Day five of the Competition Tribunal hearing between the Commissioner of Competition and the Toronto Real Estate Board (TREB) opened in Ottawa Monday with Chief Justice Paul Crampton advising both sides that the two biggest questions for hearing panel concern substantiality – how much of an impact TREB’s rules have on its members – and whether privacy, when used as a business justification, is a genuine concern or was thought of after the fact to justify TREB’s position.
“Obviously there are other issues… but those are our two biggest questions,” said Crampton.
John Rook, counsel for the Competition Bureau, called expert witness Gregory Vistnes, vice-president of U.S.-based Charles River Associates, a global economic and financial consulting firm. Prior to joining Charles River Associates, Vistnes worked as deputy director of anti-trust with the U.S. Federal Trade Commission. He also testified at the first tribunal hearing in 2012.
Vistnes spent most of the day on the stand. He said in his opinion, TREB has substantial market power and is exercising its market power to lessen competition. To illustrate his point, he said that a broker who does not have access to the MLS system effectively cannot compete in the real estate market. So, because TREB has control over who can access the MLS data and how, it essentially gives TREB the power to decide who can compete and who can’t.
“Because (TREB) controls access to MLS, it’s effectively dictating the rules on how, whether or not, and the form in which (brokers) can compete,” said Vistnes, adding that be believes TREB rules with an iron fist.
“In my opinion, TREB, by using their control over how and when (brokers access MLS), is preventing an entire class of competition in the market,” said Vistnes. “By excluding this class of competition – those brokers who want to compete by using a virtual office website (VOW), (TREB) is significantly reducing competition in the market.”
Vistnes said that in 2011, the question was whether any MLS information should be made available. Now, while some of the data is available to VOWs, he said the most important data – the sold information, which he called the “crown jewels” of the MLS data – is still restricted and that is where most of the harm is occurring.
In addressing the tribunal panel’s question of substantiality, Rook asked if Vistnes considered the lessening of this competition substantial. Vistnes replied that he did because, in part, there was evidence that consumers wanted to see the information that VOWs want to deliver.
During cross-examination, TREB counsel David Vaillancourt spent most of his time going over Vistnes’ previous testimony. In an effort to establish substantiality, Vaillancourt argued that while Vistnes was given access to certain U.S. MLS data for an earlier engagement, he didn’t use any of this U.S. data to help to qualify his statements for these proceedings.
Another issue that was dealt with was that of “free-riding”, where if a consumer accesses the information from a specific VOW, there is nothing preventing that consumer from then using the services of a different VOW or broker. Vistnes said that there is no justification in using that excuse to restrict VOWs or their access to the MLS data because the brokers who want to operate as a VOW say they are not concerned with free-riding.
He said his research shows that VOWs want to offer that information, and that they believe offering it may very well translate into business for them down the road.
“TREB is causing the problem to the VOWs and pushing them out of business,” said Vistnes, adding that these brokers want to offer the service and data because it costs them nothing to have consumers look and educate themselves.
“Even if it takes a year, three years or five years, the payoff is still attractive to (these VOWs),” said Vistnes.
He said that another key question the panel needs to consider is, if full-informational VOWs are not allowed to exist, are consumers better or worse off?
“For those consumers who want to move their business to a different broker, there is still a consumer benefit,” he said. “It would still be harmful to the free-rider consumer to not get that information.”
Late in the afternoon, former TREB CEO Don Richardson was called to the stand by TREB counsel Donald Affleck. Richardson described the role of TREB and indicated that operating the MLS system absorbs about half of TREB’s total budget, in the range of $7 million to $8 million. It also involves the purchasing of data from a third party.
Richardson said agreements are in place to provide its members with specific information from the Municipal Property Assessment Corporation and Teranet, Ontario’s exclusive provider of online property search and registration data. This includes validation of homeowners’ information, sales data and transfer transaction records across the province.
Richardson is expected to resume his testimony Tuesday morning when the Ottawa portion of the hearing resumes.
Tony Palermo is a contributing writer for REM.
