The Competition Commission has instructed Property24 and Private Property to stop charging listing fees, and put an end to their multi-year contracts with large real estate agencies.
It has also informed Real Estate Business Owners of South Africa (Rebosa) that it needs to cease its support of Private Property as the preferred platform for the industry.
These instructions come by way of the Commission’s Online Intermediation Platforms Market Inquiry, which was initiated in 2021 due to the belief that market features of online intermediation platforms may impede, distort, or restrict competition.
Read our latest Property360 digital magazine below
The report, released on Monday, says Private Property is “uniquely placed” in that it is a partnership between the large national estate agencies through the Estate Agency Property Portal Company (EAPPC), which is facilitated by Rebosa. As a result, Private Property has been able to secure, and lock-in, most of the listings.
“A vertical classifieds platform needs to have most of the listings as consumers want the convenience of a one-stop-shop for search and comparison. In property classifieds...there is a raft of features that hinder platforms other than the two leading platforms from securing listings.”
Property24 and Private Property have reinforced their positions in syndication software by charging a monthly R500 fee for feed-in from external syndication software. This fee means that smaller agents particularly, will use their software as it is cheaper for them to do so, therefore impeding competition at a syndication software level.
As these software providers are the most likely competitors in platforms, it has a ripple effect on platform competition.
Explaining further, the report says that estate agents typically have a budget for marketing and promotion, and look to optimise that budget between different marketing activities, including property classified listings.
“Both Property24 and Private Property have sought to lock-in this spend through multi-year contracts, limiting opportunities for competing platforms to contest this spend. Property24 offered a multi-year subscription package to estate agencies that would limit increases to make it attractive.
“Private Property has achieved the same outcome contractually with the largest estate agents through the EAPPC shareholding in the platform.”
Furthermore, it states that Rebosa has “actively promoted” Private Property as a partnership with the industry, and one which agents should support as a preferred provider, facilitating the share offers to Rebosa members.
“The Inquiry finds these features impede competition.”
To address these distortions, the Competition Commission has instructed that:
- Property24, Private Property, and PropData provide interoperability at no fee for estate agents to feed listings to other platforms
- Property24 and Private Property must cease charging for incoming listings and put an end to multi-year contracts with large agencies
- Rebosa must cease to support Private Property as the preferred platform for the industry.
An application will also be made to the Tribunal for the national agencies to divest their shareholdings in Private Property, the report says.
It elaborates further by stating that the leading property classified platforms “exercise extensive price discrimination” based on the volume of listings that an agency, both at a group and at an office level. These differences are not based on cost but, rather, on the value provided; larger agents bring more listings and hence provide more value to the platform.
The primary difficulty for the platforms was that they could not explain why this justifies price differentials in excess of 300% on rate cards – and none have attempted to do so.
“There is no objective value-based pricing model at play but rather relative bargaining power that drives price differences.”
It states that the effect of the discrimination on smaller agents, including historically disadvantaged persons (HDPs), is that the marketing budget does not go as far, forcing small and medium enterprises (SMEs) to forego additional marketing activities relative to the national agencies and dealers, resulting in lower visibility to the consumer.
“Some small agents...list only on one platform due to the higher cost, unlike the national agencies, which denies them exposure to a portion of leads, or do not list on platforms at all. Other smaller...agents forego the use of value-added services that provide visibility and brand-building benefits on the classified platforms.”
For new estate agents, the high and discriminatory fees pose a barrier to entry as it raises costs during the establishment phase of the business. This will impede competition and participation by black-owned agents in particular, whose lack of historic wealth accumulation reduces the extent of financial resources at start-up.
“Moreover, the classified platform business model and fee levels are tailored to the more established agencies...operating in historically white middle-class areas with higher property...prices.
“The Inquiry finds that the discrimination on listing and promotion fees impede and distort competition in online classifieds, particularly to the detriment of SME and HDP agencies...”
To address this distortion, the property platforms must “substantially” reduce their prices to SME agents and dealers to a level closer to that of larger agents and dealers.
The Inquiry also stated that:
- Property24 must introduce a Small Independent Business Package (SIBP) for business users with 30 leads or less, priced at an average per lead or listing level within 15% of the average of all other business users, reducing to 10% later
- Property24 must adjust the pricing of their value-added services for SIBP users.
These interventions are expected to halve the monthly fees of listing for SME agents and dealers. Private Property already has a Kickstarter package and its lower revenues and market share has precluded it from further action, it adds.
To address the distortion to black-owned agencies in particular, all the leading platforms, except Private Property, must introduce an HDP Programme.
“For Property24, that programme must, at no cost, provide personalised training including site design and support, branded listings, five value-added services per month, access to the market intelligence report, and, for new HDP agents, 12 months free standard listing subscription.”
IOL Business