Tribunal to reconsider TREB's practices
The Federal Court of Appeal has overturned the Competition Tribunal’s decision on the Toronto Real Estate Board matter issued on April 15, 2013, stating that the Tribunal misinterpreted the abuse of dominance provisions of the Competition Act and that the Tribunal must reconsider the Commissioner of Competition’s application on its merits.
The Bureau’s appeal was based on its position that the Tribunal's ruling was based on an overly narrow interpretation of the Competition Act — the abuse of dominance provision. The Tribunal originally ruled that TREB, as an incorporated trade association, does not compete with its own members in the real estate brokerage market and therefore cannot be found to have contravened the abuse of dominance provision.
Toronto MLS decision under appeal
The Competition Bureau has filed an appeal with the Federal Court of Appeal today, seeking to overturn the Competition Tribunal’s ruling in the Toronto Real Estate Board's ‘abuse of dominance’ matter.
“The Bureau believes that the Tribunal’s ruling was based on an overly narrow interpretation of section 79 of the Competition Act — the ‘abuse of dominance’ provision. The Tribunal ruled that TREB, as an incorporated trade association, does not compete with its own members in the real estate brokerage market and therefore cannot be found to have contravened the abuse of dominance provision,” says the Bureau in a news release.
“Allowing the Tribunal’s finding to stand could leave a significant loophole in the application of the Competition Act,” says Interim Commissioner of Competition John Pecman in the release. “While most trade associations comply with the Competition Act, we are concerned that, if the Tribunal’s decision is left to stand, trade associations may be tempted to develop rules aimed at preventing or eliminating potential new forms of competition.”
Pecman says: “We believe that the Competition Tribunal erred in dismissing our application and in not ruling on the facts of the case. Tt is our view that TREB’s anti-competitive behaviour continues to restrict potential homebuyers and sellers from taking advantage of a greater range of service and pricing options when making one of the most significant financial transactions of their lives.”
Is TREB abusing market power?
As reported by the Toronto Star:
Osfficials with the Toronto Real Estate Board are expected to appear before a Competition Tribunal Monday to respond to allegations that the trade association is abusing its “substantial market power” and hurting consumers.
A damning report from a U.S. expert on competition and antitrust issues criticizes TREB’s efforts to freeze out new online competitors and control access to MLS listing data, saying its real aim is to protect traditional realtors across the GTA and the $2.2 billion they made in commissions last year alone.
“TREB has abused, and continues to abuse, its substantial market power and control of relevant markets to reduce competition and protect its member brokers’ interests at the expense of consumers,” says Gregory Vistnes, a vice president with Washington-based consulting firm Charles River Associates in a 189-page report filed as part of the complex case.
“TREB’s use of the MLS to control how, and even whether, brokers can compete in the GTA raises serious competitive concerns,” writes Vistnes, an economist who was retained by the Competition Bureau to examine how TREB and its 34,000 members do business.
The Tribunal has already heard that just five major real estate brokerages raked in more than 70 per cent of commissions paid last year on some $40 billion in GTA home sales. Giants ReMax and Royal LePage alone accounted for more than half of all that business.
Just 27,000 of TREB’s members are active and sold one or more properties last year, the report says.
Until November of 2011, TREB discriminated against new online competitors by cutting off their access to vital listing information on the MLS system, Vistnes says.
Since then, the board has prevented “dynamic” competition: Technically, TREB okayed the creation of so-called Virtual Office Websites, but denied those new competitors and their customers online access to the full range of MLS information more traditional “bricks and mortar” realtors routinely provide to their clients.
That information, such as the previous sale price of a home, allows consumers do more of their own homework and online realtors to offer a range of cheaper, a la carte real estate services.
“VOWs represent an innovation that can take competition to a new level characterized by even more attractive services and even lower prices than what consumers already enjoy,” says the report.
TREB has cited privacy concerns around having MLS data readily available online.
But Vistnes argues more open access would put more information — and power — in the hands of consumers and bring an end to costly and questionable real estate practices.
Making commission agreements public, for instance, might discourage realtors who now refuse to take potential buyers through homes where the owner has negotiated a lower commission, pushing them instead to other homes that may be less ideal but have better payoff.
It would also be more obvious when an agent is engaging in “gaming” — removing a property that’s been languishing on MLS for weeks and reposting it a day later to create the illusion of a new listing, says the report. That can be a red flag to buyers that a home is overpriced.
Consumers would also be able to tell when a realtor has acted as both the listing and the buying agent, a “conflict of interest” that occurs in about 10 per cent of all GTA transactions, says Vistnes, who analyzed several years of TREB’s MLS data.
By denying a new generation of Internet-savvy homeowners and buyers access to information, as travel agents did years ago, realtors remain the only real “gateway” to critical property details, says Vistnes.
“VOWs are not simply a vehicle by which consumers can access raw MLS data and conduct searches. Brokers can also offer VOW-based tools through which consumers can then analyze those data,” says the report.
“VOWs often attract buyers by offering a convenient means to search listings, to learn details about individual listings, to learn how home prices differ by neighbourhood, to see how quickly homes are selling and the extent to which final prices differ from the list prices and, in some cases, by offering a commission rebate.”
TREB Chief Executive Office Don Richardson is scheduled to take the stand Monday afternoon. The board declined to comment on the Vistnes report Friday.
Commissioner: 1 TREB: 0
Competition Tribunal rejects constitutional challenge by Toronto Real Estate Board
The Competition Tribunal has rejected a constitutional challenge by the Toronto Real Estate Board, saying that the question was filed too late and could disrupt the ongoing hearing into allegations of anti-competitive practices. Tribunal chair Madam Justice Sandra Simpson announced her decision Tuesday on the second day of hearings examining whether Canada’s largest real estate board is engaged in anti-competitive behaviour by restricting access to data on its Multiple Listing Service (MLS) system for new, online discount brokerages.
Competition Commissioner vs TREB
The Commissioner of Competition's case against the Toronto Real Estate Board (TREB) began on September 10 before the Competition Tribunal. The Competition Bureau is seeking to ensure new and innovative real estate brokerage services are accessible for consumers through the Internet by prohibiting anti-competitive practices by TREB.
In May 2011, the Bureau announced that it had filed an application with the Tribunal seeking to prohibit TREB's has anti-competitive rules that restrict how its member agents provide information, such as previous listings and previous sale prices, to customers, thereby denying agents the ability to introduce innovative real estate brokerage services using the Internet, such as through Virtual Office Websites (VOWs).
VOWs are password-protected websites that permit customers to search a full inventory of listings containing up-to-date data online, before making the decision to tour a home or attend an open house. This enables customers to be more selective and focused, and agents to spend less time trying to find an appropriate property for a specific customer.
"Many real estate agents are eager to offer new, innovative services for consumers through the Internet," said Melanie Aitken, Commissioner of Competition, "but TREB's anti-competitive behaviour is essentially restricting potential homebuyers and sellers from taking advantage of a greater range of service and pricing options when making one of the most significant financial transactions of their lives."
With approximately 35,000 members, TREB is the largest real estate board in Canada. It owns and operates the Toronto Multiple Listing Service (MLS) system, which contains current property listings and historical information about residential real estate purchases and sales in Toronto and the surrounding area. The majority of local real estate transactions make use of the Toronto MLS system, which is an essential tool for agents to help customers buy and sell homes. It is much more detailed than what is available on public sites, such as Realtor.ca. For example, the Toronto MLS system contains data about previous listings and previous sale prices.
While agents can provide detailed MLS listing information not available on Realtor.ca to customers by hand, mail, fax, or e-mail, TREB's anti-competitive practices effectively prevent agents from providing similar MLS listing information to customers via VOWs. As a result, there are currently no VOWs operating in the Toronto real estate market that enable customers to search a full inventory of listings.
The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
Competition Tribunal Proceedings
The Competition Tribunal proceedings in the case of the Commissioner of Competition vs. The Toronto Real Estate Board commence Monday, September 10 in Toronto at the Federal Court Building at 180 Queen Street West and are expected to span 4 to 5 weeks.
The decisions reached by the Tribunal will profoundly affect the way real estate information is disseminated in the future
Realtysellers will be an active participant in the proceeding because that brokerage wants to provide the selling details on listed properties on their 'Virtual Office Website'.
If the outcome is as we hope, brokers will soon be able to display information on sold properties as Realtysellers does now for current MLS® listings »