An Antitrust Primer for Realtors®
By Henry A. Hart, Esq.
In order to comply with federal and state antitrust laws, REALTORS® must have a general understanding of how these laws apply to both their practice and to their operations within their local REALTOR® Association. What are the most pertinent federal and state antitrust provisions? And how do REALTORS® avoid violating these antitrust laws?
Relevant Federal And State Antitrust Laws
The federal antitrust provision which is most pertinent to REALTORS® is Section 1 of the Sherman Act which prohibits any contract, combination or conspiracy in restraint of interstate commerce. Violation of the federal Sherman Act carries significant civil penalties, including treble damages and stiff criminal penalties. Actions prohibited by Section 1 of the Sherman Act include most importantly the following:
Price Fixing - (e.g., an agreement among competing real estate firms to charge the same commissions or to increase their commissions, or an agreement among REALTORS® to use a form listing agreement which includes a set commission rate).
Division Of Markets - An agreement among competing real estate firms to allocate customers (e.g., each firm agrees not to solicit the other firm's customers).
Group Boycotts - An Association of REALTORS® denies to a competing real estate agent or broker, without any reasonable basis, competitive advantages which are derived from membership in the Association, (e.g., denying access to a multiple listing service to a competing real estate agent or broker because a director of the Association has a personal grudge against such agent or broker).
Section 5 of the Federal Trade Commission Act prohibits unfair methods of competition. Essentially, any violation of Section 1 of the Sherman Act would also violate Section 5 of the Federal Trade Commission Act.
Virginia, Maryland and District of Columbia all have so-called "mini-Sherman Acts" which contain provisions essentially identical to Section 1 of the Sherman Act, except that they apply to restraints upon Virginia, Maryland and District of Columbia commerce respectively. Therefore, even if a REALTOR® actions were found not to affect interstate commerce, they would in all likelihood affect Virginia, Maryland or District of Columbia commerce, and would therefore be subject to the Virginia, Maryland or District of Columbia antitrust laws.
Guidelines For REALTOR® Compliance With Antitrust Laws
To avoid the substantial expense, risk, time and distractions of antitrust litigation, it is advisable for all REALTORS® to avoid not only actual violations of antitrust laws, but also any conduct which might create the appearance of a violation of the antitrust laws. REALTORS® should take care that neither their statements nor their written documents contain any information which would allow a judge or jury to make the inference that an agreement restraining competition had been reached with another REALTORS®.
REALTORS® must be cognizant of antitrust issues arising not only from their professional practice, but also from their volunteer activities within their local association of REALTORS®. Here are some guidelines for avoiding antitrust problems in both arenas.
Four Key Guidelines For REALTORS® Engaged In Real Estate Brokerage Activities
1. NAR Publication -- For a detailed discussion of REALTORS® engaged in real estate brokerage activities see the below-referenced NAR publication Antitrust Pocket Guide for REALTORSои and REALTOR®-Associates.
2. Do Not Discuss Your Business Pricing Or Strategy With Competitors - In particular do not discuss commissions or other charges, and do not suggest to any other competitor that the two of you should act in a concerted manner with respect to any particular business practice.
3. Be Careful In Your Statements To The Public - Do not make any statements to clients or the general public which imply that competing REALTORS® have agreed upon commissions or other particular business practices. For example, do not attempt to justify a commission by stating that "this is what we all charge." Not only is such a statement clearly untrue, but it also incorrectly and unfairly implies to the public that REALTORS® are violating the antitrust laws.
4. Do Not Disparage The Idea Of Competition - Do not suggest to REALTORS® in other firms that close friends should not compete.
Guidelines For REALTORS® Acting Within The Association Context
1. NAR Publication - See the below-referenced NAR Publication entitled Antitrust Pocket Guide for Association Leadership for an excellent antitrust compliance program for REALTOR® association leaders.
2. Meetings - All association meetings should be conducted pursuant to written agendas. Only items on the written agenda should be discussed.
3. Minutes - Minutes should be prepared of all association meetings which accurately reflect official action taken.
4. Arbitration And Grievance Proceedings - REALTOR® association grievance and arbitration proceedings should strictly comply with practices, policies and procedures set forth in the Ethics and Arbitration Manuals of NAR and the applicable local REALTOR® associations.
5. Denial Of Access To Association Services - Where any association member or prospective member is denied association services for reasons other than uncontested non-payment of dues, legal counsel for the association should be consulted to assure that proper procedures are followed.
If In Doubt, Consult . . .
No antitrust compliance program or article can anticipate or adequately address all antitrust questions which may arise. If you do have doubts about any antitrust issues which arise in your practice, consult the broker under whose license you work, or legal counsel knowledgeable about antitrust matters. Similarly, if you have doubts about antitrust issues which involve your association, consult your association's executive officer, who should have access to legal counsel knowledgeable in antitrust matters.Guidelines For REALTORS® Acting Within The Association Context
1. NAR Publication - See the below-referenced NAR Publication entitled Antitrust Pocket Guide for Association Leadership for an excellent antitrust compliance program for REALTOR® association leaders.
2. Meetings - All association meetings should be conducted pursuant to written agendas. Only items on the written agenda should be discussed.
3. Minutes - Minutes should be prepared of all association meetings which accurately reflect official action taken.
4. Arbitration And Grievance Proceedings - REALTOR® association grievance and arbitration proceedings should strictly comply with practices, policies and procedures set forth in the Ethics and Arbitration Manuals of NAR and the applicable local REALTOR® associations.
5. Denial Of Access To Association Services - Where any association member or prospective member is denied association services for reasons other than uncontested non-payment of dues, legal counsel for the association should be consulted to assure that proper procedures are followed.
If In Doubt, Consult . . .
No antitrust compliance program or article can anticipate or adequately address all antitrust questions which may arise. If you do have doubts about any antitrust issues which arise in your practice, consult the broker under whose license you work, or legal counsel knowledgeable about antitrust matters. Similarly, if you have doubts about antitrust issues which involve your association, consult your association's executive officer, who should have access to legal counsel knowledgeable in antitrust matters.