Wednesday, August 29, 2007

Conspiracy Claims Against New York Real Estate Brokers Allowed to Proceed

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Large New York City real estate brokerage firms, acting through their trade association, could have conspired to exclude a complaining firm, which sold listings databases and other information technology (IT) products to real estate brokers, from participation as an approved or preferred vendor in the association's listing service, the federal district court in New York City has ruled. In addition, the trade association could have conspired with one of the complaining firm's competitors to block potential competitors.

Accordingly, the brokerage firms and trade association were denied summary judgment on the IT firm's conspiracy claims under both Section 1 of the Sherman Act and the New York Donnelly Act.

Common Ownership

Several of the brokerage defendants were owned by the same parent company as the complaining firm's competitor, giving them a direct financial stake in eliminating the complaining firm as a competitor. This common ownership provided circumstantial evidence of a motive to reduce the competition faced by the competitor that would have tended to exclude the possibility of independent conduct, the court observed. Thus, the complaining firm could make out a conspiracy claim under rule of reason analysis.

Substantial questions of fact were raised regarding (1) the defendants’ concerted action through the trade association and its agreement to promote the competitor service; (2) the alleged relevant market for real estate listings IT services; and (3) the procompetitive justifications for denying the IT firm an interface with the competitor database service.

Monopoly Claims

The IT firm's monopoly claims were rejected by the court. Monopolization claims against two of the firm's competitors failed because they rested on a discounted theory of shared monopoly. The firm showed no evidence that the competitors sought to form a single entity, that competition between them had diminished, or that they allocated customers.

Monopolization claims against the real estate brokerage firms also failed for lack of standing. The complaining firm was neither a consumer nor a competitor in the relevant market. As a vendor of IT services whose customers were competitors in the relevant market, the complaining firm was too remote a party to have antitrust standing, the court ruled.

The August 6 decision is Klickads, Inc. v. Real Estate Board of New York Inc., U. S, District Court, Southern District of New York, 2007-2 Trade Cases ¶75,832.

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