Justice Department alleges anticompetitive policy
By Kristen Gerencher, MarketWatch
Last Update: 7:45 AM ET Sept. 9, 2005
SAN FRANCISCO (MarketWatch) - In a move aimed at protecting consumer
access to Web-based home listings, the U.S. Justice Department said
Thursday it's suing the National Association of Realtors for a policy
the agency says prevents competition and discourages discounting.
The case has far-reaching implications for home buyers beyond access to
listings. It also touches on the price paid for commissions as online
brokers challenge the typical 5% to 6% rate.
At issue is who should have access to the sought-after Multiple Listing
Service (MLS), a leading database of homes for sale, and under what
conditions.
The civil antitrust lawsuit, filed in U.S. District Court in Chicago,
represents the latest installment in a long battle that's seen
traditional Realtor franchises face off against newer realties that base
their businesses on the Internet.
The National Association of Realtors (NAR)'s policy, which it altered
several times during a two-year government investigation, restricts the
use of online listings outside sanctioned sites like Realtor.com by
allowing brokers to opt out of providing the listings.
"The purchase of a home is one of the most significant financial
decisions a family can make, and NAR's policy stifles competition to
advantage some of its members at the expense of home buyers and sellers
across the country," said J. Bruce McDonald, deputy assistant attorney
general in the Justice Department's Antitrust Division.
"Consumers benefit when real estate brokers are free to compete
vigorously by offering innovative services."
NAR spokesman Iverson Moore said the group hadn't received the
department's formal documents yet.
But the NAR said it didn't understand what prompted the government's
action and defended the newest revision of its policy as friendly both
to consumers and rival Realtors, according to a statement it released.
"For consumers, whether they are home buyers or sellers, this new policy
is a win-win," the prepared statement said. "Buyers will be able to find
all the listings available for public display on the Web site of the
broker of their choice and sellers will be able to work with the listing
broker of their choice."
"The policy treats all MLS members equally yet respects the rights of
property owners and their listing brokers to market a property as they
see fit."
Online businesses support suit
The ability to withhold some listings represents an effort to "punish"
Web-based Realtors for bringing competitive pressure and discounting
commissions, said Steve DelBianco, executive director of NetChoice, a
coalition of ecommerce companies including eRealty, now owned by
Prudential.
"If you're a Realtor and I go to you and can only get half the listings,
and then I go down the street to another Realtor who can show me all of
them... think about how frustrated you'd be if you missed homes that fit
all your price range and schools and neighborhood preferences."
"The Internet is very disurptive and it brings into question the whole
value proposition of the national chains," DelBianco said. "It's up to
the national chains now to use the Internet to compete and become more
efficient. I think they can do that, and so it's disappointing that
they've sought to prevent innovation and competition with this rule."
Some local Realtor boards and MLS's have already taken issue with the
NAR rule, but even those who agree with it likely will be hesitant to
implement the rule while the case is pending, he said.
The war going on between brokers catches consumers in the crossfire and
discourages would-be first-time buyers from pursuing the American dream
of home ownership, said Bruce Hahn, president of the American Homeowners
Grassroots Alliance, a consumer advocacy group representing 5,000
homeowners.
"What's at stake is competition in the real estate sector and how much
money consumers, buyers and sellers, have to pay for the real estate
sales transaction," he said.
Under the NAR rule, entry-level buyers who start at the low-priced end
of housing stock may be priced out of the market because they may miss
opportunities to tap discounts offered by new-generation Web-based
brokers, Hahn said. "There are restrictions against minimum service and
anti-rebate restrictions. That means the seller has no choice but to go
with a full-service broker charging 5% or 6%."
What's more, research shows U.S. homes are priced higher than similar
ones in many other industrialized countries, he said. "From what we can
see, a big part of the reason is efforts made to prevent new business
models from competing in the real estate market."
Kristen Gerencher is a reporter for MarketWatch in San Francisco.
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