Real estate agencies accused of price fixing, anti-competitive behaviour

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The Commerce Commission has accused 13 real estate agencies of price fixing and anti-competitive behaviour.

The commission has filed proceedings in the High Court at Auckland against 13 agencies, a company owned by some of the agencies, as well as three individuals. 

A further eight agencies have also been warned for their role in the alleged conduct between 2013 and 2014.

The commission says the accusations relate to responses by the head offices of five major companies, Barfoot and Thompson, Harcourts, LJ Hooker, Ray White and Bayleys, as well as agencies in Hamilton and Manawatu, to Trade Me [NZX: TME] changing its monthly subscription fees.

This is alleged to have occurred when Trade Me switched from a monthly subscription fee to a per-listing fee for property advertisements on its website.

The commission says the defendants breached the Commerce Act by agreeing to a “planned industry response” to Trade Me’s changes.

This allegedly involved the parties agreeing vendors would have to pay the listing fee while agencies would not commit to any preferential or discounted listing fees with the website.

It also alleges Property Page, a company owned by the five agencies, which in turn owns half of Trade Me competitor realestate.co.nz, aided and abetted the agencies in implementing its agreement.

A settlement has been agreed in principle with Bayleys, involving an admission and payment of a court-imposed penalty, but settlements have not been agreed with the others.

The commission has also filed proceedings against real estate agencies and individuals in Hamilton and Manawatu, for planning a “regional response” to Trade Me’s changes.

The Hamilton companies are Harcourts-associated Monarch Real Estate, Lodge Real Estate, Lugton’s, Ray White-associated Online Realty, Bayleys-associated Success Realty, and two individuals who work for Monarch and Lodge.

Property Brokers, LJ Hooker-associated Manawatu 1994, and Unique Realty are the Manawatu companies.

A settlement has been reached with Unique Realty, the commission says.

It will not comment further on the cases.

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Real-estate agents: the OPEC of NZ!

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The evidence of 'cartel' pricing is plain for all to see and is 'enshrined' on Sale and Purchase Agreements (unless over-written). At the time the average house in NZ was sub-$250k, this did not seem unreasonable, but 'house price spikes' in Auckland have created 'windfall' fee increases. That said my understanding is that a very tiny minority of realtors earn 7 figure incomes and the average earnings are well south of 6 figures-particularly in the provinces.

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Perhaps this type of behaviour explains the excessive commission rates too.

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The high commission rates only exist because we NZers are gullible enough to pay them in the first place. Are they up there with the highest in the world? - certainly more than the UK. Come to think of it I don't know why real estate agents exist in the first place as it's not exactly hard to sell or buy a house with a bit of work and a lawyer to take care of the legal stuff.

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funny how they all charge the same commission rates and it never gets looked at

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Good on the Com.Com.
But hey is this the same Com.Com that declared PPCS was not being ant-competitive when it sold its Blenheim meat works with the rider, "purchaser must not use the plant for processing sheep"?

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http://m.nzherald.co.nz/northern-advocate/news/article.cfm?c_id=1503450&... ... Day in court approaches at last ... : complaint ... about stock firms allegedly fixing prices prior to the introduction of National Animal Identification Tracing (NAIT) could lead to legal action to recover ... money ... overcharged ...

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This must be the stupidest government action I've seen this year. The Commerce Commission has wasted resource on a matter as asinine as this. Our bureaucracy has reached the final stage: a moronacy. Witless and bored officers looking to create work for themselves at the expense of consumers. That said, why peeps even still use agents when you can list on Trade-me for about $499 and sell your house yourself beats me.

Oh, the above comment commission rates being the same is price-fixing .. I can't even.

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Don't worry, it seems we've all had a gutsful of real estate agents, except you Mr Hubbard.

And your comment? I can't even...

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Mr/Mrs/Ms Moose.

I said very clearly I wouldn't use an agent. The last time we sold our house (about 2006, I think) we had it with an agent for a while, they said we wouldn't get more than $850k for it, but after showing most of the people around ourselves anyway, as the agent could never remember the house's features (data cabling, et al) we subsequently listed it ourselves on Trademe and sold the property for $920k. So, a $70k better deal, plus saved (from memory) $35k commission, making us $105k better off. We shouted ourselves a trip to Disney land.

Yours faithfully

Mr Hubbard

PS: Try reading peeps comments in their entirety ;)

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"That said, why peeps even still use agents when you can list on Trade-me for about $499 and sell your house yourself beats me."

If that's what you call speaking clearly and concisely on not using an agent to sell your own house I would hate to actually know what you mean with the articles on your blog site.

Wow, just wow, when I visited that as well...

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Ah. You've noticed I don't pander to the airhead attention deficit Generation Text. Well done Moosey ;)

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Albeit it - there's a word for you - re my, quote:

""That said, why peeps even still use agents when you can list on Trade-me for about $499 and sell your house yourself beats me."

Seriously, I'm interested: you can't comprehend a sentence meaning and structure as simple as that one?

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Take it back - ignoring the Moosey chap - not the silliest government action. That was the ludicrous Anti-Money laundering legislation being used to kill iPredict.

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This was certainly up there. Baffoonery from Mr Bridges.

Speaking of bridges, a close contender was also the election bribe promise of bridges to Northland voters.

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I think the problem with the commission structure is that they are essentially flat which means that the agent them exerts pressure on the vendor to accept an offer as the marginal effect of a slightly better price is little. the best deal I got in 1994 was Zero for the first $400,000, 33% for anything above. best deal I ever got, well over so called market valuation upon which the $400K was based. Great value for both parties.

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I am shocked, shocked I tell you, to hear that real estate agents are less than 100% ethical!

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I live in the wrong part of Auckland. Our weekend real estate pages are in matt finish. In the "better " parts of Auckland they are gloss finish. Herald told me it was at the request of the real estate companies. If they work this closely on something like this, what else do they collaborate on?

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This isn't about commission rates, if unhappy with that, don't list with an agency. Nor is it about print quality, which might be some are prepared to pay more for that advertising.

Keep in mind in 2013, there were Open2View (O2V), agencies own websites, realestate.co.nz, Trade Me (TM), Sella (NZ Herald) etc among the providers of online advertising. Trade Me of all of those is a general trading site, with sub-categories. It is not a specialist property advertising site like the others, and nor are these sites in direct competition with them as I see it.

Agencies often if not always offered some online and even print advertising free - including TM because they were on a fixed rate cap deal, others were paid for. This meant that pretty 100% of all listings were on TM and the other free listing websites. Agencies also on-sold upgrades for TM, passing on the fee to the seller. Another important point is while there is provision for agencies to charge a commission on advertising, they don't. They charge what the cost is of placing advertising. Those commissions have to be declared if they do charge. Most agencies are small and independent franchise holders.

TM decided they could make a predicted $22 million extra off property and to take everyone unilaterally off the capped fee and instate a fixed fee of $159 + GST per listing but probably could have raised prices with little quibble. TM also stated that agencies should charge sellers a 20% commission making the price $199 + GST to sellers - see: http://images.trademe.co.nz/others/pdf/Trade%20Me%20Property%20pricing%2...

The agencies and industries balked at this, and complained and said they'd act in response to what is arguably a price gouge and TM acting like it was the only place offering this service. Individual agencies and industry groups refused to sign a agreement agreeing to the terms and pricing, not sure if any further discounts were offered above that as an inducement to sign. They said they would pass on costs as well. They apparently decided to promote realestate.co.nz, which is industry owned (but already had 100% of listings on it anyway).

I am not sure where in law it says any individual or even a group must sign an agreement with anyone, even if they agree between themselves not to do so especially if they do not agree to the terms. I am also not sure where in the law it says companies, businesses, or industry groups cannot determine that they will pass on a cost to them to a consumer either, but apparently they think this is a problem. The issue here is the Commerce commission is claiming price fixing, but it was TM setting the price. They are claiming there was an agreement that was breached, but it was TM that unilaterally decided not to renew and change the terms.

I am not sure where they get the not passing on discounts, there weren't any to pass in the absence of an agreement, nor was the suggested commission that TM added on a discount, they didn't alter the base price but basically told the industry to charge extra. And last but not least, with realestate.co.nz because all listings were going on there I do not understand why a decision, even collectively, to promote that counts. It wasn't like they took listings off TM to put there, they were already there and they advertised the site more. TM lost no business as a result of that action, if they lost business it was due to the price hike and the reaction to that. This changed behaviour, a TM listing became an option instead of a standard due to the cost they imposed. The heavy handed action seems to imply that you must list with them and you must sign an agreement with them.

Where there could be an issue is that some (you couldn't call this nationwide at all) when the new price kicked in were reluctant to list with TM, in a couple of areas they pulled listings off. But that said, TM then got in on the act and wrote to those that had listings pulled, challenging this, and then Morgan called the industry a bunch of turkeys. You may agree with this assessment, but I'd suggest it wasn't a good idea when you want the business. Later, in 2014 after about 6 months, TM came to the table with a new offer, which most if not all accepted with lower pricing. However, things had changed forever, and the Commerce Commission action to my mind doesn't help engender good feelings either way. Some of those charged have caved, not necessarily because of fault but because the legal costs could kill their company and it's a better decision to take a fine.

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