Thursday, December 10, 2015

Can commission rates be used in advertising?

QUESTION: A broker in my area is running an ad that say he takes listings for a specified flat fee.
  The ad also prominently features a big No symbol—you know, the red circle with a diagonal line through it—and inside the circle there’s a number with a percentage symbol after it.  The clear message is that other brokers charge commissions at that percentage rate but that he does not.  Doesn’t this ad violate the antitrust laws since it mentions specific commission rates?  Should I report this to my local association?

ANSWER: Although as a general rule, it’s a good idea to avoid talking about or advertising commission rates charged by your competitors, in our view there is no antitrust violation in the ad, and we do not think you should report it to your local association.  The essence of an antitrust violation is an agreement among competitors that imposes an unreasonable restraint on trade.  You can read the ad to infer that other brokers generally charge the commission rate specified inside the No symbol, but even if all others do charge commissions at that approximate rate, it would be a violation of the law only if they've actually agreed to charge that amount.  The ad is pro-competitive because it is explicit price competition, which is favored by antitrust law enforcers.  In fact, antitrust enforcers would almost certainly object if your association made any attempt to stifle or suppress the ad.

Any question a broker may have about whether an ad or other marketing material complies with the antitrust laws should be directed to the firm’s broker-in-charge, who in turn should seek legal advice from the firm’s own lawyer is he or she is unsure of the answer.      

NCAR provides articles on legal topics as a member service.  They are general statements of applicable legal and ethical principles for member education only.  They do not constitute legal advice.  If you or a client requires legal advice, the services of a private attorney should be sought.  Always consult your broker-in-charge when faced with a question relating to the practice of real estate brokerage.
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