Canada's competition watchdog has launched an inquiry into how real estate agents list homes for sale on the Multiple Listing Service.
The Competition Bureau wants to determine if a decision by the Canadian Real Estate Association, or CREA, to tighten the rules governing MLS listings is anti-competitive.
Many discount real estate agents, who operate largely online, have complained that CREA's changes will cut them out of the MLS and increase costs to consumers. But the association, which represents 88,000 real estate agents, says it needs tighter rules to protect the MLS trademark and ensure information on the service is accurate.
The changes under question include requirements that agents inspect homes before listing them on the MLS and work with other agents throughout the sale process.
Full-service brokers worry that the service is being diluted by online realtors who list homes on MLS for a $695 fee and then let the home owner handle the rest of the sale. They say merely posting a home for sale on MLS is a misuse of the system, floods the service with listings and violates its regulations.
Many discount agents say full-service brokers are only trying to protect their high commissions.
"This has been a long continuous battle for alternative low-cost real estate agencies as it will hinder the operation structures of certain companies across the country," said Ian Martin, chief executive officer of Vancouver-based erealty.ca, an online discount service.
"CREA has invested a lot of money in legal opinions and [public relations] to claim it is a trademark rights issue, however, many in the industry and consumers view this simply as a means to protect full-service agency rates from competition," Mr. Martin said.
The MLS is more than 50 years old and only real estate agents can list homes. On average, the MLS website gets 2.8 million unique hits a months, according to CREA. The MLS trademark is owned by CREA and each real estate board operates the service in their region.
The Competition Bureau recently obtained an order from the Federal Court of Canada requiring CREA to produce documents and answer questions about the stricter rules.
"We have opened an inquiry into this matter," said Pamela Wong, a spokeswoman for the bureau. "We just want to look into it to see if [the rules] raise potential competition concerns under our Act."
In a court filing, Jean-Pierre Bornais, a senior competition law officer, said 90 per cent of residential resale transactions in Canada involve the MLS database. He added that information already obtained by the bureau from industry participants indicates that the changes enacted by CREA "have restricted, and will further restrict, access to the MLS database, and have prevented and limited and will further prevent and limit, the entry and expansion of potential competitors." The inquiry will determine whether CREA "has engaged in, or is engaging in, a practice of anti-competitive acts," he said.
CREA spokesman Bob Linney said the bureau has made similar requests before and the association will comply.
"Yes, we received a [court order]. We view it as being one of the standard tools the Competition Bureau works with," Mr. Linney said. "We will provide all the information they've requested. But we view it as normal process of business."
Alan Tennant, CREA's president, sent a notice to all real estate boards across the country last week notifying them of the court order, noting that some information may be required from some of the boards. The association has said in the past that it is confident the changes are not anti-competitive.
Debate over access to the MLS has been raging within the industry for months.
In a notice sent to agents in January, CREA said "there must be a reasonable level of professional involvement with each real estate transaction. Otherwise the MLS trademarks could become generic and therefore unenforceable."
At CREA's annual meeting this weekend in Ottawa, delegates approved a series of proposals that tighten listing rules and prevent homes from being put on MLS without follow up by the agent. Mr. Linney said the changes will go into effect despite the bureau inquiry.
The bureau has been following the debate and indicated to CREA last year that it had some concerns about the proposals. According to court filings, its formal inquiry began on March 1, 2007.
Last November, one of Canada's largest online realty services, Toronto-based Realtysellers Ltd., shut down "pending a resolution of the Multiple Listing Service issues."