On August 23, 2018, the Supreme Court of Canada (the “Supreme Court”) denied leave to the Toronto Real Estate Board (“TREB”) to appeal a Federal Court of Appeal (“FCA”) decision from December 2017. As is custom, the Supreme Court did not provide reasons. This exhausts the final appeal available to TREB, thereby definitively concluding this case in favour of the Commissioner of Competition (the “Commissioner”), who heads the Competition Bureau (the “Bureau”).
The FCA decision affirmed the Competition Tribunal’s (the “Tribunal”) holding that TREB, a trade association, had abused its dominant position by restricting the manner in which its member real estate agents could use and disseminate information from the multiple listing service (“MLS”) it controls, including historical listings and sales prices (the “Data”). A detailed summary of the FCA’s decision can be found in our previous article.
This case dates back to May 2012, when the Commissioner brought an abuse of dominance application under section 79(1) of the Competition Act (the “Act”) against TREB on the basis that it restricted the manner in which its member real estate agents could use and disseminate the Data. Specifically, although TREB allowed its members to share the Data through various means, it restricted the Data that could be received by members’ “virtual office” websites (“VOWs”), how the Data could be used and what Data could be displayed on these VOWs (collectively, the “Restrictions”).
According to the Bureau, the Restrictions prevented innovative and disruptive forms of competition, as members were barred from creating platforms that would not only allow clients to log in and view the Data directly on the VOWs from wherever convenient, but that would also enable real estate agents to offer additional features and services that could not be made available under the Restrictions. TREB, however, argued that the Restrictions were justified due to data privacy and intellectual property considerations.
The Supreme Court’s decision marks the end of a saga that took more than seven years to litigate. The case gives rise to several key implications that are applicable across all Canadian sectors, extending far beyond the real estate industry.
Specifically, businesses and trade associations should pay attention to the following important takeaways:
- The TREB case confirms that an organization may be found to have abused its dominant position even where it does not compete with the parties who are alleged to be harmed by the dominant organization’s conduct. Hence, trade associations and businesses that operate in a manner similar to TREB should evaluate whether they are at risk.
- It also confirms that controlling significant amounts of data can be a source of market power and that restrictions on the access and use of data can ultimately act as a barrier to entry. In the age of big data, companies and other organizations may increasingly be subject to investigations by the Bureau, particularly where the Bureau believes that data is being misused to punish or exclude competitors.
- While TREB’s privacy argument failed in this case, the FCA did recognize that privacy concerns could have been a valid business justification if it had been established that the Restrictions had to be put in place in order to comply with statutory or regulatory requirements.
- This case confirms that the Commissioner does not need to adduce quantifiable evidence, even where such evidence is available, in order to prove a substantial prevention or lessening of competition, which is a required element in a finding of abuse of dominance. While the FCA affirmed the Tribunal’s finding in this respect based on the Supreme Court’s decision on merger efficiencies in Tervita Corp. v. Canada (Commissioner of Competition), it expressed reluctance in doing so.
Intellectual Property Defence Remains Unsettled
Although this case has provided clarity on a number of issues, a key issue remains unsettled. Namely, section 79(5) of the Act sets out a defence to abuse of dominance, applicable where the conduct in question is the “mere exercise of an intellectual property right” (TREB claimed copyright over MLS). The FCA’s decision brought the scope of this defence into question. Specifically, in concluding that reliance on section 79(5) was precluded in light of the anti-competitive nature of the Restrictions, the FCA appears to have found that a determination that a practice is anti-competitive closes the door on the possibility of using this exemption. This raises the question of when this defence can be used at all.
Given the growing importance of the digital economy, intellectual property issues more frequently intersect with competition law. Nonetheless, since the Supreme Court will not be hearing this appeal, we will have to wait for clarity on this issue.