- Real Estate
Direct Evidence of Real Estate Broker Conspiracy Needed to Prove Antitrust Violation
Price-fixing requires a conspiracy
Similar home sales commission prices among real estate brokerages prove an antitrust violation only if the brokers conspired to set prices, a federal court in Kentucky ruled recently.
The dispute arose from a lawsuit filed by home sellers who said the fact brokers charged similar commissions, which did not decrease when home prices rose, showed they must be engaging in price fixing.
The brokers argued their commissions were determined by market competition, which compelled them to charge similar fees to pay their expenses but not so high they get beat by other realtors.
The trial court dismissed the lawsuit against HomeServices of America (“HSA”), HSA’s subsidiary HomeServices of Kentucky (“Subsidiary”), and Coldwell Banker McMahan Company (“CBMC”).
The court said the sellers needed direct proof of a conspiracy rather than an innuendo created by similar commissions.
The sellers appealed to the 6th Circuit U.S. Court of Appeals.
The outcome of the case turned largely on an interpretation of the Sherman Antitrust Act, which forbids “conspiracy… in restraint of trade or commerce.” Prior court precedents have required the evidence to exclude any possibility the accused brokers acted independently in setting their fees to prove an antitrust violation.
Part of the home sellers’ evidence was a transcript of a speech from brokerage firm CMBC’s owner who explained why his firm would not lower its commissions. He also said the state should not repeal its ban on rebates to consumers.
Other brokers were present during the speech, some of whom seemed to agree with the CMBC owner.
The home sellers said the speech and agreement from other realtors indicated a price-fixing agreement.
The plaintiffs also cited testimony from discount brokers who claimed they were harassed by other realtors because of their lower commissions. None of the discount brokers could name the realtors they said harassed them.
The appellate court said the speech and allegations of harassment provided no direct evidence of a conspiracy. The appellate court agreed the lawsuit should be dismissed.
The case is Hyland v. HomeServices of Am., Inc., 582 F. App'x 657 (6th Cir. 2014).