The Federal Court of Appeal (FCA) has confirmed a Competition Tribunal decision concerning the control of Multiple Listing Service (MLS) data by the Toronto Real Estate Board (TREB), delivering a victory to the Commissioner of Competition in the long-running dispute.
In its December 2017 decision in Toronto Real Estate Board v Canada (Commissioner of Competition),1 the Court dismissed TREB’s appeal of a 2016 Competition Tribunal (Tribunal) decision concluding that TREB policies preventing its member-brokers from accessing certain MLS property listing data for their virtual office websites constituted an abuse of TREB’s dominant position over residential real estate brokerage services in the Greater Toronto Area, contrary to section 79 of the Competition Act (the Act). The Commissioner successfully argued that such data was an input into a new form of dynamic competition and that TREB restrictions prevented the emergence of innovative, Internet-based business models.
While the FCA decision on TREB’s appeal does not break much new ground, it does provide insights into how various elements of the abuse of dominance provision are to be interpreted, particularly in an access to data context. Competition law access-to-data cases are likely to become increasingly common given the critical role data plays in the economy as an input to other products and a product in its own right. In fact, there have been a number of cases addressing refusal to provide access,2 and this issue is also addressed in the Competition Bureau’s draft discussion paper released in September 2017 on “Big Data and Innovation: Implications for Competition Policy in Canada”3 (a paper that follows similar efforts by competition authorities in Europe). The FCA’s decision also considers the interface between privacy, competition and copyright law.
Background and Procedural History
The FCA’s decision concerns MLS, a database of current and previously-available property listings operated across Canada by local real estate boards. Copyright in MLS is owned by the Canadian Real Estate Association (CREA), which intervened at the FCA in support of TREB. In the Greater Toronto Area, TREB makes the MLS available to its broker-members through an electronic data feed which those brokers, in turn, use to populate their websites, known as “virtual office websites” or “VOWs.”
In May 2011, the Commissioner challenged TREB’s VOW policies restricting specific listing information from dissemination on the MLS’s data feed, including old and “pending sold” homes, withdrawn listings and broker commission details. The Commissioner argued the VOW policies impeded the ability of “innovative” brokers with VOW-centred business models from competing.
In an initial decision in 2013, the Tribunal dismissed the Commissioner’s application, finding that since TREB did not compete with its members in the real-estate brokerage market, it could not commit the “anti-competitive acts” required to be demonstrated as an element of abuse of dominance.4 In February 2014, the FCA rejected that interpretation and reversed the Tribunal’s decision.5 In redetermination hearings in 2016, the Tribunal granted the Commissioner’s application.6 TREB then appealed to the FCA.
TREB challenged the Tribunal’s 2016 findings on three principal grounds:
- The Tribunal inappropriately relied on qualitative evidence in making its assessment of impacts on competition, contrary to the Supreme Court’s guidance in its 2015 ruling in Tervita Corp. v Canada (Commissioner of Competition)7;
- The VOW policies’ exclusion of data from the MLS feed was done for legitimate privacy reasons, not with anti-competitive intent; and
- TREB’s exercise of copyright in MLS could not, pursuant to section 79(5) of the Act, constitute an anti-competitive act.
(a) Reliance on qualitative evidence
In response to TREB’s first claim, the FCA held that the Tervita case had only insisted that the Commissioner produce evidence on quantifiable anti-competitive effects in the specific context of the “efficiencies defence” under section 96 of the Act. That defence relates to the Commissioner’s powers to review mergers, not anti-competitive conduct by a “dominant” firm (specifically, the defence shields an anti-competitive merger from the Act’s remedies if it can be shown that gains in efficiency “will be greater than, and will offset” the effects of any prevention or lessening of competition).
The Tribunal also refused to draw an adverse inference against the Commissioner for his failure to adduce empirical evidence relating to other geographic markets (the U.S. and Nova Scotia) where “full information” VOWs existed. The FCA concluded that doing so would be akin to dictating the Commissioner’s presentation of his case.
In coming to its conclusions, the FCA appeared to agree with the Tribunal’s assessment of the difficulties of quantification for a case grounded on harm to dynamic competition or innovation:
… [I]t is important to point out that the Tribunal understood the difference in nature between quantitative and qualitative evidence and that it recognized that it was more difficult for the Commissioner to prove his case on the basis of mostly qualitative evidence. The Tribunal indicated that in a case like the one before it, which pertained mostly to dynamic competition, it was inevitable that the Commissioner would have to rely on qualitative evidence in the form of business documents, witness statements, and testimonies, adding, however, that it remained the Commissioner’s burden to prove his case on a balance of probabilities.
Beyond its dismissal of this aspect of TREB’s appeal, the Tribunal found that it was not required to address certain factual issues raised by TREB given its failure to seek leave to challenge questions of fact.
With respect to privacy, TREB argued that the Tribunal had failed to accept that its efforts to comply with privacy laws (specifically the Personal Information Protection and Electronic Documents Act (PIPEDA)) could constitute a legitimate business justification for the VOW policies. If TREB’s argument had been accepted, it would have countered the Commissioner’s characterization that the refusal to supply the data constituted an “anti-competitive act” under the Act’s dominance provision.
The FCA upheld the Tribunal’s finding that TREB’s business justification “simply did not mesh with the evidence,” noting: the disputed data’s wide use by those with data feed access; TREB’s inconsistent enforcement of its privacy rules; and the lack of evidence that the VOW policies had any privacy purpose (including the absence of evidence from its Chief Privacy Officer or Chief Information Officer). The FCA also upheld the Tribunal’s finding that TREB’s Listing Agreement (on which TREB had sought legal advice) contained sufficient consent to be compliant with the statute without the VOW policies. While the FCA agreed with TREB that the Tribunal erred to the extent it required privacy to be the “original or seminal motivation” of the impugned conduct to provide a defence, it found the Tribunal’s conclusions on the lack of a privacy nexus “compelling.”
(c) Copyright in the MLS
Finally, the FCA dismissed TREB and CREA’s argument that TREB’s copyright in MLS allowed it to avail itself of section 79(5) of the Act, which states that an act “engaged in pursuant only to the exercise” of certain intellectual property (IP) rights is not an anti-competitive act. Citing the Tribunal’s finding that the VOW policies served to “insulate members from new entrants and new forms of competition,” the FCA held that TREB had gone beyond “only” exercising IP rights, commenting as follows on the interplay between those rights and Canada’s competition law framework:
Parliament clearly signaled, through the use of the word "only", to insulate intellectual property rights from allegations of anti-competitive conduct in circumstances where the right granted by Parliament, in this case, copyright, is the sole purpose of exercise or use. Put otherwise, anti-competitive behaviour cannot shelter behind a claim of copyright unless the use or protection of the copyright is the sole justification for the practice.
The FCA found that the conditions TREB attached to the use of the data—rather than aiming to protect its copyright—were instead designed to insulate its members from new entrants and forms of competition in the residential real estate brokerage market. In addition, the FCA held that TREB processed MLS information through a “mechanical exercise” that was insufficient to meet the originality standards required for a copyright claim.
While not a radical decision, TREB does provide some useful guidance about both the Commissioner and the respondent’s evidentiary burden in an abuse of dominance case.
The FCA refused to apply the Tervita merger case’s requirement for quantification of the harm to competition in the dominance context. Following its major defeat in Tervita, the Commissioner publicly indicated that the Competition Bureau “will prioritize the use of advanced econometric analyses given the SCC’s direction that anti-competitive effects should be quantified wherever possible” and referenced “further in-house resources” being dedicated to that end. In contrast to Tervita, the FCA’s decision exhibits a concern for preserving the Commissioner’s leeway to pursue enforcement targeted at non-price or dynamic dimensions of competition—and its holdings are significant in the context of the Commissioner’s recent focus on innovation.
For firms wishing to shield proprietary data on the basis of privacy rules, the FCA’s decision establishes that while privacy need not be shown to be the “original or seminal motivation”, there must be sufficient evidence (through corporate records, testimony and consistent conduct, for example) to support privacy as the reason for a refusal to supply. Privacy claims cannot merely be ex post attempts to rationalize the “predatory, disciplinary or exclusionary” behaviour prohibited by the Act.
Given the rise of the data-driven economy, the interface between privacy and competition law may be growing in significance, and future case law may be needed to clarify the balance between them. Canadian authorities have yet to follow their European counterparts who have shown a higher degree of interest in, and concern about, the privacy/competition interface to this point.