Barfoot & Thompson, Harcourts, LJ Hooker, Ray White fined close to $10m for price fixing

The Commerce Commission alleges that five agencies breached the Commerce Act by agreeing a planned industry response to a changed pricing model. / File Photo.

Four major real estate agencies have been ordered to pay almost $10 million for price fixing.

In the High Court at Auckland today, Barfoot & Thompson, Harcourts, LJ Hooker and Ray White were found to have breached the Commerce Act when they joined forces to avoid increased Trade Me prices.

Trade Me previously charged the agencies a monthly subscription and allowed them as many property listings as they wanted, but in 2013 that was changed to $159 per listing.

The heads of the country's largest real estate agencies met and collectively agreed to pass this extra cost on to vendors. They further agreed to not commit to any preferential or discounted listing fees with Trade Me.

That sparked a major Commerce Commission investigation, which culminated in Justice Paul Heath yesterday ordering Barfoot & Thompson to pay $2.575m, Harcourts $2.575m, LJ Hooker $2.475m and Ray White $2.2m.

Bayleys was also subject to the action but that case was settled earlier this year after the firm agreed to pay a $2.2m penalty.

Justice Heath said the companies' actions "had the potential to affect a large number of transactions for residential properties", adding that it had "affected ordinary New Zealanders in the buying and selling of houses".

"I find that some vendors were likely to have been prejudiced by being required to pay more than they would otherwise have had to pay for a Trade Me listing."

He found that the agencies did not deliberately breach the Act, noting they had sought legal advice before making the arrangement.

Commerce Commission lawyer John Dixon said the agreement affected a "very significant" number of residential property listings.

The parties were the most influential real estate companies in the country and represented some 560 real estate offices.

As a result of their actions, a significant number of vendors were dissuaded from listing on Trade Me because of the price bump, Dixon said.

"In such a case, the fact of not having a listing on Trade Me may have led to a lower number of 'buyer eyes' on their particular property and, in turn, may have ultimately meant that the vendor missed out on some potential purchasers and, ultimately, a potentially higher price for the property," he said.

According to the agreed summary of facts, the new pricing regime meant a 400 per cent increase in Ray White's Trade Me costs, 500 per cent for Harcourts, 600 per cent for LJ Hooker and 700 per cent for Barfoot & Thompson.

Barfoot & Thompson lawyer Miriam Dean submitted that the primary motivation for the company entering the agreement was to get realestate.co.nz - of which managing director Peter Thompson is a director - to "lift its game".

"Agencies, and in turn consumers, needed a low-priced and effective website to provide strong competition to Trade Me's dominance," she said.

"It was, after all, Trade Me that proposed that agencies vendor-fund the new listing fee of $159 in its entirety."

Despite the move to the vendor-funding model, the company continued to make significant contributions to vendors' marketing spending.

"Barfoot & Thompson nonetheless accepts that, given the important consumer protection provisions of the Act ... its conduct in entering into and giving effect to the [agreement] was serious."

LJ Hooker lawyer James Craig said each company franchisee had their own contractual agreement with Trade Me and the ability to negotiate directly.

"This meant that not all of LJ Hooker's offices did in fact vendor fund the Trade Me per listing fees as they had discretion in how to act - but LJ Hooker accepts the majority of its franchisees chose to do so," he said.

Harcourts' lawyer Andrew Peterson said once the new fees were implemented, it was inevitable vendors would foot the bill.

"Trade Me knew that price increases of this magnitude could not be absorbed and, from the outset, recommended that the cost be passed on," he said, adding that the company had not intended to breach the Act.

Ray White lawyer Simon Ladd said while the company had given effect to the agreement "to a limited extent", it never actually changed to the vendor-pays scheme.

"Ray White's responsibility for any harm that [the agreement] may have caused, through the conduct of others, was indirect."

The company had admitted its liability at an early stage and had co-operated with the Commission's investigation throughout.

Another company, The Property Page (NZ) Limited, was also party to the proceedings because the price fixing agreement was made at one of its meetings.

It is an incorporated company owned by Harcourts, LJ Hooker, Ray White, Barfoot & Thompson and Bayleys and owns a 50 per cent share of realestate.co.nz.

Justice Heath found no penalty needed to be made against the company, noting it had already made a $100,000 contribution towards the investigation.

The Property Page said in a statement that the agencies had "responsibly acknowledged there was an unintentional breach of the act of only short duration".

"They remain immensely disappointed that the competitive response they took, after seeking legal advice, has resulted in these consequences."

In a statement, Ray White NZ chief executive Carey Smith said the Commerce Commission acknowledged no vendors were harmed and there was no direct potential for commercial gain.

"Ray White never moved to a vendor funding model. Accordingly, there was no actual harm to Ray White's vendors in terms of them paying a higher amount for a Trade Me listing.

"The commission accepts that Ray White should be entitled to a lesser penalty to recognise that none of Ray White's vendors were harmed."