April 2013 competition bulletin tribunal de-lists bureau's TREB case In a short 1 but significant decision issued on April 15, 2013, the Competition Tribunal dismissed the Commissioner of Competition's Abuse of Dominant Market Position case 2 against The Toronto Real Estate Board ("TREB") regarding TREB's policies in dealing with Virtual Office Websites (generally known as "VOWs"). In dismissing the application, the Tribunal confirmed its existing jurisprudence that, for conduct to constitute abuse of dominance there must be a practice of anti-competitive acts, which requires conduct aimed at injuring or excluding a competitor. Since a trade association (such as TREB) will generally not be deemed to be a competitor in a market certainly not a competitor to its members challenges to activities of trade associations (as opposed, perhaps, to challenges to the activity of members) under the abuse of dominance provision are unlikely to succeed. The focus of the Commissioner's application were TREB's rules which, the Commissioner alleged, made it difficult for brokers to operate a low cost, web based brokerage model the VOWs. TREB was said to have market power due to its control of the Multiple Listing Service data, and allegedly used the power to prohibit VOWs. The alleged harm was said to be experienced primarily by TREB's more web-centric members which wanted to 1 Eight Pages. This succinct approach is in commendable contrast to other decisions in the area. 2 The Commissioner of Competition v The Toronto Real Estate Board, 2013 Comp. Trib. 9 [Commissioner v TREB].
Page 2 use the internet in order to set up VOWs, and offer limited traditional real estate brokerage services. 3 The application was brought under section 79 of the Competition Act ("Act"), which prohibits the abuse of dominant position by one or more persons. 4 In dismissing the application, the Tribunal concluded that TREB was not a competitor of the web-based brokers which the rules allegedly excluded, and consequently, since TREB was not their competitor the rules it enacted could not constitute anti-competitive acts. the Canada pipe rule The Tribunal referred to the case of Canada (Commissioner of Competition) v Canada Pipe Co 5 as "binding precedent". In Canada Pipe, the Commissioner of Competition's application sought to prohibit Canada Pipe Company Ltd. from conducting a loyalty rebate program under both sections 77 and 79 of the Act. The Federal Court of Appeal considered what the necessary conduct and intent for anti-competitive acts was as anti-competitive acts are one of the required elements of abuse of dominance under section 79. Harkening back to the decisions in NutraSweet, 6 Laidlaw 7 and Tele-Direct, 8 the court upheld the view that to constitute an anti-competitive act an act must be undertaken for an anti-competitive purpose, which is an intended "predatory, 3 Ibid at para. 2. 4 Competition Act, RSC 1985, c C-34 as am., s 79. 5 2006 FCA 233, 268 DLR (4th) 193, leave to appeal to SCC refused, [Canada Pipe cited to FCA]. 6 Director of Investigation and Research v The Nutrasweet Company (1990), 32 CPR (3d) 1, [1990] CCTD No. 17. 7 Director of Investigation and Research v Laidlaw Waste Systems Ltd (1992), 40 CPR (3d) 289. 8 Director of Investigation and Research v Tele-Direct Inc (1997), 73 CPR (3d) 1, 1997 CanLII 11.
Page 3 exclusionary or disciplinary negative effect on a competitor". 9 The conduct at issue was alleged to affect TREB's members, not TREB's competitors, so could not constitute an anti-competitive act. In addition to finding that TREB did not engage in a practice of anti-competitive acts, the Tribunal also found that it failed to meet another of the three requirements of the abuse of dominance provision- the requirement for control of a market (or market power), because whether or not control of the MLS System might confer market power on someone, TREB did not control a market because it did not compete in the market. 10 As a result, the Tribunal referred to the Commissioner's case as outside the "Canada Pipe Rule" and characterized the application as a request to have the Tribunal revisit the Canada Pipe decision. The Tribunal refused to do so, instead holding that it agreed with the decision in Canada Pipe and that the Canada Pipe Rule (i.e. that the conduct must have an intended negative effect on a competitor that is predatory, exclusionary or disciplinary) is the "correct approach". the effect of the new guidelines In a previous bulletin, 11 we noted a concern with revised Abuse of Dominance Enforcement Guidelines, promulgated by the Bureau in 2012. 12 The 2012 Guidelines contain language that could have expanded the scope for finding conduct constituting an abuse of dominance. Prior to the 2012 Guidelines, the jurisprudence had been unanimous that the Canada Pipe Rule applied. However, the 9 Canada Pipe, supra note 5 at paras. 63-68. The court referred the matter back to the Tribunal on other grounds. 10 Commissioner v TREB, supra note 1 at paras. 24-25. 11 James B. Musgrove, Dr. A. Neil Campbell and Jun Chao Meng, "new abuse of dominance enforcement guidelines", September 2012. 12 Competition Bureau, Revised Abuse of Dominance Enforcement Guidelines (2012).
Page 4 2012 Guidelines state that "while many types of anti-competitive conduct may be intended to harm competitors, the Bureau considers that certain acts not specifically directed at competitors could still be considered to have an anti-competitive purpose". 13 We argued that this statement was at odds with the jurisprudence, and, if accepted, would significantly broaden the scope of the abuse of dominance provision, which would then not have a meaningful limiting principle. Fortunately, in our view, the approach advocated in the New Guidelines was not adopted by the Tribunal. The Tribunal upheld the standard existent before the New Guidelines, that anti-competitive acts must have an intended negative effect on competitors. alternative recourse potentially available under section 90.1 In an obiter dicta comment, the Tribunal made an observation that while abuse of dominance was not an appropriate statutory provision for the conduct in issue, the new section 90.1 of the Act might provide a legal basis to apply to the Tribunal in an appropriate case. The Tribunal stated it was not suggesting whether such an application would succeed on its merits. 14 The grounds on which the Commissioner would base such an application are not readily obvious. It will be interesting to see whether the Commissioner responds to the Tribunal's invitation and does file follow up proceedings against TREB's members pursuant to section 90.1, especially as the rejected case was launched by the former Commissioner. 13 2012 Guidelines, section 3.2. 14 Note 2 at para. 26.
Page 5 Although the Canadian Real Estate Association sought and obtained permission to intervene for limited purposes in the case, the Bureau has been adamant that the case was strictly about TREB, as facts and circumstances may differ in other regions of the country. Moreover, the regulatory regime applying to real estate services also differ from one province to another. Yet, the Tribunal's finding that TREB was not a competitor to those allegedly harmed, is a fundamental one. The decision is likely to be welcomed by real estate boards, and trade associations generally, across Canada. by James Musgrove, Éric Vallières and Adam Chisholm For more information on this topic, please contact any member of McMillan's Competition Group including: Toronto James B. Musgrove 416.307.4078 james.musgrove@mcmillan.ca Montréal Éric Vallières 514.987.5068 eric.vallieres@mcmillan.ca Toronto Adam Chisholm 416.307.4209 adam.chisholm@mcmillan.ca a cautionary note The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained. McMillan LLP 2013