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Antitrust Issues

Antitrust Issues. Jim Peters , RCE, CAE, e-PRO Association Consultant 15 years as the CEO of the Realtor Association of Greater Ft. Lauderdale, and 13 years as the CEO of the South Carolina Association of Realtors JimPeters79@gmail.com 803-732-2660. The Laws Governing Antitrust.

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Antitrust Issues

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  1. Antitrust Issues Jim Peters, RCE, CAE, e-PRO Association Consultant 15 years as the CEO of the Realtor Association of Greater Ft. Lauderdale, and 13 years as the CEO of the South Carolina Association of Realtors JimPeters79@gmail.com 803-732-2660

  2. The Laws Governing Antitrust Firstly, the Federal antitrust laws that provide both criminal penalties, as well as civil penalties with triple damages: 1. The Sherman Antitrust Act 2. The Robinson Patman Act 3. The Federal Trade Commission Act • In addition, each state has its own antitrust laws

  3. What are the Antitrust Laws for? • The Antitrust laws are designed to encourage competitiveness and collaboration. • The Antitrust laws specifically prohibit: • Price Fixing of commissions or commission splits • Boycotts • Non-co-operation • Denial of access, or restrictions on access, to market services such as MLS or Lockboxes

  4. What do we mean by “Triple Damages”? • Triple damages are automatically awarded in all Federal antitrust cases. • This means that if a plaintiff can show that over a course of, say two years, they suffered losses amounting to $500,000 then the court will award them three times the amount of proven damages making the total award $1,500,000 • Typically errors and omissions insurance will cover defense costs in antitrust lawsuits, but not any actual damages awarded by the courts. That is why so many defendants go bankrupt!

  5. The El Paso Realtor Association Case • In 1985 the El Paso Association of REALTORS® and 67 Brokerage firms were sued because of alleged anti-competitive practices. • The complainant, a Discount Broker, tested brokerage companies and taped their conversations when they would not cooperate with him. • The Broker filed a complaint with his Realtor Association

  6. What was the Basis for the Case? • The association took no action when complaints were lodged because many of those named in the complaint served in leadership positions at the association

  7. The Consequences • The El Paso Association was forced into Bankruptcy defending its position • The Executive Officer had a heart attack, had open heart surgery and then resigned. • 16 Brokerage firms closed their doors • Over 100 Realtors declared bankruptcy • The case was finally settled after five years

  8. The Jack Foley Case • Jack Foley was the incoming President of the Baltimore Maryland Association of REALTORS® • He held a reception for incoming Directors at his house to build his Leadership Team • He decided to share his reasons for raising the commission rate charged sellers, quoting market forces and the need to maintain his bottom line

  9. What Happened to Jack Foley? • Two years passed • Two other Realtors who had been present at the reception also raised their commission rates • A complaint was filed by local citizens concerned about the high rate of commissions charged • Jack Foley was arrested and handcuffed at his house - in front of his children • Headline in the Baltimore News - “REALTORS® Conspire to Rip Off Public” • Sentenced to 3 months in jail and fine of $100,000 • Spent over $750,000 in defense costs, most of which were not covered by insurance

  10. Tough Consequences • Being handcuffed in front of your children • Three months in jail is no fun • Plus a $100,000 fine • $750,000 in defense costs • No wonder Jack Foley went out of business

  11. Today’s Antitrust Issues • Antitrust has once again become a hot issue as new business models emerge in markets across the country. • Frustrated Brokers, Boards of Directors, and Agents, have to understand that the antitrust laws, and our own Code of Ethics, mandate a competitive climate. • Failing real estate firms are looking for excuses, and who to blame for their failure. • Complaints may sometimes be filed years after the boycott or non-cooperation occurred—damages mount up.

  12. Associations can also be held Liable • Examples of Realtor association violations include: • A local Board of Directors wrote a letter to a REALTOR® and retired legislator who had a FSBO Internet Billboard telling him that this was unethical. • A local Association wants to proceed with ethics complaint against REALTOR®/Attorney advertising on television as a flat fee broker.

  13. Broker and Agent Antitrust Issues • Brokers telling Agents not to cooperate with discount brokers or show their listings. • Agents talking to Agents in other companies and suggesting they not show the listings of MLS entry only or flat fee companies. • Listing Agents telling sellers that other Agents will not show the listings of MLS entry only or flat fee listed properties.

  14. Don’t Discuss Commissions or Co-operation • Examples of typical violations today: • Four Realtors on a golf course discussing why they did not like doing business with a discount broker—won’t show her listings. • Realtors in a bar disparaging the practices of a flat fee broker who had just opened his new office.

  15. Boycotts are Anti-Competitive • In 2014 a number of Realtor Agents were unhappy with changes in the policy of a local newspaper that would increase the cost of advertising and limit access to online advertising. • These Agents decided that a boycott of the local newspaper would force the newspaper to change its policy. This is an absolute ‘No No’ as newspapers, like Realtors, have the right to make business decisions. Boycotts are a violation of the antitrust laws.

  16. MLSs under Scrutiny • In the 1980s MLSs were targeted by the Federal Trade Commission concerned about limitations on “Exclusive Agency” listings • Recently the Justice Department audited 37 MLSs in North Carolina, South Carolina and Florida to determine whether their pricing structures, rules and rebate policies were anti-competitive • Two MLSs were found in violation, heavily fined, and the investigation resulted in class action lawsuits to recover damages which are still being paid

  17. Antitrust is NOT a Dead Issue Not since the early 80s has real estate and the MLS faced so much scrutiny by: • Department of Justice • Federal Trade Commission • General Accounting Office • Banks and Treasury The oversight of the real estate industry continues, and both Realtors and Realtor Associations need to conduct themselves in accordance with the law and our own Code of Ethics

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