Antitrust

Group boycott

Competitors agreeing to refuse to deal with a particular firm

Several brokerages agreeing not to show a discount firm’s listings, or to exclude it from cooperation, is a concerted refusal to deal. The target is usually a competitor with a different business model, which is exactly the competition antitrust law protects.

How the exam asks about it

An individual firm deciding independently how it will operate is lawful. The agreement among firms is what creates the violation.

Market allocation

Competitors agreeing to divide territories, property types or customers

Two firms agreeing that one takes the north side of town and the other the south, or that one handles commercial and the other residential, is an agreement not to compete — unlawful for the same reason price fixing is.

How the exam asks about it

A firm may of course choose its own specialty or service area. What it may not do is agree with a competitor about it.

What is market allocation in real estate?

Market allocation is an agreement between competing real estate firms to divide territories, customers or property types instead of competing for them.

What is an example of market allocation in real estate?

Two brokerages agreeing that one will serve the north side of town and the other the south side is market allocation. The same is true if competitors divide residential and commercial clients between them.

Is choosing a real estate specialty market allocation?

No. A brokerage may independently choose its territory or specialty. The antitrust problem is an agreement with a competitor to divide the market and stop competing.

Price fixing

Competing firms agreeing on what to charge

Two brokerages agreeing over lunch to charge the same commission rate is price fixing, and so is a local association publishing a "standard" rate. Each firm must arrive at its own pricing independently.

How the exam asks about it

Disclosure does not cure it and matching the local average is not a defense. The offense is the agreement, not the number.

Sherman Antitrust Act

The federal law prohibiting agreements that restrain trade

Passed in 1890 and applied to real estate brokerage like any other industry. Its relevance is direct: commission rates must be set independently by each firm and are always negotiable between a firm and its client, never agreed among competitors.

How the exam asks about it

Four practices carry almost every item — price fixing, market allocation, group boycotts and tie-in arrangements. Price fixing and market allocation are treated as unlawful in themselves, with no need to show anyone was harmed.

Tie-in arrangement

Conditioning the sale of one thing on the purchase of another

A developer selling lots only to buyers who also hire the developer’s building company, or a firm listing a property only if the seller also buys through it. The customer is being forced into a second market to get access to the first.

How the exam asks about it

The fourth of the four antitrust practices and the one candidates most often cannot name on sight.

What is a tie-in arrangement in real estate?

A tie-in arrangement conditions access to one real estate product or service on buying a separate product or service.

What is an example of a tie-in arrangement?

A broker saying “I will list your home only if you also use this title company” ties the listing service to a separate title service.

Is recommending an affiliated service a tie-in arrangement?

A recommendation alone is not a tie-in. The defining fact is that the first product or service is available only if the customer also accepts the second.