Humber/Ontario Real Estate Course 1 Exam Practice

During a charity event, four real estate agents agree to charge a minimum 6% commission for any residential transaction. Which term best describes this under the Competition Act?

1. Bid-Rigging

2. Conspiracy

3. False Advertising

4. Market Allocation

5. Price Maintenance

6. Unfair Trade

The correct answer is: Conspiracy

The situation described involves four real estate agents collectively agreeing to set a minimum commission rate for their services, which is a form of collusion. This sort of agreement can be categorized as conspiracy under the Competition Act, as it entails an agreement between multiple parties to engage in practices that restrict competition. When agents agree on a minimum commission, they are essentially coordinating their pricing strategies, which can hinder competition and lead to inflated costs for consumers. Such conduct is typically viewed unfavorably in competitive markets, as it violates the principles of free trade and consumer choice. In contrast, while other terms may resonate with aspects of the scenario, they do not precisely capture the coordinated behavior exhibited by the agents. For example, bid-rigging typically involves manipulating the outcome of competitive bidding processes, and price maintenance refers to situations where sellers set minimum prices for goods across a market. The concept of market allocation pertains to agreeing to divide markets to avoid competition rather than setting a commission rate.