When it comes to real estate competition and antitrust enforcement, there’s a new sheriff in town.
Last week, in a bipartisan 69-28 vote, the US Senate approved Lina khan, associate professor of law at Columbia Law School and champion of antitrust reform, as commissioner to the Federal Trade Commission. President Joe Biden then quickly named Khan president of the FTC, the youngest in history at 32.
The FTC and the US Department of Justice (DOJ) are the two federal antitrust enforcement agencies – a hot topic in the real estate industry as a flurry of antitrust lawsuits have been filed in recent years against the National Association of Realtors, Zillow, franchise giants Realogy, Keller Williams, RE / MAX, and Home Services of America, as well as some multiple listing services.
The FTC, which also investigates unfair and deceptive business practices, has the power to make rules about what constitutes fair competition and to prosecute violations of antitrust law. The agency can also refuse mergers between competitors or force companies to change the terms of acquisitions.
Khan’s appointment appears to indicate that the Biden administration is considering taking an aggressive approach to antitrust regulation with respect to companies such as Amazon, Facebook, Google, and Apple, given Khan’s reputation as a fighter of the monopolies.
Khan made a name for herself as a law student at Yale with a 2017 article titled “Amazon’s antitrust paradoxIn which she argued for modernizing the antitrust law, arguing that measuring competition by price increases for consumers, known as the consumer welfare standard, is insufficient to address the potential damage to competition posed by Amazon’s dominance.
“Specifically, current doctrine underestimates predatory pricing risk and how integration between separate lines of business can prove to be anti-competitive,” Khan wrote. “These concerns are exacerbated in the context of online platforms for two reasons. First, the economics of platform markets incentivize a company to continue growing rather than profiting, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational, even if the existing doctrine considers them irrational and therefore implausible.
“Second, because online platforms serve as critical intermediaries, cross-industry integration allows these platforms to control the critical infrastructure on which their competitors depend. This dual role also allows a platform to exploit the information collected on the companies using its services to undermine them as competitors.
In 2020, Khan was counsel for the House Judiciary antitrust subcommittee in its investigation of Amazon, Facebook, Google and Apple and was part of the team that released a 450 page report in October, pushing for stricter enforcement of antitrust laws as well as new regulations.
“[T]These companies exercise their dominance in a way that erodes entrepreneurship, degrades the privacy of Americans online, and undermines the vitality of the free and diverse press, ”the report said. “The result is less innovation, less choice for consumers and a weakened democracy.”
Khan’s take on the real estate industry in particular is unknown, but his story suggests that a more in-depth look at real estate competition is ahead, according to Stephen Brobeck, senior researcher at the Consumer Federation of America, a watchdog group. of consumers.
“Given President Khan’s strong professional commitment to antitrust enforcement, we expect her to support the FTC’s more vigorous efforts to ensure effective price competition between agents and agents. real estate brokers, ”Brobeck told Inman via email.
When asked where these efforts might be focused – on real estate commissions or on corporate consolidations, perhaps – Brobeck replied, “Hard to say.
The FTC declined to comment on what the industry can expect from the FTC under Khan, but noted that “the agency has continued to be active in the real estate law enforcement space” since the FTC and the DOJ organized a joint workshop on real estate brokerage competition in June 2018.
The agency has reported several enforcement actions in recent years, including addition of requirements in 2018 to an order concerning the acquisition of DataQuick by CoreLogic, to block the acquisition of RentPath by CoStar which succeeded in derailing the merger and continuing and regulation with the Louisiana Board of Real Estate Appraisers over allegations that the board set prices for appraisal services in the state.
According to The New York Times, the FTC has more than 1,000 investigators, lawyers and economists tasked with monitoring the U.S. economy amid growing concerns about the power of big tech companies. Earlier this month, Democratic lawmakers in the U.S. House of Representatives introduced five antitrust bills, all of which have Republican co-sponsors, targeting the dominance of tech giants such as Amazon, Google, Facebook and Apple.
The bills, some of which would likely apply to real estate companies like Zillow and CoStar, would ban companies with at least 50 million US users per month and a market cap of $ 600 billion from preferring their own businesses over their markets, prohibit dominant companies from acquiring competitors who would strengthen their monopoly power, would make it illegal for a “dominant online platform” to own another line of business which constitutes a conflict of interest, would require platforms to forms that they make user data portable and interoperable with other services and would increase the fees that large companies pay when seeking approval for a merger, according to Vox.
NAR and CoStar declined to comment for this story. Zillow did not respond to requests for comment.
Send an email to Andrea V. Brambila.