The role of the Competition Act is to maintain and encourage competition in Canada, in part to ensure that small and medium-sized enterprises have the opportunity to participate in the Canadian economy and to provide consumers with competitive prices and choices. The Act includes provisions against “abuse of dominant position” intended to prevent a dominant company from taking undue advantage of its position in the marketplace. Under these provisions, the Commissioner of Competition may apply to the Competition Tribunal to prohibit anti-competitive acts of a company that substantially or completely controls a market, provided it is shown that those acts substantially prevent or lessen competition within the marketplace.
“Abuse of dominant position” and the Multiple Listing Service
The abuse of dominant position issue was brought before the Competition Tribunal and Federal Court of Appeal in a case concerning the Toronto Real Estate Board’s MLS, which allows member realtors to access a database of active and past residential property listings, including historical data on home sale prices, to attract and provide services to clients. However, while the Toronto Real Estate Board allows realtors to disclose historical sale prices to their clients by fax, mail, email or in person, it prohibits realtors from posting this historical data online.
The Commissioner of Competition made an application to the Competition Tribunal in May, 2011, alleging that the Toronto Real Estate Board’s online use restrictions were an abuse of its dominant position in the market for supplying residential real estate brokerage services, and that this disproportionately harmed members who preferred to provide services online.
In its initial decision (2013 Comp. Trib. 9), the Tribunal found that the Toronto Real Estate Board was not abusing its dominant position because it was not a “competitor” of its member realtors. However, on appeal (2014 FCA 29), the Federal Court of Appeal disagreed with the Tribunal’s reasoning, and stated that being a competitor was not necessary to be in violation of the abuse of dominant position provisions. The Court set aside the Tribunal’s decision and sent the application back to the Tribunal for redetermination.
The Tribunal released its reasons on April 27, 2016 (2016 Comp. Trib. 7) and a further Order on June 3, 2016 (2016 Comp. Trib. 8). In short, the Tribunal found that the Toronto Real Estate Board’s online use restrictions were an abuse of its dominant position, and ordered that the Real Estate Board may not restrict its members use of historical sales data online.
In attempting to justify its online use restrictions, the Toronto Real Estate Board raised two arguments that are of particular interest:
- Consumer privacy concerns as a legitimate business justification
The Tribunal weighed the anti-competitive effect of the Toronto Real Estate Board’s online use restriction against the Board’s assertion that concerns about consumer privacy constituted a legitimate business justification.
In particular, the Toronto Real Estate Board relied on its obligations to consumers under the Personal Information Protection and Electronic Documents Act, which governs the collection, use and disclosure of personal information by private-sector commercial organizations. Generally speaking, the legislation requires organizations to collect, use or disclose personal information only with consent, and for purposes that are reasonably appropriate in the circumstances.
The Toronto Real Estate Board asserted that removing the online use restrictions would force home buyers and sellers to consent to the wide online distribution of sales data when buying or selling a home using the MLS system. The Real Estate Board also noted that, dating back to 2004, it had implemented privacy policies to ensure that its members’ practices aligned with the requirements of the Personal Information Protection and Electronic Documents Act. The Real Estate Board stated that its concerns stemmed in part from a 2009 decision of the Privacy Commissioner, which held that the publication of a realtor’s advertisement stating that a property had sold for 99.3% of the asking price contravened the Act because it enabled the public to calculate the sold price.
The Tribunal rejected these arguments, finding that based on the evidence before it, the Toronto Real Estate Board’s online use restriction was primarily intended to limit or restrict disruptive competition from realtors offering services online and to retain full control of MLS data. Specifically, the Tribunal found that there was a lack of consumer concern about privacy issues relating to the historical sales data, and that privacy considerations were not a principal motivating factor behind the online use restrictions. The Tribunal also noted that the Real Estate Board had taken steps in the past to reinforce consumer consent language to cover the display of interior home photos on the MLS, and there was no evidence that similar action had been considered to address historical sales data.
2. Copyright defence
It is also notable that the Toronto Real Estate Board also advanced a defence that its online use policy was simply a reflection of its copyright in the MLS data. Under the abuse of dominance provisions, an act engaged in pursuant only to rights exercised under a federal intellectual property statute is not an anti-competitive act. However, the Tribunal found that the MLS data was not protected under the Copyright Act, as the compilation of data from real estate listings amounted to a purely mechanical exercise. In any event, the Tribunal noted that the Board’s online use restriction would have been more than a mere exercise of intellectual property rights.
Proceedings are currently before the Federal Court of Appeal.
The Toronto Real Estate Board is currently appealing the Tribunal’s ruling to the Federal Court of Appeal. The appeal is expected to focus on the privacy concerns raised before the Tribunal. The Court has stayed the Tribunal’s ruling pending disposition of the appeal, which is expected to be heard on December 5 and 6, 2016. We will continue to monitor the appeal and report on further developments in respect of the intersection of competition and privacy law.