A little history: The Real Estate Board (aka REBNY), a trade association that is controlled by the big brokerage firms, started a residential listing service a few years ago. These exclusive listings come from REBNY members, and their distribution is tightly controlled. The independent brokers who subscribe to our BrokersNYC service would have to pay through the nose to access them in any readily usable form. When we asked REBNY if we could disseminate the listings to our members through the BrokersNYC website, REBNY refused.

We filed an antitrust suit in 2004, saying it was anticompetitive to prevent services like BrokersNYC from distributing these listings to independent brokers at an affordable price. (And of course, the lack of competition doesn’t just hurt BrokersNYC and the independent brokers; it hurts consumers, too.)

Our lawsuit asked that REBNY be required to deal with any listings information service that, like BrokersNYC, operates on behalf of REBNY members, and to integrate directly with our software so that independent brokers could get a product equivalent to what the majors were getting. We also asked for at least $78 million in damages.

Last August, a judge threw out REBNY’s motion to dismiss the case. In January, we met with Magistrate Judge Dollinger and agreed to settle, and the settlement went into effect recently. While we didn’t get everything we asked for (that’s the point of a settlement), BrokersNYC is now free to compete on an equal footing with its competitors that service the brokerage community – and our clients, and ultimately the consumers, will get a better deal. We’re looking forward to rolling out new features for BrokersNYC very soon.

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The FTC-DOJ report shows that while real estate prices have skyrocketed in recent years, commission rates have fallen very little. Why? The industry discourages price competition through anti-rebate laws, minimum-service requirements, restrictions on usage of the MLS, and even boycotts of alternative-model brokerages (all thoroughly documented in the report).

Since there are no barriers to entry for agents, artificially high commissions attract vast numbers of agents into the industry. But the number of transactions hasn’t gone up accordingly, so the agents have to spend most of their time chasing customers – a socially wasteful activity – and many of them can’t make a living. “It’s a tragic story where nobody wins, especially the consumer,�? one of the workshop participants commented. (Not quite true. Large brokerage firms benefit from this situation. Brokers and their agents don’t always have the same interests.)

A few more choice quotes from the report:

- “Some have suggested… that the industry has not yet experienced the sort of sweeping benefits to consumers in the form of cost savings and service enhancements that have been seen in other industries from the use of the Internet and other technology.�?

(Well, that’s what happens when an industry takes the view that consumers need to be protected from themselves – and has the political power to back it up.)

- But the Internet has produced some benefits: “Home buyers’ increasing use of the Internet may limit brokers’ ability to steer buyers away from discounters’ listings without their knowledge… If a home buyer finds a discounter’s listing on his or her own that appears to be a good match, a broker likely will either have to show the home buyer the discounter’s listing or explain why he or she will not.�?

(In other words, buyer beware – not of the seller, but the broker!)

- “It is possible for one dominant group of brokers to establish MLS rules that favor them and disfavor other brokers who compete in a manner that they dislike. Such rules are illegal if they unreasonably restrict competition, and the Agencies recently have challenged, as antitrust violations, MLS rules that unreasonably restrict competition by brokers who use alternative business models.�?

(Kudos to the feds for opposing the misuse of trade associations for anticompetitive purposes.)

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In his Report, Barry accuses the National Association of Realtors of fixing prices and restraining trade. These actions result in increased transaction prices for consumers.

In this Report to the Federal Trade Association, Barry calls upon Congress to establish a national Multiple Listing Service and for the Department of Justice to criminally prosecute NAR for price fixing.

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The Justice Department’s Antitrust Division has been investigating the Realtor trade group’s policies for Internet listings over whether it has been restricting competition among real estate brokers.

The complaint accuses NAR of mandating a policy that obstructs real estate brokers who use innovative Web-based systems to offer lower costs to consumers.

“We believe the new ILD (Internet Listings Display) policy is fair, pro-consumer, pro-competitive and accommodates innovation,” NAR said in a statement this morning. “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.”

Moments before the Justice Department’s announcement this morning, the Realtor trade group said it had adopted a new online listings policy to address the department’s concerns stemming from the two-year probe.

The old policy, dubbed the Virtual office Web site or VOW policy, allowed real estate brokers to selectively hold their listings from competitor’s Web sites, a move which DOJ officials have said threatens competition in the marketplace.

While NAR’s new policy no longer allows brokers to pick and choose who among their competitors is allowed to display their listings, it still enables them to withhold listings from all brokers in the MLS. The Justice Department claims the NAR policy prevents consumers from receiving the full benefits of competition and threatens to lock in outmoded business models and discourage discounting.

“The repackaged policy narrows the opt-out a bit, but it remains effective,” J. Bruce McDonald, Deputy Assistant Attorney General for Antitrust, said this morning during a press meeting in Washington, D.C.

Allowing brokers to hold listings from the Internet “makes the online business model unattractive and tends to undercut competition by the Web-based brokers,” he said.

“Under the revised policy, a broker opting out can withhold all listings from the Web sites of other brokers, but they would still appear on NAR’s own Web site, Realtor.com, McDonald said.

The so-called “blanket opt-out” provision provided in the new policy has been in effect by “hundreds of MLSs” for three and a half years under NAR’s policy for Internet Data Exchange, according to NAR. The association has said the policy has been widely accepted by the industry and very few brokers have chosen to opt out.

The policy adopted today contains an entirely new feature that allows brokers who have opted out of displaying their listings on competitors’ Web sites the opportunity to make an exception at the direction of a particular seller who wants to have his or her property displayed on the Web sites of all other members of the MLS.

“The revised policy continues to discriminate against innovative brokers, and does not resolve the Department’s concerns,” Justice Department officials said in a statement today.

NAR President Al Mansell contested that, “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…The policy does not discriminate against any brokerage model, including discount brokers.”

But the Justice Department in its complaint contends the NAR policy significantly alters the rules that govern MLSs by permitting traditional brokers to discriminate against other brokers based on their business model, denying them the full benefits of MLS participation. “The Department’s lawsuit seeks to ensure that traditional brokers, through NAR’s policy, cannot deprive consumers of the benefits that would flow from these new ways of competing,” the Department said.

According to the Department’s complaint, brokers who participated in the NAR work group that formulated the VOW policy in May 2003 recognized that the opt-out right would be “abused beyond belief.” The chairman of the working group allegedly admitted that the opt-out right was likely to be exercised by brokers despite the fact that “it may not be in the sellers’ best interest to opt out,” the Department said in its filing.

“NAR’s policy denies brokers using new technologies and business models the same benefits of MLS membership available to their competitor brokers, suppresses innovation, discourages competition on price and quality, and prevents new, efficient competitors from entering into the marketplace – all to the detriment of consumers,” the Justice Department said.

The complaint alleges that NAR adopted the online listings policy in response to broker member concerns over rising competition from Internet brokers.

“The chairman of the board of RE/MAX, the nation’s second-largest real estate franchisor, publicly expressed his concern that these Internet sites would inevitably place downward pressure on brokers’ commission rates,” the complaint states.

NAR discussed its revised policy with the Justice Department before adoption, McDonald said, and antitrust officials warned the trade group that it didn’t comply with antitrust laws. But the association has chosen to stand by the policy. [Inman News] Justice Dept Sues NAR for Antitrust

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