People v. NAR: California Court Rules Membership-Based MLS Access Constitutes Tying Arrangement
In People v. Natoinal Association of Realtors® (San Diego II), the California Court of Appeal held that the San Diego Board of REALTORS® created an illegal tying arrangement when it conditioned participation in its multiple listing service on Board membership.
With approval from the NATIONAL ASSOCIATION OF REALTORS® (NAR) and the California Association of REALTORS® (CAR), the San Diego Board of REALTORS® (SDBR) operated a multiple listing service (MLS), to which only members of all three associations had access. SDBR allowed only exclusive right to sell listings on the MLS. SDBR encouraged members to maintain uniform commission rates (6%) and to follow a uniform commission splitting formula (50/50) when using the MLS.
In 1976, the state sued SDBR , NAR, and CAR, alleging that the exclusion of non-members from use of the MLS constituted an illegal tying arrangement. This was based on the belief that the tying product (the MLS) was linked to the tied product (membership in all three associations). The state also claimed that encouraging maintenance of uniform commission rates constituted price-fixing. These activities were alleged to violate the Cartwright Act (California Antitrust Statute) and the unfair competition statutes.
The California Court of Appeal addressed the tying arrangement by stating that a tie-in is per se illegal if two elements are met: (1) two separate products are tied, and (2) the seller has "sufficient economic power" over the tying product to restraint free competition in the tied product. The second element, sufficient economic power, is met if: (a) the seller has a dominant monopolistic position in the tying product, or (b) the tie-in restrains a substantial volume of commerce in the tied product. The court found that SDBR had a domainant monopolistic position in the tying product (the MLS) and that a substantial volume of commerce in the tied product (membership in all three associations) had been restrained. The court further held that a consideration of actual constraint of competition in the tied product is not necessary. Thus, because SDBR met all of the elements required for a finding of per se illegality, the court held there was an illegal tying arrangement. The court also held that price-fixing had occurred.
People v. National Association of Realtors® (San Diego II), 155 Cal. App. 3d 578, 202 Cal. Rptr. 243 (Cal. Ct. App. 1984).