WASHINGTON, D.C. – Airline ticket prices have generally dropped over the years, thanks to greater price competition — and it’s no accident, said Michael A. Salinger, director of the Bureau of Economics for the U.S. Federal Trade Commission.

“Prices were particularly high on long distance routes,” he said, though, “We deregulated prices and eliminated restrictions on entry and prices came down dramatically.”

Salinger spoke Tuesday during a daylong workshop, titled, “Competition Policy and the Real Estate Industry,” hosted by the Federal Trade Commission and U.S. Justice Department. The workshop, which had an estimated 150 registered attendees, was held in an FTC building that is a stone’s throw from the National Association of Realtors’ D.C. headquarters.

Federal officials have raised questions about price competition in the real estate industry for decades, and the same questions are surfacing again today. “I’m finding the world, not like Rip Van Winkel, particularly unchanged after 20 years. The puzzle is why the (real estate) percentage commission has been so stubbornly persistent. We’ve seen this pattern in industries before. This is not a unique case,” Salinger said.

Drawing a parallel between real estate and the travel industry, Salinger said that while some travelers may say that aspects of quality have dropped, such as the quality of food on some discount airlines, “economists who have looked at this have concluded that we are by far better off with the lower prices than we were with the higher service levels designed to attract the higher prices.”

While issues of real estate price competition are nothing new for federal antitrust agencies, officials at the Justice Department and Federal Trade Commission have stepped up activity this year related to possible anticompetitive practices. Officials at the agencies this year have filed lawsuits and issued numerous letters opposing trade association-backed efforts that they say could limit consumer choice and industry competition by discounters and other alternative business models.

Panelists at the Tuesday workshop included economists and real estate professionals from a range of real estate companies.

Alex Perriello, president and CEO for Cendant Real Estate Franchise Group, the largest real estate franchiser in the nation, said Cendant welcomes competition in the real estate marketplace. “We encourage free and open competition in the marketplace. Give the consumer as much choice as possible and let the chips fall where they may. There is really no need for the federal government to fix what really isn’t broken.”

Perriello said that Cendant has been working to encourage state real estate regulators to repeal state rules that block the ability of real estate brokers to offer inducements, such as rebates, to consumers. Regulators, he said, “should remove those antiquated laws and stop denying businesses the opportunity to offer rebates or incentives.”

Philip Henderson, vice president at LendingTree, a company known for offering discounts to consumers who work with its affiliated network of real estate agents, also said his company is opposed to anti-rebate stances that several states have taken. “Our message is that these barriers deserve significant scrutiny,” he said.

Meanwhile, Geoff Lewis, senior vice president and chief legal officer for RE/MAX International, one of the largest national real estate brokerage companies in the country, told workshop attendees that one need only to “stick your head out the window” to view how much competition there is in the industry, adding that consumers are “bombarded with choices.”

But Steve DelBianco, executive director for NetChoice, a coalition of e-commerce businesses and consumers and former board member for tech discounter eRealty.com, said pioneering companies are typically “the ones with all the arrows sticking in them,” and he pointed to RE/MAX’s history of litigation in the face of adversity from industry competitors. He questioned whether measures that are promoted by Realtor groups to serve as “consumer protection” are, in actuality, “competition prevention” measures.

DelBianco said the industry appears to be trying to “preserve the profitability of the traditional business model. Will consumers really buy what the Realtors are saying?”

Cathy Whatley, a former president of the National Association of Realtors, said there are holes in DelBianco’s argument. The Realtors group, she said, is all about cooperation and serving consumers. “I think that a number of the comments stated by (DelBianco) were unfounded in my mind. I think he is totally offbase in a number of his comments,” Whatley said.

Tom Early, a panelist who represented the National Association of Exclusive Buyer Agents, said he has seen a pattern in the behavior of the national and state Realtor trade groups. “I have to take exception for those who say (the national association) is open to choice and is open to competition. We were introducing a new (model) into the industry. We were not welcomed. I can’t put it any better way — we were beat up. It took a fight to survive in my industry. I am a Realtor. I deserve the same respect for my business model.”

Economists who spoke at the workshop used statistics to make a case for and against the health of price competition in the real estate industry. Chang-Tai Hsieh, Associate Professor of Economics at the University of California, Berkeley, said there is evidence that costs to consumers for real estate services are increasing, while real estate professionals do not appear to benefit from these commission increases because of the number of real estate practitioners.

Lawrence Yun, managing director of quantitative research for the National Association of Realtors, said, “price is perfectly negotiable” for real estate services. “I think there is more room for negotiation today than before.” Even so, he said that officials at the association have asked him not to study and report specific statistics on real estate commissions because “we’ll get into trouble with antitrust.”

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What’s your opinion? Send your Letter to the Editor to glenn@inman.com; (510) 658-9252, ext. 137.

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