A senior analyst at Credit Suisse has opened the debate about the possibility of unhappy agent members of OnTheMarket challenging their contracts.
An email to investor clients from Joseph Barnet-Lamb - vice president of media equity research at Credit Suisse - writes: “We believe it can be argued that agents have cause to leave OTM with OTM debatably not having delivered the service they promised to agents.”
However, he says that this may yet be some way off or may not happen at all. “Given the typically small size (and correspondingly small financial fire power) of most agents, a legal battle with OTM would likely be unpalatable. Should an agent choose to do so, we believe it would certainly cause more negative headlines for OTM, whether the agent wins the case or not. Should the agent win such a case we believe it could open the flood gates for other agents potentially leaving OTM.”
Barnet-Lamb’s comments follow the news that Agents’ Mutual, the parent company of OnTheMarket, has instructed lawyers to write to a number of its member agents. The letters have gone to those who have allegedly not fulfilled elements of their contracts relating to displaying properties on OTM, paying monthly fees, and displaying their inventory on no more than one other major portal.
The letters give the rebel agents 14 days to fall in line with their contracts.
Credit Suisse says the issue of possible legal action now becomes increasingly important.
“We see the necessity of OTM to use legal proceedings as illustrative of their operational struggles but don’t see it as surprising. With OTM traffic still uncompetitive we expect someone, eventually, to take the legal fight to OTM. We expect more negative press for them along the way” writes Barnet-Lamb.
“We see it as a poor reflection of the underlying health of a mutual business when it feels the need to use legal protections to force their members to use/pay for their service. We believe such a move will hamper the group’s attempts to draw in new members” he writes.
He then gives comparative examples of OTM and Zoopla Property Group traffic based on data produced by comScore, a firm that measures consumers’ online activities. Credit Suisse says OTM traffic “remains very weak” which - although better now than late last year - is still below its previous high of last summer.
“We believe that ZPG are winning agents back from OTM on a monthly basis. In many cases OTM has contracted its members for multiple years. As such the legal ground by which the agents are returning to ZPG will become increasingly important” writes Barnet-Lamb.
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Ouch! Wouldn't want to be part of the OTM crew! 'Business by contract rather than value'
The cracks are getting bigger day by day - it is never going to work, its a shame but the management is past their sell by date.
Yes, it does increasingly look like it isn't going to work for OTM. If they just lowered their ambitions and accepted a position as a decent, functional, fairly well-supported portal then I think they might do OK. But they were far too ambitious from the start. Attempts to oust Zoopla as the No 2 portal were always doomed to failure. It just wasn't going to happen, especially not overnight (or even within the first few years).
The slow and steady approach would have worked far better, but Springett's ego made that impossible. He made far too many bold and foolish statements that have come back to bite. Now it's not going so well, he's staying very quiet in all of this.
I don't know how much longer they will last. I don't think they are in as dire straits as some believe, but they don't seem to be making any progress. They seem to be treading water at the moment. The next 6 months will be an acid test to see what exactly OTM become.
I see. So a client who signs a 3 month contract and is unhappy after the first 2 weeks has cause to cancel their contract, that'll work well for our industry.
I read the prospectus from AM all the way through and understood this was a 5 year commitment. That is why I did not take up the opportunity. Business should be run for the long-term not what is fashionable that year. AM is a good idea but it was always going to take a longer time to acheive that some short-sighted agent fooled themselves into believing
James - you are right and the principle of contract is sacrosanct thank goodness. The problem for Agents Mutual - and one that is going to bite them massively over the coming weeks and months - is that they have misled many of the agents who signed these 5 year contracts.
I looked yesterday at the paperwork for an agent on a 5 year contract. The Info Memorandum which is an official Agents Mutual document that set out the strategy and which was referred to in this agent's contract very clearly states that agents who committed prior to launch would get the best rates.
Their sales team are now running (and phoning) around the country signing up agents at £50 per office - a level of discount which is huge and puts 5 year contracted members at a significant competitive disadvantage.
This is an act of gross stupidity on OTM's part as any agent who signed 5 years can now claim that they were misrepresented to on pricing and as such OTM are in material breach of their contract. OTM's response to this could be to offer them the same £50, but the agent can they claim that again they never would have signed as there is no way a portal can compete with the established portals with a sub rate of £50 per office.
Very careless.
So, Credit Suisse AND UBS are not happy with OTM. Oops!!
OTM seem to be having as bad a week as Cameron! Well, not quite, but they do seem to be lurching from one bad PR story to the next.
Steve Harwood - are you able to contact me please? My email is Mike.heath@kings-estates.co.uk
Would be great to chat further..
Desperate people and desperate measures.
Right Move sitting there giggling as they watch on
Yawn. Old news. AM/ OTM is registered as two companies. It's places restraints on Agents, that ifvthey feel compromises them against consumer best interest they should just serve notice on those grounds.
Any other big play portal concerned should support Agents out. It's one for unhappy portals to grow a pair.
Portals like zoopla by not acting have allowed AM/OTM time to establish some following. They should have acted sooner
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