On November 7 2016 the Competition Authority closed its investigation into real estate website operator Immoweb's most-favoured nation clauses in its contracts with developers of e-commerce software used by real estate agencies.
The authority opened an investigation into Immoweb in 2015 for a possible infringement of Articles 101 and 102 of the Treaty on the Functioning of the European Union and the corresponding provisions of the Belgian Competition Act. Immoweb operates the leading real estate website in Belgium, 'www.immoweb.be'.
At the core of the investigation was the software interface which enables real estate agencies to post their real estate portfolio on real estate websites. It is common practice for operators of real estate websites in Belgium to pay a fixed sum to software developers for each real estate ad placed on their website. This system differs from other jurisdictions, where software developers are paid by real estate agencies.
The majority of Immoweb's contracts with software developers contain a most-favoured nation clause. On this basis, the software developer undertakes to offer Immoweb the same financial conditions that it offers to Immoweb's competitors whenever these terms are more favourable. The Competition Authority's preliminary findings pointed to Immoweb's dominant position in the online real estate market. As a result, the authority considered Immoweb to be an unavoidable trade partner for software developers and held that no real estate agency would be prepared to conclude a contract with a software developer that did not feature Immoweb's website in its listings.
The authority found that the most-favoured nation clauses restricted competition by artificially raising prices for Immoweb's competitors. The software developers must include Immoweb in their offering, but have no incentive to grant better terms to Immoweb's competitors, as they would have to pass these conditions on to Immoweb and therefore lower their overall revenue.
When informed of the authority's preliminary analysis, Immoweb offered to:
- revoke the existing most-favoured nation clauses in its contracts; and
- refrain from reintroducing them in any future contracts with software developers for five years.
Following these commitments, the authority decided not to continue its investigation.
The Immoweb investigation can be linked to the Competition Authority's broader interest in the real estate sector. In 2010 the authority established that the Belgian institute for real estate agents' (BIV) recommendations regarding minimum scales for real estate agents fees violated competition law. In early 2016 the authority decided to launch an ad hoc investigation into the BIV's policy regarding real estate agents' fees and concluded in June 2016 that the real estate sector was still largely characterised by limited differentiation in fees and that a common rate of 3% was still used as a reference by the majority of real estate agents. However, the evidence collected in the context of this investigation was insufficient to establish an anti-competitive practice.
The observed price rigidity may explain the authority's position in the Immoweb case, which illustrates a determination to make the market – especially the more innovative online sector – more competitive.
For further information on this topic please contact Koen Platteau at Simmons & Simmons LLP by telephone (+32 2 542 0960) or email ([email protected]). The Simmons & Simmons LLP website can be accessed at www.simmons-simmons.com.