New Zealand Real Estate Franchisees Face Price Fixing Allegations

The Commerce Commission of New Zealand has initiated civil proceedings against the Harcourts Group Limited and four of its franchisees for alleged price fixing. The franchisees involved are Four Seasons Realty 2017 Limited, Gold Real Estate Group Limited, Grenadier Real Estate Limited, and Holmwood Real Estate Limited. This action follows claims that these real estate businesses conspired to manipulate the prices charged to customers, including commission rates, which constitutes potential cartel conduct under the Commerce Act.

According to John Small, chairperson of the Commerce Commission, the franchisees traditionally compete for clients in the Christchurch real estate market. However, the commission alleges that their agreements to affect pricing undermined this competition. Small emphasized that “for most Kiwis, buying and selling a house is a major transaction. People should be able to trust the process is free of collusion.”

The commission clarified that its focus is not on challenging the franchise model itself. Small highlighted, “The franchise model is tried and tested, and can work really well for Kiwis.” He noted that franchises are usually structured to prevent direct competition among franchisees. Nevertheless, when franchisees do compete, they are subject to the same legal restrictions on cartel conduct as any other business.

In this case, the allegations suggest that the franchisees’ actions took place within the context of their franchise relationship. Small warned that franchisees must remain aware of their competitive interactions and avoid engaging in conduct that could lead to serious legal ramifications, including criminal sanctions and financial penalties under the Commerce Act.

The commission’s investigation underscores the importance of maintaining fair practices in the real estate sector, especially given the significant share of the Christchurch market held by the accused franchisees. The outcome of these proceedings could have implications for how real estate franchises operate in New Zealand and the protection of consumers in significant financial transactions.

The case serves as a reminder that transparency and integrity are crucial in the property market, ensuring that all participants can engage in transactions without the burden of unfair practices. As the legal process unfolds, the commission’s actions will be closely monitored by industry stakeholders and consumers alike.