23 November 2018

Price Fixing: Commerce Commission v. Lodge Real Estate & Monarch Real Estate

Waikato real estate agents Lodge Real Estate and Monarch Real Estate have been found liable for price fixing after a Commerce Commission appeal.  Lodge’s Jeremy O’Rourke and Monarch’s Brian King also face personal liability for fines yet to be imposed by the High Court. 
Commerce Commission prosecutions against all four foundered in the High Court when the trial judge ruled there was no firm agreement to fix prices for vendors listing and selling.  This was overturned in the Court of Appeal.  At trial in the High Court, rival firms Success Realty, Lugton’s and Online Realty ‘fessed up to price fixing and then gave evidence against competitors Lodge and Monarch.  Fines for anti-competitive behaviour are routinely reduced for pleading guilty and assisting Commerce Commission prosecutions.  Fines recently against real estate firms admitting price fixing have run to the millions.
Commerce Commission intervention followed industry response to price changes in 2013 by Trade Me for real estate listings. Lodge’s annual Trade Me listing costs of $8000-$9000 were set to jump to $200,000-$220,000; Monarch’s $36,000 to nearly $225,000.  Horrified, representatives from Hamilton agencies met, agreeing to a common response: the cost of a Trade Me listing previously carried by agencies would be shifted to individual vendors.  Those real estate agents proved to have agreed were liable for price-fixing: having entered into ‘an arrangement or understanding’ having the effect of reducing price competition; in breach of the Commerce Act.
At their High Court trial, Lodge Real Estate and Monarch Real Estate argued there was no firm agreement with fellow agents in the Hamilton region.  They had met to discuss the issue, but each firm was given wriggle-room; specific deals could be struck with individual clients.
The Court of Appeal said there was clearly ‘an arrangement’: those attending the meeting agreed they would withdraw their standard listings from Trade Me, with subsequent listings to be vendor-funded. It was enough that those in attendance had a mutual expectation that all would follow this policy.  Each knew that unless everyone shifted to vendor-funding there was a risk listings would be lost.  While it was open for individual agents to make exceptions for specific clients in certain cases, that did not negate the fact price-fixing was agreed.
There is a distinction, said the Court of Appeal, between parallel conduct by competitors where their prices are set independently (but competitive pressure results in similar price and quality offerings) and agreements to act in the future in an anti-competitive manner.
Commerce Commission v. Lodge Real Estate Ltd & Monarch Real Estate Ltd – Court of Appeal (23.11.18)
19.010