The Canadian Real Estate Association ended a 3 1/2-year battle with regulators Sunday by ratifying a consent agreement that the Competition Bureau of Canada says will prohibit CREA’s member boards and associations from imposing anticompetitive rules on flat-fee, limited-service brokerages.
The Competition Bureau served CREA with a court order in March 2007, after Canada’s equivalent of the National Association of Realtors published a set of rule interpretations that barred the "mere posting" of listings in multiple listing services without the provision of other services.
That, and other CREA rules — such as requirements that a listing Realtor act as an agent for the seller throughout the entire period of a listing agreement, and receive and present all offers and counteroffers to the seller — have virtually eliminated fee-for-service real estate brokerages in Canada, the Competition Bureau alleged.
After negotiations with CREA broke down, the Competition Bureau in February filed a complaint against CREA with the Competition Tribunal, alleging that Canadian brokers were "expressly prohibited by (CREA’s) MLS restrictions" from providing MLS-only listing services.
The Competition Bureau, which has a role similar to that of the Federal Trade Commission in the U.S., administers Canada’s Competition Act, with the stated goal of driving innovation and maintaining a marketplace where products and services are available at competitive prices. The Competition Tribunal is a quasi-judicial body that decides disputes over issues ranging from mergers to restrictive trade practices.
CREA denied that its rules restricted competition, but the following month the association made several changes to rules singled out in the complaint.
CREA deleted the provisions of its March 2007 rule interpretations that required the listing Realtor to receive and present all offers and counteroffers to the seller, and the prohibition on "mere posting" of MLS-only listings.
The association also deleted requirements that Realtors assist sellers "throughout the entire time of the listing contract" from its "Agency Pillar" rule. The rule is one of CREA’s "Three Pillars" governing membership, agency and compensation.
But Canadian Commissioner of Competition Melanie Aitken said there was still a potential loophole in the amended Agency Pillar, which might allow CREA members to pass their own, more restrictive rules and requirements limiting the ability of fee-for-services brokerages to use the MLS.
The language Aitken objected to stated that the nature of services provided to the seller would be determined by the listings agreement, "subject to applicable regulatory requirements and the rules of CREA and boards/associations."
Under the terms of the consent agreement — which will be in effect for 10 years — that clause was deleted and CREA’s Agency Pillar now reads:
"A listing Realtor/brokerage must act as an agent for the seller to post, amend or remove a property listing in a board’s MLS system. The nature of any additional services to be provided by the listing Realtor/brokerage to the seller is determined by agreement between the listing Realtor/brokerage and the seller."
The consent agreement, which must be adopted by CREA members within 10 days, also contains language protecting MLS-only listings, including the right to list the seller’s contact information in the Realtor-only remarks section of the MLS.
The agreement ensures Canadian homeowners "will have the freedom to choose which services they want from a real estate agent and to pay for only those services," Aitken said in a statement. "For real estate agents, it ensures that they will be able to offer the variety of services and prices that meet the needs of consumers."
In announcing that its members had ratified the consent agreement, CREA said it did not believe any rules in effect today discriminate against Canadian Realtors who offer MLS-only listings. But if they do, the group said, "they must be repealed or boards will lose their license to operate under the MLS trademarks."
Bill McMullin, CEO of a Nova Scotia-based brokerage, ViewPoint Realty, that offers clients discounted commissions and access to detailed MLS data including sold listings, said the impact of the consent agreement depends on consumers.
The media coverage the consent agreement and the Competition Bureau’s dispute with CREA has generated may raise public awareness of brokerages with "disruptive" business models, he said. But CREA’s rules have long allowed brokers to offer a range of services and prices.
"The question is, why hasn’t anyone done it?" McMullin said. Few consumers, he said, want to pay real estate brokers on a fee-for-service basis for listing their property or other services.
"I’m shocked at how few consumers have faith in the salability of their home," he said. "Because they can’t assess risk, they will opt to pay a fortune on close, rather than a reasonable fee up front."