Articles Posted in Antitrust Counseling

Articles about antitrust counseling and training.

Update: Is it Time for Antitrust Lawyers and Private Equity Clients to Pay Attention to Interlocking Directorates and Section 8 of the Clayton Act? The Answer is Still Yes

November 11, 2025 | Bona Law PC

Authors: Steven Cernak and Luis Blanquez

Section 8 of the Clayton Act prohibits certain interlocking directorates between competing corporations. But while the prohibition has been around since 1914, most antitrust lawyers pay little attention to it, partly because companies can quickly resolve any issues voluntarily.

We first brought Section 8 to the attention of our readers in 2022 because of comments by then-AAG Jonathan Kanter. Even more recent actions by the agencies, detailed below, plus the Hart-Scott-Rodino (HSR) Act’s new requirements under the updated filing form—soliciting information on overlapping directorates—should be enough for everyone to keep a closer eye on the issue, in particular private equity firms.

Clayton Act, Section 8 Basics

The prohibitions of Section 8, in its most recent form, can be simply stated: No person can simultaneously serve as an officer or director of competing corporations, subject to certain jurisdictional thresholds and de minimis exceptions. Truly understanding the prohibition, however, requires understanding all those italicized terms.

First, Section 8’s prohibition applies only if each corporation has “capital, surplus, and undivided profits,” or net worth, of $10M or more, as adjusted. The Federal Trade Commission (FTC) is responsible for annually adjusting that threshold for growth in the economy. Currently, for 2025, the thresholds are $51.380 million for Section 8(a)(1) and $5.138 million for Section 8(a)(2)(A). These new thresholds took effect on February 21, 2025.

Section 8 provides an exception where the competitive sales of either or each of the corporations is de minimis. Specifically for 2025, no interlocks are prohibited if (1) both of the entities have capital, surplus and undivided profits of $51,380,000 or less, or the competitive sales of either entity are less than $5,138,000; 2) the competitive sales of either corporation are less than 2% of that corporation’s total sales; or 3) the competitive sales of each corporation are less than 4% of that corporation’s total sales.

Originally, Section 8 applied only to directors of corporations; however, the 1990 amendments extended the coverage to officers, defined as those elected or chosen by the corporation’s Board. Despite the clear wording of the statute limiting it to officers and directors, some courts have considered the possibility that Section 8 might apply when a corporation’s non-officer employee was to be appointed a director of a competitor corporation.

The language of Section 8 clearly applies to interlocks between competing corporations. An interlock between a corporation and a competing LLC would not be covered by the statutory language or the legislative history of the original statute or amendment. The FTC and DOJ have not explicitly weighed in on application to non-corporations, although the FTC’s implementing regulations for Hart-Scott-Rodino cover LLC explicitly as “non-corporate interests” different from corporations. Still, the spirit of Section 8 would seem to cover any such non-corporate interlock. Also, any corporate director who also serves a similar role for a competing LLC would face an increased risk of violating Sherman Act Section 1.

Section 8 clearly applies if the same natural person sits on the boards of the competing corporations. It might also apply if the same legal entity has the right to appoint a natural person to both Boards, even if that entity appoints two different natural persons to the two Boards. That interpretation is consistent with the Clayton Act’s broad definition of “person” and has been supported by both the FTC and DOJ and the one lower court to consider the question.

As with other parts of the antitrust laws, the question of competition between the two corporations requires some analysis. The few courts to look at the question have held that corporations that could be found to violate Sherman Act Section 1 through an agreement would be considered competitors. On the other hand, these same courts did not define competitors more narrowly to be those corporations that would not be allowed to merge under the more extensive analysis of Clayton Act Section 7.

Recent DOJ and FTC Action

The DOJ has traditionally enforced Section 8’s prohibition on interlocking directorates, which has become a priority under the current Administration.

As a result, there have recently been an increasing number of instances where directors have resigned to resolve DOJ concerns.

In April 2024, two directors from Warner Bros. Discovery Inc. (WBD)–– Steven A. Miron and Steven O. Newhouse––resigned from the WBD board after the Antitrust Division expressed concerns that their positions on both the WBD and Charter Communications Inc. boards potentially violated Section 8 of the Clayton Act. Charter, with its Spectrum cable service, and WBD, through its Max streaming subscription services, both provide video distribution services to customers. The division’s enforcement efforts to date have unwound or prevented interlocks involving at least two dozen companies.

More recently, in September 2025, the FTC found that Sevita and Beacon Specialized Living Services, Inc.—both owned by private equity investors and providers of services for individuals with intellectual and developmental disabilities—had overlapping board members, violating Section 8 of the Clayton Act. As a result, three directors resigned from the board of Sevita Health following FTC enforcement actions. The FTC didn’t engage in any formal legal action against the companies, and the resignations were enough to resolve the FTC’s competition concerns without further legal action.

Recent DOJ Speeches

The DOJ action that led to the resignations is consistent with recent speeches by DOJ officials

In 2022, Jonathan Kanter, former assistant attorney general in charge of the Antitrust Division at the DOJ, made some significant remarks about Section 8. First, he highlighted the fact that the Division is committed to litigating cases using the whole legislative toolbox that Congress has given them to promote competition, including Section 8 of the Clayton Act. Second, he reminded everyone that Section 8 helps prevent collusion before it can occur by imposing a bright-line rule against interlocking directorates. Third, that for too long, Section 8 enforcement has essentially been limited to their merger review process. And last but not least, that the Division will start ramping up efforts to identify violations across the broader economy and will not hesitate to bring Section 8 cases to break up interlocking directorates. Another former head from the FTC made a similar statement back in 2019, indicating how Section 8 of the Clayton Act protects against potential information sharing and coordination by prohibiting an individual from serving as an officer or director of two competing companies.

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Understanding Antitrust Scrutiny: Lessons from United States v. American Airlines and JetBlue

December 16, 2024 | Bona Law PC

Author: Sabri Siraj

In a landmark decision, the U.S. Court of Appeals for the First Circuit upheld a district court ruling to permanently enjoin the Northeast Alliance (NEA) between American Airlines and JetBlue Airways. This case offers key insights into the relationship between joint ventures and antitrust and the standards of review for evaluating competitive harm.

Airline Case Summary

Defendants presented NEA as a collaborative effort between American Airlines and JetBlue to streamline services, enhance route options, and compete more effectively in the Northeast region of the U.S. Specifically, the arrangement allowed the two carriers to coordinate schedules, pool revenue, and integrate operations in select markets. The airlines argued that the NEA would create efficiencies that would benefit consumers through improved services and better connectivity. But the Department of Justice (DOJ) and several state attorneys general challenged the agreement, asserting that it undermined competition, raised ticket prices, and reduced consumer choice.

The district court’s findings supported the DOJ and the States, concluding that the NEA’s anticompetitive effects far outweighed any claimed benefits. The court held that the alliance reduced output in critical markets and failed to generate meaningful procompetitive benefits that could not be achieved through less restrictive means. On appeal, American Airlines argued that the NEA deserved lenient antitrust scrutiny because it is a joint venture. The First Circuit, however, rejected that defense, emphasizing that the legality of such arrangements hinge on their substance and actual effects rather than their label.

Antitrust Issues and Decision

This case serves as a critical examination of the standards applied to joint ventures under antitrust law. Joint ventures, when properly structured, can foster innovation, enhance efficiencies, and deliver consumer benefits by pooling resources and expertise. But these benefits do not exempt joint ventures from antitrust scrutiny. The First Circuit’s ruling focused on three key principles:

First, the court emphasized the importance of substance over form. It rejected American Airlines’ argument that the NEA’s classification as a joint venture warranted less rigorous analysis. As the court noted, “One could describe price fixing as a joint venture,” highlighting that the label itself does not insulate an arrangement from scrutiny. The court’s inquiry focused instead on the practical implications of the NEA, particularly its impact on competition and consumer welfare.

Second, the court applied the rule-of-reason framework to evaluate the NEA’s competitive effects. This standard requires a detailed analysis of the agreement’s purpose, its potential procompetitive justifications, and its actual anticompetitive effects. Here, the NEA failed to demonstrate sufficient procompetitive benefits to offset its negative impact on competition. The court agreed with the district court’s finding that the alliance reduced output and increased prices in key markets, with no evidence of justifying efficiencies.

Finally, the decision reinforced longstanding antitrust principles requiring genuine economic integration in joint ventures. The court found that the NEA lacked the necessary integration of resources and operations to qualify as a legitimate joint venture. Instead, it functioned as a mechanism to coordinate behavior between two major competitors, effectively reducing competition without delivering substantial consumer benefits.

The Broader Implications of the Ruling

The First Circuit’s decision has significant implications for businesses and legal practitioners navigating antitrust issues. For companies considering joint ventures or similar collaborations, the ruling serves as a reminder that such arrangements must be carefully structured to withstand legal scrutiny. A legitimate joint venture should integrate resources and create new or improved products or services that enhance market competition. Agreements that merely coordinate behavior between or among competitors without achieving these objectives are unlikely to survive antitrust challenges.

Additionally, the case underscores that businesses should proactively address potential antitrust risks during the joint venture’s planning and formation. This includes consulting with antitrust counsel, conducting thorough market analyses, and ensuring that any restrictions are ancillary to the venture’s objectives and proportional to achieving its goals. Companies should also document the procompetitive benefits of their agreements, providing clear evidence to support their claims if challenged.

Insights for Practitioners

The NEA case highlights why antitrust attorneys tailor legal advice to the specific facts and context of each arrangement. Joint ventures remain a common strategic tool for businesses seeking to innovate or expand their market presence. But, as this case illustrates, not all joint ventures are created equal. To withstand antitrust scrutiny, an arrangement must demonstrate genuine economic integration and clear consumer benefits.

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The FTC has Algorithmic Price-Fixing in its Antitrust Crosshairs

May 20, 2024 | Bona Law PC

Author: Luis Blanquez

Are you delegating your pricing decisions to a common algorithm software platform? If so, you might violate the antitrust laws. It may not even matter whether you actually communicated with your competitors. All it might take is for the antitrust agencies—The Department of Justice or the Federal Trade Commission—to allege illegal collusion is the use by your company of an algorithm-software tool trained using competitively sensitive data, with knowledge that some of your competitors are doing the same thing. Even deviation from the algorithm’s recommended pricing might not save you from antitrust liability.

The FTC’s Blog Post: Price Fixing by Algorithm is Still Price Fixing

On March 1, 2024, the Federal Trade Commission (FTC) published a blog post explaining how relying on a common algorithm to determine your pricing decisions might violate Section 1 of the Sherman Act.

In the blog post, the FTC includes a previous Statement of Interest (“SOI”) filed in the Duffy v. Yardi Systems, Inc. case to explain the legal principles applicable to claims of algorithmic price fixing. First, price fixing through an algorithm is still price fixing. Second: (1) you can’t use an algorithm to evade the law banning price-fixing agreements, and (2) an agreement to use shared pricing recommendations, lists, calculations, or algorithms can still be unlawful even where co-conspirators retain some pricing discretion or cheat on the agreement.

The blog concludes with two important remarks:

“Agreeing to use an algorithm is an agreement. In algorithmic collusion, a pricing algorithm combines competitor data and spits out the suggested “maximized” rent for a unit given local conditions. Such software can allow landlords to collude on pricing by using an algorithm—something the law doesn’t allow IRL. When you replace once-independent pricing decisions with a shared algorithm, expect trouble. Competitors using a shared human agent to fix prices? Illegal. Doing the same thing but with an agreed upon, shared algorithm? Still illegal. It’s also irrelevant that the algorithm maker isn’t a direct competitor if you and your competitors each agree to use their product knowing the others are doing the same in concert.
Price deviations don’t immunize conspirators. Some things in life might require perfection, but price-fixing arrangements aren’t one of them. Just because a software recommends rather than determines a price doesn’t mean it’s legal. Setting initial starting prices or recommending initial starting prices can be illegal, even if conspirators deviate from recommended prices. And even if some of the conspirators cheat by starting with lower prices than those the algorithm recommended, that doesn’t necessarily change things. Being bad at breaking the law isn’t a defense.”

This is a bold statement from the FTC. Algorithmic collusion is not only on the agency’s radar now, but it is also one of its priorities.

Final Conclusions

Algorithm collusion is on the crosshairs of the FTC and DOJ, so expect more cases soon. And not only in the real-estate industry, as highlighted from existing investigations on the online retailing and meat processing industries. Indeed, it is becoming common practice for more industries and businesses to implement and rely on algorithms to set their pricing strategies.

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If I Were You…I’d Listen to this Podcast about Residential Real Estate & Antitrust

April 4, 2024 | Bona Law PC

Author: Molly Donovan & Aaron Gott

This Episode Is About: Residential Real Estate and Antitrust

Why: A settlement has been reached between the National Association of Realtors (or NAR) and the class action plaintiffs that would resolve the $1.8 billion verdict out of Missouri finding illegal collusion in the residential real estate industry. But the settlement raises its own antitrust concerns and this podcast provides actionable guidance for avoiding them. You can listen to this podcast here.

Some Background: The Missouri case focused on the NAR’s mandatory commission rule requiring the home seller to pay a non-negotiable commission to the broker representing the buyer. Plaintiffs alleged this resulted in a complete lack of competition for buy-side rates—which were artificially inflated. Before this lawsuit and copycat suits, virtually all brokerages in the industry operated under the rule and were aware that everybody else was operating in the same way.

But under the settlement, the NAR has agreed to implement a new rule prohibiting offers of buy-side compensation to be posted on the MLS (or multiple listing service, where most homes are listed for sale). Individual brokers can pursue buy-side commissions, but only off the MLS through negotiations. Assuming the settlement is approved, this change will go into effect in mid-July 2024.

Here’s what brokerages and local real estate associations need to know:

Bullet #1: Collusion often takes place after major industry disruptions like this one. Competitors panic and seek comfort in knowing how others in the industry plan to cope – we could call them “crisis cartels.” In this case, brokerages who are supposed to be competing should not discuss with one another how they plan to react to the eradication of the mandatory commission rule. Each brokerage should determine by itself how it will compete, what commissions it will seek, and from whom.

Bullet #2: Brokerages need to ensure that there isn’t a reversion back to a de facto mandatory commission rule. While some commentary suggests that disclosing to sellers and buyers that commissions are negotiable may be enough, we think that, in addition to disclosures, there must be an accessible process that prompts and facilitates bona fide arms-length negotiations over commissions. Commission negotiations should not be discouraged in any way. Disclosures to home sellers and buyers that commissions are negotiable should be understandable, easy to find and accompanied by an explanation of the actual process for negotiating.

Bullet #3: Buy-side commissions should be commensurate with the “value add” brought by the buy-side broker. This may require detaching the buy-side commission from the sale price of the home and documenting the rationale behind the final rate chosen. This shows that the rate is competitive and not an “industry-standard” or “fixed” commission.

Bullet #4: No steering. Buy-side brokers should present to clients, equally and fairly, all homes that fall within their specifications. And conversely, sale-side brokers should treat all offers equally notwithstanding commissions. Brokerages must be careful not to steer clients towards dealing with other brokerages that are known to “cooperate” with respect to commission sharing, and must not steer clients away from dealing with brokerages that are “uncooperative,” i.e., taking a unique approach to competition for clients.

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Best Practices for Merger Reviews before the Federal Agencies and the California Attorney General’s Office

February 5, 2024 | Bona Law PC

Author: Paul Moore²

Introduction

Over the past several decades State Attorneys General have become increasingly involved in merger reviews in tandem with the Federal Trade Commission and/or the U.S. Department of Justice’s Antitrust Division (the Regulatory Agencies). This increase in state merger reviews has been in parallel with states raising their merger and non-merger profile and general antitrust enforcement efforts statewide and nationally. This trend has occurred, in part, as Attorneys General expanded their staffs and have become increasingly experienced in antitrust enforcement efforts and merger analysis. While many states, including California, do not have statutes mandating proposed merger registration, Attorneys General have statutory authority to investigate conduct to ensure no laws have been violated³. This means that an Attorney General can decide to review a proposed merger whenever they think it may violate a state’s antitrust laws. Therefore, it makes sense to notify an Attorney General when a proposed merger may have a competitive impact in a specific state and is likely to trigger an in-depth analysis at the federal level. Some examples might be a merger between two competitors who have substantial overlapping retailing assets, service routes, or service areas in one state. Such a notification to a state allows parties to avoid duplicative and possibly successive investigations. Best practices have emerged around how to conduct a merger investigation with a Regulatory Agency and tandem with the California Attorney General’s office.

Best Practices When Cooperating with Staff

Contacting the federal agency likely to review a transaction before submitting an HSR filing is increasingly becoming part of merger review practice. Since there is no statutory requirement to seek regulatory authority to merge at the state level in California a best practice is to invite the Attorney General to participate in the review process to avoid subsequent investigations that could have been run in parallel with other agencies and possibly avoid efforts by the staff ex-post to unwind a transaction⁴. Contacting the California Attorney General (Cal-AG) before an HSR is filed is generally well-received by staff and is typically considered a smart strategy because it allows the staff assigned to the transaction the ability to begin reviewing the transaction before the 30-day statutory clock has started. This extra time allows staff more time to conduct a review before any enforcement decisions need to be made and in some cases provides the time necessary to avoid one altogether. In addition, a pre-filing notification to both staffs permits the two agencies to interact freely since there is no HSR confidence to maintain.

We are in an era where many meetings are conducted over video. Generally, saving time and client resources is a good thing; however, visiting a State Attorney General’s staff in their office at the beginning of a merger can pay significant dividends. An in-person visit can establish the foundation for a positive working relationship, allow for clear communications⁵ and most importantly, communicate to the staff and Attorney General that you are aware of the importance of their involvement and welcome their participation. The in-person visit makes a significant first-step in ensuring that things start off on the right foot.

Once the HSR is submitted, the Cal-AG is able to file her Form 712 and to continue the interagency dialogue with the benefit of the documents and filings the parties have made. The Cal-AG’s staff can also begin to reach out to third parties and seek waivers that permit the FTC/DOJ to share what is produced with the states. This is more efficient for the producing parties as well, as they can make what amounts to a single production to satisfy both reviewing agencies⁶. Securing these waivers early in the process also allows the staffs to communicate freely, to share economic analyses based on produced information, and for the CAL-AG staff to join party meetings with the FTC/DOJ⁷. This level of cooperation benefits all involved as it prevents parties from making the same presentation twice and it allows both regulatory agencies to hear the same information simultaneously.

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Did You Receive an FTC or DOJ Subpoena? Be Sure To Preserve Everything Ephemeral

February 2, 2024 | Bona Law PC

Authors: Steven Cernak & Molly Donovan

The Federal Trade Commission and the Department of Justice are reminding companies that, in responding to grand jury subpoenas and second requests, there is an obligation to preserve data and communications created using “new methods of collaboration and information sharing tools, even including tools that allow for messages to disappear via ephemeral messaging capabilities.” The government has specifically called out Slack, Microsoft Teams and Signal as being some of the applications of concern “designed to hide evidence.”

The government says that while there has always been an obligation to produce information from ephemeral messaging applications in investigations and litigations, the purpose of the reminder is to ensure that counsel and clients do not “feign ignorance” when choosing to use ephemeral messaging to do business. Thus, the FTC and DOJ will include new, explicit language in subpoenas and other requests specifically stating that data from ephemeral messaging applications must be preserved. A failure to meet that obligation could result in obstruction of justice charges.

More generally, once a company has been served with a subpoena, a document hold should be prepared and circulated right away. A document hold is a written notification to relevant employees not to delete, destroy or alter any electronic or paper materials potentially relevant to the subpoena. The notice must unpack what that language means in plain English and should be conservative in describing what “potentially relevant” means—(remember that just because something is being preserved does not necessarily mean it will have to be produced.)

The document hold should apply to all types of messaging (text, IM, DMs, ephemeral) to ensure that all existing and going-forward materials will not be deleted. The relevant persons with IT expertise should certify internally that preservation is occurring effectively, that all auto-delete functions have been turned off, and that back-up tapes are not being purged automatically.

It’s also a good idea to instruct employees not to talk to each other about the subpoena or the underlying subject matter. When employees talk to each other, it can create the appearance of collusion—i.e., employees are coordinating with each other about what to say or not say to the lawyers or to the government. This can raise obstruction suspicions that may only grow if the discussions occur over ephemeral messaging applications that employees think will not leave a paper trail behind.

If employees believe that they or others have violated, or behaved inconsistently with, company policies or relevant laws, employees should discuss that only with in-house or outside counsel—not with each other.

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Best Antitrust Practices for Exchanging Competitive Information via Third Parties

January 4, 2024 | Bona Law PC

Authors: Steve Cernak & Molly Donovan

There is no guaranteed safety zone for exchanging competitively sensitive information amongst competitors. Practices once deemed relatively safe—like subscribing to a third-party data services provider to manage the exchange—now carry increased risks. This is mostly because machine learning and AI have made it possible to predict a specific competitor’s future strategies even if a third party has aggregated and anonymized the underlying data and even if the underlying data is old.

While antitrust compliance is best assessed on a case-by-case basis, there are general guideposts that third parties and their subscribers should understand before gathering, providing, and/or exchanging price, production, procurement, employment or other competitively sensitive data that competitors would not (or should not) share directly with each other.

Antitrust concerns are at their peak if the exchanged information allows competitors to increase price or restrict output in explicit or even tacit collusion with each other in a joint effort to raise profits industry wide. To steer clear of even the appearance of such conduct, these pointers matter:

Avoid exchanging data that is comprehensive, detailed and current. Any one of these is a concern, but the combination is very concerning.

Comprehensive means the information covers every aspect of business planning and strategy: how to procure, how to price, how to set production levels, and how to compensate workers and executives. Have you been asked to provide entire internal business plans? That should raise flags.

Detailed means the data reveals information broken down by specific production facilities or specific products, as examples. The higher level, the better. More detailed, lower-level information entails more risk.

Current means the information exposes what your business is doing in real time. The government once said that data should be at least 3 months old before it is exchanged, but machine learning and complex algorithms have since increased the value of historical data—making it possible that subscribers might be able to use even months-old data to discern future-facing strategies.

Don’t fill in the donut hole. Even when the information exchanged is not comprehensive, make sure that it is not the missing piece that, when combined with information that “everyone knows,” allows subscribers to act collusively. Even after the information exchange, those subscribers should still not be certain about how their competitors will act and react.

Asymmetry can be a bad fact. Suspicions are raised if the third-party reports are available only to companies who compete at the same level of the supply chain—and not to their suppliers, employees, and/or customers. The “give to get” idea (i.e., you must be able to provide the relevant data to receive the relevant data) can appear collusive.

The antitrust risks from all exchanges are not equal. Exchanging price, production, and cost information is risky. Exchanging tips on organization of a parts warehouse is less risky (though not riskless). Your antitrust reaction should be calibrated to the different levels of risk.

Voluntary surveys and periodic polling are preferred over direct downloads of internal ledgers and reports. You obviously would not share the latter directly with a competitor, so you should exercise equal caution before sharing it with a third party.

Don’t couple sensitivity with deanonymization. Flags should go up if subscribers are able to deanonymize sensitive information, i.e., identify which competitor supplied what information.

Even aggregated data poses risks. Ask whether subscribers can use algorithms or other methods to disaggregate data to predict competitors’ pricing or output strategies.

Complete or near-complete industry participation could appear collusive. If the data being shared represents all or most of the relevant industry, talk to counsel about risk mitigation. The risks increase if the third party discloses the identities of the participants (or they are otherwise known, obvious or can be inferred) and/or the industry is concentrated.

Third-party consultants should not advise subscribers how to use the information to raise total industry profits. Nor should consultants in their reports to subscribers identify opportunities to raise prices or restrict output or tell one subscriber how other subscribers are using the information.

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New York Is Not Okay with Non-Competes

January 1, 2024 | Bona Law PC

Author: Molly Donovan

Update: In December 2023, New York Governor Kathy Hochul vetoed the legislature’s proposed prohibition against employee non-competes. The Governor indicated that her “top priority was to protect middle-class and low-wage earners, while allowing New York’s businesses to retain highly compensated talent.” Carve-outs to the bill for highly-compensated employees and executives were discussed, but no agreement as to an income cut-off could be reached. Senator Sean Ryan has said that he expects the legislation to be reintroduced in 2024.

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$1.8 Billion Antitrust Verdict Against Realtor Groups Provides Lessons for Brokerages, Realtor Associations, and Multiple Listing Services Nationwide

November 7, 2023 | Bona Law PC

Authors: Molly Donovan & Aaron Gott

A Missouri jury awarded a class of home sellers $1.8 billion dollars in finding that the National Association of Realtors (“NAR”) and some of the nation’s largest real estate brokerages “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”

At the center of the case was NAR’s rule requiring sellers to pay a non-negotiable commission awarded to the buyer’s broker at a transaction’s closing (“Mandatory Payment Rule”). The brokerages then compelled their agents to belong to the NAR and adhere to the NAR’s rules. The resulting lack of competition for buy-side commissions caused inflated prices that were forced upon home sellers. Every brokerage in the industry understood that every other brokerage was behaving in this same way.

In addition to inflated buy-side rates, the scheme was reinforced by other anticompetitive practices, including “steering”—where buyer brokers “steer” their clients toward homes attached to a non-negotiable buy-side commission—as opposed to homes for-sale-by owner where an automatic buy-side commission may not be offered.

Another resulting problem is that small brokerages looking to attract buyers have a tough time competing. Most importantly, there’s no opportunity to compete on price because the local NAR groups have locked prices in with the following of the major brokerages. Because of that rule—and other NAR rules—innovations with respect to process or pricing have been very difficult to achieve.

So, why has the scheme worked if it’s so bad for consumers and innovators? Because the NAR has near-exclusive control over the MLS or multiple-listing service.

The MLS is an essential database for listing homes because most homes sold in the United States are found there. If a broker does not belong to NAR and/or does not follow the NAR’s rules, it cannot access the MLS and, therefore, cannot effectively compete for selling or buying clients.

This is of antitrust concern in its own right. And certainly, the Mandatory Payment Rule is not the only rule in the industry that has—or could—draw antitrust scrutiny. Rules against buying/selling homes that are “coming soon,” for example, are also restraints of trade that could be a problem. So are rules that fix any of the terms or conditions of selling or buying a home.

Many predict the entire industry will change as a result of the Missouri verdict, the ongoing competition-law litigations and investigations, and the reality that today, home buyers can do their own legwork to find homes without needing a broker’s access or market knowledge. A buyer broker’s role can sometimes be relegated to accessing lock boxes, providing fill-and-sign access to standard forms, and collecting the check.

So what can a brokerage do now to anticipate the changes and guard against future antitrust concerns? Here is some high-level guidance that brokerages ought to consider:

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Antitrust for Kids: Watch Out for Predatory Halloween…Pricing!!

October 19, 2023 | Bona Law PC

Author: Molly Donovan

At Argo Elementary, a group of kids gathers daily at lunch to buy and sell candy. The trading activity is a longtime tradition at Argo and it’s taken very seriously—more like a competitive sport than a pastime.

Candy trading doesn’t end once a 5^th grader graduates from Argo. It continues across town at Chicago Middle School—but instead of lunch, candy trading happens there at the close of each school day. (The middle school had banned lunchtime trading due to several disputes that grew out of hand.)

Now here’s where it gets complicated, and nobody knows why it works this way, but the average lunchtime price at Argo determines the starting price for trades later in the day at Chicago.

For example: the average selling price for a candy bar on Monday, lunch at Argo is $2.50. Monday after-school prices at Chicago also will start at $2.50.

There are rules about what kind of candy can be traded—so that one trade can be easily compared to another (candied apples-to-candied apples) for purposes of determining who’s “winning.”

And sometimes kids—particularly the older ones at Chicago—place bets on what will happen on a particular trading day in the future, e.g., I bet prices will reach $3 or I bet no more than 50 candy bars will get sold this Friday.

That’s it by way of background. Here’s our story.

Arthur D. Midland (“ADM”) is 9. He is the link between Argo and Chicago. Each day, ADM leaves Argo Elementary when school lets out, walks to Chicago Middle, announces the “start-of-trade” Chicago price based on the lunchtime Argo price, and Chicago trading begins. (ADM’s mother allows this because ADM’s older brother (Midas) also trades at Chicago—so the two boys can watch each other.)

At the start of the school year, ADM contrived a very clever scheme. He bet Midas that, on Halloween, Chicago prices would be very low—as low as $1. Midas said, “No way! September prices are already at $2.50. If anything, prices will increase as kids go candy crazy in October. I’ll take that bet.”

So, for every candy bar sold at Chicago on Halloween for $1 or less, Midas would owe ADM $1. And for every candy bar sold at Chicago for more than $1, ADM would owe Midas $1.

With that bet front of mind, ADM became the primary candy seller at Argo, and as Halloween neared, he flooded Argo with candy and sold it intentionally at very low prices—50 cents for a Snickers! (ADM had the requisite inventory because he was an avid trick-or-treater and had saved all his Halloween candy from years past.)

Due to ADM’s scheme, Argo prices got so low that some kids packed up their candy and went home—refusing to trade there at all.

Well, Halloween finally came and, as you can imagine, ADM made a killing on the bet—100 candy bars were sold at Chicago on Halloween at less than $1, forcing Midas to pay ADM his entire savings. This more than compensated ADM for whatever losses he incurred for under-selling at Argo.

Once Midas realized ADM’s trick, he was furious. Didn’t ADM cheat? Midas assumed—as did all candy traders—that bets derived from candy sales would be based on real—not artificial—market forces.

Did ADM get away with it?

So far, no.

My Muse: For now, plaintiff Midwest Renewable Energy has survived a motion to dismiss its Section 2 monopolization claim against Archer Daniels Midland.

The claim is based on allegations of predatory pricing—basically that the defendant’s prices were below an appropriate measure of its costs and that the low prices drove competitors from the market allowing the defendant to recoup its losses. (For more on predatory pricing, read here.)

In the ADM case, Midwest alleges that ADM manipulated ethanol-trading prices at the Argo Terminal in Illinois to create “substantial gains” on short positions ADM held on ethanol futures and options contracts traded on the Chicago Mercantile Exchange. Because the Argo prices determined the value of the derivatives contracts, by flooding Argo with ethanol that ADM sold at too-low prices, ADM allegedly was able to win big on the derivatives exchange—recouping whatever losses it incurred on the underlying asset.

On its motion to dismiss, ADM argued that Midwest had not sufficiently alleged that ethanol producers had exited the market due to ADM’s low prices or that ADM subsequently recouped its losses in the ethanol market. (ADM classed these arguments as going to antitrust injury.)

The Court agreed that Midwest was required to allege both that rivals exited the market and that recoupment was ongoing or imminent, but the court ruled Midwest’s allegations sufficient to do so.

Specifically, Midwest had alleged that 12 ethanol producers had either stopped or decreased ethanol production—which is enough at the motion to dismiss phase. The court said whether that alleged “handful” of plant closures had a discernible effect on consumers is a fact-intensive analysis not susceptible to resolution on the pleadings.

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