Antitrust and “Conscious Parallelism”

In light of the current antitrust cases around the “Broker Compensation” rule and Multiple Listing Services, this concept again seems relevant.

If all you see are 50-50 splits in the MLS, or 3% to the Selling Broker (CBB), you may begin to believe there is a “standard” where no such standard exists.

Old timers (Walt Baczkowski) may remember philosophical conversations around this phrase and commission splits as antitrust has been discussed often in the real estate industry going back to 1969.

“Conscious parallelism” is a term often used in the context of antitrust law, specifically in the United States, to describe a situation where competing businesses engage in similar pricing or business practices without explicit collusion or agreement.

It’s a concept that recognizes that parallel conduct or similar business decisions among competitors can occur independently and may not necessarily indicate anticompetitive behavior.

In antitrust cases, if authorities suspect anticompetitive practices such as price-fixing or market allocation, they must demonstrate that there was a concerted effort or agreement among competitors to engage in such behavior.

In cases where businesses engage in similar conduct independently, without any explicit agreement, it’s referred to as conscious parallelism.

However, the line between conscious parallelism and illegal collusion can be blurred, and antitrust enforcement agencies may investigate further to determine whether there is evidence of implicit understandings or “winks and nods” among competitors that may have led to the parallel behavior.

To establish a violation of antitrust laws in cases of conscious parallelism, authorities typically need to demonstrate additional factors. These are additional circumstances or evidence that suggest there was more than just independent parallel conduct.

“Conscious parallelism” can also be relevant in the context of the real estate industry and multiple listing services (MLS). MLS is a system that facilitates the sharing of property listings among real estate professionals, allowing them to access a wide range of property information.

While the primary purpose of MLS is to promote efficiency and transparency in the real estate market, issues related to conscious parallelism can arise, especially concerning pricing and commission practices.

In the real estate industry and MLS, conscious parallelism might manifest in the following ways:

Pricing Practices: Real estate agents and brokers, when listing properties on an MLS, may independently arrive at similar pricing recommendations for properties in the same area. This can lead to a perception of conscious parallelism, where pricing appears to be consistent without explicit collusion.

Commission Rates: Similar to pricing, real estate professionals may independently establish commission rates for their services. While it’s natural for market conditions and competitive pressures to influence commission rates, any discussions or agreements among competitors to standardize commission rates could raise antitrust concerns.

Policy Decisions: MLS organizations may establish policies and rules that affect how real estate professionals interact with the platform. Conscious parallelism might occur if MLS rules or policies unintentionally lead to restrictive practices or hinder competition among real estate professionals.

In the context of real estate and MLS, it’s essential for industry participants to be cautious about pricing, commission practices, and policies that may give the appearance of collusion.

Independent decision-making based on market conditions and fair competition is typically acceptable. However, real estate professionals and MLS organizations should avoid engaging in any explicit anticompetitive agreements or practices that could harm competition or consumers.

To mitigate potential antitrust concerns, real estate professionals and MLS organizations should stay informed about antitrust laws, seek legal counsel when necessary, and ensure that their business practices and policies align with the principles of fair competition and transparency.

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2 Responses

  1. Saul, I enjoyed seeing the photo of you and Walt during your global visit to the Yardi offices in Cluj, Romania (Transylvania). Not sure Walt would like your classification of him as an “old timer”, being that he is much younger than you 🙂

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