Brandishing "Exhibit A", virtual office opt-out forms from the Emporia MLS (Kansas,) the Department of Justice (DOJ) attorney David C. Kully fires back at the National Association of Realtors' motion to dismiss the antitrust lawsuit.

The DOJ obtained the copies of eight brokers' written opt-out forms via a Civil Investigative Demand requiring the MLS to hand over the documents.

But the opt-out forms may not prove what the DOJ intended -- that brokers, if they have the choice, will selectively opt-out of sharing their listings via the NAR's Internet policy which allows brokers two options: blanket opt-out, which means their listings appear on none of their competitors' websites, and selective opt-out which allows the broker to name the firms and their participants not allowed to display the broker's listings on their Virtual Office Website (VOW.)

All eight brokers chose the blanket opt-out provision.

If anything, Exhibit "A" appears to support the NAR's claim in its motion to dismiss, that the DOJ is suing the NAR over a defunct policy. According to the NAR, the VOW policy no longer exists and has been replaced by the ILD policy. Is the DOJ on the wrong track?

The new memoradum, a response to the motion to dismiss, answers that question by stating that the DOJ has jurisdiction over the Initial VOW Policy, that the VOW policy constitutes restraint of trade, and that the modified ILD policy also causes anticompetitive harm.

The memorandum lays out the case that VOW operators are "innovative" and different from brick and mortar competitors, and that the NAR's policies "target" these brokers.

VOW operators "provide property listings through password-protected Internet sites" to consumers who can "educate themselves at their own pace and on their own schedule about the markets in which they are considering a purchase," allowing VOW operators to "operate more efficiently than their brick and mortar competitors."

The DOJ accuses "traditional brokers, through NAR, devised a tool to thwart this new mode of competition," knowing that "to compete effectively, brokers must be able to show customers virtually all relevant listings in the MLS system."

This is the crux of the case, but there are some serious holes in the DOJ's argument that could be exploited by the NAR, among them:

• What really is a virtual office website? Is it a virtual replacement for a person, company or a building? The answer could have enormous consequences across every industry as the law of unintended consequences could drown the world in fraud, copyright theft, and other malfeasance like a tsunami.

• If a VOW is a tool of the brokerage, what are fair rules for its use? Is it a customer service tool or a business procurement tool? Or both? Is it an advertising medium? And how does the use of such a tool conform to data-sharing and advertising rules and regulations as determined by state law and the MLS system?

• How does the DOJ distinguish "traditional" brokers from "innovative" brokers? If a traditional broker operates a VOW, can he or she then be called "innovative," or is he or she still traditional?

• If traditional brokers are operating VOWs, can they also be said to "save significant amounts of money" for consumers? In other words, is the only definition of a VOW one that offers "rebates or reduced commissions" to consumers, or do VOWs that don't mention fees count, too?

• If traditional brokers are operating VOWs, are they conspiring with the NAR against themselves?

• Can a brokerage be compelled to share listing data for the marketing advantage of its competitors? If so, then why can't the DOJ force Nordstrom's and Neiman-Marcus to form an MLS and offer VOW feeds to Wal-Mart?

• Can the Court be made to understand that the VOW argument is about allowing competitors to advertise the MLS database of listings to consumers?

• Does the Court understand that the listings are always available for all member brokers to search on the MLS database to deliver to their clients?

• Does the Court understand that claims of denying VOW brokers access to the listings are false?

  The VOW issue is about advertising the listings, not access.

• Does the Court understand that no broker is being denied access to the listings, but the ability to advertise a competitor's listings to get business?

• What fields of data are necessary to satisfy the demands of VOW brokers? Isn't the real reason VOW brokers want VOW feeds from MLSs is because they eliminate the name of the listing broker, making it appear as if the operator has all the "relevant" listings? Would they be wrestling over VOW feeds if the MLS made a rule that all listings must have the listing broker's name and contact information on every listing?

• Would the VOW brokers object if there were a penalty for removing the listing broker's name and contact information from the listing -- online and off?

• How would the DOJ suggest easing the fears of "traditional" brokers that this wouldn't happen?

• It's yet to be proven that the NAR withdrew its VOW policy because it was "illegal." Can the NAR prove that it negotiated with the DOJ in good faith?

• Would VOW brokers be satisfied with all the MLS listings or the "relevant" listings to a consumer's search? If there is relevancy, why does the consumer need access to the whole database?

• What protections for the listing brokers' data does the DOJ propose?

• What protections do brokers have who are uncomfortable with their MLS rules in sharing their data? What recourse do they have except to pull their listings altogether thus collapsing the MLS system?

The questions go on and on.

What the NAR has to prove is going to be challenging to explain - that virtual office websites aren't simply vehicles to provide property listings through password protection to consumers. If it were that simple, all brokers would operate VOWs. VOWs are also advertising mediums in which some brokers use other brokers' listings to get business, and that's not what the MLS was intended for. That's why some brokers object to sharing their listings on other brokers' websites.

Published: February 8, 2006

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