Selling a house in Australia is expensive. The ACCC is investigating one reason why
Australia's consumer watchdog is investigating the practices of REA Group, the News Corp-controlled real estate listings behemoth that runs realestate.com.au.
The development comes months after a major Guardian Australia investigation probing the practices of REA Group, which critics alleged was shutting out new players and hiking up advertising prices.
Some in the industry fear the market dominance of REA Group is hurting consumers, both by increasing the costs associated with buying, selling and renting, and by denying them flexibility and choice in the way they advertise and search for property.
So, what do we know about the Australian Competition and Consumer Commission's investigation?
REA Group is the biggest real estate listings company in the country.
It runs the ubiquitous realestate.com.au, the main portal for buying, selling and renting property in Australia.
The size of the company cannot be overstated.
It leads the real estate listings market across every platform and in the most recent quarter, had a monthly traffic of 12.3m people visiting its site. In August, it posted a $460.5m annual net profit in August, with a market capitalisation of $26.7bn, making it more valuable than supermarket giant Coles.
It is owned by News Corp and is larger than its nearest competitor, the Nine-owned Domain, by a considerable margin.
Last year, Guardian Australia spent months investigating the real estate sector, including the practices of REA Group.
The investigation revealed that real estate agents believed REA Group was using its effective monopoly on the market to price gouge.
Prices to list properties on the REA Group's portal and on Domain had increased by about 30% over the past three years, the investigation revealed, leaving a top-tiered listing in inner-city Sydney or Melbourne costing up to $4,000 on each platform.
Guardian Australia revealed REA Group's conduct had been the subject of multiple complaints to the ACCC, one of which alleged it was using 'deceptive' terminology and listing sales from agents who had paid for more expensive products when people searched for 'relevant' sales results in a particular area.
A spokesperson for REA Group said agents could choose advertising packages according to their needs, but said the 'seismic shift' from print to online had led to a significant increase in 'the size of realestate.com.au's audience and the number of leads delivered to agencies'.
'REA's per listing costs are priced to reflect the additional value delivered to vendors and agents in digital prime experiences,' they said.
Industry disruptors told Guardian Australia they felt they were being significantly disadvantaged by the practices and pricing structures of realestate.com.au and, to a lesser extent, Domain, claiming they cannot compete on a level playing field with traditional real estate agents.
Guardian Australia also revealed that 170 real estate agencies and franchisees were party to a 2016 application to the ACCC that sought permission from the competition and consumer watchdog to be able to collectively negotiate and, if necessary, boycott, realestate.com.au and Domain.
The 170 agencies said the dominance of the REA Group, and in some cases Domain, distorted the online advertising market and made prices 'high and disproportionate' for the services offered.
The revelations were so significant they prompted Rod Sims, the former ACCC commissioner, to say: 'This behaviour seems well worth considering under section 45 of the Competition and Consumer Act.'
Earlier this week, the REA Group informed the ASX about 'speculation regarding an investigation being undertaken by the Australian Competition and Consumer Commission'.
The company said it had received a notice from the ACCC requiring it to provide 'information regarding certain subscription offerings'. It is unclear at this stage whether the investigation directly relates to the Guardian's investigation last year.
'REA is cooperating fully with the ACCC and is unable to comment further for confidentiality reasons,' the company said. 'REA will continue to comply with its disclosure obligations and will update the market on this matter as appropriate.'
The Australian Financial Review reported that the update to the ASX had been given following its questions to the REA Group.
Some in the industry fear the price hikes to advertise on realestate.com.au and Domain were hurting consumers.
The 2016 ACCC application argued the market dominance of REA Group, and in some cases Domain, meant a lack of 'real choice or flexibility' in the advertising options available to agents and therefore consumers.
Barry Plant's chief executive, Lisa Pennell, had previously told Guardian Australia that regulators needed to be alert to the market power of REA Group and Domain.
'Competition is important in any industry,' she said. 'There is an inherent risk for any dominant player to lose sight of competitive forces and become insular in their attitude.'
Pennell said that because of the ongoing advertising fee increases, many agents were being forced to eat into their own commissions in order to secure listings.
'Ultimately because the consumer only wants to pay so much, the pressure is on the agents to work for reduced fees, which in many cases may result in poorer outcomes for the customer.'
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