Here is a summary of a settlement in an antitrust lawsuit that was brought by the United States Department of Justice (“DOJ”) against a MLS provider. I try to post lawsuit/settlement summaries in order to provide timely updates to real estate agents and broker.
This afternoon (Monday, May 4, 2009), the DOJ reached a proposed settlement with Consolidated Multiple Listing Service Inc. (“CMLS”) that requires CMLS to change its rules to allow low-priced and innovative brokers to compete with traditional brokers in the Columbia, South Carolina, area. The DOJ alleged that the rules caused consumers to pay more for residential real estate brokerage services in the Columbia area.
A multiple listing service (“MLS”), like the one operated by CMLS, is a joint venture of real estate brokers that combines its members’ home listings information into an electronic database that is made available to all member real estate brokers. This database serves as a clearinghouse for the members to communicate important information among themselves, such as descriptions of the listed properties for sale and offers to compensate other members if they locate purchasers for those listings. In addition, the database allows member brokers who represent buyers to search for nearly all the listed properties in the area that match the buyer’s needs.
Because the MLS’s database is the primary source of home listings information on virtually every home listed for sale in a given area, access to the database – and therefore MLS membership – is critical for any real estate broker seeking to serve clients successfully in the MLS’s service area. Consequently, the rules adopted by the MLS governing who can be a member and how members must behave can have a significant impact on competition among real estate brokers in the area served by the MLS.
In May 2008, the DOJ’s Antitrust Division filed a civil antitrust lawsuit against CMLS in federal court, challenging policies and rules that restrained competition among brokers in Columbia in several ways. According to the lawsuit, CMLS imposed burdensome prerequisites to membership that prevented some real estate brokers, such as those who would likely compete aggressively on price, from listing homes for sale in the MLS’s database, ensuring that those brokers could not compete in the Columbia area. CMLS required applicants for membership to discuss the nature of their businesses with a committee of incumbent members and reserved the power to deny membership to brokers who they feared would compete too aggressively. CMLS also stabilized the price of brokerage services by forcing its broker members to provide a full set of brokerage services regardless of whether a client wanted the required services. The DOJ alleged that those rules prevented consumers from receiving the full benefits of competition, discouraged discounting, and threatened to lock in outmoded business models.
The proposed settlement with CMLS requires it to change those rules and prohibits it from adopting new rules that exclude real estate brokers from membership based on their business models or price structures. CMLS must allow any broker holding the appropriate license under South Carolina law to become a member and cannot continue to exclude brokers based on their business models. The settlement requires CMLS to repeal rules that denied Columbia-area home sellers the ability to hire a real estate broker to perform only the specific services the seller desired, at a lower cost than the seller would pay a traditional, full-service broker. CMLS also will repeal its requirement that its member brokers use only the single contract approved by CMLS, which blocked home sellers from alternative arrangements that allowed them to avoid paying any commission to their broker if the sellers found buyers for their homes.
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