Have the Tables Turned in the Neighborcity Cases?
Who are the Real Data Pirates?
Multiple Listing Services (MLSs) around the country that launched an offensive against Neighborcity (“AHRN”) may have reason for pause because the legitimacy of AHRN’s counterclaims was just affirmed in the Minnesota Northstar MLS (“Northstar”) case. Northstar, claiming a copyright on “their” data (obtained by fiduciaries in the course of their duties), sued AHRN, a so-called “data pirate,” for redistributing sellers’ listing data to the public. Northstar may now find that they made a collasal error as the real story appears to be emerging.
According to AHRN’s counterclaim, Northstar and other MLSs have refused to license “their” seller data to AHRN because AHRN discourages dual agency and refuses to feature listing brokers on its site (a pro-consumer position that CAARE embraces). In its counterclaim, AHRN alleges multiple antitrust allegations including that Northstar and other MLSs started a group boycott against AHRN encouraging members not to accept referrals from AHRN.
We believe that AHRN may have legitimate and very significant claims against Northstar. Apparently, so does the Judge.
Judge Tunheim, in his recent Order (click here to see the Order) refusing to dismiss AHRN’s counterclaim spelled out how this MLS action may have exposed the Northstar MLS to liability for antitrust violations. In fact, we believe that AHRN’s counterclaim has now become the primary focus of this matter. Northstar MLS may have opened a Pandora’s Box of issues and they may find themselves wishing they had never filed this case. In our opinion, this case is no longer about whether AHRN violated copyright laws, but whether Northstar engaged in anticompetitive conducts in refusing to license data to AHRN. If AHRN wins their counterclaims, they will no longer be the bad guy, but the victim of restraint of trade. Those brokers who have refused to do business with AHRN may be construed to be conspirators to a group boycott.
CAARE advocates that data obtained by real estate fiduciaries be used only for their clients’ best interests and never for self-serving purposes. For us, this case raises many consumer concerns and some potential consumer causes of action beyond the issues in the case. Did Northstar improperly convert seller data obtained by fiduciaries and did they manipulate the distribution of that data in such a way as to wrongly increase their clients’ exposure to dual agency? If the MLSs did improperly convert fiduciary data that would make them the data pirates, not AHRN.
AHRN’s Counterclaim – You Decide (some of the key points in the Order)
Consider some of the allegations in AHRN’s counterclaim and findings of the Court and decide for yourself who might win this case.
1 .RMLS, NAR, other MLSs, and member-brokers of RMLS conspired to unreasonably restrain trade.
2. RMLS, NAR, other MLSs and member-brokers of RMLS initiated a “group boycott” to refuse to engage in good faith negotiation with AHRN on licensing agreements.
3. RMLS, NAR and other MLSs coordinated assertion of invalid copyright claims for the purpose of suppressing competition in the market for real estate brokerage referrals and the market for real estate agent services.
4. AHRN has been damaged because RMLS dissuaded brokers and agents with RMLS’s service area from entering referral agreements with AHRN and prohibited AHRN’s access to information about properties on the market.
5. RMLS’s anticompetitive conduct causes harm to consumers in the real estate market by suppressing information about and access to agents who are independent of listing brokers and agents and discouraging price competition for brokerage services and for home prices.
6. “The Court finds that AHRN has sufficiently alleged that RMLS’s petitioning activities were a sham. For example, AHRN alleges that, in the instant action, RMLS has asserted a copyright over the manner in which the facts and data are compiled on NorthstarMLS, even though the RMLS database is built on software RMLS did not design and does not own.23 AHRN also alleges that RMLS did not take the photographs over which it claims copyrights, and that it did not obtain the written assignments of these copyrights from the photographers that are required under the Copyright Act. These allegations, if true, could show that RMLS’s threats and pursuit of litigation against AHRN were in fact a sham.”
7. The Court finds that AHRN has alleged a plausible conspiracy among RMLS, other MLSs and NAR. “First, AHRN alleges that it received thirty similar cease and desist letters after NAR held its annual meeting in California. AHRN alleges that, at this meeting, there were discussions regarding the perceived threat that AHRN posed to the industry and what the industry could do to shut down AHRN. These allegations create a plausible relationship between the NAR meeting and the cease and desist letters. Second, AHRN alleges that Mosey sent an e-mail suggesting that AHRN should not think that MLSs were “unconnected, unserious, and more noise than threat.” This e-mail could further suggest an agreement between RMLS and other MLSs. Third, AHRN alleges that NAR voted at a later meeting to fund this action and other legal actions and adopted exclusionary rules. This allegation further supports the possibility of an agreement to pursue concerted action. Fourth, when AHRN approached third-party syndicators – through whom RMLS and other MLSs license the use of their data to other websites – it was allegedly told that the syndicators were not permitted to extend a license to AHRN because AHRN did not direct potential home buyers to a listing broker’s website. This allegation also raises the possibility of an agreement to pursue concerted action by suggesting that RMLS and other MLSs may have instructed third-party syndicators not to deal with companies who did not comply with their preferred business model. At this stage, the Court therefore finds that AHRN has sufficiently alleged a preceding agreement to engage in concerted action.”
8. AHRN alleged that, “RMLS and its member-brokers colluded to use RMLS as a vehicle to assert false copyright claims that impeded AHRN’s business model and to exclude companies like AHRN from accessing the universe of listings needed to compete. Furthermore, AHRN has alleged that RMLS and its member-brokers dissuaded brokers and agents within RMLS’s service area from entering referral agreements with AHRN.”
9. The Court finds, at this stage, that AHRN has sufficiently alleged a group boycott that amounts to a per se violation. First, AHRN alleges that RMLS and its co-conspirators cut off access to the “supply . . . necessary to enable the boycotted firm to compete.” Specifically, AHRN alleges that RMLS and its co-conspirators have cut off access to information that is critical to any business attempting to compete with them. These allegations satisfy the element of cutting off a supply necessary for AHRN and similar businesses to compete. Second, AHRN has alleged that “the boycotting firms possessed a dominant position in the relevant market.” See id. As noted above, AHRN alleges that there is no practical way for it to compete without licensing information directly from RMLS because RMLS and its co-conspirators dominate the market and information regarding home listings. Third, AHRN has alleged that the challenged practices were “not justified by plausible arguments that they were intended to enhance overall efficiency and make markets more competitive.” AHRN alleges that RMLS will only deal with competitors who comply with the business model of referring customers to listing brokers, which is allegedly intended to increase member-brokers’ profits at the expense of competitors and is not intended to enhance overall efficiency or to make markets more competitive. These allegations are sufficient to raise per se violation claim.
10. The Court finds that AHRN has alleged that RMLS’s business model has anti-competitive effects. Specifically, AHRN alleges that RMLS and its co-conspirators promote “dual-agency home sales,” wherein a seller and buyer’s agent are associated with the same agency. According to AHRN, because commissions are based on the sale price of the home, a broker and agent relying on dual agency have little incentive to negotiate in the interests of either the buyer or the seller, and both the buyer and the seller lose any right to independent advice and representation from the agent and broker. AHRN also alleges that the behavior of RMLS and its co-conspirators serves to increase the price of referral fees by excluding actors like AHRN from the market.
11. The Court finds, however, that AHRN has plausibly alleged that RMLS and its co-conspirators have attempted to restrict access to real estate listings to parties who will send potential home buyers to listing agents’ companies, thereby eliminating competition from those that do not comply with RMLS’s business model.
12. AHRN has alleged that the dual-agency process results in less negotiation on behalf of customers after these initial prices are set. Thus, AHRN has plausibly alleged that the conspiracy has an effect on home prices and commissions.
13. RMLS also argues that AHRN has not alleged that its activities produced significant anticompetitive effects because it has not plausibly alleged market foreclosure. Specifically, RMLS claims that AHRN is able to access “for sale by owner” and foreclosure listings and has already shown that it has entered into licensing agreements with over 180 Minnesota licensed real estate brokers and approximately fifty Minnesota licensed real estate agents. The Court finds, however, that AHRN has plausibly alleged that there are no reasonable alternative sources of complete real estate data than from MLSs and that RMLS’s refusal to license its data therefore had an effect on the ability of businesses like AHRN to compete.
14. AHRN alleges that, by advising its member-brokers that information obtained and used by AHRN on its NeighborCity website is subject to valid copyright protection, and that AHRN’s use of such information is unlawful, RMLS has disparaged the services and business of AHRN with false and misleading statements.