Antitrust enforcement in eras of financial crisis

I was talking with a friend recently, a mortgage banking executive, who expressed amazement at the extent to which the government seemed to be allowing mergers of big banks that would previously have raised significant antitrust concerns. I had not given it a great deal of thought, and I must admit that I've been occupied with other issues, so I was pleased to note that the ABA's Section of Antitrust Law has published two short articles regarding antitrust enforcement relating to mergers in an era of financial crisis.

The first, Marc Winerman's "Antitrust and the Crisis of '07," tells the tale of Teddy Roosevelt's involvement in the 1907 acquisition by U.S. Steel of Tennessee Coal and Iron, purportedly calculated to avert a broad U.S. financial crisis. This little history is generally accessible, even to those who do not practice law.

The second, "Bank Consolidation Caused by the Financial Crisis: How Should the Antitrust Division Review 'Shotgun Marriages,'" is by Jonathan M. Rich and Thomas G. Scriven. This one addresses how antitrust enforcers are dealing today with pre-merger antitrust review in situations where the government is attempting keep financial institutions from failing. This one is harder to read if you aren't an antitrust attorney, but the gist of it will be pretty clear to most readers. (Email me if you want to know what the Hart-Scott-Rodino and Tunney Acts are about.)

A key contrast between the (19)'07 and (20)'08 crises is the sophistication of the tools available to the government both in terms of antitrust enforcement and of banking regulation.

Why would this matter to MLSs and REALTOR® Associations? It might not, really, but for the fact that such organizations appear to be under close scrutiny by FTC and Department of Justice. I think the message of the articles for us is "Don't expect a financial crisis to give anyone a free pass where antitrust enforcement is concerned."

Of course, no one knows how the change in presidential administrations will impact all of this. I'm waiting with bated breath to find out.

Will MLSs helping Fannie Mae help the market?

Fannie Mae wants MLS data. Should MLSs and brokers give it to them? See my post over on the Geek Estate blog on this subject. You can post comments here or there, whatever rings your bell.

-Brian

Should idealist lawyer seek other employment opportunity?

On a recent post I did about some implications of the DOJ/NAR VOW settlement, The Notorious Rob left a comment that exhibited some cynicism about how MLSs will react to the settlement. He wrote:

As laid out, the incentives are just enormous for an MLS to create public facing websites, dirty up its IDX rules, and have everyone else toe the VOW line -- especially the "signup" requirement that creates a walled garden around listings, except on a MLS website. I just can't imagine why a MLS would not pursue this strategy.

He based this conclusion on some premises, which I think are generally correct. He said:

1) An MLS public website is not subject to the VOW signup requirement.

2) An MLS can create truly ridiculous IDX rules, because IDX was not covered by the NAR-DOJ settlement.

3) An MLS cannot not prohibit brokers/agents from sending listings to Trulia/Zillow/etc. as that would violate Sherman Anti-Trust Act. But the MLS is not required to provide Trulia, Zillow with any data either, unless Trulia signs up as a broker subject to VOW rules.

Rob accused me of not being cynical—music to any lawyer's ears. I admit I often have my head in the clouds, but I try to keep my feet on the ground. I think the scenarios Rob described, while possible, are not likely. Here's why.

First, the "VOW signup requirement" is not all that daunting anymore. So many applications folks use online now require registration. The key is to ensure that the consumer trusts you will not bombard her with crap email after she registers. You cannot use Facebook or MySpace without registering.... In the real estate space, I expect we'll see more applications that rely on registration, or that at least have an "account" mentality. 1000Watt's post about Dwellicious suggests that it might be an example.

Second, I think the VOW policy gives many MLSs incentives to make their IDX rules more open. By including more fields and statuses in IDX, the MLSs can make it easier for a broker to deliver information through the more-regulated IDX method, rather than encouraging her to use a VOW, which is harder for the MLS to regulate and monitor. I have MLS clients that have already indicated to me their intentions to take this approach. (In fact, I speculate that restrictive IDX rules will actually make it easier for brokers to get consumers to register for their VOWs. "I can show you X more listings if you register....")

Third, many MLSs have embarked on "listings syndication," which makes it easy for their brokers to send listings to places like Zillow and Trulia. We did a whitepaper on syndication this last spring (though it seems hopelessly outdated to me now). MLSs recognize the value they can bring to their brokers with syndication. Some still have "protectivist" tendencies, but I think the trend is moving to more syndication.

As to whether public-facing MLS web sites are good or bad, I think there has never been a debate, really. Those who want to believe public-facing MLS sites are good have argued for that view; those who believe they are bad likewise. Each side ignores evidence that does not support it. We did a whitepaper in May with Focus Forward Consulting (Kevin McQueen's firm) that addressed some of the problems with the MLS-public-facing debate. Those problems remain unaddressed. Neither the pro-MLS site camp nor the anti-MLS-site camp has shared with the community meaningful data supporting their central arguments. I don't think anyone wants to pay for research that might prove them wrong....

I suppose one could argue that I'm outwardly optimistic about how MLSs will behave because many of our clients are MLSs, and it's my job to sing their praises. In fact, I can think of a few of our MLS clients who might take Rob's cynical scenario to heart. Frankly, though, if most of our MLS clients were that way, I'd be looking for another job.

NAR publishes VOW implementation materials

NAR has published a packet of information for MLSs affiliated with it to assist them in implementing the new VOW policy under the settlement of the DOJ suit against NAR. The packet includes a cover letter, copy of the policy, model MLS rules, changes to model bylaws, a certification form, and FAQ.

We'll post in near future regarding some of these materials, and we are revising the VOW Clearinghouse to address NAR's model rules.

MLSs under the gun

(Updated 12/3 to reflect the correct implementation deadline as published by NAR.)

Judge Kennelly signed the settlement between NAR and DOJ on November 18, 2008, by its terms, the settlement requires NAR to adopt the VOW policy in Exhibit A of the settlement within five days after that, and it requires that MLSs adopt the VOW policy within 90 days after that. Brokers operating VOWs have 180 days to bring their VOWs into compliance with the new policy. NAR has informed MLSs affiliated with it that MLSs have to implement the VOW policy no later than February 15, 2009, which is a lot closer than it seems.

On the VOW Clearinghouse, we have put together a lot of resources to help MLSs, brokers, and others implement the policy, including a list of things that MLSs must or should do to implement it. Here is a selection four of the more important ones.

1. Determine whether to categorize fields or statuses as confidential, recognizing that doing so means that participants cannot disclose them, even orally, to their brokerage customers.
   
2. Ascertain what state law requires for the formation of broker/consumer relationships. Are disclosures required? Is a contract required? An MLS without an understanding of the answer to these questions will not be able to enforce the VOW policy.
   
3. Develop a process for receiving, evaluating, and granting broker/AVP requests for data feeds, recognizing that each broker/salesperson may have multiple VOWs under Policy Section II.7. MLSs should probably have a standard VOW access agreement (permitted under the Policy) or modify their existing IDX access agreements to address VOWs.
   
4. Prepare to provide a persistent download upon participant request. The download must include all non-confidential listing information.
   

In the coming few days, I'll post on each of these issues, and then discuss some of the other things MLSs must, ought to, and may do when implementing the VOW policy. Looking at the list of MLS To-Dos, which to you think are most important and challenging? Comment on this post or contact me with your thoughts.

-Brian