For decades, when it came to antitrust, REALTORS were in my opinion, overly cautious. I likened Industry behavior around antitrust, over my 45 plus years as a broker and educator, as “wearing a raincoat and carrying an umbrella on a cloudy day.”
Not so these days it seems, as we see behavior and conversation that can only be described as attempts to “work around” the new requirements.
Many brokers and agents scratch their heads as to how such a flawed decision could be made by the Sitzer Jury (in such a short period of time), and some NAR members are very vocal about how NAR “was not prepared to present its case,” and how it “threw members under the bus” in the Proposed Settlement with the “Practice Changes,” paragraph H. 58, i – xiii.
It was the Sitzer Case in Missouri that resulted in the Proposed NAR Settlement the Industry and Consumers are now struggling to adopt.
The fact is that NAR was prepared, but the preparation and the presentation of NAR’s side of the story did not matter from the start, as the Sitzer Case was judged on the Per Se approach to antitrust.
Antitrust law, aims to promote fair competition and prevent monopolistic practices that can harm consumers and hinder market efficiency. Two main approaches to antitrust law are the “Per Se” approach and the “Rule of Reason” approach.
Per Se Approach:
Under the Per Se approach, certain practices are deemed inherently anticompetitive and are therefore illegal without the need for further analysis. These practices are considered so harmful to competition that they are automatically condemned by the law.
Per Se violations typically include practices such as price fixing, bid rigging, market allocation agreements, and certain forms of tying arrangements.
Once it’s determined that a Per Se violation has occurred, there’s usually no need to demonstrate actual harm to competition or consumer welfare. The focus is primarily on the nature of the conduct itself.
Per Se violations are subject to severe penalties, including fines and criminal prosecution.
Rule of Reason Approach:
Under the Rule of Reason approach, the legality of a particular practice depends on its overall effect on competition and consumer welfare. This approach involves a more thorough analysis of the specific circumstances surrounding the conduct in question.
Practices subject to the Rule of Reason analysis are evaluated based on factors such as market power, potential pro-competitive justifications, and the likely impact on consumers.
The Rule of Reason requires courts to balance the potential anticompetitive effects of the conduct against any pro-competitive benefits it may have. If the benefits outweigh the harms, the practice may be deemed lawful.
Unlike Per Se violations, violations under the Rule of Reason require a demonstration of actual harm to competition or consumer welfare.
Comparison:
Standard of Proof:
Per Se: No need to prove actual harm to competition; the focus is on the nature of the conduct itself.
Rule of Reason: Requires a demonstration of actual harm to competition or consumer welfare.
Applicability:
Per Se: Applied to practices deemed inherently anticompetitive.
Rule of Reason: Applied to practices where the competitive effects are uncertain or may have potential justifications.
Analysis Complexity:
Per Se: Relatively straightforward analysis based on the nature of the conduct.
Rule of Reason: Requires a more complex analysis of market dynamics, potential justifications, and overall effects on competition.
Penalties:
Per Se: Violations can lead to severe penalties, including fines and criminal prosecution.
Rule of Reason: Penalties may vary depending on the severity of the harm caused by the conduct.
In summary, when a case is tried Per Se, the Defendant is already deemed guilty and all that is left for the Jury to decide are the damages ($1.83 billion, tripled to $5 billion).
The Per Se approach provides a more rigid framework for identifying and condemning certain anticompetitive practices, while the Rule of Reason approach offers a more flexible and nuanced analysis that considers the broader context and effects on competition and consumer welfare.
4 Responses
The “Per Se” approach to antitrust law first emerged in the early 20th century. The most significant milestone in its development was the 1898 Supreme Court case United States v. Trans-Missouri Freight Association. However, it was the landmark 1911 Supreme Court case Standard Oil Co. of New Jersey v. United States that more clearly articulated the Per Se approach, though it wasn’t referred to as “Per Se” at that time.
The Per Se rule became firmly established in U.S. antitrust law with the 1940 Supreme Court case United States v. Socony-Vacuum Oil Co., where the court ruled that certain types of agreements, such as price-fixing, were inherently illegal, regardless of their actual effect on competition. This case solidified the Per Se approach as a distinct method for evaluating certain anticompetitive practices under antitrust law.
Per Se violations typically include practices such as price fixing, bid rigging, market allocation agreements, and certain forms of tying arrangements.
FTC and Austin…
FTC Charges Austin Board of Realtors with Illegally Restraining Competition
https://www.ftc.gov/news-events/press-releases/2006/07/ftc-charges-austin-board-realtors-illegally-restraining
Great link to the FTC Austin matter. Thanks Saul