Member groups of the Canadian Real Estate Association have put off a decision on controversial changes to national Multiple Listing Service rules that were questioned by discount real estate brokers and a government antitrust enforcement agency.
The association, which is Canada’s equivalent of the U.S.-based National Association of Realtors, announced that it sought to strengthen the MLS trademark through the rule changes, which would have mandated additional services for brokers in order for the MLS to accept property listings that they represent.
A government agency, meanwhile, stated that it “questions the protection of the trademark as a legitimate justification for the proposed amendments.”
CREA’s member boards and associations, rather than voting to approve the changes, instead referred the matter back to the association’s board of directors for further study. A report on the matter will be issued at CREA’s annual meeting in March.
Similar controversy erupted over U.S. MLS policy adopted by the National Association of Realtors that set restrictions for online property listings display, and last year the U.S. Justice Department filed an antitrust lawsuit against that association, charging that its MLS policies are overly restrictive.
Also, U.S. antitrust enforcers have taken action to oppose Realtor-backed state measures that require real estate professionals to perform a specific set of minimum services for clients and local MLS rules that place restrictions on some types of property listings commonly associated with discount real estate companies.
In Canada, MLS is a registered trademark owned by the country’s real estate organization. The National Association of Realtors, meanwhile, does not hold a trademark for the MLS name and there are hundreds of Realtor association-owned MLSs as opposed to the single MLS in Canada.
“The proposed amendments to the MLS rules presented at the CREA Special Assembly … were developed to protect the trademark, and for no other reason,” said Alan Tennant, CREA’s president, in a statement. “Some reports have suggested the proposed rules would mean higher fees for consumers, or the elimination of some real estate broker business models. The MLS rules and the proposed amendments do not restrict or determine the fees or commissions that Realtors may charge. They are also flexible enough to permit a wide range of business models for real estate.”
The Competition Bureau, which is Canada’s equivalent of the U.S. Federal Trade Commission, sent a letter to CREA “expressing some concerns, and CREA responded. There is no investigation by The Competition Bureau. There was a meeting of CREA and the Bureau to go through proposed changes,” said Bob Linney, a spokesman for CREA.
A Competition Bureau spokesman said the agency could not comment on the matter.
In a seven-page Aug. 11 letter regarding CREA’s proposed rule changes, Richard Taylor, deputy commission of competition for the Competition Bureau, stated that “adoption of the proposed amendments may constitute grounds to commence an inquiry” under Canada’s Competition Act.
“Even if the proposed amendments are not passed, the bureau will continue to have concerns about CREA’s existing rules, as well as those of local boards, that serve to exclude entry-only and limited-service listings from MLS or otherwise restrict the ability of consumers to obtain the variety of relationships that they want with a broker. The bureau will continue to examine issues related to MLS as they arise to ensure that CREA and local boards do not restrict competition unless reasonably required to achieve legitimate ends,” the letter states.
In a Sept. 20 statement, Tennant noted that there are three existing requirements, or “pillars,” for a property listing to qualify for entry in Canada’s national MLS, including an offer of compensation between Realtors, continuous agency relationship during the term of the MLS listing, and accuracy of the information. If a listing is entered into the MLS, a member Realtor is required to verify the accuracy of information in the listing.
“The more extensive the requirements or pillars to qualify as an MLS listing, the better CREA would be to defend the MLS trademarks,” Tennant stated. “At the same time, we realize that this has to be balanced against minimizing any potential Competition Act concerns. It was the association’s view the proposed amendments strike an appropriate balance between what we would like to see to protect the trademarks and what could lead to Competition Act issues.” Canada’s Competition Act is a federal law that contains criminal and civil provisions aimed at preventing anti-competitive industry practices.
The Competition Bureau’s letter noted that the proposed amendments would require listing brokers to view properties, to take additional steps to ensure the accuracy of listing information, to receive and present all offers and counteroffers to the seller, and to provide professional advice and counsel on offers and counteroffers. In addition, the proposed amendments would prevent a seller from directly compensating a cooperating broker in a transaction.
The amendments require that listing brokers must inspect the property, post the listing, engage in a continuous agency relationship while the contract is posted in the MLS system, receive and advise on offers, and share compensation, the letter notes.
A dispatch by CREA to all member boards advised about the types of listings that could not be posted in an MLS system under the proposed rules.
Among the examples of listings that could not be posted in the MLS if the rule changes were adopted: Those listings that do not make an offer of compensation to a cooperating broker, that indicate that a seller may offer compensation to a cooperating broker, that allow sellers the right to sell the property themselves, that indicate that there is no agency relationships between the listing Realtor and the seller, that instruct cooperating brokers to contact the seller directly, that do not involve the listing Realtor receiving and presenting all offers and providing professional advice on them, and that do not involve the Realtor’s independent verification of the accuracy of information provided by the seller.
Ian Martin, CEO for Erealty.ca, a discount, limited-service real estate company that operates in the Vancouver region, said he actually learned about the proposed MLS rule changes when he was contacted by the Competition Bureau.
The proposed rule changes, he said, appeared to be “a bit of disguise to try to create some hurdles for companies like mine. For our business it wasn’t going to stop us, it was just going to create some more hurdles and end up being an expense to our current clients.” The rules created a backlash among some real estate companies and the Competition Bureau, he said.
Directors for the Toronto Real Estate Board voted unanimously not to support the proposed MLS changes, citing “serious concerns” about one of the items under consideration and called for “a great deal of additional consultation.” But this opposition was not unanimous. Directors for the Real Estate Board of Greater Vancouver, for example, voted unanimously to support the proposed rule amendments.
Martin said he believes more research is necessary to quantify whether there are actually any real problems with existing MLS rules. “This is a pretty major decision to make on something that hasn’t really been fully investigated, which of course to me I found as very suspicious. We’ve been in operation for five years and we’ve never had one claim or complaint.”
His company works only with sellers and offers discount commissions as low as 0.5 percent of the sale price. The company’s agents do not personally visit properties. Martin said he believes his company represents the next generation for the industry, though he said he recognizes that there are those who want and need full-service real estate representation.
“I pay the same dues as everybody else. I understand I have to cooperate and work within the Realtor industry, and a lot of Realtors don’t have any problem with what I do,” he said.