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Feds File Anti-Trust Charges Against Realtors

September 8, 2005
The U.S. Justice Department has filed an anti-trust lawsuit against the National Association of Realtors (NAR), challenging a policy that obstructs real estate brokers who use innovative Internet-based tools to offer better services and lower costs to consumers.

• Realtors Settle Anti-Trust Charges • In Real Estate, the Truth Can Reduce Home Values • Michigan Realtors Open Listing Services to All • Feds Charge Michigan Realtors with Anticompetitive Practices • Feds Target Realtors' Anti-Competitive Practices • Realtors Thwart Internet-Based Home Sales • State Real Estate Regulation Dominated by Realtors • Feds File Anti-Trust Charges Against Realtors • Realtors Try to Head Off Justice Department Suit Over Internet Listings • Feds Ready to Sue National Association of Realtors --- • Homeowners Information

The Justice Department said that NAR's policy prevents consumers from receiving the full benefits of competition and threatens to lock in outmoded business models and discourage discounting.

"The purchase of a home is one of the most significant financial decisions a family can make, and NAR's policy stifles competition to advantage some of its members at the expense of home buyers and sellers across the country," said J. Bruce McDonald, Deputy Assistant Attorney General in the Department's Antitrust Division.

"Consumers benefit when real estate brokers are free to compete vigorously by offering innovative services."

Although NAR has announced its adoption of a revised policy, Justice Department officials maintain the revised policy continues to discriminate against innovative brokers, and does not resolve the department's concerns.

In most markets, real estate brokers share information about properties for sale, known as listings, through the local Multiple Listing Service (MLS) -- a joint venture among competing brokers. Participation in the local MLS makes it possible for a broker to provide customers with listings for virtually all properties for sale in the community, which is critical to compete in the local market, the Department said.

Traditionally, brokers provided listings for properties to their customers in a variety of ways, such as by hand at their offices, or by mail, fax, or e-mail. Some brokers have recently begun offering brokerage services to their customers over the Internet, using so-called virtual office websites, or VOWs. VOWs are password-protected Internet sites that allow the broker's customers to search the MLS database on their own, using their home computers to obtain the same information that would be available in a broker's brick-and-mortar office.

Delivering listings over the Internet gives web-savvy consumers more control over their search for a home, allowing them to educate themselves about their options at their own pace and on their own time. This allows brokers to reduce the time that their agents spend searching the MLS database or showing homes the customer dislikes, the department said.

Government lawyers say that because the Internet can be used to deliver brokerage services more efficiently -- resulting in better service and lower costs to consumers -- brokers who utilize the Internet represent a competitive challenge to traditional brokers.

In its complaint, the Department alleges that NAR's 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, NAR's policy enables traditional brokers to block their competitors' customers from having full on-line access to all of the MLS's listings. When exercised, the opt-out provision prevents web-based brokers from providing all MLS listings that respond to a customer's search, effectively inhibiting the new technology, the Department said.

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