Illegal Business Practices in Real Estate: A Case of Commission Setting

The real estate sector is a highly regulated field that seeks to promote fair competition and prevent illegal business practices that could harm consumers. In the following scenario, we will explore a situation where real estate brokers in a California county agree to a standard commission rate for the major players in the county. This type of agreement could violate fair trade and antitrust laws and we will analyze the legal implications of this possible violation.

Anti-Trust and Fair Trade Laws

Brokerages, like other businesses, are subject to anti-trust laws designed to prevent the formation of monopolies and unfair business practices. These laws are fundamentally intended to maintain fair competition in the marketplace and ensure that consumers have choices and are not victims of inflated prices due to secret agreements between competitors.

Illegal Commercial Practices in Brokerages

In brokerages, there are 3 main manifestations of unfair commercial practices:

  1. Collusion: It occurs when competitors in the market join together to manipulate market conditions for their mutual benefit.
  2. Price fixing: It involves agreements between competitors to set specific prices rather than allowing prices to be determined by market forces.
  3. Market Allocation: It occurs when companies agree to divide the market and not compete with each other in specific areas or with specific customers.

The Commission Setting Case

In the scenario presented, brokers in a California county agree to a standard commission rate for major players in that county. This type of agreement is considered price fixing, as it implies that competitors have decided on a specific price for their services, rather than allowing competition and market forces to determine rates. Setting commissions limits competition and can lead to inflated prices for consumers.

Legal Implications

This agreement between brokers to set a standard commission rate could result in serious legal consequences. Anti-trust and fair trade laws expressly prohibit these types of practices. If brokers are found to have been involved in price fixing, they could face legal sanctions, substantial fines and damage to their reputation.


It is essential to understand that anti-trust and fair trade laws apply to all industries, including brokers. Competitors must compete fairly and allow prices and rates to be determined by market conditions and consumer preferences. Commission setting is not only a potential legal violation, it also undermines public confidence in the real estate market. Therefore, it is essential to avoid any practices that limit competition and violate fair trade laws.

Legal and Tax Disclaimer

Please be advised that the content presented in this blog is for informational purposes only and should not be construed as legal or tax advice. The articles and information provided here are written from the perspective of a real estate agent affiliated with Keller Williams, and do not represent legal or tax counsel.

As the author, I am a licensed real estate professional under Keller Williams, holding Brokerage DRE License Number: #02197031. However, it is important to note that my expertise is in the field of real estate, and not in legal or tax matters. The insights and opinions shared on this blog are based on my experiences and knowledge in the real estate industry and should be treated as general guidance rather than definitive legal or tax advice.

For specific legal or tax concerns relating to any real estate transactions or investments, readers are strongly encouraged to consult with a qualified attorney or tax advisor who can provide tailored advice based on your individual circumstances and the latest legal and regulatory requirements.

The information on this blog is provided "as is" without warranty of any kind, and I, along with Keller Williams and its affiliates, disclaim all liability for any loss, damage, or misunderstanding arising from reliance on the information contained herein.

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