Tying Access to Multiple Listing Service to Membership in Real Estate Trade Association Not Antitrust Violation

June 12, 2006 | Roger McEowen

 

The Sherman Act prohibits unreasonable restraints of trade.  But, certain types of “tying” arrangements - where a seller ties one product to the sale of another product - are per se illegal. The question in this case was whether the tying of access to a multiple listing service (MLS) to membership in a realtors association violated antitrust law. 

The plaintiff, a real estate broker, had been a member of the local realtors association which was affiliated with a particular national association.  Membership in this particular national association is a pre-condition to gaining access (for a fee) to the MLS for his area. The plaintiff later changed his affiliation to a national association which was not allowed participation in the MLS, and objected to having to pay dues to the former association just to get access to the MLS - a necessity for real estate agents in the region. So, the plaintiff challenged the tying of membership in the former association to MLS access on antitrust grounds.  The trial court ruled against him, granting summary judgment for the defendants. The plaintiff appealed.         

To prevail, the plaintiff had to show four things:

  1. That the tying arrangement was between two distinct products;
  2. That the owner of the MLS service had sufficient economic power in the tying market (MLS access) to appreciably restrain free competition in the market for the tied product (memberships in the realtors association);
  3. That a not insubstantial amount of interstate commerce in the tied product (realtors association memberships) was affected; and
  4. That the owner of the MLS service had an economic interest in the sales of real estate association memberships.

The court held that the plaintiff satisfied the first two requirements - access to the MLS cannot be obtained without purchasing a realtors association membership, and the company that owned the MLS had sufficient market power to restrain free competition in realtors association memberships. But, he couldn’t meet the third test because there wasn’t any competition in the market for memberships in the realtors association. No other company offered realtor association memberships, so no other company was harmed by the tie in. The plaintiff’s attempts to show that certain companies offered services that were interchangeable with the realtors association (and thereby competitors) failed. The plaintiff did not supply the court with the required economic analysis to establish the relevant market. Simply forcing a buyer to buy a product that the buyer would not have otherwise purchased does not establish harm to competition. The court didn’t have to consider the fourth requirement. 

The plaintiff also claimed that an ethical rule of the national association he was formerly a member of that barred members from interfering with the exclusive agreements other members have established with clients was an antitrust violation. The court disagreed, noting that the reason for the rule was not to foreclose competition, but to aid competition by preventing agents from improperly using the MLS as a data bank of potential customers. The plaintiff failed to establish that the ethical rule was anti-competitive. Reifert v. South Central Wisconsin MLS Corporation, et al., No. 05-3601, 2006 U.S. App. LEXIS 14327 (7th Cir. Jun. 12, 2006).