Antitrust officials at the U.S. Department of Justice lobbed another warning shell at a state legislature over "anti-competitive" real estate brokerage rules last week. Meanwhile in Washington, the war of words between NAR and the Justice department over Virtual Office Website (VOW) policies appeared to move toward a possible settlement.

Here's what happened in a busy week for Realtors and Bush Administration "trustbusters":

• The DOJ and the Federal Trade Commission sent a warning letter Thursday to the State Senate of Alabama urging it to reject pending legislation that would "restrict the ability of Alabama real estate professionals to offer customized real estate services" at discount costs to consumers. The Alabama Senate is expected to consider the legislation (House Bill 156) -- which would establish minimum service standards for brokers in the state -- as early as today.

The DOJ's and FTC's letter followed similar recent interventions in pending legislative or regulatory issues on minimum standards in Oklahoma and Texas. The DOJ also sued the Kentucky Real Estate Commission six weeks ago for alleged antitrust law violations in connection with the state's ban on rebates of realty commissions. The Justice department's top antitrust litigator, R. Hewitt Pate, said his office is "focused" on the real estate industry nationwide for activities that may have the effect of limiting competition between traditional, full-fee, full-service brokers and newer, discount-fee and fee-for-service brokers.

In their letter to the Alabama Senate, the federal agencies said, "If House Bill 156 is enacted, real estate professionals who agreed to list homeowners' property for sale would be forced to provide a state-mandated minimum service package that includes many duties associated with negotiating a property sales contract. Alabama consumers would be adversely affected by this proposed change of law because they would be forced to purchase additional services that they may not want or need."

Though the DOJ and the FTC can advise state legislatures to avoid adopting statutes that the federal government believes would thwart competition and raise consumers' costs, neither agency has the legal authority to sue a state legislature that chooses to adopt bills that may have those effects.

• On a related battlefield involving the DOJ and the real estate industry, the NAR announced Thursday that it was "considering" modifying its long-pending VOW proposal to meet objections expressed by Justice Department lawyers. Though the department never confirmed them, media reports surfaced last week suggesting that DOJ planned to sue NAR over its VOW policy.

NAR's General Counsel, Laurie Janik, said Thursday that the association might blend key provisions of its IDX (Internet Data Exchange) policy governing sharing of listing data online with a modified version of its VOW policy into a single set of rules. Under the possible VOW policy modification, brokers could opt-out of sharing MLS data on all competitors' websites, but would not be able to selectively choose to withhold listings data from certain competitors.

The Justice department had no comment on either NAR's possible policy change or about its ongoing investigation of the VOW policy.

In a statement Wednesday, NAR president Al Mansell said the association feels strongly that its VOW policy is both legal and necessary to the rights of home sellers and the real estate professionals they work with to decide where their listings are shown on the Internet.

"A fundamental issue is at stake here," said Mansell. "We believe real estate professionals should retain the right to control whether and how their own listings may be used or displayed by other real estate professionals. A broker's decision to participate in the MLS should not require that the broker also consent to the use of his or her listings by competitors in any way whatsoever."

Published: May 16, 2005

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.