The Department of Justice and the National Association of Realtors have agreed to minor modifications to their proposed settlement of the government’s antitrust lawsuit against the Realtors’ association, paving the way for a final judgment in the three-year-old case.
The government says the settlement, announced in May, will give consumers access to multiple listing service data on homes for sale similar to that enjoyed by Realtors. After wrapping up its review of public comments submitted during a 60-day window, the DOJ proposed leaving the settlement virtually unchanged.
But in its response to comments received from the industry, the DOJ shed some light on how it expects the agreement to be enforced: by NAR. The government also left the door open for future antitrust action concerning NAR’s Internet Data Exchange, or IDX, policy.
In its September 2005 lawsuit, the DOJ alleged that NAR’s policy on "virtual office Web sites," or VOWs, violated antitrust laws. The policy alleged suppressed competition from real estate brokers who gave consumers access to multiple listing service data on a par with that enjoyed by Realtors through password-protected sites.
By allowing brokers to withhold their sellers’ listings from VOWs, NAR restrained VOW brokers in their ability to compete with traditional brokers, who often provide information on MLS listings by hand, mail, fax or e-mail, DOJ lawyers said.
By blocking VOW brokers from allowing their customers to review the same set of MLS listings that traditional brokers can provide to their customers, NAR’s rules "restrained VOW brokers from competing in a way that is efficient and desired by many customers," the DOJ claimed.
The proposed settlement requires NAR to modify its challenged VOW policy, making it clear that brokers can operate VOWs "without interference from their rivals," and that traditional brokers cannot withold sellers’ listings from display on VOWs.
The proposed settlement would also allow brokers to operate referral VOWs, which allow prospective buyers to search for homes online, but directs them to other brokers or agents when they are ready to see a home in person, negotiate a price, enter into a contract, and close the deal.
Existing referral VOWs have established relationships with Internet companies and developed "significant numbers of potential buyer leads," the DOJ says, and the proposed settlement prohibits MLSs from standing in the way of VOW brokers referring customers to other brokers for compensation.
Brokers who are MLS members would also be allowed to operate their own referral VOW or contract with an affiliated VOW partner. As long as a broker "actively endeavors to obtain some seller clients … or some buyer clients to whom it will offer in-person brokerage services," it can become a member of the MLS and and use MLS data to populate its referral VOW.
The DOJ received nine comments on the proposed settlement, including two submissions from VOW brokers and a real estate franchisor that operates VOWs for hundreds of franchisees.
ZipRealty, which founded a VOW-based brokerage in 1999 and operates in 35 major markets, said the proposed settlement "favors public and consumer interests."
In its comments, the company said MLSs must be held to applying the same policies, rules and regulations to VOW brokers as traditional "bricks-and-mortar" brokers, and not subject VOWs to additional costs, fees or restrictions.
The proposed settlement requires NAR to withhold insurance from and report to the DOJ any MLS that "refuses to adopt, maintain, act consistently with, or enforce" its terms. NAR would also be required to forward to the DOJ any communications it receives concerning any MLS’s noncompliance with the terms of the proposed settlement.
The DOJ "believes that these provisions will cause MLSs to comply with the modified VOW Policy and will provide the Unites States with the ability to detect whether MLSs are, in fact, complying," government lawyers said.
The agreement assumes that NAR "would find out through multiple channels about an MLS’s failure to act in accordance with the decree," DOJ lawyers said.
MLSs "routinely turn to NAR for advice and approval on various issues in order to maintain coverage under NAR’s insurance," the DOJ said, and are expected to consult with NAR to make sure their conduct was consistent with the proposed settlement.
If any MLS failed to comply and NAR did not take action, the Department of Justice said it could pursue further antitrust charges against NAR or sue an MLS directly, if needed.
Prudential Real Estate, which operates VOWs for 480 franchisees, asked that the Justice Department clarify provisions of the settlement.
Prudential complained that requiring customers of a VOW broker to agree not to copy or redistribute listings they receive might prevent them from saving copies of listings or sharing them with someone in order to consult with them about a purchase. The DOJ and NAR agreed that the provision — intended to protect MLSs from someone using a VOW to access and sell MLS data to third parties — was too broad.
The provision will be modified to allow the copying and redistribution of data "in connection with (a VOW customer’s) consideration of the purchase or sale of an individual property."
Prudential also wanted the Modified VOW Policy to be codified in the settlement to make explicit that, in cases where sellers instruct their broker to withhold information about their property or address from the Internet, that VOW brokers can still provide information on those listings by other methods — such as e-mail or fax. NAR and DOJ agreed to a minor change in language to accomplish that goal.
Washington-based MLS4owners.com, a flat-fee, limited-service brokerage, asked for clarification on whether the DOJ views NAR’s Internet Data Exchange Policy as violating antitrust laws. MLS4owners.com maintains that it does, by permitting brokers operating IDX Web site to exclude exclusive agency or limited-service listings from their own IDX Web sites.
The government "takes no position as to the permissibility under the antitrust laws of NAR’s IDX policy," the DOJ said in its filing.
Michael Erdman, a Chicago lawyer who has been monitoring the lawsuit, said in an e-mail to Inman News that while DOJ apparently won’t be modifying the proposed settlement on that point, "it was crystal clear that it is not taking a position on whether the IDX policy, as written or applied, is fully compliant with federal antitrust laws."
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