[Federal Register: October 18, 2006 (Volume 71, Number 201)]
[Notices]
[Page 61474-61478]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18oc06-56]
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FEDERAL TRADE COMMISSION
[File Nos. 061 0087; 051 0065; 061 0268; 061 0267; 051 0217]
Information and Real Estate Services, LLC; Northern New England
Real Estate Network, Inc.; Williamsburg Area Association of Realtors,
Inc.; Realtors Association of Northeast Wisconsin, Inc.; Monmouth
County Association of Realtors, Inc.; Analysis of Agreements Containing
Consent Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreements.
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SUMMARY: The consent agreements in these matters settle alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaints and the terms of the consent orders--embodied in the consent
agreements--that would settle these allegations.
DATES: Comments must be received on or before November 10, 2006.
ADDRESSES: Interested parties are invited to submit written comments.
Comments should refer to ``Information and Real Estate Services, File
No. 061 0087; or Northern New England Real Estate Network, File No. 051
0065; or Williamsburg Area Association of Realtors, File No. 061 0268;
or Realtors Association of Northeast Wisconsin, File No. 061 0267; or
Monmouth County Association of Realtors, Inc., File No. 051 0217,'' to
facilitate the organization of comments. A comment filed in paper form
should include this reference both in the text and on the envelope, and
should be mailed or delivered to the following address: Federal Trade
Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania
Avenue, NW., Washington, DC 20580. Comments containing confidential
material must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR
4.9(c) (2005).\1\ The FTC is requesting that any comment filed in paper
form be sent by courier or overnight service, if possible, because U.S.
postal mail in the Washington area and at the Commission is subject to
[[Page 61475]]
delay due to heightened security precautions. Comments that do not
contain any nonpublic information may instead be filed in electronic
form as part of or as an attachment to e-mail messages directed to the
following e-mail box: consentagreement@ftc.gov.
The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. All timely and responsive public comments, whether filed
in paper or electronic form, will be considered by the Commission, and
will be available to the public on the FTC Web site, to the extent
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC
makes every effort to remove home contact information for individuals
from the public comments it receives before placing those comments on
the FTC Web site. More information, including routine uses permitted by
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm
.
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\1\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See Commission Rule 4.9(c),
16 CFR 4.9(c).
FOR FURTHER INFORMATION CONTACT: Patrick J. Roach, Bureau of
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202)
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326-2793.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 of
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given
that the above-captioned consent agreements containing consent orders
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, have been placed on the public
record for a period of thirty (30) days. The following Analysis to Aid
Public Comment describes the terms of the consent agreements, and the
allegations in the complaints. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for October 12, 2006), on the World Wide Web, at http://www.ftc.gov/os/2006/10/index.htm.
A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington,
DC 20580, either in person or by calling (202) 326-2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. All comments should be filed as
prescribed in the ADDRESSES section above, and must be received on or
before the date specified in the DATES section.
Analysis of Agreements Containing Consent Orders To Aid Public Comment
The Federal Trade Commission has accepted for public comment a
series of agreements containing consent orders with five respondent
entities. Each of the proposed respondents operates a multiple listing
service (``MLS'') that is designed to foster real estate brokerage
services by sharing and publicizing information on properties for sale
by customers of real estate brokers. The agreements settle charges that
each respondent violated Section 5 of the Federal Trade Commission Act,
15 U.S.C. 45, through particular acts and practices of the MLS. The
proposed consent orders have been placed on the public record for 30
days to receive comments from interested persons. Comments received
during this period will become part of the public record. After 30
days, the Commission will review the agreements and the comments
received, and will decide whether it should withdraw from the agreement
or make the proposed order final.
The purpose of this analysis is to facilitate comment on the
proposed consent orders. This analysis does not constitute an official
interpretation of the agreements and proposed orders, and does not
modify their terms in any way. Further, the proposed consent orders
have been entered into for settlement purposes only, and do not
constitute an admission by any proposed respondent that it violated the
law or that the facts alleged in the respective complaint against each
respondent (other than jurisdictional facts) are true.
I. The Respondents
The agreements are with the following organizations:
--Information and Real Estate Services, LLC (``IRES'') is a limited
liability company based in Loveland, Colorado, that is owned by five
boards and associations of realtors in Boulder, Fort Collins, Greeley,
Longmont, and Loveland/Berthoud, Colorado. IRES operates a regional MLS
for Northern Colorado that is used by more than 5,000 real estate
professionals.
--Northern New England Real Estate Network, Inc. (``NNEREN'') is a
corporation based in Concord, New Hampshire, that functions as an
association of realtors. NNEREN operates an MLS for New Hampshire and
some surrounding areas that is used by several thousand real estate
professionals.
--Williamsburg Area Association of Realtors, Inc. (``WAAR''), is a
corporation based in Williamsburg, Virginia, that functions as an
association of realtors. WAAR operates an MLS for the Williamsburg,
Virginia, metropolitan area and surrounding counties that is used by
approximately 650 real estate professionals.
--Realtors Association of Northeast Wisconsin, Inc. (``RANW'') is a
non-profit corporation based in Appleton, Wisconsin, that functions as
an association of realtors. RANW operates an MLS for the Northeast
Wisconsin Area, which includes the cities of Green Bay, Appleton,
Oshkosh, and Fond du Lac, Wisconsin, and the surrounding counties, that
is used by more than 1,500 real estate professionals.
--Monmouth County Association of Realtors, Inc. (``MCAR'') is a
corporation based in Tinton Falls, New Jersey, that functions as an
association of realtors. MCAR operates an MLS for Monmouth County,
Ocean County and the surrounding areas of New Jersey that is used by
several thousand real estate professionals.
II. Industry Background
A Multiple Listing Service, or ``MLS,'' is a cooperative venture by
which real estate brokers serving a common local market area submit
their listings to a central service, which in turn distributes the
information, for the purpose of fostering cooperation among brokers and
agents in real estate transactions. The MLS facilitates transactions by
putting together a home seller, who contracts with a broker who is a
member of the MLS, with prospective buyers, who may be working with
other brokers who are also members of the MLS. Membership in the MLS is
largely limited to member brokers who generally must possess a license
to engage in real estate brokerage services and meet other criteria set
by MLS rules.
Prior to the late 1990s, the listings on an MLS were typically
directly accessible only to real estate brokers who were members of a
local MLS. The MLS listings typically were made available through books
or dedicated computer terminals, and generally could only be accessed
by the general public by physically visiting a broker's office or by
receiving a fax or hand delivery of selected listings from a broker.
Information from an MLS is now typically available to the general
public not only through the offices of real
[[Page 61476]]
estate brokers who are MLS members, but also through three principal
categories of Internet Web sites. First, information concerning many
MLS listings is available through Realtor.com, a national Web site run
by the National Association of Realtors (``NAR''). Realtor.com contains
listing information from many local MLS systems around the country and
is the largest and most-used Internet real estate Web site. Second,
information concerning MLS listings is often made available through a
local MLS-affiliated Web site. Third, information concerning MLS
listings is often made available on the Internet sites of various real
estate brokers, who choose to provide these Web sites as a way of
promoting their brokerage services. Most of these various Web sites
receive information from an MLS pursuant to a procedure often known as
Internet Data Exchange (``IDX''), which is typically governed by MLS
policies. The IDX policies allow operators of approved Web sites to
display MLS active listing information to the public.
Today the Internet plays a crucial role in real estate sales.
According to a 2005 survey by the National Association of Realtors
(``NAR''), 77 percent of home buyers used the Internet to assist in
their home search, with 57 percent reporting frequent Internet
searches. Twenty-four percent of respondents first learned about the
home they selected from the Internet, the second most common means
behind learning about a home from a real estate agent (50 percent).\2\
In all, 69 percent of home buyers found the Internet to be a ``very
useful'' source of information, and a total of 96 percent found the
Internet to be either ``very useful'' or ``somewhat useful.'' \3\
Moreover, the NAR Survey makes clear that the overwhelming majority of
Web sites used nationally in searching for homes contain listing
information that is provided by local MLS systems.\4\
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\2\ E.g., Paul C. Bishop, Thomas Beers and Shonda D. Hightower,
The 2005 National Association of Realtors Profile of Home Buyers and
Sellers (hereinafter, ``NAR Study'') at 3-3, 3-4.
\3\ Id. See Home Buyer & Seller Survey Shows Rising Use of
Internet, Reliance on Agents (Jan. 17, 2006), available at http://www.realtor.org/PublicAffairsWeb.nsf/Pages/HmBuyerSellerSurvey06?OpenDocument
.
\4\ NAR Study at 3-19.
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A. Types of Real Estate Brokerage Professionals
A typical real estate transaction involves two real estate brokers.
These are commonly known as a ``listing broker'' and a ``selling
broker.'' The listing broker is hired by the seller of the property to
locate an appropriate buyer. The seller and the listing broker agree
upon compensation, which is determined by written agreement negotiated
between the seller and the listing broker. In a common traditional
listing agreement, the listing broker receives compensation in the form
of a commission, which is typically a percentage of the sales price of
the property, payable if and when the property is sold. In such a
traditional listing agreement, the listing broker agrees to provide a
package of real estate brokerage services, including promoting the
listing through the MLS and on the Internet, providing advice to the
seller regarding pricing and presentation, fielding all calls and
requests to show the property, supplying a lock-box so that potential
buyers can see the house with their agents, running open houses to show
the house to potential buyers, negotiating with buyers or their agents
on offers, assisting with home inspections and other arrangements once
a contract for sale is executed, and attending the closing of the
transaction.
The other broker involved in a typical transaction is commonly
known as the selling broker. In a typical transaction, a prospective
buyer will seek out a selling broker to identify properties that may be
available. This selling broker will discuss the properties that may be
of interest to the buyer, accompany the buyer to see various
properties, try to arrange a transaction between buyer and seller,
assist the buyer in negotiating the contract, and help in further steps
necessary to close the transaction. In a traditional transaction, the
listing broker offers the selling broker a fixed commission, to be paid
from the listing broker's commission when and if the property is sold.
Real estate brokers typically do not specialize as only listing brokers
or selling brokers, but often function in either role depending on the
particular transaction.
B. Types of Real Estate Listings
The relationship between the listing broker and the seller of the
property is established by agreement. The two most common types of
agreements governing listings are Exclusive Right to Sell Listings and
Exclusive Agency Listings. An Exclusive Right to Sell Listing is the
traditional listing agreement, under which the property owner appoints
a real estate broker as his or her exclusive agent for a designated
period of time, to sell the property on the owner's stated terms, and
agrees to pay the listing broker a commission if and when the property
is sold, whether the buyer of the property is secured by the listing
broker, the owner or another broker.
An Exclusive Agency Listing is a listing agreement under which the
listing broker acts as an exclusive agent of the property owner or
principal in the sale of a property, but under which the property owner
or principal reserves a right to sell the property without assistance
of the listing broker, in which case the listing broker is paid a
reduced or no commission when the property is sold.
Some real estate brokers have attempted to offer services to home
sellers on something other than the traditional full-service basis.
Many of these brokers, often for a flat fee, will offer sellers access
to the MLS's information-sharing function, as well as a promise that
the listing will appear on the most popular real estate Web sites.
Under such arrangements, the listing broker does not offer additional
real estate brokerage services as part of the flat fee package, but
allows sellers to purchase additional services if sellers so desire.
These non-traditional arrangements often are structured using Exclusive
Agency Listing contracts.
There is a third type of real estate listing that does not involve
a real estate broker, which is a ``For Sale By Owner'' or ``FSBO''
listing. With a FSBO listing, a home owner will attempt to sell a house
without the involvement of any real estate broker and without paying
any compensation to such a broker, by advertising the availability of
the home through traditional advertising mechanisms (such as a
newspaper) or FSBO-specific Web sites.
There are two critical distinctions between an Exclusive Agency
Listing and a FSBO for the purpose of this analysis. First, the
Exclusive Agency Listing employs a listing broker for access to the MLS
and Web sites open to the public; a FSBO listing does not. Second, an
Exclusive Agency Listing sets terms of compensation to be paid to a
selling broker, while a FSBO listing often does not.
III. The Conduct Addressed by the Proposed Consent Orders
Each of the proposed consent orders is accompanied by a complaint
setting forth the conduct by the respondent that is the reason for the
proposed consent order. In general, the conduct at issue in these
matters is largely the same as the conduct addressed by the Commission
in its recent consent order involving the Austin Board of Realtors
(``ABOR'').\5\
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\5\ In the Matter of Austin Bd. of Realtors, Docket No. C-4167
(Final Approval, Aug. 29, 2006). The ABOR consent order was
published with an accompanying Analysis To Aid Public Comment at 71
FR 41023 (July 19, 2006).
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[[Page 61477]]
The complaints accompanying the proposed consent orders allege that
respondents have violated Section 5 of the FTC Act by adopting rules or
policies that limit the publication and marketing on the Internet of
certain sellers' properties, but not others, based solely on the terms
of their respective listing contracts. The rules or policies challenged
in the complaints state that information about properties will not be
made available on popular real estate Web sites unless the listing
contracts are Exclusive Right to Sell Listings. When implemented, these
``Web Site Policies'' prevented properties with non-traditional listing
contracts from being displayed on a broad range of public Web sites.
The respondents adopted the challenged rules or policies at various
times between 2001 and 2005. Each respondent, prior to the Commission's
acceptance of the consent orders and proposed complaints for public
comment, rescinded or modified its rules to discontinue the challenged
practices. The members of each respective MLS affected by these rules
have been notified of the recent changes.
The complaints allege that the respondents violated Section 5 of
the FTC Act by unlawfully restraining competition among real estate
brokers in their respective service areas by adopting the Web Site
Policies.
A. The Respondents Have Market Power
Each of the respondents serves the great majority of the
residential real estate brokers in its respective service area. These
professionals compete with one another to provide residential real
estate brokerage services to consumers.
Each of the respondents also is the sole or dominant MLS serving
its respective service area. Membership in each of the respondents' MLS
systems is necessary for a broker to provide effective residential real
estate brokerage services to sellers and buyers of real property in the
respective service area.\6\ Each respondent, through the MLS that it
operates, controls key inputs needed for a listing broker to provide
effective real estate brokerage services, including: (1) A means to
publicize to all brokers the residential real estate listings in the
service area; and (2) a means to distribute listing information to Web
sites for the general public. By virtue of industry-wide participation
and control over a key input, each of the respondents has market power
in the provision of residential real estate brokerage services to
sellers and buyers of real property in its respective service area.
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\6\ As noted, the MLS provides valuable services for a broker
assisting a seller as a listing broker, by offering a means of
publicizing the property to other brokers and the public. For a
broker assisting a buyer, it also offers unique and valuable
services, including detailed information that is not shown on public
Web sites, which can help with house showings and otherwise
facilitate home selections.
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B. Respondents' Conduct
At various times between 2001 and 2005, each of the respondents
adopted a rule that prevented information on listings other than
traditional Exclusive Right to Sell Listings from being included in the
information available from its respective MLS to be used and published
by publicly-accessible Web sites.\7\ The effect of these rules, when
implemented, was to prevent such information from being available to be
displayed on a broad range of Web sites, including the NAR-operated
``Realtor.com'' Web site; the Web sites operated by several of the
respondents; and member Web sites.
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\7\ For example, MCAR's rule stated: ``Listing information
downloaded and/or otherwise displayed pursuant to IDX shall be
limited to properties listed on an exclusive right to sell basis.
(Office exclusive and exclusive agency listings will not be
forwarded to IDX sites.).'' (MCAR Rules and Regulations (2004)). The
NNEREN rule used somewhat different wording: ``Exclusive Agency
listings will not be included in NNEREN datafeeds to any Web site
accessed by the general public such as nneren.com, REALTOR.com,
third party feeds, IDX, etc. `` (NNEREN Rules and Regulations (Feb.
2005)).
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Non-traditional forms of listing contracts, including Exclusive
Agency Listings, are often used by listing brokers to offer lower-cost
real estate services to consumers. The Web Site Policies of each of the
respondents were joint action by a group of competitors to withhold
distribution of listing information to publicly accessible Web sites
from competitors who did not contract with their brokerage service
customers in a way that the group wished. This conduct was a new
variation of a type of conduct that the Commission condemned 20 years
ago. In the 1980s and 1990s, several local MLS boards banned Exclusive
Agency Listings from the MLS entirely. The Commission investigated and
issued complaints against these exclusionary practices, obtaining
several consent orders.\8\
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\8\ See, e.g., In the Matter of Port Washington Real Estate Bd.,
Inc., 120 F.T.C. 882 (1995); In the Matter of United Real Estate
Brokers of Rockland, Ltd., 116 F.T.C. 972 (1993); In the Matter of
Am. Indus. Real Estate Assoc., 116 F.T.C. 704 (1993); In the Matter
of Puget Sound Multiple Listing Assoc., 113 F.T.C. 733 (1990); In
the Matter of Bellingham-Whatcom County Multiple Listing Bureau, 113
F.T.C. 724 (1990); In the Matter of Metro MLS, Inc., 113 F.T.C. 305
(1990); In the Matter of Multiple Listing Serv. of the Greater
Michigan City Area, Inc., 106 F.T.C. 95 (1985); In the Matter of
Orange County Bd. of Realtors, Inc., 106 F.T.C. 88 (1985).
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C. Competitive Effects of the Web Site Policies
The Web Site Policies have the effect of discouraging members of
the respective respondents' MLS systems from offering or accepting
Exclusive Agency Listings. Thus, the Web Site Policies substantially
impede the provision of unbundled brokerage services, and make it more
difficult for home sellers to market their homes. The Web Site Policies
have caused some home sellers to switch away from Exclusive Agency
Listings to other forms of listing agreements.\9\
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\9\ WAAR does not appear to have implemented the Web Site
Policies, as Exclusive Agency Listings have been included in IDX
feeds before, during and after its policy was in effect. However,
its adoption and publication of the policy alone has inhibited the
use of such listings in the Williamsburg area by at least one local
real estate broker, who chose not to use Exclusive Agency Listings
because he did not wish to violate the local rule.
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When home sellers switch to full service listing agreements from
Exclusive Agency Listings that often offer lower-cost real estate
services to consumers, the sellers may purchase services that they
would not otherwise buy. This, in turn, may increase the commission
costs to consumers of real estate brokerage services. By preventing
Exclusive Agency Listings from being transmitted to public-access real
estate Web sites, the Web Site Policies have adverse effects on home
sellers and home buyers. In particular, the Web Site Policies deny home
sellers choices for marketing their homes and deny home buyers the
chance to use the Internet to easily see all of the houses listed by
real estate brokers in the area, making their search less efficient.
D. There Is No Competitive Efficiency Associated With the Web Site
Policies
The respondents' rules at issue here advance no legitimate
procompetitive purpose. If, as a theoretical matter, buyers and sellers
could avail themselves of an MLS system and carry out real estate
transactions without compensating any of its broker members, an MLS
might be concerned that those buyers and sellers were free-riding on
the investment that brokers have made in the MLS and adopt rules to
address that free-riding. But this theoretical concern does not justify
the rules or policies adopted by the various respondents here.
Exclusive Agency Listings do not enable home buyers or sellers to
bypass the use of the brokerage services that the MLS was created to
promote, because a listing broker is always involved in an Exclusive
Agency
[[Page 61478]]
Listing, and the MLS rules of each of the respondents already provide
protections to ensure that a selling broker--a broker who finds a buyer
for the property--is compensated for the brokerage service he or she
provides.
It is possible, of course, that a buyer of an Exclusive Agency
Listing may make the purchase without using a selling broker, but this
is true for traditional Exclusive Right to Sell Listings as well. Under
the existing MLS rules of each of the respondents that apply to any
form of the listing agreement, the listing broker must ensure that the
home seller pays compensation to the cooperating selling broker (if
there is one), and the listing broker may be liable himself for a lost
commission if the home seller fails to pay a selling broker who was the
procuring cause of a completed property sale. The possibility of
sellers or buyers using the MLS but bypassing brokerage services is
already addressed effectively by the respondents' existing rules that
do not distinguish between forms of listing contracts, and does not
justify the Web Site Policies.
IV. The Proposed Consent Orders
Despite the recent cessation by each of the respondents of the
challenged practices, it is appropriate for the Commission to require
the prospective relief in the proposed consent orders. Such relief
ensures that the respondents cannot revert to the old rules or
policies, or engage in future variations of the challenged conduct. The
conduct at issue in the current cases is itself a variation of
practices that have been the subject of past Commission orders; as
noted above, in the 1980s and 1990s, the Commission condemned the
practices of several local MLS boards that had banned Exclusive Agency
Listings entirely, and several consent orders were imposed.
The proposed orders are designed to ensure that each MLS does not
misuse its market power, while preserving the procompetitive incentives
of members to contribute to the MLS systems operated by the
respondents. The proposed orders prohibit respondents from adopting or
enforcing any rules or policies that deny or limit the ability of their
respective MLS participants to enter into Exclusive Agency Listings, or
any other lawful listing agreements, with sellers of properties. The
proposed orders include examples of such practices, but the conduct
they enjoin is not limited to those five enumerated examples. In
addition, the proposed orders state that, within thirty days after each
order becomes final, each respondent shall have conformed its rules to
the substantive provisions of the order. Each respondent is further
required to notify its participants of the applicable order through its
usual business communications and its Web site. The proposed orders
require notification to the Commission of changes in the respondent
entities' structures, and periodic filings of written reports
concerning compliance with the terms of the orders.
The proposed orders apply to each of the named respondents and
entities it owns or controls, including its respective MLS and any
affiliated Web site it operates. The orders do not prohibit
participants in the respondents' MLS systems, or other independent
persons or entities that receive listing information from a respondent,
from making independent decisions concerning the use or display of such
listing information on participant or third-party Web sites, consistent
with any contractual obligations to respondent(s).
The proposed orders will expire in 10 years.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. E6-17357 Filed 10-17-06; 8:45 am]
BILLING CODE 6750-01-P