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An Iowa court has ruled in favor of a large brokerage firm, Iowa Realty Company, Inc., First Realty, LTD., the parent corporation of both of them ("Iowa Realty"), and also the Des Moines Area Association of REALTORS® ("Association"), on a variety of antitrust allegations brought by Next Generation Realty, Inc. ("Next Generation"), a primarily flat-fee broker operating in the area, and Homebuyer's Consultants ("Homebuyer's"), an exclusive buyer's representative firm which was affiliated with Next Generation.
Next Generation and Iowa Realty are both brokerage firms operating in the Iowa area. Next Generation operates its business using primarily a flat-fee model (consumers are charged a one-time flat fee for selling the home), whereas Iowa Realty uses a traditional brokerage model (commission is based on the home's selling price). Homebuyer's was started in 1998 and went out of business that same year. Evidence gathered during the course revealed that Iowa Realty had approximately 70% of the real estate listings for the Des Moines area, while Next Generation had approximately 2.5%.
Both Next Generation and Iowa Realty participated in the multiple listing service offered by the Association ("MLS"). Next Generation listed property for a flat fee, and accepts both “office exclusives” as well as listings that are submitted to the MLS so that other MLS participants have the opportunity to earn a fee by marketing and selling them. Under an office exclusive listing, only Next Generation may sell the home and earn a fee. The flat fees charged to consumers by Next Generation are generally lower than those charged by other brokers, in part because, with respect to the office exclusive listings of Next Generation, no cooperative fee is offered or paid to another MLS participant in connection with sale of the property. Almost all of Next Generation's listings – upwards of 95% - are office exclusives.
Because Next Generation took most of its listings on an office exclusive basis, and thus did not offer a commission on the sale of such properties to other MLS participants, Iowa Realty and First Realty adopted a policy of not offering to Next Generation any cooperative commission on the sale of their listings by Next Generation. Next Generation sued both Iowa Realty, First Realty, and their corporate parent, claiming that such refusal to offer to share commissions on the sale of Iowa Realty and First Iowa listings violated the antitrust laws.
The MLS had a policy of requiring submission to the MLS within 48 hours not only listings offered through the MLS to other participants, but also any office exclusives that the participants held out of the MLS. MLS imposed a fee for placing a listing into the MLS of $6/per listing, while in 2000 the MLS imposed a fee for submission of office exclusives of $35/per listing. The MLS collected the office exclusive data so that it could advise members that a property was listed on an office exclusive basis. The MLS claimed that the difference between the two fees was justified because of the administrative burden on the MLS staff to review local papers to verify that all office exclusives were being properly reported to the MLS. The MLS stated that an office exclusive reporting requirement had been in its MLS rules since the 1970s, and that all office exclusives were required to be reported to the MLS within 48 hours of a participant taking an office exclusive listing.
In March 2000, the Association's Board of Directors distributed a notice to all MLS participants that on April 15, 2000, the MLS would begin enforcing the rule imposing a fee on submission of office exclusives. Next Generation met with the Association to discuss the office exclusive policy, and Next Generation agreed to turn over all office exclusive listings twice per week. However, the Association determined in May 2001 that Next Generation was not properly reporting all office exclusives and so Next Generation was fined $20,160.00 for unpaid office exclusive listing fees. In July 2001, the Association sent a letter to Next Generation informing it that if the unpaid fees were not paid within ten (10) days, it could be terminated from the MLS. Ultimately, the Association suspended Next Generation's MLS access in September 2001, at which time the outstanding office exclusive listing fees amounted to $36,120.00. The Association sent a letter to Next Generation notifying them of the suspension and stating that if the amount remained unpaid for three months following the suspension, Next Generation's membership in the Association would automatically terminate, pursuant to the Association's bylaws. Next Generation did not pay the fees, and so its membership in the Association was automatically terminated in January 2002.
Following the Association's termination of Next Generation's membership, Next Generation added the Association as a defendant to its lawsuit against Iowa Realty and others for alleged violations of the state's antitrust laws. Among other things, the new claims in the lawsuit alleged that Iowa Realty entered into a conspiracy with the Association to deny Next Generation membership in the Association. Prior to trial, Iowa Realty and the Association filed motions with the trial court seeking entry of judgment in their favor.
The Iowa District Court for Polk County entered judgment in favor of the Association and Iowa Realty. The provisions of Iowa's antitrust law are intended to mirror those of the Sherman Act, which are the federal antitrust laws. The court first considered whether Next Generation had standing to bring an antitrust lawsuit. "Standing" is a judicially-created doctrine which requires a party to show that it has a sufficient stake in the case outcome before it can proceed in the lawsuit. In an antitrust case, a party must also show that it has suffered an "antitrust injury" in order to have standing to bring such a lawsuit. An antitrust injury is a showing that the alleged conduct had an anticompetitive effect in the relevant market. The court found that neither Next Generation nor Homebuyer's had suffered an antitrust injury because there was no showing that their services were excluded from the marketplace. Instead, the court found what was being alleged as an antitrust injury simply reflected a business disappointment by the two companies, which is not actionable under the antitrust laws. Thus, the court ruled that Next Generation and Homebuyer's lacked standing to bring an antitrust lawsuit and so judgment was entered by the court in favor of the Association and Iowa Realty.
Even though the court concluded that Next Generation had no standing to maintain this antitrust suit against the defendants, the court nevertheless went on to consider the validity of the allegations made by Next Generation and Homebuyer's, all of which the court ruled were legally insufficient. The court considered the various conspiracy allegations. One conspiracy allegation centered around the alleged boycott by Iowa Realty for refusing to pay a cooperative fee to Next Generation and Homebuyer's. The court found no support for these allegations, holding that Iowa Realty could not, as a matter law, conspire with itself. The court also found no evidence that the Association played any role in this alleged boycott, as the Association's own bylaws prohibited it from interfering with the division of commissions between MLS participants.
The court also considered the alleged conspiracy between the Association and Iowa Realty to exclude Next Generation from the Association and its MLS. In support of its allegations, Next Generation claimed that an election held in the fall of 2001 by the Association had placed Iowa Realty firm members in the majority on the Association's Board of Directors, who then expelled Next Generation from the MLS. The court found no support for these allegations, as there was no evidence that the Association had taken any actions to further this alleged conspiracy and also all of the actions which lead to the expulsion of Next Generation from the MLS had occurred prior to the election held in the fall of 2001, when there was not a majority of Iowa Realty directors on the Board. Thus, the evidence did not support these conspiracy allegations made by Next Generation.
Another conspiracy allegation considered by the court was the allegation that Iowa Realty and the Association conspired to fix prices by excluding Next Generation from the MLS. As stated above, the court stated that there was no evidence that the Association was involved in setting commission rates nor did the Association exercise any control over the listing of property or the sharing of commissions by its participants. Next Generation and Homebuyer's argued that Iowa Realty's refusal to pay a cooperative fee to them as well as the Association's $35 office exclusive fee was attempt to stabilize commission rates. The court rejected this argument, finding that Next Generation and Homebuyer's policies had no impact on other MLS participants' ability to collect and receive commissions, since Next Generation only placed a few of its listings into the MLS and Homebuyer's placed no listings into the MLS. Because only rarely were they offering compensation via the MLS, there was no impact on other MLS participants' ability to set commission rates. Therefore, the evidence did not support the alleged price fixing conspiracy.
The court also rejected the argument that the MLS constituted a vehicle for the MLS participants to exchange price information with each other, resulting in illegal price fixing. The court found no evidence that the MLS set a minimum fee or set commission rates, nor did the evidence support allegations that the information received through the MLS caused participants to charge a certain commission rate. The court also rejected the argument that Iowa Realty violated antitrust laws as a monopolist by refusing to pay a cooperative fee to Next Generation or Homebuyer's salespeople, because there was insufficient evidence to support the argument that Iowa Realty had attempted to monopolize the market. Thus, the court not only ruled that Next Generation and Homebuyer's lacked standing to bring an antitrust lawsuit but also that all of their allegations against the Association and Iowa Realty failed and so judgment was entered in favor of the Association and Iowa Realty.
Next Generation, Inc. v. Iowa Realty Co., No. CE 38825 (Iowa Dist. Ct. Feb. 18, 2003). [Note: This opinion was not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion.]