US unveils antitrust investigation of real estate brokerage industry

Bloomberg

US antitrust officials are investigating potentially anti-competitive practices in the residential real estate brokerage business, with a focus on compensation to brokers and restrictions on their access to listings.
The probe was detailed in a civil investigative demand, which is akin to a subpoena, issued by the Justice Department to CoreLogic Inc., which provides real estate data to government agencies, lenders and other housing-market participants.
The US residential real estate industry has long faced criticism that it stifles competition among brokerages, protecting agent commissions that are higher than those paid by sellers in many other countries. In 2008, the Justice Department reached a settlement with the National Association of Realtors, a trade group, that was designed to lower commissions paid by consumers by opening the industry to internet-based brokers.
News of the investigation was cheered by REX, an online brokerage that charges flat fees that it says are lower than those charged by traditional brokers.
“Any effort to shed light on these practices is good for the American consumer,” REX Chief Executive Office Jack Ryan said in a statement. “Now is the time to drive change in the industry.”
Shares of real estate brokerage companies Realogy Holdings Corp. and Re/Max Holdings Inc. fell after the investigation was reported.
Shares of Realogy, with brands including Century 21, Coldwell Banker and Sotheby’s, closed 5.2 percent lower at $7.43. Re/Max shares fell 4.4 percent to $32.19.
The investigative demand to CoreLogic, dated last month, follows a lawsuit filed against the Realtors association and real estate broker franchisors, including Realogy Holdings Corp., claiming they conspired to prevent home sellers from negotiating commissions they pay to buyers’ agents.
The Realtors association filed a motion to dismiss the lawsuit, arguing that it misunderstands the role of brokers. The trade group didn’t immediately respond to a request for comment on the lawsuit or the Department of Justice investigation.
“We believe this case has no merit and have moved jointly with the other corporate defendants to dismiss the case,” Realogy spokesman Trey Sarten said in an email. “Additionally, we have joined in NAR’s motion
to dismiss.”