In O'Riordan v. Long Island Board of REALTORS®, the district court addressed tying arrangements and group boycotts in the context of requiring Board membership to participate in a MLS. The court held that under Rule of Reason analysis, the Board practices did not constitute a group boycott or tying agreement in violation of the Sherman Antitrust Act.
The Long Island Board of REALTORS® (Board) was a member of the NATIONAL ASSOCIATION OF REALTORS® (NAR) and operated a MLS. One of the requirements for membership in the MLS was Board membership. A consequence of this requirement was that all members of the MLS were subject to the arbitration rules and code of ethics of NAR. Subject to a 1971 consent decree, the Board agreed that it would not erect any unreasonable barrier to participation in the MLS. Since that time, no licensed broker or salesman had been denied Board membership, and no Board member had been denied membership in the MLS.
O'Riordan was a licensed broker and salesman who sold homes on Long Island. In 1973, O'Riordan joined the Board, and complained of the requirement that he belong to the Board to be an MLS participant. In 1984, O'Riordan resigned from the Board and applied for membership in the MLS, but was denied solely because he was not a Board member. O'Riordan claimed that the MLS would not permit him to join unless he became a member of the Board, and sued the Board alleging group boycott and tying arrangement violations of the Sherman Act.
The district court first addressed the illegal group boycott claim. Group boycotts are ordinarily per se violations of the Sherman Act. However, where trade associations are involved, courts have been reluctant to apply a per se approach because the pro-competitive aspects of a trade organization may outweigh the negative consequences it may have on competition. There is no federal case law where a court applied per se analysis to an MLS. Under the Rule of Reason, the district court held that the Board's ethical rules and arbitral forum for enforcing those rules constituted a valid pro-competitive reason for the membership requirement. The court also stressed the fact that, since 1971, no applicant had been denied Board membership. The court held that the MLS rule that required brokers to be Board members did not constitute an illegal group boycott.
The district court next addressed the illegal tying arrangement claim. The court found five elements necessary to establish a tying violation: (1) two distinct products; (2) evidence of coercion; (3) sufficient economic power in market for tying product; (4) anti-competitive effect in tied market; and (5) involvement of not insubstantial amount of interstate commerce. The court found this case analogous to Wells v. Greater
Lowell Board of REALTORS®, 850 F.2d 803 (1st Cir. 1988). The court found that here, as in Wells, the plaintiff failed to show that there was a market for membership in real estate boards. The court further concluded that the requirement of "two distinct products" had not been satisfied, as the relationship between the Board and the MLS constituted a single product. Thus, the court held that the MLS rule that required brokers to be Board members did not constitute an illegal tying arrangement.
O'Riordan v. Long Island Board of REALTORS®, 707 F. Supp. 111 (E.D.N.Y. 1988).