Background

Summary of Council decision:

Two issues were investigated, both of which were Upheld.

Ad description

The website, www.hatched.co.uk, promoted an online estate agent. Under the heading "Our average customer saves around £3,800" further text stated "We offer a choice of flexible fees to suit you. Our lowest and most popular fee is just £225+VAT up front and then just £225+VAT again on completion of a successful sale. On a typical £200,000 house, this means that you'd pay less than £480, compared to around £4,000 if you used a high street agent! We've saved customers over £6,000,000 in estate agency fees, so it's no wonder we are one of the fastest growing estate agents in the country".

Unlinked footnote text at the bottom of the page stated "Figures relating the individual and total fee savings of our customers who completed their house sale through Hatched.co.uk in 2012, and calculated using the average estate agency fee of 1.6%+VAT, as found in the OFT Home Buying & Selling Study 2010, and using Hatched.co.uk's average sale price in 2012 of £218,000".

Issue

Country Properties challenged whether the claims:

1. "Our average customer saves around £3,800"; and

2. "We've saved customers over £6,000,000 in estate agency fees"

were misleading and could be substantiated.

Response

1. Hatched.co.uk Ltd (Hatched) said the figure of £3,800 represented the average saving that a Hatched customer had made when selling their house in 2012, in comparison to the amount they would have paid if they had used a local agent. They said the disclaimer at the bottom of the web page clearly communicated to consumers that fact and therefore they would be aware of how the figure had been calculated.

Hatched stated that they had used their 2012 sales data to work out the average price for which they had sold a house, and the average completion fee which had applied, including VAT. They explained that they had then worked out the amount that an average customer would have paid if, for Hatched's average house price, they had been charged the average estate agency fee for England and Wales, and compared the two figures. They considered that using the national average fee was the fairest measure, as they had five offices covering the whole of England and Wales and had marketed at least one property in every postcode area in England and Wales in the last seven years. They provided a report from the Office of Fair Trading (OFT) entitled "Home buying and selling" which they said showed that the average estate agent fee nationally was 1.6%, excluding VAT. Hatched therefore multiplied the average price they had sold a house for in 2012 by the national average completion fee of 1.6% and added VAT to secure a figure for the average estate agency fee their customers would have paid if they had used a high street agent rather than Hatched. They said that figure then allowed them to calculate the average saving that a customer had made by using Hatched, rather than a high street estate agent. They said the savings figure was slightly less than £3,800, but they had rounded it up to the nearest one hundred, and felt it was fair to claim that their average customer had saved that amount. They provided spreadsheets which showed their sales data since the company was established in 2007, and data showing a more detailed breakdown of the fees charged for their 2012 sales.

Hatched explained that they had not included their "upfront fee" in their fee calculations as that was a "marketing fee" and not "commission" for selling the property. They also highlighted that the disclaimer clearly stated that the saving was based on customers who completed their sales through Hatched. They said they would consider including the upfront fee in their future claims, but maintained their belief that their savings claims should be based solely on the completion fee charged as there were many high street agents who charged a separate "marketing fee" too. They acknowledged, however, that they were unable to find any independent evidence of such a charge being applied by high street agents. Hatched also provided additional sales data for April to June 2013 which showed the number of homes they had sold, those they were marketing, and data regarding the agreed upfront fee and the completion fee charged.

In response to the complaint, Hatched commented that they would link the disclaimer to the savings claim with an asterisk and amend the savings claims to reflect their latest fee data from 2013.

2. Hatched said they had multiplied the 2012 savings figure by the number of properties they had sold since they had opened in 2006, which resulted in a figure of over £6,000,000. They acknowledged that some agents would charge less than 1.6% commission, but that the OFT average figure would include and account for those agents, and therefore they believed their calculations were accurate and fair.

Assessment

1. Upheld

The ASA noted that Hatched had provided sales data which they believed confirmed that in 2012, their average customer had saved slightly less than £3,800 in agency fees compared to the amount they would have paid if they had sold their house using a high street agent. We noted that the figure used as the basis of their comparison had been calculated by multiplying the average sales price achieved by Hatched in 2012 by an average completion fee for England and Wales of 1.6%, plus VAT. We understood that Hatched had used an average fee as they believed it to be the most appropriate comparison, as they sold properties across England and Wales. We reviewed Hatched's 2012 sales data and considered that they had sold properties in a sufficient number of areas across England and Wales to refer to themselves as a "national" agency and that it was appropriate for them to make comparisons with the average estate agency fee figure.

We noted that the average fee for England and Wales had been sourced from a 2010 OFT report, and that the survey used to inform that report had been conducted in 2009. We considered that that figure was likely to have changed since 2009, and to have been different in 2012, however, we noted that the disclaimer clearly stated that the figure of 1.6% had been used to calculate the savings claim and was from a 2010 OFT report. We therefore considered that consumers reading the disclaimer would understand that the savings claim was based on the average completion fee of 1.6% (+VAT) from 2010; that it may have fluctuated since; and would able to compare it to any quotes they had secured from a local agent. Although we welcomed the fact Hatched said they intended to amend the web page so the savings claims and the disclaimer were linked with an asterisk, we had concerns that when the ad appeared the disclaimer explaining how the figures had been calculated was not linked to the savings claim, and therefore a number of consumers could not read the text and not understand how the claim had been calculated.

We noted that the claim "our average customer saves around £3,800" was based on the completion fees, plus VAT, that Hatched's clients had paid in 2012, and did not include the upfront fee levied depending on the selling option selected by a consumer. We understood that consumers had three options with differing upfront and completion fees and that option one included no upfront fee, option two an upfront fee of £125, and option three an upfront fee of £225. We also noted that VAT was applied to those fees. We noted Hatched's argument that they did not include upfront fees in their comparison as they were marketing fees and that some high street agents also levied such fees. We noted, however, that they had not been able to provide any evidence to confirm that it was standard practice for estate agents to charge separate marketing fees. We also understood that although they charged different upfront fees, even for those customers who selected option one and therefore initially paid nothing, all their properties were marketed in the same way and noted that consumers had the opportunity to select other marketing techniques beyond those included in the upfront figure if they wanted to. We considered that consumers would understand the claim "our average customer saves £3,800", the repeated reference to "fees" and the claim "this means that you'd pay less than £480, compared to around £4,000 if you used a high street agent", to refer to the total fees that a Hatched customer had paid Hatched for marketing their property. We therefore considered that the upfront fee charged should have been included in Hatched's saving calculations.

Because the disclaimer was not linked to the savings claim, and therefore we considered consumers would not understand how the savings claim had been calculated, and because we considered the savings claim was inaccurate as it did not include all the costs Hatched customers had paid in 2012, we concluded that the claim was misleading and in breach of the Code.

The claim breached CAP Code (Edition 12) rules  3.1 3.1 Marketing communications must not materially mislead or be likely to do so.  (Misleading advertising),  3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation.  (Substantiation) and  3.11 3.11 Marketing communications must not mislead consumers by exaggerating the capability or performance of a product.  (Exaggeration).

2. Upheld

We noted that the figure of £6,000,000 had been reached by multiplying the 2012 savings figure by the number of properties Hatched had sold since they launched in 2006. We noted that the 2012 savings claim was inaccurate because it did not include all the fees that consumers were charged when selling their house with Hatched. We also had concerns that Hatched had calculated the figure by applying their 2012 sales data (2012 average house price and average completion fee) to every year they had been in operation, rather than work out the savings achieved for each year separately. We again noted that the claim was unlinked to the disclaimer, but considered that even if it had been linked, consumers would not understand how the figure of £6,000,000 had been calculated. For those reasons, we concluded that the claim was misleading and in breach of the Code.

The claim breached CAP Code (Edition 12) rules  3.1 3.1 Marketing communications must not materially mislead or be likely to do so.  (Misleading advertising),  3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation.  (Substantiation) and  3.11 3.11 Marketing communications must not mislead consumers by exaggerating the capability or performance of a product.  (Exaggeration).

Action

We told Hatched that the claims should not appear again in their current form. We told them to ensure they held robust substantiation for the claims made in their ads, and to ensure that any qualifications were clearly presented and linked to the relevant claim.

CAP Code (Edition 12)

3.1     3.11     3.7    


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