Property investor Ron Hoy Fong, outside one of his properties on Gillies Ave in Epsom. Photo / Jason Oxenham
A company owned by a property investment coach who oversaw a complicated bid-rigging syndicate designed to limit competition and secure cheap homes is set to pay a $400,000 fine for illegal price fixing.
Ron Hoy Fong is a Justice of the Peace and Queen's Service Medal holder who boasts of owning more than 30 investment properties and describes himself as a "super investor".
But his company Ronovation Ltd has agreed to pay a $400,000 financial settlement after admitting it breached the Commerce Act through cartel activity.
The Commerce Commission launched an investigation into Fong's company after the Weekend Herald revealed Fong was encouraging buyers to use fake names, work in packs to drive down prices and target desperate homeowners facing foreclosure.
The commission filed High Court proceedings against Ronovation Ltd earlier this year for alleged price fixing.
In 2017 the Weekend Herald revealed a tutoring video by Fong was being supplied free to members of the Auckland Property Investors Association (APIA).
It encouraged investors to target the "seven Ds" - deceased estates, desperate homeowners needing quick sales, developers on the brink of bankruptcy, divorcees and "dummies" who don't know the value of their home.
The video, used to promote Fong's company, also advised people to work in packs to drive down prices, and give vendors false names when making repeat offers.
"Some places are already a bargain," Fong told viewers in the video. "That's simply because the vendor's a dummy. He doesn't know what it's worth.
The Commerce Commission alleged Fong's company had facilitated a complicated bid-rigging syndicate by devising a set of "priority rules" for paid members to prevent students bidding against each other and unnecessarily driving up prices.
The rules were published on the group's private Facebook page, where members would "tag" properties they were interested in by posting a selfie of themselves outside the house.
This gave them first right to make offers or bid at auctions, even if other members were prepared to pay more – effectively avoiding multi-offer situations and limiting competition.
"We are a group, so we shouldn't have to compete against each other because when you do, the vendor is really the only one who wins," the rules stated.
Court documents obtained by the Herald ahead of a penalty hearing last week at the High Court at Auckland show the rules were initiated in September 2011.
The cartel activity continued for seven years and was implicated in the sale of at least 470 properties, the court heard.
The number of Ronovation Ltd members swelled to more than 400 during this time, each paying up to $19,500 to be coached by Fong – the company's managing director - or his contracted tutors.
Addressing Justice Sarah Katz at Thursday's hearing, Commerce Commission prosecutor John Dixon QC said the conduct was serious, deliberate and sustained.
"They agreed to a form of queuing to avoid bidding against each other and driving up prices. Part of the mischief was each member at the front of the queue had first right, even if another member was prepared to pay more."
But Dixon said it was impossible to establish how much financial harm had been suffered by vendors due to lack of record keeping and the nature of the activity.
Fong had cooperated with the Commission's investigation, giving investigators unfettered access to the group's private Facebook account, which provided a "treasure trove of evidence".
Ronovation Ltd had also admitted wrongdoing and agreed to pay a hefty financial penalty, Dixon said.
The Commission accepted that although Fong's conduct was deliberately anti competitive, he did not realise it was in breach of the law.
The Commission proposed a starting point for the fine of $550,000-$650,000 but had offered a 35 per cent discount to reflect Fong's cooperation and lack of previous offending.
Fong's lawyer, Matt Dunning QC, said most of the Commissions allegations were not in dispute and Fong accepted his company's activity had breached the law.
But he said the Ronovation Ltd property investment group was not a bunch of fire sale speculators out for a quick buck. They were interested in long-term property investment and were akin to a share or art buying syndicate.
"Yes, [the priority rules were] plainly designed to avoid the farcical situation of members of the same group bidding up against one another.
"There were rules and Mr Hoy Fong was attempting to ensure they were complied with.
"This was not a secret arrangement. It wasn't a secret cartel."
Dunning added that other than potentially gaining more members, Fong's company had not benefited financially from the offending.
It was also difficult to quantify whether any actual harm had been suffered by vendors during what was a booming Auckland property market characterised by rapid house value growth.
"What was the harm? We aren't able to assess it."
Justice Katz reserved her decision.
Fong declined to comment when approached by the Herald.
Earlier this year the commission said the Commerce Act banned price fixing and agreements that parties "would not compete at auctions or on tenders" - 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."
The commission's investigation was sparked by a complaint about Fong's tactics from Labour's then consumer affairs spokesman Michael Wood.
"At that time it was evident that the practices being promoted by Ron Hoy Fong including 'hunting in packs', putting in low bids under false names, and targeting vulnerable vendors were in my opinion deeply unethical and predatory," Wood said yesterday.
"The commission's prosecution shows that some of the practices also breached the law."
He said Fong's conduct was symptomatic of the "immoral speculative frenzy that consumed New Zealand's property market for a number of years".
The prosecution showed these sorts of tactics would not be tolerated.
Fong previously denied exploiting people and blamed real estate agents for advertising properties with "motivated sellers" or "divorcees looking to sell up urgent".
"We're looking for opportunities but we're not preying on people as such. We look for the advertisements but it's not like we're going through the death pages or divorce courts."
After the Weekend Herald revealed the contents of Fong's tutoring videos in 2017, businesses pulled sponsorship arrangements with the APIA in droves.
ANZ said it was "appalled" by the tactics being advocated, which did not align with the bank's core values.
APIA president Andrew Bruce issued a public apology "for any offence" the video may have caused and his organisation immediately withdrew it.
"Clearly we don't want to see people being taken advantage of. Clearly we don't condone that sort of behaviour.
"Now that we've actually seen what is in that material we'll stop that immediately and an email will be going out to our members."
Fong's company is still operating. In a video posted earlier this year celebrating its 10th anniversary he credited his coaching with creating more than 750 multi-millionaires.
"Come on board with Ronovation. I'll show you all the secrets."
OPINION: You need to consider interest, taxes and fees.