Thursday, August 9, 2007

Realcomp knowingly violates NAR rule, its CEO offers after-the-fact explanations for suspect Website Policy

Last week the FTC (technically lawyers supporting the complaint) filed a post-trial brief in the FTC v. Realcomp matter. No surprises really, but I did come across two matters worth noting here.

First, in several prior posts on this blog, I have wondered how it could be that Realcomp was enforcing its Website Policy, which among other things prevents EA listings from being uploaded to, notwithstanding a NAR rule that prohibited such practices. The FTC’s brief shed some light on this inconsistency:

At the same time [Realcomp] voted to change the Search Function Policy, the Realcomp Board rejected a motion that would have eliminated the Website Policy. That motion proposed that Realcomp comply with a recently passed NAR rule that requires NAR associated MLSs to include all listings, regardless of listing type, in any feed to public websites and in the IDX. Compliance with this rule is mandatory, which means that NAR has determined that the rule is necessary for the proper operation of an MLS. Realcomp had urged NAR not to pass this mandatory rule, but NAR rejected Realcomp's arguments. [citations omitted].

Thus we now learn that Realcomp has been knowingly violating the NAR rule. The brief elaborates further-

The National Association of Realtors - the organization whose purpose is to promote the interests of Realtors such as Realcomp's members – considered and rejected Realcomp's arguments. NAR has made it mandatory for every one of its hundreds of associated MLSs to include all listings, regardless of listing type, in any feed to public and IDX websites. Realcomp tried to convince NAR not to do this, arguing the very same thing it does here - that allowing Exclusive Agency listings "is in direct conflict with the very purpose of the MLS" because the seller could avoid paying a commission. But NAR, through its general counsel, squarely rejected Realcomp's arguments. NAR explained that including Exclusive Agency listing on feeds to public websites and the IDX is not a problem because (1) "the seller had engaged the services of a real estate professional"; (2) these listings include "an offer of cooperation and compensation to MLS participants"; and (3) if a cooperating broker brings a buyer, "that broker is entitled to the compensation communicated to the MLS participants by the listing broker." Thus, concluded NAR, including Exclusive Agency listings on these feeds would not detract from the purposes of the MLS. [citations omitted].

Accordingly, Realcomp’s Website Policy has not only triggered an FTC enforcement action alleging anticompetitive conduct in violation of the Federal Trade Commission Act, it has also knowingly contravened, and continues to contravene, a NAR rule directly on point.

In this light, perhaps my second observation will not be too surprising. I noticed this paragraph in a footnote toward the end of the brief:

While Realcomp elicited testimony from Karen Kage [Realcomp’s CEO] regarding the reason the Board adopted the Website Policy, not a single member of the Board of Governors could testify as to these reasons. Moreover, Ms. Kage's testimony is not supported by a single contemporaneous document. Instead, the contemporaneous documents indicate that Realcomp wanted to exclude Exclusive Agency listings entirely. Realcomp's supposed reasons for the Website Policy should therefore be viewed as post hoc rationalizations, which deserve no weight. [citations omitted]

Thus Realcomp has not only (i) promulgated, and declined the opportunity to rescind, a policy that it knows is in violation of what appears to be a carefully considered NAR rule, and (ii) subsequently been charged by the Federal Trade Commission with anticompetitive conduct, it would appear that (iii) its CEO has offered justifications for the policy that the governing board couldn’t even recite, and, regardless, were “not supported by a single contemporaneous document.”


  1. And what are the implications for Realcomp's violation? Will actually do anything?

  2. Thanks for your comment, Oahu Real Estate.

    I assume you are talking about Realcomp's apparent violation of a NAR policy. While NAR's "rulebook" no doubt provides for the consequences of violating that rule, my guess is that NAR will not take any action. Why? In part because NAR is actually paying some of Realcomp's legal bills in connection with the FTC matter (that's right - subsidizing a lawsuit that challenges a Realcomp rule that appears to directly violate a NAR rule). And for whatever reason, I have not come across many NAR members that have a problem with that.