Real Estate

Estate agents under scrutiny after UK authorities unveil another cartel

Key Points
  • UK real estate cartel fined by competition watchdog for minimum fee fixing
  • Watchdog highlights value of informants in around half of cases undertaken
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A group of real estate agents who colluded to push up local fees in southwest England has been fined £370,084 ($500,620) by national competition authorities after incriminating emails were uncovered detailing the cartel's illegal plans.

The six agents were all based in the Burnham-on-Sea area in the county of Somerset and had agreed in a meeting to fix their minimum commission rates at 1.5 percent in order to avoid the possibility of clients negotiating a better deal when undertaking local property transactions. The ultimate aim of these actions was to drive up profits for all firms involved.

The U.K.'s Competition and Markets Authority (CMA) told CNBC via email on Tuesday that given it is the second time it has had to take enforcement action against real estate businesses in recent years, there is a clear suggestion of "low levels of competition law awareness" in the sector.

Changes aside from Brexit impacting central London property: JLL
Changes aside from Brexit impacting central London property: JLL

"This is why we have on each occasion followed up our enforcement action with a targeted compliance campaign to raise awareness of competition law. Indeed, our recent case started as a result of information provided to us following our earlier campaign, so hopefully our message is getting through," said Stephen Blake, senior director in cartels and criminal enforcement at the CMA.

Blake was alluding to the help of a sixth estate agent in uncovering the collusion. This agent was not among the five fined given that it was the first to confess participation in the cartel to the CMA and thereafter cooperated with the latter's investigation.

"The CMA has a leniency program under which cartelists can confess their involvement in cartel behavior and cooperate with the CMA in exchange for a reduction in fines or, in some cases, complete immunity. Around half of our cartel cases come to us this way," noted the competition specialist.

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In this case, the black-and-white evidence against the cartel was revealed in the form of damaging email communications which included statements such as "with a bit of talking and cooperation between us, we all win!", according to a press release from the CMA.

The emails also disclosed that "the aim of the meeting … will be to drive the fee level up to 1.5 percent" and "…it's really important we all give it the priority it deserves (making as much profit as possible!)."

However, Blake emphasized that in the pursuit of cartels, the CMA does not rely on uncovering emails alone.

"We also carry out our own intelligence work, usually on the basis of information provided to our dedicated cartels hotline. This will often be from members of the public who are not directly involved in the cartel but are concerned about what they have seen or heard," he confirmed.

"We have an informant rewards program to try and encourage calls to the hotline and recently ran a social media stop cartels campaign to promote both the hotline and our leniency policy," added Blake.

Normalcy appears to have returned to the UK property market
Normalcy appears to have returned to the UK property market