National Real Estate Exam (PSI)Practice of Real EstateHard
A national franchise brokerage requires all of its affiliated offices to only use one specific title company for closings as a condition of using the franchise name. This arrangement may violate antitrust law because it constitutes:
- AMarket allocation
- BA tying arrangement
- CA group boycott
- DPrice fixing
Show answer & explanationAnswer & explanation
Correct answer: B. A tying arrangement
A tying arrangement occurs when a seller conditions the sale or use of one product or service (the franchise name) on the buyer's agreement to also use another product or service (the title company), which can unlawfully restrain competition.
Why the other options are wrong
- A. Market allocation involves dividing territories or customers among competitors.
- C. A group boycott involves competitors refusing to deal with a third party, not tying two services together.
- D. Price fixing involves competitors agreeing on prices, not bundling services.
Tying Arrangement
An antitrust violation where use of one product/service is conditioned on the purchase of a separate, unrelated product/service.
- Illegal when it unreasonably restrains trade or reduces consumer choice
- Common example: requiring use of an affiliated title/escrow company
- Differs from bundling voluntarily chosen by the consumer
Memory trick: Tied together against your will—that's a tying deal.