Posted by: Daryl & Wendy Ashby | March 31, 2010

Looks Like The Gloves are Off

Canada’s real estate agents have rejected an offer to try to settle allegations of anti-competitive behaviour, saying they would rather take their chances on a court showdown than make further concessions to appease Ottawa’s competition watchdog.

Melanie Aitken, the Commissioner of Competition, yesterday opened the door to negotiations with the Canadian Real Estate Association, the body that represents the country’s 98,000 real estate agents.

Ms. Aitken, who has alleged that CREA keeps prices artificially high for real estate services by tightly controlling who can access the popular Multiple Listing Service, said yesterday that her office “would much prefer to have this resolved consensually” than pursue a legal fight.

But Georges Pahud, CREA’s new president, said his group has already made a number of changes to respond to the criticisms and doesn’t intend to make more.

“We need to do away with these legal issues properly so we can move on and get back demonstrating the value of realtors,” said Mr. Pahud.

The Competition Bureau filed charges with the Competition Tribunal in February, alleging that CREA’s strict rules governing the listings service make it impossible for competitors to offer innovative services to consumers, such as flat-fee listings or a la carte services based on minimal levels of service.

Until Monday, anyone who wanted to list their home on the Realtor.ca site – the public face of MLS (yet privately owned and operated), where about 90 per cent the country’s homes are sold – were required to employ an agent through the entire process and pay a commission when the home sold.

In essence, the system required the consumer to pay an agent for services they may not have wanted – such as conducting open houses and handling negotiations – in order to gain an MLS listing.

The commission is usually 4 to 5 per cent of the sale price of the home. That means it would cost between $13,100 and $16,400 in commissions to sell the average Canadian home, using the January average price of about $328,000.

In a last-ditch bid to satisfy the commissioner’s concerns and head off the court case, CREA passed rules at its annual general meeting Monday that make it possible for someone to pay a realtor to place the house on the listing service for a flat-fee, and then handle the rest of the sale without the agent’s help.

While CREA said the changes were intended to satisfy Ms. Aitken’s concerns, she said the changes were largely meaningless because the association retained the right to alter the rules at any time.

“What they preserved was an absolutely open-ended blank cheque opportunity to pass any rules that they wanted including highly anti-competitive rules. So give with one hand, take away with the other,” she said yesterday at a public appearance in Calgary. “They could reinstate the exact same rules or they could instate even more anti-competitive rules.”

Ms. Aitken said that a negotiated settlement is “always our preference.”

“But when faced with a situation where CREA’s leadership simply wasn’t prepared to deal with us to resolve the problems in a way that we felt was going to be effective, instead of just sort of an illusion, we feel we have no choice but to go to the Competition Tribunal to try to get a permanent solution. That said, if CREA wants to talk to us and we can get a permanent solution through a consent order, we’re all ears.”

As it stands now, there is no incentive for realtors to offer new, scaled-back services to consumers and there’s no downward pressure on prices, she said.

CREA has until tomorrow to file its defence with the Tribunal, and a hearing could take place in the fall. The Competition Bureau could still withdraw the charges if the two sides reach a deal before the hearing.

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