Neil Sharma and Tony Palermo
other
The Toronto Real Estate Board (TREB) has engaged in anti-competitive acts that had “a considerable adverse impact on innovation, quality and the range of residential real estate brokerage services that likely would be offered in the GTA” without TREB’s restrictive rules, the Competition Tribunal has found.
During the tribunal hearing last fall, the Competition Bureau said that TREB stymies fair competition by monopolizing the MLS terms of use to the detriment of virtual office websites (VOWs), as well as to TREB’s 42,000 members and to consumers.
In a statement, the tribunal says the Commissioner of Competition “has established, on a balance of probabilities, that the three elements of section 79 (of the Competition Act) have been satisfied.” It says, “TREB substantially or completely controls the supply of MLS-based residential real estate brokerage services in the GTA, within the meaning of paragraph 79(1)(a) of the Act.”
The tribunal then found that “TREB has engaged in, and continues to engage in, a practice of anti-competitive acts, as contemplated by paragraph 79(1)(b). In essence, that practice is comprised of the enactment and maintenance of certain restrictive aspects of the rules and policy that TREB has adopted with respect to VOWs…”
The tribunal also found that “the VOW restrictions have had, are having and are likely to have the effect of preventing competition substantially in a market, as contemplated by paragraph 79(1)(c). The tribunal reached that conclusion after finding, among other things, that the VOW restrictions have substantially reduced the degree of non-price competition in the supply of MLS-based residential real estate brokerage services in the GTA, relative to the degree that would likely exist in the absence of those restrictions.”
The tribunal says the specific terms of its order will be determined “after the parties have provided written submissions addressing this issue of remedy” and have had an opportunity to make oral submissions on that issue.”
A confidential decision was released to the parties involved in the hearing on Wednesday. A public version of the decision will be released in the next couple of days. Watch REMonline for details and updates.
Update: The full public decision is now available here.
John DiMichele, CEO of the Toronto Real Estate Board said in a statement to REM: “TREB has been advised by its legal counsel that they have received a lengthy confidential document containing the Competition Tribunal’s decision in the matter of TREB vs. Competition Bureau.
“At this time we understand that no order has been issued and that the tribunal has only partially granted the bureau’s application. The tribunal has also asked that both parties provide input to remedies.”
During the hearing, the Competition Bureau’s lead counsel, John Rook, argued that TREB has substantial or complete control of real estate brokerage services in the GTA; that TREB has exercised that control in a manner that had the effect of creating or maintaining its market power to the benefit of its members; and that this has substantially lessened competition in the real estate marketplace. Rook described TREB’s business practices as predatory.
TREB counsel Don Affleck challenged the Competition Bureau’s position that TREB’s VOW policy was anti-competitive, suggesting that the evidence is “clear and abundant” that the policy is neither exclusionary nor disciplinary to members or entrants who want to offer a VOW.
TREB cited privacy concerns as its reason for prohibiting VOWs from displaying some information, such as sold prices, that can be gathered from the MLS. TREB currently permits the disputed information to be shared with clients in person, by fax or email only.
A bureau witness during the trial was Bill McMullin, CEO of Viewpoint Realty, which has grown into Nova Scotia’s largest real estate database, in part, said McMullin, because it makes all relevant information available to the public.
TREB’s lawyers said that Viewpoint was the subject of numerous privacy complaints and ignored them, and rebuked Viewpoint’s claim that its success is wholly attributable to making all sold data available to the public.
McMullin countered by stating that given the sheer scope of business Viewpoint conducts, a few complaints could be expected.
A key cog in TREB’s defence strategy was 38-year real estate veteran Pamela Prescott, the owner of Century 21 Heritage Group in Richmond Hill, Ont., who’s been involved in more than 45,000 transactions. She told the hearing that the reason clients’ sold data information is not published online is because they’ve expressed grim disapproval.
“If it’s necessary, they don’t mind Realtors seeing it, but they don’t want the public seeing it,” Prescott said at the hearing, adding that before discarding the practice altogether, it was brokerage policy to secure written consent before publishing sold data online.
Prescott said it was brokerage policy for both buyers and sellers to agree to publishing that information online for the public to see, and that, by her estimate, only five to 10 per cent consented.
Another witness during the hearing was TheRedPin.com Realty, which operates a VOW that had conducted $325-million in business at the time its co-founder and chief sales officer, Tarik Gidamy, took the stand in September 2015.
“Given the nature of this trial, having the ability to extract (MLS) data would do wonders for me,” Gidamy told the tribunal. “TREB is there to serve its members, which they do well, but there are some members that want to do better.”
CREA was granted intervener status at the tribunal.
“CREA has a valid interest in making sure it is not associated with a violation of privacy laws and regulations,” said CREA counsel Sandra Forbes during the tribunal. “There is a difference between disputed fields being available for everyone, who may have no interest in buying or selling (real estate), or for brokers who can use the information and disseminate it at their own discretion.”
But the bureau took aim at CREA’s participation in the trial, as well as its credibility. Counsel Andrew Little, cross-examining CREA CEO Gary Simonsen, had him confirm that TREB is CREA’s largest member, comprising between 35 and 40 per cent of its membership, and that several members of its Board of Directors were TREB members.
The complaint against TREB was initially dismissed on April 15, 2013, but the Competition Bureau successfully appealed the case to the Federal Court of Appeal the following February, arguing the previous committee improperly defined section 79 of the Competition Act – the “abuse of dominance” clause.
Under the previous section 79 interpretation, it was determined that TREB could not compete with its own members because it is an incorporated trade association. Therefore, it did not circumvent the abuse of dominance stipulation.
“Allowing the tribunal’s finding to stand could leave a significant loophole in the application of the Competition Act,” then-interim commissioner of competition John Pecman said in a May 14, 2013 statement. “While most trade associations comply with the Competition Act, we are concerned that, if the tribunal’s decision is left to stand, trade associations may be tempted to develop rules aimed at preventing or eliminating potential new forms of competition.”
The case resumed in September 2015 in Toronto and was presided over by Chief Justice Paul Crampton.
© 2016 REM Real Estate Magazine
