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 Realtor.com.

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.

Missouri Real Estate Commission Wins First Battle with Kansas City Premier Apartments

Over two years after it first filed suit, Kansas City Premier Apartments, Inc. finally had its day in court earlier this year with the Missouri Real Estate Commission (here's my last pre-trial post).  During the trial, the MREC failed to prove that any of the property advertisements on the KCPA website were false or misleading, or that KCPA's rental advisors conveyed any false or misleading information about specific rental units.     

However, in a six page judgment remarkably short on reasoning, Missouri Circuit Judge Abe Shafer held that KCPA is not exempt from the restrictions and requirements of Missouri's real estate broker statute.  Specifically, the court ruled that KCPA is not exempt from the statutory definition of a real estate broker, and that the statutory provisions challenged by KCPA were not unconstitutional under the U.S. or Missouri constitutions.

In response to MREC's request for injunctive relief, the court directed that "until KCPA complies with the requirements of Chapter 339 applicable to KCPA operations," it is enjoined from:

Contracting with property owners to receive compensation in return for referring prospective tenants who rent from property owners, which is not an enforceable contract under the terms of Section 339.160, RSMo.

Any act requiring real estate licensure pursuant to the terms of [Chapter] 339 RSMo.

KCPA was also enjoined from "paying a reward or incentive to tenants who notify property owners that they were directed to the property through KCPA's services, which would violate Section 339.00.2(13) if performed by a licensed real estate broker."

KCPA's attorneys have appealed the ruling to the Missouri Supreme Court.  Stay tuned.

Showdown in Missouri

Some time ago I first wrote about an action filed by Kansas City Premier Apartments in a Missouri state court, seeking clarity on licensing issues raised by the Missouri Real Estate Commission.

The case is set for trial later this week. Here's a cute piece produced by KCPA driving home its point that criminal sanctions are entirely inappropriate in this context.  KCPA has been threatened, among other things, with prosecution under Section 339.170, RSMo, which makes it a Class B misdemeanor (punishable by up to six months in prison) to knowingly violate any of the prohibitions relating to the communication of real estate information.

Want to learn more?  Here's an op-ed recently penned by KCPA's President:

Real Estate Commission Criminalizes Helpful Advice

Can you believe that your own mother might be considered a criminal for helping you find a suitable apartment? That’s the position taken by the head of the Missouri Real Estate Commission (MREC), the government agency currently trying to ensure that people must pay a licensed real estate broker if they want help finding information about rental opportunities.

Years ago, I started Kansas City Premier Apartments (KCPA), a business designed to help people access a vast amount of useful information about renting in Kansas City, including a website with a searchable database of available rental units and a customer service team familiar with Greater Kansas City to help answer prospective renters’ questions, set appointments, and provide driving directions. All of our informational services are offered at no charge to the prospective renters.

The website quickly attracted the attention of people worldwide looking for just the sort of assistance we offer, helping them avoid the stress and uncertainty that frequently accompanies the search for a new rental home. Many have offered testimonials praising our services and, to our knowledge, no one we have assisted has ever expressed dissatisfaction with the information our company provided them. But, unfortunately, our business also attracted the attention of the MREC, which has asked a local court to prevent us from providing our informational services.

Fortunately, Americans enjoy constitutional protections for our freedom to exchange information and opinions – and KCPA is fighting to ensure that everyone will continue to enjoy these freedoms. The First Amendment of the United States Constitution denies governments the authority to make laws “abridging the freedom of speech.” Furthermore, the United States Supreme Court has previously recognized that this protects not only the rights of speakers who would share truthful, non-misleading information, but also the rights of those interested in hearing that information. Interpreting the First Amendment, courts have also held that governments are not generally permitted to pick and choose who is permitted to share a particular type of information. Missouri’s constitution offers even broader protections, stating that speech cannot be restricted “no matter by what means communicated; that every person shall be free to say, write, or publish, or otherwise communicate whatever he will on any subject, being responsible for all abuses of that liberty.”

We asked the MREC to explain how the useful information we provide could be considered an “abuse” of our constitutional freedoms. Rather than offering a substantive answer, the MREC responded that our question was “not relevant”. Fortunately, government bureaucrats do not have the final say in whether our constitutional freedoms can be so flippantly disregarded. We are both hopeful and confident that when the judge considers this matter, he will rule that all Missourians must remain free to enrich each others’ lives through the communication of useful information and ideas.

Tiffany Lewis is the President of Kansas City Premier Apartments, Inc.

DOJ Investigation of Hamptons Brokerages

Yesterday the New York Post reported on an inquiry being conducted by the U.S. Department of Justice's Antitrust Division involving Hamptons real estate brokerages.

Here's subsequent coverage on the New York Times' DealBook blog. 

Google Love

It was recently brought to my attention that when searching the phrase "real estate competition" on Google, this blog organically comes up third, behind the Federal Trade Commission and the Department of Justice. I have to admit that's pretty cool (although probably meaningless).

I see for myself that searching "real competition" brings this blog up in the top slot.

Notwithstanding the love Google is showing us, we don't run ads here. But as a reminder, please feel free to drop me a line if you ever come across a real estate issue or story that you think deserves some electric ink here.

-Michael