April 15, 2013
Earlier today, the Competition Bureau announced that the Federal Competition Tribunal has dismissed its 2011 abuse of dominance application against The Toronto Real Estate Board and that it would be “reviewing” the Tribunal’s decision (see the Competition Bureau’s news release: Competition Bureau to Review Competition Tribunal Ruling).
In making the announcement, Canada’s Interim Commissioner of Competition, John Pecman, said: “While I am disappointed that the Tribunal has dismissed the Bureau’s application, we will be reviewing the Tribunal’s decision to determine our next steps.”
In this case, the second recent abuse of dominance challenge against major Canadian real estate boards or associations (an earlier challenge against The Canadian Real Estate Association was settled in the fall of 2010), the Bureau brought an application challenging certain membership rules enacted by The Toronto Real Estate Board.
In particular, the Bureau alleged that TREB was dominant in the residential real estate services market in the GTA, that certain membership rules enacted by it governing the use of its MLS® data were anti-competitive and that competition had been substantially lessened in the residential real estate services market in the GTA. The Bureau specifically challenged TREB membership rules governing the use of its MLS® data, which it argued make it impossible for existing members or new entrants to offer certain Internet based services that rely on the use of the Board’s MLS® data. Like the CREA case, the Bureau’s application focused on TREB’s ability to exclude and discipline non-compliant members by foreclosing access to its MLS® system.
The essence of the Bureau’s challenge related to the ability (or rather inability) of some members of TREB to use the board’s MLS listing data to operate certain types of online services, including so-called “virtual office websites” or “VOWs”, in which potential clients could obtain property information through brokers’ online platforms historically only available through more traditional means (e.g., by visiting a broker in person, by fax, etc.). Some TREB members and the Bureau argued that the inability to use the board’s MLS data for such new and innovative types of online models substantially lessened competition. TREB on the other hand argued, among other things, that the wider use and dissemination of its MLS information, such as through online VOWs, would result in privacy and other concerns.
While the bases for the Tribunal’s dismissal of the Bureau’s application still remain to be seen (as the decision was not yet available when the Bureau announced the Tribunal’s decision earlier today), some of the frailties of the Bureau’s abuse of dominance theory against the real estate board included potentially legitimate justifications (i.e., alternate business and other explanations) for its control of its MLS system data (including based on intellectual property and property rights), defects in the Bureau’s market definition and market power arguments (e.g., the Bureau challenged the real estate board in a market in which it was not actually present – i.e., residential real estate services in the Greater Toronto area) and also based on arguments that, in any event, the board’s MLS policies didn’t substantially prevent or lessen competition, which is the relevant market effects test under section 79 of the Competition Act.
According to media releases today, the Tribunal’s order was released to parties and may have turned on technical defects in the Bureau’s filing, although it is not yet clear what those technical defects may be.
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