The Department of Justice Demands CoreLogic Turn Over Documents and Answer Questions

Boy, some things are happening this week. Last night, I saw that NAR had filed its response in the form of a motion to dismiss the Moehrl v. NAR case. That was entirely expected, and now that I have a copy of the filing (Thanks Jay Thompson!) I can look at what the theory of the defense is likely to be. I’ll post on that later once I’ve reviewed the filing.

In the meantime, I have had multiple clients, friends, and contacts reach out to me today as I was sitting in meetings about something they learned about today. It appears that the U.S. Department of Justice has made a written demand to Corelogic, the top MLS platform vendor, for a whole lot of documents and testimony-under-oath about all kinds of things pertaining to MLS data — particularly cooperating compensation information.

According to my source at CoreLogic, all major MLS vendors received the same Civil Investigative Demand from the DOJ, but thus far, only my friends who are CoreLogic customers were notified. I’d love to get some confirmation from Black Knight and FBS and their customers whether they too received the same demand from the DOJ or not.

With permission from my sources, I’ll embed the documents below. Then have some thoughts about what this could mean.

Let’s get into it.

The Demand from the DOJ

We might as well begin with the CID itself.

I don’t know about you, but I think there is something intimidating about the letterhead and a letter that begins:

This civil investigative demand is issued pursuant to the Antitrust Civil Process Act, 15 U.S.C. §§ 1311-1314, in the course of an antitrust investigation to determine whether there is, has been, or may be a violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 by conduct, activities, or proposed action of the following nature: Practices that may unreasonably restrain competition in the provision of residential real-estate brokerages services in local markets in the United States, including Greater Las Vegas.

You are required by this demand to produce all documentary material described in the attached schedule that is in your possession, custody, or control, and to make it available at your address indicated above for inspection and copying or reproduction by a custodian named below. You are also required to answer the interrogatories on the attached schedule. Each interrogatory must be answered separately and fully in writing, unless it is objected to, in which event the reasons for the objection must be stated in lieu of an answer. Such production of documents and answers to interrogatories shall occur on the 16th day of May, 2019 at 5:00 p.m.

The production of documentary material and the interrogatory answers in response to this demand must be made under a sworn certificate, in the form printed on the reverse side of this demand, by the person to whom this demand is directed or, if not a natural person, by a person or persons having knowledge of the facts and circumstances relating to such production and/or responsible for answering each interrogatory.

A bit later, in case this wasn’t intimidating enough, the DOJ is kind enough to inform the reader: “Your attention is directed to 18 U.S.C. § 1505, printed in full on the reverse side of this demand, which makes obstruction of this investigation a criminal offense.” Yikes!

Before we get into what is actually being demanded by the DOJ, I am curious about one thing. The deadline to produce documents and answers was May 16th… which was four days ago. My MLS clients and contacts received an email from CoreLogic today, which read:

Please be advised that CoreLogic has received a Civil Investigative Demand (CID) from the US Department of Justice (DOJ) pursuant to the Antitrust Civil Process Act (15 U.S.C. §§ 1311-1314). According to the CID, the DOJ is conducting an antitrust investigation related to the practices of residential real estate brokerages services in local markets in the United States. The CID includes a demand for documents and answers to interrogatories. We believe that some of your confidential information may be disclosed as a part of our response to the CID.

CoreLogic safeguards the confidential information of our clients. However, the CID has the force of law, and compliance with the CID is mandatory rather than voluntary. We thus have no choice but to respond.

This notice is being provided to you to permit you to intervene in the proceeding and assert any rights you may have to maintain the confidential nature of the information intended to be produced.

Not that any sane MLS would want to intervene, but if someone did want to, isn’t it too late to intervene four days after the deadline? CoreLogic had this CID in hand since April 16, 2019… so one does wonder what took them so long to notify their MLS clients. Maybe it’s no harm, no foul, since I’m not sure that any MLS anywhere would have intervened, but still… it’s odd.

It is also very, very interesting that the DOJ called out Las Vegas. After all, its jurisdiction and its investigation is not limited to one area… so why specifically name Greater Las Vegas area?

What the DOJ Wants

Anyhow, we move on to the Schedule to see what the DOJ wants CoreLogic to produce. I won’t quote the entire wall of text, since you can read the CID yourself above. But it seems pretty clear what the DOJ is after, isn’t it?

The first major area is whether MLS members can search for properties based on amount or type of cooperating commission offered. The DOJ seems very interested in whether MLS subscribers can search by commission amount, or type, and if not, why not. The DOJ wants every email or letter between CoreLogic and its customer MLSs that pertain to how much a member can and cannot search by commission amount or type.

Since Moehrl v. NAR is at the forefront of our minds, there should be alarm bells ringing.

The second major area is far more sweeping. The second area of document production covers “any policy, guideline, rule, practice, agreement, or contract term that restricts the Company’s usage, distribution, sale, or licensing of any MLS data.” The DOJ wants CoreLogic to supply any documents that outline any “possible or actual reason, rationale, or basis” for such a policy, rule, etc. etc.

That’s incredibly broad. It covers everything from IDX to VOW to private comments in the MLS. But I think I know what the real target here is: Sold and Off-Market Information.

And then we get this doozy of a demand:

3. Submit each database or data set used or maintained by the Company that may be used to measure the frequency of searches of MLS listings by each member of any MLS on the Company’s multiple listing platform that condition results based on the amount of compensation or type of compensation offered by listing brokers to buyer brokers.

Wouldn’t that database be… like the MLS database itself? The entire thing? Maybe I’m wrong, but does seem like the DOJ is going to be digging through the MLS database for CoreLogic’s customer MLSs to see about commissions and data that CoreLogic is not allowed to distribute or sell. It sure does seem like DOJ is going to do its own statistical analysis to see what’s going on beneath the hood of dozens of the largest MLSs in the country.

You know what this sounds like, don’t you? Longtime readers and Red Dot Subscribers should immediately think of Commissioner of Competition v. TREB. I wrote about that massive case in the November report.

The Likely Shape of Regulatory Action

Based solely on the DOJ’s Civil Investigative Demand, I’m going to speculate wildly and irresponsibly. Because I don’t have any responsibilities when it comes to speculating about regulatory action, unlike say Katie Johnson or Mitch Skinner. So I get to have fun while they have to be sober.

It really does feel like the DOJ (and possibly the FTC, its comrade in arms when it comes to regulating the real estate industry) is going to bring some kind of an enforcement action against a variety of MLSs, possibly against NAR (as the entity that creates national rules and regulations for MLSs), alleging that most of the “private information” on the MLS is anti-competitive. Why would the DOJ invoke the Sherman Anti-Trust Act otherwise?

At the same time, either the DOJ or the FTC or someone else with jurisdiction is likely to promulgate regulation requiring disclosure of previously private information. If Commissioner v. TREB is any indication, that is going to involve:

  • Sold and pending homes
  • Withdrawn, expired, suspended or terminated listings
  • Offers of cooperating commission

See, in the Canadian, case the “Disputed Data” that the Competition Bureau went after TREB over was those three categories.

Just like in the U.S., all of those were kept behind the walls of the TREB MLS. Subscribers had access to that information, but the information was not to be made public. The VOW feed from TREB did not contain this information, and obviously, the IDX feed did not either. And that’s what the Canadian authorities went after.

I think it’s more likely than not that the U.S. government copies the Canadian precedent and mandates public disclosure of the above information. If anything, the DOJ might require a broader disclosure than did the Canadian Competition Bureau; after all, the CID asks for documents pertaining to CoreLogic’s ability to distribute, sell or license “any MLS data.” That implies not just Participants in an MLS, but third-party portals and others such as banks and investment funds.

The syndication feed to Zillow, Realtor.com, and others might become far more robust.

The Reasoning

There are three reasons why I think this is what’s in the works.

First, mandating disclosure is fairly light-touch when it comes to regulation. Mandating that the MLS prohibit the sharing of commissions between listing and buyer brokers is a heavy regulatory requirement, and the industry would fight that to the Supreme Court. Ordering businesses to do X or to stop doing Y is always a tricky business for government regulators. But requiring that businesses simply disclose X or Y is far easier to do.

Second, regulators are not exactly risk-taking by nature. The fact that the Canadian Competition Bureau did this, fought the real estate industry for seven years, and won at the highest level of that country’s legal system (which is nearly identical to our own) gives our regulators a great deal of comfort when they do something very similar.

Third, the regulators could justifiably believe that this “lightweight” regulatory action requiring disclosure of formerly secret information would go a long way towards addressing the issue of high commission costs.

Recall the Brookings Institute panel I wrote about recently. The point that a couple of the panelists made over and over again is that there exists “information asymmetry” between the consumer and the real estate agent. And the panel also agreed that the problem is steering by buyer agents away from houses that do not offer “full market” cooperating commission.

Jack Ryan’s solution to the problem of high commissions was transparency: just let consumers know what the past sold prices on homes were, and they can figure things out for themselves.

For our purposes, it isn’t important whether Ryan is right or wrong; what is important is that the DOJ and FTC regulators see as Ryan does. And as I mentioned in that post, that focus on knowledge asymmetry was very reminiscent of the FTC/DOJ workshop on the real estate industry from last year.

So in summary, if you are a federal regulator, requiring that the MLS disclose Sold, Pendings, WEST (Withdrawn, Expired, Suspended and Terminated) listings, and Cooperating Commission types and amounts to the public via brokers and agents, as well as via portals and non-Participant companies (who may have to buy or license that data, but cannot be refused it) has three great advantages: (1) it is simple to do, (2) it is less likely to be overturned by a court, and (3) it might actually achieve the goal, which is greater competition and lower commissions.

I think that’s what is coming our way in the near future.

Obviously, the focus on the cooperating commission will impact the Moehrl v. NAR case (and copycat cases). I’ll have to think more about that, and read the motion to dismiss from NAR. Look for that in the next couple of days.

All I can say for now is that we may be living in interesting times… and attracting the attention of the powerful. Two ancient Chinese curses….

-rsh

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44 Comments

Join the discussion and state your opinion. Some comments may be held in moderation. I try to get to them as soon as possible, but may be traveling or unable to approve comments immediately. I do not censor comments, but reserve the right to remove anything that looks like spam, trolling, or just outright inappropriate.

  1. *Super* interesting. (And, you’re welcome!)

    1. I’d like to see this for the mortgage brokerages. NAR is an easy target and completely unnecessary. The Seller is 100% aware of how much they are paying. Why is there any need for the DOJ to touch this? Most agents don’t make any money in this industry as it were. Ridiculous. We’re expected to spend money and time marketing a product, the industry is already competing with Redfin / Purplebricks etc… This industry is currently self regulating.

      1. I completely agree with your comment. Instead of creating a robust economy and stable market, they are looking for a boogeyman. NAR is not protecting realtor’s interests as it is and does absolutely nothing to protect the industry from sharks like redfin, zillow, and such. What about developers who make over $100K on every house they sell? What about banks and other lenders? What about attorneys and title companies that charge an arm and a leg per transaction?

  2. […] CID  requires CoreLogic turn over documents and answer questions.   The article by Rob Hahn explains that the case revolves around not only the search features of the MLS systems, but the […]

  3. I’m wondering how disclosing commission splits will “lower commissions”. Is that because, when the secret commission to the buyer’s agent is low, the buyer agent is motivated to have the buyer pay more in order to make the lower split net the agent his desired amount? So by disclosing the split to the buyer, their agent would then have a difficult time driving up their offer to achieve his personal goal with the transaction thus keeping the commission “lower”? The buyer who’s offer is the most secure and nets the seller the most is the offer the seller is going to accept. Considering the listing agent and seller set the cooperating commission at the listing appointment, it’s the same for every buyer’s agent that brings that winning buyer. Curious to see what the dismissal reads.

  4. “In times of change, it might be a good time to change.”

    I have long supported and called for the obvious need for sweeping changes to the antiquated policies and rules of the MLS industry. Now those policies and rules are coming back to have a direct impact on the industry the MLS industry was supposed to serve – the brokerage industry.

    Expect swift action and profound change now. Unfortunately not due to progressive things the industry should have foreseen and made well ahead fo these actions.

    And so now it gets interesting. Very interesting.

    1. All commissions–listing agent and selling agent–are fully negotiable.

      1. That is not true! Many agents will not negotiate on their commission. Many buyer`s agent will not show properties with a low commission offered by the seller. You are probably one of those agents who are thinking one thing, saying a different thing and doing absolutely nothing for the consumer. Well got to tell you pal, we have hundred of thousands agents like you who are the face of this industry.

  5. The MLS is a monopoly and is the cancer of this industry. It does not add any value to real estate agents or and the consumer as well. All it does is charging the agents more and more fees and gaining power by the day.It creates wars between brokerages and limiting competition.Most consumers do not go to search for listings on agents sites.Consumers prefer the 3rd party sites who have no interest in commission.If the consumer could get rid from the agents and the MLS, they would do it in a blink of an eye.
    All these MLS should disappear today not tomorrow and open the market to tech companies who helps the consumer to get a better service. Companies like Listhub who belongs to Realtor.com should disappear tomorrow as well. They make a fortune from the MLS data. This is a monopoly and it should be prohibited.The government should step in and put the MLS in the garbage disposal.

    1. Hi Bert – We must have the same DNA. I have felt this way for a long, long time. And then, there is the class action lawsuit alleging price fixing via the 6% residential “normal” commission. This industry is about to be turned upside down. A real nail in the coffin will be allowing banks to own brokerages. NAR is scared to death of this. Banks will have offer salaries, paid benefits, maybe cell phones, maybe paid vacations and then have to offer the same health insurance they offer all of their employees. The best agents will go work for the banks, brokers will have to reduce their agent count by 60%-75% to meet the wherewithal salaries, benefits, etc. Then the 20-25% of surviving agents will reap the increased cash flow that will double, triple may be more of transactions. Brokers will not be able to take on every person with a pulse and has a new piece of paper in their hand.

      1. Sorry to not have a less smug reply, but, Really? Like the best agents got to work now for Redfin, or before to Zip Realty or in the early years to E-Realty?

      2. Hi Marvin,

        We sure do have the same DNA. (:

        The residential real estate industry, is a complete circus.
        It starts with venture capital companies who invest heavily in illusions and one of them for example is Compass who claims they are using a high end technology but no one really saw that mysterious technology yet. The real truth of this technology is, the money who comes from Saudi oil to step into the american real estate industry and to buy brokerages like the tomorrow will never come. They did the same in Canada and now here. It goes to Redfin that only GOD knows who they really are, to Zillow who became a real estate investor (iBuyer) from a media company, to Opendoor who promised a smooth fast transaction using the iBuyer business model but with tons of negative consumer reviews, to the MLS who is in a total control of the listings and still fighting an endless war on who will control the data, to the agents that most never heard the word transparency and have no idea how to really serve the consumer because all in their minds is their commission, and ends up with the consumer who is totally confused. Thank you NAR.

    2. All consumers are free at any time to use–or not use–the services of a real estate agent.

    3. Which Third Party sites do consumers rely on that do not receive MLS data feeds as the source of available homes for sale?

  6. Great stuff Rob. Thanks for this.

  7. Just a few thoughts to add fuel to your wild and irresponsible speculation.

    It’s possible that they could address this request:

    “Submit each database or data set used or maintained by the Company that may be used to measure the frequency of searches of MLS listings by each member of any MLS on the Company’s multiple listing platform that condition results based on the amount of compensation or type of compensation offered by listing brokers to buyer brokers.”

    with a member/search history file rather than the property/listing database.

    As far as the reference to the Sherman Act, it’s possible that it’s due to Corelogic’s market power, much of which was gained through acquisition. Previous numbers I’ve seen point to near 80% market share, which exceeds the 70% (or 55%, depending on which court you’re using) needed to be deemed a market power/monopoly.

    rqd

  8. Just went on the MLS. While I can read the buyer’s agent commission offered, I cannot sort or filter by that field. A small point in the MLS’s favor.

    1. Nor can I do this in Midwest Real Estate Data (MRED) which holds +80% of all Illinois listings and a chunk of NW Indiana.
      The simple remedy here is to conceal the co-op commission on all listings for agent view.
      As with Commercial (somehow not on the radar, same license) the co-op commission, if any is offered, would have to be requested by an inquiring broker.

  9. Corelogic is the worst keeper, numerous omissions and mistakes in data for MLS I must check every sale now through the County or City website cannot rely on the CVMLS data which we pay for and now corelogic ignores any responsibility to update or correct. In appraising same thing, never ran into anyone who knew what they were doing or cared from Corelogic. Now they bought the software company and if you do work for them amazing how they match the same lack of any knowledge. demanding documents already supplied just cannot take the time to read a report this is an all around evil company, thanks to the DOJ for investigating, is the nuke option available?

    1. Ron Cloninger,

      The complaints from the agents on 3rd party portals giving the wrong data is a B.S
      I am using only the 3rd party portals and most have an accurate information on sold properties, neighborhood, prices, taxes etc, etc.

  10. Here in Chicago, the listing agreements have the total commission % and the split that the selling agent receives. The seller is always aware what the commission is and where it’s going to before the listing is signed. Also, there’s no way to find a listing based on commission split one our MLS. We might have our politics ass backwards over here but as far as real estate goes, we’re transparent. ?

  11. […] have never heard of these accounting changes coming at us. CoreLogic and the Department of Justice sparring. In the MI biz, lots of talk about how the volume & market share of only two – Genworth […]

  12. […] have never heard of these accounting changes coming at us. CoreLogic and the Department of Justice sparring. In the MI biz, lots of talk about how the volume & market share of only two – Genworth […]

  13. […] have never heard of these accounting changes coming at us. CoreLogic and the Department of Justice sparring. In the MI biz, lots of talk about how the volume & market share of only two – Genworth […]

  14. […] have never heard of these accounting changes coming at us. CoreLogic and the Department of Justice sparring. In the MI biz, lots of talk about how the volume & market share of only two – Genworth […]

  15. […] PreviousPrevious post:The Department of Justice Demands CoreLogic Turn Over Documents and Answer Que… […]

  16. […] have never heard of these accounting changes coming at us. CoreLogic and the Department of Justice sparring. In the MI biz, lots of talk about how the volume & market share of only two – Genworth […]

  17. […] The Department of Justice Demands CoreLogic Turn Over Documents and Answer Questions […]

  18. […] have never heard of these accounting changes coming at us. CoreLogic and the Department of Justice sparring. In the MI biz, lots of talk about how the volume market share of only two – Genworth and […]

  19. […] have never heard of these accounting changes coming at us. CoreLogic and the Department of Justice sparring. In the MI biz, lots of talk about how the volume & market share of only two – Genworth […]

  20. I think there is one more thing the DOJ wants: complete transparency of information to help consumers. There are two separate areas that MLS’s impact transparency in a negative way: 1. they limit the information made available to people who are not members of the MLS, 2. they charge a lot of money to companies who do public listing displays which in turn limits businesses that can pay for the information and limits public access to info and transparency – the ironic thing is that the majority of companies who pay for the info are paid lead generation portals which agents hate! I had a predictive analytics website that gave free leads to listing agents and we were shut down by a number of MLS’s that considered us a threat to their business model. I met with the DOJ antitrust group in DC in 2014 over the treatment. The DOJ had some interesting thoughts and I have been waiting for what is currently transpiring to finally come to the forefront. The real estate industry and MLS has always been self interested (naturally) and navigated laws to maintain monopoly status, not always ethically and perhaps not legally. In my case three MLS’s erroneously claimed we were mis-representing our business, unilaterally cut our data feed and told us to sue them, knowing full well we could not afford litigation. I look forward to the disruption of the MLS cartel/monopoly and hope the anti-trust group of the DOJ bring the hammer down.

    1. Tom,
      Every word you wrote is true.The MLS will put all agents out of business. You can rest assured it will happen.The MLS and the agents will lose control on the listings once more and more new options will be given to the consumer to sell and buy real estate.In the future people will buy houses from companies and not from real estate agents.I personally saw a great new platform the is in a construction now who in my opinion will put the MLS out of business. I am prohibited from saying the company name but trust me it is will be a bombshell to many MLS.

  21. […] Hahn, an industry commentator and management consultant specializing in real estate operations, reported on his blog that the U.S. Department of Justice issued a formal demand for information from CoreLogic related […]

  22. […] Hahn, an industry commentator and management consultant specializing in real estate operations, reported on his blog that the U.S. Department of Justice issued a formal demand for information from CoreLogic related […]

  23. […] an industry commentator and management consultant specializing in real estate operations, reported on his blog that the U.S. Department of Justice issued a formal demand for information from CoreLogic […]

  24. Interesting read but not so fast. The industry should have some transparency around commissions and fees. I can tell you 6percent is a pipe dream. Our average listing is 4-4.25 percent with 2.5 to buyers agent. I certainly have seen compression on commission rates the last few years. I think the tech startups are some of the worst offenders. Many are playing a Consumer Acquisition Arbitrage game and that is bad for consumers as well. Many are practically practicing false advertising and at best misleading consumers with their platform value proposition calculators. Several tech companies for example, offer their 1 percent listing fee, what about the convenience or tech fees they charge , throw that in and you are at or exceed what we charge and you get black box service versus professional in depth market knowledge and service. In general, transparency is good and having a standardized fee and rate disclosure would make things easier for a customer to compare. Reg Z / truth in lending creates an APR on loans so you can compare rate and fees easily. Having something similar will only help reputable brokers and agents.

  25. […] (CID) notice to CoreLogic. The CID requires CoreLogic turn over documents and answer questions. The article by Rob Hahn explains that the case revolves around not only the search features of the MLS systems, but the […]

  26. Here is one thing I have seen as an appraiser and investor. I have sold many of my flips with limited listing services. In conversations with several agents I have been told that many agents will not show those listings unless it is a last resort. This punishes (you/me) for not paying 2-3% for a listing agent. (the agent Mafia is strong, you scum seller) This seems to be more common in the city, and I flip in the burbs so I don’t think I have been personally hurt by this yet. My point is that several agents I happened to chat with during appraisals have told me this happens a lot. They had no skin in the game for my flips, and know I would list with agents I am friends with who specialize in the burbs if I went that route anyway, so they had no motivation to lie and scare me. Which is why I believe them. This is why I have NEVER listed a flip with anything lower than 3% for the selling agent commission. I save the money on the flat rate listing but I am well aware that even in the burbs I would get far fewer showings at 2%. Now to me as an appraiser. To be brief, we are reviewed and judged by the UAD data that we are not allowed to see. The same data that they (the Corelogic Monopoly Mafia) sell for endless millions of dollars. The best of that days comes from the appraisals that they forced us to submit in UAD format so they could data mine it even easier. I also have to pay “tech fees” out of my split of the appraisal fee to help upload that data to AMC portals….. (Sorry in advance for the crude language, but it truly embodies my feelings); That kind of feels like my rapist billing me for the Vaseline.

  27. […] It’s not been a good couple of weeks for CoreLogic, the massive data aggregator of real estate information. It’s been no secret that Corelogic has been steadily amassing all the major real estate data sources and the top MLS platform vendor. In my industry, they purchased the market leader of appraisal software, and many of my peers became wary of some of the software changes that were initiated. […]

  28. […] a letter to CoreLogic, which was posted on the website Notorious R.O.B, the DOJ specifically requests “all documents relating to any MLS […]

  29. Rob, Well done on this article. I need to find out from a few agents what their MLS allows with regards to putting in commissions and searching by commissions plus so much more after reading this. Hey, I have a weekly news show now. (State of the Market) . My co host is OOT next week you want to guest host with me and go over this? Pat pat@hiban.com

  30. My hope is that this opens the door for the beginning of a DOJ investigation of CoreLogic as a monopoly in violation of anti-trust law. In the meantime, if the issue is that Realtors / Brokers are only showing their buyers listings with the best commissions being offered…hmmm.

    In my area we utilize FLEX MLS and there is a field / option for “Buyer Agent Comm” however there is not a way to search or sort for that option in the active listings. So an agent would not be able to sort active listings by the commission being offered.

    But we must realize; some MLS feature are provider specific, but many of the features are individual LOCAL BOARD SPECIFIC restrictions and/or settings. For example; 2 different Realtors Boards may use the same MLS system / software provider, but have different data fields showing and different features available for use. The MLS software provider allows each Board Office to determine which features they want. So just because a certain MLS provider is used, doesn’t mean it works the same for every Board that uses it.

  31. […] The Department of Justice Demands CoreLogic Turn Over Documents and Answer Questions […]

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