Once again, the Feds are after real estate associations for rules they have already rescinded. Even more disturbing -- the FTC has declared that "a popular real estate website was de facto public property," and that FTC lawyers could "suppress the First Amendment rights of the site's owners and dictate future content," says a grassroots FTC watchdog organization.

Echoing the behavior of the Department of Justice, when it filed suit against the National Association of Realtors over a policy it had already modified, the Federal Trade Commission filed suit against the Austin Board of Realtors (ABOR) for a listings requirement that it rescinded months ago.

According to an ABOR press release, the Federal Trade Commission issued a news release announcing a voluntary agreement with Austin Board of REALTORS® (ABOR) related to a rule no longer in effect at the organization. The rule, an attempt to protect the liability of some members who are put into the position of assisting other brokers' clients at increased risk and with no compensation, prevented homes under "exclusive agency listings" to be featured on the organization's consumer website, AustinHomeSearch.com.

After 90 days of complaints by members who found the language confusing, CEO David Foster says the requirement was voluntarily removed.

Then why did the FTC file suit against the Austin Board of Realtors when the Board had removed the problem months ago?

"I don't know," says Foster, "We're confused about that ourselves."

In fact, Foster says that he was shocked by the suit, the FTC's subsequent press release, and that the FTC's actions far from match the spirit of the agreement.

"We introduced the policy last year (May 2005) and we saw that it was unsuccessful and confused our members and we did away with the policy on our own (August 2005)" explains Foster. "In the meanwhile the FTC contacted us. We volunteered to remove the policy and we did. We will abide by the agreement and it's fair, but the FTC issued a press release that didn't match in spirit or content what we agreed. We thought the press release was surprisingly strong."

"The FTC press release didn't mention that we rescinded the policy or that we voluntarily settled this matter," says Foster. "We support the agreement, but the release that did not match the spirit of the agreement."

Why would the FTC sandbag the Austin Board like that? No question -- to send a strong message to other boards that they're next. Also, the publicity value is inestimable -- especially when no one knows the FTC laid a knock out punch to an opponent who had already thrown in the towel.

Dirty? You bet. A year later, the FTC files suit and settles with a stunned ABOR in the same day, and announces the smackdown minus significant facts -- like the policy was long gone and that ABOR cooperated voluntarily.

FTC spokesperson Mitchell J. Katz says that the FTC wouldn't have filed suit if the policy had been rescinded.

But David Foster, CEO, says his attorney Joe Knight of Baker Botts was in talks with the FTC months ago and that he understood that the matter was long settled.

Knight says, "The basic timeline was the rule (that disallowed exclusive agency listings in ABOR's public website) was voted on Feb 2005, adopted in May, and in August I got subpoena. It was a request for documents, and when I asked what this was about, the FTC said it was about the rule. Within a week I told them if that's all you're worried about, we'll rescind the rule, and would that resolve the issue? They said it would, so I told Dave to rescind the rule, and the board rescinded the rule in September. The FTC said we accept that, and they agreed. They said they still needed a consent order because as a law enforcement agency, they didn't want us to re-adopt a rule just like it. I said 'let me see what you have in mind, and it took them two months to produce a draft of the consent order.

"It went far beyond the issues of that rule, far beyond exclusive right to sell or exclusive agency listings-it was focused on discount brokers," continues Knight. "This rule doesn't have anything to do with discount brokers, and we negotiated on that point for six months. They were very difficult, and there were many times we said we would fight them, but they know they have you over a barrel because of the expense. I took David to Washington and they agreed to take out all the stuff about unbundled services and discount brokers, and address only the exclusive right to sell contracts. They equate discount brokerage with the exclusive agency contract, that is the vehicle unbundled models use to do business."

In the consent order, there isn't a word about discount brokers, unbundled service providers or anything. But the FTC wanted the last word anyway, and put into its press release all the stuff about discount brokers and unbundled service providers that they took out of the consent order, says Knight.

Dirty, dirty, dirty.

"They tie this in to discount brokerage, and nothing could be further from the truth," maintains Foster. "We are buisness-model agnostic. We have no idea what a broker's level of service is or what they are engaged in. We tried to pass common-sense rules that work for the Realtor community. We have attorneys, among the best in the country, and draft the language for it. That rule applied to everybody regardless of services."

Despite the sucker-punch, Foster took the high road in a press release. "As an association that supports members of all business models, we feel the approach outlined in the FTC ruling is correct. However, we also feel the FTC's press release misrepresented the purpose of the ABOR rule."

Foster continued, "The rule was initially established to ensure that our consumer website was used to promote listings to benefit members. We realized, however, that the rule was confusing and did not work as well as we'd intended, which was why it was rescinded so quickly. We are disappointed that the FTC's press release implies that we are guilty of wrongdoing -- which the agreement expressly contradicts -- and that the spirit of cooperation with which the FTC and ABOR negotiated the consent order did not translate to the FTC's public statement."

When this rule in question was established, it applied to all members of the Austin Board of REALTORS®, regardless of the services they chose to provide. Exclusive agency listings comprise approximately 3 percent of total property listings contained in the ABOR Multiple Listing Service.

Luckily for ABOR, others have begun to notice that the FTC's ear-biting methods aren't fair.

The Voluntary Trade Council (VTC) issued a statement that castigated the FTC for its suppression of ABOR's First Amendment rights, putting the association's Austinhomesearch.com under FTC controls for at least 10 years, according to the terms of the forced agreement. The VTC "promotes free market alternatives to the state-sponsored violence of antitrust enforcement. VoluntaryTrade.org, VTC's principal website, contains information on current antitrust cases, the latest antitrust news, expert analysis, and answers to basic questions about the antitrust laws."

"The FTC said that ABOR violated the antitrust laws by disallowing "Exclusive Agency Listings" from the group's website," states the Council. "Under an Exclusive Agency Listing, a property owner pays a broker an up-front fee to serve as his exclusive agent, but the owner may also sell his property without the agent's assistance, in which case the agent receives a reduced or no commission. ABOR's policy only allowed Exclusive Right to Sell listings on its website. These listings give an agent the exclusive right to sell a property and receive a commission within a specified period."

"ABOR's website rules create significant roadblocks for real estate brokers to offer consumers alternatives to full-service brokerage agreements," responded Jeffrey Schmidt, Director of the FTC's Bureau of Competition. "By its law enforcement action today, the Commission is not saying that one form of brokerage agreement is better than another. We are saying that the consumer should be able to decide."

But in fact, the FTC's action was predicated on the view that operators of a "public website" have no right to control the content of their sites. Exclusive agency listings could still be published on non-ABOR websites, but the FTC said that ABOR has a legal duty to publish all listings.

The FTC's proposed order prohibits ABOR from adopting any policy that might "discourage" the use of Exclusive Agency Listings. This means ABOR cannot legally control the content of Austinhomesearch.com, as the FTC will determine what listings must be published.

"The FTC is effectively declaring any popular website a public utility," said Skip Oliva, president of the Voluntary Trade Council. "ABOR is a private organization, and the First Amendment guarantees its right to free speech and assembly. The FTC's actions are facially unconstitutional."

"ABOR did not contest the FTC's charges," observes Oliva. "Most businesses accused by the FTC of antitrust violations settle without a trial due to the time, expense, and lack of due process rights in FTC proceedings. The proposed order will be subject to public comment until August 11, after which the FTC will vote to make its decision final."

"The whole thing has been very disappointing," says Foster.

Not to mention -- punitive.

"We signed the deal four to six weeks ago," says Knight. "A a matter of FTC procedure, they do have to file a complaint and put the order up for public comment, but what they don't have to do is issue a misleading press release focused on the very element we negotiated out of the consent order. That's pretty backstabbing of them."