DOJ settles Internet complaint against real estate group

Proposed settlement requires National Association of Realtors to allow Internet-based brokers of residential real estate to compete with traditional brokers

The U.S. Department of Justice and the National Association of Realtors (NAR) have reached a settlement on a 2005 antitrust complaint in which the DOJ accused the group of freezing out Internet-based real estate agents.

The proposed settlement, which would be enforced for 10 years, requires the NAR to allow Internet-based brokers of residential real estate to compete with traditional brokers, the DOJ said. The settlement could give real estate customers "more choice, better service and lower commission rates," the DOJ said.

The DOJ's Antitrust Division filed a civil lawsuit against the NAR in September 2005. The agency accused the NAR of implementing policies that obstructed real estate brokers who used Internet-based tools to offer better services and lower costs.

The DOJ accused the NAR of allowing brokers to pull their real estate listings from the Multiple Listing Service (MLS), a joint venture among competing brokers. Association brokers have traditionally shared listings with each other, and customers could access those listings by mail, fax, or at real estate broker offices, the DOJ said. But an association policy allowed brokers to opt out of sharing their listings with brokers offering Web-based property search services, the DOJ said.

The NAR's policies "threatened to lock in outmoded business models," the DOJ said.

The NAR did not admit wrongdoing and will make no payments in connection with the settlement, the trade group said.

"This is clearly a win-win" for the real estate industry and its clients, NAR president Richard Gaylord said in a statement.

The case was scheduled to go to trial in July in U.S. District Court for the Northern District of Illinois, Eastern Division, in Chicago.

Under the proposed settlement, the NAR will enact a new policy that guarantees that Internet-based brokerage companies will not be treated differently from traditional brokers. Brokers participating in a MLS will not be permitted to withhold their listings from brokers who serve their customers through virtual office Web sites, the DOJ said. The settlement still has to be approved by the court.

Brokers will be able to use virtual offices to educate consumers, make referrals, and conduct brokerage services. The NAR also has agreed to adopt antitrust-compliance training programs that will instruct real estate groups about the antitrust laws and the requirements of the proposed settlement.

The settlement will prevent traditional brokers from "deliberately impeding competition," said Deborah Garza, deputy assistant attorney general of the DOJ's Antitrust Division, in a statement. Consumers are more likely to receive better services and pay lower commissions with "unfettered competition" that allows "innovative and efficient approaches to the residential real-estate market," she said.

The NAR is a trade association of more than 1.2 million residential real-estate brokers as members. In almost every area of the country, brokers have organized MLSes, and more than 80 percent of the 1,000 MLSes in the U.S. are affiliated with NAR, the DOJ said.

The DOJ antitrust lawsuit challenged the NAR policies adopted in 2003 and 2005. One association rule challenged by the DOJ allowed traditional brokers to withhold MLS listings from brokers operating virtual offices. The NAR does not allow brokers to withhold listings from other traditional brokers, the DOJ said.

A second association policy prevented a broker from showing homes through a virtual office, then referring those customers to other brokers who could help customers view homes in person and negotiate contracts for them. Some brokers using virtual offices attempted to pass along some savings to customers, the DOJ said.