Multiple Listing Arrangements in Residential Real Estate Transactions: An Antitrust Analysis

Posted by D. Daniel Sokol

Richard Epstein of the University of Chicago Law School provides his thoughts on Multiple Listing Arrangements in Residential Real Estate Transactions: An Antitrust Analysis.

ABSTRACT: Let me start this short paper on the antitrust law governing multiple listings in the real estate brokerage industry with a conventional account. Thereafter I shall try to explain why this account, while not wholly wrong, is in at least one important respect incomplete.

This two-part journey addresses some of subtleties that are involved in cases of horizontal price-fixing in information markets, where intermediaries play a critical role in bringing together diffuse buyers and sellers on the opposite side of the same market.

The antitrust case law on this issue is something of a jumble. Early cases on information exchange recognized that the sharing of information could both aid and restrict competition simultaneously. They are not all that clear in specifying exactly which forms of information-sharing among firms had which predominant effect.

The reason for this persistent duality is not hard to fathom. Reliable information that is shared among competitors can facilitate the fixing of prices and the division of markets, both of which count as per se offenses under Section 1 of the Sherman Act. Yet by the same token, the sharing of information could allow for more efficient transactions among firms located at the same level inside the marketplace. The question is how to draw the appropriate lines between these two scenarios.

As in all antitrust areas, there is no free lunch, for errors in both directions are costly. Failing to identify and correct cartelization schemes can lead to the usual deadly trio of antitrust law sins: increased prices; reduced quantities; and deadweight social losses, where the last element (a consequence of the first two) is the ultimate measure.

But the converse proposition is also true. The imposition of excessive antitrust liability can result in diminished forms of efficiency by burdening firms that seek to introduce efficient forms of communication and coordination. To give but one simple example, it is surely wrong to allow competitors to fix prices for similar products. But it is important to allow them to combine to set industry standards for their various products, whether they are for insurance policies or Internet protocols. Standardization reduces search costs by making it easier to compare products, such that information about price offers a stronger signal about the relative desirability of the two alternatives.

There are strong arguments why a rule of per se legality should apply to these organizational efforts.