Realtors' Web Rules Draw Antitrust Inquiry
Tuesday, May 10, 2005
Government antitrust regulators are investigating the National Association of Realtors for a possible lawsuit alleging that the group's policies illegally discriminate against online competitors.
The Justice Department investigation, part of a government push to increase competition in real estate sales, comes as Internet listings of homes for sale are exploding and Web-based discount brokerages are competing with traditional brokerages.
It also comes during a still-sizzling housing market, where soaring home values have sharply hiked the incomes of agents and brokerages, which are paid commissions based on the price of a home.
Traditional agent commissions, divided between the agents and brokerages who represent the buyers and the sellers of a home, usually run between 5 and 6 percent of the sales price. Although those commissions are technically negotiable, they tend not to vary much. Online discount brokerages have been offering reduced commissions, however, often in the form of fee-based pick-and-choose services.
The government's investigation, which has been going on for about 18 months, centers on a policy the National Association of Realtors is trying to adopt that would allow its 1.2 million members to control whether their real estate listings can be displayed on the Web sites of other agents. Now, other agents can display listings on their Web sites from regional multiple listing services and urge users of the sites to contact them, rather than the listing agent.
"We're 180 degrees apart on that issue," said Laurie Janik, the general counsel of the Realtors' group who has been negotiating with government regulators. "They're saying the policy may be illegal. We're saying the policy is lawful. A federal judge may have to decide."
Gina Talamona, a Justice Department spokeswoman, said antitrust regulators are "investigating the potential competitive impact of certain rules involving the display of residential real estate listings data over the Internet." She said no lawsuit has yet been filed. She declined to give other details.
The Justice Department recently sued the state of Kentucky, arguing that its rules prohibiting real estate brokers from offering rebates to customers violate antitrust law. Kentucky is one of several states that prohibit agents from offering cash rebates or other incentives to home sellers to list with them. The Justice Department lawsuit argued that the practice limits free-market competition.
The Realtors' group adopted its policy in May 2003 but hasn't implemented it because of the investigation, Janik said. "We were being asked what the policy was, and we had no policy," she said.
Janik said the policy has "nothing to do with commission rates, nothing to do with discount brokerages." She said it has "everything to do with the degree to which a broker who has won a competition for a listing through hard work retains control over how much benefit he's going to give to his competitors."
The Wall Street Journal, citing unnamed lawyers, reported yesterday that antitrust enforcers were preparing to sue the Realtors' group. The report came out on the first day of an NAR mid-year meeting in Washington. President Bush is scheduled to address the group later this week.
Janik said the next meeting between NAR officials and antitrust regulators was scheduled for tomorrow.
The issue boils down to whether a listing agent can effectively claim ownership rights to a home listing, deciding where and when it can be displayed on the Internet, for the duration of the listing contract, which usually runs between 60 and 90 days.
The Realtors' group argues that agents work hard to get listings and so should be entitled to choose whether a home can also be displayed on a competitor's Web site.
"In the past, another broker would never have been able to run a classified ad in the newspaper advertising my listing," Janik said. "You couldn't come put your yard sign in front of my listing. It's the same thing."
She insisted the policy was not directed at online discount brokerages, but rather at competing agents who wanted to make their Web sites more attractive by displaying as many listings as possible.