The U.S. District Court in Chicago has just issued a 29-page opinion allowing the Department of Justice's antitrust lawsuit against the National Association of Realtors (NAR) to proceed.

"In denying NAR's motion to dismiss the case, the court stated in its opinion that 'NAR has failed, with all respect, to demonstrate that this case should be dismissed at the outset,'" wrote DOJ spokespersons in a news release.

According to the DOJ's version of events, the Department's Antitrust Division filed a lawsuit in September 2005 challenging that NAR Internet data display policies "limit competition from real estate brokers who use the Internet to serve their customers." In its lawsuit, the Department alleges that NAR's policy prevents consumers from receiving the full benefits of competition and threatens to lock in outmoded business models and to discourage discounting.

NAR's position is that all brokers have the right to decide where their listings are displayed online, as the display effectively is the online advertisement for the seller's home. Brokers by state law have the right to decide where to advertise listings, including whether or not to display their ads on competitors' websites.

The DOJ insists that the NAR "targeted" certain brokers who operate password-protected websites through which they provide information, including property listings, to their customers, potential home buyers. These are sometimes called "virtual office websites" or "VOWs," because a broker operating such a site is able to provide customers with the same property listing information on-line that customers can obtain by visiting the "brick-and-mortar" office of a traditional broker.

"Consumers who work with brokers that operate VOWs are better able to educate themselves about available properties that may meet their requirements," explains the DOJ. "By working with a VOW broker, customers can search the database of local property listings on their own, using their home computers to obtain the same information other brokers provide by less convenient means, such as by hand at their office or via fax, mail or e-mail. Because VOWs enable consumers to research and learn about the marketplace at their own pace and on their own time, brokers who provide this service can, in turn, lower their costs by reducing the time that their agents spend searching the Multiple Listing Service (MLS) database or showing homes the customer dislikes."

"Because the Internet can be used to deliver brokerage services more efficiently -- resulting in better service and lower prices to consumers -- brokers who utilize the Internet represent a competitive challenge to traditional brokers," the Department said.

However, the argument fails to recognize some important market realities -- namely that nearly all brokers operate VOWs, making it difficult to isolate the discrimination alleged by the DOJ to more than the complainants who have testified before the antitrust division. Their complaint is that "NAR's policy enables traditional brokers to exercise an "opt out" right to block their competitors' customers from having full on-line access to all of the MLS's listings. But what isn't acknowledged by the DOJ is that no broker should be forced to share his inventory with a competitor who insists on denigrating his business model.

What makes multiple listings service operate so smoothly is that they are not a public marketplace. Listings are submitted by member brokers in the spirit of cooperation. What the DOJ seeks to do is to force brokers to advertise their listings on competitors' websites against their will.

When exercised, the opt-out provision prevents VOW brokers from providing all MLS listings that respond to a customer's search, effectively inhibiting the new technology. The Department alleges in its lawsuit that these policies significantly alter the rules that govern MLSs by permitting traditional brokers to discriminate against other brokers based on their business model, denying them the full benefits of MLS participation. The Department's lawsuit "seeks to ensure that traditional brokers cannot use NAR's policy to deprive consumers of the benefits of these new ways of competing."

But what should be at issue is whether or not some of these companies are playing the system to get information and listings that they really shouldn't have. For example, some third-party companies such as LendingTree believe that as parents of brokerages such as iNest, they deserve full access to MLS listings. Their intention is to use the listings to sell referral services to brokers, but is that the intent of the MLS as a cooperative service to brokers? LendingTree is fighting SoCal MLS at this very moment over this issue, despite the fact that the rules of cooperation clearly state that no member can give listings to a third-party, which LendingTree as the parent clearly is.

Are these companies really brokerages? Are brokers who get FSBO-minded sellers into the MLS really brokerages? Is that the spirit of cooperation? The purpose of MLS cooperation is for other brokers to find buyers for the listing agent's listing, not to cut themselves out of the loop by providing free or cheap access to the MLS that cuts out selling agents. Should these brokers be allowed complete and total access to listings or are they back-door cheats?

The cooperative process has worked well, sometimes providing tremendous advantage to brokers who don't contribute inventory to the MLS. Buyers' brokers, for example, have full use of the MLS as members without contributing inventory, but they seem to understand that they are allowed access to listings in the spirit of selling their clients, not in cutting themselves out of the transaction.

"The Department of Justice's Antitrust Division is committed to preserving competition in this vital sector of our nation's economy," said J. Bruce McDonald, Deputy Assistant Attorney General in the Department's Antitrust Division. "We are pleased that the court has allowed the lawsuit to proceed and we look forward to presenting our case at trial."

Laurie Janik, general counsel for the NAR, says that in late September, the judge denied the motion to dismiss, pending since last December. The written opinion was released two days ago.

"It's a long-shot to get something thrown out on a motion to dismiss on the outset," says Janik. "The court is required to accept as true everything that is stated in the complaint. That's the legal standard in a motion to dismiss."

In other words, all benefit of doubt goes to the DOJ.

"It's still early in the game. We're in discovery, and the case is moving forward," says Janik. "There may be motions for summary judgment filed when discovery is concluded, but that won't be until about the middle of next year."

Published: November 29, 2006

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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.