Antitrust Laws and Brokerage Practices

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Questions and Answers

Two competing brokerage firms agree to fix commission rates at a set percentage for all clients. Which law does this action directly violate?

Truth in Lending Act (TILA)
Real Estate Settlement Procedures Act (RESPA)
Fair Housing Act
Sherman Antitrust Act (correct)

What type of behavior is explicitly prohibited by the Sherman Antitrust Act, as demonstrated when competing brokers agree on a fixed commission rate?

Collusion and price fixing (correct)
Steering
Blockbusting
Redlining

If a real estate broker pre-prints a specific commission rate on their listing agreements, what potential legal risk are they taking?

Misleading clients into thinking the rate is non-negotiable (correct)
Infringing on intellectual property laws
Violation of the Federal Communications Act
Breaching local zoning ordinances

A brokerage firm sets a very high commission rate. What legal obligation does this firm have regarding informing their clients?

They are obligated to state that commissions are negotiable. (A) Signup and view all the answers

Which of the following scenarios would be LEAST likely to violate the Sherman Antitrust Act?

One firm independently decides to increase its commission rate. (C) Signup and view all the answers

Two competing brokerage firms agree to charge a uniform 7% commission. What is the primary legal concern regarding this agreement?

Price fixing and reduced competition. (D) Signup and view all the answers

The Sherman Antitrust Act is primarily designed to prevent:

Anti-competitive business practices. (D) Signup and view all the answers

If a brokerage firm has a policy of pre-printing a specific commission rate, what potential action should they also take to avoid legal issues?

Inform clients the rate is negotiable. (B) Signup and view all the answers

In the context of the scenario, what is the primary disadvantage to clients when brokers fix commission rates?

It eliminates the ability to negotiate lower fees. (D) Signup and view all the answers

Which of the following scenarios would LEAST likely be a violation of the Sherman Antitrust Act?

A single brokerage firm deciding to set a very high commission rate, while still informing clients the rates are negotiable. (A) Signup and view all the answers

Two real estate brokerage firms decide to standardize their commission rates. What potential legal consequence is most applicable to these firms?

They are in violation of the Sherman Antitrust Act. (A) Signup and view all the answers

A brokerage firm allows team members flexibility in commission negotiations. Why might this strategy be beneficial for the firm?

It creates the perception of a better outcome for their client. (B) Signup and view all the answers

A real estate broker has set a high commission rate. What legal obligation do they have regarding this rate?

They must ensure clients are aware commissions are always negotiable. (B) Signup and view all the answers

What is the primary purpose of the Sherman Antitrust Act in relation to real estate brokerage firms?

To protect consumers and prevent anti-competitive behavior. (A) Signup and view all the answers

If a brokerage firm pre-prints a commission rate on listing agreements, what potential perception should the firm be aware of?

It may be perceived as a non-negotiable rate. (B) Signup and view all the answers

What is the primary aim of the Sherman Antitrust Act?

To promote competitive pricing in markets (B) Signup and view all the answers

What must brokers do in relation to commission rates according to legal obligations?

Clearly state that commission rates can be negotiated (A) Signup and view all the answers

Which of the following actions would most likely violate the Sherman Antitrust Act?

Two brokers agree to set a uniform commission rate (C) Signup and view all the answers

What risk do brokerage firms face when pre-printing a specific commission rate in their listing agreements?

They might face allegations of price fixing (C) Signup and view all the answers

What behavior is indicated when brokers give employees leeway in negotiations with clients?

Promoting a perception of favorable deals for clients (D) Signup and view all the answers

Flashcards

Sherman Antitrust Act

A law that prevents businesses from illegally working together to set prices or limit competition.

Price Fixing

When two or more businesses secretly agree to set the same prices or limit their services to reduce competition.

Oligopoly

A situation where a small number of businesses control a particular industry, which can lead to higher prices for consumers.