Clear Cooperation Policy: Open or Closed?

Clear Cooperation Policy: Open or Closed?

Last week The Data Advocate reported on the Homie group boycott case in Utah that focused on NAR’s Exclusionary Rules, including those related to the 5-year old Clear Cooperation Policy (CCP) — Homie attempted to avoid the MLS entirely by marketing properties off the MLS, including through its website and mobile app, as so-called private listings. As claimed by Homie, the Clear Cooperation Policy blocked this possibility, injuring Homie by eliminating alternative marketing avenues that would have allowed it to avoid the pervasive effects of Defendants’ anticompetitive conduct, namely, the tacit and express boycotts of Homie facilitated by NAR’s Exclusionary Rules and Policies.

Recently, we saw the CCP issue taking the spotlight in a WAV Group Clear Cooperation Study that concluded “while registering solid support for removal of the policy, especially among brokers, the study also demonstrated strong interest in making the policy optional or re-working it. Overall, just 28% of respondents, however, recommended keeping the policy as-is. The majority want to change or remove the policy.”

The results of that survey  were likely discussed last week at a special meeting of NAR’s MLS Technology and Emerging Issues Advisory Board to craft the future path for CCP. According to WAV Group’s co-founder Marilyn Wilson, the study was designed to get a read on current brokerage and MLS Leadership’s sentiments on CCP.

That study also motivated us to update what we know about the mysterious DOJ state of mind, the related lawsuits, brokerage practices, and the most telling statements from recognized authorities. What follows are some public excerpts as food for thought to help leadership decide whether to work with an open or closed CCP:

First, what is the Department of Justice’s position with the CCP based on the DOJ’s amicus briefs, hearings, and Statements of Interest (SOI)

• The DOJ feels it is irrelevant that the restrictive practice may not be strictly enforced by its terms because “the antitrust laws do not require that we wait until the restraint is accomplished before we hold invalid a rule which gives an association power to produce unjustified anticompetitive effects”. Indeed, for mandatory rules governing members’ conduct, proof of enforcement is unnecessary because the existence of the rule is direct evidence of concerted action.”
• But the District Court’s analysis wrongly focused instead on competition in a distinct market: the downstream market in which real-estate brokerage services help consumers buy and sell homes. The District Court never analyzed whether Top Agent Network’s (TAN) alleged injury flows from the Defendants’ anticompetitive acts in the market TAN alleged—namely, the upstream market for listing services provided to agents and brokers. The law requires that analysis.
• Competition can include new rivals taking market share from a dominant provider, replacing the dominant provider altogether with a better product or service, or creating a niche product preferred by some segments of the market. The District Court’s reasoning, however, effectively precludes any off-MLS competitor   from challenging MLSs in that upstream market—improperly entrenching the dominant market position of the NAR-affiliated MLS system.
• This Court, in PLS.Com, recently applied this principle to NAR’s Clear Cooperation Policy. In doing so, it recognized that PLS was a competitor in the upstream “real estate network services market,” and held that PLS was not required to allege harm to home sellers and buyers in the downstream market in order to adequately allege antitrust injury.  This Court held that it was sufficient for PLS to allege that brokers and agents, who “are the consumers of PLS’ and the MLSs’ listing network services,” were harmed by the Policy. The antitrust laws protect competition in both upstream and downstream product markets. The Sherman Act “does not confine its protection to consumers, or to purchasers, or to competitors, or to sellers.”
• Antitrust law “assesses both harms and benefits in light of the [Sherman] Act’s basic objectives, the protection of a competitive process.” Editor note: Just like the keyword in the proposed NAR Settlement is NEGOTIATION, the keyword in the DOJ position on Clear Cooperation Policy is COMPETITION.
• Customer-facing websites such as Zillow or Trulia,” for instance, do not compete with TAN or MLSs, as they are consumers rather than suppliers of property listing services.” These websites report listings that appear on MLSs but do not independently generate listings.
• The District Court erred by focusing on the downstream market instead of the upstream listing services market in which TAN alleged anticompetitive harm. The District Court’s decision is inconsistent with PLS.Com and other longstanding precedent showing that in cases like this, where the plaintiff alleges that it competes in an upstream input market, courts properly analyze competition in that upstream market. The antitrust laws protect competition in both upstream and downstream product markets.
• By assuming consumers are better off with the current dominant provider—instead of with additional rivalry—the District Court’s reasoning disregards basic antitrust principles. As the Supreme Court has made clear, “[t]he Sherman Act reflects a legislative judgment that ultimately competition”—here, between listing services—“will produce not only lower prices, but also better goods and services.” For this reason, “[t]he heart of our national economic policy long has been faith in the value of competition.” Indeed, antitrust jurisprudence firmly establishes that the role of courts’ antitrust analysis is to protect competition, not to pick winners and losers in the marketplace.
• Not everyone wants to list their home for the entire world to see. A business offering that service is not acting anticompetitively merely because fewer people will be able to see a home. To the contrary, consumers benefit from the various forms of competition that can occur in the upstream market. That competition can take the form of replacing the dominant provider altogether with a better product or service.
• The court added that, if not for its findings on “antitrust injury,” the court would have found “that PLS has alleged facts plausibly to show that the Clear Cooperation Policy is a prima facie (at first view) unreasonable restraint of trade under the Rule of Reason framework,”
• But unlike a traditional MLS, TAN offers a “match-making” service for its members that
  “facilitates one-on-one private conversations between a buyer’s agent
  and seller’s agent with symmetrical needs without any marketing of the property.” TAN “limit[s] its membership to the top ten percent of agents responsible for most residential real estate
  transactions by sales volume.”
• An MLS’s business, and PLS’s ability to compete with MLSs, depends on brokers and agents choosing on behalf of sellers to list properties on the service. The direct “consumers” in this market therefore are brokers and agents— not home buyers and sellers. See Freeman v. San Diego Ass’n of Realtors,  (agents had standing to sue realtor associations that provided support services to an MLS); Thompson v. Metropolitan Multi-List,  (agent-members of realtors’ association, who were the relevant “consumers of the multilisting service,” had antitrust standing to bring claim for conspiracy to monopolize the multi-list market).
• TAN sued NAR and the San Francisco Association of Realtors (“SFAR”). It alleged that the Policy violates, among other laws, Section 1 of the Sherman Act, 15 U.S.C. § 1, as both a per se unlawful “group boycott” against TAN and an unreasonable restraint of competition in the market for professional real estate listing services.
• After dismissal but before briefing in this case, we considered the sufficiency of similar allegations in PLS.com v. Nat’l Ass’n of Realtors,. Because the facts of PLS.com are sufficiently analogous to the facts as alleged here, we vacate the district court’s order and remand Top Agent’s claims for reconsideration under PLS.com. Filed 08/28/23 with trial scheduled for Nov 3, 2025.

DOJ v NAR

The Antitrust Division began to investigate NAR in March 2019. In April 2019 and June 2020, the Division issued Civil Investigative Demands (CID) in connection with its investigation, numbered 29935 and 30360, respectively. The CIDs included inquiries concerning several NAR policies, including the Participation Rule and the Clear Cooperation Policy

Correspondence between NAR attorney and DOJ attorney shed light on the parties’ intentions:

DOJ attorney: Second, we appreciate NAR’s offer to discuss potential changes to NAR’s Clear Cooperation Policy. To that end, the Division proposes modifying NAR’s Clear Cooperation Policy as follows: 1. Revise NAR’s Clear Cooperation Policy to extend from one business day to sixty (60) days the time by which listing brokers must submit listings to the MLS; and 2. Eliminate the exception to the Clear Cooperation Policy for “office exclusives.” Finally, the Division appreciates NAR’s agreement to memorialize any such commitments in a consent decree. Should NAR be willing to accept these terms and the Court enters a resulting consent decree as a final judgment, the Division is willing to close its investigation into NAR’s Participation Rule. Consistent with what we have previously noted, however, we cannot commit to never challenge NAR rules and policies in the future in light of longstanding Department policies on such commitments.

NAR attorney response: Before discussing the specifics of our counterproposal, however, we note that the Division’s July 29 letter included two new requests regarding a different rule than we had previously discussed: the Clear Cooperation Policy. First, the Division asked NAR to revise the Clear Cooperation Policy “to extend from one business day to sixty (60) days the time by which listing brokers must submit listings to the MLS.” Second, the Division asked NAR to “[e]liminate the exception to the Clear Cooperation Policy for ‘office exclusives.’” We do not understand the purpose of the Division’s requests regarding the Clear Cooperation Policy because, on their face, the Division’s new proposals will reduce competition and access to fair housing opportunities. Because we have not previously discussed these matters with the Division, we take this opportunity to explain the impact of the Clear Cooperation Policy, and how the Division’s requested relief would reduce competition and access to fair housing

DOJ attorney response:  That said, we remain far apart on the Clear Cooperation Policy. Your previous letter invited us to discuss potential changes to that policy. We proposed extending from one business day to sixty days the time by which listing brokers must submit listings to the MLS and eliminating the exception for “office exclusives.” Your counterproposal— extending the time to three business days and retaining the “office exclusives” exception—does not reflect a meaningful change in NAR’s position. And your rationale—that consumers now, after decades of experience with pocket listings, need the new Clear Cooperation Policy to prevent them from choosing private listings but that the “office exclusives” exception is required to allow them to choose private listings—is internally inconsistent and blatantly protectionist with respect to, in your words, the “bigger” brokerages. In any event, it seems we are too far apart to resolve this issue at this stage. Consequently, the Division will take the Clear Cooperation Policy off the settlement track and staff will continue to investigate this policy separately for its effects on competition. The Division, accordingly, expects NAR to immediately comply with CID No. 30360 and produce information and documents in response.

ORDER DENYING PETITION TO SET ASIDE, OR IN THE ALTERNATIVE MODIFY, CIVIL INVESTIGATIVE DEMAND NO. 30729 The Petition to Set Aside, or in the Alternative Modify, Civil Investigative Demand No. 30729, ECF No. 1, is hereby DENIED. IT IS SO ORDERED. Date: TIMOTHY J. KELLY UNITED STATES DISTRICT JUDGE

Broker Practices and Opinions

Reference the Stellar MLS office policy at https://www.stellarmls.com/clearcooperation

In those exceptional cases where the fully informed seller decides to hold off submitting to the MLS under the CCP one-day rule, the broker can evidence the seller’s informed consent with a special company form as in this sample :

Temporary: Check out this “informed consent” form used by Stellar MLS – (Editor note — be sure to have your real estate attorney give your version local review):

OWNER(S) AUTHORIZATION TO TEMPORARILY EXCLUDE LISTING FROM THE MLS – note the definition of  “public marketing” that will require/trigger next day submission to MLS

For a more permanent exclusion, click here: more permanent, subject to modification:

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Opinion from thought leader extraordinaire and friend Brian Boero of 1000Watt

The CCP should stand, and be fought for

“…this is about what kind of industry we want to be, and what kind of housing market we want to create: open or closed.

This language, from Compass’ Private Exclusives site, feels decidedly closed:

“In an inventory constrained market, access to listings is everything. Working with a Compass agent from the #1 brokerage in the U.S. opens the doors to homes that are not available to the public yet or may never hit the market.”

If the Justice Department thinks the MLS is fundamentally anti-competitive and anti-consumer, they should meditate on what it means when housing is labeled “Private Exclusive.”

They should look hard at Europe, as they did when comparing commission rates to those found in the United States, to understand what happens to consumers when listings (otherwise known as “homes”) are closely held.

So, open or closed

 Which do you want?

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In his prolific writings, industry commentator Rob Hahn has voiced the following points about CCP:

• CCP is about shutting down competition to the existing MLS system
• My suggestion is chip away at CCP while going directly at the DOJ’s main objection: lack of competition between MLSs. The whole point is to force incumbents to enable competitors, both new and old. The compromise is to institute a wide open free market system, paired with waivers for those individual sellers who give informed consent to an off-market strategy for their homes.
• The MLS should be the Primary Marketplace, meaning that the MLS is the first place where such things happen. The key concept is priority in time.
• It would look a lot like Broker IDX: if you come in, you provide all your data, and in exchange, get all of the data from other participating MLSs. With no strings attached, so that you all can compete against one another like crazy on price, on service, on technology, on education, on whatever other than access to listing data.

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Interview with Saul Klein on Sept 15, 2024:

John and I spoke of this in detail yesterday. The DOJ is confused.

Eliminating Office Exclusives while extending the timeframe to submit listings is self-defeating.

I have never been a fan of “office exclusives.” The purpose is, for the most part, to let listing brokers find buyers for their listings without submitting to the MLS…”Double Ending.”

If the DOJ wants to end office exclusives, that is ok, as it is in the public’s and the MLS’s best interest to have all listings entered into the MLS for transparency, fairness, and marketability. Office Exclusives are vestiges of the past, a work around to allow for non-submission to MLS (there may be some exceptions for privacy of certain sellers giving “informed consent.”).

Extending the time for submission to say, 60 days (per the DOJ unrealistic suggestion), in essence, allows for all listings to be “office exclusives” for the first 60 days. At least with the requirement to get a form signed for an office exclusive, there is some level of seller consent.

The DOJ is all screwed up.

Saul

BREAKING NEWS 

From Marilyn Wilson in WAV Group Blog on 9-18-2024:

The fate of the Clear Cooperation Policy (CCP) remains uncertain, with further discussions scheduled for next month. During their recent bi-annual meeting on September 12th and 13th, 2024, the MLS Technology and Emerging Issues Advisory Board engaged in extensive deliberations about the CCP, but no definitive decisions were reached. NAR has announced that the Advisory Board will add an additional session to the schedule to continue to discuss these important issues.

The Clear Cooperation Policy, which mandates REALTORS® to list properties on NAR-affiliated MLSs within one day of signing the listing agreement, is under scrutiny from the Department of Justice (DOJ), which has revived its investigation into the association’s rules. NAR has announced plans to appeal a court decision allowing the DOJ’s inquiry to continue. The discussion has also reached emergency status because of a Clear Cooperation Lawsuit scheduled to go to trial in November.

WAV Group has learned that more than 88 brokers representing 200,000 real estate agents may be forced to lodge a class action case against NAR using the DOJ arguments to protect themselves from future direct litigation from the DOJ if this action is not addressed. Moreover, the Private Listing Service, PLS.com, now called the NLS.com (currently not operational) is re-submitting their litigation arguing that the Clear Cooperation Policy is effectively a group boycott against the PLS MLS system. California Regional MLS, BrightMLS, and MRED have all settled with PLS.

WAV Group’s research showed that just over half of real estate brokers respondents would like the policy removed, mostly to avoid legal and Federal regulatory pressures. 40% of MLSs would like to see the policy reworked/made optional and another 32% would like to see the policy removed. In total, 75% of brokers and 72% of MLSs would like the policy to be reworked, made optional or removed.

For a 45-min webinar video focused on the Clear Cooperation Policy featuring Tristan Ahumada, Saul Klein, and John Reilly, be sure to Click Here

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