Things are moving fast. I received a copy of the complaint filed yesterday by a group of MLSs against Compass in the SDNY – the same court where CRMLS filed its declaratory judgment lawsuit – asking for the same declaratory judgment and injunctive relief.
The MLSs involved are among the largest in the country:
- ARMLS
- BridgeMLS
- Canopy MLS
- REcolorado
- Hive MLS
- Doorify MLS
I suspect they are not the last; others may join this one or file their own. I will have to admit that perhaps the CRMLS lawsuit doesn't get dismissed in light of these; perhaps they all get consolidated into one big action somehow.
I have already done a couple of write ups, one on the CRMLS's version of this lawsuit, and of course on Compass's actual lawsuit against CRMLS. But I thought this complaint is worth spending a bit of time on because it is very well drafted. The arguments are crisp and clear in a way they really were not in the CRMLS version and definitely not in the Compass version.
That clarity, in turn, allows us to pinpoint where the potential legal issues will be and possibly point towards an out of court resolution. Well, once they are done fighting, I suppose.
I doubt I'll be breaking new ground here since I've already done quite a bit of the analysis and research already for previous posts. If you are wanting that, go read those two.
Rob Hahn
and
Rob Hahn
Again, I am not your lawyer and none of this is legal advice. This is edutainment from an industry analysis perspective. With that said, let's get into it.
The Complaint
As I said above, I wanted to write on this because this Complaint is really well-drafted. Kudos to the lawyers involved; I know how difficult it is to take such a complicated issue and set of facts and get them so succinct and clear.
As an aside, the PDF is protected... which is super annoying since that prevents copy-paste. I don't understand why anyone would protect a PUBLIC FILING but whatever. Here it is.
Right off the bat, this Complaint is just easier to read and understand. We get an Introduction that outlines what the dispute is about and what the MLS's position is. Just compare this to the CRMLS complaint and you'll see what I mean. The problem is straightforward:
- The MLS is a cooperative of competing brokers who agree to cooperate for a limited purpose to build a complete and current listings database that no single broker could build.
- The Cooperation Rules are required to make this database possible.
- One such rule is that "Any property that is marketed to the public must be entered into the MLS so it becomes part of the database of listings made available to all MLS members and thus all consumers."
- This rule is necessary to stop free riding. If brokers could use the database for their buyer-clients while withholding their own listings, the database would become incomplete and lose its value.
- Compass wants other brokers’ listings while deciding for itself what it contributes and when (“cake and eat it too”). "This may benefit Compass and its strategy of leveraging its market power to wield its substantial inventory of for-sale properties as a weapon to drive smaller brokerages out of business." That would diminish competition.
- Sellers have existing options for marketing that do not undermine the MLS, such as private listings and Coming Soon options and "Limited Exposure" options.
- So, the MLSs are entitled to a declaratory judgment that these rules do not violate antitrust laws.
So clear, so simple. We then get a far clearer and cleaner narrative section. This Complaint cites the relevant parts of the Butters Report rather crisply:
The MLS serves an essential market-making function. As the Federal Trade
Commission recognized in its 1983 study of the residential real estate brokerage industry (the "Butters Report"), "both sellers and buyers would be served best if they could reach all potential buyers or receive information relating to all homes for sale, through a single, convenient source."
The Butters Report found that the MLS "create[s] an excellent centralized
source of information regarding housing values" and that the "market-making effect of the MLSs probably exceeded even the founders' expectations." [Citations removed, line breaks added.]
And the Complaint notes how the MLS maximized seller's price, buyer satisfaction and doubled the probability of the home selling. It points out the concern with "vest-pocket listings."
Then it points to the 2007 Competition Report by the FTC and DOJ that talked about the positives of the MLS:
To the contrary, the agencies acknowledged in the 2007 Competition Report the importance of the MLS not just to sellers and their exclusive agents but also to buyers and other brokers. Specifically, the agencies stated that buyers benefit from the MLS because they can have access to "a single source (that is, a single broker) for information regarding the vast majority of homes for sale within a given area, instead of visiting multiple brokerages to obtain such information. Access to the largest number of potentially appropriate homes for sale allows buyers to maximize their chances of finding a home that most clearly matches their desired
characteristics."
All true and thus very strong.
The Complaint then cites NAR's Clear Cooperation Policy, and says how the MLS must abide by mandatory policies.
