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Agents in a fix
Real Insights - Property Update

Real Insights - Property UpdateIssue 19 | June 2017

Date
08 June 2017

Andrij Jurkiw Partner

This spring, five estate agencies in Somerset admitted to fixing minimum commission rates for residential property sales at 1.5%, preventing local home owners from obtaining better deals.


Agents in a fix

This spring, five estate agencies in Somerset admitted to fixing minimum commission rates for residential property sales at 1.5%, preventing local home owners from obtaining better deals. 

The price-fixing cartel, a blatant breach of competition law, lasted for about a year between 2014 and 2015.  Four of the agencies have admitted breaking the law and agreed to pay fines totalling £372,000.  These amounts were lower than they would have been because the companies concerned admitted liability and cooperated with the investigation.

The fifth agency avoided penalties because it was the first to confess its participation in the cartel.  The Competition and Markets Authority (CMA) have what they call a "leniency" policy, encouraging companies to self-report wrongdoing and so aid law enforcement.  However, the fifth agency has still been named and shamed in the press alongside the four other agencies. 

The CMA had previously warned the industry that it needed to "clean up its act", having uncovered instances of estate agents co-operating in relation to fees in local markets.  We reported on this in our July 2015 bulletin – see "Agents in cahoots".

This is not an issue limited to small agencies knowingly running businesses based on price-fixing, however.  Large organisations can occasionally discover irregular arrangements at a local level which have been carefully hidden from senior management.

When these come to light, the whole business suffers.  The fines imposed by the CMA have not been huge but the disruption and PR damage caused by the CMA investigation will have been significant for those agencies that have been investigated to date. 

Many businesses would benefit from a managed review of their operations, to ensure there are no questionable arrangements in place, for example in a local branch office.  Our competition law team can help by:

  • assisting clients with audits of email accounts
  • preparing questionnaires to be sent out to the business and reviewing the responses
  • drafting/reviewing compliance mechanisms; and
  • offering training to senior and junior staff.