While new business models are welcome in the real estate industry, reciprocation within the MLS is still the name of the game, according to a decision by the Iowa Supreme Court, and smaller size, start-up status or business model reasons don't give one company the right to operate without reciprocation to another.

Five years ago in September 1999, start-up Next Generation Realty sued the leading full-service real estate broker in the state, Iowa Realty Co. Inc., part of Berkshire-Hathaway's HomeServices of America.

According to Iowa Realty spokesperson Jamie G. Buelt, the dispute was over listings and commissions.

"Next Generation Realty was only putting two percent of their listings in the MLS," explains Buelt, "and 98 percent they weren't sharing information and they weren't paying other brokers co-op fees, so Iowa Realty said if you aren't going to share your listings or commisssions, we aren't going to share with you either. Next Generation alleged Iowa Realty was a monopoly and sued. They also sued the MLS. When the lower court made its decision, it granted summary judgment to the MLS, and Next Generation didn't appeal that and dropped the MLS from the suit. In Feb, 2003, the district court judge found for us, then they appealed again, and now the Iowa Supreme Court has ruled in our favor."

The Iowa Supreme Court upheld a lower court decision to dismiss the civil action brought by Next Generation Realty Inc. in September 1999 involving claims of anti-trust and attempted monopoly behavior that were ultimately found to be without merit or proof.

In February 2003, Polk County District Court Judge Glenn E. Pille dismissed action No. CE 38825 filed by Next Generation Realty, Inc. and Homebuyers Consultants. Initially, Next Generation filed the suit to require Iowa Realty to share commissions, while Next Generation refused to share commissions on its listings sold. When Iowa Realty declined to reciprocate on that basis, Next Generation accused it of violating Iowa’s anti-trust statute.

Smaller real estate companies sometimes feel because of their size, newness or untried business model that they deserve special rights or consideration that larger, more established companies shouldn't have. In this case, Next Generation seemed to feel it was OK not to share listings or commissions, but if Iowa Realty treated Next Generation in kind, that somehow that constituted an anti-trust violation which all three courts disagreed with.

In his 56-page decision dismissing the suit, Pille wrote: “Next Generation has not presented sufficient facts fairly supportable by the record illustrating the presence of ‘anti-trust injury.’ The injuries Next Generation sustained only reflect Next Generation’s own private losses and economic disappointments, and these injuries simply do not likewise result in harm to the consumer and competition generally.”

The Iowa Supreme Court affirmed Pille’s decision and added the following clarification of the state’s anti-trust statute: “…antitrust laws were not intended to deal with claimed wrongs inflicted on individual parties. Their function is only to foster the public’s access to a freely competitive market. Antitrust is in place to protect the market, not any individual merchant doing business there…The record here contains no hint that the public was inhibited from access to services of real estate brokers. The proofs are unanimous to the contrary.”

"A lot of the agents supported our position," suggests Buelt. "Whenever they tried to show a Next Generation listing, there was no opportunity to share in the fruits of that sale, but their agents expected to share in our sales. They didn't bring a lot of buyers but Iowa Realty because of its agent force could have brought them quite a few buyers. So if they aren't getting paid commission, it was a case of them having a business model that wasn't very good, if they feel they should get something without reciprocating it is a flawed model. They wouldn't pay dues in the MLS and the MLS expelled them after they owed about 36,000 and they tried to stay in without paying, also.

While it was not part of the decision, Buelt also points out that Next Generation Realty also was kicked out of the MLS for not paying dues, and owed the MLS as much as $30,000 in back dues and fees. "They expected to get MLS service for nothing, too," she says.

Next Generation maintains that Iowa Realty used its size and influence to get the MLS to change the rules so that the company had to pay $30 apiece for exclusive-right-to-sell listings, and that's what racked up the five-figure arrears to the MLS.

“For the past five years, we have been defending our right to make decisions for our company against a competitor who tried to use the legal system to run our company for the benefit of its business, not for the benefit of the market or buyers and sellers in Central Iowa,” Mike Knapp, president of Iowa Realty said. “Our programs, innovations and business initiatives are designed to enhance competition in the market. We believe that home buyers and sellers in Central Iowa will benefit when we all go back to competing in the marketplace, rather than in the courtroom.”

Next Generation Realty co-owner and president Tom Franklin would not comment. "I'm in the middle of something, don't have time right now."

Published: September 6, 2004

Use of this article without permission is a violation of federal copyright laws.

Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.