FTC Charges Pittsburgh-Area MLS With Illegally Restraining Competition

West Penn Multi-List, Inc., the operator of the real estate multiple listing service (MLS) in the Pittsburgh, Pennsylvania metropolitan area, has agreed to settle Federal Trade Commission charges that certain restrictions on access to its MLS services were anticompetitive and violated U.S. antitrust laws. West Penn’s MLS rules limited publication and marketing of the listing of sellers’ properties based solely on the terms of the seller’s listing contract with the real estate broker.

The FTC’s consent order settling the charges bars West Penn from imposing restrictions that discouraged brokers who subscribed to the MLS from offering lower-cost, limited brokerage services to home sellers in the Pittsburgh area.

“This case demonstrates that the Commission has no tolerance for attempts by those who run an MLS to ban nontraditional listings or limit the use of discounting in brokerage services,” said David P. Wales, Acting Director of the FTC’s Bureau of Competition. “We have challenged such conduct in a number of cases in the last few years because it results in higher prices for consumers, and we will continue to prosecute such conduct wherever we find it.”

West Penn is the only MLS that serves metropolitan Pittsburgh and surrounding counties, according to the FTC. It is owned by its membership, which consists of more than 6,800 real estate professionals in the area. Membership in West Penn is necessary for a broker to provide effective residential real estate brokerage services to buyers and sellers of real estate in the area, the FTC alleges.

The FTC alleges that West Penn’s rules excluded from the MLS, and refused to make available for viewing on popular Internet Web sites, any type of listing other than the traditional full-service style of real estate broker listing agreement, which is typically associated with a non-discounted commission.

The FTC alleges these restrictions favored traditional full-service brokerage agreements, in which a property owner appoints a real estate broker for a set period of time as an exclusive agent to sell the property, and agrees to pay the listing broker a commission if and when the property is sold. The restrictions effectively blocked brokers from offering an alternative form of listing agreement, which could be used by home sellers who do not want to pay for the full range of brokerage services. The FTC charges that these rules illegally restrained trade and harmed competition by limiting consumers’ ability to obtain lower-cost real estate brokerage services.

The FTC’s consent order prohibits West Penn from adopting or enforcing these rules. The order also prohibits West Penn from adopting or enforcing rules that (1) had required brokers to comply with the MLS form contract and submit copies of their listing contracts to the MLS, and (2) discouraged brokers and home sellers from contracting for services for terms of less than a year. Although West Penn has already dropped these restrictions, the settlement bars West Penn from reverting back to the old rules or adopting any new ones that deny or limit the ability of MLS participants to enter into any lawful listing agreement.

The Commission vote to approve the consent order was 4-0. The order will be subject to public comment for 30 days, until February 10, 2009, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.

The materials related to this case, as well as a wide range of other real estate competition information, can be found on the FTC’s real estate competition Web page.

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 $11,000.

Copies of the complaint, consent order, and an analysis to aid public comment are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 081-0167)