By Jeffrey May, J.D.
The Louisiana Real Estate Appraisers Board, a state agency controlled by licensed real estate appraisers, unreasonably restrained price competition for real estate appraisal services provided to appraisal management companies (AMCs) in Louisiana, the FTC alleged in a complaint announced today. According to the agency, the challenged conduct is not shielded from antitrust attack by the "state action" defense because independent state officials had not supervised the board’s discretionary actions. This is the Commission’s first administrative complaint against a state board since the U.S. Supreme Court issued its 2015 decision in N.C. State Bd. of Examiners v. FTC (In the Matter of Louisiana Real Estate Appraisers Board, FTC Dkt. 9374).
At issue is a Louisiana appraisal board regulation implementing a requirement under federal and Louisiana law that AMCs pay appraisers a "customary and reasonable" fee for real estate appraisal services. The regulation specifies how AMCs must comply with the customary and reasonable fee requirement. Under the regulation, AMCs must compensate appraisers at a rate determined by one of three methods: (1) an AMC may use a survey of fees recently paid by lenders in the relevant geographic area; (2) an AMC may use a fee schedule established by the board; or (3) an AMC may identify recently paid fees and adjust this base rate using six specified factors. By requiring one of these three methods, the board prevents AMCs and appraisers from arriving at appraisal fees through bona fide negotiation and through the operation of the free market, according to the agency.
The board also has illegally restrained price competition in enforcing the regulation by effectively requiring AMCs to match or exceed appraisal rates listed in a published survey of median fees paid by lenders, the agency alleged. The complaint details actions against AMCs that followed complaints from appraisers over low fees.
The board’s regulation purportedly follows federal efforts to stop undue pressure placed on appraisers from lenders or other parties with financial interests in mortgage transactions. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included provisions intended to ensure that appraisers would operate independently. However, this did not prevent antitrust challenges. The Dodd-Frank Act included an "antitrust savings clause," clarifying that the Act did not displace generally applicable antitrust principles, including the prohibition on unreasonable agreements in restraint of trade, the Commission noted.
According to the agency, federal implementing rules do not require states or state appraiser licensing agencies to impose standards for customary and reasonable fee requirements beyond what federal law provides, or to set customary and reasonable fees at any particular level. Further, Louisiana state law does not require the board to impose standards for customary and reasonable fee requirements beyond what federal law provides, or to set customary and reasonable fees at any particular level.
Acting Bureau of Competition Director’s comments. In announcing the action, the FTC took steps to avoid appearing overly aggressive in its enforcement efforts against state boards.
"The Bureau is committed to the judicious exercise of its enforcement discretion as mapped out by the Supreme Court in the North Carolina State Board of Dental Examiners case," said Acting FTC Bureau of Competition Director Abbott (Tad) Lipsky. "The great preponderance of state board activity across the country occurs without significant antitrust concern, and the Commission will respect the authority of such boards when they operate within the defined scope of antitrust law." Lipsky noted that the complaint "shows that the Commission remains vigilant and will exercise its prescribed authority when economically sound and otherwise consistent with the public interest."
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