Pope v. Mississippi REC: Fifth Circuit Reviews REALTOR® Trademark Protection and Whether Required Membership Is an Unreasonable Entry Barrier to MLS

In Pope v. Mississippi Real Estate Commission, the Fifth Circuit applied the Rule of Reason Test to determine that membership fees based on the number of agents within a real estate agency did not establish an unreasonable entry barrier to the MLS operated by the Board of REALTORS®.

Pope operated a real estate agency in Amory, Mississippi. At one time, he was a member of the Monroe County Board of REALTORS® (Board) which operated an MLS within the county. In 1981, Pope withdrew from the Board allegedly because it changed its membership fee schedule and increased the dues owed by his agency. Historically, the Board assessed dues on an equal, per member agency basis. However, this practice violated the Board's charter which provided for assessment due to the number of agents within an agency. When Pope's agency grew to the point that he employed half of the county's agents, the Board began to enforce per agent fees. Despite the fact that Pope's agency had only one vote on Board affairs, it was asked to pay nearly half of the total dues collected by the board. Pope refused to pay higher dues and left the Board.

About the time Pope resigned from the Board, a cooperative listing service was formed. In 1984, the service merged with the Board and became the MLS. Pope was not permitted to participate in the MLS because he was not a Board member. Pope was also forbidden to use the term "REALTOR®" to describe his operations because he was not a member of the Board or NATIONAL ASSOCIATION OF REALTORS®. Pope sued the Board and several other defendants under federal and state antitrust claims alleging that they boycotted his agency by refusing it access to the MLS and by refusing to allow the agency to use the term "REALTOR®" unless he once again became a Board member.

The Fifth Circuit first addressed the applicable standard of review. In holding that the Rule of Reason Test would apply, the court stated "if properly administered, membership requirements serve pro-competitive purposes," and "the Board's activities were not 'plainly anti-competitive' and lacking in 'any redeeming value.'" Thus, application of the harsh "per se" rule was avoided.

The Rule of Reason Test weighs the anti-competitive effects on competitors and consumers against the benefit of the practice involved. The Fifth Circuit stated that MLS membership dues that are reasonably related to expenses and to recouping costs of the MLS are reasonable. Pope argued that under the current fee schedule, if he rejoined the MLS he would be forced to carry the majority of the Board's financial burden. In holding that the new fee schedule was reasonable, the court said "if the fee schedule poses any barrier to the MLS, it discourages the entry of large agencies, who will pay a greater share of the costs because they employ more agents. Such a schedule is not a barrier, however, because it is imposed only upon the firms employing the most agents who presumably will make the greatest use of the MLS." The court further stated "at the time Pope resigned from the Board, he employed nearly half of the agents in the county and controlled approximately half of the real estate market. Under such circumstances, it is patently reasonable for Pope to be assessed half of the cost of running the MLS." Because the membership rules were found to be reasonable and properly administered, the court's conclusion also permitted the Board to exclude from MLS participation those who chose not to become members pursuant to those rules.

Pope v. Mississippi Real Estate Commission, 872 F.2d 127 (5th Cir. 1989).