Opinion ID: 214064
Heading Depth: 3
Heading Rank: 2

Heading: Complaint Against Realcomp

Text: On October 10, 2006, complaint counsel for the Commission issued an administrative complaint against Realcomp, alleging that Realcomp's policies unreasonably restrained competition among brokers in the market for the provision of residential real-estate-brokerage services in southeastern Michigan or the Realcomp Service Area, and constituted unfair methods of competition in violation of Section 5 of the FTC Act. Specifically, the Commission alleged that Realcomp's website policy and search-function policy injured consumers by explicitly limiting the publication and marketing of nontraditional listings, thereby eliminating certain forms of competition without cognizable and plausible efficiency justifications. The Commission argued that Realcomp had adopted restrictive policies in order to restrain the competition from limited-service brokers. According to complaint counsel, pursuant to Realcomp's website policy, Realcomp prohibited information about EA listings and other nontraditional listings [2] on Realcomp's MLS from being distributed to public real-estate advertising websites through the MLS feeds. Adopted in 2001, the website policy was first enforced in 2004 when Realcomp incorporated the requirement that members designate a listing type for all listings. The policy violated an NAR rule forbidding member MLSs from excluding EA listings from their IDX feeds. But the Realcomp board voted against adopting the NAR IDX policy and retained its data-feed exclusions. Pursuant to the search-function policy, adopted in 2003 and eliminated in 2007, EA and other nontraditional listings were excluded from the default search setting in the Realcomp MLS. As a result of the default settings on the MLS, a broker wanting to display EA listings in her search results had to select specifically to search all listings or the EA listings, or change permanently the search default by saving changes to her settings. In addition to requiring members to disclose each listing's type, Realcomp implemented a minimum-service requirement which mandated that, in order for a listing to be labeled ERTSand consequently included in data feeds to public websites and in the default search settings in the Realcomp MLSbrokers were required to provide full-service brokerage services in connection with the listing. The minimum-service requirement was adopted in 2004 and eliminated in 2007. The Commission's Chief ALJ held hearings over eight days in June 2007 evaluating these policies and summarized his findings in his Initial Decision, issued on December 10, 2007. The ALJ dismissed the Commission's complaint upon finding that the Commission's complaint counsel did not demonstrate that Realcomp's policies unreasonably restrained or substantially reduced competition in violation of Section 5 of the FTC Act. Applying a traditional rule-of-reason analysis, the ALJ concluded that, although the website policy was likely anticompetitive in nature, and although Realcomp possessed substantial market power in the relevant markets, the Commission's complaint counsel failed to show significant anticompetitive effects of the policies. In addition, the ALJ found that the website policy addressed a free-rider problem and a bidding-disadvantage problem whereby EA home sellers compete with Realcomp cooperating brokers for home buyers. The Commission unanimously reversed, concluding that the Realcomp policies unreasonably restrained competition, first on the grounds that the policies were inherently suspect and therefore presumptively unlawful. The Commission also concluded that the ALJ erred when it credited Realcomp's proffered procompetitive justifications. Alternatively, under a full rule-of-reason analysis, the Commission further found that Realcomp's substantial market power, combined with the likely anticompetitive tendencies of its policies, rendered the policies unreasonable due to their likely anticompetitive effects. The Commission also found that direct evidence established actual anticompetitive effects. The Commission then entered its cease-and-desist order, prohibiting Realcomp from adopting or enforcing any policy, rule, practice or agreement . . . that denies, restricts or interferes with the ability of Realcomp Members to enter into Exclusive Agency Listings or Other Lawful Listing agreements with the sellers of properties. Pet'r App. Vol. I at 4 (Final Order at 4). Realcomp petitioned for review, claiming that a traditional rule-of-reason approach is required to evaluate Realcomp's restrictions and that there was no substantial evidence that Realcomp's website policy had anticompetitive effects. Realcomp repealed the search-function policy and the minimum-services requirement after the Commission's complaint and does not challenge paragraph five of Part II of the order, which incorporated repeal of the search-function policy.