Federal antitrust authorities are entering a long-running fight between the National Association of Realtors and aggressive, Internet-based real-estate agents, who are challenging the industry’s grip on residential listings and its custom of charging a 6 percent commission on most home sales.
The National Association of Realtors, the powerful trade association for the nation’s real-estate agents, disclosed recently that the U.S. Department of Justice is examining its Internet policies. These include a contentious new industry rule that will give brokers the option of restricting Internet-based competitors from posting certain listings online. The rule was approved by the association last May and is scheduled to take effect Jan. 1.
Industry critics and consumer advocates have lambasted the new rule as anticompetitive. But traditional brokers say that putting too much information online could tilt the playing field in favor of low-cost, Internet-based companies that haven’t invested the time and money in compiling real-estate listings on their own.
The Justice Department confirmed that an investigation is under way. "The antitrust division is investigating the potential competitive impact of certain rules involving the display of residential real-estate listings data over the Internet," said Gina Talamona, a department spokeswoman.
The fight is another illustration of the way the Internet threatens to squeeze the profits of middlemen, such as real-estate agents, travel agents and car dealers, and the lengths to which established industries go to resist the competition that the Internet makes possible. For consumers, the Justice Department’s attention could result in downward pressure on real-estate commissions.
The question of how much control real-estate agents should have over their listings has long bedeviled the industry. Typically, agents seek out sellers to get listings, then pool those listings in local Multiple Listing Services, which are made available exclusively to other real-estate agents who pay a fee to join the MLS. To find out which properties are available for sale, consumers must seek out an agent who has access to the local MLS. The system dates back to the first MLS in Cincinnati in the 1880s.
Many thought all that would change with the advent of the Internet, but so far the Internet hasn’t had as big an impact as expected. Traditional real-estate companies often post condensed versions of their listings online, enabling consumers to do more research at home. But the listings generally don’t provide enough information for consumers to sidestep hiring an agent. As a result, most agents still charge the same commissions as before.
But a newer breed of competitors, including eRealty Inc. of Houston and zipRealty Inc. of Emeryville, Calif., have taken a different tack in recent years. Typically, these companies pay real-estate agents in individual markets to gain access to the local MLS. The online companies then post portions of the MLS listings on their own Web sites, undercutting other local real-estate companies by charging lower-than-usual commissions. Some traditional brokerage firms have responded by introducing discount, Web-based services of their own.
To clarify the rules governing such postings, National Association of Realtors leadership approved a rule in May affirming that online real-estate brokerages have the right to display property information obtained from local MLS services, as long as they fulfill certain minimum obligations. But the rule also included a much-debated provision allowing brokers and home sellers to withhold listings from online brokerages if they choose. The concept was supported by several big industry players, including Cendant Corp., which owns such brokerage companies as Coldwell Banker, Century 21 and ERA.
A traditional Realtor "goes out and finds the property, finds the sellers, puts the listing together, and markets it," says Steve Cook, a National Association of Realtors spokesman. Consequently, he says, a Realtor "has as much right over the listing as a newspaper has over its news stories. A news story is a newspaper’s stock in trade, and so is a listing for a real-estate broker."
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