A dispute between Canadian regulators and the Toronto Real Estate Board over the right of TREB’s member brokers to operate Virtual Office Websites (VOWs) could have broader implications for the Internet distribution of property listings data throughout Canada.
That’s according to the Canadian Real Estate Association, which has been granted limited standing to participate in an administrative proceeding initiated against TREB by Canada’s Competition Bureau.
CREA — Canada’s equivalent of the National Association of Realtors — maintains that an order the Competition Bureau is seeking against TREB is "broad and imprecise," and that the outcome of the dispute could affect other means of distributing listings over the Internet with "national implications for the real estate industry."
Any finding made or order issued by the administrative court hearing the case "will directly affect the ability and manner in which CREA’s members across Canada can and will provide services to their customers using the Internet," attorneys for the association said in seeking status as an "intervenor" in the case.
The administrative court overseeing the case, the Competition Tribunal, agreed with CREA’s argument that the case could have wider repercussions, granting the association a limited right to participate in a proceeding that’s on track for a 2012 hearing.
The Competition Tribunal also granted intervenor status to Realtysellers Real Estate Inc., a brokerage whose owners have battled TREB in the past over their right to provide limited, menu-based services to their clients. Now Realtysellers wants to be able to provide comprehensive listings data to their clients over the Internet.
Realtysellers President and CEO Lawrence Dale said that while he believes Canadian regulators are pushing TREB in the right direction, he wants more than just the right to provide listings data to registered users of a password-protected VOW site.
Dale said Realtysellers should be able to employ any means — a website or smartphone app, for example — to provide consumers with the same information they could obtain by hand if they walked through the door of a brick-and-mortar brokerage office.
"The implications are going to be significant," Dale said of the dispute. "MLS data has been the holy grail for real estate agents and it’s pretty clear in my view that there will be more information available, it’s just a question of how much."
TREB accused of restricting competition
Canada’s Competition Bureau initiated its proceeding against TREB in May, claiming the board was restricting competition by not allowing brokers to provide consumers with access to in-depth multiple listing service (MLS) data through password-protected VOWs.
TREB — which, with more than 32,000 members, is the largest real estate board in North America — has denied restricting competition. TREB published a proposed policy in June that the association said would allow its members to operate VOWs.
But the Competition Bureau said the proposal didn’t go far enough, because VOW operators would still not be allowed to display data on pending sales and compensation offered by the seller’s broker to the buyer’s broker.
TREB’s proposed VOW policy would also prevent brokers operating VOW sites from displaying MLS data on sold properties unless the data is "readily publicly accessible," the Bureau argued in an amended application filed with the Competition Tribunal in July.
In responding to the amended application in August, lawyers for TREB argued that such restrictions were necessary to make sure the board’s member brokers are in compliance with federal privacy laws and a real estate broker code of ethics that’s part of Ontario regulations.
TREB maintains it has a legal right to restrict the use of copyrighted listings data, which are the "intellectual property" of the board and its members.
TREB operates an Internet Data Exchange (IDX) service that brokers can use to display listing data provided by other participating brokers on their own websites, and the Toronto board’s 32,000 members also supply listings to CREA’s national listing portal, Realtor.ca.
If not protected by federal privacy legislation or withheld at the request of a vendor, TREB argues that listing data "may well be found at Realtor.ca and on literally hundreds of websites. There are no restrictions whatsoever placed by TREB on its members that preclude members from also making their listings available through the multitude of websites and listing services not affiliated with TREB."
But the Competition Bureau says some information — such as sold data, days on market, price changes and pending sales data — is available to TREB’s member brokers through the multiple listing service (MLS) but not the public at large.
Such information is "highly salient to consumers’ home purchase and sale decisions," the bureau said in its application, but TREB restricts its availability. "While this information may be provided to brokers’ customers by such means as fax, email or in person, (TREB’s policies) prohibit brokers from sharing the same information through a VOW."
National implications of a local case
In the U.S., brokerages like ZipRealty and Redfin operate VOW sites under the terms of a 2008 settlement between the Department of Justice and the National Association of Realtors that prohibits Realtor-affiliated MLSs from denying VOW brokerages with access to listings.
Last year, the Competition Bureau and CREA broke off talks that were aimed at developing a national VOW policy. While VOWs are an option in some provinces and territories, many local boards and associations have no formal policy, CREA CEO Gary Simonsen said in an affidavit submitted with CREA’s application for intervenor status.
Simonsen said the Competition Bureau’s proceeding against TREB has already created "confusion and uncertainty in the industry" that will delay the development of such policies until the Competition Tribunal issues a ruling in the case.
CREA said issues of importance that will be determined by the Tribunal include:
- The "appropriate definition" of a VOW, IDX or similar website;
- Preconditions for customer participation (such as the necessity for a broker-client relationship and registration requirements);
- What information should qualify as confidential;
- Whether seller or listing agents should be able to opt out;
- Whether there should be restrictions relating to referrals; and
- Monitoring and regulation by local boards and associations.
CREA has created a new VOW task force to develop a national VOW policy. Simonsen said the association’s MLS and Technology Council has also proposed that CREA operate a "data distribution facility" that would allow brokers to share their listings with other brokers nationwide and send listings to third-party websites.
The Competition Bureau had opposed CREA’s bid for intervenor status, characterizing the proceeding as "a local case, not a national one, as it concerns a real estate board’s practices in one specific geographic area."
The Bureau said it was not asking the tribunal "to decide, or even consider, what VOW rules and polices are generally appropriate or acceptable across Canada, nor to adjudicate the rules and policies of any real estate board other than TREB."
The order sought by the bureau would prohibit TREB from "enacting, interpreting and enforcing rules, policies and agreements that exclude, prevent or impede the entry of innovative business models and impose restrictions on real estate brokers who wish to use the Internet to more efficiently serve homebuyers and sellers."
In a Nov. 2 order granting CREA and Realtysellers limited rights as intervenors in the proceeding, Competition Tribunal Chairwoman Sandra J. Simpson said the order sought by the Competition Bureau is broad enough that it could encompass more than TREB’s proposed VOW rules. She said other restrictions TREB might impose or rely on in the future might also "be caught by the order."
Simpson ruled that CREA "will be directly affected by an order dealing with the lawfulness of TREB’s proposed VOW rules because … CREA has been trying and has so far failed to reach an agreement with the Commissioner about what rules it can impose when it provides MLS data for VOWs directly to its members."
But Simpson limited CREA’s role in the proceeding to addressing the development, use and competitive impact of data-sharing vehicles other than VOWs. TREB, she said, is in the best position to argue whether the restrictions it’s placed on members have an impact on broker innovation and fees paid by consumers.
Simpson also limited attorneys for Realtysellers to submitting evidence and cross-examining witnesses on selected topics, including cost savings that VOW operators can pass along to consumers, the impact of current TREB rules and the proposed VOW policy on nontraditional brokerages, and the impact the Competition Bureau’s proposed order.
Dale said he was pleased with the ruling, because it ensures that the debate will not be limited to the distribution of listings through password-protected VOW sites. The proceeding will also encompass the right of brokers to distribute listings data using other currently available means, such as smartphone apps.
Although the Canadian real estate industry would probably "jump at" a chance to reach an agreement similar to the VOW policy adopted by NAR after it was sued by the U.S. Department of Justice, Dale said he thinks that with regulators backing them up, innovative Canadian brokers can win a bigger battle.
"I would not accept the U.S. settlement," Dale said. "It’s only the first step — it doesn’t address the fundamental issues" faced by nontraditional brokerages competing with brick-and-mortar firms.
"Why do I have to force you to give me a phone number or email?" he said of registration requirements that Dale sees as a "competitive disadvantage" for U.S. brokers operating virtual office websites.
Dale said that as a result of his previous legal battles with TREB, Canadian courts have already ruled that laws governing privacy and advertising don’t prohibit real estate brokers from providing clients with the same type of listings data that the Toronto board has tried to prevent from being distributed on the Internet.
"From our perspective, it makes no logical sense that there were restrictions on the broker’s ability to choose how they want to provide information (to their clients), or that it was something a trade association should be involved with," Dale said. "Once (courts) decide that information can be given out, it’s up to the brokerage" to decide how it should be provided, he said.
In the U.S., NAR has struggled to develop policies that would govern the electronic distribution of listings data via mobile devices, social media sites, and "really simple syndication" (RSS) feeds. The issue is once again on the agenda of NAR’s Multiple Listing Issues and Policies Committee, which meets Saturday in Anaheim.
In requesting the right to intervene in the proceeding against TREB in September, Realtysellers claimed to have established itself as "Canada’s largest nontraditional brokerage" in less than two months.
Offering only limited a la carte MLS services, such as simple MLS posting for consumers who don’t want to purchase any other brokerage services, Realtysellers said it had posted more than 600 properties on Realtor.ca and was signing up 100 customers a week.
Dale said the brokerage currently has 1,500 to 2,000 listings and plans to roll out programs for buyers and full services for sellers.
"This fight is affecting the growth of my current business," he said of the restrictions TREB has placed on the distribution of listings data to customers and potential customers.
History of lawsuits
In opposing Realtysellers’ request to intervene, attorneys for TREB said Dale and another brokerage he founded, Realtysellers Ltd., have "a protracted and continuing history of litigation against TREB," including two pending lawsuits that claim more than $1 billion in damages.
Testimony by Dale and Realtysellers Real Estate Inc. executive Fraser Beach would be "tainted by Dale and Beach’s historical and current status as litigants against TREB," attorneys for the Toronto board claimed.
In 2002, Realtysellers Ltd. sued TREB and CREA over new MLS rules that the company claimed were directed against them. TREB settled the lawsuit on confidential terms in 2003.
In 2007, Realtysellers won a temporary court injunction allowing it to continue accessing the TREB MLS after alleging that its access had been improperly denied. Realtysellers lost a motion to have the injunction continued, and dropped the case the following year with costs awarded to TREB.
Also in 2007, Dale — who is an attorney — represented Beach after TREB terminated Beach’s access to the MLS. TREB claims Beach was "attempting to take or scrape all of the residential listing data for an area of the City of Toronto and republish it on a website of BNV Real Estate."
A trial court ruled that TREB was justified in suspending Beach’s access, and the case and a subsequent appeal were dismissed with costs.
Dale said he recently partnered with PropertyGuys.com to launch his new brokerage, Realtysellers Real Estate Inc., in June. The new venture was made possible, he said, by an Oct. 25 consent decree between CREA and the Competition Bureau in October that regulators said would prohibit CREA’s member boards and associations from imposing anticompetitive rules on flat-fee, limited-service brokerages.
Although the Competition Tribunal will not allow Realtysellers to call Dale or Beach as witnesses, Dale said lawyers for the Competition Bureau will have that right.
"What we asked for (the right to intervene) is what we got," he said.