Analysis of NAR/DOJ Settlement of VOW Litigation

I’ve had my first pass over the terms of the settlement of the NAR/DOJ litigation over VOWs (virtual office web sites).   Though I was surprised by the announcement of the settlement, I’m not surprised by the fact the litigation finally settled.   In fact, during a couple of different meetings in D.C. a week or so ago, I mentioned to people that I felt the litigation was, for practical purposes, irrelevant.  As such, I don’t see the settlement as huge news (it won’t likely be a game changer), though it’s definitely interesting news.

The action on the web has shifted over the last few years from VOWs (authenticated access) to syndication (advertising oriented, non-authenticated sites), with everyone racing to get listings nearly everywhere instead of trying to figure out how to control where the listings are going to be shown.  If anything, I think the settlement puts an arrow back in the quiver for brokers, MLSs, their vendors, and others to develop hybrid systems bridging the gap between syndication sites and client service oriented sites.  In this regard, I definitely see the settlement as a win for everyone, as it clears away the last vestiges of this issue.

Though I think the settlement is a “good thing” and don’t believe the NAR gave up much of importance given the current reality of listing distribution on the web, the DOJ did get pretty much everything they wanted in the settlement.  The primary issue in the VOW litigation was whether a participant could keep some VOWs from displaying their listings while allowing others.  This was known in the litigation as the “selective opt-out” provision because it allowed participants to select which web sites could display their listings in a VOW and which could not.   On that front, the DOJ clearly prevailed as there is no selective opt out in the new policy.  In fact, the only opt-out available now is by the seller:

 An MLS shall, if requested by a Participant, provide basic ‘downloading’ of all MLS non-confidential listing data . . . .  Confidential data includes only that which Participants are prohibited from providing to customers orally and by all other delivery mechanisms. . . .  If an MLS provides a VOW-specific feed, that feed must include all of the non-confidential data included in the feed described . . . above excpet for listings or property addresses of sellers who have elected not to have their listings or addresses displayed on the Internet.

Settlement Agreement Sections III(2) and III(4) (emphasis added).

Earlier, Section II(5) of the Agreement specifies that, in order to have their listing excluded from the VOW feed, a seller must “affirmatively direct their listings brokers to withhold their listing or property address from display on the Internent” by signing a document that says “I understand and acknowledge that . . . consumers who conduct searches for listings on the Internet will not see infomration about the listing property in response to their search.”

In other words, this seller exception is no back door way of getting a selective opt out.  First, it’s not selective, it’s all or nothing.  Second, very few sellers will want their listings completely off the web.  The end result is that a VOW will be able to display all listings from all participants, with no blanket opt-outs allowed except by the seller.  This is a clear departure from the selective opt-out fought for by NAR and even the IDX blanket opt-out.

I think this last point is important.  Way back when, the impetus to VOWs was to get around the limitation in some IDX policies allowing participants to opt out or even requiring them to opt in to include their listings in the IDX feeds from the MLS.  There were and are several markets where participants with significant market share were not participating in IDX, making that program ineffective, and so those who wanted to display all the MLS listings on the web argued that a VOW should be able to display all the listings just like they could show all the listings if a consumer came into their physical office.   That’s where everything fell apart, because there were participants who didn’t want to be told what they had to with their listings.  With this new VOW settlement, however, no opt outs are possible and everyone is opted in, which means the DOJ won this point decisively.

The DOJ also appears to have won the other major issue in the litigation: referral fees.  Section III(11) of the Agreement says, “An MLS may not prohibit, restrict, or impede a Participant from referring Registrants to any person or from obtaining a fee for such referral.”  This was the big argument raised by RE/MAX, Realogy and others, namely that they didn’t want to provide their data to a web company only to have it sold back to them in the form of a referral fee.   As Dave Liniger is often quoted as saying, this is “like the guy who shows up at a pot-luck dinner bringing only a fork.”  RE/MAX even went so far as to say that they’d advocate withdrawing from MLSs if selective opt-out was not allowed, and that ultimately gave rise to the ill-fated ILD policy and the DOJ litigation.

I suspect the reason the litgation was able to be settled was because no one really cares about this issue any more.  The listings are flowing everywhere already, referral fees and other models are developing regardless and the main issue now is effectiveness and cost and not who is providing what service.  Perhaps the litigation bought some time for a variety of competitors but I think the more likely conclusion is that the market just found the solutions around the litigation, making it irrelevant enough that a settlement could be crafted.

One of the more interesting provisions from an enforcement perspective is what I’ll call the “no outsourced call center” provision, which appears to be a requirement NAR sought to balance the referral fee provision won by DOJ:

A Participant’s VOW must prominently display an e-mail address, telephone number, or specific identification of another mode of communication (e.g., live chat) by which a consumer can contact the Participant to ask questions, or get more information, about properties displayed on the VOW.  The Participant, or a non-principal broker or sales licensee licensed with the Participant, must be willing and able to respond knowledgeably to inquiries from Registrants about properties within the market area served by that Participant and displayed on the VOW.

Enforcing this provision is going to be interesting.  What does knowledgeable mean in this context?   What is the “market area” served?  The provision definitely has the potential to thwart abuses of the referral fee provision by trying to require that VOWs be operated by “real” agents but it seems to open a huge can of worms for MLSs and others trying to figure out who the real agent is or isn’t.

There are all sorts of other interesting provisions that are different from the earlier ILD/VOW policies,  such as the indirect recognition of Zillow and Trulia in Section II(5)(c) by allowing the seller to require removal of automated value estimates (zestimates) and comments or other discussion about the listings.  I’ll likely cover these and other provisions in a separate post, as I want to get this posted first to see what others are finding before delving into more of  the minutiae.

The main conclusion I have from the settlement is that it’s about time and doesn’t really change the game in a big way, but it clears the field for innovation in the space between the MLS system and listing portals.

Coverage elsewhere:

Bloodhound

AgentGenius

Inman

Jonathan Dalton

TechCrunch

Redfin Blog

Jay Thompson