Documentation

PUBLIC CT-2011-003 THE COMPETITION TRIBUNAL

IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34, as amended; IN THE MATTER OF an application by the Commissioner of Competition pursuant to section 79 of the Competition Act; and

AND IN THE MATTER OF certain rules, policies and agreements relating to the residential multiple listing service of the Toronto Real Estate Board.

BETWEEN: THE COMMISSIONER OF COMPETITION Applicant - AND -

THE TORONTO REAL ESTATE BOARD - AND -THE CANADIAN REAL ESTATE ASSOCIATION

UPDATED CLOSING SUBMISSIONS OF THE CANADIAN REAL ESTATE ASSOCIATION October 28, 2015

A. Overview 1. This proceeding is not about whether real estate brokers should be permitted to use the Internet to innovate and compete. They are already doing so, and doing so successfully, using a number of different Internet data-sharing vehicles. This

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Respondent Intervenor

PUBLIC - 2 ­proceeding is also not about whether brokers should be permitted to innovate and compete by incorporating a VOW into their websites. TREB's VOW Policy permits VOWs, and brokers in the GTA have been incorporating VOWs into their websites for many years. Lastly, this proceeding is not concerned with whether brokers should have access to the information contained in TREB's MLS® System. Brokers already have such access and share such information with their clients. 2. The issue is whether competition in the relevant market is likely to be substantially lessened or prevented if certain fields of information from TREB's MLS® System (the so-called "Disputed Fields") are not included in TREB's VOW data feed, even though they are accessible through other means. The "Disputed Fields" are: (i) sale price, (ii) pending sale price, (iii) WEST listings and (iv) cooperating buyer commission information. 3. Accordingly, the question is not whether the Disputed Fields are accessible to brokers and their clients but, rather, how they are accessible. While the Disputed Fields are excluded from the TREB VOW data feed, they are available to TREB members from TREB's MLS® System and other sources and can be provided by TREB members to their clients through means other than a VOW. 4. As was the case in 2012, CREA's closing submissions focus on the impact on CREA's members and trademarks of the remedy the Commissioner requests be imposed on TREB. The remedy's impact requires a consideration and balancing of the potential incremental benefits and harm that may result from the implementation of the remedy, and engages the third part of the section 79 test – being whether TREB's T or#: 3274211.1

PUBLIC - 3 ­exclusion of the Disputed Fields from its VOW data feed has had, is having or is likely to have the effect of substantially preventing or lessening competition in the relevant market. 1 5. CREA's position in this proceeding can be illustrated through seven main themes. 6. First, there is no question that the Internet has had a significant effect on the provision of real estate brokerage services, most particularly in the provision of relevant property information to consumers. CREA has supported and continues to support the distribution of relevant, appropriate and accurate information to consumers through the Internet and remains committed to providing REALTORS® with the tools they need to service consumers in the Internet age. 7. Second, innovation in brokerage services through use of the Internet is not restricted to VOWs alone. A VOW is simply a portal to certain MLS® listing information that exists on a broker's website and that website can and usually does contain additional relevant and detailed information that is valued by consumers. In this sense, VOWs are properly viewed as one part of one type of Internet data-sharing vehicle, being broker operated websites. In addition to broker operated websites incorporating VOWs, there are many other Internet data-sharing vehicles, including REALTOR.ca, IDXs, CREA's DDF® and third party websites. A VOW on a broker's website is therefore only one of the many options, and it is important from CREA's perspective that 1 The fact that CREA will not be addressing the first two elements of the section 79 test is not an admission that the Commissioner has satisfied those two elements but simply a reflection of the issues on which CREA was permitted to intervene.

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PUBLIC - 4 ­the result in this proceeding not have the harmful effect of endorsing one type of innovative tool over another. 2 8. Third, VOWs do not and were never intended to replace brokers. VOWs provide a means by which a broker can partially provide one of the services a broker normally provides to a client, being the provision of relevant property information that a client needs or wants to buy or sell real estate. VOWs do not provide the entire range of information required, nor do they fully analyze that information, show houses, negotiate prices or close a transaction. 9. Fourth, the Commissioner has not established that VOWs on a broker's website (as opposed to other aspects of the broker's website, other Internet data-sharing vehicles or the Internet in general) have had a significant competitive effect. The experience of Redfin in the United States, the experience of Viewpoint in Nova Scotia and the experience with VOWs and IDXs across Canada reinforce this. In this regard, it is critical to keep in mind that the benefits allegedly attributed by the Commissioner to VOWs are, in fact, not specific to VOWs, but are benefits associated with the use of broker operated websites or are attributable to other Internet data-sharing vehicles. 10. Fifth, since TREB's VOW policy does not prohibit consumers from obtaining the information in the Disputed Fields, and consumers can obtain this information through means other than a VOW, the key question is how allowing brokers 2 Updated Witness Statement of Gary Simonsen, dated June 1, 2015, Exhibit IC-177, para. 97 ("Updated Simonsen Statement").

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PUBLIC - 5 ­to make the Disputed Fields available to consumers via a VOW versus other available means will affect competition. This depends on whether allowing the Disputed Fields to be shown through a VOW would materially change the quality of brokerage services from the consumer's perspective, which in turn requires proof that the available services to consumers would be either higher in quality or lower in cost as a result of having a VOW that displays the Disputed Fields. The Commissioner has not established these elements: In particular: (a) Dr. Vistnes does not provide reliable support for the assertion that brokers who use VOWs offer higher quality or less expensive brokerage services. He does not perform an empirical analysis on whether the delivery of the Disputed Fields through a VOW is competitively important to brokers who use VOWs. Further, he uniquely attributes services to brokers who use VOWs that are available through brokers who do not use VOWs (such as lower commission rates or the provision of detailed information over the Internet).

(b) Dr. Vistnes does not appropriately address the evidence that the incremental value associated with providing the Disputed Fields on a VOW versus other means may be limited. (See, for example, the evidence of both Viewpoint's and Redfin's market share and conversion rate of website visitors into registrants and into clients, the popularity of REALTOR.ca, the evidence from the NAR 2014 Profile of Home Buyers and Sellers in the United States and the evidence that VOWs with data feeds that do not include the Disputed Fields have attracted significant interest in British Columbia and in the GTA.

(c) In order to reliably conclude that the requested remedy provides an overall benefit to consumers, one must consider both potential benefits and potential harm. Dr. Vistnes does not appropriately analyze potential harm, including the potential harm associated with displaying consumer's property information over the Internet.

11. Sixth, CREA has a significant concern about the negative effect of the requested remedy on CREA's Trademarks. In essence, the accessibility of the Disputed Fields on a VOW may serve to diminish the credibility of an MLS® System in

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PUBLIC - 6 ­the eyes of the consumer (who is concerned about their property information being disclosed on a public website), as well as the credibility of REALTORS® who placed the information on the MLS® System and provide services using that System, which in turn may negatively affect the credibility of CREA's Trademarks. 12. Considerable time was spent during the 2012 hearing dissecting the consents to the disclosure of listing information found in standard form listing agreements and buyer representation agreements and in schedules to agreements of purchase and sale (which are not standard, but vary). This evidence, and the further evidence heard in 2015, does not establish that all appropriate informed consents have been obtained to the disclosure of the Disputed Fields to the public through a VOW. There remains the risk that consumers will be upset with REALTORS® by what consumers may view as improper disclosure of their information for uses they have not consented to. 13. Seventh, any remedy that may be deemed to be appropriate for the GTA should be expressly limited to the GTA and should not extend to other jurisdictions in which MLS® Systems operate. This is because the effect of the requested remedy depends on competitive alternatives to obtaining the Disputed Fields, consumer and broker demands and preferences, the regulatory environment and the technical and financial resources of local boards and associations, all of which can vary across the jurisdictions of boards that operate MLS® Systems. 3 3 Updated Simonsen Statement, para. 98. Tor#: 3274211.1

PUBLIC - 7 -B. Introduction and Summary of CREA's Evidence 14. CREA represents over 110,000 real estate brokers and agents working through approximately 90 real estate boards and associations. CREA is the national voice for the Canadian real estate industry, including on competition law, as well as technological issues. 4 15. CREA owns the Multiple Listing Service® trademark, the MLS® trademark, and the associated logos (the "MLS® Trademarks"), and co-owns with the National Association of REALTORS® ("NAR") the trademarks REALTOR® and REALTORS® and the associated logos (the "REALTOR® Trademarks"). The MLS® Trademarks and REALTOR® Trademarks (together, "CREA's Trademarks") are certification marks which can only be used in Canada by members in good standing of CREA, are an assurance of integrity and identify a certain standard of brokerage services and professionalism. 5 16. An MLS® System is a cooperative selling system operated by a local board in association with the MLS® Trademarks which are licenced to the board by CREA. In essence, the MLS® Trademarks identify professional services provided by CREA members to effect the purchase and sale of real estate as part of a cooperative selling system. 17. REALTORS® use MLS® Systems to provide valuable services to clients. The REALTOR® Trademarks certify to the public in Canada that the services are being 4 Updated Simonsen Statement, para. 4. 5 Updated Simonsen Statement, paras. 9-17. Tor#: 3274211.1

PUBLIC - 8 ­offered by professional and licensed real estate agents who are CREA members, subject to CREA's rules and policies, and subscribe to a high standard of professional service and a strict code of ethics. 18. CREA called two witnesses at both the 2012 hearing and the 2015 reconsideration hearing; Mr. Gary Simonsen, Chief Executive Officer of CREA, and Dr. Fredrick Flyer, an economist who was qualified to give expert economic evidence. 19. Among other things, Mr. Simonsen explained that CREA has supported and continues to support the distribution of relevant, appropriate and accurate information to consumers through the Internet. His evidence detailed the various Internet data-sharing vehicles studied and developed by CREA over the years, the challenges and benefits associated with them, and the current experience with respect to their use across Canada. Mr. Simonsen explained CREA's view that the provision of property information over the Internet needs to be done in a manner which (i) respects the requirements of relevant federal and provincial legislation, including privacy legislation, (ii) protects and preserves the integrity and quality associated with CREA's Trademarks, (iii) recognizes that multiple Internet data-sharing vehicles—not just VOWs—can and do serve this purpose, and (iv) acknowledges that real estate boards and associations differ in relevant respects and therefore what may be appropriate in one jurisdiction may not be appropriate in others. 6 20. Dr. Flyer was asked by CREA to examine the potential effects on CREA (including its members and Trademarks) of the remedy the Commissioner requests be 6 Updated Simonsen Statement, paras. 95-103. T or#: 3274211.1

PUBLIC - 9 ­imposed on TREB. Dr. Flyer's analysis focused on evaluating the economic evidence on the likely competitive effects of the requested remedy. Dr. Flyer testified in both 2012 and 2015 that: (a) in order to assess the competitive effects of the remedy requested by the Commissioner, both the relevant benefits and harms to consumers of that specific remedy must be appropriately considered; (b) the Commissioner's expert, Dr. Gregory Vistnes, failed to adequately assess and balance the potential benefits and harms of providing the information in the Disputed Fields to consumers via a VOW versus other available means; and (c) the effect of the requested remedy will depend on many factors that vary across real estate boards in Canada so that a remedy which might be appropriate for TREB cannot be presumed to be appropriate elsewhere. 7 C. The Key Evidence – Non-VOW Internet Data-Sharing Vehicles 21. The Internet has had a significant impact on the provision of residential real estate brokerage services, including as a marketing tool for REALTORS® and as a source of information for consumers. 8 22. This impact has resulted from a multitude of Internet data-sharing vehicles, including but not limited to VOWs. As elaborated on below, these include REALTOR.ca, Internet data exchange ("IDX") facilities, CREA's data distribution facility ("DDF®") and numerous innovative broker-owned and operated websites. 7 Expert Report of Fredrick Flyer dated August 3, 2012, Exhibit IC-088 ("Flyer Report"); 2012 Hearing Transcript, volume 15 (Public), pp. 2387-2425; Summary and Main Conclusions from Expert Report of F. Flyer, Exhibit IC-089 ("Flyer Summary"). Expert Report of Fredrick Flyer dated June 2, 2015, Exhibits IC–182 and CIC-183 ("2015 Flyer Report"). Dr. Flyer's analysis and conclusions remain the same in 2015.

8 Updated Simonsen Statement, para. 24; 2014 CREA Consumer Insights Report, Exhibit IC-109, p. 10 ("CREA Insights Report"); 2015 Hearing Transcript, volume 5 (Public), p. 773; 2012 Hearing Transcript, volume 7 (Public), p. 1114.

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PUBLIC - 10 -23. Many if not most consumers want to search properties anonymously. As a result, one important benefit to consumers of non-VOW Internet data-sharing vehicles is the absence of any registration or sign-in requirement in order to access detailed property and neighbourhood information. 9 (a) REALTOR.ca 24. REALTOR.ca is a very popular public website operated by CREA. 10 It contains a subset of active listing content from MLS® Systems across Canada 11 and allows consumers to search active listings and obtain detailed information and photos about properties without the need to call a broker or to provide their identity through a log-in requirement. 12 REALTOR.ca does not display any of the Disputed Fields. 25. REALTOR.ca has been consistently identified by CREA members as "number one or the most important service provided by CREA". 13 Mr. McMullin, the principal of Viewpoint, described REALTOR.ca as "the single most valuable and utilized asset that CREA provides and manages on behalf of members". 14 9 2012 Hearing Transcript, volume 3A (Public), p. 589. 10 Commissioner of Competition v. The Canadian Real Estate Association, (2015) Comp. Trib. 3 at para. 4.

11 Updated Simonsen Statement, para. 30. 12 Updated Simonsen Statement, para. 31; 2012 Hearing Transcript, volume 14 (Public), pp. 2200, 2205-2217; Example of Residential Property Search on www.realtor.ca, Exhibit IC-086; 2015 Hearing Transcript, volume 6 (Public), pp. 1052-1054.

13 Updated Simonsen Statement, para. 31; 2012 Hearing Transcript, volume 14 (Public), p. 2199. 14 Email chain between McMullin and CREA, Ex.IC-107, p. 4-5. Tor#: 3274211.1

PUBLIC - 11 -26. In 2014 alone, REALTOR.ca provided 1 million leads to Canadian REALTORS® and is on track to provide close to 2 million leads in 2015. 15 The website's success has been acknowledged by several of the Commissioner's witnesses. 16 27. REALTOR.ca continues to be a popular resource for consumers to gather information. REALTOR.ca is Canada's leading source for real estate listings and is Canada's leading property listing site. 17 In 2014, 58% of those "just browsing" for properties were using REALTOR.ca as their primary source of information – 37% were working with a REALTOR® and 81% planned to do so. 18 For purchasers planning on making a real estate decision within 3 months, 60% of them were using REALTOR.ca as their primary source for searching properties, 70% were working with a REALTOR® and 72% planned to do so. 19 28. REALTOR.ca received a range of between 4.66 and 5.67 million visitors each month from January to April of 2015. 20 Usage of REALTOR.ca and its associated platforms (including the mobile version of the website and the various app versions) has generally increased over time. Reductions in usage of the main website are due to the migration of users to mobile platforms. 21 15 2015 Hearing Transcript, volume 6 (Public), pp. 1046-1048; CREA Insights Report. 16 2012 Hearing Transcript, volume 3A (Public), pp. 592; 2012 Hearing Transcript, volume 5 (Public), pp. 841-844; 2012 Hearing Transcript, volume 6A (Public), p. 926.

17 CREA Insights Report, pp. 1, 6. 18 CREA Insights Report, p. 3. 19 CREA Insights Report, p. 4. 20 Updated Simonsen Statement, para. 37. 21 Updated Simonsen Statement, para. 38. Tor#: 3274211.1

PUBLIC - 12 -29. Since 2012, CREA has initiated a number of significant improvements to REALTOR.ca, including releasing an enhanced version with updated appearance, improved functionality and additional information. 22 30. Users of REALTOR.ca are able to keyword search or search using a map function, view listing information including up to 99 photos for each listing (with more available by link), take virtual tours, compare properties, review neighbourhood demographic information, get directions to a property, assess the property's walkability by its "walk score", email the listing to others and contact an agent. 23 31. CREA intends to introduce a consumer log-in feature in 2016, that will allow consumers to save searches across devices and platforms and also will be adding a "transit score" to allow users to assess a given property's proximity to transit. 24 32. CREA continues to offer mobile "apps" for major mobile devices which are available at no cost, and added an app for the Apple Watch in 2015. 25 The iPad version of the app was featured by Apple in its store. 26 Since June 2012, these apps have been downloaded an average of slightly more than 100,000 times per month, corresponding to a total rate of 1.3 to 1.4 million downloads per year. 27 (b) IDX Facilities 22 Updated Simonsen Statement, para. 34. 23 2015 Hearing Transcript, volume 6 (Public), pp. 1050-1063. 24 2015 Hearing Transcript, volume 6 (Public), pp. 1050, 1052-1053. 25 Updated Simonsen Statement, para. 32. 26 2012 Hearing Transcript, volume 14 (Public), p. 2203. 27 Updated Simonsen Statement, para. 32. Tor#: 3274211.1

PUBLIC - 13 -33. An IDX is a reciprocal system whereby consenting brokerages agree to advertise on their websites each other's active property listings, either from the MLS® System of the relevant local board/association or from REALTOR.ca, subject to the rules of the relevant local board/association and the REALTOR®'s oversight. 28 An IDX does not display any of the Disputed Fields. 34. IDX technology has revolutionized real estate websites in a manner which has been beneficial to buyers, sellers and brokers. 29 IDXs are a benefit to brokers because they allow them to advertise more than just their own listings on a website. IDXs are a benefit for sellers because they provide them with more exposure for the property they are selling. IDXs are a benefit to buyers because they can see a larger inventory of properties on a website than would be available without the sharing of listings. 35. Even with the advent of VOWs, IDXs remain popular. For example, in Vancouver, 95% of brokers have opted into the board's VOW/IDX policy, with 30% using IDX solutions and 30% using VOWs. 30 In Edmonton, interest in VOWs appears to have waned, with IDXs currently satisfying the demand. 31 Lastly, the London St. Thomas Association of REALTORS® currently offers an IDX facility that is highly successful, being utilized for approximately 99% of the Association's brokers' listings. 32 28 Updated Simonsen Statement, para. 48. 29 2012 Hearing Transcript, volume 6A (Public), pp. 897-98. 30 Updated Simonsen Statement, para. 87. 31 Updated Simonsen Statement, para. 88. 32 Updated Simonsen Statement, paras. 90-91; 2012 Hearing Transcript, volume 14 (Public), pp. 2235-36.

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PUBLIC - 14 -Due, at least in part, to this successful IDX solution, there continues to be virtually no interest by either members of the Association or the public in the provision of a VOW solution in the area. 33 (c) CREA's Data Distribution Facility 36. CREA's DDF® is intended to supply reliable and accurate publicly available MLS® listing content for publication on both member and non-member (i.e., third party) websites. The listing information available for publication is comparable to that found on REALTOR.ca, and therefore does not include the Disputed Fields. CREA'S DDF® is a permissions-based system that allows brokers to share their listings with other brokers, receive a feed of their own listings for display on their website, and send their listings to third parties. 34 37. The DDF® addresses the needs of both consumers and REALTORS®. Sellers receive the benefit of their property being accurately and consistently advertised on a wider range of websites. REALTORS® are able to provide this service to their clients without the need to invest in additional infrastructure and with confidence in the quality of the data. 35 The DDF® also provides members with a number of analytical tools to assess the extent to which their listings are viewed. 36 33 Updated Simonsen Statement, para. 91. 34 Updated Simonsen Statement, para 62; 2012 Hearing Transcript, volume 14 (Public), pp. 2223-29.

35 Updated Simonsen Statement, para. 71. 36 Updated Simonsen Statement, para. 74. Tor#: 3274211.1

PUBLIC - 15 -38. Industry interest in CREA's DDF® has been high, even with the availability of other Internet data-sharing vehicles, including VOWs. In 2012, 93% of local boards/associations expressed the intention to offer the CREA DDF® solution and 72.5% of REALTORS® across Canada indicated an intention to use it. 37 Since 2012, member participation in the DDF® has increased, and, in line with predictions in 2012, 73% of eligible members are currently participating. 38 (d) Broker Websites 39. Many brokers have sophisticated and successful websites that provide leads and allow consumers to access significant amounts of useful information and conduct detailed property searches without the consumer ever having to access the information available on a VOW. Where a broker's website includes a VOW, it is important to remember that the VOW is just one portion of a broker's website – a portal to a specific form of search by a consumer, in the midst of other relevant information and available searches which are accessible to the consumer without accessing the VOW. 40. These broker websites succeed because of the range of informative features available on them and because of their user-friendly designs. 39 Examples include TheRedPin, Realosophy, Viewpoint, Sage Real Estate and Redfin. As discussed below, each one of these brokers have websites designed to attract leads, 37 Updated Simonsen Statement, para. 94; Witness Statement of Gary Simonsen, Dated August 12, 2012, p. 710 (Exhibit 27) ("2012 Simonsen Statement"); 2012 Hearing Transcript, volume 14 (Public), pp. 2226-27.