UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF KENTUCKY
UNITED STATES OF AMERICA,
KENTUCKY REAL ESTATE COMMISSION,
| Civil Action No. 3:05-cv-00188-S
WHEREAS, Plaintiff, United States of America, filed its Complaint
on March 31, 2005, and Plaintiff and Defendant, by their respective
attorneys, have consented to the entry of this Final Judgment without
trial or adjudication of any issue of fact or law, and this Final Judgment
shall not be evidence against or an admission by any party regarding
any issue of fact or law;
AND WHEREAS, Defendant agrees to be bound by the provisions of this
Final Judgment pending its approval by the Court;
AND WHEREAS, Plaintiff requires Defendant to take certain actions
for the purpose of remedying the loss of competition alleged in the
AND WHEREAS, Defendant has represented to the United States that the
actions required below can and will be made and that Defendant will
later raise no claim of hardship or difficulty as grounds for asking
the Court to modify any of the provisions contained below;
NOW THEREFORE, before any testimony is taken, without trial or adjudication
of any issue of fact or law, and upon consent of the parties, it is
ORDERED, ADJUDGED, AND DECREED:
This Court has jurisdiction over the subject matter of and each
of the parties to this action. The Complaint states a claim upon which
relief may be granted against Defendant under Section 1 of the Sherman
Act, as amended, 15 U.S.C. § 1.
As used herein, the term:
- "Defendant" means the Kentucky Real Estate Commission, its successors
and assigns, and its commissioners, directors, officers, managers,
committees, agents, and employees.
- "Disciplinary Action" means:
- the Defendant's revocation or suspension of, or refusal to grant,
a license to provide Real Estate Brokerage Services in Kentucky;
- the Defendant's imposition of a reprimand, fine, probation,
or other penalty or condition; or
- the initiation, by the Defendant or at its request, of an administrative,
criminal, or civil proceeding.
- "Enforcing" a Regulation means any manner--formal or informal--in
which Defendant requires compliance with any Regulation, including,
but not limited to, investigations or hearings of purported violations
of the Regulation, and any Disciplinary Actions for any violation
of the Regulation.
- "Inducement" means money, a free gift, a prize, or any other thing
of value that a Licensee would offer a potential client or customer.
- "Licensee" means any person who is licensed by Defendant under
chapter 324 of the Kentucky Revised Statutes or any future recodification
thereof and legally can perform acts of real estate brokerage, and
any person who legally can perform acts of real estate brokerage
while acting under the supervision of a licensed broker.
- "Licensee Price" means any commission, fee, or charge that the
Licensee offers to charge, or does charge, for its Real Estate Brokerage
Services, and includes any discounts.
- "Price Advertising" means advertising information about the Licensee
Price or any discount, Rebate, or Inducement.
- "Real Estate" means real property, and includes timeshares, options,
leaseholds, and other interests less than leaseholds.
- "Real Estate Brokerage Services" means any service that only a
Licensee is authorized to provide pursuant to applicable Kentucky
statutes and regulations.
- "Rebate" means a payment of monies or anything of value by, or
on behalf of, a Licensee to a client or customer (or to a third
party authorized by the client or customer to receive the payment)
that is in connection with the provision of Real Estate Brokerage
Services. Examples of Rebates directed to third parties include,
but are not limited to, payments to charities, home inspectors,
and moving services. A Rebate does not include compensation paid
for Real Estate Brokerage Services to any third party who is not
licensed in Kentucky to perform such services; this Final Judgment
does not authorize a client or customer to permit or direct such
payments to an unlicensed third party for performing such services.
- "Rebate Ban" means any Regulation, including, but not limited
to, the Defendant's Regulation at 201 Ky. Admin. Reg. 11:011, Section
1(5) and 201 Ky. Admin. Reg. 11:121, Section 1(2), that might prevent
Licensees from offering or using any Licensee Price, discounts,
Rebates, or Inducements, or using any Price Advertising to notify
consumers of any Licensee Price, discounts, Rebates, or Inducements.
- "Regulation" means any Kentucky administrative regulation, and
includes any formal or informal policy, restriction, rule or legal
interpretation adopted or applied by Defendant.
This Final Judgment applies to the Kentucky Real Estate Commission,
as defined above, and all other persons in active concert or participation
with it who receive actual notice of this Final Judgment by personal
service or otherwise.
IV. PROHIBITED CONDUCT
Defendant is enjoined from, directly or indirectly, or through
any Regulation, Disciplinary Action or other conduct:
- Entering into, continuing, maintaining, or renewing any agreement,
contract, or Regulation to fix, establish, raise, stabilize, suppress,
eliminate, regulate, or maintain the level of commissions, discounts,
Rebates, Inducements, or the Licensee Price;
- Prohibiting, restricting, impeding, or discouraging any Licensee
from Price Advertising or from offering any Licensee Price, discounts,
Rebates, or Inducements;
- Investigating any Licensee for Price Advertising or for offering
any Licensee Price, discounts, Rebates, or Inducements;
- Threatening or taking any Disciplinary Action against any Licensee
for Price Advertising or for offering any Licensee Price, discounts,
Rebates, or Inducements;
- Enforcing the Rebate Ban; or
- Inducing, urging, encouraging, or assisting any person or organization
to take any of the actions prohibited by this Section of the Final
V. OTHER ACTIONS
- Until the Rebate Ban is repealed and eliminated, Defendant shall
treat the Rebate Ban as preempted by the federal antitrust laws
and null and void.
- Defendant shall address the substance of this Final Judgment--including
that Licensees are free to compete by offering any Licensee Price,
discounts, Rebates, or Inducements--in the training or educational
materials that Defendant prepares, reviews, or approves for the
following courses (including any course in the future, which may
have a different name, but covers substantially the same topics):
the Kentucky Core course, the Brokerage Management course, and a
- All Disciplinary Actions--to the extent they related to the offering
of any discounts, Rebates, or Inducements--shall be null and void.
Any records in the Defendant's possession, custody, or control relating
to a Licensee subject to such Disciplinary Action shall reflect
- Within thirty (30) days from the filing of the proposed Final
Judgment, Defendant shall notify in writing:
- each Licensee who--as of the date the proposed Final Judgment
is filed--is on probation or whose license is suspended or revoked
for offering a discount, Rebate, or Inducement, that the license
may be reinstated, at the Licensee's request, to the extent that
the Licensee otherwise meets the contemporary licensing requirements
under the Kentucky Revised Statutes.
- each Licensee, who--as of the date the proposed Final Judgment
is filed--is being investigated or subject to a Disciplinary Action
for offering a discount, Rebate, or Inducement, that such investigation
or action--to the extent it relates to the offering of discounts,
Rebates, or Inducements--has ceased with no further Disciplinary
Action taken. Any records in the Defendant's possession, custody,
or control relating to the affected Licensee shall reflect the
- Within one-hundred-and-twenty (120) days from the filing of this
proposed Final Judgment, Defendant shall display prominently on
the first page of its newsletter the following language:
On [the filing date], under the terms of a settlement with the
U.S. Department of Justice Antitrust Division, the Kentucky Real Estate
Commission agreed to stop enforcing regulations that restricted the use
and advertisement of rebates, inducements or discounts by KREC licensees.
The proposed Final Judgment effecting the settlement and a letter of explanation
were mailed to each KREC licensee. Any licensee who did not receive this
mailing may request another copy. Links to the proposed Final Judgment
and the explanatory letter can also be found on the "Real Estate Licensing
Laws in Kentucky" and "Legal Information" pages of KREC's website, http://www.krec.ky.gov/.
- Within thirty (30) days from the filing of this proposed Final
Judgment, Defendant shall mail or deliver a copy of this proposed
Final Judgment, under cover of the letter attached hereto as "Appendix
A," to each active Licensee.
- For a period of three (3) years from the filing of this proposed
Final Judgment, Defendant shall mail or deliver a copy of this proposed
Final Judgment, under cover of the letter attached hereto as "Appendix
- each escrowed Licensee (those who requested the Defendant in
writing to place its license in escrow), within forty-five (45)
days when such escrowed Licensee seeks to reactivate its license;
- each new Licensee of Defendant within forty-five (45) days of
each such person's acceptance by Defendant as a Licensee.
- Within thirty (30) days from the filing of this proposed Final
Judgment, and for a period of sixty (60) days thereafter,
- Defendant shall prominently publish this proposed Final Judgment
and the letter attached hereto as "Appendix A" on the home page
of its website, http://www.krec.ky.gov/.
- After such sixty (60) day period, and for a following period
of three (3) years, Defendant shall maintain a link from its "Real
Estate Licensing Laws in Kentucky" and "Legal Information" web
pages, or their equivalent, to the Final Judgment and the letter
attached hereto as "Appendix A" in a manner that provides reasonable
notice to interested parties.
- Defendant shall notify Plaintiff at least thirty (30) days prior
to any proposed change to its Regulations that may affect Defendant's
compliance obligations arising out of the Final Judgment.
- As soon as Defendant is aware of any proposed change to any statute
or executive order that may affect its compliance obligations arising
out of the Final Judgment, Defendant shall immediately notify Plaintiff.
VII. LIMITING CONDITIONS
VIII. COMPLIANCE INSPECTION
- With the exception of such actions that are prohibited elsewhere
in this Final Judgment, nothing shall alter the Defendant's general
authority to adopt and enforce reasonable Regulations, or to take
Disciplinary or other action designed to prevent violations of the
Kentucky Revised Statutes. Such authority includes the right to
- advertising that is fraudulent, false, deceptive, or misleading
within the meaning of Kentucky Revised Statutes, Chapter 324,
- any promise, assertion, representation, or statement of fact
that is false, deceptive, or misleading; or constitutes under
Kentucky law an otherwise illegal lottery scheme, whereby there
is the payment of valuable consideration for the chance to receive
a prize; or
- for the protection of the client or customer, failure by Licensees
to disclose in writing to their clients or customers the terms
of any offered Rebates or Inducements.
IX. RETENTION OF JURISDICTION
- For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should
be modified or vacated, and subject to any legally recognized privilege,
from time to time duly authorized representatives of the United
States Department of Justice, including consultants and other persons
retained by the United States, shall, upon written request of a
duly authorized representative of the Assistant Attorney General
in charge of the Antitrust Division, and on reasonable notice to
Defendant, be permitted:
- access during Defendant's office hours to inspect and copy,
or at Plaintiff's option, to require Defendant to provide copies
of, all books, ledgers, accounts, records and documents in the
Defendant's possession, custody, or control, relating to any matters
contained in this Final Judgment; and
- to interview, either informally or on the record, Defendant's
commissioners, officers, employees, or agents, who may have their
individual counsel present, regarding such matters. The interviews
shall be subject to the reasonable convenience of the interviewee
and without restraint or interference by Defendant.
- Upon the written request of a duly authorized representative of
the Assistant Attorney General in charge of the Antitrust Division,
Defendant shall submit written reports or interrogatory responses,
under oath if requested, relating to any of the matters contained
in this Final Judgment as may be requested.
- No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person
other than an authorized representative of the executive branch
of the United States, except in the course of legal proceedings
to which the United States is a party (including grand jury proceedings),
or for the purpose of securing compliance with this Final Judgment,
or as otherwise required by law.
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and directions
as may be necessary or appropriate to carry out or construe this Final
Judgment, to modify any of its provisions, to extend the duration of the
Final Judgment, to enforce compliance, and to punish violations of its
X. EXPIRATION OF FINAL JUDGMENT
This Final Judgment will expire ten (10) years from the date of its entry,
but only if the Rebate Ban has been repealed and eliminated.
For purposes of this Final Judgment, any notice or other communication
shall be given to the person at the address set forth below (or such
other addresses as the recipient may specify in writing):
For the United States:
Litigation III Section
U.S. Department of Justice
325 Seventh Street, N.W., Suite 300
Washington, D.C. 20530
For the Defendant:
Lee B. Harris
Kentucky Real Estate Commission
10200 Linn Station Road, Suite 201
Louisville, KY 40223
With a copy to:
John S. Reed
David J. Hale
Reed Weitkamp Schell & Vice PLLC
500 West Jefferson Street, Suite 2400
Louisville, KY 40202-2812
XII. PUBLIC INTEREST DETERMINATION
Entry of this Final Judgment is in the public interest.
Court approval subject to procedures
of Antitrust Procedures and Penalties
Act, 15 U.S.C. § 16
United States District Judge
(Letterhead of the Kentucky Real Estate Commission)
The Kentucky Real Estate Commission, under the terms of a settlement
with the U.S. Department of Justice, has agreed to stop enforcing regulations
that restricted the use and advertisement of rebates, inducements, or
discounts by you or any other licensee. A copy of the proposed Final
Judgment is enclosed.
In order that you may readily understand the terms of the proposed
Final Judgment, we describe below its essential provisions, although
you must realize that the proposed Final Judgment itself is controlling,
rather than the following explanation of its provisions:
- The Commission must allow you or any other licensee to offer customers
rebates, discounts, or other inducements. The Commission must also allow
you or any other licensee to use truthful and non-misleading advertisements
to notify consumers of rebates, inducements, or other discounts, which
you may choose to offer.
- The Commission will no longer enforce any ban against rebates,
discounts, or other inducements. Specifically, the Commission will not
enforce the regulation at 201 Ky. Admin. Reg. 11:011, Section 1(5) and
201 Ky. Admin. Reg. 11:121, Section 1(2), that, in the absence of the
proposed Final Judgment, had prevented you from offering rebates, discounts,
or other inducements.
- You and any other licensee are now free to compete by offering
consumers rebates, discounts, and other inducements.
- If you were disciplined for offering a rebate, discount, or other
inducement, then that disciplinary action shall be deemed null and void,
and the Commission will note that in its records.
Please note that the proposed Final Judgment does not alter the Commission's
authority to enforce its regulations generally and to prohibit advertising
or other conduct that is fraudulent, false, deceptive, or misleading.
Moreover, licensees still cannot offer illegal lottery schemes. Also
enclosed are the relevant portions of a new Kentucky Administrative
Regulation filed July __, 2005. This regulation requires licensees to
disclose in writing to their clients and customers the terms of all
rebates and inducements.
| [appropriate Commissioner or officer]