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Court Hammers Realtors In DOJ Case

By: David Utter

The National Association of Realtors experienced a setback in their attempts to have a case dismissed where the Department of Justice has accused the NAR of blocking Internet-based brokers from accessing MLS databases.

Court Hammers Realtors In DOJ CaseWhen electronic commerce began to gain traction, people fantasized about clearing out the middlemen from several professions where they served as a money-grabbing chokepoint between seller and buyer. The automotive industry managed to successfully fight this off and preserve its dealership model.

Real estate agents hoped for a similar victory that would preserve the customary and lucrative six-percent commissions they gain from home sales. The Justice Department has been fighting back against behavior they perceive as preventing consumers from enjoying the benefits of a competitive realty marketplace.

A federal court in Chicago rejected the motion to dismiss brought by NAR. Justice first brought the suit in September 2005, and complained that NAR policies targeted Virtual Office Websites (VOW) unfairly:

In its complaint, the Department alleges that NARs policy restrains competition by requiring NAR-affiliated MLSs to adopt rules that will allow brokers to withhold their clients listings from other brokers websites by means of an opt out. In essence, NARs policy enables traditional brokers to block their competitors customers from having full on-line access to all of the MLSs listings. When exercised, the opt-out provision prevents web-based brokers from providing all MLS listings that respond to a customers search, effectively inhibiting the new technology, the Department said.

NAR said they changed the policy a month before the Justice action, but not to the satisfaction of the court, an report noted:

The NAR in August 2005 rescinded its 2003 Web policy allowing traditional real-estate agents to selectively opt out of sharing listings with Web-base brokers, but the modified policy still prohibited any broker participating in a multiple listing service (MLS) from sharing the listings online without the permission of the listing broker. The NAR controls most of the U.S. MLSes, which are joint ventures offered by competing brokers, according to court documents.

"This provision would prevent a VOW broker from providing over the Internet the same [listing] information that can be provided in person, or through any non-Internet technology, without restriction," wrote Judge Mark Filip, of the U.S. District Court of the Northern District of Illinois, in a decision released by the DOJ Tuesday.

Justice has also targeted state associations over the years to encourage them not to block VOW brokers. In early November, Justice sent a letter to the New Mexico Real Estate Commission, asking "the commission not to define Virtual Office Websites (VOWs) as advertising because it would stifle innovation and harm consumers.":

A state-imposed rule that defined VOWs as advertising could enable traditional brokers to block the customers of their VOW-operating competitors from using the competitor's website to review the same set of listings that traditional brokers deliver to their customers by other means.

"The proposed amendments stifle competition at the expense of home buyers and sellers in New Mexico," said J. Bruce McDonald, Deputy Assistant Attorney General of the Department of Justice's Antitrust Division. "Consumer choice should not be restricted by 'one size fits all' regulation."


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