How The Regulator Went Through Ray White Like A Dose Of Salts

by Tim O’Dwyer Solicitor*

A year after I lodged a bait-advertising complaint with the Australian Competition and Consumer Commission, the ACCC completed its investigations. And, blow me down, the occasionally-maligned regulator produced an extraordinary result. Undertakings, seeking to ensure compliance with the misleading and deceptive conduct provisions of the Trade Practices Act (“TPA”), were given to the ACCC on behalf of an entire network of franchised real estate offices across Queensland. The ACCC will use this outcome to send an “important message” to all Queensland real estate agencies that it is in their “commercial” interests to comply with the Act.

In other words, suggests consumer advocate Neil Jenman, the punishment for agents who break the law may, for the first time, exceed the rewards.

I had complained about dubious pre-auction advertising by one Ray White agency, but the ACCC raised my “concerns” not only with that agency but also with senior personnel of Ray White (Real Estate) Pty Ltd (“Ray White”) including CEO Peter Camphin. The ACCC described Ray White as the “master franchisor of the Ray White network in Queensland.”

This all began in December 2003 when the ACCC took action under the TPA against a Victorian agent for alleged misleading and deceptive conduct. The agent advertised a house at “price guide $600,000 plus buyers should inspect” then later at “price guide $650,000 plus buyers should inspect”, yet it was subsequently passed in at auction for $781,000 with the vendor’s reserve being some $850,000.

Shortly afterwards I spotted some Ray White Alderley (“RWA”) auction results in The Sunday Mail for three particular houses, then checked the previous week’s Courier Mail where one had been advertised at “$250,000 + buyers to inspect” with the other two at “$300,000 +”. The first passed in at $325,000, the second at $380,000 and the third at $395,000. I decided to send these details not only to the ACCC but also to Queensland’s Office of Fair Trading (“OFT”). When OFT went to investigate, they found the Feds already at RWA’s office – just like in a scene from a Hollywood movie.

OFT promptly declared it “inappropriate” to commence any investigation because of the ACCC’s involvement.

Nevertheless the local consumer cops nailed a ReMax agency nine months later for misleading conduct and soliciting customers through adverts known to be misleading. This agency advertised one property for $200,000 less than the top of the sales range given to the owners. This tactic was used to attract potential buyers as part of “bait-and-switch”. Six other properties were similarly advertised well below their known values. The agency and its directors were fined, and ordered to implement an education and training program.

Queensland’s Fair Trading Minister said, “Misleading advertising is illegal and wastes the time of prospective buyers … is not acceptable, and the industry needs to know that.” The Fair Trading Commissioner was asked to write to “the industry” to clearly convey that message.

No doubt his letter began: “Dear Foxes, please stop eating the chickens …” Meanwhile the ACCC went through Ray White like a dose of salts.

This is part of Acting Assistant Director John Cream’s letter to me dated 20th January 2005:

“Based on our assessment of the information obtained during this office’s investigation, it was arguable as to whether the conduct of RWA may have raised implications in terms of the misleading or deceptive conduct provisions of the Act. Furthermore, it was apparent that RWA had engaged in the alleged conduct on only one occasion. (Pull the other one! – TOD)

By way of response to this office’s concerns that RWA’s conduct in this instance may raise implications under the Act, RWA and Ray White have fully cooperated with the ACCC and have provided administrative undertakings as a means of resolving its concerns. … RWA has undertaken not to engage in the conduct in questions, including “indicative pricing” or “bait pricing” in the future. (So what did they do in the past? – TOD)

In its undertaking to the ACCC Ray White has stated that it will, amongst other things:

* Bring to the attention of all Ray White franchisees the details of the conduct of RWA and the concerns of the ACCC;

* Conduct training sessions on a regular basis for Ray White’s Office Principals and sales people which contain elements pertaining to Trade Practices compliance to update Ray White’s materials, content and methodology with the specific provisions pertaining to “bait pricing” and in particular Sections 52, 53(e) and 53A of the Act and to convene a specifically designed training program in January 2005; (Would love to have been a fly on the wall! – TOD)

* Amend all of its manuals to include specific references to the relevant sections of the Act; and

* Issue a formal policy that all its Officers must comply with the specific provisions of the Act as they relate to “indicative” or “bait pricing”.

This office considers the administrative undertakings provided by RWA and Ray White in this instance to be an effective and positive resolution of this matter. While this office does not intend to further pursue this matter at the present time, should it receive additional complaints against Ray White and/or any of its Queensland franchisees in relation to the conduct in question, this office’s decision not to pursue will be reviewed. “

ACCC Chairman Mr Graeme Samuel, in a media release which seems unreported in any Queensland newspaper, said the high level of cooperation provided by Ray White Pty Ltd and its agent should be acknowledged.

“Ray White’s recognition that its agent’s actions in this instance may raise implications under the Act should alert other real estate companies that it is in their commercial interests to ensure that advertising practices comply with the Act”, he said.

Ray White auction adverts in The Courier Mail now do not seem to mention price. On a recent Saturday there were none for RWA.

Same day, no ReMax auction adverts even hinted at price, although one had “bidding from $480,000”. A quick scan indicated only a handful of agents using the old indicative price formulas, compared with 12 months ago when I counted 22 such adverts in the first 12 pages of the real estate supplement. Interestingly in an LJ Hooker liftout one property was advertised with “Auction reserve under $550,000” and the other with “Auction reserve under $600,000.”

OFT’s one-off ReMax success, and the ACCC’s rattling of the Ray White cage, may indicate that consumer-protection laws, long treated with contempt by the foxes, are finally being complied with after a measure of overdue enforcement.

So, while State and Federal regulators once appeared largely oblivious to the blatant bait-advertising practices of many of Queensland’s agents, one growl from this little watchdog may have resulted in a rousing of the regulators and the frightening of an awful lot of foxes.

This month one suburban Brisbane newspaper reported that, in response to the state government’s (not the feds’, mind) “crackdown” on price-baiting of buyers and obtaining listings by overpricing before “eroding their clients’ asking price”, the Real estate Institute of Queensland had begun professional development courses and deemed them compulsory for the maintenance of ongoing membership. According to the report, the REIQ is teaching member agents “how to take more responsibility for their actions.”

In line with this “initiative” the REIQ will reportedly run a public education campaign so consumers can know what to look for when dealing with agents. Consumers will be told to check that any preferred agent has given a written statement and evidence on “your price expectation.” (Will the REIQ similarly warn consumers about agents’ unsubstantiated price recommendations.)

* (Tim O’Dwyer is a Queensland solicitor and consumer advocate – watchdog@argonautlegal.com.au)