Allowing franchisors to index and display their brokers’ Internet Data Exchange (IDX) listings on their own websites could create an "unacceptable concentration of market power" in the hands of just two franchisors — Century 21 and RE/MAX International — according to the ranking executive at the nation’s second-largest real estate brokerage company.
Ron Peltier, chairman and CEO of HomeServices of America Inc., is asking the National Association of Realtors to repeal its franchisor IDX rule, implemented in January, saying it raises "significant antitrust concerns."
Before the change was approved, brokerages entering into IDX reciprocity agreements could display the listings of other participating brokers in their market on their own websites, but they could not share other brokers’ IDX listings with their franchisor.
"Until the time of the passage of the franchisor IDX rule, no single aggregator of listings data was able to aggregate the listings data in a single, national collection point," Peltier said in an April 18 letter to NAR President Ron Phipps.
Allowing franchisors to aggregate listings data "raises significant monopolization and concentration of market power issues," Peltier said.
Although franchisors still need permission from one of their franchisees before they can index all of the IDX listings in a given market, franchisors can be expected to write such permissions into future franchise agreements, Peltier said.
"Franchise agreements will become IDX aggregation agreements," Peltier warned. "This will allow two, chosen franchisors who have a franchise in every MLS market in the country to create a national MLS database by aggregating those listings feeds and to develop a unique, NAR-legislated competitive advantage."
Although Peltier did not name the two franchisors in the letter, a HomeServices spokeswoman said he was referring to Century 21 and Re/Max. Both franchisors declined to comment, as did Century 21 parent company Realogy Corp.
It was Realogy that called on NAR to change its IDX policy last year, after the association decided that search engine indexing does not amount to "scraping," or unauthorized duplication of listings data.
To improve the speed and quality of keyword searches, search engines index the World Wide Web using automated "spiders" that crawl websites to gather information. Search engines store some of the information discovered by spiders on their own servers, and make that information viewable to their own users when displaying keyword search results.
Realogy asked NAR to allow franchisors to do much the same thing — index their affiliated brokers’ IDX websites to provide consumers with more comprehensive results.
When presenting summary data on listings represented by brokers who aren’t affiliated with them, franchisor websites must provide a link back to a full IDX site operated by a broker or MLS. But these links are generally provided to a broker affiliated with the franchisor, regardless of whether or not that broker represents the listing.
HomeServices is a member of two referral networks — The Realty Alliance and Leading Real Estate Companies of the World — that have also asked NAR to repeal the policy next week at the association’s midyear meeting in Washington, D.C.
In a March 28 letter to NAR CEO Dale Stinton, Leading Real Estate Companies of the World’s president and CEO, Pam O’Connor, asked for "the same rights as national franchise organizations to index affiliates’ IDX listings with their permission."
Leading Real Estate Companies of the World’s board of directors voted April 22 to ask NAR to rescind the policy, O’Connor told Inman News.
Peltier said broadening the rule won’t avoid a concentration of market power as long as access to IDX data feeds is governed by the "arbitrary standard" set forth in the IDX rule, which allows companies meeting the Federal Trade Commission’s definition of a franchisor to index listings.
"Except for one or two competitors in the marketplace, no other competitor has the market presence to aggregate more than 10 percent of national IDX data feeds," Peltier argued. "The only alternative available to avoid an unacceptable concentration of market power is to allow all potential competitors to access all MLSs in the country, irrespective of whether they have a franchise brand or company in the local MLS."
In a recent blog post, real estate technology consultant Rob Hahn of 7DS Associates wondered whether the controversy — and a related debate over IDX listing feeds to social media sites and mobile devices — will lead some of the biggest players in the industry "to decide that continuing to participate in IDX is not in their best interest."
Peltier — who also raised warnings about copyright issues and legal liability for agents and brokers under state licensing laws — did not mince words in summarizing his views on the policy’s potential impacts on competition.
In his letter, Peltier, said, "It is one thing for a competitor to achieve market power on its own merit," though he charged that "NAR, which ostensibly exists to benefit its members," appears to have acted with nonmembers "to impose an arbitrary mandatory rule upon its membership to force the delivery of member data to nonmembers without their consent."
That, Peltier also charged in his letter, appears to be an effort to enact "a concentration of competitive advantage and, presumably, market power," and "No other single change in the industry has so facilitated the concentration of market power as the franchisor IDX rule has."
NAR has declined to comment on the requests it has received on the IDX policy, saying the issue is on the agenda when the Multiple Listings Issues and Policies Committee meets May 12. The committee took comments at at least two meetings before issuing a final recommendation to allow franchisor IDX indexing that was approved by NAR’s board of directors at the group’s annual meeting in November.