Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What is not allowed between brokerage firms in relation to commissions?

1. Discussions about commission strategies

2. Agreement on standard commissions

3. Price fixing agreements

4. Competition for clients

The correct answer is: Price fixing agreements

Price fixing agreements are not allowed between brokerage firms because they violate antitrust laws designed to promote fair competition in the marketplace. When firms come together to set a standard commission rate, it restricts competition and can lead to higher costs for consumers. Antitrust laws, including the Sherman Act, prohibit such agreements that can manipulate market prices and eliminate the natural competitive environment where firms set their prices independently based on their business models and market conditions. Other activities, such as discussions about commission strategies or competing for clients, are typically permissible and can even be beneficial for fostering an open market. These practices can lead to innovation and better service for clients as brokers strive to attract more business. However, colluding to fix prices undermines the principles of free market competition, which is why that practice is prohibited.