Published & updated 23 September 2019:
High Court judge Sarah Katz ordered Ron Hoy Fong’s company, Ronovation Ltd, last week to pay a $400,000 penalty after it admitted to price fixing – bid rigging – in the Auckland residential real estate market.
Mr Hoy Fong said his company accepted responsibility for its role, immediately revised its procedures and continued to focus on helping investors achieve their property goals.
Ron & Yoleen Hoy Fong set up Ronovation (trading as Ronovationz) in April 2009 and advised 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 alleged that Ronovation developed rules in September 2011 to govern the conduct of members, including rules that prevented Ronovation members from competing for properties, and that the rules, which applied between September 2011 & September 2018, amounted to cartel conduct in breach of section 30 of the Commerce Act.
The rules grew out of Ronovation’s success, the commission alleged: “As Ronovation’s membership grew, its members found themselves competing with each other to purchase houses they had identified as suitable targets for investment. In 2011, Ronovation’s director, Mr Hoy Fong, developed a set of rules to ensure members were not competing against each other.
“In summary, the rules required members to notify the group of their interest in a property. The first member to notify their interest then had priority over other members, who were not permitted to negotiate or bid for that property in competition with the first member. The conduct came to an end in 2018.”
Justice Katz said in her judgment Ronovation’s rules were deliberately anticompetitive & designed to suppress competition between members in a manner that was to the detriment of vendors. She also noted there was no evidence that Mr Hoy Fong or the members realised the conduct breached New Zealand’s competition laws.
Commerce Commission chair Anna Rawlings said the Ronovation case was the first time the commission had brought proceedings against a buyer-side cartel: “Even agreements entered into by competing buyers can amount to price fixing. It is important that businesses & individuals are aware of the risks of engaging in this type of conduct, especially since price fixing will become a criminal offence from April 2021.”
The Commerce Act has been amended by the Commerce (Cartels & Other Matters) Amendment Act 2017, which came into force on 15 May 2018. As a result, the commission broke its allegations into 2 separate periods.
Hoy Fong responds
Mr Hoy Fong said his company continued to focus on helping investors achieve their property goals: “We have accepted responsibility for our role relating to the historic priority rules agreement that guided our members looking to purchase properties.
“As the judgment observed, it was never our intent to breach the Commerce Act, and there was no direct gain to Ronovationz by doing so. As soon as the Commerce Commission outlined its concerns about the priority rules agreement, we immediately acted and revised our procedures with members, which the court acknowledged.
“Our priority rules agreement has not been in place for more than a year and there had been no prior concerns raised around this agreement before then.
“While we are incredibly disappointed that this has occurred, we have been working with the commission throughout the investigation and are pleased to have now achieved a resolution.
“Our focus continues to be helping more Kiwis & our growing membership achieve their property goals.”
9 July 2019: Commission alleges price fixing by “super investor” Ron Hoy Fong’s investment advice company
Attribution: Commission release.