From a front page story on the L.A.Times to a Wall Street Journal feature and numerous others, the announcement of information gathering by the Department of Justice is bringing less than favorable publicity to the real estate community. Not since the release of the Federal Trade Commission report in 1983 has the real estate industry been subject to such scrutiny. There's never a good time for a negative spotlight, but the timing couldn't be worse for the traditional practitioner. Loss of consumer confidence With discount brokerages entering major markets, agency representation issues being tested in court, and FSBOs on the rise according to the A.D.Little survey commissioned by the National Association of REALTORS®, the full-service Realtor foot soldier has enough battles to wage. Now publicity over the relationship between Homestore and the N.A.R. is burgeoning, giving more ammunition to real estate industry critics. Reporters and pundits are already questioning the motives of the N.A.R. to participate in exclusive listing arrangements. From a big picture standpoint, the N.A.R.'s mission is to promote and preserve the role of the Realtor, but that may not be a good enough explanation to the DOJ, which will be more inclined to review the net effect on the consumer. Critics are already pointing out the questionable benefit to the consumer of having their listings limited on the Internet to Homestore's exclusive "Gold Alliance" participants, even if it is of tremendous benefit to the broker or agent who is paying to advertise their services with the largest listings giant on the Web. Higher Internet marketing costs for agents Says one high-level executive competitor, only too glad to add fuel to Homestore's roasting, "The Gold Alliance is anti-consumer, anti-competitive, and most of all, anti-agent," he says. "They get sheared in the "only game in town" scenario that the Gold Alliance sets up. If you want to get your message broadcast and the only place you can buy personal promotion exposure is on Realtor.com, their rates reflect that." Realtor.com defends its higher Web site and enhancement rates with its ability to generate qualified leads for participating Realtors. Errol Samuelson, director, Professional Products, said in a recent Realty Times interview, "Realtor.com was first to the game, conducting detailed analysis on what home buyers and sellers wanted on the Internet. We continue to lead the industry in actively translating this research features that connect consumers with REALTORS, with a focus to create such contact earlier in the buying / selling cycle." One MLS chose to handle the whole mess another way. Though constantly importuned to sign a Gold Alliance agreement, Metro Listing Service (Atlanta, 13,000 agents, 27,000 listings) CEO Richard Boone, said no. "We told Realtor.com, we will provide you data but we will not give anyone exclusivity because it is wrong for the industry," says Boone. Explains Boone, "We were afraid of something exactly like this happening. It's a mistake to give one provider too much power, because that could change the industry in a way that no one would be able to control." GMLS responded with a very simple program for its agents. Brokers can post listings to all six national site partners, or none. That way infighting is halted before it even begins. Hamstringing the agent The broker faces a true lady-or-the-tiger dilemma with the exposure of listings to the public. In a personal visit from Homestore CEO Stuart Wolff, accompanied by a Homestore attorney, Boone was told of a 1,000 page agreement that the listings site had signed with the N.A.R. restricting a number of things that Realtor.com can and can not do in order to protect the interests of Realtors. He was told that this document makes Realtor.com the only site that the MLS could trust. "They can not do FSBOs or participate in commission structures or share data with unapproved sources," says Boone. "The odd thing is I don't think we can view this document. We have always thought that was funny." Many MLS executives and brokers continue to believe that this is true, and took the money extended by Homestore to restrict their data. Gold Alliance renewals, according to Homestore competitors, have been high. They believe that the N.A.R. and Realtor.com is their last line of defense in a climate of escalating disintermediation. Caught in the middle is the agent. "Let me just ask you this question: What does the word fiduciary responsibility mean?" asks Boone. "Does it mean that I am only going to put your listing on one site because it protects me, or put it on six sites because it is good for you? If I assume fiduciary responsibility to market your property , how can I meet my responsibility and agree to limit the exposure of your home at the same time?" What will happen? An industry analyst speculates that one of two things could happen. That the probe will blow over as it did with other online industries, and that the Realtor community will close ranks around Realtor.com's parent Homestore, and the N.A.R. will be able to weather the storm with a new public relations campaign. Should any misconduct be found, the DOJ may ask the N.A.R. and Homestore to revise their agreement. Another scenario is that Homestore becomes an exclusive provider to the N.A.R. which will become its own MLS, using its transaction management platform. This could release Homestore from some of the very same constraints that once were such an effective marketing tool (the 1,000 page agreement), freeing it to pursue other avenues of revenues. And the Realtor will continue to do what s/he does every day. Try to serve buyers and sellers at the local level.