A South Carolina multiple listing service has reached a proposed settlement with the U.S. Department of Justice over a lawsuit filed last year alleging anticompetitive practices.

A South Carolina multiple listing service has reached a proposed settlement with the U.S. Department of Justice over a lawsuit filed last year alleging anticompetitive practices.

The federal government, in its May 2, 2008, complaint, had charged that Consolidated Multiple Listing Service Inc. — a broker-operated MLS based in Columbia, S.C. — had sought to restrict competition in adopting rules and practices that made it "unnecessarily costly and inconvenient for brokers without an established presence in the Columbia area."

"Today’s settlement will remove unlawful impediments to competition for real estate brokerage services in the Columbia area and will lead to more choices and lower brokerage fees for South Carolina consumers," said Christine A. Varney, assistant attorney general in charge of the Justice Department’s Antitrust Division, in a statement.

Edward M. Woodward Jr., a lawyer representing Consolidated MLS, said today, "We think we did a right good negotiating job," in arriving at the proposed settlement, which is subject to a public review and comment period.

"I think both sides got what they needed. The mediation process … proved fruitful in getting a settlement that both sides could live with," he added. The MLS had already changed some policies in response to a Justice Department investigation that preceded the lawsuit.

The proposed final judgment, agreed to by federal officials and MLS representatives, provides that CMLS cannot directly or indirectly engage in any practices that would deny membership to any real estate company owner who requests membership, and cannot discriminate against any member or licensee based on "office location, pricing or commission rates, business model, contractual forms or types used, or services and activities," as examples.

The cost of membership, which had been $5,000 and was later reduced to $2,500, is also at issue in the proposed final judgment, which states that the MLS shall not require fees from prospective members that "exceed the reasonably estimated cost incurred by CMLS in adding a new member."

And the MLS cannot "inquire into or request information about the actual or anticipated business model, prices or commission rates charged or to be charged" of owners or prospective members, according to the final judgment.

While the MLS bylaws had stated that members must work "within primary areas served by the CMLS," the new language will read that membership is open to those "who are or who employee brokers-in-charge holding licenses allowing them to engage in the real estate business in South Carolina" — this represents a broadening to the entire state rather than the region served by the MLS.

Also as proposed, the MLS will delete language from its bylaws that require new members to submit a resume and to agree to a credit check.

The MLS maintains, though, the right to conduct criminal background checks of prospective members to ensure that they have "no convictions of either a criminal sexual nature or relating to the improper handling of funds." …CONTINUED

The MLS had earlier opened up to accept property listings under a type of contract known as "exclusive agency" listings — which the Justice Department has argued are more likely to be used by low-cost and alternative real estate companies — and there are additional language changes in the proposed final judgment related to the acceptance of listings under this type of contract.

A rule that has stated, "Offers on properties included in the CMLS shall be made in written form to the selling company and not directly to the owner" will be changed, under the proposed settlement, to state that the listing company can choose to direct communications to the owner instead, and the owner can sign off on a form specifying this arrangement.

Another rule change will allow the owner’s name and phone number to appear on signage related to the for-sale home, provided the owner has entered into an exclusive agency listing contract.

The MLS, if the proposed settlement is finalized, will delete language that required prospective members to personally appear at the CMLS office "for a brief orientation meeting with th membership committee," followed by a subsequent e-mail vote on whether the prospective member would be allowed to join.

But prior to gaining access to the CMLS system, an agent/representative or individual new member "must attend and complete an introductory class on the use of the CMLS system and an orientation with a CMLS staff member," according to modified language in the proposed settlement.

Woodward noted that the proposed settlement preserves CMLS approval for home lockboxes, though it does broaden the policy, and it also loosens an MLS mandate on members’ errors and omissions insurance.

"We have maintained the use of our rather sophisticated lockbox system," Woodward said. Listings with lockboxes in the MLS’s primary service area still require CMLS approval, though proposed new language provides that other types of lockboxes can also be placed on those homes, and that sellers may obtain lockboxes from CMLS based on a signed agreement of a CMLS member.

The MLS board had required that each member maintain a $500,000 policy for errors and omissions insurance, and the proposed final judgment would eliminate this mandate will providing for disclosure in the listing process if a company does not maintain this insurance.

Comments on the proposed settlement can be submitted to: John R. Read, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 5th St., N.W., Suite 4000, Washington, D.C. 20530 (phone: (202) 307-0468).

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