NAR vs. the DOJ: round one
In November 2018, a ten-year agreement between the National Association of Realtors® (NAR) and the Department of Justice (DOJ) is set to expire, putting the future of the internet’s developing stake in the real estate industry in jeopardy.
At issue is the fate of what NAR refers to as “virtual office websites” (VOWs). VOWs are online brokerages through which buyers and sellers can research local real estate markets and scour listings without the direct assistance of a licensed broker. This designation could include large-scale data aggregators like Zillow and Redfin — depending on who you ask.
According to NAR, a VOW is “a website operated by a broker, through which the broker is capable of providing real estate brokerage services to consumers with whom the broker has first established a broker-consumer relationship, as defined by state law, where the consumer has the ability to search MLS data, subject to the broker’s oversight, supervision, and accountability.”
With this definition, NAR deliberately excludes large aggregators. But it’s not clear that everybody — including the DOJ — agrees with this interpretation.
The agreement between NAR and the DOJ resulted from a 2005 investigation and lawsuit alleging that NAR unfairly restricted access to multiple listing service (MLS) data for brokers who elected to use VOWs in lieu of running more traditional brokerages. VOWs, however, appeal to brokers and agents who want to work smarter, not harder, spending less time poring through MLS data and give their buyers and sellers the freedom to review properties online on their own.
As local Realtor® associations (and by extension, NAR) own and control MLS information, NAR’s interests were directly at stake. NAR did not want brokers to gather and distribute listing information independently of MLSs, “leaking” this sacrosanct property data to the public at large and putting NAR’s revenue from membership dues at risk.
Many real estate licensees believe union membership is required for MLS access, when in fact a subscription to the MLS is enough. However, MLS access is bundled with a NAR membership, and with no further motivation to have access to MLS data, agents and brokers have little reason to be part of a Realtor® association at all.
In order to combat what NAR saw as an existential threat to its business, the trade union instituted two broad policies governing brokers’ use of VOWs:
- “traditional” brokers could withhold their listings from VOWs — a practice NAR disallows with other traditional brokers — severely crippling VOW brokers’ ability to do business; and
- VOW brokers could not receive a referral fee for referring buyers or sellers to other brokers through a VOW.
Consequently, the DOJ argued that “NAR’s policies prevented consumers from receiving the full benefits of competition in the residential real estate industry.” By enabling brokers to withhold listing information from VOWs, NAR rendered these VOWs less able to compete with their more data-rich MLS colleagues — and therefore unable to compete in the real estate marketplace. At its core, this constituted an antitrust violation, and a barrier to broker freedom and innovation.
As a result of the lawsuit, NAR reversed its policies regarding VOWs in 2008, agreeing to treat VOWs no differently than traditional brokers, and requiring MLSs to abide by conduct pursuant to its updated policies. Since 2008, VOWs have been allowed to operate relatively uninhibited, with full access to the same MLS information available to brick-and-mortar brokerages at the behest of the DOJ.
So the question is: What happens when the agreement expires in November?
An uncertain future
The short answer? Probably nothing.
And really, why would anything happen? Ten years of adjustment makes major changes to the DOJ-mandated platform impractical.
Katie Johnson, NAR’s General Counsel, claims NAR has no plans to change its modified policies regarding VOWs. Johnson also notes “NAR’s MLS policies have evolved over the past decade to permit MLS participants to share a wealth of MLS data with consumers on their public websites, including information that was once only available via VOWs.”
What does this mean, exactly? Times are changing, and NAR is struggling to keep up — sites like Zillow have surpassed MLSs in usefulness when it comes to making property data available to brokers, agents and the public, and NAR knows it.
“If NAR determines that some modifications to that policy are helpful and lawful,” Johnson writes, “we may consider implementing them but would do so very judiciously and with careful consideration to avoid any potentially anticompetitive implications of such proposed changes.”
Of course, NAR is clearly still nervous of DOJ involvement — a good thing for brokers and agents who want to practice real estate unmolested.
Still, it’s not evident whether NAR will stick to its guns, or whether it will in fact say one thing but offer a different interpretation of its policies in light of its newfound freedom from oversight. Even if its VOW rules were to change — or revert to their pre-2008 iteration — it’s hard to say whether that would have any significant effect on the way brokers and agents currently do business.
NAR vs. the DOJ: round two?
With the rise of large-scale listing aggregators like Zillow and Redfin, brokers and agents have become accustomed to their clients coming into the conversation with at least a cursory understanding of properties on and off the market, gleaned from independent online resources.
NAR and its advocates argue organizations like these don’t compete in the same market as smaller brokerages — in fact, they don’t count as VOWs at all. However you classify them, their sizable impact on the modern real estate industry can no longer be ignored or reversed — including their impact on NAR’s bottom line.
Not only is Realtor.com, one of Zillow’s largest competitors, owned and controlled by NAR, but NAR — as well as plenty of non-union brokers and agents — see aggregators like Zillow as a threat to the imperial structure of an MLS-based market itself.
Since Zillow in particular obtains many of its listings directly from MLSs (as well as various other syndicated sources) it is feasible that, on the expiration of the DOJ agreement, NAR may attempt to once again to flex its muscles and limit Zillow’s access to data from NAR-affiliated MLSs.
But is it likely?
The probability of NAR taking measures to limit Zillow’s resources is up in the air, but NAR and the California Association of Realtors® (CAR), NAR’s California arm, have a history of trying to smother their competition.
CAR’s crass treatment of DotLoop — and subsequent litigation against PDFfiller — is a clear display of the organization’s anticompetitive bent, and there’s no reason not to believe it won’t start heading down the same road with regard to these aggregators. This is true even for those like Redfin which participate more directly in brokerage activities than other multi-state companies, and thus are more likely to fall under the purview of the DOJ agreement.
That said, any adverse action on NAR’s part would ultimately be disadvantageous for California brokers and agents. For one thing, even as the DOJ lets the agreement expire, it will still have its eye on NAR. And for another, brokers and agents —not to mention the general public — have become accustomed to the access to listing information sites like Zillow provide. A battle over MLS data would prove lengthy, costly and likely unpopular for the general population of both licensees and consumers.
Ultimately, there’s no way to know how all this will play out until after November. But in the meantime, it’s in the best interest of the DOJ — and real estate licensees — to keep all eyes on NAR.