Understanding how antitrust law applies to the practice of real estate is foundational knowledge. Let’s see how much you know.
Understanding how antitrust law applies to the practice of real estate is foundational knowledge. Let’s see how much you know.
1. Federal and state antitrust laws are designed to:
A. Prevent companies from misleading the public in their advertising.
B. Protect competition.
C. Limit competition.
D. Regulate trust funds.
Answer: B. The nature of the real estate brokerage—characterized by vigorous competition for listings and cooperation in sales—makes real estate brokers particularly susceptible to antitrust challenges. Therefore, it’s imperative to understand what actions might constitute a potential violation.
2. Under Section 1 of the federal Sherman Antitrust Act, there are two basic elements of any violation: There must be a (1) ____________ that (2) unreasonably restrains trade.
A. Contract, combination, or conspiracy
B. Rumor, falsehood, or threat
C. Rule, signage, or physical barrier
D. Person, place, or thing
Answer: A. The conspiracy element is satisfied when two or more persons or entities carry out a common scheme or plan. If that can be shown, the remaining issue is whether or not the effect was an unreasonable restraint of trade.
3. Courts apply one of two analytical standards to antitrust cases: the per se rule and _______.
A. The rule of threes
B. The rule markets
C. The rule of reason
D. The rule of thumb
Answer: C. The per se standard in restraint of trade cases is applied to practices deemed so inherently anticompetitive under Section 1 that their effects on trade are presumed to restrain trade. Under the rule of reason, the court weighs the pro-competitive and anticompetitive aspects of a practice. Conduct challenged as unlawful under this standard may escape condemnation if the pro-competitive benefits outweigh the anticompetitve implications.
4. Brokers are in violation of antitrust law if they
A. Join with other brokers to shut out a competitor.
B. Fail to keep escrow money separate from personal money.
C. Lie about a competitor publicly.
D. Charge one seller a higher commission than another seller.
Answer: A. Group boycotts, or concerted refusals to deal with another competitor or a supplier, and conspiracies to fix prices, such as real estate commission rates, are examples of unlawful per se restraints. (As for the other choices, state license law governs the proper use of escrow accounts; disparaging a fellow REALTOR® by using false or misleading language could result in an ethics complaint; and all commissions are negotiable!).
5. To avoid antitrust problems, your brokerage firm should
A. Adopt and rigorously apply a written officewide antitrust compliance program.
B. Review their antitrust compliance policy with every staff member and independent contractor.
C. Instruct sales agents to report to the broker any suggestions by sales agents from other firms that could be interpreted as an invitation to fix commissions or boycott a competitor.
D. Identify legal counsel to be consulted when antitrust issues arise.
Answer: A. Answer: All of the above. An antitrust compliance policy is a business necessity since brokers are responsible for the conduct of their staff and salespeople. Source: Real Estate Brokerage Essentials, Fourth Edition
How Did You Do?
Five correct answers. Maybe it’s time to open your own brokerage.
Three to four. You get it, but keep your knowledge fresh with the Antitrust Compliance Guide for REALTORS®, a pocket guide from store.realtor(link is external) (member price: $6.95).
Fewer than three. Break out the books—specifically, Real Estate Brokerage Essentials, Fourth Edition, by NAR’s legal team. The book provides clear explanations, sample documents, case law, and training materials on a range of legal matters.
©National Association of REALTORS®
Reprinted with permission
