FTC Testifies on Competition in the Real Estate Brokerage Industry

On July 25, the Federal Trade Commission (“FTC” or “Commission”) told the Subcommittee on Housing and Community Opportunity of the House Financial Services Committee that changes in the real estate industry, which increasingly incorporate the Internet into their business models, give consumers “the choice to save potentially thousands of dollars in commissions in exchange for taking on more work.” Maureen Ohlhausen, Director of the FTC's Office of Policy Planning told the Committee that the Commission has a long history of preventing unfair methods of competition and ensuring that real estate markets remain competitive.
On July 13, the Austin Board of Realtors settled FTC charges that their rules effectively prevented consumers using non-traditional listing agreements from gaining access to important public Web sites and made it more difficult for sellers to market their homes. The settlement bars the Board from adopting or enforcing any policy that interferes with members' ability to enter into non-traditional listing arrangements with clients.

The FTC also provides analysis of the likely competitive effects of legislative proposals. At the urging of state realtor associations, four states considered or adopted minimum-service requirements that would force consumers to purchase a “state mandated bundle of real estate brokerage services.” The FTC and DOJ advocated against them. The testimony notes that the FTC and Department of Justice co-hosted a real estate workshop in October 2005, to explore competition in the real estate industry.

The workshop found that while the industry exhibits characteristics one would expect to find in competitive markets, there is a perception of lack of price competition. The workshop found that despite a significant amount of information available to consumers on the Internet, there are gaps in consumer knowledge – for example, they are not necessarily aware that commission rates are negotiable.

Authored by

Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com