Price fixing earns Ronovationz $400k penalty
Wednesday 18 September 2019
Property investment guru, Ron Hoy Fong’s, company has been handed down a $400,000 penalty by the High Court after admitting to price fixing in Auckland’s real estate market.
By The Landlord
Ronovation, which trades as Ronovationz, agreed to the penalty as part of the settlement negotiations in proceedings that were filed back in July.
The proceedings were initiated by the Commerce Commission which alleged that rules developed and used by the company between 2011 and 2018 amounted to cartel conduct in breach of the Commerce Act.
The rules were intended to prevent Ronovationz members from competing for properties against each other, but the Commission said they had the effect of price fixing and bid rigging.
Shortly after the Commission launched proceedings, the company admitted the wrongdoing and in a penalty hearing earlier this month agreed to pay the Commission-recommended fine for the behaviour.
However, Justice Sarah Katz did not release her decision on the penalty until today.
In her judgment, she said Ronovationz’s rules were deliberately anticompetitive and designed to suppress competition between members in a manner that was to the detriment of vendors.
But Justice Katz noted there was no evidence that Ron Hoy Fong, or Ronovationz members, realised that the conduct breached New Zealand’s competition laws.
“Publication of the case, and the penalty imposed, will likely lead to greater public awareness of the unlawfulness of anticompetitive buyer side conduct of this nature, and the serious consequences that can result from engaging in such conduct.”
The case was the first time the Commission had brought proceedings against a buyer side cartel.
Commission chair Anna Rawlings says the purpose of the rules was to remove competition between members for those properties.
“While we cannot calculate the loss, some properties may have sold for less than they would have if Ronovation members had been competing against each other.
“A house is many New Zealanders’ most valuable asset, and it is important that the integrity of the sales processes for properties is maintained.”
Rawlings says that even agreements entered into by competing buyers can amount to price fixing.
“It is important that businesses and individuals are aware of the risks of engaging in this type of conduct, especially since price fixing will become a criminal offence from April 2021.”
Ron Hoy Fong, as the director of Ronovationz, has accepted responsibility for the breach.
The company earlier said it did not know that its conduct was a breach of the Act until the Commission wrote to it in 2018. As soon as it became aware of the Commission’s concerns, it had revoked the rules and ceased the conduct.
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