The gloves come off as a tribunal hearing appears inevitable

By Kathy Bevan

A pointed reply filed with the Competition Tribunal by the Competition Bureau has made it clear that the gloves are now officially off in the bureau’s dispute with CREA over access to CREA’s trademark MLS system. 

The bureau alleges that CREA’s MLS rules amount to “abuse of dominant position” in the market – contrary to section 79 of Canada’s Competition Act – and filed an application with the Competition Tribunal to hold a court hearing into this allegation. CREA filed its formal response to the bureau’s application in late March, stating that the association felt no tribunal hearing was necessary because changes to MLS access had been passed at CREA’s AGM that addressed the bureau’s initial concerns.

Melanie Aitken

Melanie Aitken

Bureau commissioner Melanie Aitken’s 13-page reply, filed with the tribunal on April 9, uses very direct language to dismiss the CREA arguments, stating that contrary to CREA’s claims, “the recent amendments are further evidence of CREA’s high degree of control in the market for residential real estate services. Given CREA’s high degree of control, even a small impact on competition resulting from the MLS restrictions is ‘substantial’ for the purposes of section 79 of the Competition Act.” 

The crux of the bureau’s case against CREA is set out in section 20 of the commissioner’s reply:  “CREA’s rules continue to prohibit real estate brokers from offering fully unbundled services to home sellers and continue to prevent entry and expansion of alternatives to the traditional, full-service real estate model. Further, CREA (and member boards) have expressly protected the freedom to pass further rules at any time that may hinder or exclude (or have the effect of hindering or excluding) competitors from offering alternative services in the relevant market.” The commissioner further states, “CREA and its members cannot evade examination by the tribunal of their long-standing anti-competitive conduct by purporting to suspend that behaviour, particularly when it can be reinstated at any time.” 

Also countering CREA’s claim that there is vigorous competition among its number individual member brokers, the commissioner alleges that “any such competition is limited to competition within the rules of the game set by CREA.  In effect, ‘competition’ is confined to competition for one service model, with one compensation model, and terms limited by CREA. Regardless of the number of CREA members competing in the relevant market, CREA, though its MLS restrictions, sets the terms of competition among all members, restricting the degree to which members can compete with one another.”

What appears to be support for CREA’s position in any eventual tribunal hearing has come from an unexpected source – a new national network representing For Sale By Owner (FSBO) firms.  Stephen Skelly, vice-president of operations for the National FSBO Network (NFN), filed a motion to be granted intervenor status by the tribunal. In his motion, Skelly states he is seeking intervenor status to ensure that the complete range of real estate marketing options is considered by the tribunal before it makes a decision on the application for a hearing.

“Clearly, Canadians who wish to sell their homes fall into a spectrum ranging from, on one end, those who wish to have the whole process handled by an agent, to those at the other, who wish to do everything themselves. The commissioner makes no attempt to quantify where sellers in Canada fall within this spectrum and also fails to demonstrate that the segment of owners who wish to operate on a fee-for-service basis is not already adequately served.”

NFN represents FSBO companies in B.C., Alberta, Ontario and Nova Scotia – the national network has been in operation since January, posting its members’ FSBO listings on its website and updating them daily.

“There is serious concern in the FSBO community that if the commissioner’s application is successful, it would be very difficult for FSBO businesses to compete with agents who would (have) full use of the MLS and ‘related trademarks’ and who would have all of the advertising and marketing recourses of the CREA and its members,” added Skelly. “This could ultimately lead to the demise of FSBO businesses and the cost effective services they provide and effectively a monopoly situation.”

Lawrence Dale, co-founder of the former Realtysellers brokerage, has also filed a motion requesting intervenor status, stating in his motion that, in general, he intends to support the commissioner’s position. Dale and Realtysellers were both referenced in the commissioner’s original application to the tribunal, cited as an example of the kind of non-traditional brokerage restricted by CREA’s MLS access rules. Realtysellers ceased operations in 2006 after six years of offering alternative ways of supplying real estate brokerage services at lower rates and fees.

In Dale’s intervenor status motion, he says that he “has plans to re-enter the industry with non-traditional brokerages offering innovative services in a number of areas that will compete directly with members of CREA” if the bureau’s application to the tribunal is successful. Dale says he has “a unique and distinct perspective on the matters at issue in the application, as well as specialized knowledge and expertise” to assist the tribunal, as well as “direct knowledge of the relationship between CREA and its member boards, such as TREB, and the operations as far as CREA exercising control over how the member boards operate their MLS systems.”

If Dale is granted intervenor status, he has requested he be allowed to participate in the proceedings by attending and making representations at motions, pre-hearing conferences and the hearing of the commissioner’s application. He also is requesting that he be allowed, among other things, to review transcripts and documents during the “discovery” process and make copies of documents listed in any affidavit – unless restricted by the tribunal – and to cross-examine witnesses after the commissioner has done so, if he can demonstrate he has pertinent questions that the commissioner had not asked, as well as to make oral and written final arguments and submissions. 

For its part, NFN has asked to be allowed to participate and to submit written evidence to the tribunal regarding the role of FSBO businesses in the Canadian real estate market and the services that FSBOs provide. While the concerns Skelly expresses on behalf of NFN and its FSBO members seem at first glance to support CREA in its stance countering the allegations of the commissioner, NFN has expressly asked that “CREA not be permitted to seek documentary or oral discovery of the NFN.”

Both CREA and the Competition Bureau now have the opportunity to respond to the motions for intervenor status filed by NTN and Dale; depending on whether those responses are in support, against or neutral, NTN and Dale will then either respond or the Tribunal will make a decision as to their status approvals.

While no date has been set by the tribunal, it’s expected that the earliest a hearing could be scheduled would be this fall; the latest would likely be at the beginning of 2011.  Tribunal hearings are usually held in front of three members: one judicial member and two lay members.  The Competition Bureau v. CREA would likely be a public hearing in Ottawa and could take up to three weeks to conclude.

All the case documents can be found here.

Posted: 2010-04-12 07:16:09

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