[Federal Register: November 27, 2007 (Volume 72, Number 227)]
[Notices]
[Page 66188-66198]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27no07-110]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Multiple Listing Service Of Hilton Head Island,
Inc.; Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation and Competitive Impact Statement have been filed with the
United States District Court for the District of South Carolina in
United States of America v. Multiple Listing Service of Hilton Head
Island, Inc., Civil Action No, 07-3435. On October 17, 2007, the United
States filed a Complaint alleging that the Multiple Listing Service of
Hilton Head Island, Inc. violated section 1 of the Sherman Act, 15
U.S.C. 1, by adopting and enforcing rules that restrict access to the
Multiple Listing Service database and limit members' business behavior.
The proposed Final Judgment, filed at the same time as the Complaint,
requires the group to change its membership rules so that low-priced
and innovative real estate brokers can compete in the Hilton Head area.
Copies of the Complaint, proposed Final Judgment and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, Antitrust Documents Group, 325 7th Street,
NW., Room 215, Washington, DC 20530 (telephone: 202-514-2481), on the
Department of Justice's Web site at http://www.usdoj.gov/atr. and at
the Office of the Clerk of the United States District Court for the
District of South Carolina. Copies of these materials may be obtained
from the Antitrust Division upon request and payment of the copying fee
set by Department of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be addressed
to John R. Read, Chief, Litigation III Section, Antitrust Division,
U.S. Department of Justice, 325 7th Street, NW., Suite 300, Washington,
DC 20530, (202) 307-0468.
J. Robert Kramer II,
Director of Operations Antitrust Division.
United States District Court for the District of South Carolina
Beaufort Division
United States of America, Department of Justice, Antitrust Division,
325 7th Street, NW., Suite 300, Washington, DC 20530, Plaintiff, v.
Multiple Listing Service of Hilton Head Island, Inc., 18 Bow Circle,
Hilton Head Island, SC 29928, Defendant
Civil Action No.9 :07-CV-3435-SB
Filed: 10/16/07
Complaint for Equitable Relief for Violation of 15 U.S.C. 1 Sherman
Antitrust Act
Complaint
The United States of America, by its attorneys acting under the
direction of the acting Attorney General, brings this civil antitrust
action against Defendant Multiple Listing Service of Hilton Head
Island, Inc. (``Hilton Head MLS'') to obtain equitable and other relief
for violation of Section 1 of the Sherman Act, 15 U.S.C. 1, as amended.
Introduction
1. The United States brings this action to enjoin the Defendant
from enforcing certain of its rules that unreasonably restrain
competition among real estate brokers in the Hilton Head, South
Carolina area Defendant is a multiple listing service, which is
controlled by its members who are real estate brokers competing to sell
brokerage services to consumers in the Hilton Head area.
2. Defendant provides a variety of services to its members,
including the maintenance of a database of past and current listings of
properties for sale in the Hilton Head area. Access to the database is
critical to being a successful broker. Therefore, brokers seeking to
provide brokerage services in the Hilton Head area need to be members
of the Hilton Head MLS.
3. By its rules, Defendant denies membership to brokers who would
likely compete aggressively on price or would introduce Internet-based
brokerage into the market, and imposes unreasonable membership costs on
publicly-owned brokerage companies.
[[Page 66189]]
Defendant's rules also stabilize prices by forcing member brokers to
provide a certain set of brokerage services, whether or not the
consumer desires to purchase those services.
4. Additionally, Defendant has authorized its Board of Trustees to
adopt rules that would regulate commissions and impose discriminatory
requirements on Internet-based brokers. The mere prospect that the
Board might adopt such rules likely inhibits price and service
competition. Their actual adoption would stabilize prices and
competitively disadvantage Internet-based brokers.
5. By adopting and enforcing rules that restrict access to its
database and limit members' business behavior, Defendant has restrained
competition, reduced consumers' choices, and stabilized prices on
Hilton Head Island.
Defendant And Its Members
6. Defendant Hilton Head MLS is organized as a not-for-profit
corporation under the laws of South Carolina with its principal place
of business on Hilton Head Island, Beaufort County, South Carolina.
7. Hilton Head MLS is a joint venture of over one hundred competing
licensed brokers and other licensed real estate professionals doing
business in the Hilton Head area. Hilton Head MLS serves Hilton Head
Island, South Carolina. Although Hilton Head MLS also serves several
surrounding counties as well as Hilton Head Island, close to 85 percent
of the properties listed--as measured by dollar volume of closed
transactions--in the Hilton Head MLS are located on Hilton Head Island,
which no other MLS serves.
8. Whenever this complaint refers to any act, deed, or transaction
of the Hilton Head MLS, it means the Hilton Head MLS is engaged in the
act, deed, or transaction by or through its members, officers,
directors, trustees, employees, or other representatives while they
were actively engaged in the management, direction, control, or
transaction of its business or affairs.
9. Various others, not named as Defendants, have participated as
conspirators with Hilton Head MLS in the violations alleged in this
complaint, and have performed acts and made statements to further the
conspiracy.
Jurisdiction and Venue
10. This Court has subject matter jurisdiction over this action
under Section 4 of the Sherman Act, as amended, 15 U.S.C. 4, and 28
U.S.C. 1331, 1337(a), and 1345.
11. Because Hilton Head MLS maintains its principal place of
business on Hilton Head Island, South Carolina and transacts business
and is found within this District, venue is proper in this District
under 15 U.S.C. 22 and 28 U.S.C. 1391(b) .
Trade and Commerce
12. Broker-members of the Hilton Head MLS provided residential real
estate brokerage services to in-state and out-of-state clients seeking
to buy or sell property in the Hilton Head area. In 2005, those brokers
facilitated the exchange of property worth over $2.5 billion, and they
collected fees of approximately $170 million for their services.
Interstate mortgage financing is affected by this exchange of property.
13. The Hilton Head MLS's activities and the violations alleged in
this Complaint affect brokers, home buyers, and home sellers located
throughout the United States. The Hilton Head MLS' s real estate
activities are in the flow of, and have a substantial effect on,
interstate commerce.
Concerted Action
14. The rules of the Hilton Head MLS are the product of agreements
or concerted action among brokers who compete in the Hilton Head area.
The broker-members of the Hilton Head MLS, as a group and through the
Board they elect and the staff they indirectly employ, maintain and
enforce MLS rules affecting a broker's participation in the MLS.
Relevant Markets
15. The provision of real estate brokerage services to sellers of
residential real property and the provision of real estate brokerage
services to buyers of residential real property are relevant service
markets within the meaning of the antitrust laws. In the event of a
small but significant increase in the price of brokerage services, the
number of buyers and sellers that would switch to another way of
selling or buying a home would not be sufficient to make such a price
increase unprofitable.
16. The real estate brokerage business is local in nature. Most
sellers prefer to work with a broker who is familiar with local market
conditions. Likewise, most buyers seek to purchase property in a
particular city, community, or neighborhood, and typically prefer to
work with a broker who has knowledge of the area in which they have an
interest. Both home buyers and home sellers desire a residential real
estate broker who is a member of the MLS that serves the area in which
they are purchasing or selling a home. Even though the Hilton Head
MLS's service area encompasses neighboring counties as well as Hilton
Head Island, nearly 85 percent of the properties listed--as measured by
dollar volume of closed transactions--in the database are located on
Hilton Head Island. In the event of a small but significant increase in
the price of brokerage services relating to properties located on
Hilton Head Island, the number of buyers and sellers who would switch
to brokerage services relating to properties located elsewhere would
not be sufficient to make such a price increase unprofitable.
Therefore, for purposes of this complaint, Hilton Head Island
constitutes the relevant geographic market, within the meaning of the
antitrust laws.
Background Of The Offense
Industry Background and MLS Market Power
17. Most prospective home sellers and buyers engage the services of
a broker to purchase and sell homes. Real estate brokers formed the
Hilton Head MLS to facilitate the provision of real estate brokerage
services to such buyers and sellers.
18. The Hilton Head MLS pools and disseminates information on
almost every property available for sale on Hilton Head Island. It
combines its members' property listings information into an electronic
database and makes this data available to all brokers who are members
of the MLS. By listing information on a home in the MLS, a broker can
market it to a large number of potential buyers. A broker representing
a buyer likewise can search the MLS to provide a home buyer with
information about nearly all the listed properties in the area that
match the buyer's housing needs.
19. Members of the Hilton Head MLS utilize the database as a
clearinghouse to, among other things: communicate the listings
information of the properties that they have for sale to other members;
offer to compensate other members as cooperating brokers if they locate
purchasers for those listings; locate properties for prospective
purchasers; distribute listings to other members for advertisement
purposes; and compile and distribute market statistics.
20. The Hilton Head MLS also maintains records of sold homes. These
``sold data'' records are very important for brokers working with
sellers to set an optimum sales price. Brokers representing a buyer
likewise use the sold data to help buyers determine what price to offer
for a home.
21. Access to the database provided by the Hilton Head MLS is
critical for
[[Page 66190]]
brokers who wish to serve buyers or sellers successfully on Hilton Head
Island. By virtue of marketwide participation and control over a
critically important input, the Hilton Head MLS has market power.
Growth of Alternative Business Models
22. The prices consumers paid to brokers for the brokerage services
associated with a typical home sales transaction have increased
substantially since 2003 on Hilton Head Island and in many other parts
of the country. This is because brokers who adhere to traditional
methods of doing business typically charge a fee calculated as a
percentage of the sales price of the home, and that percentage has
tended to be relatively inflexible as housing prices on Hilton Head
Island and in many other parts of the country have increased
dramatically. As a result of these higher prices, brokers offering
competitively significant alternatives to traditional methods have
emerged in other areas of the country.
23. Technology-Savvy Brokers. Some brokers in other parts of the
United States use technology to automate certain tasks and to
communicate more efficiently with consumers. For example, technology
enables brokers to contact, communicate with, and service consumers
remotely or in-person without the need for a retail office location
that consumers can visit. Such technology-savvy brokers can reduce
brokerage costs by operating fewer or no physical offices, and may pass
cost savings on to consumers through reduced brokerage fees.
24. Fee-for-Service Brokers. Other brokers around the country now
contract with buyers and sellers to provide a subset of services for a
flat fee rather than for a percentage of the home sale price. Fee-for-
service brokers provide certain enumerated services such as marketing
the house or attending closings, while the buyer or seller takes
responsibility for other services associated with brokerages such as
making offers and counteroffers or conducting open houses on their own.
Through fee-for-service packages, buyers and sellers can save money by
purchasing only the services that they wish for their broker to
provide.
25. Price Discounters and Publicly-owned Brokerages. Brokers in
other areas of the country have attracted customers by offering full-
service, reduced commission brokerage services. Additionally, brokers
in other areas of the country have sought competitive advantage by
creating nationwide firms. These firms raise capital through public
ownership, invest in nationwide brands and provide brokerage services
to consumers in multiple markets.
26. These types of brokerage models have not emerged on Hilton Head
Island due to Defendant's rules. As a result, the prices that consumers
pay for brokerage services are higher on Hilton Head Island than in
other areas of the country.
Restraints on Competition
27. Defendant's rules and practices have harmed competition in a
variety of ways. As a result of Defendant's rules, consumers of
residential real estate brokerage services on Hilton Head Island have
fewer choices among types of brokers and pay higher fees for those
services than consumers in other areas of the country. Defendant's
rules and practices are not reasonably necessary to achieve the
procompetitive benefits of the MLS. Instead, the rules at issue here
unreasonably: (1) Raise entry barriers for potential competitors by
imposing burdensome prerequisites for membership; (2) provide a means
of identifying potentially aggressive competitors so they can be
excluded from membership; (3) stabilize the price of brokerage services
through the prospect of price controls; (4) deter the emergence of
Internet-based brokerages; (5) stabilize the price of, and reduce
consumer options for, brokerage services by dictating the services that
all brokers must provide; and (6) discourage entry of potential
competitors who raise funds through public ownership.
28. Defendant's rules achieve these adverse effects by requiring
that broker-members: (1) Maintain a physical office within the Hilton
Head MLS service area; (2) reside within the area served by the Hilton
Head MLS; (3) operate their offices during hours deemed reasonable by
the Hilton Head MLS; and (4) hold a South Carolina real estate license
as their primary license. (Bylaw Article II, Section II; Bylaw Article
VII; & Rule II.) These rules allow Defendant to deny membership to
brokers who operate business models that would increase competition.
For example, these rules enable Defendant to exclude technology-savvy
brokers who serve their clients without a physical office and who can
pass along the cost savings to consumers through reduced commission
rates. These rules also deprive consumers of the benefits of
competition from brokers who work part-time or who are licensed under
reciprocity provisions of South Carolina law.
29. Defendant's rules have enabled it to identify applicants who
could be aggressive competitors and deny their application for
membership. Broker-applicants are required to disclose their business
history and prior employment, undergo a credit check, and obtain
letters of recommendation from three current broker-members, i.e.,
those with whom the applicant would compete. (Bylaw Article VII,
Section IV; Bylaw Article VII, Section IV(a); Rule II.A.2.) These rules
have allowed unreasonable denials of membership and thus deprived
consumers of the benefits of competition.
30. Defendant has authorized its Board of Trustees to adopt
mandatory guidelines that would regulate the commission that listing
brokers offer to selling brokers in exchange for their cooperation on
the home sale. (Bylaw Article XI, Section I.) The mere prospect that
the Board might adopt such controls likely inhibits price competition.
Their actual adoption would directly fix and stabilize prices.
31. Defendant has a rule that requires its members to provide
certain services to all brokerage customers, whether or not desired by
the customer. (Bylaw Article X; MLS Listing Agreement.) Embodied in the
terms of Defendant's mandatory form listing agreement, this rule
prevents current and prospective members from operating a fee-for-
service business model. This rule decreases competition and harms
consumers because it insulates Defendant's members from the competitive
pressures posed by brokers who would offer additional pricing and
service choices to their customers.
32. Defendant has authorized its Board of Trustees to impose
discriminatory requirements on Internet-based real estate brokers.
(Bylaw Article II, Section II.) The mere prospect that the Board might
adopt such controls likely deters Hilton Head brokers from developing
that business mode! and thereby inhibits such service competition. Such
requirements, if implemented, would competitively disadvantage
Internet-based brokers and discourage them from joining the MLS and
competing on Hilton Head Island, thereby limiting consumer choice.
33. Defendant has a ``change in ownership'' rule that requires
publicly-held brokerages to make a significant payment to the Defendant
every time a share of their stock changes hands. (Bylaw Article VII,
Section X; Rules II.A.3; II.B & II.E.) This rule competitively
disadvantages publicly-owned companies and discourages them from
joining the MLS and competing on Hilton Head Island, thereby limiting
consumer choice.
34. Taken together, Defendant's rules discourage competition on
price and service, and inhibit competitive actions
[[Page 66191]]
that would alter the status quo. As a result of Defendant's
anticompetitive rules, consumers of brokerage services on Hilton Head
Island have fewer choices of service options and pay higher prices for
real estate brokerage services than do consumers in other parts of the
country.
Violations Alleged
35. Defendant's above-referenced rules and practices constitute a
contract, combination, or conspiracy by competitors with market power
that unreasonably restrains competition on Hilton Head Island in
violation of section I of the Sherman Act, 15 U.S.C. 1. Defendant's
rules and practices are not reasonably necessary to carry out the
procompetitive purposes of a multiple listing service.
36. The aforesaid contract, combination, or conspiracy has had and
will continue to have unreasonable anticompetitive effects in the
relevant market, including:
a. stabilizing and raising prices for real estate brokerage
services;
b. reducing competition on price and quality for real estate
brokerage services;
c. impeding innovation in the provision of real estate brokerage
services;
d. preventing consumers from choosing fee-for-service brokerage
models; and
e. creating barriers to entry into the provision of real estate
brokerage services.
Request for Relief
Wherefore, the United States prays that final judgment be entered
against Defendant declaring, ordering, and adjudging:
a. That the aforesaid contract, combination, or conspiracy
unreasonably restrains trade and is illegal under Section 1 of the
Sherman Act, 15 U.S.C. 1;
b. That the Defendant, its officers, directors, agents, employees,
successors, and assigns and all other persons acting or claiming to act
on their behalf, be permanently enjoined from engaging in, carrying
out, renewing or attempting to engage in, carry out or renew the
combination and conspiracy alleged herein, or any other combination or
conspiracy having a similar purpose or effect in violation of section 1
of the Sherman Act, 15 U.S.C. 1; and
c. That the Court grant such other relief as the United States may
request and the Court deems just and proper.
Dated: October 16, 2007.
For Plaintiff United States of America.
Thomas O. Barnett,
Assistant Attorney General.
David L. Meyer,
Deputy Assistant Attorney General.
J. Robert Kramer II,
Director of Operations.
John Read,
Chief, Litigation III Section.
Nina Hale,
Assistant Chief, Litigation III Section.
Lisa A. Scanlon, Owen M. Kendler, Christopher M. Ries,
Attorneys for the United States of America, U.S. Department of
Justice, Antitrust Division, 325 7th Street, N.W., Suite 300,
Washington, DC 20530, Telephone: (202) 616-5954, Facsimile: (202)
514-7308.
Respectfully submitted,
Reginald I. Lloyd,
United States Attorney.
By:
Barbara M. Bowens (I.D. 4004),
Assistant United States Attorney, 1441 Main Street, Suit 500,
Columbia, South Carolina 29201.
United States District Court for the District of South Carolina;
United States of America, Plaintiff, v. Multiple Listing Service of
Hilton Head Island, Inc., Defendant
Proposed Final Judgment
Whereas, Plaintiff, United States of America, filed its Complaint
on October 16, 2007, and Plaintiff and Defendant, Multiple Listing
Service of Hilton Head Island, Inc., by their respective attorneys,
have consented to the entry of this Final Judgment (the ``Final
Judgment'') without trial or adjudication of any issue of fact or law,
and this Final Judgment shall not be evidence against or an admission
by any party regarding any issue of fact or law;
And Whereas, Defendant is a multiple listing service among
competing real estate brokerages, organized as a not-for-profit
corporation under the laws of South Carolina, and maintains its
principal place of business in Hilton Head Island, South Carolina;
And Whereas, Defendant agrees to be bound by the provisions of this
Final Judgment pending its approval by the Court;
And Whereas, Defendant agrees to take certain actions for the
purpose of remedying the loss of competition alleged in the Complaint;
And Whereas, Defendant has represented to the United States that
the actions required below can and will be made and that Defendant will
later raise no claim of hardship or difficulty as grounds for asking
the Court to modify any of the provisions contained below;
Now Therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is Ordered, adjudged, and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against Defendant under section 1 of the Sherman
Act, as amended, 15 U.S.C. 1.
II. Definitions
As used in this Final Judgment:
A ``Defendant'' means the Multiple Listing Service of Hilton Head
Island, Inc., its successors and assigns, and its members, officers,
managers, committees, and employees.
B. ``Affiliate Member'' means any member of the Defendant that is
engaged in banking, mortgage lending, mortgage brokering, and similarly
related fields.
C. ``Associate Member'' means: (1) A member of the Defendant who is
an `associated licensee' as the term is defined in S.C. Code Ann. Sec.
40-57-30 (2005) or any recodification thereof; and (2) a Licensee who
associates with a Full Member or a Broker-in-Charge of a Full Member.
D. ``Applicant'' means a person who applies for full, associate, or
affiliate membership in the Multiple Listing Service of Hilton Head
Island.
E. ``Appraiser'' means any person who is licensed under Title 40
Chapter 60 of the South Carolina Revised Statutes or any future recode
fication thereof and legally can perform real estate appraisal.
F. ``Appraisal Firm'' means a firm owned by or employing an
Appraiser.
G. ``Broker-in-Charge'' means: (1) A ``broker-in-charge'' as the
term is defined in S.C. Code Ann. Sec. 40-57-30 (2005) or any
recodification thereof; or (2) any licensed broker who is designated as
having responsibility over the actions of all its associated licensees
and is affiliated with a Full Member.
H. ``Buyer's Representation Agreement'' means the contract between
a Licensee and Client or any other person who is a prospective home
buyer.
I. ``Client'' means a person with whom a Licensee has established
an agency relationship.
J. ``Compensation'' means: (1) Any commission or fee charged by, or
rebate offered by, a Licensee to a Client or any person who is a
prospective home buyer or seller; (2) any commission or payment offered
to other Licensees in exchange for cooperation on a property
transaction; or (3) any commission, salary, or fee exchanged between a
Full Member and its affiliated or employed Licensees.
[[Page 66192]]
K. ``Full Member'' means any member of the MLS that is a real
estate brokerage firm having a Broker-in-Charge or an Appraisal firm.
L. ``Licensee'' means: (1) Any person who is licensed under Title
40 Chapter 57 of the South Carolina Code Annotated or any future
recodification thereof; (2) any person who legally can perform acts of
real estate brokerage; or (3) any person who legally can perform acts
of real estate brokerage while acting under the supervision of a
licensed broker.
M. ``Listing Agreement'' means the contract between a Licensee and
Client or any other person who is a prospective home seller.
N. ``Member MLS Database Access'' means the security measures, such
as a login-id and password or key token, needed to access the complete
MLS database provided by Defendant to Full, Associate or Affiliate
Members. Member MLS Database Access does not mean or encompass any
login-id or password that a Full or Associate Member establishes for,
or grants to, its customers or clients either to access the broker's
website or to access listings content provided on the broker's website.
O. ``Method of Service'' means the time, place, or manner in which
a Licensee provides brokerage services to Clients or any other person
who is a prospective home buyer or seller, subject to state and federal
law (e.g., office hours, the method by which the Licensee markets
properties for sale, and the method by which the Licensee provides
listings information to Clients or any other person who is a
prospective home buyer or seller).
P. ``MLS'' means any multiple listing service owned or operated by
Multiple Listing Service of Hilton Head Island, Inc.
Q. ``MLS Listing'' means any listing in which:
1. The Client or any other person who is a prospective home
seller grants the Licensee the sole right to make an offer of
compensation to cooperating brokers; and
2. The Licensee makes an offer of compensation to other
cooperating Full or Associate Members.
R. ``MLS Service Area'' means the geographic area from which
listings are placed in the MLS by Full or Associate Members.
S. ``Office Exclusive'' means a listing in which the owner refuses
to grant permission for distribution of the listing to the MLS.
T. ``Real Estate Brokerage Firm'' means a firm owned by or
employing a Broker-in-Charge.
U. ``Scope of Service'' means the set of specific brokerage
services a Licensee has agreed it will provide to a Client or such
other person who is a prospective home buyer or seller as well as the
set of specific services that a Licensee will allow a Client or any
other person who is prospective home buyer or seller to perform herself
or himself (whether or not the licensee offers to provide such
services). The Scope of Service may be set forth in a Listing
Agreement, Buyers Representation Agreement, or other agreement between
a Licensee and a Client or any other person who is a prospective home
buyer or seller.
V. ``Trustees'' means the Trustees elected by the Full Members of
Defendant.
III. Applicability
This Final Judgment applies to the Defendant and all other persons
in active concert or participation with it who receive actual notice of
this Final Judgment by personal service or otherwise.
IV. Prohibited Conduct
A. Subject to the provisions of paragraph VI, Defendant is enjoined
and restrained from adopting or enforcing any bylaw, rule, regulation,
policy, or practice that has the purpose or effect of excluding:
1. from full membership any Real Estate Brokerage Firm that has
a broker-in-charge holding an active real estate broker license
issued by the appropriate State of South Carolina governmental
licensing authority or any Appraisal Firm owned by or employing at
least one person with an active appraiser license issued by the
appropriate State of South Carolina governmental licensing
authority; or
2. from associate membership any Licensee who holds an active
real estate broker, agent, or salesman license issued by the
appropriate State of South Carolina governmental licensing
authority.
B. Subject to the provisions of paragraph VI, Defendant is enjoined
and restrained from adopting or enforcing any bylaw, rule, regulation,
policy, or practice that has the purpose or effect of:
1. failing to make available or furnish on like terms to any
Full Member any and all services that Defendant now or hereafter
makes available or furnishes to any of its Full Members;
2. failing to make available or furnish on like terms to any
Associate Member any and all services that Defendant now or
hereafter makes available or furnishes to any of its Associate
Members;
3. failing to make available or furnish on like terms to any
member who is an Appraiser any and all services that Defendant now
or hereafter makes available or furnishes to any of its members who
are Appraisers;
4. discriminating against, disfavoring, disciplining, or
expelling any Full or Associate Member based on its office location,
corporate structure, level or type of Compensation, Scope of
Service, or Method of Service;
5. requiring any Full or Associate Member to perform brokerage
services in excess of those required by South Carolina law;
6. prescribing the terms of Listing Agreements, Buyer's
Representation Agreements, or any other agreement between a Full or
Associate Member and any Client or any other person who is a
prospective home buyer or seller;
7. refusing to accept or place in the MLS any MLS Listing
submitted by a Full or Associate Member;
8. prescribing, recommending, setting standards, or guidelines
concerning Compensation;
9. requiring an Applicant or a Full Member to inform Defendant
of the ownership interests that others have in such Applicant or
Full Member or charging a fee for a change in ownership;
10. requiring any Full or Associate Member, Appraiser or Trustee
to reside or have an office in the MLS Service Area or any
particular area or location; or
11. changing its three classes of membership (Full, Associate,
and Affiliate) without the prior approval of the Department of
Justice.
V. Required Conduct
A. Defendant is required to accept all Applicants into the
Applicant's corresponding membership class (Full, Associate, or
Affiliate) as follows:
1. any Real Estate Brokerage Firm that has a Broker-in-Charge
who holds an active real estate broker license issued by the
appropriate State of South Carolina governmental licensing authority
shall be granted Full Membership;
2. any Licensee who holds an active real estate broker, agent,
or salesman license issued by the appropriate State of South
Carolina governmental licensing authority shall be granted Associate
Membership; and
3. any Appraisal Firm with an owner or employee holding an
active appraiser license issued by the appropriate State of South
Carolina governmental licensing authority shall be granted Full
Membership.
B. Defendant is ordered to delete from its Bylaws and Rules and
suspend enforcement of:
1. The language in Bylaw Article II, Section II stating:
``Any realty or appraisal firm whose Broker in Charge or Head
Appraiser applies for membership and which is owned as a subsidiary
or affiliate of a realty firm which has its headquarters a state
other than South Carolina must comply with the following additional
regulations: * * * (2) it must have an office located within the
Multiple Listing Service area (Beaufort, Jasper, Allendale, Bamberg,
Barnwell, Colleton, Hampton and Orangeburg counties); (3) the broker
in charge or head appraiser of such realty or appraisal must be a
resident of the Multiple
[[Page 66193]]
Listing Service area (Beaufort, Jasper, Allendale, Bamberg,
Barnwell, Colleton, Hampton and Orangeburg counties); and (4) all
licensees of the realty firm or appraisal firm must hold their South
Carolina license as their primary license.''
2. The language in Bylaw Article V, Section I stating:
``The Board of Trustees of MLS shall consist of persons who are
residents of the counties served by MLS, including Beaufort, Jasper,
Allendale, Bamberg, Barnwell, Colleton, Hampton and Orangeburg,
South Carolina,''
3. The language in Bylaw Article VII, Section II stating:
i. ``and shall consist of the brokers-in charge or Head
appraiser of realty and appraisal firms who qualify for membership
based upon the following criteria: (a) the firm has established and
maintained a specific place of business in any of the following
counties served by MLS: Beaufort, Jasper, Allendale, Bamberg,
Barnwell, Colleton, Hampton and Orangeburg, which office is
available to the public during reasonable business hours;'' and
ii. ``Membership of internet only members are subject to
restrictions set by the Board of Trustees.''
4. The language in Bylaw Article VII, Section ill stating:
``which: (a) Have established and maintained a specific place of
business within the Multiple Listing Service Area (which includes
Beaufort, Jasper, Allendale, Bamberg, Barnwell, Colleton, Hampton
and Orangeburg counties) that is available to the public during
reasonable business hours;''
5. The language in Bylaw Article VII, Section IV stating:
i. ``to obtain or make credit checks or''; and
ii. ``and applications may require that the applicant supply
various information and recommendations, including but not limited
to:
(a) Three (3) separate character references from three (3)
presently qualified Full Members; and
(b) In the case of Full Members, a history of business
experience and employment information concerning all persons,
including all partners and shareholders, who have any ownership
interest in the applicant. Any such party acquiring an ownership
interest of any kind after acceptance of the realty firm as a Full
Member must submit all information required by this Section within
ten (10) days after acquisition of the ownership interest and must
be approved by the Board of Trustees.''
6. The Bylaw Article VII, Section X stating:
``In the event of any change of ownership of a member firm as
determined by the Board of Trustees in accordance with the
provisions of the Rules and Regulations, the Board of Trustees, at
its option, may terminate the membership of such firm and require
the firm to reapply for membership and pay the then current
initiations fees in MLS as if said firm had never been a member of
MLS.''
7. The language in Bylaw Article XI, Section I stating:
``The listing Full Member shall specify a commission split or
other compensation which would be reasonably expected to encourage
cooperation by other Full Members. It is to the advantage of the
listing Full Member, and, consequently the owner, to establish
compensation which will encourage other MLS Full Members to devote
time and energy to the sale of the owner's listing with the
expectation of reasonable compensation for the member's efforts. The
Board of Trustees may adopt compensation guidelines that it deems
sufficient to encourage such devotion of time and energy. Any Full
Member which the Board of Trustees, in its sole discretion, believes
is consistently establishing compensation which would discourage the
intended cooperation by other Full Members may have its membership
terminated by a majority vote of the Board of Trustees.''
8. The language in Rules and Regulations Section II, stating:
i. ``A.1.c. Establish and maintain a specific place of business
in Beaufort, Jasper, Allendale, Bamberg, Barnwell, Colleton,
Hampton, Orangeburg Counties, which is available to the public.'';
ii. ``A.2.c. Submit letters of recommendation from the Broker-
In-Charge/Head Appraiser of three (3) firms who are members in good
standing with the MLS of Hilton Head Island, Inc.'';
iii. ``A.2.g. Submit statement of Residence of Owners and
Broker-In-Charge/Head Appraiser'';
iv. ``A.2.h. (2) address of the New Firm's office located within
the Multiple Listing Service area (Beaufort, Jasper, Allendale,
Bamberg, Barnwell, Colleton, Hampton, [and] Orangeburg Counties);
(3) the address of the Broker-In-Charge/Head Appraiser to confirm
that he/she is a resident of the Multiple Listing Service area; and
(4) confirmation that all licensees of the New Firm hold their South
Carolina licenses as their primary license and are residences of the
aforementioned area''; and
v. ``B. Board of Trustees must be notified of any ownership
changes within 10 days of said change and all changes of ownership
fees paid. Notification must be in writing and signed by the BIC/
Head Appraiser. A new Membership Agreement and Principals Audit must
be fully executed and signed by the BIC/Head Appraiser and submitted
to the MLS office along with notification. (Forms may be obtained on
the MLS website http://www.hiltonheadmls.com and selecting Members Only.)''
9. The language in Rules and Regulations Section IT, Subsection
E referring to principals.
10. The language in Rules and Regulations Section VI, Subsection
2 stating:
``Only MLS Exclusive Right to Sell Listing Agreements are
accepted.''
C. Defendant is ordered to delete the term ``Exclusive Agency'' in
Rules and Regulations Section VI, Subsection 7 and replace it with
``Office Exclusive.''
VI. PERMITTED CONDUCT
Notwithstanding the above, nothing shall prohibit Defendant from:
A. Requiring Applicants or Full, Associate, or Affiliate Members to
pay:
1. A fee equal to the reasonable set-up costs of preparing to
make Defendant's services available to the Applicant, Full,
Associate, or Affiliate Member;
2. A reasonable security deposit, to secure against any unpaid
claims or charges that may be asserted by Defendant against the
Applicant, Full, Associate, or Affiliate Member; and
3. Fees for use of Defendant's services that are non-
discriminatory and reflect the reasonable expenses of Defendant's
operations.
B. Adopting or enforcing any bylaw, rule, regulation, policy
practice, or agreement that is required for the MLS not to violate
South Carolina law.
C. Publishing or making available illustrative Listing Agreements,
Buyer's Representation Agreements, and any other written agreements, or
contracts that Full or Associate Members may choose to use or modify,
provided any such agreements leave blank the Compensation terms.
D. Adopting or enforcing any bylaw, rule, regulation, policy,
practice, or agreement that prohibits Full, Associate, or Affiliate
Members from enabling a third party to make use of its Member MLS
Database Access.
E. Requiring a Full Member to notify the MLS of a change in or
departure of its Broker-in-Charge, or the departure of any Associate
Member.
F. Requiring a Full Member to provide the MLS with the name of a
designated contact person to whom the MLS may direct correspondence and
inquiries.
VII. COMPLIANCE AND INSPECTION
A. Within sixty (60) days after the date of entry of this Final
Judgment, Defendant shall: (J) provide each of its members, trustees,
and employees with notice of the amendments to its bylaws, rules,
regulations and policies to conform to the provisions of this Order;
(2) provide each of its members, trustees, and employees with a copy of
this Order via its member-only Internet page; (3) inform all persons
who are known to have inquired about membership in the last two years
but who are not members of the amendments to its bylaws, rules,
regulations and policies to conform to the provisions of this Order;
(4) inform all persons under subsection (3) that they may apply or
reapply for membership and that Defendant will grant membership if the
applicant meets the requirements of the bylaws, rules, regulations and
policies as revised by this Order; and (5) place on its home page of
its publicly accessible web site (currently http://www.hiltonheadmls.com
) a notice of the Final Judgment with a link to
the Final Judgment.
[[Page 66194]]
B. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally recognized privilege,
from time to time duly authorized representatives of the United States
Department of Justice, including consultants and other persons retained
by the United States, shall, upon written request of a duly authorized
representative of the Assistant Attorney General in charge of the
Antitrust Division, and on reasonable notice to Defendant, be
permitted:
1. access during Defendant's office hours to inspect and copy,
or at Plaintiffs option, to require Defendant to provide copies of,
all books, ledgers, accounts, records and documents in the
Defendant's possession, custody, or control, relating to any matters
contained in this Final Judgment; and
2. to interview, either informally or on the record, Defendant's
trustees, officers, employees, or agents, who may have their
individual counsel present, regarding such matters. The interviews
shall be subject to the reasonable convenience of the interviewee
and without restraint or interference by Defendant.
C. Upon the written request of a duly authorized representative of
the Assistant Attorney General in charge of the Antitrust Division, for
the purposes of determining or securing compliance with this Final
Judgment, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally recognized privilege,
Defendant shall submit written reports or interrogatory responses,
under oath if requested, relating to any of the matters contained in
this Final Judgment as may be requested.
D. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as required
by law.
VIII. Retention Of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to extend the
duration of the Final Judgment, to enforce compliance, and to punish
violations of its provisions.
IX. Expiration Of Final Judgment
This Final Judgment will expire ten (10) years from the date of its
entry.
X. Notice
For purposes of this Final Judgment, any notice or other
communication shall be given to the person at the address set forth
below (or such other addresses as the recipient may specify in
writing): John R. Read, Chief, Litigation III Section, U.S. Department
of Justice, Antitrust Division, 325 Seventh Street, NW., Suite 300,
Washington, DC 20530.
XI. Public Interest Determination
Entry of this Final Judgment is in the public interest.
Date:
-----------------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16
-----------------------------------------------------------------------
United States District Judge.
United States District Court for the District of South Carolina
Beaufort Division;
United States of America, Plaintiff, v. Multiple Listing Service of
Hilton Head Island, Inc, Defendant
Civil Action No. 9:07-CY-3435-SB
Filed: 10/16/2007
Competitive Impact Statement
Plaintiff United States of America (``United States''), pursuant to
section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or
``Tunney Act''), 15 U.S.C 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding.
I. Nature and Purpose of the Proceedings
On October --, 2007, the United States filed a civil antitrust
complaint alleging that Defendant Multiple Listing Service of Hilton
Head Island, Inc. (``Hilton Head MLS'') violated Section 1 of the
Sherman Act, 15 U.S.C. 1, by enforcing certain rules that unreasonably
restrain competition among real estate brokers in the Hilton Head,
South Carolina area. Defendant is a multiple listing service, which is
controlled by its members who are real estate brokers competing to sell
brokerage services to consumers in the Hilton Head area. As explained
more fully below, brokers seeking to provide brokerage services in the
Hilton Head area need to be members of the Hilton Head MLS.
In its Complaint, the United States alleges that the Defendant, by
its rules, denies membership to brokers who would likely compete
aggressively on price or would introduce Internet-based brokerage, and
imposes unreasonable membership costs on publicly-owned brokerage
companies. Defendant's rules also stabilize prices by forcing member
brokers to provide a certain set of brokerage services, whether or not
the consumer desires to purchase those services. The United States also
alleges that the Defendant has authorized its Board of Trustees to
adopt rules that would regulate commissions and impose discriminatory
requirements on Internet-based brokers.
At the same time the Complaint was filed, the United States filed a
Stipulation and proposed Final Judgment, which are designed to
eliminate the anticompetitive effects of the acquisition. The proposed
Final Judgment, which is explained more fully below, requires the
Defendant to rescind certain of its rules. The proposed Final Judgment
also prohibits Defendant from adopting new rules that have the effect
of excluding real estate brokers from membership based on such criteria
as their business model, price structure, or office location. The
proposed Final Judgment further prohibits Defendant from adopting new
rules that would dictate the services and prices that its members must
offer to their clients.
The Stipulation and proposed Order require Hilton Head MLS to take
the actions required under the proposed Final Judgment. The United
States and Hilton Head MLS have also stipulated that the proposed Final
Judgment may be entered after compliance with the APPA, unless the
United States withdraws its consent. Entry of the proposed Final
Judgment would terminate this action, except that this Court would
retain jurisdiction to construe, modify, and enforce the proposed Final
Judgment and to punish violations thereof.
II. Description of the Events Giving Rise to the Alleged Violation of
the Antitrust Laws
A. Description of the Defendant and Its Activities
Hilton Head MLS is organized as a not-for-profit corporation under
the laws of South Carolina with its principal place of business on
Hilton Head Island, Beaufort County, South Carolina. Hilton Head MLS is
a joint venture of over one hundred competing licensed brokers and
other licensed real
[[Page 66195]]
estate professionals doing business in the Hilton Head area.\1\
---------------------------------------------------------------------------
\1\ The Hilton Head MLS requires that brokerage firms, rather
than individual brokers, be members of the MLS. For the purposes of
this document, any reference to brokers includes also the brokerage
firms with which the broker is associated.
---------------------------------------------------------------------------
Most prospective home sellers and buyers engage the services of a
broker to purchase and sell homes. Real estate brokers formed the
Hilton Head MLS to facilitate the provision of real estate brokerage
services to such buyers and sellers. The Hilton Head MLS pools and
disseminates information on almost every property available for sale on
Hilton Head Island. It combines its members' property listings
information into an electronic database and makes this data available
to all brokers who are members of the MLS. By listing information on a
home in the MLS, a broker can market it to a large number of potential
buyers. A broker representing a buyer likewise can search the MLS to
provide a home buyer with information about nearly all the listed
properties in the area that match the buyer's housing needs.
Members of the Hilton Head MLS utilize the database as a
clearinghouse to, among other things: communicate the listings
information of the properties that they have for sale to other members;
offer to compensate other members as cooperating brokers if they locate
purchasers for those listings; locate properties for prospective
purchasers; distribute listings to other members for advertisement
purposes; and compile and distribute market statistics. The Hilton Head
MLS also maintains records of sold homes. These ``sold data'' records
are very important for brokers working with sellers to set an optimum
sales price. Brokers representing a buyer likewise use the sold data to
help buyers determine what price to offer for a home.
Access to the database provided by the Hilton Head MLS is critical
for brokers who wish to serve buyers or sellers successfully on Hilton
Head Island. By virtue of market-wide participation and control over a
critically important input, the Hilton Head MLS has market power.
Industry Background
The prices consumers paid to brokers for the brokerage services
associated with a typical home sales transaction have increased
substantially since 2003 on Hilton Head Island and in many other parts
of the country. This is because brokers who adhere to traditional
methods of doing business typically charge a fee calculated as a
percentage of the sales price of the home, and that percentage has
tended to be relatively inflexible as housing prices on Hilton Head
Island and in many other parts of the country have increased
dramatically. As a result of these higher prices, brokers offering
competitively significant alternatives to traditional methods have
emerged in other areas of the country.
Some brokers in other parts of the United States use technology to
automate certain tasks and to communicate more efficiently with
consumers. For example, technology enables brokers to contact,
communicate with, and service consumers remotely or in-person without
the need for a retail office location that consumers can visit. Such
technology-savvy brokers can reduce brokerage costs by operating fewer
or no physical offices, and may pass cost savings on to consumers
through reduced brokerage fees.
Other brokers around the country now contract with buyers and
sellers to provide a subset of services for a flat fee rather than for
a percentage of the home sale price. Fee-for-service brokers provide
certain enumerated services such as marketing the house or attending
closings, while the buyer or seller takes responsibility for other
services associated with brokerages such as making offers and
counteroffers or conducting open houses on their own. Through fee-for-
service packages, buyers and sellers can save money by purchasing only
the services that they wish their broker to provide. Brokers in other
areas of the country have attracted customers by offering full-service,
reduced commission brokerage. Additionally, still other brokers in
other areas of the country have sought a competitive advantage by
creating nationwide firms. These firms raise capital through public
ownership, invest in nationwide brands, and provide brokerage services
to consumers in multiple markets.
C. Description of the Alleged Violation
Defendant Hilton Head MLS, through the collective voting of its
broker membership, has adopted and enforced rules and practices that
exclude new entry and restrict member output. These rules are not
reasonably necessary to carry out the procompetitive purposes of the
multiple listing service. As such, these rules are agreements amongst
competitors that restrain competition. Accordingly, in its Complaint,
the United States alleges that Defendant's rules constitute a contract,
combination, or conspiracy by competitors with market power that
unreasonably restrains competition on Hilton Head Island in violation
of Section I of the Sherman Act, 15 U.S.C. 1.
Specifically, the Complaint alleges that Defendant has rules and
practices that require broker-members to: (1) Maintain a physical
office within the Hilton Head MLS service area; (2) reside within the
area served by the Hilton Head MLS; (3) operate their offices during
hours deemed reasonable by the Hilton Head MLS; and (4) hold a South
Carolina real estate license as their primary license. (Bylaw Article
II, Section II; Bylaw Article VII; & Rule II.) These rules allow
Defendant to deny membership to brokers who operate business models
that would increase competition. These rules enable Defendant to
exclude technology-savvy brokers who serve their clients without a
physical office and who can pass along the cost savings to consumers
through reduced commission rates. These rules also deprive consumers of
the benefits of competition from brokers who work part-time or who are
licensed under reciprocity provisions of South Carolina Law.
Defendant's rules have also enabled it to identity applicants for
MLS membership who could be aggressive competitors and deny their
application for membership. Broker-applicants are required to disclose
their business history and prior employment, undergo a credit check,
and obtain letters of recommendation from three current broker-members,
i.e., those with whom the applicant would compete. (Bylaw Article VII,
Section IV; Bylaw Article VII, Section IV(a); Rule II.A.2.) These rules
have allowed unreasonable denials of membership and thus deprived
consumers of the benefits of competition.
Defendant has authorized its Board of Trustees to adopt mandatory
guidelines that would regulate the commission that listing brokers
offer to selling brokers in exchange for their cooperation on the home
sale. (Bylaw Article XI, Section I.) The mere prospect that the Board
might adopt such controls likely inhibits price competition. Their
actual adoption would directly fix and stabilize prices. Defendant also
has a rule that requires its members to provide certain services to all
brokerage customers, whether or not desired by the customer. (Bylaw
Article X; MLS Listing Agreement.) Embodied in the terms of Defendant's
mandatory form listing agreement, this rule prevents current and
prospective members from operating a fee-for-service business model.
This rule decreases competition and harms consumers because it
insulates Defendant's members from the competitive pressures posed by
brokers
[[Page 66196]]
who would offer additional pricing and service choices to their
customers.
Defendant has also authorized its Board of Trustees to impose
discriminatory requirements on Internet-based real estate brokers.
(Bylaw Article II, Section II.) Such requirements, if implemented,
would competitively disadvantage Internet-based brokers and discourage
them from joining the MLS and competing on Hilton Head Island, thereby
limiting consumer choice. The mere prospect that the Board might adopt
such controls likely deters Hilton Head brokers from developing an
Internet-based model and thereby inhibits such service competition.
In addition, Defendant has a ``change in ownership'' rule that
requires publicly-held brokerages to make a significant payment to the
Defendant every time a share of their stock changes hands. (Bylaw
Article VII, Section X; Rules II.A.3; IIB & IIE.). This rule
competitively disadvantages publicly-owned companies and discourages
them from joining the MLS and competing on Hilton Head Island, thereby
limiting consumer choice.
D. Harm From the Alleged Violation
Taken together, Defendant's rules discourage competition on price
and service, and inhibit competitive actions that would alter the
status quo. Furthermore, there are no plausible justifications that
these rules are reasonably necessary to carry out the procompetitive
purposes of the multiple listing service. As a result of Defendant's
anticompetitive rules, consumers of brokerage services on Hilton Head
Island have fewer choices of service options and pay higher prices for
real estate brokerage services than do consumers in other parts of the
country.
Data analyzed from a MLS in another area of the country support
these allegations. Data have shown an inverse correlation between the
share of homes listed by fee-for-service brokers in the area and the
level of cooperating commission offered to buyer's brokers for homes in
that area. Thus, controlling for other influences, where fee-for-
service brokers account for a greater portion of listings in an area,
traditional brokers in that area offer lower cooperating commissions,
on average, to brokers representing buyers.
III. Explanation of the Proposed Amended Final Judgment
The proposed Final Judgment will restore the competition that the
agreement among the Hilton Head MLS members has eliminated and will
prevent Hilton Head MLS from engaging in similar conduct in the future.
The proposed Final Judgment will first require Hilton Head MLS to
rescind all of the current MLS rules discussed above. Second, the
proposed Final Judgment will enjoin Hilton Head MLS from adopting or
enforcing any rules that will have a similar purpose or effect. More
specifically, the proposed Final Judgment will prevent the Defendant
from adopting rules or engaging in practices that (i) exclude active,
licensed real estate professionals from their respective membership
class in the MLS; (ii) fail to furnish under like terms to any member
any services it furnishes to other members in its membership class;
(iii) discriminate against any member based on its office location,
corporate structure, level or type of compensation, scope of service,
or method of service; (iv) require members to perform brokerage
services in excess of those required by state law; (v) prescribe the
terms of agreements between a member and its clients or any other
person who is a prospective home buyer or seller; (vi) refuse to accept
and place in the Multiple Listing Service any member's MLS listing;
(vii) set standards or guidelines concerning compensation; (viii)
charge members a fee for any change in ownership; (ix) require a member
to maintain an office or reside in the MLS Service Area or any other
particular location; or (x) alter any of its three classes of
membership without the prior approval of the Department of Justice. The
proposed Final Judgment will also require Hilton Head MLS to provide
each of its members, trustees, employees, and agents with a copy of the
proposed Final Judgment; inform all persons who inquired about
membership in the last two years but who are not members of the MLS of
the changes in the MLS rules caused by the proposed Final Judgment; and
place on the home page of its publicly accessible website a notice of
the proposed Final Judgment with a link to the proposed Final Judgment
and the amended rules.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act (15 U.S.C. 15) provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of section 5(a) of the Clayton Act (15 U.S.C.
16(a)), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against the Defendant.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and the Defendant have stipulated that the
proposed Final Judgment may be entered by the Court after compliance
with the provisions of the APPA, provided that the United States has
not withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States Department of Justice, which
remains free to withdraw its consent to the proposed Final Judgment at
any time prior to the Court's entry of judgment. The comments and the
response of the United States will be filed with the Court and
published in the Federal Register.
Written comments should be submitted to: John Read, Chief,
Litigation III Section, Antitrust Division, United States Department of
Justice, 325 Seventh Street, NW., Suite 300, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Amended Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against the Defendant. Given
the inherent delays of a full trial and the appeals process, the United
States is satisfied that the relief contained in the proposed Final
Judgment will quickly establish, preserve, and ensure competition for
real estate brokerage services in the Hilton Head MLS Service Area.
[[Page 66197]]
VII. Standard of Review Under the APPA for Proposed Amended Final
Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a sixty-day comment
period, after which the Court shall determine whether entry of the
proposed Final Judgment ``is in the public interest.'' 15 U.S.C.
16(e)(l). In making that determination, the Court, in accordance with
amendments to the APPA in 2004, is required to consider:
(A) the competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. 16(e)(l)(A) & (B); see generally United States v. SBC
Commc'ns, Inc., Nos. 05-2102 and 05-2103, 2007 WL 1020746, at *9-16
(D.D.C. Mar. 29, 2007) (assessing public interest standard under APPA
and effect of 2004 amendments).\2\ As courts have held--both before and
after the 2004 amendments--the United States is entitled to deference
in crafting its antitrust settlements, especially with respect to the
scope of its complaint and the adequacy of its remedy, which are the
``two most significant legal questions'' relating to a public interest
determination. United States v. Microsoft Corp., 56 F.3d 1448, 1458-62
(D.C. Cir. 1995); SBC Commc'ns, 2007 WL 1020746, at *12-*16.3.\3\
---------------------------------------------------------------------------
\2\ Compare 15 U.S.C. 16(e) (2004), with 15 U.S.C. 16(e)(1)
(2006) (substituting ``shall'' for ``may'' in directing relevant
factors for court to consider and amending list of factors to focus
on competitive considerations and to address potentially ambiguous
judgment terms). The 2004 amendments do not affect the substantial
precedent in this and other circuits analyzing the scope and
standard of review for APPA proceedings. See SBC Commc'ns, 2007 WL
1020746, at *9 (``[ A] close reading of the law demonstrates that
the 2004 amendments effected minimal changes. * * *'').
\3\ The Microsoft court explained that a court making a public
interest determination under the APPA should consider, among other
things, the relationship between the remedy secured and the specific
allegations set forth in the government's complaint, whether the
decree is sufficiently clear, whether enforcement mechanisms are
sufficient, and whether the decree may positively harm third
parties. Microsoft, 56 F.3d at 1458-62.
---------------------------------------------------------------------------
With respect to the adequacy of the relief secured by the decree, a
court may not ``engage in an unrestricted evaluation of what relief
would best serve the public.'' United States v. BNS, Inc., 858 F.2d
456, 462 (9th Cir. 1988) (citing United States v. Bechtel Corp., 648
F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62.
Courts have held that:
[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\4\ In
making its public interest determination, a district court must accord
due respect to the United States' prediction as to the effect of
proposed remedies, its perception of the market structure, and its
views of the nature of the case. SBC Commc'ns, 2007 WL 1020746, at *16
(United States entitled to ``deference'' as to ``predictions about the
efficacy of its remedies''); United States v. Archer-Daniels-Midland
Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003).
---------------------------------------------------------------------------
\4\ Cf BNS, 858 F.2d at 464 (holding that the court's ``ultimate
authority under the [APPA] is limited to approving or disapproving
the consent decree''); United States v. Gillette Co., 406 F. Supp.
713, 716 (D. Mass. 1975) (noting that, in this way, the court is
constrained to ``look at the overall picture not hypercritically,
nor with a microscope, but with an artist's reducing glass''), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983). See
generally Microsoft, 56 F.3d at 1461 (discussing whether ``the
remedies [obtained in the decree are] so inconsonant with the
allegations charged as to fall outside of the `reaches of the public
interest' '').
---------------------------------------------------------------------------
Court approval of a final judgment requires a standard more
flexible and less strict than the standard required for a finding of
liability. ``[A] proposed decree must be approved even if it falls
short of the remedy the court would impose on its own, as long as it
falls within the range of acceptability or is `within the reaches of
public interest.' '' United States v. AT&T Co., 552 F. Supp. 131, 151
(D.D.C. 1982) (citations omitted) (quoting Gillette, 406 F. Supp. at
716); see also United States v. Alcan Aluminum Ltd., 605 F. Supp. 619,
622 (W.O. Ky. 1985) (approving the consent decree even though the court
would have imposed a greater remedy). To meet this standard, the United
States ``need only provide a factual basis for concluding that the
settlements are reasonably adequate remedies for the alleged harms;''
SBC Commc'ns, 2007 WL 1020746, at *16.
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States did not pursue. Id.
at 1459-60. As the United States District Court for the District of
Columbia recently confirmed in SBC Communications, courts ``cannot look
beyond the complaint in making the public interest determination unless
the complaint is drafted so narrowly as to make a mockery of judicial
power.'' SBC Commc'ns, 2007 WL 1020746, at *14.
In its 2004 amendments to the Tunney Act, Congress made clear its
intent to preserve the practical benefits of utilizing consent decrees
in antitrust enforcement, adding the unambiguous instruction
``[n]othing in this section shall be construed to require the court to
conduct an evidentiary hearing or to require the court to permit anyone
to intervene.'' 15 U.S.C. 16(e)(2). This language codified the intent
of the original 1974 statute, expressed by Senator Tunney in the
legislative history: ``[t]he court is nowhere compelled to go to trial
or to engage in extended proceedings which might have the effect of
vitiating the benefits of prompt and less costly settlement through the
consent decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of
Senator Tunney). Rather, the procedure for the public interest
determination is left to the discretion of the court, with the
recognition that the court's ``scope of review remains sharply
proscribed by precedent and the nature of Tunney Act proceedings.'' SSC
Commc'ns, 2007 WL 1020746, at *9.\5\
---------------------------------------------------------------------------
\5\ United States v. Mid-Am. Dairymen. Inc., 1977-1 Trade Cas.
(CCH) ] 61,508, at 71,980 (W.D. Mo. 1977) (``[T]he Court, in making
its public interest finding, should * * * carefully consider the
explanations of the government in the competitive impact statement
and its responses to comments in order to determine whether those
explanations are reasonable under the circumstances.'').
---------------------------------------------------------------------------
[[Page 66198]]
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Amended Final Judgment.
Dated: October 16, 2007.
Respectfully submitted,
Lisa A. Scanlon,
Owen M. Kendler,
Christopher M. Ries,
Attorneys for the United States of America, U.S. Department of
Justice, Antitrust Division, 325 7th Street, NW., Suite 300,
Washington, DC 20530, Telephone: (202) 616-5954, Facsimile: (202)
514-7308.
Certificate of Service
I hereby certify that on October 16, 2007, I caused a copy of
the foregoing Competitive Impact Statement to be served on counsel
for Defendant in this matter in the manner set forth below:
Jane W. Trinkley,
McNair Law Firm, P.A. P.O. Box 11390, Columbia, SC 29211, (via e-
mail and first-class mail).
Respectfully submitted,
Reginald I. Lloyd,
United States Attorney.
By:
Barbara M. Bowens (I.D. 4004),
Counsel for Defendant, Assistant United States Attorney, 1441 Main
Street, Suite 500, Columbia, South Carolina 29201.
Christopher M. Ries,
Attorney for the United States of America, U.S. Department of
Justice, Antitrust Division, 325 7th Street, NW., Suite 300,
Washington, DC 20530, Telephone: (202) 616-5954, Facsimile: (202)
514-7308.
[FR Doc. 07-5653 Filed 11-26-07; 8:45 am]
BILLING CODE 4410-11-M