The Competition Bureau has escalated its case against the Canadian Real Estate Association to the country's Competition Tribunal, in a bid to smash what it says is an anti-competitive home-listings system that artificially increases the cost of real estate transactions. Here's a primer on who's involved and what's at stake.
The players |
CREA and its Multiple Listing Service:
Canada's national real estate association, which was founded in 1954. The Multiple Listing Service trademark is owned by CREA, which has nearly 100,000 members, and each of the country's real-estate boards (there are 101) operates the service in their region. The MLS, which has come under fire, is an Internet-based system where homes are listed and agents can find additional information about a home's history. Roughly 90 per cent of all residential real-estate transactions in Canada involve MLS data.
Competition Bureau:
Led by Commissioner Melanie Aitken who was appointed last year. Her mandate is the "administration and enforcement of the Competition Act and three labelling statutes, the Consumer Packaging and Labelling Act, the Precious Metals Marking Act and the Textile Labelling Act. Under the Competition Act, the Commissioner can launch inquiries, challenge civil and merger matters before the Competition Tribunal, make recommendations on criminal matters to the Attorney General of Canada, and intervene as a competition advocate before federal and provincial bodies." It has been investigating CREA for three years.
Competition Tribunal:
A "specialized tribunal that combines expertise in economics and business with expertise in law. The Tribunal is a strictly adjudicative body that operates independently of any government department. The cases it hears are complex and deal with matters such as mergers, misleading advertising and restrictive trade practices." Any decision made by the body can be brought before the Federal Court of Appeal.
What's at stake |
For CREA, the MLS system generates billions of dollars in commissions. In 2009, 465,251 homes changed hands on the Realtor.ca system, at an average price of $320,333. Any ruling that loosens access to the system and allows competitors to offer cheaper a la carte services will have an economic impact on the association.
The stakes are also 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.
Consumers are also affected – prices may come down if more competition is introduced, but some worry that a “wild west” mentality could overrun the market as more companies begin to offer cut-rate services. With MLS regulated the way it is now, the industry has tight control over the listings and is able to ensure they are accurate and timely. The most obvious benefit, however, is that those who want minimal interaction with an agent would still be able to get their homes listed on MLS, which guarantees the widest possible audience of potential buyers.
The allegations |
In its filing to the Tribunal, the Competition Bureau makes the case that CREA's rules which force a consumer to employ an agent if a home is sold (usually for a set commission) on the MLS is unfair because it prevents competitors from creating alternative business models. From the filing:
