Canadian COMPETITION LAW

On July 7, 2011, the Competition Bureau filed an Amended Notice of Application in its abuse of dominance case against The Toronto Real Estate Board (“TREB”).

The Bureau’s Amended Notice of Application follows TREB’s issuance of a proposed policy and rule amendments to allow its broker members to operate “virtual office websites” (“VOWs”) (secure, password-protected websites operated by real estate brokers allowing customers to perform their own MLS searches over the Internet).

The Bureau first challenged TREB in May (see: Commissioner of Competition and The Toronto Real Estate Board – Notice of Application and Competition Bureau Sues Canada’s Largest Real Estate Board for Denying Services Over the Internet).

The Bureau has taken the position that TREB and its members control the market for residential real estate brokerage services in the Greater Toronto Area, that TREB has engaged in a practice of anti-competitive acts (board rules and policies preventing members from operating VOWs) and that its rules have resulted in a substantial lessening of competition in the residential real estate brokerage services market in the GTA (in particular, blocking real estate firms from offering innovative Internet-based services, including VOWs).

The essence of the Bureau’s abuse of dominance argument was (and remains) that TREB has used its control of its MLS system (each local real estate board in Canada operates its own MLS system) to pass rules that discipline and exclude real estate firms that want to offer VOWs.

In its amended Application, the Bureau reinforces its earlier abuse of dominance arguments against TREB by arguing that TREB’s new VOW rules are a further anti-competitive act that would continue to discriminate against brokers wishing to offer VOWs (conduct must be predatory, disciplinary or exclusionary toward a competitor to constitute an anti-competitive act under section 79 of the Act).

In particular, the Bureau argues that by imposing limitations on the types of information available on VOWs that are not in place for traditional brokerages, including historical sales information, which can currently be provided by traditional means (e.g., hand, e-mail or fax), TREB is discriminating against brokers that want to operate VOWs.

In addition to proving that TREB engaged in a practice of anti-competitive acts, the Bureau will also need to show that as a result of TREB’s conduct, competition has been (or will likely be) prevented or substantially lessened, which involves considering whether a target’s market position will likely be maintained or enhanced as a result of its actions.

In this regard, the Bureau makes a number of new arguments including that TREB’s VOW rules would continue to require customers to contact a member broker personally for key information including historical sales data and that TREB’s VOW rules are “vague and ambiguous” so would “impede the entry of innovative real estate models”.

In essence, the Bureau argues that TREB’s proposed VOW rules would operate as a further barrier to entry for real estate brokerages wishing to operate VOWs using TREB’s MLS data, reinforcing the market position of traditional brokerage firms.

Interesting aspects of this case include whether the Bureau will be able to prove that TREB is dominant in the market for residential real estate services in the GTA (given that TREB, as a trade association, does not actually provide residential real estate brokerage services), whether TREB’s MLS system is indeed the essential facility the Bureau argues it is (the Bureau’s case turns in large part on the argument that TREB’s MLS system is an essential input into the provision of real estate services in the GTA, though there has not yet been a decided essential facilities case in Canada) and whether TREB’s rules constitute an anti-competitive act for section 79 of the Act (given the limited case law to date under the modern abuse of dominance provisions, and no direct precedent for the Bureau’s position on anti-competitive acts).

For a copy of the Bureau’s amended Notice of Application see:

Commissioner of Competition and The Toronto Real Estate Board – Amended Notice of Application

For a copy of the Bureau’s Notice of Application see:

Commissioner of Competition and The Toronto Real Estate Board – Notice of Application

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