[Federal Register Volume 74, Number 93 (Friday, May 15, 2009)]
[Notices]
[Pages 22965-22976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-11392]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Consolidated Multiple Listing Service, Inc.;
Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the District of South Carolina in
United States of America v. Consolidated Multiple Listing Service,
Inc., No. 3:08-CV-1786-SB. On May 2, 2008, the United States filed a
Complaint alleging that Consolidated Multiple Listing Service, Inc.
(``CMLS'') violated Section 1 of the Sherman Act, 15 U.S.C. 1, by
denying consumers choice of innovative fee-for-service business models
available to consumers in other parts of South Carolina and by adopting
burdensome prerequisites to membership that prevented some real estate
brokers, who would likely compete aggressively on price, from becoming
members of CMLS. The proposed Final Judgment, filed on May 4, 2009,
requires CMLS to repeal its offending rules and prohibits CMLS from
adopting any new rules that exclude or otherwise disadvantage brokers
who compete in innovative ways.
Copies of the Complaint, proposed Final Judgment and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, Antitrust Documents Group, 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
District of South Carolina. Copies of these materials may be obtained
from the Antitrust Division upon request and payment of the copying fee
set by Department of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be addressed
to John R. Read, Chief, Litigation III Section, Antitrust Division,
U.S. Department of Justice, 450 5th Street, NW., Suite 4000,
Washington, DC 20530, (202) 307-0468.
J. Robert Kramer II,
Director of Operations, Antitrust Division.
In the United States District Court for the District of South Carolina
Columbia Division
United States of America, Plaintiff, v. Consolidated Multiple Listing
Service, Inc., Defendant
Civil Action No.
Date: May 2, 2008
Judge:
Complaint for Equitable Relief for Violation of Section 1 of the
Sherman Act, 15 U.S.C. Sec. 1
The United States of America, by its attorneys acting under the
direction of the Attorney General, brings this civil antitrust action
pursuant to Section 4 of the Sherman Act, 15 U.S.C. 4, against
Defendant Consolidated Multiple Listing Service, Inc. (``CMLS''), to
obtain equitable and other relief to prevent and remedy violations of
Section 1 of the Sherman Act, 15 U.S.C. 1.
The United States complains and alleges as follows:
I. Introduction
1. The United States brings this action to prevent CMLS from
enforcing rules, regulations, by-laws, policies, and procedures
(collectively ``Rules'') that unreasonably restrain competition among
real estate brokers in Columbia, South Carolina and the surrounding
areas (``Columbia Area'').
2. CMLS is a joint venture comprised of brokers who compete with
each other to sell brokerage services in the Columbia Area. CMLS, like
other multiple listing services, provides services to its members,
including an electronic database of information relating to past and
current home listings in the Columbia Area. The database serves as a
clearinghouse for the members to communicate information among
themselves, such as descriptions of the listed properties for sale and
offers to compensate other members if they locate buyers. In addition,
the database allows members who represent buyers to search for nearly
all the listed properties in the area that match the buyer's needs. By
providing an efficient means of exchanging information on home
listings, multiple listing services benefit buyers and sellers of real
estate, and in turn, buyers of real estate brokerage services, in their
service areas.
3. However, that same role makes access to CMLS's database--and
therefore membership in CMLS--critically important for any broker
seeking to serve clients efficiently in the Columbia Area. Access to
the services provided by CMLS is key to being a successful broker, and
CMLS is the only provider of such services in the Columbia Area.
Therefore, brokers seeking to provide brokerage services in the
Columbia Area need to be members of CMLS.
4. CMLS, its Board of Trustees (``Board''), and its members have
adopted Rules that govern the conduct and business practices of its
approximately 370 members and set standards for the admission of new
members. Through these Rules, CMLS's Board and its members have
unreasonably inhibited competition over the method of providing
brokerage services to consumers in the Columbia Area and have
stabilized the price those consumers pay for brokerage services. For
example, CMLS's Rules prevent members from providing a set of brokerage
services that includes less than the full array of services that
brokers traditionally have provided--even if a consumer prefers to save
money by purchasing less than all of such services. Additionally,
CMLS's Rules require members to use a standard, pre-approved contract
that, among other things, prevents its members from offering to a home
seller the option of avoiding paying the broker a commission if the
seller finds the buyer on her own.
[[Page 22966]]
5. CMLS's Rules also require members to conform other aspects of
their brokerage businesses in the manner that the group demands. CMLS
Rules impose unreasonable objective criteria for membership and contain
subjective standards for admission to membership that allow CMLS
representatives to deny membership to brokers who might be expected to
compete more aggressively or in more innovative ways than CMLS's
members would prefer, thereby excluding such brokers or deterring them
from seeking membership.
6. Taken together, CMLS's Rules limit competition among brokers,
artificially stabilize the price of brokerage services, and deter
innovation and the emergence of new brokerage business models. By
adopting and enforcing such Rules, CMLS has violated and continues to
violate Section 1 of the Sherman Act, 15 U.S.C. 1.
II. Defendant CMLS, Its Board, and Its Members
7. CMLS is organized as a nonprofit corporation under the laws of
the State of South Carolina. Its principal place of business is in
Columbia, South Carolina, and its service area encompasses the counties
of Richland, Lexington, Saluda, Kershaw, Calhoun, Newberry and
Fairfield. CMLS is a joint venture comprised of over 370 competing
brokers in the Columbia Area. Affiliated with those CMLS members are
over 3,100 other licensed real estate professionals doing business in
the Columbia Area.
8. Whenever this Complaint refers to any act or deed of CMLS, it
means CMLS engaged in the act or deed by or through its members,
officers, directors, Board, committees, trustees, employees, staff,
agents, or other representatives while they were actively engaged in
the management, direction, or control of CMLS's business or affairs.
9. Various persons and entities, not named as defendants in this
action, have participated as conspirators with CMLS in the offense
alleged in this Complaint, and have performed acts and made statements
to further the conspiracy.
III. Jurisdiction and Venue
10. This Court has subject matter jurisdiction over this action
under Section 4 of the Sherman Act, 15 U.S.C. 4, and 28 U.S.C. 1331,
1337(a), and 1345.
11. Venue is proper in this District and this Division under 15
U.S.C. 22, 28 U.S.C. 1391(b), and Civil Local Rule 3.01 because CMLS
maintains its principal place of business, transacts business, and is
found within this District and this Division.
IV. Effect on Interstate Commerce
12. The activities and the violations by CMLS alleged in this
Complaint affect consumers located in South Carolina and in other
States. CMLS members have provided and continue to provide residential
brokerage services to in-state and out-of-State residents seeking to
buy or sell real estate in the Columbia Area. In 2005, CMLS members
facilitated the sale of real property worth more than $2 billion and
they collected commissions of over $125 million for their services.
Many of the real properties sold in transactions involving CMLS members
are purchased with mortgages from out-of-state lenders and mortgage
payments often are made across State lines. CMLS's activities and
violations are in the flow of, and have a substantial effect on,
interstate commerce.
V. Concerted Action
13. CMLS is a combination or conspiracy among its members, who are
brokers that compete with one another in the Columbia Area. The members
of CMLS, as a group and through the Board they elect and the staff they
indirectly employ, have agreed to, adopted, maintained, and enforced
Rules affecting the method of members' provision of brokerage services,
participation in CMLS, and access to CMLS's services, including access
to the electronic listings database. CMLS's Rules are therefore the
product of agreements and concerted action among its members.
VI. Relevant Markets
14. The provision of brokerage services to sellers of residential
real property and the provision of brokerage services to buyers of
residential real property are relevant service markets within the
meaning of the antitrust laws.
15. The brokerage business is local in nature. Most sellers prefer
to work with a broker who is familiar with local market conditions.
Likewise, most buyers seek to purchase real estate 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 CMLS's service area establishes the
outermost boundaries of the relevant geographic market, although
meaningful competition among brokers may occur in narrower local areas.
VII. Background of the Offenses
Industry and Market Power
16. The vast majority of prospective real estate sellers and buyers
engage the services of a broker. Brokers in the Columbia Area are in
direct competition with each other to provide brokerage services to
consumers.
17. CMLS is the only multiple listing service for the Columbia
Area. Among other services that CMLS provides its members is the
pooling and dissemination of information on the vast majority of
properties available for sale in the Columbia Area. CMLS combines its
members' real estate listings information into an electronic database
and makes these data available to all brokers who are members of CMLS.
By listing information about a property for sale with CMLS, a broker
can market it efficiently to a large number of potential buyers. A
broker representing a buyer likewise can search the CMLS database to
provide the buyer with information about the vast majority of the
properties for sale in the Columbia Area.
18. CMLS members use the database to, among other things:
Communicate to other members the listings information relating to real
estate that they have for sale; offer to compensate other members as
cooperating brokers if they locate buyers for those listings; and
locate real estate for prospective buyers.
19. CMLS also provides records of sold real estate, which are used
by brokers working with sellers to set the real property's listing
price and to determine what offers to accept. Brokers representing a
buyer likewise use the sold data to help buyers determine what price to
offer for real estate.
20. Access to CMLS is critical for brokers who wish to serve buyers
or sellers successfully in the Columbia Area, and CMLS members account
for virtually 100 percent of the real estate brokerage services
provided to home buyers and sellers in the Columbia Area. Accordingly,
CMLS has market power in the market for real estate brokerage services
in the Columbia Area.
Alternative Brokerage Models
21. Brokers who adhere to traditional methods of doing business
typically charge a fee calculated as a percentage of the sales price of
the real estate. Some brokers outside of the Columbia Area offer
alternatives to the traditional methods of providing brokerage
services. If brokers offering these alternatives were not restricted
from competing in the Columbia Area, they would provide consumers of
brokerage services with competitive options and, in the process, would
place downward
[[Page 22967]]
pressure on the prices charged by brokers offering traditional methods
of providing brokerage services. However, CMLS's actions have
unreasonably restricted such competition in the Columbia Area, thereby
depriving consumers of these options and artificially stabilizing
prices.
22. Fee-for-Service Models. Some brokers outside of the Columbia
Area contract with home buyers and sellers to provide a subset of
brokerage services charging only for the services that consumers wish
to purchase. Many of these brokers offer their services for a flat fee
rather than a percentage of the home's sales price and typically their
fees are lower than what traditional brokers charge. One popular
service offered by fee-for-service brokers is known as an ``MLS listing
only,'' whereby a broker, in exchange for a fee, lists a property on
the multiple listing service database, while allowing the seller to
handle all other aspects of the transaction. Another fee-for-service
package available to consumers outside of the Columbia Area involves
the broker handling all aspects of the transaction, except for
attending the closing. This is attractive to home sellers who are
capable of performing all the necessary closing services themselves, or
who have separately retained assistance with the closing, and would
prefer not to pay a broker to attend. Through such packages, buyers and
sellers can save money by purchasing only the services that they want
their broker to provide.
23. Exclusive Agency Listings. Outside of the Columbia Area,
brokers also are able to offer consumers the opportunity to save money
on commissions and fees by offering an ``Exclusive Agency Listing,''
which is an agreement under which the seller pays no commission or fee
to his broker if the seller finds the buyer himself.
24. While these and other competitively significant alternatives to
the traditional method of providing brokerage services are available to
consumers outside of the Columbia Area, CMLS's actions have
unreasonably restricted such competition in the Columbia Area.
VIII. Restraints on Competition
25. CMLS has harmed competition among brokers in the Columbia Area
to the detriment of consumers. As a result of CMLS's Rules, consumers
of brokerage services in the Columbia Area pay higher commissions or
fees for brokerage services and have fewer alternatives regarding the
method of providing those brokerage services.
26. CMLS achieves these adverse effects by adopting and enforcing
the following Rules, among others:
a. CMLS's Rules prohibit its members from competing with one
another by offering consumers the sort of fee-for-service brokerage
options described in Paragraph 22 above. For example, CMLS's Rules
require that its members have ``active involvement'' in all aspects of
the transaction, including ``in the marketing, sale, and closing of the
property.'' CMLS By-laws, Art. IV. See also CMLS Rules, Rule 1(a)
(requiring that members only use CMLS's pre-approved contract, which
includes Article IV's active involvement language). The Rules also
require that ``[o]ffers on properties included in the CMLS shall be
made in written form to the Selling Company and not directly to the
Owner,'' thereby precluding brokers and home sellers in the Columbia
Area from entering into contracts whereby the brokers would let the
sellers handle the offers in return for a reduced commission. CMLS
Rules, Rule 2. These Rules prohibit brokers and home sellers from
negotiating brokerage service terms and, consequently, harm consumers
in the Columbia Area because they have fewer brokerage service models
from which to choose.
b. CMLS's Rules prohibit its members from competing with one
another by offering alternative contractual terms to consumers, such as
the Exclusive Agency Listings contract described in Paragraph 23 above.
CMLS requires that ``[e]ach listing submitted by a Member shall be in
writing on the Exclusive Right to Sell Form as approved by the Board
from time to time. No alteration of any kind to the provisions of the
Listing Agreement shall be allowed.'' CMLS Rules, Rule 1(a). That same
Rule forbids CMLS's members and consumers from ``mak[ing] any agreement
* * * which varies, in any way, the provisions of the Listing
Agreement.'' This Rule, for example, prevents brokers and home sellers
in the Columbia Area from agreeing to an Exclusive Agency Listing
whereby the seller would pay no commission or fee to her broker if the
seller finds the buyer herself. Consequently, through CMLS, brokers in
the Columbia Area have stabilized the commissions and fees they
collect, at the expense of Columbia Area consumers.
c. These examples are not exhaustive. Other CMLS Rules have similar
anticompetitive effects. CMLS's Rules, coupled with the need to be a
CMLS member in order to compete effectively in the Columbia Area, allow
brokers who are members of CMLS to prevent innovative or aggressive
brokers from competing by denying them membership in CMLS, and to
restrict the ways in which existing Columbia Area brokers do business
by disciplining existing members who compete too aggressively or in a
manner inconsistent with the wishes of other CMLS members. For example,
CMLS's Rules require that members be ``primarily in the real estate
business within primary areas served by the CMLS.'' CMLS By-laws, Art.
III, Sec. 1. CMLS also refuses to admit brokers who do not have
commercial offices in the Columbia Area. CMLS Rules, Rule 5(b). These
Rules exclude brokers located outside of the Columbia Area or that
engage primarily in a business other than real estate, even if such
brokers are fully licensed by the State of South Carolina to serve as
real estate brokers. Moreover, CMLS provides its Board and officers
unfettered discretion to reject applicants for membership, CMLS Rules,
Rule 5(c), while simultaneously requiring those potential competitors
to provide information about their proposed brokerage models and
competitive histories. CMLS By-laws, Art. III, Sec. Sec. 6-7. In
addition to maintaining unfettered discretion over membership
decisions, CMLS imposes an excessive initial fee on new members, well
above its costs of adding them to the membership. See CMLS Rules, Rule
5(b). And, CMLS maintains unfettered discretion to expel or discipline
members. CMLS By-laws, Art. III, Sec. 4. Consequently, through CMLS,
brokers in the Columbia Area have precluded the entry of aggressive
competitors and stifled aggressive competition between members.
27. On April 17, 2008, after the United States informed CMLS of its
intention to bring this action, CMLS's counsel told counsel for the
United States that it had voted to amend some of its Rules. CMLS's
counsel told counsel for the United States that the amendments affect
some of the Rules listed in Paragraph 26, but that other of the rules
about which the United States complains have not been changed. CMLS has
not identified for the United States the precise changes that CMLS made
to its Rules despite requests that it do so. Even if CMLS has changed
some of its rules, those rules may well continue to violate the
antitrust laws. Furthermore, even if CMLS, in the face of this lawsuit,
has in fact brought some of its rules into conformity with the
antitrust laws, CMLS retains complete discretion to make further
changes to those rules that would unduly restrict competition and thus
violate the Federal antitrust laws.
[[Page 22968]]
28. Taken individually or in conjunction with each other, the Rules
restrain trade, and are not reasonably necessary to make a multiple
listing service more efficient or effective nor to achieve any other
procompetitive benefits. Therefore, the Rules are anticompetitive and,
as a result, consumers of brokerage services in the Columbia Area pay
higher commissions or fees for brokerage services and have fewer
choices among types of brokers and the method of providing the
brokerage services they offer.
IX. Violation Alleged
29. CMLS's adoption and enforcement of the Rules described above
constitutes a contract, combination, or conspiracy among CMLS and its
members that unreasonably restrains competition in the Columbia Area
brokerage markets in violation of Section 1 of the Sherman Act, 15
U.S.C. 1.
30. The aforesaid contract, combination, or conspiracy has had and
will continue to have anticompetitive effects in the relevant markets
including: Stabilizing the price of broker commissions and fees;
reducing competition on the method of providing brokerage services;
raising barriers to entry; and suppressing innovation.
31. This contract, combination, or conspiracy is not reasonably
necessary to accomplish any of CMLS's legitimate goals.
X. Request for Relief
Wherefore, the United States prays that final judgment be entered
against CMLS declaring, ordering, and adjudging that:
a. 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. CMLS, its members, officers, directors, Board, committees,
trustees, employees, agents, representatives, successors, and assigns
and all other persons acting or claiming to act on their behalf, be
permanently enjoined from engaging in, carrying out, renewing or
attempting to engage in, carry out or renew the contract, combination,
or conspiracy alleged herein, or any other contract, combination, or
conspiracy having a similar purpose or effect in violation of Section 1
of the Sherman Act, 15 U.S.C. 1;
c. CMLS eliminate and cease enforcing any and all Rules that
unreasonably restrain trade and be prohibited from otherwise acting to
unreasonably restrain trade; and
d. The United States be awarded its costs of this action and such
other relief as may be appropriate and as the Court may deem just and
proper.
Dated: May 2, 2008.
For Plaintiff The United States of America
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Thomas O. Barnett,
Assistant Attorney General.
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David L. Meyer,
Deputy Assistant Attorney General.
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J. Robert Kramer II,
Director of Operations.
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John Read,
Chief, Litigation III Section.
Nina Hale,
Assistant Chief, Litigation III Section.
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Ethan C. Glass,
Lisa A. Scanlon,
Owen M. Kendler,
Nathan Sutton,
Christopher M. Ries,
Attorneys for the United States of America, U.S. Department of
Justice, Antitrust Division, Litigation III Section, 325 7th Street,
NW., Suite 300, Washington, DC 20530, Telephone: (202) 307-0468.
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Kevin F. Mcdonald,
Acting United States Attorney, District of South Carolina.
By:
Jennifer J. Aldrich (6035),
Assistant United States Attorney, 1441 Main Street, Suite 500,
Columbia, SC 29201, Telephone: (803) 343-3176.
United States District Court for the District of South Carolina
Columbia Division
United States of America, Plaintiff, v. Consolidated Multiple Listing
Service, Inc., Defendant
Case No. 3:08-CV-01786-SB
Date: May 8, 2009
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
The United States brought this lawsuit against Defendant
Consolidated Multiple Listing Service, Inc. (``CMLS'') on May 2, 2008,
to stop CMLS from violating Section 1 of the Sherman Act, 15 U.S.C. 1,
by excluding and restricting new forms of competition and harming
consumers of real estate brokerage services throughout the Columbia,
South Carolina area. CMLS is a joint venture of nearly all active
residential real estate brokers in the Columbia area. It controls
access to the Columbia real estate brokerage market because it operates
the area's only multiple listing service (``MLS''), a database of
nearly all homes for sale through a broker. Because local brokers
effectively need to be members of CMLS to be in business, CMLS has the
power to dictate how brokers can compete and to exclude brokers who
plan to compete in ways that traditional brokers do not like.
The United States' complaint alleged that CMLS used this power to
adopt rules that disrupted the competitive process by impeding the
ability of innovative brokers to enter the Columbia market and
challenge the competitive methods of CMLS's existing members. CMLS
required brokers to be actively involved in all aspects of each real
estate transaction, even if their clients desired fewer services at a
lower cost. It prohibited brokers from entering ``exclusive agency''
agreements with sellers under which the seller would owe no commission
if he or she, rather than the broker, found a buyer. Brokers who hoped
to lower their overhead by working from home offices or who were
located in other areas but wanted to offer their services to home
buyers and sellers in Columbia were denied membership in CMLS. CMLS
charged applicants for membership a nonrefundable $5,000 initiation fee
and demanded that they appear before a membership committee composed of
the applicant's prospective competitors to discuss ``the nature of
[their] business[es].'' If CMLS's board members did not like applicants
or wanted to avoid competing with them, they could vote to reject the
application.
As a result of these policies, consumers in Columbia were denied
the benefits that innovative brokers have brought to real estate
markets in other parts of South Carolina and around the country. Not
only were Columbia-area home sellers unable to hire brokers with
innovative business models--such as ``fee-for-service'' brokers who
would provide only the services the sellers desired at a lower cost
than full service brokers typically charged--consumers in Columbia paid
more for brokerage services than consumers in other markets.
On May 4, 2009, the United States filed a Stipulation and proposed
Final Judgment. The proposed Final Judgment, which is described more
fully below, is designed to eliminate the harm to competition caused by
CMLS's policies and restore competition to the
[[Page 22969]]
real estate brokerage market in Columbia. It requires CMLS to repeal
its offending rules and prohibits CMLS from adopting any rules or
practices that exclude or otherwise disadvantage brokers who compete in
innovative ways.
The United States and CMLS 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 the Defendant and Its Activities
CMLS is owned by, and its membership consists of, real estate
brokers who compete with each other to represent buyers and sellers of
homes in the Columbia area. It operates the Columbia area's only MLS, a
listing service that maintains a database of nearly all homes for sale
through a broker. Brokers in Columbia regard membership in CMLS to be
critical to their ability to compete effectively for buyers and
sellers. By joining CMLS, brokers in Columbia can promise their seller
clients that information about the seller's property will immediately
be shared with 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.
CMLS is controlled by its Board of Trustees, which has been
dominated by traditional brokerage firms. For example, of the nine CMLS
Board members in 2008, eight represented traditional, high-end
brokerage firms that do not employ discount or alternative business
models. The CMLS Board possessed the power to approve or deny
membership applications, propose by-laws (subject to membership
approval), and make rules for members. All CMLS member brokers must
agree, in writing, to follow the CMLS rules as a condition of
membership.
Like MLSs in other areas, CMLS possesses substantial market power.
To compete successfully in Columbia, a broker must be a member of CMLS;
to be a member, a broker must adhere to any restrictions that CMLS's
Board imposes. Unlike most other MLSs, however, CMLS exercised this
market power to regulate how brokers in Columbia were allowed to
compete and to enact burdensome prerequisites to membership that
prevented some real estate brokers, such as those who would likely
compete aggressively on price, from becoming members of CMLS, ensuring
that those brokers could not compete in the Columbia area.
B. Industry Background
The prices that Columbia-area consumers paid for brokerage services
increased substantially from 2001 to 2007. Brokers who adhere to
traditional methods of doing business typically charge a commission
calculated as a percentage of the sales price of the home. As housing
prices in Columbia (as in many other parts of the country) increased
during that time period, commission fees that consumers paid
traditional, full-service brokers also increased.
Outside Columbia, brokers responded to the higher home prices and
increasing fees by competing in new ways. Many brokers outside Columbia
have adopted fee-for-service business models under which home sellers
pay a flat fee for specific services they want their broker to perform.
Home sellers who choose fee-for-service brokers and who, for instance,
take responsibility for marketing their own homes, negotiating their
own contracts, or attending closing without broker assistance can
substantially reduce the fees they pay their brokers. Many home sellers
in markets outside of Columbia have opted to purchase only a single
brokerage service: Having the broker submit information about the
seller's property to the MLS. Some brokers offer an MLS-entry-only
service for only a few hundred dollars (with an additional fee to be
paid to any MLS member who finds a buyer for the property). Home
sellers who elect to work with these brokers forego important services
provided by full-service brokers, but can save thousands of dollars.
Other brokers outside Columbia deliver some brokerage services over
the Internet, reducing their costs by automating some time-intensive
tasks and passing cost savings onto consumers in the form of lower
commissions. The ease of sharing information over the Internet has also
allowed some brokers to serve a larger geographic area than they were
able to when face-to-face communication was expected. Some brokers from
other parts of South Carolina and neighboring states have expressed
interest in competing with existing Columbia-area brokers and offering
brokerage services to buyers and sellers in Columbia.
C. Description of the Alleged Violation
CMLS unreasonably restrained competition by impeding the
competitive process through its adoption and enforcement of rules that
banned innovative forms of competition and raised barriers to entry for
new competitors. These rules, which were agreed to by CMLS's member
brokers, injured consumers by limiting the variety of services
available from Columbia-area brokers and raising the commissions that
consumers must pay them. As none of these rules enhanced the efficiency
or effectiveness of its MLS, CLMS's rules violate Section 1 of the
Sherman Act, 15 U.S.C. 1.\1\
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\1\ CMLS's rules harmed competition in the provision of real
estate brokerage services to buyers and sellers. The relevant
geographic market in which these brokers compete is the greater
Columbia area served by CMLS. As discussed above, CMLS possesses
substantial market power in this market because virtually all
Columbia-area brokers regard membership in CMLS and access to its
MLS to be essential to their ability to compete effectively to serve
Columbia-area buyers and sellers.
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As alleged in the complaint, CMLS harmed competition through the
following rules.
1. Freedom-of-Contract Restriction
CMLS prohibited brokers and their clients from entering into any
agreement other than the single form contract dictated by CMLS. The
single contract allowed by CMLS--an ``exclusive right to sell''
agreement--required the seller to pay a commission to the broker even
if the seller, and not the broker, was responsible for finding a buyer
for the home. In other markets, clients can negotiate an ``exclusive
agency'' agreement under which the seller owes no commission to the
broker if the seller finds a buyer. Exclusive agency agreements are
favored by sellers who want to market their own properties, even after
hiring a broker, and preserving the option of paying no commission.
CMLS outlawed these agreements and any other deviations from its
mandatory form contract.
2. ``Active Involvement'' Requirement
CMLS required brokers to be ``active[ly] involve[d]'' in the
marketing, sale, and closing of each property. This prevented Columbia-
area consumers from saving money by working with fee-for-service
brokers who charged only for the specific services the consumers
desired. This rule caused one Columbia-area broker who also operates in
other parts of South Carolina to charge Columbia-area consumers $500
more than he charges consumers in other markets, where he is not
obligated to
[[Page 22970]]
provide services consumers may not want.
3. Home Office Prohibition
CMLS required all new members to maintain commercial offices and
prohibited them from operating out of their homes. This prevented entry
into the Columbia market by many brokers who hoped to reduce their
overhead by using home offices and passing on their cost savings to
their clients in the form of lower fees.
4. Out-of-Area Broker Prohibition
CMLS insulated itself from competition from brokers outside of the
Columbia area by requiring that all brokers maintain an office in the
Columbia area. Discount brokers operating outside Columbia found they
could not offer their services to Columbia-area consumers because their
low-margin business models did not support opening offices within the
CMLS territory.
5. Restrictive Membership Requirements
CMLS charged applicants a nonrefundable initiation fee of $5,000,
greater than its costs in adding new members and substantially higher
than similar entry fees charged by any other MLSs in South Carolina.
CMLS, which maintains a million-dollar-surplus annually--in part based
on these higher-than-necessary initiation fees--distributes a portion
of its surplus each year to existing members, effectively taxing new
competition to enrich incumbents. CMLS also required applicants for
membership to appear for an interview with a membership committee
consisting of the traditional, full-service brokers that dominated
CMLS's Board, at which applicants were expected to discuss the nature
of their businesses. This interview requirement deterred applications
from several nontraditional, low-priced brokers who were fearful of
losing their nonrefundable initiation fee if the interview committee
opposed their business model and declined to approve their application.
These brokers' fears were well founded, as CMLS's Board also possessed
the power to deny membership to brokers who they feared would compete
too aggressively.
D. Harm From the Alleged Violation
Taken together, CMLS's rules--established through the exercise of
market power by CMLS's broker members--impeded competition among
brokers in Columbia, denying Columbia-area consumers choices that are
available outside of Columbia and increasing the fees they paid for
brokerage services. The prevalence of nontraditional service offerings
in markets outside Columbia makes it clear that consumers demand these
offerings. The CMLS rules prohibited Columbia-area brokers from
competing to satisfy that demand. One study conducted in connection
with this case estimated, based on experiences in other markets, that
approximately 1,500 Columbia-area home sellers were denied their
preferred option--an exclusive agency listing--between 2005 and 2008.
Not surprisingly, data collected and analyzed in connection with
this case also revealed that Columbia-area consumers paid more, on
average, for brokerage services than consumers in other markets. Data
supplied by four Columbia-area brokers that also do business elsewhere
in South Carolina revealed that each broker collected more in
commission fees from Columbia-area consumers than it did for the same
service provided to consumers in other areas. On average, Columbia-area
home sellers paid these brokers approximately $1,000 more per
transaction than home sellers outside Columbia.
In sum, by disrupting the competitive process, CMLS's rules forced
Columbia-area consumers to pay for less preferred and often more
expensive brokerage services.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment will restore competition to the
Columbia-area brokerage market by eliminating the anticompetitive CMLS
rules and imposing additional restrictions to ensure that CMLS does not
adopt new methods to continue to impede competition. It requires CMLS
to repeal its freedom-of-contract restriction,\2\ its ``active
involvement'' requirement,\3\ and its requirement that brokers maintain
an office in the Columbia area.\4\ CMLS repealed its home-office
prohibition during the course of the litigation. The proposed Final
Judgment prohibits it from reinstating the rule.\5\
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\2\ See proposed Final Judgment, ] V.B.7. Sellers who enter
exclusive agency agreements with their brokers, under which they owe
no commission if they find buyers for their properties, may seek to
market their homes themselves and not rely on their brokers for
marketing services. The proposed Final Judgment also prohibits CMLS
from interfering in the marketing efforts of home sellers who enter
these exclusive agency agreements. See id. at ]] IV.A.4, V.B. 11,
V.B.12 & V.B.16.
\3\ See id., ] V.B.3. The proposed Final Judgment also requires
CMLS to eliminate a related rule that required that offers to
purchase a property be submitted only to the seller's broker, and
not directly to the seller, regardless of the seller's wishes. See
id., ] V.B.10.
\4\ See id., ] V.B.13. CMLS also unnecessarily burdened brokers
from other markets who sought to compete in Columbia by requiring
that its members use CMLS-supplied keyboxes (devices installed on
homes for sale that store a key that CMLS members can use to access
the home to show to potential buyers). This requirement necessitated
two trips to Columbia: One to pick up the keybox from CMLS and
install it on the seller's home and another to remove and return the
keybox to CMLS. The proposed Final Judgment alleviates this burden
by allowing home sellers to pick up a keybox from CMLS and by
requiring CMLS to maintain a list of local brokers available to
remove and return keyboxes. See id., ] V.B.18.
\5\ See id., ]] IV.A.1 & IV.A.2.
---------------------------------------------------------------------------
CMLS will also no longer be able to prevent the entry of innovative
brokers. Under the proposed Final Judgment, applicants for membership
will no longer be forced to submit to a potentially intimidating
interview with existing CMLS members,\6\ and CMLS's Board will no
longer possess the discretion to deny applications for admission.\7\ In
fact, under the proposed Final Judgment, CMLS must admit any broker who
is duly licensed in South Carolina.\8\ The proposed Final Judgment also
prohibits CMLS from charging application or initiation fees that exceed
its ``reasonably estimated cost'' in adding new members.\9\ This will
ensure that applicants will not face an unnecessarily high entry fee
and will end the practice of incumbent members enriching themselves at
the expense of potential entrants.
---------------------------------------------------------------------------
\6\ See id. ] V.B.14. Applicants will be required to complete an
introductory class in the use of CMLS's system (unless they are
already familiar with the system) and an orientation with a CMLS
staff member. CMLS will provide the introductory training class and
orientation no less frequently than once every two weeks. See id ]]
V.B.17 & V.E.
\7\ See id., ] V.B.14. CMLS collects copies of some agreements
between brokers and their seller clients to ensure that a home
seller has actually selected the broker to provide brokerage
services in the sale of the seller's property or that the broker has
complied with CMLS's reasonable requirement that brokers promptly
submit information about the property to CMLS. These agreements,
however, also identify the commission fee the seller agrees to pay
his or her broker. To ensure that no CMLS member broker is able to
learn about competitors' pricing practices from these agreements,
the proposed Final Judgment requires CMLS to prevent any CMLS member
from seeing the agreements it collects and permits brokers who are
selected for CLMS's audit of their agreements to substantially
redact the agreement to remove any competitively sensitive
information. See id., ]] V.B.9 & V.F.
\8\ See id., ] IV.A.1.
\9\ Id., ] IV.B. CMLS had also raised entry costs by requiring
that applicants obtain at least $500,000 in errors and omissions
insurance coverage. This requirement forced a number of CMLS members
who were unable to obtain insurance coverage to terminate their
memberships in CMLS. The proposed Final Judgment requires CMLS to
repeal its insurance requirement, but allows CMLS to insist that
uninsured brokers disclose their lack of insurance coverage to
clients and other brokers. Id., ] V.B.20. This disclosure
requirement will ensure that sellers and other brokers are fully
informed about a broker's insurance coverage and will allow the
marketplace to dictate the need for such coverage.
---------------------------------------------------------------------------
The proposed Final Judgment also broadly prohibits CMLS from
excluding
[[Page 22971]]
any licensed broker (who does not possess a criminal record\10\) from
membership and from discriminating against or disadvantaging any broker
based on the services the broker provides his or her clients, the
contractual forms the broker uses, the broker's pricing or commission
rates, or the broker's office location.\11\
---------------------------------------------------------------------------
\10\ See id., ]] VI.A.
\11\ Id., ]] IV.A.1 & IV.A.2.
---------------------------------------------------------------------------
Finally, the proposed Final Judgment, applicable for ten years
after its entry by this Court,\12\ establishes an antitrust compliance
program under which CMLS must furnish to the United States minutes of
each meeting of CMLS's Board or its committees and copies of its rules
following any rule changes.\13\ After entry of the proposed Final
Judgment, CMLS is also required to provide copies of the Final Judgment
and of its rules, modified to conform to the Final Judgment, to each of
its members and to each person CMLS knows to have inquired about
membership in the past five years.\14\ 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
CMLS.\15\
---------------------------------------------------------------------------
\12\ Id., ] X.
\13\ Id., ] V.G.
\14\ Id., ] V.H.
\15\ Id., ] IX.
---------------------------------------------------------------------------
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. Sec. 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 CMLS.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and CMLS have stipulated that the proposed Final
Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States, 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.\16\
---------------------------------------------------------------------------
\16\ Id., ] VIII.
---------------------------------------------------------------------------
VI. Alternatives to the Proposed Amended Final Judgment
At several points during the litigation, the United States received
from defendant CMLS proposals or suggestions that would have provided
less relief than is contained in the proposed Final Judgment. These
proposals and suggestions were rejected.
The United States considered, as an alternative to the proposed
Final Judgment, proceeding with a full trial on the merits against
CMLS. The United States is satisfied that the relief contained in the
proposed Final Judgment will quickly establish, preserve, and ensure
that Columbia-area consumers can benefit from unfettered competition in
the Columbia market.
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. Sec. 16(e)(1). 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 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 1 (D.D.C. 2007) (assessing public
interest standard under the Tunney Act).\17\
---------------------------------------------------------------------------
\17\ 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)(1) (2006); see also SBC Commc'ns,
489 F. Supp. 2d at 11 (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:
[[Page 22972]]
[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).\18\ 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).
---------------------------------------------------------------------------
\18\ 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 court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States did not pursue. Id.
at 1459-60. As the United States District Court for the District of
Columbia recently confirmed in SBC Communications, courts ``cannot look
beyond the complaint in making the public interest determination unless
the complaint is drafted so narrowly as to make a mockery of judicial
power.'' SBC Commc'ns, 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.\19\
---------------------------------------------------------------------------
\19\ 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.'').
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VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that the United States considered in formulating
the proposed Final Judgment.
Respectfully submitted,
For Plaintiff The United States of America
s/ Jennifer J. Aldrich
William Walter Wilkins, III,
United States Attorney, District of South Carolina.
By:
Jennifer J. Aldrich (6035),
Assistant United States Attorney, 1441 Main Street, Suite 500,
Columbia, SC 29201, Telephone: (803) 343-3176.
David C. Kully,
Timothy T. Finley,
Ethan C. Glass,
Lisa Scanlon,
Nathan Sutton,
Owen M. Kendler,
United States Department of Justice, Antitrust Division, Litigation
III Section, 450 5th Street, NW., Suite 400, Washington, DC 20530,
Telephone: (202) 305-9969.
Dated: May 8, 2009
Certificate of Service
I, Jennifer J. Aldrich, certify that on this 8th day of May, 2009,
I caused a copy of the Competitive Impact Statement to be served on the
person listed below by ECF.
Edward M. Woodward, Jr.
Woodward, Cothran & Herndon
P.O. Box 12399
Columbia, SC 29211
e-mail: [email protected]
Counsel for Defendant Consolidated Multiple Listing Service, Inc.
s Jennifer J. Aldrich
Jennifer J. Aldrich
United States District Court for the District of South Carolina
Columbia Division
United States of America, Plaintiff, v. Consolidated Multiple Listing
Service, Inc., Defendant
Case No. 3:08-CV-01786-SB
Filed: 05/04/2009
[Proposed] Final Judgment
Whereas, Plaintiff, United States of America, filed its Complaint
on May 2, 2008, alleging that Defendant Consolidated Multiple Listing
Service,
[[Page 22973]]
Inc. (``CMLS'') adopted rules and practices that exclude competitors
from and restrain competition in the Columbia, South Carolina, real
estate brokerage market 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 or law, and without this
Final Judgment constituting any evidence against, or any admission by,
any party regarding any issue of fact or law;
Whereas, the United States requires CMLS to agree to certain
procedures and prohibitions for the purposes of preventing and
remedying the loss of competition alleged in the Complaint;
Whereas, CMLS agrees to be bound by the provisions of this Final
Judgment pending its approval by the Court;
Whereas, the purpose of this Final Judgment is the prompt and
certain elimination of barriers to new and innovative broker
competitors and impediments to competition among brokers in the
Columbia area;
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is ordered, adjudged, and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against CMLS under Section 1 of the Sherman Act,
as amended, 15 U.S.C. 1.
II. Definitions
As used in this Final Judgment:
A. ``Board'' means CMLS's Board of Directors or Board of
Trustees.
B. ``Broker-in-Charge'' means a broker-in-charge as the term is
defined under Title 40, Chapter 57 of the Code of Laws of South
Carolina.
C. ``CMLS'' means the Defendant, Consolidated Multiple Listing
Service, Inc., its predecessors, successors, subsidiaries,
affiliates, partnerships, and joint ventures and all directors,
trustees, 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 CMLS
and any other Person.
D. ``Department of Justice'' means the United States Department
of Justice, Antitrust Division.
E. ``Including'' means including, but not limited to.
F. ``Licensee'' means a Person licensed as a broker or salesman
under Title 40, Chapter 57 of the Code of Laws of South Carolina and
affiliated with a Member of CMLS.
G. ``Member'' means an Owner who is entitled to receipt of or
access to all products and services that CMLS offers to any member
or participant.
H. ``Membership'' means being a Member of CMLS.
I. ``Owner'' means a person who is or employs a Broker-in-
Charge.
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. ``Rule'' means any CMLS rule, bylaw, policy, standard, or
guideline.
L. The terms ``and'' and ``or'' have both conjunctive and
disjunctive meanings.
III. Applicability
This Final Judgment applies to CMLS and all other persons in active
concert or participation with it who receive actual notice of this
Final Judgment by personal service or otherwise.
IV. Prohibited Conduct
A. Subject to the provisions of Section VI of this Final
Judgment, CMLS shall not adopt, maintain, or enforce any Rule, or
enter into or enforce any agreement or practice, that directly or
indirectly
1. Denies Membership in CMLS to any Owner who requests
Membership in CMLS;
2. Discriminates against or disadvantages any Member or Licensee
based on the Member's or Licensee's office location, pricing or
commission rates, business model, contractual forms or types used,
or services or activities the Member or Licensee performs or does
not perform for any home buyer or home seller;
3. Conditions CMLS's acceptance of any listing or its provision
of any other product or service to any Member or any Licensee on the
Member's or Licensee's pricing or commission rate or performance of
or agreement to perform any service or activity for any home buyer
or home seller; or
4. Prohibits, restricts, or impedes any truthful advertising or
marketing activities of any home seller or discriminates against or
disadvantages any Member or Licensee for any truthful advertising or
marketing activity in which any home seller is engaged. For purposes
of this provision, it is not untruthful for a home seller who has
entered an exclusive agency listing agreement with a Member or
Licensee to advertise his or her home in ``For Sale by Owner'' or
``FSBO'' publications or on ``For Sale by Owner'' or ``FSBO'' Web
sites or to otherwise suggest to the public that the home seller is
selling his or her own home.
B. CMLS shall not require any Owner who seeks to become a Member
to pay, as a condition of becoming a Member, initiation,
application, or other fees that, individually or in the aggregate,
exceed the reasonably estimated cost incurred by CMLS in adding a
new Member.
C. CMLS shall not inquire into or request information about the
actual or anticipated business model, prices or commission rates
charged or to be charged, or operations of (i) any Owner who
requests Membership in CMLS, (ii) any Member, or (iii) any Licensee,
except as necessary to ensure that the Owner, Member, or Licensee
holds (or employs a person who holds) the appropriate license under
Title 40, Chapter 57 of the Code of Laws of South Carolina.
D. CMLS shall not re-adopt or enforce any Rules or portions of
Rules that it must delete under Sections V.A or V.B of this Final
Judgment or reverse or modify any modifications to Rules or portions
of Rules that it must modify under Section V.B of this Final
Judgment.
V. Required Conduct
A. Subject to the provisions of Section VI of this Final
Judgment, CMLS shall delete and cease to enforce any Rule, and
discontinue any practice, that CMLS would be prohibited from
adopting, maintaining, or enforcing pursuant to Section IV of this
Final Judgment.
B. CMLS shall make the following specific changes to its Rules
(all references are to the December 2008 version of CMLS's Bylaws
and to the January 2009 version of CMLS's rules):
1. CMLS shall modify Article III, Section 1 of its Bylaws as
follows:
Current language:
Those eligible for membership in CMLS shall consist of entities
and/or individuals holding a license to engage in the real estate
business within the Midlands of South Carolina which are primarily
in the real estate business within primary areas served by the CMLS
shall qualify for membership. The service areas include the counties
of Richland, Lexington, Saluda, Kershaw, Calhoun, Newberry and
Fairfield.
Modified language:
Those eligible for membership in CMLS shall consist of Owners
who are or who employ Brokers-in-Charge holding licenses allowing
them to engage in the real estate business in South Carolina.
2. CMLS shall delete and cease to enforce the following portion of
Article III, Section 6 of its Bylaws:
This application will include a thorough resume of the new
Member's Broker-in-Charge and owner. The prospective member also
agrees that a credit check may be required. The application must be
submitted to the CMLS office no later than two weeks prior to the
scheduled membership meeting.
3. CMLS shall delete and cease to enforce the following portion of
Article IV of its Bylaws:
Recognizing That Professional Representation Of Both A Buyer And
A Seller Is Critically Important In Any Real Estate Transaction, No
Property Shall Be Listed With The CMLS Unless The Agreement Between
The Seller And Listing Agent Expressly Requires Active Involvement
By That Agent In The Sale And Closing Of The Property. Failure To
Abide By This Precept Shall Cause A Property To Be
[[Page 22974]]
De-Listed And May Subject The Listing Agent To Expulsion From CMLS.
4. CMLS shall modify Article XI of its Bylaws as follows:
Current language:
Any dispute between Members relating to or arising out of
breaches or violations of the rules and regulations of the CMLS, or
between Members and buyers and sellers, arising out of the use of
the CMLS, shall be submitted for mediation as herein provided in the
Exclusive Right to Sell Contract.
Modified language:
Any dispute between Members relating to or arising out of
breaches or violations of the rules and regulations of the CMLS
shall be submitted for mediation.
5. CMLS shall modify a portion of Definition 8 (``Listing
Agreement'') as follows:
Current language:
CMLS allows the entry of Exclusive Right to Sell and Exclusive
Agency into the CMLS database, as adopted and approved by the Board
from time to time.
Modified language:
CMLS allows the entry of Exclusive Right to Sell and Exclusive
Agency listings into the CMLS database.
6. CMLS shall modify Definition 10 (``FSBO'') as follows:
Current language:
Properties for sale by an Owner with no CMLS Exclusive Right to
Sell Form executed by Owner.
Modified language:
Properties for sale by an Owner with no Listing Agreement
executed by Owner.
7. CMLS shall modify Rule 1(a) as follows:
Current language:
Written Agreement. Each listing submitted by a Member shall be
in writing on the Exclusive Right to Sell (ERTS) Form or Exclusive
Agency (EA) Form as approved by the Board from time to time. No
alteration of any kind to the provisions of the Listing Agreement
shall be allowed. No material shall be included in the `Special
Stipulations' section of the Listing Agreements which is
inconsistent with or which modifies the printed portion of the
Listing Agreements or which is inconsistent with the By-Laws or
Rules or Regulations of CMLS. No Member or representative thereof
shall make any agreement with an Owner, whether verbally or in
writing, which varies, in any way, the provisions of the Listing
Agreements provided herein. CMLS allows only a single list price for
a property.
Modified language:
Written Agreement. For each listing submitted to CMLS by a
Member, the Member shall have a written Listing Agreement with the
property owner.
8. CMLS shall modify Rule 1(b)(1) as follows:
Current language:
All listings shall be prepared on such forms as the Board shall
approve from time to time* * *
Modified language:
Members shall collect information about listings submitted to
CMLS on Listing Input Sheets as the Board shall approve from time to
time * * *
9 . CMLS shall modify Rule 1(b)(2) as follows:
Current language:
All listings must be entered into the computer within 2 business
days upon acceptance of the listing by the Member. If not entered by
the Member, the listing shall be delivered to CMLS within 2 business
days by hand delivery or facsimile transfer and a fee of $15.00 will
be required for entry by CMLS. Completed Listing Forms (to include
Listing Input Sheets and Exclusive Right to Sell or Exclusive Agency
Contracts) are not required to be submitted to CMLS, but will be
retained by member companies in accordance with current State Law.
Copies of these documents shall be submitted to CMLS upon request.
Additionally, ten (10) percent of new listings entered into the CMLS
database will be automatically selected for audit. The Listing
Company will be notified at the time the listing is entered into the
system and an MLS number assigned. A follow-up e-mail will be
transmitted to the Listing Agent, the person entering the listing
and the BIC.
Modified language:
All listings must be entered into the computer within two (2)
business days upon acceptance of the listing by the Member. If not
entered by the Member, the Listing Input Sheet shall be delivered to
CMLS within two (2) business days by hand delivery or facsimile
transfer and a fee of $15 will be required for entry by CMLS.
Completed Listing Agreements should be retained by member companies
in accordance with current State Law. Copies of Listing Input Sheets
(but not Listing Agreements) shall be submitted to CMLS upon
request. However, no more than ten (10) percent of new listings
entered into the CMLS database will be randomly selected for audit.
The Listing Company will be notified at the time the listing is
entered into the system and an MLS number assigned. A follow-up e-
mail will be transmitted to the Listing Agent, the person entering
the listing and the BIC. If selected for audit, the Listing Company
shall submit copies of Listing Input Sheets and Listing Agreements
to CMLS within two business days. Before submitting any Listing
Agreement, the Listing Company may white out, black out, or
otherwise conceal all information in the Listing Agreement except
the Member's or Listing Agent's and owner's signatures, the co-broke
fee to be paid to any Selling Company, the date of execution of the
Listing Agreement, the term (length) of the Listing Agreement, and
the address of the listed property. Listings submitted for audit may
be reviewed by any CMLS employee other than those employees who are
also CMLS Members. CMLS will destroy any audited Listing Input
Sheets and Listing Agreements within five business days of receiving
them or following the resolution of any issues.
10. CMLS shall modify a portion of Rule 2 as follows:
Current language:
Offers on properties included in the CMLS shall be made in
written form to the Selling Company and not directly to the Owner.
Modified language:
Offers on properties included in the CMLS shall be made in
written form to the Listing Company and not directly to the Owner,
unless the Listing Company communicates otherwise in the broker or
agent remarks field in the listing. The Listing Company shall, upon
request, furnish an executed copy of a form dated and signed by the
Owner stating as follows: `I have entered a listing agreement with
[broker] for the sale of my property. I have agreed with my broker
that offers from potential buyers (or their brokers or agents) will
be submitted to me and not to my broker'
11. CMLS shall modify a portion of Rule 3 as follows:
Current language:
There will be no owner's names or phone numbers on any signage.
Modified language:
There will be no owner's names or phone numbers on any signage,
unless the Listing Company and Owner have entered an Exclusive
Agency Listing as opposed to an Exclusive Right to Sell Listing.
12. CMLS shall modify a portion of Rule 3 as follows:
Current language:
No `For Sale By Owner' (FSBO) sign may be placed on the property
nor may the property be advertised in print media as a FSBO or
electronically on FSBO sites.
Modified language:
No `For Sale By Owner' (FSBO) sign may be placed on the property
nor may the property be advertised in print media as a FSBO or
electronically on FSBO sites, unless the Listing Company and Owner
have entered an Exclusive Agency Listing as opposed to an Exclusive
Right to Sell Listing.
13. CMLS shall modify a portion of Rule 5(b) as follows::
Current language:
In order to maintain the highest professional standards and meet
the requirements of Article II Item 3, all Members must maintain an
office in accordance with State Law. The office shall be maintained
within primary areas served by CMLS, which includes the counties of
Richland, Lexington, Kershaw, Saluda, Newberry, Calhoun and
Fairfield.
Modified language:
In order to maintain the highest professional standards and meet
the requirements of Article II Item 3, all Members
[[Page 22975]]
must maintain an office in accordance with State Law, enforcement of
which is the responsibility of the appropriate State officials.
14. CMLS shall delete and cease to enforce Rule 5(c), which states
as follows:
A representative (Owner/Broker-in-Charge) of the prospective
Member must personally appear at the CMLS office for a brief
orientation meeting with the Membership Committee. The CMLS Board
will vote on acceptance of the prospective new Member at the next
scheduled board meeting. This voting process may also be conducted
via e-mail. The prospective Member will be notified of the Board's
decision within 2 business days.
15. CMLS shall modify a portion of Rule 7 as follows:
Current language:
* * * no Member may advertise in any media that they can list a
property in the CMLS for a flat fee without disclosing to the
consumer that the consumer will be required to sign an Exclusive
Right to Sell contract which includes the co-broke fee the consumer
is willing to pay.
Modified language:
* * * no Member may advertise in any media that they can list a
property in the CMLS for a flat fee without disclosing to the
consumer that the consumer will be required to offer a co-broke fee.
16. CMLS shall modify a portion of Rule 7 as follows:
Current language:
No property may be advertised in print media as a FSBO or
electronically on FSBO sites nor can a FSBO sign be placed on the
property.
Modified language:
No property may be advertised in print media as a FSBO or
electronically on FSBO sites nor can a FSBO sign be placed on the
property, unless the Listing Company and Owner have entered an
Exclusive Agency Listing as opposed to an Exclusive Right to Sell
Listing.
17. CMLS shall modify Rule 17 as follows:
Current language:
Prior to being granted access to the CMLS system for the purpose
of information entry an agent/representative or individual Member
must attend and complete an introductory class on the use thereof
and provide evidence thereof to the CMLS staff.
Modified language:
Prior to being granted access to the CMLS system for the purpose
of information entry, an agent/representative or individual Members
must attend and complete an introductory class on the use of the
CMLS system and an orientation with a CMLS staff member (who is not
a CMLS Member). New Members who previously worked as an agent/
representative under another CMLS Member and had training in and
access to the CMLS system need not repeat the introductory class and
orientation. The agent/representative or individual Member will also
be excused from the introductory class if he or she demonstrates
familiarity with the MLS software used by CMLS, through membership
in another MLS that uses the same software. In such case, the agent/
representative or individual Member may receive the orientation by
phone. CMLS shall provide introductory classes/orientation no less
frequently than once every two weeks, if needed.
18. CMLS shall modify Rule 20(21) as follows:
Current language:
All keyboxes must be approved by the CMLS. Within the primary
service area of CMLS, another type of keybox may be placed on the
listing but must be accompanied by a keybox approved by the CMLS
(including HUD homes, Corporate Owned homes, Foreclosures, etc).
Subleasing of CMLS keyboxes is strictly forbidden and will result in
a fine of $500 for each offense. Listings in violation of this rule
will be removed from the CMLS system without notice.
Modified language:
Listings with keyboxes in the CMLS primary service area
(Richland, Lexington, Kershaw, Saluda, Fairfield, Newberry and
Calhoun Counties) must have a CMLS approved keybox. Another type of
keybox (non-CMLS approved) may be placed on the listing but must be
accompanied by a keybox approved by CMLS (including HUD homes,
Corporate Owned homes, Foreclosures, etc.). Upon receipt of a signed
agreement between the Seller and an agent/representative or
individual Member requesting CMLS to supply a keybox directly to the
Seller, CMLS will furnish the Seller a keybox. The agreement shall
include a statement that the agent/representative or individual
Member agrees to pay all normal fees associated with the issuance of
a keybox. CMLS shall maintain a list of keyholders available to
remove keyboxes as a service to listing brokers at a fee to be
negotiated between the keyholder and Member. Subleasing of CMLS
keyboxes is strictly forbidden and will result in a fine of $500 for
each offense. Listings in violation of this rule will be removed
from the CMLS system without notice.
19. CMLS shall modify Rule 20(23) as follows:
Current language:
Any agreement between a listor client and a Member that gives
the Member an advantage over another Member must be disclosed on the
CMLS listing input sheet and appear on the computer printout sheet,
i.e., if the listing company or owner sells the property the
commission will be modified. The listing member must disclose the
details of such agreement when requested by another Member.
Modified language:
If a Member enters a Listing Agreement with an Owner under which
the commission rate varies for any reason, that fact (but not the
commission rate) shall be disclosed on the CMLS Listing Input Sheet
and appear on the computer printout sheet.
20. CMLS shall modify Rule 21 as follows:
Current language:
Each member shall provide evidence to the Board annually that it
maintains Errors and Omissions insurance in an amount of $500,000.00
or greater. Failure to maintain such insurance shall result in loss
of membership if not corrected within 90 days after notice.
Modified language:
If a Member does not have or maintain at least $500,000 in
Errors and Omissions insurance, it shall disclose that fact on each
document required to be executed in the course of creating a
listing. The Member shall also disclose that fact on the Listing
Input Sheet and CMLS will include the following statement on any
publication of that listing: `The Listing Company for this property
does not maintain Errors and Omissions insurance.
C. CMLS shall deliver, to any Person who requests it and by
whatever reasonable delivery method such Person requests (including e-
mail), a complete set of materials necessary to apply for Membership,
including a complete set of CMLS's then-current Rules.
D. CMLS shall permit any Owner to submit an application for
Membership by whatever reasonable delivery method he or she desires.
E. Within three business days of completion of orientation and CMLS
system training, if needed, CMLS shall grant the Owner Membership in
CMLS. If the applicant (Member, if orientation has been completed) has
previously been trained in the use of CMLS's systems (by CMLS or
another MLS), CMLS shall immediately provide the applicant all
passwords and other information and materials necessary for him or her
to submit listings to CMLS, to access CMLS's database of listings
(including confidential or broker-to-broker information fields), and to
use any product or service provided by CMLS. If the new applicant has
not previously been trained in the use of CMLS's systems, CMLS shall
provide such information and materials after the new applicant has
completed training in the use of CMLS's systems. CMLS shall offer
training in the use of its systems no less frequently than once every
two weeks, if needed.
F. CMLS shall prevent any employee, officer, director, or trustee
of CMLS who is himself or herself a Member or Licensee from viewing or
accessing listing or other agreements between a Member or Licensee and
any home buyer or home seller. Membership applications shall not
request any
[[Page 22976]]
information concerning the business model or operations of or the
commissions or other prices to be charged by the applicant.
G. CMLS shall furnish to the Department of Justice
1. A complete set of CMLS's Rules, within five business days of
each modification to those Rules; and
2. A complete set of minutes of any meeting of CMLS Members or any
regular or special meeting of CMLS's Board or of any committee
comprised of members of CMLS's Board, within five business days of the
approval of such minutes (if such minutes are formally approved) or of
the finalization of such minutes (if such minutes are not formally
approved).
H. Within five business days after entry of this Final Judgment,
CMLS shall
1. Furnish to each Member and Licensee a hard or electronic copy of
this Final Judgment and a hard or electronic copy of CMLS's Rules
modified to conform to the provisions of this Final Judgment; and
2. Furnish a copy of this Final Judgment and a copy of CMLS's Rules
modified to conform to the provisions of this Final Judgment to each
Person who, in the five years preceding entry of this Final Judgment,
CMLS knows to have picked up an application for Membership or who
otherwise inquired about becoming a Member. CMLS shall also notify each
such Person that CMLS will allow any Owner, who is not prohibited from
Membership (under Rules permitted under Section VI of this Final
Judgment), to become a Member.
VI. Permitted Conduct
Subject to Section IX of this Final Judgment and notwithstanding
any of the above provisions, nothing in this Final Judgment shall
prohibit CMLS from:
A. Denying Membership to or terminating the Membership of any Owner
who no longer holds, or no longer employs a Broker-in-Charge who holds,
a broker's license under Title 40, Chapter 57 of the Code of Laws of
South Carolina or who has been convicted of a crime of either a
criminal sexual nature or relating to the improper handling of funds;
B. Requiring, as a condition of obtaining or maintaining
Membership, that CMLS Members certify that each Licensee affiliated
with the Member has undergone a nationwide background check and has no
convictions of either a criminal sexual nature or relating to the
improper handling of funds; and disciplining, including terminating the
Membership or access to CMLS of, any Member or Licensee who violates
CMLS Rules or fails to pay CMLS's fees or dues, provided (i) that CMLS
not discriminate in its investigation or discipline of Members or
Licensees for Rules violations or failure to pay fees or dues based on
the Members' or Licensees' office locations, pricing or commission
rates, business models, contractual forms or types used, or the
services or activities they perform or do not perform for any home
buyer or home seller and (ii) that it maintain processes consistent
with the requirements of Sec. 33-31-621(b)(2) of the Code of Laws of
South Carolina.
VII. Compliance and Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally recognized privilege,
from time to time duly authorized representatives of the Department of
Justice, including consultants and other persons retained by the United
States, shall, upon written request of a duly authorized representative
of the Assistant Attorney General in charge of the Antitrust Division,
and on reasonable notice to CMLS, be permitted:
1. Access during CMLS's office hours to inspect and copy, or at the
United States's option, to require CMLS to provide hard or electronic
copies of, all books, ledgers, accounts, records, data and documents in
CMLS's possession, custody, or control, relating to any matters
contained in this Final Judgment; and
2. To interview, either informally or on the record, CMLS's
Members, directors, trustees, officers, employees, or agents, who may
have their individual counsel present, regarding such matters. The
interviews shall be subject to the reasonable convenience of the
interviewee and without restraint or interference by CMLS.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division, CMLS
shall submit written reports or interrogatory responses, under oath if
requested, relating to any of the matters contained in this Final
Judgment as may be requested.
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 CMLS
to the United States, CMLS represents and identifies in writing the
material in any such information or documents to which a claim of
protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules
of Civil Procedure, and CMLS marks each pertinent page of such
material, ``Subject to claim of protection under Rule 26(c)(1)(G) of
the Federal Rules of Civil Procedure,'' then the United States shall
give CMLS 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 CMLS.
X. Expiration of Final Judgment
Unless this Court grants an extension, 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' 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.
Date:------------------------------------------------------------------
Court approval subject to procedures set forth in the Antitrust
Procedures and Penalties Act, 15 U.S.C. Sec. 16.
Sol Blatt, Jr.,
United States District Judge.
[FR Doc. E9-11392 Filed 5-14-09; 8:45 am]
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