As he walked out of a Toronto boardroom last week following a meeting with Ottawa's competition watchdog, Dale Ripplinger thought he was close to a deal.
The Canadian Real Estate Association (CREA), of which Mr. Ripplinger is president, had been negotiating for five months with officials from the federal Competition Bureau. The goal was to settle concerns that CREA was engaged in anti-competitive practices through its tight control of the Multiple Listing Service or MLS database, through which the vast majority of Canadian home sales are done.
By the time Mr. Ripplinger and the association's legal team met last Wednesday with Melanie Aitken, the Commissioner of Competition, CREA had agreed to a number of concessions. One change would have allowed homeowners to list on MLS but handle offers without the help of an agent. But the language of CREA's proposal contained some wiggle room that allowed local real estate boards to retain the power to enforce their own rules.
“For the most part the conversation was quite amicable – I thought we were making progress and weren't that far apart,” Mr. Ripplinger said.
It was a calculated bet by the real estate industry association that is now threatening its 50-year lock on the country's home sale business.
On Monday, the bureau escalated the case by serving notice that it would be challenging the association's practices before the Competition Tribunal. With no settlement in sight, Ms. Aitken said that three years of investigation and negotiations had “come to an end.”
The bureau's tactics have put trade associations and companies on notice that the competition regulator, long criticized for being too soft, is taking a tougher stance on alleged anti-competitive conduct.
“They are taking an aggressive enforcement approach. This shows they're prepared to take a hard line when it's appropriate,” said Omar Wakil, a competition specialist with Torys LLP.
The stakes are high for the bureau. When Ms. Aitken was appointed commissioner last summer, she promised to improve the bureau's lacklustre record of challenging companies and organizations accused of anti-competitive conduct. By taking the case against CREA to a tribunal, the bureau will have to convince a specialized body that the association's practices are limiting competition in the home-selling business.
CREA could prolong the legal battle by challenging any tribunal decision in higher courts.
In real estate, Ms. Aitken is taking on an industry that has faced the commission's interest before. Following a lengthy investigation by the bureau of its practices in the 1980s, CREA agreed in 1988 to a prohibition that restricted it from setting rules that standardized commissions and restricted advertising and incentives.
The current investigation dates back to 2007, when the bureau began investigating new rules CREA brought in to manage the way consumers and agents interact on the MLS. The rules dictate that anyone using the system – which accounts for about 90 per cent of all home sales in Canada and generates billions of dollars in commissions – must employ a real estate agent throughout the whole process.
Ms. Aitken said the rules restrict competition, because real estate agents are unable to hive off certain services within the system and offer them on a flat-fee basis. Agents who want to offer such services have been excluded from the MLS by CREA, she said.
“What that means is consumers don't have any choice. It's either all [services] or nothing,” she said.
The real estate industry has made itself somewhat of an easy target, said Century 21 president Don Lawby. It has spent millions of dollars developing the site, but hasn't made it clear why real estate agents are an essential part of the offering.
“A sense of value may be lost because that story isn't being told,” he said. “There is a perception selling a home is real simple, that someone just comes along and says I will pay you X amount … it takes expertise, especially in large cities where we're talking about very significant dollars.”
