A real estate agency has been ordered to pay a $1.25 million penalty by the High Court after admitting price fixing allegations made by the Commerce Commission.
Unique Realty Ltd, a Manawatu-based company associated with The Professionals group, was the first of 13 national and regional real estate agencies to appear in court after the Commerce Commission filed proceedings for alleged breaches of the Commerce Act.
In December last year, the Commission filed charges against Unique and Property Brokers Ltd, Manawatu 1994 Ltd (trading as LJ Hooker) and one individual, alleging they breached the Commerce Act by agreeing with each other that they would pass on to vendors the full cost of advertising their properties on Trade Me.
That followed Trade Me changing its pricing model from a monthly subscription fee for agencies to a per-listing fee for properties the agencies advertised on its website.
Unique reached a settlement with the Commission prior to the court proceedings being filed, in which it admitted price fixing, and a High Court hearing was subsequently held to determine the penalty it should face.
In his judgment Justice Venning said Unique, Property Brokers and LJ Hooker Palmerston North, along with others, met to discuss the possibility of an industry wide response to Trade Me's pricing changes.
"The discussion strayed into unlawful price-fixing when the agencies present at the meeting agreed that...they would no longer absorb the cost of Trade Me listings but pass on the whole of the increased fee to their vendor customers," it said.
Without such an agreement the individual agencies would have been required to decide whether or not to impose the fee and if so at what level, creating what could have been a point of competition between them, the judgment said.
Unique accepted that its entering into the agreement with the other agencies had the effect of fixing, controlling or maintaining the price vendors paid for services from real estate agencies in the Manawatu and substantially lessened competition among them, the judgment said.
One of the factors Justice Venning took into account when setting the penalty was that "the market affects ordinary people because for many individuals, purchasing and selling a home is one of the most significant financial decisions they will make," his judgment said.
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8 Comments
Good on the commerce commission. It's a pity they didn't also look at the commission rates and how they are largely the same between most established agencies. That's what really hits people in the pocket. The average auckland house owner probably pays at least 15k in fees.
This article makes the real estate agencies involved sound like a consortium of criminals. My understanding is that trademe increased there charges for listings by about x3, so the Realestate Co's formed a united front to all pass the costs on to the consumer and in doing so educate the consumer that there are other websites namely realestate.co.nz which is a site set up and owned by the RE Co's. The united front by these real estate co's and other ones boycotting trademe forced trademe to back down on there rate hikes.
Realesteate.co.nz is now the most used property website so trademe's greed shot themselves in the foot. The RE Cos who are getting million dollar fines will regret sticking their heads over the parapet. they are probably just small town family businesses franchised to the big brands. Hopefully the brand backs them up or a fine like that will tip them over.
If the Commerce Commission and the REAA, i.e. the Real Estate Agents Authority together, were to dig deeper it would be shocked at the extent of rot in the real estate agency industry, that their investigation would reveal about the way property is bought and sold in Auckland, which is largely driven, in the main, by greed, ignorance, mispricing and weak legislation around property transactions.
Unknown to many of us is it not possible that there might some element of corruption, cronyism or malpractice creeping in to the real estate industry? Maybe, if a survey is done it will reveal what goes on in the name of "sales"..
Sometimes in the garb of sales talk, some of the agents / sellers might be tempted to lie / conceal some of the facts about a property with the intent to fool the buyer and palm off the property to him or her at an inflated price with a view to maximize their profits or their own commissions. And some of them manage to conceal their lies through omission, i.e. by omitting to disclose rather than by outright lies or by simply saying they don't know.. All the onus to check out the property cannot be upon the buyer
Take the case how some properties go to auction... when there are no bids, the vendor himself bids for his own property to show a bid - when in fact there were none. How is that possible? Why is it allowed? Is it fair? Does it not create a distorted view of the market?
Take the case of some of the non-market purchases ... sometimes a property might just change hands internally within family or within an internal group of persons known to each other, merely to record a particular price without there being any actual change in the beneficial ownership - thereby creating a false market. This is not to say that all non-market sales would be of dubious nature..
Or, worse, what, if any, are the systemic checks and balances in place to ensure a "buyer" is not propped up by some vested interests to "buy" a property at a particular price, with a view to create a false impression about the market?
Only what has been reported in the media / websites, etc., has been mentioned. No claim has been made. The power to investigate lies with the authorities. They too are reading what the public is reading. They need to proactively act on what they deem necessary, if they feel there is a need to do so
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