Canada's Housing Bubble

Apr 09, 2010 Steve Ladurantaye theglobeandmail.com

Only an order from the Competition Tribunal will compel real estate association to change its practices, Melanie Aitken says

Canada's Competition Commissioner is through negotiating with the country's real estate  agents, saying the only way the industry will change its allegedly anti-competitive behaviour is if it is forced to do so by a regulator.

In a 15-page filing to the Competition Tribunal, Melanie Aitken argues that the Canadian Real Estate Association has a long history of shutting out would-be competitors and can't be trusted to voluntarily open itself up to competition.

The two sides are locked in a battle destined for the Competition Tribunal that was sparked by her charges that the association makes it impossible for competitors to offer innovative services to consumers, such as flat-fee listings or individual services based on minimal levels of service.

“Unless CREA and its members are restrained by an order of the Competition Tribunal, they will continue to have the incentive, the opportunity and the ability to enact and enforce restrictions that prevent or will likely prevent competition substantially,” she said in the filing.

The 98,000-member CREA said agents are already allowed to set their own commission rates, and that new rules approved by the association last month will allow consumers to post their homes on its Multiple Listing Service, where the majority of the country's residential sales take place. Indeed, several flat-fee listing services are operating that allow access to MLS for as little as $109.

The new rules aren't enough, Ms. Aitken reiterated Friday, because the organization retains the “unilateral ability” to set its own rules and there's nothing stopping it from clamping down on agents who stray from their guidelines.

Neither Ms. Aitken nor CREA would comment on the filing, because the case appears destined for the tribunal. Both sides have insisted they'd prefer a negotiated settlement, but Friday's filing would appear to close the door on that option.

CREA has said it is “disappointed” the commissioner hasn't dropped her charges, because recent rule changes allow consumers to take advantage of MLS and not pay a real estate agent a commission for services when a home is sold. Before the changes, consumers had to pay an agent for services they may not have wanted – such as conducting open houses and handling negotiations – to gain access to the MLS system.

CREA president Georges Pahud, a Vancouver-based agent, said last month that both sides were close to settling at one point and that he didn't know what else the organization could do to appease Ms. Aitken. Friday's filing, however, elaborated on her concerns.

While agents may now post flat-fee listings, she said, interested buyers must contact the agent to ask for the information. She also takes issue with the fact that anyone who lists using a flat-fee service must pay the buyer's agent a fee. Both restrictions make it more difficult for newcomers to the industry to offer competitive services, she said, because they are forced to go through agents.

“[It] serves to do just what CREA wants: to perpetuate the traditional, full-service model including its compensation structure.”

The case is likely to be heard by the tribunal in the fall. So far, two other parties have requested standing at the hearing. Real estate lawyer Lawrence Dale ran a service called RealtySellers, which allowed home sellers to list on the MLS for a fee, without the aid of a real estate agent beyond the initial listing. He said CREA's rules made it impossible for him to operate.

Stephen Skelly, who runs the National FSBO Network out of his home in Ottawa, has asked to speak at the hearing on behalf of the for-sale-by-owner market. He says anything that makes it easier for those selling their own homes to post on the MLS would wipe out businesses such as his, that rely on listings that don't make it onto the national system for revenue.