Documentation

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CT-2011-003 COMPETITION TRIBUNAL IN THE MATTER OF the Competition Ac~ 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 residential multiple listing service of the Toronto Real Estate Board.

BETWEEN: COMMISSIONER OF COMPETITION Applicant

AND THE TORONTO REAL ESTATE BOARD Respondent

RESPONSE OF THE TORONTO REAL ESTATE BOARD TO THE REQUEST OF REALTYSELLERS REAL ESTATE INC. FOR LEAV E TO INTERVENE

PART I: OVERVIEW 1. The Toronto Real Estate Board ("TREB") opposes the request of Realtysellers Real Estate Inc. ("Realtysellers") for leave to intervene. 2. The Affidavit of Lawrence Dale ("Dale"), sworn August 31, 2011 in support of Realtysellers' request (the "Dale Affidavit"), fails to establish a basis upon which Realtysellers ought to be granted leave to intervene.

3. Realtysellers is not an unbiased party seeking to assist the Tribunal. Rather, as is evident throughout the Dale Affidavit, Realtysellers' motivation is based entirely on its desire to promote its (and Dale's) own business aspirations and agenda. Any submissions made by Realtysellers (including through Dale or Fraser Beach) will be tainted by Dale and Beach's historical and current status as litigants against TREB and individual members of TREB's Board of Directors and Executive. 4. Realtysellers is not directly affected by the matters in issue before the Tribunal. Its business is focused on the sell-side of the residential real estate market, not the buy-side. It is the buy-side with which the Commissioner of Competition's application is primarily concerned. 5. Further, Realtysellers will not bring to the Tribunal a unique or distinct perspective that will assist the Tribunal in deciding the issues before it. 6. Realtysellers has no greater interest in the outcome of the application than any other member of TREB. All members of TREB are bound equally by the rules and policies at issue in the proceedings. If Realtysellers is directly affected by the proceeding or has a unique and distinct perspective that will assist the Tribunal, so too must TREB' s other approximately 32,000 current members. 7. Realtysellers has been in operation for a little over 3 months. This hardly speaks of a party with a depth of experience or expertise sufficient to offer the Tribunal an informed, let alone unique and distinct, perspective. 8. Realtysellers states in its request to intervene that it intends to support "generally" the position of the Commissioner of Competition ("Commissioner"). In fact, many of the 2

assertions made by Realtysellers in its request to intervene, as well as throughout the Dale Affidavit, closely mirror those made by the Commissioner in her Notice of Application, Amended Notice of Application and Reply. The Dale Affidavit provides no examples of topics on which Realtysellers' position differs from that of the Commissioner or upon which its position is unique or distinct. 9. Should there be matters on which Realtysellers could possibly assist or develop the Commissioner's position, it is open to the Commissioner to call representatives of Realtysellers as witnesses. 10. TREB respectfully submits that Realtysellers' request to intervene should be denied. PART II: FACTS · 11. TREB is an Ontario corporation without share capital, operated for the benefit of its members. 12. Currently TREB has some 32,000 members, including brokerages, brokers and agents. 13. Realtysellers is a member ofTREB, and has been since April 27, 2011. 14. Dale is the Chief Executive Officer, President, Secretary and sole director of Realtysellers. Corporate Profile Report for Realtysellers dated September 9, 2011, Appendix 1 hereto.

15. Dale is a member of TREB, and has been since April 27, 2011. Dale was also a member ofTREB during the period from February 14, 2001 to February 9, 2007. 3

16. The Dale Affidavit deposes that Fraser Beach ("Beach") is a senior member of the Realtysellers executive group. In the "Our Story" section of Realtysellers' website, Beach is described as "[a] special consultant to the team". Dale Affidavit, para. 26. Excerpt from http://realtysellersrealestate.com/about/changing-the-rules/, Appendix 2 hereto.

17 . Realtysellers, by its own admission, has been offering real estate brokerage services since only about June, 2011. Realtysellers' Request to Intervene, paras. 8, 10 and 13. Dale Affidavit, paras. 10, 11, 12 and 14.

18. Dale co-founded Realtysellers (Ontario) Limited in 2000 ("Realtysellers I") with Stephen Moranis ("Moranis"). 19. Dale, Beach and Realtysellers I, each have a protracted and continuing history of litigation against TREB: (a) In January, 2002 Realtysellers I commenced an action in the Ontario Superior Court of Justice (Court File No. 02-CV-223195CM1) against TREB, The Canadian Real Estate Association ("CREA") and officers and directors of TREB and CREA in their individual capacity, seeking damages in the amount of $25 million plus punitive damages of $1 million against all defendants on a joint and several basis. Included in the allegations against TREB, was that it breached sections 45, 51, 52 and 61 of the Competition Act in connection with the operation of the TREB MLS®. This action was ultimately settled in 2003 by confidential settlement agreement. 4

(b) In 2007, Realtysellers I, commenced a proceeding against TREB in the Ontario Superior Court of Justice (Court File No. 07-CV-342165PD1), alleging that TREB improperly terminated its access to the TREB MLS®. In November 2007, Realtysellers I's motion to continue an interim injunction granting it access to the TREB MLS® was dismissed, with costs. The proceeding was wholly discontinued by Realtysellers I in May, 2008, with costs awarded in TREB's favour. (c ) Also in 2007, Beach commenced a proceeding against TREB in the Ontario Superior Court of Justice (Court File No. CV-08-366597) after TREB terminated his access to the TREB MLS® upon discovering that Beach was attempting to take or scrape all of the residential listing data for an area of the City of Toronto and republish it on a website of BNV Real Estate Inc. It is this situation that is referenced by the Commissioner at paragraphs 3, 32, 46 and 52 of the Amended Notice of Application and that is responded to by TREB at paragraph 24 of its Response and that is referred to in the Dale Affidavit. Dale was Beach's counsel. As noted in TREB 's Response, after a seven day trial the Court held that TREB was justified in suspending Beach's access to the TREB MLS® and that Beach had breached his contract with TREB. Both Beach's original action and his subsequent appeal in the Ontario Court of Appeal were dismissed, with costs. Amended Notice of Application, paras. 3, 32, 46 and 53. TREB's Response, para. 24. Dale Affidavit, paras. 6 and 26.

(d) In March 2009, Dale, Moranis, and Realtysellers I (as assignor) commenced an action in the Ontario Superior Court of Justice (Court File No. CV-09-374829) 5

against TREB, CREA and number of then current or former officers and directors of TREB and CREA in their individual capacity, again alleging breaches of sections 45 and 61 of the Competition Act. The plaintiffs seek damages of $540 million against the defendants on a joint and several basis. This proceeding is ongomg. ( e) On October 11, 2009 Dale, Moranis, Beach and Realtysellers I commenced a proceeding in the Ontario Superior Court of Justice (Court File No. CV-09-389169) against TREB and a number of former and current officers and directors of TREB seeking, amongst other relief, damages in the amount of $750 million for terminating the access of Moranis, Beach, Realtysellers I and BNV Real Estate Inc. to the TREB MLS®; damages in the amount of $750 million for alleged breaches of section 45 and 61 of the Competition Act, damages for defamation in the amount of $5 million and punitive, aggravated or exemplary damages in the amount of $10 million. Again, relief is sought against the defendants on a joint and several basis. This proceeding is also ongoing.

PART III: TEST FOR INTERVENTION 20. The test for granting intervenor status is set out in subsection 9(3) of the Competition Tribunal Act: Any person may, with leave of the Tribunal, intervene in any proceedings before the Tribunal, other than proceedings under Part VII.1 of the Competition Act, to make 6

representations relevant to those proceedings in respect of any matter that affects that person. 21. The Tribunal has consistently held that, in order to grant the status of intervenor, the Tribunal must be satisfied that all of the following elements are met: (a) the matter alleged to affect that person seeking leave to intervene must be legitimately within the scope of the Tribunal's consideration or must be a matter sufficiently relevant to the Tribunal's mandate: (b) the person seeking leave to intervene must be directly affected; ( c) all representations made by a person seeking leave to intervene must be relevant to an issue specifically raised by the Commissioner; and (d ) the person seeking leave to intervene must bring to the Tribunal a unique or distinct perspective that will assist the Tribunal in deciding the issues before it. Commissioner of Competition v Canadian Waste Services Holdings, [2000] CCTD. No. 9 22. Realtysellers bears the onus of demonstrating that each of these elements is met. Canada (Director ofI nvestigation and Research, Competition Act) v. Air Canada [1992] CCTD No. 24

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PART IV - REALTYSELLERS' REQUEST FOR INTERVENOR STATUS SHOULD BE DENIED

23. Realtysellers cannot demonstrate that its request to intervene satisfies the test for granting intervenor status. Specifically, Realtysellers cannot satisfy the Tribunal: (a) that its interests are directly affected by the matters at issue; or (b) that it has a unique or distinct perspective that will assist the Tribunal in deciding the issues before it. Realtysellers' interests are not directly affected 24. A party seeking intervenor status must satisfy the Tribunal that it would be directly affected by the proceedings. Canada (Director ofI nvestigation and Research, Competition Act) v. Air Canada [1992] CCTD No. 24 25. The relief sought by the Commissioner's Amended Notice of Application is aimed at allowing brokers to operate a "virtual office website" without restrictions being placed on the type of information displayed or the way in which those brokers can display information to users of that such virtual office website, to the extent that that information has been taken from the TREB MLS®. As is implicitly acknowledged throughout the Commissioner's Amended Notice of Application, virtual office websites are primarily targeted at and operated for the benefit of buyers and potential buyers ofreal estate. Ai;nended Notice of Application: paragraphs 22 to 24, 29, 59 and 62. 26. The focus of the Commissioner's Amended Notice of Application, therefore, is on the alleged effect of TREB's Access Terms (as defined in TREB's Response filed August 19, 8

2011) on brokers seeking to offer what the Commissioner alleges are more innovative real estate brokerage services to buyers of residential real estate. 27. Realtysellers, however, does not service the buy-side of the market for residential real estate services. As noted in the Dale Affidavit, "Realtysellers is only offering limited ala carte MLS services concentrating on the "sell side of the business" such as a simple MLS posting for consumers who do not want to purchase any other brokerage services". (emphasis added) Dale Affidavit, para 13. 28. Indeed, the "buy-side" focus of virtual office websites is acknowledged by Realtysellers itself: In less than two months, Realtysellers has established itself as a real market competitor to the traditional agent and brokerage while operating almost exclusively on the "sell" side of the business. Realtysellers' market share will substantially increase once it is able to operate a virtual office and attract prospective home buyers .... Dale Affidavit, para 24. See also Dale Affidavit, para 19.

29. Dale claims that Realtysellers is unable to expand its service offerings "given the current restrictions that TREB has placed on our ability to provide the same MLS information that traditional agents and brokerages can provide to consumers by hand delivery". However, to date, TREB has received no request from Realtysellers to operate a virtual 9

office website nor has it sought guidance from TREB as to what would be required in order for it to operate a virtual office website in compliance with TREB's Access Terms. Dale Affidavit, para 15. 30. By its own account, Realtysellers is a highly successful brokerage despite its infancy; "Realtysellers currently is signing up more than 100 customers per week, with that number growing each week. Realtysellers anticipates assisting over 30,000 consumers ... in the next 12 months representing approximately $4 billion in property transaction value". Realtysellers' self-proclaimed success hardly tells of a party directly affected by alleged anti-competitive conduct. Dale Affidavit, para 14. 31. That Realtysellers may choose to operate a virtual office website if the Commissioner is successful in obtaining the relief sought, does not place it within a class of persons "directly affected" by the proceeding. Directly affected must mean more than hypothetically affected. 32. Despite the allegations made in the Commissioner's Notice of Application, Amended Notice of Application and Reply and in Realtysellers' request to intervene, TREB's Access Terms apply equally to all members: Realtysellers therefore stands to be affected no more and no less than any ofTREB's other approximately 31,000 members. It has no interest more or less direct than other members. As noted in Canada (Director of Investigation and Research, Competition Act) v. Air Canada [1992] CCTD No. 24: A broader role of this sort [intervenor status] should not in my view be automatically accorded to anyone who as .a 10

member of the public may have strong views on the appropriate outcome of the case but can demonstrate no direct effect on him or her that is different from all or a large segment of the public at large. 33. Realtysellers' interests are not directly affected by the matters in issue. It therefore fails to satisfy the elements required to be granted intervenor status and should be denied leave to intervene.

Realtysellers has no unique or distinct perspective that will assist the Tribunal 34. Realtysellers has no unique or distinct perspective that will assist the Tribunal in deciding the issues before it in these proceedings. 35. By its own admission: (a) It was only after the Commissioner filed her Notice of Application on May 25, 2011 that Realtysellers "finalized plans to enter the residential real estate brokerage marketplace in the Greater Toronto Area and elsewhere in Canada". Request to Intervene, para 6. See also Dale Affidavit, para 10.

(b) "Realtysellers has only been operating for less than two months offering very limited programs". Request to Intervene, para 8. Dale Affidavit, para 12.

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36. It is implausible that a business operating for such a short period of time could possibly have gained enough experience to offer a "unique or distinct perspective that will assist the Tribunal". 37. Realtysellers' submits that it is able to offer the Tribunal a umque and distinct perspective on account of its claimed status as "TREB' s largest non-traditional brokerage", "likely TREB's only non-traditional brokerage wanting to operate a true virtual office", "TREB's largest innovative non-traditional brokerage member", and "the only known non-traditional brokerage member in TREB that wants to operate a virtual brokerage ... ". Such facts are not known to be true by TREB and no evidentiary support is given in the Dale Affidavit to substantiate Realtysellers' bald assertions. Request to Intervene, paras. 14, 15 and 17. Dale Affidavit, paras. 12 and 23.

38. By the Dale Affidavit, Realtysellers seeks to conflate the experiences of it and Mr. Dale. However, the request to intervene is not made on behalf of Mr. Dale, it is made on behalf of Realtysellers. While TREB says that Mr. Dale would in any event also be unable to satisfy the elements to be granted intervenor status, it respectfully submits that any submissions made by Dale as to the information he may personally be able to offer the Tribunal are completely irrelevant to the consideration of whether Realtysellers' brings a unique and distinct perspective to the issues before the Tribunal. Dale Affidavit, para 27. 39. Realtysellers requests leave to intervene on the following issues: 12

(a) "How a brokerage like Realtysellers would operate a virtual office and provide MLS information to consumers over the internet as opposed to through a bricks and mortar office and by hand"; (b) "The cost savings and operational efficiencies of operating a virtual office and the savings that can be passed along to consumers"; (c) "The impact of the current TREB rules and policies including its recent VOW policy on a non-traditional brokerage like Realtysellers who wants to provide consumers with MLS information in a virtual office environment over the internet as apposed [sic] to through a bricks and mortar office by hand"; ( d) "The absence of any privacy issues and other issues preventing virtual offices" as described in Realtysellers' request to intervene; and (e) The proposed order sought by the Commissioner on "non-traditional brokerages". Request to Intervene, para 24. Dale Affidavit, para 28.

40. Privacy issues have been directly raised by TREB in its Response and by the Commissioner in her Reply. Those issues will be adequately addressed by the parties to the proceeding. Realtysellers' provides no basis upon which the Tribunal should expect the Commissioner to fail to adequately address this area of contention. Further, Realtysellers' has no demonstrated expertise or knowledge in the area of privacy that could be expected to assist the Tribunal. Amended Notice of Application, paras. 35 and 51 TREB Response to Amended Notice of Application, paras. 4, 48 and 59. Commissioner's Reply, paras. 8, 21 and 31.

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41. With respect to the balance of the topics on which Realtysellers wishes to intervene, Realtysellers offers no explanation as to how its position differs from that advanced by the Commissioner. To the contrary, the language used throughout the request to intervene and the Dale Affidavit, closely mirrors the language adopted by the Commissioner in her Amended Notice of Application and Reply. Based on Realtysellers' request to intervene and the Dale Affidavit, rather than offering a unique or distinctive perspective on the matters raised in the proceeding, Realtysellers' position is identical to that of the Commissioner. An intervenor is not to be called upon to make the very case that an application is called upon to make. Southam Inc. v. Canada (Competition Act, Director of Investigation and Research) Trib. Dec. No. CT9001/343 at para. 12. 42. To the extent that Realtysellers is able to offer factual evidence relevant to the Commissioner's position, the Commissioner is free to call a representative of Realtysellers as a witness.

PARTV: SCOPE OF INTERVENTION, IF PERMITTED 43. For the reasons set out above, TREB submits that Realtysellers' request for leave to intervene should be denied. 44. Should the Tribunal grant leave to Realtysellers to intervene, TREB submits that the intervention should be strictly limited. Realtysellers should not be permitted to call a witness or witnesses, to produce documents or receive documents from other parties, to produce any affidavit of documents or received those produced by other parties, to attend

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oral discoveries, to cross-examine witnesses at the hearing or to make oral representations to the Tribunal.

PART VI: HEARING REQUESTED 45. TREB requests that a hearing be held to determine Realtysellers' Request to Intervene. DATED at Toronto, this 15 1 h day of September, 2011. Affleck Greene McMurtry LLP 365 Bay Street Suite 200 Toronto, Ontario M5H2V2

Donald S. Affleck Q.C. Phone: (416) 360 1488 Fax: (416) 360 5960 Email: dsaffleck@agmlawyers.com

Renai E. Williams Phone: (416) 360 2668 Email: rwilliams@agmlawyers.com

Michael Binetti Phone: (416) 360 0777 Email: mbinetti@agmlawyers.com

Counsel for The Toronto Real Estate Board

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To: Mark Nicholson Gow ling Lafleur Henderson LLP 1 First Canadian Place 100 King Street West Toronto, Ontario MSX 1G5

Counsel for Realtysellers Real Estate Inc. And To: John F. Rook Andrew D. Little Bennett Jones LLP One First Canadian Place Suite 3400, P.O. Box 130 Toronto, Ontario MSX 1A4

And To: Roger N assrallah Competition Bureau Legal Services Department of Justice 50 Victoria Street Gatineau, Quebec KlA OC9

Counsel for the Applicant And To: Sandra A. Forbes George Addy James Dinning Davies Ward Phillips & Vineberg LLP 1 First Canadian Place Suite 4400, Box 63 Toronto, Ontario MSX lBl

Counsel for The Canadian Real Estate Association And To: The Registrar Competition Tribunal Thomas D 'Arey McGee Building 90 Sparks Street, Suite 600 Ottawa, Ontario KlP 5B4

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APPENDIX 1

Request ID: 013507250 Province of Ontario Transaction ID: 45346832 Ministry of Government Services Category ID: UN/E CORPORATION PROFILE REPORT Ontario Corp Number Corporation Name 1832861 REALTYSELLERS REAL ESTATE INC. Corporation Type Corporation Status ONTARIO BUSINESS CORP .. ACTIVE Registered Office Address 2 -26 DUNVEGAN ROAD .,_ TORONTO ONTARIO CANADA MSP 2P2 Mailing Address 226 DUNVEGAN ROAD TORONTO ONTARIO CANADA MSP 2P2 Number of Directors Minimum ·00001 Activity Classification

NOT AVAILABLE

Date Report Produced: 2011/09/09 Time Report Produced: 16:10:05 Page: 1 Incorporation Date 2010/09/03 Jurisdiction ONTARIO Former Jurisdiction NOT APPLICABLE Date Amalgamated Amalgamation Ind. NOT APPLICABLE NOT APPLICABLE New Amal. Number Notice Date NOT APPLICABLE NOT APPLICABLE Letter Date NOT APPLICABLE Revival Date Continuation Date NOT APPLICABLE NOT APPLICABLE Transferred Out Date Cancelflnactive Date NOT APPLICABLE NOT APPLICABLE EP Licence Bf.Date EP Licence Term.Date NOT APPLICABLE NOT APPLICABLE Date Commenced Date Ceased Maximum in Ontario in Ontario 00010 NOT APPLICABLE NOT APPLICABLE

Request ID: 013507250 Province of Ontario Transaction ID: 45346832 Ministry of Government Services Category ID: UN/E CORPORATION PROFILE REPORT Ontario Corp Number Corporation Name 1832861 Corporate Name History Effective Date REALTYSELLERS REAL ESTATE INC. TFH REALTY INC. Current Business Name(s) Exist: Expired Business Name(s) Exist: Administrator: Name (Individual I Corporation) Address LAWRENCE M. DALE

TORONTO ONTARIO CANADA MSP 2P2

Date Began First Director 2011/06/06 NOT APPLICABLE Designation Officer Type Resident Canadian OFFICER SECRETARY

Date Report Produced: 2011/09/09 Time Report Produced: 16:10:05 Page: 2 REALTYSELLERS REAL ESTATE INC. 2010/10/26 2010/09/03 NO NO 226 DUNVEGAN ROAD

Request ID: 013507250 Province of Ontario Date Report Produced: 2011 /09/09 Transaction ID: 45346832 Ministry of Government Services Time Report Produced: 16:10:05 Category ID: UN/E Page: 3 CORPORATION PROFILE REPORT Ontario Corp Number Corporation Name 1832861 REALTYSELLERS REAL ESTATE INC. Administrator: Name (Individual I Corporation) Address LAWRENCE M. 226 DUNVEGAN ROAD DALE

TORONTO ONTARIO