Initial Questions and Thoughts: New NAR Franchise-IDX Rule

As reported by Inman News, NAR’s Multiple Listing Issues and Policies Committee has approved a new addition to the Internet Data Exchange (“IDX”) policy as follows:

Display of IDX Information by Real Estate Franchise Organizations

Participants may provide IDX information to their real estate franchise organizations (“franchisors”) to be indexed for display on franchisors’ websites. For purposes of this policy, “real estate franchisor” is defined as a company granting real estate brokerage franchises under the franchisor’s trademarks pursuant to a franchise disclosure document meeting applicable Federal Trade Commission rules. Display of IDX information by franchisors is subject to the following requirements and limitations. Failure of a franchisor to comply with the following requirements and limitations can, at the discretion of the MLS, result in suspension or termination of the participant(s)’ authority to provide IDX information to the franchisor:

• Initial search results that provide minimal information (e.g. “thumbnails”) are exempt from MLS-required disclosures (e.g. listing firm, listing agent, source of information, notice that information is deemed reliable but is not guaranteed accurate) provided that a direct link to a detailed (“full view”) display that includes all required disclosures is provided.
• Consumers can link directly to the detailed (“full view”) display that complies with MLS disclosure/display rules of the source MLS.
• IDX information is not used for any unauthorized purpose.
• Inaccurate or incomplete information related to any listing is promptly corrected by the franchisor at the request of the source MLS.
• No advertising may appear on pages displaying IDX information.
• IDX listing information will not be modified, manipulated or permanently retained.

Rationale: This proposed expansion of the IDX policy would authorize real estate franchise organizations, with their franchisees’ consent, to index those franchisees’ IDX displays, with the results being displayed on franchisors’ websites, subject to appropriate qualifications and limitations.

On the surface, this seems like a fairly minor change to the IDX policy.  But we’re not content to lick the surface of this watermelon.  Let’s dive in a bit with some questions that immediately arise.

Curious…

I thought this formulation was, to say the least, curious:

Initial search results that provide minimal information (e.g. “thumbnails”) are exempt from MLS-required disclosures (e.g. listing firm, listing agent, source of information, notice that information is deemed reliable but is not guaranteed accurate) provided that a direct link to a detailed (“full view”) display that includes all required disclosures is provided. (Emphasis added.)

Exempt from MLS disclosure rules?  So the search results display can be made to appear as if all of the properties “belong” to the franchise, as long as there is a “direct link” to a detailed property display page that does follow the MLS rules.

In and of itself, this doesn’t appear to be that big of a deal.

The larger national franchises, such as Century 21, Coldwell Banker, Remax, and such, will improve their SEO with the much larger inventory of listing data on the search results page.  I’m certain that SEO consultants are hard at work right this minute creating thousands of landing pages populated with IDX search results.  Before, Coldwell Banker for example, could populate those pages only with listings of the franchisee (or with other Realogy brand franchisees).  Going forward, those landing pages will be populated with every listing via IDX.

Tactically, I wonder if the big national websites (e.g., remax.com) will make those “direct links” back to the franchisee’s “detailed page” be follow or no-follow.  It’s not clear to me whether they’d want to use up Google Juice (in the form of page rank) on thousands upon thousands of pages on franchisee websites.

Details aside, strategically, this is a big win for the franchisors.  I can think of several ways to utilize this new capability to benefit not only the national website, but also the franchisees.  One major difficulty will be figuring out to which franchisee’s webpage to link the “detail view” if you have multiple companies within the same MLS — those links constitute a funnel for leads, and lead routing/distribution will be a big issue for franchises in 2011.

Curioser…

What’s even curioser is the definition of a franchise: “For purposes of this policy, “real estate franchisor” is defined as a company granting real estate brokerage franchises under the franchisor’s trademarks pursuant to a franchise disclosure document meeting applicable Federal Trade Commission rules.”

I believe this language will lead to inevitable litigation, either for clarification or to have it be struck.

First, that language leaves out quite a few “marketing networks” — the largest of which is Leading Real Estate Companies of the World.  I can think of no good reason why the filing or not filing of a UFOC (Uniform Franchise Offering Circular) should have any bearing on how a MLS’s rules do or do not apply.  If the idea is that a franchisor works for the benefit of its franchisees in marketing the brand, marketing their properties, and drives leads (at no extra charge) to them… then marketing networks work exactly the same way, utilizing exactly the same tools.

This is particularly poignant in light of the fact that the Franchise Rule of the FTC was created to prevent deceptive sales of franchises to unsuspecting entrepreneurs:

To prevent deceptive and unfair practices in the sale of franchises and business opportunities and to correct consumers’ misimpressions about franchise and business opportunity offerings, the Commission adopted the original Franchise Rule, which is primarily a pre-sale disclosure rule. The original Rule did not purport to regulate the substantive terms of the franchise or business opportunity relationship. Rather, it required franchisors and business opportunity sellers to disclose material information to prospective purchasers on the theory that informed investors can determine for themselves whether a particular deal is in their best interest

While the Rule was amended in 1997, that original intent was never changed to my knowledge.  The Franchise Rule does not purport to regulate the actual day-to-day operations of a franchise, nor have any impact on how a franchise markets itself to consumers (as opposed to potential investors/franchisees).

Therefore, for NAR to rely on the FTC as the standard of what company is and is not a franchise, in the context of a rule that is entirely about consumer access to listings information (i.e., a marketing strategy), is… to curioser, to say the least.

Second, that language leaves out various web-based lead generation companies, such as Homegain, Trulia, Zillow, and others.  Given that all of those companies are competing fiercely on organic SEO, I doubt any of them are particularly thrilled about this decision.  Once again, the justification for singling out “franchises” as defined by reference to the FTC is pretty weak, given that display of real estate listings to consumers is simply marketing and unconnected to the offering of business opportunities.

If suit is brought on this IDX policy against NAR and against various MLS’s, for anticompetitive restraint of trade (because that’s what it really smells like from the outside), I rather imagine it’d be difficult to justify the different treatment of one website over another simply because the corporate parent of one filed a UFOC with the FTC.

If, after further consideration and review, or after legal challenge, NAR elects to either get rid of the “franchise” requirement — thereby opening up the IDX to any company that has permission from a bona fide member of a MLS… well, we’ve entered a new and interesting world then.

Curiosest…

[Note: Yes, I know neither that, or “curioser” is an actual word….]

The most curious impact of this policy, of course, is on the brokers and agents.  Assume that Acme Realty, a brokerage, does not belong to a large national franchise, which can leverage the new IDX policy to create highly competitive SEO-optimized national sites that can compete with Realtor.com, Trulia, Zillow, etc. (and beat them, as they have access to all of the IDX data for any MLS where they have a franchisee).

It was already difficult enough for an independent to compete on organic search against the national portals.  After this policy, it will make it that much harder to do so.

An independent brokerage, then, is left with two choices.  One, it can join a national franchise — and bigger the better, since more listings, more data, all of which can be indexed and displayed, means better SEO opportunities (e.g., better landing pages, etc.).  Two, it can try to deny permission to national franchises — whose franchisees, mind you, are direct competitors in its marketplace — to use its listing data in this manner, even in IDX.

I expect that in some MLS boardrooms, this issue will become quite perplexing in the next several months.  Note in this context that the current IDX rules do allow for case-by-case opt-out (or a blanket opt-out, but I don’t think most independent brokerages will want to opt out of IDX entirely), but on a listing-by-listing basis, rather than denying display rights to a company or to a type of organization. The key provision is this:

Q. Can I authorize some, but not all, Participants to display my listings on the Internet?

A. If you consent to the display of your listings by other Participants under the IDX program, then any other Participant in the MLS may display your listings. If you prefer to authorize some, but not all, Participants to display your listings, this can be accomplished – though not under the IDX program. Separate consents would have to be granted to each Participant authorized to display your listings. As noted in an earlier question, MLSs may, but are not required, to transmit your listings to any destination you authorize. The decisions as to whether an MLS will provide such a service, and the related charges (if any) are matters to be determined locally. (Emphasis added)

Also note that a MLS may refuse under the current rules to syndicate your listing to property portals and other websites, such as Realtor.com, if you opt-out of IDX.

All of which signals that in some MLS’s, where franchised brokers do not dominate, I suspect that a new program — let’s call it… Broker Data Exchange or BDX — will be proposed and hotly debated, where “separate consents” would be granted that do not fall under the IDX policy.

An individual agent, of course, is in the same boat — but with fewer rights, since they actually do not have any rights to any of the listing data; the broker does.  If this rule is approved by the Board of Directors, and implemented… an individual agent using IDX for SEO purposes is likely to find the effort (a) very difficult, and (b) not really worthwhile.

Keep in mind that a year ago, quite a few agents and brokers fought hard to make sure that “search engines” can index (aka, “scrape”) IDX data.  This was framed as an issue of innovation — the people who wanted to protect the data were portrayed as being a bunch of out of touch luddites.  With this rule (and its possible progeny), the individual real estate agent may come to view things differently.  Time will tell.

Miscellany

A couple of miscellaneous questions that arise from this policy.

First, note this language:

• Inaccurate or incomplete information related to any listing is promptly corrected by the franchisor at the request of the source MLS.

“At the request of the source MLS” sounds like the various Compliance departments of MLS’s are about to take on more work.  Thing is, the Franchises are not members of a MLS; they are not paying the dues out of which additional Compliance people may be hired.  Even if the MLS gets around this by charging some sort of a premium fee to the Franchise for the IDX program (a provision that is missing from the policy) to pay for additional Compliance, the actual work of looking at a large national-scale website like a Coldwell Banker to see if information is inaccurate or incomplete is non-trivial.

Any MLS that does not today have automated compliance systems should consider investing in one pronto.

Second, note this clause:

• IDX listing information will not be modified, manipulated or permanently retained

Given that the policy, on its face, is that the Franchise is exempt from MLS rules, one is left wondering how modification and manipulation are to be defined, policed, and enforced.  Presumably, this doesn’t mean the Franchise has to put the raw CSV or XML data on a website with no design, no user interface.  There has to be some modification and manipulation.

Perhaps it means merely the actual data itself — dates, addresses, prices, etc. cannot be modified or manipulated.  Which makes sense, but raises the issue of Compliance again.  Since data modification/manipulation cannot be determined solely by looking at the webpage itself, presumably MLS’s will need to figure out a way to audit the Franchise website’s IDX database, where the data will be held temporarily to be made available for display.  Good luck with that.

Conclusion

It is difficult to draw any real conclusions yet.  We may do some formal research into this topic at a later point.  But initial impressions are:

• This will lead to lawyers making money.
• MLS’s will face some resistance, possibly heated, from some of their membership.
• Brokers and agents are likely to find that listings-based SEO just got a lot harder to pull off.
• Compliance, the piece being taken for granted, will be a challenge.

I welcome any thoughts on this issue.