I don’t have a lot of time, so this won’t be one of my normal lengthy speculations and such. Just a few questions.
In case you missed it, Inman reported on the PLS v. NAR lawsuit that was just dismissed with prejudice by the federal court. It’s a good piece of reporting, so go read the whole story. (Subscription is required).
The short summary is that the court found that Clear Cooperation might harm PLS’s business, but it does not harm competition in general and does not harm consumers.
Buried in the opinion — and thankfully quoted by Inman — is this paragraph from the opinion:
“Basic economics dictates that increased information about market conditions stimulates more competition among real estate professionals, whose goal is, at least in part, to match a buyer and a seller as quickly and efficiently as possible. This effect minimizes transaction costs. Consumers also have access to more information regarding market conditions, enabling them to make better informed choices about the bundle of real estate brokerage services that will best serve their needs.”
I have a few questions.
The Paragraph in Context
First, let’s put this paragraph in greater context from the opinion itself (you can find the opinion here):
The Clear Cooperation Policy requires listings that are publicized by a member of an NAR-affiliated MLS to be reciprocally listed on an MLS for exposure to other MLS members. This means that all MLS members have access to information about listings that are publicly marketed by other MLS members, which ultimately promotes competition among real estate professionals and home sellers and buyers. Basic economics dictates that increased information about market conditions stimulates more competition among real estate professionals, whose goal is, at least in part, to match a buyer and a seller as quickly and efficiently as possible. This effect minimizes transaction costs. Consumers also have access to more information regarding market conditions, enabling them to make better informed choices about the bundle of real estate brokerage services that will best serve their needs.
Although the Clear Cooperation Policy may harm PLS by discouraging the use of PLS’s platform, that injury to PLS’s business model does not translate to consumer harm. Notably, PLS alleges that the Clear Cooperation Policy results in, among other things, listings being “removed from PLS and submitted instead to NAR-Affiliated MLSs.” Shifting sales to “other competitors in the market,” however, “does not directly affect consumers and therefore does not result in antitrust injury.” Pool Water Prods., 258 F.3d at 1036. Indeed, based upon this allegation (and others like it), it is evident that the Clear Cooperation Policy does not reduce the output of brokerage services to home sellers and buyers, nor does the policy reduce competition among the real estate professionals who provide services to consumers. Compare Cal. Dental Ass’n, 526 U.S. at 776–77 (no reduction in overall output of services to consumers), and Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 21–24 (1979) (to similar effect), with Sunday Ticket Antitrust Litig., 933 F.3d at 1155 (the challenged restraint plausibly reduced the overall output of services to consumers by restricting games available for viewing). [Emphasis added]
So, the court’s reasoning is that Clear Cooperation leads to more people having access to information, which minimizes transaction costs, and allows consumers to make better choices about the “bundle of services” that will best serve their needs. Furthermore, just because PLS got screwed doesn’t mean the consumer got screwed. As long as “overall output of services to consumers” (and one assumes, overall price of services) is unaffected, there is no antitrust case to be made.
This is a big win for NAR and the MLSs, no doubt about that. Or… is it?
So here are my questions.
- Does greater information within the MLS lead to lower transaction costs? The commission lawsuits of Moehrl and Sitzer and Leeder argue otherwise.
- Is it me or is the court placing a lot of importance on “consumer access to more information regarding market conditions”?
- What is this “bundle of real estate brokerage services” that the court is referring to? All of those business models that offered to unbundle services died out, as far as I know.
- If we think through the “shifting sales to other competitors does not affect consumers” thing… is this really a big win for the MLS?
In connection with #4, the court also said (with emphasis in the original), “Accordingly, PLS must allege a plausible injury to both home sellers and home buyers, which it has not done.”
Then note that in footnote #87 (which Inman quoted), the court says:
The office exclusive exception is significant. PLS alleges that the presence of large brokerages operating across the nation increased demand for a nationwide listing network. Surely, then, marketing a private listing within a large nationwide brokerage under the office exclusive exception provides significant exposure of the property in an off-MLS setting. This is important in evaluating whether the Clear Cooperation Policy has the plausible effect of reducing output of services to consumers. It does not. [Emphasis added]
So here’s question #5:
5. Is there an antitrust problem if 30% of the listings are office exclusives, and not in the MLS, as long as they are shared within a large nationwide brokerage (or a group of large nationwide brokerages), and there is no reduction in “overall output” to consumers? What about 50%? 80%?
Your thoughts, as always, are welcome.