Property Brokers Manawatu and director fined $1.5m in price fixing case

Property Brokers Limited and its director Tim Mordaunt have been ordered to pay penalties totalling $1.5 million in a judgment today of the High Court, following a hearing in March.

Property Brokers and Mr Mordaunt are the final defendants to appear in Court in the Commerce Commission’s Manawatu proceedings.

The Commission filed proceedings in December 2015 alleging Property Brokers, Manawatu 1994 and Unique Realty breached the Commerce Act by agreeing with each other, and other Manawatu agencies, that they would each pass on to vendors the full cost of advertising a property on Trade Me. Proceedings were also filed against Mr Mordaunt for his role in facilitating the agreement.

Property Brokers and Mr Mordaunt reached settlements with the Commission admitting that their conduct breached the prohibition on price fixing in the Commerce Act. They have been ordered to pay penalties of $1.45 million and $50,000 respectively.

In his ruling released today, Justice Gilbert said the penalty needed to reflect the nature and seriousness of this type of misconduct.

“Price-fixing agreements fundamentally undermine the proper functioning of competitive markets and have the potential to substantially erode the benefits the public is entitled to expect from them. Such agreements are antithetical to the purpose of the Commerce Act which is to promote competition in markets for the long-term benefit of consumers within New Zealand. For these reasons, participation in price-fixing agreements is regarded as serious misconduct and must be met with a penalty that is sufficient to deter other market participants from engaging in this type of conduct,” Justice Gilbert said.

Chairman Dr Mark Berry said the Commission was pleased to have concluded the Manawatu proceedings.

“Property Brokers and Mr Mordaunt acted as the lead facilitators in establishing the agreement between Manawatu agencies that vendors would have to pay the listing fee to have their property advertised on Trade Me. This agreement left vendors with only two options: pay extra to advertise on Trade Me themselves or don’t advertise on the site at all,” Dr Berry said.

“It is vital that businesses compete with their rivals and make their own decisions on how to respond to issues that impact on a whole industry, including whether to pass on costs increases to consumers. The penalties awarded in this case send a clear message that such collusion is taken seriously as it can cause significant harm to consumers.”

A copy of the High Court judgment is available on the Enforcement Response Register.

Unique Realty and Manawatu 1994 were earlier fined $1.25 million each for their roles in the Manawatu agreement.

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 here.

The Commission has now concluded both the Manawatu and national proceedings in this investigation. It has also agreed settlements with Hamilton-based Success Realty and Lugton’s. Court-imposed penalties to date total $17.925 million.

Settlements have not been agreed with Monarch Real Estate (trading under the Harcourts banner), Online Realty (trading under the Ray White banner), Lodge Real Estate Limited and two individuals in the Hamilton proceedings. These proceedings remain before the Court.

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