Commerce Commission v Property Brokers Ltd - [2017] NZHC 681

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-003051 [2017] NZHC 681

UNDER
sections 27, 30 and 80 of the Commerce

Act 1986

BETWEEN

COMMERCE COMMISSION Plaintiff

AND

PROPERTY BROKERS LIMITED First Defendant

MANAWATU (1994) LIMITED Second Defendant

TIMOTHY JOHN MORDAUNT Third Defendant

Hearing: 10 March 2017

Appearances:

J Dixon and L Farmer for Plaintiff
T Mullins and D Nilsson for First and Third Defendants

Judgment:

10 April 2017

JUDGMENT OF GILBERT J

This judgment is delivered by me on 10 April 2017 at 2 pm pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

Counsel/Solicitors:
J Dixon, Barrister, Auckland
Meredith Connell, Auckland
Lee Salmon Long, Auckland

COMMERCE COMMISSION v PROPERTY BROKERS LTD [2017] NZHC 681 [10 April 2017]

Introduction

[1] Property Brokers Ltd is a real estate agency based in Palmerston North. It has 36 branch offices in the lower part of the North Island and a 25 to 28 per cent share of the residential real estate market in the Manawatu region. Timothy Mordaunt is the sole director of the company and his family trust owns all of the shares in it.

[2] Property Brokers and Mr Mordaunt admit that they contravened s 27 of the Commerce Act 1986 by entering into and giving effect to an anti-competitive price- fixing agreement with at least 10 other real estate agencies in the Manawatu region. The agreement was to pass on to vendor clients the costs of listing properties on Trade Me instead of absorbing these costs as overheads, as was the previous practice. This agreement was reached in October 2013 in response to a new pricing model signalled by Trade Me that would significantly increase the listing costs from
1 February 2014. From that date onwards, Property Brokers did not offer listings on Trade Me as an advertising option for its clients and would only place such a listing if specifically requested to do so by a client. In such cases, the listing cost was passed on to the vendor or to the individual agent.

[3] The Commerce Commission recommends that the Court should impose a penalty of $1.45 million on Property Brokers and $50,000 on Mr Mordaunt for their roles in this unlawful activity. Property Brokers and Mr Mordaunt support this recommendation.

[4] In considering whether these recommended penalties should be approved by the Court, the accepted approach is to establish an appropriate starting point having regard to the maximum penalty and then adjust this starting point to take account of any aggravating or mitigating factors specific to each defendant. The role of the Court is to ensure that the recommended penalty falls within an appropriate range rather than to substitute its own assessment of the particular penalty.

[5] Adopting this approach, and for the reasons set out below, I am satisfied that the recommended penalties are appropriate and should be confirmed. I first address the position of Property Brokers and then consider Mr Mordaunt’s position.

Property Brokers

Starting point

[6] In…

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 681
Decision Date: 10 April 2017

CaseChat Overview and Summary

Property Brokers Ltd, a prominent real estate agency in Palmerston North with significant market share in the Manawatu region, along with its sole director, Timothy Mordaunt, were before the High Court of New Zealand to address allegations of anti-competitive conduct under the Commerce Act 1986. The central dispute centred on the establishment and implementation of an anti-competitive price-fixing agreement with other real estate agencies, aimed at passing on the costs of listing properties on Trade Me to vendor clients, rather than absorbing these costs as overheads. This agreement, which came into effect in February 2014, was a direct response to a significant increase in listing costs by Trade Me. The Commerce Commission sought penalties for these breaches, recommending $1.45 million for Property Brokers and $50,000 for Mr Mordaunt.

The court was required to determine whether the recommended penalties were appropriate. This involved establishing an appropriate starting point for the penalties, considering the maximum penalties available under the Act, and adjusting this starting point based on aggravating and mitigating factors specific to each defendant. The court acknowledged the seriousness of the misconduct, given the potential impact on market competition and consumers, and the leading role of Property Brokers in orchestrating the price-fixing agreement.

In its reasoning, the court found that the maximum penalty for Property Brokers was $10 million per breach, considering the nature and seriousness of the misconduct, the potential impact on a large number of consumers, and the need for a penalty that would deter future misconduct. The court also considered mitigating factors such as the lack of significant benefit from the agreement, cooperation with the Commission, and early admission of wrongdoing, which warranted a discount of 25 to 30 per cent on the starting point. For Mr Mordaunt, the court considered his central role in initiating and implementing the agreement, his potential personal benefit, and mitigating factors similar to those applied to Property Brokers, leading to a recommended penalty of $50,000.

Ultimately, the court confirmed the recommended penalties, imposing a pecuniary penalty of $1.45 million on Property Brokers and $50,000 on Mr Mordaunt, and declared that their conduct contravened section 27 of the Commerce Act 1986. The court's decision underscores the importance of maintaining competitive markets and the severe consequences for entities and individuals engaging in anti-competitive practices.

Orders