The complaint letter - reproduced in full below - is the latest in a war of words waged by the new CIELA group on Purplebricks.
Meanwhile Purplebricks itself has so far remained relatively tight-lipped on the CIELA attacks. A spokesperson told Estate Agent Today: "We don't propose to comment on CIELA's press release."
Dear Sirs, CIELA alleges that Purplebricks advertisements are misleading to consumers, thereby in violation of portions of the UK Code of Broadcast Advertising, and the Consumer Protection from Unfair Trading Regulations.
While the statements made in Purplebricks advertisements are not factually inaccurate, they serve to mislead the reasonable, average consumer. The public perceives “agents” as individuals who sell homes and retain a commission upon a successful sale. Purplebricks flat fee is not comparable to that of a commission, and its savings claims are based on material assumptions that are omitted from the advertising materials.
I. Misleading Nature of the Improper Price/Savings Comparison:
A. Omission of risk of loss associated with flat fee: The Purplebricks flat fee guarantees that a home will be listed to sell or to let. It is non-refundable, regardless of whether it is up-front or paid later. Conventional agents charge a commission only upon a successful sale. To compare the two in televisionadvertisements, and on the Purplebricks website, is irresponsible and misleading.
B. Absolute Number Average Monies: Purplebricks’s website champions an average savings of £6,267 for London and surrounding area sales, and £3,035 across the UK. In miniscule print, it explains these figures are based on a commission of 1.8% charged by non-online agents. CIELA demands substantiation of this percentage.
Omission of material assumption that final sale or letting price achieved would be the same, regardless of agent: Purplebricks omits a material assumption upon which its claim of savings depends. It does this in multiple locations on its website, and within its television commercials. The Purplebricks equation only functions if the hypothetical comparison agent would final sales or letting price. CIELA strongly contends that this is not substantiated, and that the omission of that material assumption itself is misleading.
II. Applicable Regulations:
Consumer Protection from Unfair Trading Regulations 2008 defines a commercial practice as misleading if it “causes or is likely to cause the average consumer to take a transactional decision he would not have taken otherwise.”
Part 2 § 5(1) (b). Part 2 Section (5) (2) (a) of the Regulations dictates that even if a practice contains factually accurate information, it is misleading if “its overall presentation in any way deceives or is likely to deceive the average consumer.”
UK Code of Broadcasting Advertising
Rule 3.2: Advertisements must not mislead consumers by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner. Material information is information that consumers need in context to make informed decisions about whether or how to buy a product or service. Whether the omission or presentation of material information is likely to mislead consumers depends on the context, the medium and, if the medium of the advertisement is constrained by time or space, the measures that the advertiser takes to make that information available to consumers by other means.
Rule 3.9: Broadcasters must hold documentary evidence to prove claims that the audience is likely to regard as objective and that are capable of objective substantiation.
Rule 3.33: Advertisements that include a comparison with an identifiable competitor must not mislead, or be likely to mislead, consumers about either the advertised product or service or the competing product or service.
Rule 3.39: Advertisements that include a price comparison must make the basis of the comparison clear.
The misleading advertisements jeopardise the UK estate and letting industry’s reputation, as they promote distrust and dissatisfaction with the market, and they unfairly disadvantage independent estate and letting agents based on faulty and irresponsible price comparisons.
The advertisements harm vulnerable consumer homeowners, who are not fully aware of the risks they take on when entering into a contract with Purplebricks. A reasonable, average consumer equates payment to an estate agent with the obligation to sell or let their home, and Purplebricks’ false comparison to non-online agents perpetrates this faulty reliance. Further, failing to present consumers with the proper context of Purplebricks’ savings claim removes from them the ability to make an informed decision. It is undeniable that such a decision is one of the most important financial decisions that a homeowner will make.
1. Remove existing advertisements from all remaining sites;
2. Refrain from comparing the guaranteed service that Purplebricks provides for its
non-refundable fee to the service provided by non-online agents, who charge
contingent-upon-successful-sale commissions; and
3. In future advertisements, communicate that the fee is non-refundable, even in light of an unsuccessful attempt to sell or let.
4. Do not label the fee a “selling fee,” because it merely guarantees a listing, so label it as such;
5. Alternatively, communicate that the fee is non-refundable, or, not contingent on a successful sale;
6. Substantiate the 1.8% commission fee upon which the purported savings claim depends; and
7. Explain that the savings claim necessarily assumes that a non-online agent would in a final sale amount than a Purplebricks agent.
We look forward to your prompt response on this important matter. We look forward to improving the industry together, and providing improved and transparent service to vendor-customers. Because CIELA considers this a high priority, be advised that we will submit a complaint to the Advertising Standards Authority in the event that we are not satisfied that you are taking reasonable steps to correct instances of misleading representations on your website and television advertisements.