We all know it’s happening: the Canadian Competition Bureau has launched proceedings against CREA (Canadian Real Estate Association). The question no one has answered yet is: how does it affect you as a Realtor™?

Time Line

• October 24, 2008 - the Canadian Competition Bureau releases its draft Information Bulletin on Trade Associations for public comment. (Click here to download PDF)
• January 9, 2009 - CREA submits comments on the Information bulletin. (Click here to download PDF)
• 2009 - 2010 - The Competition Bureau opens discussions with CREA regarding anti-competitive behavior.
• Late 2009 - early 2010 - Discussions between the Competition Bureau and CREA break down and no resolutions are reached.
• February 2, 2010 - The Competition Bureau files a Notice of Application for proceedings with the Competition Tribunal. (Click to download PDF)

The Proceedings

Here’s what the Competition Bureau is claiming (from Statement of Grounds and Material Facts in the Notice of Application):

1. CREA, through its members (i.e. you) has too much control over the supply of residential real estate brokerage services in Canada.
2. There are no existing adequate substitutes for the MLS system.
3. CREA has used its control to exclude real estate brokers seeking to provide discount brokerage packages (or fee-for-service packages) and “MLS-Only” options (ie. no compensation to selling agent).
4. When working with a broker using the MLS system, consumers are forced to buy a bundle of services, including some they may not want to receive or pay for.
5. CREA controls boards/associations by imposing MLS restrictions (see below) on them, in exchange for them using the MLS™ (Multiple Listing Service) trademark.

Here’s exactly what they are asking for:

An Order prohibiting CREA from imposing MLS restrictions (see below) on boards/associations when licensing the MLS™ trademark to those boards/associations.

The “MLS Restrictions”

This is the important part - the Competition Bureau is pushing to remove the following restrictions. We’ll start with what CREA refers to as the “Three Pillars”:

Three Pillars

1. Membership: Only REALTORS® may place a listing on a Board/Association’s MLS® System;
2. Agency: A listing REALTOR® must act as agent for the seller to  sell the property and to assist the seller throughout the entire time of  the listing contract; and
3. Compensation  to  Co-operating  Broker:  The listing REALTOR® agrees to pay to the co-operating (i.e.  selling) REALTOR® compensation for the co-operative selling of the property. An offer of compensation of zero is not acceptable.

With these in mind the Competition Bureau elaborates further on the CREA’s MLS Restrictions:

Further MLS Restrictions

1. The listing REALTOR® shall receive and present all offers and counteroffers to the seller.
2. The listing REALTOR® shall provide professional advice and counsel to the seller on all offers and counteroffers unless otherwise directed by the seller in writing.
3. The mere posting of property information in an MLS® system is contrary to CREA’s Rules. A “mere posting” occurs when the listing agreement relieves the listing member of any obligations under the Rules, including the obligation that the listing REALTOR® remain the agent of the seller throughout the term of the listing contract.
4. The listing REALTOR® is responsible and accountable for the accuracy of information submitted to a Board/Association for inclusion in the Board’s MLS® system, and the Board/Association is responsible for ensuring that the data submitted to it meets reasonable standards of quality.
5. Only REALTORS® are permitted to display the MLS® trademarks in signage, advertising, etc.
6. Only the listing REALTOR® name(s) and contact information may appear on REAL TOR.ca. The seller’s name or contact information shall not appear on REALTOR.ca or in the public remarks section of the MLS® system.
7. In cases where a Board permits listings in which the seller has reserved the right to sell the property himself/herself, that fact shall be specified in the Board’s MLS® database.

“I thought you’d be sparing us from the legal mumbo-jumbo??!!”

Yes, so let me get to the point…

The Point

The Competition Bureau says that item 1 and 3 of the Three Pillars and item 6 of the Further MLS Restrictions

completely prohibit or severely impede the ability of alternatives to the full-service brokerage model to compete.

They have cited several examples of fee-for-services brokerages either leaving or not entering the market purely because of these restrictions, and that this represents anti-competitive behavior.

How it Affects You

Removing “restriction” 3 from the Three Pillars isn’t a big deal and, in fact, is already being done in many boards/associations across the country. The reality is that if there is no compensation offered to selling agents then properties won’t be shown.

Now’s where it gets interesting: removing “restriction” 3 from the Three Pillars and “restriction” 6 from the Further MLS Restrictions could create a flurry of  activity from Realtors™ undercutting one another to offer the cheapest “listing only” services to sellers. The truth, however, is that sellers would quickly realize that they’re doing hundreds of showings to nosy-neighbors rather than qualified buyers. The eventual outcome would still see most career Realtors continuing to sell homes on behalf of home-owners.

Removing “restriction” 1 from the Three Pillars would allow casual and unqualified entry of data which would destroy the integrity of the MLS System altogether. I’d be extremely surprised if the tribunal ruled in favor of this.

Ok, so guess what? The National Association of Realtors (CREA’s sister organization in the US) went through all of this 3 years ago and guess how it resolved?

• Restriction 3 was removed

Yep, that’s it; and that’s what I think will happen in Canada.

I’m very interested in what you think: be sure to write a comment or two below.

Just read this article on Canadian housing starts.

“… Canada’s housing starts rose in March, a sign that builders have begun putting more stakes in the ground, according to new statistics released Wednesday.

The Canada Mortgage and Housing Corporation said starts increased by 13.7 per cent, or 154,700 new units when one-month figures are stretched over a full year.

The increase is a welcome bit of news for a sector hammered by a global credit crunch and a domestic economic slowdown.

“While the multiples segment experienced the largest increase, the overall boost in starts was broad based, encompassing the singles segment as well,” said Bob Dugan, chief economist at CMHC’s Market Analysis Centre.

Building in Canadian cities and towns with populations in excess of 10,000 jumped by 17 per cent, with construction of multiple units — essentially apartment buildings and condominiums — posting a 28 per cent gain…“

As a matter of fact, that’s supported by some of the real estate board numbers:

Vancouver: up 53% over February (http://www.rebgv.org)
Calgary: up 32% over February (http://www.creb.com)
Edmonton: up 30% over February (http://www.ereb.com)

Here’s an article showing increased activity in the bond market.

That’s great news - it means that there’s more money being lent by banks and more people in the market to buy. That, combined with a lower inventory is starting to show that the Canadian housing market has some footing.