The Federal Trade Commission today charged Multiple Listing Service, Inc. (MLS), a group of real estate professionals based in Milwaukee, Wisconsin, with violating the antitrust laws by adopting rules that withheld valuable benefits of the multiple listing service it controls from consumers who chose to enter into non-traditional listing contracts with real estate brokers. The rules blocked non-traditional, less-than-full-service listings from being transmitted by MLS to popular Internet web sites, but provided this important benefit for traditional forms of listings.
In settling the charges, MLS is barred from adopting or enforcing any rule that treats one type of real estate listing agreement more advantageously than any other, and from interfering with the ability of its members to enter into any kind of lawful listing agreement with home sellers. The order applies not only to MLS, but to other entities it controls, including MetroMLS and any affiliated Web site it operates. The settlement announced today follows the FTC’s 2006 announcement of a sweep alleging similar conduct by multiple listing services in other local areas in several states.
“The Commission action announced today reconfirms our commitment to ensuring that consumers can freely enter into lawful agreements with real estate brokers for help in selling their homes,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “Homeowners should be able to lawfully contract with a broker on the terms that they choose, without facing interference by the broker’s competitors.”
Types of Real Estate Listings
Under the traditional type of listing agreement, known as an Exclusive Right to Sell Listing, the property owner appoints a real estate broker for a set period of time as an exclusive agent to sell the property, and agrees to pay the listing broker a commission if and when the property is sold. Home sellers who do not wish to purchase the full range of brokerage services, however, often use an Exclusive Agency agreement. Under such an agreement, the listing broker is still the exclusive agent of the property owner, but the property owner retains the right to sell the property without extensive help from the listing broker. Under an Exclusive Agency agreement, the listing broker often charges an up-front fee, but may receive a reduced commission, or no commission at all, if the owner sells the property without the broker’s further help.
Multiple Listing Service, Inc.
MLS is a Wisconsin corporation that provides multiple listing services to each of the local associations of real estate professionals based in the Milwaukee metropolitan area and surrounding counties. It is owned by several broker boards and associations, and has more than 6,500 members. MLS serves most of the residential real estate brokers in its service area, and is the sole multiple listing service for that area. It also owns and operates a Web site, wihomes.com, that provides listing information directly to consumers over the Internet.
The Commission’s Complaint
According to the Commission’s complaint, MLS violated Section 5 of the FTC Act by unlawfully restraining competition among real estate brokers in Milwaukee and the surrounding area. MLS has market power because membership in MLS is necessary for a broker to provide effective residential real estate brokerage services to property buyers and sellers in the Milwaukee area. As a result of this broad industry participation and its control over a key input – the multiple listing service – MLS can exercise market power in the provision of such services in southeast Wisconsin.
The complaint alleges that MLS acted anticompetitively by adopting rules and policies that limit the publication and marketing of certain sellers’ properties, but not others, based solely on the terms of their respective listing contracts. The restrictions challenged in the complaint state that information about properties will not be made available on popular real estate web sites unless the listing contracts follow the traditional format approved by MLS. When implemented, according to the FTC, these restrictions prevent Exclusive Agency Listings from being displayed on a broad range of public Web sites, including Realtor.com and the MLS’s local wihomes.com site. The Commission alleges that this conduct was collusive and exclusionary and that it served to withhold valuable benefits of the MLS from brokers who did not use traditional listing contracts with their customers.
The Commission contends that there were no competitive efficiencies associated with MLS’s Web Site Policy, and that by prohibiting Exclusive Agency Listings from being transmitted to popular real estate Web sites, MLS’s restrictions have harmed home buyers and sellers.
Terms of the Consent Order
The consent order approved by the Commission is designed to remedy MLS’s alleged anticompetitive conduct. It will ensure that despite the recent decision by MLS’s board of directors to remove the challenged restrictions, MLS does not revert to the old rules or policies, or engage in future variations of the challenged conduct. Specifically, the order is designed to ensure that MLS does not misuse its market power, while preserving the pro-competitive incentives of members to contribute to the joint venture it operates.
The order prohibits MLS from adopting or enforcing any rules or policies that deny or limit the ability of its participants to enter into Exclusive Agency Listings, or any other lawful listing agreements, with property sellers. The order, which is virtually identical to those issued in the cases brought through the sweep announced in October 2006 and the similar case against Austin Board of Realtors, states that MLS must fully comply with its provisions within 30 days of when it becomes final. MLS also is required to notify its members of the applicable order and must enter into a compliance program with the Commission. The order will expire in 10 years.
The Commission vote to approve the consent order was 5-0. The order will be subject to public comment for 30 days, until January 14, 2008, after which the FTC will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.
The materials related to this case, as well as a wide range of other real estate competition information, can be found on the FTC’s real estate competition Web page at: http://www.ftc.gov/bc/realestate/index.htm.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to email@example.com, or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.