The High Court has ordered property investment advisory company Ronovation Ltd to pay $400,000 for price fixing.
Ronovation, trading as Ronovationz, was set up to by so-called "super investor" Ron Hoy Fong to advise and train property investors on how to acquire and increase the value of residential properties in Auckland.
Investors who signed up for the company's services were required to abide by a set of rules which prevented them competing against one another to acquire specific properties, which the Commerce Commission maintained breached the price fixing provisions of the Commerce Act.
"As Ronovation's membership grew its members found themselves competing with each other to purchase houses they had identified as suitable targets for investment," the Commission said.
"In 2011 Ronovation's director developed a set of rules to ensure members were not competing against each other."
This had the effect of lessening competition for properties, potentially to the detriment of their vendors and after an investigation the Commission prosecuted Ronovation.
In her judgment, Justice Sarah Katz said the rules were deliberately anticompetitive.
"The clear aim of the agreement was to suppress competition between members, due to concerns that increased competition between members would drive up prices for the properties they were seeking to acquire.
"The conduct was therefore designed to suppress the normal rivalry between members that would arise in a competitive sale process, in a manner that was to the detriment of any vendors who were directly impacted," she said.
Commerce Commission Chair Anna Rawlings said the case the first the Commission had brought against a buyer-side cartel.
"Even agreements entered into by competing buyers can amount to price fixing," she said.
"It is important that businesses and individuals are aware of the risks of engaging in this type of conduct, especially since price fixing will become a criminal offence from April 2021," she said.
The $400,000 penalty was previously agreed between Ronovation and the Commission but has now been confirmed by the High Court judgment.
Hoy Fong said as a director of Ronovation he accepted responsibility for the breach.
"It was never our intention to breach the Commerce Act and there was no direct gain to Ronovationz by doing so," he said.
Ronovation had acted immediately and revised its rules as soon as the Commerce Commission had made its concerns known, he said.
"While we are incredibly disappointed that this has occurred, we have been working with the Commission throughout the investigation and are pleased to have now achieved a resolution," he said.
The comment stream on this story is now closed.
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47 Comments
(Potentially libellous comment deleted, Ed. Please see our commenting policy here - https://www.interest.co.nz/news/65027/here-are-results-our-commenting-p…)
I don't know what the comment was, but it having been deleted makes me think I'd wholeheartedly agree with it.
Thx Ed
Huge blunder by RHF. Imagine if this was a criminal offence after April 2021 .... "the defendant has not come before the court previously so instead of jail time the defendant would qualify for home detention your honour."
Property Tutors Wellington tag a property then the other members can not touch...
Same same..
First in first served? Unfair just to hammer RHF and ronovationz if others doing the same
Or just "hammer" everyone the same.
If you manipulate public markets in any other asset class like this you'll go to jail.
That's what happens when you really get "hammered".
But instead, we let unsophisticated property mugs off with a slap over the wrist.
The level of sophistication of a crime is something a court would take into consideration.
"The clear aim of the agreement was to suppress competition between members, due to concerns that increased competition between members would drive up prices for the properties they were seeking to acquire.:
Could it not also be argued that Ronovations had he opposite effect by tutoring more investors in the first place?
You seem not to be sure. Cartel behavior is cartel behavior .
https://comcom.govt.nz/business/avoiding-anti-competitive-behaviour/wha…
You sound as if you are trying to minimize peoples actions and conduct.
Yeah Yvil, that's a capital offense, that is,"minimizing".
Imagine though, if Ron had a class of ten students and they identified this single property and all ten of them went and started bidding on it. It's quite funny thinking about that and imagining the look on Ron's face.
So you are admitting it was an attempt to prevent a bidding war - that is called collusion.
It's collusion aka price fixing. Illegal.
It's not price fixing. I don't think collusion among private individuals is illegal. Friends or family members wouldn't bid against each other.
All the reports I have read including this one from Greg have called it price fixing.
I love it when property spruikers come in to bat for each other. Such a cancer on society.
Your flippant attitude to a very serious and distressing disease is offensive.
It's funny to see how people who whinged about investors or foreign buyer's outbidding first home buyers now coming into bat for all out bidding wars.
Outrage porn
I know the anti landlord feeling is strong on this site, but none of the above comments addressed my question: did RFH not increase competition for buying houses with his seminars in the first place?
They refuse to face their cognitive dissonance. Encouraging investors to compete against FHBs is bad. Suppressing competition is also bad.
This is an interesting case. Our culture accepts certain behaviour at an individual level yet not at an organized level. A person can collude, exploit people and profiteer and be lauded as a successful business person whereas a company that does that is considered criminal.
"Encouraging investors to compete against FHBs is bad. Suppressing competition is also bad."
Sorry, there is no cognitive dissonance. Both of those things can be bad simultaneously. It just so happens the former is not a crime while the latter is. He got fined for doing the latter. The fact that he also did something legal does not actually excuse the crime and thus undo the fine. When you go to Court, there is no defence of "but what about all the crimes I DIDN'T commit?"
This is an interesting case. Our culture accepts certain behaviour at an individual level yet not at an organized level. A person can collude, exploit people and profiteer and be lauded as a successful business person whereas a company that does that is considered criminal.
"This is an interesting case. Our culture accepts certain behaviour at an individual level yet not at an organized level. A person can collude, exploit people and profiteer and be lauded as a successful business person whereas a company that does that is considered criminal."
No, actually. First of all, a single person cannot "collude". Collusion, by definition, requires multiple people. This is a case of multiple people colluding.
Second, your vague attempt to brush this off with "actually, society is the bad guy" might go better if you actually included some examples. Who are these exploiters that are lauded as successful business people? When giving the example, please also explain why they're so great at business but they're too stupid to set up a limited liability company? Is it so society won't hate them?
"but what about all the crimes I DIDN'T commit?" Actually that line is used all the time. You can get diversion if you can present a good case.
Diversion is not a defence. It requires admitting that you did a crime.
One interesting thing to note is if Ron presented the property to one investor group at a time, until one said ill bid, it would have been legal. A sad case of been technically illegal with no intent. I feel there where probably more important fish to catch and in that sense its disapointing.
Spot on ZS, good to see someone understanding my point
Probably not, I doubt he created property investors out of people that weren't already that way inclined.
Give me a break.if that's the best kind of retort you can come up with.
Have you never heard of metaphor.
Don’t worry. They’ll eventually get tired of property and start buying up all the dialysis machines on interest only. Rent them out for a profit and claim they’re saving lives.
If that resulted in more dialysis machines, more development of the machines and competition amongst dialysis machine makers then their claim could well be valid.
Why would it do ANY of that?
Cheap Chinese dialysis machine manufacturers targeting the ex-landlord market. We saw it with smart phones and e-scooters.
Smart phones and e-scooters were developed because of the ex-landlord market? You're going to have to include a URL here.
Because of an increase in the number of buyers. Act dumb all you want GGP.
Just send me a source if this is so obvious? I'm not acting dumb here. This is literally the first I've heard of anyone targeting ex-landlords with e-scooters or smart phones.
I accept you are not "acting" dumb. An increase in demand for something could result in further development of something and a lowering in price of that something due to competition among manufacturers.
And ex-landlords increase demand for e-scooters and smart phones??? If all you meant was that increased demand results in further development, why use such a bizarre example?
Now that I know what you actually mean, I guess I can give you a more helpful response. The only way to increase the "demand" for a dialysis machine is to increase the amount of kidney failures people have. It's really not like a smart phone or an e-scooter where there is a potentially limitless pool of customers. The technology will keep developing, obviously, but not because some assholes will hypothetically be buying them up and gouging people to use them.
Doesn't seem that credible that they didn't know it was anti-competitive.
I heard directly from tutors in another property investment teaching business (let's call it Property Learner, for example) that they also use this tactic to condition a seller to accept a low offer from the eventual serious buyer. Hunting in packs to get more money out of everyday folk.
It's good to see action taken against property crooks.
And that's not a defamatory statement - the court found them guilty of illegal behaviour. They are crooks.
Agreed. See my comment below.
Many a real estate agent would be getting their mate to make a low ball offer to a frail old lady and recommend acceptance.... Share the proceeds. This thing would happen every day of the week in NZ.
Just people of low character being parasites in society, so it seems.
So any salesmen on a commission based income?
I had to deal with several of Roys morons who were meddling in a deal I was working. In the end I got my landscapers to tidy a couple of them up when they were spreading untrue rumours about the property in an attempt to scare off the eventual buyer. Boxes of beer and bruised knuckles...beats a property tutors dirty tricks hands down ;-)
No competition between members.. Yep, seems legit. Oh, and must buy under market value!
Seems a bit hypocritical but property investors on here are given a hard time, for apparently forcing up prices so that others can not buy them.
Now Ron is castigated because he is trying to keep prices low, which is what any property investor wants, if he is after yield!
Make up your mind, do you want higher prices or lower ones, can’t be both!
That's exactly my point in my earlier comment but many can't see this, it seems. "Let's just hate the guys who have done well for themselves, no matter what" seems to be the modus operandi
Doing well for yourself is to be commended however leveraging and borrowing large sums of money will only result in most becoming tenants and a few benefiting. With taxes being used to support a overvalued market.
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