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Press releases 2002 -

OFT launches study into estate agency market

PN 36/02    11 June 2002   

The OFT today launched a study into the estate agency market in England and Wales, which is worth around £4 billion a year.

The inquiry, to be carried out by the OFT's Markets and Policy Initiatives division, will be a comprehensive study of buying and selling residential property in England and Wales. Issues covered will include:

  • fee structures - how they are changing and evidence on value for money
  • the nature and effectiveness of competition in the market
  • how well the Estate Agents Act is working to protect consumers
  • comparisons with Scotland, where solicitors have a greater role in the house buying and selling process, and with other countries.

The aim of the study is to see whether the market is working well for consumers - both as buyers and sellers - and if not, to propose ways in which any shortcomings could be remedied.

John Vickers, Director General of Fair Trading said:

'Buying or selling a home is the largest transaction that most people make, so it is essential that consumers are able to understand the process and the options open to them. This comprehensive study will tell us whether the market is working well for consumers.'

Residential sales account for about three-quarters of total revenues of the estate agents in England and Wales. There are signs of increasing concern from consumers about the services they receive from estate agents. For example, the Ombudsman for Estate Agents (OEA) received over five and a half thousand complaints from consumers in 2001, an increase of 25 per cent on the previous year. In addition, almost 5,000 complaints were made to trading standards offices, mostly related to selling techniques.

The study will include customer surveys and evidence gathering from the industry. The OFT will also be seeking information from other interested parties.

The study will take around a year to complete and will run in parallel with discussions between the OFT and the industry about a new code of practice.

NOTES

1.  The Markets and Policy Initiatives division of the OFT conducts around five full inquiries a year. The possible outcomes of these include:

  • enforcement action by the OFT's competition and consumer regulation divisions
  • a reference of the market to the Competition Commission
  • recommendations that Government consider changes in laws and regulations and to regulators, self-regulatory bodies and others to consider changes to their rules
  • campaigns to promote consumer education and awareness
  • a clean bill of health.

2.  The Markets and Policy Initiatives division complements the Competition and Consumer Regulation Enforcement divisions. It takes a broader perspective in reviewing markets that could work better for consumers.

The division has three branches:

MPI1- provides the central resource of specialist economic, statistical, and financial analysis advisers

MPI2 - is responsible for the OFT's enhanced role in investigating markets that might not be working well for consumers but where competition or consumer regulation enforcement action does not appear to be the immediate answer

MPI3 - co-ordinates with Government, other organisations (both national and international) involved in consumer protection and competition matters, manages a public information line on matters within the OFT's responsibilities, and handles preparations for OFT's role as regulator of payment systems.

3.  Since its establishment in October 2001 the Markets and Policy Initiatives division has started four studies in the following markets:

  • Consumer IT services (a report will be published in the autumn)
  • Pharmacies (a report will be published in the autumn)
  • Extended warranties for electrical goods (a report will be published in the next few weeks)
  • Private dentistry (following a super-complaint from the Consumers' Association, a full study was launched and a report will be published by the end of the year).

4.  In this press release the functions of the Director General of Fair Trading (DGFT) are for simplicity described as the functions of 'the OFT'. The Enterprise Bill proposes to replace the office of the DGFT with the OFT, to which would be transferred the DGFT's functions.




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