CNMC imposed a fine of eur 1.25 million for setting minimum brokerage commissions in the real estate sector
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In December 2021, the Spanish Competition Authority (“CNMC”) made public a fine of EUR 1.25 million imposed to seven companies in the Spanish real estate brokerage market for entering into price-fixing and information-sharing agreements, which constituted a single and continuous infringement of Articles 1 of the Spanish Competition Act and 101 of the TFEU.
The sanctioned companies set up a multiple listing service (“MLS”) in Spain, through which they imposed minimum brokerage commissions on sale/rental transactions. According to the CNMC, the membership in the MLS limited the ability of real estate agencies to compete and set their own commissions independently.
The CNMC fined two franchisers real estate companies, Remax and Look&Find, which spearheaded the MLS system in Spain; other two companies created by the formers, Anaconda and MLS, allegedly to implement the sanctioned agreements; as well as other CRM real estate management software providers: Inmovilla, Witei and a well-known company Idealista, which would have contributed to the development and rollout of the MLS system through which the infringement was committed. The fine imposed on Witei was reduced by 45% for its cooperation in the CNMC's leniency programme.
The MLS, imported from the United States, entails sharing a database which allows member real estate agencies to share property listings and sales on an exclusive basis. When an MLS member finds a property to list for sale or rental, it can share that property in the MLS system, giving other members the opportunity to complete the transaction.
In particular, in accordance with internal rules of the MLS system, member agencies and brokers were required a minimum 4% commission rate on sales and one month’s rent on rentals. Membership also required splitting the commission equally between the company that shared the property with the MLS members and the company that closed the transaction.
In addition, with the aim of reinforcing compliance with the described rules, MLS members were subject to disciplinary penalties and even suspension of membership in case they infringed those rules.
The software providers were involved in the anticompetitive practices by participating in meetings regarding the MLS system’s design and by implementing several control measures to ensure that all properties included in the system complied with the internal regulations. The software developed by these companies tracked fees charged by competitors and allowed sharing commercially sensitive information between them.
Pursuant to the CNMC’s decision, both the internal rules and the software restricted competition between real estate agencies by setting minimum commissions and other commercial terms and conditions. These practices gave rise to a level of transparency that eliminated the uncertainty necessary for effective competition between companies in the real estate market, which is characterised by a fragmented supply and demand side. Other companies reluctant to accept the established internal rules were excluded from the system and found themselves in a disadvantaged position, as they were deprived from benefitting from the MLS.
In the CNMC’s view, and against the allegations of the sanctioned companies, the restrictions of competition identified were not indispensable for the proper functioning of the MLS system. The CNMC acknowledged that this kind of systems can lead to efficiencies, such as reducing the time to sell or rent property by widening the range of potential buyers or tenants), However, it was considered neither necessary nor proportionate that competitor had engaged in a price coordination to achieve such efficiencies.
By contrast, the efficiencies in the framework of the MLS system could have been achieved by allowing the companies sharing the properties to set the transaction fee and even the percentage they would share with other members.
Although the infringement took place in the private sector, following previous decisions, the CNMC has also proposed to ban the infringing companies from contracting with the public administration.
With these fines, the CNMC closed a year in which it has been particularly active enforcer of competition law, having imposed heavy fines to companies active in multiple sectors, especially for engaging in cartels and other serious infringements. Last year review can be found in our previous article in Competitive Edge December 2021.
The press release of the CNMC can be found here (in English) and the decision here (in Spanish).
For more information, please contact Candela Sotés.
