Russell Capper, CEO of eRealty, is one of the complainants who has been instrumental in bringing the Department of Justice's attention to the National Association of Realtors' virtual office Website/MLS data display policy.

If Capper is successful in his mission to get the National Association of Realtors to abandon the opt-out and referral fee provisions of its virtual office Website (VOW) policy, his company will benefit as a virtual office service provider who is focused on providing information electronically to consumers.

But his views on how MLS data should be shared between MLS members for consumer consumption have put him at odds with some NAR members who want the same benefits but with a few controls.

One source with RE/MAX International said (RE/MAX is no stranger to pushing new business models through the system) that the marketplace decides value, not new business models. Capper feels that the MLS data should be available to him in a virtual environment to share with consumers. Others agree, but they would like to see what they call reasonable restrictions on how the data is used by all brokers, third-parties, and consumers.

According to statements by NAR leadership, all brokers should be able to do what Capper can do -- operate Websites known as virtual offices and use the collected listings directly from the MLS to give to consumers. In fact, many of the largest brokers in the land operate VOWs including Fox and Roach Realtors, John L. Scott Realtors and Prudential California Realty, among many others.

But some NAR members including leadership of RE/MAX International and Cendant brands (about 50 percent of franchise brokers nationwide) told the NAR that brokers should be able to control through VOWs the same thing they control by licensing statute -- where their listings are advertised.

Licensing statutes in almost every state prohibit a broker from advertising another's listing without permission. Because VOWs are Websites, it can be argued that VOWs are also publications which can be used as ads or in ads, an unauthorized use of MLS data downloads if brokers haven't given their permission for such use. Therefore listing brokers should be able to say yes or no to individual members who intend to use the MLS data downloads in ads or as ads, just as they are able to say yes or no to other advertising mediums.

eRealty has relationships with advertising mediums such as Yahoo! through which they are the exclusive provider of MLS listings in 13 markets. This raised another objection by some listing brokers that the MLS-collected listings should not be used in advertising arrangements to benefit a single broker. In other words, access to the MLS should not be used by any member as a personal marketing advantage to the exclusion of the other broker members who supply the listings.

Capper says that only about 20 percent of people who come to his VOW "click through" because they are daunted by the mandatory user agreement that requires consumers to declare themselves. But it is unknown how many click-throughs he does get.

It is finding out what he is doing with the MLS listings after getting them that has some in the industry watching Capper closely.

Capper first came to prominence in the real estate industry when he was sued by the Austin MLS Board for advertising the MLS listings on his VOW without getting permission from the other brokers. He counter-sued, he says, and the case was settled out of court, with the result that Capper was allowed to keep the listings on his VOW. Shortly afterward, eRealty became an exclusive provider of those listings to Yahoo! in certain markets.

It was this case that turned the industry's attention to questioning what is a VOW, and how much obligation do brokers have to share listing data in other brokers' VOW environments.

Capper proved that VOWs are advertising by engaging in its exclusive positioning agreement with Yahoo!, but he argues fervently that he has the right to do so. He should be able to do what any broker can do in a brick and mortar office, including putting listings before consumers.

"On my wall in my office, I have a framed letter from Laurie Janik in which she states that the way eRealty delivers MLS data to its customers and clients in Austin is within the rules and regulations of the Austin MLS Board."

But that letter was written before news of the Yahoo! arrangement was discovered by other brokers.

Some other brokers' objection is that they didn't fully understand the implications of allowing VOWs to showcase MLS listings, or engage in exclusive advertising arrangements. They felt they handed a marketing advantage to Capper, whose deal with Yahoo! was to be the exclusive gateway to listings in certain markets. If a consumer wanted to see listings on Yahoo! in certain markets, they had to go through eRealty, which gave eRealty a marketing advantage. While this was hugely clever on Capper's part, other brokers argue that this wasn't their intent in supplying listings to the MLS. They share listings to get them sold, not to give a marketing advantage to a single broker. Capper began to see serious opposition to his use of the MLS data. With no opt-out available in the MLS for advertising purposes (because the MLS is not an advertising medium) some brokers felt their listings were hijacked by Capper. They demanded that the NAR "do something." MLSs are either owned by or operated at the request of NAR subsidiaries, making NAR the logical choice to establish a virtual office policy that all could live with. The NAR did so in fits and starts, and with much review by antitrust attorneys, knowing full well that this was one situation where somebody is going to come out unhappy.

What is largely unknown about the VOW issue is that many of the same brokers who objected to Capper's use of MLS data also operate VOWs. Many brokers wanted the NAR to establish a policy so that their MLSs, which had been reluctant to offer MLS data downloads because of security, pricing and competitive issues, would have an operating plan to go by. With NAR doing the heavy lifting, the MLSs could simply sit back and wait for a blueprint on how to supply and police MLS data downloads to VOW operators.

It is the debate over who owns the rights to the data, who is responsible for policing the data, and how can the data be used that has polarized the industry into what is commonly known now as the VOW issue. Many brokers insisted to the NAR that they wanted to be able to operate VOWs, but they also wanted reasonable controls over how the listing data would be used.

And that is where the issue stands, as the industry awaits the findings of the DOJ inquiry.

Part II, the Russell Capper interview, will run on Monday, November 17, 2003.

Published: November 14, 2003

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