Commerce Commission v Property Brokers Ltd - [2016] NZHC 2851

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-003051 [2016] NZHC 2851

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: 25 November 2016

Appearances:

J C L Dixon and A L McConachy for Plaintiff
A N Isac for Second Defendant

Judgment:

28 November 2016

JUDGMENT OF GILBERT J

This judgment is delivered by me on 28 November 2016 at 4.30 pm pursuant to r 11.5 of the High Court Rules.

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

Counsel/Solicitors:
John Dixon, Barrister, Auckland
A N Isac, Barrister, Auckland
Meredith Connell, Auckland

COMMERCE COMMISSION v PROPERTY BROKERS LTD & ORS [2016] NZHC 2851 [28 November 2016]

Introduction

[1] Manawatu (1994) Ltd (Manawatu) is a real estate agency trading under the L J Hooker banner in Palmerston North. In October 2013, in response to price increases resulting from a change in Trade Me’s pricing model for online advertising, Manawatu entered into an agreement with at least 10 other real estate agencies in the region to pass these costs on to vendor clients instead of absorbing them as overhead as they had previously done. This was an anti-competitive price-fixing agreement in contravention of s 27 of the Commerce Act 1986 (the Act).

[2] Manawatu has admitted that it was a party to this agreement which operated from 1 February 2014 until 1 August 2014. Manawatu has agreed with the Commerce Commission, subject to the Court’s approval, to pay a penalty of
$1.25 million for its anti-competitive conduct. The Commission seeks a declaration that Manawatu’s conduct contravened s 27 of the Act and asks the Court to impose the recommended penalty.

[3] The recommended penalty is in line with penalties imposed by the Court against other real estate agencies in similar circumstances and is the same as that imposed by Venning J against Unique Realty Ltd, a similar sized agency that was a party to the same agreement.1 Counsel agree that there is no basis for distinguishing between the positions of Unique Realty and Manawatu and the penalty should be the same. I agree. My reasons for approving the recommended penalty can therefore be brief.

Penalty

[4] Section 80(2B) of the Act provides that the maximum penalty for a body corporate is the greater of: $10 million; or either three times the value of any commercial gain resulting from the contravention or, if this cannot be readily ascertained, 10 per cent of the turnover of the body corporate and any interconnected
bodies corporate. The commercial gain resulting from the agreement is not readily

1 Commerce Commission v Unique Realty Limited [2016] NZHC 1064; Commerce Commission v Bayley Corporation Limited [2016] NZHC 1493; Commerce Commission v Success Realty Limited [2016] NZHC 1494.

ascertainable but is likely to be modest. Manawatu’s turnover for the 12 month period ending 12 June 2014 was substantially less than $10 million. Accordingly, the maximum penalty…

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 2851
Decision Date: 28 November 2016

CaseChat Overview and Summary

In the High Court of New Zealand, the Commerce Commission brought an action against Manawatu (1994) Ltd, a real estate agency, alleging that it had contravened section 27 of the Commerce Act 1986 by participating in an anti-competitive price-fixing agreement. The agreement, which operated from 1 February 2014 until 1 August 2014, was to pass on to vendor clients the costs resulting from a change in Trade Me’s pricing model for online advertising instead of absorbing them as overhead. The primary legal issue before the court was whether the penalty imposed by the Commission on Manawatu for its anti-competitive conduct was appropriate. The court needed to determine if the penalty was consistent with penalties imposed in similar circumstances and if the mitigating factors warranted any reduction in the penalty.

The court found that the recommended penalty of $1.25 million was appropriate. The court considered various factors in determining the penalty, including the nature and seriousness of the contravention, the duration of the contravening conduct, the financial strength and market power of Manawatu, the seniority of the personnel involved, the extent of any benefit gained, and the desirability of imposing penalties that are consistent with those imposed in similar cases. The court noted that while participation in price-fixing agreements is regarded as serious misconduct, Manawatu acted in ignorance of the law and did not knowingly breach the Act. The court also found that Manawatu cooperated with the Commission’s investigation and admitted its contravention at an early stage, which warranted a discount of 25 to 30 per cent. The court approved the recommended penalty of $1.25 million, taking into account the starting point range and applying the discount for the mitigating factors identified.

The court made a declaration that Manawatu (1994) Ltd’s conduct contravened section 27 of the Commerce Act 1986 and imposed a pecuniary penalty in the sum of $1.25 million. Manawatu (1994) Ltd was also ordered to pay $25,000 towards the costs of the Commission’s investigation. The sums were to be paid to the Commission within specified timeframes. The costs of these proceedings were to lie where they fell.

Orders