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Federal Antitrust Class Action filed against West Penn MLS & Area Brokerages

By Michael Erdman

[Editor's Note: As explained in a previous post, this blog has unfortunately been gathering dust as of late. While I'm unable to go back and write about every notable development that occurred in this space during my hiatus, I will be hitting on some of the highlights in the coming weeks and months.]

Earlier this month an antitrust class action complaint was filed against West Penn Multi-List (?West Penn MLS?) and five area real estate brokerages in a Pittsburgh federal court. Plaintiff Thomas Logue, who previously hired a broker to list his home on the West Penn MLS, alleges the defendants unlawfully restrained competition among real estate brokerages in Western Pennsylvania by ?enacting and enforcing unlawful West Penn MLS rules, policies, and procedure that caused Plaintiff and the other class members to pay higher prices for real-estate-brokerage services . . . than they would have paid absent defendants? illegal conduct.?

Specifically, Logue complains of rules that allegedly

• allow West Penn MLS representatives to refuse membership to brokerages who they might expect to compete more aggressively or in more innovative ways than West Penn MLS members would prefer;

• prevent members from providing a set of services that includes less than the full array of services that brokerages traditionally provide;

• require members to use ERTS contracts (all original listing contracts were allegedly required to be collected and retained by West Penn MLS);

• prevent non-ERTS listings from being published on West Penn MLS?s approved websites (including Realtor.com and West Penn MLS-subscriber websites); and
  

• mandate the duration of listing contracts between a broker and seller (365 days).

According to Logue, ?[i]f defendants hadn?t restricted [] innovative brokerages from competing in the West Penn MLS Service Area, these brokerages would have provided West Penn MLS Service Area customers of real-estate-brokerage services with competitive options and, in the process, placed downward pressure on the prices charged by the brokerage defendants, who offer only traditional methods of providing real-estate-brokerage services.?

As you may recall, just over a year ago West Penn MLS reached a consent agreement with the Federal Trade Commission that, generally speaking, bars West Penn MLS from adopting or enforcing any policy, rule, practice or agreement to deny, restrict or interfere with the ability of West Penn MLS subscribers to enter into EA listings or other lawful listing agreements. I haven't examined the accompanying order, but suspect it requires West Penn MLS to eliminate most, if not all, of the rules that are the subject of this newly-filed civil suit. I note Logue?s proposed class consists of ?[a]ll individuals or businesses that purchased the brokerage defendants? real-estate brokerage services in the West Penn MLS Service Area from February 13, 2005 through February 13, 2009." (about the time West Penn MLS settled with the FTC).

Interesting that West Penn MLS apparently was enforcing a minimum service rule, notwithstanding the fact that state law provides Pennsylvania consumers with the right to waive certain brokerage services. See 63 P.S. § 455.606a(a)(3).

Given that West Penn MLS previously settled with the FTC, it will be interesting to see if a quick settlement will be reached in this civil case. I note, however, that the brokerage defendants were not parties to the FTC consent agreement.

This isn't the first civil suit to arise out of the FTC's recent enforcement activities against multiple listing services. I'll be writing about others in future posts.

Full post as published by Real Estate, Real Competition & The Law on April 19, 2010 (boomark / email).