Rocket Homes Consumer Allocation and Antitrust
A copy of the request filed with the DOJ and the FTC asking to review practices of Rocket Homes brokerage.
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 Rocket Homes, a "shell" "paper" "sham" subsidiary of Rocket Mortgage operating in an open collusion with Rocket Homes 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?
Rocket Homes Real Estate LLC
dba Rocket Companies, Inc. RKT (NYSE)
701 Griswold Street
Detroit, MI 48226 US
Phone: (833) 297-9378
Michigan License 6505-346028
Further, a partner network of more than 15,000 real estate agents who choose to execute blanket broker-to-broker referral agreements in an alleged collusion scheme with Rocket Homes Real Estate LLC brokerage.
Acting as the "spokes" within the "hub-and-spoke" broker-to-broker collusion scheme, Rocket Homes 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.
Why do you believe this conduct may have harmed competition in violation of the antitrust laws?
Rocket Homes operates under a broker license in Michigan License #6505-346028, but it does not produce any services that are typically offered by real estate agents and does not represent consumers when buying or selling real estate in any state. In exchange for matching consumers with a Partner Agent, Rocket Homes is compensated by the Partner Agent with an undisclosed percentage of their commission, agreed in advance.
According to the Rocket Companies IPO Filing on July 7, 2020
“We earn the majority of our revenues from the upfront origination of each mortgage through origination fees and the sale of mortgages into the secondary mortgage market. Additional revenue is earned through recurring fees from servicing these same mortgages. We also earn fees from real estate agent referrals in Rocket Homes”
For consumers, Rocket Homes promises real estate assistance, supposedly “helps match Rocket Mortgage clients with highly rated agents, and the coordinated home buying experience improves the certainty of closing.”
For real estate professionals, Rocket Homes is a “referral” real estate brokerage that “does not engage in actual real estate broker services.” Rocket Homes systematically applies pay-to-play bias towards all matching results, meaning, only real estate agents that have agreed to pay a referral fee are matched with consumers.
In reality, Rocket Homes is a broker-to-broker collusion scheme that utilizes its parent mortgage company consumer’s information and passes it along to a colluding broker who is willing to pay for it with a cut of their commission. All Partner Agents agree to pay Rocket Homes a pre-arranged referral fee, on all closed transactions, through their employing broker.
A referral agreement between Rocket Homes and a Partner Agent for a random transaction that may or may not happen sometime in the future is executed in advance. Rocket Homes claims to have participated in more than 30,000 real estate transactions in 2019. Assuming a full-service 5.3% commission of $9,770 on home sold for $184,334 an undisclosed blanket referral fee of 25%-35% is roughly $3,000 paid to Rocket Homes from each transaction. This yields an estimate of $90,000,000 in revenue generated from “blanket” referral fees to Rocket Homes in 2019 alone.
Rocket Homes engages in consumer and market allocation schemes with partner Agents brokerages, because it is a broker itself. Instead of representing consumers to help buy and sell homes, the company actively disengages from its licensed activities so that every Partner Agent knows that Rocket Homes brokerage will not compete with them. According to the company, “Rocket Homes' core business is the referral of homebuyers, who have been prequalified for a mortgage by Quicken Loans, to a network of third-party partner real estate agents that assist those homebuyers in the purchase of their new home.”
Rocket Homes does not act in a real estate brokerage capacity, instead, their real estate license is used to collect a blanket referral fee from the largest number of brokers possible. Sherman Act, effectively, requires all active real estate brokers to proactively compete for consumers without entering into agreements that restrain free trade. An agreement or an understanding between brokers not to compete 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 because such agreements always restrict free trade.
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 in a particular instance for a particular transaction.
Rocket Homes owes absolutely no duty of care to consumers and takes no responsibility for the transaction, despite receiving a direct financial benefit from the home sale or purchase completed by a referred brokerage.
Actions of Rocket Homes directly increase the costs of owning homes in the United States due to added referral fees, consumer allocation practices, and reverse completion between brokers. Partner Agents in the scheme have no incentive to compete for consumers with lower fees, instead, they have an incentive to compete for Rocket Homes’ attention. In this scheme, both colluding parties benefit from offering consumers higher commissions. Rocket Homes promotes Partner Agents as a way to limit competition with those agents outside of the network, thus limiting free-market competitive forces and steering consumers in self-interest.
Rocket Homes rakes in hidden junk fees while consumers are fighting their way through a housing affordability crisis.
As long as referring schemes, such as Rocket Homes, 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.
Rocket Homes' referral-only 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.
As a matter of fair real estate transactions across the United States, there is no excuse to maintain these blanket broker-to-broker collusion schemes established by a handful of “paper” brokers, such as Rocket Homes.
The government must treat Rocket Homes as a broker because it is paid as a broker and is licensed as a broker. Rocket Homes is not a technology company, as it claims since technology companies do not cut into the fees associated with buying and selling real estate. Licensed brokers are not allowed to promote the services of competitors for profit. A broker must promote their individual services directly to consumers and exist to actually help consumers buy, rent, and sell real estate.
According to the company’s S-1 statement, “Rocket Mortgage, Rocket Homes and our partner agents have a symbiotic relationship, as referrals are more likely to lead to a mortgage and real estate transaction, increasing profitability for each party. We earn a commission on real estate transactions we refer to our 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. Rocket Homes may seem like a clever by-pass of RESPA’s prohibition against kickbacks, but this loophole is built entirely on “blanket” collusion agreements prohibited by the Sherman Act.
RESPA further requires brokers to act in brokerage capacity in order to pay and/or accept kickbacks. Rocket Homes brokerage must offer consumers a tangible service as a licensed broker, but instead, it acts as a “blanket” referral fee intermediary between 15,000 random real estate agents and Rocket Mortgage.
All real estate brokers must compete with one another; there is no exception. In the event brokers organize their operations into referral networks, this basic rule of free competition fails – a broker who organizes the scheme, in one way or another, refuses to compete with participants of the scheme.
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.