Competition Is Not Tortious Inteference

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A brief note this Saturday morning…

Conversations around my last post, about FTC taking action on anti-competitive Code of Ethics provisions, have raised an interesting and salient point. The best example comes from the comments, where Brian Rayl writes:

Despite what the FTC states in terms of “soliciting other’s clients” there are very strict laws – federal laws – that prohibit interfering with a contract.

http://en.wikipedia.org/wiki/Tortious_interference

If someone is going down a list of new listings and contacting them with the intention of damaging the contractual relationship, they are guilty of tortious interference. I’m not sure why the FTC would require the code of ethics to allow this when the federal government doesn’t? What are your thoughts on that?

My thoughts are that tortious interference with contract requires a tort. Obviously, what is about to follow is legal mumbo-jumbo, which I do for fun as a blogger with a law background. Please consult your own attorney or counsel; this is not legal advice.

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The NAR Code of Ethics is Illegal (Probably)

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I got a heads-up from a source, which then led me to investigate further, and… unless there’s something I am missing, the NAR Code of Ethics is (probably, in all likelihood) illegal as it stands today. It will need to be rewritten.

News from federal regulators rarely make the front page. In fact, they rarely make any page of any newspaper unless it’s a Really Big Deal, and few regulatory actions are that. But… last month, the FTC (Federal Trade Commission) entered into a consent decree with the National Association of Residential Property Managers that should be sending shockwaves throughout the ranks of REALTOR Associations.

From the official Press Release:

The FTC’s complaint against NARPM, which represents more than 4,000 real estate managers, brokers, and agents, alleges that NARPM and its members restrained competition in violation of the FTC Act through provisions in its code of ethics that restrict comparative advertising and solicitation of competitor’s clients. The provisions read, “The Property Manager shall not knowingly solicit competitor’s clients,” and “NARPM Professional Members shall refrain from criticizing other property managers or their business practices.”

The proposed consent order settling the FTC’s charges requires NARPM to stop restraining its members from soliciting property management work, and from making statements that are not false or deceptive about a competitor’s products, services, or business or commercial practices. NARPM also must implement an antitrust compliance program, among other things.

As all REALTORS know (or should know, if they are members of NAR, and therefore subject to the Code of Ethics), those two provisions are exactly equivalent to the Code of Ethics Article 16 and similar to Article 15.

Given the similarities involved in the NARPM case and as-yet-unfiled NAR case, I assume the only issue will be whether NAR proactively changes its Code of Ethics, or waits for the FTC to file a complaint. But as it stands today, the Code of Ethics is an illegal violation of anti-trust laws.

A quick dive into the issue…

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Notorious POD: Episode 11 — Kathy Dryden of Allre.com

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Wow, it’s been a long time, eh? I apologize for the lapse, but as I sort of explain in the podcast itself, I’ve been busy, and there hasn’t been that much going on that makes me want to record one of these.

But… that’s changed with the introduction of Allre.com, a new startup based in San Diego, CA, that really, actually wants to disrupt the industry. Here’s the video presentation from TechCrunch Disrupt:

 


The initial reaction from real estate folks has been… as expected. Just check out the comments to that TechCrunch post above.

I figured, rather than slinging mud, maybe we should get to know the company a bit better, so I asked Kathy Dryden, the Founder & CEO, for an interview. And she granted it. So this episode is about Allre, about disruption, and about my thoughts and opinions based on our conversation.

Many thanks to Kathy for the interview, and for agreeing to reschedule them a couple of times, despite the thousands of emails in her inbox, and a zillion things to do after the TechCrunch debut.

Thanks!

-rsh

Listhub Acquires Point2; I Think of TS Eliot

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[EDIT: Please see the clarification posted below.]

I’ve been hearing rumblings about a big game-changing deal for a couple of days, and this morning, it’s been confirmed. Listhub, a Move entity, has acquired Point2 from Yardi, bringing all listings syndication in the United States under one roof.

From Celeste Starchild, General Manager of Listhub:

Move has acquired the Point2 U.S.-based syndication business to further our shared vision of delivering a single listing aggregation, storage and distribution service.  As one of our key partners, we wanted to make sure that you were among the first to hear this good news.

Point2 realized the benefits to the industry of having a single platform, and ultimately worked with ListHub to help bring it to fruition.  The ListHub vision is to provide the industry with a single platform to improve data synchronization between systems, organize appropriate data licensing provisions for participants, and solve for the fragmentation and duplication of efforts that occurs throughout our industry today. Combining the Point2 and ListHub technologies into a single platform is a giant leap forward in reaching these goals.

Benefits to the industry of the single platform include:

  • Better access to listing data for thousands of brokers and franchises who operate across multiple MLSs
  • Increased accuracy for online listings, as agent-entered listings will be transitioned to MLS-connected solutions wherever possible
  • Enhanced customer service to the industry through a single help desk
  • Ability to better measure the results of online marketing across sites and across MLS markets 
  • Leading data protections for all brokerages through ListHub’s comprehensive publisher agreements
  • Ability for software and website technology companies to focus efforts on innovation for REALTORS®, not managing data from multiple sources

How will the acquisition work?

  • The ListHub platform technology will be provided to all of Point2’s previous MLS customers (in the U.S.)
  • ListHub and Point2 will work collaboratively with each MLS to cutover all of Point2’s U.S. based MLS customers to ListHub over the next six months.
  • The MLS-connected Point2 syndication service will operate unchanged for each MLS market during the period prior to their ListHub cutover date to ensure no disruption in service.
  • Once an MLS market is transitioned, the Point2 syndication service will cease operations.

NOTE: While it’s nice of Celeste to say I am a “key partner”, I assume this was a blast email that went out to their actual key partners. :) As the main thing I partner with Listhub on is karaoke with their people, I doubt the phrase applies to me.

In any event… a couple of thoughts.

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So, About This “Our Listings” Business…

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I saw a post on a Facebook group that references this Inman News story about Zillow having no plans to raise prices. The Facebook author (Miriam Bernstein) thought the key graf from the story was this:

“As long as we’re partners in success, we’re happy,” Liniger [CEO of REMAX] told Rascoff in front of the audience of approximately 1,000 Re/Max broker-owners, predominantly from the U.S. and Canada. “If we become competitors (if Zillow starts making moves as a real estate firm rather than a media company), you won’t get any more of our listings.”

“I hear you loud and clear,” Rascoff said. [Emphasis mine]

Then of course, like most things on Facebook, the rest of the commentary quickly dissolved into various “I R Hate da Zillow” stuff. But that phrase by Dave Liniger makes me wonder about something.

When Liniger says “our listings”… what exactly does he mean by that?

I mean, yes, I understand that it’s a figure of speech referring to the feed that REMAX corporate, the franchise company, sends to Zillow. So if Zillow pisses REMAX off, REMAX will stop sending that feed. Okay, that’s obvious. But we hear brokers and franchise leaders say these types of things — our listings, our data, our, our, our — all the time.

Three reasons why I’m asking.

1. REMAX is a franchise; its customers are brokerages. It has no copyright or ownership over any listing of its franchisee brokerages (unless such a thing is written into the franchise agreement, which it may be).

(If the answer is, Yes, those copyright assignments do exist, then my followup question is whether every franchise has such assignments, and if they do, whether those are nonexclusive licenses or actual transfer of ownership. But now we’re entering legalese land.)

2. Even if such an assignment did exist, we have the Edina Realty issue. No one denies that Edina Realty is a brokerage, with full copyright ownership over all of its listings. We also know that Edina pulled out of syndication a couple of years ago. But roughly 50% of its listings are still on Zillow, because Edina agents can choose to post listings themselves. Allowing agents to make that decision is actually Edina’s policy.

Does REMAX have more control than the actual brokerage does?

3. Perhaps the usage of “our listings” here means something like: “We have so much influence over our franchisees and their agents that they will do what we tell them to do.”

In fact, think of the issue this way: imagine for a moment that every single agent and broker affiliated with REMAX decides not to advertise their listings on Zillow. It seems obvious that REMAX corporate could not still keep sending a feed to Zillow. Those listings are not “ours” to send over the objections of the agents and brokers, who actually own and control the listing, right?

So… I’m inclined to think that the actual translation of that phrase is #3: REMAX has so much influence over its brokers and agents that they will do what REMAX tells them to do. It isn’t so much that Dave Liniger decides one day to kill the feed to Zillow, and overnight, every REMAX listing would disappear. No, rather, it must mean that REMAX is so influential with the brokers and agents affiliated with REMAX that they would cease advertising on Zillow.

If this is the correct interpretation, then there are all kinds of odd dichotomies in our industry. Because on the one hand, it seems that brokers and franchises exercise so much influence that they can direct listing agents to send or not send listings to one website or another. On the other hand, how often do we hear brokers saying they can’t get agents to show up to training, or take better photographs of listings, or stay in touch with past clients, or return phone calls promptly, or… well, a hundred other things… because the agents are 1099 independent contractors?

Do brokerages and franchises exercise enormous influence on agents or do they not? Do they, in fact, more or less control those agents or do they not?

These are the times when I feel like this industry suffers from multiple personality disorder. Either REMAX (and other brands and big brokerages) exercises such control, in which case many of the ills of the industry that’s all over Raise The Bar and elsewhere can be laid at their feet, or they do not have such control, because agents are independent contractors who don’t have to listen to the broker or the brand, in which case this talk of “our listings” seems a bit overblown.

But it can’t be both… can it?

So which way do you lean? Do they have control? Or do they not have control?

-rsh