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Sherman Antitrust Act | Real Estate Exam Prep Video - YouTube
Channel: The Real Estate Classroom
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hey everybody my name is paul vachesky
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and welcome to the real estate classroom
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youtube channel hey before we get
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started in today's video
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on the sherman anti-trust act hey do me
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a favor give this video a thumbs up hit
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that red subscribe button
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click on the notification bell and at
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any time during the video if you have a
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please put it down below in the comment
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and i will respond to any question that
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you have or comments so
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all right let's get to today's video
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[Music]
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in today's video we're going to discuss
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a federal law called the sherman
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anti-trust act now this is a pretty old
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law it was passed in 1890 and that's
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probably a date you want to remember
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but it is still very relevant and it it
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is a law that the government still
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enforces now
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the sherman anti-trust act it uh it
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covers
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every industry not just real estate but
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in so far as what we're going to discuss
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in this video
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we're going to discuss how it impacts
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and is applicable to the real estate
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industry
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and the biggest thing that we find is
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there are four areas of concern
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that it regulates this industry and
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especially
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the parts you need to know for the real
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estate licensing exam and the first one
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is what we call price fixing the second
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one is
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group boycotting number three is
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market allocation and number four is
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what we call
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tie-in agreements and we're going to
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discuss each one in detail and how they
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apply
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to the real estate business now the
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first area i want to talk about is
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what's called price fixing
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and price price fixing exists when there
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are two
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or more competing brokers that
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set a commission a fee
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or a management rate or a buyer
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cooperating agent payout something to
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that effect the key here is it prohibits
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two
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or more brokers from conspiring
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to set those things and i've left a
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couple of examples on your screen there
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if you take a look at example
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number one an example of a
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antitrust violation would be broker a
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and broker b
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they sit down over breakfast and they
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both agree that hey
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if you charge six percent and i charge
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six percent we're not competing against
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each other
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and we're gonna guarantee that we get
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six percent
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and that would be an anti-trust
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violation
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example number two it says brokers and
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or agents this applies to both
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brokers and agents they can't use terms
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such as standard or average
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or the going rate
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and what i mean by that is let's say a
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listing agent
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goes on a listing appointment to try to
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get a get a
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home up for sale and while they're
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meeting with the seller
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and they're discussing discussing the
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commission rate
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if that agent uses a word or a term like
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hey the
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the average commission in our area or
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the standard commission that real estate
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agents
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charge or the going rate today in our
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area for commission those are things
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that
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imply that there is a fixed standardized
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commission
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rate that is a violation of anti-trust
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laws
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all right so and it actually even goes a
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little further than that for this
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particular area
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even if two or more brokers get together
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just to simply discuss
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commission rates or discuss what fees
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they're charging or
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what their management fees are or those
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type of things just getting together and
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having the conversation
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could actually rise to the level of an
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anti-trust
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violation there's a lot of what-ifs in
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that scenario
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but it is something that that brokers
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when they get together
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and they often do um as an association
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or as an have to be very careful when it
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comes to discussing these
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kind of items now there is an exception
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to this
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so if broker a and broker b broker a
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is the listing a listing company and
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broker b
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has a buyer they can
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negotiate commissions and fees and
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payouts and things like that they can do
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that for that one single individual
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transaction
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that would be an exception example
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number three
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boards or commissions or organizations
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or associations
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they can't set or standardize
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commissions fees
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uh payouts to cooperating brokers or
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management fees those type of things
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based on membership so here's what i
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mean the
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the national association of realtors
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they could not put out a requirement
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that hey if you're going to be a member
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of our organization
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the minimum commission that you can
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charge a seller is six percent or the
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minimum management fee
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or those type of things they couldn't
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make that
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they couldn't make that a requirement
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another thing that
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these groups can't do is deny membership
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based on that so maybe you have a
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let's say the national association of
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realtors again said listen
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if you're going to be a member of our
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association and participate in the
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multiple listing service
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then you must pay out cooperating buyers
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brokers
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a minimum of blank percent in buyer
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agent commission
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that would be a violation all right
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because there are some members of the
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association
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that our members and they do use the
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multiple listing service and they don't
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pay
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anything for buyer cooperation so
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that's what this law does it would
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forbid that forbid
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that practice and one last thing as you
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can see on the bottom of your screen
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here i put it it says
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note it says an individual company can
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set a commission percentage they can set
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a a fee requirement
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those type of things a singular a
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singular company can say
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our minimum commission that our
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independent contractor agents and
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associate brokers can charge
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is six percent or everyone
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in this company a minimum broker
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administrative commission
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uh is 300 or whatever the case may be
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a company can do it we get into trouble
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when two or more companies conspire
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to set a fee or a commission
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all right the second prohibition under
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the sherman anti-trust
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act is what we call group boycotting
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so this exists when two or more
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competing brokers collectively decide
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not to do business with a third-party
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competitor
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and it's a blatant attempt to put that
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person
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out of business or eliminate competition
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so let's say we have broker a
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b and c and all thir all
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let's just say for example all three
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companies have 33 percent of the market
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share in their local area so
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broker a and b get together and say hey
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listen
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uh let's not show broker c's
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property what they're trying to do is
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eliminate competition
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that would be a violation of the
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anti-trust law now
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let's say broker a and broker c do not
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get along
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for whatever reason broker a can have a
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company policy
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that says you you won't show broker b's
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or broker c's uh uh listings they could
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do that
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a company would not be in violation of
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the anti-trust law
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if a company said i'm not going to show
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c company listings all right example
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number two local brokers or
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organizations agreeing
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to boycott a local newspaper until the
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newspaper
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lowers their advertising cost and this
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applies not only to local brokers but it
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would also apply to organizations and
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associations
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so let's say the local newspaper
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everybody advertises in it and it's very
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expensive
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well if all the brokers got together and
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went to the newspaper and said listen
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your rates are too high we're all going
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to boycott you
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until you lower your prices that is a
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violation of anti-trust laws
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now again a company can say your prices
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are too high and we're not going to
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advertise but when two or more get
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together to conspire that's when it
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becomes an issue
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all right and i noted that at the bottom
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of this slide here
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prohibition number three is what we call
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market
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allocation this is where two or more
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uh parties agree to divide their
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marketplace
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so let's say broker a and b in a local
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area says listen a says i'll take every
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listing south
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of main street you take every listing
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north of main street so they have
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collectively divided the market area
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with the guarantee that they won't poach
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each other side of main street that is a
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violation of anti-trust this also
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extends to
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customers or past customers as well
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so if two or more brokers got together
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and said hey let's not poach each
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other's current customers and let's not
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poach
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past customers that again would also be
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a violation all right and then lastly
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prohibition number four under the
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sherman anti-trust act
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they're called tie-in agreements and
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it's an agreement to sell a product or
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provide a
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service only on the condition that that
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customer
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will purchase an additional product or
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purchase
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an additional service so how do we see
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this in real estate or where do we see
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this in real estate
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honestly here's a common one so you're a
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listing agent you go on a listing
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appointment and the seller says
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yes uh we're gonna sell our house and
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then turn around and buy
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another house and the the agent says
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well here's the deal
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i singular i i only allow or i only
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charge a six percent commission i don't
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accept anything less than six percent
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that is okay because it's singular that
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company or that person
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six percent is the minimum commission
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but if you guarantee me
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or allow me to represent you on the buy
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side i will reduce my commission to four
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percent or five percent
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that is a tie-in agreement and that is
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illegal under the sherman anti-trust act
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another example would be let's say that
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you're a licensed real estate agent and
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you own
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a vacant lot in a subdivision that's
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being developed
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and the and a builder wants to buy the
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lot from you and you say fine i will
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sell you this lot but when the house is
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ready and it's ready to go on the market
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you have to ge
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you have to guarantee that you're going
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to use me as uh the listing agent that
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would
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also be considered a tie-in agreement
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and would be
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illegal under the sherman anti-trust act
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those are the two
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i guess the most visual examples that i
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have for the
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tie-in agreement provision of the
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sherman anti-trust act
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and last but not least if you're going
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to continue studying for your real
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estate licensing exam check out this
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video right here it will help you
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in the next video
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