4 Common Violations of Antitrust Laws

Antitrust violations are probably most readily associated with big companies using predatory business practices to hinder competition. The General Motors streetcar conspiracy is a classic example and the one that actually led to the introduction of the first comprehensive American law protecting fair competition – the 1890 Sherman Antitrust Act. However, even with such laws in place, unfair business practices have hardly become a thing of the past. The 1998 lawsuit against Microsoft – the world’s dominant software firm at the time – is a well-known case of an antitrust violation.

Many might be surprised, though, that not only giant firms can be guilty of violating antitrust laws. Even individual professionals operating on a much smaller scale may sometimes inadvertently use practices that break the rules of the competitive marketplace and amount to a felony under the Sherman Antitrust Act. In this blog, we will analyze some common violations of antitrust laws that realtors can be guilty of.

Commission Fixing

In order for healthy competition to thrive, professionals must let the open market establish the prices of their services. If two or more professionals or companies agree to charge a specific, fixed price for their products or services, they are in violation of antitrust laws. In the case of the real estate industry, the price for the services of a broker or a realtor is usually expressed as the commission and fees. Therefore, in order to avoid antitrust violations, two or more brokers, realtors, or real-estate companies cannot agree on the commission rate or fees they will charge. These must be determined individually by each professional or firm based on their financial needs. As noted by the National Association of Realtors, commision fixing is “a per se violation of the antitrust laws” and brokers must “avoid even implying that they have discussed and/or reached agreement on fees.”

Allocation of Customers or Markets

Allocation involves an agreement between two more business offering the same services to avoid operating in each other’s “territory” or compete for each other’s clients. Such allocation may be based on geographical boundaries – for example, one real-estate firm operating in the northern districts of the city and the other in the southern areas. It may also relate to specific market category and range – based on the prices of real estate or types of housing offered. Such agreements reduce competition in an obvious way and, like price fixing, are antitrust violations per se.

Boycotts

A group boycotting refers to a situation where two or more professionals or companies refuse to deal with a certain competitor or agree between themselves to do business with the competing firm on less favorable terms. Such an agreement usually aims to make the competitor conform to certain business practices, change their business models, or even to force it out of business. In the case of the real estate industry, boycotts are often directed against brokers who employ some special compensation strategies for their clients such as discounts that are not used by other brokers or realtors in the area. In addition, real estate companies agreeing to avoid business with a certain service provider may be illegal too.

Bid Riggings

This practice may concern foreclosure auctions in particular. Making agreements with other participants of an auction with regards to the bidding details, strategy, price, etc. are in direct violation of Section One of the Sherman Act. Conversations with other bidders where such sensitive information is exchanged should then be avoided. To highlight how serious this matter can be, it is worth mentioning that, in the past, practices related to bid rigging have led to FBI investigations and fraud charges.

Final Considerations

Violating antitrust laws is an extremely serious matter. Not only do they hinder fair competition and harm consumers, but they can also have severe legal consequences for the guilty party. Individuals guilty of some of the unfair practices mentioned in this article can face a fine of up to $100,000 and up to three years in prison. If you are a realtor and need legal advice with regards to your business model and practices, do not hesitate to contact the Law Offices of Enrique J. Fernandez. We are a reliable residential real estate law firm in Florida and we can help you with many issues related to residential real estate deals.

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The Law Offices of Enrique J. Fernandez, P.A.

Enrique J. Fernandez is a trusted real estate attorney and title agent serving the people of Miami, Florida and the surrounding areas. If you or one of your clients is looking to buy or sell real estate, we are here to help ensure everything goes as smoothly as possible throughout the entire process.

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