Technological innovation has made it cheaper, easier, and faster to buy and sell most products. However, the real estate industry has firmly resisted disruption, successfully lobbying for state laws banning commission rebates, preventing the public disclosure of residential sale prices, and requiring consumers to purchase real estate services that they may not want, as well as blocking third parties from accessing listing data. These practices have allowed the industry to preserve the long-standing fixed commissions for brokers even as home prices have climbed much faster than inflation.
In 2005, the U.S. Department of Justice (DOJ) brought an antitrust lawsuit against the National Association of Realtors (NAR) for its anti-competitive policies that were designed to exclude lower-cost online real estate startups from competing with traditional brokers. The lawsuit resulted in a 10-year settlement that prohibited local multiple listing services (MLSs) from enacting rules that limit competition; however, this agreement expires this year. Since the issue is still complex, the Federal Trade Commission (FTC) and DOJ held a workshop to explore competition in the real estate brokerage industry on June 4, 2018.
On April 5, 2018, the Information Technology and Innovation Foundation (ITIF) hosted a panel on the topic, with ITIF Vice President Daniel Castro serving as moderator. Speakers represented diverse views and stakeholders and included Ben Clark, real estate broker; Jessica Drake, attorney at the Federal Trade Commission (FTC); Ralph Holmen, associate general counsel at NAR; David Kully, partner at Holland & Knight and former antitrust attorney at the U.S. Department of Justice (DOJ); and Brian Larson, senior business consultant at Larson Skinner PLLC.
Panelists discussed the challenges and opportunities to increase competition in the real estate industry through technological innovation, and the role that policymakers can play in using technology to make home ownership more affordable today.
One of the key questions of the debate was whether MLSs, which are local real estate organizations that brokers use to disseminate details on properties, should be more open to the public. Much of the information that Castro shared came from the recent ITIF report “Blocked: Why Some Companies Restrict Data Access to Reduce Competition and How Open APIs Can Help.” In the report, Castro and his co-author Michael Steinberg argued that unfairly limiting third parties from accessing certain data hurts competition, innovation, and consumers. Clark echoed this sentiment during the event, claiming that “there is a data war happening.”
However, supporters of the MLS system, such as Holmen and Larson, argue that MLSs are already open to the public, creating ample opportunity for anyone to compete. Holmen argued that fewer than 20 MLSs are not in compliance with the Real Estate Standards Organization’s guidelines and that NAR does not advocate for exclusionary legislation at the state level.
Larson claimed that MLSs are quite open and that creating a consolidated MLS, which many hope to do, would be antithetical to antitrust principles. Consolidation would also infringe on local groups’ ability to make their own economic decisions. According to him, one conglomerate would not be more conducive to competition, though Kully, a former DOJ antitrust lawyer, refuted that claim, responding that it would foster competition.
From the regulator standpoint, Drake believes that the FTC and likely the DOJ would explore alternatives to MLSs at the workshop in June, in order to fully understand the implications. One such alternative is a pocket listing, which is when a broker and a seller explicitly agree to not submit a listing to the MLS. Though Castro listed examples of when MLSs or legislators tried to thwart pocket listings, Larson claimed that MLS—though they would obviously not be huge proponents of pocket listings—would never actually get prevent a broker from creating one.
Kully discussed the pro-competitive benefits of real estate portal websites, since most sellers would want their listings as widely available as possible. He claimed that the FTC and DOJ would likely get involved when wide swaths of brokers quit posting to these sites, such as Zillow, since it may indicate that MLSs are preventing them from doing so. However, he also noted that mandated public access to MLSs or real estate data may not be the correct answer either. Holmen responded by asserting that a broker can post his or her client’s listing on any website.
The debate over MLS data access is fraught with many different perspectives and standpoints. However, more transparency and access will benefit consumers in the end.
Follow the discussion on Twitter using the hashtag #ITIFrealestate.