The West Virginia Real Estate Commission, in response to a U.S. Department of Justice antitrust investigation, has issued a new rule that lifts a decades-old statewide ban on the offer of inducements and gifts by real estate licensees.
Last summer, the Justice Department expressed opposition to the state’s law banning inducements, and in September the commission “unanimously determined that it would no longer enforce the ‘anti-inducement rule,'” according to a statement at the commission’s Web site.
In January 2006, the commission approved amended language for the rule, and the commission filed this “emergency rule” with the West Virginia Office of the Secretary of State Jan. 31. After receiving comments on the emergency rule, the real estate commission amended the rule March 15 and the amended rule became effective today, according to a Justice Department announcement.
The Justice Department has sought change to anti-rebate and anti-inducement real estate policies in other states, too. In August 2005, the South Dakota Real Estate Commission responded to a Justice Department investigation by canceling its rulings that prevented commission rebates, incentives and other discounts to buyers and sellers.
And in July 2005 the Justice Department reached settlement with the Kentucky Real Estate Commission over a lawsuit filed against the state for its ban on real estate rebates and inducements to consumers. The Justice Department’s Antitrust Division had filed a lawsuit against the commission in March 2005 over its regulations, and the commission agreed in the settlement not to enforce the regulations and to allow licensees to offer rebates and inducements.
In addition to the crackdown on state regulations that restrict real estate rebates, the Justice Department and Federal Trade Commission have also been active in opposing state laws or regulations that require real estate licensees to perform a set of services for all clients, regardless of whether the clients want or need those services. In several cases, states have approved such Realtor-backed measures, sometimes referred to as minimum-service laws, despite federal objections.
And the Justice Department last year filed a lawsuit against the National Association of Realtors trade group, charging that the group’s policies for the sharing and display of online property listings information are overly restrictive. The trade association has responded that its policies are not anticompetitive and that the policies allow the public to view a large volume of industry-collected information on properties.
Richard Strader, executive director for the West Virginia Real Estate Commission, said that Justice Department officials did not threaten to sue the commission if the anti-inducement rule was not changed, though the commission decided it was best to make the change. “We understood what the ramifications could be if we didn’t follow through and do what needed to be done,” he said.
The commission allowed Justice Department officials to review the proposed rule change, Strader said. Prior to the contact by the Justice Department, Strader said he was not aware of any formal complaint filed about the state’s anti-inducement policy, which he said may have been in effect since the 1950s.
Thomas O. Barnett, assistant attorney general in charge of the Justice Department’s Antitrust Division, said in a statement, “Consumers in West Virginia can expect to benefit from increased competition through broker-offered rebates, incentives and discounts. The Antitrust Division is pleased that the commission, like the real estate commissions in Kentucky and South Dakota, took quick action to address the competition issues raised during the division’s investigation.”
According to the Justice Department announcement, the Antitrust Division “continues to examine competition issues in the real estate brokerage service industry.”
The amended policy in West Virginia provides that “a licensee may offer, directly or indirectly, to clients or consumers rebates of commission fees, inducements, or other discounts,” as long as certain requirements are met.
Licensees must, for example, disclose in writing the terms and fair market value of any rebate, inducement or other discount; and “only under the direct supervision and in the name of the employing broker,” according to the language in the amended policy.
The policy also states that licensees cannot give any undisclosed rebate, inducement or other offer to a client or consumer.
