The Commerce Commission has launched civil proceedings alleging cartel conduct against four Harcourts franchises and their franchisor.
The alleged conduct involves the businesses’ franchisor, Harcourts Group Limited, and franchisees Four Seasons Realty 2017 Limited, Gold Real Estate Group Limited, Grenadier Real Estate Limited, and Holmwood Real Estate Limited.
Commerce Commission chairperson John Small said authorities believed the franchisees had a “significant share” of the market and therefore the alleged conduct was damaging.
Because the franchisees competed with each other for customers, entering into agreements that affected the prices they charged customers – including commission rates – constitutes alleged cartel conduct under the Commerce Act, he said.
The franchisor, Harcourts Group, was a party to those agreements.
“The franchise model is tried and tested and can work really well for Kiwis. Typically, franchises are organised so that franchisees don’t compete with each other,” Small said.
But the regulator said that, where franchisees competed, the law that prevented cartel conduct also applied to them, just like other businesses.
“In this specific case, it just so happens that the cartel conduct we are alleging took place in the context of a franchise relationship,” Small said.
“Franchisees need to be aware of when and where they compete with one another and ensure that they do not engage in cartel conduct, which carries significant risks such as criminal sanctions and potential penalties under the Commerce Act.”
A spokesperson for the franchisor said: in a statement “Harcourts NZ confirms that we have received proceedings from the Commerce Commission.
“We take any allegations seriously and have cooperated with the Commerce Commission’s process. As this is a legal matter, we will not be making further comment.”
Small stressed “the commission is not looking to challenge the franchise model generally”.
A cartel occurs when two or more businesses agree not to compete with each other, with conduct potentially taking place in many forms — including price fixing, sharing markets, rigging bids or restricting output of goods and services.
“Because cartel members make more profit than they would if they competed fairly, goods and services become more expensive, consumers end up with fewer choices, and quality and service levels are likely to deteriorate,” the Commerce Commission restated.
