Case law: Directors of local estate agents disqualified for breaches of competition law

Directors of businesses colluding to restrict competition in any way, even on a small or local scale, such as agreeing minimum prices they will all charge, could be breaching competition law and risk disqualification as directors and heavy fines.

Six estate agents in Somerset agreed a minimum rate of 1.5% commission they would all charge on sale of residential properties. The arrangement lasted around a year.

The Competition and Markets Authority (CMA), the body responsible for investigating breaches of UK competition law, fined five of them a total of £370,084 for restricting price competition. The remaining company paid no fine after applying for leniency under the CMA’s leniency scheme (which provides an incentive to provide the CMA with information about anti-competitive activities). Two others later applied under the scheme and also had their fines reduced.

However, the CMA also took action against two directors under UK company law, on grounds they had breached competition law and their conduct made them unfit to be directors. The directors agreed to give legally binding undertakings not to act as directors of a company for 3 and 3.5 years respectively.

This followed a case two years ago when members of a local association of estate agents in Hampshire and their local newspaper colluded so that the paper would not advertise fees and discounts offered by members of the association. The collusion was later extended to stop any local estate agents from advertising their fees and discounts, even if not a member of the association.

The CMA found the collusion broke competition law because it reduced competitive pressure on estate and letting agents' fees in the local area and made it harder for new entrants to the market to break into it by advertising lower fees. This was despite the fact the collusion did not involve any agreement on the prices and discounts themselves.

The association, three of its members and the local paper were fined £775k, even after a 10 per cent discount for co-operating with the CMA.

Operative date

• Now

Recommendation

• Businesses and associations colluding to restrict competition in any way, even on a small or local scale, should make sure they are not breaching competition law, or risk heavy fines and disqualification of their directors.

Case ref: See the relevant case page on gov.uk.