Brokers compete with each other, and antitrust law exists to keep it that way. Because a broker runs the business and supervises others, antitrust is core broker exam material. The rules come from federal law, mainly the Sherman Act, which outlaws "every contract, combination, or conspiracy in restraint of trade" and monopolization.
Price fixing
The Federal Trade Commission defines price fixing as an agreement (written, verbal, or inferred from conduct) among competitors to raise, lower, maintain or stabilize prices. For brokers, the "price" is usually the commission or fee.
- It doesn't need a signed document. An understanding reached in conversation, or inferred from a pattern of identical pricing with no other explanation, can be enough.
- It's illegal whether the agreed price is a minimum, a maximum or a range.
- Once a plain price-fixing agreement is proven, there is no defense. It doesn't matter whether the agreed price was "reasonable."
In practice: each brokerage must set its commissions and fees independently. Brokers from different firms shouldn't discuss their rates with each other, and no one should suggest that commissions are "standard" or set by a local association.
Related: What to Expect on Your State's Real Estate Broker Exam
Group boycotts
An agreement among competitors not to do business with a particular person or firm may be an illegal boycott, especially when the group has market power. The FTC notes the key distinction: a business can always unilaterally choose whom to deal with, but coordinated refusals to deal raise antitrust concerns. Brokers agreeing among themselves not to cooperate with a discount brokerage is a real estate example of what to avoid.
Market allocation
Competitors agreeing to divide up territories or customers ("you take the east side, we'll take the west") is market division. The FTC groups it with price fixing and bid rigging as one of the most blatant agreements not to compete, for which the rules are clear.
Tie-in arrangements
Tying means conditioning the sale of one product or service on the purchase of another. The FTC says it can violate antitrust law when the seller has enough market power and the arrangement restricts competition without benefiting consumers. Brokers should be cautious about conditioning a listing or sale on the use of a particular affiliated service.
The penalties
Criminal violations of the Sherman Act are prosecuted by the Department of Justice. According to the FTC, penalties can reach:
- up to 10 years in prison
- fines up to $1 million for individuals and $100 million for corporations, or twice the gain or loss from the offense if that is greater
Civil lawsuits by injured parties are also possible.
How brokers stay compliant
- Set commissions and policies independently, and document how you arrived at them.
- Don't discuss rates or terms with competing brokers.
- Train salespeople never to describe a commission as fixed or standard.
- If a conversation drifts toward pricing or "who works with whom," end it and make a note.