DOJ Sues National Association of Realtors for Obstructing Internet Based Brokers

September 8, 2005. The Department of Justice's (DOJ) Antitrust Division filed a civil complaint in U.S. District Court (NDIll) against the National Association of Realtors (NAR) alleging violation of federal antitrust laws in connection with its obstruction of real estate brokers who use internet tools to offer services to consumers.

The one count complaint alleges violation of Section 1 of the Sherman Act, which is codified at 15 U.S.C. § 1. The DOJ seeks to enjoin the NAR "from maintaining or enforcing a policy that restrains competition from brokers who use the Internet to more efficiently and cost effectively serve home sellers and buyers, and from adopting other related anticompetitive rules".

Section 1 provides, in partl, that "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine ..."

The complaint states that "The brokers against whom the policy discriminates operate secure, password-protected Internet sites that enable the brokers' customers to search for and receive real estate listings over the Internet. These websites thus replace or augment the traditional practice by which the broker conducts a search of properties for sale and then provides information to the customer by hand, mail, fax, or e-mail. Since these websites were first developed in the late 1990s, brokers' use of the Internet in connection with their delivery of brokerage services has become an important competitive alternative to traditional ``brick-and-mortar´´ business models."

"Defendant's members include traditional brokers who are concerned about competition from Internet-savvy brokers", the complaint continues. "In response to such concerns, defendant, through its members, adopted a policy (the ``VOW Policy´´) limiting this new competition. The VOW Policy significantly alters the rules governing multiple listing services (``MLS´´). MLSs collect detailed information about nearly all properties for sale through brokers and are indispensable tools for brokers serving buyers and sellers in each MLS's market area. Defendant's local Realtor associations (``member boards´´) control a majority of the MLSs in the United States."

The complaint adds that this "VOW Policy permits brokers to selectively or generally withhold their clients' listings from VOW operators by means of an ``opt-out´´ right. In essence, the VOW Policy allows traditional brokers to block the customers of targeted competitors from using the Internet to review the same set of MLS listings that the traditional brokers provide to their customers."

And this, states the DOJ, "restricts the manner in which brokers with efficient, Internet-based business models may provide listings to their customers, and imposes additional restrictions on brokers operating VOWs that do not apply to their traditional competitors. Defendant thus denies brokers using new technologies and business models the same benefits of MLS membership available to their competitor brokers, and it suppresses technological innovation, discourages competition on price and quality, and raises barriers to entry. Defendant -- an association of competitors -- has agreed to a policy that suppresses new competition and harms consumers."

The DOJ added in a release that "Although NAR today announced its adoption of a revised policy, the revised policy continues to discriminate against innovative brokers, and does not resolve the Department's concerns."

The NAR responded by issuing two release. One release states that the NAR has adopted a new policy titled "Internet Listing Display" or "ILD".

The NAR's second release states that "We believe the new ILD policy is fair, pro-consumer, pro-competitive and accommodates innovation. 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."

The NAR added that "The policy will bring consumers more points of access to real estate information from multiple listing services than they have ever had before. For consumers, whether they are home buyers or sellers, this new policy is a win-win. Buyers will be able to find all the listings available for public display on the Web site of the broker of their choice and sellers will be able to work with the listing broker of their choice. 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."

This case is U.S.A. v. National Realtors Association, U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No. 05C-5140, Judge Filip presiding.