Real estate deals online: U.S. Government fights for your rights

United States of America Department of Justice, Antitrust Division v. National Assocation of Realtors (NAR), Defendant, filed in the United States District Court for the Northern District of Illinois Eastern Division last Fall, pursuant to Sherman Antirust Act, aims to:

enjoin the defendant — a national association of real estate brokers — from maintaining or enforcing a policy that restrains competition from brokers who use the Internet to more efficiently and cost effectively serve home sellers and buyers, and from adopting other related anticompetitive rules.

The U.S. Government antitrust action is ongoing and asserts:

Brokers with innovative, Internet-based business models present a competitive challenge to brokers who provide listings to their customers only by traditional methods. Many brick-and-mortar brokers fear the ability of VOW (Virtual Office Websites) operators to use Internet technology to attract more customers and provide better service at a lower cost.

The “Nature of the Offense” alleged by the US Government:

In response to concerns raised by certain NAR members about this new form of competition, NAR's Board of Directors voted on May 17, 2003, to adopt the VOW Policy, a Policy governing use of MLS data in connection with Internet brokerage services offered by MLS Participants…

VOW Policy contains an opt-out provision that forbids any broker participating in an MLS from conveying a listing to his or her customers via the Internet without the permission of the listing broker…

In contrast, prior to NAR's adoption of the VOW Policy, a broker could provide any relevant listing in the MLS database to any customer — by whatever method the customer or broker preferred, including via the Internet…

VOW Policy includes other provisions that impose greater restrictions and limitations on brokers with Internet-based business models than on traditional brokers…NAR's member boards may forbid VOW operators from displaying advertising on any website on which MLS listings information is displayed. In contrast, no NAR rule limits the ability of traditional brokers to include advertisements in packages of printed listings they provide to their customers…

VOW Policy thus prevents brokers from guaranteeing customers access through the Internet to all relevant listing information, increases the business risk and other costs associated with operating an efficient, Internet-intensive brokerage, denies brokers a source of high-quality referrals, and withholds from Internet brokers revenue streams permitted to other participants in the MLS. Moreover, the opt-out provisions provide brokers an effective tool to individually or collectively punish aggressive competition by any Internet-based broker.

NAR has informed plaintiff of its intention to replace the VOW Policy with a new 'Internet Listings Display Policy' and to make restrictive membership rules changes. NAR's revised policies continue to discriminate against brokers who use the Internet to more efficiently and cost effectively serve home sellers and buyers.

The Department of Justice is not the only U.S. Government entity rallying in support of Internet based competition in the real estate brokerage industry.

Michael G. Oxley (of Sarbanes-Oxley), Chairman, U.S. House of Representatives, Committee on Financial Services, called in 2004 for a General Accounting Office “review and report on how the provision of real estate services may be affected or benefit from new forms of information technology and electronic commerce.”

Last month, Chairman Oxley presided over a hearing before The House Financial Services Subcommittee on Housing and Community Opportunity on “The Changing Real Estate Market.” In his opening statement, Oxley put forth:

we will focus on residential real estate brokerage – a valuable service for millions of Americans each year – and the serious problems we have recently learned about the industry that can affect one of the most important financial transactions most people will ever undertake: buying or selling a home…

organized real estate brokers setting or using the rules to protect higher fees or stifle competition to the detriment of consumers and to the detriment of new brokerage models…

we have an obligation to make sure markets are fair and open, and to protect consumers.

Sometimes, the U.S Government is on our side, and on the side of open Internet competition!

Real estate industry stats estimate that “77% of real estate sales start on the Internet.”

Stay tuned to this Digital Micro-Markets Blog to find out more on how the Internet helps not only “start” real estate sales, but how it drives the home buying and selling process.