Realtor-Opcity Possible Antitrust Violations

Realtor-Opcity Possible Antitrust Violations

A copy of the complaint filed with the US DOJ and the US FTC asking to review practices of Realtor-Opcity.

This is copy of the author’s request that officially asks the United States Federal Trade Commission (US-FTC), the United States Department of Justice (US-DOJ) to investigate Realtor-dot-com Opcity on the grounds of alleged violation of Federal Trade Commission Act of 1914, and alleged violation of Sherman Antitrust Act of 1890, as well as any other possible violations of antitrust and consumer protection laws currently ratified and enforced in connection with possible market allocation, consumer allocation, and price-fixing practices.

Attn: Citizen Complaint Center, Antitrust Division
950 Pennsylvania Ave., NW Room 3322
Washington, DC 20530
Attn: Office of Policy and Coordination, Room CC-5422
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Ave. N.W.
Washington, D.C. 20580

Please see information about a possible antitrust violation as described below.

What are the names of companies, individuals, or organizations that are involved?

Realtor-dot-com Opcity (DBA Opcity, Inc.)
6800 Burleson Road, Bldg. 312, Suite 125
Austin, TX 78744
Phone: (512) 233-6530
Texas TREC License 9005100

How do you believe they have violated the federal antitrust laws?

Realtor-Opcity is a referral fee network designed to collect fees by matching consumers with local real estate agents willing to participate. Opcity operates as a licensed real estate brokerage in Texas under TREC License # 9005100, but it does not produce any services that are typically offered by real estate agents and does not represent consumers when buying or selling real estate in any State. Opcity engages in market allocation scheme because the referring broker effectively agrees not to compete with the referred brokers for any leads that pass through it.

When consumers submit information to Realtor-Opcity, this information is simply sold to real estate agents who are willing to pay for it with 30%-40% share of their commission. Referral fees are inevitably passed down to consumers in the form of higher commissions.

Realtor had acquired Opcity in 2018, making this scheme one of the most scaled and damaging Referral Fee Networks in the United States. In this process Opcity "qualifies" and "dispatches" consumers, where consumers are no longer in the driver's seat, but instead, are traded as a commodity.

Can you give examples of the conduct that you believe violates the antitrust laws? If so, please provide as much detail as possible.

Recently, Opcity has further engaged itself in a price-fixing scheme called “Client Rewards referrals.” In this scheme, consumers receive a cash reward from Opcity when they close on a home with an independent agent participating in the network. Opcity actively promotes this scheme to buyers in select markets when they inquire about a property on the Realtor website or mobile app.

After submitting a property inquiry or choosing to connect with an agent on Realtor, the buyer is contacted by an Opcity representative within seconds to begin the screening process. Opcity then dispatches “fresh lead” and the first agent to claim the referral “wins” and gets live-connected to a ready buyer who is financially motivated to work with them. Once the agent and buyer close on a home, Opcity manages and distributes the reward directly with the buyer. The cash reward is based on the price of the home and is determined by Opcity, ranging between 600 USD for lower price homes to 12,000 USD for homes worth 4 Million USD and up.

The cash reward is managed and distributed by Opcity. The participation in the Client Rewards is subject to no upfront cost to the broker, but the broker pays a referral fee on the closed transaction.

Client Rewards referrals program managed by Opcity is a violation of antitrust laws for several reasons.

First, Opcity is an active licensed real estate broker that willfully chooses to disengage itself from genuine completion with other brokers. Brokers only sign up into Opcity referral network knowing that Opcity brokerage will not directly compete for client representation. This is a form of consumer allocation between actively licensed brokers.

Second, Opcity offers a refund to consumers from a referral fee earned, not from a commission earned. This is a form of collusion and is effectively a kickback on to another kickback, instead of a legal buyer's rebate mechanism.

Third, in 40 States that allow buyer’s rebates, brokers are not allowed to share their commissions with non-licensed persons, unless a non-licensed person is directly involved in a transaction, such as an agent issuing a refund to a client after the transaction. In this price-fixing scheme, Opcity is not involved in a transaction of the actual home purchase and, therefore, it shares proceeds from a separate transaction that does not involve the actual purchase of the property. This act is without any legal merit since Opcity does not produce any tangible service to the purchaser of a home.

Fourth, this scheme is equivalent to a mechanism for price-fixing services of others. By setting Client Rewards amounts for brokers, Opcity mandates the refund an agent must provide to receive a referral, while the true intention of Opcity is to motivate the consumer to use the network, despite the added referral fee.

Fifth, nothing stops Opcity from further manipulation for an optimal referral fee/cash rewards amounts with independent brokers as a way to bait consumers to use their service for no other reason but to earn a referral fee from the home purchase.

What is the product or service affected by this conduct? Where is the product manufactured or sold, or where is the service provided?

Consumer brokering is an act of selling information of potential home buyers and home sellers (paid referrals) between real estate brokers, in exchange for a cut of a broker’s commission. Brokers on each side of the adopted scheme, cause direct damage to the real estate representation market with reverse competition, anticompetitive market allocation, price-fixing, lack of competition, limited choices to consumers, unnecessary high commissions, and improperly negotiated fees. A referring broker in such a scheme effectively agrees not to compete with referred brokers, or to only compete with referred brokers on a limited basis. Opcity, in this case, takes the scheme to the next level by baiting consumers with a cut of a referral fee as a way to persuade them to use an overpriced service, and/or to further price fix services of independent agents to make the scheme viable.

RESPA (12 U.S.C. 2607) Section 8 narrowly allows payments pursuant to cooperative brokerage and referral arrangements between real estate agents and real estate brokers. This limited exemption on kickbacks only applies to fee divisions within real estate brokerage arrangements when all parties are acting in a real estate brokerage capacity. Opcity does not act in a brokerage capacity, in fact, this broker willfully chooses to disengage from offering real estate representation services to consumers.

A RESPA cooperative brokerage exception does not allow for kickbacks between brokers as a means for consumer brokering. Kickbacks in the real estate industry are what RESPA aims to resolve, be that as it may, between real estate brokers and mortgage companies. Real estate transaction is a rare, high value, and high risk-aversion experience – it is easily subjected to kickbacks, especially with the use of the Internet. Consumers are often subjected to high commissions and hidden referral fees without a full understanding that these fees increase their commissions, or result in a lower quality of service.

Realtor is an MLS aggregator and one of the top three most popular web sites for home shoppers in the United States, alongside Zillow and Trulia. This scheme has the potential to irrevocably damage all competitive forces in the industry and to subject the home buying and selling process to a massive price-fixing and consumer allocation scheme by means of nationwide MLS aggregation.

Realtor and Opcity call themselves "a true end-to-end solution," not because it results in savings and a fair approach to residential real estate process, but because such consumer brokering scheme is capable of placing a 30%-40% rake on a massive volume of home transactions in the United States.

Who are the major competitors that sell the product or provide the service?

There are approximately 2,000,000 real estate professionals in the United States that aim to provide a great service for consumers buying or selling approximately 6,000,000 homes each year. Real estate brokers must and, generally, are eager to compete with each for the service to represent consumers. It is not an occupation of a licensed real estate broker to promote other brokers, or to allocate consumers among brokers, or to collude with other brokers on commissions. It is certainly not appropriate for a licensed real estate broker to set service levels, commissions, and rebates for other brokers.

What is your role in the situation in question?

I currently serve as a CEO HomeOpenly. HomeOpenly is an Open Real Estate Marketplace™ designed to provide home buyers, home sellers and real estate agents with a transparent home and representation search experience. The core feature of the platform allows home buyers and sellers to receive live and actionable savings from local competitive real estate agents, including listing rates, home buyer’s refunds, and flat fees. Our service is free and does not tax our users with referral fees. HomeOpenly does not lock anyone into any specific rates or rebates — competitive market forces guides the process. HomeOpenly doesn’t fix prices, instead, we maintain the fair and open competition at the core of our platform. Our neutrality is secured by the fact that HomeOpenly is not a real estate broker, and we never intend to become one. HomeOpenly is always a technology company. With my request to the Department of Justice and the Federal Trade Commission, I am seeking a fair and open competitive environment to develop our service. Successful implementation of an Open Marketplace™ platform requires full enforcement of existing antitrust laws that are enacted to protect US consumers. As long as referring brokers can practice market allocation and price-fix services of independent brokers in exchange for referral fees, an Open Marketplace™ operates at a competitive disadvantage and suffers damages as a result.

Who is harmed by the alleged violations? How are they harmed?

Realtor-Opcity antitrust and consumer protection violations are not harmless. Real estate brokers who attempt to compete for consumers on fair terms are at a massive disadvantage in this environment. As a result of broker-to-broker collusion, consumers end up getting steered toward a limited pool of agents and overpay for commissions. Consumers’ private transaction information is always shared with a referring broker that requires it to be disclosed to calculate the referral fees to be paid at the close of each transaction.

As long as referring broker market and consumer allocation schemes are allowed to operate, brokers looking to represent consumers are naturally encouraged to participate in the scheme. “There are no upfront costs, only pay us once the transaction closes,” is an attractive proposition to a broker who acts on this proposition by simply increasing a quoted commission to any consumer who comes as a referral. Any broker who chooses not to participate in such schemes risks to lose “free business.” Such an environment is highly poisonous to a healthy real estate market.

Consumers, of course, pay for this abuse with higher costs of commissions that eventually make it directly into their mortgages.

If you have a question or comment about an antitrust issue, you may submit it to the Bureau of Competition at the United States Federal Trade Commission and/or to the Antitrust Division of the United States Department of Justice Potential violations of federal consumer protection financial laws, including RESPA, can be reported to the Office of Enforcement of the United States Consumer Financial Protection Bureau.

Related to: antitrust, price fixing, real estate, Realtor, Opcity

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First published: August 11, 2019
Last updated: November 03, 2019