The Commerce Commission has filed High Court proceedings against Ronovation Ltd (Ron & Yoleen Hoy Fong) for alleged price fixing in Auckland’s residential real estate market.
Mr Hoy Fong is described on the company website as “a super investor operating an investing strategy & system that continues to get extraordinary results and assists his students in building their own wealth”.
The focus of the commission was on bid rigging at auction or collusion in tendering by the Hoy Fongs or members of their Ronovation group.
The Hoy Fongs set up Ronovation (trading as Ronovationz) in April 2009 and conducted business advising members on how to acquire & improve investment properties in Auckland. The commission said Ronovation had over 400 paid members by March 2018.
The company website says they did better than that: “Coupled with a successful portfolio of over 30 properties valued at over $25 million and a passion to help change lives, Ronovationz was established by Ron Hoy Fong in 2009. Since then, Ronovationz has grown into a community of over 600 ordinary New Zealanders seeking financial independence through property investment. This has resulted in over 1700 properties owned by Ronovationz members, worth $1 billion.
“Ronovationz prides itself on practising a ‘buy & hold’ strategy, maximising your profits in the long run.”
The commission alleges that Ronovation developed rules in September 2011 to govern the conduct of members, including rules that prevented Ronovation members from competing for properties.
The commission alleges the rules, which applied between September 2011 & September 2018, amounted to cartel conduct in breach of section 30 of the Commerce Act.
The commission said yesterday Ronovation had entered into a settlement with the commission to resolve the proceedings, and a penalty hearing would be scheduled in due course.
The Commerce (Cartels & Other Matters) Amendment Act 2017 came into force on 15 May 2018, so the commission has brought separate proceedings for the 2 periods before & after that date.
Before the amendment act, section 27 of the Commerce Act (via section 30) prohibited contracts, arrangements or understandings between competitors that had the purpose, effect or likely effect of fixing, controlling or maintaining the prices for goods or services.
The amendment act introduced a prohibition on entering into or giving effect to a cartel provision. A ‘cartel provision’ includes provisions contained in a contract, arrangement or understanding related to price fixing, restricting output or market allocation.
The commission added: “Agreements not to compete at auctions or on tenders are also commonly known as ‘bid rigging’. ‘Bid rigging’, or collusive tendering, occurs when there is an agreement among some or all of the bidders about who should win a tender or auction. Bid rigging is a form of cartel conduct and is prohibited by both the former & current section 30 of the Commerce Act.
Attribution: Commission release, company website.