On 8 May 2015 the Competition and Markets Authority ("CMA") closed its investigation into the advertising of estate agents' fee rates in a local newspaper in the small town of Fleet, Hampshire between 2005 and 2014.
Alleged infringement and decision
On 19 March 2015, the CMA announced that a newspaper publisher, an association of local estate agents and three of its members had admitted breaching competition law by agreeing to prevent estate and letting agents from advertising their fees in a local property newspaper. The CMA announced that the parties had accepted penalties totalling £775,000. This figure included a settlement discount of 10%. On 8 May 2015, the CMA announced its findings of infringement and closed the investigation. Interestingly, the penalties for two of the estate agents were reduced by a further 5% (to be applied before the settlement discount, bringing the total fines to £735,000), as the CMA took into account their commitments to introducing future company-wide competition law compliance regimes.
Specifically, the CMA alleged that the three agencies had entered into an agreement precluding members of the association from advertising their fees or discounts in the newspaper.In addition, the CMA alleged that two of the agencies had, with the cooperation of the publisher, extended the scope of this agreement so that no agent (regardless of membership of the association) could advertise its fees or discounts in the newspaper.
The CMA found that the association's membership rules infringed Chapter I CA98 by prohibiting members from advertising their fees in the newspaper. The CMA suspected that these arrangements "reduced competitive pressure" on local estate agents and increased barriers to entry for potential competitors, as they could not advertise their fees to attract customers. As such, the arrangements limited consumer choice and restricted price comparison in and around Fleet.
This investigation is interesting for a number of reasons, namely its geographic scope, timeframe and most importantly the penalty reduction.
The CMA's decision demonstrates its commitment to the enforcement of competition law at a local level as well as in national markets, regardless of the size of the companies involved. This is noteworthy for small businesses around the country in particular, emphasising that notwithstanding its prioritisation of significant cases, the CMA will not overlook smaller companies and local markets.
The decision also illustrates the CMA's determination to push investigations to a conclusion more quickly than its predecessor, the OFT. The statement of objections (issued on 10 December 2014) was the first to be issued within a year of the launch of the investigation by the CMA (in December 2013).
In addition, this decision indicates that the CMA will reward (through penalty reductions) companies that commit to implementing a compliance programme. According to the CMA's penalty guidance, the CMA will "consider carefully" whether a company's particular compliance activities merit a penalty discount of up to 10%. This contrasts with the European Commission's approach. The Commission has historically refused to accept that implementing a compliance regime merits a reduced fine, particularly in cases of serious infringement.
There is a public policy argument that companies should not benefit from diminished fines by implementing a compliance programme after the infringement has taken place, as this does not encourage early adoption of effective compliance mechanisms which are aimed at preventing such infringement in the first place.
However, the CMA's decision may be explained by the circumstances surrounding the decision, and in particular, the fact that it has received a number of similar complaints and is understood to be carrying out similar investigations across the UK. It may therefore be sending a signal to smaller market players encouraging them to establish internal compliance programmes.
It will be interesting to see whether the CMA continues to accept such commitments as a mitigating factor in future settlements and/or decisions. It does indicate however a willingness to be pragmatic and to reward cooperation from the parties under investigation even after the launch of an investigation.