[Federal Register: August 14, 2008 (Volume 73, Number 158)]
[Notices]
[Page 47613-47632]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14au08-51]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. National Association of Realtors; 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 Northern District of Illinois in
United States of America v. National Association of Realtors[supreg],
No. 05-C-5140. On September 8, 2005, the United States filed a
Complaint alleging that the National Association of Realtors[supreg]
(``NAR'') violated Section 1 of the Sherman Act, 15 U.S.C. 1, by
adopting policies that suppress competition from real estate brokers
who use password-protected ``virtual office websites'' or ``VOWs'' to
deliver high-quality brokerage services to their customers. The
proposed Final Judgment, filed on May 27, 2008, requires NAR to repeal
the challenged policies arid to adopt new rules that do not
discriminate against brokers who use VOWs.
Copies of the Amended Complaint, proposed Final Judgment and
Competitive Impact Statement are available for inspection at the
Department of Justice, Antitrust Division, Antitrust Documents Group,
450 5th Street, NW., Room 1010, 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 Northern District of Illinois. 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, 450 5th Street, NW., Suite 4000,
Washington, DC 20530, (202) 307-0468. Please note that this notice
supercedes 73 FR 36104, the June 25, 2008, publication of the proposed
Final Judgment and Competitive Impact Statement in United States of
America v. National Association of Realtors[supreg]. That publication
contained a typesetting error in the ``Statement of MLS Policy'' that
is Exhibit B to the proposed Final Judgment (73 FR at 36112). A
corrected version of Exhibit B to the proposed Final Judgment is
included with this notice.
J. Robert Kramer II,
Director of Operations, Antitrust Division.
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
United States of America, Department of Justice, Antitrust
Division, 325 7th Street, NW., Suite 300, Washington, DC 20530,
Plaintiff, v. National Association of Realtors, 430 North Michigan
Ave., Chicago, IL 60611, Defendant.
Civil Action No. 05C-5140, Judge Filip, Magistrate Judge Denlow.
Filed: October 4, 2005
Amended Complaint
The United States of America, by its attorneys acting under the
direction of the Attorney General, brings this civil action pursuant to
Section 4 of the
[[Page 47614]]
Sherman Act, as amended, 15 U.S.C. 4, to obtain equitable and other
relief to prevent and restrain violations of Section 1 of the Sherman
Act, as amended, 15 U.S.C. 1.
The United States alleges:
1. The United States brings this action to enjoin the defendant--a
national association of real estate brokers--from maintaining or
enforcing policies that restrain competition from brokers who use the
Internet to more efficiently and cost effectively serve home sellers
and buyers, and from adopting other related anticompetitive rules.
2. The brokers against whom the policies discriminate operate
secure, password-protected Internet sites that enable the brokers'
customers to search for and receive real estate listings over the
Internet. These websites thus replace or augment the traditional
practice by which the broker conducts a search of properties for sale
and then provides information to the customer by hand, mail, fax, or e-
mail. Since these websites were first developed in the late 1990s,
brokers' use of the Internet in connection with their delivery of
brokerage services has become an important competitive alternative to
traditional ``brick-and-mortar'' business models.
3. Defendant's members include traditional brokers who are
concerned about competition from Internet-savvy brokers. Before
defendant adopted its policies, several of its members voiced
opposition to brokers' delivery of listings to customers through their
websites--sites that defendant referred to as ``virtual office
websites,'' or ``VOWs.'' The head of the working group created by
defendant to develop regulations for VOWs argued that defendant should
act quickly in adopting regulations for the use of these websites
because brokers operating VOWs were ``scooping up market share just
below the radar.'' The chairman of the board of RE/MAX, the nation's
second-largest real estate franchisor, publicly expressed his concern
that these Internet sites would inevitably place downward pressure on
brokers' commission rates. One broker complained that because of the
lower cost structure of brokers who provide listings to their customers
over the Internet, they are able to kick-back 1% of the sales price to
the buyer.'' And Cendant, the nation's largest real estate franchisor
and owner of the nation's largest real estate brokerage, asserted in a
widely circulated white paper that it was ``not feasible'' for even the
largest traditional brokers to compete with large Internet companies
that operated or affiliated with brokers operating VOWs.
4. In response to such concerns, defendant, through its members,
adopted a policy (the ``Initial VOW Policy'') limiting this new
competition. The Initial VOW Policy has been implemented in many
markets. After plaintiff informed NAR of its intention to bring this
action, NAR announced that it had modified this policy (the ``Modified
VOW Policy''). Plaintiff challenges both policies in this action as
part of a single, ongoing contract, combination, or conspiracy.
5. These policies significantly alter the rules governing multiple
listing services (``MLSs'') MLSs collect detailed information about
nearly all properties for sale through brokers and are indispensable
tools for brokers serving buyers and sellers in each MLS's market area.
Defendant's local Realtor associations (``member boards'') control a
majority of the MLSs in the United States.
6. Defendant's VOW Policies permit brokers to withhold their
clients' listings from VOW operators by means of an ``opt-out'' right.
In essence, the policies allow traditional brokers to block the
customers of web-based competitors from using the Internet to review
the same set of MLS listings that the traditional brokers provide to
their customers.
7. The working group that formulated defendant's Initial VOW Policy
understood that the opt-out right was fundamentally anticompetitive and
harmful to consumers. Two members of the working group wrote that the
opt-out right would be ``abused beyond belief'' as traditional brokers
selectively withhold listings from particular VOW-based competitors.
The chairman of the working group admitted that the opt-out right was
likely to be exercised by brokers notwithstanding the fact that ``it
may not be in the seller['] best interest to opt out.'' But he took
comfort in the fact that the rule did not require brokers to disclose
to clients that their listings would be withheld from some prospective
purchasers as a result of the brokers' opt-out decision, thus providing
brokers ``flexibility without conversation.''
8. Defendant's VOW Policies restrict the manner in which brokers
with efficient, Internet-based business models may provide listings to
their customers, and impose additional restrictions on brokers
operating VOWs that do not apply to their traditional competitors.
Defendant thus denies brokers using new technologies and business
models the same benefits of MLS membership available to their
competitor brokers, and it suppresses technological innovation,
discourages competition on price and quality, and raises barriers to
entry. Defendant--an association of competitors--has agreed to policies
that suppress new competition and harm consumers.
Jurisdiction and Venue
9. This Complaint is filed under Section 4 of the Sherman Act, as
amended, 15 U.S.C. 4, to prevent and restrain violations by defendant
of Section 1 of the Sherman Act, 15 U.S.C. 1. This Court has subject
matter jurisdiction over this action under 28 U.S.C. 1331, 1337(a), and
1345.
10. Venue is proper in this district under 28 U.S.C. 139 1(b)
because defendant maintains its principal place of business in Chicago,
Illinois, and is found here.
Defendant
11. Defendant National Association of Realtors (``NAR'') is a trade
association organized under the laws of Illinois with its principal
place of business in Chicago, Illinois. NAR establishes and enforces
policies and professional standards for its over one million individual
member brokers and their affiliated agents and sales associates
(``Realtors''), and 1,600 local and state member boards. NAR's member
brokers compete with one another in local brokerage services markets to
represent consumers in connection with real estate transactions.
Concerted Action
12. Various others, not named as defendants, have contracted,
combined, or conspired with NAR in the violations alleged in this
Complaint and have performed acts and made statements in furtherance
thereof.
Trade and Commerce
13. NAR's policies govern the conduct of its members in all fifty
states, including all Realtors and all of NAR's member boards. NAR's
member boards control approximately eighty percent of the approximately
1,000 MLSs in the United States.
14. NAR's activities, and the violations alleged in this Complaint,
affect home buyers and sellers located throughout the United States.
15. NAR, through its members, is engaged in interstate commerce and
is engaged in activity affecting interstate commerce.
Relevant Markets
16. The provision of real estate brokerage services to sellers of
residential real property and the
[[Page 47615]]
provision of real estate brokerage services to buyers of residential
real property are relevant service markets.
17. The real estate brokerage business is local in nature. Most
sellers prefer to work with a broker who is familiar with local market
conditions and who maintains an office or affiliated sales associates
within a reasonable distance of the seller's property. 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. The geographic
coverage of the MLS serving each town, city, or metropolitan area
normally establishes the outermost boundaries of each relevant
geographic market, although meaningful competition among brokers may
occur in narrower local areas.
Background of the Offense
18. At any one time there are over 1.5 million homes for sale in
the United States. Most home sellers and buyers engage residential real
estate brokers to facilitate transactions.
19. The predominant form of payment for brokerage services is a
``commission,'' a percentage of the price paid for the property. In a
typical transaction, the seller agrees to pay a commission to the
broker who has contracted with the seller to market the home (the
``listing broker''). If the listing broker finds the buyer, the listing
broker keeps the full commission. Frequently, however, a second broker
(the ``cooperating broker'') finds the buyer, and the two brokers share
the commission.
20. After a listing broker has established an agency relationship
with a seller, the broker typically submits detailed information
regarding the seller's property to a local NAR-affiliated MLS. Along
with the information about the property it submits to the MLS, the
listing broker also typically includes an offer to split the commission
with any cooperating broker.
Multiple Listing Services
21. MLSs are joint ventures among competing brokers to share their
clients' listings and to cooperate in other ways. MLSs list virtually
all homes for sale through a broker in the areas they serve. In a
substantial majority of markets, a single MLS provides the only
available comprehensive compilation of listings. The MLS allows brokers
representing sellers to effectively market the sellers' properties to
all other broker participants in the MLS and their buyer customers.
Conversely, the MLS allows brokers to provide their buyer customers
information about all listed properties in which the customers might
have an interest.
22. NAR promulgates rules governing the conduct of MLSs and
requires its member boards to adopt these rules.
23. The vast majority of brokers believe that they must participate
in the MLS operating in their local market in order to adequately serve
their customers and compete with other brokers. As a result, few
brokers would withdraw from MLS participation even if the fees or other
costs associated with that participation substantially increased.
24. By virtue of industry-wide participation and control over a
critically important input, the MLS (a joint venture of competing
brokers) has market power in almost every relevant market.
25. The methods of making MLS information available to customers
have changed as technology has evolved. From the 1920s, when MLSs first
became prevalent, brokers allowed customers to view a printed ``MLS
book.'' Later, the availability of copy machines allowed brokers to
reproduce pages from the MLS book and deliver the pages with responsive
listings to customers by hand or mail. The advent of facsimile
transmission--and, later, electronic mail--further quickened the
process of delivering MLS listings to customers.
Virtual Office Websites
26. With the development of the Internet as an information source
for consumers, potential home buyers began to seek Internet sources of
information about homes for sale. Beginning in the late 1990s, a number
of NAR member brokers began creating password-protected Web sites that
enabled potential home buyers, once they had registered as customers of
the broker and agreed to certain restrictions on their use of the data,
to search the MLS database themselves and to obtain responsive MLS
listings over the Internet. These websites came to be known as virtual
office websites or VOWs. NAR recognizes the Internet delivery of MLS
listings to customers to be an authorized method of providing brokerage
services.
27. Brokers can use the Internet to operate more efficiently than
they can by using only traditional methods. By transferring search
functions from the broker to customers who prefer such control over the
process, VOW-operating brokers allow customers to educate themselves at
their own pace about the market in which they are considering a
purchase. By doing so, brokers with successful password-protected Web
sites are able to reduce or eliminate the time and expense involved in
identifying and providing relevant listings and otherwise educating
their customers. These brokers also spend less time on home tours with
their buyer customers, as these buyers frequently tour fewer homes
before making a purchase decision than typical buyers. With lower cost
structures, brokers with Internet-intensive business models have
offered discounted commissions to sellers or commission rebates to
buyers.
28. Other sources of listing information on the Internet are
inferior to the password-protected VOWs because they do not and cannot
guarantee access to all information available in the MLS.
29. Brokers can also use the Internet to support a ``referral''
business model. Referral services provide brokers information about
potential buyers in return for a share of any commission the broker
receives if the ``lead'' results in a completed transaction. Brokers
are not obliged to purchase leads from referral services and do so only
when they choose to. Some traditional brokers refer customers to other
brokers for a fee, and some VOW operators, similarly, have referred (or
have considered referring) some of their customers to other brokers for
a fee. Many brokers dislike the concept of paying for leads, and the
prospect that Internet-savvy brokers could support referral business
models has been a source of industry antipathy to VOWs.
Nature of the Offense
30. Brokers with innovative, Internet-based business models present
a competitive challenge to brokers who provide listings to their
customers only by traditional methods. Many brick-and-mortar brokers
fear the ability of VOW operators to use Internet technology to attract
more customers and provide better service at a lower cost.
31. In response to concerns raised by certain NAR members about
this new form of competition, NAR's Board of Directors voted on May 17,
2003, to adopt the ``Initial VOW Policy,'' a ``Policy governing use of
MLS data in connection with Internet brokerage services offered by MLS
Participants (`Virtual Office Websites').'' Prior to the filing of the
Complaint in this action, NAR had mandated that all 1,600 of its member
boards implement the Initial VOW Policy by January 1, 2006.
Approximately 200 member boards implemented the Initial VOW Policy
[[Page 47616]]
and received NAR's approval of their implementing rules.
32. Section I.3 of the Initial VOW Policy contains an opt-out
provision that forbids any broker participating in an MLS from
conveying a listing to his or her customers via the Internet without
the permission of the listing broker. Specifically, the opt-out
provision allows brokers to direct that their clients' listings not be
displayed on any VOW (a ``blanket opt-out'), or on a particular
competing broker's VOW (a ``selective opt-out'').
33. In contrast, prior to NAR's adoption of the Initial VOW Policy,
a broker could provide any relevant listing in the MLS database to any
customer--by whatever method the customer or broker preferred,
including via the Internet. Nearly all of NAR's member boards had also
adopted rules requiring all participants in their affiliated MLSs to
submit, with minor exceptions, all of their clients' listings to the
MLS. More importantly, NAR did not permit any broker to withhold his or
her clients' listings from a rival.
34. In several of the markets in which NAR's member boards have
implemented the Initial VOW Policy, brokers have already exercised
their opt-out rights to withhold their clients' listings from the
customers of brokers operating VOWs, as well as from brokers who will
use password-protected websites to provide listings to their customers
in the future. In at least one such instance, an innovative broker
discontinued operation of his website because all of his competitor
brokers had opted out, making him unable to effectively serve his
customers through operation of his site.
35. Section II.4.g of the Initial VOW Policy contains an ``anti-
referral'' provision that, with minor exceptions, forbids VOW operators
from referring their customers to ``any other entity'' for a fee. In
contrast, no NAR rule limits referrals for a fee by brokers who do not
convey MLS listings to customers over the Internet.
36. The Initial VOW Policy includes other provisions that impose
greater restrictions and limitations on brokers with Internet-based
business models than on traditional brokers. For example, under section
IV.1.b of the Initial VOW Policy, NAR's member boards may forbid VOW
operators from displaying advertising on any website on which MLS
listings information is displayed. In contrast, no NAR rule limits the
ability of traditional brokers to include advertisements in packages of
printed listings they provide to their customers.
37. The Initial VOW Policy also contains provisions to make it
obligatory and enforceable. Section I.4 of the Initial VOW Policy
expressly forbids NAR's member boards from adopting rules ``more or
less restrictive than, or otherwise inconsistent with'' the Initial VOW
Policy, including the opt-out provisions and the anti-referral
provision. Appendix A to the Initial VOW Policy provides for remedies
and sanctions for violation of the Policy, including financial
penalties and termination of MLS privileges.
38. On September 8, 2005, after plaintiff informed NAR of its
intention to bring this action, NAR advised its member boards to
suspend application and enforcement of the above-referenced provisions
of the Initial VOW Policy, and announced its adoption of a new
``Internet Listings Display Policy'' and its revision of an MLS
membership policy (together, the ``Modified VOW Policy''). NAR's
Modified VOW Policy continues to impede brokers from using the Internet
to serve home sellers and buyers more efficiently and cost effectively.
NAR's Modified VOW Policy mandates that all of NAR's member boards
enact rules implementing the Internet Listings Display Policy by July
1, 2006, but NAR subsequently communicated to its member boards that
they ``wait to adopt'' the policy ``until th[is] litigation is over.''
39. Section I.3 of the Modified VOW Policy contains a blanket opt-
out provision that forbids any broker participating in an MLS from
conveying a listing to his or her customers via the Internet without
the permission of the listing broker. Specifically, the opt-out
provision allows brokers to direct that their clients' listings not be
displayed on any competitor's Internet site. When exercised, this
provision prevents a broker from providing over the Internet the same
MLS information that brick-and-mortar brokers can provide in their
offices. Additionally, NAR's Modified VOW Policy specifically exempts
its own ``Official Site,'' Realtor.com, from the blanket opt out that
applies to all Internet sites operated by brokers.
40. The portion of the Modified VOW Policy that is NAR's revision
to its membership policies--much like the Initial VOW Policy's anti-
referral rule--denies MLS membership and access to listings to brokers
operating referral services. This membership policy effectively forbids
Internet-based brokers from referring their customers to other brokers
for a fee.
41. NAR's Modified VOW Policy includes other provisions that
restrict brokers' ability to use the Internet to serve their customers
effectively. The Modified VOW Policy, for example, allows MLSs to
downgrade the quality of the data feed they provide brokers,
effectively restraining brokers from providing innovative, Internet-
based features to enhance the service they offer their customers. The
Modified VOW Policy also permits MLSs to interfere with efficient
``cobranding'' relationships between brokers and entities that refer
potential customers to the broker.
42. Defendant's policies, both the Initial VOW Policy and the
Modified VOW Policy, thus prevent brokers from guaranteeing customers
access through the Internet to all relevant listing information,
increase the business risk and other costs associated with operating an
efficient, Internet-intensive brokerage, deny brokers a source of high-
quality referrals, and withhold from Internet brokers revenue streams
permitted to other participants in the MLS. Moreover, the opt-out
provisions provide brokers an effective tool to individually or
collectively punish aggressive competition by any Internet-based
broker.
43. Unless permanently restrained and enjoined, defendant will
continue to engage in conduct that restricts competition from
innovative brokers in violation of Section 1 of the Sherman Act, 15
U.S.C. 1.
Violation Alleged
44. NAR's adoption of the above-referenced provisions in its
Initial VOW Policy and its Modified VOW Policy, or equivalent
provisions, constitutes a contract, combination, or conspiracy by and
between NAR and its members which unreasonably restrains competition in
brokerage service markets throughout the United States in violation of
Section 1 of the Sherman Act, 15 U.S.C. 1.
45. The aforesaid contract, combination, or conspiracy has had and
will continue to have anticompetitive effects in the relevant markets,
including:
a. Suppressing technological innovation;
b. Reducing competition on price and quality;
c. Restricting efficient cooperation among brokers;
d. Making express or tacit collusion more likely; and
e. Raising barriers to entry.
46. This contract, combination, or conspiracy is not reasonably
necessary to accomplish any procompetitive objective, or,
alternatively, its scope is broader than necessary to accomplish any
such objective.
[[Page 47617]]
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 be restrained and enjoined from requiring or
permitting its member boards or the MLSs with which they are affiliated
to adopt rules implementing the opt-out provisions;
c. That the defendant be restrained and enjoined from requiring or
permitting its member boards or the MLSs with which they are affiliated
to adopt rules implementing the anti-referral provision or an MLS
membership restriction that denies MLS access to operators of Internet-
based referral services;
d. That the defendant be restrained and enjoined from requiring or
permitting its member boards or the MLSs with which they are affiliated
to adopt rules that restrict--or condition MLS access or MLS
participation rights on--the method by which a broker interacts with
his or her customers, competitor brokers, or other persons or entities;
e. That the Court grant such other relief as the United States may
request and the Court deems just and proper; and
f. that the United States recover its costs in this action.
Dated: October 4, 2005.
/s/--------------------------------------------------------------------
J. Bruce McDonald,
Deputy Assistant Attorney General.
/s/--------------------------------------------------------------------
J. Robert Kramer II,
Director of Operations.
/s/--------------------------------------------------------------------
Patrick J. Fitzgerald,
United States Attorney, Northern District of Illinois, by Linda
Wawzenski, Assistant United States Attorney.
/s/--------------------------------------------------------------------
Craig W. Conrath,
David C. Kully,
Mary Beth McGee,
Allen P. Grunes,
Lisa A. Scanlon,
Attorneys for the United States, Department of Justice, Antitrust
Division, 325 Seventh Street, NW., Suite 300, Washington, DC 20530,
Telephone: (202) 305-9969, Facsimile: (202) 307-9952.
Certificate of Service
I hereby certify that on this 4th day of October, 2005, I have
caused a copy of the foregoing Amended Complaint be served by
Federal Express upon counsel for Defendant in this matter:
Jack R. Bierig, Sidley Austin Brown & Wood, LLP, Bank One Plaza, 10
South Dearborn Street, Chicago, IL 60603.
/s/--------------------------------------------------------------------
Linda Wawzenski
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
United States of America, Plaintiff, v. NATIONAL ASSOCIATION OF
REALTORS,[supreg] Defendant
Civil Action No. 05 C 5140, Judge Kennelly, Magistrate Judge Denlow
[Proposed] Final Judgment
Whereas, Plaintiff, the United States of America, filed its Amended
Complaint on October 4, 2005, alleging that Defendant National
Association of Realtors[supreg] (``NAR'') adopted policies that
restrain competition from innovative real estate brokers in violation
of Section 1 of the Sherman Act, 15 U.S.C. 1, and Plaintiff and
Defendant, by their respective attorneys, have consented to the entry
of this Final Judgment without trial or adjudication of any issue of
fact, and without this Final Judgment constituting any evidence
against, or any admission by, any party regarding any issue of fact or
law;
Whereas, Defendant has not admitted and does not admit either the
allegations set forth in the Amended Complaint or any liability or
wrongdoing;
Whereas, the United States does not allege that Defendant's
Internet Data Exchange (IDX) Policy in its current form violates the
antitrust laws; and
Whereas, the United States requires Defendant to agree to certain
procedures and prohibitions for the purpose of preventing the loss of
competition alleged in the Complaint;
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact, and upon consent of the parties, it
is ordered, adjudged and decreed:
I. Jurisdiction
This Court has jurisdiction over the Parties and subject matter of
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. ``Broker'' means a Person licensed by a state to provide
services to a buyer or seller in connection with a real estate
transaction. The term includes any Person who possesses a Broker's
license and any agent or sales associate who is affiliated with such a
Broker.
B. ``Customer'' means a seller client of a Broker or a Person who
has expressed to a Broker an interest in purchasing residential real
property and who has described the type, features, or location of the
property in which he or she has an interest, entitling the Broker to
Provide the Customer multiple listing service (``MLS'') listing
information by any method (e.g., by hand, mail, facsimile, electronic
mail, or display on a VOW).
C. ``Final Judgment'' includes the Modified VOW Policy attached as
Exhibit A and the definition of MLS Participant and accompanying Note
attached as Exhibit B.
D. ``ILD Policy'' means the ``ILD (internet Listing Display)
Policy'' that NAR adopted on or about August 31, 2005, and any
amendments thereto.
E. ``Including'' means including, but not limited to.
F. ``Listing Information'' means all records of residential
properties (and any information relating to those properties) stored or
maintained by a multiple listing service.
G. ``Member Board'' means any state or local Board of
Realtors[supreg] or Association of Realtors[supreg], including any
city, county, inter-county, or inter-state Board or Association, and
any multiple listing service owned by, or affiliated with, any such
Board of Realtors[supreg] or Association of Realtors[supreg].
H. ``Modified VOW Policy'' means the policy attached to this Final
Judgment as Exhibit A.
I. ``NAR'' means the National Association of Realtors[supreg], its
predecessors, successors, divisions, subsidiaries, affiliates,
partnerships, and joint ventures and all directors, officers,
employees, agents, and representatives of the foregoing. The terms
``subsidiary,'' ``affiliate,'' and joint venture'' refer to any Person
in which there is or has been partial (twenty percent or more) or total
ownership or control between NAR and any other Person.
J. ``Person'' means any natural person, corporation, company,
partnership, joint venture, firm, association, proprietorship, agency,
board, authority, commission, office, or other business or legal
entity, whether private or governmental.
K. ``Provide'' means to deliver, display, disseminate, convey, or
reproduce.
L. ``Rule'' means any rule, model rule, ethical rule, bylaw,
policy, standard, or guideline and any interpretation of any Rule
issued or approved by NAR,
[[Page 47618]]
whether or not the final implementation date of any such Rule has
passed.
M. ``VOW'' or ``virtual office website'' means a website, or
feature of a website, operated by a Broker or for a Broker by another
Person 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 opportunity to search MLS data, subject to
the Broker's oversight, supervision, and accountability.
N. ``VOW Policy'' means the ``Policy governing use of MLS data in
connection with Internet brokerage services offered by MLS Participants
(``Virtual Office Websites'),'' adopted by NAR on or about May 17,
2003, and any amendments thereto.
O. The terms ``and'' and ``or'' have both conjunctive and
disjunctive meanings:
III. Applicability
This Final Judgment applies to NAR and all other Persons in active
concert or participation with NAR who have received actual notice of
this Final Judgment. A Member Board shall not be deemed to be in active
concert with NAR solely as a consequence of the Member Board's receipt
of actual notice of this Final Judgment and its affiliation with or
membership in NAR and its involvement in regular activities associated
with its affiliation with or membership in NAR (e.g., coverage under a
NAR insurance policy, attendance at NAR meetings or conventions, or
review of Member Board policies by MAR).
IV. Prohibited Conduct
Subject to the provisions of Sections V and VI of this Final
Judgment, the Modified VOW Policy (Exhibit A), and the definition of
MLS Participant and accompanying Note (Exhibit B), NAR shall not adopt,
maintain, or enforce any Rule, or enter into or enforce any agreement
or practice, that directly or indirectly.
A. Prohibits a Broker from using a VOW or prohibits, restricts, or
impedes a Broker who uses a VOW from providing to Customers on its VOW
all of the Listing Information that a Broker is permitted to Provide to
Customers by hand, mail, facsimile, electronic mail, or any other
methods of delivery;
B. Unreasonably disadvantages or unreasonably discriminates against
a Broker in the use of a VOW to Provide to Customers all of the Listing
Information that a Broker is permitted to Provide to Customers by hand,
mail, facsimile, electronic mail, or any other methods of delivery;
C. Prohibits, restricts, or impedes the referral of Customers whose
identities are obtained from a VOW by a Broker who uses a VOW to any
other Person, or establishes the price of any such referral;
D. Imposes tees or costs upon any Broker who operates a VOW or upon
any Person who operates a VOW for any Broker that exceed the reasonably
estimated actual costs incurred by a Member Board in providing Listing
Information to the Broker or Person operating the VOW or in performing
any other activities relating to the VOW, or discriminates in such VOW
related fees or costs between those imposed upon a Broker who operates
a VOW and those imposed upon a Person who operates a VOW for a Broker,
unless the MLS incurs greater costs in providing a service to a Person
who operates a VOW for a Broker than it incurs in providing the same
service to the Broker; or
E. Is inconsistent with the Modified VOW Policy.
V. Required Conduct
A. Within five business days after entry of this Final Judgment,
NAR shall repeal the ILD Policy and direct each Member Board that
adopted Rules implementing the ILD Policy to repeal such Rules at the
next meeting of the Member Board's decisionmaking body that occurs more
than ten days after receipt of the directive, but no later than ninety
days after entry of this Final Judgment.
B. Within five business days after entry of this Final Judgment,
NAR shall direct Member Boards that adopted Rules implementing the VOW
Policy to repeal such Rules at the next meeting of the Member Board's
decisionmaking body that occurs more than ten days after receipt of the
directive, but no later than ninety days after entry of this Final
Judgment.
C. Within five business days after entry of this Final Judgment,
NAR shall adopt the Modified VOW Policy. NAR shall not change the
Modified VOW Policy without either obtaining advance written approval
by the United States Department of Justice, Antitrust Division
(``DOJ'') or an order of the Court pursuant to Section VIII of this
Final Judgment authorizing the proposed modification.
D. Within five business days after entry of this Final Judgment,
NAR shall direct Member Boards to adopt the Modified VOW Policy within
ninety days after entry of this Final Judgment, and to thereafter
maintain, act consistently with, and enforce Rules implementing the
Modified VOW Policy. NAR shall simultaneously direct Member Boards,
beginning upon receipt of the directive, not to adopt, maintain, or
enforce any Rule or practice that NAR would be prohibited from
adopting, maintaining, or enforcing pursuant to Section IV of this
Final Judgment (including Rules or practices that unreasonably
discriminate against Brokers in their operation of VOWs).
E. If NAR determines that a Member Board has not timely adopted or
maintained, acted consistently with, or enforced Rules implementing the
Modified VOW Policy, it shall, within thirty days of such
determination, direct in writing that the Member Board do so. NAR shall
deny coverage under any NAR insurance policy (or cause coverage to be
denied) to any Member Board for as long as that Member Board refuses to
adopt, maintain, act consistently with, and enforce rules implementing
the Modified VOW Policy. NAR shall also notify the DOJ of the identity
of that Member Board and the Modified VOW Policy provisions it refused
to adopt, maintain, act consistently with, or enforce. For purposes of
this provision, a failure of a Member Board to adopt, maintain, act
consistently with, or enforce Rules implementing the Modified VOW
Policy within ninety days of a written directive to that Member Board
from NAR shall constitute a refusal by the Member Board to do so.
F. If NAR determines that a Member Board has adopted, maintained,
or enforced any Rule or practice that NAR would be prohibited from
adopting, maintaining, or enforcing pursuant to Section IV of this
Final Judgment (including Rules or practices that unreasonably
discriminate against Brokers in their operation of VOWs), it shall,
within thirty days of such determination, direct in writing that the
Member Board rescind and cease to enforce that Rule or practice. NAR
shall deny coverage under any NAR insurance policy (or cause coverage
to be denied) to any Member Board for as long as that Member Board
refuses to rescind and cease to enforce that Rule or practice. NAR
shall also notify the DOJ of the identity of that Member Board and the
Rule or practice it refused to rescind and cease to enforce. For
purposes of this provision, a Member Board's failure to rescind and
cease to enforce the Rule or practice within ninety days of a written
directive from NAR shall constitute a refusal by the Member board to do
so.
G. Within thirty days of entry of this Final Judgment, NAR shall
designate an Antitrust Compliance Officer with
[[Page 47619]]
responsibility for educating Member Boards about the antitrust laws and
for achieving full compliance with this Final Judgment. The Antitrust
Compliance Officer shall be responsible for the following:
(1) Supervising NAR's review of Rules of NAR's Member Boards for
compliance with this Final Judgment and the Modified VOW Policy;
(2) Maintaining copies of any communications with any Person
containing allegations of any Member Board's (i) noncompliance with
any provision of the Modified VOW Policy or with this Final Judgment
or (ii) failure to enforce any Rules implementing the Modified VOW
Policy;
(3) Reporting to the United States 180 days after entry of this
Final Judgment and again on the first anniversary of the entry of
this Final Judgment, the identity of each Member Board that has not
adopted Rules implementing the Modified VOW Policy;
(4) Ensuring that each of NAR's Member Boards that owns or
Operates a multiple listing service are provided briefing materials,
within ninety days of the entry of this Final Judgment, on the
meaning and requirements of the Modified VOW Policy and this Final
Judgment; and
(5) Holding an annual program for NAR Member Boards and their
counsel that includes a discussion of the antitrust laws (as applied
to such Member Boards) and this Final Judgment.
H. NAR shall maintain and shall furnish to the DOJ on a quarterly
basis (beginning ninety days after entry of this Final Judgment) copies
of any communications with any Person containing allegations of any
Member's Board's (1) noncompliance with any provision of the Modified
VOW Policy or with this Final Judgment or (2) failure to enforce any
Rules implementing the Modified VOW Policy.
I. Within five business days after entry of this Final Judgment,
NAR shall provide, in a prominent size and location on its Web site
(www.realtor.org) a hyperlink to a Web page on which NAR has published
copies of
(1) This Final Judgment;
(2) A notification that Member Boards must repeal any Rules
implementing the ILD and VOW Policies (in accordance with Sections V.A
and V.B of this Final Judgment); and
(3) A copy of the Modified VOW Policy.
NAR shall also publish each of the three above items in the first issue
of Realtor[reg] Magazine scheduled for publication after the date of
entry of this Final Judgment.
VI. Permitted Conduct
A. Subject to Section IX of this Final Judgment, nothing in this
Final Judgment shall prohibit NAR from adopting and maintaining the
definition of MLS Participant and the accompanying Note, together
attached as Exhibit B. However, NAR shall direct each Member Board not
to suspend or expel any Broker from multiple listing service membership
or participation for reasons of the Broker's then-failure to qualify
for membership or participation under the definition of MLS Participant
and the accompanying Note, together attached as Exhibit B, until May
27, 2009.
B. Notwithstanding any of the above provisions, and subject to
Section IX of this Final Judgment, nothing in this Final Judgment shall
prohibit NAR from adopting, maintaining, or enforcing Rules that are
generally applicable on their face and that do not, in their
application, unreasonably restrict any method of delivery of Listing
Information to Customers.
VII. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether this Final Judgment should be
modified or vacated, and subject to any legally recognized privilege,
from time to time authorized representatives of the DOJ, including
consultants and other Persons retained by the United States, shall,
upon written request of an authorized representative of the Assistant
Attorney General in charge of the Antitrust Division, and on reasonable
notice to NAR, be permitted:
(1) Access during NAR's office hours to inspect and copy, or at
the option of the United States, to require NAR to provide hard copy
or electronic copies of, all books, ledgers, accounts, records,
data, and documents in the possession, custody, or control of NAR,
relating to any matters contained in this Final Judgment; and
(2) To interview, either informally or on the record, NAR's
officers, employees, or agents, who may have their individual
counsel and counsel for NAR present, regarding such matters. The
interviews shall he subject to the reasonable convenience of the
interviewee and without restraint or interference by NAR. NAR may,
however, prevent the interviewee from divulging matters protected by
the attorney-client privilege, work product doctrine, or other
applicable privilege.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division, NAR
shall submit written reports or response to written interrogatories,
under oath if requested, relating to its compliance with any of the
matters contained in this Final Judgment as may be requested.
C. 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
otherwise required by law.
D. If at the time information or documents are furnished by NAR to
the United States, NAR marks as confidential any pertinent page of such
material on the grounds that such page contains information as to which
a claim of protection may be asserted under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure, then the United States shall give NAR
ten calendar days notice prior to divulging such material in any legal
proceeding (other than a grand jury proceeding).
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 enforce
compliance, and to punish violations of its provisions.
IX. No Limitation on Government Rights
Nothing in this Final Judgment shall limit the right of the United
States to investigate and bring actions to prevent or restrain
violations of the antitrust laws concerning any Rule or practice
adopted or enforced by NAR or any of its Member Boards.
X. Expiration of Final Judgment
This Final Judgment shall expire ten years from the date of its
entry.
XI. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, and
any comments thereon and the United States's responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the Court, entry of this Final Judgment is in the public interest.
Dated:
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16
[[Page 47620]]
Matthew F. Kennelly,
United States District Judge.
Exhibit A
Policy Governing Use of MLS Data in Connection With Internet Brokerage
Services Offered by MLS Participants (``Virtual Office Websites'')
I. Definitions and Scope of Policy
1. For purposes of this Policy, the term Virtual Office Website
(``VOW'') refers to a Participant's Internet website, or a feature of a
Participant's Internet website, through which the Participant is
capable of providing real estate brokerage services to consumers with
whom the Participant has first established a broker-consumer
relationship (as defined by state law) where the consumer has the
opportunity to search MLS data, subject to the Participant's oversight,
supervision, and accountability.
a. A Participant may designate an Affiliated VOW Partner (``AVP'')
to operate a VOW on behalf of the Participant, subject to the
Participant's supervision and accountability and the terms of this
Policy.
b. A non-principal broker or sales licensee, affiliated with a
Participant, may, with the Participant's consent, operate a VOW or have
a VOW operated on its behalf by an AVP. Such a VOW is subject to the
Participant's supervision and accountability and the terms of this
Policy.
c. Each use of the term ``Participant'' in this Policy shall also
include a Participant's non-principal brokers and sales licensees (with
the exception of references in this section to the ``Participant's
consent'' and the ``Participant's supervision and accountability,'' and
in section III.l0.a, below, to the ``Participant acknowledges''). Each
reference to ``VOW'' or ``VOWs'' herein refers to all VOWs, whether
operated by a Participant, by a non-principal broker or sales licensee,
or by an AVP.
2. The right to display listings in response to consumer searches
is limited to display of MLS data supplied by the MLS(s) in which the
Participant has participatory rights. This does not preclude a firm
with offices participating in different MLSs from operating a master
website with links to such offices' VOWs.
3. Participants' Internet websites, including those operated for
Participants by AVPs, may also provide other features, information, or
services in addition to VOWs (including the Internet Data Exchange
(``IDX'') function).
4. The display of listing information on a VOW does not require
separate permission from the Participant whose listings will be
available on the VOW.
5. Except as permitted in Sections III and IV, MLSs may not adopt
rules or regulations that conflict with this Policy or that otherwise
restrict the operation of VOWs by Participants.
II. Policies Applicable to Participants' VOWs
1. A Participant may provide brokerage services via a VOW that
include making MLS active listing data available, but only to consumers
with whom the Participant has first established a lawful consumer-
broker relationship, including completion of all actions required by
state law in connection with providing real estate brokerage services
to clients and customers (hereinafter ``Registrants''). Such actions
shall include, but are not limited to, satisfying all applicable
agency, non-agency, and other disclosure obligations, and execution of
any required agreement(s).
2. A Participant's VOW must obtain the identity of each Registrant
and obtain each Registrant's agreement to Terms of Use of the VOW, as
follows:
a. A Registrant must provide his or her name and a valid email
address. The Participant must send an email to the address provided by
the Registrant confirming that the Registrant has agreed to the Terms
of Use (described in subsection c below). The Registrant may be
permitted to access the VOW only after the Participant has verified
that the email address provided is valid and that Registrant received
the Terms of Use confirmation.
b. The Registrant must supply a user name and a password, the
combination of which must be different from those of all other
Registrants on the VOW, before being permitted to search and retrieve
information from the MLS database via the VOW. The user name and
password may be established by the Registrant or may be supplied by the
Participant, at the option of the Participant. An email address may be
associated with only one user name and password. The Registrant's
password and access must expire on a date certain but may be renewed.
The Participant must at all times maintain a record of the name and
email address supplied by the Registrant, and the username and current
password of each Registrant. Such records must be kept for not less
than 180 days after the expiration of the validity of the Registrant's
password. If the MLS has reason to believe that a Participants's VOW
has caused or permitted a breach in the security of the data or a
violation of MLS rules related to use by one or more Registrants, the
Participant shall, upon request, provide to the MLS a copy of the
record of the name, email address, user name, current password, and
audit trail, if required, of any Registrant identified by the MLS to be
suspected of involvement in the violation.
c. The Registrant must be required affirmatively to express
agreement to a ``Terms of Use'' provision that requires the Registrant
to open and review an agreement that provides at least the following:
i. That the Registrant acknowledges entering into a lawful
consumer-broker relationship with the Participant;
ii. That all data obtained from the VOW is intended only for the
Registrant's personal, non-commercial use;
iii. That the Registrant has a bona fide interest in the purchase,
sale, or lease of real estate of the type being offered through the
VOW;
iv. That the Registrant will not copy, redistribute, or retransmit
any of the data or information provided;
v. That the Registrant acknowledges the MLS's ownership of, and the
validity of the MLS's copyright in, the MLS database.
After the Registrant has opened for viewing the Terms of Use
agreement, a ``mouse click'' is sufficient to acknowledge agreement to
those terms. The Terms of Use Agreement may not impose a financial
obligation on the Registrant or create any representation agreement
between the Registrant and the Participant.
The Terms of Use agreement shall also expressly authorize the MLS,
and other MLS Participants or their duly authorized representatives, to
access the VOW for the purposes of verifying compliance with MLS rules
and monitoring display of Participants' listings by the VOW.
d. An agreement entered into at any time between the Participant
and Registrant imposing a financial obligation on the Registrant or
creating representation of the Registrant by the Participant must be
established separately from the Terms of Use, must be prominently
labeled as such, and may not be accepted solely by mouse click.
3. A Participant's VOW must prominently display an e-mail address,
telephone number, or specific identification of another mode of
communication (e.g., live chat) by which a consumer can contact the
Participant to ask questions, or get more information, about properties
displayed on the VOW. The Participant, or a non-
[[Page 47621]]
principal broker or sales licensee licensed with the Participant, must
be willing and able to respond knowledgeably to inquiries from
Registrants about properties within the market area served by that
Participant and displayed on the VOW.
4. A Participant's VOW must protect the MLS data from
misappropriation by employing reasonable efforts to monitor for and
prevent ``scraping'' or other unauthorized accessing, reproduction, or
use of the MLS database.
5. A Participant's VOW must comply with the following additional
requirements:
a. No VOW shall display listings or property addresses of sellers
who have affirmatively directed their listing brokers to withhold their
listing or property address from display on the Internet. The listing
broker or agent shall communicate to the MLS that a seller has elected
not to permit display of the listing or property address on the
Internet. Notwithstanding the foregoing, a Participant who operates a
VOW may provide to consumers via other delivery mechanisms, such as
email, fax, or otherwise, the listings of sellers who have determined
not to have the listing for their property displayed on the Internet.
b. A Participant who lists a property for a seller who has elected
not to have the property listing or the property address displayed on
the Internet shall cause the seller to execute a document that conforms
to the form attached to this Policy as Appendix A. The Participant
shall retain such forms for at least one year from the date they are
signed.
c. With respect to any VOW that
(i) Allows third-parties to write comments or reviews about
particular listings or displays a hyperlink to such comments or reviews
in immediate conjunction with particular listings, or
(ii) Displays an automated estimate of the market value of the
listing (or hyperlink to such estimate) in immediate conjunction with
the listing,
The VOW shall disable or discontinue either or both of those
features as to the seller's listing at the request of the seller. The
listing broker or agent shall communicate to the MLS that the seller
has elected to have one or both of these features disabled or
discontinued on all Participants' websites. Except for the foregoing
and subject to subparagraph (d), a Participant's VOW may communicate
the Participant's professional judgment concerning any listing. Nothing
shall prevent a VOW from notifying its customers that a particular
feature has been disabled ``at the request of the seller.''
d. A VOW shall maintain a means (e.g., e-mail address, telephone
number) to receive comments about the accuracy of any data or
information that is added by or on behalf of the VOW operator beyond
that supplied by the MLS and that relates to a specific property
displayed on the VOW. The VOW operator shall correct or remove any
false data or information relating to a specific property upon receipt
of a communication from the listing broker or listing agent for that
property explaining why the data or information is false. However, the
VOW operator shall not be obligated to remove or correct any data or
information that simply reflects good faith opinion, advice, or
professional judgment.
e. Each VOW shall refresh MLS data available on the VOW not less
frequently than every 3 days.
f. Except as provided elsewhere in this Policy or in MLS rules and
regulations, no portion of the MLS database may be distributed,
provided, or made accessible to any person or entity.
g. Every VOW must display a privacy Policy that informs Registrants
of the ways in which information obtained from them will be used.
h. A VOW may exclude listings from display based only on objective
criteria, including, but not limited to, factors such as geography,
list price, type of property, cooperative compensation offered by
listing broker, or whether the listing broker is a Realtor[supreg].
6. A Participant who intends to operate a VOW must notify the MLS
of its intention to establish a VOW and must make the VOW readily
accessible to the MLS and to all MLS Participants for purposes of
verifying compliance with this Policy and any other applicable MLS
rules or policies.
7. A Participant may operate more than one VOW itself or through an
AVP. A Participant who operates a VOW itself shall not be precluded
from also operating VOWs in conjunction with AVPs.
III. Policies Applicable to Multiple Listing Services
1. A Multiple Listing Service shall permit MLS Participants to
operate VOWs, or to have VOWs operated for them by AVPs, subject to the
requirements of state law and this Policy.
2. An MLS shall, if requested by a Participant, provide basic
``downloading'' of all MLS nonconfidential listing data, including
without limitation address fields, listings types, photographs, and
links to virtual tours. Confidential data includes only that which
Participants are prohibited from providing to customers orally and by
all other delivery mechanisms. They include fields containing the
information described in paragraph IV(1) of this Policy, provided that
sold data (i.e., listing information relating to properties that have
sold) shall be deemed confidential and withheld from a download only if
the actual sales prices of completed transactions are not accessible
from public records. For purposes of this Policy, ``downloading'' means
electronic transmission of data from MLS servers to a Participant's or
AVP's server on a persistent basis. An MLS may also offer a transient
download. In such case, it shall also, if requested, provide a
persistent download, provided that it may impose on users of such
(download the approximate additional costs incurred by it to do so.
3. This Policy does not require an MLS to establish publicly
accessible sites displaying Participants' listings.
4. If an MLS provides a VOW-specific feed, that feed must include
all of the nonconfidential data included in the feed described in
paragraph 2 above except for listings or property addresses of sellers
who have elected not to have their listings or addresses displayed on
the Internet.
5. An MLS may pass on to those Participants who will download
listing information the reasonably estimated costs incurred by the MLS
in adding or enhancing its ``downloading'' capacity to enable such
Participants to operate VOWs.
6. An MLS may require that Participants (1) utilize appropriate
security protection, such as firewalls, as long as such requirement
does not impose security obligations greater than those employed
concurrently by the MLS, and/or (2) maintain an audit trail of
Registrants' activity on the VOW and make that information available to
the MLS if the MLS has reason to believe that any VOW has caused or
permitted a breach in the security of the data or a violation of
applicable MLS rules.
7. An MLS may not prohibit or regulate display of advertising or
the identification of entities on VOWs (``branding'' or ``co-
branding''), except to prohibit deceptive or misleading advertising or
co-branding. For purposes of this provision, co-branding will be
presumed not to be deceptive or misleading if the Participant's logo
and contact information (or that of at least one Participant, in the
case of a VOW established and operated by or for more than one
Participant) is displayed in immediate conjunction with that of every
other party, and the logo and
[[Page 47622]]
contact information of all Participants displayed on the VOW is as
large as the logo of the AVP and larger than that of any third party.
8. Except as provided in this Policy, an MLS may not prohibit
Participants from enhancing their VOWs by providing information
obtained from sources other than the MLS, additional technological
services (such as mapping functionality), or information derived from
nonconfidential MLS data (such as an estimated monthly payment derived
from the listed price), or regulate the use or display of such
information or technological services on any VOW.
9. Except as provided in generally applicable rules or policies
(such as the Realtor[supreg] Code of Ethics), an MLS may not restrict
the format of data display on a VOW or regulate the appearance of VOWs.
10. Subject to the provisions below, an MLS shall make MLS listing
data available to an AVP for the exclusive purpose of operating a VOW
on behalf of a Participant. An MLS shall make MLS listing data
available to an AVP under the same terms and conditions as those
applicable to Participants. No AVP has independent participation rights
in the MLS by virtue of its right to receive data on behalf of a
Participant, or the right to use MLS data except in connection with
operation of a VOW for a Participant. AVP access to MLS data is
derivative of the rights of the Participant on whose behalf the AVP is
downloading data.
a. A Participant, non-principal broker or sales licensee, or AVP
may establish the AVP's right to receive and use MLS data by providing
to the MLS a writing in which the Participant acknowledges its or its
non-principal broker's or sales licensee's selection of the AVP to
operate a VOW on its behalf.
b. An MLS may not charge an AVP, or a Participant on whose behalf
an AVP operates a VOW, more than a Participant that chooses to operate
a VOW itself (including any fees or costs associated with a license to
receive MLS data, as described in (g), below), except to the extent
that the MLS incurs greater costs in providing listing data to the AVP
than the MLS incurs in providing listing data to a Participant.
c. An MLS may not place data security requirements or restrictions
on use of MLS listing data by an AVP that are not also imposed on
Participants.
d. An MLS must permit an AVP to download listing information in the
same manner (e.g., via a RETS feed or via an FTP download), at the same
times and with the same frequency that the MLS permits Participants to
download listing information.
e. An MLS may not refuse to deal directly with an AVP in order to
resolve technical problems with the data feed. However, the MLS may
require that the Participant on whose behalf the AVP is operating the
VOW participate in such communications if the MLS reasonably believes
that the involvement of the Participant would be helpful in order to
resolve the problem.
f. An MLS may not condition an AVP's access to a data feed on the
financial terms on which the AVP provides the site for the Participant.
g. An MLS may require Participants and AVPs to execute license or
similar agreements sufficient to ensure that Participants and AVPs
understand and agree that data provided by the MLS may be used only to
establish and operate a VOW on behalf of the Participant and not for
any other purpose.
h. An MLS may not (i) prohibit an AVP from operating VOWs on behalf
of more than one Participant, and several Participants may designate an
AVP to operate a single VOW for them collectively, (ii) limit the
number of entities that Participants may designate as AVPs for purposes
of operating VOWs, or (iii) prohibit Participants from designating
particular entities as AVPs except that, if an AVP's access has been
suspended or terminated by an MLS, that MLS may prevent an entity from
being designated an AVP by another Participant during the period of the
AVP's suspension or termination.
i. Except as stated below, an MLS may not suspend or terminate an
AVP's access to data (a) for reasons other than those that would allow
an MLS to suspend or terminate a Participant's access to data, or (b)
without giving the AVP and the associated Participant(s) prior notice
and the process set forth in the applicable provisions of the MLS rules
for suspension or termination of a Participant's access.
Notwithstanding the foregoing, an MLS may immediately terminate an
AVP's access to data (a) if the AVP is no longer designated to provide
VOW services to any Participant, (b) if the Participant for whom the
AVP operates a VOW ceases to maintain its status with the MLS, (c) if
the AVP has downloaded data in a manner not authorized for Participants
and that hinders the ability of Participants to download data, or (d)
if the associated Participant or AVP has failed to make required
payments to the MLS in accordance with the MLS's generally applicable
payment policies and practices.
11. An MLS may not prohibit, restrict, or impede a Participant from
referring Registrants to any person or from obtaining a fee for such
referral.
IV. Requirements That MLSs May Impose on the Operation of VOWs and
Participants
1. An MLS may impose any, all, or none of the following
requirements on VOWs but may impose them only to the extent that
equivalent requirements are imposed on Participants' use of MLS listing
data in providing brokerage services via all other delivery mechanisms:
a. A Participant's VOW may not make available for search by or
display to Registrants the following data intended exclusively for
other MLS Participants and their affiliated licensees:
i. Expired, withdrawn, or pending listings.
ii. Sold data unless the actual sales price of completed
transactions is accessible from public records.
iii. The compensation offered to other MLS Participants.
iv. The type of listing agreement, i.e., exclusive right to sell or
exclusive agency.
v. The seller(s) and occupant(s) name(s), phone number(s) and email
address(es), where available.
vi. Instructions or remarks intended for cooperating brokers only,
such as those regarding showing or security of the listed property.
b. The content of MLS data that is displayed on a VOW may not he
changed from the content as it is provided in the MLS. MLS data may be
augmented with additional data or information not otherwise prohibited
from display as long as the source of such other data or information is
clearly identified. This requirement does not restrict the format of
MLS data display on VOWs or display of fewer than all of the listings
or fewer authorized data fields.
c. There shall be a notice on all MLS data displayed indicating
that the data is deemed reliable but is not guaranteed accurate by the
MLS. A Participant's VOW may also include other appropriate disclaimers
necessary to protect the Participant and/or the MLS from liability.
d. Any listing displayed on a VOW shall identify the name of the
listing firm in a readily visible color, and reasonably prominent
location, and in typeface not smaller than the median typeface used in
the display of listing data.
e. The number of current or, if permitted, sold listings that
Registrants may view, retrieve, or download on or from a VOW in
response to an inquiry may be limited to a reasonable number.
[[Page 47623]]
Such number shall be determined by the MLS, but in no event may the
limit be fewer than 100 listings or 5% of the listings in the MLS,
whichever is less.
f. Any listing displayed on a VOW shall identify the name of the
listing agent.
2. An MLS may also impose the following other requirements on the
operation of VOWs:
a. Participants displaying other brokers' listings obtained from
other sources, e.g., other MLSs, non-participating brokers, etc. shall
display the source from which each such listing was obtained.
b. A maximum period, no shorter than 90 days and determined by the
MLS, during which Registrants' passwords are valid, after which such
passwords must be changed or reconfirmed.
3. An MLS may not prohibit Participants from downloading and
displaying or framing listings obtained from other sources, e.g., other
MLSs or from brokers not participating in that MLS, etc., but may
require either that (i) such information be searched separately from
listings obtained from other sources, including other MLSs, or (ii) if
such other sources are searched in conjunction with searches of the
listings available on the VOW, require that any display of listings
from other sources identify such other source.
EFFECTIVE DATE: MLSs have until not later than [90 DAYS AFTER ENTRY OF
THE FINAL JUDGMENT] to adopt rules implementing the foregoing policies
and to comply with the provisions of section III above, and (2)
Participants shall have until not later than 180 days following
adoption and implementation of rules by an MLS in which they
participate to cause their VOW to comply with such rules.
See Appendix A for Seller Opt-Out Form.
Appendix A--Seller Opt-Out Form
1. [Check one]
a. [Check here] I have advised my broker or sales agent that I do
not want the listed property to be displayed on the Internet; or
b. [Check here] I have advised my broker or sales agent that I do
not want the address of the listed property to be displayed on the
Internet.
2. I understand and acknowledge that, if I have selected option a,
consumers who conduct searches for listings on the Internet will not
see information about the listed property in response to their search.
-----------------------------------------------------------------------
initials of seller
BILLING CODE 4410-11-M
[[Page 47624]]
Exhibit B
[GRAPHIC] [TIFF OMITTED] TN14AU08.008
[[Page 47625]]
[GRAPHIC] [TIFF OMITTED] TN14AU08.009
BILLING CODE 4410-11-C
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
United States Of America, Plaintiff, v. National Association of
Realtors[supreg], Defendant.
Civil Action No. 05 C 5140, Judge Kennelly
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
Overview. The United States brought this lawsuit against Defendant
National Association of Realtors[supreg] (``NAR'') on September 8,
2005, to stop NAR from violating Section 1 of the Sherman Act, 15
U.S.C. 1, by its suppression of competition from real estate brokers
who use the Internet to deliver real estate brokerage services. NAR's
policies singled out these innovative brokers and denied them equal
access to the for-sale listings that are the lifeblood of competition
in real estate markets. The settlement will eliminate NAR's
discriminatory policies and restore even-handed treatment for all
brokers, including those who use the Internet in innovative ways.
Virtual Office Websites (``VOWs''). The brokers who have been
restrained by NAR's policies operate password-protected Web sites
through which they deliver brokerage services to consumers. NAR has
referred to these websites as ``virtual office websites'' or ``VOWs.''
As discussed below and in the United States' October 4, 2005, Amended
Complaint, brokers who use VOWs (``VOW brokers'') can operate more
productively than other brokers, providing high quality brokerage
services efficiently to consumers.
Defendant NAR and MLSs. NAR is a trade association whose membership
includes both traditional, bricks-and-mortar real estate brokers and
innovative brokers, such as those who operate VOWs. NAR promulgates
rules for the operation of the approximately 800 multiple listing
services (``MLSs'') affiliated with NAR. MLSs are joint ventures of
virtually all real estate brokers in each local or regional area. MLSs
aggregate information about all properties in the areas they serve that
are offered for sale through brokers.
NAR's Challenged Policies. On May 17, 2003, NAR adopted its ``VOW
Policy,'' which contained rules that obstructed brokers' abilities to
use VOWs to serve their customers, as described below in Section II.
After an investigation, the United States prepared to file a complaint
challenging this Policy.
On September 8, 2005, NAR repealed its VOW Policy and replaced it
with its Internet Listings Display Policy (``ILD Policy''). NAR hoped
that this change would forestall the United States' challenge to its
policies. NAR's ILD Policy, however, continued to discriminate against
VOW brokers. As part of its adoption of the ILD Policy, NAR also
revised and reinterpreted its MLS membership rule, which would have
excluded some brokers who used VOWs, as detailed below in Section II.
(NAR's VOW and ILD Policies, including its membership rule revision and
reinterpretation, are referred to collectively in this Competitive
Impact Statement as NAR's ``Challenged Policies.'')
As an association of competitors with market power, NAR's adoption
of policies that suppress new and efficient competition to the
detriment of consumers violates Section 1 of the Sherman Act, 15 U.S.C.
1.
The Complaint. On September 8, 2005, the day NAR adopted its ILD
Policy, the United States tiled its Complaint. The United States filed
an Amended Complaint on October, 4, 2005, that explicitly addressed the
ILD Policy and membership rule revision
[[Page 47626]]
and reinterpretation. The Amended Complaint alleges that NAR's adoption
of the Challenged Policies constitutes a contract, combination, and
conspiracy by and between NAR and its members which unreasonably
restrains competition in brokerage service markets throughout the
United States, in violation of Section 1 of the Sherman Act, 15 U.S.C.
1.
In the Amended Complaint, the United States asks the Court to order
NAR to stop violating the law. The United States did not seek monetary
damages or fines; the law does not provide for these remedies in a case
of this nature.
Motion to Dismiss. NAR filed a motion to dismiss the case, claiming
that, because NAR did not restrain brokers by compelling them to use
the ``opt-out'' provisions of the Challenged Policies (discussed below
in Section II.C), those provisions did not constitute actionable
restraints of trade. NAR also sought dismissal on two procedural
grounds. On November 27, 2006, the Court issued an opinion denying
NAR's motion. The Court found that the appropriate analysis under
Section 1 is not whether individual market actors are restrained but
instead whether competition is restrained.\1\ The Court also rejected
NAR's procedural arguments.\2\
---------------------------------------------------------------------------
\1\ See United States v. NAR, No. 05-C-5140, 2006-2 Trade Cas.
]75,499, 2006 WL 3434263, at *12.14 (ND. Ill. Nov. 27, 2006).
\2\ Id. at *6-11 & 15.
---------------------------------------------------------------------------
Course of the Litigation. Discovery began in December 2005 and
continued through 2006 and 2007. The case was scheduled for trial on
July 7, 2008.
Proposed Settlement. On May 27, 2008, six weeks before trial was
scheduled to begin, the United States and NAR reached a settlement. The
United States filed a Stipulation and proposed Final Judgment that are
designed to eliminate the likely anticompetitive effects of NAR's
Challenged Policies. The proposed Final Judgment, which is explained
more fully below, requires NAR to repeal its VOW Policy and its ILD
Policy and to adopt and apply new rules that do not discriminate
against brokers who use VOWs to provide brokerage services to their
customers.
The United States and NAR have 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 Competition and Innovation Enabled by VOWs
In many respects, most VOW brokers operate just like their more
traditional competitors. They hold brokers' licenses in the states in
which they operate, they ordinarily are Realtor members of NAR, they
participate in their local MLS, they tour homes with potential buyer
customers and guide those customers through the negotiating,
contracting, and closing process, and they derive revenues from
commissions earned in connection with real estate transactions.\3\
---------------------------------------------------------------------------
\3\ The real estate licensing laws of most states allow real
estate professionals to be licensed as either brokers or as agents
or sales associates. To offer real estate brokerage services, a
person licensed as an agent or sales associate must affiliate with
and be subject to the supervision of a person who holds a broker's
license. See, e.g., 225 ILCS 454/1-5.
---------------------------------------------------------------------------
These VOW brokers differ from other brokers in how they use the
Internet to provide brokerage services. VOW brokers use primarily their
websites, rather than the efforts of their agents, to educate potential
buyers about the market.
This service necessarily involves--as it does with brokers who
operate in a more traditional fashion providing those MLS listings to
buyer customers that meet their expressed needs and interests. NAR's
MLS rules permit brokers to ``reproduce from the MLS compilation and
distribute to prospective purchasers'' information about properties in
which the purchaser might have an interest. See NAR, Handbook on
Multiple Listing Policy, ``Model Rules & Regulations for an MLS
Operated as a Committee of an Association of Realtors[supreg],'' Sec.
12.2 (21st ed. 2008). Rather than providing this information to
prospective buyers by hand delivery, mail, fax, or e-mail--the delivery
methods historically used by brokers--VOW brokers deliver listings over
the Internet.\4\
---------------------------------------------------------------------------
\4\ As the court found in Austin Board of Realtors v. E-Realty,
Inc., No. 00-CA-154, 2000 WL 34239114, at *4 (W.D. Tex. Mar. 30,
2000), ``all * * * methods of distribution'' of listings, including
the Internet, ``are equivalent'' and should be treated equally under
MLS rules. Until it began developing its VOW Policy, NAR agreed with
this position. For instance, on January 29, 2001, a top NAR official
stated in a letter to the president of eRealty (a VOW broker) that
eRealty's distribution of MLS listings through its VOW was ``in
compliance with'' MLS rules governing the provision of MLS listings
to prospective buyers. NAR also published a white paper in December
2001 in which it described VOWs as an ``emerging, authorized use of
MLS current listing data,'' and stated that brokers using VOWs are
subject to the same MLS rules governing the dissemination of
listings to potential buyers that are applicable to all other
brokers. The same official reiterated the point in a March 8, 2002,
interview, stating that NAR's rules ``don't discriminate between
methods of delivery.''
---------------------------------------------------------------------------
VOWs help brokers operate more efficiently and increase the quality
of services they provide. By enabling consumers to search for and
retrieve relevant MLS listings, VOW brokers can operate more
efficiently than other brokers. Because customers are educating
themselves without the broker's expenditure of time, a VOW broker can
expend less time, energy, and resources educating his or her customers.
Operating a VOW can also enhance broker competitiveness in working with
home seller clients by allowing the broker to provide detailed
information to both potential and active seller clients about the
apparent interests of buyers who are searching for homes in the
seller's neighborhood. A study conducted in connection with this case
showed that one sizeable VOW broker, for example, was able to generate
many more transactions per agent (controlling for years of agent
experience) than the traditional brokers it competed against.
With lower costs and increased productivity, some VOW brokers have
offered discounted commission rates to their seller clients and rebates
to their buyer customers.\5\ VOW brokers have already delivered tens of
millions of dollars in financial benefits directly to their customers.
Another study conducted in connection with this case revealed evidence
consistent with a finding that the growth of a VOW broker that offered
discounts led a sizeable traditional competitor to reduce its
commissions to consumers.
---------------------------------------------------------------------------
\5\ Prospective buyers frequently do not enter contractual
relationships with the broker from whom they receive brokerage
services and, as such, are considered ``customers,'' rather than
``clients,'' of the broker.
---------------------------------------------------------------------------
Innovative brokers with VOWs have enhanced the consumer experience
by offering tools and information that allow consumers to approach the
purchase of a home well informed about all aspects of the markets they
are considering. VOW brokers not only provide their customers access to
up-to-date MLS listings information, but also offer mapping and
property-comparison tools and provide school district information,
crime statistics, and other neighborhood information for consumers to
consider as they educate themselves regarding the most important
purchase in the lives of most Americans. Many VOW brokers
[[Page 47627]]
also allow customers to maintain a personal portfolio of properties
they are monitoring, with the VOWs automatically updating those
listings as their price or status changes.
Of course, many traditional brokers provide neighborhood and other
similar information to their customers, and some even provide such
information on Internet websites. VOWs can differ, however, in the
quantity and quality of information that they provide. VOW brokers
offer their customers complete and up-to-date information and often
focus on information most valuable to prospective buyers, identifying
price reductions and the number of days a property has been on the
market and providing information about comparable recent sales.
Customers of VOW brokers can obtain information at their own pace, on
their own time, and in the form in which they are most interested in
receiving it.
Some VOW brokers have established brokerage businesses that focus
solely on the high technology aspects of brokerage services that can be
delivered over the Internet. Like other VOW brokers, these ``referral
VOWs'' educate prospective buyers about the market in which they are
considering a purchase by providing buyers MLS listings and other
information on a VOW. When the buyer is ready to tour a home, the
referral VOW broker can direct the buyer to brokers or agents who
specialize in guiding the buyer on tours of homes and advising them
during the negotiating, contracting, and closing process. In some
instances, referral VOW brokers have obtained a referral fee
(contingent on closing) for delivering educated buyer customers to the
brokers or agents who received the referrals. Some referral VOW brokers
have offered Commission rebates or other financial benefits to their
customers.
B. Description of the Defendant and Its Activities
Chicago-based NAR is a trade association that establishes and
enforces policies and professional standards for its over one million
real estate professional members and 1,400 local and state Boards or
Associations of Realtors[supreg] (``Member Boards''). NAR promulgates
rules governing the operation of the approximately 800 MLSs that are
affiliated with NAR through their ownership or operation by NAR's
Member Boards.\6\ In order to encourage adherence to its policies, NAR
can deny coverage under its errors and omissions insurance (i.e.,
professional liability insurance) policy to any Member Board that
maintains MLS rules not in compliance with NAR's policies.
---------------------------------------------------------------------------
\6\ There are approximately 1,000 MLSs in the United States,
approximately 800 of which are affiliated with NAR and subject to
NAR's rules. The rules of the remaining approximately 200 MLSs are
not at issue in this lawsuit, although, as a practical matter, many
MLSs that are not affiliated with NAR adopt rules that conform
substantially to NAR's. Some non-NAR MLSs, such as the MLS serving
the Columbia, South Carolina, area and the MLS serving the Hilton
Head, South Carolina, area, adopted and maintained rules that have
been the subject of antitrust enforcement. On May 2, 2008, the
United States brought an antitrust action against the MLS in
Columbia alleging that its rules restrain competition among real
estate brokers in that area and likely harm consumers. See Complaint
in United States v. Consolidated Multiple Listing Service, Inc., No
3:08-cv-01786-SB (D.S.C. May 2, 2008), available at http://
www.usdoj.gov/atr/cases/f232800/232803.htm. The United States
challenged similar allegedly anticompetitive rules imposed by the
MLS in Hilton Head, South Carolina, also not affiliated with NAR.
See Complaint in United States v. Multiple Listing Service of Hilton
Head Island, Inc., No. 9:07-cv-03435-SB (D.S.C. Oct. 16, 2007),
available at http://www.usdoj.gov/atr/cases/t226800/226869.htm. The
MLS in Hilton Head agreed to settle the case by repealing the
challenged rules and agreeing to other conduct restrictions, and the
court entered the Final Judgment in the case of May 28, 2008. See
Final Judgment in United States v. Multiple Listing Service of
Hilton Head Island, Inc., No. 9:07-cv-03435-SB (D.S.C, May 28,
2008), available at http://www.usdoj.gov/atr/cases/f233900/
233901.htm.
---------------------------------------------------------------------------
MLSs are joint ventures among virtually all real estate brokers
operating in local or regional areas.\7\ NAR's MLS rules require its
members to submit to the MLS, generally within two to three days of
obtaining a listing, information about each property listed for sale
through a broker member. By doing so, the broker promotes his or her
seller client's listing to all other brokers in the MLS, who can
provide information about the listing to their buyer customers. Listing
brokers create incentives for other MLS members to try to find buyers
for their listed properties by submitting with each new listing an
``offer of cooperation and compensation,'' identifying the amount
(usually specified as a percentage of the listing broker's commission)
that the listing broker will pay to any other broker who finds a buyer
for the property.
---------------------------------------------------------------------------
\7\ Many MLSs draw brokers and their listed properties from a
single local community. Others are substantially larger, with some
covering entire states and others--such as Metropolitan Regional
Information Systems, Inc., which serves the District of Columbia,
and parts of the states of Maryland, Virginia, West Virginia, and
Pennsylvania-serving multi-state regions. As the Amended Complaint
alleges, the relevant geographic markets in which brokers compete
are local and normally no larger than the service area of the MLS or
MLSs in which they participate.
---------------------------------------------------------------------------
Brokers regard participation in their local MLS to be critical to
their ability to compete with other brokers for home sellers and
buyers. By participating in the MLS, brokers can promise their seller
clients that the information about the seller's property can be
immediately made available to virtually all other brokers in the area.
Brokers who work with buyers can likewise promise their buyer customers
access to the widest possible array of properties listed for sale
through brokers. An MLS is thus a market-wide joint venture of
competitors that possesses substantial market power: To compete
successfully, a broker must be a member; and to be a member, a broker
must adhere to any restrictions that the MLS imposes.
C. Description of the Alleged Violation
1. The Challenged Policies
NAR's Challenged Policies discriminate against and restrain
competition from brokers who use VOWs. In its Challenged Policies, NAR
denied VOW brokers the ability to use their VOWs to provide customers
access to the same MLS listings that the customer could obtain from all
other brokers by other delivery methods. NAR did so by allowing a
listing broker to ``opt out'' and keep his or her client's listings
form being displayed on a competitor's VOW.
On May 17, 2003, NAR adopted its ``VOW Policy.'' As the Amended
Complaint alleges, the VOW Policy, most significantly, allowed brokers
to opt out of VOWs, withholding their seller-clients' listings from
display on VOWs. The opt-out provisions discriminated against VOW
brokers because NAR's rules do not otherwise permit one broker to
dictate how competitors can convey his or her listings to customers.
The VOW Policy permitted opt out either against all VOW brokers
(``blanket'') or against a particular VOW broker (``selective'').
The Amended Complaint also alleges that the VOW Policy's ``anti-
referral'' rule restrained competition by prohibiting VOW brokers from
receiving any payment for referring prospective buyer customers to
other brokers. The prospect that brokers could use VOWs to support
referral-based businesses was a source of industry antipathy to VOWs,
and NAR's rules singled out VOW brokers for a ban on referring
customers for a fee.
NAR's VOW Policy, as alleged in the Amended Complaint, also
restrained competition from VOW brokers by prohibiting them from
selling advertising on pages of their VOWs on which the VOW broker
displayed any listings, and by permitting MLSs to degrade the data they
provide to VOWs, thus preventing the use of popular technological
features offered by many VOW brokers.
[[Page 47628]]
NAR repealed its VOW Policy and replaced it with its ILD Policy on
September 8, 2005, the day the United States filed its initial
Complaint. As alleged in the Amended Complaint, NAR's ILD Policy
continued to discriminate against VOW brokers by permitting their
competitors a blanket opt out where they could withhold their listings
from display on all VOWs.\8\ Although the ILD Policy did not include an
explicit anti-referral rule, NAR revised and reinterpreted its rule on
MLS membership to prevent brokers who operate referral VOWs from
becoming members of the MLS and obtaining access to MLS listings. The
Amended Complaint also alleges that the ILD Policy continued to permit
MLSs to downgrade the data they provide to VOWs and to restrict VOW
brokers' co-branding or advertising relationships with third parties.
---------------------------------------------------------------------------
\8\ NAR did delete from its ILD Policy its rule allowing brokers
to selectively opt out against particular VOW brokers.
---------------------------------------------------------------------------
2. Effects of the Challenged Policies
As discussed above, NAR's rules permit brokers to show prospective
buyers all MLS listings in which the buyers might have an interest. For
most brokers, this means that they can respond to a request from a
buyer customer by delivering responsive listings by whatever delivery
method the broker and customer choose. NAR's opt-out provisions deny
this right only if the method of delivery selected by the broker and
the customer is a VOW. Thus, NAR's rules restrain VOW-operating brokers
from competing in a way that is efficient and desired by many
customers.
Even if no broker uses the opt-out device, its existence renders a
VOW broker unable to promise customers access to all relevant MLS
listings, materially disadvantaging brokers who use a VOW to compete.
When opt out occurs, a VOW broker is further disadvantaged because it
cannot deliver complete MLS listings to customers through its VOW.
Finally, with the threat of opt outs constantly hanging over it, any
VOW broker contemplating a pro-consumer initiative would have to weigh
the prospect of an angry response from its incumbent competitors.
Opt outs were an empirical reality. Although the United States'
investigation became public just a few months after NAR adopted its VOW
Policy, the United States discovered over fifty instances of broker opt
outs under a wide variety of circumstances in fourteen diverse markets.
Brokers opted out of VOWs in large markets (e.g., Detroit and
Cleveland), medium markets (e.g., Des Moines), and small markets (e.g.,
Emporia (Kansas), Hays (Kansas), and York (Pennsylvania)). In some
markets (Emporia and Hays), virtually all brokers opted out. In others,
only one or a few opted out (e.g., Detroit, York, Maine). Opt outs
occurred in a market with one dominant broker (Des Moines), in markets
with only a small number of broker competitors (Emporia and Hays), and
in markets with hundreds of brokers (Detroit). In some markets (e.g.,
Des Moines, Detroit, Cleveland, York, and Jackson (Wyoming)), large
brokers opted out. In others (e.g., Marathon (Florida) and Hudson (New
York)), only relatively small brokers opted out. Brokers opted out in
markets in which price competition is highly restricted by the state
(Kansas, which prohibits brokers from providing commission rebates to
home buyers), as well as in markets in which the state does not
restrict such price competition (Michigan). Opt outs occurred in
circumstances that imply they were independent business decisions by
the opting-out brokers (e.g., Detroit) and in circumstances in which
opt-out forms were filled out by almost all brokers in the same room at
the same lime (Emporia).
NAR's Challenged Policies also obstruct the operation of referral
VOWs. NAR's VOW Policy prohibited referral fees explicitly and
directly. NAR's 2005 modification to the requirements of MLS membership
denied MLS membership and--of greatest significance to a referral VOW
access to MLS data to any broker whose business focused exclusively on
educating customers on a VOW and referring those customers to other
brokers to receive other in-person brokerage services. Each of these
policies prevents two brokers from working together in an innovative
and efficient way, with a VOW broker attracting new business and
educating potential buyers about the market, and the other broker
guiding the buyer through home tours and the negotiating, contracting,
and closing process.
As discussed above, NAR's Challenged Policies also permit MLSs to
downgrade the MLS data feed provided to VOW brokers, which limits the
consumer-friendly features VOW brokers could provide through their
VOWs. The Challenged Policies also allow MLSs to prohibit VOW brokers
from establishing some advertising or co-branding relationships with
third parties, limiting the freedom of VOW brokers to operate their
businesses as they desire and enabling MLSs (which are controlled by a
VOW broker's competitors) to micromanage the appearance of brokers'
VOWs.
3. The Challenged Policies Violate the Antitrust Laws
NAR's Challenged Policies violate Section 1 of the Sherman Act,
which prohibits unreasonable restraints on competition. The Challenged
Policies were the product of an agreement among a group of competitors
(the members of NAR) mandating how brokers could use VOWs to compete
and unreasonably restraining competition from VOW brokers. Competition
from VOW brokers had posed a threat to the established order in the
real estate industry. Yet it was clear from prior litigation that
antitrust law would not allow incumbent brokers simply to prevent VOW
brokers from providing any listings to customers through their VOWs.
See Austin Board of Realtors v. e-Realty, Inc., No. 00-CA-154, 2000 WL
34239114 (W.D. Tex. Mar. 30, 2000). Instead, NAR's Challenged Policies
restrained competition from VOW brokers by denying them full access to
MLS listings and restricting how VOW brokers could do business.
While an MLS, like other joint ventures with market power, can have
reasonable membership restrictions related to a legitimate,
procompetitive purpose, it cannot create rules that unreasonably impede
competition among brokers and harm consumers. See United States v.
Realty Multi-List, 629 F.2d 1351, 1371 (5th Cir. 1980). NAR's
Challenged Policies restrain competition because they dictate how the
MLS's broker-members could compete--specifically, restricting how they
could compete using a VOW. See Id. at 1383-85 (finding MLS rule
precluding part-time brokerage to be unlawful); Cantor v. Multiple
Listing Serv. of Dutchess County. Inc., 568 F. Supp. 424, 430-31
(S.D.N.Y. 1983) (finding that MLS yard sign restriction violated
Section 1 of the Sherman Act because it ``substantially impair[ed] [the
plaintiffs'] freedom to conduct their businesses as they see fit'' and
``vitiated any competitive advantage which plaintiffs endeavored to
obtain'' through association with a national franchisor); see also
National Soc'y of Prof'l Eng'rs, 435 U.S. 679,695 (1978) (condemning
trade association ban on competitive bidding by members). Similarly,
NAR's Challenged Policies restrain competition because they impede the
operations of a particularly efficient class of competitors: VOW
brokers. See Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144,
1159 (3d Cir, 1993) (upholding verdict against railroads that
``block[ed] the entry of low cost
[[Page 47629]]
competitors''); see also RE/MAX v. Realty One, Inc., 173 F.3d 995, 1014
(6th Cir. 1999) (upholding Sherman Act Sec. 1 claim where competitors
``impose[d] additional costs'' on innovative entrant). NAR's Challenged
Policies also restrain competition by denying consumers the full MLS
listings information (including valuable information such as sold data
and data fields such as days on market) that consumers want. See FTC v.
Indiana Fed'n of Dentists, 476 U.S. 447, 457, 462 (1986) (``The
Federation's collective activities resulted in the denial of the
information the customers requested in the form they requested it, and
forced them to choose between acquiring that information in a more
costly manner or forgoing it altogether. * * * The Federation is not
entitled to pre-empt the working of the market by deciding for itself
that its customers do not need that which they demand.'')
Moreover, NAR's Challenged Policies constitute an unreasonable
restraint on competition because they produced no procompetitive
benefits that justified the restraints. Although NAR claimed that the
Challenged Policies were essential to the continued existence of MLSs,
those MLSs without the Challenged Policies functioned just as well
without them. Given the market power of the MLS, brokers believe it
would amount to economic suicide for them to leave the MLS.
D. Harm From the Alleged Violation
Taken together, NAR's Challenged Policies obstruct innovative
brokers' use of efficient, Internet-based tools to provide brokerage
services to customers and clients. The Challenged Policies inhibit VOW
brokers from achieving the operating efficiencies that VOWs can make
available and likely diminish the high-quality and low-priced services
offered to consumers by VOW brokers. The result is that the Challenged
Policies, products of agreements among competitor brokers, likely would
deter, delay, or prevent the benefits of innovation and competition
from reaching consumers, and thus violate Section 1 of the Sherman Act,
15 U.S.C. 1.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment embodies the fundamental principle that
an association of competing brokers, operating an MLS, cannot use the
aggregated power of the MLS to discriminate against a particular method
of competition (in this case, VOWs). The proposed Final Judgment will
end the competitive harm resulting from NAR's Challenged Policies and
will allow consumers to benefit from the enhanced competition that VOW
brokers can provide. The proposed Final Judgment requires NAR to repeal
its VOW and ILD Policies and to replace them with a ``Modified VOW
Policy'' (attached to the proposed Final Judgment as Exhibit A) that
makes it clear that brokers can operate VOWs without interference from
their rivals.\9\ With respect to any issues concerning the operation of
VOWs that are not explicitly addressed by the Modified VOW Policy, the
proposed Final Judgment's general nondiscrimination provisions
apply.\10\
---------------------------------------------------------------------------
\9\ See proposed Final Judgment, ]] V.A-V.D. Under the Modified
VOW Policy, with the consent of their supervising broker, agents and
sales associates are also expressly permitted to operate VOWs.
Brokers cannot agree, by MLS rule or otherwise, to ban VOWs operated
by agents or sales associates. See Modified VOW Policy, ] I.1.b.
\10\ See proposed Final Judgment, ]] IV.A, IV.B, & IV.C; see
also id., ] V.F (requiring NAR to deny insurance coverage to any
Member Board that maintains rules at odds with ] IV of the proposed
Final Judgment).
---------------------------------------------------------------------------
The Modified VOW Policy does not allow brokers to opt out and
withhold their clients' listings from VOW brokers.\11\ This change
eliminates entirely the most egregious impediment to VOWs that was
contained in the Challenged Policies.\12\ Under the Modified VOW
Policy, the MLS must provide to a VOW broker for display on the VOW all
MLS listings information that brokers are permitted to provide to
customers by all other methods of delivery.\13\
---------------------------------------------------------------------------
\11\ See Modified VOW Policy, ] I.4.
\12\ The Modified VOW Policy does allow an individual home
seller to direct that information about his or her own home not
appear on any Internet Web sites, id., ] II.5.a, recognizing the
legitimate interests of a seller to protect his or her privacy and
not to expose information about his or her property or the fact that
it is on the market to the public on the Internet. It also allows a
home seller to request that a VOW broker who permits customers to
provide written reviews of properties disable that feature as to the
seller's listing. Id., ] II.5.c. Such comments--which can be
anonymous--have no exact analogue in the bricks-and-mortar world.
Unlike books, music, or other consumer goods, reviews of which can
provide useful information to other potential purchasers of the same
items, the uniqueness of each individual home creates an opportunity
for an interested buyer (or his or her broker) to attempt to
manipulate the market by providing a negative review in hopes of
deterring other buyers from visiting or making an offer on the home.
An individual home seller is also permitted under the Modified VOW
Policy to request that an automated home valuation feature provided
by a VOW broker be disabled as to the seller's individual property,
although the VOW broker is permitted to state on the VOW that the
seller requested that this type of information not be presented on
the VOW about his or her property. See id. Though such valuations
might be provided in a bricks-and-mortar environment, they would not
likely be provided without evaluation, comment, or input from an
agent or sales associate. The Modified VOW Policy also provides a
mechanism for sellers to correct any false information about their
property that a VOW adds, Id., ] II.5.d, consistent with the general
responsibility of any broker (VOW or otherwise) to present accurate
information.
\13\ See Id., ] III.2. The information that MLSs must provide to
VOW brokers for display on their VOWs includes information about
properties that have sold (except in areas where the actual sales
prices of homes is not accessible from public records) and all other
information that brokers can provide to customers by any method,
including by oral communications. Id.
---------------------------------------------------------------------------
The Modified VOW Policy that NAR must adopt under the proposed
Final Judgment also permits brokers to operate referral VOWs. It
expressly prohibits MLSs from impeding VOW brokers from referring
customers to other brokers for compensation.\14\ It also provides two
avenues by which a broker desiring to serve customers through a
referral VOW may do so: As an ``Affiliated VOW Partner'' (``AVP'') and
as a member who directly serves some customers.
---------------------------------------------------------------------------
\14\ Id., ] III.11.
---------------------------------------------------------------------------
Under the Modified VOW Policy, a broker who desires to operate a
referral business can partner as an AVP with a network of brokers and
agents to whom the AVP will ultimately refer educated buyer customers
who are ready to tour homes and receive in-person brokerage
services.\15\ The Modified VOW Policy requires MLSs to provide complete
MLS listings information to any broker designated by another broker to
be an AVP that will operate a VOW on the designating broker's
behalf.\16\ The MLS must provide listings information to the AVP on the
same terms and conditions on which the MLS would provide listings to
the broker who designated the AVP to operate the VOW.\17\ This
provision will allow referral VOWs to partner with brokers or agents,
obtain access to MLS data to operate their referral VOWs, and provide
the efficiencies that come from operating a
[[Page 47630]]
VOW to the brokers and agents with whom they partner.
---------------------------------------------------------------------------
\15\ Nothing in the Modified VOW Policy requires an AVP to hold
a broker's license. An unlicensed technology company would be
permitted under the Modified VOW Policy to host a VOW for a broker
or brokers (or for one or more agents or sales associates, with the
consent of their supervising brokers). When a licensed broker
operates VOWs as an AVP in conjunction with other brokers (or their
agents or sales associates), the AVP can perform services for which
a broker's license may be required, including answering questions
for customers who register on the VOW and referring customers to the
brokers and agents or sales associates for whom the AVP operates the
VOWs. See, e.g., 225 ILCS 454/1-10 (describing the activities for
which a broker's license is required in Illinois, including
``assist[ing] or direct[ing] in procuring or referring of
prospects'').
\16\ Modified VOW Policy, ]] I.1.a & III.10. An AVP's rights to
obtain listings information from the MLS is derivative of the rights
of the brokers for whom the AVP is operating VOWs. Id., ] III.10.
The AVP would not itself be an MLS member entitled to MLS access
directly.
\17\ Id., ] III.10.
---------------------------------------------------------------------------
Under the proposed Final Judgment, a broker who works directly with
some buyers and sellers, but who also wants to operate a VOW and focus
on referrals, can become a member of the MLS and use MLS data as a
member, including for its referral VOW. The Final Judgment permits
NAR's Member Boards to implement the new requirements for MLS
membership that NAR originally adopted with its ILD Policy,\18\ but an
interpretive Note (see Exhibit B to the proposed Final Judgment)
explains that the new membership rule is not to be interpreted to
restrain VOW competition.\19\
---------------------------------------------------------------------------
\18\ Proposed Final Judgment, ] VI.A.
\19\ Under the interpretative Note included in Exhibit B to the
proposed Final Judgment, if a VOW broker actively endeavors to
obtain some seller clients for whom it will market properties or
some buyer customers to whom it will offer in-person brokerage
services, that VOW broker will be permitted to operate a referral
VOW and refer to other brokers the educated customers he or she does
not serve directly.
---------------------------------------------------------------------------
Finally, the Modified VOW Policy prohibits MLSs from using an
inferior data delivery method to provide MLS listings to VOW brokers
\20\ and from unreasonably restricting the advertising and co-branding
relationships VOW brokers establish with third parties.\21\ VOW
brokers, under the Modified VOW Policy, will be free from MLS
interference in the appearance and features of their VOWs.\22\
---------------------------------------------------------------------------
\20\ See Modified VOW Policy, ] III.2 (``For purposes of this
Policy, `downloading' means electronic transmission of data from MLS
servers to a Participant's or AVP's server on a persistent basis''
(emphasis added)).
\21\ See Id., ] III.7.
\22\ See Id., ] III.8 & III.9.
---------------------------------------------------------------------------
NAR is required by the Final Judgment to direct its Member Boards
to adopt rules implementing the Modified VOW Policy within ninety days
of this Court's entry of the Final Judgment.\23\ To ensure that its
Member Boards adopt, maintain, and enforce rules implementing the
Modified VOW Policy, NAR is required to deny errors and omissions
insurance coverage to any Member Board that refuses to do so and
forward to the United States any complaints it receives concerning the
failure of any Member Board (or any MLS owned or operated by any Member
Board) to abide by or enforce those rules.\24\ The proposed Final
Judgment also broadly prohibits NAR from adopting any other rules that
impede the operation of VOWs or that discriminate against VOW brokers
in the operation of their VOWs.\25\
---------------------------------------------------------------------------
\23\ Proposed Final Judgment, ] V.D.
\24\ Id., ]] V.E & V.H.
\25\ Id., ]] IV.A & IV.B.
---------------------------------------------------------------------------
Finally, the proposed Final Judgment, applicable for ten years
after its entry by this Court,\26\ establishes an antitrust compliance
program under which NAR is required to review its Member Board's rules
for compliance with the proposed Final Judgment, to provide materials
to its Member Boards that explain the proposed Final Judgment and the
Modified VOW Policy, and to hold an annual program for its Member
Boards and their counsel discussing the proposed Final Judgment and the
antitrust laws.\27\ The proposed Final Judgment expressly places no
limitation on the United States' ability to investigate or bring an
antitrust enforcement action in the future to prevent harm to
competition caused by any rule adopted or enforced by NAR or any of its
Member Boards.\28\
---------------------------------------------------------------------------
\26\ Id., ] X.
\27\ Id., ] V.G.
\28\ Id., ] IX.
---------------------------------------------------------------------------
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 NAR.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and NAR 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 he considered by the United States, 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 R. Read, Chief,
Litigation III Section, Antitrust Division, United States Department of
Justice, 450 Fifth Street, NW.; Suite 4000, 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.\29\
---------------------------------------------------------------------------
\29\ Proposed Final Judgment, ] VIII.
---------------------------------------------------------------------------
VI. Alternatives to the Proposed Amended Final Judgment
At several points during the litigation, the United States received
from defendant NAR proposals or suggestions that would have provided
less relief than is contained in the proposed Final Judgment. These
proposals arid suggestions were rejected.
The United States considered, as an alternative to the proposed
Final Judgment, proceeding with the full trial on the merits against
NAR that was scheduled to commence on July 7, 2008. The United States
is satisfied that the relief contained in the proposed Final Judgment
will quickly establish, preserve, and ensure that consumers can benefit
from the enhanced brokerage service competition brought by VOW brokers
as effectively as any remedy the United States likely would have
obtained after a successful trial.
VII. Standard of Review Under the APPA for Proposed Final Judgment
The Clayton Act, as amended by 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 the statute as amended 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
[[Page 47631]]
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)(1)(A) & (B). In considering these statutory factors,
the court's inquiry is necessarily a limited one as the United States
is entitled to ``broad discretion to settle with the defendant within
the reaches of the public interest.'' United States v. Microsoft Corp.,
56 F.3d 1448, 1461 (D.C. Cir. 1995); see generally United States v. SBC
Commc'ns, Inc., 489 F. Supp. 2d I (D.D.C. 2007) (assessing public
interest standard under the Tunney Act).\30\
---------------------------------------------------------------------------
\30\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for a court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. (Compare 15 U.S.C.
16(e) (2004), with 15 U.S.C. 16(e)(l) (2006); see also SBC Commc'ns,
489 F. Supp. 2d at II (concluding that the 2004 amendments
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------
As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other things,
the relationship between the remedy secured and the specific
allegations set forth in the United States' complaint, whether the
decree is sufficiently clear, whether enforcement mechanisms are
sufficient, and whether the decree may positively harm third parties.
See 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; United States v. Alcoa, Inc., 152
F. Supp. 2d 37,40 (D.D.C. 2001). 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).\31\ In
determining whether a proposed settlement is in the public interest, a
district court ``must accord deference to the government's predictions
about the efficacy of its remedies, and may not require that the
remedies perfectly match the alleged violations.'' SBC' Commc'ns, 489
F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need
for courts to be ``deferential to the government's predictions as to
the effect of the proposed remedies''); United States v. Archer-
Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that
the court should grant 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).
---------------------------------------------------------------------------
\31\ 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''). 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' '').
---------------------------------------------------------------------------
Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[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. Am. Tel. & Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. 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,
489 F. Supp. 2d at 17.
Moreover, the courts 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, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[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 effectuates what
Congress intended when it enacted the Tunney Act in 1974, as Senator
Tunney explained: ``[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.'' SBC
Commc'ns, 489 F. Supp. 2d at 11.\32\
---------------------------------------------------------------------------
\32\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt
failure of the government to discharge its duty, the 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.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at
6(1973) (``Where the public interest can be meaningfully evaluated
simply on the basis of briefs and oral arguments, that is the
approach that should be utilized.'').
---------------------------------------------------------------------------
[[Page 47632]]
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 Final Judgment.
Respectfully submitted,
s/David C. Kully
-----------------------------------------------------------------------
Craig W. Conrath,
David C. Kully,
U.S. Department of Justice,
Antitrust Division,
450 5th Street, NW.; Suite 4000,
Washington, DC 20530,
Tel: (202) 307-5779,
Fax: (202) 307-9952.
Dated: June 12, 2008
Certificate of Service
I, David C. Kully, hereby certify that on this 12th day of June,
2008, I caused a copy of the foregoing Competitive Impact Statement to
be served by ECF on counsel for the defendant identified below. Jack R.
Bierig, Sidley Austin LLP, One South Dearborn Street, Chicago, IL
60603, (312) 853-7000, jbierig@sidley.com.
s/David C. Kully
-----------------------------------------------------------------------
David C. Kully
[FR Doc. E8-17800 Filed 8-13-08; 8:45 am]
BILLING CODE 4410-11-M