Real estate agencies to pay penalties for price fixing

Media release

Issued 16 December 2016
Release no. 67

Real estate agencies to pay $9.825 m in penalties for price fixing

The head offices of Barfoot & Thompson, Harcourts, LJ Hooker and Ray White will collectively pay $9.825 million following a price fixing penalty hearing in the Auckland High Court.

The parties are among 13 national and regional real estate agencies the Commerce Commission filed court proceedings against in December 2015. The proceedings relate to three separate price fixing and anti-competitive agreements among national real estate agencies, Hamilton agencies and Manawatu agencies in response to Trade Me changing its fees for listing properties for sale on its website.

The penalties handed down today to Barfoot & Thompson, Harcourts, LJ Hooker and Ray White conclude the national proceedings.

Commission Chairman Dr Mark Berry said the national agreement was formed at a Property Page board meeting, which was convened to discuss a combined, industry-wide response to Trade Me changing its pricing model. Property Page is an incorporated company owned by Barfoot & Thompson, Harcourts, LJ Hooker, Ray White and Bayleys. It owns 50% of property listing website realestate.co.nz, which is a competitor to Trade Me.

At that meeting the parties agreed that they would all pass on the cost of listing on Trade Me to vendors who wished to have their properties listed for sale on Trade Me.

“Trade Me’s change from a subscription-based pricing model to a per-listing fee meant real estate agencies faced substantially increased costs in order to list properties on the website. As national competitors with significant influence across the country, it was vital that each agency made its own decision on how it responded to Trade Me,” Dr Berry said.

“Instead, the defendants agreed that they would each pass on the increased costs to vendors. This agreement removed the risk of the agencies competing in relation to the Trade Me charges thereby exposing vendors to harm.”

In his judgment Justice Heath commented on the seriousness of the conduct. He observed that the parties to the agreement were the five largest and most influential agencies in New Zealand who together control a significant share of the real estate markets and that the agreement was entered into by staff at the highest levels of the companies involved. He also said that the agreement had the potential to affect a large number of transactions undertaken by ordinary New Zealanders when buying and selling houses.

The respective penalties handed down by the Court today are:
• Barfoot and Thompson: $2,575,000
• Harcourts Group: $2,575,000
• LJ Hooker: $2,475,000
• Ray White: $2,200,000

Each of the defendants reached separate settlement agreements with the Commission under which they admitted their conduct breached the Commerce Act. Ray White faced a lower penalty as, unlike the other parties, it did not implement vendor funding and, as such, the conduct did not harm its vendors.

Property Page did not face a court penalty, however under the terms of its settlement it agreed to pay $100,000 towards the Commission’s investigation costs.

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 proceedings relate to alleged conduct in 2013 and 2014 by the national head offices of five major real estate companies, and separately by agencies in Hamilton and Manawatu. The alleged conduct occurred in response to Trade Me’s change from a monthly subscription fee to a per-listing fee for properties advertised for sale on its website. Further information can be found in the media release.

In addition to the settlement agreed with Lugton’s, the Commission has agreed settlements with Success Realty, Manawatu-based Unique Realty and Manawatu 1994 and Bayleys at the national level. Court-imposed penalties currently total $5.6 million.

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