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In a short and unpublished per curiam opinion, the U.S. Court of Appeals for the Sixth Circuit has upheld a lower court decision affirming multiple listing service's requirement that only members of a REALTOR® association could participate in the multiple listing service. Below is a summary of the trial court decision.
Buyer’s Corner Realty, Inc. ("Brokerage") is a real estate brokerage firm whose principal, Sherry Edwards (“Member”), is a member of the Northern Kentucky Association of REALTORS® ("Association"). The Northern Kentucky Multiple Listing Service (“MLS”) is a wholly-owned subsidiary of the Association. Only members of a REALTOR® association can participate in the MLS. The Association provides real estate services such as dispute resolution, code of ethics enforcement, education programs, legislative monitoring, and technology services.
The Member maintained that she held membership in the Association solely to obtain MLS access. After paying the allegedly unwanted membership dues for a number of years, the Member brought an antitrust lawsuit against the MLS and the Association claiming that they illegally tied Association membership to MLS services. The Member also claimed that conditioning access to MLS services on Association membership constituted a group boycott. Both parties filed motions with the trial court seeking judgment in their favor.
The United States District Court for the Eastern District of Kentucky ruled in favor of the Association and dismissed the Member’s lawsuit. The court considered whether the Member had standing to bring an antitrust lawsuit against the MLS and the Association. “Standing” is a threshold requirement which courts use to determine whether there is a sufficient “justiciable” controversy for the court to resolve. Here, the court examined the Member’s lawsuit to determine whether she had demonstrated a sufficient antitrust injury. A party must show an antitrust injury that results either from the anticompetitve effect of the alleged violation of antitrust law or the anticompetitive acts made possible by the violation. The Member alleged that the antitrust injury resulted from “tying” Association membership to MLS access. The court considered whether the claimed harm constituted an antitrust injury.
“Tying” arrangements are a type of restraint which can violate the antitrust laws. In order to allege a tying violation, a party must demonstrate the following: (1) a tying arrangement between two identifiable products or services; (2) market power in the tying market to restrain competition in the tied product market; (3) a substantial effect on interstate commerce; and finally, (4) the tying company has an economic interest in the sales of the tied product. The Association and MLS argued that the Member had not demonstrated a sufficient antitrust injury because the Member had not identified any harm caused by the membership access requirement.
The court agreed with the MLS and Association that the Member had not demonstrated a sufficient antitrust injury. A tying arrangement only violates antitrust law if the arrangement itself forecloses a substantial volume of interstate commerce. The Member argued that requiring Association membership foreclosed MLS participants from joining other real estate associations. However, the Member failed to identify any competitors in the market for real estate services who were harmed by the membership requirement. The Member had joined the only other association identified by the Member as one she would like to join, namely the National Association of Exclusive Buyer Agents. Since the Member had not demonstrated that the tying arrangement harmed competition in any way, the court ruled that the Member had not shown an antitrust injury and so lacked standing to bring an antitrust lawsuit against the MLS and the Association.
As the Wisconsin court did in the case referenced above, the court distinguished the evidence in this case from Thompson v. Metropolitan Multi-List, Inc., 934 F.2d 1566 (11th Cir. 1991), where the Eleventh Circuit had found an unlawful tying arrangement between an association and a multiple listing service. In that case, the evidence showed that a competing association did offer services similar to the association "tied" to the multiple listing service and that hundreds of individuals would have joined the other association except for the tying arrangement. However, the Member had produced no such evidence in this case, as no competing associations had come forward to claim that they had been harmed by the tying arrangement.
Next, the court considered the Member’s argument that by requiring Association membership, the MLS foreclosed participants from joining other real estate associations, listing the following associations: National Association of Exclusive Buyer Agents ("NAEBA"), Massachusetts Association of Buyer Agents ("MABA"), The Appraisal Institute ("AI"), National Association of Real Estate Appraisers ("NAREA"), the Asian Real Estate Agent Association ("AREAA"), and the National Association of Real Estate Brokers ("NAREB"). Like the Reifert court, the court rejected these arguments because these associations were not in the same product market as the Association. While there were superficial similarities between all of the associations, such as having conventions and education programs, none of the various associations identified by the Member offered real estate services like the Association. NAEBA and MABA only have exclusive buyer agents as members. AI and NAREA only offer membership services to real estate appraisers. AREAA serves a distinct ethnic community and does not offer services which could be substituted for the Association's services. Therefore, the court ruled that the Member had failed to demonstrate that there was foreclosure in the market for the tied product and so the Member’s tying claim should be dismissed.
Finally, the court considered the boycott allegations. To advance her boycott allegations, a party must show that the membership rule has adverse impact on competition in the relevant market. As set forth above, since the Member had produced no such evidence, the court rejected this argument as well. Thus, judgment was entered on behalf of the Association and the MLS.
Buyer’s Corner Realty, Inc., v. N. Ky. Ass’n of REALTORS®, 410 F.Supp.2d 574 (E.D. Ky. 2005), aff’d, 198 Fed. Appx. 485 (6th Cir.(Ky.) 2006)