Opinion ID: 214064
Heading Depth: 4
Heading Rank: 1

Heading: Potential Adverse Effects

Text: The Commission adopted the ALJ's findings that Realcomp possessed substantial market power in the relevant markets, and Realcomp does not dispute those findings. The ALJ defined the relevant product market as real-estate-brokerage services and found that, for most home sellers and buyers, no reasonable substitutes for such services exist because of the significant advantages of using a real-estate broker to sell a home. Because of the local nature of real-estate markets, the ALJ found that counties in southeastern Michigan define the geographic scope of competition for real-estate-brokerage services. Because of the lack of substitutes for brokerage services, the ALJ found that a broker monopolist could profitably increase commissions significantly above competitive levels. Defining the relevant input market as the supply of multiple listing services to real-estate brokers, the ALJ found that an MLS like Realcomp exhibits network effects, meaning that the value of the MLS increases as the number of other users of the service increases. The value of an MLS to home sellers (or their representatives) increases with the number of home buyers (or their representatives) using the site, and, similarly, the value to home buyers increases as more home sellers list their properties on the MLS. Brokers without full access to an MLS would . . . be at a significant competitive disadvantage, Pet'r App. Vol. II at 101 (Dec. ¶ 313), listing services with fewer users are not economically viable substitutes, id. (Dec. ¶ 310), and barriers to entry make it improbable for a rival MLS successfully to enter the market, id. at 104 (Dec. ¶ 333). Because the value of an MLS depends on the number of users, the ALJ observed that market share is a good indicator of market power, and found that Realcomp possessed a large market share in each relevant county. Id. at 103 (Dec. ¶ 329). In light of Realcomp MLS's market share, network effects, and barriers to entry, the ALJ concluded that Realcomp possessed substantial market power in the relevant markets. Adopting these findings, the Commission agreed that Realcomp possessed substantial market power in two relevant markets in Southeastern Michigan: the market for residential real estate brokerage services and the market for multiple listing services, which is a vital input into the brokerage services market. Pet'r App. Vol. I at 42 (Comm'n Op. at 36). Given the extensive and undisputed market analysis undertaken by the ALJ and adopted by the Commission, substantial evidence supports the Commission's findings that Realcomp possessed substantial market power.
Because Realcomp possesses substantial market power, we next evaluate the anticompetitive tendencies of the Realcomp website policy. Realcomp does not regulate rates of commission, offers of compensation, or other price terms; thus, we examine the effect of Realcomp's restrictions on consumer choice, specifically, the reduction in competitive brokerage options available to home sellers. The relevant output to be measured, therefore, is the share of non-ERTS listings in the Realcomp MLS, the exposure of these listings to consumers, and the relationship of these outcomes to the Realcomp website policy. In establishing that Realcomp's policies narrow consumer choice and hinder the competitive process, the Commission made the following relevant findings: (1) because of its database of listings, the Realcomp MLS is the most effective tool for the sale of residential real estate in Southeastern Michigan; (2) brokers offering limited service and brokers offering traditional, full-service brokers' services compete with one another for new listings; (3) limited service brokers' services potentially cost less than the services of brokers offering only full-service listings (they not only unbundle the services offered but also unbundle the commission structure); (4) limited service brokers' listings consequently exert `price pressure' on full-service brokers' listings; (5) Realcomp's Website Policy, coupled with its Minimum Service Requirement, severely restricted consumers' access to limited service listings because, as a result of those policies, the listings were not available on the most popular websites. Id. at 48 (Comm'n Op. at 42). These findings are supported by the evidence before the ALJ and the Commission that the website policy created barriers to the dissemination of discount listings to public websitesthe entry point for many consumers in their online real-estate searches. This evidence showed that EA listings can be posted on some public websites, despite Realcomp's policies, but only by dual-listing with another MLS that does not impose similar restrictions. Moreover, such dual-listing raises costs for offering and advertising such discount services, and limited-service brokers testified that Realcomp's policies placed them at a competitive disadvantage. In addition, two of the top four public websites used by consumers in the relevant market can be accessed only through the Realcomp MLS; therefore, due to the website policy, EA listings cannot be placed on these websites. Consumers using these websites are not informed that the websites display only ERTS listings. Realcomp's website policy thus limited access to internet marketing and imposed additional costs on the marketing of discount listings. Furthermore, the ALJ and Commission both found that limited-service listings exert price pressure on the full-service brokerage model; and brokers testified that discounted online and limited-service models have led to customers asking agents to reduce their commissions. Evidence that the website policy limited exposure of discount listings thus reveals a concerted refusal to deal with [EA listings] on substantially equal terms and establishes that the website policy is likely to protect its full-service brokers from competitive pricing pressure. Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., 472 U.S. 284, 295 n. 6, 105 S.Ct. 2613, 86 L.Ed.2d 202 (1985). Combining these findings with Realcomp's substantial market power, the Commission reasonably concluded that Realcomp's website policy is likely to be anticompetitive. The ALJ observed that the Realcomp MLS alone reached about 80% of home buyers, and brokers could place EA listings on Realtor.com and reach approximately 90% of home buyers. The ALJ concluded that, consequently, the website policy prevented EA listings from reaching only a relatively small additional percentage of home buyersthe 10% who perused home listings on the inaccessible websites. Pet'r App. Vol. II at 162 (Dec. at 101). To the contrary, however, by reducing by 10% the number of home buyers that are exposed to discount listings, the website policy may very well constitute an unreasonable restraint. Restricting the online dissemination of home listings is especially pernicious because of the emerging competitive impact of the internet and of discounted brokerage services on the residential real-estate market. As the D.C. Circuit observed, the exclusion of nascent threats is the type of conduct that is reasonably capable of contributing significantly to a defendant's continued monopoly power. United States v. Microsoft Corp., 253 F.3d 34, 79 (D.C.Cir.2001). The D.C. Circuit was analyzing a monopolization claim under Section 2 of the Sherman Act, rather than a horizontal restraint under Section 1. Id. at 80. Substantial evidence shows, though, that the exclusion of nascent threats such as discount brokerage services and consumer access to online listings is reasonably capable of contributing significantly to anticompetitive effects. As discussed in Part II.B., supra, courts have found potential antitrust violations when MLS rules deny MLS membership to some brokers, see, e.g., Realty Multi-List, Inc., 629 F.2d at 1388-89, and when dealers have excluded discount brokers altogether from a venue, see, e.g., Denny's Marina, Inc., 8 F.3d at 1220-22. At issue here is a different sort of restriction than membership exclusioninternal rules within an MLS regarding its distribution of certain types of real-estate listings to the public. There is no rule of complete exclusion from the MLS, and evidence shows that brokers are allowed to and do place limited-service listings on the Realcomp MLS. Nonetheless, similar to excluding discount brokers from the MLS altogether, the website policy limits exposure of discount listings. [L]istings [are] not . . . distributed as widely as possible due to the website policy, resulting in inefficient sales prices, which is the same kind of economic harm caused by MLS exclusions. Thompson v. Metropolitan Multi-List, Inc., 934 F.2d 1566, 1580 (11th Cir.1991); cf. Ind. Fed'n, 476 U.S. at 461-62, 106 S.Ct. 2009 (holding that proof of higher prices is not required in the context of [a] concerted and effective effort to withhold (or make more costly) information desired by consumers for the purpose of determining whether a particular purchase is cost justified); Polygram Holding, Inc., 416 F.3d at 37 ([A]greements restraining autonomy in pricing and advertising impede the `ordinary give and take of the market place.'). In particular, the website policylike exclusions found to be anticompetitivereduces the competition among brokers and could result in less competition for brokerage fees. Thompson, 934 F.2d at 1580; see Cantor v. Multiple Listing Service of Dutchess Cnty., Inc., 568 F.Supp. 424, 430 (S.D.N.Y.1983) (MLS rules restrict[ed] [brokers'] ability to advertise their services in order to prevent brokers from obtain[ing] any competitive advantage); see also Morales v. Trans World Airlines, Inc., 504 U.S. 374, 389, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992) ([P]rice advertising surely relates to price.) (internal quotation marks omitted). It is undisputed that the website policy restricted the public dissemination of Realcomp real-estate listings tending to offer consumers limited-brokerage services at reduced costs. The Commission concluded that [the] finding of market power, coupled with [the] . . . determination that the tendency of the challenged policies was to suppress competition, provide `indirect' evidence that those policies have or likely will have anticompetitive effects. Pet'r App. Vol. 1 at 41 (Comm'n Op. at 35). Evaluating the website policy, the ALJ also notably found that the nature of the restraint is such that it is likely to be anticompetitive. Pet'r App. Vol. II at 158 (Dec. at 97). [8] Given the significance of the Realcomp MLS to the advertising of real-estate listings, and given the role of the internet in providing consumers with the ability to self-provide certain real-estate services, substantial evidence supports the Commission's conclusion that Realcomp's website policy is likely to have an adverse impact on competition by restricting consumer access to discount listings.