UK: New UK Competition And Markets Authority Targets Local Markets

The UK Competition and Markets Authority (CMA) has announced it has reached a settlement agreement with an association of estate and lettings agents, three of its members, and a newspaper publisher regarding UK competition law breaches between 2005 and 2014. The enforcement action marks this newly-formed authority's increase in planned activities against anticompetitive "cartel" conduct in both local and larger markets.

The CMA is the UK's primary competition authority with responsibility for investigations into mergers and markets and the enforcement of competition and consumer law. It has been operating since 1 April 2014 when it took over the responsibilities and functions of the Office of Fair Trading (OFT) and the Competition Commission. This also is the first time that the CMA has reached a settlement in an antitrust investigation. The companies involved have agreed to pay fines totalling over £775,000 (US$1.15 million).

While the fines in this case do not themselves appear significant, the CMA has the power to fine businesses 10% of their global group turnover for competition law breaches. But this case is notable as an indication of the CMA's ambition to be more active in relation to cartel enforcement compared with its predecessor, the OFT, including clamping down on smaller, regional breaches of competition law in the UK as well as the higher profile national cases. Since it acquired its powers last year, the CMA has opened four new investigations into suspected competition law breaches, bringing the total number of ongoing cases to ten. In comparison, in its last year the OFT commenced just one such investigation. Notably, four of the investigations being pursued by the CMA involve criminal prosecution of cartel offenses, and two individuals will stand trial in June 2015 (this will be the first criminal cartel trial since the collapse of the trial of three individuals in the British Airways/Virgin Atlantic price-fixing case in 2010).

Background

Three Counties Estate Agents Association is a trade association of estate and lettings agents (known as real estate brokers in other countries). Three of its members are Waterfords Estate Agents Limited, Castles Property Services Limited and Hamptons International. The other defendant was Trinity Mirror Southern Ltd, which publishes a local newspaper, the Surrey and Hants Star Courier. The CMA issued a Statement of Objections against Three Counties and Trinity Mirror in December 2014, indicating its belief that the parties had breached the Competition Act 1998, which prohibits anticompetitive agreements in the UK.

The three estate agents had entered into an agreement that prohibited members of the association (including themselves) from advertising their fees or discounts in the Surrey & Hants Star Courier. Additionally, Waterfords Estate Agents and Hamptons International had also agreed with the newspaper that any estate agent, whether or not a member of the association, would be prevented from advertising their fees or discounts in the newspaper. This agreement was reflected in the membership rules of the association.

The companies involved all admitted the allegations and agreed to settle with the CMA in order to bring the investigation to an early conclusion. According to the terms of the settlement, the companies agreed to the following fines: Castles Estates £19,275; Hamptons International £690,317; Waterfords Estates £51,693; Trinity Mirror Southern £101,397; and Three Counties Estate Agents Association £100. These penalties were further reduced by an early settlement discount of 10% provided the companies meet the agreed settlement terms. In agreeing the settlement for the trade association, the CMA took account of its very limited financial resources and low profitability during the period the anticompetitive practices took place.

Outlook for Future CMA Enforcement

In announcing the fines, the CMA stated, "This case again demonstrates the CMA will take action in local markets as well as big national ones. It also shows that, where infringements take place within the context of trade associations, both the members of the association and the association itself can be found to have breached the law. This can result in severe financial penalties for the members, even where the association itself has limited funds."

This latest decision may be of particular interest to trade associations, whose activities can fall within the scope of UK competition law, particularly where the association facilitates or acts as a conduit for agreements among its members. The CMA's predecessor competition authority only once found against a trade association. In 2003, the OFT found that the Northern Ireland Livestock Auctioneers Association had breached competition law. However, due to the difficult conditions in the cattle market following a foot and mouth outbreak, the OFT did not impose a financial penalty on the association. In contrast, the CMA has signaled that it will not hesitate to take action against trade associations that are involved in breaches of competition law. The penalty imposed on the estate agents' trade association was nominal. In the future, we would expect trade associations and their members to receive higher fines now that the CMA has served notice of its intent to take a stricter approach.

The CMA is keen to exercise its enhanced powers to enforce competition law more rigorously within the UK and at levels of the economy that have previously not seen as much enforcement activity, in particular, in small, local, or regional markets. Companies and trade associations should be aware they may be targeted for activities the CMA's predecessor may not have regarded as a priority for investigation. The CMA believes that these cases will send out a strong deterrence message to other parts of the economy about the need for competition law compliance. In particular, the CMA went on to signal that, following other complaints it had received, it was considering commencing investigations into potentially similar conduct between other estate agents and local newspapers unless those businesses take action to remove the relevant restrictions.

Although the full text of the CMA's decision will not be published until April, its press release is here. CMA has published an Annual Plan for 2015/16, which can be found here. CMA's Guidance on Competition Law for Trade Associations is here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.