GovWire

Case study: Estate agents fined over 600,000 for illegal price fixing

Competition Markets Authority

February 25
09:16 2020

In December 2019, 4 estate agents were found to have broken competition law by agreeing to fix and maintain a minimum level of commission fees to be charged for the sale of residential properties over a period of almost 7 years. Their arrangement denied local residents the chance to shop around for the best possible commission rates when selling their homes.

This was the CMAs third infringement finding in the real estate sector in recent years.

What happened

The price fixing arrangement took place between at least September 2008 and May 2015. During this time, the estate agents conspired to set and maintain minimum commission rates for the sale of residential properties in Wokingham, Winnersh, Crowthorne, Bracknell and Warfield. Although the estate agents were relatively small businesses, they were leaders in the Berkshire areas residential market at the time.

The estate agents implemented their illegal arrangement primarily through secret meetings where they discussed sensitive information. One director wrote via email:

The company average fee is now around 1.8%. I am willing to do whatever it takes to get this sorted. Weve had meetings over the last few weeks with other agents [] and there is at last a general consensus that something should be done.

Maintaining the arrangement

The agents used various methods to maintain their arrangement, including monitoring and internal reporting. For a time, the 4 agents also agreed a system of penalty payments for those who broke it.

Several of the agents were concerned that their conduct might be a cartel yet still went ahead. A cartel, in simple terms, is where rival businesses agree not to compete, or to reduce competition, between one another for example on price. One agent incorrectly reassured another:

This is obviously not a cartel as the public has plenty of choice in terms of cheap, poorly-performing agents to go to. This is not a fixed fee either, but a minimum fee.

Despite not always complying with the arrangement, all 4 met to discuss their fee levels and none of them at any time took any proactive steps to end their involvement or to distance themselves from it. The arrangement gradually broke down by May 2015.

How this broke the law

Competition law exists to ensure businesses compete fairly and customers are protected from getting ripped off. Price fixing cartels are among the most serious kinds of anti-competitive behaviour as they cheat customers by forcing up prices and reducing quality and choice.

By fixing minimum levels of commission rates, the estate agents denied local people selling their homes the chance of getting the best possible deal.

What action was taken

Three agents were fined a total of 605,519. As the fourth agent brought the illegal activity to the CMAs attention and fully cooperated with the investigation, it received immunity from fines and director disqualifications under the CMAs Leniency Programme. Under the programme, another agent had their fine reduced by 50% and gained immunity from director disqualification.

Lessons learnt

  • do not discuss what you or your competitors intend to charge
  • just receiving or sharing sensitive commercial information is likely to be illegal
  • make it very clear you will not participate in illegal arrangements or discussions about them and take active steps to distance yourself from the outset
  • all anti-competitive arrangements written or verbal, formal or informal are equally illegal, and the CMA has sophisticated means of tracking down evidence
  • there are no excuses for illegal anti-competitive activity - ignorance of the law is not one either
  • if 2 competitors participate in an anti-competitive arrangement, this is sufficient to make it illegal - it doesnt matter if not all competitors in the market participate
  • if you are a small business competition law still applies to you

What you can do

If you think your business has been involved in illegal activity, you should notify the CMA as soon as possible you may benefit from lenient treatment by being the first to come forward to the CMA. We also recommend that you seek independent, legal advice.

If you have information on other companies in your industry that may have been involved in an anti-competitive arrangement, report it to us.

For more information, including how best to report a cartel, visit our Cheating or Competing campaign page.

Published 25 February 2020

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