5.3 Advertising, Antitrust, and Risk Management

Advertising rules

Real estate advertising is regulated to keep the public from being misled and to keep the responsible broker identifiable. Core national rules:

• Identify the brokerage. Most jurisdictions ban blind ads (ads that omit the licensed firm's name and make the firm look like a private party). A salesperson advertises in the name of the employing broker, not as an independent business.
• Be truthful. No false statements about price, availability, condition, financing, or features. The federal Truth in Lending Act (Regulation Z) triggers full disclosure of credit terms once a financing trigger term (such as a specific down payment, monthly payment, term, or APR) appears in an ad.
• No discriminatory content. Words, images, or targeting that indicate a protected-class preference violate the Fair Housing Act, including on social media and lead forms.
• Do-not-call, CAN-SPAM, and texting rules apply to telemarketing, email, and SMS solicitation.

"Puffing" - non-factual sales talk like "the best view in town" - is generally allowed. But a statement of fact that is false ("the roof is brand new") is misrepresentation, and silence about a known material defect can be actionable nondisclosure.

Antitrust law

The Sherman Antitrust Act (and related federal/state law) forbids competing businesses from rigging the market. Four violations dominate exam questions:

Price-fixing is a per se violation: it is illegal on its face, with no need to prove harm, and it can bring criminal penalties. Commission rates must be set by each firm independently. Even casual agreement is dangerous, which is why agents are trained to say "our firm's rate is X" rather than "the going rate is X."

Worked antitrust scenario

Three competing brokers meet for coffee. Broker A says, "None of us should go below 6%, and let's all refuse to show listings from that new 4% discount brokerage." Brokers B and C nod.

• The agreement to hold commissions at 6% is price-fixing - a per se Sherman Act violation.
• The agreement to refuse to show the discounter's listings is a group boycott - a second violation.
• No actual loss needs to be proven for the price-fixing charge; the agreement itself is illegal.
• Penalties can reach $100 million for a corporation and $1 million / 10 years for an individual under the Sherman Act, plus treble (3x) civil damages.

The correct exam reaction is to refuse to participate and document that each firm sets rates alone.

Risk management

Brokerages manage liability through prevention, documentation, and insurance:

1. Errors-and-omissions (E&O) insurance covers negligence and mistakes in professional services (it does not cover intentional fraud or criminal acts).
2. Full written disclosures - agency relationship, known material defects, lead-based paint (pre-1978 homes), and any licensee personal interest.
3. Documented procedures and supervision - standardized forms, deadlines, transaction checklists, and broker review reduce errors.
4. Stay in your lane - avoid the unauthorized practice of law (drafting custom contract clauses, giving legal opinions) and refer technical questions to inspectors, attorneys, lenders, or appraisers.

Trap: E&O insurance is not a license to be careless. It excludes intentional misconduct, fraud, and fair-housing or antitrust violations in many policies, so it is no substitute for honest, well-documented practice.

Telemarketing, CAN-SPAM, and the Do-Not-Call rules

Prospecting is heavily regulated, and the national exam expects the headline rules.

• The National Do-Not-Call Registry bars cold-calling registered consumers; an established business relationship (a past client) is a limited exception, and agents must scrub call lists.
• CAN-SPAM governs commercial email: every message needs a truthful subject line, a physical mailing address, and a working opt-out honored promptly.
• The Telephone Consumer Protection Act (TCPA) restricts autodialed and pre-recorded calls and texts; texting a consumer without prior express consent can bring statutory damages of $500 to $1,500 per message.

Worked numeric: An agent blasts 200 unsolicited automated texts. At the $500 minimum TCPA statutory penalty, exposure is 200 × $500 = $100,000 — before any treble enhancement for willful violations. The lesson the exam reinforces: get documented consent before automated outreach.

Misrepresentation, fraud, and the duty to supervise

Liability theories on the risk-management questions divide by intent.

A supervising broker can face vicarious liability for an affiliated licensee's acts within the scope of the brokerage relationship. This is why brokers impose written procedures, transaction checklists, and file review.

Worked scenario: A salesperson assures a buyer the home's square footage is "about 2,400" without verifying; the true figure is 2,050. The buyer overpays based on a price-per-square-foot calculation. This is negligent misrepresentation: the agent stated a material fact carelessly. The fix is to source figures from the appraisal, public records, or a measurement, and to disclose the source rather than guessing — and the supervising broker may share the liability for failing to train against it.