Real
Estate Groups Settle FTC Complaint
Associations to Stop Blocking Rivals' Listings
By Dina ElBoghdady
Washington Post Staff Writer
Friday, October 13, 2006; Page D02
The Federal Trade Commission yesterday said groups representing
thousands of real estate agents in five states have agreed
to drop practices that hampered rival discount brokers from
posting home-sale listings on Internet sites.
In a meeting with reporters, FTC regulators also said they
are suing two more groups in the Detroit suburbs -- Realcomp
II Ltd. and MiRealSource Inc. -- over similar allegedly
anti-competitive practices.
The FTC's actions are the latest step in an ongoing struggle
between traditional full-service real estate agents (who
typically earn 5 to 6 percent in commission on each house
they sell) and their newer rivals, firms that offer limited
services for a lower commission, mostly on the Internet.
At stake are tens of billions of dollars in real estate
commissions.
Each side is accusing the other of doing a disservice to
consumers. The traditional firms say their rivals often
offer poor service and leave consumers in the lurch. In
recent years, they have pressed several states to enact
laws that force nontraditional agents to offer a wider array
of services. Newcomers say that practice is designed to
stifle competition and allow real estate agents to charge
excessive commissions.
Yesterday, the FTC said it is not endorsing one model over
the other or trying to attack the real estate industry as
a whole.
"Our aim is to provide consumers with as many choices
as the marketplace can provide," said Jeffrey Schmidt,
director of the FTC's bureau of competition.
Some antitrust experts say the aggressive role the FTC
has taken signals a possible shake-up ahead for an industry
that has long clung to its way of doing business. The newer
firms generally offer a la carte services, such as entering
a listing but not holding open houses, for reduced commissions
or flat fees.
"The industry will either undergo a revolution where
you will see brokers' fees go down and alternate business
models thrive or incumbents will prevail," said Mike
Cowie, a former FTC official who is now a lawyer at Howrey
LLP.
At the center of the issue are multiple-listing services,
cooperatives formed by real estate brokers in which all
their properties for sale are lumped together in one database.
Most of the nation's 900 multiple-listing services display
members' listings on Internet sites that can be accessed
by the public.
The five companies that settled with the FTC yesterday
were all charged with barring the listings of some competitors
from appearing on the public Web sites, though they did
allow them on Web sites open only to agents. The companies
did not admit to violating the law but agreed not to engage
in those practices.
Those firms were Information Real Estate Services LLC,
based in Loveland, Colo.; Northern New England Real Estate
Network Inc., Concord, N.H.; Williamsburg Area Association
of Realtors Inc., Williamsburg; Realtors Association of
Northeast Wisconsin Inc., Appleton, Wis.; and Monmouth County
Association of Realtors Inc., Tinton Falls, N.J.
Of the two Michigan groups that did not settle, Realcomp
was accused of the same practice. The FTC alleges that the
other group, MiRealSource, will not let alternative agents
list on its MLS at all.
Karen Kage, chief executive of Realcomp, said her group
did not settle with the FTC because it does not think it
discriminates.
"The job of the MLS is to promote cooperation and
ensure compensation to our Realtor members," Kage said.
"They are the subscribers who pay fees to us to keep
us in business. So we don't see that our position should
be to promote the sale of properties between consumer and
consumer. . . . Our position is to promote properties represented
by Realtors to bring the buyer and seller together."
Some of the firms that settled with the FTC also said they
did nothing wrong, including the Williamsburg Area Association
of Realtors.
Linda Kinsman, the group's chief executive, said the National
Association of Realtors provides model governing documents.
In 2002, one of these documents included optional language
that barred from public Web sites "exclusive agency"
listings, in which the seller retains the option to sell
the property to a buyer he or she identifies and not pay
a commission to the broker. Some limited-service firms use
such listings.
Kinsman's group adopted the language but "never implemented
the policy and never caused public harm," she said.
"We were muscled by the FTC into signing the consent
order."
Ralph Holmen, associate general counsel at the National
Association of Realtors, said the home seller who operates
under an exclusive agency listing is essentially competing
against the broker he hired. Any seller who wants to list
on the MLS must hire a broker, he said.
"Why should [the seller] get the benefit of being
on these public Web sites when in the end, they sell it
without paying commission to the brokers?" Holmen said.
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