Commission wins court appeal in Hamilton real estate case

23 November 2018
Release No. 76

Commission wins court appeal in Hamilton real estate cartel case

The Court of Appeal has found Hamilton-based Lodge Real Estate and Monarch Real Estate and its directors engaged in price-fixing in breach of the Commerce Act, overturning an earlier High Court ruling that had cleared them.

The Commission filed proceedings against Lodge and Monarch in December 2015 alleging that those firms and other Hamilton real estate agencies and their directors had agreed a planned regional response to Trade Me’s changed pricing model.

The Commission’s case centred on the respondents’ so-called “vendor funding” model, whereby the Hamilton agencies would no longer pay for TradeMe property listings, as had previously been the usual practice. Under “vendor funding”, the seller of the property or their agent would meet the cost..

Following a trial in the High Court, Justice Jagose cleared Lodge , Monarch and the directors, ruling that although there was an arrangement or understanding between the respondents, to which they gave effect, it did not have the purpose or effect of fixing, controlling, or maintaining the price for TradeMe listings services. The Commission appealed the ruling as it considered the High Court had erred in its interpretation of the law.

Chairman Dr Mark Berry said the Commission was pleased the Court of Appeal judgment had provided clarity on the law.

“The judgment confirms it is unlawful for competitors to collectively agree they will pass on cost increases, rather than letting competition take its course. The Court has endorsed our view that collusion on a start or offer price is unlawful, even where the trader retains some discretion as to the final price.”

The Court of Appeal agreed that prices had been fixed because consumers “lost the opportunity to be offered a price which had been set … in response to working competitive market forces”.

As the Court of Appeal has referred this case back to the High Court for a penalty hearing, the Commission cannot comment further at this time.

A copy of the Court of Appeal judgment can be found here.

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.

The Court has so far imposed penalties of $16.425 million on Hamilton-based defendants Lugton’s and Success Realty, Manawatu-based defendants Unique Realty and Manawatu 1994, as well as Bayleys, Barfoot & Thompson, Harcourts, LJ Hooker, Ray White and Property Page New Zealand.

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