Lawyers for the U.S. Federal Trade Commission, in a legal filing this week, asked the commission to reverse a December decision by an administrative law judge that vindicated a Michigan MLS from antitrust charges.
A commission hearing is scheduled for April 1 in Washington, D.C., to consider the appeal by federal antitrust officials.
FTC officials charged in February 2006 that Realcomp II, a 14,000-member Michigan MLS owned by a group of Realtor associations, adopted anticompetitive policies that restrict the marketing of some properties based on the type of listing contract that consumers entered into with real estate brokers.
They charged that the rules prevented the display of some properties on popular home-search Web sites and made it more difficult for brokers to search for certain properties within the MLS system.
FTC officials had simultaneously announced a series of other actions against MLSs at that time, including a handful of settlement agreements with MLSs that had instituted similar policies.
Policies targeted by the FTC placed restrictions on exclusive-agency listing contracts, a type of contract favored by alternative, low-cost and variable-service real estate companies, FTC officials argued.
"The policies penalize a form of discounting. They remove from the market a product desired by consumers. This reduces important forms of competition," FTC lawyers argue in a 43-page brief filed this week to support their appeal.
FTC lawyers also state in their brief that in an exclusive-right-to-sell agreement, the seller pays the full commission if the buyer in the transaction is not represented by an agent, while a seller using an exclusive-agency listing contract may pay "a reduced or no commission" if the buyer is unrepresented.
There is no difference for Realcomp, the lawyers conclude. "The only difference is the amount paid to the broker, not to the MLS."
An administrative law judge for the FTC found in his December ruling that the FTC "has not demonstrated that Realcomp, despite having market power … unreasonably restrained or substantially lessened competition, thereby resulting in consumer harm." And the judge also found that Realcomp restrictions in sharing property information with some public Web sites may have a "narrowly crafted, pro-competitive justification."
The appeal by FTC antitrust officials brings the matter under consideration by the full five-member commission of the agency. If the commission finds in favor of the FTC, Realcomp can appeal the decision to a federal court. If it finds in favor of Realcomp, the decision is final.
Realcomp officials have maintained that MLS restrictions were intended to prevent non-Realtor sellers from using the MLS to advertise their homes and avoid paying commission to Realtors who are members of the MLS.
Karen Kage, CEO for Realcomp, had testified during the initial hearing process that the MLS restrictions were adopted "out of concern that homeowners using (exclusive agency) listings have an incentive to sell their homes without the assistance of a cooperating broker and avoid paying commission," and the MLS "felt that it was not in the best interests of its members, the Realtors, to provide free advertising for home sellers who were negotiating their own deals."
FTC lawyers, meanwhile, argue that home sellers who enter into exclusive agency contracts do not receive any additional benefits from the MLS.
Kage said that Realcomp lawyers will have to present the argument against the appeal during the April 1 hearing, and an answer from the commission is expected by late fall.
The National Association of Realtors has offered financial support for Realcomp’s legal defense — its board approved a contribution up to $125,000 in November and earlier approved a $175,000 contribution.
In the brief filed this week, FTC lawyers ask the commission to reverse the administrative law judge’s order and to enter an order that specifically prevents Realcomp from engaging in the practices at issue in the complaint.
"Absent a commission order, Realcomp can close off any leaks in its Web site policy and ban all listings — no matter how labeled — that offer a discount contingent on a sale to an unrepresented buyer."
Realcomp is also the subject of another antitrust lawsuit filed by Home Quarters Real Estate Group LLC, a company that formerly offered low-cost real estate brokerage services in Michigan. Home Quarters claims that Realcomp sought to block the company’s access to data.
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