Commerce Commission v Bayley Corporation Ltd - [2016] NZHC 1493

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-003052 [2016] NZHC 1493

UNDER
Sections 27, 30 and 80 of the Commerce

Act 1986

BETWEEN

COMMERCE COMMISSION Plaintiff

AND

BAYLEY CORPORATION LIMITED Defendant

Hearing: 10 June 2016

Appearances:

J C L Dixon and L C A Farmer for Plaintiff
T D Smith and R M Dixon for Defendant

Judgment:

1 July 2016

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 1 July 2016 at 4.00 pm
pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date………………………..

COMMERCE COMMISSION v BAYLEY CORPORATION LTD [2016] NZHC 1493 [1 July 2016]

Introducton

[1] Bayley Corporation Limited is a real estate company that operates through franchisees throughout New Zealand. It has admitted conduct constituting a breach of s 27, via s 30, of the Commerce Act 1986. Specifically, between 29 August 2013 and 1 August 2014 Bayley entered into and gave effect to an anti-competitive price fixing agreement with four other real estate companies (the PPL agreement).1 The Commerce Commission and Bayley have agreed to recommend to the Court that it would be appropriate for a penalty of $2.2m to be imposed in respect of this conduct.

[2] The Commission seeks a declaration that Bayley’s conduct contravened s 27, via s 30, and the imposition of a recommended penalty. Bayley seeks to have payment of the penalty deferred. There is no objection from the Commission to that request.

The anti-competitive conduct

[3] The price fixing agreement related to the use of the Trade Me website to advertise real estate listings. Prior to 2013 Trade Me operated a subscription-based model for standard listing of residential real estate by real estate companies. Under this model real estate companies were charged a capped subscription fee which was a base price with a further charge for each standard listing up to a finite number of listings. Once that number was reached the price was capped with no charge for further listings.

[4] In 2013 Trade Me advised its customers, including Bayley, of its intention to change the pricing model to charge a fee of approximately $159 for each standard listing with no cap on the fee charged for a set number of listings (the per-listing pricing model). This change was discussed at a meeting of representatives of Bayley, Harcourts, Barfoot & Thompson, L J Hooker and Ray White in August 2013. These companies own 50 per cent of Property Page (NZ) Ltd (PPL), the company that operates the realestate.co.nz website. The remaining 50 per cent of PPL is
owned by other real estate agents in New Zealand.

1 Of this group only Bayley has accepted that the conduct was unlawful.

[5] The practice at the time among real estate companies, including Bayley, varied as to how the subscription price previously charged by Trade Me was funded in terms of the extent to which the real estate company absorbed the cost of listing on Trade Me. Under the PPL agreement, however,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] NZHC 1493
Decision Date: 1 July 2016

CaseChat Overview and Summary

The High Court of New Zealand heard a case between the Commerce Commission and Bayley Corporation Limited, a real estate company, regarding a breach of the Commerce Act 1986. Bayley admitted to engaging in anti-competitive conduct by entering into a price-fixing agreement with other real estate companies, which violated section 27 of the Act through section 30. The court was tasked with deciding whether the conduct contravened the Act and to determine an appropriate penalty. The court also considered Bayley's request to defer the payment of the penalty.

The court found that Bayley's conduct constituted a breach of the Act as it entered into an agreement with other real estate companies to fix prices for listing properties on Trade Me, a real estate website. The agreement resulted in vendors bearing the full cost of listing fees, removing any competition among the companies to offer discounted prices to their clients. The court accepted the recommended penalty of $2.2 million, considering factors such as the nature and seriousness of the conduct, the duration of the contravening conduct, the involvement of senior employees, the potential commercial gain, and the company's cooperation with the Commission.

The court also granted Bayley's request to defer payment of the penalty until 31 December 2016, due to the company's financial commitments. The court made a declaration that Bayley's conduct contravened the Commerce Act, imposed the recommended penalty of $2.2 million, and directed that payment be made by 31 December 2016, with interest calculated from 20 working days after the judgment until the penalty is paid in full. Costs were to lie where they fall by consent.

Orders