Homestore's Gold Alliances may have turned to rust with dual announcements by both Homestore and the National Association of REALTORS® that the U.S. Department of Justice (DOJ) anti-trust division has come calling seeking information relating to Internet realty sites. But the giant's site competitors aren't celebrating as expected. Some feel that the probe will hurt the entire real estate industry. Both Homestore and the N.A.R. have downplayed the investigation with claims that no laws have been broken and that both organizations intend to cooperate fully with the DOJ. "We're entirely confident that no laws have been violated in the operation of REALTOR.COM. Of course, we will cooperate completely with the Justice Department and we anticipate that it will reach the same conclusion," said Dennis R. Cronk, NAR president. According to a recent Bloomberg report, Homestore's chief financial officer John Giesecke said the government "wants to get an understanding of the dynamics of our business and real estate on the Internet." He said, "It's a very broad request." Broad is a relative term if you consider that the probe appears directed only at Homestore and its partner, the N.A.R. Reuters quoted a spokesperson for the Justice Department, Jennifer Rose as saying, "We are conducting an investigation into potentially anti-competitive conduct involving the online realty listings industry." Could the probe be investigating the Gold Alliance agreements which were so highly publicized last year by Realtor.com as one of the means to keep the Realtor at the center of the transaction? In an apparent attempt to cast red herrings as bait, the report went on to say that Giesecke said the government wouldn't tell the company whether it made similar requests of its competitors. Officials at its two main competitors, Microsoft Corp.'s Homeadvisor.com and Reno, Nevada-based Homeseekers.com weren't immediately available for comment, said the Bloomberg reporter. Not so, says Homeseekers president John Giaimo. Bloomberg never called the company, he says. A Homeadvisor PR spokesperson says the publication also didn't contact him, but may have gotten lost in the Microsoft maze. Cyberhomes also was not contacted. Homeseekers wonders if the lack of journalistic effort may partly account for the slump in its stock prices following the release of the Bloomberg story. A stock market analyst said, "Homestore is perceived as the market leader. If its valuation is down, the whole sector could also go down. It may not be due to any belief on analysts' part that Homeseekers may or may not be also under investigation." Witness Microsoft's woes and how their anti-trust suit has rocked technology stocks for the past few weeks. HOMS closed at 15 1/2, an all-time low. Wary of being painted with the same brush, a Homeadvisor spokesperson said, "Homeadvisor is not under investigation, but the company will not comment further." According to Giaimo, Homeseekers is not involved in the government probe either, and has not been asked for information since last July when an article in the Wall Street Journal was released just before Homestore's IPO. The DOJ called Homeseekers in response to the article, said Giaimo, but hasn't contacted the company since. At the time, Homestore denied that it was being investigated and the company made its debut, ultimately reaching $138 per share, and enriching its founder, Stuart Woolf, who sold some shares at $105 in a secondary offering in January, raking in over $18 million. "We are not being investigated," says Giaimo. "We have no exclusive deals with anyone. People forget that we are the MLS for many areas of the country and that we push data to our competitors, including Homeadvisor, Cyberhomes and Homestore." Giaimo adds that the public side is a small part of what Homeseekers does, the company is focused primarily on business-to-business products and services. Homeseekers provides information to 67 MLS organizations and is currently in negotiations with another 12. Another Homestore competitor estimates that last year at the Gold Alliance's height that as many as 135 MLS organizations out of a possible 700 signed the exclusive agreement. "The Gold Alliance is still in effect with at least one third of the top MLSs and boards across the country," said the source. "Some MLSs may have 10 to 15 boards working in alliance with a single MLS provider." Although the number of Gold Alliance deals in place are not that many, they do represent the creme of MLSs, and may account for many thousands of listings each. "Few Gold Alliance members have defected, says the insider. "The reason why may include the number of warrants they received." Although few MLS organizations are on record as selling or offering their shares for sale, points out the insider, a number of association and board members are easily recognized on the HOMS insider list, published at Yahoo! Business. CyberHomes president John Mosey also confirms the Gold Alliance estimates, and says the Gold Alliances continue to hurt Cyberhomes' business. "We lost a year or two just trying to hold on to our place in the business from the listings perspective," says Mosey. "It cost all that time and effort as opposed to applying those resources to building the business. To this day it remains one of our most serious issues." Mosey points out that many of the agreements signed by the MLSs which his company could not penetrate, are for one to two years and are not up for renewal. What he is more concerned about is how the probe will affect the industry as a whole. "Realtors have looked terrible all through this," laments Mosey. "Because many made a choice between getting a quick hit for big money or doing the right thing and representing the people they were supposed to be representing. "There are pockets of people who said this is wrong all along, and it is going to bite the real estate community," he continues. "I think with the hot markets all over the country and commissions are still high, that the effort and value of real estate services is being questioned on a broad scale. It is an outcome of the new Internet economy when consumers are accustomed to having actionable information on every purchase they make. And the real estate industry is still in the mode of restricting information." "My entire working life has been spent with the real estate industry and it is part of my life when it is harmed," concludes Mosey. "I feel it the same way they do. This whole thing was so short-sighted." Part II - How Will the Realtor Be Affected?.