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Penne v. Minneapolis BOR: "Interseller Price Verification" Is Not Price Fixing

In Penne v. Greater Minneapolis Area Board of REALTORS®, the Eighth Circuit addressed boycott law and its applicability to the real estate brokerage industry. The court held that the defendants had not contracted, combined, or conspired to fix and maintain brokerage fees in violation of the Sherman Antitrust Act.

Penne was the president of Penne Realty, a Minneapolis real estate brokerage firm which belonged to the Greater Minneapolis Area Board of REALTORS® (Board) and its MLS. While the "prevailing" rate of sales commissions in the city was six to seven percent, Penne charged discount fees of four to five percent. Nearly twenty other Board members instituted a "punitive" fee-splitting policy with regard to discount brokers' sales from the MLS. If a discounter sold a full-price listing, the full-price broker would split the fee, in the normal 55/45 manner. However, the amount of the fee (pre-split) was the rate which the discount broker would have paid a full-price broker for selling a discount listing.

Additionally, through the MLS, the other brokers were allegedly able to "police" their competitors by identifying price cutters on whom a punitive split would be imposed. They did this by placing a Roman numeral indicating the percentage commission charged by the listing broker (Penne having a IV or V on his houses, and defendants having a VI or VII). Penne felt that this "punitive" approach was anti-competitive and sued the board and offending brokers for conspiracy to stabilize commissions at an artificially high level. He also alleged a boycott due to the defendants' cooperation with him on discriminatory terms. Penne also sued several of the brokers for derogatory comments they made regarding him to his seller/principals.

The Eighth Circuit concluded that the "interseller price verification" among real estate brokers consisting of information that identified specific firms as selling at specific prices was not a per se violation of the Sherman Antitrust Act. It also held that such information exchanges were not necessarily per se legal either, and that their legality depended on their effect upon competition. It further stated that its inquiry was whether, assuming non-predatory motives and business purposes, the effect upon competition in the marketplace is substantially adverse.

On remand, a jury held that the actions of the defendants, in instituting such "punitive splits" and other actions alleged, did not violate the antitrust laws.

Penne v. Greater Minneapolis Area Board of REALTORS®, 604 F.2d 1143 (8th Cir. 1979).