Eye received the following press release from Zoopla today. It is printed below, exactly as sent to us. More on this story tomorrow.
ONTHEMARKET MEMBER FIRMS COULD FACE SIGNIFICANT FINANCIAL PENALTIES, ACCORDING TO LEADING UK LAW FIRM
According to advice from top UK law firm, Freshfields Bruckhaus Deringer LLP, if the Competition and Markets Authority (CMA) ever concluded that Agents’ Mutual Limited’s (AM) arrangements infringe competition law, not only would AM as a corporate entity be subject to fines and possible damages, but each individual member agent would also likely be liable based on their participation in AM.
The advice, provided to Zoopla Property Group plc (ZPG), states that, if the CMA at any time found an infringement of competition law, it could impose fines on each agency of up to 10% of their total annual turnover. In the case of an independent single branch firm the fines could run into the tens of thousands of pounds or for a larger firm such as Savills plc into the tens of millions of pounds.
The advice adds that any of AM’s competitors, including competing portals and excluded online agents and property developers that have suffered losses as a result of any anti-competitive actions, could use the CMA’s decision to seek damages in ‘follow-on’ litigation, including compensation for lost profits, the diminution in the value of capital assets or lost commercial opportunities. And, critically, each agency firm would be individually liable for the full amount of any damages awarded, rather than just for a share, which could run into the millions of pounds.
Whilst the CMA may choose to take a ‘wait and see’ approach to AM and not act immediately, the implication of the advice is that, if at any time during the life of AM the CMA does rule that its conduct has been anti-competitive, then the risks for those firms involved could be potentially devastating.
Drawing on case law from 2012, the advice reveals that The Competition Appeal Tribunal awarded exemplary damages where it found that the defendants had acted with a specific intent to eliminate a competitor from the market. The specific statements and actions of AM with regard to ZPG create a heightened risk for its members in this regard.
Lawrence Hall of ZPG commented, “Following receipt of this advice and the significant potential risks, we felt it important to share this information with our members and other industry participants in the interests of transparency. We do wonder if Agents’ Mutual has made its members fully aware of the potential exposure that they have opened each of them up to.”