On April 16, 2013, the Competition Tribunal released its long-awaited decision in the Commissioner of Competition v. The Toronto Real Estate Board matter.1 In an uncommonly brief decision (8 pages), the Tribunal dismissed the Commissioner’s application and ordered costs in favour of the Toronto Real Estate Board ("TREB"). It is unknown at this time if the Commissioner will appeal.
In May of 2011, the Commissioner of Competition at the time, Melanie Aitken, brought an application against TREB seeking to prohibit what she alleged to be anti-competitive practices. The application was brought pursuant to the Competition Act’s (the "Act") abuse of dominance provisions.2 TREB is a not-for-profit corporation and the largest real estate board in Canada. It owns and operates the Toronto Multiple Listing Service ("MLS") system. The MLS contains current property listings and historical information about residential real estate purchases and sales in Toronto and the surrounding area.
The Commissioner claimed that:
- TREB had been using the MLS to control how and whether brokers could compete in the market for the supply of residential real estate brokerage services to vendors and purchasers in the Greater Toronto Area;
- TREB substantially or completely controlled the supply of real estate brokerage services in the market and had discriminated against its members by restricting their access to the services provided by the MLS;
- more specifically, the Commissioner contended that TREB had enacted rules (defined in the Decision as the "Restrictions") that restricted how TREB’s member agents could provide information, such as previous listings and previous sales prices, to customers and prevented them from introducing innovative Internet-based real estate brokerage services like Virtual Office Websites ("VOWs");
- VOWs enabled customers to be more selective and focused, and allowed agents to spend less time trying to locate appropriate properties for customers; and
- TREB’s control of MLS and MLS data was alleged to have been exercised in such a way that it was having an exclusionary and restrictive effect on real estate brokers’ access and use of the MLS and, as a result, had limited or prevented competition substantially.
The Commissioner requested that the Competition Tribunal issue an order compelling TREB to eliminate the impugned rules.
In its defence, TREB relied on, among other things, an exception in section 79(5) of the Act and argued that its limits on the use of MLS data were legitimate exercises of its copyright in a proprietary database.3
The Tribunal summarily dismissed the Commissioner’s application, finding that the requirements of section 79(1)(b) of the Act had not been satisfied, with the result that an in-depth consideration of the balance of the issues raised in the application (including TREB’s copyright defence) was unnecessary. The Tribunal gave three principal reasons for rejecting the application.
- The application did not follow the Federal Court of Appeal’s decision in Canada Pipe4
Section 79(1) of the Act prohibits firms that have market power in a properly defined market (section 79(1)(a)) from engaging in a practice of "anti-competitive acts" (section 79(1)(b), that has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market (section 79(1)(c)).
In Canada Pipe, the Federal Court of Appeal held, among other things, that to constitute an "anti-competitive act" under section 79(1)(b), the impugned conduct must have had an intended negative effect on a competitor that is predatory, exclusionary or disciplinary.5 In order for section 79(1) to apply, "the dominant firm must compete with the firm(s) harmed by the dominant firm's practice of anti-competitive acts".6 The Tribunal described this as the “Canada Pipe Rule”.
Because TREB does not compete with its members, the Tribunal concluded that the Restrictions could not have a negative effect on a competitor, and thus, did not satisfy the Canada Pipe Rule.
- The application did not fall under the Competition Bureau’s 2012 Abuse of Dominance Guidelines
The Competition Bureau issued its most recent Abuse of Dominance Guidelines (the "Guidelines") in September 2012. The Tribunal concluded that by referring to the Federal Court of Appeal’s decision in Canada Pipe, the Guidelines endorsed the Canada Pipe Rule. The Tribunal reached this conclusion despite the fact that (i) the same guidelines also explicitly state that “certain acts not specifically directed at competitors could still be considered to have an anti-competitive purpose”, and (ii) the Federal Court of Appeal has previously determined Bureau guidelines are not binding on the Commissioner.7
The Tribunal also found that because the Guidelines do not clearly state that the alleged dominant party need not compete in the market, the Commissioner’s application was seeking (improperly) to extend the reach of the Act’s abuse of dominance provisions not only beyond the Canada Pipe Rule but also beyond the Guidelines.
- The application was inconsistent with subsection 79(4) of the Act
Subsection 79(4) provides that for the purposes of determining whether an impugned practice is having or likely to have the effect of preventing or lessening competition, the Tribunal shall consider whether the practice is a result of superior competitive performance.
According to the Tribunal, by referencing “competitive performance” this provision also “makes it clear” that the Act’s abuse of dominance provisions apply only if the dominant firm is a competitor.
Interestingly the Tribunal suggested, as “an observation”, that the Commissioner’s application may have been more appropriately advanced under the Act’s reviewable competitor agreements provisions in section 90.1. The Tribunal remarked that the Commissioner might be able to seek an order under this provision prohibiting the members of TREB’s board of directors (who are competitors) from enforcing the Restrictions, but quickly disclaimed any intention to suggest that such an application would or could be successful on its merits.
The Commissioner has thirty days in which to appeal the Decision. Since the Decision rests exclusively on questions of law, the appeal is a matter of right. The Interim Commissioner of Competition has not yet indicated whether he intends to appeal.
As it stands, the Tribunal’s decision effectively reads associations out of the abuse of dominance provisions. In the future, the Commissioner will be forced to try to attempt to bring similar cases under the Act’s reviewable competitor agreement provisions for which administrative monetary penalties are not an available remedy. Notably, at least in the case of incorporated "associations" like TREB, these applications will face an additional, significant (if not fatal) legal hurdle. Corporations like TREB are, at law, distinct legal persons. The boards of directors of corporations constitute the directing mind and will of the corporation. Contrary to what the Tribunal suggested, there is good reason to doubt that a decision of a board of directors that falls within the mandate of a company could ever constitute an agreement or arrangement for the purposes of section 90.1.