Home Real Estate Austin’s IDX Kerfuffle and Antitrust Issues

Austin’s IDX Kerfuffle and Antitrust Issues

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You know who doesn't have an opinion on IDX? These guys.

So that whole Austin IDX kerfuffle is back in the news again, courtesy of Inman:

A contingent of Austin Realtors say listing agents should be clearly identified when brokers and agents publicize each other’s listings on their websites.

With two of the city’s prominent luxury brokers leading the charge, they’ve asked the Austin Board of Realtors (ABoR) to change current policies governing the display of Internet Data Exchange (IDX) listings.

An equally vocal group of ABoR members contends that promoting other brokers’ listings on their websites is one thing, but promoting their agents is quite another. They object to a proposed IDX rule change that would require them to identify listing agents on the properties they showcase on their sites.

I wrote about the Austin IDX issue a while back, but this Inman article introduces a new element to the story:

Some listing brokers and agents who are pushing for rule changes also want sellers to have the ability to opt out of having their listings included in feeds of shared listing data, without giving up their right to advertise their home on the listing broker’s website.

A selective, listing-by-listing “opt out” of IDX listing feeds is frowned upon by antitrust regulators. Model rules drawn up by the National Association of Realtors and adopted by most multiple listing services (MLSs) require that brokers take an “all-in” or “all-out” approach. (Emphasis added)

Izzatso? Since I covered most of the issues in the Austin IDX Kerfuffle in a previous post on the subject, I want to focus on this one aspect of antitrust and IDX.

I must now solemnly warn you that I am not licensed to practice law in the State of Texas, and that anything you read in here is just my opinion and does not constitute a legal opinion. Please consult your own attorney for actual legal advice. And so on and so forth.

Does the Justice Department Actually Take a Position on IDX?

Laurie Janik, the General Counsel of NAR, says in this video put out by ABoR (Austin Board of REALTORS) that “selective opt-out” from IDX is frowned on by the boys and girls at the DoJ, and that the only option available is for the seller (not the broker) to opt out of display on the Internet entirely.

Back in 2008, when I was looking at the whole NAR-DoJ settlement, I noted that the settlement covered only VOW (Virtual Office Websites) policy and not IDX. I wrote about that specific issue here, here, and here.

As a matter of fact, I wrote back in 2008:

Here’s section (V) of the Proposed Final Order, entitled “Required Conduct”:

A.  Within five business days after entry of this Final Judgment, NAR shall repeal the ILD Policy and direct each Member Board that adopted Rules implementing the ILD Policy to repeal such Rules at the next meeting of the Member Board’s decisionmaking body that occurs more than ten days after receipt of the directive, but no later than ninety days after entry of this Final Judgment.

Section V goes on to talk about implementing the new Modified VOW Policy (which was attached, and described as a Revised VOW Policy), setting up an Antitrust Compliance Officer at NAR, etc.  It never mentions ILD or IDX ever again in the document. [Emphasis added]

To conflate the two now, as Janik does, is to imply that there is no difference between IDX and VOW. But there are substantial differences between the two, and the anti-trust suit itself was motivated by those differences.

IDX Is Not VOW, and the Justice Department Thought So Too

You can read it for yourself in the Amended Complaint filed by the Justice Department, to wit:

27. Brokers can use the Internet to operate more efficiently than they can by using only traditional methods. By transferring search functions from the broker to customers who prefer such control over the process, VOW-operating brokers allow customers to educate themselves at their own pace about the market in which they are considering a purchase. By doing so, brokers with successful password-protected websites are able to reduce or eliminate the time and expense involved in identifying and providing relevant listings and otherwise educating their customers. These brokers also spend less time on home tours with their buyer customers, as these buyers frequently tour fewer homes before making a purchase decision than typical buyers. With lower cost structures, brokers with Internet-intensive business models have offered discounted commissions to sellers or commission rebates to buyers.

28. Other sources of listing information on the Internet are inferior to the password-protected VOWs because they do not and cannot guarantee access to all information available in the MLS.

[Emphasis added]

Hmm… “other sources of listing information on the Internet” that are inferior to password-protected VOWs because “they do not and cannot guarantee access to all information available in the MLS”… what might that be? Maybe… something like IDX, which is a very limited data feed?

Well, Justice Department had a thing about that too:

NAR’s Modified VOW Policy includes other provisions that restrict brokers’ ability to use the Internet to serve their customers effectively. The Modified VOW Policy, for example, allows MLSs to downgrade the quality of the data feed they provide brokers, effectively restraining brokers from providing innovative, Internet-based features to enhance the service they offer their customers. The Modified VOW Policy also permits MLSs to interfere with efficient “cobranding” relationships between brokers and entities that refer potential customers to the broker.

The DOJ sued on that basis, and got NAR to settle. And yet, somehow, IDX is legal, despite the fact that it provides a “downgraded data feed”.

The only possible explanation is that IDX is not VOW. The two programs have entirely different purposes, and are treated entirely differently under the law.

Fact is, the DOJ went after VOW policy, because they saw brokers screwing around with other brokers (particularly the Internet-only brokers and discount brokerages) within the MLS. Their antitrust concerns had to do with price fixing, since their theory was that Internet-savvy brokers can provide services to consumers at lower cost (see, e.g., Redfin).

Not one statement addresses IDX, because IDX is not about providing lower cost service to buyers and sellers. It is, rather, about marketing to potential buyers and generating leads.

Put simply, VOW is about serving customers, while IDX is about acquiring customers. The Justice Department to date has taken a position on servicing customers. It has not (and I believe it cannot, because of copyright laws) taken any position on acquiring customers.

I hate to disagree with the eminent counsel of NAR, but on this issue, I think she’s wrong. Selective opt-out of the VOW is a no-no under antitrust, because that affects the ability of brokers to provide lower-cost services. The only option to opt-out belongs to the seller, who must then opt out of display on the Internet as a whole. But selective opt-out of the IDX is an issue that has never been litigated as far as I know, and I simply do not believe that it would be an antitrust violation to refuse a competitor the ability to use your listing data to market their services.

If I Am Wrong…

But let us suppose for a moment that I’m wrong about antitrust not applying to IDX. Let’s suppose that for some reason, selectively opting out of IDX would be restraint of trade, since that makes it more difficult for competitors to provide free, no-password-required, listing data to potential (not actual, but potential) buyers.

The rule, then, would be something like this:

It is unfair restraint of trade to disallow a competitor to use your copyrighted information in marketing his services.

The key issue, then, would turn on the meaning of “competitor”.

Agents and brokers think that “competitor” simply means other agents and brokers. But why would the general public — or the Justice Department for that matter — accept that narrow definition of “competitor”?

Cable networks regard satellite TV operators as competition, despite the fact that the latter have no wires in the ground. More recently, they have realized that Internet media companies like YouTube are also competitors. Airlines don’t compete only with each other; they also compete with trains, with automobiles, and when we get the technology, with instant teleportation. The examples go on and on and on. Movie theaters don’t only compete with other movie theaters — they also compete with big screen TV’s and Blu-Ray DVD and video games and amusement parks and live concerts and… you get the idea.

Without question, competing on actually assisting a home buyer or seller with the real estate transaction is limited to brokers and agents, since real estate brokerage requires a license to provide those services. But marketing homes for sale, or marketing the services of a broker or agent has never required a license and likely never will. (Think all those newspapers are going to go apply for a real estate license to run ads?)

If providing potential consumers access to property information is a matter of antitrust protection, then refusing to syndicate to Zillow, Trulia, Realtor.com, or CrappyHomesForSale.com, or PornoUSA.com is a violation of antitrust laws. All of those sites are “competitors” in the business of marketing properties to consumers.

For that matter, I don’t really see a reason why “competition” to provide listing information to consumers need to be limited to the Internet. What prohibits an agent from planting his own yard signs on the listings of competitors?  What prevents an agent from running around the neighborhood, taking photos of listings of other agents, and printing up a bunch of flyers advertising homes for sale? If you say that the local Association rules, or local state regulations prevent such a thing, then those rules and those local state regs are in violation of Federal antitrust laws and must be struck down.

Since that ridiculous result cannot stand, the notion that antitrust prohibits selective opt-out from IDX is… shall we say untested. The reality is that the notion is specious reasoning.

Insofar as IDX is marketing, antitrust does not apply, and more specifically, the NAR-DoJ Settlement does not apply. The MLS can allow brokers to selectively opt-out of IDX without worrying too much about antitrust issues.

Can’t Square the Circle: IDX Go Bye-Bye

As it happens, I think the proposed changes to the Austin policy are not great. Forcing brokers and agents to display the listing broker/agent through policy is an imposition of costs, both financial and branding, that isn’t the greatest.

As Deborah Madey says in her comment on the Inman article, why should a successful buyer’s agent be forced to advertise a competitor on her website that she spent time and money on?

But at the same time, why should the listing broker allow his copyrighted material to be used by a competitor to generate new business? We already know that the listing broker cannot prevent a competitor to use that information — if submitted to the MLS — to service an existing client, since that’s the substance of the NAR-DoJ settlement on VOW. But there is nothing in the law, in the NAR-DoJ Settlement, or common sense that suggests that intellectual property of one person can be used by another to acquire new business, without a license to do so.

The solution, then, is simply to allow for selective opt-out of IDX. There should be no requirement to advertise a competitor on one’s website: that’s too far an imposition. On the other hand, there should be no requirement to provide listing data to competitors for the purpose of securing new business either.

The end result of those two combined is that IDX becomes syndication… which it is.

If having the listing agent prominently displayed is important to the listing broker, then he can allow only those buyer brokers who agree to do so to display his listings. If it isn’t that important to the listing broker, he can leave things as they are. It’s his right to do whatever he wants with his own listings. There is no antitrust issue here, at all, in my ever so humble opinion.

I have argued this point before, only to have a number of industry people insist that IDX and Syndication are different. I haven’t yet heard one good argument as to what makes them different, except some sort of circular tribal logic that people with real estate licenses deserve to make money off other people’s intellectual property, while people who don’t have the license do not, but if those who don’t have licenses go get licenses (e.g., “Zillow Realty”), it means the end of the world is coming. Or something like that.

Oh, and before you raise up the spectre of big bad dual agency and whatnot… please go read my original post on the Austin IDX issue where I address that.

Make Whatever IDX Policy You Want

In the end, I have no particular position on what IDX policy a particular MLS should adopt. That’s an industry matter for the participants in the MLS to figure out and decide. I may not like some policies, and like others, but my opinion on that topic is worth approximately zero.

But I do think that a MLS has the right to adopt whatever IDX policy it wants without regard to antitrust issues, because those simply do not apply to IDX. They do apply like Thor’s Hammer to VOW policy, as that relates to servicing existing clients, but not to IDX, which relates to marketing to get new clients.

If you have a different view on the application of antitrust law to IDX, I’d love to hear about it in the comments or on your website/blog. Please distinguish IDX from syndication in that comment/post if you can.

Thanks!

-rsh

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1 COMMENT

  1. […] Rob Hahn has said there is no meaningful difference between IDX and syndication and that he thinks brokers pulling out of syndication are a harbinger of IDX’s demise; but I think he’s dead wrong. I’ll try to make my point here in a post considerably shorter than one of Rob’s Notoriously long ones You can see Rob’s post claiming (erroneously, I think) the equivalence of IDX to syndication here; regarding the Austin “kerfuffle” as evidence of the impending demise of IDX here; and offering further comments about Austin and IDX here. […]

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