The Competition Bureau's case against the Toronto Real Estate Board, which began Monday after years in the making, takes on added significance in this period of rapidly rising home prices, a lawyer for the bureau suggested.
The case before the Competition Tribunal is expected to last up to five weeks. The bureau argues that Canada's largest real estate board, which represents about 35,000 agents, is unfairly keeping data about home sales away from online services that threaten to compete with real estate agents and potentially eat into their commissions. The board counters that it is upholding privacy laws that protect home buyers and sellers whose personal information might otherwise become more accessible to nosy neighbours and others.
At stake is the future of a massive industry that is going through a period of upheaval as a result of the Internet, and the ultimate outcome could have an impact on how individuals throughout Canada – not just in Toronto – search for a home in the future.
In his opening remarks, John Rook, a lawyer for the bureau, suggested that the case is even more important in this period of escalating home prices. Real estate agents are earning higher commissions, and consumers have more at stake when buying and selling homes.
More than $40-billion worth of properties changed hands in the Greater Toronto Area last year via the Multiple Listing Service, and the city's real estate agents earned an estimated $2.2-billion, Mr. Rook said.
Given the magnitude of those amounts, the Toronto Real Estate Board (TREB) has a real incentive to protect the realtors' way of doing business, he said. And the top five agencies have cornered the market, taking in more than 70 per cent of commissions in recent years, with Re/Max and Royal LePage combined being responsible for more than 40 per cent of commissions, he added.
"TREB has engaged in the practice of anti-competitive acts," he told the tribunal. In terms of competition law, he said that TREB is an association of competitors, and should therefore attract scrutiny.
The problem, the bureau argues, is that the real estate board has a stranglehold on the most accurate and up-to-date data about home sales. TREB owns and operates the Toronto Multiple Listing Service system, and the bureau argues that rules restricting how real estate agents provide that information – including previous listings and previous sales prices – are anti-competitive because they deny agents the ability to set up new online services such as virtual office websites (VOWs). VOWs are password-protected sites on which customers can search up-to-date data on listings to decide whether to look at a house.
"We are seeking a remedy from the tribunal that will take away the shackles that have been imposed by TREB on VOW operators," Mr. Rook said.
But Donald Affleck, a lawyer for the board, countered that individuals' sensitive personal information should not be made openly available online. He questioned whether somebody's neighbour should be able to go online and find out how much they paid for a property. Agents, he said, act as a filter or buffer between a seller's private information and the public.
And he argued that there is plenty of innovation going on. "In the incredibly competitive Greater Toronto Area real estate market there is no such thing as the status quo," he said.
The remedy that the Competition Bureau is seeking is contrary to both privacy laws and the regulations that govern real estate agents, he added, asking "Why are we here?"