WSJ.com - Antitrust Suit Could Reshape Residential Real-Estate Sector

By JAMES R. HAGERTY
Staff Reporter of THE WALL STREET JOURNAL
September 12, 2005

A Justice Department antitrust suit against the National Association of Realtors raises a tricky legal question: Who controls information about homes listed by brokers as available for sale?

The answer is likely to help determine the future shape of the residential-real-estate brokerage business. Buoyed by a booming market for homes, that business reaps more than $60 billion a year in commissions on home sales, according to Real Trends, an industry publication.

In a suit filed Thursday, the department alleges that the association's policy on Internet displays of listings data -- which allows brokers to block their listings from being displayed on other brokers' Web sites -- "restrains competition" from brokers that rely mainly on Web sites to engage with their customers.

"It is the Web-based brokers who have been the most aggressive about cutting commissions," said J. Bruce McDonald, a deputy assistant attorney general in the Justice Department, in an interview Friday.

Realtors say that they aren't thwarting competition but that brokers have "ownership rights" in their listings and should be able to determine how they are displayed on the Web. The trade group argues that the department hasn't fully taken into account changes to its policy that were announced last week in a bid to avert the suit. Justice Department officials "do not understand the real-estate industry," Laurie Janik, the group's general counsel, said in an interview.

The policy involves Internet displays of information from multiple-listing services, or MLS, which are local databases of homes available for sale. As revised last week, the policy lets brokers refuse to allow their listings to be displayed on other brokers' Web sites. If they exercise this "opt out," brokers must inform home sellers that their listings won't appear on rivals' sites and get written consent.

Geoff Lewis, chief legal officer at RE/MAX International Inc., a major franchiser of brokerage firms, says very few brokers would opt out because their customers would demand maximum Internet exposure. "We intend to share all our listings with other companies," he said.

But Robert D. Butters, a Chicago lawyer who represents Internet-based brokers, still sees opt-outs as a big threat. If one or more major firms in a local market opted out from sharing data with rival Web sites, consumers would find they could get more information by going to a real-estate office to meet an agent face to face than they could get by dealing with a Web-based agent.

Traditional brokers who refuse to let their listings be shown on rivals' sites still could provide the data to Realtor.com, a site owned by the National Association of Realtors, Mr. Butters noted. By offering to put the listings on that popular national site, the brokers might persuade many consumers that they don't need to be on rival brokers' sites.

People looking for homes often start their searches on the Internet and favor sites with the most comprehensive and easily searchable data. Some of those sites pitch real-estate-brokerage, mortgage-lending and other services. The site operators then can collect referral fees from local firms eager for customers.

Write to James R. Hagerty at bob.hagerty@wsj.com