When it comes to real estate competition and antitrust enforcement, there’s a new sheriff in town.
Last week, on a bipartisan 69-28 vote, the U.S. Senate approved Lina Khan, associate professor of law at Columbia Law School and a champion of antitrust reform, as a commissioner at the Federal Trade Commission. President Joe Biden then promptly named Khan as chair of the FTC, the youngest in history at age 32.
The FTC and the U.S. Department of Justice (DOJ) are the two federal agencies responsible for antitrust enforcement — a hot topic in the real estate industry as a flurry of antitrust lawsuits have been filed in recent years against the National Association of Realtors, Zillow, franchise giants Realogy, Keller Williams, RE/MAX and Home Services of America, and some multiple listing services.
The FTC, which also investigates unfair and deceptive trade practices, has the power to make rules regarding what constitutes fair competition and sue for violations of antitrust law. The agency can also reject mergers between competitors or to force companies to modify the terms of acquisitions.
Khan’s appointment appears to indicate that the Biden administration plans to take an aggressive approach to antitrust regulation when it comes to firms such as Amazon, Facebook, Google and Apple, given Khan’s reputation as a monopoly fighter.
Khan made a name for herself as a law student at Yale with a 2017 paper titled “Amazon’s Antitrust Paradox,” in which she advocated for modernizing antitrust law, arguing that measuring competition based on whether prices for consumers rise, known as the consumer welfare standard, is insufficient to address the potential harms to competition posed by Amazon’s dominance.
“Specifically, current doctrine under appreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive,” Khan wrote. “These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational — even as existing doctrine treats it as irrational and therefore implausible.
“Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.”
In 2020, Khan was counsel for the House Judiciary’s antitrust subcommittee in its investigation into Amazon, Facebook, Google and Apple and was part of the team that published a 450-page report in October pushing for more forceful enforcement of antitrust laws as well as new regulations.
“[T]hese firms wield their dominance in ways that erode entrepreneurship, degrade Americans’ privacy online, and undermine the vibrancy of the free and diverse press,” the report said. “The result is less innovation, fewer choices for consumers, and a weakened democracy.”
Khan’s views on the real estate industry in particular are unknown, but her history suggests greater scrutiny of real estate competition is coming, according to Stephen Brobeck, senior fellow at the Consumer Federation of America, a consumer watchdog group.
“Given Chairperson Khan’s strong professional commitment to antitrust enforcement, we expect that she will support more vigorous FTC efforts to ensure effective price competition among real estate agents and brokers,” Brobeck told Inman via email.
Asked where those efforts might focus — on real estate commissions or on company consolidations, perhaps — Brobeck said, “Hard to tell.”
The FTC declined to comment on what the industry can expect from the FTC under Khan, but noted that “the agency has continued to be active in the real estate enforcement space” since the FTC and DOJ held a joint workshop on real estate brokerage competition in June 2018.
The agency pointed to several enforcement actions in recent years, including adding requirements in 2018 to an order regarding CoreLogic’s acquisition of DataQuick, suing to block CoStar’s acquisition of RentPath which succeeded in derailing the merger and suing and settling with the Louisiana Real Estate Appraisers Board over the allegations that the board fixed prices for appraisal services in the state.
According to The New York Times, the FTC has more than 1,000 investigators, attorneys and economists responsible for policing the U.S. economy amid growing concerns surrounding the power of big tech companies. Earlier this month, Democratic lawmakers in the U.S. House of Representatives introduced five antitrust bills, all of which have Republican co-sponsors, targeting the dominance of tech giants such as Amazon, Google, Facebook and Apple.
The bills, some of which would likely apply to real estate companies such as Zillow and CoStar, would forbid companies that have 50 million or more monthly U.S. users and $600 billion in market capitalization from preferring their own businesses in their marketplaces, prohibit dominant companies from acquiring competitors that would reinforce their monopoly power, make it illegal for a “dominant online platform” to own another line of business that is a conflict of interest, require platforms to make user data portable and interoperable with other services and would raise the fees that large companies pay when requesting approval for a merger, according to Vox.
NAR and CoStar declined to comment for this story. Zillow did not respond to requests for comment.