Documentation

THE COMPETITION TRIBUNAL

IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34, as amended; the Competition Tribunal Act, R.S.C 1985, c. 19 (2"d Suppl.) as amended, and the Competition Tribunal Rules, SOR/2008-141, as amended;

AND IN THE MATTER OF an application pursuant to section 79 of the Competition Act, relating to certain practices of The Canadian Real Estate Association ("CREA") in the residential real estate industry in Canada;

AND IN THE MATTER OF a Consent Agreement between the Commissioner of Competition and CREA dated 30 September 2010 and registered on 25 October 2010 pursuant to section 105 of the Competition Act (the "Consent Agreement");

AND IN THE MATTER OF a motion about the interpretation and enforcement of certain terms in the Consent Agreement.

BETWEEN: COMMISSIONER OF COMPETITION - and -

THE CANADIAN REAL ESTATE ASSOCIATION Respondent/Responding Party and Moving Party

NOTICE OF MOTION and RESPONSE OF THE COMMISSIONER OF COMPETITION TO NOTICE OF MOTION OF CREA DATED 4 APRIL 2014

Court File No. CT-2010-002

Applicant/Moving Party and Responding Party

- 2 -TAKE NOTICE THAT the Applicant, Commissioner of Competition (the "Commissioner") will make a motion to the Competition Tribunal (the "Tribunal") on a date and time to be set by the Tribunal for a hearing in Ottawa, Ontario, orally and not in writing.

THE COMMISSIONER ALSO RESPONDS to the Notice of Motion filed by CREA dated 4 April 2014 ("CREA's Motion").

THE COMMISSIONER'S MOTION IS FOR THE FOLLOWING RELIEF (capitalized terms are defined herein or in the Consent Agreement): 1. an Order directing that the terms of the Consent Agreement, sections 3 and 7, do not permit CREA to adopt, maintain or enforce: a. Rules that prevent the display of the contact information of a home seller on websites other than Approved Websites and, specifically, on websites of CREA's individual Members; b. CREA's Seller Contact Information Policy, particularly paragraphs 2, 3 and4; c. CREA's Alternate Feature Sheet Policy, particularly paragraph 5; d. Rules that define "advertisement of private sales" to include references to a home seller's contact information, including CREA's Use of Multimedia Links Policy, paragraphs 6 and 7 and the second introductory paragraph of that policy; and

- 3 -e. CREA's Legal Practices Memorandum dated 27 April 2011 (re: MTC Policy and Multimedia Links), (all of which are the "Offending Rules"); 2. an Order enforcing sections 3 and 7 of the Consent Agreement and requiring CREA to rescind the Offending Rules or to amend them to conform with the terms of the Consent Agreement as interpreted by this Tribunal; 3. an Order requiring CREA to pay to the Commissioner his costs of this motion and CREA's Motion under such column or in such amount as may be agreed or determined by the Tribunal; and 4. such further and other relief as counsel may request and this Tribunal may grant. THE GROUNDS FOR THE COMMISSIONER'S MOTION AND HIS RESPONSE TO CREA'S MOTION ARE AS FOLLOWS: Overview 1. The Commissioner commenced an application against CREA by Notice of Application dated 8 February 2010. The Commissioner and CREA executed the Consent Agreement on 30 September 2010. The Consent Agreement was registered with the Tribunal on 25 October 2010. 2. Since the execution and registration of the Consent Agreement, CREA has adopted, maintained and enforced the Offending Rules, which are contrary to paragraphs 3 and 7 of the Consent Agreement.

-4-3. Paragraph 3(e)(iii) of the Consent Agreement provides that CREA shall not adopt, maintain or enforce Rules that prevent Members from displaying the home seller's contact information on a website, other than on CREA's own website (realtor.ca) and on websites operated by CREA' s local member boards. 4. Contrary to paragraph 3(e)(iii), CREA has adopted the Offending Rules that prevent individual Members from displaying the seller's contact information on any of the pages of the Member's own website where a potential buyer first arrives after leaving realtor.ca. Buyers must navigate away from that initial page to another page by clicking a link. The Offending Rules go further: they require Members not to tell potential buyers where to find the seller's contact information elsewhere on the Member's website - or even whether it is available. 5. In its Notice of Motion, CREA's position is that the Consent Agreement does not preclude CREA from prohibiting the display of the seller's contact information on webpages, as opposed to websites. That position is inconsistent with the express words used in paragraph 3(e)(iii), the proper interpretation of that paragraph within section 3, and the overall intent of the Consent Agreement. 6. CREA's position also implies that as long as CREA's Rules do not prevent the seller's contact information from being displayed somewhere on the Member's website, even dozens of clicks away, CREA would still be in compliance with paragraph 3(e)(iii) of the Consent Agreement. The proper interpretation of the Consent Agreement cannot produce such an absurd result. 7. The Offending Rules also (or alternatively):

- 5 -a. discriminate against Mere Postings or Members who offer, or wish to offer, Mere Postings, contrary to subsection 3(c) and the opening language of section 3 of the Consent Agreement; and b. are contrary to section 7 of the Consent Agreement, which provides that CREA shall not adopt any Rules that would have the effect of breaching the terms of the Consent Agreement. 8. Under section 20 of the Consent Agreement, a dispute has arisen between the Commissioner and CREA concerning the interpretation or application of the terms of the Consent Agreement, which requires the assistance of this Tribunal.Under subsection 105(4) of the Competition Act, the Consent Agreement has the same force and effect, and proceedings may be taken, as if it were an Order of the Tribunal.

The Commissioner's 2010 Application against CREA 9. The Commissioner's application against CREA dated 8 February 2010 was commenced under section 79 of the Competition Act. The application challenged certain of CREA's rules and formal rule interpretations related to the delivery of services to consumers by Members of CREA. The Commissioner's pleaded position was that CREA's then-existing rules (including a "pillar" of its multiple listing service ("MLS") system) required individual Members of CREA to provide minimum service levels to home sellers across Canada. One of CREA's then-existing rules challenged by the Commissioner (known by March 2010 as Interpretation 17 .2.4) also prohibited a practice known as "mere postings".

- 6 -10. On 30 September 2010, the Commissioner and CREA entered into the Consent Agreement, which was registered with the Tribunal following ratification by the Members of CREA. It is the interpretation and enforcement of the terms of the Consent Agreement that is the subject of the present motion. Mere Postings 11. A Mere Posting is a listing on the MLS system of a local real estate board in respect of which a real estate professional chooses, or agrees with a seller, only to list the home on the MLS system of the local board and not to perform other services for the seller. The seller is responsible for the other activities involved in selling the home. 12. A Mere Posting is, like any other listing, entered into the MLS system of a Member Board and may be viewed on the MLS by other Members of CREA who represent buyers. 13. A Mere Posting also is, like any other listing, automatically uploaded to CREA's website, www.realtor.ca, in order to advertise the property for sale to consumers who are potential home buyers. 14. Listings on realtor.ca, including Mere Postings, may have links that potential home buyers can click to access additional information about the specific listing. Particularly (but not exclusively) in the case of Mere Postings, such links may take a potential buyer from realtor.ca to another website with additional information about the listing, for example, on the listing Member's own website or on a website operated by a third party on behalf of a Member or the seller (collectively, a "Member's website").

- 7 -15. On a home listing on realtor.ca, a potential buyer may click on either the "Realtor Website" link or click on one of the "multimedia links" to travel to a Member's website. Key Terms of the Consent Agreement Unbundling of Members' Services 16. The Consent Agreement is concerned with, among other things, removing restrictions imposed by CREA on the types of services provided by its Members and the business models they choose to operate. Instead of having to offer a bundle of services in order to comply with prior CREA Rules, under the Consent Agreement Members may provide to their customers as many or as few services as they may agree, including offering Mere Posting services. 17. Paragraph 4 of the Consent Agreement therefore required CREA to amend its Rules to remove the "agency pillar" of the MLS system and replace that pillar with the following: A listing REALTOR®/brokerage must act as agent for the seller to post, amend or remove a property listing in a Board's MLS® System. The nature of any additional services to be provided by the listing REAL TOR®/brokerage to the seller is determined by agreement between the listing REAL TOR®/brokerage and the seller. [Emphasis added.]

18. The Consent Agreement also contains terms that restrict CREA's ability to adopt, maintain or enforce certain kinds of "Rules". A CREA "Rule" is defined very broadly in subsection 1(1) to mean "any rule, regulation, bylaw, code, policy, standard, practice, agreement or similar instrument, or any other instrument referred to therein, including any interpretations thereof'.

- 8 -Obligations of CREA concerning Mere Postings 19. Section 3 of the Consent Agreement requires that CREA shall not adopt, maintain or enforce certain Rules related to Mere Postings. A Mere Posting is defined as follows in subsection 1( h): "Mere Posting" means a listing on a Member Board's MLS® System in respect of which the Member has chosen or agreed not to provide services to the Seller other than submitting the listing for posting on a Member Board's MLS® System;

20. Section 3 of the Consent Agreement provides: 3. CREA shall not adopt, maintain, or enforce any Rules that deny the ability of Members to provide Mere Postings for Sellers, or that discriminate against Members because they offer, or wish to offer, to provide Mere Postings for Sellers. including, but not limited to, any Rule that:

[ ... ] (c) discriminates against Mere Postings, provided that the bare identification of a Mere Posting in a Member Board's MLS® System is not discriminatory;

[ ... ] ( e) prevents Members from: (i) listing a Seller's contact information in the REALTOR®-only remarks section of the MLS® System, with instructions directing interested Members to contact the Seller directly,

(ii) including, in the General Description section on an Approved Website, a direction to visit either the REALTOR®'s or his or her brokerage's website (whichever site is included as the contact link in the REALTOR®'s contact information on the Approved Website) for additional information about the listing (without specifying the nature of such additional information), or

(iii) displaying the Seller's contact information on a website other than an Approved Website;

[Emphasis added.]

- 9 -21. As is apparent, paragraph 3( e) concerned the display of the contact information of a home seller ("the seller's contact information"). Paragraphs 3( e )(i), (ii) and (iii) address the display of the seller's contact information, respectively, (i) on a Member Board's MLS system, (ii) on an Approved Website, and (iii) on all websites other than an Approved Website (i.e., including Members' websites). 22. The Consent Agreement defines "Approved Website" to mean realtor.ca or any other website operated by CREA or one if its Member Boards originating from a service operated under an MLS® System. 23. Paragraph 3 of the Consent Agreement thus addresses CREA's ability to limit the display of the seller's contact information on the MLS system (which is only accessible by Members) and on Approved Websites such as realtor.ca. 24. However, paragraph 3(e)(iii) prohibits CREA from preventing the display of the seller's contact information on Members' own websites. Section 7 of the Consent Agreement 25. Section 7 of the Consent Agreement provides: 7. CREA shall not adopt any Rules that would have the effect of breaching the terms of this Agreement.

The Offending Rules: CREA's Policies and Legal Practices Memoranda 26. Following the registration of the Consent Agreement, CREA adopted, maintained and enforced a number of Rules, including the Offending Rules. 27. In November 2010, internal competition law counsel at CREA issued a Legal Practices Memorandum dated 16 November 2010 re Content of Multi-media Links on

- 10 -REALTOR.ca. In this memorandum, CREA recommended certain new rules for inclusion in Member Boards' rules and regulations. 28. The Legal Practices Memorandum provided that: a. a Member's website or brokerage website, whichever is designated as the Member's contact information on real tor.ca, may provide contact information for third parties and third party advertising; b. All multi-media links for a listing on REALTOR.ca, including alternate feature sheets and brochures, "must be limited to specific property information and no third party advertising is permitted on those links, including third party contact information"; c. On realtor.ca, Members can include, in the General Description field of the listing, a comment to "see my website for further information" without specifying the nature of such information; and d. For current listings on realtor.ca which contain links that go directly to third party websites, reliance can be placed on the current policy of CREA for their removal. 29. Effective April 2011, CREA rescinded this Legal Practices Memorandum and adopted the Offending Rules. First, CREA's Board of Directors (the "Directors") adopted a Seller Contact Information policy. This new Rule purported, in paragraphs 2, 3 and 4, to prevent the seller's contact information from being displayed (i) on pages of a Member's website that are directly linked from Realtor.ca via multimedia links, and (ii)

- 11 ­on "alternate feature sheets" (which are pages located on Members' websites that contain detailed descriptions of the features of specific homes). 30. Second, the CREA Directors adopted new Rules amending CREA's Alternate Feature Sheet policy to prohibit the seller's contact information from appearing on feature sheets displayed on CREA Members' own websites. 31. Third, the CREA Directors adopted Rules that amended CREA' s Use of Multimedia Links policy that provided that the seller's contact information is itself a form of advertisement of a so-called "private sale". The Rule requires advertisements of such "private sales", in turn, also not to be linked directly from realtor.ca using multimedia links. 32. CREA's amended Use of Multimedia Links policy also expressly provided that multimedia links on realtor.ca (e.g., alternate feature sheets) cannot be used to link to webpages on its Members' websites that contain the seller's contact information and that Webpages linked directly from REALTOR.ca through the multimedia links cannot be used to link to webpages that indicate where private sale information can otherwise be located (e.g. brochures cannot say "see my website for seller contact information").

33. Fourth, the adoption of these Offending Rules was formally announced to CREA's Member Boards by CREA's Senior Competition Law counsel in a Legal Practices Memorandum dated 27 April 2011 (re Update to November 16, 2010 Legal Practices Memorandum). This memorandum, which is a "Rule" under the Consent Agreement and an Offending Rule in this application, recommended that Member Boards incorporate new wording (provided by CREA) into the Boards' rules and regulations to

- 12 ­reflect the revised CREA Rules, including changes to the wording previously recommended on 16 November 2010. 34. The April Legal Practices Memorandum advised Member Boards inter alia that the revised CREA Rules provided that: a. seller contact information must not be displayed on REALTOR.ca; b. seller contact information shall not be contained on webpages that are linked directly from realtor.ca, either through multimedia links or REALTOR website links. Seller contact information may be displayed on any other part of the Member's website that is not directly linked to real tor.ca; c. the "former blanket ban on third party advertising on multimedia links is now removed and replaced with a narrower restriction on the advertisement of private sales"; and d. webpages linked directly from multi-media links on realtor.ca may not indicate to a visitor where "private sale" information could otherwise be located on that website. The Offending Rules Prevent the Display of the Seller's Contact Information 35. Because the Member who offers a Mere Posting service agrees only to provide that service to the seller, buyers require information about how to contact the home seller directly to inquire about the home, arrange to view the home or ultimately to make an offer to purchase it.

- 13 -36. The Offending Rules prevent the display of the seller's contact information in the very place where it is needed: the first webpage consumers visit on the Member's website after leaving realtor.ca. 37. Similarly, CREA prevents the display of the seller's contact information on Members' alternate feature sheets and brochures linked directly from realtor.ca, although those webpages are also located on Members' websites and not on realtor.ca. 38. Further, the Offending Rules require that on those webpages, Members make it deliberately opaque where potential buyers can actually find the seller's contact information. For example, CREA's Members cannot create a link on the first webpage that says "Click here for seller contact information", and cannot state "See my website for seller contact information" on feature sheets and brochures. 39. In practice, the Offending Rules prohibit Members from putting all the information about a home for sale in one single place on their website. 40. The Offending Rules therefore require anyone visiting a Member's website via a link from realtor.ca to make one or more additional "clicks" beyond the initial webpage and navigate around Members' websites to find the seller's contact information - all the while not knowing, and Members being unable to tell them (i) that the seller's contact information is even available and (ii) where to lookfor it- because CREA Rules require Members to obfuscate, on their own websites, the fact that the seller's contact information is available and where it is located. 41. The Offending Rules cannot be justified on the basis that the seller's contact information is available somewhere on the Member's website, as CREA's position

- 14 -implies. That interpretation of the Consent Agreement would produce an absurdity - that CREA could impose Rules making the seller's contact information dozens of clicks away for consumers, not tell potential buyers where to find it, and still be in compliance with section 3 of the Consent Agreement. 42. Importantly, CREA is aware of the impact on consumers of adding even one additional click on a website, as the Offending Rules do. In the proceeding commenced by the Commissioner against The Toronto Real Estate Board under section 79 of the Competition Act, CREA's Chief Executive Officer testified in 2012 that CREA knows: "from our own consumer testing that any - even an additional click is something that deters a consumer from use of a [weblsite. So the less disruption that they [consumers] have in being able to access the information, the more popular it is going to be." [Emphasis added.]

CREA's Offending Rules are Contrary to the Consent Agreement 43. The Offending Rules described above are contrary to the terms of the Consent Agreement, sections 3 and 7, specifically: a. Paragraph 3(e)(iii) of the Consent Agreement; b. the opening language of section 3 of the Consent Agreement; c. Subsection 3(c) of the Consent Agreement; or, in the alternative, d. Section 7 of the Consent Agreement. 44. CREA's Offending Rules are contrary to paragraph 3(e)(iii) because they purport to prevent the display of the seller's contact information on the websites of CREA Members. In addition, the Offending Rules require Members to obfuscate the availability

- 15 ­and location of that information on the Member's website. CREA is not permitted, on the express terms of paragraph 3(e)(iii) of the Consent Agreement, to do so. CREA cannot prevent the display of that information anywhere on a Member's website. 45. CREA's Offending Rules also discriminate against Mere Postings and against CREA Members that offer, or wish to offer, Mere Postings for Sellers. CREA's Offending Rules were either designed to have, or in fact have, an adverse effect on Members' businesses that offer Mere Postings and/or the ability of Members to offer Mere Postings in their business model, a model that involves the seller handling some aspects of the real estate transaction rather than the Member doing so. CREA's Rules impose a disadvantage on Members that adversely affects their ability to compete successfully using that model. They also require, in practice, Members to incur additional costs and to provide additional services to sellers. In addition, they decrease the efficiency and efficacy of a Mere Posting business model. 46. Accordingly, the Offending Rules are contrary to the opening language of section 3 and subsection 3( c) of the Consent Agreement. 47. In the alternative, the Offending Rules have the effect of breaching the terms of section 3 and are therefore contrary to section 7 of the Consent Agreement. 48. Contrary to CREA's position in paragraphs 20 and 29 of its Notice of Motion, the "member-to-member" and/or "cooperative nature" of the MLS system operated by Member Boards are not relevant to what information should be displayed on a Member's website, nor to the Tribunal's interpretation of the Consent Agreement, paragraph 3. 49. Similarly, the Offending Rules were not adopted to protect CREA's trade-marks.

- 16 -50. The Commissioner agrees that the Consent Agreement contains an "entire agreement" clause in section 18 of the Consent Agreement, as mentioned in CREA' s Notice of Motion, paragraph 15. 51. In view of the above and the proper interpretation of the Consent Agreement, CREA's Motion dated 4 April 2014 should be dismissed. 52. The Commissioner may refer inter alia to the Competition Act, R.S.C. 1985, c. C-34, s. 105; Competition Tribunal Act R.S.C 1985, c. 19 (2nd Suppl.), ss. 8, 8.1 and 9; Competition Tribunal Rules, SOR/2008-141, Rules 2(1), 5, 34, and 82-88; Federal Court Rules, 1998, including Part 11; and the Consent Agreement, section 20; and 53. Such further and other grounds as counsel may advise and this Tribunal may consider.

- 17 -THE FOLLOWING DOCUMENTARY EVIDENCE WILL BE USED AT THE HEARING OF THE MOTIONS: 1. Affidavit(s) filed on behalf of the Commissioner, to be sworn and filed; 2. The pleadings and the Consent Agreement in this application (CT-2010-002); 3. such further and other evidence as counsel may advise and this Tribunal may consider.

DATED AT GATINEAU, QUEBEC on 7 MAY 2014. Department of Justice Competition Bureau Legal Services 50 Victoria Street, 22"d Floor Gatineau, Quebec K 1A OC9