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Antitrust Questions on MLS Decision to Screw With Syndication

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Having just spent a couple of days at CMLS, a young man’s fancy turns to questions of MLS-related things. In this case, a middle-aged man’s fancy might turn that way too, since it’s been a while since I’ve been a young man with fancy of any sort.

As most of my readers probably know, RealTracs, a large regional MLS in Nashville, recently made news:

By the end of the month, Brentwood, Tennessee-based RealTracs Solutions says it will limit the information included in direct data feeds it sends to public portals. RealTracs, which has nearly 10,000 members, is also in negotiations with listing syndicator ListHub to limit third-party portals’ display of listing data.

The changes include a four-photo limit; the elimination of several data fields; listing descriptions will be restricted to 150 characters; and public portals will be required to include a link to the listing detail page on the listing broker’s website.

As part of its reasoning behind the changes, RealTracs said consumers deserve a closer relationship with Realtors who provide the work product powering public portals, and brokerage websites can provide a more personal experience for consumers. The MLS also said brokerages should be allowed to manage advertising in ways advantageous to their companies.

Zillow has already said Nyet to the plan:

Now, White says Zillow has informed him it would reject any data feed that did not have complete data and would therefore terminate the feeds of RealTracs listings it receives from listing syndicators ListHub and Point2 on Sept. 23. Zillow is the most highly trafficked real estate portal on the Web with 46 million unique visitors via desktop and mobiles devices in June, according to comScore.

No response yet from Realtor.com, but Trulia has already said it’ll go along with the MLS’s wishes.

I have to admit to being some sort of strange real estate nerd in that this situation makes me wonder about a couple of antitrusty things. But here goes.

Small Brokers vs. Large Brokers

I wrote about this in relation to the first instance of an MLS screwing with syndication, when TheMLS/CLAW put in a 48-hour delay in its feed to the portals:

That 93% figure is also significant because it implies that every single large brokerage and national franchise has a direct feed to Zillow in place already. The majority of the Board members at CLAW belong to such large brokerages and franchise companies, which means that their decision to delay the feed would not affect them or their companies.

Who does it affect?

The small independents. The mom-n-pop brokerage. The buyer specialists and buyer-brokerages who spend money advertising on Zillow for buyer leads.

The debate over syndication is usually framed as “industry” vs. portals, or brokerages vs. big tech companies. But as I’ve pointed out before, the portals can’t stay in business without agents and brokers willing to pay them. The reality is that the syndication fight is actually a fight between brokerages: those who feel they don’t need Zillow, except to appease their listing agents, and those who do. That’s usually a Big vs. Small divide.

Right after the CLAW decision in the news, I spoke with the office manager of a small boutique brokerage in the LA area, who asked for anonymity for obvious reasons. She thought the decision was, in her words, “total bullshit” and she viewed it as the big brokerages who control the CLAW board (her words, not mine) trying to make it harder for small boutiques like hers to compete. She mentioned that her small company doesn’t have a Chief Technology Officer, doesn’t have a large technology budget, and relies on the MLS to get their listings to the portals, unlike the big brokerages. Yes, she was fairly upset about the decision.

That’s anti-trust, y’all. There’s really no other way to describe such a thing: a cadre of big brokerages colluding through the MLS, which they control, to create competitive disadvantage for smaller brokerages.

Now, it seems that because those paragraphs were in a much larger piece, we didn’t really focus on the concerns there. With RealTracs, it seems to me that this may be an even more of an issue.

The national franchises and the large brokerages have the technology, the staff, and the resources to setup direct syndication feeds with the major portals. For example:

And so on and so forth. In fact, Zillow offers every brokerage a simple way to send listings directly to Zillow. (Trulia has the same sort of thing.) But there’s a catch:

If you have more than 200 listings, you can send us listings data through our free automated feed program. You can upload multiple property photos, virtual tours, open house information, and much more. There is no cost to participate in the program. Additionally, Zillow and Yahoo! Real Estate have an exclusive partnership where Zillow powers all for-sale listings on Yahoo! Real Estate! With one feed, your listings will show up on both sites.

Requirements to send a feed

Sending a listing feed is a technical undertaking that requires publishing an XML file to Zillow. Simply sending us a URL of your website does not provide enough information for online listing display. Creating a feed XML file requires the ability to create a file that conforms to our specification.

If you have fewer than 200 listings, however, you’re stuck doing it manually. While publishing an XML file isn’t a big technical challenge, most small brokerages with 3 agents or so aren’t going to be experts in doing such a thing.

So when RealTracs decided to degrade its syndication feed, that decision will not affect any REMAX, KW, Coldwell Banker, Century 21, Sotheby’s, Better Homes and Gardens, or ERA brokerage. It won’t affect any brokerage that has 200 listings and can setup an XML file. All of their listings will appear with all of the data, all of the photos, on Zillow, Trulia and Realtor.com

The small independents — like the one quoted above — who have to rely on the MLS to do that for them will be affected.

Now, I have no idea what the makeup of RealTracs is in terms of brokerage size. But I do know what it looks like for the state of California:

California Brokerages
California Brokerages

So if the above ratio holds, 88% of the brokers have 4 or fewer agents. Maybe a bunch of them are franchisees and therefore unaffected, but since most national franchises don’t sell franchises to tiny little ma-and-pa shops (2 agents?) I kinda doubt it.

The Inman News article makes it clear that RealTracs knows about the disparate impact:

White [CEO of RealTracs] said Zillow had pointed out that many large brokers send their own direct feeds to the portal with full listing information, potentially putting RealTracs’ smaller brokers at a disadvantage.

So far, White said smaller brokers who have reached out to him about the decision to limit data haven’t questioned it. But RealTracs is working with ListHub to give brokers the option of sending full information on their own listings should they wish to.

I guess we’ll see how many of the small brokers opt to send the full information via ListHub, and the practical difference in cost, energy, effort, and impact between that method and the direct feed method the larger companies have.

It will also be interesting to see if 93% of the brokers in RealTracs “opt-in” to send the full listing on to the portals, as happened with CLAW. Because that also makes a statement about the MLS.

[PLEASE SEE EDIT BELOW: I spoke directly to Stuart White, CEO of RealTracs, and got some additional information that is relevant to the analysis.]

Wouldn’t Prices Have to Drop?

Let’s assume for the sake of discussion that the decision to degrade syndication feeds is pro-competitive. After all, the MLS justified the decision as a pro-consumer move:

As part of its reasoning behind the changes, RealTracs said consumers deserve a closer relationship with Realtors who provide the work product powering public portals, and brokerage websites can provide a more personal experience for consumers. The MLS also said brokerages should be allowed to manage advertising in ways advantageous to their companies.

“This is an approach to allow brokerage firms to control their customers’ experience with the company,” said Stuart White, RealTracs’ CEO, in a statement.

“It is a pro-consumer approach that also meets the needs of our customers, the brokerage firms.”

If degrading syndication feeds is a pro-consumer approach, because it allows a closer relationship between consumers and REALTORS… wouldn’t we need to see prices for real estate services drop in RealTracs’ area compared to the non-degraded areas?

Here’s why I ask that: Antitrust Guidelines for Collaboration Among Competitors.

That’s the guide published by the Federal Trade Commission in 2000. In it, the FTC goes over a whole variety of issues when competitors end up collaborating in some way or another. But the overall thrust of the guide, as well as specific guidance in how the FTC analyzes something as anti-competitive or not, is that the FTC looks mostly to whether the collaboration among competitors lead to lower prices for consumers.

Obviously, there are dozens of factors that the FTC or a judge might look at when doing antitrust analysis. But the main goal of fostering competition is lower prices.

Seems to me that the real estate industry’s take on what is “pro-consumer” and “pro-competition” (such as NAR’s argument that Article 16 of the Code of Ethics is pro-competitive) centers around fostering a closer relationship between consumer and REALTOR, and control over that relationship. The industry’s take often mentions accuracy, fiduciary duty, ensuring proper representation, etc.

The one thing the industry never talks about is lower prices for consumers. But wouldn’t that have to be the case if the rules and regulations of the industry are to be defended?

In this case, wouldn’t there need to be a showing of some sort that limiting data sent to the portals results in lower prices for consumers? That somehow, by providing a competitive advantage to the larger firms with their direct feeds, the buyer or seller is paying less for brokerage services?

I don’t know… these are mere fancies of the mind right now.

But if the FTC or the Dept. of Justice comes knocking wanting to know how these and other policies that the industry claims are “pro-competitive” and “pro-consumer” have lowered the price of brokerage services over the last 10 years or so… what exactly can we point to?

We’ll have to touch on that more in future posts.

-rsh

EDIT/P.S.:

I spoke with Stuart White, CEO of RealTracs, directly this morning. Some of you may have seen his nonplussed comment. Well, we cleared that up; if there was misquotation or misattribution going on, it wasn’t me, as I simply quoted the Inman News story. If there is misattribution there, that’s between White and Inman News.

The relevant piece of information, however, was missing from the Inman News story.

White told me that there is no anti-trust issue with RealTracs at all because all of the national franchises and large brokers have voluntarily agreed to limit their feeds to the portals with whom they have direct feed relationships. I have not verified this yet, but if true, that would likely eliminate the anti-competition concerns. The small independents and the large brokers and the national franchises would all be on the same footing vis-a-vis the issue of completeness of data.

If an MLS is going to look to limit or restrict or eliminate its syndication feeds, it seems to me that this is likely the best approach: make sure that all participants are on the same competitive footing. I don’t know if that eliminates the risk of some unhappy broker bringing an antitrust claim, but it sure does minimize both the likelihood and the appearance of anti-competitive motivations.

Additionally, White said that RealTracs was in negotiation with ListHub (which powers its syndication) to allow all brokers the option to send the full data feed to portals they have selected. Simply by checking a box — or some similarly simple step — a brokerage can have all of its listings sent without limitations to websites it chooses. The MLS, via ListHub, would continue to provide the data transport services. As White put it, “It’s their data; they can do what they want.”

My overall analysis stands, that if an MLS restricts its data feed, it has to deal with the differences between small and large brokerages (and national franchises). But in the case of RealTracs, based on this new information, I don’t see the risk.