MLS challenge could change the way houses are sold
Federal Competition Bureau launches aggressive attack on Canadian Real Estate Association’s Multiple Listing Service
Paul Waldie, Richard Blackwell and Jacquie McNish
Globe and Mail Tuesday, Feb. 09, 2010
The federal Competition Bureau has launched an aggressive attack on the Canadian Real Estate Association, challenging its rules governing the Multiple Listing Service and calling for a radical change in how homes are sold in Canada.
“Our concern is that [CREA] are improperly and unlawfully leveraging [their control over MLS] in order to impose these restrictions and to deny competitive forces and to deny good old-fashioned market competition,” said Competition Commissioner Melanie Aitken. “This case is focused pure and simple: Let consumers have the choice, let agents have the opportunity to satisfy and serve those choices.”
The MLS has been around for more than 50 years and only registered agents are allowed to list homes on the service. The MLS trademark is owned by CREA, which has nearly 100,000 members, and each real-estate board operates the service in their region. Roughly 90 per cent of all residential real-estate transactions in Canada involve MLS data.
The bureau has asked the federal Competition Tribunal to strike down a series of rules CREA adopted in 2007 that tightened the MLS listing requirements.
Ms. Aitken said the rules stifled competition because they restricted the type of services real-estate agents offered, which resulted in higher fees for consumers. Agents who wanted to offer a wider range of services, such as flat fees instead of traditional commissions charged by full-service agents, have been excluded from the MLS by CREA, she added. “What that means is consumers don’t have any choice, it’s either all [services] or nothing,” she said.
CREA president Dale Ripplinger called Ms. Aitken’s decision “surprising and disappointing,” and said her allegations about the MLS restrictions were “simply false.”
“We do not agree with the bureau’s position that certain CREA rules are anti-competitive, either as a matter of fact or as a matter of law,” he said in a statement. CREA has insisted the 2007 changes were meant to protect the integrity of the MLS and ensure consumers had accurate information.
Mr. Ripplinger added that CREA had always expressed a willingness to work with the bureau to clarify the MLS rules. He said the association notified the bureau last week that it had drafted rule changes.
Ms. Aitken said CREA’s efforts did not go far enough. “Unfortunately, CREA’s leadership has taken the view that they don’t accept what we think is absolutely necessary to protect Canadians, to inspire the kind of competition we all deserve,” she said.
Many industry players said the bureau has been building a case against CREA for three years and federal officials approached several real-estate agents up to half a dozen times seeking information.
“This is big news for us,” said Steve Neil, a Vancouver agent who runs HomeBuyAndSell.com and has pushed for changes. “There is no question it will change things in the next several years.”
Discount brokers, who mostly operate online, have long argued that CREA’s rule changes were designed to put them out of business and protect full-service agents who rely on commissions, which average about 5 per cent in total on a residential sale.
Before the 2007 changes, some discount brokers offered to list homes on MLS for a fee, typically less than $700. The homeowner then handled the sale.
The CREA changes required all agents to inspect homes before listing them on the MLS and work with other agents throughout the sale. As a result, discount brokers say they could no longer offer their low-fee services and had to charge more to carry out the various CREA requirements.
Mr. Neil, for example, charges customers $299 to list their home on MLS, plus $79 for each week the house is listed. When the house is sold, he charges a fee of 0.25 per cent of the sale price. Mr. Neil said if the bureau wins its case, he would likely lower his fees and change his services.
“We would offer probably a sort of à la carte -type menu of services; if [customers] want them they can pay for them,” he said. He also believes several American online services would expand into Canada.
“The consumer demand is phenomenal for this service,” added Donald Hewie, a real-estate agent in Ottawa who has also been pushing for changes. “This could be the beginning of the end for CREA.”
But others, such as Phil Soper, CEO of Royal LePage Real Estate Services, say consumers already have a significant amount of choice, and the bureau’s move could create a “frontier mentality” that might leave consumers worse off.
“CREA has gone to great lengths to understand the bureau’s concerns,” he said.
By breaking off settlement discussions and publicly challenging CREA’s practices, the bureau also appears to be signalling new and harder stand against anti-trust targets.
Shortly after Ms. Aitken was named commissioner of the bureau last year, she identified anti-competitive conduct as a priority for the regulator, which has been plagued for years by a poor enforcement track record.
MLS at a glance
The MLS – or multiple listing service – is a database of information about houses that are currently for sale.
Information is gathered by local real estate boards and compiled by the Canadian Real Estate Association, which owns the MLS system.
Years ago, the information was distributed to real estate agents on paper; then the service moved to an electronic form.
For more than a decade, some – but not all – of the information has been made available to the public on a CREA website (realtor.ca). But some details, such as past sale prices of properties, are restricted to licensed agents.
To get a listing on MLS, a seller must agree to have a licensed real estate agent handle all aspects of a transaction, including the presentation of offers and negotiation of the deal.
The Competition Bureau wants sellers to be able to list for a simple fee, and then deal with buyers themselves or go through a discount-priced agent.