National Real Estate Exam (PSI)Practice of Real EstateMedium
Several competing brokerages in a city secretly agree to all charge a standard 6% commission rate on residential listings. This agreement is an example of illegal:
- AGroup boycotting
- BTying arrangement
- CPrice fixing
- DMarket allocation
Show answer & explanationAnswer & explanation
Correct answer: C. Price fixing
Price fixing occurs when competitors agree on the prices or fees they will charge, which violates the Sherman Antitrust Act. Commission rates must always be independently negotiable and set.
Why the other options are wrong
- A. Group boycotting is refusing to do business with a competitor or client, not fee agreements.
- B. Tying arrangements require a customer to buy one product/service to get another.
- D. Market allocation is dividing up territories or clients among competitors.
Price Fixing
An illegal agreement between competing brokers to set uniform commission rates or fees.
- Violates Sherman Antitrust Act
- Commissions must always be negotiable
- Even informal or implied agreements can be illegal
Memory trick: Price fixing = 'fixed' prices, no room to negotiate