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Competition Law

Competition e-LERT: Trade Associations: Lessons Learned From CREA

Published: 10/28/2010

By Chris Hersh, Nicole Washington

In a somewhat surprising turn of events, given the rancorous public statements of the parties, on October 24, 2010, the Canadian Real Estate Association (“CREA”) and the Commissioner of Competition (“Commissioner”) reached a settlement in the abuse of dominance proceedings pending before the Competition Tribunal. The fact that a settlement was reached seems to confirm the Commissioner’s preference for negotiated settlements – even in cases where contested proceedings have been initiated.

By way of background, the application launched by the Commissioner in February of this year alleged that CREA and its members had abused their control of the Multiple Listing Service (“MLS”) (the MLS is the pre-eminent Canadian on-line vehicle for posting real estate listings) trademarks in a manner that substantially lessened or prevented competition in the Canadian market for the supply of residential real estate brokerage services. Among the anti-competitive acts alleged by the Commissioner was CREA’s imposition of minimum service requirements that prohibited real estate brokerages from offering alternatives to the traditional full-service model – a prime example being the prohibition on simply listing a seller’s property on the MLS for a flat fee.

The settlement agreement attempts to address the Commissioner’s concerns by prohibiting CREA from enacting rules or otherwise discriminating against members who want to provide sellers with non-traditional real estate services. It also requires CREA to monitor the conduct of its member real estate boards and, if necessary, take steps (including revoking access to the MLS) to ensure that they comply with the settlement.

Of note, the consent agreement is to remain in effect for a period of ten years. At the Canadian Bar Association’s recent Annual Competition Law Fall Conference, the Deputy Commissioner of Competition, Civil Matters, remarked that the term of consent agreements reflects the Commissioner’s view as to the length of time the conduct in question must be restricted to address the competitive concerns in the market at issue.

This case illustrates the Commissioner’s concerns regarding the manner in which trade associations regulate the conduct of their members and use their facilities to limit competition between their members in downstream markets. The message to take away from the CREA case is that trade associations must exercise caution in imposing rules that impact the manner in which their members compete. When enacting rules that may impact competition between members, there must be a legitimate business objective at the association level (a potential example would be reasonable advertising guidelines designed to protect consumers). The challenge is that trade associations are often governed by their members, whose primary commercial interest lie in the downstream business. As a result, it is often difficult for the directors of trade associations to distinguish between rules that are necessary or appropriate to advance the goals of the association versus those that are intended to advance the interests of individual members.

Please click to view a copy of the Consent Agreement on the Competition Tribunal's website.

For more information on this topic, do not hesitate to contact any member of the Competition, Antitrust & Foreign Investment Law Group.