What is a “paper” brokerage, exactly?

“Founded in 2017, Clever Real Estate is a “paper” brokerage, licensed in Missouri, which means that the company does not itself work with buyers and sellers but rather matches them with agents in their referral network across all 50 states who have agreed to both pay Clever a 25 percent referral fee and provide full service for a discount. For homes under $350,000, Clever charges sellers a $3,000 flat fee. For homes above $350,000, Clever charges a 1 percent listing fee rather than the typical 2 to 3 percent fee.”

Let’s try this: “Founded in 1971, Starbucks is a “paper” coffee shop, which means that the company does not itself sell coffee anywhere, but rather matches customers with competing coffee shops in their network across all 50 states who have agreed to both pay Starbucks a 25 percent of their sales by any customer who walks into an empty retail store. For all coffee shops in their network, Starbucks fixes all prices for Caffe Americano at $1, rather than the typical $2.65″

Obviously, the example above is a flat out lie. Starbucks is a business that sells legitimate products, like coffee, and fairly competes against other coffee shops locally. This example shows how ridiculous Andrea V. Brambila’s article sounds when we remove the #Realtor notions form the equation and think of any other business sector, anywhere else.

What is a “paper” brokerage, exactly?

In United States antitrust law, a “hub and spoke conspiracy” is a term of art used to describe horizontal conspiracies that include participants who are in a vertical relationship with one or more of the competitor conspirators.

A hub and spoke conspiracy is correctly characterized as an agreement to eliminate competition among the spokes. It is per se illegal under United States law for horizontal competitors to collude, whether on their own or through an intermediary, to set prices, divide markets, or rig bids. When the objective of the conspiracy is such a per se illegal restraint of trade, all participants in the conspiracy are held liable.

Whatever economic justification particular price-fixing agreements may be thought to have, the law does not permit an inquiry into their reasonableness. They are all banned by the virtue of the Federal Trade Commission Act of 1914 (15 U.S.C. Section 45), Sherman Antitrust Act of 1890 (15 U.S.C. Section 1) and RESPA Section 8 (12 U.S.C. 2607), and related unfair or deceptive advertising, business and professions federal and state regulations.

Both, the handful of “shell” broker entities, such as Clever Real Estate, and hundreds of thousands of colluding independent Realtors violate these laws equally.

HomeOpenly remains deeply committed to the open competition in the real estate sector. Part of that commitment is an ability to dispel misinformation, especially as dull as this Inman News article.

Author: Litesand

Antitrust, real estate, e-commerce, fintech, proptech, bigtech

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