FTC rules against Web practices of real estate group

The U.S. Federal Trade Commission has issued an opinion saying that Realcomp II, the largest real-estate listing group in Michigan, violated federal law by restricting some discount real-estate listings from its own and other publicly available Web sites.

The FTC's opinion, issued Monday, said that Realcomp restricted access to listings of discount real-estate services. Realcomp restricted the listings of real-estate brokers who have offered discounted services, such as lower commission rates, flat fees or unbundled real-estate services, the FTC said. The opinion reverses a 2007 decision by an FTC administrative law judge, who ruled in favor of Realcomp.

"Given the market structure and competitive dynamics of the residential real estate industry, we find that Realcomp's [policies] harmed competition and created a likelihood that valuable rivalry among real estate service providers would be suppressed," Commissioner William Kovacic wrote in the opinion.

Internet listings have become "vital" to real-estate sales, the FTC said.

Realcomp operates a multiple listing service, or MLS, in southeastern Michigan, including the Detroit area. Member brokers (who compete with each other) provide information on homes for sale. Other members representing buyers can then use the database to find potential homes for their clients.

While the discounted real-estate listings were available in Realcomp's MLS database, searchable by brokers, they weren't listed on Realcomp's public Web sites, the FTC said.

The FTC found that full-service real-estate brokers, who make up a majority of Realcomp's membership, saw the combination of discount brokers with the public availability of MLS listings via Internet Web sites as a "serious threat" to their business model, the FTC said. In response, Realcomp established policies that limited the effectiveness discount brokers' listings, the FTC alleged.

The case centers around real-estate services that allow homeowners to sell their houses and not be charged real-estate agent commissions, said Karen Kage, CEO of Realcomp. Those properties weren't listed on Realcomp's Web sites because the service's real estate agent members believed those homeowners would be getting free publicity on a site supported by real estate agencies, she said.

"We felt that this was unfair to our paying subscribers," Kage said.

Realcomp is "very disappointed" the FTC reversed the decision of the administration law judge, she added. "It was clear [the judge] understood what we bring to the table."

The FTC's Final Order forbids Realcomp from discriminating against discount brokers in determining what listings it transmits to public Web sites or setting its default search criteria. The order also requires Realcomp, within 30 days of the order becoming final, to amend its rules and regulations to conform with the order's provisions.

Realcomp may appeal the decision in court, Kage said.

In recent years, the U.S. Department of Justice has filed complaints against several MLS services, alleging bias against Internet-based real-estate agents. In May 2008, the DOJ and the National Association of Realtors (NAR) reached a settlement on a 2005 antitrust complaint in which the DOJ accused the group of freezing out Internet-based real estate agents.

The IDG News Service is a Network World affiliate.