California Real Estate SalespersonLaws of Agency and Fiduciary DutiesHard
Several competing brokers in a local market informally agree to all charge the same 6% commission rate on residential listings. What is the legal problem with this arrangement?
- AIt only becomes illegal if the rate exceeds 6%
- BIt is permissible as long as clients are informed of the standard rate
- CIt constitutes illegal price fixing in violation of antitrust laws
- DIt is required practice under California Real Estate Law to maintain uniform pricing
Show answer & explanationAnswer & explanation
Correct answer: C. It constitutes illegal price fixing in violation of antitrust laws
Commission rates are always negotiable between broker and client, and any agreement among competing brokers to fix commission rates constitutes illegal price fixing under federal and state antitrust laws, regardless of informing clients.
Why the other options are wrong
- A. The illegality stems from the agreement itself, not the specific percentage chosen.
- B. Informing clients does not cure an illegal price-fixing agreement between competitors.
- D. California law explicitly requires that commissions be negotiable, not fixed.
Commission Price Fixing
Commissions must always be negotiable; any agreement among competing brokers to set uniform rates violates antitrust law.
- Commission rates are never fixed by law or custom
- Antitrust laws (state and federal) prohibit broker price-fixing agreements
- Listing agreements must state rates are negotiable
Memory trick: Brokers who team up on price break the antitrust ice.