Hamilton real estate agencies to pay $4 million for price fixing

The Auckland High Court has ordered Hamilton-based Lodge Real Estate Limited (Lodge) to pay $2.1 million and Monarch Real Estate Limited (Monarch) to pay $1.9 million for engaging in price-fixing in breach of the Commerce Act.

The Court’s penalty judgment brings an end to proceedings the Commission first filed in December 2015 against 13 national and regional real estate agencies and three individuals for agreeing to pass on the costs of Trade Me’s pricing change for real estate listings to vendors. The final total of penalties imposed in this case is just under $23 million.

Lodge and Monarch have been penalised for their roles in coordinating the Hamilton regional response to Trade Me’s pricing decision. The High Court did not require a director of Lodge and a director of Monarch to pay a penalty despite the Court of Appeal finding they did engage in unlawful conduct, which was upheld in the Supreme Court.

“It is not unusual for industries to experience price increases from suppliers and this case illustrates how important it is that companies avoid any discussions with their competitors on how they could or should respond to such a change,” Commission Chair Anna Rawlings said.

“Cartels can harm consumers and business, by raising prices, restricting supply and changing the competitive dynamic between businesses.

“The nearly $23 million in total penalties handed down in this case is substantial and from April next year cartel conduct will also be a criminal offence subject to a maximum term of 7 years’ imprisonment. We strongly urge businesses to familiarise themselves with the law and ensure they have processes in place to guard against collusion with their competitors.”

A copy of the penalty judgment is on the Commission’s case register.

Background

In December 2015, the Commission filed proceedings in the Auckland High Court for alleged price fixing and anti-competitive behaviour by 13 national and regional real estate agencies, a company owned by a number of national real estate agencies, and three individuals. The Commission also issued warnings to an additional eight agencies for their role in the conduct.

The Commission filed proceedings against Lodge and Monarch alleging that those firms and other Hamilton real estate agencies and their directors had agreed a planned regional response to a 2013 increase in Trade Me’s pricing for real estate listings.

The Commission’s case centred on the real estate agencies’ so-called “vendor funding” model, whereby the Hamilton agencies would no longer meet the costs of Trade Me property listings for their vendors, as had been the previous practice. Instead, the default position would be that the seller of the property or their agent would pay.

In November 2017 the High Court dismissed the Commission’s claims against Lodge and Monarch and their directors. Justice Jagose held that there was an arrangement or understanding between the respondents, to which they gave effect, but that it did not have the purpose or effect of fixing, controlling, or maintaining the price for Trade Me listings services.

The Commission’s appeal against that decision was upheld in November 2018. The Court of Appeal held that the agreement fixed prices because consumers “lost the opportunity to be offered a price which had been set… in response to working competitive market forces”.

Lodge, Monarch and their directors then appealed to the Supreme Court which subsequently upheld the Appeal Court’s judgment.

Thirteen companies and three individuals have been ordered to pay a total of nearly $23 million dollars in penalties related to this case:

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