The detailed discussions between the four estate agents involved in the Berkshire cartel case have been published by the Competition and Markets Authority (CMA), along with shocking evidence given by the individuals involved.
These are largely emails sent between people working at Michael Hardy, Prospect, Richard Worth and a branch of Romans and are the lion’s share of the evidence gathered by the CMA to come to its decision on the cartel case.
The discussions took place between September 2008 and May 2015 and were part of a ‘concerted effort’ to fix and maintain a level of commission fees for property sales in five areas.
These were Wokingham, Winnersh, Crowthorne, Bracknell and Warfield.
The combined £605,519 fines levied on three of the companies, Michael Hardy, Prospect and Richard Worth were revealed in December following a year-long investigation.
- Highlights of the report include inconsistencies in the evidence given by a Romans director during two interviews, who was also accused during the investigation of not cooperating with the CMA during it early stages.
- A director of Richard Worth initially refused to be interviewed but later relented.
- The cartel was prompted largely by the severe downturn in the economy and property market created by the financial crash of 2008 and started around the time of the failure of Northern Rock building society.
- The initial agreement was to set a minimum fee of £2,500 or 1.75% and a multiple agency fee of 3%. The average fee was between 1.7 and 1.8% but did drop down to 1.5% where competition was weakest.
- At least one of the agency directors believed their agreement ‘stopped short of cartel’.
- Romans put one smaller agency, Prospect, under severe pressure to join the cartel or suffer severe consequences. It was told that Romans could easily survive a downturn but that smaller agencies would not as the market contracted.
- Evidence shows agents emailed each other to point out when different branches were not ‘playing ball’ and had been charging clients 1.25% commission, for example, rather than the agreed 1.75% and above.
- Ignorance played a role – one agent says in an email “‘I’m not sure the exact definition of a cartel, but I do think the top 3 or 4 agents could quite easily agree a higher minimum fee.”
- One Romans director told other agents that agreeing common fees ‘was fine’ because not all agents in the area were involved.
- Wokingham was the focus of the cartel because it was where the four agents competed hardest for instructions.
- The agents kept the cartel going after 2012 when the recession ended because of competition from low-fee online agents.
- Four meetings a year held to discuss fees and keep branches in line continued until 2015.
- Within at least one of the agencies all the branch managers were aware of the minimum fee arrangement.
- Directors told staff who emailed in about the cartel ‘not to put things in writing’ and delete emails ‘like it never arrived’.
- All parties spent considerable amounts of time and effort monitoring competitors within the cartel ‘being sneaky’ over commission rates, as one email puts it.
- The cartel operated a fine system via invoices that forced participants who did not stick to the fee agreement to compensate competitors for lost business, although not all participated.
- The cartel (and exploring the setting up of similar arrangements in other areas,) was made part of a personal performance objective for one Romans director.
Following the investigation, and the admission by all four agencies of their involvement in the cartel, Michael Hardy was fined £142,843, Prospect £268,765 and Richard Worth £193,911. Romans was not fined because it had come forward to the CMA about the cartel and therefore was able to benefit from the authority’s ‘lenience’ rules.
Read the latest CMA document in full.