The Commerce Commission dismissed concerns about competition in the online real estate field in granting clearance for Trade Me to buy website homes.co.nz.
The competition watchdog recalled questions it had about the purchase and cited OneRoof, owned by the same entity which publishes the New Zealand Herald.
"We are satisfied that any benefits that Trade Me may obtain from combining its listings offering with Homes' information/data offering would not substantially affect the ability of rival platforms to compete in the market. These rivals include industry-owned Realestate.co.nz and OneRoof, which is owned by NZME," chair Anna Rawlings said.
"In our June statement of unresolved issues, the commission raised potential concerns that the acquisition might prevent Homes from developing into a significant competitor to Trade Me for property listings," she said.
"The commission also had potential concerns that the acquisition could make it harder for other property platforms to set up or grow by combining the respective strengths of Trade Me and Homes, i.e. listings and property data/information, into a single entity."
But in the end, it decided on the deal.
Trade Me Property is New Zealand's largest online residential listings platform. It sought to buy PropertyNZ which owns and operates the homes.co.nz website.
While Homes also displays listings on its website, its primary focus is providing property data/information to consumers, such as estimated house values, the commission said.
The acquisition was unlikely to substantially lessen competition here.
"We are aware of the harm to competition that can arise when a larger firm buys a growing competitor, and we thoroughly tested whether Homes would develop into a significant competitor. However, evidence received since we issued our Statement of Unresolved Issues has satisfied us Homes is unlikely to become a significant competitor for real estate listings," Rawlings said.
TradeMe's head of property Alan Clark welcomed the decision.
"We're always looking for ways that we can be more helpful for New Zealanders interested in property. Homes.co.nz has an awesome suite of tools for buyers, sellers and homeowners, as well as agents looking to market themselves," Clark said.
"Kiwis interested in property can expect to see a range of Homes.co.nz's services come through on to Trade Me, including property histories, valuations, and home expense estimates.
"We will also be working with the Homes.co.nz team on some other exciting developments that we will reveal down the track."
He said Trade Me was now working through the final steps of the acquisition and would take full ownership of Homes.co.nz by the end of August.
One anonymous submission opposing clearance being granted said the deal would "materially strengthen TradeMe's network effect and this will result in higher prices for consumers and will raise barriers to entry for competitors. It materially reduces competition to the extent that TradeMe's monopoly power will likely be further strengthened and used against New Zealand consumers".
Another anonymous submitted also opposed clearance.
"To approve the merger will strengthen an already substantial degree of market
power held by TradeMe and will materially disadvantage consumers who are vendors of
residential property," the submission said.
"TradeMe is owned by a United States-based team of private equity investors who are aggressive investors seeking to generate outperformance returns largely using the pricing lever in the businesses they invest in. You should expect them to push every boundary further than a locally owned business in the interests of generating returns. They will have
an ownership timeline of circa 5 years and they will understand that TradeMe at this
point in time has a substantial degree of market power that can be exploited to
generate outsize investor returns," that said.
Residential for-sale listings were vendor funded to the tune of about $1800+ per property so it is the consumer largely paying TradeMe via agents. Agents build their businesses using consumer-paid advertising, this aspect is very unique hence TradeMe will try to partner with agents to gain funding from consumers, that submission said.
"The merger will strengthen an already substantial degree of market power in TradeMe. TM will use this power to gain close to 90 per cent-plus of available margin, the cost to
consumers will move into the $500 to $1000 range for listing a residential house in Auckland and this price can only be gained through having an untouchable network effect
"You need to do the right thing for New Zealand consumers and decline to approve the
merger as this will enable other competition to improve against TradeMe as this will produce a more acceptable level of competition in the market and keep prices to consumers substantially lower," the submitter said.