Opinion ID: 763285
Heading Depth: 3
Heading Rank: 5

Heading: 12.94 Realty One Re/Max Partners

Text: 8.16.94 Smythe Cramer Re/Max Experts 38 12.19.94 Smythe Cramer Re/Max Premier Service 39 It appears that the remaining plaintiffs received notice of the adverse-splits policy before 1990, although the record is unclear as to the exact dates. 40 Similarly, according to the plaintiffs, Realty One and Smythe Cramer have market power in the cities and towns where one defendant has at least a 40% market share, and no other competitor is close to having 40%. Thus, Realty One purportedly has monopoly power in 26 cities and towns; Smythe Cramer, in 19. The plaintiffs claim that each city and town in northeast Ohio is its own market, because, unlike such products as automobiles or video equipment that can be sold anywhere, the expertise possessed by real-estate agents is specific to small geographic areas. Each agent trades in his knowledge of the physical characteristics of the stock of lo cally listed housing, of the socio-economic characteristics of the population of local homeowners and of the nature of local community amenities (e.g., schools, churches, police security, etc.) together with other relevant details. The defendants advertise and seek market share by reference to particular cities and towns, and the listing services in northeast Ohio list homes for sale by political subdivision. According to plaintiffs, in light of the intensely local nature of the residential real-estate business and the fact that brokerages use political boundaries for other purposes, individual cities and towns must each comprise a separate marketplace in the market for real-estate services. The plaintiffs claim that Realty One and Smythe Cramer each have a monopoly on experienced agents in certain cities and towns, and on the supply of persons with homes for sale, and that the defendants have used these monopolies to keep their agents from accepting better-paid positions with Re/Max affiliates by imposing adverse commission splits. That is, they refuse to sell listed homes--except on terms that are not profitable for the Re/Max agent--to buyers brought by Re/Max agents, including, of course, any former agent of the defendants who has defected to Re/Max. 2. The Defendants' Response 41 Realty One and Smythe Cramer deny conspiring or exercising monopoly power to impose adverse commission splits. Each defendant maintains that it independently decided to use adverse commission splits to fight a competitor who was trying to lure away its most successful agents and deprive it of a return on its investment in the training of its agents. The defendants claim that as a matter of economic self-defense they decided to cut the amount of commission paid to Re/Max agents, with the result that agents who defected to Re/Max and received all of a 25% or 30% commission would earn approximately the same in the end as agents who stayed at Realty One or Smythe Cramer and received half of the 50% commission that, under the traditional compensation formula, is split with the broker.