A new private venture capital-backed real estate firm called Home Quarters is testing established and future virtual office - MLS data download advertising restrictions by filing suit against its MLS. MiRealSource cut off HQ's MLS datafeed because it was using the direct MLS data download on the company's virtual office Website instead of the MLS' broker reciprocity solution.

While some are calling the suit a "test case" for the NAR's new virtual office display policy that was voted upon in May and will be implemented by Realtor-owned MLSs as of January 2004, the defendant in the case - Michigan Regional Data Exchange, Inc. dba MiRealSource - is broker-owned, not Realtor-owned, which could skew the outcome.

While that fact may be hair-splitting to some, it could be a core element, and may provide the answers to some questions - why now? Why this broker? Why this MLS?

If a broker-owned MLS could be proven to be anti-competitive with its VOW policy, then the local, state, and national associations which are made up of brokers, would surely be forced to follow.

But wait a minute. Didn't the NAR just vote to allow VOWs to publish MLS datafeeds? This is a tremendous victory for online brokers, who advertise consumer access to the MLS to get business. There's just one caveat - broker opt-out. Brokers will have the choice to allow or not allow competitors to showcase their listings via the MLS feed.

If a broker can win the right via a court case to get the listings without broker opt-out, it could make it more difficult for MLSs to enforce broker opt-out when MLSs begin implementing the NAR VOW policy in January 2004.

According to the complaint brought by Home Quarters (HQ), MIRealSource cut off HQ's MLS datafeed, causing the company to seek "in addition to other relief, preliminary and permanent equitable relief to enjoin defendants' unlawful efforts to prevent HQ from providing to the public an efficient and cost-effective way to buy and sell real estate in the Detroit metropolitan area."

HQ, says the complaint, "provides the same realty services and same information provided by other Realtors in the State of Michigan. It simply does so using a different and more efficient way of doing business, and it passes the resulting cost savings on to its customers."

The suit alleges that MiRealSource terminated HQ's "right to access their MLS data as part of their effort to destroy HQ's innovative business model and to thwart competition."

According to MiRealSource executive officer Virginia Bratt, the case is very simple.

"They didn't ask permission to use the other brokers' listings on their Website," she says.

MiRealSource, says Bratt, already had a way for brokers to share and advertise listings - through broker reciprocity. Broker reciprocity, also known as Internet Data Exchange (IDX), is a voluntary participation program in which the MLS provides a consumer-friendly feed of MLS listing data to brokers using listings that participating brokers have given their permission to share.

"If I am a broker, I own this data," explains Bratt, "and they don't have permission to use the MLS datafeed on their Website. They do have permission if they are using the broker reciprocity datafeed. Nobody has the direct MLS datafeed on their Websites. I have 740-odd offices out there, and none of them are using the data without permission. If that were okay, wouldn't they all be doing it?"

Broker reciprocity is voluntary, which means that some brokers may have already opted out of sharing their listings with competitors. That leaves the MLS datafeed as a more complete source of listings. Even though broker reciprocity was created for advertising the listings among competitors, some competitors feel the whole MLS should be available for advertising. The NAR established that this was true, but with the proviso that MLS listings must have brokers' permission to be advertised by competitors.

Both Bratt and HQ CEO Kyle Hoylman agree that MiRealSource offered the broker reciprocity solution to HQ several times, but Hoylman refused. He believes that having the MLS datafeed is "essential to the business model."

Hoylman says, "We have invested a lot of time and effort in building a technology system and we made a decision that we weren't using the IDX feed because it was for general advertising purposes, and we decided instead that it was an essential part of the business model to get the data directly."

"We are in business to sell homes and because we utilize a little different model and at least with our information, we are capturing a valid e-mail address and we choose to send MLS information to our customer base in a little different manner.

"I hope we can settle this and develop a good working relationship. We aren't going away, so we are going to have to figure out our differences. We can either settle it, or settle it through the legal system."

The issue then isn't about whether or not HQ can have access to display the same data that other MLS members have access to display. They were offered that chance through broker reciprocity and turned it down. What they are seeking is the right to use MLS data, rather than broker reciprocity data, to attract consumers.

Meanwhile MiRealSource has filed a motion to dismiss.

Bratt says, "We are trying to have the suit dismissed as meritless, it doesn't make any sense."

Published: August 28, 2003

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