California Association of Realtors, Legal Affairs Forum
January 24, 2014
Jarod M. Bona, DLA Piper
www.TheAntitrustAttorney...
Introduction
1. The basics of antitrust law
2. Real-estate-specific issues
3. The spirit of antitrust and
competition
Jaro...
US Antitrust Basics
Antitrust prohibits unreasonable restraints on trade.

Jarod M. Bona www.TheAntitrustAttorney.com
US Antitrust Basics
Why should I care about antitrust law?
 Antitrust violations are not always intuitive.
 Antitrust la...
US Antitrust Basics
 Criminal Violations

-Imprisonment of up to 10 years
-Fines of up to $100 million for corporations a...
US Antitrust Basics
 Sherman Act, Section 1: Prohibits certain agreements and

understandings between competitors, custom...
US Antitrust Basics
Sherman Act, Section 1
Prohibits agreements and understandings that

unreasonably restrict competitio...
US Antitrust Basics
Contract, Combination or Conspiracy
 Written agreements
 Oral agreements
 Agreements implied from c...
US Antitrust Basics
Sherman Act, Section 1

Per Se Violations
 Illegal regardless of the reason for the activity or wheth...
US Antitrust Basics
Sherman Act, Section 1
Most Common Per Se Violations
Price agreements: Price or any price components,...
US Antitrust Basics
Sherman Act, Section 1





Rule of Reason
Most conduct falls into this category.
Virtually all ve...
US Antitrust Basics
Sherman Act, Section 2
Monopolization, Attempted Monopolization, and

Conspiracy to Monopolize
Monop...
US Antitrust Basics
 Sherman Act violations may result in substantial
criminal penalties for certain violations.
 Moneta...
US Antitrust Basics
 Antitrust violations may lead to substantial civil
penalties and remedies.
 Government may obtain f...
US Antitrust Basics
Information Sharing Generally
Any information sharing among competitors can create the
possibility of...
US Antitrust Basics
Trade Associations
 Counsel should be present at all meetings.
 Written agenda should be prepared, a...
US Antitrust Basics
Federal Government Antitrust Agencies
 Federal Trade Commission (FTC): Civil actions
only, but can ut...
Real-Estate Antitrust Issues
Why does antitrust matter to real-estate professionals?
 Competitor brokers both compete and...
Real-Estate Antitrust Issues
Fixing Prices—Per Se Antitrust Violation
 Do not agree, directly or tacitly, with other
brok...
Real-Estate Antitrust Issues
Fixing Prices—Per Se Antitrust Violation
 Do not discuss or agree with competitors on
rebate...
Real-Estate Antitrust Issues
Allocating Markets—Per Se Antitrust Violation
 Do not discuss or agree with competitors to d...
Real-Estate Antitrust Issues
Bid-Rigging—Per Se Antitrust Violation
 Bid Rotation: Competitors agree to take
turns being ...
Real-Estate Antitrust Issues
 Bid-Rigging—Per Se Antitrust Violation
 Wide-ranging DOJ criminal investigation into
forec...
Real-Estate Antitrust Issues
Group Boycotts
 Per se antitrust violations (generally) when they involve







agreeme...
Real-Estate Antitrust Issues
Multiple Listing Service Antitrust Issues
 Complex—work with an antitrust expert.
 Market p...
Real-Estate Antitrust Issues







What should we do?
Develop, follow, and enforce an antitrust compliance
policy for...
The Spirit of Antitrust and Competition
 Antitrust is full of jargon, economic theories, and legal

doctrines.
 It evolv...
The Spirit of Antitrust and Competition
 To determine whether an action fits within the spirit of

antitrust and competit...
The Spirit of Antitrust and Competition
 Compete by adding value for your customer, or do a

better job letting your cust...
The End
Any questions?

Jarod M. Bona www.TheAntitrustAttorney.com
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Antitrust and real estate

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This presentation discusses antitrust issues that real-estate professionals should consider. Further detail is available at http://www.theantitrustattorney.com/2014/01/28/five-antitrust-concerns-real-estate-professionals/

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Antitrust and real estate

  1. 1. California Association of Realtors, Legal Affairs Forum January 24, 2014 Jarod M. Bona, DLA Piper www.TheAntitrustAttorney.com
  2. 2. Introduction 1. The basics of antitrust law 2. Real-estate-specific issues 3. The spirit of antitrust and competition Jarod M. Bona www.TheAntitrustAttorney.com
  3. 3. US Antitrust Basics Antitrust prohibits unreasonable restraints on trade. Jarod M. Bona www.TheAntitrustAttorney.com
  4. 4. US Antitrust Basics Why should I care about antitrust law?  Antitrust violations are not always intuitive.  Antitrust law is often unclear and confusing.  Defending a government antitrust investigation or civil case is both expensive and time-consuming.  Strong incentives built into antitrust law for private enforcement—treble damages and attorneys’ fees.  Antitrust violations carry serious criminal and civil consequences. Jarod M. Bona www.TheAntitrustAttorney.com
  5. 5. US Antitrust Basics  Criminal Violations -Imprisonment of up to 10 years -Fines of up to $100 million for corporations and $1 million for individuals  Civil Lawsuits -Automatic treble damages -Injunctive relief -government civil actions -private lawsuits, including class actions Jarod M. Bona www.TheAntitrustAttorney.com
  6. 6. US Antitrust Basics  Sherman Act, Section 1: Prohibits certain agreements and understandings between competitors, customers and suppliers, or other firms with business relationships  Sherman Act, Section 2: Prohibits certain conduct by a monopolist or by someone attempting to become a monopolist and certain other forms of unilateral conduct  Clayton Act:  Section 3: Prohibits anticompetitive conditions on the sale of goods, including “tying” and some exclusive dealing.  Section 7: Governs mergers and acquisitions.  FTC Act: Prohibits unfair methods of competition and unfair acts and practices.  State Antitrust Acts: Often follows federal antitrust laws, but there can be some variation. Jarod M. Bona www.TheAntitrustAttorney.com
  7. 7. US Antitrust Basics Sherman Act, Section 1 Prohibits agreements and understandings that unreasonably restrict competition. Horizontal: Agreements or understandings with competitors. Vertical: Agreements with customers, agents, etc. There must be more than one economic unit involved (e.g. combination, contract, conspiracy). The agreements need not be formal. The evidence of a conspiracy in a civil action or government prosecution is often circumstantial or inferred from conduct. Jarod M. Bona www.TheAntitrustAttorney.com
  8. 8. US Antitrust Basics Contract, Combination or Conspiracy  Written agreements  Oral agreements  Agreements implied from circumstantial evidence  Conduct consistent with conspiracy  Opportunity or motive to conspire  No independent business explanation  Be careful at trade-association meetings  Communication and information exchange among competitors Jarod M. Bona www.TheAntitrustAttorney.com
  9. 9. US Antitrust Basics Sherman Act, Section 1 Per Se Violations  Illegal regardless of the reason for the activity or whether there was any competitive harm  Almost exclusively horizontal conduct—agreements among competitors.  Examples: Price-fixing, group boycotts, dividing markets or customers, rigging bids, and certain forms of tying. Jarod M. Bona www.TheAntitrustAttorney.com
  10. 10. US Antitrust Basics Sherman Act, Section 1 Most Common Per Se Violations Price agreements: Price or any price components, including commissions, referral fees, discounts, promotions, credit terms, allowances, advances, mark-ups, costs, margins, or price ranges. Market Allocation. Agreements dividing territories, products or services, or customers (including agreements not to steal clients). Group Boycott. Agreements not to deal with another person or business (or to pressure that person or business to force certain behavior). Bid Rigging. Collusive bidding practices. Tying. Someone with market power—or a unique advantage— that refuses to sell a product or service in that market unless the customer buys another type of product or service. Jarod M. Bona www.TheAntitrustAttorney.com
  11. 11. US Antitrust Basics Sherman Act, Section 1     Rule of Reason Most conduct falls into this category. Virtually all vertical conduct is judged under the rule of reason. Courts will balance the pro-competitive benefits against any anticompetitive harm. Quick Look review: Between rule of reason and per se review. Courts are increasingly applying standards that are neither pure per se or pure rule of reason. Jarod M. Bona www.TheAntitrustAttorney.com
  12. 12. US Antitrust Basics Sherman Act, Section 2 Monopolization, Attempted Monopolization, and Conspiracy to Monopolize Monopolization:  Monopoly Power: The ability to set prices, control output, or exclude competitors in a given market.  Exclusionary Conduct to acquire, maintain or enhance that power.  It is not illegal to acquire or maintain monopoly power as a result of superior product or business acumen. Attempted Monopolization: A company that (1) engaged in exclusionary conduct with a (2) specific intent to gain monopoly power and (3) has a “dangerous probability” of gaining monopoly power. Jarod M. Bona www.TheAntitrustAttorney.com
  13. 13. US Antitrust Basics  Sherman Act violations may result in substantial criminal penalties for certain violations.  Monetary fines: Corporate and personal.  Prison sentences—even for first time offenders.  Almost exclusively based upon Section 1, per se antitrust violations like price-fixing, marketallocation, and bid-rigging. Jarod M. Bona www.TheAntitrustAttorney.com
  14. 14. US Antitrust Basics  Antitrust violations may lead to substantial civil penalties and remedies.  Government may obtain financial penalties.  Private antitrust lawsuits can result in treble damages and plaintiffs’ attorneys’ fees.  The private lawsuits and government investigations are expensive and distracting, even if you prevail.  Mergers, acquisitions, and other transactions may be threatened. Jarod M. Bona www.TheAntitrustAttorney.com
  15. 15. US Antitrust Basics Information Sharing Generally Any information sharing among competitors can create the possibility of an antitrust violation. Information-sharing may facilitate a per se antitrust violation. DO NOT share any of the following types of information with competitors (except as necessary for individual transaction):  Pricing, promotions, costs, market shares;  Past, current, or future marketing, pricing, plans, etc. Jarod M. Bona www.TheAntitrustAttorney.com
  16. 16. US Antitrust Basics Trade Associations  Counsel should be present at all meetings.  Written agenda should be prepared, approved in advance, and followed.  No agreement (express or implied) that limits each member’s right to make independent decisions.  If there is any inappropriate discussion, announce you are leaving and walk out.  Be careful what you say at social gatherings. Jarod M. Bona www.TheAntitrustAttorney.com
  17. 17. US Antitrust Basics Federal Government Antitrust Agencies  Federal Trade Commission (FTC): Civil actions only, but can utilize Section 5 of the FTC Act to enforce competition policy behind traditional antitrust laws.  Department of Justice, Antitrust Division: Civil and Criminal Enforcement. Jarod M. Bona www.TheAntitrustAttorney.com
  18. 18. Real-Estate Antitrust Issues Why does antitrust matter to real-estate professionals?  Competitor brokers both compete and cooperate on a daily basis.  Prices (particularly commission splits) are often announced and well-known.  Tension and battles between the traditional business model and new business models.  Large role in industry for associations and MLS entities.  Heavy government antitrust scrutiny. Jarod M. Bona www.TheAntitrustAttorney.com
  19. 19. Real-Estate Antitrust Issues Fixing Prices—Per Se Antitrust Violation  Do not agree, directly or tacitly, with other brokers or competitors to set certain or minimum commissions.  Do not discuss commissions with competitors, outside the context of a specific transaction. Jarod M. Bona www.TheAntitrustAttorney.com
  20. 20. Real-Estate Antitrust Issues Fixing Prices—Per Se Antitrust Violation  Do not discuss or agree with competitors on rebates or other discounts, credit terms, service charges, or any fees.  Do not imply or represent that commissions are fixed by any group or organization.  Do not discuss or agree with competitors on commission splits or referral fees (outside the context of a specific transaction). Jarod M. Bona www.TheAntitrustAttorney.com
  21. 21. Real-Estate Antitrust Issues Allocating Markets—Per Se Antitrust Violation  Do not discuss or agree with competitors to divide territories— “you stay north of the river and I will stay to the south.”  Do not discuss or agree with competitors to refrain from offering any type of product or service.  Do not discuss or agree with competitors to refrain from competing for particular clients, including each others’ clients or former clients. Jarod M. Bona www.TheAntitrustAttorney.com
  22. 22. Real-Estate Antitrust Issues Bid-Rigging—Per Se Antitrust Violation  Bid Rotation: Competitors agree to take turns being the low bidder.  Bid Suppression: Competitor agrees not to bid.  Complementary Bid: Competitor Agrees to bid high. Jarod M. Bona www.TheAntitrustAttorney.com
  23. 23. Real-Estate Antitrust Issues  Bid-Rigging—Per Se Antitrust Violation  Wide-ranging DOJ criminal investigation into foreclosure-auction bid-rigging among real-estate investors in Northern California.  Over 40 guilty pleas already.  Conspirators rigged bids at the public auctions, then had their own private auctions among the conspirators. Jarod M. Bona www.TheAntitrustAttorney.com
  24. 24. Real-Estate Antitrust Issues Group Boycotts  Per se antitrust violations (generally) when they involve     agreements among competitors. Do not discuss or agree with competitors to decline to deal with a certain or class of broker. Do not discuss or agree with competitors to pressure these brokers to take or refrain from any actions (like raising prices) Often arises in relation to brokers that offer discounts or unique-business models. The MLS antitrust cases often have a group-boycott component. Jarod M. Bona www.TheAntitrustAttorney.com
  25. 25. Real-Estate Antitrust Issues Multiple Listing Service Antitrust Issues  Complex—work with an antitrust expert.  Market power for MLS entities.  Discrimination against brokers employing certain business models, including  Office location (or existence)  Full or part time  Full service or partial service  Pricing structure or discounts  Commission splits  Advertising or marketing practices Jarod M. Bona www.TheAntitrustAttorney.com
  26. 26. Real-Estate Antitrust Issues     What should we do? Develop, follow, and enforce an antitrust compliance policy for your organization. Antitrust compliance training for employees or members—it just takes one employee to take down an organization under the antitrust laws. Compete on the merits for the customer not at the competitor. Call me or another antitrust attorney with questions. Jarod M. Bona www.TheAntitrustAttorney.com
  27. 27. The Spirit of Antitrust and Competition  Antitrust is full of jargon, economic theories, and legal doctrines.  It evolves, sometimes quickly, in a common-law way that is attached to both academic theory and economics.  Cases and doctrine merely reflect how courts at that point decide to address specific types of challenged conduct.  The doctrine is important, but it merely serves an underlying spirit. Jarod M. Bona www.TheAntitrustAttorney.com
  28. 28. The Spirit of Antitrust and Competition  To determine whether an action fits within the spirit of antitrust and competition, ask whether it adds competition to the world, or subtracts it?  Does the action add value to the customer? Or does it instead merely make it more difficult for a competitor to compete? Does it harm the customer?  In most cases, the answer to the bolded question will determine whether you have an antitrust violation.  It isn’t often an easy question to answer, but it is always the first question I ask myself when presented with a set of facts. Jarod M. Bona www.TheAntitrustAttorney.com
  29. 29. The Spirit of Antitrust and Competition  Compete by adding value for your customer, or do a better job letting your customer know about the value you can provide.  Resist the temptation to direct your actions toward your competitors—in either a collusive or malicious way.  Your competitor is neither your enemy nor your friend—direct your energies toward the customer. Jarod M. Bona www.TheAntitrustAttorney.com
  30. 30. The End Any questions? Jarod M. Bona www.TheAntitrustAttorney.com

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