Class 7 Antitrust, Winter, 2018 Applying the Rule of Reason 11/15/2018 Class 7 Antitrust, Winter, 2018 Applying the Rule of Reason Randal C. Picker James Parker Hall Distinguished Service Professor of Law The Law School The University of Chicago Copyright © 2000-18 Randal C. Picker. All Rights Reserved.

Press Release November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Press Release November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Press Release November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Joint Glossary November 15, 2018 Realcomp II (FTC 31 July 2007)

Full Service Brokerage Services November 15, 2018 Realcomp II (FTC 31 July 2007)

Limited Service Listing: One But Not All November 15, 2018 Realcomp II (FTC 31 July 2007)

MLS-Entry Only Listing: None of the Listed Services November 15, 2018 Realcomp II (FTC 31 July 2007)

Administrative Complaint November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Single Firm or One Firm? “This matter concerns a corporation, owned by a group of shareholder Boards of Realtors in Southeastern Michigan, that operates a Multiple Listing Service, which is designed to foster real estate brokerage services by sharing and publicizing information on properties for sale by customers of real estate brokers.” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Type of Broker Deal Impacts Status “Realcomp has adopted policies that limit the publication and marketing of certain properties, based on the terms of the listing contract entered into between a real estate broker and the customer who wishes to sell a property.” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Limits Searchability “The policies limit the publication of information about such properties on popular internet real estate web sites, and make it more difficult for brokers to search for such listings on the Realcomp MLS.” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Discrimination Based on Contract Status “These policies discriminate against certain kinds of lawful contracts between listing real estate brokers and their customers, and lack any pro-competitive justification.” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Concerted Refusal to Deal “These rules constitute an anticompetitive concerted refusal to deal except on specified terms with respect to key inputs for the provision of residential real estate brokerage services, and violate the antitrust laws.” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Conspiracy to Protect Full Service Brokerage “Respondent has restrained competition in the provision of residential real estate brokerage services by combining or conspiring with its members or others, or by acting as a combination of its members or others, to hinder unreasonably the ability of real estate brokers in” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Conspiracy to Protect Full Service Brokerage “Southeastern Michigan to offer residential real estate brokerage services on terms other than those contained in the traditional form of listing agreement known as an Exclusive Right to Sell Listing.” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Website Policy “In 2001, Realcomp adopted and approved a rule that stated: ‘Listing information downloaded and/or otherwise displayed pursuant to IDX shall be limited to properties listed on an exclusive right to sell basis’ (the ‘Web Site Policy’).” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Search Function Policy “In or about the fall of 2003, Respondent changed the Realcomp MLS search screen to default to Exclusive Right to Sell Listings (‘Search Function Policy’). In order to view any other listing types, including Exclusive Agency Listings, Realcomp members have to select the additional listing types in the search screen.” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Market Power “By virtue of industry-wide participation and control over the ability of real estate brokers to participate in the Realcomp MLS and the ability of home sellers to publicize their homes for sale on Approved Web Sites, Realcomp has market power in the Realcomp Service Area.” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

Nothing Procompetitive Here “There are no cognizable and plausible efficiency justifications for the conduct that constitutes the violation alleged in this Complaint. Such conduct is not reasonably ancillary to the legitimate and beneficial objectives of the MLS.” November 15, 2018 Realcomp II (FTC 12 Oct 2006)

ALJ Dismissed Complaint 11/15/2018 ALJ Dismissed Complaint November 15, 2018 Realcomp II (FTC 13 Dec 2007)

FTC Finds Violation November 15, 2018 Realcomp II (FTC 2 Nov 2009)

Four Hypos Hypo 1: The Michigan Pizza Makers Ass’n Admits only members who sell pizza Hamburger, chicken, other food sellers excluded Hypo 2: The Full-Service Broker Association Full-service brokers form group with FSB-only MLS November 15, 2018

Four Hypos Hypo 3: Only Brokers Ass’n All brokers allowed with corresponding MLS No for-sale-by-owner (FSBO) listings allowed Hypo 4: Broker only MLS and no feeds Only brokers can search MLS and no public feeds are spun off from it. November 15, 2018

The Restrictions in the Case 1. The Public Feed Exclusion The MLS IDX feed to the public websites excluded the discount broker (exclusive agency) listings 2. The Search Defaults Nontraditional listings were excluded from search defaults (by default, only searched traditional Exclusive Right to Sell listings) November 15, 2018

The Restrictions in the Case 3. ERTS Label Attachment Established minimum service standard for listing to carry ERTS label That mattered for how default search worked and for what went into IDX public-site feed November 15, 2018

The Restrictions in the Case Status IDX feed: adopted in 2001, enforced in 2004 Search defaults: adopted in 2003, dropped in 2007 ERTS label standards: adopted in 2004, dropped in 2007 November 15, 2018

The Key Questions How should we figure out whether these restrictions matter? What are the procompetitive benefits of the restrictions? November 15, 2018