On April 15 2013 the Competition Tribunal rejected(1) the commissioner of competition's argument that the Toronto Real Estate Board was engaging in anti-competitive acts contrary to Section 79 of the Competition Act.(2) The case, which was launched in 2011, was part of then-Commissioner Melanie Aitken's tough new approach to enforcement of the act. Her successor, Interim Commissioner John Pecman, has indicated(3) that he will review the decision in order to determine the Competition Bureau's next steps in this matter.
This remarkably short (eight-page) decision confirms existing case law, which states that in order to constitute abuse of dominance, the dominant party's conduct must (with limited exceptions) have intended negative effects on competitors.
The commissioner alleged that the Toronto Real Estate Board – Canada's largest real estate board, with some 35,000 estate agent and broker members – restricted how its member agents could provide information to their customers from the Toronto Multiple Listing Service system. The system contains data on previous listing and sale prices, historical prices for comparable properties in the area and the length of time that a property has been on the market. The commissioner argued that, through its restrictions, the board denied member agents the ability to provide innovative brokerage services over the Internet (eg, through password-protected websites). The board is a member of the Canadian Real Estate Association, which owns the Multiple Listing Service online database that is operated by its members.
The Competition Tribunal concluded that the board's actions did not affect competitors. It found the commissioner's case to have failed for the following three reasons:
- It was inconsistent with existing Federal Court of Appeal case law;
- It fell outside the bureau's own abuse of dominance guidelines; and
- It was inconsistent with the act.
The tribunal stated that it agreed with, and was bound by, the Federal Court of Appeal's 2006 decision in Canada v Canada Pipe Co.(4) In that decision, the Federal Court of Appeal had ruled that in order for a dominant company's actions to constitute abuse of dominance, they must have "an intended negative effect on a competitor that is predatory, exclusionary or disciplinary".(5) In the case at hand the board admitted, and the commissioner acknowledged, that the board does not compete with its members, meaning that the board's actions cannot have a negative effect on a competitor as required by case law and the act's abuse of dominance provisions.
The tribunal rejected the commissioner's view that Section 79 includes abusive conduct by entities that are not competitors. The common element in eight of the nine examples of anti-competitive acts provided in Section 78 is harm to a competitor, and the tribunal held that it is possible to conceive of harm to a competitor in that ninth example.
The tribunal also noted that the bureau's own 2012 abuse of dominance guidelines(6) – which are only guidelines and do not have the same force as case law or legislation – state that anti-competitive acts must be intended to have a negative effect on a competitor. The guidelines make allowance for circumstances where actions not specifically aimed at competitors can be considered anti-competitive, which the tribunal interpreted as a signal that the commissioner was unhappy with the result in Canada Pipe.
Finally, the tribunal found that Section 79(4) of the act clarifies that abuse of dominance can be found only where a competitor is affected by the anti-competitive behaviour. In light of this, the tribunal concluded that Section 79 could not apply to the facts of the case, because no competitor was affected by the board's actions.
Interestingly, the tribunal included an 'observation' that the commissioner might have grounds to proceed against the board under Section 90.1 of the act, which is a civil prohibition against anti-competitive competitor collaboration. In such a case, the commissioner would need to argue that the board's members were competitors and were using the association to enact anti-competitive rules. The tribunal noted that its observation was not intended to suggest whether such an action would be succeed.
An interesting question arising from this case is whether behaviour that is harmful to competition generally, but which is not targeted specifically at a particular competitor, can ever be considered an abuse of dominance. The case also raises the question of whether an abuse of dominance case can ever succeed against a trade association that does not compete with its members. In the absence of an affected competitor, the commissioner may be left to seek redress through Section 90.1, where the powerful deterrent of a C$10 million penalty is unavailable to the commissioner.
The bureau is reviewing the decision and may appeal to the Federal Court of Appeal or may bring an application against the board under another section of the act.
For further information on this topic please contact Kevin Ackhurst or Stephen Nattrass at Norton Rose Canada LLP by telephone (+1 416 216 4000), fax (+1 416 216 3930) or email (firstname.lastname@example.org or email@example.com).
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.Endnotes
(4) Available at www.canlii.org/en/ca/fca/doc/2006/2006fca233/2006fca233.html.
(6) Available at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03497.html.