CMA: Economies of scale important
The merger of two of the four big property search providers “substantially lessens competition”, the Competition and Markets Authority (CMA) has decided, ordering Dye & Durham to sell TM Group.
The Canadian company bought TM Group for £92m a year ago but the CMA concluded that the deal could lead to less innovation, higher prices and lower-quality services.
Confirming its provisional decision from May, the CMA said that the merged entity was “materially larger in terms of market shares” than the next largest competitors, ATI Global – which owns InfoTrack – and Searchflow owner Landmark.
“This is in a market in which we have evidence that economies of scale are important,” it said.
Together, the three businesses account for over 70% of the £300m market, with none of the smaller suppliers having a share above 5%. “These smaller competitors have lost market share since 2018,” the CMA observed.
The evidence showed that Dye & Durham and TM saw each other as a key competitor and “a material proportion” of the former’s customers had seen the latter as an important alternative.
It looked at the merging businesses’ own strategic documents and a survey of customers, as well as extensive information provided by customers, competitors and other industry players.
“We consider that the two large national providers (ATI and Landmark) each would provide a credible competitive constraint post-merger, with ATI having been particularly effective in recent years…
“On the other hand, the competitive constraint that the smaller suppliers exert on the merged entity, individually and in aggregate, is limited and likely to diminish in the future. We consider that the smaller suppliers are likely to struggle to match the evolving needs of customers in an increasingly digitised market…
“We have decided that only the divestiture of the whole of TM Group to a suitable purchaser would be an effective remedy to address the substantial lessening of competition and the harm it would cause to competition.”
The CMA rejected Dye & Durham’s proposal to divest TM Group’s operations in England and Wales but retain Property Searches Scotland.
The two businesses were so closely integrated that it risked the transfer or disclosure of TM Group’s proprietary information and know-how, as well a financial impact on the group.
Richard Feasey, chair of the independent CMA group conducting this inquiry, said: “The merger of two of the biggest players in this market would be bad news for anyone buying or selling property in England and Wales.
“Competition drives innovation and keeps prices down. Without it, we can pay more for worse products and services. To address our concerns, Dye & Durham must sell TM Group in its entirety to a suitable buyer.”
In a statement, Dye & Durham said it “strongly disagrees” with the decision and “continues to believe that the acquisition of TMG would be beneficial for the search report market and its customers”.
“The company is reviewing the CMA’s final report in detail and will carefully consider its options and next steps, including potentially appealing the decision.”
But it noted that TM Group accounted for “minimal revenue and EBITDA” compared to its global businesses.
The CMA said the merger parties chose not to notify the CMA about the deal, but it identified potential concerns with the merger in October 2021 and began an initial investigation.
It was refered for an in-depth investigation, overseen by an independent inquiry group, in December 2021.
