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My house comes with a covenant to pay a maintenance charge for some nearby land. Part of this charge is a fee paid to the managing agent for the service of doing the management.

This year they have stated that the management fee will increase by 5%. Their explanation was:

All our management fees have increased by 5% this year, in line with other managing agents.

The Competition Act 1998 Section 2 says:

[...] agreements between undertakings, decisions by associations of undertakings or concerted practices which—

(a)may affect trade within the United Kingdom, and

(b)have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom,

are prohibited unless they are exempt in accordance with the provisions of this Part.

(2)Subsection (1) applies, in particular, to agreements, decisions or practices which—

(a)directly or indirectly fix purchase or selling prices or any other trading conditions;

Am I right in thinking that an increase above inflation "in line with other managing agents" is a "concerted practice" to "fix selling prices" and hence a violation of the law?

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  • I think "in line with other managing agents" means what the managing agent thinks other managing agents are charging - or what the agent wants you to believe other agents are charging. I don't think it means they are admitting to being in a cartel.
    – Lag
    Commented Jun 6, 2019 at 11:15

2 Answers 2

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No

The prohibition is on competitors making an agreement to fix prices. Changing your prices to match your competition is not making an agreement.

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No, if I understand your circumstances and the OFT's Agreements and concerted practices - Understanding competition law (2004):

In considering if a concerted practice exists, the OFT will follow relevant Community precedents established under Article 81 [of the EC treaty]. The OFT will need to establish that the parties, even if they did not enter into an agreement, knowingly substituted cooperation between them for the risks of competition.

The following are examples of factors which the OFT may consider in establishing if a concerted practice exists:

  • whether the parties knowingly entered into practical co-operation
  • whether behaviour in the market is influenced as a result of direct or indirect contact between undertakings
  • whether parallel behaviour is a result of contact between undertakings leading to conditions of competition which do not correspond to normal conditions of the market
  • the structure of the relevant market and the nature of the product involved
  • the number of undertakings in the market and, where there are only a few undertakings, whether they have similar cost structures and outputs.
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  • Thanks for the link. The third bullet in your quote may be relevant because I don't know how the managing agents would know what each other's price increases are without some kind of contact; our price is published to the householders but not (AFAIK) elsewhere.
    – Paul Johnson
    Commented Jun 6, 2019 at 16:02
  • @PaulJohnson How do you know the managing agents know each other's prices? They could be 'trying it on' - just attempting to justify an increase in price to you. You could ask them how they know - and their reply might constitute evidence of concerted practice.
    – Lag
    Commented Jun 7, 2019 at 7:45
  • I'm waiting for a reply to that question. In the meantime I'm asking here what it would mean if their words were taken at face value.
    – Paul Johnson
    Commented Jun 7, 2019 at 8:03
  • @PaulJohnson I was going to suggest calling the OFT, then I remembered it was closed in 2014 and its responsibilities divided among a number of different entities. I don't know which entity could help with this query.
    – Lag
    Commented Jun 7, 2019 at 9:37

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