Documentation

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 residential multiple listing service of the Toronto Real Estate Board.

BETWEEN: THE COMMISSIONER OF COMPETITION Applicant AND

THE TORONTO REAL ESTATE BOARD

AFFIDAVIT OF GARY SIMONSEN (Application for Leave To Intervene by CREA)

I, Gary Simonsen, of the Town of Maberly, in the Province of Ontario, MAKE OATH AND SAY AS FOLLOWS: 1. I am the Chief Executive Officer of The Canadian Real Estate Association ("CREA") and have held that position since July 3, 2011. Prior to becoming CEO, I was

Respondent

- 2 ­the Chief Operating Officer of CREA for approximately three years, and prior to becoming COO in 2008, served CREA for approximately a decade as its Associate Executive Officer. As a result, I have personal knowledge of the matters referred to in this affidavit except where any information is stated to be based on information and belief, in which case I verily believe that information to be true. Introduction and Summary of Position 2. CREA seeks leave to intervene in the Commissioner's Amended Application for an order against the Respondent pursuant to section 79 of the Competition Act in relation to the use of the Internet by the Respondent's member real estate brokers to provide services to their customers. 3. CREA is the national voice of the Canadian real estate industry on significant issues affecting that industry, including the issues raised by the Amended Application. CREA is directly affected by the Amended Application by virtue of its trademark rights in the MLS® and REAL TOR® Trademarks (as defined below) and due to the fact that any Order issued by the Tribunal will directly affect how CREA's members across Canada provide services using the Internet. As a result of being at the forefront of the development of innovative Internet services for use in the Canadian real estate industry, CREA is uniquely positioned to provide the Tribunal with a valuable perspective, including in respect of (i) the operation of VOWs (as defined below) and similar Internet and data sharing vehicles in the Canadian marketplace, (ii) how the Order sought by the Commissioner would impact the Canadian real estate industry as a whole and (iii) the competitive effects of VOWs (and similar services) and the appropriateness of the relief sought by the Commissioner.

- 3 -Background Facts - CREA And Board MLS® Systems 4. CREA was incorporated in 1954 under Part II of the Canada Corporations Act and is one of Canada's largest single-industry trade associations. 5. CREA represents over 100,000 real estate brokers and agents working through approximately 100 real estate boards and associations, including provincial and territorial associations. Membership in CREA is open to real estate boards and associations, as well as their members in good standing, and is conditional on agreeing to be bound by, amongst other things, the REALTOR® Code (CREA's code of ethics), CREA's By-Laws and Rules, Privacy Code and Principles of Competition, as well as applicable federal and provincial laws. 6. Each province/territory regulates and licences the real estate boards/associations, brokers and agents within its jurisdiction. The regulatory regimes differ across Canada. Accordingly, there are differences across Canada in terms of the standards and requirements imposed on brokers, agents, boards and associations. 7. As the national voice for the Canadian real estate industry, CREA's key objectives include national representation of the industry on issues at the federal government level, assisting members in understanding the Competition Act and its effect on their business, formulating professional standards, acting as an interactive forum, and researching and disseminating information on issues affecting the real estate industry, including technological issues. 8. CREA owns the Multiple Listing Service® trademark, the MLS® trademark, and the associated logos (the "MLS® Trademarks"). The MLS®

- 4 -Trademarks identify professional services provided by CREA members to effect the purchase and sale of real estate as part of a cooperative selling system. 9. The trademarks REAL TOR® and REAL TORS® and the associated logos (the "REAL TOR® Trademarks") are owned by REAL TOR® Canada Inc., a company owned by CREA and the National Association of REAL TORS®, the national real estate industry association in the United States. In Canada, the REAL TOR® Trademarks identify licensed real estate practitioners who are CREA members. 10. Both the MLS® Trademarks and REAL TOR® Trademarks are an assurance of integrity and identify a certain standard of brokerage services and professionalism. They can only be used in Canada by members in good standing of CREA. 11. An MLS® System is a cooperative selling system operated by a local board or association in association with the MLS® Trademarks (under license from CREA). It provides an ongoing inventory of available properties listed for sale by REAL TORS® and ensures a certain level of accuracy of information, professionalism and cooperation among REAL TORS® to effect the sale of real estate. This inventory is accessed by REAL TORS® by virtue of their membership in the local board/association. Some boards also have inter-board agreements with other boards to allow access to MLS® listings. 12. In order for a board's/association's MLS® System to operative effectively and to maintain the distinctiveness of the MLS® Trademarks, REAL TORS® must adhere to certain standards which promote confidence in, and the reliability of, the

- 5 -system. These standards ensure that the quality of the information is high and available on a timely basis. 13. While only REAL TORS® can enter information concerning properties for sale on a board's/association's MLS® System and access the information entered by other REAL TORS® on that system, a portion of the listing information contained within a MLS® System may be uploaded by local boards/associations to a public website at REAL TOR.ca (formerly MLS.ca). REAL TOR.ca is operated by CREA and is a means of disseminating information to the public about properties listed by REAL TORS® across Canada. 14. In 2010, 478,600 properties included in the various board/association MLS® Systems were sold, with a total value of more than $159.5 billion. The residential portion of MLS® sales was approximately 93.4%. CREA Is The National Representative Of The Canadian Real Estate Industry 15. Over the past 10 years, CREA has made over 70 submissions to various federal governmental entities on a broad range of federal legislation that affects the real estate industry. 16. Many of CREA's significant submissions on federal matters have been in relation to competition law matters. CREA has consistently undertaken an intermediary role in relation to competition issues of concern to the Canadian real estate profession by advising its members of the Competition Bureau's (the "Bureau") perspective on competition issues and ensuring that its membership's views and concerns are communicated to the Bureau.

- 6 -17. For example, in the recent past, CREA has participated in a number of consultation processes relating to various issues under the Competition Act (Canada), including consultations conducted by the Bureau, the House of Commons Standing Committee on Industry, Science and Technology and the Public Policy Forum, on matters such as Bill C-10 (2009 amendments to the Competition Act), the Bureau's 2009 draft Competitor Collaboration Guidelines, the Bureau's 2008 draft Information Bulletin on Trade Associations, and Bill C-19 (2005 proposed amendments to the Competition Act). 18. CREA has also taken a leadership role in ensuring that competition issues are properly addressed within the Canadian real estate industry. In 1999, CREA created the Principles of Competition, adherence to which is a condition of membership. CREA also coordinates a national competition awareness campaign and provides an online competition compliance program for REAL TORS®. CREA's Response To Technology And The Internet 19. The Internet has had a significant effect on the real estate industry, and CREA has been at the forefront of the Canadian real estate industry's response to the challenges and opportunities created by the advent of the Internet. The local boards and associations look to CREA for leadership and guidance on these issues. As a result, CREA has a unique national role and expertise in matters directly relevant to this Application. 20. CREA's MLS® and Technology Council (the "MTC") has been at the forefront of CREA's initiatives in relation to the Internet. The MTC reports to CREA's

- 7 ­board and is responsible for devising strategies and policies for the provision of national technological services (including data management, delivery and security), researching technology trends and their impact on the real estate industry, facilitating the creation of national data standards for the operation of the MLS® Systems and facilitating in the determination of national data and information sharing solutions. 21. CREA has always supported the use of new and innovative business models which improve customer service and give REALTORS® greater flexibility. In that respect, CREA is supportive of the provision by REAL TORS® of relevant, accurate and up-to-date information to customers through the Internet in a manner which protects and preserves the integrity and quality associated with its trademarks, appropriately addresses privacy concerns and meets the requirements of the relevant provincial and federal legislation. 22. For the past decade, the MTC has studied the potential use of the Internet to provide new and innovative services and has devised several proposals and policies to meet this objective, including the following. 23. First, at the time when the Internet began to gain prominence as a vehicle for commercial applications, CREA launched an initiative to respond to the technological revolution that the real estate industry was facing. One of the end results of this initiative was the establishment in 1995 of MLS.ca (the predecessor to REAL TOR.ca), with the cooperation of boards/associations across the country. CREA assumed the operation of this public website in 1999.

- 8 -24. Second, in 2002, the MTC established the Electronic Data Usage Task Force (the "EDU Task Force") to develop guidelines for the use of electronic data for local boards and associations. The EDU Task Force considered three vehicles for sharing data through the Internet, as well as the provision of information for use by third parties. 25. The three vehicles considered by the EDU Task Force were Internet Data Exchange Networks ("IDX"), Virtual Office Websites ("VOW") and Deep Link Framing ("DLF"). These vehicles are referred to as "permissions based technology" and can be summarized generally as follows: (a) An IDX is a reciprocal system whereby consenting brokerages agree to advertise on their Internet websites each other's active property listings, either from the MLS® System of the relevant local board/association or from REAL TOR.ca, subject to the rules of the relevant local board/association and the REAL TOR®'s oversight.

(b) A VOW is a broker or REAL TOR® Internet website through which the REAL TOR® provides real estate services to consumers with whom the REAL TOR® has first established a broker-consumer relationship, where the consumer has the opportunity to search for MLS® data from the MLS® database of the board/association, subject to the rules of the relevant board/association and the REAL TOR®'s oversight.

(c) A DLF is an inexpensive Internet marketing tool using the current technology of REAL TOR.ca for both display and searching of listings.

26. After considering the numerous issues raised by these three vehicles of permission based technology, the EDU Task Force delivered a report in October, 2003. The EDU Task Force Report encouraged local boards/associations to enable members to display on their public websites aggregated MLS® active listing information, subject to the board's/association's rules and provincial law. In addition, the EDU Task Force provided detailed guidelines and proposed rules that boards/associations could use in

- 9 ­setting up their own permission based technology systems, including IDXs and VOWs, as well as a model contract for use with third parties who wish to provide these services to REAL TORS®. 27. CREA also developed rules and guidelines whereby CREA (as opposed to a local board/association) could provide the actual technology services necessary for the implementation of IDXs, VOWs, and DLFs (the "Permissions Management Guidelines"). The goal of the Permissions Management Guidelines was to provide a cost-effective alternative for a board/association to offer permission based technology to its members. A copy of the most recent version of the Permissions Management Guidelines (version 2, published in 2005), is attached to my affidavit as Exhibit "A". 28. The technology services offered by CREA under the Permissions Management Guidelines are not mandatory for CREA members. Rather, each board/association was able to decide whether its members would be permitted to access CREA's services, as opposed to the board/association simply offering these technology services on its own (as it was entitled to do). 1 29. Boards and associations who allowed their members to access the technology services offered by CREA under the Permissions Management Guidelines were required to comply with the Permission Management Rules specified by CREA in the Permissions Management Guidelines. The Permission Management Rules contain detailed rules and requirements for the use of the CREA permissions management system in general (such as in relation to trademarks, obtaining authorization, content of Accordingly, VOWs and IDXs can be provided through CREA or through local boards/associations (either directly or by retaining third party providers).

- 10 ­frames created and display of pages) as well as separate detailed rules and requirements for using each of the CREA DLF, VOW and IDX vehicles. 30. Third, in July 2008, CREA created a VOW Task Force to review various areas of concerns raised by the Bureau with respect to VOWs in Canada and to make recommendations if appropriate. The VOW Task Force held a number of meetings with the Bureau and consulted with CREA members across Canada on the issues relevant to a VOW policy. The Bureau and the VOW Task Force did not reach an agreement on the appropriate terms and conditions for a national VOW policy as of 2010, when discussions between the Bureau and CREA ceased. 31. Fourth, the MTC has recently proceeded to the next stage of promoting the use of technology and Internet access by designing a data distribution facility for Canadian REALTORS® (the "DDF"). CREA's DDF proposal, developed after research and consultation with the industry, is intended to supply publicly available MLS® listing content for publication on both member and non-member (i.e., third party) websites. It is a permissions-based system that will allow brokers to share their listings with other brokers, as well as to send their listings to third party websites. The DDF consists of three modules 2 and, at each stage, brokers will be able to decide if they wish to share listing content for display on other brokers' websites, display the listing content of other

2 Module One, the National Shared Pool Module, will allow brokers to contribute their listings to a national data pool and receive a feed from that pool to display all other participants' listings on their websites. Module Two, the Member Feed Module, will enable brokers and salespeople to have their listings fed back to their own website to ensure consistency and accuracy of data. Module Three involves the distribution of data to third party websites outside of organized real estate. It will include procedures to ensure that information contained on third party sites remains accurate and up to date, as well as and terms and conditions on the use of the data.

- 11 ­participating brokers on their own website, and/or send their listing content for display on third party sites. 32. The establishment of CREA's DDF policy was approved at CREA's Annual General Meeting on April 2, 2011. The rules and policies relating to DDF that boards/associations will be required to follow are in the process of being finalized and it is expected that the DDF will be available before the end of this year. 33. Lastly, CREA's Board of Directors recently created a new VOW Task Force to assess and develop a national VOW policy, which is intended to provide guidance to boards/associations and to REAL TORS® offering online brokerage services to consumers. This VOW Task Force will build upon the work of the previous CREA VOW Task Force {which, as noted above, operated from 2008 to 2010 for the purpose of discussing concerns about VOWs raised by the Bureau). Status of VOWs in Canada 34. As is evident from the above summary, CREA does not currently have a mandatory rule which specifically governs the use of VOWs or similar Internet vehicles by members across Canada. Rather, CREA's REAL TOR® Code provides that VOWs, IDXs and any similar sites or technologies which display properties of other REAL TORS® shall be subject to all applicable laws and be operated in accordance with the rules established by the local board/association for such sites. 35. Canada's experience with VOWs and similar Internet vehicles has varied considerably across the country.

- 12 -36. This variability is due to a number of factors. First, each local board/association is subject to specific regulation by their province or territory, and that regulation may differ. 3 37. Second, for those provinces/territories where VOWs or other Internet vehicles are an option, only a selection of local boards/associations have implemented a formal policy to date and, for those that have, the rules differ for a number of reasons, including the particular factual circumstances faced by the board/association. Related to this is the fact that the demand for the use of Internet vehicles has varied considerably across the country. 38. CREA is also aware that a number of its member boards/associations currently without a formal policy are considering implementing Internet information sharing policies. The filing of the Amended Application has created confusion and uncertainty in the industry, which CREA believes will delay the development of such policies until the Amended Application is resolved. The Matters In Issue In The Application Directly Affect CREA And Its Members 39. The Order requested by the Commissioner is both extremely broad and imprecise in nature. The Order requested, in essence, seeks to allow brokers to use the information from boards'/associations' MLS® Systems to provide services over the Internet (including, but not restricted to, VOWs), without any restrictions, including any restrictions which might be mandated by provincial or other federal regulation. Further, in the Order requested, the Commissioner asks that the Tribunal "direct" the 3 For example, CREA's understanding is that VOWs are not available in Quebec.

- 13 -Respondent to "implement" resources and facilities that are necessary to ensure the operation of VOWs or "similar services". 40. Considering the breadth of the Application and the Order requested, the Tribunal's decision will have national implications for the real estate industry and therefore will directly affect all of CREA's members. As the representative of the Canadian real estate industry, CREA has a direct and significant interest in the competitiveness, efficiency and reliability of that industry. 41. Any Order in respect of the use of VOWs and any other Internet vehicles will directly affect the ability, format and extent to which CREA members across Canada can and will provide information to their customers using the Internet. 42. In addition, CREA has a direct interest in the Application by virtue of its trademark rights in the MLS® and REAL TOR® Trademarks. CREA has been diligent to ensure that those trademarks are associated with a high standard of professionalism and with the provision of accurate and up-to-date information. CREA therefore has a direct interest in ensuring that any use on the Internet of information sourced from a MLS® System is subject to sufficient rules and policies that protect those standards. CREA's Unique And Distinct Perspective 43. CREA is the recognized voice of the Canadian real estate industry on important issues affecting that industry, including competition matters in general and the very issues (i.e., use of the Internet, including VOWs) at issue in this Application.

- 14 -44. In considering the Application and, in particular, the impact the Order requested by the Commissioner may have, it will be important for the Tribunal to understand, amongst other matters, (i) the different types of Internet services and data sharing available to the real estate industry and the resources required to provide those services, (ii) the issues associated with the creation, implementation and enforcement of the different types of Internet services and data sharing, and (iii) the extent to which Internet services are being used in the industry across Canada and the reasons for differences across provinces or regions. CREA is uniquely positioned to provide the Tribunal with a national perspective on the operation of VOWs and similar Internet and data sharing vehicles in the Canadian market place, including in relation to these matters. 45. In developing proposed rules and policies for the various Internet and data sharing vehicles, including the CREA VOW program, the MTC carefully considered all of the relevant issues, including the very issues that the Tribunal will face in determining whether an order should issue in this Application and, if yes, the content of an appropriate Order. Because of its position and experience with permission-based technology, including VOWs, CREA is uniquely qualified to address the specific issues that are triggered by the use of Internet and data sharing vehicles in the Canadian real estate industry. Those issues include the following: (a) Definition - the appropriate definition of a VOW, IDX or similar website; (b) Customers - the pre-conditions for participation, including, with respect to VOWs, the necessity for a broker-client relationship, the issue of compliance with all provincial laws (including disclosure obligations) and the requirements for registration (including the information that must be

- 15 ­provided by a consumer before they are permitted access to a VOW, and security related features);

(c) Terms of Use - the terms that a customer should agree to (and the form of any agreement) in order to have access to a VOW, including with respect to the use of the information received, as well as the terms that should not be imposed on a customer as a pre-condition to access;

(d) Participants - who should be permitted to participate in terms of providing information through a VOW;

(e) Information Provided - which data/information can and should be provided, including the issue of geographic boundaries and what information should qualify as "confidential information";

(f) Opt-Outs - whether a seller or listing agent should be able to prevent a listing from being accessed on a VOW and, if yes, the procedure that should be followed;

(g) Privacy Issues and Concerns - the effect of privacy legislation on VOWs and similar services, including the need for a privacy policy informing consumers how information they provide can be collected, used and disclosed, in accordance with applicable privacy legislation. 4 (Historically, CREA has taken the lead in addressing privacy issues and concerns that are relevant to the Canadian real estate industry 5 ); (h) Referrals - whether there should be any restrictions or rules relating to referrals;