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Realkredit Danmark A/S' agreements with real estate agents on the market for mortgage loans

29. januar 2003

Journal nr. 3/1120-0301-0223/Fødevare- og Finans//KE The Council meeting 29. January 2003

Summary

September the 3th 2002 Realkredit Danmark (RD) has notified two agreements with local real estate agents concerning the marketing of mortgage loans to the private market (households) to the Competition Authority. RD has applied for a declaration of non-intervention according to section 9 in The Competition Act, or – if a non-intervention declaration cannot be granted - an exemption according to section 8 (1). RD intends to introduce one of these agreements as a standard supplement to the company’s existing agreements with real estate agents. RD has ranked its application of the two agreements: if The Competition Council accepts the first agreement (model no. 1), the application for a declaration on the second agreement will be withdrawn.

On January the 6th 2003 RD has furthermore notified the existing standard agreements with local real estate agents and applied for a declaration of non-intervention for these agreements according to section 9 in the Competition Act.

The relevant market is the marketing of mortgage loans to private households in Denmark. All the notified agreements – the existing standard agreements and the supplementary agreements – are used for owner-occupied houses, including weekend cottages. They concern the loans in new houses, the transfer of existing loans to new owners, and the distribution of supplementary loans to new owners.

RD has 35 pct. of the market for mortgage loans. RD intends to introduce one of the new agreements as a supplement to its agreements with the independent real estate agents (that is estate agents who are not a member of one of the chains with a long term agreement with a mortgage institute). For instance, RD collaborates already with all the members of the “home” chain.

Today, RD has three different kinds of agreements with the independent real estate agents on the marketing of mortgage loans. The total number of such agreements exceeds 100. According to the first two agreements, RD pays the real estate agent a fixed amount of DDK 1500 for each distributed loan. In no. 3, there are no stipulations about payment. The standard agreements further define the tasks of the real estate agent: survey of the house, offer of price fixation for the bonds, evaluation of buyer as a RD-debitor, etc.

The Authority considers that the existing standard agreements do not raise any questions as far as section 6 in the Competition Law is concerned; consequently, the application for a declaration of non-intervention according to section 9 in the Competition Act can be granted for these agreements.

The supplementary agreements introduce an extra bonus to the agents. This bonus is agreed according to a scheme which induces the local real estate agents to provide an agreed number of loans to RD.

Model no. 1 of the supplementary agreements does not contain any articles of exclusivity; it does not exclude the agent from marketing loans from other mortgage institutes. This implies that the effect of the agreements will be less restrictive to competition compared to the situation, where RD expanded the home-organisation with an equal number of new agents.

As distribution channel, the real estate channel deals with 25 pct. of all new mortgage loans. Consequently, the supplementary agreements will only affect a very limited part of the market, probably less than 3 pct.

From these facts, the Competion Council concludes that model no. 1 does not come under the prohibition of section 6 (1), neither separately nor seen together with the standard agreements. Consequently, the application for a declaration of non-intervention according to section 9 in the Competition Act for this agreement can be granted.

Following this, it is not necessary to investigate the application for a declaration of non-intervention on model no. 2.