State of California Won’t Appeal’s Victory In Online Real Estate Licensing Case

John Kramer
John Kramer · December 20, 2004

Washington, D.C.—The State of California announced late last week that it would not appeal a victory by Internet publisher that struck down California’s demand that websites obtain a real estate broker’s license to publish real estate advertising and information. This is yet another legal victory for the Washington, D.C.-based Institute for Justice, which had litigated the case for free on behalf of

“It’s certainly nice to see a State recognize that the simple solution in this case is also the right solution,” said Steve Simpson, a senior attorney with the Institute for Justice. “The Internet should be treated like traditional media; there’s no justification for licensing publications of either type. We hope other states recognize this simple truth as well.”

The New York-based filed suit challenging the broker licensing law on May 14, 2003, in U.S. District Court in Sacramento. The law required websites to spend years and thousands of dollars obtaining a real estate broker’s license simply because they allow individuals to advertise homes for sale on the Internet and they publish information of interest to buyers and sellers. In early 2001, the California Department of Real Estate began vigorously enforcing the licensing law against “for-sale-by-owner” and classified advertising websites that allow individuals to buy and sell homes without a real estate broker. The Department enforced the laws arbitrarily, requiring independent websites to get a license, while exempting newspapers and other print publications. The Department of Real Estate even said during the course of the lawsuit that websites cannot claim it is “easy” to buy and sell homes without a real estate broker or publish other information with which officials disagree.

But on November 18, 2004, Federal District Judge Morrison England ruled that the distinction between newspapers and websites was “wholly arbitrary” and violated the First Amendment guarantees of free speech and freedom of the press. The court found the State’s effort to justify the distinction “totally unpersuasive.” “[T]here appears to be no justification whatsoever for any distinction between the two mediums,” the court stated. “Even if a distinction was warranted in 1959, when the [newspaper exemption was passed], that does not mean that the same rationale for exempting newspapers remains viable in 2004, given the vast advances in technology that have occurred in the meantime.”

“This is an important case with broad implications for e-commerce,” Simpson said. “Information is more important to the economy than ever before, yet government remains a serious impediment to its free flow and the economic benefits it promises. States clamor to tax Internet businesses, they erect barriers to e-commerce, and they pass laws that favor local brick-and-mortar businesses at the expense of Internet competitors. These laws harm businesses and consumers, stifle innovation, and perpetuate wasteful and antiquated business practices.”

The victory to strike down California’s real estate licensing law was especially important for the Institute for Justice because the court relied upon an earlier IJ legal victory. In that decision, the U.S. District Court for the District of Columbia held that the Commodity Futures Trading Commission could not require licensure of online and software publishers who offered opinions on commodities. This victory by the Institute for Justice was the first federal court case to extend First Amendment protections to Internet publishers.