By F. P. Maxson
In a victory for Realtor® associations and the MLSs they operate, a Wisconsin federal court has rejected a challenge to a requirement that only members of a Realtor®
association may participate in the multiple listing service.
It all started when Jay Reifert, a member of the Realtors® Association of South Central Wisconsin, claimed that he was not allowed to purchase services from the association-owned MLS without joining the association. Reifert then joined the association to receive MLS access. After four years of paying the membership dues, Reifert brought an antitrust lawsuit against the MLS, the association, and the association’s directors, claiming that they illegally tied association membership to the MLS. Reifert also claimed that conditioning MLS access on association membership constituted a group boycott.
The U.S. District Court for the Western District of Wisconsin ruled in favor of the association, the association’s directors, and the MLS, dismissing the member’s lawsuit. Here’s why:
Conditions for antitrust not met
First, the court found that in order to allege a tying arrangement in violation of the antitrust laws against the association and the MLS, Reifert also would have to allege: (1) that the association services were tied to the MLS; (2) that the MLS had sufficient power in the market to restrain competition in the real estate services market; (3) that the tying arrangement posed a substantial effect on interstate commerce; and, finally, (4) that the MLS had an economic interest in the sale of association memberships.
The association and the MLS argued that Reifert had failed to establish the third and fourth elements. Additionally, the parties argued that he had failed to demonstrate an antitrust injury.
No valid comparison to open MLS markets
Reifert produced expert testimony stating that between 19 percent and 24 percent of MLS participants would not have joined the local association if it weren’t for the tying arrangement. This finding was based on analysis of the Alaska and Massachusetts markets, where association membership is not required for MLS participation.
But the court stated that this was insufficient evidence. Simply showing that some customers had purchased unwanted services was not enough to establish that competition for similar real estate services was restricted in south central Wisconsin. The court also stated that Reifert’s expert evidence was flawed because the survey failed to account for unique market factors, such as population density.
Reifert argued that requiring association membership prohibited MLS participants from joining other real estate associations, such as the National Association of Exclusive Buyer Agents and the Asian Real Estate Agent Association, but the court found no evidence to back up his claims. Additionally, the court found that none of these other organizations offered the same services as the Realtors® Association of South Central Wisconsin.
Wisconsin case differs from previous cases
The court distinguished the evidence in this case from Thompson v. Metropolitan Multi-List, where the 11th Circuit (covering Alabama, Florida, and Georgia) 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 had it not been for the tying arrangement.
No mass boycott found
Finally, the court considered the boycott allegations. To claim a boycott, a party must show that the membership rule has an adverse impact on competition in the relevant market. But because Reifert could produce no such evidence, the court rejected this argument as well. Thus, judgment was entered on behalf of the association, its directors, and the MLS.
The August decision may have little bearing on similar cases pending across the country, but it is a positive step, according to NAR. Because this decision is not what is referred to as “binding precedent” (a decision of a higher court that sets the legal standard for similar cases in lower courts within the same jurisdiction), it will not change the “open MLS” requirements in Alabama, California, Colorado, Florida, and Georgia. However, the decision is helpful for associations facing similar cases pending in trial courts located in the 6th and 9th circuits because it could set a useful precedent if the 7th circuit affirms the lower court’s ruling on appeal. A favorable appellate court decision will affirm that this likely is legal in most of the country.
Ultimately, this decision is an important step in establishing that it is permissible to premise MLS participation on association membership.
F. P. Maxson is an associate counsel in NAR’s legal department and editor of the online newsletter Letter of the Law on nar.realtor. He can be reached at email@example.com.