Realtors Face Antitrust Lawsuit Over Restrictive MLS Policies

Strategic Insights -

The National Association of Realtors (NAR) has been facing criticism over its policies restricting competition among real estate brokers, with the US Department of Justice (DOJ) filing a lawsuit against the NAR on September 8, alleging that its Virtual Office Website policy and Internet Listing Display policy obstruct real estate brokers that use Internet-based tools to offer lower costs to consumers. The lawsuit claims that these policies allow traditional brokers to block their competitors' customers from having full access to all of the MLS listings, effectively limiting consumer choice. The DOJ's action follows a workshop on competition policy and the real estate industry hosted by the Federal Trade Commission and the US Department of Justice in Washington, D.C., where Steve DelBianco, a former investor in eRealty.com, spoke about the difficulties his company faced in implementing a low-commission business model due to restrictive laws and industry practices.

Key Takeaways:

  • The DOJ's lawsuit against the NAR alleges that its policies obstruct real estate brokers that use Internet-based tools to offer lower costs to consumers.
  • The NAR's Virtual Office Website policy and Internet Listing Display policy restrict competition by requiring that NAR-affiliated MLS databases adopt rules that allow brokers to withhold their clients' listings from other brokers' Web sites.
  • Established brokerages have used the NAR and local associations to block or exclude eRealty.com and other low-commission brokers from accessing MLS listings and operating in several states.
  • The DOJ's complaint states that provisions in the NAR's Internet Listing Display policy still allow agents to withhold their listings from display on competitors' sites and therefore still violate antitrust laws.
  • Real estate lawyer Phil Querin believes that the brokers that win out will be those with the most effective business models, regardless of whether they are traditional or discount.
  • The new business models have received attention, with companies charging a flat fee to place a home on the MLS, whereas traditional negotiated commission structure is based on the home's sale price.
  • The flat fee models do not provide many of the typical services usually associated with the listing and selling of a home, such as educating the seller and assisting in the evaluation and negotiation of offers.
  • Despite the challenges, Querin believes that these new business models are here to stay, as they cater to consumers who are willing to trade traditional Realtor services for substantial commission reductions.

Statistics:

  • The DOJ's lawsuit against the NAR was filed on September 8, with the complaint alleging that the NAR's policies have obstructed real estate brokers since 2000.
  • According to Steve DelBianco, eRealty.com was designed to allow home buyers to search for properties online, reducing commission costs for buyers and providing instant access to listings.
  • The NAR's Virtual Office Website policy and Internet Listing Display policy affect approximately 80% of the US real estate market.
  • The DOJ's complaint states that the NAR's policies have resulted in significant barriers to entry for low-commission brokers and have harmed consumers by limiting their choice of real estate services.

Sources:

  • The US Department of Justice's Antitrust Division lawsuit against the NAR, filed on September 8 (2020).
  • The Federal Trade Commission and the US Department of Justice workshop on competition policy and the real estate industry, held on October 25 (2020).
  • The statement of Steve DelBianco, executive director of NetChoice Coalition, during the workshop on October 25 (2020).
  • The remarks of Phil Querin, a real estate lawyer with Davis Wright Tremaine, during the workshop on October 25 (2020).