Plaintiff, a real estate agent representing buyers, brought an action under Section 1 of the Sherman Act for illegal tying, Reifert v. South Central Wisconsin MLS Corp., 7th cir., No. 05-3601, 6/12/06. Plaintiff claimed that defendant Realtors’ Association violated Section 1 by requiring an agent subscribing to a multiple listing service ("MLS") to also pay dues to an affiliated national association, the National Association of Realtors ("NAR").

Plaintiff also alleged an unlawful group boycott pursuant to Section 1, and finally, that a provision of the NAR Code of Ethics violated Section 1 as an unreasonable restraint of trade, as it prohibited members of NAR from "interfering" with exclusivity agreements entered into by other members with their respective clients.

The district court granted summary judgment on the tying claim, finding that the plaintiff had failed to present any evidence of competition in the market for the tied product. The district court granted summary judgment on the group boycott claim based upon the same factors which mitigated against the finding of an unlawful tying arrangement. As to the Code of Ethics claim, the court entertained a rule of reason analysis and found that the "balance between pro and anti-competitive effects weighs heavily in favor of Article 16." This was on the principle ground that the non-interference policy promoted information transparency, and thus would have been output expansive in the relevant market.

The Court of Appeals for the 7th Circuit affirmed. Relying on its decision in CarlSandburgVillage Condo Association No. 1 v. First Condo Development Co.1, the court held that plaintiffs had failed to produce any "economic evidence" of foreclosure to a substantial volume of interstate commerce in the market for the tied product, namely membership in NAR. The alleged tying product market was access to the defendants MLS. Relying on Carl Sandburg, the court held that it is incumbent upon the plaintiff to present "economic evidence" that there is at least one additional competitor in the market for the tied product. The court held that by simply forcing a purchaser to purchase an unwanted tied product, conditioned upon access to the tying product, a defendant does not violate the antirust laws, absent substantial foreclosure in the tied product market.2 The court stated,

"Despite Reifert’s desire to avoid purchasing a Realtor’s Association membership, without evidence of competitors in the market for services offered by the Realtor’s Association, there can be no foreclosure of competition."3

While plaintiff produced a lengthy list of associations, arguably in competition for realty services, the court determined that none were in the same market, because their services were not sufficiently good substitutes to raise a genuine issue that there was meaningful cross-elasticity with NAR.

The court also noted that in the 7th Circuit, it was insufficient for a plaintiff to simply offer a listing of "practical indicia" factors as referenced in Brown Shoe.4 The court noted that

"While the "practical indicia" named in Brown Shoe … are important considerations in defining a market, they were never intended to exclude economic analysis altogether."5

Thus, while the Court of Appeals affirmed the district court’s grant of summary judgment on the ground that there was no evidentiary showing of a "non-insubstantial amount of interstate commerce" being affected, it inferred that there was no foreclosure based upon the amount of commerce involved.6 

In concurring in the judgment, Circuit Judge Diane Wood would have found that the plaintiff failed to provide evidence of a per se violation, as

"It is the fact that Reifert offered no evidence to show that there was any foreclosure in the tied product market. As far as we can tell from this record, no one refrained from joining any other organization because of the cost of membership in the realtor associations … before us."7

Judge Wood held that this is what distinguished the instant case from Thompson Metro Multi-List, Inc., 934 F.2d 1566 (11th Cir. 1991), cert. denied, 506 U.S. 903 (1992).In Thompson, a substantial effect on interstate commerce was shown where the competitor offering similar services lost 400 members because of a tie between an association of real estate agents and an MLS Service. Judge Wood, however, would avoid a seeming rule of reason analysis, and rely on the majority opinion in Jefferson Parish,8 and not on the concurring opinion of Justice O’Connor, that tying arrangements should be evaluated under the standards applied in Fortner II, and not under the per se rule applied in Morton Salt9 and Loew’s10.

Citing the 7th Circuit opinion in Kahn v. State Oil Co11., she would limit the court to pointing out the problems with per se analysis in the area of tying arrangements,12 but nevertheless adhere to the Supreme Court’s articulation of a per se rule in tying cases.13

1. 758 F.2d 203 (7th Cir. 1985).

2. Perhaps this is another way of expressing the dicta of Brown Shoe Co. v. United States, 370 U.S. 294, 320, (1962) that "the antitrust laws were enacted for the protection of competition, not competitors." (emphasis original). See also, Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) Nevertheless, it may well be a resource misallocation, and allocatively inefficient, to force a purchaser to buy an unwanted product. However, if there is sufficient economic power to compel the purchase of the unwanted product, price theory would argue that the price for the unwanted tied product could have been included in the tying product. See, e.g., United States Steel Corp. v. Fortner Enterprises, Inc., 429 U.S. 610 (1977) (Fortner II); Gellhorn & Kovacic, "Antitrust Law and Economics" 330-331 (1994).

3. Slip Opinion at p. 5.

4. 370 U.S. at 325.

5. Slip Opinion at p. 7. Query whether on a motion for summary judgment, Brown Shoe "practical indicia", particularly relating to cross elasticity of demand factors would support an inference of substituteability sufficient to present a genuine issue of material fact, thus obviating the propriety of the grant of a motion for summary judgment. In Carl Sandburg, decided by Judge Flaum in 1985, the court held that it was appropriate to dismiss the tying claim with prejudice, as the sellers of the tying product, namely condominium units, did not have a sufficient economic interest in the sale of the tied product to support a tying claim. See, 758 F.2d at 206.

6. Slip Opinion at p. 10.

7. Emphasis added. Judge Wood also noted that Carl Sandburg had been decided under the rule of reason.

8. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984).

9.  United States v. Morton Salt Co., 338 U.S. 632 (1950).

10.  United States v. Loew’s, Inc., 371 U.S. 38 (1962).

11.  93 F.3d 1358 (7th Cir. 1986), overruled, State Oil Co. v. Kahn, 522 U.S. 3 (1997).

12.  As noted by commentators, there are whole categories of dealership termination and substitution and tying cases "relegated to the scrap heap of antitrust, if not to its "mothball fleet". See, Don T. Hibner, Jr. & Heather M. Cooper, Market Competitiveness: Does State Antitrust, Law Need To Be Updated, 15 Competition Magazine 59, 113 (2006); See also, Richard M. Steuer, Monsanto and the Mothball Fleet of Antitrust, 30 THE ANTITRUST BULLETIN 1 (1985).

13.  As stated by Justice Stevens, "[i]t is far too late in the history of our antitrust jurisprudence to question the proposition that certain tying arrangements pose an unacceptable risk of stifling competition and therefore are unreasonable per se." 466 U.S. 2, 9 (1984).

Authored by:

Don T. Hibner, Jr.