Two City consultancies have been quick to interpret the rebellion by OnTheMarket member agents as an indication of dire changes - or worse - facing the portal, including possible claims for compensation.
Credit Suisse, which has a respected team of real estate analysts, titles its note to investors ‘Beginning of the end of OTM exclusivity?’
The bank’s analysts throw their weight behind the formation of an Action Group - as reported by Estate Agent Today earlier this week - and says in its note: “The formation of an action group for ‘disillusioned’ OTM members gives a clear and coherent voice to unhappy OTM members and in our view makes a challenge to the enforceability of OTM’s Exclusivity Clause more likely. ... Should the action group be able to prove that OTM has broken contracts with member agents, those agents could look for financial recompense; if able to get it this would clearly further hamper the financial position of OTM.”
Credit Suisse’s note gives its backing to an Action Group, saying: “We have previously argued that dissatisfied member agents could consider fighting back against OTM. However given the typically small size (and correspondingly small financial fire power) of most agents, a legal battle with OTM would likely be unpalatable. We see the formation of a group of agents with a common view as positive as it gives these agents a clear coherent voice and allows them to share any legal costs between them. Beyond that the publicity afforded the action group should also bring forward further dissatisfied agents who have not yet spoken out.”
The bank - which has discussed the Action Group with its founder Iain White - says: “We are unsurprised to hear that he has had a significant number of responses from agents dissatisfied with the service offered by OTM but unsure of their legal positioning. We believe this gives further credence to our view that agents are in fact dissatisfied but it also raises the probability of an action group launching a legal challenge against the enforceability of the OTM contract.”
In another note to investors, Jefferies - another independent consultancy, although one which has advised Zoopla in the past - says: “The Action Group may act as a catalyst for the relaxing of the 'one other portal rule', which, in our view is rather anti-competitive and not in consumers' interest. It appears to us that OTM members are increasingly starting to believe it is not in their interests either.”
As with much of the past week’s debate surrounding OnTheMarket, it is the fees paid by early-joining agents that, in Jefferies’ view, marks the likely focus of dissent and possible legal action.
“According to the contracts they signed, Gold and Silver members - who joined OTM before the launch of its consumer facing website in January 2015 - will always be charged at the most competitive rates for OTM's services. However we also understand that as OTM seeks to convert 'Letters of Intent' into signed contracts, it has offered rates in the region of £50 per month as an incentive to join OTM. Clearly many who are paying higher rates than this believe that the mutual's treatment of its members is far from mutual” says the Jefferies note.
Meanwhile yet another City consultancy - the BNP Paribas bank - has written on the subject to its investor clients.
It says it sees the trade publicity surrounding the formation of an Action Group as “a small positive for Zoopla” but cautions against “any imminent major shift of membership back from AM to Zoopla.”
It says the reasons behind the caution include the fact that the bank believes most of the agents involved were already considering leaving Agents Mutual, or had chosen to do so, and were facing legal action for reneging on the terms of their contract.
BNP Paribas also says Agents Mutual membership was growing as recently as January “and has lasted well beyond initial consensus expectations” and that it appears only about four per cent of existing members are believed to be involved in the Action Group.
In addition, it says any legal action will take months if not years, limiting any rapid change to the equilibrium.
The bank also reiterates its long-publicised view that the commercial impact of leaving Zoopla “has proven somewhat limited for estate agents” although it goes on to say that “on the lettings side we see Zoopla's impressive lead generation as a more critical factor in agent decision making.”
The bank’s note to investors concludes by briefly addressing the controversy over an alleged £50 per month contract offered to agents by Agents’ Mutual/OnThe Market. “We await further details but would be surprised if AM had pursued a new contract that jeopardised the contractual security of their existing membership base” it says.