But will the Competition Bureau now come calling?

By Kathy Bevan

An Ontario Superior Court judge has dismissed Toronto real estate broker Fraser Beach’s lawsuit against the Toronto Real Estate Board (TREB), ruling that TREB was justified in suspending Beach’s access to its MLS database after the broker downloaded thousands of listings onto his brokerage’s public website.

TREB shut down Beach’s MLS access in May 2007, after learning that the broker had downloaded a large number of listings from the board’s MLS database onto his realestateplus.ca website and was making them available to the public – in effect giving consumers the same ability as a member of TREB to search portions of the MLS database.

When TREB refused to restore Beach’s MLS access he took it to court, claiming he was being discriminated against as a discount brokerage. TREB for its part claimed that Beach and his corporate partner BNV Real Estate Inc. (a subsidiary of Bell Canada) had breached provisions of TREB’s Authorized User Agreement (AUA), which limited the use its members could make of data obtained from its MLS database to the member’s “exclusive and internal use”. In the ruling issued on December 7, Justice David Brown sided with TREB.

“In the ordinary course, a member of the public did not enjoy access to the MLS database. It had to make an inquiry to a TREB member about properties of interest,” Justice Brown said in his ruling. “Through its realestateplus.ca website, BNV made available, for the direct search and retrieval by members of the public, content from the MLS database. In doing so, BNV breached section 2 of the AUA because it did not confine its access and use of the services and MLS database to its exclusive and internal use. It accessed and used services and MLS database for external use by members of the public.”

Citing Beach’s own estimate that he had downloaded approximately 20,000 listings onto the website, Justice Brown described the magnitude of the breach as “significant” and ruled that TREB’s actions in immediately shutting down Beach’s access were reasonable.

“While it is a very serious matter for an organization to depart from its established procedures to deprive a member of services, in the particular circumstances of this case I conclude that TREB was justified in suspending access to the MLS system by BNV and Mr. Beach without giving them an opportunity to cure the alleged breaches,” Justice Brown said.

Prior to May 2007, TREB had never cut off the access of a member for alleged misuse of the MLS database or breach of any of the MLS rules or agreements relating to the database.

Beach had argued that the service he was providing to the public was a “good thing”, as it was using advances in information technology to enhance consumer choice. While commenting that Beach was free “to build a better mousetrap” to offer services to the public, the judge stressed that, as a member of TREB, Beach had to use the MLS database and its related services in accordance with the AUA.

In response to Beach’s argument that BNV was only doing what other brokers were doing with information from the MLS database, the judge added, “There was no evidence led before me that any other TREB member did what BNV was doing on its website – making available for direct public search listing information from the MLS database about all listings within certain geographic areas.”

In a statement, TREB CEO Don Richardson said, “TREB is pleased with the decision and feels the integrity of the MLS system and the rights of sellers, consumers and brokers have been protected.”

Meanwhile, Lawrence Dale, one of the lawyers who represented Beach in this lawsuit says that, although the judge ruled in TREB’s favour, the fact that the board’s MLS rules were made public through the court may draw the attention of the federal government’s Competition Bureau.

“The Competition Bureau has indicated that they would be concerned if any rules restricted the method that an agent can use to provide information to consumers – we now know that TREB has such rules,” says Dale. “It’s now up to the Competition Bureau to decide whether or not they feel these rules are in fact illegal”, adding that he hopes the Competition Bureau makes a determination about this issue “in the next 45 days, so that the landscape becomes clear.”

In response to questions from REM, Greg Scott of the Competition Bureau would not comment specifically on the Beach case, but did confirm that an observer from the bureau was present during the hearings phase of this trial last summer. As to whether or not the bureau might be considering investigating or taking action against any other members of the Canadian real estate industry, Scott says that “by law, the bureau is obliged to conduct its investigations confidentially”, adding that “it would be inappropriate to speculate on whether the bureau may or may not investigate any organization in the future.”

The Competition Bureau is currently negotiating a settlement with CREA following a two-year investigation into CREA’s MLS access rules; whether it decides to focus its attention on TREB at the same time remains to be seen and may well influence the timing of another legal challenge to the Toronto board.

Dale and Stephen Moranis, co-founders of the now dormant discount Toronto brokerage  Realtysellers, have filed – but not yet served – a $750 million lawsuit against TREB and a number of individuals, alleging breach of contract and actions contrary to the Competition Act. Dale and Moranis served a separate $100 million lawsuit against TREB and CREA in September, alleging breach of settlement, related to a settlement agreement originally reached in 2003.

Posted: 2009-12-09 07:18:09

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