Federal agency targets MLS rules
February 9, 2010
Tony Wong
BUSINESS REPORTER
The battle for lower real estate fees in Canada has been ratcheted up significantly, with the federal Competition Bureau challenging organized real estate for what it sees as "anti-competitive" behaviour and restricting consumer choice.
"For so many Canadians it's the biggest financial transaction of their life and to have choice is important," said Melanie Aitken, Commissioner of Competition, in an interview.
"In our experience choice does lead to downward pressure on pricing."
On Monday, Aitken announced the bureau was targeting the Canadian Real Estate Association after talks apparently bogged down between the sides last month.
The bureau has made an application to the Competition Tribunal, a quasi-judicial body that will determine if the bureau's complaints have merit. If so, the tribunal could force the 98,000 strong realtors' organization to strike down rules it deems anti-competitive.
The stakes are high. The outcome will determine whether consumers will be able to access lower fees for real estate transactions and whether organized real estate can dictate how homes are sold in Canada. CREA owns the Multiple Listing Service, where the vast majority of transactions are made.
"What CREA is really doing is using their control over the MLS system in order to restrict choices for Canadian consumers and their own agents who may want to choose innovative models where consumers can get to pick and choose what services they want," said Aitken.
In a statement released late Monday, CREA said it was surprised by the bureau's decision to go to a tribunal.
"We do not agree with the bureau's position that certain CREA rules are anti-competitive, either as a matter of fact or as a matter of law," said CREA president Dale Ripplinger in a statement.
"CREA's rules allow for innovative business models and provide a broad range of choice for consumers."
After three years of discussions, talks between the Competition Bureau and CREA were unresolved, said the commissioner.
"We have been trying to resolve our concerns in an acceptable way and unfortunately we haven't been able to do so, so we're on to the next step," said Aitken.
"Our preference is that in all our actions we try to resolve this consensually."
Before listing a property on the MLS, agents must comply with CREA's rules and restrictions.
One big bone of contention with the Competition Bureau is that under the current rules, agents are prohibited from offering consumers the option of paying a fee for an agent to list a home on the MLS.
Instead, consumers looking to list a property must purchase a "pre-determined" set of additional services, says the Competition Bureau.
In the United States, the U.S. Department of Justice reached a settlement with the National Association of Realtors in 2008 over similar allegations.
"They have struck down rules in the U.S. similar to the ones here," said Aitken. "Competition is flourishing, there are lower cost models out there as a result."
Aitken pointed out that in some states sellers can post their listings on the Multiple Listing Service for as little as $99 (U.S.).
"Very different than the opportunities that sellers have here," said the commissioner.
"We believe we have a very strong case. If we didn't we wouldn't be bringing it to the Competition Tribunal. We certainly intend to pursue this with vigour."
CREA president Ripplinger said his organization had been working on a resolution.
As early as last week CREA had informed the Competition Bureau that it intended to make some rule changes to "address issues raised by the bureau," whether or not a settlement with the bureau could be reached, he said.
"CREA's interest and that of its members is to ensure that consumers have choice, that they are protected during one of the most significant transactions they will undertake and that the integrity of the MLS system is preserved," said Ripplingler.
The bureau's move against CREA is not popular with many agents, who see it as an attack on their hard-earned livelihood.
Andrew Zsolt, president of Coldwell Banker Terrequity Realty, thinks the challenge will "hurt the public more than it will help."
The move to have listings put up on the MLS more cheaply might mean the public does not have the representation and expertise they may need when selling a property, said Zsolt.
"It appears that the Competition Bureau feels that the client should decide how much representation they want and when they should get it. I have a problem with this.
Either we represent the client or we don't. Either you're pregnant or you're not," said Zsolt.
"The Competition Bureau has a faulty understanding of the role of a realtor and how they assist their client in a transaction."
However, Lawrence Dale, a lawyer who ran a real estate company that offered a flat fee for some services, said the bureau was taking the right step.
Dale claims he was forced out of business by the restrictive rules.
"I applaud the bureau for taking the steps to ensure real estate agents will be able to offer consumers choice," said Dale.
"By doing this the bureau is essentially saying that after all these years we're not going to let this drag out any longer."
Toronto Star