Are Blog Discussions About Retainers and Pricing Policies a Price Fixing Lawsuit Waiting to Happen?

By
Real Estate Agent with Atlanta Communities Real Estate Brokerage GREC #208281

Everyone seems to know that it's not OK to talk about commissions.  Fellow real estate agents can't have a discussion about what they charge.  You can advertise what you charge and other non-agents can discuss and compare commissions that are charged but competing members in the same business can't discuss prices with each other.

But how about discussing fee structures?  How about discussing things like charging an upfront retainer or charging processing fees in addition to commissions?  Is it just illegal to discuss specific prices or is it also illegal to discuss more general pricing policies and strategies?

I've seen several featured posts over the past months where these general pricing policies and strategies have created discussions amongst fellow real estate agents. I'm always uneasy about joining in the discussion.   I'm not an anti-trust lawyer so maybe I don't understand the nuances of some of the guidelines that the FTC has on their website.

On the FTC page on Guide to Antitrust Laws  it states that:

Price fixing relates not only to prices, but also to other terms that affect prices to consumers, such as shipping fees, warranties, discount programs, or financing rates. Antitrust scrutiny may occur when competitors discuss the following topics:

  • Present or future prices
  • Pricing policies
  • Promotions
  • Bids
  • Costs
  • Capacity
  • Terms or conditions of sale, including credit terms
  • Discounts
  • Identity of customers
  • Allocation of customers or sales areas
  • Production quotas
  • R&D plans

So, what do they mean by "pricing policies"?  Is that something like the policy of charging retainer fees? Is it something like discussing the policy of charging some kind of administration or processing fees?  "Policy" seems to mean that a specific number isn't the key factor.  It sounds like just the general idea is enough to cause problems. 

What do they mean about discussing "costs"?  Is it like when someone discusses specific details about how much it costs them to stay in business?  What their splits are and how little they are left with?

What do they mean by "discounts"?  Is this like when someone discusses whether they give a customer a discount if they buy and also sell a house with them?

Is it a problem when there are discussions about wanting to raise the requirements, i.e. cost and education, in order to become a real estate agent?  I've seen discussions about doing this so that we can then all be able to demand higher compensation or demand upfront retainer fees.  That kind of discussion doesn't sound like it is for bringing lower prices to the consumer, does it?

I'm no expert but words are words.  Am I reading too much into these FTC Guidelines?

What if there was a discussion on a blog post about the joys of charging an upfront retainer fee? Let's say that 186,000 members of ActiveRain all see other agents chiming in  and saying that they all are going to start trying this pricing strategy.  No one says how much they will charge, but now the consumer can't find any agents who don't charge an upfront retainer fee.  Do you see that as a problem?  Would that be something that could trigger an Antitrust lawsuit?

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About the Author:  Tim Maitski has been a full time Realtor since 1999. He has sold several hundreds of homes in areas around metro Atlanta.  Tim started with RE/MAX Greater Atlanta and is now with Atlanta Communities Real Estate Brokerage.

Along with blogging on ActiveRain, he provides one of the best real estate websites in Atlanta at www.HomeAtlanta.com where he has market price charts of 37 areas around Atlanta with data going back over 10 years.  His online Property Tax Calculator allows you to compare property taxes in many counties and cities around the Atlanta area.  He provides the Atlanta MLS Power Search Tool that allows searches of homes using over 35 specific criteria.

A visit to Tim's  YouTube Channel will make you see why RealtyBizNews.com says that "Tim Maitski may just be America' most vocal real estate professional"

Tim is always looking to LinkIn with anyone who is interested in building their social network.

View Tim Maitski ●Atlanta Realtor●'s profile on LinkedIn

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  1. Donald Bradbury 07/17/2010 09:56 PM

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Rainmaker
449,396
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
The Agent Who Uses "Watermelon Tough" Sign Posts

 Melina,  Here's something from the NAR site.  These things don't have to be from formal agreements and they don't need direct proof.

real estate professionals should recognize that the outcome of courtroom trials in general, and antitrust trials in particular, does not necessarily depend upon the actual facts regarding the conduct alleged to violate the law. Rather, the outcome of trials depends entirely upon what the judge or jury believes, based on the evidence presented at trial, to have happened at the relevant time. Moreover, price fixing or other antitrust conspiracies are rarely created or proved by direct evidence of an agreement, such as a document signed by all parties to the conspiracy. Rather, antitrust conspiracies are most commonly proven by inferences drawn from the actions of competitors, such as private discussions about prices and subsequent uniformity of the prices charged by the participants to such discussions. For this reason, antitrust compliance programs are addressed as much to avoiding conduct that creates the appearance of a conspiracy as to avoiding conduct that actually consummates or advances that conspiracy.

They go on to say more about discussions.  I would believe that ActiveRain is an online meeting of REALTORS and we probably should follow the same advice as if we were meeting in person.  Notice that they don't  just mention commission rates.  They mention pricing structures, listing policies and marketing practices of other brokers.

A broker who participates in the affairs of an association of REALTORS® must always be alert to discussions at association meetings relating to commission rates, pricing structures, listing policies, or marketing practices of other brokers. A broker who finds himself in the midst of such a discussion should immediately suggest that the topic is changed and, if unsuccessful, he should promptly leave the meeting. If minutes are being taken, he should insist that his departure be noted for the record.

July 17, 2010 08:53 PM #17
Rainmaker
449,396
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
The Agent Who Uses "Watermelon Tough" Sign Posts

Greg, I agree.  It's not worth taking a chance on this stuff.  You just know that sooner or later someone will want to make a name for themselves.

Richard, You are right.  But it can get easy to get sucked into talking about these things.

Joe,  You can never be too careful about making general statements especially when it comes to pricing.

John,  It would be sad if the ActiveRain platform ended up getting agents in trouble with these laws.  The thing is that most of this stuff never comes up and most agents just forget about it or assume that since not many cases get prosecuted that it's not anything to worry about.  But then someone writes something and since it's featured, it is deemed to be OK.  Then others begin writing similiar things and before you know it everyone assumes that it's OK to have conversations about these things. 

J. Phillip, That's true.  It's easy to do without even thinking that it might be construed as a potential boycott.

Michael,  That's a different twist.  I haven't seen anything about it  having to be industry wide or regional wide.  I could be wrong but I thought I read somewhere that it just took two or more competitors conspiring together.  Do you have any  references that states how big of a conspiracy it needs to be?  I'll try to see what I can find.

July 17, 2010 09:12 PM #18
Rainmaker
271,033
LaNita Cates
REMAX of Joliet - Joliet, IL

What a good post and I agree with you. We shouldn't tell what we do on our own because then we are discussing it.

July 17, 2010 09:26 PM #19
Rainmaker
449,396
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
The Agent Who Uses "Watermelon Tough" Sign Posts

Michael,  I looked at the realtor.org site again to see how many people are needed. Here's the quote that says you only need two:

The conspiracy element is satisfied whenever two or more persons or entities carry out a common scheme or plan. If adherence to a common scheme or plan can be shown, the only remaining issue is whether or not the effect of the scheme or plan is to restrain trade.

July 17, 2010 09:31 PM #20
Rainmaker
449,396
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
The Agent Who Uses "Watermelon Tough" Sign Posts

LaNita, It should only be discussed with agents in your own brokerage and with your customers.  At least that's what it sounds like to me.

July 17, 2010 09:33 PM #21
Rainer
175,528
Julia Odom
Select Realty Professionals - Chattanooga, TN
Chattanooga Homes for Sale

I have often sent private messages warning post authors who specifically mention commission percentages about this very thing. I hadn't thought about the other aspects of pricing that you mention. I'll steer clear of these conversation from now on. It's just asking for trouble...

July 17, 2010 09:40 PM #22
Ambassador
883,319
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Looks like it is sufficiently vague to make sure that almost anyone can become a criminal if it is inline with the desires of the government at the time... 

July 17, 2010 09:45 PM #23
Rainmaker
449,396
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
The Agent Who Uses "Watermelon Tough" Sign Posts

Julia,  those others aspects of pricing is what gets me thinking. I really couldn't believe it when I first learned about it.

Lane, You are spot on.  Everyone is probably a criminal in some way and we get to continue our lives at the whim of the people in charge.  I'm convinced that that is the main reason for the IRS and the insane tax code.  It's impossible to know whether or not you are complying.  That way they can always have that threat hanging over your head.  Make things vague enough and only prosecute when you want to send a message or get some kind of revenge.  Unfortunately that is a good way for people to lose all respect for the law and it leads to lawlessness.

July 17, 2010 10:23 PM #24
Rainmaker
620,216
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645

I am with you on this one too.  I won't mention the percent I am with you though.  LOL

July 18, 2010 12:50 AM #25
Rainmaker
334,459
Agent Aaron Vaughn, REALTOR® Listing Specialist
Capitol Home Team | Austin TX - Buda, TX
The $500 Million Marketing Advantage

Tim: I agree with you, it seems pretty clear. I don't have these discussions except with clients and potential clients.

July 18, 2010 01:21 AM #26
Rainmaker
223,559
Laurie Mindnich
Centennial, CO

Tim, I deleted my comment (too late, but it seems inappropriate to leave it) because having read this, I believe that you are 100% correct. If anyone elected to jump on board with a fee (irrespective of the amount) it does appear that such a choice is the result of a group discussion, and falls under the parameters that the DOJ considers an issue.  Point well taken- thanks for the heads up (for future reference). In hindsight, not sure why it didn't jump out at me.

I *think* that Michael #16 above is missing the point: it is not AR that would be culpable, it is those engaging in the conversation that could be found at fault. Nothing to do with AR.

July 18, 2010 06:47 AM #27
Rainmaker
449,396
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
The Agent Who Uses "Watermelon Tough" Sign Posts

Randy,  Thanks for stopping by.

Aaron, That's just a good policy.

Laurie,  On the surface, many of those discussions  seem harmless.  But then we you go and read some of the links that I posted, it makes you begin to think about things and question yourself about what is actually covered by the law.

Here's the scenario I can see happening.  You read another agent's post about charging retainer fees. You make a comment on how you don't do that now but it seems like a good idea.  Then the next week you go out and begin charging retainer fees. It seems to me that they can make a case that you changed your pricing policy due to your "conversations" with another competitor in the same industry.  All they need to do is show the judge and jury your comment and the timeline of events.  Do you think the common jury member would like the idea of retainer fees for agents who they think already make too much money for what they do?  They would see it as a big price increase.  Something that was free upfront is now being charged for. I surely wouldn't like my chances on that one.  And for what?  All that potential trouble just because you wanted to chime in on a blog.  The risk/reward is way too high.

July 18, 2010 08:33 AM #28
Ambassador
895,064
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Realtor - Ann Arbor Real Estate

I try to stay away from posts like you referenced. But, here I am commenting on yours. LOL

July 18, 2010 09:41 AM #29
Rainmaker
449,396
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
The Agent Who Uses "Watermelon Tough" Sign Posts

Missy,  It's a discussion about things that should not be discussed.  I would assume that discussions about how to follow the law better would be good.  But then, what do I know?

July 18, 2010 09:53 AM #30
Anonymous
Anonymous
Anonymous

Thank you thats interesting information.

July 18, 2010 10:39 AM #31
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1,082,802
Bryan Robertson
Catarra Real Estate, Inc - Los Altos, CA
Broker, Author, Speaker

I'll preface this by saying I'm not an attorney and am not offering legal advice.  However, I do have a fair bit of experience in discussions around anti-trust considerations (from a previous career).

Since commissions are variable and negotiable, I see nothing wrong with discussing the prevailing public practices of any brokerage.  A significant number of brokerages make a point of advertising their commissions as a means of generating publicity and business.

Here's the deal, the FTC will NEVER come after you for discussing something in the public domain.  In my experience, they are only interested in behavior that sets to establish a standard through collaboration (and possible conspiracy).  I'd welcome a counter opinion but that's been my experience.

What I would consider inappropriate discussion about commissions is the terms under which I might reduce my commission or the any other incentives to retain a client.  However, in those cases I would avoid specifics and have no issue discussing general ideas.

July 18, 2010 12:53 PM #32
Rainmaker
449,396
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
The Agent Who Uses "Watermelon Tough" Sign Posts

Bryan,   What the FTC does and what it can do are probably two different things. But to be safe, I'd probably stay away from the worst case scenarios.  Just because they don't prosecute many things doesn't mean that they won't in the future. 

Here's something that's from the realtor.org article that should make you think twice about making annoucements, especially on real estate forums such as ActiveRain.

In one infamous case a court found that an unlawful agreement had been reached when one competitor announced to others his intention to raise his commission rates and the other competitors adopted the same course of action within a short period of time. The court construed the announcement as an invitation to conspire and the subsequent action by the other competitors as acceptance of that invitation. An inference of conspiracy can be drawn even if the other competitors had each already decided independently to implement the particular policy, but had not already done so.

It is therefore imperative that brokers never discuss with or reveal to competitors their intentions concerning fees or other competitive business activities. Such actions will "taint" not only the subsequent decisions made by the broker who raised the subject, but also the decisions of all other competitors to whom the discussions or announcements were directed.

I guess you can announce price changes to the public in general but not to more specific competitors or groups of cometitors.

July 18, 2010 01:26 PM #33
Rainmaker
1,085,481
Bryant Tutas
Bryant Tutas-Tutas Towne Realty, Inc - Poinciana, FL
Broker/REALTOR, Tutas Towne Realty, Inc

Great discussion Tim. Well done. And beleive me I do proceed with caution. Thanks for the reminder

July 18, 2010 02:34 PM #34
Rainmaker
449,396
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
The Agent Who Uses "Watermelon Tough" Sign Posts

Here's a question.  I just saw a feature post where an agent is asking other agents how they feel about giving a buyer a rebate of part of their commission.  Most agents say that they never give any sort of rebate and are offended at people who ask for such a concession. Is that not a discussion between two or more competitor about pricing policy?  Encouraging fellow agents to stand firm on their commissions isn't going to bring lower prices to the public. Maybe I'm just getting paranoid and seeing price fixing ghosts now.

July 18, 2010 09:38 PM #35
Ambassador
1,082,802
Bryan Robertson
Catarra Real Estate, Inc - Los Altos, CA
Broker, Author, Speaker

Tim - Yes, I'd agree that discussing a rebate could be considered a pricing policy but only if it's done as a standard and not the exception.  It really is a tough call because sometimes the exceptions become the rule and when that happens, we could have a problem.

 

July 19, 2010 12:15 PM #36
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