Some in the property industry may believe that competition law is not really relevant to their business. Many will have taken note of the fines totalling almost £130m imposed in 2009 on more than 100 construction firms in England that were found to have colluded on building contracts, but thought such action may have been a one-off. With the UK competition regulator recently fining estate and letting agents, the sector should once again take note.
What has happened recently?
The UK Competition and Markets Authority (CMA) has fined an association of estate and letting agents in Hampshire and a newspaper publisher £775,000 for breaching the competition rules.
Three members of the association entered into an agreement which prevented all members of the association from advertising their fees and discounts in the local newspaper: the Surrey Hants Star Courier. Two additional estate agents extended the scope of the agreement, with the co-operation of the newspaper publisher, to prevent any agents (whether they were members of the association or not) from advertising their fees and discounts in the newspaper.
Even though there was no agreement on prices and discounts, the CMA investigation found that the agreements prohibiting advertising had the object of reducing the competitive pressure on estate and letting agents’ fees in the local area. It also made it harder for newcomers to enter the market because they were not able to advertise lower fees.
Why is this important?
The CMA’s press release explained that it had: “Received complaints of potentially similar conduct concerning alliances of estate and lettings agents and local newspapers in other UK locations. This may result in further investigations into similar restrictions, regardless of the size of company involved, particularly if they take no steps to remove such restrictions in light of the present investigation.”
The message is crystal clear. This is the first warning to a particular part of the property sector to ensure that certain practices are competition law compliant. If similar behaviour is taking place throughout the country and the agents involved either do not realise they are doing anything wrong or decide against taking steps to end such practices and behaviour, the above example may be the first of many significant fines in the property agency sector.
It is important that competition law is viewed by a company’s compliance team in the same way as any other business risk to ensure firms do not, intentionally or otherwise, breach the rules and face large fines.
Practical competition law do’s and don’ts
Do
• Continue to compete for customers
• Make pricing decisions independently and implement them unilaterally
• Keep records of all communications with competitors and speak to your legal department if you have any concerns regarding a competition law breach
• Immediately terminate any discussion with a competitor where pricing is raised and inform your legal department
• Speak to your legal department for advice on any proposal concerning pricing strategy or competitors before committing it to writing
• Ensure that all sales, marketing and other staff involved in pricing and communications with customers or competitors are aware of competition law and its application to their activities and are regularly trained
Don’t
• Agree with competitors not to compete
• Agree with competitors on pricing strategy or any matters relating to prices, costs, margins, volume, capacity, revenue and customer terms and conditions
• Engage in any form of communication with competitors on pricing matters, such as meetings, informal conversations, supplying pricing information directly or through customers or issuing advance price announcements
• Continue any conversation initiated by a competitor on pricing
• Assume that internal documents do not carry any competition law risk or that destroying documents will avoid the risk (these can usually be recovered)
• Assume that a certain practice is lawful just because others are doing it or it is industry standard
John Cassels and Daniel Geey are lawyers in the Fieldfisher competition and EU regulatory Team
