SAN FRANCISCO – Justice Department and Federal Trade Commission antitrust officials, who participated in a real estate technology conference Thursday, said they have an open ear for any suspected antitrust law violations but in some cases cannot take any action.

David Kully, a representative for the DOJ’s Antitrust Division, and Maureen Ohlhausen, director of the FTC Office of Policy Planning, fielded questions about their agencies’ roles and limitations, and heard complaints about real estate industry practices in various markets.

The officials, who stated that

SAN FRANCISCO – Justice Department and Federal Trade Commission antitrust officials, who participated in a real estate technology conference Thursday, said they have an open ear for any suspected antitrust law violations but in some cases cannot take any action.

David Kully, a representative for the DOJ’s Antitrust Division, and Maureen Ohlhausen, director of the FTC Office of Policy Planning, fielded questions about their agencies’ roles and limitations, and heard complaints about real estate industry practices in various markets.

The officials, who stated that they were expressing their own views, spoke during a roundtable discussion titled “Antitrust: What is the Story?” at Real Estate Connect 2005.

Antitrust has been on the minds and mouths of real estate professionals a lot lately, as national media and federal agencies have focused in on real estate antitrust issues.

Over the past few months, the DOJ and FTC have taken the real estate industry to task over alleged anticompetitive and anti-consumer practices. The agencies have issued letters to state regulators, legislators and governors in several states, for example, to protest proposed laws and regulations that would set new service requirements for all real estate brokerages.

Also, the Justice Department settled a lawsuit this month with the Kentucky Real Estate Commission over a state ban on real estate rebates and inducements for real estate consumers. And Justice Department lawyers are investigating the National Association of Realtors’ online property listings policies.

State Realtor trade groups have worked aggressively to pass legislation setting new service requirements – often referred to as minimum-service laws – even after the federal agency objections to the proposals.

Ohlhausen said that there are antitrust immunities for states that pass laws, even if those laws violate antitrust law, and the National Association of Realtors, through its general counsel, has communicated to the leadership of its counterpart state trade groups that it is entirely legal for trade groups to lobby for the minimum-service legislation.

Proponents of such minimum-service laws, including Realtor trade groups and state real estate regulators, have said that the measures can protect consumers by ensuring that they will receive a specific set of services in all real estate transactions. Meanwhile, some real estate professionals who offer consumers the choice of reduced services at a reduced price, have said the laws harm consumers by taking away their freedom to choose.

The antitrust litmus test for the FTC is “are consumers being harmed, what are the effects on competition, (and) overall is this restriction going to benefit consumers or is it going to harm them,” Ohlhausen said.

In the case of legislation that the FTC believes is anticompetitive, “We can try to convince the Legislature not to enact it, try to convince the governor not to pass it. Once it’s passed, we can’t sue the legislature, we certainly can’t sue the governor.” But the agency can call attention to the issue, and make consumers more aware, she said.

Generally, Ohlhausen said the FTC tends to favor consumer choice rather than the restriction of consumer choice. “If the consumer wants less (real estate) help at a lower price or more help at a higher price — the point is that a consumer should be allowed to decide,” she said.

One attendee told the federal officials that the conference tends to draw real estate innovators and technology start-ups who do not necessarily represent the mainstream real estate industry. Another attendee questioned whether federal agencies would look into actions taken by legislators who are Realtors to propose laws that possibly harm consumers and some real estate business models. Agency representatives said state antitrust immunity would apply here, too.

Other participants in the discussion described local MLS rules and advertising restrictions that they said can harm competition.

Bob Hale, president and CEO for the Houston Association of Realtors, asked whether the Justice Department is turning its attention to MLS issues.

Kully said he could not discuss any possible future actions the DOJ may take relating to real estate antitrust issues. He described past actions the Justice Department has taken to prevent price-fixing and open up competition in the real estate, and encouraged real estate professionals to report any suspected anticompetitive activity through the department’s antitrust Web site, at www.usdoj.gov/atr.

Kully also said that there are many actions that can be pro-competitive, citing the example of the creation of multiple listing services to share property listings. MLS rules, though, could also be used to restrict competition, he said. “These are complicated matters. You evaluate each (issue) on a case by case basis.”

He cited a statement written by science-fiction writer Isaac Asimov about reaction to new technology: “All through history, there had been resistance – and bitter, exaggerated, last-ditch resistance – to every significant technological change that had taken place on earth. Usually the resistance came from those groups who stood to lose influence, status, money as a result of the change, although they never advanced this as their reason for resisting it. It was always the good of humanity that rested upon their heart.”

Aaron Farmer, a participant in the roundtable session and owner of Texas Discount Realty, a flat-fee real estate company, had fought new regulations by the Texas Real Estate Commission that sought to bar certain types of limited-service real estate practices in the state. After the DOJ and FTC objected to the proposed regulations, the state Legislature quickly proposed a similarly worded bill that was passed and approved by the governor this year.

While Farmer said that while he lost his battle against the Texas minimum-service measure, he expects the Justice Department to continue to take a look at possibly anticompetitive practices within the industry. Farmer had contacted FTC and DOJ officials about the minimum-service issue in that state.

“It’s kind of scary the first time you call the DOJ. They said, ‘We know about you.’ I think there are still a lot of issues, other than minimum-service, that they will probably be looking at,” he said.

Ohlhausen said real estate is one of many industries that the FTC monitors, and it’s up to citizens to bring issues to the agency’s attention. “We as antitrust agencies do what we can,” she said. “You may think we have a huge staff and a light goes off when something is anticompetitive. I have three attorneys working for me now. We just can’t monitor everything.”

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Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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