The judicial handwriting is on the wall for listing brokers who attempt to unfairly limit competition from real estate companies and agents with differing business models by discriminating on commission splits.

On February 2, 2000, the Iowa District Court issued a temporary injunction ordering Iowa Realty Company and First Realty of Des Moines to stop imposing adverse splits against three local residential real estate brokerage companies, RE/MAX 100, Next Generation Realty, and Homebuyer's Consultants.

According to a RE/MAX spokesperson, the court found that the 0% split offered by the defendants in that case was tantamount to a refusal to deal and amounted to an exploitation of their monopoly power. The court rejected the defendants' argument that the adverse splits promoted efficiency. Instead, the court found that the adverse splits were an attempt to prevent alternative forms of realty competition and resulted in a "closing off" of certain consumers from a segment of the market.

The Iowa decision is the second major court decision in the past year addressing the legality of so-called adverse commission splits. In April 1999, the United States Court of Appeals for the Sixth Circuit ordered a trial to proceed in which antitrust claims asserted by RE/MAX International, Inc. and several current and former RE/MAX franchisees against Realty One and Smythe Cramer, two northeast Ohio realty companies, for their imposition of adverse commission splits in the Cleveland metropolitan area. The Ohio adverse split litigation is scheduled to go to trial in April 2000.

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Published: February 10, 2000

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