Free Speech Victory for Real Estate Websites:

John Kramer
John Kramer · April 1, 2008

Arlington, Va.—In a legal victory for online free speech, Magistrate Judge James R. Muirhead of the U.S. District Court for the District of New Hampshire ruled yesterday that real estate advertising company may do business online without having to first secure a real estate broker’s license. The court ruled that websites that advertise properties for sale are like newspaper classified advertising and thus do not need a broker’s license under New Hampshire law. As a result, held the Court, is entitled to an injunction preventing the state from enforcing the licensing requirement against it.

“This ruling gives exactly what they have always wanted—the ability to do business in New Hampshire free of the threat of prosecution,” said Valerie Bayham, a staff attorney with the Institute for Justice, which represents (ZBF). IJ filed the case in June 2006 and secured a federal ruling striking down a similar law in California in 2004. Bayham said, “Now home sellers, not the real estate establishment, will determine how best to advertise and sell homes in New Hampshire.”

Ed Williams and Frank Mackay-Smith started, based in Ipswitch, Mass., after recognizing the power of the Internet to transform real estate transactions. Using the Internet to distribute real estate listings to a large audience, provides consumers maximum choice and flexibility in selling or buying their home without paying high broker commissions.

But New Hampshire state law required Internet advertising companies to become licensed real estate brokers in order to provide, in essence, an online classified ad service. Obtaining a broker’s license takes thousands of hours of training, a significant time and financial burden. Meanwhile, newspapers and other publications of “general circulation” are exempt from the licensing requirements.

In his 33-page decision, Judge Muirhead first rejected the state’s argument that ZBF faced no real threat of prosecution: “It is undisputed that plaintiff engages in a course of conduct that is protected by the First Amendment and perceives sufficient threat of prosecution to have chilled its interest in pursuing its business in New Hampshire.” The Court declined to rule on ZBF’s First Amendment challenge, however, deciding instead to interpret the licensing law to exempt ZBF from the licensing requirement along with newspapers. Finding that ZBF is a “web-based publisher of real estate advertising and information,” the Court concluded that “[t]here is no logical distinction between [a newspaper classified advertising service] and plaintiff’s business, and I will not construe the exemption [for newspapers] to reach the absurd result of exempting one form of classified advertising but not another.”

“We are delighted that the Court recognized both the threat of prosecution we faced under this law and the simple fact that web-based real estate sites are no more ‘brokers’ than newspapers,” said ZBF Chief Executive Officer and Publisher Ed Williams. “If the state had simply made this clear from the beginning, we could have avoided a lawsuit and focused instead on running our business.” Added ZBF Chief Financial Officer Frank Mackay-Smith, “We hope this ruling clears the way for businesses like ours to operate in other states without the hassles and threats of prosecution from pointless regulations.”

“The Internet has revolutionized our entire economy, including home buying and selling, allowing consumers to save thousands of dollars,” said Steve Simpson, IJ senior attorney. “But Americans will realize these benefits only if the government recognizes that its job is to promote the free flow of information, not to protect the status quo.”