The Competition and Markets Authority has exposed what really went on in the latest estate agency cartel case.
The ruling was made back in May, but the CMA has now made public the details.
These show that a group of six agents in Burnham-on-Sea, Somerset, had a meeting where they agreed to fix their minimum commission rates to 1.5%.
The six, says the CMA report, potentially had 95% local market share between them.
“With a bit of talking and cooperation between us, we all win!” was their rationale.
Email evidence also explained how “the aim of the meeting…will be to drive the fee level up to 1.5%” and “…it’s really important we all give it the priority it deserves (making as much profit as possible!)”
The estate agents took steps to ensure the minimum fee agreement was kept to by emailing each other when a specific issue arose, such as accusations of “cheating” on their agreement.
One email read: “If anyone is having problems with our agreement, […] let’s talk about it […] rather than going back to slashing fees!”
Each business also took it in turn to ‘police’ the cartel to make sure everyone was sticking to the agreement – parties were to report any issues “to the policeman immediately and get the matter resolved rather than let it fester and risk the agreement falling apart!!!!”
One email to the ‘policeman’ read: “It appears that [another cartel member] are being naughty tinkers […] I am working on proof […] with it going quieter, we just need to make sure we keep these fees up, eh!!!”
The cartel broke up in 2015, after publicity about an earlier cartel case, in north-east Hampshire and an adjoining part of Surrey.
The Burnham-on-Sea agents were not entirely happy to see their own arrangement go.
One email read: “I just cannot see, why on earth, any one of us would think it is a good idea to give ourselves a 25%-30% pay cut for doing exactly the same job that we were doing last year???
“We all know from recent experience that with a bit of talking and co-operation between us, we all win!!!”
A few of the estate agents thought about re-starting the cartel. One even weighed up the financial benefits it had gained from the cartel against the amount it could be fined by the CMA if it was caught, but decided it wasn’t worth the risk.
The CMA imposed fines totalling £370,084 on five of the six estate agents involved in this cartel.
The agents fined were Abbott and Frost Estate Agents Ltd, Gary Berryman Estate Agents Ltd (and its ultimate parent company Warne Investments Ltd), Greenslade Taylor Hunt, Saxons PS Ltd; and West Coast Property Services (UK) Ltd.
The sixth agent, Annagram Estates Ltd (trading as CJ Hole), was not fined as it was the first undertaking to confess its participation in the arrangement under the CMA’s leniency policy and co-operated with the CMA’s investigation.
Greenslade Taylor Hunt, a well known independent chain in the west country, has always made it clear that it was a partner in the Burnham-on-Sea area who decided to participate in the cartel, without the knowledge of other partners.
Yesterday, Greenslade Taylor Hunt partner and chairman Charles Clark told EYE: “The partner remains with us, though was severely sanctioned and now has a much changed role outside the residential agency.”
The 143 page ruling now made public can be found here:
A short case study revolving around the Burnham-on-Sea case has also been published and ends with advice to agents.
https://www.gov.uk/government/case-studies/estate-agents-cartel-case-study
So, a group of independent companies setting and agreeing a fixed price for a service is illegal? Glad we’ve cleared that up.
Dom and Ducky, remind me again of which PLC and its independent franchisees set and agree fees between them.
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As much as I think a certain company does bend or indeed snap the rules is this not an accusation too far?
If they are bound by a franchise licence than they need to adhere to it?
Is McDonald’s, Subway etc price fixing as well?
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My take on the law is based on the following. Franchises can and should have agreements but must, in law, be free to set their own prices (go into a motorway McDonalds and I’ll bet you won’t pay the same price as the one down the road and, prices will vary between car dealers for the same car around the UK).
1 – https://www.gov.uk/government/case-studies/competition-law-case-studies
2 – https://www.gov.uk/government/publications/competing-fairly-in-business-at-a-glance-guide-to-competition-law
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Actually, smile please, McDonalds have a flexible pricing policy from what I see.
The same item – Happy Meal in this instance – can vary in cost by around 30p in outlets where I am (NE).
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Mcdonalds are also free to change the names , for example , a Big Mac meal in Newcastle is called “wor Dinna”
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You may find this interesting too https://www.hamiltonpratt.com/franchising-uk/
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If you listen carefully, you can hear chins hitting desks all over the UK right now.
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Question for Chris:
Is it is illegal to fix mindbogglingly high conveyancing referral fees across the board that appear to be part of a deferred payment fee as the user has to pay a £360 fee if they choose not to continue to use it?
Do TV adverts promote any suggestion of a deferment fee?
As a separate company, with those fees, can you imagine how ezie it would be to make huge profits without having to pay dividends to the host companies ordinary shareholders?
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If you contact the CMA, they will be happy to advise and respond swiftly.
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Surely a franchise is different to a group of independents. There are some very big dangers however both both types of price fixing.
The CMA is more concerned with consumer rights than business models. If the public invite an agent out then they want the best fee that agent is willing to offer to secure their property. If they invite out what appears to be, or unbeknownst to them is basically the same firm trading under different names in the same town who have all been ‘coached’ into fee fixing then that actually is a problem in the industry. Just like agents getting together to price fix.
If your talking about a franchise model which trades under the same brand then too right they should set their fee’s between them. After all, why would the public invite the same company out twice to value their home?
I’m a local agent, not a franchise, not an ‘onliner’ and not a ‘part servicer’. Good independent agents should focus on getting together to offer the public a better service so they want to use us, not get together in a market with 95% share and specifically work together to extract more money out of customers through price fixing.
No one likes a bully, and that includes bullying customers as well as competitors. If a customer fails to see why they should pay you more than another agent then that’s what you should focus on! Spend that time in price fixing meetings calling vendors with updates and buyers about houses, that’s what makes you worth the extra.
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If you read the CMA guidelines, the law on franchises and franchises is quite clear.
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It seems to me that the major factor here was that the cartel “potentially had 95% local market share between them”. This gave clients no real choice and therefore undermined competition.
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A large estate agency network could have a fee policy across their business as would any single office independent. Franchises operate with individual companies trading as a single brand and have flexibility to charge what they wish, I am not aware of any estate agency franchise operation (in the UK) that set fees across their network
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This happens in Mid Herts area. The local independents agree fee levels. They even set up their own property newspaper (in rival to the local rag) to try and drive anyone not in agreement out of business and yet the CMA did nothing when it was reported.
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If all agents valued their industry and the service they provide they would not offer ridiculously cheap fees in the first place.
When you look at what employees in other industries earn for a fraction of the work an agent does, it’s clear we need to stand up for ourselves and start fighting back.
Stand firm on your fees, appreciate yourselves, and stop being bullied into working for nothing!
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If someone can afford to offer cheap fees then good for them. If they offer them and can’t afford to then they will go out of business. I suppose it depends where you can make savings in the business model to pass on to the customer.
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“Warne investments Ltd. and all of its subsidiaries are committed to conduct our operations in full compliance with U.K and E.U competition law and rules. The W.L Group recognises the value of healthy competition and the benefits it brings to our customers. Fair competition also helps us to become better, more efficient, client focused, innovative and provide a higher quality service”
From the Berryman web site.
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I am with Chris on this one. A group of agents, clearly having had enough of the race to the bottom, decided they wanted a fair days pay for a fair days graft. IMHO 1.5% is actually towards the lower end (our standard sole is 2%). So what?
If they had 95% market share, the consumer still and the choice which agent to use. Why should the CMA encourage a situation that simply means a potential drop in service standards so agents can save a few hundred quid in order to compete on fees?
I just don’t get it but am open to enlightenment!
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If the prices being paid by 95% of the market are being set in an anti-competitive way then it is wrong.
I don’t know why Chris always brings up franchises when a cartel is discussed. Unless the franchises represent a high percentage of the market then it’s irrelevant.
As usual, Chris is missing the point of the legislation. It’s the proportion of the market that is the significant factor.
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If you take a little time to read the advice and examples on the CMA wesbite, you will see a perfect example for the franchise market: Mercedes Benz (link below).
These franchised dealerships had non-competing areas and did not have 95% of the market (or anything like). By the way, the size share of a market has nothing to do with the legality of otherwise of price fixing or cartel type activity. They are simply illegal activities, full stop.
http://webarchive.nationalarchives.gov.uk/20140402171711/http://oft.gov.uk/news-and-updates/press/2013/16-13
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Chris,
It was certainly 95% of the Mercedes Vans market which you can see as being anti-competitive for those people looking to buy a Mercedes Van.
Common sense dictates that market share and price would be factors taken into account when deciding whether to use valuable resources to investigate and pursue a franchise. Probably also the degree of collusion. Also, despite what they say in the reference Geography must also be a factor
Just reading the article above again, it appears that at least one of the Agents who colluded was not only ripping the public off but was also cheating on his co-conspirators. All very distasteful.
Do you know if much of this goes on? Why do you bring up the topic of franchises when these cartels are fined?
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As usual, we disagree. Let’s see what transpires, shall we?
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