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Competition could heat up in property portals sector, hearing told

In later proceedings yesterday, the tribunal heard from economic experts with David Parker, for Gascoigne Halman, explaining how the markets have changed in the last decade.

He said: “The relevant portals operate across Great Britain as a whole.

“There are some differences in the UK market, but from an economist perspective, the market definition side doesn’t add much to the debate, but from a competition perspective, it is rather different to Northern Ireland.

“Estate agents have a small share of the market, they aren’t tied to a specific geographical area.

“Maybe in the future that might change development definition of estate agents in the market, but we still have, at least for now, house hunters still looking in specific areas, and a quarter of estate agents are still in specific areas.

“A hypothetical monopolist of all of the estate agents in the area would still have enough of a presence, they are important enough at this stage to change from a geographical market definition.

“You might find a tin of beans in a supermarket in north London, but that’s not a substitute for a tin of beans in Aberdeen.”

Tribunal chair Mr Justice Marcus Smith then raised the issue of how estate agents advertised to the expert witnesses, Mr Parker, and Simon Bishop for Agents’ Mutual.

He asked: “I want to ask now about whether we are being a little bit narrow in viewing portals in isolation and let me unpack that a little bit before I ask you to comment.

“There is some evidence, and I am thinking particularly of answers that Mr Springett gave in the course of his cross examination, that estate agents, that side of the market, regard portals as substitutable for other forms of advertising, for example, print media advertisements, their own wesbites, shared property newspapers or magazine.

“And I wonder, before we proceed to other participants in the market, as regards estate agents how far you consider that to be a material factor when considering the market position of the portals.”

Mr Parker replied: “I think estate agents look at a variety of routes when advertising their property – portals, newspapers, magazines, maybe radio stations. A range of routes are used to get to customers, and it is of course the case they will look to optimise their marketing budget.

“You can see that in my first report.”

Mr Parker then pointed the tribunal to a report on total advertising expenditure using different channels across a number of years.

He said: “As you can see, they have split that up by channel over time.

“Online expenditure, since 2002, has gradually grown over time, and from round about 2013 more is spent on online advertising than it was on local newspapers.

“What you see from this is as different types of marketing outlooks become more or less attractive they shape their spend.

“There is a trend of people looking online, and if that continues to grow we will see an increase in the share of online portals.

“The markets are competitive today, but that doesn’t mean you can’t make them more competitive tomorrow.

“If you come in with a new business model tomorrow that’s much, much then that could completely change the competitive dynamics.”

Mr Bishop said: “The question is how does the entry of OnTheMarket with the OOP rule alter, chance, Zoopla’s competitive constraint on Rightmove or indeed, actually to be more precise, what are the overall competitive constraints operating on Rightmove’s pricing, pre-entry and post-entry, and how are those changing?”

Mr Parker then addressed the matter of dominating a market.

He said: “One can certainly get more dominant after they pass the threshold, but I think a new dominance will still be competing in a market.

“The level of competition is largely decided by the overlap of the housing size.

“Mr Bishop rightly pointed out if one portal has access to a group of unique house hunters and another party has access to another, they are two separate areas of the market, and they are both monopolist over their markets.

“Both can charge what they have, and there isn’t really any competition.

“Opposite of this, with both having access, competition is extremely strong, if one charges more than the second portal, agents can trade off those portals against each other for the best margin of cost, which would be essentially zero.

“So instead we have a range of intermediate scenarios. You have a set of unique customers for this group, Zoopla, unique customers for this group Rightmove, and some others.

“[The] selling point for Rightmove is that these are agents you can meet and not get anywhere else. You get some surplus, but I also get some surplus.

“The same happens for Zoopla. They would do a deal, charge a certain amount to agent, customers can’t get elsewhere.

“The competition is driven by the overlap.

“You’d expect to find people listed on both, but that doesn’t mean they aren’t competing.”

Meanwhile, two new documents have been made publicly available at the link below:

http://www.catribunal.org.uk/237-9308/1262-5-7-16-T-Agents-Mutual-Ltd.html

The hearing continues.

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