Alleged Cartel Conduct in Christchurch Franchise Network

The parties named in the case are Harcourts Group Limited (the franchisor) and four Christchurch franchisees: Four Seasons Realty 2017 Limited, Gold Real Estate Group Limited, Grenadier Real Estate Limited, and Holmwood Real Estate Limited. Commerce Commission The Commission alleges these businesses entered into agreements that affected the prices charged to clients, specifically, commission rates, amounting to cartel provisions under section 30 of the Commerce Act. 

According to Commerce Commission chair Dr John Small, the franchisees in question hypothetically competed with each other for business. The contention is that, despite being part of a franchise network, they made arrangements to coordinate pricing. Because those franchisees represented a substantial share of the Christchurch real-estate market, the Commission views the conduct as likely to have harmed competition and consumers. Commerce Commission

Dr Small emphasised that the Commission is not seeking to challenge the franchise model per se, but rather to underscore that when franchisees compete, they remain bound by the same anti-cartel rules as any independent businesses. He warned that cartel conduct carries serious risks, including civil penalties and potential criminal sanctions. 

This case spotlights a delicate tension in franchise systems: balancing the benefits of central oversight, brand consistency, and shared policies with preserving independent competition among franchisees. For franchisors, it serves as a caution that coordination among franchisees must not stray into price-fixing or market allocation. For franchisees, it underscores the need for vigilance when communicating or aligning pricing strategies with neighbouring outlets (even in the same network).

Notably, this is not New Zealand’s first brush with cartel enforcement in real estate. In earlier cases, agencies were penalised for colluding over Trade Me listing fees. More recently, the Commission initiated criminal charges in the construction sector for bid rigging - signalling that cartel enforcement is actively expanding.

For the broader franchise sector, the implications are significant. The case may prompt franchisors and franchisees alike to re-review internal policies, communications protocols, and compliance training to ensure no inadvertent cartel exposure. While franchise systems offer strengths in scale and brand cohesion, this matter starkly reminds all participants that competition law does not pause at the franchise boundary.

In October, the Franchise Association hosted an informative webinar twith the Commerce Commission to assist and reassure franchises. Further recommendations for steps to take in ensuring franchise compliance with Commerce Commision can be found here.