The Toronto Real Estate Board ("TREB") has engaged in anti-competitive acts according to Canada's Competition Tribunal. A recent decision of the Tribunal resolves, at least for now, a long standing dispute between TREB and the Commissioner of Competition about restrictions TREB imposes on its members' use of Multiple Listing Service ("MLS") information on their virtual office websites ("VOWs").
TREB is Canada's largest real estate board, serving the interests of approximately 42,500 members. The MLS is an information system that allows real estate agents to share data about properties listed for sale. TREB provides its members with access to MLS. A VOW is a password protected area of a brokerage's website where consumers can access and search a database containing MLS information. TREB restricts the information from its VOW data feed about sold and "pending sold" homes, withdrawn, expired, or terminated listings, and offers of commission to brokers representing the successful home buyer through its By-Laws, MLS rules and policies, and by the terms of the authorized user agreement its members must execute to obtain access to the MLS.
Although not available through TREB's VOW data feed, TREB's members have access to the restricted information through other channels including the MLS database operated by Stratus Data Systems Inc. This begs the question as to why TREB would limit its members' use of the restricted information in the first place. The simple answer, according to the Commissioner, was to prevent forms of innovative competition by on-line brokerages and to preserve the traditional "bricks and mortar" model of providing real estate services to which many of its members adhered. TREB's Board of Directors, made up of its membership, approved the TREB restrictions.
Thus, the issue before the Tribunal was not access to the restricted information but rather how that information is made accessible to TREB's members and what use they can make of it.
The proceeding began in May 2011 when the Commissioner filed an application pursuant to section 79 of the Competition Act for an Order prohibiting TREB from engaging in anti-competitive acts by restricting its members' access to the restricted information. The Tribunal dismissed the Commissioner's application on April 15, 2013. On February 3, 2014, the Federal Court of Appeal set aside the Tribunal's dismissal order and referred the matter back to the Tribunal for reconsideration on the merits. The Federal Court of Appeal held that the Tribunal erred in finding that an anti-competitive act must be the act of a person who competes in the relevant market, which TREB does not do. Leave to appeal to the Supreme Court of Canada was denied.
At the recent reconsideration hearing, TREB re-argued that its restrictions could not be anti-competitive because TREB did not compete in the relevant market. In TREB's words, TREB had no "horse in the race" because it did not compete with its members. In its reasons for decision dated April 27, the Tribunal rejected this argument, effectively holding that it is enough that TREB sets the race rules and influences who will win to fall within the broad purview of section 79(1) of the Competition Act.
In an effort to justify the VOW restrictions, TREB argued that wide, on-line availability of the restricted information threatened the privacy interests of its members and their customers, and could result in non-compliance with privacy legislation and the Code of Ethics established by the Real Estate Council of Ontario. Not surprisingly, the Tribunal rejected this argument. TREB's members can and already do convey the restricted information in person, by phone, fax, or email and there is nothing preventing them from doing so.
Ultimately, the Tribunal found that the VOW restrictions had a significant adverse impact on entry into and expansion within the GTA by web-based and other innovative brokerages that would otherwise offer the full range of MLS information in their VOWs. TREB's primary motivation in implementing and maintaining the restrictions on the restricted information was to limit a potentially disruptive form of competition according to the Tribunal. On June 3, the Tribunal ordered that TREB shall not exclude the restricted information from its VOW data feed or restrict its members' use of the information in the VOW data feed on any electronic device. TREB has sixty days to comply with the order.
A TREB appeal will be a long shot. The Federal Court of Appeal has already rejected one of TREB's more compelling arguments about whether TREB is a competitor in the relevant market. Further, TREB's restrictions go against the more general shift toward technological innovation and developments in other jurisdictions such as a 2008 settlement between the United States Department of Justice and the National Association of Realtors which resulted in a lifting of similar restrictions that were imposed on VOWs in the United States.
A version of this article originally appeared in the July 1, 2016 edition of Lawyers Weekly, published by LexisNexis Canada Inc