Federal antitrust agencies attack Missouri real estate law
DOJ, FTC ask governor to veto limited-service legislation
Tuesday, May 24, 2005
By Glenn Roberts Jr.
Inman News
The U.S. Department of Justice and Federal Trade Commission on Monday sent a letter to Missouri Gov. Matt Blunt that encourages him to veto legislation mandating services that real estate brokers must perform for home buyers and sellers. The federal agencies charge that the bill is anti-competitive and will likely lead to higher prices for real estate services.
House Bill 174, which passed the House on March 14 in a 156-0 vote and passed the Senate on May 5 with a 33-0 vote, provides that all brokers and agents who enter into a written agreement to exclusively represent a consumer in a real estate transaction must accept and present all offers and counteroffers for their clients, assist clients in developing, communicating, negotiating and presenting offers and counteroffers, and must answer their clients’ questions relating to offers, counteroffers, notices and contingencies. And the bill specifies all of the scenarios in which real estate professionals must enter into written agreements with their clients.
“The proposed legislation, if enacted, is likely to reduce competition and harm Missouri consumers in two significant ways,” the federal agencies state in their letter to the governor. “First, consumers who want to perform for themselves some steps involved in negotiating home sales in Missouri will pay real estate professionals more than they do today. Second, House Bill 174 is likely to increase the price that some consumers who prefer full-service brokerage pay for real estate services.”
The letter also states that the Missouri legislation “limits competition far more than could possibly be necessary to address any plausible consumer protection concerns” and “there is no justification for excluding fee-for-service brokerage options from the marketplace.”
Sam Licklider, senior vice president of government affairs for the Missouri Association of Realtors, said, “I am to a degree astounded that (the federal agencies) would do this.” Licklider said he believed that the requirement of the proposed minimum-service law was “so minimal” that it would not draw a response from the Justice Department.
While federal agencies have asked lawmakers and regulators in several other states to reject laws and rules mandating a list of real estate services that brokers and agents must perform for clients, Licklider said the Missouri legislation would only apply to transactions in which consumers have entered into an exclusive agreement with a real estate professional.
To date, the Justice Department and Federal Trade Commission have also separately or together filed letters with regulators or lawmakers in Texas, Oklahoma and Alabama opposing proposals that would heighten real estate service requirements.
Over one dozen states have proposed or passed similar minimum-service measures, which typically require that brokers accept and present all offers and counteroffers on behalf of their clients. The law and rule changes typically prevent companies from offering bare-bones services, such as listing a property in a local multiple-listing service for a flat fee without performing any other services for clients.
Backers of such measures have claimed that they are working to protect consumers from those companies that offer less services than they need to complete a real estate transaction, while opponents say that such measures can restrict consumer choice and force consumers to buy services that they may not want or need. State Realtor associations supporting the measures have said that agents at full-service real estate brokerages can feel obligated to perform services for consumers whom they do not directly represent when those consumers are working with a limited-service company.
Licklider said that despite the federal agencies’ opposition, the association will encourage the governor to pass House Bill 174. The Justice Department is acting as “an interested special interest group,” he said. “They have a position, we have a different position.” He contacted the Missouri Association of Realtors today to notify the association about the federal agencies’ letter, and he also spoke with the governor’s office.
“Really, it’s too early to tell what’s going to happen,” he said, adding that he plans to submit some information to the governor’s office and will encourage the governor to sign the bill.
The governor has 45 days from receiving the bill to consider whether to approve or veto the legislation, said Jessica Robinson, a spokeswoman for the governor. “The governor is reviewing the letter as well as the related bill,” she said.
While the 1-million-member National Association of Realtors has not formally endorsed these efforts by state Realtor associations to pass similar minimum-service laws, the association has provided legal advice about such laws and has not discouraged the associations from pursuing the laws.
Laurie Janik, general counsel for the National Association of Realtors, said in an April 22 letter to state Realtor association executives that they should not give too much weight to Justice Department and Federal Trade Commission comments on minimum-service measures.
“The views submitted by the DOJ or FTC should be evaluated on their merits and should not be afforded undue weight based on a mistaken belief that state legislatures or real estate commissions must acquiesce to (their) views or face the prospect of defending their actions in court,” she wrote. “Nor should Realtor associations be deterred from expressing the views of their members to legislators and regulators.”
Janik also noted that Realtors and Realtor associations “have the right to lobby for legislative and regulators action they support – even if the effect of such action would be anticompetitive. In making this statement, we do not mean to suggest that laws and regulations imposing minimum duties on licensees are anticompetitive. To the contrary, they are intended to assure that the market for the sale of real estate functions efficiently and in the interests of buyers and sellers. But even if they DOJ or FTC believes that these government actions suppress competition, the right to petition for such actions should be unquestioned.”
The Justice Department is also investigating other aspects of the real estate industry. Justice Department officials have been investigating a National Association of Realtors’ policy for Internet property listings for about two years, and the association is negotiating with agency officials and pursuing changes to its online listings policy in an effort to find a compromise. Also, the Justice Department’s Antitrust Division filed a lawsuit against the Kentucky Real Estate Commission in March, charging that the state’s anti-rebate law limits competition among real estate brokers.
Steve Brobeck, executive director for the Consumer Federation of America, a pro-consumer group that represents about 300 nonprofit organizations, said that he has heard complaints from real estate discounters for years about “the subtle and not-so-subtle ways that they are discriminated against,” and he said that the National Association of Realtors still appears “committed to helping to preserve the price structure.” He added, "I think many consumers are surprised that there are not more pricing options (in real estate). "
Chris Nye, broker and founder of MLS4Owners.com, a real estate advertising company that offers flat-fee property listings in Washington, said that he would like to see the National Association of Realtors conduct a survey of its members on the topic of minimum-services legislation.
“I would be willing to bet that a majority of Realtors don’t like these actions taken by state associations. I would be willing to bet that many Realtors are not aware of it,” said Nye, who also said he has personally been in contact with the Justice Department.
Nye said that the minimum-service efforts across the country appear to be “a cartel protecting its turf,” and he believes that the Justice Department has reason to take an interest in antitrust issues relating to minimum-service laws. “(DOJ investigators) are busy people – for them to make the statements they’re making, to jump into this argument the way they did – they obviously feel there’s some meat to chew on here.”
Craig Cheatham, executive vice president for the Association of Real Estate License Law Officials, a nonprofit group that links real estate regulators, said that his group is compiling a list of states that are considering or have passed real estate minimum-service measures. The association’s board requested a status report on each jurisdiction’s status on the minimum-service issue as of June 30.
“The study will analyze the rationale and goals of each initiative and will compare and contrast the most significant points in each law, each regulation or each proposal.” Cheatham said the group’s board members will study that document to determine what guidance the group could or should give to its member agencies.
“Although the mission of ‘consumer protection’ is often being invoked in the recent crop of proposals relating to ‘minimum service,’ few, if any, appear to have been initiated from consumer-protection agencies – the licensing and enforcement bodies that have protecting the public as their primary mission,” Cheatham said. Also, he said that “at first glance, it appears that most ‘limited-service’ arrangements are not hindered” by the laws.
