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One of the consequences of Board of Choice is that local REALTOR® associations may now be viewed as competitors. Boards have already recognized what the Board of Choice policy means in terms of examining services offered to members. They must also know what the policy means in terms of the antitrust laws. Certain conduct should always be avoided, such as any agreement that could be characterized as price-fixing. Other activities such as board mergers, regionalization of multiple listing services or joint administration of professional standards enforcement should generally be permissible. However, they should be reviewed by knowledgeable antitrust counsel.
Never Ever
Price-fixing is a per se violation of the antitrust laws. This means that the courts will not attempt to assess the reasonableness of the conduct or assess the circumstances surrounding it or the consequences flowing from it. If defendants are found to have engaged in price-fixing, they will be found to have violated the law. Real estate brokers learned this lesson in the late 1970's as a result of numerous lawsuits alleging that brokers had conspired to set their commission rates at certain levels. Brokers are now aware that they should never discuss their commission rates or structures with their fellow brokers. This lesson must now be heeded by local associations. Two or more boards should never agree among themselves on the amount of dues or other fees. Indeed, even discussions with other boards in nearby geographic areas regarding the level of dues, fees, or other charges could raise serious antitrust issues.
Boards may participate in cost-gathering surveys but only under certain circumstances. The following three conditions should be met to insulate surveys requesting cost information from antitrust challenge:
1. The survey is managed by a third party such as a government agency or trade association (other than another Board of REALTORS®).
2. The information provided by survey participants is at least three months old;
and
3. At least five participants supply data for the survey; no single participant's data represents more than 25% on a weighted basis of any statistic and the information is sufficiently aggregated that a recipient cannot identify prices charged by any participant.
Other conduct that should always be avoided is agreements or understandings with competing boards regarding recruitment or solicitation of members, such as an agreement that Board A will not solicit members with offices in Board B's jurisdiction if Board B will do likewise.
Caution Advised
Boards that may be considering merging with neighboring boards need to be mindful of antitrust considerations as they proceed. For example, suppose that Boards A and B are considering a merger. The members of Board A currently pay $100 per year in dues, whereas the members of Board B pay $200 in annual dues. After the merger, dues will be $200 per year. This means that the members of former Board A will now pay $100 per year more for membership. Antitrust concerns could arise if the members of former Board A have no other board in the vicinity that offers membership at a lower price.
Similarly, concerns could arise if, under the above scenario, the dues of the new board are $250 per year, so that the former members of both Boards A and B are now paying higher dues.
Yet another example of potential concern could arise if the dues of the new board were $175, so that former members of Board A are now paying an additional $75.00 per year in dues whereas former members of Board B are now pay $25 per year less.
The lawfulness of the above examples will depend upon the particular facts of each case. The antitrust risk could either be confirmed or dispelled based upon the presence or absence of certain factors such as the following:
- The services offered by each of the former boards and those offered by the new board. If the new board offers more services or improved services, it is a positive factor.
- The reason for the merger. If both boards conclude that members will be better off as a result of the merger, it is a positive factor. This is so even if the cost of membership may be somewhat higher due to increased services.
- The proximity of other boards with lower dues is a positive factor.
- The history of fee levels, the amount of change in fee levels after the merger and the strength of any cost-justification for any fee. A merger that results in a reduction in the overall level of membership dues is a positive factor.
- The practicality of using a joint venture to accomplish a limited purpose rather than a total merger of the two boards. If the procompetitive purposes of merger can be accomplished by way of a joint venture, then an analysis should be undertaken of why a complete merger is being proposed.
Mergers are appropriate when they result in REALTORS® being better served by having one rather than two boards in a given area. For example, a merger that results in lower membership costs for all concerned should not be a problem. If some REALTORS® will pay more for membership after a merger, the merger might nonetheless survive antitrust scrutiny if it can be shown that,
- there is another board reasonably near that charges less; or
- on balance, the total dues for all members of the merged boards are lower than the dues for all of the members of the prior boards; or
- the lower priced board was losing members and would have had to increase dues and services in order to survive.
It is always appropriate for boards considering a merger to determine whether their goals might be achieved instead through a joint venture. Joint ventures involve collaboration between two or more boards that involves some degree of integration of board resources or sharing of risk. An example would be two boards joining together for professional standards enforcement. Another common example is operating a regional MLS. Joint ventures are less restrictive than mergers and consequently pose less antitrust risk. Joint ventures frequently produce efficiencies from the combination of forces that provide better service to the members or result in a lower cost.
Although most joint ventures between boards should not raise antitrust concerns, boards should be particularly cautious if they are involved with a joint venture that involves the setting of a common price for a good or service sold to members. The joint setting of a price might well be viewed as price-fixing. Boards that come together to purchase multiple listing services for their members must avoid any price-fixing among themselves when determining the price charged to their respective MLS participants.
Similarly, if several Boards jointly purchase lockboxes in order to benefit from the financial savings that can be achieved, those Boards should not agree on a re-sale price to their members. Independent pricing decisions should be made by each Board based upon its administrative expenses and other pertinent factors unique to each Board.
Do not let your antitrust awareness lapse in this new era of Board of Choice. Avoid any conduct that could be viewed as price-fixing. Mergers and joint ventures will frequently produce positive results for the members, and satisfy antitrust requirements. When in doubt, however, be sure to consult with legal counsel before proceeding.