Critics of the National Association of Realtors' virtual office Website (VOW) policy love to point out that the policy has invited the scrutiny of the Department of Justice (DOJ.)

What's really inviting scrutiny are VOWs by agents. Agents like Keller Williams' Beth Enos don't like what they see - their listings being used by other brokers to capture leads.

"We work so hard and spend a lot of marketing dollars to obtain a listing," writes Enos, "and then another agent can receive a request for showings on my property, from the Yahoo! search engine! It's just not right!"

Enos is referring to the exclusive advertising arrangement Prudential has with Yahoo! where housing searches by consumers lead them to a Prudential broker. The Prudential broker then engages the consumer. To add insult to injury, Enos put additional pictures in the MLS which the Prudential broker is using as a lead capture device! To see the rest of the pictures, the consumer has to give the Prudential broker their contact information.

It's an ingenious lead capture device. But it's certain that wasn't what Enos intended when she put the listing in the MLS. It's one thing to share listings with other brokers to show their customers; it's another for other brokers to use the listing to get customers.

In fact, Enos plans to ask her broker what this is all about, and why isn't her broker protecting her interests?

It's these kinds of confrontations that will cause the failure of the VOW policy, not the DOJ investigation. The simple reason is that brokers won't like being investigated for anti-trust for disallowing competitors to use their listings the way Prudential is using Enos'. Why risk it when you don't have to? There are plenty of alternatives to using an association-run MLS, and following its rules.

VOWs

VOWs aren't brokerages, and therefore don't have special rights

Being in the publishing business, Realty Times has long held the position that:

1. VOWs are Internet publications, not brokerages.

2. VOWs are tools that are operated by brokerages.

3. All brokers are equal competitors, whether they look across the street at each other or across the virtual information highway.

4. VOW-operating brokers are no different from other brokers, except that they choose to do business in a virtual environment.

5. No broker has the right to use other brokers' listings in an advertising environment without their permission. This is state law in every state.

6. Because VOWs are publications, they are also an advertising environment. Therefore, brokers should ask and get permission before using other brokers' listings in a VOW.

Simple enough? Hardly. If that explanation flew with the DOJ, there wouldn't be an investigation.

Some Internet-based brokers feel that they are entitled to special considerations, such as forcing change in the rules of MLS cooperation. They want to be enabled to publish their competitors' listings virtually and use them to attract consumers, the way Prudential has done with Yahoo! Consumers can use VOWs to look at listings to their heart's content, and if they have a question, they are put in touch not with the listing broker, but with the VOW broker. VOW brokers feel this is a justifiable business model because they have paid big money to traffic-producing sites like Yahoo! to make sure they get customers.

But it only works if they can get the listings without permission.

And all of that is OK, as long as everyone agrees. The problem is that they don't agree.

It was the little guys who first blew the whistle on the NAR, but now it's no longer about start-ups VS traditional brokers. Prudential is a "piece of the rock" and fully capable to giving any competitor a hard run in any environment.

Which proves that if the DOJ thinks it is protecting the little guys, all that will happen is that the big guys will win anyway. Not only did Prudential neutralize a competitor when it bought eRealty, it took over its assets, bringing the clout of size and substance and brand to bear to eRealty's fledgling relationship with Yahoo!.

Without the advantage of brand, VOW listings, and armies of agents, most virtual brokers are hard-pressed to woo consumers away from more established brokers. Hence, they have the same operating problems as any other broker. So they couple other brokers' listings with a discount or rebate, something Prudential doesn't need to do.

That muddies the point but it clarifies it also. Any broker, whether it is eRealty or Enos, is going to squawk when they perceive they are losing an advantage. But this continued battling could have devastating consequences for the industry.

The VOW debate is already having a profound effect on the industry, directly or indirectly, and producing plenty of angry actions:

• MLSs are suing each other for lack of access.

• Brokers are suing each other over adverse splits.

• The DOJ is investigating an MLS that bans broker gifts to consumers, (brought on no doubt by a complaint from a VOW operator that they can't follow their business model to provide rebates to consumers.)

• MLSs are dropping their public Websites due to complaints from big brokers.

• Brokers are pulling away from association-owned MLSs and fleeing to broker-owned MLSs where they don't have to follow NAR's edicts or watch their listings being sold to third-party dataminers.

• MLSs are in serious financial trouble, partly due to having to implement access for the public, (like forcing a warehouse to retrofit dressing rooms and display tables).

And all because some brokers believe the entire MLS depository should be public instead of warehoused in an MLS.

Brokers may leave association-run MLSs to start their own where they can re-enact rules they are comfortable with. Or they may do without an MLS at all, in favor of a marketing campaign instead. After all, parts of New York have operated for decades without an MLS, and no one's taking The Corcoran Group to court.

If the DOJ is so worried about consumers, then the investigators should be looking at what's right about MLS cooperation. It's voluntary, it's worked for years, and the rules force competitors to take their fights for dominance to the outside.

The MLS is a cooperative, not a boxing ring.

Published: February 10, 2005

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