Almost two years after holding a workshop on competition in the real estate industry, the Federal Trade Commission and Department of Justice have produced their report on the subject. The feds come down on the side of consumer choice, transparency and efficiency and in opposition to the collusion, conflicts of interest and ethical lapses that seem to emerge whenever large brokerage firms get together.

The FTC-DOJ report shows that while real estate prices have skyrocketed in recent years, commission rates have fallen very little. Why? The industry discourages price competition through anti-rebate laws, minimum-service requirements, restrictions on usage of the MLS, and even boycotts of alternative-model brokerages (all thoroughly documented in the report).

Since there are no barriers to entry for agents, artificially high commissions attract vast numbers of agents into the industry. But the number of transactions hasn’t gone up accordingly, so the agents have to spend most of their time chasing customers – a socially wasteful activity – and many of them can’t make a living. “It’s a tragic story where nobody wins, especially the consumer,�? one of the workshop participants commented. (Not quite true. Large brokerage firms benefit from this situation. Brokers and their agents don’t always have the same interests.)

A few more choice quotes from the report:

- “Some have suggested… that the industry has not yet experienced the sort of sweeping benefits to consumers in the form of cost savings and service enhancements that have been seen in other industries from the use of the Internet and other technology.�?

(Well, that’s what happens when an industry takes the view that consumers need to be protected from themselves – and has the political power to back it up.)

- But the Internet has produced some benefits: “Home buyers’ increasing use of the Internet may limit brokers’ ability to steer buyers away from discounters’ listings without their knowledge… If a home buyer finds a discounter’s listing on his or her own that appears to be a good match, a broker likely will either have to show the home buyer the discounter’s listing or explain why he or she will not.�?

(In other words, buyer beware – not of the seller, but the broker!)

- “It is possible for one dominant group of brokers to establish MLS rules that favor them and disfavor other brokers who compete in a manner that they dislike. Such rules are illegal if they unreasonably restrict competition, and the Agencies recently have challenged, as antitrust violations, MLS rules that unreasonably restrict competition by brokers who use alternative business models.�?

(Kudos to the feds for opposing the misuse of trade associations for anticompetitive purposes.)

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