What Should the Scope of MLS Services Be?
At the 2013 Council of MLS conference, The Realty Alliance (TRA), a group of large brokerages, put MLSs on notice that a number of MLS practices were angering some participant firms. In TRA’s brokers’ eyes, MLSs were providing products and services out of the MLSs’ scope – for example, agent websites, CRM, property marketing tools, showing systems, transaction management systems, and MLS public-facing websites — and requiring brokers to pay for these items as a part of their MLS dues. TRA complained about MLSs “pushing NAR to add as many items as possible to the list of ‘basic’ MLS functions to force participants to pay for them, whether they want them or intend to use them or not.” For those not up to speed on how NAR categorizes MLS services, here is a summary [1]:
Core: Core MLS information, services, and products are essential to the effective functioning of MLS, as defined, and include current listing information and information communicating compensation to potential cooperating brokers
Basic: In addition to core services, an MLS may also provide additional information and services in a basic package of MLS information, services, and products, as determined locally and provided automatically or on a discretionary basis, such as: sold and comparable information, pending sales information, expired listings and “off market” information, tax records, zoning records/information, title/abstract information, mortgage information, amortization schedules, mapping capabilities, statistical information, public accommodation information, MLS computer training/orientation, and access to affinity programs.
Optional: An MLS may not require a participant to use, participate in, or pay for the following optional information, services, or products: lock box equipment including lock boxes (manual or electronic), combination lock boxes, mechanical keys, and electronic programmers or keycards; advertising or access to advertising (whether print or electronic), including classified advertising, homes-type publications, electronic compilations, including Internet home pages or Web sites, etc.
Although it seems clear above that MLSs cannot require a participant to pay for optional items, NAR policy goes on to state that “None of the foregoing precludes an association or MLS from utilizing association or MLS reserves, dues, or fees or special assessments … to acquire assets … necessary to make optional information, services, or products available.” Is anyone else confused yet?
What really set TRA in motion to articulate its members’ issues was back in May 2013, when NAR, over their objections, added the “establishment, maintenance or promotion of public-facing websites” to “basic” services. While I, myself, believe that such websites are in the best interests of MLS subscribers and consumers, no rigorous arguments to that effect were made before the rules were changed, so I understand why TRA brokerages were angry about the inclusion of public facing websites. I feel that what has been missing from the conversation regarding MLS public-facing displays as well as well as what else should be included in the litany of “basic services” is the answer to the following question: “What are the principles by which MLS information, services, and products belong in the categories of core, basic, and optional?”
At the heart of answering that question is the definition on what an MLS is. According to NAR, an MLS is [2]:
- a facility for the orderly correlation and dissemination of listing information so participants
may better serve their clients and customers and the public,
- a means by which authorized participants make blanket unilateral offers of compensation to other participants (acting as subagents, buyer agents, or in other agency or non-agency capacities defined by law),
- a means of enhancing cooperation among participants,
- a means by which information is accumulated and disseminated to enable authorized, participants to prepare appraisals, analyses, and other valuations of real property for bona fide clients and customers, and
- a means by which participants engaging in real estate appraisal contribute to common databases.
It’s important to go back to this definition because of how it relates to antitrust tying concerns. In its most simple terms, tying is the practice of requiring the purchase of one product that a buyer does not want in order for the buyer to be able to purchase a product the buyer does want. The core of one of the four tests for illegal tying is that “there must be two separate products.” How does one determine whether the products are separate? We have to look at how the product is defined, and in this case, the product we’re looking at is “MLS services”. Each bullet point in the definition of MLS services effectively spells out a core principle, which is a test for how appropriate it is for a product or service to be included in the basic MLS package. Without being aware of such principles, it must seem to broker’s as though MLSs are acting without rhyme or reason. If items fall under this definition, they are clearly core or basic, and if they don’t, they should probably not be site-licensed by the MLS or included in base fees.
One part of the definition of MLS, “Enhancing cooperation among participants,” seems excitingly malleable, and one could ask why requiring use of a common lock box system – something that enhances cooperation tremendously — doesn’t universally fall under that definition as something that could be considered a “basic” product rather than as an unrelated “optional” product. [3]
I would like to suggest that there are some additional principles that should be considered, and possibly addressed in the NAR policies and definitions. These principles should supplement the principles mentioned above, while keeping in mind their potential antitrust implications:
- Does the product or service require many or all MLS subscribers to use it to achieve benefits from it? Professional collaboration tools (i.e. transaction management and showing systems) would fall under this principle. Yes, I am aware that TRA does not like MLSs fielding these products in some markets – that’s why we need a principle-based discussion regarding both viewpoints.
- Does the product or service help participants better serve their clients but is it economically or otherwise infeasible for any one participant to field the product or service on their own? This principle could go beyond “listing information”; frankly, I would like to see the word “listing” struck from the first part of the NAR definition, because it is very out-of-date to think that Realtors® are not expected by their clients to provide a wide array of data and services.
- Does the product or service require a level of integration into core systems that would not be feasible from an economic and/or interface perspective if every broker or agent selected their own?
- Is there an overarching subscriber economic interest?
These additional principles don’t necessarily stand on their own; the product or service would need to help fulfill part of the definition of MLS as well.
I understand that MLSs want clear guidance from NAR, and the lists of core, basic and optional elements have served that role, but perhaps these examples would be better located in some sort of policy implementation guide rather than in the policy itself. I believe it would be better for the MLS policy to focus more on the principles that would allow one to determine the categories into which future products and services would fit. If we do this, it will be far clearer what constitutes an MLS product versus a separate product and brokers will be able to have a better-structured and more productive conversation with MLSs at the local level on which products and services should be offered by the MLS.
[3] It’s understood that in some markets (not those in the First, Second, and Eighth Circuits) lock boxes can be treated in much the same way as a “basic” product is – if the MLS does not derive economic benefit from it. But this assumes lock boxes fail the other tests and must rely on this “economic benefit” argument.