The merger of two of the four big property search providers “substantially lessens competition” and the only remedy would be to break up the business, the Competition and Markets Authority (CMA) has provisionally found.
The watchdog said the £92m acquisition of TM Group by Canada-based Dye & Durham in July last year had created “by far the largest player in the market”.
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 referred for an in-depth investigation, overseen by an independent inquiry group, in December 2021.
In its provisional findings report, the group said it had looked at a “wide range of evidence”, including from competitors, several law firms specialising in large transactions which were among TM Group’s biggest customers and some other law firms which are medium-sized or large customers of Dye & Durham.
The CMA also commissioned a telephone survey of 170 conveyancing firms from market research agency DJS Research.
This found that the factor most commonly mentioned when choosing a supplier of property search report bundles was quality/timeliness of service (64 conveyancers), followed by price (30), functionality (29) and customer service (28).
Around two-thirds of conveyancers reported “multi-sourcing” of search reports.
“They were most likely to agree that ‘shopping around encourages suppliers to remain competitive’ and least likely to agree that they use different suppliers for different regions,” the report said.
Researchers found that 49 of conveyancers had switched search suppliers since January 2020.
The CMA said Dye & Durham and TM Group were two of the largest players in the supply of property search services in the UK and “competed closely” before the merger.
“It also shows that the combined business would be by far the largest player in the market and face only limited competition from other suppliers.
“On this basis, the CMA is concerned that the deal could result in higher prices for property search services (or lower quality services, including less innovation).
“This could result in higher fees or worse service standards for people and businesses buying or selling residential and commercial properties across the UK.”
In the light of this loss of competition, the CMA said its initial view was that “the only effective way to address the issues it has identified would be for Dye & Durham to sell TM Group to a suitable buyer”.
Dye & Durham and the TM Group have until 8 June to respond to the CMA’s provisional findings, before it issues a final decision on 16 August.
Richard Feasey, chair of the CMA group conducting the inquiry, commented: “We need to ensure that fees for search reports are competitive and that we continue to see innovation in digital services to make the process easier and faster.
“By reducing competition in an already concentrated market, we have found that Dye & Durham’s purchase of TM Group could increase the costs and reduce quality in these services.”
In a statement, Dye & Durham said it disagreed with the provisional findings and was “evaluating its potential options”.
It continued: “Dye & Durham complies with all laws and regulations in every market in which it operates. The company has exercised every best effort to help the CMA with its review of the transaction, explain its benefits and offer a remedy proposal and is ready to continue to work collaboratively with the CMA going forward.”
It added that there was no obligation under UK law to notify the CMA of the transaction.