On May 30, 2017, the Federal Trade Commission (“FTC”) filed a complaint against the Louisiana Real Estate Appraisers Board (“Louisiana Board”) alleging that the Louisiana Board unreasonably restrained price competition for appraisal services in Louisiana, thus essentially fixing the price that appraisal management companies (“AMCs”) would have to pay appraisers, in violation of federal antitrust law.
The Dodd-Frank Act requires AMCs to pay appraisers “at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.” However, the Dodd-Frank Act includes an “antitrust savings clause” which provides “nothing in this Act . . . shall be construed to modify, impair, or supersede the operations of the antitrust laws.” The FTC argues in its complaint that the “antitrust savings clause” within the Dodd-Frank Act shows Congress did not intend this “customary and reasonable standard” to displace generally applicable antitrust principles, including the prohibition on unreasonable agreements in restraint of trade.
Back in 2013, the Louisiana Board adopted a regulation that required AMCs to pay appraisers a “customary and reasonable” fee for real estate appraisal services. Under the regulation, the AMCs must develop its “customary and reasonable fee” by one of the following three methods: (1) a survey of fees recently paid in the geographic area; (2) a fee schedule developed by the Louisiana Board; or (3) by identifying recently paid fees and adjusting the base rate using six specific factors. The Dodd-Frank Act itself permits, but does not require, AMCs to use any of these methods. The FTC argues that by requiring one of these three methods the Louisiana Board prevents AMCs and appraisers from arriving at an appraisal fee through bona fide negotiation.
Moreover, the FTC argued that the Louisiana Board restricted price competition even further by commissioning and publishing a price survey, and then bringing enforcement actions against AMCs who did not pay at or above the commissioned survey price. Finally, the FTC argues that independent state officials have not supervised the Louisiana Board, which is composed primarily of individual fee appraisers, resulting in the Louisiana Board having unbridled discretion.
The FTC’s entire complaint can be found here: https://www.ftc.gov/system/files/documents/cases/d09374louisianareappraiserscomplaint.pdf.