REALTORS® are tough competitors. Every morning, you prepare yourself to do battle, but instead of putting on armour and raising a sword, you put on your best business attire and raise your smartphone. At the same time, even battle has to follow rules of acceptable conduct. In real estate, we need to treat our competitors fairly and with civility and avoid business conduct that could be considered anti-competitive under the Competition Act.
Let’s take the scenario where a REALTOR® decides not to show properties offering less than a certain level of cooperating commission (say “X” per cent or dollar amount), which the REALTOR® feels is the minimum fair compensation for the time, expenses, and effort spent acting for buyer clients. In general, you can make independent decisions about with whom you want to do business, but you need to (i) respect your agency obligations to your client and (ii) avoid competition concerns.
From the agency side, an agent who refuses to show certain houses that might be of interest to their client raises a red flag. Agents need to act in the best interests of their buyer clients, because failure to do so could be contrary to both agency law and to Article 3 of the REALTOR® Code. The good news is that if you fully disclose to your client your intention not to show certain houses below a certain cooperating commission and your client agrees, then you are going to fulfill your agency obligations. Of course, you need to be prepared to lose a client if they do not agree. The best advice is that a buyer agent should take the time to talk to their client about a buyer broker agreement. Under this agreement, the buyer would agree to guarantee a minimum level of compensation and will pay the buyer agent the difference if the cooperating commission ends up below that amount. It’s simple and effective.
From the competition law side, an independent decision on who you will deal with generally won’t raise issues under the Competition Act unless the entity involved is very large and has a degree of market power in a particular market. However, the answer changes if two competitors start talking to each other about how to treat a third competitor. For example, an agreement between two competitors in a market to refuse to show a third competitor’s homes is a “group boycott,” and would immediately raise potential concerns under the criminal conspiracy provisions of the Competition Act. The Commissioner of Competition has shown a willingness to put conspirators in jail and impose hefty fines, so all business decisions should be made independently.
We can all keep competing vigorously and effectively, but we need to ensure that our business conduct is in compliance with both competition and agency legal requirements at all times. For more information on this topic, watch our video “Doing Business with Competitors.”
The article above is for information purposes and is not legal advice or a substitute for legal counsel.