JUDGMENTS: Antitrust • Commissions

MLS may restrict use to members

U.S. District Court, E. Kentucky, 2005
Buyer’s Corner Realty Inc. v. N. Kentucky Assoc. of REALTORS®

In a victory for the MLS membership model, a federal court in Kentucky has ruled that an MLS can limit participation to members of the local REALTOR® association.

The principal of a real estate brokerage sued the Northern Kentucky Association of REALTORS®, alleging that the association and its wholly owned subsidiary, the Northern Kentucky Multiple Listing Service, illegally tied association membership to MLS services. The principal, Sherry Edwards, claimed that, although she was a member of the association, she joined only to gain access to the MLS.

After considering the case, the federal court ruled that the anticompetitive effects of tying association membership and MLS participation weren’t sufficient to justify an antitrust claim. Tying arrangements violate antitrust laws if the arrangement restrains competition in the relevant market and has a substantial impact on interstate commerce, and the tying company has an interest in the sale of the tied product.

The court found that Edwards had failed to identify any competitors in the market who were harmed by the membership requirement. It noted that Edwards had joined one of the only other associations (the National Association of Exclusive Buyer Agents) she had identified as competition, so the requirement of membership hadn’t kept her from joining other groups. In addition, the court found that associations such as the NAEBA didn’t provide the same services as the REALTOR® association and so was not in the same product market. Therefore, said the court, the tying agreement didn’t violate antitrust law.

No commission on personal deal

California Court of Appeals, 2005
Horning v. Shilberg

A California court has ruled that a broker who was purchasing a property for personal investment wasn’t entitled to a commission as damages when the seller canceled the contract. The owner of a multifamily building signed a purchase agreement with a licensed real estate broker, who represented himself in the transaction. The agreement stated that the owner would pay the broker a percentage of the price as “compensation for services.”

When the broker failed to submit a mortgage prequalification letter to the owner as required by the purchase agreement, the owner canceled the contract. The broker sued seeking specific performance on the contract, the commission outlined in the contract, and damages because the contract’s cancellation prevented him from completing a like-kind exchange.

Under California law, a broker is defined as an individual “who, for compensation . . . negotiates . . . for another or others.” Since the broker wasn’t acting on behalf of a third party, the court ruled that he wasn’t offering brokerage services and therefore wasn’t entitled to any compensation. The court also found that the agreement to pay compensation in the purchase contract was, in fact, an agreement by the owner to lower the price of the property, so the broker wasn’t entitled to compensation.

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