In a unanimous decision, the FTC found that Michigan’s MLS Realcomp II Ltd., which accepts listings of all kinds (whether limited service or full service), adopted anti-competitive policies which:
(1) prohibited discount real estate broker listings from being distributed from Realcomp’s MLS to public websites like Realtor.com and IDX feed to broker websites,
(2) imposed minimum service requirements on brokers in order to have their listings included in public website feeds
(3) limited the exposure of these listings on the closed MLS database. They were excluded from the default MLS property search results.
Not kosher, said the Federal Trade Commission:
We find that the practices at issue improperly limit consumers’ access to information about the availability of these lower-priced alternatives, and we conclude that the association’s acts and practices unreasonably restrain trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. (emphasis added). ….
The combined effect of Realcomp’s policies was to limit exposure of EA listings to brokers searching the MLS for homes to present to potential buyers, and to consumers searching public websites for homes to purchase.
The penalty “requires Realcomp to cease and desist from adopting or enforcing any policy, rule, practice or agreement that interferes with the ability of its broker members to enter into EA listings or other forms of nontraditional listings.”
RealComp’s can either accept the ruling or take the case to U.S. District Court.
Crib notes from the decision:
- The MLS is generally acknowledged to be a superior platform for matching home buyers and sellers. It is the most effective marketing tool and substantially more important than any other method of promoting the sale of residential real estate in southeastern Michigan.
- MLS create data feeds to websites available to the general public, though without all the information available in the MLS database.
- Buyers can access these websites, search for homes that meet their needs, and then either work with their own broker to pursue these leads or, if unrepresented by a broker, directly contact the seller’s broker.
- the traditional model faces competition from brokers who discount their fees by offering lower commission rates, accept flat fees, or unbundle real estate services previously available only as a package.
- Realcomp MLS excluded Exclusive Agency listings and other nontraditional listings from the default search results in the Realcomp MLS and implemented a Minimum Service Requirement, which compelled brokers to provide full brokerage services in order to have their listing included in data feeds to public websites.
- Realcomp’s excluded EA (Exclusive Agency) listings completely from its IDX feeds to public websites.
- In November 2006, NAR amended its rules to require an MLS to “include all current listings,” including discount listings, in its IDX feeds– Realcomp went rogue in 2007 by rejecting the NAR IDX rule.
- Realcomp range of penalties includes fines of up to $2,500 for each violation, lengthy suspension from the MLS, and expulsion from Realcomp.
- More than 80 percent of homeowners hire a real estate broker to assist with some or all tasks associated with the typical real estate transaction.
- In general, EA listings and other unbundled services offered by limited service brokers offer consumers a low-cost alternative to traditional brokerage services. Limited service brokers compete not only by unbundling listing services, but also by unbundling the commission structure. Sellers using a limited service broker can save significantly on the price of a commission and avoid a cooperating broker fee with an unrepresented buyer.
- the evidence shows that EA brokers bring in more listings
- While an MLS may adopt reasonable rules to control its membership and to determine the services it will provide its members, it may not use the impose inappropriate limits on individual competitive initiative.
- Realcomp’s restrictive practice was aimed at discount listing
- brokersbrokers testified that they received complaints from consumers who had been told by brokers that their EA listed homes were difficult to find in the MLS. Limited Service brokers also received complaints from customers whom other agents told that their listings were not on the Realcomp MLS.
- One Realcomp Governor voted to change the default search results because he wanted the default to include all available listing types
- Realcomp’s Website Policy completely excludes limited service listings from their highly promoted “MoveInMichigan.com…one of the most comprehensive Real Estate listing sites in Southeastern Michigan,” and from “ClickOnDetroit.com,” the leading local website in southern Michigan. But Realcomp does not inform consumers that MoveInMichigan.com
only includes ERTS listings, so consumers are unaware that it is ncomplete. Limited service brokers have no other way to place their listings on MoveInMichigan.com or ClickOnDetroit.com because Realcomp has an exclusivity agreement for those websites. - the website policy affected some Comparative Market Analysis reports generated by brokers through the Realcomp MLS default to ERTS listings.
Read the full 48 page FTC Opinion here.
h/t: Inman News.
