Better.com Price Fixing and Vertical Tying
A request to review practices of Better.com Real Estate on the subject of consumer allocation practices, tying, price fixing, and reverse completion filed with the DOJ, CFPB, and the FTC.
A copy of the author’s official request that asks the United States Federal Trade Commission, the United States Department of Justice, and the United States Consumer Financial Protection Bureau to investigate Better Real Estate, LLC (dba BRE, Better Home Services, BRE Services, LLC, Better Real Estate, Better.com Real Estate) and Better Real Estate Partner Agents on the grounds of an alleged violation of the Federal Trade Commission Act of 1914 (15 U.S.C. Section 45) an alleged violation of the Sherman Antitrust Act of 1890 (15 U.S.C. Section 1) an alleged violation of RESPA Section 8 (12 U.S.C. 2607) as well as any other possible violations of antitrust and consumer protection laws currently ratified and enforced in connection with alleged broker-to-broker market allocation, consumer allocation, false advertising, unlawful kickbacks, wire fraud, and price-fixing practices.
Attn: Citizen Complaint Center, Antitrust Division
Department of Justice
950 Pennsylvania Ave., NW Room 3322
Washington, DC 20530
Attn: Office of Policy and Coordination
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Ave. NW Room CC-5422
Washington, DC 20580
Attn: CFPB Regulatory Implementation
Consumer Financial Protection Bureau
1700 G St., NW
Washington, DC 20552
Please find the information below with regards to possible antitrust violations.
What companies or organizations are engaging in conduct you believe violates the antitrust laws?
Better Real Estate, LLC
(dba BRE, Better Home Services, BRE Services, LLC, Better Real Estate, Better.com Real Estate)
3 World Trade Center
175 Greenwich Street, 59th Floor
New York, NY 10007
Arizona Firm name: BRE Services, LLC
Firm License #LC696841000
Address: 175 Greenwich Street, 59th Floor, New York, NY 10007
Colorado Firm name: BRE Services, LLC
Firm License #EC.100090017
Address: 175 Greenwich Street, 59th Floor, New York, NY 10007
Florida Firm name: Better Real Estate, LLC
Firm License #CQ1063036
Address: 175 Greenwich Street, 59th Floor, New York, NY 10007
Georgia Firm name: Better Real Estate, LLC
Firm License #78570
Address: 260 Peachtree NW, Suite 2200, Atlanta, GA 30303
Illinois Firm name: Better Real Estate, LLC
Firm License #481013601
Address: 175 Greenwich Street, 59th Floor, New York, NY 10007
New Jersey Firm name: Better Real Estate, LLC
Firm License #2076522
Address: 101 Eisenhower Parkway, Suite 300, Roseland, NJ 07068
New York Firm name: BRE Services, LLC
Firm License #10991232130
Address: 175 Greenwich Street, 59th Floor, New York, NY 10007
North Carolina Firm name: Better Real Estate, LLC
Firm License #C34427
Address: 160 Mine Lake Court, Suite 200, Raleigh, NC 27615
Pennsylvania Firm name: Better Real Estate, LLC
Firm License #RB069269
Address: 325 Chestnut Street, Suite 826, Philadelphia PA 19106
Texas Firm name: Better Real Estate, LLC
Firm License #9008203
Address: 175 Greenwich Street, 59th Floor, New York, NY 10007
Virginia Firm name: Better Real Estate, LLC
Firm License #226029484
Address: 312 F East Market Street, Ste 102, Leesburg, VA 20176
Washington Firm name: Better Real Estate, LLC
Firm License #20107469
Address: 1420 Fifth Avenue, Suite 2200, Seattle, WA 98101
Better Mortgage Corporation
3 World Trade Center
175 Greenwich Street, 59th Floor
New York, NY 10007
NMLS #330511
In an alleged open collusion scheme with a vast partner network of Better Real Estate Partner Agents who operate for competing brokerages and choose to execute blanket broker-to-broker referral agreements with Better Real Estate, LLC to collect kickbacks and to restrain free trade.
Acting as the "spokes" within the "hub-and-spoke" broker-to-broker collusion scheme, Better Real Estate Partner Agents are independent Realtors firmly affiliated with various brokerages such as Berkshire Hathaway HomeServices, eXp Realty, Windermere Real Estate, Keller Williams Realty, Inc., RE/MAX, Coldwell Banker, NextHome, Inc., HomeSmart, Compass, John L. Scott Real Estate, CENTURY 21, Realty ONE Group, Vylla, ERA Real Estate, Weichert Realtors, Better Homes and Gardens Real Estate, Fathom Realty, Intero Real Estate Services, John R. Wood Properties, Worth Clark Realty, Sotheby's International Realty, etc.
Further, an alleged vertical tying scheme between Better Mortgage Corporation mortgage origination services and real estate brokerage representation services offered by Better Real Estate, LLC, under the following set of conditions (1) two separate services are involved (2) the purchase of the tying service is conditioned on the additional purchase of the tied service (3) the seller has sufficient market power in the market for the tying service (4) a not insubstantial amount of interstate commerce in the tied service market is affected.
The following documents are referenced in this report:
Better Real Estate Refund Terms and Conditions
Finche, LLC dba BRE, Better Home Services and Better Real Estate Affiliated Mortgage Lender Discount
What's the fine print for the Better Real Estate discount?
How do I get the Better Real Estate discount?
Consumer Allocation between Licensed Real Estate Brokers
Better.com Real Estate operates under several brokerage licenses, in certain circumstances helping consumers to buy homes as a licensed real estate broker, commonly known as a buyer agent. However, the vast majority of all transactions originated by Better.com Real Estate are "farmed out" to competing buyer agent brokerages. The company relies on a referral network of competitors who all work for competing brokerages.
According to the company: "Better Real Estate maintains a nationwide network of partner brokerages and real estate agents. Better Real Estate Partner Agents are members of this network and work with Better Real Estate to provide high quality service outside our direct service area or when Better Real Estate Agents experience excessive demand."
This statement fails to mention is that Better.com Real Estate collects a sizable blanket referral fee from Partner Agents that directly increase the cost of buying a home to consumers. Once Better.com Real Estate refers a customer to a Partner Agent, that agent, not Better.com Real Estate, represents the customer from the initial meeting through closing, at which point the agent pays Better.com Real Estate a portion of her commission as a referral fee. The price and quality of such transactions are not only better, but they are also substantially worse.
Better.com Real Estate currently mandates a hidden kickback (likely set at a 25% to 35% blanket referral fee, where this fee is deliberately hidden from consumers) from agents that participate in this program. This open collusion arrangement between competitors leads to an inefficiency known as "reverse competition" where referring brokers end up competing not for the consumer attention but for the attention of the middle-man who steers the consumer toward its network of brokers and away from competitors.
Such pay-to-play steering results in lower quality of service and/or higher commissions, fees, and price levels. In effect, Better.com Real Estate turns consumers into a commodity for sale to a competing brokerage.
Both, Better.com Real Estate and competing Better Real Estate Partner Agents benefit from the consumer allocation scheme where both parties choose to openly collude, rather than compete with one another.
Partner Agents are independent licensed agents affiliated with other brokerages, and Better.com Real Estate does not have any control over their actions. This scaled arrangement with third parties exists based on allocation between competitors that not only leads to consumer confusion but also adversely affects the final price of commissions. A referral agreement between Better.com Real Estate and a Partner Agent for a random transaction that may or may not happen sometime in the future is executed in advance designed to restrain free trade.
Instead of representing consumers to help buy and sell homes, the company actively disengages from its licensed activities so that every Better Real Estate Partner Agent knows that Better.com Real Estate brokerage will not actively compete with them on a certain set of transactions.
Better Real Estate Partner Agents are likely enticed, or more likely forced by the terms of the agreements, to make sure that consumers do not stray away from Better.com services, such as mortgage origination. The full terms of the consumer allocation agreements between Better.com and Better Real Estate Partner Agents are hidden from consumers.
Better Real Estate owes absolutely no duty of care to consumers and takes no responsibility for the transaction facilitated by Partner Agents, despite receiving a direct financial benefit from the home sale or purchase completed by a referred brokerage.
Price Fixing between Licensed Real Estate Brokers
As part of the consumer allocation agreements between Better.com Real Estate and Better Real Estate Partner Agents, these parties further engage in price-fixing of services.
According to the company: "Purchase borrowers matched with a Better Real Estate Agent may receive $2,000 in lender credits and purchase borrowers matched with a Better Real Estate Partner Agent may receive up to 1% of the home sales price in lender credits … This offer is available to purchase borrowers who have been notified that Better Real Estate has matched them with a real estate agent on or after July 9, 2021 … This offer is open to conforming loan product customers who have (a) entered a purchase contract on a home using the Better Real Estate Agent or Better Real estate Partner Agent; and (b) closed a mortgage loan on said home with Better Mortgage Corporation."
While Better.com Real Estate is perfectly free to set rates for services within their firm, price-fixing agreements with competitors is a "per se" uncompetitive practice. Saving consumers from having to pay excessive brokerage fees can never be justified with price-fixing, especially in exchange for a financial gain between brokers. The blanket referral fee received by Better.com Real Estate for setting up these price-fixing terms is not insignificant - it is at the core of the company's hidden revenue model.
Section 1 of the Sherman Act states: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce … is declared to be illegal." This means that (1) there must at least two parties agreeing to take action, and (2) the agreed-upon action must restrain free trade. Price fixing and consumer/market allocation agreements are "per se" violations of the Sherman Act because these practices are inherently harmful to consumers; in other words, no defense or justification is allowed.
The free commerce belligerents in this “hardcore” price-fixing scheme are Better.com Real Estate and any broker they refer a consumer to subject to these terms. These two independent parties are carrying out a common course of action by setting fixed commissions with the use of blanket referral agreements for mutual financial gain.
Agents must never agree on commission rates or rebate amounts with any outside party. Agents must take care to avoid even the implication that they have discussed or reached an agreement about their service fees, service offerings, and rates due to any outside influence.
Commission rates and buyer rebates should never be fixed through collusion. All commissions and rebates must be set by each real estate agent individually and may only be negotiable between the consumer and the real estate agent.
Further, it is a per se violation of antitrust laws for brokers to set "standard" referral fees that will be paid to other brokers. Real estate agents (only when they act in full brokerage capacity) may discuss or negotiate the referral fees concerning an individual transaction, but real estate professionals are not allowed to enter into a "uniform" or a "blanket" agreement on how a commission will be split, or a "standard" referral fee paid. The reason for this is exactly the premise behind the Better.com Real Estate business model where brokers work to steer consumers toward other brokers in exchange for a pre-arranged referral fees, instead of offering a service.
Quality and honest real estate professionals establish pricing for their services independently, offer a tangible service, and without any kickbacks. Every single agent is different, and every single agent has an individual commission structure.
When Better.com Real Estate price fixes an arbitrary rate for all agents, such proposition becomes absurd when comparing home transactions worth $15 Million to home transactions worth $150,000 in different states, rural, or urban areas, variable market conditions, agents with different backgrounds, yeas of experience, etc. Obviously, in some situations, consumers' interest may be with the lowest fees, in other cases, consumers are looking for the most experienced agents, etc.
When Better.com Real Estate price fixes rebates of Partner Agents in self-interest, it only does so to offer homebuyers a "dangling carrot in front of the nose" to attract them toward the scheme, rather than to deliver genuine savings. The hidden fees between these brokers make it impossible for Partner Agents to offer consumers true market-rate savings. Brokers who pay 25% to 35% of their commission as kickbacks are unable to offer competitive rates to consumers in this scheme, making all price fixed commissions artificially inflated. There is never an open market condition that justifies hiring two brokers for the work performed by one.
Consumers can receive much greater refunds on the open market than from Better.com Partner Agents, including from flat-fee agents and agents who offer up to and more than 50% of their buyer agent commissions to consumers as refunds in the 40 US states and Washington DC, where allowed by law.
In effect, Better.com Real Estate collects tens of millions of USD annually in hidden kickbacks, claims to offer false savings, and steers consumers toward an unethical set of brokers involved in this scheme. On the other hand, consumers are faced with the impossible costs of buying homes while honest highly competitive agents who offer genuine savings are left high and dry due to the combined effects of "hardcore" antitrust violations.
Kickbacks between Better Mortgage and Licensed Real Estate Brokers
RESPA (12 U.S.C. 2607) Section 8 narrowly allows payments under cooperative brokerage and referral arrangements between real estate agents and real estate brokers. This limited exemption on kickbacks only applies to fee divisions within real estate brokerage arrangements when all parties are acting in a real estate brokerage capacity. To comply in good faith with RESPA (12 U.S.C. 2607) Section 8 exception for cooperative brokerage and referral arrangements, real estate agents must render referral agreements on an individual basis, in a particular instance, for a particular transaction.
Sherman Antitrust Act (15 U.S.C. Chapter 1), effectively, requires all active real estate brokers to proactively compete for consumers without entering into blanket anticompetitive agreements that restrain free trade. An agreement or an understanding between brokers not to compete (or, in this case, to actively promote a network of competing brokers for a mutual profit) is a "per se" violation of antitrust regulations in the United States.
It is a "per se" violation of the Sherman Act for real estate brokers to agree on a "standard" referral fee that will be paid for producing a client. Real estate professionals are not allowed to enter into “standard” referral agreements with competitors because such agreements always restrict free trade.
Once the consumer is "farmed out" to a random Better Real Estate Partner Agent, Better.com Real Estate owes no duty of care to said consumer and takes no responsibility for the transaction, despite receiving a direct financial benefit from the home sale or purchase completed by a referred brokerage.
Better Mortgage and Better Real Estate Partner Agents are in a "symbiotic relationship" designed to convert referrals from the mortgage origination to the third party involved in the real estate transaction, increasing profitability for each party. Better Mortgage, in all practical terms, earns kickbacks from real estate transactions "farmed out" to their network of real estate agents.
The entire RESPA prohibition against kickbacks was enacted specifically to stop mortgage companies from entering into "symbiotic relationships" with real estate brokers. Better Real Estate consumer allocation schemes may seem like a clever by-pass of RESPA’s prohibition against kickbacks, but this loophole is built entirely on "blanket" consumer allocation agreements prohibited by the Sherman Act.
RESPA further requires brokers to act in a brokerage capacity to pay and/or accept kickbacks. Better Real Estate must offer consumers a tangible service as a licensed broker, but instead, it acts as a "blanket" referral fee intermediary between random real estate agents and Better Mortgage.
Actions of Better.com Real Estate and Better Real Estate Partner Agents directly increase the costs of owning homes in the United States due to added referral fees, consumer allocation practices, and reverse completion between brokers. In this scheme, both colluding parties benefit from offering consumers higher commissions. Better.com Real Estate promotes Partner Agents as a way to limit competition with those agents outside of the network, and to encourage competing brokers to collude with them, thus limiting free-market competitive forces and steering consumers in self-interest.
Honest agents who choose to advertise competitive rates fairly to consumers also end up receiving less business while operating outside the dominant VC-backed scheme. Better.com Real Estate, on the other hand, rakes in hidden kickbacks while consumers are fighting their way through a housing affordability crisis.
As long as consumer allocation schemes, such as Better.com Real Estate Partner Program, are allowed to operate, brokers looking to represent consumers are naturally encouraged to participate in the scheme. "There are no upfront costs, only pay us once the transaction closes," is an attractive proposition to a broker who acts on this proposition by simply increasing a quoted commission to any consumer who comes as a referral. Any broker who chooses not to participate in such schemes risks losing "free business." Such an environment is highly poisonous to a healthy real estate representation market.
Better.com Real Estate Partner Program collusion scheme secretly harms real estate consumers and diminishes the efforts of competitive independent agents to provide a tangible service at an independently set competitive price.
The government must treat Better Real Estate Partner Agents and Better.com Real Estate as competing brokers because they are equally licensed as brokers and they currently choose "at-will" to either compete or to collude with one another. Licensed brokers are not allowed to promote the services of competitors, they are required to compete with competitors. A broker must promote their services, within their firm, directly to consumers and exist to solely help consumers buy, rent, and sell real estate.
Vertical Tying of Services between Better Mortgage Corporation and Better Real Estate
Better.com Real Estate buyer agent services and Better.com mortgage origination services are unlawfully tied. This trend is a brazen new strategy used by a handful of VC-backed real estate companies, including Better.com, that are forced to deliver unreasonably high returns on billions of investments poured into them.
As of July 2021, Better.com has taken about $905 million in funding and suffers from a sky-high burn rate. To make up for this poor allocation of capital, commonly known as mega-rounds, Better.com uses a set of unlawful strategies to increase the gross revenue from mortgage origination services and real estate services by unlawfully bundling them.
The company extends unlawfully bundled services by offering an incentive “to conforming loan product customers who have (a) entered a purchase contract on a home using the Better Real Estate Agent or Better Real estate Partner Agent; and (b) closed a mortgage loan on said home with Better Mortgage Corporation."
In this scheme, consumers are harmed by being forced to buy a fairly common service (mortgage origination service) to purchase a much more valuable service they want (buyer agent savings from a real estate brokerage transaction.) Consumers must be able to shop for mortgage origination services and real estate representation services independently. This tying agreement is further complicated with an unlawful price-fixing of services offered by competitors - Better Real Estate Partner Agents.
The government must take immediate action to stop these anticompetitive practices. In 2021, the residential real estate industry is at the crossroads, where a handful of mega-funded VC schemes freely set terms for a vast number of brokers and earn billions in kickbacks each year from commissions. Since 2016, the vast majority of VC capital in the housing sector was poured directly into anticompetitive products that earn revenue from illicit activities. These schemes are now consolidating the industry into a handful of schemes on the basis of blanket referral agreements between competitors in order to realize meaningful returns.
According to the DOJ Office of Public Affairs Press Release dated July 1, 2021 the real estate industry consists of "millions of real estate brokers and agents and, in turn, impact millions of American home buyers and sellers, who, according to reported industry data, paid over $85 billion in residential real estate commissions last year." Out of the $85 billion figure, $10 to $15 billion of annual commissions are currently lost due to kickbacks, price-fixing, consumer allocation, tying, and uncompetitive commission schemes promoted over the Internet by VC-backed companies such as Better.com that aim to unlawfully rake, rather than improve, the most valuable transaction in every consumer's life: buying a home. "Millions of real estate brokers and agents" are no longer independent professionals who set their terms and acquire their clients, but rather umbrella networks of various schemes maintained by a handful of "paper" brokers with heavy use of Internet advertising via "Big Tech" channels, such as Google and Facebook. Almost 40 cents of all aggregate VC-dollars in the sector are spent on promoting open collusion schemes between licensed brokers, rather than product development.
As long as brokers can trade consumers as "leads" between independent service providers in exchange for blanket referral fees, Open Marketplace™ continues to operate at a competitive disadvantage.
If you have a question or comment about an antitrust issue, you may submit it to the Bureau of Competition at the United States Federal Trade Commission and/or to the Antitrust Division of the United States Department of Justice.
If you have a question or comment about federal consumer protection financial laws, including RESPA, you may submit it to the Office of Enforcement of the United States Consumer Financial Protection Bureau