In response to this post, Russ Cofano (of Rain City Guide fame) wrote:
“For a division of the United States government to allege some sort of Realtor price fixing in an industry that is so overloaded (sic) with competition that it almost defies belief IS breading hate and contempt.”
In the present suit against NAR, the DOJ is not alleging price fixing. They are alleging a violation of federal anti-trust laws because of anti-competitive policies that allegedly make it more difficult for non-traditional brokers to “play”, harm consumer choice and stifle innovation. Russ
Thank you for the correction, Russ. There may also be other false impressions for me on this issue. I would be very interested in having someone who is extremely articulate and well informed (like you, for example!) explain why the DOJ may be right to go after the NAR on this point. I’m all for a level playing field for anyone who wants to play. But aren’t the “anti-competitive policies” basically who has the right to decide how and where listings will be displayed?
If you’re game – either send anything you want to post to me or just put it in the comments section and I’ll get an email notice from BloodhoundBlog. It would be a LOT more fun than the agency smackdown.
I would rather have a mind opened by wonder than one closed by belief.
– Gerry Spence
Russ Cofano says:
Hi Russell,
Happy to add some background here. You ask, “But aren’t the “anti-competitive policies” basically who has the right to decide how and where listings will be displayed?”
Kinda.
The initial DOJ complaint against NAR revolved around NAR’s initial Virtual Office Website (VOW) policy that allowed brokers to selectively “opt-out” by not allowing certain brokers to display their listings online. This would have allowed a “traditional” broker the right to effectively hand pick the firms that they don’t want to compete with online by eliminating any chance for them to have inventory to show to prospective buyers. From the DOJ’s perspective, the problem was that the under these same MLS rules, that same broker could not prohibit a particular “bricks and mortar” company from showing listings to a buyer who walked in off the street. The distinction being online vs. offline.
NAR then amended the VOW rule and replaced it with the new Internet Listing Display (ILD) policy which changed the selective “opt-out” to a blanket “opt-out”. In other words, the broker could not selectively pick which brokers could display their listings online. Either everyone or nobody. Since the ILD policy applies across the board, NAR felt that it eliminated the anti-competitive concerns of the initial VOW policy.
At or about the same time, NAR changed its definition of “MLS Participant”. The new rule defines an MLS Participant as a broker who makes offers of compensation to and accepts such offers from other brokers. Prior to the change, an MLS Participant had only to be capable of making and accepting offers of compensation.
This last issue is, I believe, the REAL issue in this case. NAR wants to define who can have access to and display listing information online as brokers who are actively working with buyers and sellers and sharing commissions via the MLS. DOJ believes this is too restrictive and that any licensed broker should be able to have such access. DOJ believes that such restrictions will stifle innovative brokers from assisting consumers in non-traditional ways.
Let’s face it. Most MLSs are powerful entities when it comes to aggregation of listing data. In anti-trust lingo, MLSs have “market power”. A broker’s ability to play is absolutely hinged on their ability to access the MLS. Without it, they are dead in the water. It is always humorous to hear people say things like “if you don’t like the rules, just go start your own MLS.” Problem is, they can’t. So, the more that NAR chooses to tighten the grip on MLS data by defining rules of who can “participate”, the greater the anti-trust scrutiny.
You asked whether the DOJ was “right” to go after NAR on this issue. Well, my friend, that depends on which side of the tracks you sit. Was it “right” for the DOJ to go after Microsoft for using its market power to tie IE with its monopoly on the desktop. If you are MS, clearly no. Ask the Firefox guys (and people who use their browser) and you will hear a different answer.
I tend to be one that values innovation. I think it makes our world a better place.
Take Zillow for instance. Many brokers have no love lost for Zillow. However, in the Northwest, the MLS changed its rules about use of off market data to allow brokers to provide their own version of “valuation” in order to compete with Zillow. Now, assume a world without Zillow. Would the MLS and the brokers have spent the money to provide this service to consumers. Based on past history, probably not.
I think the real question is “why not”?
-Russ
January 12, 2007 — 10:47 am