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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION United States of America, ) ) Plaintiff, ) Case No. 05 € 5140 ) ) ) Bon, Mark Filip National Association of Realtors, ) ) Defendant. ) MEMORANDUM OPINION AND ORDER DENYING DEFENDANT'S MOTION TO DISMISS COMPLAINT OF THE UNITED STATES, Plaintiff, the United States of Ameriva (“United States” or “Plaintiff”, has filed this civil antitrust suit against the National Association of Realtors® (“NAR or “Defendant”).' (D.E. 1.) The Amended Complaint alleges that NAR has violated Section 1 of the Sherman Acl, 15 U.S.C. § 1. (DE. 6.) ‘The ease is before the Court on Defendant's motion to dismiss (10.1, 22) for lack of subject matter jurisdiction and for failure to state claims upon which relic can be granted. See Fed. . Civ. P, 12()(1) and 12(b)(6). For the reasons stated below, Defendant's motion to dismiss is respectfully denied. FACTUAL BACKGROUND NAR is a trade association that establishes and enforces policies and professional standards for its over one million individual member brokers and their affiliated agents and sales : ‘The various docket entries in this ease are designated “D.E._.” The term “Realtor®” isa collective membership mark indicating that a real estate broker or ayent so designated is u member of the National Association of Realtors. associates? (D.E. 6411.) NAR’s member brokers compete with one another in local brokerage services markets to represent consumers in connection with real estate transactions. (Jd.) NAR’s policies govern the concuct of its members in all fifty states, including all Realtors® and all of NAR’s local Realtor® associations (“member boards”). (ld. 413.) ALany one time, there are over 1.5 million homes for sale in the United States. (Id. 18.) Jt goes without saying, and the Court takes judicial notice, that each year many billions of dollars of residential real estate are sold, with realtors taking commissions on such sales. The vast majority of residential real estate transactions involve the use of a multiple listing service (*MLS"), a cooperative arrangement brokers have developed to poo! information about nearly all propertics for sale through brokers in a particular market area.’ (Ii. 5.) MLSs collect detailed information about nearly all properties available for sale through brokers and are alleged to be indispensalle tools for brokers servicing consumers in each MLS’s market area (Id.) Defendant's local Realtor associations (“member boards”) control a majority of the MLSs in the United States. (Ja!) ‘The geographic coverage of the MLS serving each town, city, or metropolitan area normally establishes the outermost boundaries of each relevant geographic market. (Id. 417.) In a substantial majority of markets, a single MLS provides the only available comprehensive compilation of listings. (/d. 4121.) ‘The vast majority of brokers believe that they must participate in the MLS operating in their local market to adequately serve their customers and > The facts are taken from the Amended Complaint and presented in a light most favorable to Plaintiff. With respect to facts relevant to the jurisdictional inquiry, the Court has credited Plaintiff's version of material facts, and, to the extent that Defendant has presented uncontroverted evidence on a point, credited Defendant's evidence in that regard. Accord, e.g., Ezekiel v. Michel, 66 F.3d 94, 897 (7th Cir, 1995) (collecting cases). , MLSs list virtually <1! homes for sale through a broker in the areas they serve, (D.B. 64 21.) 2 compete with other brokers. (Jd. 23.) Most home sellers and buyers engage residential real estate brokers, who typically have access to MLS listings, to facilitate transactions. ([d. 17.) The predominant form of payment for brokerage services is a commission—a percentage of the price paid for the property. (Id. § 19.) Ina typical transaction, the seller agrees to pay a commission to the broker who has contracted with the setler to market the home (the “listing broker”). (/d.) If the listing broker finds the buyer, the listing broker keeps the full commission, (Jd) Frequently, however, a second broker (the “cooperating broker”), who is also a member of the MLS, finds the buyer, and the two brokers share the comm sion. (Jd.) The commission rate is determined by, inter alia, the level of competition between brokers in the relevant market. (See, eg, id. 3.) NAR’s member boards control a majority of the MLSs in the United States. (Id. 5.) NAR promulgates nules governing the conduct of MLSs and requires its member boards to adopt these rules. (Jd. 4/22.) NAR’s MLS rules provide for sanetions against member brokers found to have violated MLS rules. (See, e.., id. 22, 37) Beginning with the popular growth of the Internet in the late 1990s, a number of NAR memiber brokers began creating password-protected websites that enabled potential home buyers, once they had registered as customers of the broker, to search the MLS database themselves and to obtain responsive MLS listings over the Internet. (Id. 4426-27.) These websites came to be known as virtual office websites or VOWs, and brokers who operated primarily or exclusively through a VOW came to be known as VOW-operating brokers. (ld. § 2 27.) Certain brokers used password-protected websites and Intemet-intensive business models to lower their cost structures by reducing overhead; by transferring search functions to customers; and by reducing