Canada: Competition Tribunal Confirms Abuse Of Dominance Must Target Competitors

On April 15, 2013, the Competition Tribunal rejected the Commissioner of Competition's argument that the Toronto Real Estate Board was engaging in anti-competitive acts contrary to section 79 of the Competition Act.¹ The case, launched in 2011, was part of then-Commissioner Melanie Aitken's tough new approach to enforcement of the Competition Act (Act). Her successor, interim Commissioner John Pecman, has indicated he will review the decision to determine the Competition Bureau's next steps in this matter.

This remarkably short (8 pages) decision confirms existing case law, which states that in order to constitute abuse of dominance, the dominant party's conduct must (with limited exceptions) have intended, negative effects on competitors.

The commissioner's case

In this case, the Commissioner of Competition was alleging that the Toronto Real Estate Board (TREB), Canada's largest real estate board with some 35,000 real estate agents and brokers, restricted how its member agents could provide information from the Toronto Multiple Listing Service (MLS) system to their customers. The MLS system contains data about previous listing and sale prices, historical prices for comparable properties in the area, and the length of time a property has been on the market. The commissioner argued that, by its restrictions, TREB denied member agents the ability to provide innovative brokerage services over the Internet, such as through password-protected websites. TREB is a member of the Canadian Real Estate Association, which owns the MLS online database that is operated by its members.

The tribunal's decision

The Competition Tribunal concluded that TREB's actions did not affect competitors, and found three reasons why the commissioner's case failed: i) it was inconsistent with existing Federal Court of Appeal case law; ii) it fell outside the bureau's own Abuse of Dominance Guidelines; and iii) it was inconsistent with the Act.

The tribunal first stated that it agreed with, and was bound by, the Federal Court of Appeal's 2006 decision in Canada v. Canada Pipe Co. In that decision, the Federal Court of Appeal had ruled that, to be an abuse of dominance, the dominant firm's actions must have "an intended negative effect on a competitor that is predatory, exclusionary or disciplinary."² In this case, TREB admitted and the commissioner acknowledged that TREB does not compete with its members, meaning TREB's actions could not have a negative effect on a competitor as required by case law and the Act's abuse of dominance provisions.

The tribunal rejected the commissioner's view that section 79 includes abusive conduct by entities that are not competitors. The common element in eight of the nine examples of anti-competitive acts provided in section 78 is harm to a competitor, and the tribunal held that it was possible to conceive of harm to a competitor in that ninth example.

Second, noted the tribunal, the bureau's own 2012 Abuse of Dominance Guidelines, which are only guidelines and do not have the same force as case law or legislation, state that anti-competitive acts must be intended to have a negative effect on a competitor. The guidelines did make allowance for circumstances where actions not specifically aimed at competitors could be considered anti-competitive, which the tribunal interpreted as a signal the commissioner was unhappy with the result in Canada Pipe.

Finally, the tribunal found that section 79(4) of the Act clarifies that abuse of dominance can only be found where there is a competitor affected by the anti-competitive behaviour. In light of this, the tribunal concluded that section 79 could not apply to the facts of the case, because there was no competitor affected by TREB's actions.

Interestingly, the tribunal included an "observation" that the commissioner might have grounds to proceed against TREB under section 90.1 of the Act, which is a civil prohibition against anti-competitive competitor collaboration. In such a case, the commissioner would need to argue that TREB's members are competitors and were using the association to enact anti-competitive rules. The tribunal noted that its observation was not intended to suggest whether such an action would be successful.

Implications

An interesting question arising from this case is whether behaviour that is harmful to competition generally, but which is not targeted specifically to a particular competitor, can ever be considered an abuse of dominance. The case also raises the question whether an abuse of dominance case can ever succeed against a trade association that does not compete with its members. In the absence of an affected competitor, the commissioner may be left to seek redress through section 90.1, where the powerful deterrent of a $10-million penalty is not available to the commissioner.

The bureau is currently reviewing the decision and could appeal to the Federal Court of Appeal, or it could bring an application against TREB under another section of the Act.

Footnotes

^{1 The Commissioner of Competition v The Toronto Real Estate Board, 2013 Comp. Trib. 9.}

^{2 Canada (Commissioner of Competition) v Canada Pipe Co., 2006 FCA 233, [2007] 2 FCR 3, at para 64.}

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