Commerce Commission v Ronovation Ltd – “buyer side” cartel

Press Release – New Zealand High Court

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA
TĀMAKI MAKAURAU ROHE

CIV-2019-404-1353
[2019] NZHC 2303

UNDER
Sections 27, 30 and 80 of the Commerce Act 1986 (conduct before 15 May 2018)
AND UNDER
Sections 30 and 80 of the Commerce Act 1986 (conduct on or after 15 May 2018)

BETWEEN

COMMERCE COMMISSION
Plaintiff

AND

RONOVATION LIMITED

[…]

Introduction

[1] Ronovation Limited (“Ronovation”) is a company owned by the family of Ronald Ng Hoy Fong. Mr Hoy Fong was also the director of the company at the relevant times.

[2] Ronovation (which traded as RonovatioNZ) provided advisory services to clients (referred to as “members” or “students”) who wanted to acquire residential real estate in the Auckland area, for investment purposes. Ronovation’s advice included information about what to look for in a property; how to negotiate with the vendor or bid at auction; how to renovate the property after acquisition; and how to find and manage tenants. Ronovation operated a Facebook page, accessible only to members, for the sharing and exchanging of information about property investments.

[3] In August/September 2011, Mr Hoy Fong implemented rules (“the Priority Rules”) to avoid members competing against each other to purchase properties. In essence, the first member to notify the group of their interest in a property had priority over other members, who were not permitted to negotiate or bid for that property in competition with the member who had priority. The Priority Rules were posted on Ronovation’s Facebook page on or about 10 September 2011 and agreed to by members (“the Agreement”). The Agreement potentially affected up to 471 properties, over a seven-year period.

[4] Although Mr Hoy Fong was unaware of it at the time, the Agreement breached Part 2 of the Commerce Act 1986 (“the Act”). The Commerce Commission (“the Commission”) accordingly brought proceedings against Ronovation (the first time the Commission has brought proceedings against a “buyer-side” cartel). Ronovation promptly admitted the Commission’s claims against it. The parties have conferred and agree that a penalty of $400,000 would be appropriate in all the circumstances. They jointly request that the Court impose a penalty in that amount. The parties have filed an agreed statement of facts.

[5] Although Ronovation agreed in general terms with the Commission’s approach to, and explanation of, the factors relevant to determining an appropriate penalty, there were some differences between the parties as to the relevance and weight that should be accorded to particular factors. I address those differences in my discussion of the relevant factors below.

[…]

Conclusion

[73] Applying a 35 per cent discount to the starting range of $550,000 to $650,000 results in a penalty range of approximately $355,000 to $425,000. The proposed penalty of $400,000 falls within that range, and I am satisfied that it is an appropriate penalty figure in all the circumstances.

[74] Although penalties in previous (seller side) cases have generally been higher, those cases are not analogous to this one, for the reasons I have outlined previously. A penalty of $400,000 is a very significant penalty for a company of the size and with the resources of Ronovation. I am satisfied that it will achieve the objectives of specific and general deterrence. Publication of the facts of this 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.

Result

[75] I make a declaration that Ronovation’s conduct contravened s 27 via s 30 of the Act (for conduct before 15 May 2018) and s 30 of the Act (for conduct after 15 May 2018).

[76] I order Ronovation to pay a pecuniary penalty in the sum of $400,000.

[77] As the Commission did not seek costs, I make no order as to costs.
Full judgment: 2019NZHC2303.pdf

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