The first ever Commerce Commission prosecution of a ‘buyer-side’ cartel saw Auckland property company RonovatioNZ fined $400,000 over operation of its membership rules designed to prevent clients bidding up house prices competing against each other.
Operated by Ronald Ng Hoy Fong, Ronovation Ltd traded as RonovatioNZ. It provided advisory services to clients acquiring residential property in Auckland. From 2011, Ronovation implemented ‘priority rules’ to minimise the risk of clients bidding against each other, driving up prices. After payment of a membership fee, clients had access to a database in which they could mark their interest in a specific property. This gave priority. Other members could not negotiate to buy that property nor bid at auction unless the auction price exceeded a ceiling set by the priority member.
The High Court was told Ronovation membership numbers grew from 40 to over 400 in the seven years priority rules were in place. The number of Auckland property sales affected over the seven year period totalled some 470. More properties than that number are typically sold across Auckland in a single month.
Buyer-side cartels amount to price-fixing, in breach of the Commerce Act. A buy-side cartel is not always successful. A non-participating buyer can show up and outbid the cartel. But even if successful only some of the time, it is profitable for cartel members and damaging for sellers. Joint-buying operations are exempted by the Commerce Act from liability for price-fixing.
The fine imposed on Ronovation was reduced because of the company’s small size and the fact it co-operated with Commerce Commission investigations.
Commerce Commission v. Ronovation Ltd – High Court (13.09.19)
19.167