Commerce Commission v Lodge Real Estate Ltd - [2017] NZHC 1875

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-003045 [2017] NZHC 1875

BETWEEN
COMMERCE COMMISSION

Plaintiff

AND

LODGE REAL ESTATE LIMITED First Defendant

LUGTONʼS LIMITED
Second Defendant

MONARCH REAL ESTATE LIMITED Third Defendant

ONLINE REALTY LIMITED Fourth Defendant

SUCCESS REALTY LIMITED Fifth Defendant

BRIAN KING Sixth Defendant

JEREMY OʼROURKE

Seventh Defendant

Hearing: 2 August 2017

Appearances:

L C A Farmer and J Carlyon for Plaintiff
G H J Brant for Fourth Defendant

Judgment:

8 August 2017

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 8 August 2017 at 3.00 pm
pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date…………………………

COMMERCE COMMISSION v LODGE REAL ESTATE LTD & ORS [2017] NZHC 1875 [8 August 2017]

Introduction

[1] Online Realty Ltd (Online) is one of several real estate agents facing proceedings by the Commerce Commission for breaches of s 27 of the Commerce Act 1986 arising from the co-ordinated response of various agents to Trade Me’s decision to revise its pricing model for listing residential properties on its website.

[2] A number of agents have admitted that their conduct was in breach of the Act and have had penalties imposed on them.1 Online has also now admitted that it engaged in conduct that breached s 27. Online and the Commerce Commission have jointly recommended a penalty of $1,050,000 which they say recognises the nature of the conduct and the relevant mitigating factors. They seek the Court’s approval and imposition of a penalty at that level.

The contravening conduct

Relevant statutory provisions

[3] Section 27 of the Commerce Act prohibits certain types of conduct which have the effect of substantially lessening competition:

(1) No person shall enter into a contract or arrangement, or arrive at an understanding, containing a provision that has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market.

(2) No person shall give effect to a provision of a contract, arrangement, or understanding that has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market.

(3) Subsection (2) of this section applies in respect of a contract or arrangement entered into, or an understanding arrived at, whether before or after the commencement of this Act.

(4) No provision of a contract, whether made before or after the commencement of this Act, that has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market is enforceable.

1 Commerce Commission v Lodge Real Estate Ltd [2016] NZHC 3115 (Lugton’s); Commerce Commission v Lodge Real Estate Ltd [2016] NZHC 1494 (Success); Commerce Commission v Unique Realty Ltd [2016] NZHC 1064 (Unique Realty); Commerce Commission v Property Brokers Ltd [2016] NZHC 2851 (Manawatu 1994); Commerce Commission v Property Brokers Ltd [2017] NZHC 681 (Property Brokers and Mordaunt); Commerce Commission v Bayley Corp Ltd [2016] NZHC 1493 (Bayleys); Commerce Commission v Barfoot & Thompson Ltd [2016] NZHC 3111 (PPL).

[4]…

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: [2017] NZHC 1875
Decision Date: 8 August 2017

CaseChat Overview and Summary

The High Court of New Zealand, Auckland Registry, heard proceedings brought by the Commerce Commission against several real estate agents, including Online Realty Limited, for breaches of s 27 of the Commerce Act 1986. The agents had entered into an agreement, known as the Hamilton agreement, to coordinate their response to Trade Me's proposed change in its pricing model for residential property listings. The Commission and Online have jointly recommended a penalty of $1,050,000, which the Court is asked to approve and impose.

The court was required to decide whether the proposed penalty was appropriate and whether Online should be granted permission to pay the penalty in instalments. The court assessed the appropriateness of the penalty by considering the nature of the market, the nature and seriousness of the conduct, the role of the defendant, the deliberateness of the conduct, the seniority of personnel involved, the duration of the conduct, the potential gain to the defendants, and the harm caused by the conduct. The court found that Online, while an active participant, was not a ringleader or initiator of the agreement and that the most senior of Online's personnel were involved. The court also found that the Hamilton agreement had a lasting effect on the real estate market in Hamilton, which supported the appropriateness of the penalty.

The court found that the recommended penalty of $1,050,000 was appropriate and fell within the correct range. The court accepted Online's application for staged payment of the penalty, finding that it would allow Online to continue trading in an orderly way. The penalty is to be paid in four instalments over three years. The court made a declaration that Online's conduct contravened s 27, via s 30, of the Commerce Act 1986 and imposed a pecuniary penalty of $1,050,000. The penalty is to be paid in four instalments over three years. The parties have agreed that costs will lie where they fall.

Orders