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McLain v. Real Estate Board of New Orleans: U.S. Supreme Court Holds That Alleged Real Estate Commission Price-fixing Could Effect Inter-State Commerce and Could Be Challenged Under the Sherman Antitrust Act

In McLain v. Real Estate Board of New Orleans, the U.S. Supreme Court addressed whether alleged real estate commission price-fixing was activity within the scope of interstate commerce sufficient to be challenged under the Sherman Antitrust Act. The Court held that a conspiracy regarding commissions can have the requisite effect upon interstate commerce to confer subject matter jurisdiction.

The plaintiffs were a class of real estate purchasers and sellers who instituted a private antitrust action against various real estate firms, trade associations, and brokers who had transacted real estate business in the Greater New Orleans area. The plaintiffs alleged that the defendants had engaged in a price-fixing conspiracy, in violation of Section 1 of the Sherman Act, through an agreement to conform to a fixed rate of brokerage commissions on sales of residential property. The complaint also included allegations that defendants' activities were "within the flow of interstate commerce and have an effect upon that commerce," and that defendants assisted their clients in securing financing and title insurance which came from sources outside the state. The district court and court of appeals dismissed the suit on jurisdictional grounds, and eventually the case was appealed to the Supreme Court.

The Supreme Court held that Section 1 of the Sherman Act would only address a defendant's conduct which was either: (1) in the stream of interstate commerce, or (2) had an effect upon interstate commerce. Applying the "effect upon interstate commerce" approach, the Court examined the evidence. First, the Court found that an appreciable amount of commerce was involved in the financing of residential property in Greater New Orleans. Second, the Court found that the presidents of two of the many lending institutions in the area stated that their institutions committed hundreds of millions of dollars to residential financing during the period in question. Third, testimony demonstrated that this appreciable commercial activity occurred in interstate commerce. Fourth, the Court found that funds were raised from out-of-state investors and from interbank loans obtained from interstate financial institutions. Under this evidence, the Court held that the alleged price-fixing conspiracy could have enough effect on interstate commerce to warrant jurisdiction under the Sherman Act.

McLain v. Real Estate Board of New Orleans, 444 U.S. 232, 100 S. Ct. 502 (1980).