By: Amelia Okulewicz
Volume IX – Issue II – Spring 2024
Introduction
The Multiple Listing Service (MLS) is an online database where brokers “create and share information” regarding property listings [1]. Most of the information on this database is public aside from seller contacts and property availability, which is limited to those that pay for a subscription. The question of antitrust and fee inflation arises in this case, as buyers must compensate an agent to input this information within MLS. The argument of a monopoly can be brought forth, as there is currently no other reputable source currently used for listing real estate information. Furthermore, should a person choose to sell property themselves, they would still have to pay a real estate agent for an MLS service. Uproar in this category has commenced on the side of real estate websites like Zillow Group, Inc., showing more than homeowners have felt outrage towards the listing service.
I. Overview of the Multiple Listing Service
The original multiple listing service (MLS) emerged in the late 1800s, used as a compensatory measure for those assisting in property sale. The platform has expanded to nearly 800 different services, ranging all throughout the United States. Its main purpose is tailored as an information-sharing platform where brokers entice other brokers to provide buyers for listed properties. It promotes collaboration amongst brokers to input information regarding their buyers and sellers to essentially serve as a “match-making” process [23].
Although information regarding real estate is available and free for access, the various MLSs are “limited to licensed real estate agents and brokers who pay for a subscription.” [4] A real estate license is necessary for access to this platform on the basis of protecting privacy or safety. Specifically, showings of properties, names, addresses, and other contact information is limited to those with direct access to MLS databases. In theory, this protective measure is necessary, but it does not permit private sellers without real estate brokers or licenses to be limited in their selling practices, promoting the idea that there may be an antitrust violation. This can therefore lead to the notion that inaccessibility caused by associated licensing prerequisites creates a disclusionary measure within the MLS as an institution.
II. MLS Antitrust Compliance Policy
The MLS contains antitrust compliance policies to be considered as a service; however, these policies seem to be a suggestion rather than mandate, given the later discussed lawsuit between Zillow Group, Inc., ARMLS, and MetroMLS. Because the policies are not fully upheld but are mentioned, this can allude to the idea that the MLS has monopolistic tendencies, thus needing these regulations in the first place. Furthermore, no sense of repercussion or responsibility is upheld if these said regulations are not correctly followed.
Within the MLS Handbook under the section titled, Part Two: Policies, the MLS antitrust compliance policies are delineated. After close analysis, many of the primary rules and regulations pertain to brokers that are part of the site. It essentially focuses on how to correctly utilize the website in contrast to how to legally and lawfully abide by its rules, showing an aspect of negligence from the part of the MLS. The main connection between those that are not subscribers is briefly discussed in points 8, 9, and 10.
As stated in the MLS Handbook, it mandates that the MLS databases shall not:
“8. Give participants or subscribers blanket authority to deal with or negotiate with buyers or sellers exclusively represented by other participants (Interpretation 10).
9. Establish, or permit establishment of, any representational or contractual relationship between an MLS and sellers, buyers, landlords, or tenants.
10. Prohibit or discourage cooperation between participants and brokers that do not participate in the MLS.” [5]
i. Point 8
This point refers to a mandate of negotiation with buyers and sellers that are not part of the MLS. This acknowledgement of other buyers and sellers, represented by parties not participating in the MLS, shows the blatant exclusionary nature of this database. The sole fact that there needs to be a clause in the antitrust policy delineation implies that there was a precedent case that warranted this need. It still However, this aspect of the policy does not mention the allowance of those without a real estate license to participate.
ii. Point 9
The ninth point emphasizes the idea that business transactions such as representation and contractual relationships are unable to result through the MLS platform. This point prevents there from being unlawful relations within the actual platforms that could exclude those participating in real estate transactions. This implies that transactions and representation can commence without the use of the database.
iii. Point 10
The MLS Handbook directly discourages contact with those not part of the database, this is where the main area of antitrust is concerned. It implies that only those with a real estate license are able to access this website implying that sellers without the corresponding licenses are unable to engage in the same selling benefits as brokers. Similar to point 8, the MLS Handbook had to delineate an area that prohibits exclusion of those not participating in the MLS.
III. Section 2 of the Sherman Act
Section 2 of the Sherman Act emphasizes the unlawfulness in:
“[Monopolizing], or [attempting] to monopolize, or [combining] or [conspiring] with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations.” [6]
The seemingly simple definition of what constitutes monopolistic behavior was ignored by the MLS leading to lawsuits in the western region of the US. Lawsuits, such as the Zillow Group, Inc. and ShowingTime.com, LLC v. Arizona Regional Multiple Listing Service, Inc., Multiple Listing Service, Inc., and MLS Aligned, LLC, have alluded to this section of antitrust legislation to be violated by the MLS services. However, the National Association of Realtors (NAR) argues:
“The practice of the listing broker paying the buyer broker’s compensation saves sellers time and money by having so many buyer brokers participating in that local marketplace and thus creates a larger pool of buyers for sellers. For buyers, these marketplaces save them the burden of extra costs at closing, enable them to receive professional representation and make homeownership possible for more people.” [7]
In essence, the NAR’s argument pertains to the creation of competition but only within the MLS service. The brokers that participate in the MLS, which represent the aforementioned buyers and sellers, in fact, only create competition and “a larger pool” within this confined platform. Their justification lies in the “burden of extra costs,” most likely associated with a real estate license or other fees, as a defense against the exclusionary practices in participation. However, yet again, the NAR dismisses the claims of the limitation of competitive advantage for those who are unable to access the MLS. Simply because an organization refutes a claim, does not mean that there is no ground for questioning and outrage based on a possible violation of the Sherman Act. The MLS provides a limitation on the consumer usage, and does not account for all those presently working in the real estate market. Its lack of competition in this field, does not allow those who are disincluded from MLS to remotely participate in another service.
The alleged conspiracy or monopolization to this area of commerce, being real estate, spans throughout the entire United States, where only a set group can have access to this portion of the market. The ease provided by the MLS provides a clear advantage to those using the database, not only with the speed of transactions, but with a direct connection to new buyers and sellers for some of these broker’s existing clients.
IV. Zillow Group, Inc. and ShowingTime.com, LLC v. Arizona Regional Multiple Listing Service, Inc., Multiple Listing Service, Inc., and MLS Aligned, LLC
The lawsuit of Zillow Group, Inc. and ShowingTime.com, LLC v. Arizona Regional Multiple Listing Service, Inc., Multiple Listing Service, Inc., and MLS Aligned, LLC alleges an unlawful monopolization and limitation of competition caused through the MLS databases such as Arizona Regional Multiple Listing Service, Inc. (ARMLS), Multiple Listing Service, Inc. and Metro Multiple Listing Service, Inc. (Metro MLS) [8]. This ongoing case alleges that the previously mentioned MLS services are “attempting to monopolize the market for real estate showing management services in the geographic regions they control and from unlawfully conspiring to exclude or severely limit ShowingTime, their competitor in those markets.” [9] The collection, organization, and distribution of the information fund on the MLS website is said to hinder access to imperative real estate information on behalf of the consumers and other sellers
The MLS databases of ARMLS and Metro MLS, have combined forces, not only creating a potential monopoly among platforms that buyers and sellers can utilize, but increasing the impact of the exclusionary preface of needing a real estate license to access significant information used for property transactions. In reference to ShowingTime, this is a platform used by home buyers and sellers to compile appointments that allow tours or showings of various properties. This alludes to the idea that in addition to the MLS, there is another platform that is able to produce a similar service as the MLS, but without the needed licenses. Therefore, the unofficial merger of two MLS databases, which already hold a majority in the market, poses unlawful competition to sites like ShowingTime.
The lawsuit further argues the idea that under Section 2 of the Sherman Act, the MLS conspired to create a monopoly to discredit and overpower less powerful competitors through the ARMLS and Metro MLS merger. The plaintiffs in this lawsuit also claim that there are no reasonable alternatives to MLS platforms, while their exclusionary nature is applicable to only a few consumers. Further, the MLS Handbook’s policies on antitrust do not address any collaboration between the platforms; however, the absence of this clause poses another indication of a Section 2 of the Sherman Act violation.
V. Conclusion
When delineating facets that comprise the MLS, it seems to be a nationwide powerhouse of information that is able to promote success and accelerate the selling and buying processes for those that obtain access. This discredits the average consumer without a real estate license that would be willing to participate in such service. Although the database service claims that they are not imposing on antitrust laws, thus not imposing a monopoly, the lawsuit between the Zillow Group, INC and MLS services like Metro MLS and ARMLS make it difficult to see opposing claims, given their unofficial “merger conspiracy”. The combination of MLS services greatly stems into a realm of monopoly, which causes speculation of how the MLS as an institution is upholding their own policies, mentioned in the handbook, and if they are even aware of the databases’ actions under the overarching organization.
The NAR attempted to refute any antitrust claims with an argument pertaining to the competition created within the website itself, yet that does not account for other entities like ShowingTime, which have been directly affected through the potential violations of Section 2 of the Sherman Act. Public organizations are put at an informatory disadvantage, leading to the idea that the MLS does not have a single competitor in the real estate market. The MLS itself has a list of policies that prohibit the internalization of its services; however, the various loopholes and caveats pose a nearly impossible threshold to break for consumers.
Endnotes
[1] “Multiple Listing Service.” Legal Information Institute. Accessed April 8, 2024. https://www.law.cornell.edu/wex/multiple_listing_service.
[2] “Multiple Listing Service (MLS): What Is It.” www.nar.realtor, January 11, 2012. https://www.nar.realtor/mls-online-listings/multiple-listing-service-mls-what-is-it.
[3] “Multiple Listing Service.” Legal Information Institute. Accessed April 8, 2024. https://www.law.cornell.edu/wex/multiple_listing_service.
[4] Ibid.
[5] Handbook on multiple listing policy. Accessed April 8, 2024. https://www.nar.realtor/sites/default/files/documents/pdf-mls-handbook-2023.pdf.
[6] “Competition and Monopoly: Single-Firm Conduct under Section 2 of the Sherman Act : Chapter 1.” Antitrust Division, March 18, 2022. https://www.justice.gov/archives/atr/competition-and-monopoly-single-firm-conduct-under-section-2-sherman-act-chapter-1.
[7] “Re/Max Settles Claims in Compensation Lawsuits.” www.nar.realtor, September 20, 2023. https://www.nar.realtor/magazine/real-estate-news/remax-settles-claims-in-compensation-lawsuits.
[8] Case 2:23-cv-02701-MTL. Accessed April 8, 2024. https://fingfx.thomsonreuters.com/gfx/legaldocs/zgpokwjzgpd/Zillow-v-ArizonaMLS-20231227.pdf.
[9] Ibid.