In State ex rel. Miller v. Cedar Rapids Board of REALTORS®, the Supreme Court of Iowa addressed the reasonableness of board membership as it related to MLS access. The court held that if all membership criteria were reasonable and if membership was available to all applicants on the same terms, that MLS access could be limited to board members.
The Cedar Rapids Board of REALTORS® (Board) operated a MLS in Linn County, Iowa. Members paid a Board initiation fee of $500 and a monthly MLS charge of $29 per listing book. A Board rule limited MLS participation to members of the Board. No one who applied for Board membership had ever been denied. The State of Iowa sued the Board and alleged that the rule limiting MLS participation to Board members violated Iowa Competition Law. The complaint did not allege that the membership criteria were unreasonable, but rather advanced the theory of Glendale Board of REALTORS® v. Hounsell, 72 Cal. App. 3d 210, 139 Cal. Rptr. 830 (1977), infra. Hounsell holds that if access to the board's MLS provides a significant competitive advantage over competitors in that market, then any board rule excluding non-members from MLS participation is illegal.
The Supreme Court of Iowa held that the test for gauging whether a restraint is undue or unreasonable was the Rule of Reason. The court found that the MLS had several pro-competitive aspects, and that there was extensive cooperation between MLS members and non-member brokers. The supreme court also affirmed the lower court holding that the Board's membership criteria were reasonable and its rule against non-member MLS participation was lawful.
In examining the evidence under the Rule of Reason, the Supreme Court of Iowa stated that competition enhancing mechanisms like a MLS should not be enjoined simply because their reasonable and non-discriminatory rules and regulations impose certain burdens on competitors. The court held that because the membership requirements were reasonable and because there was extensive cooperation between members and non-members, denial of MLS access to non-members did not unreasonably restrain trade. The court also held that so long as Board membership was available to all on a nondiscriminatory basis, the Board would not be required to share one of the membership benefits with brokers who, for whatever personal or business reasons, declined to join.
State ex rel. Miller v. Cedar Rapids Board of REALTORS®, 300 N.W.2d 127 (Iowa 1981).