The Sherman Antitrust Act in Real Estate: Price Fixing, Boycotts and Tie-Ins
How the Sherman Antitrust Act applies to real estate: price fixing, group boycotts, market allocation and tie-ins, penalties, real cases and exam questions.
By PSI Exams Prep Editorial Team 6 min read
What is the Sherman Antitrust Act in real estate?
The Sherman Antitrust Act is the 1890 federal law that bans agreements that unreasonably restrain trade and bans monopolization. In real estate, it means competing brokerages and agents must set their commissions and business practices independently. They can never agree with each other on prices, customers, territories or whom to do business with.
Antitrust is a standard topic in the practice of real estate section of the national portion. Questions usually describe a scenario and ask you to name the violation, so you need to recognize four patterns.
Not legal advice
What are the four antitrust violations in real estate?
| Violation | What it looks like | Example |
|---|---|---|
| Price fixing | Competitors agree on commission rates, fees or splits, or agree to keep them at a 'standard' level | Two brokers agree neither will take a listing for less than a set percentage |
| Group boycotting | Competitors agree to refuse to deal with a particular person or company | Several brokerages agree not to show listings from a new discount brokerage |
| Market allocation | Competitors divide the market by geography, type of property, price range or customers | Two firms agree one will work only north of the highway and the other only south |
| Tie-in arrangement | Selling one product or service only on the condition that the buyer also buys another | A developer will sell a lot only if the buyer lists their current home with the developer's brokerage |
A single brokerage setting its own commission policy is legal. The violation is the agreement between competitors. That's why even casual conversations about “what everyone charges” can create risk.
What are the penalties?
According to the U.S. Department of Justice, criminal violations of the Sherman Act can bring:
- fines of up to $100 million for a corporation;
- fines of up to $1 million and up to 10 years in prison for an individual;
- higher fines of up to twice the gain from the illegal conduct or twice the loss to victims, under federal sentencing law.
Separately, people harmed by an antitrust violation can sue for triple their actual damages, plus attorneys' fees, under the Clayton Act. State antitrust laws and real estate license laws can add further penalties, including license discipline.
The real estate commission lawsuits
Antitrust isn't only a textbook topic. In October 2023, a federal jury in Missouri awarded about $1.78 billion in damages, which could be tripled under antitrust law, against the National Association of Realtors (NAR) and several large brokerages. Home sellers had claimed industry rules inflated commissions. In March 2024, NAR agreed to a settlement that included paying $418 million over several years. It also changed key practices: ending offers of buyer-broker compensation on MLSs and requiring MLS participants who work with buyers to sign written buyer agreements. A federal appeals court later upheld the settlement.
For the exam you won't need case names or dollar amounts. You need the principle: commission practices must come from independent decisions and genuine negotiation with each client. For how commissions are earned under different contracts, see types of listing agreements.
How do licensees stay compliant?
- Never discuss your commission rates or policies with competing brokers.
- Tell clients that commissions are negotiable, and avoid language like “the standard rate.”
- Make business decisions, such as who you cooperate with and where you work, independently.
- Don't condition a sale or service on the client buying something else from you.
- If a conversation turns to fixing prices or avoiding a competitor, end it and tell your broker.
Practice questions
Question 1. Over lunch, two competing brokers agree that neither will accept a listing for less than a 6% commission. This is an example of:
- A. Market allocation
- B. Price fixing
- C. A tie-in arrangement
- D. Group boycotting
Show answer
Answer: B. An agreement between competitors on commission rates is price fixing. It's illegal regardless of whether the agreed rate is reasonable.
Question 2. Several brokerages in a town agree not to show any listings held by a new flat-fee brokerage. This is an example of:
- A. Group boycotting
- B. Market allocation
- C. Price fixing
- D. Steering
Show answer
Answer: A. Competitors agreeing together to refuse to deal with another business is a group boycott.
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