A federal appellate court has considered a multiple listing service’s (“MLS”) appeal of a determination by the Federal Trade Commission (“FTC”) that certain MLS policies were anticompetitive. Click here to read the earlier decisions in this case.

Realcomp II, Ltd. (“MLS”), a regional multiple listing service located in southeastern Michigan that is wholly owned by REALTOR associations, had several policies addressing the treatment of “exclusive agency listings” (“EAL”), or listings where the listing broker is the exclusive broker working to sell the home but the seller reserves the right to the sell home on his/her own without paying a commission to the listing broker. An EAL is contrasted with an “exclusive right-to-sell listing” (“ERSL”), where the listing broker will receive a commission if the property is sold during the listing period, regardless of who produced the buyer. Some brokers entering into EAL with their clients allow the clients to select the level of service they will receive from the broker, including MLS-entry only service.

The FTC filed a complaint against the MLS over its EAL policies. The FTC argued that the MLS’s policies discriminated against discount brokers utilizing EAL listings by limiting their distribution and making it more difficult for other MLS participants to locate these listings (“Website Policy”). The Website Policy stated that the MLS would only transmit ERSL to public websites, such as the MLS’s public website and realtor.com, and would only allow ERSL in the IDX feed sent to other MLS participants.

An administrative law judge (“ALJ”) held a trial and ruled that the Website Policy did not have the anticompetitive effects claimed by the FTC nor did it harm consumers. Therefore, the ALJ dismissed the FTC’s complaint and the FTC appealed the ALJ’s rulings to the FTC commissioners. The FTC reversed the ALJ and found the Website Policy to be anticompetitive. The MLS appealed.

The United States Court of Appeals for the Sixth Circuit affirmed the FTC. The FTC claimed that the Website Policy injured consumers because it unreasonably hindered the ability of EAL brokers to advertise and disseminate information about their listings. The policies limited the ability of these brokers to have their listings available on various public websites, putting these listings at a disadvantage and eliminating competition without offering a sufficient procompetitive justification.

The court found that the Website Policy constituted a restraint of trade, and therefore the MLS had to offer a procompetitive justification for the policy. The court determined that the Website Policy required consumers who wanted a wider public distribution of their listing information to enter into a potentially more costly ERSL and so the policy could have an anticompetitive effect. The evidence purportedly supported this conclusion, as an economist for the FTC found the Website Policy had caused changes in the number of consumers entering into EAL agreements, despite the fact that EAL only constituted 1-2% of the total listings in the MLSs that the economist reviewed.

The MLS offered two justifications for its policies: first, the policies eliminated the “free-riding” from homeowners who use EAL and then complete the transaction without paying a commission; and second, the policies helped to remove a “bidding disadvantage” by buyers who used cooperating brokers, since sellers would favor unrepresented buyers so they wouldn’t need to pay a cooperative commission.

The court rejected both of the MLS’s procompetitive justifications. First, the court found there was no “free-riding” for brokerage services because both EAL and ERSL brokers pay the same fees to the MLS for their listings. ERSL brokers may lose listings to the EAL brokers, but the court stated they aren’t losing these listings through a pricing disadvantage but rather through competition between the two brokerages and protecting competition is the goal of the antitrust laws enforced by the FTC.

The court also rejected the “bidding disadvantage” argument. Simply because one buyer may be more attractive to a seller because of potentially lower costs does not make the competition unfair; instead, this is exactly the type of competition that the antitrust laws are intended to protect. The MLS’s justification for the policy did not serve to promote competition, but rather to protect cooperative commissions to other MLS participants. Therefore, the court rejected the MLS’s procompetitive justifications and affirmed the FTC’s order.

Realcomp II, Ltd. v. F.T.C., 635 F.3d 815 (6th Cir. 2011).

Editor’s Note: NAR contributed financial support to the MLS, per the recommendation of NAR's Legal Action Committee.