Antitrust: Get up and walk out

Try this at your next association board meeting: Ask all the brokers there to reveal their commission schedules.

If the assembled brokers respond, “YOU CAN’T DISCUSS COMMISSIONS!,” you and your  competitors passed the test.  Next, ask why you cannot discuss commission rates with your competitors.  The answers will not be as uniform. The answers, of course, have to do with antitrust laws.

An agreement among competitors to set fees is something the Federal Trade Commission (FTC) calls “price fixing.”  Price fixing does not always involve a villain — or even a clear agreement. Take the case of United States v. Foley. At a lunch meeting of REALTORS® at the Congressional Country Club in Maryland, a broker stood up and told the others that he was raising his commission rate from 6 to 7 percent. Within weeks, a number of the others present at that meeting had also raised their rates to 7 percent. A criminal prosecution of these brokers was pursued on the theory that they tacitly agreed to fix prices. They were found guilty. On appeal, the 4th Circuit Court of Appeals affirmed the criminal convictions, thus clearly establishing that even tacit agreements (wink and nod) to establish fees constitutes antitrust price fixing.

Whether it’s through knowledge of this case, an understanding of antitrust laws or mere intuition, most REALTORS® steer clear of discussions about commission rates when in mixed company (brokers and licensees from different offices).  But these conversations occasionally come up. What do you do?  In a meeting, the best approach is to stand up, ask the secretary to note that you refused to take part in the discussion and that you are leaving the room. Ask to be notified when the discussion has ended so that you may return to the meeting. You will not be named in any antitrust litigation and it is just as likely that your action will underscore for the other members the need to refrain from any discussion of this nature.

More insidious are discussions of competitive practices outside of the commission or fee arena.  Discussions about a newspaper’s high advertising rates and moving traditional newspaper ads to a different advertising provider may also constitute an antitrust violation. Other conversations to avoid involve creating uniform protocol for listing or buyer agents. Uniformity may make life easier for brokers frequently called upon to cooperate with their competitors. Unfortunately, uniformity tends to suppress diverse, unique and competitive practices. The theory that underlies antitrust laws is that aggressive competition drives down prices and creates competitive service models that benefit consumers.

I am sure that the nine REALTORS® who were convicted in the Foley case would tell you how they wish they had stood up and left the room at that fateful lunch at the Congressional Country Club way back when. What will you do at a meeting of competing brokers when one complains about the lawful but unsavory practices of another?  You may certainly, as an individual broker, decide how you will compete and cooperate with that unpopular broker, but you cannot base your decision on what the group will do. Stand up and excuse yourself.