Canadian COMPETITION LAW

With all the recent activity in the real estate services sector in Canada, which has included cases brought by the Competition Bureau against The Canadian Real Estate Association (CREA), The Toronto Real Estate Board (TREB) as well as the ongoing Realtysellers private action challenge of CREA and TREB, the recent U.S. MLS case note by Stein, Mitchell & Muse LLP below caught my eye.

(For more about the Canadian real estate cases see: Hearing dates set in The Commissioner of Competition v. The Toronto Real Estate Board, Realtysellers lawsuit against CREA and TREB survives motion to dismiss, Competition Tribunal grants CREA leave to intervene in TREB abuse of dominance case, Competition Bureau amends its abuse of dominance case against The Toronto Real Estate Board).

The case, in which an internet-based real estate agent’s case against a multiple listing service, an association of real estate brokers and competing real estate agents was dismissed, involves interesting association and intellectual property law related issues.

The plaintiff’s case was ultimately unsuccessful based on a failure to adequately plead and show antitrust injury.  The District Court for Minnesota held that, like Canada, where actual damage or loss is a prerequisite to commencing a private civil action under the Competition Act, that the law was clear that antitrust standing requires a showing of antitrust injury, which is injury of the type the antitrust laws are intended to prevent and which flow from that which makes the acts unlawful.

The Court also had interesting things to say about the test for group boycotts under the Sherman Act, which courts in both the U.S. and Canada have wrestled with, concluding that the alleged boycott should be approached in this case under a rule of reason standard.

The question of how Canadian courts will treat boycotts under Canada’s amended Competition Act, i.e., whether they will follow a per se approach under the amended section 45 or a rule of reason standard of review under the new civil agreements provision (section 90.1), still remains to be determined.

Many of these issues are relevant to the ongoing Realtysellers challenge of CREA and TREB.

Lack of Injury to Competition Dooms Real Estate Multiple Listing Service Case

By David Fierst (Stein, Mitchell & Muse LLP Washington)

– Reprinted with permission

The District Court for Minnesota dismissed a section 1 antitrust claim by an internet-based real estate agent against a multiple listing service, an association of real estate brokers and competing realtors, because the complaint failed adequately to allege injury to competition. TheMLSonline.com, Inc. v. Regional Multiple Listing Service of Minnesota, Inc., 2012 WL 37144 (D.Minn., January 5, 2012).

MLSonline was an internet-based real estate agent. It had a number of domain names using the term “mls,” generally known as an abbreviation for multiple listing service. The local association of realtors, which operated the multiple listing service, had a rule prohibiting members from using the phrase “mls” or “multiple listing service” in their firm names or domain names where doing so could be misleading.

When the association threatened to enforce that rule against MLSonline in 2007, MLSonline filed an antitrust complaint. That case was settled with an agreement that allowed MLSonline to continue to use its business and domain name, so long as it included an appropriate disclaimer.

Later, competitors of MLSonline filed ethics complaints alleging that it violated another rule. That rule requires realtors to be honest and truthful. The ethics complaint alleged, among other things, that the use of “mls” in the name and website was deceptive. The association held a hearing. It first rejected a timeliness defense to the complaint, and then concluded that the name and website were deceptive. MLSonline was fined $5,000, issued a letter of reprimand, and required to attend a class on ethics and social media. It continued to use its name and website, and the association took no action to prevent that.

Other competitors filed new ethics complaints, making the same allegations of deception. MLSonline filed an antitrust suit to prevent adjudication of the new ethics complaint.

Defendants moved to dismiss on the grounds that plaintiff lacked standing, because he had not pleaded antitrust injury. The district court correctly noted that the law was clear – antitrust standing requires a showing of antitrust injury, which is injury of the type the antitrust laws are intended to prevent and which flow from that which makes the acts unlawful. The court noted that in the 8th Circuit, the standing issue of antitrust injury and the substantive claim of injury to competition are closely related, and sometimes conflated.

The court then focused on whether the complaint alleged injury to competition for purposes of stating a substantive claim under the Sherman Act. The court first rejected the argument that this was a per se group boycott. A group boycott, the court ruled, requires a showing of market power and attempts to influence the behavior of customers or suppliers, neither of which was alleged. The court also noted that in other realtor association cases, courts applied the rule of reason.

The complaint failed under the rule of reason. First, it only alleged an effort to drive plaintiff out of the real estate market, but not an injury to the broader market. Nor did the complaint allege that the alleged boycott had driven plaintiff from the market. So far, the only repercussions were a fine and a reprimand. The new ethics complaint has not been resolved yet, and the association may find in plaintiff’s favor. Thus, there is no allegation of injury to competition, and the complaint was dismissed.

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