Estate agents under CMA scrutiny for collusion
Author: Simon Barnes, Angela Gregson and Louisa Mottaz
Applies to: UK wide
The UK competition regulator, the Competition and Markets Authority (CMA) has opened a new investigation into the residential estate agents' market. It has not yet named the companies involved.
The decision to open a new investigation was prompted by information received by the CMA during a previous investigation into anti-competitive agreements between six real estate agents in Burnham-on-Sea. In that case, five of the companies were fined £370,084 in May last year for agreeing to fix prices on the commission they charged for their services.
The CMA found that, at a meeting in early 2014, the Burnham-on-Sea estate agents had met to "have a chat about fees". At the meeting, they agreed to charge sellers a minimum commission rate of 1.5% for residential property sales. According to the CMA's findings, the businesses' aim was "to drive the fee level up" and make the agents "as much profit as possible". To enforce the price fixing, the businesses even established a rota, taking it in turns to police the cartel. The Burnham-on-Sea price fixing arrangements came to the CMA's attention when one of the six cartelists blew the whistle to obtain leniency from fines and the CMA subsequently launched its investigation.
It is perhaps not surprising that the CMA has decided to launch another investigation into the real estate industry; the CMA's first investigation into this sector, which concluded in May 2015, involved estate agencies that had agreed with one another that they would bargain collectively with the area's local newspaper, the Star Courier, in relation to buying advertising space, and they agreed with one another not to include, in their respective advertisements in the Star Courier, details of their fees or commission rates, or make any direct or indirect references to their fees, commission rates, promotions, discounts or special offers, or any other value proposition. The CMA concluded that the agents had, in effect, agreed that they would not use their advertising in the Star Courier to compete with one another on price.
Following the Star Courier and Burnham-on-Sea decisions, the CMA issued further guidance to the estate agency sector, with a clear message: be aware of the competition rules and take steps to comply, or else face the risk of investigation and sanctions. The opening of this new investigation clearly shows that the CMA is serious about enforcement in this sector but it also explained on its website that the investigation is still at an early stage and that assumptions should not be made as to whether the companies under investigation did in fact breach the competition law rules.
The CMA will now proceed to gather information on the case by reviewing documents and speaking to employees of the companies concerned, in order to make a decision in September whether to formally open an infringement case.
Again, the message to businesses in the estate agency sector is clear: ensure you and your staff understand and comply with the competition law rules, or otherwise face the risk of CMA investigation.
If you have any questions or concerns about the issues mentioned above, please do not hesitate to contact us.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.