Monday, April 11, 2011

Federal Appellate Court: Realcomp's Website Policy Unreasonably Restrained Competition

The U.S. Court of Appeals for the 6th Circuit has ruled in the FTC v. Realcomp matter.  You'll recall at issue in the case is Realcomp's alleged anticompetitive treatment of non-ERTS property listings.

What seems like ages ago, an FTC Administrative Law Judge entered an initial decision in favor of Realcomp.  The FTC later vacated and reversed the ALJ's decision, and Realcomp asked the 6th Circuit to weigh in.  Last week the court denied Realcomp's petition for review.

Realcomp's Website Policy "prohibited information about exclusive agency and other nontraditional listings on Realcomp's MLS from being distributed to public real-estate advertising websites through its MLS feeds."  Such public sites include IDX participant websites and

Among other things, the panel concentrated on "the effect of Realcomp's restriction on consumer choice, specifically, the reduction in competitive brokerage options available to home sellers." It concluded that the Website Policy had both potential and actual adverse effects on competition, noting the Website Policy "created barriers to the dissemination of discount listings to public websites."  The court also highlighted Realcomp's substantial market power and the anticompetitive nature of the Website Policy in finding substantial evidence supporting the FTC's ruling.

The panel also found that "the Commission properly rejected Realcomp's proffered justifications [for the Website Policy] as not 'legitimate, plausible, substantial and reasonable.'"

So far I can think of three takeaways here:

First, while Realcomp wasn't the only MLS targeted for alleged FTC Act violations, it was the only one that resisted the FTC's crackdown (the others having previously entered into consent decrees with the agency, which among other things likely saved them some serious attorneys' fees).  Sometimes the herd is right.

Second, notwithstanding NAR's supposed financial support of Realcomp's legal challenge, Realcomp's Website Policy directly violated NAR's own rule prohibiting such discriminatory practices.  Did Realcomp really think the FTC or an appeals court would bless conduct that NAR itself did not condone?  Sometimes the folks upstairs are right.

Third, and most importantly, most forms of censorship are bad.  If the effect of an MLS rule is to limit the dissemination of listings based upon listing type or terms, trouble is probably around the corner.  Consider my favorite line from the opinion:  "Restricting the online dissemination of home listings is especially pernicious because of the emerging competitive impact of the internet and of discounted brokerage services on the residential real-estate market."  In other words, think twice before going up against market and technological forces.