Port Washington Real Estate Board

The Port Washington Real Estate Board (the Board) has agreed to settle Federal Trade Commission allegations that it has restrained competition in the provision of residential real estate brokerage services in and around Port Washington, New York. Under the proposed settlement, the Board would be prohi- bited from, among other things, restricting the use of exclusive- agency listings (listings permitting homeowners to pay a reduced fee or commission, or no fee or commission, if they sell the properties themselves); fixing commission splits between listing and selling brokers; restricting or prohibiting members from holding open houses or using "For Sale" signs; restricting brokers from advertising free services to property owners; and excluding from membership brokers who do not operate a full-time office in the territory served by the Board's multiple listing service.

Port Washington Real Estate Board, based in Port Washington, New York, operates the predominant multiple listing service (MLS) serving Port Washington and a number of adjacent towns. The Board currently has approximately 18 member brokers, and the annual sales of real estate listings published on PWREB's MLS are approximately $100 million. (An MLS is a clearinghouse that allows member real estate brokerage firms to regularly and quickly exchange information on properties for sale in order to locate purchasers and sellers and to transact sales efficiently.)

According to the FTC's complaint detailing the allegations, real estate brokers submit their exclusive listings for publi- cation to the entire MLS membership. The broker who accepts a listing (the "listing broker") offers to share the commission paid by the homeowner with any other member broker who locates a purchaser for the property (the "selling broker"). Only members of the Board can participate in the MLS.

The complaint charges that PWREB, through its rules governing membership, advertising and listings, has unreasonably restained competition among real estate brokers and between brokers and homeowners by:

-- prohibiting members from obligating themselves to share with the listing broker any portion of a commission paid by a property owner on an exclusive agency listing that is sold by a different selling broker;

-- prohibiting its members from holding open houses;

-- prohibiting its members from using permanently affixed real estate signs (such as "For Sale" signs) on resi- dential properties, and from using signs for house inspections attended by brokers, salespeople and homeowners;

-- prohibiting its members from displaying their name or telephone number on permanent signs placed by homeowners;

-- prohibiting members from offering free services to property owners; and

-- requiring its members to operate a full-time real estate brokerage office in the Board's service area.

According to the FTC, these practices have injured consumers by, among other things, restraining brokers from competing with respect to their willingness to offer attractive and beneficial contract terms (such as exclusive agencies); substantially limiting the ability of homeowners to compete with real estate brokers in locating purchasers; preventing homeowners from negotiating with listing brokers the division of commissions with selling brokers or obtaining agreements to hold open houses or to provide free services; unreasonably restraining the entry of new competing brokerage firms; and restraining competition from brokerage firms located outside the Board's service area.

The proposed consent agreement to settle these allegations, announced today for public comment, would prohibit PWREB from restricting or interfering with any broker's acceptance or publ- ication on the Board's multiple listing service of exclusive agency listings. (The agreement would, however, allow the Board to include in its publication a code or symbol indicating that a listing is an exclusive agency listing, or to adopt reasonable terms applicable whether the listing is an exclusive agency listing or an exclusive right-to-sell listing.)

The proposed settlement also would prohibit the Board from suggesting or fixing the rate or amount of any commission split between a listing broker and a selling broker, or restricting a property owner from playing a role in determining what the commission split should be.

In addition, the proposed order would prohibit the Board from restricting or interfering with any member's or homeowner's ability to hold open houses or place signs on properties.

The order would further prohibit the Board from restricting or interfering with the ability of its member brokers to advertise free services to property owners.

Further, the order would prohibit the Board from limiting membership in, or use of, its multiple listing service on the condition that a broker operate or maintain a full-time office in PWREB's territory. The Board may, however, adopt a reasonable and nondiscriminatory policy that would assure its members are actively engaged in real estate brokerage and that listings published on the multiple listing service are adequately serviced.

The proposed order would require the Board to amend its rules to conform with the FTC order and to provide a copy of the amended rules and the FTC's order to its members.

Finally, the settlement contains various reporting provisions that would assist the FTC in monitoring the respondent's compliance.

The Commission vote to accept the proposed consent for public comment was 5-0. The proposed consent agreement will appear in the Federal Register shortly, and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE:  A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $10,000.

Copies of the complaint, the consent agreement, and an analysis of the agreement to assist the public in commenting, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202-326-2502. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov

(FTC File No. 901 0094)