HousingWireHousingWireThe Department of Justice could be ready to square off again with the National Association of Realtors — this time over an optional rule to prevent commingling of MLS and non-MLS listings. (Image generated by AI in Midjourney)
The Department of Justice and the National Association of Realtors (NAR) are currently locked in what may be the culmination of a decades-long battle over a variety of NAR’s policies and rules.
DOJ seemingly succeeded via proxy with the Sitzer/Burnett suit in changing the structure of real estate agent commissions. And by being allowed to reopen its investigation into NAR, the DOJ has redirected its focus on NAR’s Clear Cooperation Policy and its optional no-commingling rule, which is at the center of REX Real Estate’s lawsuit against NAR and Zillow.
But while clear cooperation is a relatively new policy, first implemented in 2020, the origins of NAR’s optional no-commingling rule are a bit murkier.
Real estate and the dawn of the internet era
Prior to the advent of the World Wide Web, for-sale listings were published in a hard-copy MLS book, which was not allowed to leave the broker’s brick-and-mortar office. “All of the books said they were confidential and not to give them away,” said Saul Klein, the current CEO of San Diego MLS.
In 1995, Klein was hired by Realtors Information Network (RIN), a wholly owned subsidiary of NAR, as a consultant to figure out how the real estate industry could utilize the newly released World Wide Web. This effort eventually became Realtor.com, which at that point was owned by RIN. First, however, Klein had to convince MLSs and brokerages to put listings online in the form of virtual office websites (VOWs). But brokers were reluctant.
“Brokers were afraid of something called public access to MLS,” Klein said. “They were afraid because there were entities that were saying that all listing information should be available to everyone. But brokers paid money to be part of the MLS, and if the data was going to be available to everyone for free, it would erode the value proposition of the MLS.”
Klein was then tasked with convincing brokerages and MLSs to put their listings on the internet.
“But nobody wanted to put their listings on the internet if other people were going to be able to put their listings on their internet and benefit from the critical mass of listings,” Klein said. “So, one of the things that I promised in my presentations was that there would be no for-sale-by-owners, because if you wanted to sell your property yourself and there was a website with all the listings, everyone would just start listing their homes on the site themselves, because they could benefit from the critical mass of listings without belonging to the MLS.”
It was out of this informal promise that NAR’s optional rule of not mixing, or “commingling,“ MLS and non-MLS listings was born.
“We as an industry didn’t think it was fair to allow people who weren’t paying to put all this information together to be able to tag along and benefit from the traffic we were able to create from our hard work,” Klein said.
Round one with the DOJ
According to an antitrust lawsuit the DOJ filed against NAR in September 2005, the hesitancy and suspicion some brokers expressed over moving MLS listings online led to the creation of NAR’s “Initial VOW Policy.”
In its suit, the DOJ claimed the policy restrained “competition from brokers who use the Internet to more efficiently and cost effectively serve home sellers and buyers.”
According to the second amended complaint, NAR had policies in place at the time that discriminated against brokers who “operate secure, password-protected Internet sites that enable the brokers’ customers to search for and receive real estate listings over the Internet.”
The DOJ claims that NAR developed regulations for VOWs, which the head of the working group recommended NAR should adopt quickly because “browsers operating VOWs were ‘scooping up market share just below the radar.’” Additionally, some brokerage executives expressed concerns that VOWs could drive down agent commissions.
According to the DOJ, these concerns led NAR to adopt its Initial VOW Policy, and eventually its Modified VOW Policy, which the trade group promulgated after the DOJ informed NAR of its intent to sue.
In the complaint, the DOJ states that the policies “significantly alter the rules governing multiple listing services,” and that they may allow brokers to withhold sellers’ listings from VOW operators by giving them the right to opt out of digital marketing.
In doing so — which the DOJ alleges brokers do without the expressed consent of sellers — the DOJ claims traditional brokers “block the customers of web-based competitors from using the Internet to review the same set of MLS listings that the traditional brokers provide to their customers” through a hard-copy listing book kept in the broker’s office.
Prior to either of the VOW policies going into place, NAR “did not permit any broker to withhold his or her clients’ listings from a rival.” But the new opt-out feature in the VOW policies made it possible to keep or hide listings from internet-based firms.
“When exercised, this provision prevents a broker from providing over the Internet the same MLS information that brick-and-mortar brokers can provide in their offices,” according to the DOJ’s amended complaint.
The department also noted that the policy exempted Realtor.com (which was still owned by RIN) from the opt-out provisions.
After nearly three years of litigation, the DOJ and NAR reached a settlement in May 2008. As a result, NAR agreed to implement yet another Modified VOW Policy. The policy went into effect in November of that year after receiving final approval from U.S. District Court Judge Matthew F. Kennelly. In his final ruling, Kennelly noted that as part of the settlement, NAR had agreed that it could not change the policy “without either obtaining advance written approval by the United States Department of Justice Antitrust Division or an order of the Court.”
Included in the modified policy is Section 19.23, which reads: “A Participant shall cause any listing displayed on his or her VOW obtained from other sources, including from another MLS or from a broker not participating in the MLS, to be searched separately from listings in the MLS.” The policy notes that the rule is optional and adoption is “at the discretion of the MLS.”
A similar optional policy, which was last amended in May 2017, was later added to the NAR Handbook on Multiple Listing Policy. Section 18.3.11 states: “Listings obtained through Internet Data Exchange feeds [the successor of VOWs] from Realtor Association MLSs where the MLS participant holds participatory rights must be displayed separately from listings obtained from other sources.”
With these rules, NAR cemented an optional but long-held custom of not commingling MLS listings with listings obtained from non-MLS sources, such as for-sale-by-owner or builder listings. Additionally, based on the DOJ signing off on the Modified VOW Policy in 2008, the department — at least at one point in time — was OK with the rule.
Since then, however, the DOJ’s stance has clearly changed.
Friends in the REX suit
In June 2024, the DOJ filed an amicus curiae brief with the Ninth Circuit Court of Appeals, which is overseeing REX’s appeal of its antitrust suit against NAR and Zillow. After losing at trial in September 2023, REX filed a motion for a new trial in November. In its request, REX argued that it was unfairly prevented from presenting testimony about agent commissions to the jury. Judge Thomas Zilly, who oversaw the original trial, denied REX’s request for a new one.
At the center of the suit was Zillow’s decision to put non-MLS listings, which included those of now-defunct discount brokerage REX, on a different section of the website. REX alleged that Zillow was engaging in false advertising by doing this.
Zillow created its two-tab design, with one tab displaying MLS listings and another showing non-MLS listings, after the listing giant became a brokerage member of NAR so it could gain access to Internet Data Exchange (IDX) feeds to display MLS listings on its site. Some of the MLSs that Zillow belonged to had the no-commingling rule in place, so the firm was forced to comply.
In its amicus brief, the DOJ argued that the district court relied on the optional nature of the rule — and the lack of an enforcement mechanism by NAR for MLSs to adopt the rule — to reach its conclusion that there was no concerted action by Zillow, NAR or the MLSs.
“But the court failed to consider other factors — such as NAR’s role in promulgating the rule to segregate listings and prohibiting modifications by MLSs adopting the rule, the effect of an MLS adopting the rule of making it mandatory on its members, and MLSs’ role in enforcing the rule on their members — that suggest that NAR proposed a common plan to MLSs and their members to segregate and demote non-MLS listings,” the filing states.
“If uncorrected, the district court’s incomplete approach creates a risk that associations like NAR could evade antitrust scrutiny for many anticompetitive schemes by using optional rules.”
Despite its beliefs that concerted action may have occurred, the DOJ states that Zillow was not a part of the rule at its formation. But the DOJ also said that Zillow “allegedly joined this common scheme when becoming a member of NAR and affiliated MLSs and complying with the no-commingling rule despite being opposed to it.”
The DOJ concluded its brief by recommending that the Ninth Circuit overturn Zilly’s ruling and reopen the case for further review at the district court level. The appeals court must still rule on REX’s appeal.
In addition to filing its amicus brief in REX’s appeal for a new trial, multiple sources have confirmed to HousingWire that the DOJ has sent Civil Investigative Demands (CIDs) to at least 10 MLSs across the country as it looks into the optional no-commingling rule.
In an email sent to members in mid-August and obtained by HousingWire, NAR said that it is “engaged with DOJ in discussions on data commingling and other real estate industry practices.”
“As President [Kevin] Sears recently shared, NAR Leadership met with leadership at the DOJ Antitrust Division in July, including Assistant Attorney General for Antitrust Jonathan Kanter,” the letter states.
NAR would not elaborate on the contents of the letter, which was written by Katie Johnson, the trade group’s former chief legal officer, but it did confirm the authenticity of the email.
From quiet to contentious
The attention by the DOJ to this optional rule has thrust it into the spotlight and made it a point of contention for some. Klein of the San Diego MLS is one of the few folks who will talk openly about his support for the no-commingling rule.
“There is a long history of how this happened. This wasn’t some insidious things that people did — this made total business sense,” Klein said. “If you are a content provider, which these brokerages are to the MLSs, you want to protect the content that you provide and you want to use that content to your advantage. Today, one way or another, content providers on the internet are typically compensated in some way, and one way to do that is protecting the content they provide.”
Zillow, on the other hand, as it has said multiple times throughout its legal battle with REX, does not support the optional rule. Since 2021, Zillow has submitted four requests to NAR asking the trade group to eliminate the rule.
“Fundamentally, it comes down to the fact that we believe in transparency in real estate,” said Errol Samuelson, Zillow’s chief industry development officer. “We think that consumers should have access to all of their housing options in one place and that they should be able to see their options side by side.”
In a 2023 consumer survey, Zillow found that 91% of buyers believe they should be able to see all of their housing options for free and without barriers in a single spot. Samuelson said he believes good agents and brokers feel the same way.
“If you are working with a buyer, you want to make sure that they are aware of all of their options,” Samuelson said. “If the buyer comes to you with a listing that suits them and asks why you didn’t show it to them, it can actually undermine the trust and your relationship.”
But Art Carter, CEO of the California Regional MLS, is indifferent toward the optional rule. CRMLS is one of the firms to never implement it.
“It has never been a touch point for our brokerage community,” Carter said. “I’ve never had someone call me up and ask why we don’t have it. It is just something that our board of directors, for whatever reason, when the policy was initially presented, they decided not to implement it.”
Carter said CRMLS reopened the discussion around the rule with membership about five years ago. The board ultimately felt that it was not something members wanted CRMLS to change.
“I don’t get why there is such heat around this right now,” Carter said.
As contention over the rule has increased in recent months, some MLSs have made the decision to rescind the optional rule. Bright MLS was one of the firms to make this change.
“It may have had some utility in the early days of the internet when there were concerns about how data was accessed and displayed,” said Rene Galicia, executive vice president of customer advocacy at Bright MLS. “These rules came around when IDX was in its infancy over 20 years ago and no one knew how the display of listings was going to evolve.”
While Bright MLS declined to elaborate in detail about the decision to remove the rule, Galicia noted that Bright regularly reviews rules based on subscriber feedback.
In contrast, REcolorado — which was the first MLS to rescind the rule — had a lot to say about its decision. In August 2022, when the rule was rescinded, it said the decision was based on the evolving role of the consumer in the real estate transaction due to improved technology.
“Through IDX websites, you can now find more listings — and be aware of properties that are not currently in the MLS,” REcolorado wrote in a blog post cited by Inman News. “You can also potentially increase your business by marketing your services to off-MLS sellers.”
Looking ahead, it remains unclear what the DOJ’s next moves will be in regard to the no-commingling rule. The DOJ’s antitrust division declined to comment on this issue and its recent actions regarding it. But regardless of what the future may hold, the DOJ has certainly succeeded in stirring up a discussion.
