As each contract is prepared for signature during a real estate transaction, the licensee should advise the parties of the desirability of securing legal counsel to protect their interests. Only a lawyer can offer legal advice. Licensees are prohibited from practicing law.
Technology and Brokerage of the Future
Social networking sites such as Facebook, Linkedln, YouTube, and Twitter are becoming increasingly useful in business and the real estate industry is no different.
Recognizing the value and pervasiveness of these sites, sponsoring brokers should set out clear guidelines in policy manuals and brokerage agreements to permit and guide the use of these technologies by licensees.
Sponsoring brokers must also learn about the potential risks and liabilities of these sites for instance, recognizing that communication through these sites establishes a permanent record of sorts and should incorporate this understanding into the policies and guidelines they establish for licensees on the use of social networking in their businesses.
Antitrust violations include:
- price-fixing,
- group boycotting,
- allocation of customers,
- allocation of markets, and
- tie-in agreements (tying).
Price-Fixing
Price-fixing is the practice of setting prices for products or services rather than letting competition in the open market establish those prices. In real estate, price-fixing occurs when competing real estate companies agree to set standard sales commissions, fees, or management rates or if they attempt illegal tying arrangements.
Price-fixing is illegal. Real estate companies must independently determine any minimum commission rates or minimum fees. These decisions must be based on a company’s business judgment and revenue requirements without input from other real estate companies.
MLSs, Boards of REALTORS®, and other professional organizations may not set fees or commission splits. They cannot deny membership to licensees based on the fees the licensees charge.
The challenge for real estate licensees is to avoid even the impression of price-fixing. Hinting to prospective clients that there is a “going rate” of commission or a “normal” fee also implies that rates are, in fact, standardized, which must be avoided. The licensee must make it clear to clients that any stated minimum is only the firm’s minimum. The specific commission is negotiable in a fair market.
Group Boycotting
Group boycotting occurs when two or more businesses conspire against another business or agree to withhold their patronage to reduce competition. Group boycotting is illegal under the antitrust laws.
Allocation of Customers or Markets
Allocation of customers or markets involves an agreement among real estate companies to divide their markets and refrain from competing for each other’s business. Allocations may be made on a geographic basis, with real estate companies agreeing to specific territories within which they will operate exclusively. The division also may occur by markets, such as by price range or category of housing. These agreements result in reduced competition.
Tie-in Agreements
Tie-in agreements, also known as tying agreements, are agreements to sell one product only if the buyer purchases another product as well. The sale of the first (desired) product is “tied” to the purchase of a second, less desirable, product.
Penalties
The penalties for violating antitrust laws are severe. For instance, under the Sherman Antitrust Act, people who fix prices or allocate markets may be subject to a maximum $1 million fine and up to ten years in prison. For corporations, the penalty may be as high as $100 million.
