|Date Announced:||May 27, 2011|
|Date Closed:||August 23, 2018|
|Deal Value:||$68 billion|
|Client Name:||Commissioner of Competition|
Since 2011, the Commissioner of Competition has litigated to remove the anticompetitive restrictions placed on innovative real estate brokers and agents by their trade association, the Toronto Real Estate Board (TREB). The Commissioner triumphed on August 23, 2018, after two trials, two appeals, and two unsuccessful applications by TREB for leave to appeal to the Supreme Court of Canada.
TREB can no longer prohibit its 50,000 members from using and displaying key information, including the selling price of a home, on password-protected virtual office websites (VOWs). Home buyers and sellers will have access to more market information online. Enhanced competition is anticipated in the GTA’s multi-billion dollar real estate brokerage industry, particularly through new and innovative technology-based products and services.
The Commissioner’s case against TREB
Every year in the Greater Toronto Area (GTA), close to 100,000 homes sell through TREB’s Multiple Listing Service or MLS. TREB’s broker and agent members provide services related to these transactions. In aggregate, they receive billions of dollars of commissions every year.
Some TREB members saw an opportunity to disrupt the traditional model of residential real estate brokerages by moving some of their products and services online onto VOWs. VOWs enable them to provide some products and services more efficiently and to improve the products and services they offer. But for years, TREB did not permit VOWs and would not provide MLS information to members for use on VOWs. When VOWs debuted elsewhere, some in the real estate industry feared disintermediation – that VOWs and technology would put traditional real estate agents out of business, just as websites had done to travel agents.
Under pressure from the Commissioner, TREB finally created VOW Rules and Policies in 2011 and began making some MLS information available to members for display on their VOWs. But TREB excluded other listing information, including sold prices, from the data feed and restricted what members could do with the data it did provide. Specifically, TREB withheld and prohibited VOWs from displaying information about inactive listings, such as listings for homes that had just sold. In contrast, TREB placed no restrictions in practice on members providing sold prices by hand, email or fax, and they routinely did so.
TREB also prohibited members from using the information for any purpose other than display on their VOWs, which prevented members from efficiently developing more sophisticated, technology-assisted analytical tools. Again in contrast, there were no comparable restrictions on members when they sourced information manually from TREB’s MLS. Members could and routinely did use that information for analysis purposes to provide greater insights to potential buyers and sellers.
The First Hearing and Appeal (2011-2014)
The Commissioner applied to the Competition Tribunal for a remedy under the abuse of dominance provision of the Competition Act in May 2011. The Commissioner alleged that TREB had intentionally implemented discriminatory restrictions on VOWs to blunt their competitive impact and to insulate TREB’s more traditional members from competition from VOW-based brokerages. In response TREB contested all aspects of the Commissioner’s case. In addition to arguing it had not violated the abuse of dominance provision, TREB argued that privacy laws and other regulations kept it from permitting VOWs to disclose sold prices. It also argued that it had copyright in the MLS, which insulated its conduct from the application of the Competition Act.
Over a six-week trial in the Fall of 2012, the Competition Tribunal heard evidence from numerous fact and expert witnesses relevant to the key questions: did TREB have substantial market power, had TREB engaged in a practice of anticompetitive acts, and had those acts substantially lessened or prevented competition?
In a six-page decision released six months after the hearing, the Tribunal dismissed the Commissioner’s application. It ruled that in law, TREB could not have engaged in a practice of anticompetitive acts because it did compete in the market – its acts were not been aimed at a competitor of TREB, but at competitors of TREB’s members. The Tribunal did not consider any of the evidence or make any findings of fact.
The Commissioner successfully appealed to the Federal Court of Appeal, which unanimously overruled the Tribunal and returned the application to the Tribunal for redetermination. The Supreme Court of Canada dismissed TREB’s application for leave to appeal in July 2014.
The Second Hearing and Appeal (2015-2018)
By mid-2014, more than two years had passed since the initial hearing and the original Tribunal panel members were not available to redetermine the matter. The Tribunal struck a new panel and directed the parties to file evidence about developments since the 2012 hearing. The Tribunal heard the matter again over several weeks in the Fall of 2015. Although the evidence had evolved since 2012, the parties’ positions were effectively the same: the Commissioner alleged TREB had acted to exclude VOWs from the GTA and to blunt their competitive impact; TREB argued that it had done everything it could to enable VOWs and that privacy laws kept it from doing any more.
In April 2016, the Tribunal released a sweeping and comprehensive 787-paragraph decision that upheld the Commissioner’s position and rejected all of TREB’s main arguments. It concluded that TREB had substantial market power by virtue of its control of the MLS, which was a key input into the supply of residential real estate brokerage services in the GTA. It concluded that TREB’s restrictions on VOWs were a practice of anticompetitive acts that had substantially prevented competition by limiting the products and services offered by its members to home buyers and sellers. TREB’s arguments about privacy were and remained a pretext contrived to insulate TREB from the legal consequences of its anticompetitive conduct. The Tribunal held that TREB had not established copyright on the evidence, but that even if TREB had copyright, the Competition Act still applied in the circumstances of this case.
In June 2016, the Tribunal ordered TREB to end the VOW Restrictions and not to exclude the so-called “Disputed Data”, including sold prices, from its VOW data feed.
TREB appealed and obtained a stay of the Tribunal’s order pending its appeal to the Federal Court of Appeal. In December 2017, the Federal Court of Appeal unanimously dismissed TREB’s appeal. TREB obtained a further stay of the Tribunal’s order pending its application for leave to appeal to the Supreme Court of Canada. On August 23, 2018, the Supreme Court dismissed TREB’s application for leave. TREB has since made public statements about its intent to comply with the Tribunal’s Order.
At every stage, the case has received significant media attention given the public interest in real estate matters and the promise of greater information transparency and improved products and services in a critical sector of the economy.
Bennett Jones LLP and Competition Bureau Legal Services represented the Commissioner of Competition throughout the proceedings. The Bennett Jones team included John F. Rook QC, Andrew D. Little and Emrys Davis.