The U.S. Department of Justice (DOJ) announced on Tuesday that it had reached a proposed settlement with the National Association of Realtors' (NAR) to end a long-simmering dispute over the use of multiple listings on the Internet.
The basis of the dispute and an eventual anti-trust lawsuit against NAR filed in 2005 was what DOJ called "policies and related rules that obstructed real estate brokers who use innovative Internet-based tools to offer better services and lower costs to consumers."
One way that brokers use the Internet to provide brokerage services to their customers is through password-protected Internet sites, known as VOWs. VOWs allow a broker's customers to search real estate listings themselves instead of relying on a broker to conduct searches for them. Delivering listings via the Internet enables customers to control their search process and educate themselves about the real estate market in their area on their own schedule. Members of various Multiple Listing Services are generally allowed to publish all listings from that service on their websites. However, in some locations MLS had refused to allow VOWs full access to the listings. DOJ said that the policies prevented consumers from benefiting from competition, discouraged discounting, and threatened to lock in outmoded business models.
The second practice challenged by DOJ prevented a broker from educating customers about homes for sale through a VOW and then referring those customers (for a fee) to other brokers who would help customers view homes in person and negotiate contracts for them. Collectively, NAR's policies prevented consumers from receiving the full benefits of competition in the residential real estate industry.
The case was scheduled to go to trial in July.
Under terms of the ten-year settlement agreement, NAR will repeal its policies and require affiliated MLSs to repeal rules that were based on those policies. The organization will enact a new policy that guarantees that Internet-based brokerage companies will not be treated differently than their bricks and mortar counterparts. The settlement also allows brokers to use virtual office websites (VOWs) to make referrals, educate consumers, and conduct brokerage services. VOW brokers cannot be excluded from MLS membership based on their business model.
Deborah A. Garza, Deputy Assistant Attorney General of the Antitrust Division said about the proposed settlement: "[It] prevents traditional brokers from deliberately impeding competition. When there is unfettered competition from brokers with innovative and efficient approaches to the residential real estate market, consumers are likely to receive better services and pay lower commission rates. In addition, under this settlement, NAR will foster compliance with the antitrust laws by educating its members and its 800 affiliated MLSs."
NAR, had little comment, but on its website it listed the impact of the settlement on its various constituencies.
"Consumers," it said, "have always been able to access and view all publicly available listing information on the Web site of their broker of choice." Broker-owners now have clear rules for operating a VOW and preserves the right to determine whether or not listings are displayed on other brokers' Web sites (the source of this claim is not immediately apparent) while giving sellers the right to prohibit certain features such as home-value estimates and blog posts to accompany the display. NAR members are ensured that the online environment in which listings are displayed is the fairest possible.
While DOJ stressed on the pro-consumer aspects of the settlement, it is unlikely that it will have much impact on commissions. Buyers, who constitute the main users of on-line listings, have a different relationship with their real estate agents than do customers of stock brokers or banks. This relationship can make them resesistant to basing agent selection on the size of the commission which, in any case, most buyers feel that the seller is paying. What we find stunning about the settlement, however, is that DOJ is apparently able to treat privately owned intellectual property (i.e. listings) as a public utility. It would have been interesting to see how the courts treated this alleged violation of anti-trust regulations.