Canada: Canadian Competition Tribunal Issues Important Guidance On The Interpretation Of Consent Agreements

On April 30, 2015, the Canadian Competition Tribunal ("Tribunal") released its latest decision (The Commissioner of Competition v. The Canadian Real Estate Association, 2015 Comp. Trib. 3) in a long-running dispute between the Commissioner of Competition (the "Commissioner") and the Canadian Real Estate Association ("CREA") over advertising restrictions in respect of private sales of residential properties on CREA's popular "realtor.ca" website. The Tribunal confirmed CREA's right, pursuant to a consent agreement previously entered into with the Commissioner, to prohibit the display of a private seller's contact information or the reference to a private sale on webpages that are linked directly from realtor.ca. The decision is noteworthy in several respects, including in that it expressly articulates the principles governing the Tribunal's approach to the interpretation of consent agreements, an instrument commonly used in Canada to resolve or avoid antitrust enforcement proceedings.

Background

CREA is a trade association that represents over 100,000 real estate brokers and agents, as well as local real estate boards and associations, across Canada. It operates a cooperative selling system known as the Multiple Listing Service ("MLS"), a "member-to-member" system consisting of an inventory of available properties for sale or rent with detailed information accessible only to CREA members. CREA also owns and operates the realtor.ca website for the purpose of advertising its members' real estate listings. Only a subset of the listing information found in the MLS system is made available to the public on realtor.ca.

In October 2010, the Commissioner and CREA entered into a consent agreement (the "Consent Agreement") to resolve an application filed by the Commissioner with the Tribunal under the abuse of dominance provision in section 79 of the Competition Act (the "Act"). At the time, CREA's rules prohibited its members from providing "mere posting" services to private sellers (i.e., listing a property on the MLS system without providing any additional services). The Commissioner alleged that this rule and others constituted an abuse of dominant position by CREA with the effect of limiting consumer choice and preventing innovation in the market for residential real estate brokerage services to home sellers in Canada.

Under section 3 of the Consent Agreement CREA agreed not to adopt, maintain or enforce any rules that deny its members the ability to provide mere postings services, or that discriminate against mere postings or members that offer such services. CREA further agreed pursuant to that provision to allow a private seller's contact information to be listed in the realtor-only section of the MLS system, and for a direction to be provided to the public on realtor.ca to visit the realtor's or brokerage's website for additional information about the listing (without specifying the nature of such additional information or providing the private seller's contact information on the realtor.ca website). Finally, CREA also agreed in section 3 not to "prevent" its members from displaying a private seller's contact information on a website other than an "Approved Website" (defined as realtor.ca or any other CREA-operated website originating from a service operated under an MLS system).

After the Consent Agreement was entered into with the Commissioner, CREA adopted new rules (the "Rules") prohibiting the advertisement of private sales, including the display of a seller's contact information, on webpages that are linked directly from realtor.ca through multimedia links. Under the new Rules, a seller's contact information can be displayed on a realtor's or brokerage's own personal website, as long as the webpage containing that information is not directly linked from realtor.ca. In other words, there has to be a "buffer page" between realtor.ca and the realtor's or brokerage's webpage displaying the seller's contact information.

In response, the Commissioner alleged that the Rules violated CREA's obligations under section 3 of the Consent Agreement. In particular, he asserted that the prohibition on displaying a seller's contact information on landing pages of a realtor's or brokerage's website breached CREA's obligation not to "prevent[] Members from ... displaying the Seller's contact information on a website other than an Approved Website". In the alternative, the Commissioner took the position that the "buffer page" requirement was expensive and time-consuming for low-fee brokers and confusing for prospective buyers, thereby violating CREA's obligation not to discriminate against members offering mere posting services.

In April 2014, CREA filed a motion requesting directions from the Tribunal as to the correct interpretation of section 3 of the Consent Agreement. The Commissioner responded with a motion of his own for an order declaring that CREA was not permitted to adopt, maintain or enforce the Rules.

Decision

The decision (written by the Tribunal's Chairperson, Justice Rennie) begins with a discussion and analysis of the principles governing the interpretation of consent agreements. In this regard, the Tribunal adopted the Supreme Court's recent pronouncement on the principles governing the construction of contracts in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53:

[47] The overriding concern is to determine "the intent of the parties and the scope of their understanding"... To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:

No contracts are made in a vacuum: there is always a setting in which they have to be placed. . . . In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

(Reardon Smith Line, at p. 574, per Lord Wilberforce)

[48] The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement (see Moore Realty Inc. v. Manitoba Motor League, 2003 MBCA 71, 173 Man. R. (2d) 300, at para. 15, per Hamilton J.A.; see also Hall, at p. 22; and McCamus, at pp. 749-50). As stated by Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich Building Society, [1998] 1 All E.R. 98 (H.L.):

The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. [p. 115]

However, Justice Rennie identified two important qualifications to the above principles applicable to the interpretation of consent agreements. He noted that unlike private contracts, section 105 of the Act deems consent agreements that are registered with the Tribunal (as was the case here) to have "the same force and effect ... as if [they] were an order of the Tribunal". Non-compliance with a consent agreement can, therefore, give rise to contempt, and is in fact an offence under section 66 of the Act punishable by fine or imprisonment, or both. As a result, Justice Rennie concluded that consent agreements must be "clear [and] ... capable of enforcement", and that any ambiguities should be construed in favour of the respondent.

Secondly, given the remedial context in which consent agreements are drafted (i.e., to address conduct that, at least in the Commissioner's opinion, results in anti-competitive effects contrary to the Act), the Tribunal Chair held that a consent agreement must also be interpreted "in light of the purpose and objects of the [Act]".

In dismissing the Commissioner's motion for an order that CREA's Rules violated the Consent Agreement, the Tribunal found that the agreement was drafted to "respect the member-to-member nature of the MLS system" and therefore had to be interpreted in that light. In the Tribunal's view, the Consent Agreement was "not intend[ed] to eliminate completely the barrier between realtor.ca and private sellers". In this regard, Justice Rennie observed that while the Consent Agreement required CREA to allow its members to post private sellers' contact information in the private realtors-only section of the MLS system, it preserved CREA's right to adopt rules to preclude members from posting such information on the publicly-accessible realtor.ca website. In his view, if the parties had intended a direct linkage from realtor.ca to private sellers, then the requirement for CREA to allow private sellers' contact information in the realtors-only section of the MLS system would have been redundant, thereby violating the principle of interpretation "that provisions are not read in isolation but are to be read to achieve consistency, harmony and meaning between each provision".

The Tribunal rejected the Commissioner's argument that CREA's "buffer page" rule violated its obligation not to "prevent" its members from displaying a seller's contact information on a website other than an "Approved Website". In Justice Rennie's view, the Commissioner's interpretation of section 3 would require the Tribunal to read in words not found in the provision (e.g., that CREA shall not "prevent Members from displaying the Seller's contact information [anywhere] on a website other than an Approved Website") and in effect mandate a direct linkage from realtor.ca to private sellers, contrary to the intent of the Consent Agreement and its express provisions. Further, the Tribunal also found that, from a functional and evidentiary perspective, the Commissioner had not shown that the "buffer page" rule did, in fact, hinder or constrain members from listing a seller's contact information on their private websites. Based on the evidence before it, the Tribunal concluded that "even a novice user of realtor.ca would have little difficulty in finding the information under the existing rules and design of the website".

Lastly, the Tribunal also rejected the Commissioner's claim that CREA's rules discriminated against mere postings. Given the Tribunal's finding that the "buffer page" requirement was "neither convoluted nor time-consuming", Justice Rennie found that the Commissioner's evidence did not support the conclusion that the Rules discriminated against mere postings. As the Tribunal noted, "not all distinctions are discriminatory".

Implications and Practical Considerations

The Tribunal's decision raises two points for consideration. First, as noted above, the decision provides an express articulation of the Tribunal's approach to the interpretation of consent agreements. Since a significant number of disputes with the Commissioner and contested antitrust enforcement proceedings in Canada are resolved by way of consent agreement, the decision and the principles it adopts should be of interest to parties who may be required to negotiate such agreements in the future. Second, this case and others demonstrate that the Commissioner will not hesitate to seek to enforce the terms of a consent agreement where he believes (rightly or wrongly) that a respondent is in breach of its obligations thereunder. As such, the Tribunal's decision underscores the importance of clear and careful drafting to avoid potential ambiguities and costly litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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