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.