The UK Competition and Markets Authority (CMA) has fined a group of five real estate agents just over £370,000 after plans to introduce an illegal cartel were discovered. The information was contained in explosive e-mails between the parties amid suggestions that no company involved would allow customers to negotiate a commission rate of less than 1.5%. In effect the parties were looking to protect their profitability which would reduce competition in the marketplace to the detriment of consumers.
While there is no doubt that UK real estate agents are struggling at the moment, with a dearth of transactions and many investors sitting on the sidelines, restricting competition is illegal. This is not the first time that CMA has had to act on cartels with a similar operation just a few years ago. There are suggestions that those involved in the cartels have “low levels of competition law awareness” despite a number of prominent social media campaigns by the CMA. While the fines may seem relatively small in the context of the accusations they will hit the five real estate agents involved in the pocket.
Further information released by the CMA also confirmed that a sixth member of the cartel was exonerated from any fines or legal action after coming forward as an informant. This seems to be the price that the CMA has to pay for detailed information regarding illegal activities in not only the real estate sector but business wide. When you bear in mind the average price of a UK home, we are talking about potentially large cost savings for those real estate agents named and shamed.
In some ways it is difficult for companies operating in the same industry to know at what level they are able to communicate about general market conditions. Fixing prices is obviously illegal but how far can they go with regards to communicating their thoughts and ideas for the future?
Is this another body blow for UK real estate agents?
As we have covered in some of our recent articles, high street real estate agents in the UK are struggling to fight the ever-growing challenge of the Internet. We know that many online real estate agents are able to slash their commission rates because of their relatively low cost base. In many cases they offer a fixed fee service which is something that high street real estate agents are in many ways unable to compete with. So, what does the future hold for the UK real estate agents sector?
Experts believe we will see consolidation and mergers right across the online and the off-line industry. Many companies need to slash their cost base to improve their profit margins and secure their long-term future. There is also a need to challenge head-on the ever-growing attractions of the Internet and the array of online real estate agents who are dominating the current market. There will always be a place for high street real estate agents and buyers looking to visit properties in person. However, real estate agents, online and off-line, will also need to incorporate the latest technology, such as drones, to help those unable to visit properties in person.
As online real estate agents become more and more disruptive to the industry it was perhaps inevitable that such a cartel as the one smashed by the CMA would eventually emerge. However, companies operating together to the detriment of customers is illegal and some would suggest immoral.