Leaders within the Multiple Listing Service (MLS) industry are anticipating a significant increase in legal and regulatory challenges, with some describing the current environment as one of 'lawfare.' This comes amid ongoing antitrust lawsuits, such as the one filed by Zillow against Midwest Real Estate Data (MRED), and reexaminations of broker cooperation and competition guidelines by the Department of Justice (DOJ) and the Federal Trade Commission (FTC).
Compass CEO Robert Reffkin has added to the pressure by threatening to sue any MLS that does not meet his demands by October 6. Mitch Skinner, a managing member at Larson Skinner PLLC, noted that the industry is at a "legal inflection point" and that the legal landscape has never been more challenging. He observed that the Sitzer/Burnett case has created a "chilling effect" that has influenced other lawsuits.
Kelly Lennox, chief legal officer of Northwest MLS, which recently settled an antitrust suit with Compass, agreed that litigation is pervasive. She stressed that MLSs cannot afford to remain passive and must develop strategies to navigate these risks. Ed Zorn, vice president and general counsel of California Regional MLS (CRMLS), highlighted risk management as crucial, noting that policies currently under scrutiny were often implemented to mitigate previous risks, such as agents being unable to access information about available homes.
Brian Schneider, a partner at ArentFox Schiff and general counsel for Bright MLS, advised MLS leaders to "game out" the potential consequences of their actions and rule implementations, considering various legal outcomes and potential future lawsuits. The scrutiny often targets rules around mandatory listing submission and participation, with concerns that cooperation, a core MLS pillar, is at risk as brokers may withhold listings while seeking access to MLS databases.
Legal experts are questioning whether it is the MLS's role to police brokers withholding listings, especially given the potential impact on consumers. Zorn argued that the concept of "seller’s choice" is often illusory, with brokers leveraging their expertise to influence seller decisions. Schneider suggested that issues of fiduciary duty and free-riding might be better addressed by state regulators or courts, but also proposed that MLSs could mandate cooperation even for listings outside their system and impose penalties for brokers interfering with buyer-agent relationships.
Attorneys also pointed out that resistance to changing rules may stem from outdated fears related to the DOJ's 2008 consent decree, which expired years ago. Zorn suggested it's time to re-evaluate these rules given technological advancements and market consolidation. Marinda Neumann, principal and managing attorney at Neumann & Associates, called for updated definitions of "participants" to reflect the changing brokerage services landscape. CRMLS, for instance, has shifted its approach to a data access model, charging different rates based on data contribution and usage.
Skinner encouraged MLS leaders to remain curious, skeptical, and strong, acknowledging that while change is difficult, it is possible to adapt core principles without degrading the marketplace. He emphasized that demand letters, threats, and lawsuits are now the norm, and flexibility around core principles is key to navigating these challenges.
