Online property search companies not anticompetitive

20 January 2005

Richard Eccles

The Office of Fair Trading (“OFT”) has concluded that two commonly-owned online property search companies are not in a position of dominance and are, therefore, not in breach of the rules against abuse of dominance, set out in section 18(1) of the Competition Act 1998 in relation to their pricing policies. This resulted to a large extent from a finding that the relevant market was for property search services in general and not online property search services in particular.

TM Property Services Ltd (“TM”) alleged abuse of dominant position as a result of one of its competitors, Transaction Online (“TOL”), engaging in predatory pricing by pricing a particular land search below average variable costs. The information provided in the Con29 search can only be obtained by a conveyancer by means of an official postal search, via a personal search company or online via the National Land Information Service (“NLIS”). The Con29 together with the LLC1 search is known as the “official search”. TM also alleged that MacDonald Dettwiler (Hub) Ltd (“MDHL”) was abusing its position as sole information hub operator of the NLIS by raising its wholesale prices for providing search information by 12% across all searches. Both TOL and MDHL are owned by MacDonald Dettwiler Ltd. The effect according to TM was that MDHL and TOL as a single undertaking were acting as a vertically integrated operator with the intention of forcing TM out of the online market for property searches.

Outcome/Facts

In a decision published on 29 September 2004, the OFT concluded that the relevant product market in this case is the market for delivery of LLC1 and Con29 property searches. However, as a result of the alternative property search methods that are available to conveyancers, the online property search sector cannot at present be regarded as a separate relevant market. Conveyancers can currently substitute direct postal searches for personal search companies as well as for online searches and receive the same information. The OFT states, however, that the level of functionality supplied by NLIS could, in future, delineate the online market from postal searches and personal searches.

In taking the property search market as a whole, MDHL held only 32% of the market for delivery of property searches at the wholesale level, and at retail level, the three competing online providers together represented only 42% of the market.

The OFT did not, therefore, have to decide on abuse in the absence of a finding of dominance but in a preliminary assessment, it found that TOL had been charging below average variable costs for certain searches. However, TOL was seen to be generating total revenue exceeding costs and could continue to do so even on the basis of higher wholesale prices charged by MDHL. The evidence showed that its pricing policies were not predatory but were designed to promote other complementary services. There was also no evidence that MDHL had artificially inflated its costs.

As a result of other complaints received, the OFT announced its intention to make further general enquiries into the property search market in accordance with its fact finding powers under the Enterprise Act 2002.

Comment

Although the OFT concluded that the relevant market was for property searches in general, its analysis reveals that the increased functionality of online property searches could in time lead to the delineation of a separate market for online searches.

Source: TM Property Services Limited’s complaint against MacDonald Dettwiler (Hub) Limited and MacDonald Dettwiler (Channel) Ltd (trading as Transaction Online) found here (in English only)

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