It has been some time since the real estate market has been mentioned on Antitrust Review.  Yesterday, the FTC and DOJ rectified this with the release of a joint report: “Competition in the Real Estate Brokerage Industry.” The 78 page report appears to be very through and provides a wealth of background material.  The report makes the following recommendations:

• The Agencies should continue to monitor the cooperative conduct of private associations of real estate brokers, and bring enforcement actions in appropriate circumstances. While cooperation among brokers through a multiple listing service can provide consumers with important efficiencies, cooperation used to adopt rules that hinder rivals can be anticompetitive and, as recent Agency actions indicate, may violate the antitrust laws.

• The Agencies should continue to provide state legislators and industry regulators with information concerning the competitive consequences of state legislation and regulations that threaten to or already do restrict competition and consumer choice in the real estate brokerage industry, and take enforcement action in appropriate circumstances.

• State legislators and industry regulators should consider repealing existing laws, rules and regulations, such as minimum-service and anti-rebate provisions, that limit choice and reduce the ability of new brokerage models (e.g., fee-for-service brokers, discount full-service brokers, virtual office website brokers, and broker referral networks) to compete and that do not appear to provide any consumer benefits that would justify such restrictions. They should also avoid enacting such laws, rules, and regulations in the future.

• The Agencies and industry regulators should promote consumer understanding of marketplace options. Some consumers may not be aware of the range of alternatives available to them when hiring a real estate broker, including the types of business models available and the negotiability of fees, for both home buyers and sellers, and/or may not understand the duties owed by their broker. Competition in the real estate brokerage industry would likely be enhanced if consumers had better access to such information.

• The Agencies and industry regulators should assess the feasibility of an empirical study of the real estate brokerage industry. Transaction-level data on commission rates and fees are not publicly available, but broad national aggregate data suggest that commission rates and fees move in tandem with housing prices. Just as the 1983 FTC study provided valuable information about how real estate brokers competed in the late 1970s and early 1980s, a new study examining how transaction-level commission rates and fees vary based on such factors as market conditions, housing prices, and regulation would provide a better understanding of the current state of competition in the real estate brokerage industry.

The AP (via Business Week) reports that:

State laws and real estate agents’ business practices are preventing consumers from getting the full benefit of the competition that the Internet was expected to bring to the real estate industry, federal regulators said Tuesday. In a new report from the Federal Trade Commission and the Department of Justice, regulators said that discount brokers and other rivals to traditional agents have been constrained in their ability to use the Internet to reduce fees and improve service. The Internet is now more important tool than yard signs for advertising homes for sale, the report said. In 2006, 80 percent of home buyers used the Internet while looking for a house versus 63 percent who said they looked for yard signs, according to a study cited in the report. … In an e-mailed response, Pat Combs, president of the National Association of Realtors, said the real estate industry is “dynamic, entrepreneurial and fiercely competitive.” The Justice Department sued state real estate commissions in Kentucky, South Dakota, West Virginia and Tennessee, charging that rebate bans limited competition. The states agreed to lift the bans. And the FTC last October ordered real estate groups in five states to allow fee-for-service and other discount brokers full access to their online multiple listing services, warning that refusal to do was a violation of antitrust law. “For the past 25 years, the association has conducted membership education and training programs to ensure compliance with antitrust law,” the NAR’s Combs said. “The report released today is based on a government workshop on competition in the real estate industry that was held nearly two years ago.”

The FTC’s press release is available here.

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