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Ethical Dilemmas: Challenging the notion of competition law – is it wrong to argue for a middle ground?

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Once again, anti-competitive accusations are being leveled against our industry, this time in the McFall case. I remember back in the early 1990s when the first discount broker of substance came to our market. We were all upset, I still think rightfully so, and there was much talk about not showing their listings or offering them the same fees they offered us.

This was really our first foray into competition law, and we really weren’t well prepared for it. One large brokerage decided to offer the discounter what they offered us — that didn’t go so well.

 

The question of what is right is complicated

 

This was a prime example of the complexity of the world of laws and ethics. Sometimes laws conflict and sometimes both laws and ethics conflict. The law is very complex and even lawyers don’t know where cases will end up, but when we add in ethics the water becomes very muddy.

Let’s say, for example, you and I are the only two barbers in town. I cut your hair for $20 and you cut mine for $30. Fine, I start charging you $30 even though I charge all my other customers $20. Arguably, I am ethically right but legally wrong. Now, of course, this is oversimplified, but hopefully, my point that the question of what’s right is complicated is clear.

 

MLS systems: Serving two masters, something courts have trouble with

 

Let’s roll this back into real estate. I argue the MLS is the best system ever created, and better by a country mile. It allows buyers access to the greatest number of homes, it allows sellers access to the greatest number of buyers and it allows agents to better serve their clients’ needs. But, just as important, it allows both parties to have their own agent working for their best interests.

The argument against the MLS is that a cooperative system is also collaborative and it breaks competition law. It is, arguably, a system where a consumer (or an agent) is being asked to serve two masters, and courts have a very difficult time with the concept of serving two masters.

Before going any further, let me state that nothing exists in a vacuum, and it’s my firm belief that it’s time the concept of competition is knocked off the pedestal we have placed it. Let me explain.

 

The problem is not lack of competition but a perceived lack of competition

 

I think it’s safe to say that anyone who has spent any time as a realtor knows that our industry is one of the most competitive to be found anywhere on this planet and that no organized price fixing exists. The argument that our system is collaborative is correct in that we collaborate to help clients but the collaboration stops there.

The industry’s barrier to entry is quite low and many people leave in their first two or three years. The problem is not lack of competition. The problem is a perceived lack of competition (or maybe, an ability to claim a lack of competition) and that competition law is on this pedestal, a shining light for all to see, never to be questioned or subjected to scrutiny. It’s the manifestation of pure goodness on earth. And it’s time this assertion is challenged.

 

Let’s get competition law off its pedestal

 

Let me start by saying I do believe competition is a critical component of a market economy and should indeed be given a priority ranking; my issue is that it’s given an almost divine ranking, placed so far above any mitigating factors that it can become destructive. 

Cooperation can be a strong mitigating factor deserving of consideration. As mentioned, our cooperative system benefits everyone — I think that’s unquestionable. I do not believe it’s unethical to argue that if you want the benefits of the system, you must also pay the cost.

 

Arguing for a middle ground

 

The problem arises in how we set that cost. An industry-wide agreed-upon buyer’s agent fee is clearly anti-competitive and very few would argue that. I think just as few people would argue that to ask someone to work for weeks or months for $1 is also wrong, and in many cases where this argument is being made, it’s hypocritical.

Is it wrong to argue for a middle ground? Is it wrong to say “You have to pay something?” Even more defensible, is it wrong that something is anything more than zero?

I think that’s an easy argument to make ethically but clearly, it isn’t so easy legally. Maybe the law is wrong? Maybe it’s time the courts realize that the benefits of a cooperative system in which everyone is better off is worth some cost?

 

Nothing exists in a vacuum and that includes competition. I predict that if we continue down this anti-competitive allegations road, we will soon throw the baby out with the bath water.

 


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