California Real Estate Broker ExaminationReal Estate PracticeHard
A group of real estate agents working for the same brokerage decides to informally agree on a fixed commission rate for all residential sales in their exclusive territory. This agreement is discussed and implemented among themselves, without the direct knowledge of their broker. This action is a clear violation of which of the following?
- ATruth in Lending Act.
- BFair Housing laws.
- CThe Statute of Frauds.
- DAntitrust laws.
Show answer & explanationAnswer & explanation
Correct answer: D. Antitrust laws.
An agreement among competitors (even within the same brokerage, if they operate independently for commission purposes) to fix commission rates is a per se violation of antitrust laws, specifically the Sherman Antitrust Act. This practice eliminates competition and harms consumers.
Why the other options are wrong
- A. Truth in Lending Act deals with disclosure of credit terms, not commission rates.
- B. Fair Housing laws address discrimination, not commission agreements.
- C. The Statute of Frauds requires certain contracts to be in writing; it doesn't regulate commission rate agreements.
Antitrust Laws (Real Estate)
Federal and state laws designed to prevent monopolies and promote competition, prohibiting practices like price fixing, group boycotts, market allocation, and tie-in agreements in real estate.
- Price fixing: Agreeing on commission rates is illegal.
- Group boycotts: Refusing to cooperate with a competitor.
- Market allocation: Dividing territories among competitors.
- Violations can result in severe penalties, including fines and imprisonment.
Memory trick: Don't 'fix' prices or 'boycott' competition, or the 'law' will come for you.