[Federal Register Volume 72, Number 28 (Monday, February 12, 2007)]
[Notices]
[Pages 6566-6570]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-2305]


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FEDERAL TRADE COMMISSION

[File No. 061 0266]


MiRealSource, Inc.; Analysis of Agreement Containing Consent 
Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before March 7, 2007.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``MiRealSource, Inc., File No. 061 0266,'' to 
facilitate the organization of comments. A comment filed in paper form 
should include this reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission, Office of the Secretary, Room 135-H, 600 Pennsylvania 
Avenue, NW., Washington, DC 20580. Comments containing confidential 
material must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR 
4.9(c) (2005).\1\ The

[[Page 6567]]

FTC is requesting that any comment filed in paper form be sent by 
courier or overnight service, if possible, because U.S. postal mail in 
the Washington area and at the Commission is subject to delay due to 
heightened security precautions. Comments that do not contain any 
nonpublic information may instead be filed in electronic form as part 
of or as an attachment to e-mail messages directed to the following e-
mail box: [email protected].
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Patrick Roach (202/326-2793), Bureau 
of Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for February 5, 2007), on the World Wide Web, at http://www.ftc.gov/os/2007/02/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted for public comment an 
agreement containing consent order with MiRealSource, Inc. 
(``MiRealSource'' or ``Respondent''). Respondent is a corporation owned 
by real estate brokers in Southeastern Michigan that operates a 
multiple listing service (``MLS'') designed to facilitate real estate 
transactions. The agreement settles charges that Respondent violated 
Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, through 
particular acts and practices of the MLS. The proposed consent order 
has been placed on the public record for 30 days to receive comments 
from interested persons. Comments received during this period will 
become part of the public record. After 30 days, the Commission will 
review the agreement and the comments received, and will decide whether 
it should withdraw from the agreement or make the proposed order final.
    The purpose of this analysis is to facilitate comment on the 
proposed consent order. This analysis does not constitute an official 
interpretation of the agreement and proposed order, and does not modify 
their terms in any way. Further, the proposed consent order has been 
entered into for settlement purposes only, and does not constitute an 
admission by Respondent that it violated the law or that the facts 
alleged in the complaint (other than jurisdictional facts) are true.

I. The Respondent

    MiRealSource is a Michigan corporation. Its shareholders are real 
estate brokers doing business in Southeastern Michigan, and they are 
generally referred to as ``members'' of the Respondent. MiRealSource 
has approximately 7,000 members, and these members supply real estate 
brokerage services to home sellers in Southeastern Michigan and to 
prospective purchasers seeking homes in that area. One of the primary 
tools utilized by members to carry out their business efficiently is 
the MiRealSource MLS. This service facilitates the process of matching 
sellers and buyers for a large number of individual properties. It 
functions as a clearinghouse through which members regularly and 
systematically exchange information on property listings.

II. Industry Background

    A Multiple Listing Service, or ``MLS,'' is a cooperative venture by 
which real estate brokers serving a common local market area submit 
their listings to a central service, which in turn distributes the 
information, for the purpose of fostering cooperation among brokers in 
real estate transactions. The MLS facilitates transactions by putting 
together a home seller, who contracts with a broker who is a member of 
the MLS, with prospective buyers, who may be working with other brokers 
who are also members of the MLS. Typically, the MLS rules establish 
criteria for membership, including the requirement that brokers and 
agents must be licensed by the applicable state regulatory agency to 
engage in real estate brokerage services.
    Prior to the late 1990s, the listings on an MLS generally were 
directly accessible only to real estate brokers who were members of a 
local MLS. At that time, the MLS listings typically were made available 
through books or dedicated computer terminals, and generally could only 
be accessed by the public by physically visiting a broker's office or 
by receiving a fax or hand delivery of selected listings from a broker.
    Information from an MLS is now typically available to the general 
public not only through the offices of real estate brokers who are MLS 
members, but also through three principal categories of internet Web 
sites. First, information concerning many MLS listings is available 
through Realtor.com, a national Web site run by the National 
Association of Realtors (``NAR''). Realtor.com contains listing 
information from many local MLS systems around the country and is the 
largest and most-used internet real estate Web site. Second, 
information concerning MLS listings is often made available through a 
local MLS-affiliated Web site. Third, information concerning MLS 
listings is often made available on the internet sites of various real 
estate brokers, who choose to provide these Web sites as a way of 
promoting their brokerage services to potential clients (home buyers 
and sellers). Most of these various Web sites receive information from 
an MLS pursuant to a procedure known as Internet Data Exchange 
(``IDX''), which is typically governed by MLS policies. The IDX 
policies allow operators of approved Web sites to display MLS active 
listing information to the public.

[[Page 6568]]

    Today the internet plays a crucial role in real estate sales. 
According to a 2006 survey by the National Association of Realtors 
(``NAR''), 80 percent of home buyers used the internet to assist in 
their home search, with 59 percent reporting frequent internet 
searches. Twenty-four percent of respondents first learned about the 
home they selected from the internet, the second most common means 
behind learning about a home from a real estate agent (36 percent).\2\ 
In all, 73 percent of home buyers found the internet to be a ``very 
useful'' source of information, and a total of 98 percent found the 
internet to be either ``very useful'' or ``somewhat useful.'' \3\ 
Moreover, the NAR Survey makes clear that the overwhelming majority of 
Web sites used nationally in searching for homes contain listing 
information that is provided by local MLS systems.\4\
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    \2\ E.g., Paul C. Bishop, Harika Bickicioglu, and Shonda D. 
Hightower, The 2006 National Association of Realtors Profile of Home 
Buyers and Sellers (hereinafter, ``NAR Study'') at 3-3, 3-4, 3-6.
    \3\ Id. at 3-5.
    \4\ NAR Study at 3-19.
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A. Types of Real Estate Brokerage Professionals

    A typical real estate transaction involves two real estate brokers. 
These are commonly referred to as a ``listing broker'' and a ``selling 
broker.'' The listing broker is hired by the seller of the property to 
locate an appropriate buyer. The seller and the listing broker agree 
upon compensation, which is determined by written agreement negotiated 
between the seller and the listing broker. In a common traditional 
listing agreement, the listing broker receives compensation in the form 
of a commission, which is typically a percentage of the sales price of 
the property, payable if and when the property is sold. In such a 
traditional listing agreement, the listing broker agrees to provide a 
package of real estate brokerage services, including promoting the 
listing through the MLS and on the internet, providing advice to the 
seller regarding pricing and presentation, fielding all calls and 
requests to show the property, supplying a lock-box so that potential 
buyers can see the house with their agents, running open houses to show 
the house to potential buyers, reviewing offers, negotiating with 
buyers or their agents on offers, assisting with home inspections and 
other arrangements once a contract for sale is executed, and attending 
the closing of the transaction.
    The other broker involved in a typical transaction is commonly 
referred to as the selling broker. This selling broker will identify 
and discuss the properties that may be of interest to the buyer, 
accompany the buyer to see various properties, try to arrange a 
transaction between buyer and seller, assist the buyer in negotiating 
the contract, and help in further steps necessary to close the 
transaction. In a traditional transaction, the listing broker offers 
the selling broker a fixed commission, to be paid from the listing 
broker's commission when and if the property is sold. Real estate 
brokers typically do not specialize as only listing brokers or selling 
brokers, but often function in either role depending on the particular 
transaction.

B. Types of Real Estate Listings

    The relationship between the listing broker and the seller of the 
property is established by agreement. The two most common types of 
agreements governing listings are Exclusive Right to Sell Listings and 
Exclusive Agency Listings. An Exclusive Right to Sell Listing is the 
traditional listing agreement, pursuant to which the property owner 
appoints a real estate broker as his or her exclusive agent for a 
designated period of time, to sell the property on the owner's stated 
terms, and agrees to pay the listing broker a commission if and when 
the property is sold, whether the buyer of the property is secured by 
the listing broker, the owner or another broker.
    An Exclusive Agency Listing is a listing agreement pursuant to 
which the listing broker acts as an exclusive agent of the property 
owner or principal in the sale of a property, but under which the 
property owner or principal reserves a right to sell the property 
without assistance of the listing broker, in which case the listing 
broker is paid a reduced or no commission when the property is sold.
    Some real estate brokers have attempted to offer services to home 
sellers on something other than the traditional full-service basis. 
Many of these brokers, often for a flat fee paid at the inception of 
the listing contract and not contingent on whether the home sells 
during the term of that contract, will offer sellers access to the 
MLS's information-sharing function as well as a promise that their 
listing will appear on the most popular real estate Web sites. Under 
such arrangements, the listing broker does not offer additional real 
estate brokerage services as part of the flat fee package, but allows 
sellers to purchase additional services if sellers so desire. These 
non-traditional arrangements often are structured using Exclusive 
Agency Listing contracts.
    There is a third type of real estate transaction that does not 
involve a real estate broker or the services of the MLS, and it is 
known as a ``For Sale By Owner'' or ``FSBO'' transaction. With a FSBO 
transaction, a home owner will attempt to sell a house without the 
involvement of any real estate broker and without paying any 
compensation to such a broker, by advertising the availability of the 
home through traditional advertising mechanisms (such as a newspaper) 
or FSBO-specific Web sites.
    There are two critical distinctions between an Exclusive Agency 
Listing and a FSBO for the purpose of this analysis. First, the 
Exclusive Agency Listing employs a listing broker for access to the MLS 
and popular Web sites providing MLS listing information open to the 
public; a FSBO transaction does not. Second, an Exclusive Agency 
Listing sets terms of compensation to be paid to a selling broker, 
while a FSBO transaction often does not.

III. The Conduct Addressed by the Proposed Consent Order

    The complaint in this matter, issued on October 10, 2006,\5\ 
alleges that MiRealSource has violated the FTC Act by adopting rules or 
policies that limit the publication and marketing of certain sellers' 
properties, but not others, based solely on the terms of their 
respective listing contracts. The complaint alleges that Respondent 
favored Exclusive Right to Sell Listings and disfavored Exclusive 
Agency Listings through, among other things, the adoption of a rule 
excluding the latter listings entirely from the MLS.
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    \5\ See http://www.ftc.gov/os/adjpro/d9321/061012admincomplaint.pdf.
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    The allegations explain that Respondent also adopted a series of 
further rules to stifle competition from real estate brokers using 
alternative business models to provide brokerage services in 
Southeastern Michigan. These rules include: (1) The ``Web Site 
Policy,'' which limits the publication of certain residential real 
estate listings on popular real estate Web sites; (2) the ``Listing 
Broker Policy,'' which requires a Listing Broker to perform a minimum 
set of services; (3) the ``Physical Office Policy, which requires each 
member to have an office in the state of Michigan; (4) the ``FSBO 
Policy,''which restricts how and where home sellers can advertise and 
market their homes; and (5) the ``Co-Mingling Policy,'' which (for a 
time) restricted MiRealSource listing information from being searched 
on public Web sites along side listing information from other sources.

[[Page 6569]]

    Such rules limit the acceptance, publication, and marketing of 
certain residential real estate listing contracts, thereby limiting 
home sellers' ability to choose a listing type that best serves their 
specific needs. The complaint alleges that the conduct was collusive 
and exclusionary, because in agreeing to keep non-traditional listings 
off the MLS and from public Web sites, the brokers enacting the rules 
were, in effect, agreeing among themselves to limit the manner in which 
they compete with one another, and withholding valuable benefits of the 
MLS from real estate brokers who did not go along. In addition, the 
complaint alleges that MiRealSource actively enforced the 
anticompetitive rules and policies through violation letters to members 
and substantial fines.
    Some of the conduct at issue in this matter also is similar to the 
conduct addressed by the Commission in its recent consent orders 
involving real estate boards and associations operating MLSs in Texas, 
New Hampshire, New Jersey, Virginia, Wisconsin and Colorado.\6\ As in 
those matters, certain rules or policies of Respondent challenged in 
the complaint preclude information about properties from being made 
available on popular real estate Web sites because the listing 
contracts do not follow the traditional format approved by the MLS. 
These rules or policies prevent properties with non-traditional listing 
contracts from being displayed on a broad range of public Web sites, 
including the national ``Realtor.com'' web site operated by the 
National Association of Realtors, the local web site operated by 
MiRealSource, and individual members' Web sites.
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    \6\ In the Matter of Austin Bd. of Realtors, Docket No. C-4167 
(Final Approval, Aug. 29, 2006); In the Matter of Northern New 
England Real Estate Network, Inc., Docket No. C-4175 (Final 
Approval, Nov. 22, 2006); In the Matter of Monmouth County 
Association of Realtors, Inc., Docket No. C-4176 (Final Approval, 
Nov. 22, 2006); In the Matter of Williamsburg Area Association of 
Realtors, Inc., Docket No. C-4177 (Final Approval, Nov. 22, 2006); 
In the Matter of Realtors Association of Northeast Wisconsin, Inc., 
Docket No. C-4178 (Final Approval, Nov. 22, 2006); In the Matter of 
Information and Real Estate Services, LLC, Docket No. C-4179 (Final 
Approval, Nov. 22, 2006). The ABOR consent order was published with 
an accompanying Analysis To Aid Public Comment at 71 Fed. Reg. 41023 
(July 19, 2006). The other five consent orders were published at 71 
Fed. Reg. 61474 (October 12, 2006).
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A. The Respondent Has Market Power

    MiRealSource serves residential real estate brokers in Southeastern 
Michigan. These professionals compete with one another to provide 
residential real estate brokerage services to consumers. Membership in 
the MiRealSource MLS is necessary for a broker to provide effective 
residential real estate brokerage services to sellers and buyers of 
real property in this area.\7\ By virtue of broad industry 
participation and control over a key input, MiRealSource has market 
power in the provision of residential real estate brokerage services to 
sellers and buyers of real property in the MiRealSource Service Area.
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    \7\ As noted, the MLS provides valuable services for a broker 
assisting a seller as a listing broker, by offering a means of 
publicizing the property to other brokers and the public. For a 
broker assisting a buyer, it also offers unique and valuable 
services, including detailed information that is not shown on public 
web sites, which can help with house showings and otherwise 
facilitate home selections.
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B. Respondent's Conduct

    Non-traditional forms of listing contracts, including Exclusive 
Agency Listings, are used by listing brokers to offer lower-cost real 
estate services to consumers. The series of rules and policies adopted 
by Respondent were joint action by a group of competitors to withhold 
distribution of listing information from rivals who did not contract 
with their brokerage service customers in a way that the group wished. 
This type of conduct was condemned by the Commission 20 years ago. In 
the 1980s and 1990s, several local MLS boards banned Exclusive Agency 
Listings from the MLS entirely. The Commission investigated and issued 
complaints against these exclusionary practices, obtaining several 
consent orders.\8\ The complaint alleges that, in addition to following 
these past practices, MiRealSource also extended its exclusionary rules 
to the more modern method of distributing listing information publicly 
via the internet.
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    \8\ See, e.g., In the Matter of Port Washington Real Estate Bd., 
Inc., 120 F.T.C. 882 (1995); In the Matter of United Real Estate 
Brokers of Rockland, Ltd., 116 F.T.C. 972 (1993); In the Matter of 
Am. Indus. Real Estate Assoc., Docket No. C-3449, 1993 WL 13009648 
(F.T.C. Jul. 6, 1993); In the Matter of Puget Sound Multiple Listing 
Serv., Docket No. C-3390 (F.T.C. Aug. 2, 1990); In the Matter of 
Bellingham-Whatcom County Multiple Listing Bureau, Docket No. C-3299 
(F.T.C. Aug. 2, 1990); In the Matter of Metro MLS, Inc., Docket No. 
C-3286, 1990 WL 10012611 (F.T.C. Apr. 18, 1990); In the Matter of 
Multiple Listing Serv. of the Greater Michigan City Area, Inc., 106 
F.T.C. 95 (1985); In the Matter of Orange County Bd. of Realtors, 
Inc., 106 F.T.C. 88 (1985).
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C. Competitive Effects of the Respondent's Rules and Policies

    The MiRealSource rules and policies have prevented its members from 
offering or accepting Exclusive Agency Listings. Thus, the rules impede 
the provision of unbundled brokerage services, and may make it more 
difficult and costly for home sellers to market their homes. The 
Respondent's rules and policies have caused some brokers to exit from 
the real estate business in Southeastern Michigan, or to refrain from 
offering non-traditional brokerage services in that market or to not 
enter at all. Furthermore, the rules have caused home sellers to switch 
away from Exclusive Agency Listings to other forms of listing 
agreements.
    By preventing Exclusive Agency Listings from being included in the 
MLS and transmitted to public-access real estate Web sites, the 
MiRealSource rules and policies have adverse effects on home sellers 
and home buyers. When home sellers switch to full service listing 
agreements from Exclusive Agency Listings that often offer lower-cost 
real estate services to consumers, the sellers may purchase services 
that they would not otherwise buy. This, in turn, may increase the 
commission costs to consumers of real estate brokerage services. In 
particular, the rules deny home sellers choices for marketing their 
homes and deny home buyers the chance to use the internet easily to see 
all of the houses listed by real estate brokers in the area, making 
their search less efficient.

D. There Is No Competitive Efficiency Associated With the Web Site 
Policy

    The Respondent's rules at issue here advance no legitimate 
procompetitive purpose. As a theoretical matter, if buyers and sellers 
could avail themselves of an MLS system and carry out real estate 
transactions without compensating any of its broker members, an MLS 
might be concerned that those buyers and sellers were free-riding on 
the investment that brokers have made in the MLS and adopt rules to 
address that free-riding. But this theoretical concern does not justify 
the rules or policies adopted by MiRealSource. Exclusive Agency 
Listings are not a credible means for home buyers or sellers to bypass 
the use of the brokerage services that the MLS was created to promote, 
because a listing broker is always involved in an Exclusive Agency 
Listing, and other provisions in the MiRealSource rules ensure that a 
selling broker--a broker who finds a buyer for the property--is 
compensated for the brokerage service he or she provides.
    Under existing MLS rules that apply to any form of listing 
agreement, the listing broker must ensure that the home seller pays 
compensation to the cooperating selling broker (if there is one), and 
the listing broker may be liable himself for a lost commission if the 
home seller fails to pay a selling broker who was the procuring cause 
of

[[Page 6570]]

a completed property sale. The possibility of sellers or buyers using 
the MLS but bypassing brokerage services is already addressed 
effectively by the Respondent's existing rules that do not distinguish 
between forms of listing contracts, and does not justify the series of 
exclusionary rules and policies adopted by MiRealSource. It is 
possible, of course, that a buyer of an Exclusive Agency Listing may 
make the purchase without using a selling broker, but this is true for 
traditional Exclusive Right to Sell Listings as well.

IV. The Proposed Consent Order

    The proposed order is designed to ensure that the Respondent does 
not misuse its market power, while preserving the procompetitive 
incentives of members to contribute to the MLS.
    The proposed order prohibits MiRealSource from adopting or 
enforcing any rules or policies that deny or limit the ability of MLS 
members to enter into Exclusive Agency Listings, or any other lawful 
listing agreements, with sellers of properties. More specifically, the 
proposed order prohibits MiRealSource from preventing its members from 
offering or accepting Exclusive Agency Listings or other lawful listing 
agreements; cooperating with Listing Brokers or agents that offer or 
accept Exclusive Agency Listings or other lawful listing agreements; 
publishing Exclusive Agency Listings or other lawful listing agreements 
on the MLS and approved Web sites; publishing their information 
concerning listings on public real estate Web sites, including but not 
limited to http://www.FSBO.com; requiring members to have a physical 
office; and offering unbundled real estate brokerage services, 
including but not limited to requiring MiRealSource Shareholders to 
provide a minimum set of real estate brokerage services. The proposed 
order also prohibits MiRealSource from denying or restricting the 
services of the MLS to Exclusive Agency Listings or other lawful 
listings in any way that such services of the MLS are not denied or 
restricted to Exclusive Right to Sell Listings; or treating Exclusive 
Agency Listings, or any other lawful listings, in a less advantageous 
manner than Exclusive Right to Sell Listings, including but not limited 
to, any policy, rule or practice pertaining to the transmission, 
downloading, or displaying of information pertaining to such listings.
    In addition to these substantive provisions, the proposed order 
states that, within forty-five days after it becomes final, Respondent 
shall have conformed its rules to the substantive provisions of the 
order. Respondent is further required to notify its members of the 
applicable order through its usual business communications and its Web 
site. The proposed order requires notification to the Commission of 
changes in the respondent's structure, and periodic filings of written 
reports concerning compliance. The relief in the proposed consent order 
ensures that the Respondent cannot revert to the old rules or policies, 
or engage in future variations of the challenged conduct.
    The proposed order applies to MiRealSource and entities it owns or 
controls, including its respective MLS and any affiliated Web site it 
operates. The order does not prohibit members, or other independent 
persons or entities that receive listing information from Respondent, 
from making independent decisions concerning the use or display of such 
listing information on member or third-party Web sites, consistent with 
any contractual obligations to Respondent.
    The proposed order will expire in 10 years.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. E7-2305 Filed 2-9-07; 8:45 am]
BILLING CODE 6750-01-P