Friday, June 1, 2007

Tennessee governor signs anti-rebate bill into law

As a commenter on one of my prior posts has noted, and as reported on, Governor Bredesen signed SB 1160, as amended, into law Wednesday evening, which immediately prohibits Tennessee real estate brokers from providing cash rebates, cash gifts or cash prizes to their customers. This law effectively overrules the judgment of the state's purported experts in the field - the TN Real Estate Commission - which was leaning toward the conclusion that such prohibition - embodied in a Commission regulation - was no longer desirable.

Specifically, Rule 1260-2-.33(2) of the Tennessee Real Estate Commission states that “[n]o cash rebates, cash gifts, or cash prizes may be paid to any person who does not hold a real estate license.” Yet the Commission was on the verge of repealing the rule. See page 2 of this Notice of Rulemaking Hearing pertaining to a May 2007 meeting of the Commission (“Rule 12602.33 Gifts and Prizes is amended by deleting paragraph (2).”). Thus with little if any meaningful debate before passing the bill (at the Tennessee Association of Realtors' urging), the legislature recently sent SB1160 as amended to the governor, who has made the bill law in Tennessee.

Not wanting to come across as opponents of price competition, it sounds like proponents of the bill, incredulously, are boasting of its purported pro-consumer justifications, none of which are cited in the law or, apparently, were meaningfully considered by either legislative body before passing the bill. Furthermore, both the state legislature and the governor chose to ignore the advice of the United States Department of Justice to reject the bill, the DOJ being one of the chief enforcers of the nation's antitrust laws that, along with the FTC, has no doubt heard similar "pro-consumer" justifications for such a prohibition from legislators and governors in other states.

Interestingly, I have come across an Arizona broker/blogger - apparently a traditional one mind you - that seems to acknowledge in a post that TAR's motives were anticompetitive and protectionist.

For what it is worth, I note that the law is limited to cash rebates, etc. I imagine that innovative Tennessee brokers will continue to find ways to effectively compete on price, much to the chagrin of those who fear to their core the idea of price competition.

1 comment:

  1. The Tennessee Real Estate Commission's (TREC) meetings are public record. Meeting minutes and video are posted to the Commission's website regularly. This provides a glimpse into the politics involved with the intriduction of the anti-rebate bill.

    A review of the public record would likely reveal that the Commission is tight with the Tennessee Association of Realtors (TAR) government liason and lobbyist. TREC was very familiar with the previous US DOJ action against the Kentucky Real Estate Commission, and had received direct warnings from the DOJ concerning their anti-rebate rule.

    Due to the state action immunity docterine, the state itself would be immune from a DOJ suit whereas the Commission would have liabililty for an anti-competitive rule. Aware of the state action immunity docterine, TREC voted to go forward with the deletion of the rule. The timeframe for the rule changes was quite lenghty. To pacify the DOJ, TREC adopted a policy to not enforce the rule until the actual rule changes could occur.

    During that legislative session a caption bill was introduced that would later include this anti-rebate language. It was TAR's lobbyist who spoke on behalf of the bill sponsor when discussed in commitee.

    A letter from the DOJ explained the anti-competitive impact of this bill to Tennessee Speaker of the House, Jimmie Naife. That letter was ignored.

    Everyone in state politics involved with this bill was aware of its anti-competitive implications. The state's primary concern was for the dollars and votes generated by the real estate lobby.