CADE opens an Administrative Proceeding to investigate wrongdoings in the real estate brokerage market

On  October 28, The General Superintendence of the Administrative Council for Economic Defense – CADE has opened an Administrative Proceeding against the Brazilian Federal Council of Real Estate Brokers (COFECI, for its acronym in Portuguese) and 22 Regional Brokerage Councils (CRECIs for their acronym in Portuguese) from different Brazilian regions for allegedly inducing their members to standardize commercial practices in the real estate brokerage market  (Administrative Proceeding 08700.004974/2015-71)  

The investigation – initiated to ascertain whether real estate brokerage associations  have violated the Brazilian Competition Law – is also verifying the existence of cartels comprising  real estate brokerage trade unions and  companies that purchase, sell, rent and manage real estate properties in condominiums in the states of Goiás, Mato Grosso do Sul, Rondônia, Paraíba and Rio de Janeiro.

According to the evidence obtained by the antitrust authority, COFECI has published normative resolutions imposing professional scales of charges, which were devised by real estate brokerage trade unions and validated by the CRECIs. There is also evidence of price fixing of charges that can be validated by the Regional Councils to charge fees in rental contracts and in contracts that require exclusivity clauses for hiring real estate brokerage services.

CADE’s General Superintendence has also noted that 22 CRECIs have monitored real estate brokerage companies’ compliance to the prices imposed. Some of the CRECIs have opened disciplinary proceedings to investigate alleged ethical violation against brokers who did not follow the professional scales of charges

Moreover, the evidence indicates that the brokerage trade unions and associations may have jointly defined the aforementioned scales of prices that were validated by the CRECIs.

According to CADE’s General Superintendence, if proven, such practices are potentially anticompetitive, since they standardize and enlarge the fees charged by real estate brokers to the detriment of consumers and of brokers who seek a free negotiation with their clients.   

The respondents have been ordered to present their defense. After the Administrative Proceeding’s instruction phase, the General Superintendence will issue an opinion either in favor of condemning or filing the case. The opinion will then be submitted to CADE’s Tribunal, which is responsible for the final decision. If condemned, the parties may have to pay fines ranging from BRL 50 thousand to BRL 2 billion.