0

I previously asked this question on the legality of anti-poaching agreements. If it's not illegal for two companies to enter into an agreement not to poach each others' talent, why is it legal for a NAR® to state,

REALTORS® shall not solicit a listing which is currently listed exclusively with another broker.

Why is that though? I mean if I solicit a listing from a client who is locked into an exclusive listing with another broker, but the other broker isn't the procuring cause of the sale it sounds to me like the other broker will not be entitled to a commission and I will (subject to my contract). How is a non-compete between two brokers for a client in contract permissible in real estate, but not in other forms of employment?

Here are two questions from my practice ethics quiz (not exam)

When can a REALTOR® “solicit” another broker’s exclusive listing?

  • a. Never.
  • b. At any time – anti-trust laws prohibit restrictions on such activities .
  • c. If the owner initiates the contact and the REALTOR® has not directly or in direct ly initiated the discussion¸ the REALTOR® can discuss the terms of a future li sting .
  • d. If the owner does not initiate the contact but the REALTOR® initiates a d iscussion at a social event¸ the REALTOR® can discuss the terms of a future listing.

They're saying the answer is "C". But how can it be legal to tell me that I compete with another broker for a client through a discussion I initiate with social even

When can a REALTOR® deal with the client of another REALTOR® who has an exclusive agreement with the client?

  • a. Never.
  • b. At any time – there are no restrictions on this activity.
  • c. If the client initiates the dealings.
  • d. If the client returns a call after the REALTOR® has initiated the dealings.

They're saying the answer is "C". But again, if I prospective client calls me after a general mailing (which they permit) it's not clear to my how it's legal to say we can't compete and "deal" in terms of future listing or for business?

Just wanting to get a better idea of how these non-competition agreements work in real estate and what guiding law limits their use, and when they reach over into being anti-competitive.

1
  • There's a somewhat relevant discussion here of an FTC consent decree where an association of music teachers agreed to do away with a similar rule. On the other hand, as noted in Dale's answer, realtors often have explicit exclusivity contracts with their clients, which the music teachers probably don't. Dec 23, 2021 at 20:10

2 Answers 2

3

They are merely telling you what the law is

There is a tort called interference with contractual relations:

The question strikes at the heart of our economic and legal system both of which are based upon principles of freedom of contract and freedom of choice. However, parties that freely enter contracts cannot freely breach such contracts and Courts have shown that they are prepared in some cases to provide relief against unlawful interferences with contractual relations.

If A (the vendor) has contracted with B (the realtor) it is unlawful for a third-party (you) to induce A to breach their contract. If you were to approach A and they then broke their contract with B, B could sue A for breach of contract and you for interference in contractual relations.

Anti-competition law is directed at ensuring there is a free and fair market for goods and services but once two parties have willingly entered a contract, they are no longer participating in the market.

Now, if A approaches you, that's on A and hence why the answer o both questions is c.

10
  • I'm not familiar with how these agreements are structured, but I don't see what the breach here would be. If I list with A, does that bind me to remain listed with A until A closes a sale? I'd expect that I remain free to fire A, and if that's the case, there doesn't seem to be any breach in switching to B.
    – bdb484
    Dec 23, 2021 at 16:38
  • Are you referring to my contract with the ethics committee which bounds my behavior to be non-competive towards potential customers who have entered into a contract with agents bound by the same ethics committee? And if so, wouldn't this be like clear cut illegal if the ethics committe had a slightly less innocent name, like Real Estate Cartel or Real Estate Trust? I thought there was something about contracts which were specifically designed to reduce choice and competition? Dec 23, 2021 at 17:00
  • 1
    Let me ask it another way too, to bring it home -- how come is NOT legal for a company to freely enter into an areement with another company to mutually not hire from each others workforce, but it is legal for two agents to enter into an agreement that restricts or limits their hiring practices to employees of another company? Dec 23, 2021 at 17:04
  • 1
    It looks like it is indeed common (though maybe not universal) for clients to enter a binding agreement to stay listed with A until a sale is made, or for some fixed period of time: nolo.com/legal-encyclopedia/… Dec 23, 2021 at 17:45
  • 1
    @EvanCarroll your second comment is a good question: you should ask it.
    – Dale M
    Dec 23, 2021 at 21:09
3

The answer by @DaleM is not wrong.

But, it is also true that the National Association of Realtors is a voluntary association whose members can enter into voluntary contracts with each other.

A member Realtor also, for example, submits to binding arbitration of commission disputes with another Realtor.

The only conceivable issue would be whether this was an anti-competitive practice barred by anti-trust attacks. But courts have not taken this position, in part, because someone does not have to join and be bound by its rules, and in part, because it isn't inherently monopolizing.

2
  • "But courts have not taken this position, in part, because someone does not have to join and be bound by its rules, and in part, because it isn't inherently monopolizing." but why isn't the same true about employement with companies locked into no-poaching agreements? And why are those viewed as inherently more monopolizing? Dec 24, 2021 at 3:30
  • @EvanCarroll Employment with companies locked into no-poaching agreements is permitted and legal in most jurisdictions.
    – ohwilleke
    Dec 24, 2021 at 19:44

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .