Justice Dept. sues NAR for antitrust

September 8, 2005

Alleges new online listings policy undercuts competition

By Jessica Swesey
Inman News

The U.S. Justice Department today filed an antitrust lawsuit against the National Association of Realtors challenging its new policy for online property listings display.

The Justice Department's Antitrust Division has been investigating the Realtor trade group's policies for Internet listings over whether it has been restricting competition among real estate brokers.

The complaint accuses NAR of mandating a policy that obstructs real estate brokers who use innovative Web-based systems to offer lower costs to consumers.

"We believe the new ILD (Internet Listings Display) policy is fair, pro-consumer, pro-competitive and accommodates innovation," NAR said in a statement this morning. "After months of negotiations, we are at a loss to understand why the Department of Justice would bring a legal action. Many of the changes incorporated in the new policy are in direct response to concerns they have raised over the course of the two-year investigation."

Moments before the Justice Department's announcement this morning, the Realtor trade group said it had adopted a new online listings policy to address the department's concerns stemming from the two-year probe.

The old policy, dubbed the Virtual office Web site or VOW policy, allowed real estate brokers to selectively hold their listings from competitor's Web sites, a move which DOJ officials have said threatens competition in the marketplace.

While NAR's new policy no longer allows brokers to pick and choose who among their competitors is allowed to display their listings, it still enables them to withhold listings from all brokers in the MLS. The Justice Department claims the NAR policy prevents consumers from receiving the full benefits of competition and threatens to lock in outmoded business models and discourage discounting.

"The repackaged policy narrows the opt-out a bit, but it remains effective," J. Bruce McDonald, Deputy Assistant Attorney General for Antitrust, said this morning during a press meeting in Washington, D.C.

Allowing brokers to hold listings from the Internet "makes the online business model unattractive and tends to undercut competition by the Web-based brokers," he said.

Under the revised policy, a broker opting out can withhold all listings from the Web sites of other brokers, but they would still appear on NAR's own Web site, Realtor.com, McDonald said.

The so-called "blanket opt-out" provision provided in the new policy has been in effect by "hundreds of MLSs" for three and a half years under NAR's policy for Internet Data Exchange, according to NAR. The association has said the policy has been widely accepted by the industry and very few brokers have chosen to opt out.

The policy adopted today contains an entirely new feature that allows brokers who have opted out of displaying their listings on competitors' Web sites the opportunity to make an exception at the direction of a particular seller who wants to have his or her property displayed on the Web sites of all other members of the MLS.

"The revised policy continues to discriminate against innovative brokers, and does not resolve the Department's concerns," Justice Department officials said in a statement today.

NAR President Al Mansell contested that, "The policy treats all MLS members equally yet respects the rights of property owners and their listing brokers to market a property as they see fit…The policy does not discriminate against any brokerage model, including discount brokers."

But the Justice Department in its complaint contends the NAR policy significantly alters the rules that govern MLSs by permitting traditional brokers to discriminate against other brokers based on their business model, denying them the full benefits of MLS participation. "The Department's lawsuit seeks to ensure that traditional brokers, through NAR's policy, cannot deprive consumers of the benefits that would flow from these new ways of competing," the Department said.

According to the Department's complaint, brokers who participated in the NAR work group that formulated the VOW policy in May 2003 recognized that the opt-out right would be "abused beyond belief." The chairman of the working group allegedly admitted that the opt-out right was likely to be exercised by brokers despite the fact that "it may not be in the sellers' best interest to opt out," the Department said in its filing.

"NAR's policy denies brokers using new technologies and business models the same benefits of MLS membership available to their competitor brokers, suppresses innovation, discourages competition on price and quality, and prevents new, efficient competitors from entering into the marketplace - all to the detriment of consumers," the Justice Department said.

The complaint alleges that NAR adopted the online listings policy in response to broker member concerns over rising competition from Internet brokers.

"The chairman of the board of RE/MAX, the nation's second-largest real estate franchisor, publicly expressed his concern that these Internet sites would inevitably place downward pressure on brokers' commission rates," the complaint states.

NAR discussed its revised policy with the Justice Department before adoption, McDonald said, and antitrust officials warned the trade group that it didn't comply with antitrust laws. But the association has chosen to stand by the policy.

Copyright 2005 Inman News

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