The country’s largest real estate board and the federal competition watchdog head back to court this week, the latest development in a decades-long tug-of-war between competition regulators and real estate agents that has the potential to transform the way Canadians buy and sell their homes.
Starting on Monday, Sept. 21 in Toronto, the federal Competition Tribunal is set to rehear a lawsuit brought by the federal Competition Bureau against the Toronto Real Estate Board (TREB) over whether the board is unfairly restricting public access to crucial home-sales data.
While the case involves a single local real estate board and a narrow set of issues, many in the industry see it as a game-changer that will set a precedent for how real estate is sold in Canada.
At its heart, the battle which has flared up in one form or another for nearly 30 years – is about wresting control over Canada’s housing market from the more than 100,000 licensed real estate agents through whom an estimated 90 per cent of Canadian residential real estate still flows, with commissions that the Competition Bureau argues have ballooned alongside Canada’s soaring home prices.
The case boils down to public access to the Multiple Listing Service, a system that allows agents to share information among themselves about homes for sale. The MLS is trademarked by the Canadian Real Estate Association (CREA), a national umbrella group, but access to it is controlled individually by each of CREA’s 110 local real estate boards. While the public version of the site, known as realtor.ca, has some information on home listings, the agent-only MLS offers many other non-public details, such as the number of days a home has been on the market along with a home’s current and previous selling price.
Even as some local real estate boards now allow their members to offer such details to customers over the Web, TREB restricts its members to sharing information with clients in person, by fax or e-mail. It prohibits brokers from posting the details online through what the industry has termed “virtual office” websites.
The Competition Bureau has argued that the restrictions have harmed competition in the industry by making it more difficult for low-fee discount brokers to offer information and services to Canadians who want to buy and sell homes without an agent and have kept real estate commissions artificially high.
South of the border, a court ruling on similar issues has opened to door to sites such as Zillow that now offer Americans an in-depth look at local housing markets and individual properties. In Toronto, however, the real estate board argues it is protecting the privacy of buyers and sellers and safeguarding details about deals that may not be finalized.
In the years since the Competition Tribunal first heard the case, several discount brokers have found ways around TREB’s rules by offering data through newsletters that require members of the public to sign up as subscribers, sometimes for a nominal fee. But some began shutting down those services earlier this year after TREB fired off a salvo to members saying those who violated its terms would lose their access to the MLS, the lifeblood of any agent.
Both the industry and the federal watchdog have scored past victories on similar issues. In 2010, CREA allowed “for sale by owner” listings to appear on the MLS, but the agreement stopped short of opening the system entirely. Homeowners must still pay a broker to post a listing and are still required to pay a commission to a buyer’s agent. In a ruling on that issue earlier this year, the tribunal reaffirmed the real estate industry’s control over the MLS by upholding rules forbidding sellers from including their contact information in “for sale by owner” listings that were linked directly to the industry-owned realtor.ca website.
This week’s tribunal hearing may finally spell the end to a fight that has been brewing since as early as 1987, when the federal competition watchdog raided the offices of B.C.’s Fraser Valley Real Estate Board, accusing it and other local real estate boards of price-fixing for refusing to accept membership applications from agents who charged low commissions.
That case forced the industry to draft new rules against commission price-fixing, which many expected would lead to a rush of low-cost brokerages and a whittling away of the real estate commission.
But that hasn’t happened. While there is no official measure to track real estate commissions across Canada, most estimates point to commissions in many parts of the country remaining roughly where they were in the late 1980s, even though home prices have tripled in some regions of the country since then, something the competition watchdog is eager to see change.
The Competition Tribunal has scheduled a week of hearings on the case in Toronto this month, followed by another week of hearings in Ottawa in October.
Timeline of the fight over MLS access
The federal Competition Bureau raids the offices of B.C.’s Fraser Valley Real Estate Board in an investigation over alleged price-fixing, leading to a landmark order by the Federal Court prohibiting boards from discriminating against members on the basis of the commission they charge.
The Canadian Real Estate Board strikes an agreement with the Competition Bureau allowing homeowners to list their properties for sale on the Multiple Listing Service for a flat fee, opening the door for Canadians to make it easier to sell homes without using a full-service agent.
The Competition Bureau sues the Toronto Real Estate Board over access to its MLS data, losing the case in a Competition Tribunal ruling that was ultimately overturned by the Federal Court of Appeal.
The Supreme Court of Canada refuses to hear an appeal by the Toronto Real Estate Board of the Appeal Court’s ruling, sending the case back to the Competition Tribunal for another hearing this year.
The Toronto Real Estate Board warns members that those who violate its strict rules on sharing home-sales data with the public online risk losing their access to the MLS, which many take to be a sign of the board shoring up its defences ahead of the Competition Tribunal hearing, which starts in Toronto on Monday.Report Typo/Error