Why do 13 states block eRealty?

November 1, 2002

Old-line businesses have regulations that protect their turf

By Susan Romero
Inman News Features

Traditional businesses are using government rules and regulations to impede competition from Internet-based businesses. For instance, laws in 13 states prohibit eRealty's reduced fee formula, which allows the company's agents to rebate a portion of their commission to a home buyer.

This sort of problem was the topic of discussion at Federal Trade Commission workshop, "Possible Anticompetitive Efforts to Restrict Competition on the Internet," held earlier this month. The agency is investigating whether state regulations and private business practices are having anticompetitive effects on e-commerce in real estate, mortgages and nine other sectors.

National Association of Realtors policies that govern how Multiple Listing Services distribute and display real estate listings data were at the heart of the issue, according to eRealty CEO Russell Capper, who was one of seven participants on the real estate, mortgages and financial services panel.

"I definitely feel like we got their attention," said Capper. ERealty has long been an advocate of displaying MLS listings online through virtual office Web sites known as VOWs and actively opposed a NAR MLS data display policy proposal that until recently aimed to restrict the amount of MLS data that could be displayed on a VOW.

Capper said eRealty's reduced fee formula also was discussed.

A NAR spokesperson said the association is "always happy to cooperate with the FTC," but he declined to comment on the e-commerce workshop or its agenda.

Capper noted that the workshop concluded a week before a NAR work group issued a revision of its proposal for rules governing display of MLS data on the Internet. The revised proposal would allow looser restrictions on MLS data distribution and display policies.

Capper said the revision was "clearly a major step in the right direction," but didn't make his testimony obsolete.

"There are still some differences in what a brokerage can deliver over a browser-based system verses an e-mail system and I don't necessarily think that's right. I think they should be treated the same way," he said.

Other speakers on the real estate panel were Eric Cunliffe, SVP of LendingTree, Darren Ross, director of electronic commerce of Stewart Information Services Corp., two attorneys and two economics professors from the University of Maryland and George Washington University.

Ted Cruz, director of the FTC Office of Policy Planning, said the FTC was taking testimony from all sides and trying to determine whether competitive restrictions exist on the Internet on an industry-by-industry basis.

"It may well be that what restrictions exist in a particular industry exist for sound public policy reasons or there may be other motivations behind them," he said.

The FTC already has filed four advocacy comments on anticompetitive practices that hinder e-commerce. Two of the comments were real estate-related. A joint FTC/Department of Justice recommendation issued to the North Carolina state bar opposed two recent court opinions that would require the physical presence of an attorney for all real estate closings and refinancing. A similar comment was issued to the Rhode Island state legislature.

Cruz said the FTC is investigating instances when bricks-and-mortar competitors use rules and regulatory restrictions to impede the entry of Internet-based competition.

The workshop was an information and fact-finding venture and the FTC is continuing to collect written testimony. Cruz said the agency is especially interested in obtaining testimony that includes empirical data and hard evidence of restrictions that limit competition from online companies.

All 50 states ban auto sales over the Internet unless a local auto franchise owner is involved, approximately 30 states block online sales of wine and 17 states require online mortgage brokers to have a physical office in the state, according to an FTC fact sheet.

Cruz said such restrictions as a physical office requirement and required office hours disproportionately harm businesses that operate primarily online.

Copyright: Inman News Service

Contact ALTA at 202-296-3671 or [email protected].