RE/MAX International knows its way around civil litigation. Among the first franchise organizations to upset traditional real estate with a new business model, (100 percent commissions to agents) the company knows what it feels like to buck the system. It's taken decades, but now RE/MAX is part of the real estate establishment.

RE/MAX has court-KO'd adverse-split-wielding competitors and the CBS network, and is currently in round one with LendingTree over alleged trademark infringement. (LendingTree just lost a key court decision in a similar suit brought by Cendant brands when a preliminary injunction enjoined the referral fee-based real estate broker from using the brands' trademarks/servicemarks in a way that might confuse consumers that the brands endorse LendingTree or its real estate services.)

Now RE/MAX is embroiled in a Department of Justice (DOJ) investigation into the National Association of Realtors' virtual office website (VOW) display policy.

First, here's a little background. Broker demand led the NAR to create a policy which allows all brokers to operate virtual office websites using MLS data downloads to share with clients. Some members, including RE/MAX brand brokers, asked for restrictions on third party use of the listings and a broker opt-out provision for brokers who are uncomfortable seeing their listings in certain environments.

But some competitors, particularly "discount" virtual brokers, feel that the MLS data downloads should be shared freely with consumers and claim that the virtual offices should be treated statutorily the same as a bricks and mortar office.

The problem with that argument is that brick and mortar offices may give listings to consumers (it's called taking the MLS book home) but they don't use their office space to create third-party advertising relationships making use of the MLS database of listings, and that's where the controversy erupts.

To be able to advertise the MLS listings virtually gives some broker members a competitive advantage, such as eRealty's exclusive advertising relationship with Yahoo!. eRealty is the exclusive gateway to listings in certain Yahoo! geo-markets. If consumers want to see listings they have to go through eRealty's user agreement to get to them, but meanwhile they pass through the website which acts as an advertisement to promote discount rates. eRealty also gets the consumer's contact information for follow-up. It's a clever variation on customer acquisition.

Some brokers claim that the MLS isn't there to help any single member acquire customers, but MLS data can be used virtually to serve existing clients. When it learned that eRealty and others were using MLS listings to get customers, RE/MAX International's leadership called the exclusive advertising arrangement, "coming to a potluck supper with nothing but a fork."

RE/MAX has since been a vocal opponent to a VOW policy without a broker opt-out provision.

But as a new competitor, eRealty relies on relationships with third-party advertising mediums such as Yahoo! to get its website seen by consumers. CEO Russell Capper vigorously denies this activity is advertising, and told Realty Times that only 20 percent of consumers actually click through a user agreement to get to the listings. The conceit to this argument is that as soon as the 20 percent click through, they become "clients" even though they weren't clients before. They came in because of the advertising arrangements. But Capper says the agreements are not even binding as agency agreements.

eRealty management wants all the listings with no opt-out by any broker. When the NAR leadership voted on a VOW policy in May, 2003 that included a broker opt-out and limitations to third-party use of MLS listing data, Capper objected strenuously to the Federal Trade Commission (FTC) and since then has met with the Department of Justice.

It wasn't long before the DOJ came calling on RE/MAX International seeking information on the NAR's VOW policy. RE/MAX attorneys knew what to expect and what to supply.

RE/MAX International's Senior Vice President and general counsel Steve Squeri explains that antitrust authorities are in divisions of both the FTC and the DOJ and that the two government agencies decide among themselves who investigates which matters.

The investigation into the NAR's VOW policy is being handled as a civil matter, says Squeri, a 23-year antitrust specialist.

"All that is happening is there is an investigation for whatever reason and you don't always know what the reason is," explains Squeri. "Somebody files a complaint and the authority is given to the DOJ antitrust division by law. The attorney general looks into a matter, and there is a judgment that an antitrust violation has taken place.

"No determination has been made," says Squeri. "They can investigate circumstances where an alleged violation has taken place. If investigators conclude that what they believe has taken place, they can go to court, the court would review evidence and in any case, there is a range of options. In a civil case by the Justice Department, there would be injunctive relief."

That means that the court would require the NAR to eliminate the parts of its policy that the court rules as antitrust.

"There are many antitrust investigations that don't go forward," notes Squeri. "All that is occurring is an inquiry. To evaluate whether it is a case, the complainants have the burden of proving that a violation has taken place."

Squeri appears a lot more relaxed about the inquiry than the NAR. The NAR voted to postpone adoption of the VOW policy from January 2004 to July 2004 in the wake of the investigation.

"I would not have done it," says Squeri, "unless their reason was to allow more people to implement the policy. I think beyond that, it is a mistake to extend it. There has been no determination of violation of law, and if the lawyers of the Justice Department approach with an open mind, my understanding is that NAR has relied on antitrust counsel, who have determined policy to be lawful. To postpone the policy is to allow the other side opponents to win by default."

NAR declined comment on whether or not the policy adoption was postponed due to the investigation or due to more time needed by MLSs to provide technologies, security, field selections and pricing to implement the policy.

What has RE/MAX been asked to provide?

"We have been contacted by the DOJ to provide information," explains Squeri, "we have not had any opportunity as of yet to discuss with the Justice Department our views of the lawfulness of the policy. I am not aware that before the Justice Department announced the investigation that they spoke to anyone other than those who complained. It is highly premature to draw an inference of the DOJ investigation as they go through a preliminary inquiry."

Isn't being involved in an inquiry a little like being accused of rape? NAR says it can't answer any questions about an ongoing investigation, yet the whole country knows it is under investigation thanks to leaks by complainants. It's hard to put up a defense.

"I can tell you that in the ordinary course, I wouldn't be giving you an interview," says Squeri, "this is contrary to my normal practice, it is not good to try to vent the merits of the investigation in the media. I feel the need to comment simply because of the Wall Street Journal article and that is why NAR had to go public. Under those circumstances you are vulnerable, there is no law that you can't disclose that, you as a party have the right to comment, and I have no idea of what conversation was between NAR and the government, but the NAR was placed in a difficult position -- trial by press."

"The Wall Street Journal misses the boat and does not look at what really is at issue. You have this whole issue hashed out in the press which is like talking to a brick wall. Litigating cases in the press is a problematic thing; it is even more problematic with antitrust issues. You are talking about fundamental antitrust and economic principles. Those who are complaining want to insulate themselves from the free marketplace where consumers decide who they want to deal with, who is providing value, and others who oppose the VOW policy want an opportunity to be insulated from normal market pressure."

If the inquiry concludes in the court demanding injunctive relief, could eRealty or other complainants sue?

"You can't prevent anyone from filing suit," says Squeri, "if the policy isn't enforced by NAR what is there to sue about?"

"We have provided documents, and our intention would be to meet with lawyers with antitrust who understand economics very well and explain why this policy makes sense, but we don't have a date as yet."

What would RE/MAX do if the opt-out and third-party provisions of the NAR's policy were to be eliminated?

"We haven't contemplated any action. I don't think that is going to happen, and we have not focused on it," says Squeri. "If there is an injunction, NAR needs to comply with the court order."

How does Squeri feel personally?

"I don't know who made the complaint, and I am not going to say any company doesn't have the right to complain. To me that is not the issue. The issue is whether or not this policy amounts to a violation of antitrust laws or is a procompetitive policy. Everyone has the right to play. They do not have the right to utilize the property of others. If the marketplace sees they are providing value, and if they aren't providing value, let the free market function.

"This is not about feeling any animosity toward these firms, our view is they need to let the marketplace decide.

"Our is view that the NAR policy is pro-competitive. It does allow the free marketplace to function. Without this, you are taking away the independence that would otherwise be available to brokers and clients how the listings ought to be marketed. eCommerce has to respond to normal free market value. If they do provide value, the marketplace is about maintaining independence."

Will the DOJ be able to understand an industry as independent-contractor-centric as the real estate industry? Will they understand how MLS works? Will they be convinced by a complaint?

"Litigating antitrust is problematic," says Squeri. "The issues are complicated and the economics are complicated. It is easy to make superficial arguments when all it is really about is a company wants to better their own position. It is very easy to rattle an antitrust saber. It is much harder to prove."