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Wells v. Greater Lowell BOR: First Circuit Holds Membership-Based Access to MLS Does Not Constitute per se Tying Arrangement

In Wells v. Greater Lowell Board of REALTORS®, the First Circuit addressed tying arrangements in the context of Board membership as a condition of MLS participation. The court held that limiting access to the MLS to members of the real estate board operating the MLS was not a per se illegal tying arrangement.

Wells Real Estate, Inc. (Wells) was a brokerage that sold homes in the Lowell, Mass. area. The Lowell Board of REALTORS® (Board) operated an MLS in the area. Participation in the MLS was limited to Board members. Wells chose not to join the Board. Wells sued the Board for alleged violations of the Sherman Antitrust Act. Among its other allegations, Wells claimed that the MLS constituted an illegal tying arrangement. Wells argued that access to the MLS may not be conditioned on joining the Board and adhering to its rules. The district court granted directed verdicts to the defendants on all claims.

The First Circuit stated that tying arrangements involve the use of leverage over the market for one product (tying product) to coerce purchase of a second product (tied product). In this case, the MLS is the alleged tying product, and Board membership is the tied product. The court found that in order to establish an illegal tying arrangement, the plaintiff must prove three elements: (1) an actual tie exists between two separate products, such that purchase of one is conditioned on purchase of the other; (2) the seller has sufficient "market power" in the tying product to compel acceptance of the tied product; and (3) the tie affects a "not insubstantial" amount of interstate commerce in the market for the tied product.

In applying this rule of law, the First Circuit stated that it was doubtful whether the case at hand constituted a "tie" of separate "products." The court held that Wells failed to show that there was any "market" for memberships in real estate trade associations - the tied product - in which competition was being restrained since the Board operated the only real estate trade association in the area where Wells conducted business.

The First Circuit found that the Board was not a "seller" in the usual sense of the term, but rather a trade organization, offering the MLS as one of the advantages gained by joining that trade organization. The court concluded that whether or not it was subject to challenge on other antitrust grounds, this arrangement was not a matter of invalid tying.

Wells v. Greater Lowell Board of REALTORS®, 850 F.2d 803 (1st Cir. 1988).