Once upon a time, when the real estate market was just getting familiar with internet technology, prospective Realtors® dreamt of using the new technology to both excel and fine-tune their craft. One Realtor®, Aaron Farmer, thought about offering his services based on “per task” scale, rather than the standard 6 percent fee. Not long after he considered this scale, the Texas Real Estate Commission passed rules establishing what they termed “minimum levels of service” that real estate agents had to meet (effectively making Farmer’s idea of a fee scale, illegal).
Since Farmer’s idea was in line with the beginning of the internet boom, he felt as though TREC’s rules were unfair. In 2002, he decided to sue them for restricting his trade and was assisted, astonishingly, by the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC). Surprisingly, the government was investigating the real estate industry already, mainly claims that new players to the real estate game were not afforded the same opportunities as vested professionals. In many instances, veteran professionals were blocking or restricting access of the newer agents (particularly it seemed those agents who had an eye for the budding technology that was/is the internet).
After years of back and forth debates, the DOJ came to an agreement with the National Association of Realtors® (NAR). This settlement, set forth in 2008, outlined and limited anti-competitive practices, as well as situations where agents were denied access to listing data.
The decree specifically outlines acceptable and prohibited conduct for Realtors® and brokers. The decree clearly states how VOWs (Virtual Office Websites) should operate. In essence, since the internet was just getting started, VOWs were the primary way technologically-minded brokerages presented their information to consumers.
Nowadays, these VOWs are commonplace through multi-state online brokerages like Redfin, Compass, and Zillow, as well as, smaller, local brokerages which allow customers to search for homes currently on the market in any given location.
Here’s the issue: The “VOW policy” imposed restrictions on how brokers could access listings from the MLS across the US, but simultaneously exempted other “traditional” brokers (those who weren’t using VOWs, but were instead keeping to the “old school” principles of using mail, faxes, paper, or postcard to deliver their information).
Given this inequity, the Antitrust Division of the U.S. Department of Justice launched an investigation and began to conclude that the playing field wasn’t equal, and was in fact, violating antitrust laws. Thus, why they interceded and why the decree to block their current VOW policies was created and put into effect. The decree basically states play nicely and everyone should have a fair shot at accessing MLS data and sharing it, regardless of whether or not you share this data through traditional “old school” means, or the new online method.
The decree stated that the NAR shall not adopt, maintain, or enforce any rule, or enter into, or enforce any agreement or practice that directly or indirectly prohibits a Broker from using a VOW (Virtual Office Website).
VOW includes all of the listing information that a Broker is permitted to provide to customers by hand, mail, facsimile, electronic mail, or any other delivery methods. It also stated the NAR® cannot unreasonably discriminate against a Broker who uses a VOW to provide customers all listing information.
It also details the required conduct expected from the NAR. The original decree states, that within five business days, the following actions are expected: the NAR shall repeal the policy and implement the new VOW policy; NAR shall not change the new policy; the NAR shall direct each coveted entity to adopt the new VOW policy; NAR will notify the DOJ if the coveted entities do not comply, the NAR shall notify the DOJ if any member board violates the new VOW rules after notifying that member to cease; NAR will furnish the DOJ copies of communication with any person that alleges a member boards’ noncompliance or failure to enforce the new rules.
In order to ensure the NAR complied, authorized DOJ representatives would inspect and copy records, including books, ledgers, accounts, records, data, and documents. They are also allowed to interview NAR® officers, employees, or agents and more.
The decree is set to expire on November 18th of this year.
The industry is already beginning to assess what will happen. Already, two members of Congress have written to the DOJ and asked them to consider extending the 10-year decree. It is possible the decree could be extended, but both the DOJ and the FTC may hold hearings to determine the continued validity of the decree.
If the decree is not renewed, the NAR and MLS will no longer be required to support VOWs. While I don’t expect they will go back to the “old school” methods, it does beg the question, will they restrict current brokerage services?
The bigger question seems to be, not if the decree will be extended or not, but rather, since the internet has become such an incredibly integral part of our lives, is the decree even valid any longer? To clarify, aren’t VOWs a common practice now? Would extending the decree change anything? Instead of worrying about whether or not the NAR and their associates will revert to practices that kept individuals like Farmer from operating, perhaps our government should be looking at the bigger picture: is the decree even valid in this technologically-driven age?
