News update
8 MAY 2007 |
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U.S. DOJ and FTC Issue Report on Competition in the Real Estate Brokerage Industry
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Agencies Make Recommendations to Maintain Competition and Protect Consumers from Anticompetitive Conduct
WASHINGTON — The U.S. Department of Justice and the Federal Trade
Commission (FTC) today issued a joint report, “Competition in the
Real Estate Brokerage Industry.” The purpose of the report is to
inform consumers and others involved in the industry about important
competition issues involving residential real estate, including the
impact of the Internet, the competitive structure of the real estate
brokerage industry, and obstacles to a more competitive environment.
“The Antitrust Division seeks to educate industry participants and
bring enforcement actions where necessary to ensure that consumers
benefit from competition in this crucial sector of our economy,”
said Thomas O. Barnett, Assistant Attorney General for the
Department of Justice’s Antitrust Division. “This report will help
inform Americans about their real estate brokerage options and alert
state legislatures and real estate commissions about the danger of
enacting laws and regulations that harm competition.”
The report follows a workshop conducted by the agencies in October
2005, entitled “Competition Policy and the Real Estate Industry.”
The workshop focused on issues related to the competitiveness of the
residential real estate industry and covered topics such as multiple
listing services, online “virtual office Web sites,” discount and
fee-for-service
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brokers, and minimum service requirements. Panelists at the workshop
included real estate brokers, state regulators, and academics. In
addition, nearly 400 public comments were filed in response to the
agencies’ request for public comment in connection with the
workshop.
“Home ownership is the American dream, and real estate brokers have
helped to achieve that dream for many,” said FTC Chairman Deborah
Platt Majoras. “But when anticompetitive |
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practices stand in the way, consumers lose. The FTC is committed to
working with the industry and policymakers to ensure that
competition is not inhibited and that consumers are well-informed
about this important marketplace.”
As discussed in the report, the review by the Department and the FTC
suggests that, although the real estate industry has undergone a
number of substantial changes in recent years – particularly as a
result of technological advances such as the Internet – competition
in the industry has been hindered as a result of actions taken by
some real estate brokers acting through multiple listing services
and the National Association of Realtors, state legislatures, and
state real estate commissions. In addition, consumers likely would
benefit significantly from additional knowledge about the range of
options available in brokerage services and fees. Based on their
review, the Department and the FTC recommend the following to help
maintain competition and protect consumers in the real estate
brokerage industry:
*The Department and the FTC should continue to monitor the
cooperative conduct of private associations of real estate brokers
and bring enforcement actions in appropriate circumstances. While
cooperation among brokers through a multiple listing service can
provide consumers with important efficiencies, cooperation used to
adopt rules that hinder rivals can be anticompetitive and, as recent
agency actions indicate, may violate the antitrust laws.
*The Department and FTC should continue to provide state legislators
and industry regulators with information concerning the competitive
consequences of state legislation and regulations that threaten to
or already do restrict competition and consumer choice in the real
estate brokerage industry, and take enforcement action in
appropriate circumstances.
*State legislators and industry regulators should consider repealing
existing laws, rules and regulations, such as minimum-service and
anti-rebate provisions, that limit choice and reduce the ability of
new brokerage models (e.g., fee-for-service brokers, discount
full-service brokers, virtual office Web site brokers, and broker
referral networks) to compete and that do not appear to provide any
consumer benefits that would justify such restrictions. They should
also avoid enacting such laws, rules and regulations in the future.
*The Department, FTC, and industry regulators should promote
consumer understanding of marketplace options. Some consumers may
not be aware of the range of alternatives available to them when
hiring a real estate broker, including the types of business models
available and the negotiability of fees, for both home buyers and
sellers, or may not understand the duties owed by their broker.
Competition in the real estate brokerage industry would likely be
enhanced if consumers had better access to such information.
*The Department, FTC, and industry regulators should assess the
feasibility of an empirical study of the real estate brokerage
industry. Transaction-level data on commission rates and fees are
not publicly available, but broad national aggregate data suggest
that commission rates and fees move in tandem with housing prices.
Just as a 1983 FTC study provided valuable information about how
real estate brokers competed in the late 1970s and early 1980s, a
new study examining how transaction-level commission rates and fees
vary based on such factors as market conditions, housing prices, and
regulation would provide a better understanding of the current state
of competition in the real estate brokerage industry.
Copies of the report can be found on the Department of Justice’s Web
site at http://www.usdoj.gov/atr/public/reports/223094.pdf.
Transcripts and written submissions from the workshop are available
at http://www.usdoj.gov/atr/public/workshops/reworkshop.htm.
Individuals seeking more information on the report should contact
the Department of Justice’s Office of Public Affairs at
202-514-2007. (DOJ)
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