FOR THE DISTRICT OF SOUTH CAROLINA
The United States of America, by its attorneys acting under the direction of the Attorney General, brings this civil antitrust action pursuant to Section 4 of the Sherman Act, 15 U.S.C. § 4, against Defendant Consolidated Multiple Listing Service, Inc. ("CMLS"), to obtain equitable and other relief to prevent and remedy violations of Section 1 of the Sherman Act, 15 U.S.C. § 1.
The United States complains and alleges as follows:
1. The United States brings this action to prevent CMLS from enforcing rules, regulations, by-laws, policies, and procedures (collectively "Rules") that unreasonably restrain competition among real estate brokers in Columbia, South Carolina and the surrounding areas ("Columbia Area").
2. CMLS is a joint venture comprised of brokers who compete with each other to sell brokerage services in the Columbia Area. CMLS, like other multiple listing services, provides services to its members, including an electronic database of information relating to past and current home listings in the Columbia Area. The database serves as a clearinghouse for the members to communicate information among themselves, such as descriptions of the listed properties for sale and offers to compensate other members if they locate buyers. In addition, the database allows members who represent buyers to search for nearly all the listed properties in the area that match the buyer's needs. By providing an efficient means of exchanging information on home listings, multiple listing services benefit buyers and sellers of real estate, and in turn, buyers of real estate brokerage services, in their service areas.
3. However, that same role makes access to CMLS's database — and therefore membership in CMLS — critically important for any broker seeking to serve clients efficiently in the Columbia Area. Access to the services provided by CMLS is key to being a successful broker, and CMLS is the only provider of such services in the Columbia Area. Therefore, brokers seeking to provide brokerage services in the Columbia Area need to be members of CMLS.
4. CMLS, its Board of Trustees ("Board"), and its members have adopted Rules that govern the conduct and business practices of its approximately 370 members and set standards for the admission of new members. Through these Rules, CMLS's Board and its members have unreasonably inhibited competition over the method of providing brokerage services to consumers in the Columbia Area and have stabilized the price those consumers pay for brokerage services. For example, CMLS's Rules prevent members from providing a set of brokerage services that includes less than the full array of services that brokers traditionally have provided — even if a consumer prefers to save money by purchasing less than all of such services. Additionally, CMLS's Rules require members to use a standard, pre-approved contract that, among other things, prevents its members from offering to a home seller the option of avoiding paying the broker a commission if the seller finds the buyer on her own.
5. CMLS's Rules also require members to conform other aspects of their brokerage businesses in the manner that the group demands. CMLS Rules impose unreasonable objective criteria for membership and contain subjective standards for admission to membership that allow CMLS representatives to deny membership to brokers who might be expected to compete more aggressively or in more innovative ways than CMLS's members would prefer, thereby excluding such brokers or deterring them from seeking membership.
6. Taken together, CMLS's Rules limit competition among brokers, artificially stabilize the price of brokerage services, and deter innovation and the emergence of new brokerage business models. By adopting and enforcing such Rules, CMLS has violated and continues to violate Section 1 of the Sherman Act, 15 U.S.C. § 1.
II. DEFENDANT CMLS, ITS BOARD, AND ITS MEMBERS
7. CMLS is organized as a nonprofit corporation under the laws of the State of South Carolina. Its principal place of business is in Columbia, South Carolina, and its service area encompasses the counties of Richland, Lexington, Saluda, Kershaw, Calhoun, Newberry and Fairfield. CMLS is a joint venture comprised of over 370 competing brokers in the Columbia Area. Affiliated with those CMLS members are over 3,100 other licensed real estate professionals doing business in the Columbia Area.
8. Whenever this Complaint refers to any act or deed of CMLS, it means CMLS engaged in the act or deed by or through its members, officers, directors, Board, committees, trustees, employees, staff, agents, or other representatives while they were actively engaged in the management, direction, or control of CMLS's business or affairs.
9. Various persons and entities, not named as defendants in this action, have participated as conspirators with CMLS in the offense alleged in this Complaint, and have performed acts and made statements to further the conspiracy.
III. JURISDICTION AND VENUE
10. This Court has subject matter jurisdiction over this action under Section 4 of the Sherman Act, 15 U.S.C. § 4, and 28 U.S.C. §§ 1331, 1337(a), and 1345.
11. Venue is proper in this District and this Division under 15 U.S.C. § 22, 28 U.S.C. § 1391(b), and Civil Local Rule 3.01 because CMLS maintains its principal place of business, transacts business, and is found within this District and this Division.
IV. EFFECT ON INTERSTATE COMMERCE
12. The activities and the violations by CMLS alleged in this Complaint affect consumers located in South Carolina and in other states. CMLS members have provided and continue to provide residential brokerage services to in-state and out-of-state residents seeking to buy or sell real estate in the Columbia Area. In 2005, CMLS members facilitated the sale of real property worth more than $2 billion and they collected commissions of over $125 million for their services. Many of the real properties sold in transactions involving CMLS members are purchased with mortgages from out-of-state lenders and mortgage payments often are made across state lines. CMLS's activities and violations are in the flow of, and have a substantial effect on, interstate commerce.
V. CONCERTED ACTION
13. CMLS is a combination or conspiracy among its members, who are brokers that compete with one another in the Columbia Area. The members of CMLS, as a group and through the Board they elect and the staff they indirectly employ, have agreed to, adopted, maintained, and enforced Rules affecting the method of members' provision of brokerage services, participation in CMLS, and access to CMLS's services, including access to the electronic listings database. CMLS's Rules are therefore the product of agreements and concerted action among its members.
VI. RELEVANT MARKETS
14. The provision of brokerage services to sellers of residential real property and the provision of brokerage services to buyers of residential real property are relevant service markets within the meaning of the antitrust laws.
15. The brokerage business is local in nature. Most sellers prefer to work with a broker who is familiar with local market conditions. Likewise, most buyers seek to purchase real estate in a particular city, community, or neighborhood, and typically prefer to work with a broker who has knowledge of the area in which they have an interest. The geographic coverage of CMLS's service area establishes the outermost boundaries of the relevant geographic market, although meaningful competition among brokers may occur in narrower local areas.
VII. BACKGROUND OF THE OFFENSES
Industry and Market Power
16. The vast majority of prospective real estate sellers and buyers engage the services of a broker. Brokers in the Columbia Area are in direct competition with each other to provide brokerage services to consumers.
17. CMLS is the only multiple listing service for the Columbia Area. Among other services that CMLS provides its members is the pooling and dissemination of information on the vast majority of properties available for sale in the Columbia Area. CMLS combines its members' real estate listings information into an electronic database and makes these data available to all brokers who are members of CMLS. By listing information about a property for sale with CMLS, a broker can market it efficiently to a large number of potential buyers. A broker representing a buyer likewise can search the CMLS database to provide the buyer with information about the vast majority of the properties for sale in the Columbia Area.
18. CMLS members use the database to, among other things: communicate to other members the listings information relating to real estate that they have for sale; offer to compensate other members as cooperating brokers if they locate buyers for those listings; and locate real estate for prospective buyers.
19. CMLS also provides records of sold real estate, which are used by brokers working with sellers to set the real property's listing price and to determine what offers to accept. Brokers representing a buyer likewise use the sold data to help buyers determine what price to offer for real estate.
20. Access to CMLS is critical for brokers who wish to serve buyers or sellers successfully in the Columbia Area, and CMLS members account for virtually 100 percent of the real estate brokerage services provided to home buyers and sellers in the Columbia Area. Accordingly, CMLS has market power in the market for real estate brokerage services in the Columbia Area.
Alternative Brokerage Models
21. Brokers who adhere to traditional methods of doing business typically charge a fee calculated as a percentage of the sales price of the real estate. Some brokers outside of the Columbia Area offer alternatives to the traditional methods of providing brokerage services. If brokers offering these alternatives were not restricted from competing in the Columbia Area, they would provide consumers of brokerage services with competitive options and, in the process, would place downward pressure on the prices charged by brokers offering traditional methods of providing brokerage services. However, CMLS's actions have unreasonably restricted such competition in the Columbia Area, thereby depriving consumers of these options and artificially stabilizing prices.
22. Fee-For-Service Models. Some brokers outside of the Columbia Area contract with home buyers and sellers to provide a subset of brokerage services charging only for the services that consumers wish to purchase. Many of these brokers offer their services for a flat fee rather than a percentage of the home's sales price and typically their fees are lower than what traditional brokers charge. One popular service offered by fee-for-service brokers is known as an "MLS listing only," whereby a broker, in exchange for a fee, lists a property on the multiple listing service database, while allowing the seller to handle all other aspects of the transaction. Another fee-for-service package available to consumers outside of the Columbia Area involves the broker handling all aspects of the transaction, except for attending the closing. This is attractive to home sellers who are capable of performing all the necessary closing services themselves, or who have separately retained assistance with the closing, and would prefer not to pay a broker to attend. Through such packages, buyers and sellers can save money by purchasing only the services that they want their broker to provide.
23. Exclusive Agency Listings. Outside of the Columbia Area, brokers also are able to offer consumers the opportunity to save money on commissions and fees by offering an "Exclusive Agency Listing," which is an agreement under which the seller pays no commission or fee to his broker if the seller finds the buyer himself.
24. While these and other competitively significant alternatives to the traditional method of providing brokerage services are available to consumers outside of the Columbia Area, CMLS's actions have unreasonably restricted such competition in the Columbia Area.
VIII. RESTRAINTS ON COMPETITION
25. CMLS has harmed competition among brokers in the Columbia Area to the detriment of consumers. As a result of CMLS's Rules, consumers of brokerage services in the Columbia Area pay higher commissions or fees for brokerage services and have fewer alternatives regarding the method of providing those brokerage services.
26. CMLS achieves these adverse effects by adopting and enforcing the following Rules, among others:
27. On April 17, 2008, after the United States informed CMLS of its intention to bring this action, CMLS's counsel told counsel for the United States that it had voted to amend some of its Rules. CMLS's counsel told counsel for the United States that the amendments affect some of the Rules listed in Paragraph 26, but that other of the rules about which the United States complains have not been changed. CMLS has not identified for the United States the precise changes that CMLS made to its Rules despite requests that it do so. Even if CMLS has changed some of its rules, those rules may well continue to violate the antitrust laws. Furthermore, even if CMLS, in the face of this lawsuit, has in fact brought some of its rules into conformity with the antitrust laws, CMLS retains complete discretion to make further changes to those rules that would unduly restrict competition and thus violate the federal antitrust laws.
28. Taken individually or in conjunction with each other, the Rules restrain trade, and are not reasonably necessary to make a multiple listing service more efficient or effective nor to achieve any other procompetitive benefits. Therefore, the Rules are anticompetitive and, as a result, consumers of brokerage services in the Columbia Area pay higher commissions or fees for brokerage services and have fewer choices among types of brokers and the method of providing the brokerage services they offer.
IX. VIOLATION ALLEGED
29. CMLS's adoption and enforcement of the Rules described above constitutes a contract, combination, or conspiracy among CMLS and its members that unreasonably restrains competition in the Columbia Area brokerage markets in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.
30. The aforesaid contract, combination, or conspiracy has had and will continue to have anticompetitive effects in the relevant markets including: stabilizing the price of broker commissions and fees; reducing competition on the method of providing brokerage services; raising barriers to entry; and suppressing innovation.
31. This contract, combination, or conspiracy is not reasonably necessary to accomplish any of CMLS's legitimate goals.
X. REQUEST FOR RELIEF
WHEREFORE, the United States prays that final judgment be entered against CMLS declaring, ordering, and adjudging that:
Dated: May 2, 2008