The Court of Appeal has overturned a High Court decision to the effect that certain Hamilton real estate agencies (Agencies) had not acted in breach of the Commerce Act 1986 (Act).
In Commerce Commission v Lodge Real Estate Ltd [2018] NZCA 523, the fact that the real estate agents had come to an arrangement or understanding to withdraw their standard listings from Trade Me, was not in issue. However, the NZ Commerce Commission (Commission) appealed against the High Court’s finding that the arrangement or understanding did not amount to fixing, controlling or maintaining prices and therefore was not a breach of section 27 of the Act.
The Court of Appeal agreed that the Agencies, in meeting to establish a consensus (that the parties would withdraw their proposed listings from Trade Me rather than absorbing the cost of Trade Me’s proposed new “per listing fees”), had moved beyond “conscious parallelism”. Conscious parallelism, or tacit collusion, is a natural market phenomenon whereby an informal “price leader” may emerge, which other participants then mimic, as a limited (and licit) form of unspoken consensus.
The Court of Appeal held that whether there is an “arrangement” under section 27 depends on whether there is a consensus among competitors which has given rise to mutual expectations as to how they would act. A party may act in the belief that its competitors will follow suit, and they may do so, without going beyond conscious parallelism; but actions taken on the basis of actual commitment from competitors to act in a similar way will fall foul of section 27.
The Court of Appeal diverged from the High Court’s view that because there was a discretionary aspect to the arrangement, it did not interfere with the normal competitive setting of prices. The Court of Appeal took a broader approach, holding that the discretionary element was an irrelevant consideration given that the agreement to withdraw from Trade Me, and resulting avoidance of the cost of standard Trade Me listings, would adversely affect the price for customers. It was enough that the Agencies had agreed on a starting point.
Accordingly, the Commission’s appeal was successful, and the case has been remitted back to the High Court for assessment of pecuniary penalties. However, leave to appeal to the Supreme Court has been sought.