More than a decade ago, rules governing the online sharing and display of property listings attracted the attention of the U.S. Department of Justice (DOJ). The result was a two-year investigation, an antitrust lawsuit against the National Association of Realtors (NAR) and a 2008 settlement that called for the adoption of a new online listings policy mandating that MLSs make property data available to online brokerages such as Redfin.
That settlement expires in November 2018 and it seems the real estate industry will once again come under federal scrutiny.
Daniel Castro, vice president of nonprofit, nonpartisan think tank Information Technology & Innovation Foundation (ITIF), alarmed a roomful of Inman Connect New York attendees last Thursday when he declared that he had “seen some evidence” that the DOJ and the Federal Trade Commission (FTC) would hold a workshop on real estate competition.
The workshop would discuss the “legal hurdles, regulatory barriers, and anti-competitive actions in the real estate industry that may suppress competition,” Castro later said via email.
In a phone interview, a DOJ official confirmed to Inman that a joint DOJ-FTC workshop on real estate competition would be held sometime in the spring, though the official said no details were available yet as to when exactly the workshop would be held, what it would cover, and who would participate.
The workshop will be held in response to a letter the DOJ received on Sep. 21, 2017 from the U.S. Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights regarding concerns about real estate competition, the official said.
The DOJ replied to the subcommittee in a Dec. 20, 2017 letter noting that the DOJ and FTC had released a report in April 2007 on real estate competition and held a workshop in October 2005 and that “it’s a good time to revisit the dynamic in the real estate industry and look at competition,” the official said.
The official noted the DOJ and the FTC have continued to monitor technological developments in the industry since then and some “may have had an anticompetitive effect,” though the official declined to specify which developments the letter referred to.
The DOJ official declined to provide copies of the letters from and to the subcommittee. Inman has reached out to the office of Subcommittee Chair Mike Lee for copies of the letters.
The FTC declined to comment for this story. “The FTC has not announced that we are holding such a workshop, and I can’t really comment further until/unless we do,” FTC spokesperson Betsy Lordan told Inman via email.
Castro, who is also the director of ITIF’s Center for Data Innovation, co-authored a November 2017 report that called for federal regulators to investigate MLSs restricting listing data from third-party websites for antitrust. Redfin CEO Glenn Kelman co-authored a response to that report last month. As Inman reported and ITIF confirmed, the think tank has been partially funded by Zillow in the past, though Castro said the company had no input into this report or recommendations and ITIF’s editorial practice is to operate free from external influence (Zillow has been critical of some MLSs’ syndication practices).
Asked at Inman Connect whether the real estate industry would be represented at this FTC-DOJ workshop, Castro said the proceedings are typically open to the public.
He later elaborated that the workshops tend to be one-day or half-day affairs that consist of a series of panels and presentations led and organized by government staff. The agencies also usually have a public comment period before and after the workshop “where individuals and organizations can submit written responses to the questions under consideration,” Castro said.
“The goal is fact-finding, although these facts may lead to white papers, investigations, legislative recommendations, or other actions.”
Panelists at the October 2005 workshop included traditional real estate brokers, brokers offering nontraditional business models, state regulators, and academics and the DOJ official said the lineup for this spring’s workshop would likely be similar.
Getting ahead of possible regulation
Usually, ITIF doesn’t advocate interfering in markets and encourages letting technologies advance, “but occasionally we see market failures,” Castro said.
It is for that reason that ITIF recommended making all real estate listings — not just MLS listings, but also off-MLS listings such as pocket listings or listings only displayed on certain websites — available to the public for free and without restrictions, according to Castro.
While some may argue that the availability of real estate listing data on sites such as Zillow, realtor.com, and thousands of others means consumers have plenty of access to listings, that doesn’t mean that restrictions imposed by brokers or MLSs aren’t stifling innovation.
“If you want third parties building tools off this data it needs to be available in a very unrestricted manner,” Castro said.
He advocated an approach similar to that laid out by industry consultant (and frequent Inman contributor) Rob Hahn, also at Inman Connect Thursday: a public-private partnership between the government and a company such as Google to create a national database of listings and require agents to enter data into it.
“You’re not going to get as much investment in tech” if a new player has to get data from all 700 multiple listing services, Castro said.
Castro suggested the U.S. real estate industry get ahead of possible regulation before it’s too late. He pointed to open banking rules that just went into effect in the United Kingdom and require banks to create open APIs (application programming interfaces) so that consumers and businesses can share their data with authorized third-party applications in a secure, standardized format.
“[T]hese rules were ultimately the result of the UK competition regulator intervening in the market. Had the industry gotten ahead of this issue, and created its own open banking policies, it would have likely had more control over the final rules,” Castro said.
“There is a lesson here for the U.S. real estate industry. It can either wait until regulators decide to address this problem, or they can provide open access to listing data voluntarily and possibly preclude regulatory intervention.”
He suggested, for instance, that the industry could create its own listing database and make the factual listing data, which is not copyrightable, available for free, while copyrighted data, such as photos, could be made available for a licensing fee.
Panel moderator David Charron, chief strategy officer of the Mid-Atlantic-serving Bright MLS, noted that “there’s a lot of time, treasure and talent invested in gathering this asset [real estate listings],” but also questioned “are we being overly protective?”
Castro responded that when the FTC and DOJ hold their workshop, their question won’t be “What’s in the best interest of real estate agents?”
“[It’ll be] ‘Is there competition?'” Castro said, especially if the answer to that question could impact a major issue in the market today: home affordability.
Castro later noted that while many real estate leaders say they embrace change, “there seems to be a lot of resistance to improving access to real estate data,” he said.
“This is holding back technological innovation in the real estate sector. The [Inman Connect] conference featured a number of interesting startups, but if brokers provided open access to real estate data, the number would likely have been greater. And more technological innovation would serve both agents and consumers.”
The Trump administration and antitrust
The new administration is fond of minimizing regulations, but it is also active on antitrust and competition issues, Castro said.
And President Donald Trump has just sent four FTC commissioner nominations to the Senate for confirmation. The FTC chair nominee is Joseph Simons, who between June 2001 and August 2003 was the chief antitrust enforcer at the FTC, serving as Director of the Bureau of Competition, according to his firm’s website.
Once the nominees are confirmed, there may be a shift in FTC focus, according to Castro.
“[O]nce there are new FTC commissioners, they may have different priorities than the current ones. So projects that are initiated now, may look different in a few months. That said, much of the staff will remain the same at the FTC, so I would expect some continuity,” he said.