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

BETWEEN: THE COMMISSIONER OF COMPETITION Applicant - and -

THE TORONTO REAL ESTATE BOARD Respondent - and -

THE CANADIAN REAL ESTATE ASSOCIATION and REALTYSELLERS REAL ESTATE INC.

Intervenors WITNESS STATEMENT OF MARK ENCHIN I, Mark Enchin, of the City of Guelph, in the Province of Ontario, state as follows: 1. I am Realtor and a member of the Guelph & District Association of Realtors ("GDAR"). I am a sales representative with Realty Executives Plus Ltd. I have been actively involved in the real estate industry for about the last twenty-five years.

- 2 - PUBLIC 2. Since the late 1990s and early 2000s, I have focused more of my time on providing technology and Internet services to Realtors, rather than exclusively working as a Realtor. In 2001, I created a virtual office website ("VOW") that I used and which I licensed to approximately 1,000 other Realtors. My VOW displayed MLS listing data, including sold and pending sold information. I operated my VOW until the Toronto Real Estate Board ("TREB") disabled members' ability to download TREB MLS data in large quantities in 2007. 3. In 2012 with TREB now providing certain MLS data through a VOW feed, I created a new VOW modeled on my first VOW, which should be ready to launch in the next several weeks. However, my new VOW lacks critical functionality because TREB does not provide certain information through its VOW feed such as sold or pending sold data. My 2001 VOW 4. I developed and launched my first VOW service, called RealtyInfo, in 2001. I had long thought that Realtors could use technology to improve the quality of the services they offered to their clients and reduce the time they spent on some tasks, like driving clients to see houses. I also wanted to empower my clients to search information themselves and make informed decisions when selecting houses to visit. I viewed my VOW as doing just this. 5. At the time, I was working for RE/MAX Specialists and developed the VOW for myself and other Realtors at RE/MAX Specialists. My VOW was a complete web portal based on a templated website platform. Any Realtor could use my VOW template for his or her own website and get all the functionality of my VOW.

- 3 - PUBLIC 6. My VOW used and displayed MLS data from the GDAR and TREB MLS systems. 1 GDAR did not have a VOW feed, so I manually entered in all of the relevant MLS data into my own database daily. In contrast, TREB permitted its members to download MLS listings in bulk. I was not a TREB member but could access the TREB MLS system as a third party administrator because I worked with RE/MAX Specialists. I used TREB's download function daily to update my database with the TREB MLS data. Downloading the TREB MLS data in this fashion was the only practical way to keep my VOW current. There were far too many new and changing listings in the TREB MLS system to manually enter all the data as I did for the Guelph-area data. 7. My VOW displayed all of the then approximately 20,000 active listings in the GDAR and TREB systems, including the sold and pending sold price. The Realtors that I worked with and that used my VOW template loved having all of the listings on their own websites. Advertising the ability to search all MLS listings was a powerful marketing tool to attract potential clients to their websites and their brokerages. It was also a great tool to strengthen relationships with my existing home buyer and seller clients. 8. Displaying all the listings saved me significant time as a Realtor. I did not have to drive home buyers to as many home showings as I had done before. Instead, home buyers spent their time navigating and searching my VOW for homes that interested them. Access to sold and pending sold data enabled them to educate themselves about homes and assisted them in determining which ones were the best value for them. Once they identified a few homes, I would accompany them to the homes they chose. For this reason, I showed about 30% fewer homes once I began operating my VOW.

1 I also worked with some Realtors who were members of the Niagara Association of Realtors, the Barrie and District Real Estate Board and received listings from those particular brokers. But I did not assemble data from the Niagara or Barrie MLS systems as I did for Guelph or the GTA.

- 4 - PUBLIC 9. My VOW also reduced the time I spent responding to client requests. Before my VOW, my clients would call me for information when they saw an advertisement for a home that interested them. The advertisement would typically display only the list price, a picture, and a short description of the home. Before they decided to visit the home in person, my clients wanted to know more about it (number of bedrooms, bathrooms, square footage etc.). I would speak with them, access the MLS myself, and then send them the information by email or otherwise. 10. MY VOW saved all those steps. Rather than calling me to get more information, my clients could access my VOW and find the MLS listing themselves. They could search by company, address, mls number, or sales person and then see the home's other characteristics as listed on the MLS. They could quickly identify whether they wanted to visit the home in person or not. By enabling my clients to do the work themselves, my VOW saved me about 20-30 minutes each day per active client. It also improved the service I offered to my clients: they got the information they needed at their convenience and immediately, without having to wait for me to get back to them. The Appraisal Feature 11. Among other features on my VOW, I developed a sophisticated appraisal feature to permit VOW-users (both Realtors and their clients) to better estimate an appropriate listing price (if home sellers) or an appropriate offer price (if home buyers). Effectively, the appraisal feature was an online comparative market analysis ("CMA") tool. It involved software that used MLS data, including sold data and pending sold data, to identify properties with similar characteristics.

- 5 - PUBLIC 12. Users of the Realtor's website inputted the characteristics of the home they were looking for or wanted to sell (e.g., square feet, number of bedrooms, two-storey, detached, etc.) and selected a neighbourhood or street to narrow their geographic search. Users could also select the timeframe to search. For example, they could search for comparable properties sold in the last week, the last month, the last six months, or the last ten years. Screenshots of the information users would input are attached as Exhibit "A". 13. With the relevant criteria entered, the appraisal software would search my database for comparable properties that best matched the characteristics entered by the user. My VOW would then display a list showing the comparable properties and their characteristics, including the sold price, date of sale, and days on market. Screenshots of a list of comparable properties are attached as Exhibit "B". 14. From this list of comparable properties, users could adjust the price of different variables to more precisely estimate the property's price. For example, the home for sale might have a premium feature, like air conditioning, but some of the comparable properties might not. The appraisal software automatically assigned a $3,000 premium to the home with air conditioning and factored in this amount when calculating the estimated price based on the prices of comparable homes. However, the user could manually adjust the auto-assigned $3,000 amount if the user thought that the air conditioning system was worth more or less. With that variable adjusted, the software would automatically adjust the "price" of air conditioning for all the properties and produce a revised final price. Screenshots of this process are attached as Exhibit "C".

- 6 - PUBLIC 15. Because the appraisal feature was so customizable, it was very precise and because it used a comprehensive dataset of recent sold and pending sold data, it was very accurate. To test its precision and accuracy (and impress my Realtor customers), I would often ask other Realtors to input the characteristics of a home they had just sold. My software would predict the actual sale price within $1,000-$2,000. It could do so because it used pending sold data – the agreed sale price entered into the MLS system while the parties waited to close – which best indicated what was happening in the market. Other sources of information, such as Teranet, were not as up-to-date and therefore did not as accurately reflect current market conditions as the pending sold information in the MLS did. Teranet was also a costly and less efficient source of the data than the MLS. These disadvantages of data from Teranet remain the case today. The Registration Requirement 16. Not all website visitors could use the appraisal feature or view all listings. Website visitors had to first become a client of a Realtor. They could do so by registering through the VOW. A copy of the terms of use for registered users is attached as Exhibit "D". Screenshots of the registration process are attached as Exhibit "E". 17. If website users did not register, they could still search the listings but the VOW would not display all of the MLS listings. It would display only the listings of the particular Realtor whose website they were on. It would also display any listings other Realtors had given permission to display on the particular Realtor's website. The VOW would inform the user that more listings were available upon registration. 18. I implemented the registration requirement because I understood that the real estate boards might raise concerns with direct public access to their property listings systems.

- 7 - PUBLIC However, when users registered and became a client of a Realtor, in my view, the Realtor should provide the client with all the information the client needs to find the right home, including sold and pending sold information, just like I did and my Realtor colleagues did in a bricks and mortar environment. 19. Thus, after users registered with a Realtor they would be able to see the full information for every MLS listing through my VOW, just like Realtors would see, or would typically provide to clients in their offices or in a meeting. The only difference is that my VOW did not display certain information such as lockbox codes, the property owner's name, mortgage information, or notes such as "owner away on weekends", which is not relevant to home buyers. 20. Essentially, my VOW provided the same MLS data via each Realtors' website as those Realtors were able to provide, and in my experience typically did provide, by hand or email to their clients, such as through a CMA. For instance, about ten years before I developed my VOW, I created an excel spreadsheet to appraise homes using MLS data similar to my VOW's appraisal feature ten years later. I used that spreadsheet with clients at every listing presentation I made and gave it to colleagues in the office who also used it. Although the excel spreadsheet was useful, I still had to look up and manually enter listings into the sheet, which took at least a half hour (still faster than most Realtors). A copy of excel spreadsheet is attached as Exhibit "F". 21. My VOW performed the same task in minutes and my clients could use it themselves. The Response to my VOW 22. I used my VOW, and in particular the appraisal function, to impress clients (who had direct access) and prospective clients (if I demonstrated the feature to them in person). The ability to value their home or a home they were interested in purchasing in a few easy steps and

- 8 - PUBLIC with a click of a computer mouse impressed home buyers and sellers. It also impressed other Realtors. 23. My VOW was very popular with my own clients and with the Realtors who used it. I charged each Realtor about $30 per month to cover the labour that kept my database up to date with MLS data. At my peak, I had about 800 to 1,000 agents using my VOW. In one year, over 10,000 clients registered through their Realtors. 24. I had many Realtor clients in the GTA in part because I did not compete with these Realtors in their local market. I worked as a Realtor in Guelph, whereas they worked in their local areas in the GTA. Realtors in Guelph were more reluctant to use a product I had developed since I competed against them for business (and I was more reluctant to license it to competing non-RE/MAX Specialist Realtors as well). 25. Some Realtors complained to me and to Realtors who used my VOW template that my VOW advertised their listings without their permission. I would respond to these complaints, explain how only clients could access all the listings, and that my VOW did not advertise listings to the general public but displayed information for Realtor clients. This satisfied the complainants. 26. On one occasion, I spoke with the Real Estate Council of Ontario ("RECO"), which was investigating my VOW after a Realtor complained that it advertised listings without permission. I explained my VOW and its registration requirement to RECO. RECO did not pursue any disciplinary action because my VOW did not advertise MLS listings to the public. Instead, RECO told me that I was one of the few and perhaps the only Realtor in Ontario following the guidelines for buyer agency relationships by establishing a relationship with a customer as soon

- 9 - PUBLIC as possible and before showing them properties or preparing offers. Given my explanation, the RECO representative I spoke with told me that RECO was unlikely to investigate further complaints of this nature about my VOW. 27. TREB executives were also aware of my first VOW. In or around 2004, I demonstrated my VOW to GDAR. At the same meeting, John DiMichele demonstrated the Stratus software TREB uses. Mr. DiMichele watched my presentation. Afterwards, he said to me that he liked the functionality of my software but that it would face political opposition. On a different occasion, I also demonstrated my first VOW to then TREB President, Cynthia Lai, and other sales persons in her office. TREB never disciplined me or requested that I cease and desist operating my first VOW. TREB's actions cause me to cease operating my VOW 28. In the first five years of developing my first VOW, I invested nearly $400,000. In 2007, I spent an additional $100,000 or so improving my software and about $10,000 on marketing materials to distribute in the Greater Toronto Area ("GTA") to grow my VOW business among GTA Realtors. But just as I prepared to launch my marketing campaign, TREB disabled the download functionality that allowed me to download MLS listings in bulk from the TREB MLS system. I learned that TREB did so because it understood Bell New Ventures had used that functionality to download MLS data, inappropriately according to TREB. 29. I asked TREB if it intended to re-enable the download functionality but TREB did not provide any details or a timeline for when it might resume. 30. Manually entering new TREB listings was too time consuming, costly and inefficient. Without the download functionality I could not maintain my database with 100% of current

- 10 - PUBLIC listings that sustained my VOW and enabled its features. The Realtors who used my VOW were upset that they no longer had all of the listings on their own websites. Fewer listings meant fewer choices for their clients when they accessed the Realtors' website. My VOW could no longer function as the information portal with consistent, reliable, and accurate data that I had designed it to be. 31. Recognizing that I could not provide the same service to my Realtor customers as before, I sold the use of my software and my contracts with Realtors to a company called MCS Real Estate Systems Inc. I understood that MCS had data transfer agreements with many more TREB members than I did. Combining the active listings displayed on MCS' website with those on my VOW gave my former Realtor customers the ability to display a large number of active listings on their websites. Without the ability to download from the TREB MLS as I had before, I could not offer to display the number of listings MCS could and it would have been impractical for me to contact thousands of Realtors to obtain data transfer agreements with all of them. MCS wanted to purchase all of my contracts with Realtors so I also sold my contract with RE/MAX Specialists in Guelph. My 2012 VOW 32. In 2011, I learned of TREB's new VOW policy and its proposal to provide a VOW feed with some MLS data. I emailed TREB in the summer of 2011 to learn more details about its VOW policy and feed. I decided to begin work to revive and modernize my first VOW with a view to reentering the market. 33. I have developed a new VOW with my partners, Ian Shaw and Don Cox. We are working with a company called Adpioneers, an interactive performance agency in downtown

- 11 - PUBLIC Toronto that specializes in website development. We have committed to a $100,000 contract to complete version one of my 2012 VOW. 34. Like with my first VOW, my vision is that home buyers and sellers who work with a Realtor get access to all of the information that their Realtor has. That does not include irrelevant and sensitive information such as lockbox codes but it does include sold and pending sold data, which in my experience is the most essential data a Realtor can provide to his or her clients. It helps home buyers and sellers understand what is happening in the marketplace and price homes accordingly. Realtors require access to the MLS to provide services to their clients. Inability to provide sold and pending sold data to clients hurts a Realtor's business. 35. In my view, providing MLS data, including sold and pending sold data, to clients in an open and neutral manner (such as through a VOW) would build trust between clients and potential clients and Realtors because they cannot fear that Realtors are withholding critical information from them. 36. My 2012 VOW has similar functionality to my first VOW, although its user interface is more modern and improved. It has three critical features, only two of which are currently possible because TREB does not provide sold or pending sold data in its VOW feed: (a) All listings: Like my first VOW, the 2012 VOW displays all active listings in the TREB MLS system to registered users. (b) Homematch: Like an Internet dating website, my 2012 VOW efficiently matches sellers to buyers. There are three steps to this process. First, buyers searching for homes input search criteria (e.g., neighbourhood, three bedrooms, two-car garage,

- 12 - PUBLIC priced between $400,000 and $500,000 etc.) to identify a narrow subset of homes that interest them. The software saves the criteria entered during these searches. It is critical that the VOW display all the MLS listings or buyers will search elsewhere instead. Second, home sellers input their home's characteristics. The software matches the characteristics of the seller's home to the criteria buyers entered during their recent searches. It then reports to the seller how many buyers are looking for a home just like theirs (but does not provide the buyer's identities). Sellers can even filter the interested buyers by price and other characteristics, like when buyers intend to purchase and whether they will pay in cash. Third, the seller can click one button to send a message to every interested (and still anonymous) buyer that the system identified and to each buyer's Realtor, telling them all that a new property which meets their search criteria is coming onto the market. In other words, rather than posting a home on the MLS system and waiting for buyers to call, sellers can immediately have a sense of the potential demand for their home. Some may conclude that it is not a good time to list their home for sale because there are no interested buyers. Others may decide to list immediately because of high demand. In either case, I expect they would appreciate working with a Realtor who enabled them to make that decision with the market information provided through this service on his or her website. Buyers using my 2012 VOW will likely appreciate learning of new homes for sale immediately and potentially earlier than other buyers. Screenshots of the Homematch page are attached as Exhibit "G".

- 13 - PUBLIC (c) Appraisal Feature: Unlike my first VOW, I cannot offer any CMA tool, such as the appraisal feature that made my first VOW so popular, because TREB does not provide sold or pending sold data in its VOW feed. If it did, the appraisal feature would be the third cornerstone of my 2012 VOW. 37. The inability to offer the appraisal feature disadvantages my 2012 VOW and the Realtors who wish to use it. CMAs and valuations are key services that all Realtors provide. The appraisal feature would permit Realtors who wish to provide these services efficiently over the Internet to do so without disadvantage. 38. In addition, in my experience as a Realtor, my first VOW's appraisal feature helped me attract new clients and helped me better serve my existing clients. I also used the appraisal feature to market my first VOW to other Realtors, who I understand used it like I did to better serve their clients and attract new clients. I believe that my 2012 VOW would be more popular with Realtors and their clients if I could offer the appraisal feature. 39. The appraisal feature would also assist buyers and sellers when they used the Homematch feature. Both could conduct valuations of the subject property. In my experience, when both parties use the same appraisal system there is less uncertainty in moving forward with the transaction. 40. Despite the lack of an appraisal feature at the moment, I am offering my 2012 VOW to Realtors and other industry participants as is. My 2012 VOW is a widget which Realtors can plug in to their own websites. As with my first VOW, users must register through members to access the full listing data.