In an attempt to save the cooperation-based MLS system from the infighting of some traditional brokers VS some nontraditional brokers, the National Association of Realtors and general counsel Laurie Janik is meeting with the Department of Justice (DOJ) regularly to explain the case for the infamous "opt-out clause" and third-party "referral-fee" clause in its Virtual Office Website Policy, adopted in May 2003, that has been bitterly complained about by eRealty, zipRealty, LendingTree and others as restrictive to their business models.

The investigation by the DOJ began in September 2003, and the investigation is ongoing, says Janik. Until now, says Janik, the DOJ requested documents but had not allowed comment from the NAR and its attorneys until recently.

The DOJ was particularly concerned about such matters as the ability of brokers to opt-out of sharing their listings via the MLS with competitors, and the restriction on selling consumers' identities obtained through public access to the MLS for a referral fee.

Opponents felt that it was unfair that a broker could allow the MLS to share the broker's data with one competitor while restricting sharing with another. Some brokers felt that the MLS should not be used to give marketing advantages to certain brokers over others, especially those that wish to advertise their fees, something which has never been done with public access to MLS data before.

Many new brokerage business models are based in lead generation, rather than in providing traditional brokerage services, but existing state laws mandate that in order to participate in referral fees, companies which do so must be licensed as brokerages. Some opponents feel that these new models are deliberately trying to destroy the existing MLS system in favor of the advertising and networking systems they have developed more successfully on the Internet.

The threat of destruction of the MLS model is very real. If the NAR should be found to be in violation of anti-trust laws, the NAR would have to alter its policy, which could prompt some brokers to pull out of MLSs altogether and start their own broker-owned MLSs which would not be subject to the NAR's policies. Brokers in many communities are already pulling out of association-run MLS participation over other issues such as ownership of the data for data-mining purposes. Why wouldn't they pull out of association-run MLSs over core ownership of the data?

The Virtual Office Website Policy was supposed to be implemented by MLS boards by January 2004, but Janik says that "it was not appropriate to require compliance during the investigation." A new date of July 1, 2005 has been set for adoption by the NAR's board.

"The DOJ called in the spring that they'd be finished about July," Janik told the MLS crowd. "We have a dialog going now and we have given them depositions. A two-way exchange has begun."

But Janik is firm that the NAR's analysis is right. "We have tried to keep an open mind that our analysis might be wrong," she says, "but our conclusion is legally defensible, and we are submitting information about how we reached our legal analysis."

To help the DOJ with its investigation, Janik says the NAR will mail a nine-question email for response that will supply the DOJ with information it needs. "We are asking for complete cooperation," says Janik. "If we disagree, we will go up the supervisor level or we can modify the policy, but that decision is at least four months away."

The policy is already in effect for several hundred MLSs. Unless an MLS has a dominant "monopoly" member, there should be no difficulties in implementing the policy, suggests Janik.

She makes it clear that the Department of Justice is not investigating MLS policy in general, but only the "additional use of data for display."

Janik answered a question from the crowd that nonparticipants in the MLS can come to private agreements on data-sharing.

She also advised that there will be a two-day VOW workshop to be held February 2-4, 2005 in Fort Lauderdale. For more information, see Realtor.org.

Published: November 9, 2004

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