11/4 Part 2 Realcomp

S2. Background

An MLS is a joint venture between realtors, where realtors are competitors in the business of providing services for selling houses.

Q. Why is such a joint venture allowed to exist?

A. They make searching for a house substantially easier. There are “network” effects.

A network effect means there is a feeback loop. Sellers want to list on MLS the buyers there are. Buyers want to use the MLS the more houses that are listed.

Q. What sort of rules should an MLS be allowed to make?

Q. What sort of rules shouldn’t an MLS be allowed to make?

House selling contracts:

ERTS - Exclusive Right To Sell - Listing agent get’s commission no matter who sells the house.

EA - Exclusive Agency - Listing agent get’s commission if she sells the house.

ERTS - 3% of house price

EA - $500 (plus 3% if she sold the house)

S3. Measuring Economic Effects

S4. What is proof?

It was given that:

1. Realcomp had “market power”

2. Realcomp’s action had the potential to harm competition.

Realcomp and the ALJ argued that points (1) and (2) could be overturned by the lack of evidence that there was actual harm and by the proffered pro-competitive justifications.

Evidence of no actual harm != No evidence of actual harm.

6th Circuit Decision: