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10. D. Antitrust Laws

 

Many consumers have never heard of antitrust laws, but when these laws are effectively and responsibly enforced, they can save consumers millions and even billions of dollars a year in illegal overcharges. Most States have antitrust laws, and so does the Federal Government. Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, resulting in higher prices for inferior products and services.

Antitrust laws protect competition. Free and open competition benefits consumers by ensuring lower prices and new and better products. In a freely competitive market, each competing business generally will try to attract consumers by cutting its prices and increasing the quality of its products or services. Competition and the profit opportunities it brings also stimulate businesses to find new, innovative, and more efficient methods of production.

When competitors agree to fix prices, rig bids, or allocate (divide up) customers, consumers lose the benefits of competition. The prices that result when competitors agree in these ways are artificially high; such prices do not accurately reflect cost and therefore distort the allocation of society’s resources. The result is a loss not only to U.S. consumers and taxpayers, but also the U.S. economy.

When competing firms get together to fix prices, to rig bids, to divide business between them, or to make other anticompetitive arrangements that provide no benefits to consumers, the Government will act promptly to protect the interests of American consumers.

The Sherman Antitrust Act

It is illegal to: fix prices, rig bids, and allocate customers.

The Sherman Act also makes it a crime to monopolize any part of interstate commerce. An unlawful monopoly exists when only one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct. 

Individual violators can be fined up to $1 million and sentenced to up to 10 years in Federal prison for each offense, and corporations can be fined up to $100 million for each offense.

The Department of Justice alone is empowered to bring criminal prosecutions under the Sherman Act.

 

How Do Antitrust Violators Cheat the Consumer?

Price fixing: 

 

Price fixing occurs when two or more competing sellers agree on what prices to charge, such as by agreeing that they will increase prices a certain amount or that they won’t sell below a certain

Bid rigging:

Bid rigging most commonly occurs when two or more firms agree to bid in such a way that a designated firm submits the winning bid, typically for local, State, or Federal Government contracts.

Customer allocation: 

Customer- allocation agreements involve some arrangement between competitors to split up customers, such as by geographic area, to reduce or eliminate competition.

There can be no doubt that price fixing, bid rigging, and customer allocation harm consumers and taxpayers by causing them to pay more for products and services and by depriving them of other byproducts of true competition. Nor is there usually any question in the minds of violators that their conduct is unlawful. It has been estimated that such practices can raise the price of a product or service by more than 10 percent, sometimes much more, and that American consumers and taxpayers pour billions of dollars each year into the pockets of cartel members. People who take consumer and taxpayer money this way are thieves.

The most common violations in real estate are:

  1. Price fixing: Price fixing occurs when two or more competing sellers agree on what prices to charge, such as by agreeing that they will increase prices a certain amount or that they won’t sell below a certain
  2. Bid rigging: Bid rigging most commonly occurs when two or more firms agree to bid in such a way that a designated firm submits the winning bid, typically for local, State, or Federal Government contracts.
  3. Customer allocation: Customer- allocation agreements involve some arrangement between competitors to split up customers, such as by geographic area, to reduce or eliminate competition.
  4. Group Boycotting:  People, real estate boards or companies getting together to boycott a competitor.

You, as an individual or single company can set commission rates.

You as an individual can boycott certain people.

A Tie In – Tying Arrangement (tie-in) are illegal:

The agent tied in the sale of a listing client’ home if the client also turns around and buys swampland the agent is selling.

One broker may decide on his own not to pay another agent the same commission split as he offers others. An agent acting on his own can decide to boycott another agent as long as he does not get together with other brokers to do the same.

Boycotting 

is an illegal activity where two or more brokers agree not to cooperate with a third broker.  

Brokers cannot get together, and price fix commissions, fees or boycott other agents.  (Sherman Antitrust Act

Antitrust Act (Sherman Antitrust Act)

Everything is negotiable.

The Board of Realty or similar organization cannot set commissions.

Brokers from separate companies cannot get together to stamp out the competition of other brokers. They cannot get together and boycott other brokers.

Brokers from separate companies cannot price fix.

Fines for individuals: Up to one million dollars and ten years in jail.