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The real estate sector is getting fresh scrutiny from U.S. antitrust regulators amid worries that a powerful industry group may be erecting new barriers to internet-based competition.
The National Association of Realtors is backing an effort to centralize the way that property listing information is disseminated.
Critics say the project has the potential to impede competition in the market by placing a large share of valuable real estate data in the hands of one entity controlled by NAR and large brokerages. Access to such data has been critical to the success of internet startups such as real estate listing company Zillow Group Inc.
Zillow and other major industry players discussed the issue at a June 5 workshop hosted by the Federal Trade Commission, in collaboration with the Justice Department. The workshop explored competition issues in the residential real estate sector, including the availability of listing data.
“From an antitrust point of view, individual agents and brokers are competitors in the market for providing residential real estate brokerage services to consumers. So when they act together, they must comply with antitrust rules relating to competitors,” FTC Chairman Joseph Simons said in opening remarks.
The FTC-DOJ workshop provides the agencies a chance to take a fresh look at competition in the real estate market for the first time in a decade. The agencies last issued a joint report on topic in 2007.
“A lot has happened since that time frame, including major changes in the housing market, as well as really important developments around consumer access to data about local real estate markets and listings,” Jessica Drake, acting deputy assistant director in the FTC’s bureau of competition, told Bloomberg Law ahead of the event.
The workshop is mainly intended as a “learning” opportunity for the agencies, according to Drake. Any next steps are “yet to be determined,” she said.
The proposed centralized system, known as Upstream, is designed to offer a single point of entry for inputting, managing, and distributing listings at the brokerage level, according to proponents. The initiative, which is still in its infancy, was officially launched in 2015, with funding support from the NAR.
The existing system is too fragmented, proponents say. Brokerages now are required to enter listing data into one or more “multiple listing services” systems, among other locations.
Zillow has raised concerns about the Upstream project, including in discussions with members of Congress. The Seattle-based company is worried that a centralized database would make it easier for legacy real estate companies to deny access to listing data.
“We think it’s in consumers’ best interest to have broad distributions of listings,” Kathleen Philips, Zillow’s chief legal officer, told Bloomberg Law. “We are mindful that there are some efforts by some parties to join together to restrict access to listings. We don’t think that’s good for consumers. We think it’s anticompetitive.”
“If you have a limited number of industry participants cooperating to distribute data, the natural conclusion can be that they’re going to cooperate to restrict data too,” she said.
“I don’t think there’s anything anticompetitive about it. It’s a data management tool for brokers,” Katie Johnson, general counsel and senior vice president at NAR, told Bloomberg Law. “I understand why Zillow would be concerned, but I don’t think any of the brokers desire to go there.”
At the event, Philips said, real estate listings should give consumers can have “wide access” to real estate data, but she didn’t mention Upstream specifically.
Regulators should look closely at any such industry collaborations where there’s the potential for some companies, such as internet startups, to be “left out in the cold” Philips said.
The Information Technology and Innovation Foundation, a Washington-based think tank, agrees that Upstream could be exploited by traditional industry players. “We know they have a long, troubling history of cutting off competition,” ITIF Vice President Daniel Castro told Bloomberg Law.
NAR settled with the DOJ in 2008 about similar issues. The parties entered a consent decree to resolve charges that NAR’s members had blocked the availability of listing data from firms seeking to operate online real estate websites.
“There were several instances where brokers, acting through multiple listing services, were found to have impeded competition in ways they shouldn’t have,” David Kully, an antitrust partner at Holland & Knight LLP, told Bloomberg Law. “These are the kinds of things that the antitrust agencies were interested in in the past, and I suspect they would remain interested going forward if they were to find any of these activities.”
Kully previously served in DOJ’s antitrust division, where he played a key role in the government’s action against the NAR.
But since then, the internet has helped to accelerate competition in the space, according to Johnson.
“Ten years ago, it was not common for brokers to have websites or to attract customers and share information via websites,” Johnson told Bloomberg Law. “It’s a totally different world today.”
Reps. Tom Marino (R-Pa.) and David Cicilline (D-R.I.), leaders of the House Judiciary Committee’s antitrust subcommittee, agree that the industry needs another look. They sent a letter to the FTC and DOJ on Jan. 5, urging them to update their 2007 report.
“Among other issues, we think it especially important that an updated report review the availability and distribution of real estate listings data within the industry,” the subcommittee leaders said.
An up-to-date report would be especially timely, given that the DOJ’s consent decree is due to expire in November, the lawmakers said.
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