Three Midland companies and five directors accused of fixing net commission rate at 2pc

Midland Holdings Ltd, its two subsidiaries and five directors were accused of breaching the Competition Ordinance for fixing the net commission of first-hand residential property transactions at 2 percent or above with their competitors Centaline Property and Ricacorp. 

This came as Hong Kong’s competition watchdog filed a writ on Tuesday, requesting the Competition Tribunal to rule that Midland Holdings, Midland Realty Int’l Ltd and Hong Kong Property Services (Agency) Ltd have contravened the the First Conduct Rule under the ordinance. 

The Competition Commission also asks the tribunal to order the three entities to implement a competition compliance program, pay the government a fine and strip the five directors of their senior management positions. 

The five are Midland Holdings’ Deputy Chair and Managing Director Angela Wong Ching-yi; Midland Realty’s Chief Executive Officer Sammy Po Siu-ming; Midland Realty's Director for Hong Kong District Jimmy Lee Chung-yin; Midland Realty’s Chief Operation Officer for Kowloon and New Territories Kelvin Cheong Tsz-chuen; and HK Property’s Chief Executive Officer Dave Ma Tai-yeung. 

The watchdog stated in the writ that senior managements of Centaline and Midland Group attended various meetings between October and December 2022 and discussed about first-hand property transactions. 

They eventually agreed that Midland Holdings, Midland Realty, HK Property, Centaline and Ricacorp adopt the policy that the net commission for all first-hand property transactions must be at 2 percent or above with effect from January 1, 2023. 

The alleged commission rate fixing came after at least five physical meetings between October 13 and December 15, 2022, where the five discussed with Mr K, Mr L, Mr C and Mr S from Centaline on the provision of rebates to end purchasers and the appropriate level of minimum net commission. 

Subsequently, Centaline and Ricacorp both issued an internal memo on December 30 to execute the 2 percent commission policy starting January 1, and Midland Realty and HK Property did so the next day. 

Midland Realty and HK Property then each issued a new internal memo on March 27, saying there should be no fixed requirement on net commission but the offer of rebate to end purchasers exceeding a certain amount should be subject to approval of senior staff at different levels. 

The watchdog believes the policy is to restrict competition among the real estate agents “since their room to compete for end purchasers via the level of rebates they could offer would be restricted.” 

It also noted that the level of rebates restricted by the policy is a decisive factor in fixing the total purchase price, and the policy indirectly affects the final price to be paid by the home buyers.

Read More: Centaline not ‘spared’ in alleged net commission fixing: Competition Commission