The competition watchdog has published its decision on the Berkshire estate agents’ cartel.
The agents, Michael Hardy & Company, Prospect, Richard Worth, and Romans, were supplied with the decision last month on December 17, but today it is made public.
The agents, with the exception of Romans, are facing fines over infringing competition law between September 1, 2008, and May 19, 2015.
Under the Competition and Market Authority’s leniency policy, Romans which told the CMA of the affair, is not being penalized.
The CMA has already announced penalties of £142,843 for Michael Hardy, £268,765 for Prospect, and £193,911 for Richard Worth.
Today’s lengthy document shows the complexity of the Competition and Market Authority’s investigation.
For example, there were a number of “material inconsistencies” between the accounts provided to it by a Romans director in his first and second interviews.
The CMA also said it placed no “weight” on an initial account by a director of Michael Hardy, when he said that he was aware of other agents trying to organise meetings to discuss and co-ordinate commission fee levels, but that he had not wanted to be involved.
Today’s published document also covers various conversations said to have taken place between the various parties.
In one, it appears that Romans had been interested in buying Prospect’s Winnersh office.
When the Prospect director said he wasn’t interested, the conversation led to the poor condition of the property market at that time, with the collapse of Northern Rock.
“It was then suggested [by DirectorA (Romans)] that we should join forces and agree fee levels to compensate for the falling balance of transactions and house prices. The idea was to try and maintain turnover levels through agreed minimum fee levels.”
Various emails are also published in today’s CMA document, including one from Prospect which discussed a meeting when a minimum fee of 1.75% was discussed, and a multiple agency fee of 3%.
“It was also agreed that a multiple agency instruction one will only be instructed with one other agent and agent has to be one of the five of us at the same rate,” says the email.
“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.”
The fee levels were then set at 1.8%, finds the CMA, in at least the Wokingham area. However, they were later adjusted, in one area, Crowthorne, down to 1.5%.
Today’s document quotes a Romans director recalling: “In about 2012 to 2013 we were coming out of the recession but we wanted to keep our fee level at sensible levels. At this time there was increased pressure on fees from online only agents.
“We all felt that the fees were too high, so we agreed to drop some of them.”
The CMA document also reveals that not all the agents in the ‘cartel’ stuck to the minimum fees all the time.
It says that meetings were held to “discuss instances of potential breaches”, with a Romans director saying: “There were occasions when agents did not stick to the minimum fee arrangement in relation to individual properties” and also “times when some of us were more committed than others”, which would lead to meetings.
There were instances, says the CMA document, when Richard Worth was charging fees below the fee arrangement minimum, and on one occasion another agent, Prospect, sent out a flyer offering a 30% discount off commission “if we don’t sell or let your property within six weeks from the point of marketing”.
In another instance, an internal Prospect email said: “We are sticking to the 1.8% when we are up against Romans but when [two other estate agents] are offering 1%, then we are doing 1.5%.”
There were also occasions when Romans staff breached the minimum fee arrangement, without the director’s knowledge.
The CMA says that the agents had a ‘penalty’ system in place between them. It says: “The CMA has concluded that the parties agreed a system of penalty payments in the event of breaches of the minimum fee arrangement.” It says it uncovered invoices in proof.
There is also reference to a “wobble” when two of the agents wanted to charge lower fees, so that they could regain lost market share.
Comments (8)
How to get rid of your competitor – talk them into fixing rates and then report them.
Thank you DMA you bunch of dopes!
If you get reported for approaching another Agent then just say you were trying to help the DMA in weeding out dodgy Agents. Or even better write to them in advance but don’t give them time to reply.
Reading the investigation in full it looks like Romans were the instigators and very forceful throughout the entire period concerned. For them to be let off the hook and leave the others to carry the burden of fines and potential closure is frankl disgraceful.
I understand whistleblowers should receive protection but to what extent when they are implicit in the crime?
A. I’m amazed that any “group” of Agents get on that well to agree fees.
B. If they are all Guilty, they should all hang on the same hook.
C. What other businesses are the CMA investigating. I would be interested to read about their efforts/success across the entire UK business sector.
A. It seems they were having difficulty maintaining the agreed MFA.
B. Agreed.
C. They have just hit Fender with a massive £4.5million fine for preventing discounting of its guitars.
How are their fines covered off???
Have they claimed on their PI for example?
Would it be a cartel if I suggested publicly here that all agents should charge a minimum of 2%? Does attending a training seminar about raising commission constitute a conspiracy to fix fees? Of course agents must never break the law, so raise your fees off your own back and for your own good, irrespective of what other agents charge. I know a town where two agents now charge 3% – which is making it easier for the “lesser” agents to increase theirs too! (call me if you want details). Have a great day.
Difference is Richard, competing agents have agreed between themselves to do this. The public are at a disadvantage as the agents are against them not the market.
No problem agents having a minimum fee but they should not collude to do this as competing businesses.
How Romans come out of this with no fines is beyond me. Grass the others up to save their own skin.
Agreed Smile.