16 Dec 2016

Real estate companies fined $10m for price fixing

7:30 pm on 16 December 2016

Four major real estate agencies have been ordered to pay almost $10 million in total, for price fixing and anti-competitive behaviour.

An auction sign outside a house for sale in Auckland.

Photo: RNZ / Claire Eastham-Farrelly

The penalties totalled $9.825 million and were handed down against Barfoot & Thompson, Harcourts, LJ Hooker and Ray White in the High Court in Auckland this afternoon.

The Commerce Commission took action against the firms after they reached a deal on how to respond to changes to TradeMe's property listing fees.

The companies agreed to pass the cost of listing on the online auction site to vendors.

Each of the agencies reached settlement agreements with the Commerce Commission, admitting their actions breached the Commerce Act.

Justice Heath said the parties to the agreement were the largest and most influential agencies in New Zealand, who together controlled a significant share of the real estate markets.

The respective penalties handed down by the Court today were:

Barfoot and Thompson: $2,575,000

Harcourts Group: $2,575,000

LJ Hooker: $2,475,000

Ray White: $2,200,000

End of the "old boys" network

Smaller players in the real estate industry hoped the penalties would help level the playing field.

200 Square head Grant Wakelin said the decision showed the big players could not act together.

"If the traditional industry actually takes notice of it and changes the way they work, it's great for newer entrants into the industry because it says to the old boys network that the way of doing business in the past is not going to be allowed into the future."

It was difficult for new agencies to get a foothold in the real estate industry, because there had always been push-back from bigger companies, Mr Wakelin said.

"It's really hard being an independent business doing something new in real estate and trying to change the way the industry works, trying to change consumer behaviour, it's really hard to get traction in there."

Hive News publisher and economic commentator Bernard Hickey said it was difficult to prove whether the big real estate companies were engaging in anti-competitive behaviour in other areas.

"Until you see evidence that's put before the court and the court rules on it, it's hard to say," he said.

"But what we do know is that the cost of selling a property in New Zealand is significantly higher as a proportion of the value of the home than it is in other countries, and many people argue that's because the cost of real estate advertising is significantly higher here than in other countries."

Unlike other countries, much of the real estate advertising spend still went on print, rather than online, Mr Hickey said.

But it was hard to say whether that was because of anti-competitive behaviour, industry practices, or a belief by those selling that they get better value in print.

"It's a question for those in the industry to think about and for vendors, so people who are selling their homes to think about - are they actually getting much value by putting a big, juicy colour ad in the newspaper or in the Property Press, when they could get just as much action and price by putting their ad online."

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