year, five agreed to settle the investigations by entering into consent agreements, and two MLSs fought the charges. One of those MLSs later settled the charges before the case proceeded before a federal administrative judge, and a decision by an administrative judge is expected to be made public soon in the lone case that did proceed to a formal hearing. That outstanding case involves an FTC complaint against Realcomp II, an MLS in Michigan that is affiliated with a group of local Realtor associations.
Peter Shuttleworth, executive vice president for MLS Inc., which operates in the Milwaukee area and has about 6,500 members, was reportedly out of the office today and was not available for comment.
Alan H. Deutch, a lawyer representing the MLS, said today that the matter “was part of a national effort by FTC relative to rules on exclusive agency. The particular orders sought by the FTC were not of any real consequence in Milwaukee, as it concerned less than one-quarter of 1 percent of the MLS listings and did not concern any rule which was enforced in Milwaukee.”
He added, “The matter was actually resolved in April and we have no idea why they waited so long to issue a press release.”
“Homeowners should be able to lawfully contract with a broker on the terms that they choose, without facing interference by the broker’s competitors,” said Jeffrey Schmidt, director of the FTC’s Bureau of Competition, in a statement. “The commission action today reconfirms our commitment to ensuring that consumers can freely enter into any kind of lawful listing agreement with home sellers.”
In its complaint, the FTC charged that MLS Inc. adopted a rule in 2001 stating that “All active listings of all participants are eligible for Internet publication unless … the listing is subject to an ‘exclusive agency’ contract,” which is a type of listing agreement in which the owner of a property is not obligated to pay a commission to the broker if the owner locates a buyer without assistance from the broker. More commonly, sellers enter into exclusive-right-to-sell agreements that provide that the listing broker will receive a commission if and when the property is sold.
The FTC maintains that exclusive agency agreements are more likely to be used when home sellers do not wish to purchase a full range of brokerage services.
“The Web site policy restricted competition by inhibiting the use of exclusive agency listings in the Southeast Wisconsin Area,” the FTC alleged in the complaint, and “There is no cognizable and plausible efficiency justification for the Web site policy.”
Corey Scholtka, founder of BuyHomes.com, a company that offers low-cost real estate services in Wisconsin, said he was in agreement with the policy not to allow exclusive agency listings to appear on the Web sites, though he said he found it was difficult in trying to work with MLSs officials to adapt his own business model to operate under exclusive right to sell listings contracts.
“I felt like the rule was in place for me to lose the benefit of the Internet,” he said.
A consent order, which was approved by the commission in a 5-0 vote and is subject to public comment until Jan. 14, prohibits the MLS from adopting or enforcing any rules or policies that deny or limit the ability of participants to enter into exclusive agency listings or other lawful listing agreements with property sellers.
The MLS will be bound to comply within this order within 30 days of its finalization, and the MLS is required to notify its members of the order, which will expire 10 years after its adoption. Public comments about the order can be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., NW, Washington, D.C., 20580.