[2] After an investigation into the activity of a number of real estate agencies, including Unique, the Commerce Commission (the Commission) commenced proceedings against Unique alleging that it had contravened ss 27(1) and 27(2) via s 30 of the Commerce Act 1986 (the Act); that is, it had entered into, and given effect to, a contract deemed to substantially lessen competition. The Commission seeks declarations of contravention and a pecuniary penalty.

[3] Unique accepts that it entered and gave effect to a price fixing agreement with at least 10 other real estate agencies in the Manawatu region, including Property Brokers Limited and Manawatu (1994) Limited (trading as LJ Hooker Palmerston North).

[4] The parties are agreed that an appropriate penalty range for Unique’s actions is between $1.2 and $1.65 million. They jointly suggest a penalty of $1.25 million as appropriate.

The parties

[5] Unique has four branch offices located in Palmerston North (including a separate office dealing in rental property only), Feilding and Foxton. Its market share in the Manawatu region is approximately 19 per cent. Unique was formed in
1992 by Mr Maxwell Vertongen. Mr Vertongen is currently one of two directors and one of three shareholders. Mr Daniel Cunningham is Unique’s residential manager. For the 12 months ended 31 March 2014 Unique’s gross residential commissions totalled [redacted], comprising [redacted] residential sales. For the financial year ending 31 March 2014 the annual net profit before tax was approximately [redacted].

Background to the offending agreement

[6] Unique listed its properties for sale with Trade Me. Trade Me charged a monthly subscription of $699 for the service. The subscription had been negotiated by The Professionals’ head office. The number of properties that could be listed under that monthly subscription was unlimited.

[7] In July 2013 Trade Me began informing key participants in the real estate industry of proposed changes to its pricing model. Trade Me intended to charge
$159 for each property listing uploaded to its website.

[8] On 17 October 2013 representatives from Unique, Property Brokers and LJ Hooker Palmerston North, together with others, met to discuss the possibility of an industry wide response to Trade Me’s proposal. Mr Vertongen and Mr Cunningham were both at the meeting. The agencies viewed the pricing change as only the…

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.

Continue reading Commerce Commission v Unique Realty Ltd

Details

AGLC: Commerce Commission v Unique Realty Ltd [2016] NZHC 1064
Case: [2016] NZHC 1064
Decision Date: 20 May 2016

CaseChat Overview and Summary

The High Court of New Zealand was presented with a case involving the Commerce Commission and Unique Realty Limited. The Commission alleged that Unique Realty Limited had contravened sections 27(1) and 27(2) of the Commerce Act 1986 by entering into and giving effect to a contract that substantially lessened competition in the Manawatu real estate sales services market. Unique accepted that it had indeed entered into and implemented a price-fixing agreement with other real estate agencies in the region. The central legal issue was whether Unique Realty Limited's actions constituted a breach of the Act and, if so, what the appropriate penalty should be.

The court examined the nature and impact of the agreement, which involved passing on the cost of property listings on Trade Me to vendor customers instead of absorbing some or all of the costs. The court acknowledged that while Unique did not gain more from vendors than it paid Trade Me, it avoided absorbing part of the fee, thereby maintaining its competitive position. The agreement had the potential to cause harm to vendors and affected the competitive landscape of the real estate market. The court also considered the statutory framework for penalties under the Commerce Act and the factors relevant to determining an appropriate penalty, including deterrence, the seriousness of the conduct, and the commercial gain or loss caused.

After considering the arguments and submissions from both parties, the court accepted the jointly suggested penalty of $1.25 million as appropriate. The court reasoned that while the actual commercial gain to Unique was likely minimal, the impact on the market and potential clients was significant. The court applied a 30% reduction from a starting point of $1.8 million, leading to the agreed penalty of $1.25 million. This penalty was deemed appropriate given the nature and seriousness of the conduct, the market impact, and the mitigating factors presented.

The court declared that Unique Realty Limited's conduct contravened sections 27(1) and 27(2) of the Act and imposed a pecuniary penalty of $1,250,000. The court also noted that Unique would contribute $25,000 towards the costs of the Commission’s investigation, with court costs to lie where they fall.

Orders