Notes from the MAR Legal Hotline

Michael McDonagh, MAR General Counsel

Ashley Stolba, MAR Associate Counsel  

Justin Davidson, MAR Staff Attorney

February 2015

Antitrust 

Q.  One area of the law that I often find confusing is antitrust.  I know from my continuing education classes that the penalties for violations can be severe.  What tips can I follow to try to keep myself and my office out of trouble?

A.  Antitrust can sometimes seem like a very complicated issue for REALTORS® to understand in their day to day practice. Federal laws on the subject tend to be complex; however, NAR has identified four main areas of concern for real estate licensees.

1. Price/term fixing. In most businesses, including real estate, many competitors may charge similar prices for the same services. This isn't illegal as long as each competitor sets prices independently. An antitrust violation occurs when you discuss and actually agree to charge the same prices or offer exactly the same terms as one or more of your competitors.  Avoid problems by: Establishing your company's fees, commission splits, and listing terms independently and without any discussion with competitors. Even informal conversations where you have no intention of actually setting prices could be misinterpreted as the basis of a price-fixing agreement.

2. Territorial assignments. Agreements between competitors to divide the market geographically, by price range, type of property, or some other segmentation are considered anticompetitive because they conspire to establish dominance in a particular market. This isn't the same as an individual company’s practice of specializing in certain properties such as historic buildings or custom-built housing. Avoid problems by: Documenting your decisions to focus on certain property types with marketing and demographic studies.

3. Boycotts. Boycotts occur when a group of businesses agree not to do business with a particular party. A typical group boycott allegation in the real estate brokerage business involves a claim that two or more brokerages have agreed to refuse to cooperate, or to cooperate on less favorable terms, with a third brokerage company. The intent is to eliminate that company as a competitor or to force it to abandon certain practices. Another form of boycott would occur if several companies collectively determined not to use a particular service provider, such as a certain newspaper. Avoid problems by: Making decisions on whether to do business with other real estate companies or service providers based on your company’s own judgments, goals, and experiences.

4. Association meetings. Associations are groups of competitors who come together to promote their common business interests. As such, they are vulnerable to allegations that agreements by members to use identical business practices are illegal conspiracies.  Avoid problems by: Remaining alert to discussions at meetings relating to commission rates, pricing structures, listing policies, or marketing practices of other brokers.

 Q.  I have received a survey that asks questions regarding my business practices, but I am afraid that it might be anticompetitive if I fill it out. What should I look out for?

A. Whether or not a survey is a violation of federal antitrust laws will be dependent upon the specific questions asked. Of course, you will want to avoid any questions that lead to anticompetitive behavior. Questions regarding commission splits and other terms are not a per se violation, but you should be mindful of antitrust when answering them.

When determining whether or not to answer the questions, you will want to consider whether the survey involves current, past or future pricing information.  If the survey is of past pricing which is not necessarily representative of current or future prices, the issue will have much less concern.

Another consideration to be mindful of is, who received the survey results, and why? If the survey was created and distributed for academic purposes, there is less of a concern. However, if the survey was conducted by industry participants for the purposes of creating an industry standard, the questions should be avoided.