In Pomanowski v. Monmouth County BOR®, the Supreme Court of New Jersey addressed a practice of the Monmouth County Board of REALTORS® which denying non-members access to a multiple listing service (MLS). The court held that the Board's denial of access was reasonable and did not violate the New Jersey Antitrust Act.
Pomanowski, a licensed real estate broker, operated the Thompson Agency in Monmouth County. The Monmouth County Board of REALTORS® (Board) operated the county MLS. Board membership was available to all on precisely the same terms: the securing of a valid real estate broker's license, and the payment of Board dues and an MLS initiation fee. However, a Board bylaw conditioned access to the MLS on Board membership. From 1972 to 1977, Pomanowski was a Board member and had access to the MLS. In April 1977, Pomanowski voluntarily terminated his membership by not paying dues, and was denied participation in the MLS. Shortly thereafter, Pomanowski sued the Board, the MLS, the NATIONAL ASSOCIATION OF REALTORS® (NAR), and several Board and MLS officers. The suit alleged that by conditioning access to the MLS in membership to the Board, the defendants had restrained trade in violation of the New Jersey Antitrust Act.
The Supreme Court of New Jersey affirmed the trial court's decision that the Rule of Reason was applicable to this case. The lower court recognized that there were two standards of review for anti-competitive activity: either it was condemned automatically as a per se violation, or if the restrictive conduct was not "manifestly anti-competitive," the Rule of Reason Test applied. The supreme court found the Board's practices were not per se violations and applied the Rule of Reason.
The Rule of Reason Test relies on a balancing process that calls for a definition of the relevant market(s) in which the alleged restraint operates and weighing the pro-competitive benefits of the practice against any anti-competitive effects. Regarding the first prong, the Supreme Court of New Jersey found that the Monmouth County residential real estate market was the target area. The court then held that the Board, by participating in 25% to 29% of ALL real estate sales in the county, maintained enough market power to warrant further review.
Turning to its examination of the defendants' impact upon the defined market, the Supreme Court of New Jersey found several pro-competitive effects. The most important benefit provided by the MLS was the potential stimulation of competition in the market by placing listings in the hands of all brokers in the area. With regard to anti-competitive impact, the court stated that where the MLS service has substantial market power, an excluded broker may be unable to compete effectively. However, the court concluded that in this case there were no exclusionary conditions attached to Board membership, no contentions that the cost was prohibitively high, and no showing that elimination of the access rule would affect pro-competitive benefits. The court also stressed that Pomanowski voluntarily withdrew from the Board. Thus, the court held that under these circumstances, the Board, by conditioning access to the MLS on Board membership, created a reasonable restraint of trade that did not violate the New Jersey Antitrust Act.
Pomanowski v. Monmouth County BOR®, 89 N.J. 306, 446 A.2d 83 (N.J. 1982).