Tomo (hellotomo.com) Price Fixing and Antitrust

Tomo Brokerage Antitrust

A copy of the request filed with the DOJ, CFPB, and the FTC asking to review practices of Tomo Brokerage on the subject of consumer allocation practices, kickbacks, and price fixing.

A copy of the author’s official request that asks the United States Federal Trade Commission, the United States Department of Justice, and the United States Consumer Financial Protection Bureau to investigate Tomo Brokerage, Inc. (dba Tomo Real Estate, hellotomo, hellotomo.com) and Tomo Brokerage Partner Agents on the grounds of an alleged violation of the Federal Trade Commission Act of 1914 (15 U.S.C. Section 45) an alleged violation of the Sherman Antitrust Act of 1890 (15 U.S.C. Section 1) an alleged violation of RESPA Section 8 (12 U.S.C. 2607) as well as any other possible violations of antitrust and consumer protection laws currently ratified and enforced in connection with alleged broker-to-broker market allocation, consumer allocation, false advertising, unlawful kickbacks, wire fraud, and price-fixing practices.

Attn: Citizen Complaint Center, Antitrust Division
Department of Justice
950 Pennsylvania Ave., NW Room 3322
Washington, DC 20530
Attn: Office of Policy and Coordination
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Ave. NW Room CC-5422
Washington, DC 20580
Attn: CFPB Regulatory Implementation
Consumer Financial Protection Bureau
1700 G St., NW
Washington, DC 20552

Please find the information below with regards to possible antitrust violations.

What companies or organizations are engaging in conduct you believe violates the antitrust laws?

Tomo Brokerage, Inc.
Texas TREC License #9010749
Tomo Mortgage, LLC
NMLS #2059741
801 Barton Springs Rd, 9th Floor
Austin, TX 78704
(833) 505-1705

Further, a partner network of an unknown number of independent real estate agents who choose to execute blanket broker-to-broker referral agreements in an alleged price fixing and kickback schemes with Tomo Brokerage and Tomo Mortgage.

Acting as the "spokes" within the "hub-and-spoke" broker-to-broker collusion scheme, Tomo Brokerage Partner Agents are independent Realtors firmly affiliated with various brokerages such as Berkshire Hathaway HomeServices, eXp Realty, Windermere Real Estate, Keller Williams Realty, Inc., RE/MAX, Coldwell Banker, NextHome, Inc., HomeSmart, Compass, John L. Scott Real Estate, CENTURY 21, Realty ONE Group, Vylla, ERA Real Estate, Weichert Realtors, Better Homes and Gardens Real Estate, Fathom Realty, Intero Real Estate Services, John R. Wood Properties, Worth Clark Realty, Sotheby's International Realty, etc.

Why do you believe this conduct may have harmed competition in violation of the antitrust laws?

Tomo operates under TX real estate license #9010749. Tomo Mortgage further operates under NMLS #205974. Tomo Brokerage acts as a broker collusion scheme with other independent brokerages.

In exchange for matching consumers with a Partner Agent, Tomo is compensated by the Partner Agent with a blanket percentage of their commission, agreed in advance. Further, Tomo Perks scheme is a price-fixing mechanism that Tomo sham brokerage uses to lure consumers with a promise of perceived savings. However, in actuality, this price-fixing scheme costs thousands in hidden costs and inflated commissions compared to those available on the open market.

Tomo Perks Terms and Conditions

Subject to the following terms and conditions, customers who buy a home with Tomo Mortgage and a Tomo Brokerage Partner Agent qualify for Tomo Perks, which lowers their mortgage interest rate by 0.125%:

Tomo Brokerage Partner Agent. The customer must be party to a fully executed home purchase contract that identifies a Tomo Brokerage Partner Agent as their real estate agent, and Tomo Brokerage must have a record of referring the customer to the Partner Agent.

Tomo. The customer must purchase the home referenced above using a mortgage loan from Tomo with a loan amount of at least $150,000.

Rate Lock. The Tomo Perks interest rate reduction will be applied when the customer locks in their interest rate.

Modification. Tomo may modify the terms of Tomo Perks, but when it does so they will be modified only for customers who entered into purchase contracts after the date the program terms were modified.

For consumers, Tomo Brokerage promises real estate assistance, supposedly, offers a match with highly-rated agents while offering “savings in your pocket when you work with a Tomo Brokerage Partner Agent, we shave 0.125% off your already competitive rate. It adds up. On a $300K loan, you'd save about $7,000 over the life of the loan.”

For real estate professionals, Tomo Brokerage is a “paper” real estate brokerage that does not engage in actual real estate broker services. Tomo systematically applies pay-to-play bias towards all matching results, meaning, only real estate agents that have agreed to pay a referral fee are matched with consumers.

In reality, Tomo Brokerage is a broker-to-broker collusion scheme that utilizes dismal price-fixed incentives to lure consumers into the scheme. A referral agreement between Tomo Brokerage and a Partner Agent for a random transaction that may or may not happen sometime in the future is executed in advance.

Tomo Brokerage establishes a set of pre-established kickback agreements with competing brokerages for the sole purpose to earn massive hidden referral fees from consumers’ real estate transactions without performing any legitimate work of a real estate broker. Consumers are offered a small portion of these kickbacks as a price-fixed incentive.

Consumer Allocation

Tomo Brokerage engages in consumer allocation, price-fixing, and market allocation schemes with Partner Agents’ brokerages because it is a broker itself. Instead of representing consumers to help buy and sell homes, the company actively disengages from its licensed activities so that every Partner Agent knows that Tomo brokerage will not compete with them for the referred consumer.

RESPA (12 U.S.C. 2607) Section 8 narrowly allows payments under 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.

Tomo Brokerage does not act in a real estate brokerage capacity, instead, their real estate license is used to collect a blanket referral fee from the largest number of brokers possible. Sherman Antitrust Act (15 U.S.C. Chapter 1), effectively, requires all active real estate brokers to proactively compete for consumers without entering into agreements with one another that restrain free trade. An agreement or an understanding between brokers not to compete for a mutual profit is a "per se" violation of antitrust regulations in the United States.

It is a per se violation of the Sherman Act for real estate brokers to agree on a “standard” referral fee that will be paid for producing a client. Real estate professionals are not allowed to enter into “standard” referral agreements because such agreements always restrict free trade.

To comply in good faith with RESPA (12 U.S.C. 2607) Section 8 exception for cooperative brokerage and referral arrangements, real estate agents must render referral agreements in a particular instance for a particular transaction.

Tomo Brokerage owes absolutely no duty of care to consumers and takes no responsibility for the transaction, despite receiving a direct financial benefit from the home sale or purchase completed by a referred brokerage.

The actions of Tomo directly increase the costs of owning homes in the United States due to added referral fees, consumer allocation practices, and reverse completion between brokers. Partner Agents in the scheme have no incentive to compete for consumers with lower fees, instead, they have an incentive to compete for Tomo’s attention. In this scheme, both colluding parties benefit from offering consumers higher commissions. Tomo promotes Partner Agents as a way to limit competition with those agents outside of the network, thus limiting free-market competitive forces and steering consumers in self-interest.

Price Fixing

The perceived “savings” from “shaving off” 0.125% from a mortgage interest rate are systematically uncompetitive when compared to legitimate commission refund offers made by legitimate brokers on the open market.

For example, some highly competitive agents offer consumers flat fees and as much as 50% in buyer commission rebates. The numerical dollar difference between open market rebates in a hypothetical home transaction valued at $1M equals to about $15,000 in lost savings to consumers compared to the Tomo scheme loaded with kickbacks. In effect, Tomo pockets this difference as a hidden fee for orchestrating the price-fixing scheme, and a homebuyer merely receives dismal savings as a result.

Obviously, subjected to hidden referral fees offered via the Tomo paper brokerage scheme, consumers lose thousands from improper steering and unlawful price-fixing practices between real estate brokers.

Genuine quality and honest real estate professionals establish pricing for their services independently, and without any kickbacks. The truth is, every single agent is different, and every single agent has an individual commission structure. If an agent is unwilling to negotiate competitive buyer rebate terms in compliance with the law, there is no reason for homebuyers to assume that they will be willing to negotiate competitively when it comes to their home purchase.

More importantly, in the United States price-fixing is an illegal uncompetitive practice, a felony, outlawed by the virtue of Section 1 of the Sherman Antitrust Act.

Tomo rakes in hidden junk fees while consumers are fighting their way through a housing affordability crisis.

As long as referring schemes, such as Tomo Brokerage, are allowed to operate, uncompetitive 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 losing “free business.” Such an environment is highly poisonous to a healthy real estate representation market.

Tomo's referral-only collusion scheme secretly harms real estate consumers and diminishes the efforts of competitive independent agents to provide a tangible service at an independently set competitive price.

As a matter of fair real estate transactions across the United States, there is no excuse to maintain these blanket broker-to-broker collusion schemes established by a handful of “paper” brokers, such as Tomo Brokerage.

The government must treat Tomo as a broker because it is paid as a broker and is licensed as a broker. Licensed brokers are not allowed to promote the services of competitors for profit. A broker must promote their individual services directly to consumers and exist to actually help consumers buy, rent, and sell real estate.

Kickbacks and Unearned Fees

Tomo Brokerage further facilitates unearned kickbacks between Partner Agents and Tomo Mortgage.

Tomo Brokerage may seem like a clever by-pass of RESPA’s prohibition against kickbacks between these entities and independent Partner Agents, but this loophole is built entirely on blanket referral agreements between licensed brokers prohibited by the Sherman Act.

Tomo Brokerage must offer consumers a tangible service as a licensed broker, but instead, it acts as a “blanket” referral fee intermediary between a large number of random real estate agents and an affiliate mortgage brokerage business.

Consumer Steering

All real estate brokers must compete with one another; there are no exceptions. In the event brokers organize their operations into referral networks, this basic rule of free competition fails – a broker who organizes the scheme, in one way or another, refuses to compete with participants of the scheme. The federal government must actively enforce Section 1 of the Sherman Act to restore open competition between independent professionals in the housing sector.

Consumers cannot be subjected to pay-to-play steering fueled with massive VC capital. A recent TechCrunch article dated June 30, 2021, states that: “Tomo … has just raised $70 million in seed funding. That’s a massive seed round by any standards (the third-largest in the U.S., according to Crunchbase), but especially for the real estate tech space (perhaps the largest ever).” Massive VC funds, such as Ribbit Capital, DST Global, NFX, Zigg Capital, are dumping millions of hard cash dollars into this scheme because scaled broker commission kickbacks are incredibly profitable. These investments are paid back easily with high returns at the ultimate expense of consumers. All hidden kickbacks taken by Tomo Brokerage reside in consumers’ mortgages indefinitely, collecting interest, and making home purchases less affordable.

What is your role in the situation? For instance, are you a user, customer, competitor or supplier?

I currently serve as a CEO HomeOpenly. HomeOpenly is an Open Real Estate Marketplace™ designed and built to improve the homeownership experience in the United States.

HomeOpenly is a technology company that designs, builds, and maintains a series of online marketplace solutions with a focus on a home search, automated valuation modeling (AVM), home buyer's and seller's representation services, mortgage origination, refinance, home insurance, renovation, design, staging, home inspections, home security, moving, home maintenance, title, escrow, cash offer stand-in programs, home warranty, and other real estate products and services.

HomeOpenly operates subject to a 0% rake as our primary competitive advantage to establish a competitive fee schedule for service providers with the use of network effects. HomeOpenly is not a broker and all service providers on our digital marketplace compete for consumers individually. Our efforts are actively hampered by anticompetitive practices of Tomo because it systematically allocates consumers to competing brokers for profit.

Successful implementation of an Open Marketplace™ platform in the real estate industry requires full enforcement of existing antitrust laws that are enacted to protect US consumers.

As long as brokers can trade consumers as “leads” between independent service providers in exchange for blanket referral fees, Open Marketplace™ continues to operate at a competitive disadvantage.

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.

If you have a question or comment about federal consumer protection financial laws, including RESPA, you may submit it to the Office of Enforcement of the United States Consumer Financial Protection Bureau

Related to: antitrust, real estate, Tomo Brokerage, consumer brokering, consumer allocation, price fixing, referral fees, RESPA, Sherman Act, FTC Act

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Last updated: July 03, 2021
First published: July 03, 2021