United States v. National Association of Realtors; Response to Public Comments on the Proposed Final Judgment, 65616-65681 [E8-25989]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 73, Number 214 (Tuesday, November 4, 2008)]
[Notices]
[Pages 65616-65681]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-25989]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. National Association of Realtors; Response to 
Public Comments on the Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes the public comments 
received on the proposed Final Judgment in United States v. National 
Association of Realtors, No. 05-C-5140, and the response to the 
comments. On October 4, 2005, the United States filed an Amended 
Complaint alleging that the National Association of Realtors (``NAR'') 
violated Section 1 of the Sherman Act, 15 U.S.C. 1, by adopting 
policies that suppress competition from real estate brokers who use 
password-protected ``virtual office Web sites'' or ``VOWs'' to deliver 
high-quality brokerage services to their customers. The proposed Final 
Judgment, filed on

[[Page 65617]]

May 27, 2008, requires NAR to repeal the challenged policies and to 
adopt new rules that do not discriminate against brokers who use VOWs. 
Copies of the Amended Complaint, proposed Final Judgment, Competitive 
Impact Statement, Public Comments, the United States' Response to the 
Comments, and other papers are currently available for inspection in 
Suite 1010 of the Antitrust Division, Department of Justice, 450 5th 
Street, NW., Washington, DC 20530, telephone: (202) 514-2481, on the 
Department of Justice's Web site (https://www.usdoj.gov/atr), and the 
Office of the Clerk of the United States District Court for the 
Northern District of Illinois. Copies of any of these materials may be 
obtained upon request and payment of a copying fee set by Department of 
Justice regulations.

J. Robert Kramer II,
Director of Operations, Antitrust Division.

United States District Court for the Northern District of Illinois, 
Eastern Division, United States of America, Plaintiff, v. National 
Association of Realtors, Defendant

[Civil Action No. 05 C 5140]
Judge Kennelly

Response of the United States to Public Comments on the Proposed Final 
Judgment

Table of Contents

I. Procedural History
II. Summary of the Allegations in the Amended Complaint
    A. Overview
    B. Multiple Listing Services
    C. VOW Brokers
    D. The Challenged Policies
III. Summary of Relief To Be Obtained Under the Proposed Final 
Judgment
IV. Standard of Judicial Review
V. Summary of Public Comments and the Response of the United States
    A. Comments Submitted by Entities Operating VOWs
    1. Comments Submitted by ZipRealty
    2. Comments Submitted by Prudential Real Estate Services 
Company, LLC, and Prudential Real Estate Affiliates, Inc.
    3. Comments Submitted by Home Buyers Marketing II
    B. Comments Submitted by Exclusive Buyer Agents
    C. Comments Submitted by MLS4owners.com
    D. Comments That Do Not Address the Amended Complaint or 
Proposed Final Judgment
VI. Conclusion

Index to Comments

    Attachment 1: Comments submitted by Zip Realty, Inc.
    Attachment 2: Comments submitted by Prudential Real Estate Services 
Company, LLC, and Prudential Real Estate Affiliates, Inc.
    Attachment 3: Comments submitted by Home Buyers Marketing II, Inc.
    Attachment 4: Comments submitted by the National Association of 
Exclusive Buyer Agents.
    Attachment 5: Comments submitted by the Buyer's Broker of Northern 
Michigan, LLC.
    Attachment 6: Comments submitted by MLS4owners.com.
    Attachment 7: Comments submitted by Realty Specialist, Inc.
    Attachment 8: Anonymous comments from brokers in Montgomery County, 
Pennsylvania.
    Attachment 9: Anonymous comments from broker in San Jose, 
California.
    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act (``APPA'' or ``Tunney Act''), 15 U.S.C. 16(b)-(h), the 
United States responds to nine public comments concerning the proposed 
Final Judgment that has been lodged with the Court for eventual entry 
in this case. After review of the comments, the United States has 
concluded that the proposed Final Judgment, with minor modifications to 
which Defendant National Association of Realtors (``NAR'') has agreed, 
will provide an effective and appropriate remedy for the antitrust 
violation alleged in the Amended Complaint. The United States will move 
the Court for entry of the proposed Final Judgment on November 7, 2008, 
as ordered by the Court, after the comments and this Response have been 
published in the Federal Register, pursuant to 15 U.S.C. 16(d).

I. Procedural History

    The United States brought this civil antitrust action against NAR 
on September 8, 2005, to stop NAR from violating Section 1 of the 
Sherman Act, 15 U.S.C. 1, by its suppression of competition from real 
estate brokers who use password-protected ``virtual office Web sites,'' 
or ``VOWs,'' to deliver high-quality brokerage services efficiently to 
consumers. On May 27, 2008, the United States and NAR reached a 
settlement. On that day, the United States filed a Stipulation and 
proposed Final Judgment to eliminate the likely anticompetitive effects 
of NAR's policies.
    The United States and NAR have stipulated that the proposed Final 
Judgment may be entered after compliance with the APPA. Pursuant to 
that statute, the United States filed a Competitive Impact Statement 
(``CIS'') on June 12, 2008; the proposed Final Judgment and CIS were 
published in the Federal Register on August 14, 2008 \1\; and a summary 
of the terms of the proposed Final Judgment and CIS, together with 
directions for the submission of written comments relating to the 
proposed Final Judgment, was published for seven days in the Washington 
Post, from June 27th to July 3rd, and in the Chicago Tribune, from July 
7th to July 13th. NAR filed the statement required by 15 U.S.C. 16(g) 
on June 10, 2008.
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    \1\ 73 FR 47613. An incorrectly typeset version of the proposed 
Final Judgment and CIS had been published in the Federal Register on 
June 25, 2008. 73 FR 36104.
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    The sixty-day public comment period ended on October 13, 2008. The 
United States received nine comments, which are addressed below.

II. Summary of the Allegations in the Amended Complaint

A. Overview

    The United States' Amended Complaint challenged policies adopted by 
NAR that restrain the ability of real estate brokers to use VOWs to 
serve their customers and clients. NAR is a trade association that 
promulgates rules that govern the operation of its approximately 800 
affiliated multiple listing services (``MLSs'') across the United 
States. The Amended Complaint alleged that, through its ``VOW Policy,'' 
adopted on May 17, 2003, and its ``Internet Listings Display Policy'' 
(``ILD Policy''), adopted on September 8, 2005 (collectively, the 
``Challenged Policies''), NAR suppressed new and efficient competition 
and harmed consumers. By enjoining NAR from permitting its affiliated 
MLSs to adopt the Challenged Policies, innovative broker members of 
NAR's 800 affiliated MLSs would be free to use VOWs to provide their 
customers better service at a lower cost.

B. Multiple Listing Services

    MLSs are joint ventures among virtually all residential real estate 
brokers operating in local or regional areas. NAR's MLS rules require 
member brokers who have been hired by home sellers to market their 
properties to submit information about those listed properties to the 
MLS.\2\ The MLS

[[Page 65618]]

compiles this information into a database containing all properties 
listed for sale through member brokers. Member brokers can then search 
the listings database for properties that prospective buyers might be 
interested in purchasing.
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    \2\ For this service, home sellers typically agree to pay real 
estate brokers a commission based on the ultimate sales price of the 
property. Listing brokers create incentives for other MLS members to 
try to find buyers for their listed properties by submitting to the 
MLS with each new listing an ``offer of cooperation and 
compensation,'' identifying the amount (usually specified as a 
percentage of the listing broker's commission) that the listing 
broker will pay to any other broker who finds a buyer for the 
property.
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    As alleged in the Amended Complaint, MLSs possess substantial 
market power because brokers regard participation in the MLS to be 
critical to their ability to effectively compete with other brokers for 
home buyers and sellers. By participating in the MLS, brokers can 
promise seller clients that the information about the seller's property 
will immediately be made available to all other brokers in the area. 
Brokers who work with buyers can likewise promise them access to the 
widest possible array of properties listed for sale through brokers. To 
compete successfully, a broker must be an MLS member. To be a member, a 
broker must adhere to any restrictions imposed by the MLS.

C. VOW Brokers

    NAR's rules permit brokers to provide to prospective buyers 
information from the MLS about all properties that satisfy the buyers' 
expressed needs or interests. Brokers typically give this information 
to buyers by hand, mail, fax, or e-mail. While many brokers who use 
VOWs (``VOW brokers'') operate in most respects like other brokers, 
they differ from traditional brokers in their use of their password-
protected VOWs to provide listings to consumers. A VOW broker's 
customers can search for and retrieve MLS listings information on the 
broker's VOW, rather than relying on the personal involvement of the 
broker in all stages of the process of finding a home.
    As alleged in the Amended Complaint, VOWs help brokers operate more 
efficiently and increase the quality of services they provide. For 
example, VOWs enable consumers to search for and retrieve relevant MLS 
listings and educate themselves without the broker's expenditure of 
time. As a result, a VOW broker can spend less time, energy, and 
resources educating customers. Lower costs and increased productivity 
have enabled some VOW brokers to offer commission rebates to their 
buyer customers.
    Some VOW brokers have differentiated themselves further from 
traditional brokers by focusing solely on the high-technology aspects 
of brokerage services that can be delivered over the Internet. Like 
other VOW brokers, these ``referral VOWs'' allow prospective buyers to 
search for homes online, but when buyers are ready to tour homes, the 
referral VOW broker directs them to other brokers or agents who can 
guide them through the negotiating, contracting, and closing process. 
The customers of referral VOWs can benefit from the specialized service 
provided by the referral VOW broker and the broker or agent to whom the 
customer is referred. In some instances, referral VOW brokers have also 
offered commission rebates or other financial benefits to their 
customers.

D. The Challenged Policies

    As alleged in the Amended Complaint, NAR's Challenged Policies 
discriminate against and restrain competition from VOW brokers. They do 
so, most significantly, by denying VOW brokers the ability to use their 
VOWs to provide customers access to the same MLS listings that the 
customer could obtain from all other brokers by other delivery methods. 
Under the ``opt-out'' provisions of the Challenged Policies, NAR 
permitted brokers to withhold their seller clients' listings from 
display on VOWs. NAR's MLS rules otherwise do not permit one broker to 
withhold listings from another broker based on how that competitor 
conveys his or her listings to customers. By blocking VOW brokers from 
allowing their customers to review the same set of MLS listings that 
traditional brokers can provide to their customers, NAR's rules 
restrained VOW brokers from competing in a way that is efficient and 
desired by many customers.
    The Amended Complaint also alleged that the Challenged Policies 
restrained competition from referral VOW brokers. NAR's May 17, 2003 
VOW Policy prohibited referral VOW brokers from receiving any 
compensation for the referral of a customer to another broker. NAR's 
rules do not otherwise restrict broker-to-broker referrals. In its 
September 8, 2005 ILD Policy, NAR revised and reinterpreted its rule on 
MLS membership to prevent referral VOW brokers from becoming members of 
the MLS and obtaining access to MLS listings.
    Finally, the Amended Complaint challenged restrictions on VOW 
brokers' advertising activities and provisions that permitted MLSs to 
degrade the data the MLS provided to VOW brokers.

III. Summary of Relief To Be Obtained Under the Proposed Final Judgment

    As explained in the CIS, the proposed Final Judgment eliminates the 
likely anticompetitive effects of NAR's Challenged Policies, prevents 
the recurrence of anticompetitive effects associated with NAR's 
Challenged Policies, and enjoins NAR from taking future actions to 
discriminate against VOW brokers. The proposed Final Judgment requires 
NAR to repeal its Challenged Policies and to replace them with a 
``Modified VOW Policy'' (attached to the proposed Final Judgment as 
Exhibit A) that makes it clear that brokers can operate VOWs without 
interference from their rivals.\3\ With respect to any issues 
concerning the operation of VOWs that are not explicitly addressed by 
the Modified VOW Policy, the proposed Final Judgment imposes a general 
obligation that NAR and its MLSs not discriminate against VOW 
brokers.\4\
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    \3\ See proposed Final Judgment, ]] V.A-V.D.
    \4\ See id., ]] IV.A-IV.B.
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    Under the Modified VOW Policy, brokers are not permitted to opt out 
and withhold their seller clients' listings from display on VOWs.\5\ 
The Modified VOW Policy instead requires MLSs to provide to VOW 
brokers, for display on their VOWs, all MLS listings information that 
brokers can give customers by all other methods of delivery.\6\
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    \5\ See Modified VOW Policy, ] I.4.
    \6\ See id., ] III.2.
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    The Modified VOW Policy that NAR must adopt under the proposed 
Final Judgment also permits brokers to operate referral VOWs. Some 
existing referral VOWs have established relationships with Internet 
companies or other businesses and consequently have developed 
significant numbers of potential buyer leads. These referral VOWs 
educate those buyers on their VOWs and then refer those buyer customers 
to other brokers once the customers have selected properties in which 
they are interested and are ready to enter the negotiating, 
contracting, and closing process. The Modified VOW Policy expressly 
prohibits MLSs from impeding VOW brokers from referring customers to 
other brokers for compensation.\7\
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    \7\ See id., ] III.11.
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    The Modified VOW Policy allows a broker, who independently 
qualifies for MLS membership by actively endeavoring to provide in-
person brokerage services to buyers and sellers, to either operate its 
own referral VOW or contract with an ``Affiliated VOW Partner'' 
(``AVP'') to operate a referral VOW on its behalf and subject to its 
supervision and accountability. Under the proposed Final Judgment, a 
broker who actively endeavors to obtain some seller clients for whom it 
will market properties or some buyer clients to whom it will offer in-
person brokerage services can become a member of the

[[Page 65619]]

MLS and use MLS data as a member, including to populate its referral 
VOW.\8\
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    \8\ The proposed Final Judgment permits NAR's affiliated MLSs to 
implement new requirements for MLS membership that NAR originally 
adopted with its ILD Policy. See proposed Final Judgment, ] VI.A. 
This revised and reinterpreted membership rule, attached to the 
proposed Final Judgment as Exhibit B, contains an interpretative 
note that explains that a broker who meets the new rule's membership 
requirements cannot be denied membership on the grounds that the 
broker operates a VOW, ``including a VOW that the [broker] uses to 
refer customers to other [brokers].''
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    Additionally, such a broker can designate an entity (even another 
broker) as its AVP, allowing the AVP to receive MLS listings data to 
operate the VOW on behalf of the designating broker.\9\ The MLS must 
provide listings to the AVP on the same terms and conditions as it 
would provide listings to the designating broker, although the AVP's 
rights to the data would be entirely derivative of the rights of the 
designating broker.\10\ An AVP, just like any broker, can, through 
Internet marketing or other relationships, establish sources of 
potential buyer leads. The designating broker can take some or all of 
the buyer leads from its AVP on whatever compensation terms the 
designating broker and AVP agree to.\11\
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    \9\ See Modified VOW Policy, ] III.10.
    \10\ See id.
    \11\ Once an AVP refers a buyer lead to a broker or agent for 
whom it operates a VOW and the buyer registers on the VOW, that 
buyer becomes a customer of the broker or agent.
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    Finally, the Modified VOW Policy prohibits MLSs from using an 
inferior data delivery method to provide MLS listings to VOW brokers 
and from unreasonably restricting the advertising and co-branding 
relationships VOW brokers establish with third parties.

IV. Standard of Judicial Review

    Upon the publication of the public comments and this Response, the 
United States will have fully complied with the APPA and will move the 
Court for entry of the proposed Final Judgment as being ``in the public 
interest.'' 15 U.S.C. 16(e), as amended. Because the United States 
frequently files antitrust actions and consent judgments in the 
District of Columbia, the Court of Appeals for the District of Columbia 
Circuit has been the primary source of judicial interpretations of the 
APPA. No decision from a court in the Seventh Circuit has considered 
the APPA's requirements.
    In making the ``public interest'' determination, the Court should 
review the proposed Final Judgment in light of the violations charged 
in the Amended Complaint, see, e.g., Massachusetts School of Law at 
Andover, Inc. v. United States, 118 F.3d 776, 783 (D.C. Cir. 1997) 
(quoting United States v. Microsoft Corp., 56 F.3d 1448, 1462 (D.C. 
Cir. 1995)), and be ``deferential to the government's predictions as to 
the effect of the proposed remedies.'' Microsoft, 56 F.3d at 1461.
    The APPA states that the Court shall consider in making its public 
interest determination:

    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) The impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

15 U.S.C. 16(e). See generally United States v. SBC Commc'ns, Inc., 489 
F. Supp. 2d 1, 11 (D.D.C. 2007) (concluding that the 2004 amendments to 
the APPA ``effected minimal changes'' to the court's scope of review 
under APPA, and that review is ``sharply proscribed by precedent and 
the nature of Tunney Act proceedings'').\12\
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    \12\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006).
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    As the Court of Appeals for the District of Columbia Circuit has 
held, under the APPA a court considers, among other things, the 
relationship between the remedy secured and the specific allegations 
set forth in the United States' complaint, whether the decree is 
sufficiently clear, whether enforcement mechanisms are sufficient, and 
whether the decree may positively harm third parties. See Microsoft, 56 
F.3d at 1458-62 (D.C. Cir. 1995). With respect to the adequacy of the 
relief secured by the decree, a court may not ``engage in an 
unrestricted evaluation of what relief would best serve the public.'' 
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing 
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see 
also Microsoft, 56 F.3d at 1460-62. Courts have held that:

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted). Cf. BNS, 
858 F.2d at 464 (holding that the court's ``ultimate authority under 
the [APPA] is limited to approving or disapproving the consent 
decree''); United States v. Gillette Co., 406 F. Supp. 713, 716 (D. 
Mass. 1975) (noting that, in this way, the court is constrained to 
``look at the overall picture not hypercritically, nor with a 
microscope, but with an artist's reducing glass''). See generally 
Microsoft, 56 F.3d at 1461 (discussing whether ``the remedies [obtained 
in the decree are] so inconsonant with the allegations charged as to 
fall outside of the `reaches of the public interest' ''). In making its 
public interest determination, a district court ``must accord deference 
to the government's predictions about the efficacy of its remedies, and 
may not require that the remedies perfectly match the alleged 
violations because this may only reflect underlying weakness in the 
government's case or concessions made during negotiation.'' SBC 
Commc'ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 
(noting the need for courts to be ``deferential to the government's 
predictions as to the effect of the proposed remedies''); United States 
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) 
(noting that the court should grant ``due respect to the [United 
States'] prediction as to the effect of proposed remedies, its 
perception of the market structure, and its views of the nature of the 
case'').
    Court approval of a consent decree requires a standard more 
flexible and less strict than that appropriate to court adoption of a 
litigated decree following a finding of liability. ``[A] proposed 
decree must be approved even if it falls short of the remedy the court 
would impose on its own, as long as it falls within the range of 
acceptability or is `within the reaches of public interest.' '' United 
States v. Am. Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982) 
(citations omitted) (quoting United States v. Gillette Co., 406 F. 
Supp. 713, 716 (D. Mass. 1975)), aff'd sub nom. Maryland v. United 
States, 460 U.S. 1001 (1983); see also United States v.

[[Page 65620]]

Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) (approving 
the consent decree even though the court would have imposed a greater 
remedy). To meet this standard, the United States ``need only provide a 
factual basis for concluding that the settlements are reasonably 
adequate remedies for the alleged harms.'' SBC Commc'ns, 489 F. Supp. 
2d at 17.
    Moreover, the district court's role under the APPA is limited to 
reviewing the remedy in relationship to the violations that the United 
States has alleged in the Amended Complaint, and the APPA does not 
authorize the Court to ``construct [its] own hypothetical case and then 
evaluate the decree against that case.'' Microsoft, 56 F.3d at 1459. 
Because the ``court's authority to review the decree depends entirely 
on the government's exercising its prosecutorial discretion by bringing 
a case in the first place,'' it follows that ``the court is only 
authorized to review the decree itself,'' and not to ``effectively 
redraft the complaint'' to inquire into other matters that the United 
States did not pursue. Id. at 1459-60. As the District Court for the 
District of Columbia recently confirmed in SBC Communications, courts 
``cannot look beyond the complaint in making the public interest 
determination unless the complaint is drafted so narrowly as to make a 
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
    In the 2004 amendments to the APPA, Congress made clear its intent 
to preserve the practical benefits of utilizing consent decrees in 
antitrust enforcement, adding the unambiguous instruction ``[n]othing 
in this section shall be construed to require the court to conduct an 
evidentiary hearing or to require the court to permit anyone to 
intervene.'' 15 U.S.C. 16(e)(2). The language effectuated what the 
Congress that enacted the APPA in 1974 intended, as Senator Tunney then 
explained: ``[t]he court is nowhere compelled to go to trial or to 
engage in extended proceedings which might have the effect of vitiating 
the benefits of prompt and less costly settlement through the consent 
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Senator 
Tunney).

V. Summary of Public Comments and the Response of the United States

    The United States received nine comments during the sixty-day 
public comment period. Among the commentors were two significant VOW 
brokers and a real estate franchisor that operates VOWs for hundreds of 
its broker franchisees. These VOW operators are best positioned to 
evaluate the likely effects of the proposed Final Judgment on 
competition from VOW brokers, and none suggested that the public 
interest would not be served by entry of the proposed Final Judgment. 
On the contrary, ZipRealty, which founded its VOW-based brokerage in 
1999 and currently operates in thirty-five major markets in twenty 
states, submitted its comment ``in support of the [p]roposed Final 
Judgment'' because it believes the proposed Final Judgment ``favors 
public and consumer interests.'' Real estate franchisor Prudential, 
which operates VOWs for 480 of its franchisees, also asserted in its 
comments that ``entry of the Proposed Final Judgment is in the public 
interest'' because it ``resolve[s] the fundamental issues raised in the 
[United States' Amended] Complaint against NAR.''
    Upon review and consideration of each of the nine comments, the 
United States believes that nothing in the comments suggests that the 
proposed Final Judgment is not in the public interest. Based on the 
comments, the United States, with the support of NAR, believes two 
minor modifications should be made to the Modified VOW Policy to 
eliminate any ambiguity and to effectuate the intention of the 
parties.\13\ The United States identifies these minor modifications and 
summarizes and addresses each of the comments it received below.
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    \13\ The United States and NAR have also agreed to a third, 
minor modification to the proposed Final Judgment. This modification 
was not precipitated by a comment from a third party. As filed with 
the Court and published in the Federal Register, the proposed Final 
Judgment would require NAR's local Boards or Associations of 
Realtors that do not own or operate MLSs to adopt and adhere to the 
Modified VOW Policy (which sets forth the rules an MLS must have for 
VOWs). See proposed Final Judgment, ]] V.D & E (requiring all 
``Member Boards'' to adopt the Modified VOW Policy or risk losing 
coverage under NAR's insurance policy). The United States agrees 
with NAR that requiring Boards or Associations of Realtors that do 
not own or operate MLSs to adopt the Modified VOW Policy would serve 
no purpose. As a result, the United States will move the Court to 
enter a proposed Final Judgment that clarifies that only Boards or 
Associations of Realtors that own or operate MLSs must adopt and 
adhere to the Modified VOW Policy. This additional, minor 
modification will not necessitate a second public comment period. 
See Hyperlaw, Inc. v. United States, No. 97-5183, 1998 WL 388807, at 
*3 (D.C. Cir. May 29, 1998) (finding that, because the proposed 
modification was a ``logical outgrowth'' of the original proposed 
consent decree, no additional public comment period was required).
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A. Comments Submitted by Entities Operating VOWs

1. Comments Submitted by ZipRealty
    ZipRealty is a VOW broker operating in thirty-five markets 
nationwide. It (along with eRealty, a company later purchased by 
Prudential) was one of the first two innovative brokers that, in 1999, 
launched VOWs as a way to provide better service to consumers at a 
lower price than many of its competitor brokers. It submitted comments 
(Attachment 1) supporting entry of the proposed Final Judgment, 
asserting that the proposed Final Judgment ``favors public and consumer 
interests.'' According to ZipRealty's comments, ``had the proposed NAR 
policy challenged by the United States * * * been implemented, 
[ZipRealty's] business would likely have faced significant 
challenges.''
    Based on its past experiences with MLSs that favored traditional, 
bricks-and-mortar brokers over VOW brokers, ZipRealty's comments 
caution that ``it is essential that * * * MLSs reasonably interpret the 
terms of the Proposed Judgment and [Modified VOW] Policy to ensure that 
they apply the same policies, rules and regulations to Brokers 
operating VOWs as are applied to `traditional' Brokers, and that they 
do not subject Brokers operating VOWs to inappropriate and unreasonable 
additional costs, fees or restrictions not imposed on other Brokers.''
    Under the proposed Final Judgment, NAR is required to direct its 
affiliated MLSs to adopt, maintain, act consistently with, and enforce 
the Modified VOW Policy.\14\ It is also required to withhold insurance 
from and report to the United States the identity of any MLS that fails 
to do so.\15\ NAR is also required to forward to the United States any 
communications it receives concerning any MLS's noncompliance with the 
terms of the proposed Final Judgment or Modified VOW Policy.\16\ The 
United States believes that these provisions will cause MLSs to comply 
with the Modified VOW Policy and will provide the United States with 
the ability to detect whether MLSs are, in fact, complying. If MLSs 
fail to comply, the United States will be prepared to move to enforce 
the proposed Final Judgment in the event of NAR inaction, or to 
consider any additional antitrust enforcement activities, including 
suing the MLS directly, if necessary.\17\
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    \14\ See proposed Final Judgment, ] V.D.
    \15\ See id.
    \16\ See id., ] V.H.
    \17\ The United States has not been reluctant to sue MLSs to 
bring an end to violations of the antitrust laws. The United States 
recently brought actions against two MLSs in South Carolina that are 
among the approximately 200 MLSs in the country not affiliated with 
NAR. On May 2, 2008, the United States brought an antitrust action 
against the MLS in Columbia, South Carolina, alleging that its rules 
restrain competition among real estate brokers in that area and 
likely harm consumers. See Complaint in United States v. 
Consolidated Multiple Listing Service, Inc., No 3:08-cv-01786-SB 
(D.S.C. May 2, 2008), available at https://www.usdoj.gov/atr/cases/
f232800/232803.htm. The United States challenged similar allegedly 
anticompetitive rules imposed by the MLS in Hilton Head, South 
Carolina, also not affiliated with NAR. See Complaint in United 
States v. Multiple Listing Service of Hilton Head Island, Inc., No. 
9:07-cv-03435-SB (D.S.C. Oct. 16, 2007), available at https://
www.usdoj.gov/atr/cases/f226800/226869.htm. The MLS in Hilton Head 
agreed to settle the case by repealing the challenged rules and 
agreeing to other conduct restrictions, and the court entered the 
Final Judgment in the case on May 28, 2008. See Final Judgment in 
United States v. Multiple Listing Service of Hilton Head Island, 
Inc., No. 9:07-cv-03435-SB (D.S.C. May 28, 2008), available at 
https://www.usdoj.gov/atr/cases/f233900/233901.htm.

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[[Page 65621]]

2. Comments Submitted by Prudential Real Estate Services Company, LLC, 
and Prudential Real Estate Affiliates, Inc.
    Prudential Real Estate Affiliates is a real estate franchisor with 
over 600 broker franchisees across the United States. Prudential Real 
Estate Services Company operates Web sites, including VOWs, on behalf 
of 480 of Prudential's broker franchisees. These companies 
(``Prudential'') collectively submitted a lengthy set of comments on 
the proposed Final Judgment (Attachment 2).
    Like ZipRealty, Prudential believes that entry of the proposed 
Final Judgment would be in the public interest. Prudential observes 
that the proposed Final Judgment, including the Modified VOW Policy 
resolves the ``fundamental issues'' raised in the United States Amended 
Complaint by eliminating a broker's ability to ``opt out'' of allowing 
VOW brokers to display the broker's clients' listings and by requiring 
MLSs to provide VOW brokers the same complete MLS listings that other 
brokers can give to their customers and clients by traditional delivery 
methods.
    Prudential, however, asks that the United States use this Response 
to Public Comments ``to clarify, or to provide interpretive guidance 
for certain provisions of the [p]roposed Final Judgment and the 
Modified VOW Policy.'' Prudential then lists twelve areas on which it 
seeks clarification or interpretive guidance. The United States 
summarizes and responds to Prudential's twelve specific comments below.
(i) Minor Modification Warranted
    Prudential raises two provisions that the United States agrees 
warrant a minor modification of the proposed Final Judgment. First, 
Prudential seeks clarification of the requirement in paragraph 
II.2.c.iv of the Modified VOW Policy that a VOW brokers' customers 
commit, through the terms of use, not to ``copy, redistribute, or 
retransmit'' any listings data they receive on the VOW. This provision 
protects the MLS from someone using a VOW not to purchase a property, 
but to access and sell the information found on a VOW to third parties. 
Prudential, however, believes that this requirement as currently 
written is too broad and would prevent the customer of a VOW broker 
from saving listings to an electronic property portfolio or from 
forwarding copies of any listings to spouses, friends, lenders, or 
others who are assisting the customer in his or her home purchase.
    The United States agrees that paragraph II.2.c.iv of the Modified 
VOW Policy is too broad as currently written and could unreasonably 
discriminate against VOW brokers by preventing their customers from 
saving copies of listings in which they might have an interest or 
sharing listings with persons with whom they wish to consult in making 
a purchase decision. Customers of traditional, bricks-and-mortar 
brokers are not subject to the same limitations. NAR has agreed to a 
minor modification to paragraph II.2.c.iv to eliminate any unintended 
discriminatory effect.

    Current version of paragraph II.2.c.iv: That the Registrant will 
not copy, redistribute, or retransmit any of the data or information 
provided.
    Revised version of paragraph II.2.c.iv: That the Registrant will 
not copy, redistribute, or retransmit any of the data or information 
provided, except in connection with the Registrant's consideration 
of the purchase or sale of an individual property.

    Second, Prudential discussed paragraph II.5.a of the Modified VOW 
Policy, which permits individual property sellers, concerned with the 
dissemination of information about their properties over the Internet, 
to direct that their listings or property addresses be withheld from 
the Internet. This provision also states that VOW brokers are permitted 
to provide withheld listings to customers by any other method of 
delivery such as e-mail or fax. Prudential points out that this 
provision, as written, does not explicitly authorize VOW brokers to 
provide withheld property addresses as well to customers using other 
delivery methods.
    This result was unintended. The United States intended that a VOW 
broker be permitted also to provide customers the property addresses 
withheld from VOW display, by other methods of delivery. NAR has agreed 
to a minor modification to paragraph II.5.a to correct this oversight.

    Current version of paragraph II.5.a: No VOW shall display the 
listings or property addresses of sellers who have affirmatively 
directed their listing brokers to withhold their listing or property 
address from display on the Internet. The listing broker or agent 
shall communicate to the MLS that a seller has elected not to permit 
display of the listing or property address on the Internet. 
Notwithstanding the foregoing, a Participant who operates a VOW may 
provide to consumers via other delivery mechanisms, such as e-mail, 
fax, or otherwise, the listings of sellers who have determined not 
to have the listing for their property displayed on the Internet.
    Revised version of paragraph II.5.a: No VOW shall display the 
listing or property address of any seller who has affirmatively 
directed its listing broker to withhold its listing or property 
address from display on the Internet. The listing broker or agent 
shall communicate to the MLS that a seller has elected not to permit 
display of the listing or property address on the Internet. 
Notwithstanding the foregoing, a Participant who operates a VOW may 
provide to consumers via other delivery mechanisms, such as e-mail, 
fax, or otherwise, the listing or property address of a seller who 
has determined not to have the listing or address for its property 
displayed on the Internet.

    The United States will move the Court to enter a proposed Final 
Judgment with these modifications.
(ii) The Proposed Final Judgment Means What It Says
    Prudential seeks clarification from the United States that, as to 
three different provisions of the Modified VOW Policy, the provisions 
literally mean what they say. It first seeks clarification concerning 
the requirement in paragraph II.5.a of the Modified VOW Policy that VOW 
brokers not display the listing or property addresses of sellers who 
have affirmatively directed that information about their properties be 
withheld from ``the Internet.'' Prudential says that the provision 
``presumably means'' that information withheld from ``the Internet'' 
must mean that the information be withheld ``from all forms of Internet 
display'' and excluded from any data that the listing broker or MLS 
sends to any other Web sites.
    Prudential has interpreted paragraph II.5.a of the Modified VOW 
Policy correctly. Under the Modified VOW Policy, an MLS may not permit 
a seller to single out individual VOWs or VOWs generally and withhold 
the listing or property address from only VOW Web sites. Rather, the 
MLS and listing broker would also be required to withhold the seller's 
listing or property address from all other non-VOW Web sites.
    Prudential next seeks to confirm the meaning of the requirement in 
paragraph III.2 of the Modified VOW Policy that MLSs provide VOW 
brokers ``all MLS non-confidential listing data.'' Prudential seeks to 
clarify that this does not permit MLSs to refuse to provide

[[Page 65622]]

VOW brokers the listings of sellers who have requested that their 
listings not be displayed on the Internet. It explains that, unless VOW 
brokers receive from the MLS even the listings they are not permitted 
to show on their VOWs, the VOW brokers cannot meaningfully exercise 
their right under paragraph II.5.a to provide their customers those 
seller-withheld listings by other delivery methods. Prudential 
expresses some concern that MLSs might interpret paragraph III.4, which 
refers to a ``VOW-specific feed'' from which the seller-withheld 
listings have been removed, as a basis to disregard the requirement in 
paragraph III.2 that MLSs provide ``all MLS non-confidential listing 
data'' to VOW brokers who request it.
    Paragraph III.2 of the Modified VOW Policy is unambiguous in 
requiring MLSs to provide ``all MLS non-confidential listing data'' 
(emphasis added) to VOW brokers who request it. MLSs may also offer to 
VOW brokers, under paragraph III.4 of the Modified VOW Policy, a ``VOW-
specific feed'' from which seller-withheld listings or addresses have 
been removed. Some VOW brokers might opt for the VOW-specific feed as a 
matter of convenience, but nothing in paragraph III.4 suggests that 
such a VOW-specific feed could replace the MLS's unambiguous obligation 
under paragraph III.2. As Prudential explains, a contrary 
interpretation of the Modified VOW Policy would also prevent VOW 
brokers from filtering seller-withheld listings and delivering those 
listings to customers by non-VOW methods of delivery, as expressly 
permitted under paragraph II.5 of the Modified VOW Policy.
    The third provision on which Prudential seeks clarification is 
paragraph II.5.c of the Modified VOW Policy. That paragraph requires a 
VOW broker to disable or discontinue, at the request of a home seller, 
any functionality providing automated market valuations on or any 
third-party commenting on or reviews about the seller's property. The 
seller may not, under this provision, selectively target particular 
VOWs with requests that these activities be discontinued. Under 
paragraph II.5.c, such a request by a seller is applicable to ``all 
Participants'' Web sites'' (i.e., all Web sites operated by any member 
of the MLS). Prudential seeks confirmation that this provision cannot 
be exercised on a selective basis as to any single broker's VOW.
    There is also no ambiguity in paragraph II.5.c. A sellers's 
request, under that provision, to discontinue automated market 
valuations or third-party comments or reviews about his or her listing 
applies to ``all Participants'' Web sites,'' whether VOW or non-VOW 
sites. This provision cannot be exercised selectively against a single 
VOW or against all VOWs, but would also be applicable to all non-VOW 
Web sites operated by all other MLS members.\18\
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    \18\ Prudential also suggests that such an election by a seller 
should apply to automated market valuations or third-party comments 
or reviews permitted by non-broker Web sites that display MLS-
supplied listings. Paragraph II.5.c. applies only to MLS 
``Participants' Web sites.'' While an MLS could require third-party 
Web sites, as a condition of receiving MLS data, to discontinue 
valuations, comments, or reviews, the United States believes the 
potential cost to third-party Web sites outweighs the benefits of 
such a requirement and elected not to insist on such a term in its 
proposed Final Judgment. As written, this provision strikes the 
appropriate balance among (i) Permitting sellers some ability to 
limit the extent to which their properties might be marketed in a 
bad light, (ii) preventing VOW brokers' competitors from directing 
sellers to target VOWs with requests to discontinue these services, 
and (iii) minimizing the effect on third parties.
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    (iii) Nondiscrimination Provisions Apply Where Modified VOW Policy 
is Silent
    Prudential seeks clarification or interpretative guidance with 
respect to two issues on which it suggests the Modified VOW Policy is 
silent. It first expresses concern that MLSs might interpret the 
requirement in paragraph II.5.e of the Modified VOW Policy, that VOW 
brokers refresh information on their Web sites no less frequently than 
every three days, to prohibit VOW brokers from refreshing the 
information on their VOW more frequently than every three days. 
Prudential states that ``[o]perating a VOW with three (3) day old data 
is totally unacceptable in a Web based environment,'' particularly when 
VOW brokers' traditional competitors can provide their customers 
listings data that is refreshed continuously by the MLS.
    As Prudential observes, the Modified VOW Policy is silent as to how 
frequently VOW brokers may refresh the MLS listings they display on 
their VOWs. Paragraph II.5.e of the Modified VOW Policy states that VOW 
brokers ``shall refresh MLS data available on a VOW not less frequently 
than every 3 days.'' It does not state or imply that VOW brokers cannot 
refresh their data more frequently than every three days.
    The proposed Final Judgment expressly prohibits NAR from adopting 
rules that discriminate against VOW brokers or that impede the 
operation of VOWs.\19\ When issues concerning VOWs are not expressly 
covered by the Modified VOW Policy, these provisions would prevent NAR 
from filling the void with discriminatory rules. Here, the United 
States agrees with Prudential that, with no express provision in the 
Modified VOW Policy, the general nondiscrimination provisions found in 
paragraphs IV.A and IV.B of the proposed Final Judgment would apply to 
prevent MLSs from restricting the ability of VOW brokers to provide 
data to customers that is less current than the data that other brokers 
can provide to their customers.
---------------------------------------------------------------------------

    \19\ See proposed Final Judgment, ]] IV.A-IV.B.
---------------------------------------------------------------------------

    Prudential also expresses concern that an AVP that operates VOWs 
for several different brokers in an MLS could be charged a separate 
data download fee for each broker for whom the AVP operates a VOW, even 
though the AVP could operate its entire network of VOWs using only a 
single data download.
    Prudential describes a ``common circumstance'' in which a single 
AVP has been designated by several different brokers in a single MLSs 
to operate VOWs on their behalf. According to Prudential, the AVP 
would, as a technical matter, need to download the MLS data only one 
time and could use that data to populate all of the VOWs it operates. 
Paragraph III.10.b of the Modified VOW Policy prohibits MLSs from 
charging an AVP more than it charges a VOW broker to download MLS 
listings, but the proposed Final Judgment and Modified VOW Policy do 
not expressly address whether the MLS could charge separate downloading 
fees to the AVP for each VOW it operates. However, because the AVP 
would need only a single MLS data download, a rule requiring an AVP to 
pay for additional unnecessary downloads would likely violate paragraph 
IV.D of the proposed Final Judgment as it would impose fees on the AVP 
in excess of the MLSs costs in delivering data to the AVP. Moreover, 
because downloading data imposes some costs on the MLS, a rule 
requiring multiple unnecessary downloads for no apparent purpose other 
than to impose additional costs on AVPs and the brokers for whom they 
operate VOWs would likely unreasonably disadvantage the AVP and VOW 
broker and violate paragraph IV.B of the proposed Final Judgment.
(iv) Relief Not Sought by the United States
    Prudential identifies two areas in which it believes additional 
relief, not sought by the United States, might be warranted. First, 
Prudential observes that the proposed Final Judgment would bind only 
NAR, the sole defendant in this case, and expresses concern whether the 
proposed Final Judgment sufficiently compels NAR to require its 
affiliated MLSs to abide by the terms of the proposed Final Judgment, 
including

[[Page 65623]]

the Modified VOW Policy. Prudential specifically questions whether 
paragraphs V.E and V.F of the proposed Final Judgment, which require 
NAR to take action against MLSs when NAR ``determines'' that the MLSs 
are not in compliance, require NAR to find out about any noncompliance 
in the first place or to determine whether the conduct at issue 
complies with the proposed Final Judgment.
    The United States believes that the proposed Final Judgment 
adequately compels NAR to direct its affiliated MLSs to comply with the 
Modified VOW Policy. The second sentence of Paragraph V.E of the 
proposed Final Judgment clearly says that NAR shall deny coverage under 
its insurance policy (a consequence that Prudential does not dispute 
will motivate compliance by the MLS) to any MLS that ``refuses to 
adopt, maintain, act consistently with, or enforce'' the Modified VOW 
Policy.
    The proposed Final Judgment is drafted with the assumption that NAR 
would find out through multiple channels about an MLS's failure to act 
in accordance with the decree. First, MLSs would turn to NAR and ask if 
their conduct was consistent with the law and the decree in order to 
maintain their insurance coverage. MLSs routinely turn to NAR for 
advice and approval on various issues in order to maintain coverage 
under NAR's insurance.\20\ Second, brokers who feel aggrieved can 
complain directly to NAR (or to the United States) about an MLS's 
conduct.\21\ And third, the United States can alert NAR to any actions 
by an MLS that are inconsistent with the Modified VOW Policy and ask 
NAR to take action. Thus, there should be little concern that if NAR 
acts in good faith it will fail to find out that an MLS is acting 
inconsistently with the Modified VOW Policy.
---------------------------------------------------------------------------

    \20\ The proposed Final Judgment also requires NAR to educate 
its MLSs about the terms of the proposed Final Judgment by providing 
briefing materials on the ``meaning and requirements'' of the 
proposed Final Judgment and by holding an annual program that 
includes a discussion of the proposed Final Judgment. See proposed 
Final Judgment, ]] V.G.4-V.G.5.
    \21\ Note that NAR is required under the proposed Final Judgment 
to furnish to the United States copies of any communications it 
receives from an MLS or an aggrieved third party concerning 
allegations of noncompliance by an MLS with the proposed Final 
Judgment or Modified VOW Policy. See proposed Final Judgment, ] V.H. 
The United States' access to such records will ensure that the 
United States knows what NAR knows about any instances of MLS 
noncompliance and will allow the the United States to make sure NAR 
fulfills its obligations.
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    The proposed Final Judgment does not require NAR to act on 
frivolous allegations of noncompliance by an MLS. But NAR is required 
to act when it determines the allegations are well-founded.\22\ To the 
extent NAR operates in bad faith, failing to reach a determination when 
an allegation is well-founded, the United States could move to enforce 
the Final Judgment. Additionally, the United States retains the right 
to sue any MLS directly for violations of the antitrust law.\23\
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    \22\ See proposed Final Judgment, ]] V.E and V.F.
    \23\ See id., ] IX.
---------------------------------------------------------------------------

    The United States believes that the enforcement scheme negotiated 
through these provisions of the proposed Final Judgment appropriately 
incentivizes NAR to evaluate any information it receives concerning MLS 
noncompliance and to take timely and appropriate actions to bring its 
MLSs into compliance. NAR understands that its failure to respond where 
a response is warranted may mean the initiation of an inquiry by the 
United States. As a membership organization, NAR will want to minimize 
the circumstances under which its members (as well as NAR itself) 
receive direct scrutiny by the United States and will act to correct 
instances of noncompliance that it observes. This enforcement scheme 
also permits NAR to decline to address allegations of noncompliance 
that have no merit. The United States believes that these provisions 
strike the appropriate balance and will ensure that MLSs do not 
unreasonably discriminate against VOW brokers.
    Second, Prudential discusses Paragraph IV.D of the proposed Final 
Judgment which forbids NAR from adopting, maintaining, or enforcing 
rules that impose fees or costs on a VOW broker ``that exceed the 
reasonably estimated actual costs'' an MLS incurs in providing listings 
to a VOW broker. Under paragraph III.5 of the Modified VOW Policy, an 
MLS is authorized to pass along to a VOW broker ``the reasonably 
estimated actual costs incurred by the MLS'' in establishing the 
ability to download listings data to VOW brokers. Prudential expresses 
concern that, because ``costs'' is not defined in the proposed Final 
Judgment or Modified VOW Policy, MLSs might assess against VOW brokers 
the salaries of software programmers or compliance officers, or other 
substantial additional expenses incurred by the MLS. Prudential seeks a 
clarification that ``'costs'' may include only actual direct costs, and 
may not include any allocations of salaries, consultant fees, rent, 
utilities, or other overhead expenses.'' It also argues that, under 
paragraph III.5 of the Modified VOW Policy, an MLS may not charge VOW 
brokers more than it charges other brokers who download listings data 
from the MLS for other purposes.
    The proposed Final Judgment and Modified VOW Policy permit MLSs to 
charge VOW brokers fees no greater than the MLSs ``reasonably estimated 
actual costs'' of providing services to VOW brokers \24\ and equal to 
the ``reasonably estimated costs'' the MLS incurs in adding or 
enhancing downloading capacity for purposes of supporting VOWs.\25\ 
Because the circumstances and capabilities of MLSs vary, the United 
States does not believe it would be appropriate to attempt to express 
with greater precision the type or level of costs it would be 
permissible for MLSs to impose upon VOW brokers. The United States 
believes that imposing on MLSs an obligation to account for the fees 
they impose on VOW brokers will be adequate to prevent the imposition 
of exorbitant fees. Furthermore, a definition is unnecessary because 
the United States agrees with Prudential that the proposed Final 
Judgment's general nondiscrimination provisions would forbid charging 
VOW brokers for downloading listings information differently than other 
brokers, unless the costs to the MLS differed as to each recipient.
---------------------------------------------------------------------------

    \24\ Proposed Final Judgment, ] IV.D.
    \25\ Modified VOW Policy, ] III.5.
---------------------------------------------------------------------------

(v) Long-Standing Provisions
    Prudential expresses concern about three provisions that long 
existed in NAR's VOW Policy but that the United States did not 
challenge. First, it discusses a requirement in paragraph II.2.c of the 
Modified VOW Policy that consumers who seek to register on a VOW ``open 
and review'' the VOW's mandatory terms of use. Prudential asserts that 
this provision might be interpreted to prohibit the usual practice on 
many Internet Web sites of opening terms of use in ``a scrollable 
frame'' that the viewer can read if he or she desires. Prudential also 
asserts that, because traditional brokers provide listings information 
to customers upon a simple request of a consumer, the registration 
requirement in II.2.c of the Modified VOW Policy discriminates against 
VOW brokers.
    NAR included the ``open and review'' requirement in the VOW Policy 
it adopted on May 17, 2003, and over 200 MLSs subsequently adopted 
rules implementing the VOW Policy. Through its lengthy investigation 
and litigation of this matter, the United States neither received any 
complaints about this requirement nor discovered any

[[Page 65624]]

evidence that it had restrained or was likely to restrain competition 
from any VOW broker. Had the United States proceeded to trial in this 
case, it would not have sought relief from the ``open and review'' 
requirement.
    The United States notes, however, that it sees no inconsistency 
between the ``open and review'' requirement and the ``scrollable 
frame'' in which Prudential's franchisees currently present terms of 
use to their customers. In the event that MLSs in the future insist 
upon different and more onerous procedures from Prudential's 
franchisees or other VOW brokers than the ``scrollable frame'' 
currently offered, the United States would then be in a position to 
evaluate whether those procedures restrained competition from VOW 
brokers.\26\
---------------------------------------------------------------------------

    \26\ See proposed Final Judgment, ] IX.
---------------------------------------------------------------------------

    Second, Prudential mentions paragraph II.2.d of the Modified VOW 
Policy, which prohibits the VOW broker from establishing any 
representation agreement or imposing any financial obligation upon a 
customer through use of a ``mouse click.'' According to Prudential, 
this provision ``would be tantamount to preventing VOW operators from 
engaging in electronic commerce at their Web sites.''
    This provision was included in the 2003 VOW Policy. Discovery in 
this case revealed no evidence that this provision had restrained or 
was likely to restrain competition from VOW brokers. Additionally, the 
Modified VOW Policy recognizes explicitly that Web sites maintained by 
VOW brokers ``may also provide other features, information, or services 
in addition to VOWs.'' \27\ And, as Prudential concedes, the Modified 
VOW Policy would not prevent VOW brokers from ``engaging in electronic 
commerce'' on those non-VOW portions of their Web sites. Thus, the 
United States disagrees with Prudential that paragraph II.2.d of the 
Modified VOW Policy is likely to restrain competition from VOW brokers 
or to ``prevent[ ] VOW operators from engaging in electronic commerce 
at their Web sites.''
---------------------------------------------------------------------------

    \27\ Modified VOW Policy, I.3.
---------------------------------------------------------------------------

    Third, Prudential mentions paragraph II.6 of the Modified VOW 
Policy, which requires VOW brokers to ``make the VOW readily accessible 
to the MLS and to all MLS Participants for purposes of verifying 
compliance with this Policy.'' Prudential expresses concern that MLSs 
might, under this provision, demand intrusive access to VOW brokers' 
systems and files and it asserts that MLSs should be permitted to 
observe only the password-protected portions of the VOW accessible by 
any customer of the VOW broker.
    NAR included a nearly identical provision in its 2003 VOW Policy, 
which was adopted by over 200 MLSs. The United States heard no 
complaints nor uncovered any evidence that that provision had been 
exercised by any MLS in the manner about which Prudential expresses 
concern. Nevertheless, the United States agrees with Prudential and 
hereby clarifies that paragraph II.6 of the Modified VOW Policy, by its 
terms, cannot be used for purposes other than to verify compliance with 
NAR's policies and it should not provide a basis for MLSs to harass VOW 
brokers or to conduct a detailed examination of VOW brokers' business 
files or computer systems.
    In over four years of investigation and litigation concerning the 
Challenged Policies, the United States had neither received complaints 
nor uncovered evidence that these three provisions had been used in the 
manner Prudential describes. But, by way of clarification and guidance, 
the United States reiterates that, to the extent that MLSs discriminate 
against and harm VOW brokers through these provisions in the future, 
the proposed Final Judgment allows the United States to investigate and 
bring an antitrust enforcement action as appropriate.\28\
---------------------------------------------------------------------------

    \28\ See proposed Final Judgment, IX.
---------------------------------------------------------------------------

3. Comments Submitted by Home Buyers Marketing II
    Home Buyers Marketing II (``HBM II'') is a VOW broker operating in 
approximately 400 markets throughout the United States. HBM II's 
comments (Attachment 3) identify ``particular anticompetitive 
practices'' and seek confirmation that the proposed Final Judgment, 
including the Modified VOW Policy, would prohibit MLSs from engaging in 
those practices.\29\
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    \29\ Three issues raised by HBM II repeat concerns expressed by 
Prudential. HBM II repeats Prudential's comment concerning how 
frequently VOW brokers may update the MLS listings that populate 
their Web sites, the meaning of the requirement in paragraph II.2 of 
the Modified VOW Policy that MLSs provide VOW brokers ``all MLS 
nonconfidential listing data,'' and whether the United States and 
NAR intended, in paragraph II.2.c.iv of the Modified VOW Policy, to 
prevent a VOW brokers' customers from sharing listings with friends, 
family, lenders, or others with whom they need to consult in their 
home purchase decision. The United States addressed each of these 
issues fully in its response to Prudential's comments.
---------------------------------------------------------------------------

    HBM II expresses concern about paragraph II.3 of the Modified VOW 
Policy, which requires that VOW brokers ``be willing and able to 
respond knowledgeably to inquires from [customers].'' It seeks 
clarification that an MLS would not be permitted to demand a greater 
level of knowledge from a VOW broker concerning properties it displays 
to customers than the MLS demands from other brokers.
    Because the Modified VOW Policy does not define the level of 
knowledge that a VOW broker must possess when responding to customer 
inquiries, the United States agrees with HBM II that the proposed Final 
Judgment's general nondiscrimination provisions would prevent MLSs from 
demanding greater knowledge from VOW brokers than they demand of other 
brokers.\30\
---------------------------------------------------------------------------

    \30\ As HBM II points out, NAR's general counsel explained in a 
June 16, 2008, speech that brokers cannot ``always be expected to 
have the answer right there'' when they receive inquiries from 
customers. ``In many instances, * * * you may have to say, 'I'll 
find that information out and I'll get back to you.' That would be 
responding knowledgeably.''
---------------------------------------------------------------------------

    HBM II also