The wheels of justice move slowly, but after years of legal wrangling and a seven-week court case, an Akron, Ohio U.S. District Court jury decided that two brokers, Smythe Cramer and Realty One did conspire with "adverse commissions" to restrain the trade of a third broker, RE/MAX.

The two largest real estate brokers in the Akron area, Smythe Cramer and Realty One have a 60 percent market share, which the jury agreed that they used to shut RE/MAX Inc., a 100 percent commission company, out of profitability by reducing their co-brokerage fees below that of the going rate. RE/MAX had brought the civil case to trial by accusing the local brokers of forming a conspiracy to hurt newcomer Re/Max's business through the imposition of adverse commissions, a violation of antitrust laws.

The commission structure is one of the most fiercely held traditions of the real estate industry. Because the listing agent and broker incurs the monetary risks in advertising and promoting a seller's listing, the listing broker will contract with the seller to be paid by commission. In order to attract buyers to the property, the listing broker advertises a co-broker fee when the listing is entered into the Multiple Listing Service system. Custom varies from parts of the country to the next, but the typical offer is half of the commission to be paid by the seller. Although fees are negotiable between the seller and broker, as well as between the buyer's representative and his/her broker, typically these fees range about six percent.

In some parts of the country, brokers with size and market share will advertise zero, one dollar, one percent of the transaction to be paid to the buyer's representative, encouraging in-house sales for which the broker can collect from both sides of the transaction. This can be a very real disservice to the seller, who is usually unaware that the rest of the agents outside the broker's firm have been discouraged from showing the home. In some cases, brokers who compete in this way will offer a fair co-broke fee in the published MLS listing to other agents outside his or her own company, but will choose to "punish" certain companies or agents with "adverse commissions," commissions which are well under the going rate. Adverse commissions is a phrase that means that a company, or a group such as buyer's agents, will be paid less, or not paid at all, than others performing the same job.

New business models tend to be the targets of adverse commissions and other harassments by some traditional brokers. Re/Max and Realty Executives, for example, are called 100 percent companies - their agents keep 100 percent of their earned commissions without paying a percentage to their brokers (they pay an amortized office/administration fee based on productivity instead). They claim to have been targets of discrimination for decades because of other brokers' fears that the 100 percent agent is better positioned to negotiate fees because there is no split with the office. Buyer's agents regularly report punitive actions by traditional brokers who are interested in limiting their growth by refusing to pay them through the seller/broker agreement. Recently, an Internet buyer's company in Austin was sued by its own MLS for showing listings to its intranet buyers. The case is going to court shortly.

Re/Max attorneys alleged the conspiracy began at a 1987 meeting between top officials of Smythe Cramer and Realty One at a Cleveland social function, reported the Akron Beacon Journal. While other companies enjoyed a fair split with the two Akron brokers, RE/MAX alleged that it was unfairly singled out by Smythe Cramer and Realty One and offered substantially less in co-brokerage fees than others, in many cases by half or 25 percent.

The two brokers countered that Re/Max's way of rewarding brokers through the 100 percent commission structure was a threat to their businesses. The companies were afraid that the company would lure its best people away whom they had cultivated with investments in training and personal promotion. They admitted that the special treatment they imposed on Re/Max was a way to prevent Re/Max from "stealing" agents by limiting the company's potential commissions.

Re/Max spokespersons insist that the 100 percent commission model is really nothing new. Top agents have been rewarded with higher commission splits since before the company began - that's where they got the business plan. Ironically, both Smythe Cramer and Realty One have top producing agents which they also reward with 100 percent commissions. In traditional brokerage, the practice is usually not publicized to agents. Commission splits are worked out privately between the agent and broker on an individual basis. Some agents are unaware that they can ask for a more favorable commission split from the broker.

Since 1987, eight local franchises as well as the regional Re/Max franchiser have gone out of business, according to court records, with only a few local Re/Max agents remaining.

The outcome of the court case and the subsequent questions that the jury have to decide could impact a number of issues that have been building to a head recently - primarily the listing broker's domination of the industry. Is it time to change the commission structure? Should listing agents be in control of what the selling agent makes? How well are sellers served by listing brokers who claim to do everything in their power to get their home sold at the highest amount possible, yet whose secondary agendas are to limit competitors from selling the listing? If the broker owns the listing, what is the point of the MLS? Isn't the cooperative value of the MLS worthless if only the listing broker can market or show the listing? Should buyers brokers have the right to show MLS listings on their own Web sites on the Internet?

Listing agent-controlled commissions are being protested by buyer's agents as a antiquated control device - a holdover from the sub-agency system. Being in control of the commissions for both sides also adds value to the listing as a commodity. The listing becomes broker-owned property which can be leveraged for money, stock options, in some cases, and certainly for market share at the local level.

Many buyer's brokers, relocation agents, and other competitors to the traditional broker are learning to draw up contracts between the buyer and themselves that not only bypass the MLS published fees, but satisfy the N.A.R. Code of Ethics regulation over non-interference with a pre-existing contract and fee agreement between another agent and his or her principal. But just as many agents don't know that they can negotiate their own fees, buyers' agents will have to learn for themselves that they can control of their own commissions.

RE/MAX Inc. already knows that listing agent-controlled commissions are antiquated. They tried to work within the system and lost their regional franchiser for their trouble. Now they've been vindicated in court, and the gloves are off.

You can bet that the world's largest franchiser won't ever let another franchisee go out of business again, no matter what it takes. It well may be the 100 percent franchisers who lead the way in cooperative commission reform as well as the other issues.