The Competition & Markets Authority (CMA) recently shocked the estate agency world by imposing total fines of more than £735,000 against a number of estate agents, their trade association and the newspaper publisher they had conspired with, for acting anti-competitively by not publishing agents’ fees and discounts in a local paper, the Surrey & Hants Star Courier.
The public notice of the fines, the levels of which are linked to each agency’s turnover and its role in the anti-competitive behaviour, disclosed that several cartelists had their fines reduced by 15% because they were unaware that their behaviour was unlawful. This is not unusual. In March, a survey for the CMA, found that 20% of businesses had never heard of competition law and an additional 25% did not know it “at all well”.
Unwitting behaviour
This is a worrying statistic about a law that can be infringed unwittingly, as agreements with an anti-competitive effect can be unlawful even if the effect was not intended.
Equally of concern were findings in the survey that showed that 55% of companies believed that competing businesses could agree prices in order to avoid losing money; nearly half thought discussing a prospective bid with competing bidders was allowable; and 40% believed that businesses could agree not to sell to the same customers as each other.
In fact, agreements between competitors to fix prices, rig bids or divide markets are three of the most typical kinds of unlawful conduct.
However, competition law is not limited to this. It is a general prohibition of any agreement or concerted practice which prevents, restricts or distorts competition (or is intended to) unless it has an economic benefit in which consumers share.
An agreement can be anti-competitive even if the parties to it are not competitors. For instance, since land agreements lost their exemption from competition law in 2011 it has been potentially unlawful for a retailer to insist that its shopping centre lease includes a term preventing the centre from granting a lease to a competitor. It is an agreement that restricts competition.
Star Courier case
The Surrey & Hants Star Courier case was an example of a less typical infringement; an agreement between competitors and non-competitors to inhibit customers’ access to information which could promote competition.
The estate agency participants were fined 17% of their “relevant” turnover, ie in the market affected by the infringement, multiplied by the length of the infringement (in most cases, over eight years), and adjusted up or down, for example:
• +5% to 10% for acting as a ringleader;
• +10% for involvement of senior management;
• -5% for cooperation in the investigation; and
• importantly, only -15% for not knowing the conduct was unlawful.
The CMA followed up this decision with warning letters to a number of agents it had reasonable grounds to suspect were guilty of similar infringement. The CMA sent, at the same time, an open letter to companies in the property and newspaper industries with guidance on the law. This letter was motivated by the Star Courier case but the recipients were not necessarily suspected of illegal activity.
Protecting against past infringement
The CMA’s 3 June press release about the Star Courier case said complaints had been received that other estate agents and local papers may be engaging in similar activity, and it was considering whether to take further action.
The best advice to anyone engaged in infringement is to make it a past infringement by stopping it.
If there is uncertainly as to the legality of the behaviour, a number of guides exist:
• If you feel that you may have infringed in a similar way to that of the Star Courier case, then requesting a copy of the CMA open letter might provide the insight needed.
• For general guidance on how to avoid breaching competition law, there is the European Commission’s Compliance Matters brochure. UK and European law are almost identical, and both apply to UK companies.
• For guidance to trade associations, such as the Three Counties estate agents’ association fined in the Star Courier case, there is the CMA’s 60-second summary.
If you believe you may have infringed competition law, you can apply for leniency in return for blowing the whistle, which can result in a 100% reduction in the penalty. Leniency applications are one of the main reasons why investigations get started, and full immunity for the first applicant is quite common, if followed by full cooperation. Subsequent applicants may get some (declining) leniency if they can provide new information, but it can be a fast diminishing pool.
Ceasing the infringement helps, but it is not a cure. It is possible to be investigated and penalised for past behaviour. However, it is also possible to apply for leniency in respect of it.
This can be of particular importance where the CMA has publicised that it is acting against a specific type of infringement, such as collusion between estate agents and local papers. Given the warning of possible further action in the Star Courier press release, participants may wish to beat their competitors in applying for leniency.
Despite the warning, there is a good chance the CMA will not investigate a past, voluntarily disclosed infringement of limited financial impact, as it applies prioritisation principles to its limited resources. Still, it may be worth notifying the CMA of the infringement to head off a notification by another party to the agreement and put yourself in the best possible position to obtain leniency in any investigation.
Stephen Critchley is head of competition at Collyer Bristow
