Competition hearing told that ‘one other portal’ rule is ‘illegal’

Claims that a restriction on the number of portals estate agents can list properties on is competitive are “completely absurd”, a hearing was told yesterday.

However, the answer of the barrister representing agent Gascoigne Halman  as to why his client had signed up in the first place to OnTheMarket was apparently unclear.

The Competition Appeal Tribunal has been examining possible competition issues around OnTheMarket’s ‘one other portal’ rule imposed by Agents’ Mutual portal OnTheMarket after issues were raised by the Connells-owned brand Gascoigne Halman.

Counsel for both parties yesterday made closing submissions as the three-week public hearing came to a conclusion.

Paul Harris QC, for Gascoigne Halman, told the tribunal that it did not matter “one jot” that Gascoigne Halman had entered into the agreement voluntarily because it was “still illegal”.

He highlighted the “negative impact the central restriction has had on Gascoigne Halman”.

He said: “The central restriction is OOP.”

He added that it was “indisputable” that online property portals were a “key parameter of competition for estate agents.

“It goes without saying that the OOP rule has restricted the ability on the part of my client to compete on that parameter.”

Mr Harris claimed there had been a direct adverse effect, not just on his client, but on other estate agents with “further adverse effects further downstream”, namely to consumers.

Mr Justice Marcus Smith asked: “Why did your client sign up in the first place?”

Mr Harris replied:”Well, that is very easy to answer, sir.

“That is because the evidence has been quite clear, including from the estate agents adduced by my learned friend’s side, that they regard it as a means to restrict competition between them, therefore reduce their costs, and that’s the answer.

“There is an anti-competitive motive. It wasn’t just on the part of my client, but it was on the part of Mr Symons, Mr Wyatt and all the others.

“What they knew full well was that costs were rising and they didn’t like that. The last they wanted was for costs to rise, so how do you reduce cost as a collective? What you do is you collectively restrict your output, therefore you reduce what you’re spending on it.

“Per se there is nothing wrong with acting for profit. One wouldn’t expect Agents’ Mutual to be doing anything less, but what is completely wrong because of its anti-competitive object and its anti-competitive effect is to deliberately disrupt and change the structure of the market so as to reduce output by a means of restricting competition between yourself, and by that method to increase your bottom line.

“So that’s what’s pernicious. It is not going for profit per se, it is excluding other people from the market and then taking the economic rents that they would otherwise be able to obtain and instead bringing them back to your bottom line. So the people being excluded are here twofold; there are other members of the estate agency market, in particular non-traditional estate agents — we call them online agents, but you know what I mean. So otherwise they would be taking some money from the market, but we know from all the foundational documents and the business plans that is the last thing Agents’ Mutual wanted, so they are excluded

“The other one of course is the other portal, in particular…..

“There was an analysis of how much money was being generated by both Rightmove and Zoopla and the estate agents as a collective, through this mutual company, wanted to bring that back to them. They don’t want this money going out to the shareholders of Zoopla and Rightmove.

Mr Harris replied: “It’s because the evidence is quite clear that they regarded it as a means of restriction of competition.”

Mr Harris added that there was a clear “anti-competitive motive”.

He said: “It is not going for profit per se, it is excluding other people from the market.”

He added that Agents’ Mutual wanted to “bring [Rightmove and Zoopla’s profits] to them.

“They didn’t want money going to shareholders of Rightmove and Zoopla.”

He added that Agents’ Mutual wanted money brought back into the club of traditional agents.

Mr Harris said that, to win this case, Agents’ Mutual had to “establish actual pro-competitive benefits” of the OOP rule.

He said: “They have not established any pro-competitive benefits,” further stating that OOP restricted agents’ output because they were limited to a total two portals by OOP.

That meant that agents “are not putting out as much advertising”.

Mr Harris claimed that it “matters not one jot” to the outcome of the case whether Gascoigne Halman entered the arrangement with Agents’ Mutual voluntarily.

He said that 99.9% of Article 101 cases “are likely to be cases where there’s a voluntary entering into [an agreement].

“It doesn’t matter [whether it is] object or effect, it’s still illegal.”

Mr Harris said that terms of membership were not limited in time “at all by this membership agreement,” which was “fatal” to Agents’ Mutual’s case because Ian Springett said he thought it was put in place for a five-year period.

Responding to questions from the panel about hypothetical alterations to the contract, Mr Harris said: “I’m attacking the agreement as it is, I’m not attacking agreement that might be altered or changed in some way.

“My client is a contractual counterpart to the agreement as it is.

“That cannot be unilaterally waived on the part of Agents’ Mutual.”

He said an amendment was “by definition a new contract provision.

“My client has not agreed to changing the very nature of certain things that were sold to it as benefits to it.”

Mr Harris referred to an arrangement with agents in Northern Ireland where Agents’ Mutual had to “create a formal contractual variation” to amend terms, which he said proved that a similar arrangement was necessary in this case also.

He said, if that were not the case, then “in any anti-competitive agreement, the offender would just say: ‘I will just unilaterally waive it,’ and then no agreement would ever be illegal.”

Mr Harris claimed that Agents’ Mutual could have chosen to insert into the contract a specific point at which the rule would not longer apply, such as a threshold of market power, as defined by the Competition and Markets Authority, a certain number of agents subscribed or a certain level of turnover.

He said that if Agents’ Mutual had done that, it could have been a problem for Gascoigne Halman’s case.

He told the tribunal: “They could’ve done this, but they didn’t. Now it’s too late.”

He said they could have also inserted fall-back clauses to replace the five-year limit, which would remove the OOP rule after three or four years where appropriate.

But Mr Harris said Agents’ Mutual had not and “now they have to live with the consequences”.

Rebutting the claim that OOP was pro-competitive, Mr Harris described it as completely absurd.

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15 Comments

  1. Thomas Flowers

    I find this whole case fascinating, a side show?

    Personally, I would have rather OTM have spent their members money highlighting practices of the largest portal?

    Was this simply acceptance of a tactical retreat for second and third portal positions, a Dunkirk?

    No one ever won a war by coming second or third?

    Did this focus allowed the largest portal to win the data war?

     

     

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    1. Robert May

      The result of this case doesn’t matter and I am beginning to view the money spent as an education; the industry has (should have) learned a lesson no-one could teach it and that is a good thing.

      No-one  has won anything other than an insight into the way things work, who is connected to who and what they are prepared to get up to. What is very clear now is everyone’s motivations, interest, connections and agendas.

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      1. Trevor Mealham

        The result does matter Robert, and you can only teach a lesson if people listen.

        Agency is changing, and something that raised enormous funding could have united agents in a beneficial way. But only if built on solid foundations rather than straw.

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        1. Robert May

          Genuinely it doesn’t matter Trevor. Good has and is going to come out of this. I know because I am looking at the good and talking with the good.

          Agency is not changing, attempts to change it have failed and those who have sought to change it have yanked hard on their own noose.

          Verdict, blah, blah,  blah…… All very interesting how do we all move forward?

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          1. Digital Expert

            Oh dear, Robert. Agency IS changing, just as every transactional service on earth is changing, and pulling against it will just quicken the death toll…

            In 2017 you must adapt to change – even Countrywide has fundamentally changed it’s business model. Isn’t that indication enough? Look around you.

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            1. Robert May

              What am I suppsed to be looking at?  a  few firms  giving their service away for less than it costs to run the firm? Woooo Hoooo! genius!

              All it takes is delusion and very little conscience to take money from friends, family, staff investors and even small children to prop up a loss making  firm and claim it  as successful but the reality is 2016 was supposed to be your tipping point  with 15% market share, blah, blah, yack, yack,yatter yatter.

              Investors want profits, a failure to deliver profits won’t have the industry changed for long. Any business based on  low quality, cheap advice and  low returns simply isn’t sustainable.

               

               

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  2. PaulC

    Unfortunately nothing anti competitive about a PORTAL that allows anyone to advertise on.. irrelevant of how the industry at all feel.

    Danger here is that both OTM and the agents who have signed up have acted anti-competively and been complicit in trying to control the market.

    One Other Portal Rule is bound to be deemed illegal.

    But the act of collusion by all involved is also illegal.

     

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  3. PaulC

    Otm should drop the OOP immiedietly and drop prices to say £50-£100 per X listings and allow everyone to join irrelevant of business type.

    Then get the entire industry to join..

    Once they have all the stock they can then focus on a long term plan to deliver better engagement for agents and consumers..

    Anything less and the project is dead.

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    1. Trevor Mealham

      Paul, if the judges find against OTM and that agents have colluded to support something that is against Article 101 and the 1998 Competition Act. Agents may need to meet (openly) to plead their innocence.

      If agents were told that AM creating OTM with the OOPr had been checked out as lawful, then agents may have a defense they were misled.

      It was for Mr Springett and the AM board to have checked that such a movement didnt go against competition law. So as to dropping the OOPr, it may be too late for that post the judges decision.

      You can’t have a train crash and simply pick up the passengers and route forward. If the damage has been done. Then the damage has been done.

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  4. Anthony

    This is all getting very boring.

    Who would have thought that Rightmove would be coming out tops in this facade.

     

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  5. Woodentop

    Having cake and trying to eat it! Article 101 & 102 permits restrictive practices, if it can be justified. It is therefore not a straight answer that the AM contracts are illegal. It is for the judges to say if the practice is justifiable, in this case. Interesting that GH shot themselves in the foot when they said OTM is not a threat to the market, it became apparent that a third party is involved in espionage in making OTM fail and of course a competitor is helping fund their fees? OTM were right to take this to court, a corporate member doing their own thing makes a total mockery of why OTM came about and stuff all the small independent agents who abided by the rules. I said in the very beginning lawyers expected it to fold before it started due to costs (settle out of court syndrome) and this became apparent during the hearing and highlighted at the end. They called AM bluff and may now wish they hadn’t, as all GH/Connells have come up with is no evidence or been corroborated, just anti-OTM innuendos as highlighted. GH entered, as did the other 7,000 agents into an OOP agreement they didn’t have to. As soon as you did that, you are onto a loosing streak. GH didn’t consider it restrictive practice when they joined AM, its only when another started to pull the strings. Thing is Judges have  a habit of surprising everyone and the only winner was counsel for both parties fat cat salaries!

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    1. Trevor Mealham

      The decision is now with the judges.

      Equally be it they vote for or against (time soon will tell). The GH/Connells angle was just one of 4-5 ways this could have come to court on a range of unfair stances.

      If AM/OTM loses, maybe others come forward claiming losses.

      ** Big thanks ** and compliments to PIE and Ros for well documented reporting throughout the trial. It takes a lot of time and funding to run such reporting and media. As such fantastic value to those of us watching with interest.

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  6. 1stTimeBuyer

    You can sell your properties to person A and either B or R or Z, but ‘we will ‘not allow’ you sell to all four people!  Especially Z, because he is taller than us and we don’t like him, and is competition… (shh, don’t tell anyone we said that!)

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    1. PeeBee

      Actually, dear boy/girl/prefer-not-to-disclose. the vast majority of vendors have only one property to sell – so for that reason alone (and believe me it isn’t a lonely reason,…) your comment is complete and utter shut of the bill.

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  7. MissCharlotteP13

    I’ve always thought OTM’s actions of OOP was illegal, but completely understand that there’s a lot more to it.

    As much as we dislike competition, we have to embrace it, but what OTM did was completely limit competition through a crazy rule.

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