On April 15, 2013, the Competition Tribunal dismissed an application by the Commissioner of Competition with respect to certain policies and practices of the Toronto Real Estate Board (TREB), a not-for-profit corporation and Canada's largest real estate board. The Commissioner had alleged that these policies restricted the ability of real estate agents to introduce innovative real estate brokerage services through the Internet.
The application was filed in May 2011 under the Competition Act's abuse of dominance provisions, which provide for non-criminal sanctions where one or more firms that dominate a market engage in a practice of anticompetitive acts that is likely to prevent or lessen competition substantially. (See our Blakes Bulletin: Competition Bureau Sues Toronto Real Estate Board for Restricting Innovation in Real Estate Brokerage Services.) The application followed the Commissioner's settlement with the Canadian Real Estate Association (CREA), registered with the Tribunal on October 25, 2010, which resolved the Bureau's concerns about the rules that CREA imposed on agents that allegedly limited consumer choice and prevented innovation in the market for real estate brokerage services in Canada. (See our Blakes Bulletin: Competition Bureau Update on MEGs Consultation, Leniency Bulletin and CREA Settlement.) The CREA case was also commenced by the Commissioner under the Act's abuse of dominance provisions.
In dismissing the Commissioner's application, the Tribunal noted that TREB does not compete with its members or other real estate brokers, and therefore could not have imposed its restrictions for the purpose of harming a competitor – this being a necessary element under the Act's abuse of dominance provisions. The Tribunal also noted, in obiter, that the Commissioner may have erred in making the application under the Act's abuse of dominance provisions, rather than its civil competitor collaboration provisions.
TREB does not compete with any firms allegedly harmed by its conductThe Tribunal's relatively short decision turned largely on the rule set out by the Federal Court of Appeal in Canada Pipe that, in determining whether one or more persons has engaged in a practice of anticompetitive acts (which is one of the elements of abuse of dominance and is set out in subsection 79(1)(b)1 of the Act), the dominant firm must have engaged in the practice for the purpose of causing an intended negative predatory, exclusionary or disciplinary effect on a competitor.
The Commissioner agreed that TREB does not compete with its members (some of whom may wish to maximize use of the Internet in the conduct of their real estate businesses). However, the Commissioner had challenged the application of the Canada Pipe rule on the basis that the open list of anticompetitive acts set out in section 78 of the Act includes one act – buying up products to prevent the erosion of existing price levels (subsection 78(1)(f)) – that does not involve harming a competitor and, thus, the abuse of dominance provision should not be limited to conduct that is intended to harm a competitor. The Tribunal rejected the Commissioner's argument on three main grounds:
- Although the term "competitor" is not used in section 78(1)(f), it is possible to imagine a dominant firm buying product to prevent the erosion of existing price levels caused by a competitor's lower or sale prices. That is, section 78(1)(f) is not necessarily inconsistent with the rule in Canada Pipe.
- Even though the Competition Bureau's Abuse of Dominance Guidelines indicate that certain acts that are not directed at a competitor might nevertheless have an anticompetitive objective, the Guidelines do not go so far as to say that the dominant entity need not compete in the market with the firm(s) being harmed by the impugned practice. Thus, in the Tribunal's view, the Commissioner's application not only sought to extend the reach of section 79 beyond the rule in Canada Pipe but also sought to extend it beyond the Bureau's own Guidelines.
- Subsection 79(4) further supports the view that a competitor must be the target of the impugned conduct, as that provision creates a carve-out for any substantial prevention or lessening of competition that is the result of "superior competitive performance".
The Tribunal's reference to the Bureau's guidelines is interesting as, historically, the Tribunal has stated that the guidelines are not binding on the Tribunal, notwithstanding that they may be afforded serious consideration. The decision implies that while the Tribunal will not defer to the Commissioner's interpretation of the law, it may hold the Bureau's stated views against the Commissioner in any contested proceedings. Also, the decision raises the question of the applicability of the Act's abuse of dominance provisions to industry associations more generally (including CREA, referred to above) where, typically, the industry association, itself, does not compete with its members, but rather its members compete with one another.
Tribunal ObservationIn obiter, the Tribunal observed that the Act's civil competitor collaboration provisions, set out under section 90.1, may provide the Commissioner a means to apply for an order in respect of the alleged conduct at issue in this case. As TREB is an association of members, to the extent that the association's rules prevent or lessen competition substantially as between members, the operation of the association could be subject to a Tribunal order under this provision. The Tribunal noted that the Bureau's Competitor Collaboration Guidelines explain that agreements between members of a trade or industry association may constitute agreements between competitors for the purpose of section 90.1. In particular, "[t]he Bureau considers that rules, policies, by-laws or other initiatives that prevent or lessen competition substantially, and that are enacted and enforced by an association with the approval of members who are competitors, constitute agreements between competitors for the purpose of section 90.1". The Tribunal underscored that this observation was not intended to suggest whether such an application in this particular case would succeed on the merits, but may have left open the possibility of the Commissioner making a subsequent application under section 90.1.
The available remedies under section 90.1 of the Act are less extensive than under section 79 – section 90.1 remedies are limited to injunctive relief, while administrative monetary penalties and divestitures may be available under section 79. However, since the Bureau was not explicitly seeking any divestitures or administrative monetary penalties, the differences in available remedies may not have driven the Bureau's decision to make its application under the Act's abuse of dominance provisions. Interestingly, subsection 90.1(10) precludes the Commissioner from making an application under section 90.1 on the basis of facts that are substantially the same as the facts on the basis of which the Commissioner is seeking an order under certain other civil provisions, including section 79. It is not clear whether subsection 90.1(10) would preclude the Commissioner from making an application against TREB under section 90.1 where the proceedings under section 79 are at an end. If the Commissioner were to make a further application against TREB under section 90.1, the issue of re-litigation could very well be considered by the Tribunal in more detail.
The Bureau has issued a press release which states that the recently appointed Interim Commissioner is disappointed in the Tribunal's dismissal of the application and will be reviewing the decision to determine next steps.