At the 2013 Midyear Meetings of the Multiple Listing Issues and Policies Committee, revisions were approved to MLS Policy Statement 7.57—Categorization of MLS Services, Information and Products. These changes include an added ability, where permitted by law, for MLSs to charge basic dues, fees, and charges for services, information, and products that were previously identified as "optional." There are also changes about public-facing webpages.
Questions and answers about these changes:
Q1. How do the changes to MLS Policy Statement 7.57 adopted at the 2013 Midyear Meetings affect MLSs?
A. The changes to the policy accomplish two things:
- First, where permitted by law and subject to certain requirements and limitations necessary to comply with antitrust laws, MLSs may now include the cost of services, information, and/or products, which were previously categorized as exclusively “optional,” in basic MLS dues, fees, and charges.
- Second, the policy now expressly provides that MLSs may include the cost of establishing, maintaining, and promoting their public-facing websites in MLS dues, fees, and charges.
Q2. When did the changes to the policy become effective?
A. The changes became effective upon approval by the NAR Board of Directors on May 18, 2013.
Q3. Are MLSs required to establish public-facing websites?
A. No. Establishment of public-facing websites remains a matter of local determination.
Q4. If an MLS operates a public-facing website, must it display participants’ listings?
A. No. Display of participants’ listings on an MLS’s public-facing website is a matter of local determination.
Q5. If an MLS operates a public-facing website, can participants be required to display their listings on it?
A. No. MLS Policy Statement 7.85, Ownership of Listing and Listing Content, makes clear that decisions on where participants’ listings are displayed are determined by each listing participant.
Q6. If an MLS operates a public-facing website that displays participants’ listings, and a particular participant chooses not to display some or all of their listings on that website, can the costs of establishing, maintaining, and promoting that website be included in that participant’s MLS dues, fees, or charges?
A. Yes. With the recently approved change to the policy, MLSs may, as a matter of local determination, include those costs in the dues, fees, and charges of all MLS participants and subscribers.
Q7. If an MLS operates a public-facing website, can the costs of establishing, maintaining, and promoting that website be included in the dues, fees, and charges to participants who primarily or exclusively represent buyers? Is the same true for appraisers participating in MLS?
A. Yes. Please refer to the answer to Question 6 (above). It should be kept in mind that because MLSs may charge on this basis does not mean they must do so.
Q8. Can MLSs now include the costs of lockbox equipment (e.g. lockboxes, keys, programmers, fobs, software, etc.) in MLS dues, fees, and charges?
A. Yes. Pursuant to the amended policy, an MLS may include the costs of lockbox equipment where (a) permitted by law, and (b) provided the MLS does not receive an economic benefit from the arrangement.
Q9. Can other services, information or products be included in MLS basic dues, fees, or charges?
A. Yes. Other services, information, and products may be categorized as “basic,” provided they are substantially related to the purpose and function of the MLS. For guidance, the policy provides a number of examples of these types of services, information, or products, but the list is not intended to be exhaustive.
Q10. How is “substantially related to the purpose and function of MLS” defined? Are there specific factors MLSs should consider in determining whether information, services, and products are “substantially related to the purpose and function of MLS”?
A. As a threshold matter, it is important to understand why the policy requires the information, services, and products included in the basic service to be “substantially related to the purpose and function of MLS.” The policy has been structured, in part, to avoid running afoul of antitrust laws. Antitrust laws disfavor tying arrangements due to their anticompetitive nature. Tying is when a party selling one product does so on the condition that the buyer also purchase a second product or service. Tying is a per se violation of anti-trust laws, and once a plaintiff establishes the requisite elements, an illegal tying arrangement is found. The first element of a tying violation is that there are two separate products or services. If this element cannot be established, a plaintiff loses his or her claim. Therefore, any information, services, or products included in the MLS’s basic services must be substantially related to the purpose and function of MLS so the MLS has a strong argument that the information, services, and products are part of one product or service, rather than two, thereby avoiding a tying arrangement altogether.
The ultimate determiner of what “substantially related” means is a federal court judge. There is no definition of “substantially related,” and no case law addressing this issue. Consequently, MLSs need to be realistic about the purpose of MLS and include in their basic “package” only information, products, and services substantially related to the MLS’s purpose. In addition to the list included in the policy, a MLS may also consider what is included as part of the MLS’s vendor’s package. This will not necessarily be determinative, but may provide MLSs with another helpful tool in their evaluation of what is “substantially related.” MLSs should keep in mind that when the information, services, or products get too far afield from being substantially related to an MLS, the single product argument becomes diluted, and the MLS may risk violating anti-trust laws.
Q11. The revised policy now permits “optional services” to be included in MLS dues, fees, and charges, where permitted by law, provided that the MLS does not receive an “economic benefit” from the arrangement. Pursuant to the Policy, the following two conditions must be satisfied:
The MLS or its shareholder(s) is not the seller, lessor, or licensor of the information, service, or product (i.e. the information, service, or product is sourced from an independent third party); and
the MLS does not make a profit or receive a commission or rebate based on the sale, lease, or license that exceeds the operational costs of providing the information, service, or product.
Does that mean MLSs cannot purchase, for example, lockboxes and keys, programmers, software, etc., and then sell or lease them to participants and subscribers as part of a basic package of services, information, and products?
A. No. Take, for example, an MLS that includes lockboxes as part of the MLS’ basic service. The MLS may purchase a lockbox and then sell or lease the lockbox to participants and subscribers as part of the MLS’ basic service, provided that the MLS does not mark up the cost of the lockbox or receive a profit, commission, or rebate from the sale of the lockbox to the participant or subscriber. The MLS cannot seek to receive an economic benefit from the sale of the lockbox, and may only recoup any operational costs associated with providing the lockbox as a basic service of the MLS.
Q12. Assume (as discussed in Question 11) that an MLS sells or leases services, information, and products (including lockboxes) and includes the cost in the MLS dues, fees, or charges. If the MLS assesses dues, fees, or charges to cover the costs of, for example, lockbox equipment, but not every participant or subscriber uses lockboxes, the revenues the MLS collects may exceed the operational costs of providing lockboxes. What steps can MLSs take to avoid realizing an economic benefit from the arrangement?
A. An MLS could use historical data concerning the percentage of participants and subscribers that buy or lease lockboxes and build into the basic MLS dues, fees, or charges, the cost of providing the lockboxes based on this historical percentage. The MLS could also consider building in a small buffer to provide for anticipated increased usage now that the lockboxes are included as a basic service. Once this change is implemented, the MLS may want to do an annual assessment to adjust, as needed, the built-in lockbox charge based on the actual use of the participants and subscribers.
Q13. Is there a definition or explanation of what constitutes “operational costs”? Are there specific criteria or factors for MLSs to consider in determining the operational costs?
A. There is no definition of what constitutes “operational costs,” but an MLS should use its best educated judgment of what its operational costs are to provide the product or service to its participants and subscribers. Factors could include, but are not limited to, the cost of time and labor, shipping costs to receive or send the products, and any costs charged to the MLS by the vendor.
Q14. The answers above condition the ability of MLSs to include the costs of services, information, or products not ordinarily considered “substantially related to the purpose and function of MLS” in the basic dues, fees, and charges, but only where permitted by law. What are the states where this is not legally permissible, and why?
A. There are four basic elements of a per se tying violation. In addition to these four elements, the majority of federal circuits have adopted a fifth element requiring plaintiffs to establish that the seller of the tying product (here, MLS access) has an economic interest in the tying product (for example, a lockbox). If a plaintiff fails to establish this fifth element, which is known as the economic interest element, the tying claim will fail.
While a majority of states have included the economic interest element into a per se tying violation, the Second Circuit has expressly rejected the inclusion of the economic interest element. As a result, MLSs operating in the Second Circuit (Connecticut, New York, and Vermont) have been excluded from being able to take advantage of the policy change. In addition, while the First and the Eighth Circuits have not expressly rejected the inclusion of the economic interest element, there are no circuit court cases in these two jurisdictions expressly adopting inclusion of the economic interest element as a requirement of a per se tying violation. Therefore, MLSs operating in the First Circuit (Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island) and in the Eighth Circuit (Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota) have also been excluded from implementing this change to the policy. This information was current as of May 2013, and may be updated in the future to reflect any changes to the law in this area or in these states.
Q15. May MLSs in the First and Eighth Circuits continue to provide lockbox equipment to participants and subscribers?
A. Yes, but only as an optional service.
Q16. Does the policy impact whether associations of REALTORS® may include the costs of lockbox equipment and other optional products and services in the basic membership dues REALTORS® pay?
A. As of November 2014, the relevant policy addressing associations of REALTORS® (as distinguished from MLSs that are committees or wholly owned subsidiaries of associations) is Official Interpretation No. 32 of Article I, Section 2 of the NAR Bylaws, which which was amended to expressly allow associations, at their discretion, to include the costs of lockboxes and lockbox keys, programmers, fobs, smart cards, and other access devices in the association dues, including the costs of optional services or activities in board/association dues.
Note: These questions and answers are advisory in nature, have not been reviewed or approved by the Board of Directors of the National Association of REALTORS®, and may be updated from time to time.