Is There Price-Fixing in the Building Industry?

Those of us who live in Toronto already know that the new home construction industry is booming.  Aside from bungalows in older neighbourhoods being torn down to make room for larger homes with granite counters and ensuite master baths, in seems like we're always hearing about a new development sprouting up in a space we weren't even aware existed!  It would seem that with all the new construction companies which have materialized to deal with this extra demand, consumers would have some ability to shop around, right?  After all, this is Toronto, not some one horse town with only one local construction company... RIGHT??

This morning, CBC News published an article about alleged price-fixing in new home construction industry, specifically between up to 10 large companies that form moulds and pour the foundation in the basements of new, low-rise homes.  According to the article, some of the larger companies have fixed prices, made a deal not to compete and attempted to "stifle" their smaller competitors.  They allegedly met or spoke regarding prices and pressured smaller companies who were undercutting them.

As a Realtor, I happen to believe that the Competition Bureau, while necessary, can be a little high-handed and impractical at times.  Still, if this is true, it could have huge implications for the new home construction industry.  Have builders (and, by proxy, buyers) been overpaying for new homes since 1997?  What does this mean for the future price of construction in the GTA?

I must however, also look at the other side and I would want a few questions answered before solidifying my opinion:

How do they know it is true price fixing?  It is normal for members of a union to know one another, even if they work for different companies.  Is there actual evidence of conversations discussing price-fixing or is the Competition Bureau inferring this for documentation provided by one man who is connected to the accused parties?  In my opinion, discussing work and suppliers with colleagues is not a crime.  After all, don't we all want to know what our competitors are charging and if they can offer any professional advice?  In real estate, I maintain professional relationships with many of my colleagues.  We offer one another advice and support.  I have found many of my colleagues in the real estate industry to be honest, bright and hard-working.  Do these professional relationships constitute a grounds to investigate us for price-fixing?  What if we all happened to charge a similar price for providing top service within our industry and agreed not to poach clients from each other?  As you can see, it's a slippery slope and a grey area.  These rules are intended to protect the consumer, not to punish needlessly.

Another point to look at further is whether the smaller companies who are being "stifled" are also in the union or are they non-union companies?  Non-union companies can be very good companies but they can also choose not to pay their employees fairly or insist on maximum shift lengths to ensure safety.  They may not have the same level of training and I would wonder whether they were giving low bids and then inflating the tab afterwards.  If this were the case, I would find it difficult to blame the larger companies for pressuring them.  In an industry where your client/customer may not be aware of the full scope of your work, a rival who manipulates the truth or over sells their wares can be dangerous.

Still, baring some great answers to these questions, it would seem that these companies are in hot water and perhaps rightfully so.  I look forward to learning the details and watching how this impacts the construction industry.  For private owners arranging building services, we may see lowered costs but I suspect the builders will still sell their homes at the same prices since they are determined by overall demand in the housing market and neighbourhood sales.

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