The
U.S. Justice Department today filed an antitrust lawsuit against the
National Association of Realtors challenging its new policy for online
property listings display.
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.
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