As the real estate industry awaits the long anticipated trial pitting the Department of Justice vs. The National Association of Realtors, another Multiple Listing Service has been targeted by the DOJ.
On May 2, 2008, the DOJ filed suit against the Consolidated Multiple Listing Service (CMLS) of Columbia, South Carolina. The suit challenges the manner in which the CMLS operates and governs its members.
The lawsuit states that CMLS rules unreasonably restricts competition among real estate brokers and has caused consumers in the Columbia area to pay more for the services of real estate agents and brokers.
The lawsuit alleges in part that the CMLS mandates that real estate agents and brokers perform a myriad of obligatory services, which provides for a reduced level of customer service and limits consumer choice.
The suit also states that these mandatory services provides for an exclusion of competitors who might offer innovative options that could provide better services to consumers in that area.
“Buying or selling a home is one of the most significant financial transactions in the lives of most Americans. The kinds of rules CMLS imposes stifle competition to the advantage of its members and the disadvantage of home buyers and sellers,” said Thomas O. Barnett, Assistant Attorney General in charge of the Department’s Antitrust Division.
“Today’s lawsuit seeks to remove unlawful impediments to competition for real estate brokerage services in the Columbia area, so that consumers will benefit from the additional options and reduced fees that competition can bring.”
The MLS in most areas allows for the free exchange of information by and between its members regarding available homes on the market. The efficiency of the CMLS, or any MLS for that matter, can be a benefit to the consumer.
The DOJ contends that certain practices by the CMLS negatively impacts how the real estate industry members can choose to operate their businesses and accordingly adversely influences competition.
Specifically cited are rules imposed by the CMLS wherein its members are not allowed to offer a home sellers the opportunity to avoid paying a broker’s commission if the seller locates a buyer on his or her own.
CMLS rules require brokers to be involved in certain aspects of the real estate transaction, even if the Seller does not want the service or can find a similar service less expensively in order to save money on the fees charged by the real estate agent or broker.
The DOJ’s lawsuit challenges CMLS rules that the Government feels unreasonably restrain trade and competition among real estate brokers and thereby lead to reduced consumer choice and higher fees paid by consumers.
The CMLS in Columbia may not be the last MLS organization in the cross hairs of the DOJ. Justice Department spokeswoman Megan Gerking said the antitrust division has been monitoring multiple listing services in the past few years to ensure they are “competitively efficient.”
As we continue to see these lawsuits filed against MLS organizations and the DOJ’s obvious intent to bring down the MLS, why is it that so many real estate agents are not preparing for the inevitable?
I read stories and write stories about the ongoing assault that the DOJ is waging against the anti-trust laden operations of MLS orgs. These bastions of information, the gatekeepers of what is holy to a real estate agent are truly under attack.
it’s not like MLS operators are not being forewarned. Obviously reading about these lawsuits, MLS operators should be re-assessing how they are conducting business. In fact the CMLS was warned they would be sued on April 17, 2008 and despite meetings to amend some aspects of their operation, they still would not amend their operations to come into compliance.
Who runs these boards and what makes them think it’s okay to spend the members money fighting a lawsuit they have little chance of winning?
I keep reading on blogs in the RE Net from advocates supporting the NAR and its member organizations. I don’t understand how one can support such an obviously misguided and allegedly illegal run operation. It’s one thing to be a team player, it’s another to exist in a state of obfuscation which it seems that blind-following faithful must.
the MLS is not going to survive in it’s present state. Any reasonably thinking adult can clearly see this. The government has made the elimination of the MLS as a private members only discriminatory club a definite priority.
The consumer wants the walls torn down and with the assistance of the mighty hand of the DOJ can it be anything less than a certainty? The first it seems to fall or become insignificant will be the object of the aforementioned flagship lawsuit, the DOJ v. NAR.
Once the head of the snake is removed it will make it much harder, if not impossible, for subsequent MLS lawsuits to be won by the local boards seeking to defend them. Once a precedent is obtained in Federal Court regarding these MLS lawsuits, what will be the outcome?
It is doubtful the MLS will survive in its present form. The prudent agent would be preparing themselves as a mercenary. Ready to go either way.
The application of the Sherman Act has brought down quite a few companies and inflicted huge monetary damages against others. It’s sword is sharp and it’s blade will not dull.
Whether you like it or not, the revolution is truly under way.
Hunter Jackson says:
I think this lawsuit has some good points. This is my local MLS, and I wrote about it last night on my blog (www.IBlogColumbia.com).
I would like to say to my clients, “you find the buyer, you pay me nothing unless you want me to walk you through the transaction”, ie Russel Shaw’s package…but currently we can’t.
I can not add things to the contract I want to…etc. This hits home for me….sometimes its good, sometimes its bad.
I do agree that the MLS will not be the same in a couple of years as it is currently.
May 6, 2008 — 10:26 am
Flat Fee MLS Alive & Well says:
Yep.
May 6, 2008 — 10:43 am
Christina Ethridge says:
I say DOJ go for it – in their quest to do away with something they perceive as a hindrance to consumer choice, they are cutting of their nose to spite their face. Let them do this and look stupid.
What will immediately happen is all of the major players will WITHDRAW from all MLS’s, reverting back to full ownership of the listing information and a more cut throat business.
The MLS is a legal contract – an offer of compensation. If we don’t have that, consumers will be required to go from office to office, agent to agent to get their information – and perhaps required to use that office. There will not be a central source of information, unlike currently. Properties will only be put online on an individual basis, or with a relationship between the player and the advertiser (ie trulia, Z).
Consumers will find that representation will go the opposite direction – from the current push for ‘true’ buyer representation to stronger seller representation. This directly affects the whole idea of ‘divorcing commissions’ as well.
The DOJ suits are so ridiculously stupid. I resent being charged for these lawsuits – and yes, I’m charged because it’s coming out of my pocket when I pay taxes.
May 6, 2008 — 4:36 pm
Kevin Boer says:
Let’s not throw out the baby with the bathwater! There are onerous (and odoriferous) MLS regulations that need to be changed, but the co-operative nature of the MLS, the glue that holds it together, is pretty valuable for both the consumer and industry.
May 6, 2008 — 5:20 pm
Hunter Jackson says:
Kevin,
I completely agree. The MLS is important for Realtors…BUT there are rules and regulations that need updating…just like my parents house!
May 6, 2008 — 5:44 pm
Smithers says:
Christina –
Sellers (and agents) would not stand for that, and the “for sale” listings (maybe with a different name) will still find their way to the internet.
Yes, agents/brokers want to be paid somehow, and I’m sure they will figure that out or get a different job, but a broker that does not share his/her/its listings with at least some global outlets will be hard pressed to get many (any?) listings in the first place.
You cannot control/hoard information to the detriment of your customers and still have any customers.
May 6, 2008 — 7:14 pm
Dave Phillips says:
Barry,
You are bit over-dramatic on the demise of the entire MLS industry. You over-estimate the speed of change and underestimate the ability of the Realtor organization to change. The Internet was suppose to take realtors down – how’d that work out.
You are correct, the “times they are a changin.” Please do not sensationalize this like a desperate politician. There are significant issues that need to be addressed, but let’s keep the discussion real big guy!
I’ve not heard about the Columbia case, but I’m sure I will at the NAR meetings in DC next week.
May 6, 2008 — 7:27 pm
Barry Cunningham says:
Dave your continued cry of over dramitization without having any substantive idea as to what you are talking about is quite tiresome. ( you wrote: “I’ve not heard about the Columbia case”)
yes you have…the entire pleading is referenced herein. The Sherman act is quite easy to be found and the Clayton Act is just as accessible.
What you accuse and denigrate albeit continually, is a continual speak before review reflex. C’mon Dave…you have to do better than that, especially given your position.
May 6, 2008 — 9:16 pm
Marlow says:
The DOJ can’t shut down private trade associations. They may change somewhat, but if those changes threaten the larger companies, ReMax, Century 21, Coldwell Banker etc. will keep the listings to themselves, just like in the bad old days.
May 7, 2008 — 12:46 am
Jim Rake says:
Barry – Well, this is “another brick in the wall.”
Why is it that so many real estate agents are not preparing for the inevitable? Like so many other instances, we aren’t because we don’t have to…..yet.
Is the handwriting there? Certainly. And, many are changing, piece by piece. Our profession’s transformation is evolutionary. It’ll get there, and so will we. Some smoothly, others (many others) will go kicking and screaming! Can you say “old school”?
As you know, old habits die hard. Supply and demand will drive us there, and it’s already pushing us along slowly. Unfortunately, much of the public’s belief hasn’t changed, that all Realtors are the same.
At the end of the day, technology will rule the day, and the MLS, any MLS, will be (and are) replaced by open source platforms.
May 7, 2008 — 5:16 am
Marc Rasmussen says:
IMHO we need the MLS system. We need a central database for Realtors. Otherwise, it will be like Europe where each agent only sells their own stuff. Can you imagine how fragmented that would be?
Try working with a buyer looking for commercial property. Many of those properties have to be uncovered and are not on any databases. You will come to appreciate having a database where properties can be located quickly.
I do agree that these Realtor boards abuse their power. I have been battling with my board about having MLS in my domain name. It has not been fun.
May 8, 2008 — 4:13 am
Barry Cunningham says:
I believe an MLS is needed as well. Buy not just for Realtors. I think there should be free and unfettered access to the MLS to both the consumer and the agent alike.
There is no reason to keep it under lock and key any longer. With all of the syndication outlets on the market, what would be the reason to keep it a private club any longer.
May 8, 2008 — 4:29 am
Greg Cremia says:
snip I believe an MLS is needed as well. Buy not just for Realtors. I think there should be free and unfettered access to the MLS to both the consumer and the agent alike.
There is no reason to keep it under lock and key any longer. With all of the syndication outlets on the market, what would be the reason to keep it a private club any longer. snip
And who would pay for it? If it free to the consumers then I am not going to pay for it. If it is funded by the government it will become a totally useless mess just like everything else they try to do.
May 8, 2008 — 5:26 am
Barry Cunningham says:
Hey Greg…on an open forum blog, which any consumer can read, you just said you would not pay for the MLS if it were free to the consumer.
Does Google charge? How about Realtor.com? How about Trulia, Zillow, Homegain..etc..etc..etc..
Many subscription based services are in existence yet allow free consumer utilization.
I guess it goes back to my question of last week. If MLS access was free, would you still pay your dues to the NAR and the local boards?
May 8, 2008 — 6:40 am
Marc Rasmussen says:
“I guess it goes back to my question of last week. If MLS access was free, would you still pay your dues to the NAR and the local boards?”
I would not really want to pay dues if that were the case. Having access to the MLS is the main reason to be a member of the local boards. I know there are other functions but quite honestly they have been a thorn in my side for a bunch of nonsense. I can’t see why you would be a member if the MLS was free to everyone.
May 8, 2008 — 6:55 am
Tom Townsend says:
Barry,
This is an excellent post. What is disheartening is that many Realtors and Brokers alike don’t understand the depth and breadth of the issues and just comment on the crap they have been spoon fed for so long by NAR and their own MLS organizations.
As a former VP-IT of a National Real Estate firm, working on our resale site was a real nightmare when it came to communicating with and trying to appease all the various MLS boards request for how we use the data. We often paid fees that were ridiculous,got no representation and were fed so much B.S. it almost made using the data more painful than what it was worth. This is not progress, and “cutting the head off the snake of NAR” is the first step in changing this.
Marc Davison at 1000 Watt Consulting actually wrote a good article on this back in Feb 2007, which I dove-tailed off of in my article entitled: (MLS Data compliance and NAR vs. DOJ) I still think my article is very relevant, in that it cuts to the chase. Let me know what you think ?
http://greatertampabayrealestate.com/blog/helpful-information/mls-compliance/
May 8, 2008 — 8:17 am
Greg Cremia says:
Hey Barry,
Yes, I will not support an MLS that requires me to pay and is free to everyone else. What kind of business sense is that? And what about reliability?
As for the free sites like google,trulia and zillow. Have you looked at their data and compared it to the real thing. The last time I looked 60% of the listings on trulia were expired or sold for my local area. I can not operate my business like this. My clients deserve better.
With a private MLS the data is fairly reliable. With fines and the threat of expulsion, the MLS data is a reliable resource. Make it a free for all and that reliability will be lost.
Now for all of you out there on the world wide web, if you want to see all of the real estate for sale on the Outer Banks of North Carolina just go to http://www.outerbankshome.com/search-mls.html and search away. You can even look at the houses from outer space. For free.
May 8, 2008 — 8:42 am
Lane Bailey says:
So, is there something that is stopping a competing organization from setting up a new MLS in any area? Just money…
Next, have you ever eaten at a restaurant that had a “no shoes, no shirt, no service” policy… or one that could refuse service to anyone at any time for any reason? I bet you have…
The MLSs are private clubs and private businesses. Whether they are free of the NAR (like here in Atlanta) or owned by the association, they aren’t crowding out competitors…
If the DoJ wanted to actually go after a monopoly, they would be nailing Ticketmaster. And if you want to make money, set up a competitor to that… they will buy you out as soon as you look sort of viable. I haven’t heard of the MLSs buying or crushing competition.
May 8, 2008 — 7:24 pm