FTC lawyers ask for appeal in MLS antitrust complaint
Full commission will hold April 1 hearing
By Glenn Roberts Jr., Thursday, March 13, 2008.Bookmarking Sites
Lawyers for the U.S. Federal Trade Commission, in a legal filing this week, asked the commission to reverse a December decision by an administrative law judge that vindicated a Michigan MLS from antitrust charges.
A commission hearing is scheduled for April 1 in Washington, D.C., to consider the appeal by federal antitrust officials.
FTC officials charged in February 2006 that Realcomp II, a 14,000-member Michigan MLS owned by a group of Realtor associations, adopted anticompetitive policies that restrict the marketing of some properties based on the type of listing contract that consumers entered into with real estate brokers.
They charged that the rules prevented the display of some properties on popular home-search Web sites and made it more difficult for brokers to search for certain properties within the MLS system.
FTC officials had simultaneously announced a series of other actions against MLSs at that time, including a handful of settlement agreements with MLSs that had instituted similar policies.
Policies targeted by the FTC placed restrictions on exclusive-agency listing contracts, a type of contract favored by alternative, low-cost and variable-service real estate companies, FTC officials argued.
"The policies penalize a form of discounting. They remove from the market a product desired by consumers. This reduces important forms of competition," FTC lawyers argue in a 43-page brief filed this week to support their appeal.
FTC lawyers also state in their brief that in an exclusive-right-to-sell agreement, the seller pays the full commission if the buyer in the transaction is not represented by an agent, while a seller using an exclusive-agency listing contract may pay "a reduced or no commission" if the buyer is unrepresented.
There is no difference for Realcomp, the lawyers conclude. "The only difference is the amount paid to the broker, not to the MLS."
An administrative law judge for the FTC found in his December ruling that the FTC "has not demonstrated that Realcomp, despite having market power ... unreasonably restrained or substantially lessened competition, thereby resulting in consumer harm." And the judge also found that Realcomp restrictions in sharing property information with some public Web sites may have a "narrowly crafted, pro-competitive justification."
The appeal by FTC antitrust officials brings the matter under consideration by the full five-member commission of the agency. If the commission finds in favor of the FTC, Realcomp can appeal the decision to a federal court. If it finds in favor of Realcomp, the decision is final.
Realcomp officials have maintained that MLS restrictions were intended to prevent non-Realtor sellers from using the MLS to advertise their homes and avoid paying commission to Realtors who are members of the MLS.
Karen Kage, CEO for Realcomp, had testified during the initial hearing process that the MLS restrictions were adopted "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 the MLS "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."
FTC lawyers, meanwhile, argue that home sellers who enter into exclusive agency contracts do not receive any additional benefits from the MLS.
Kage said that Realcomp lawyers will have to present the argument against the appeal during the April 1 hearing, and an answer from the commission is expected by late fall.
The National Association of Realtors has offered financial support for Realcomp's legal defense -- its board approved a contribution up to $125,000 in November and earlier approved a $175,000 contribution.
In the brief filed this week, FTC lawyers ask the commission to reverse the administrative law judge's order and to enter an order that specifically prevents Realcomp from engaging in the practices at issue in the complaint.
"Absent a commission order, Realcomp can close off any leaks in its Web site policy and ban all listings -- no matter how labeled -- that offer a discount contingent on a sale to an unrepresented buyer."
Realcomp is also the subject of another antitrust lawsuit filed by Home Quarters Real Estate Group LLC, a company that formerly offered low-cost real estate brokerage services in Michigan. Home Quarters claims that Realcomp sought to block the company's access to data.
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Submitted by Bruce Hahn on March 13, 2008 - 5:31pm.
From the standpoint of American homeowners, we hope that the FTC is successful.
Submitted by Jerry Hoffman on March 13, 2008 - 7:21pm.
For those who do not want to work within the frame work of this professional membership service, they should setup their own service and system. The real estate industry has substantially more competetion than most any other industry. Perhaps the FTC should be as concerned with real rather than perceived anti competitive areas such as health insurance, health care costs and obvious gas price fixing. Does anyone really believe that every oil company has overhead so similar that the prices should be virtually identical from company to company? Lets not get started on the banking industry. Realtors work on commission. Each negotiates their fee with sellers directly. Use of realtor services are voluntary, unlike gasoline, medical costs, bank services and (arguably) health insurance. There are many more "real" unfair practices. With the logic directed at the real estate industry and the MLS service, we should be allowed to park our used cars on any car dealers lot and negotiate our own deal with the public. The dealer can pickup the costs of the dealership. Since the public goes to dealers to buy cars, it is anticompetitive to have rules against freeloading off their service - we should have rights to sell our cars on their lots - that sounds fair.
Submitted by Joe Cline on March 14, 2008 - 7:09pm.
Well said Jerry! I agree. Name another profession that has the ease of entry, level of competition, and level of scrutiny that the real estate brokerage industry gets. I think we're pretty competitive already.
Joe
Search Austin Texas Homes for sale | The Preserve at Lakeway Real Estate
Submitted by Bruce Hahn on March 14, 2008 - 7:22pm.
DoJ is right in challenging the original decision. Realcomp II may be appearing to discriminate only against some of its own members who paid the same dues and fees and are thus entitled to the same benefits of other members, but as DoJ and those of us who aren't protectionists recognize, there's a lot more to it.
In attempting to shut down new business models, Realcomp II is also discriminating against consumers and violating antitrust laws. The definition of competition of real estate brokerage sector's large institutions refers only to competition between those companies with both feet (and their business models) firmly planted in the last century. They do not believe new Internet-centric business models that pass savings on to consumers business models have a right to exist, and when a new business model that threatens the status quo pops up, the Realcomps of the world just change the rules to eliminate or undermine the benefits of the new business models.
All consumers aren't the idiots the Realcomps of the world seem to think we are - we see what's going on. So does 60 minutes, the rest of the mainstream media and just about everybody else. It's time for the protectionist apologists in the real estate brokerage sector to stop fighting progress, stop whining, stop throwing out blather that is transparently protectionist, and figure out how to make their services worth the fees and commissions worth what they wish to charge.
Submitted by Alice Zamnuik on March 16, 2008 - 1:28pm.
I so agree with the FTC going after the Realcomp. As a limited service real estate agent I have encounted all types of biases. What would in a normal business envirnoment be taken as antitrust activities, is hugely ignored in the real estate industry. I have had other agents from major real estate companies, tell me that their brokers encourage the agents at office meetings to not show any property that is a limited service listing. However, because the activities of real estate agencies/brokers is not in writing, it's really hard to prove.
Until the real estate industry, as a whole, get's into the current century and stops the old school mind set, I do not see much improvement will occur in the next decade unless more lawsuits happen. Money, hassle and lawyers always have a habit of making a corporation, such as a MLS, step back and take a look at its self. I have personally sat back and watch my regional MLS pass new rules and regulations each year that have resulted in restricting more and more activites that are directly targets at the brokers/agents who are working with the limited service "Sellers. The Mls continues to limit, each year, what a member can say, what can be advertised, from signs to open houses and even lock boxes.
It appears that the mls goals are to squeeze out the the brokers/agents who want to offer a alternate to the "Traditional" real estate system. I really hope that the FTC has success with the April 1st meeting, otherwise the Realcomps' across the US will see this has an Open Door invitation to revamp their systems.
There is room for all types of real estate business models, the limited service is not for every seller, and it is a small chunk of the overall market. There will always be a need for traditional real estate. Why the real estate industry is so afraid of change, I will never understand. Look how well Century 21 is doing with both the traditional real estate model and the limited service. The MLSs' and their attorneys can said they are doing all this to "protect" the public, however it is more to protect the "commission" structures of the real estate industry and to keep the status quo.
Submitted by Richard Greenwood on March 22, 2008 - 1:37pm.
When realtors start doing the "right thing" instead of trying to "control the cow so it can be milked". . . then and only then will they start getting more respect as professionals.