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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.
September 22, 2012 in Competition Tribunal | Permalink
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Comments
Over the years TREB has created a monopoly with the MLS system, now that they have too much control they will be broken up in some way.
Posted by: Ron | Oct 18, 2012 9:27:06 AM
It's an interesting perspective, for sure. And always good for us to keep tabs on the authorities to make sure that they remember who they're responsbile to. Not too sure whether I believe an American source stating that one of our biggest real estate Boards is cheating consumers. But always great to hear another point of view. Thanks for sharing!
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Posted by: Bryan Jaskolka | Sep 26, 2012 9:43:31 PM
Yes they are kind of abusing the market.
Posted by: Absolute Condos | Sep 25, 2012 11:23:05 AM
This is all very new to me and this article really opened my eyes.Thanks for sharing with us your wisdom.
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Posted by: summers14 | Sep 25, 2012 7:31:51 AM
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