The Law & You: Antitrust Awareness

Shun conspiracy language

May 1, 2000

It usually comes as a surprise when our words or actions are interpreted other than how we intended. But regardless of what we intend, how we’re interpreted can mean everything in an antitrust investigation.

Consider, for example, this scenario: Two competing brokers are having lunch together when the conversation turns to improving the bottom line. One broker comments, “We’ve considered reducing the compensation we offer to cooperating brokers, but we worry that other companies won’t show our properties. We’d be less concerned if other companies initiated the same policy.”

If both brokers ultimately initiate the compensation-reduction policy, this seemingly innocent statement could be used as the basis for charges of price fixing. Although managing brokers within a company can talk freely about how to enhance revenue, they risk violating antitrust law when those discussions leave company boundaries.

Antitrust laws are intended to protect consumers and promote normal marketplace competition by preventing such trade restraints as price fixing, group boycotts, and monopolies. According to federal and state law, companies must establish their fee structures and business relationships independent of competitors, acting in their own best business interests in an economically rational manner.

Therefore, a statement such as “Our company charges x percent commission, which is standard for our area,” is inherently problematic because it implies that competitors have agreed on what to charge.

To maintain a free market, companies are also prohibited from conspiring to boycott or injure competitors and service providers.

An illegal agreement among competitors to restrain trade is implied by this statement: “The policy of our area is not to allow salespeople from outside our town to show our listed properties. We feel our local salespeople know the area and can do a better job showing and selling the properties located here. We’ll gladly pay other salespeople a referral fee if we make a sale to their customer or client.”

Consider another example, affecting a service provider: “To save marketing costs for our clients,our company and two others have decided to withdraw advertising from the local newspaper until it lowers its rates.”

This agreement among companies to terminate or limit their advertising in a particular publication is almost certainly an unlawful group boycott. However, if several companies decide on their own not to advertise, there’s no violation. The essence of a boycott or restraint of trade is collective action that’s the product of a tacit or explicit agreement.

Similarly, implying that area brokers have agreed not to show properties listed at reduced commission rates--whether true or not--could be interpreted as a group boycott. It would therefore be unwise to say, “Mr. Seller, if I reduce the commission rate on your listing,none of the other salespeople will show it.”

What if, at a staff meeting, a broker announces, “Effective immediately, we’re initiating a policy of offering varying compensation rates to cooperating brokerages”?Does that create antitrust problems? No. A company can refuse to do business or alter the business arrangements with a competitor or service provider at any time. However, a red flag would go up if a number of different companies instituted such a policy.

Trade groups, such as REALTOR® associations and MLSs, are subject to particular antitrust scrutiny because of their potential to influence a marketplace of multiple companies. Warning bells should sound along with comments like the following: “Our local association members work very well together. All member companies offer the same share of the commission to any company that shows your property and brings you a ready, willing, and able purchaser.”

Enforcement and penalties

The U.S. Department of Justice Antitrust Division prosecutes serious and willful violations of the antitrust laws by filing criminal suits that can lead to large fines and imprisonment. In other cases, the Justice Department or the Federal Trade Commission can file civil action seeking to forbid future violations and remedy the anticompetitive effects of past violations. Antitrust lawsuits can also be brought by private parties and state attorneys general.

The language of conspiracy is in place whenever two or more people appear to be working together to control price, injure another business, or limit market access.

The moral: Practice safe speech by thinking before you speak.

Diane Simpson is a national real estate educator and a consultant to NAR. She holds the Distinguished Real Estate Instructor designation, conferred by the Real Estate Educators Association, and can be reached at DSSpeaking@aol.com.

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