Supreme Court Upholds Commission Win In Hamilton Real Estate Cartel Case

The Supreme Court has upheld a Court of Appeal judgment which found Hamilton-based Lodge Real Estate and Monarch Real Estate and their directors engaged in price-fixing in breach of the Commerce Act.

“This is an important decision from the Supreme Court. It confirms the long-standing approach the Commission has taken to determining whether competitor collusion has occurred,” said Commission Chair Anna Rawlings.

The Commission filed proceedings against Lodge and Monarch in December 2015 alleging 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 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 today upheld the Appeal Court’s judgment.

“Cartels can harm consumers and businesses, by raising prices, restricting supply and changing the competitive dynamic between businesses. To protect the competitive process we will continue to investigate and prosecute anti-competitive cartel conduct,” said Ms Rawlings.

“This case will inform our future work and we urge businesses and their advisors to understand the Court’s findings, and the scope of the prohibition against pricing collusion between competitors.”
Ms Rawlings noted that from April 2021 cartel conduction can be a criminal offence punishable by up to 7 years’ imprisonment.

A penalty hearing is yet to be scheduled. The Commission will make no further comment while the matter remains before the Court.

A copy of the Supreme Court judgment can be found 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.

Eleven companies and one individual were ordered to pay a total of just under $19 million dollars over related cases taken by the Commerce Commission:

• Hamilton real estate agency Online Realty Limited (trading under the Ray White banner) fined $1.05 million (August 2017)
• Property Brokers Limited and its director Tim Mordaunt fined total of $1.5 million (April 2017)
• Hamilton real estate agency Lugton’s Limited fined $1 million (December 2016)
• Head offices of Barfoot & Thompson, Harcourts, LJ Hooker and Ray White fined total of $9.825 million (December 2016)
• Manawatu 1994 Limited (trading under the LJ Hooker banner) fined $1.25 million (November 2016)
• Bayleys Corporation Limited and Hamilton-based Success Realty Limited fined $2.2 million and $900,000 respectively (July 2016)
• Unique Realty Limited fined $1.25 million (May 2016).

The Commission will be making no further comment pending a penalty hearing.

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