On September 8, 2005, the Department of Justice filed suit against the National Association of Realtors over its new Internet Listings Display (ILD) policy less than one hour after the NAR announced the policy to its members.

The organization spent over two years being investigated by the DOJ and four months modifying its controversial Virtual Office Website Policy (VOW) into a new policy that the DOJ could live with. It was announced by the NAR as early as the mid-year conference last May, when the threat of a DOJ lawsuit was first leaked to the press, that the NAR would be blending characteristics of the IDX and less-well-received VOW policy.

The basic difference between the two policies is that IDX allows blanket opt-out which means that a broker can opt-out of sharing his/her listings in competitors' Websites, but if he/she chooses to do so, he/she's also restricted from displaying other brokers listings. Under the VOW guidelines, a broker could selectively opt-out of sharing listings with certain competitors' Websites.

The new ILD policy also allows broker blanket opt-out. None of the policies prevented any brokers from accessing listings for clients. The policies were merely designed to govern Internet MLS listings sharing. Because MLS listings come from a voluntary cooperative with the intention of sharing listings only with those who intend to sell homes, some brokers with business models that don't specifically sell homes are restricted from displaying the listings by NAR MLS rules.

The DOJ objected to the NAR's ILD policy, and when it filed suit, some troubling issues were raised:

• How did the Wall Street Journal reporter James Hagerty know in advance that a suit was going to be filed before the NAR was officially told by the DOJ?
• The attorney filing the suit, J. Bruce McDonald, a Bush appointee, was on the job only one month before the suit was filed. Was he hired to push a lawsuit through?
• The suit not only appeared to be prepared in advance, but in 14 pages, the term ILD doesn't appear until the end, suggesting that the DOJ might have filed the wrong suit, or at best, jumped the gun on the NAR's ILD policy.
• The NAR insists the DOJ filed suit against a policy that no longer exists.
• In four years, according to the NAR's general counsel, Laurie Janik, the DOJ had never expressed a concern with blanket opt-out, a feature of IDX. Why was it suddenly a problem in the ILD policy?
• Why a suit, why now? Realtors would be branded as "anticompetitive." A weakened NAR could open the door for banks to get into real estate that Congress has kept closed until now.
• Companies like LendingTree and others who have lobbied the DOJ have no idea of the harm they may have done to the industry and themselves by involving the DOJ. The DOJ is using these complaints to reduce real estate fees across the board. How is that going to help a referral fee model?

Determined and unrepentent, the Department of Justice today amended the complaint in its antitrust lawsuit, charging that the group's modified policy continues to "prevent Internet-based real estate brokers from offering better services and lower costs to consumers." The lawsuit challenges NAR rules that limit competition from brokers who use Internet tools to serve their customers. The new complaint addresses how NAR's changes to its rules still obstruct competition, threaten to lock in outmoded business models and inflate prices in the industry.

"Last-minute changes by NAR did not fix the anticompetitive problems of its policy," said J. Bruce McDonald, Deputy Assistant Attorney General in the Department's Antitrust Division. "When buying and selling a home, consumers should receive the full benefits of competition - better services and lower costs. NAR's modified policy continues to prevent consumers from realizing these benefits."

Specifically, the modified policy contains a provision, the "blanket opt-out," that allows brick-and-mortar brokers to prevent an innovative broker from providing over the Internet the same Multiple Listing Service (MLS) information that other brokers can provide in their offices. NAR's initial policy contained a similar provision. NAR's modified policy specifically exempts its own official website, Realtor.com, from the blanket opt out, says the DOJ.

Actually, this isn't strictly true, and should be handily proven by the NAR in court. The ILD policy doesn't prevent the Internet broker from obtaining listings to show to clients, mainly because almost all brokers have email in which they can send listings to consumers. Also, brokers at the MLS level can opt out of having their listings shown on Realtor.com, if that is what their clients' want.

If the NAR can prove, using state law as precedent, that brokers don't owe other brokers advertising display rights to their listings via the voluntary MLS, the case will be won.

NAR also announced a change to its membership rules, accuses the DOJ. "The new rule - much like the original policy's anti-referral rule- denies access to MLS listings to brokers operating referral services. This membership rule effectively prevents two brokers from working together in what can be a more innovative and efficient way, with one attracting new business and educating potential buyers about the market, and the other guiding the buyer through home tours and the contract and closing process," says the DOJ.

In response, the NAR urged MLSs not to adopt the association's new Internet Listing Display (ILD) policy until the lawsuit with the U.S. Department of Justice has been resolved.

MLSs that adopted the Virtual Office Web Site (VOW) policy may either rescind their VOW rules or stop enforcing the policy's blanket and selective opt-out provisions, the clean page rule that restricts advertising around listings, and the provision that prohibits VOW operators from using their VOWs solely to collect referral fees.

NAR believes the lawsuit with the DOJ over how listings are displayed online will last well into next year. Sometime soon, the DOJ will file an amended lawsuit that should shed more light on why it is opposed to NAR's new ILD policy, said Janik.

NAR says it has no plans to settle the case.

While the DOJ could not be reached for comment, the NAR had this to say:

“NAR’s policies that are under attack by the Justice Department preserve the integrity of multiple listing services, including the vital benefits that MLS’s bring to home sellers and buyers and the rights of listing brokers and their customers to direct the marketing of their own properties.

“This ill-considered lawsuit jeopardizes the future of the nation’s 900 multiple listing services as we know them. A victory by the Department of Justice will drive brokers out of MLS’s, resulting in less competition in real estate services, higher costs, less availability of listing information, and the very outcome Justice seeks to avoid.”