2017 FCA 236, 2017 FCA 236

A-174-16 2017 FCA 236 The Toronto Real Estate Board ( Appellant ) v . Commissioner of Competition ( Respondent ) and The Canadian Real Estate Association ( Intervener ) Indexed as: Toronto Real Estate Board v. Canada (Commissioner of Competition) Federal Court of Appeal, Nadon, Near and Rennie JJ.A.—Toronto, December 5, 2016; Ottawa, December 1, 2017.

Competition –– Appeal from two decisions of Competition Tribunal holding that certain information-sharing practices of appellant preventing competition substantially in supply of residential real estate brokerage services in Greater Toronto Area (GTA) –– Appellant maintaining database of information on available property listings in GTA, making some information available to members via electronic data feed –– However, some data available in database not distributed via data feed –– Respondent claiming appellant’s actions violating Competition Act, s. 79(1) by preventing or lessening competition –– Appellant, not-for-profit corporation, Canada’s largest real estate board –– Operating online system (Multiple Listing Service (MLS)) for collecting, distributing real estate information among members –– Many brokers operating sections of websites called “virtual office websites” (VOWs) whereby appellant’s data feed delivering information to brokers to populate websites –– Tribunal concluding that VOW restrictions adversely affecting non-price competition in relevant market; also finding that appellant not leading sufficient evidence to demonstrate copyright in MLS database in question –– Whether Tribunal erring in finding that appellant substantially reducing competition within meaning of Act, s. 79(1) –– Most of appellant’s arguments focussing on Act, ss. 79(1)(b),(c) –– No dispute that appellant’s VOW policies constituting practice in accordance with Act, s. 79(1)(b) –– Tribunal applying correct framework respecting s. 79(1)(b) –– Finding that evidence of subjective anti-competitive intent, reasonably foreseeable exclusionary effects outweighing very limited evidence adduced in support of alleged legitimate business justifications; tribunal’s analysis not unreasonable –– Also, Tribunal correctly understanding significance of word “substantially” in Act, s. 79(1)(c), test having to apply to determine whether appellant’s practice regarding disputed data constituting practice having effect of preventing competition substantially in GTA –– Understanding difference in nature between quantitative, qualitative evidence –– Tribunal making findings of number of anti-competitive effects caused by VOW restrictions –– Of opinion that, “but for” VOW restrictions, such anti-competitive effects would be considerably lower; concluding that anti-competitive effects on non- price dimensions amounting to substantial prevention of competition –– In relying on qualitative evidence for findings of anti-competitive effects, conclusion on substantiality, Tribunal not making any reviewable error; thus no basis to interfere with determination under Act, s. 79(1)(c) –– Grounds of appeal based on privacy concerns, copyright also failing — Appeal dismissed.

Privacy –– Personal Information Protection and Electronic Documents Act –– In appeal from two decisions of Competition Tribunal holding that certain information-sharing practices of appellant preventing competition substantially in supply of residential real estate brokerage services in Greater Toronto Area, appellant seeking to justify restriction on disclosure of disputed data on basis of privacy –– Specifically claiming that privacy concerns of vendors, purchasers constituting business justification sufficient to escape liability under Competition Act, s. 79(1) (b), asserting that required to comply with Personal Information Protection and Electronic Documents Act (PIPEDA) –– Whether Tribunal erring in failing to conclude that appellant’s privacy concerns or statutory obligations constituting business justification within scope of Act, s. 79(1)(b) –– Tribunal concluding that little evidentiary support for appellant’s contention that restrictions motivated by privacy, finding that privacy concerns pretext for appellant’s adoption, maintenance of restrictions of brokers’ “virtual office websites” (VOWs)–– Tribunal also examining nature, scope of consent clause in Listing Agreement appellant using; concluding that consents provided thereto effective –– Role of Tribunal to interpret scope of consents under ordinary law of contract, as informed by PIPEDA –– Tribunal doing so thus not erring in conclusion reached –– Listing Agreement at issue containing clause governing use, distribution of information –– PIPEDA only requiring new consent by clients where information used for new purpose, not where information distributed via new methods –– Introduction of VOWs not new purpose ––– Ground of appeal therefore failing.

Copyright –– Appeal from two decisions of Competition Tribunal holding that certain of appellant’s information-sharing practices preventing competition substantially in supply of residential real estate brokerage services in Greater Toronto Area raising copyright issues of real estate information in appellant’s MLS database –– Whether Act, s. 79(5) precluding appellant, intervener from advancing copyright claim in MLS database –– In light of determination that appellant’s virtual office website policy anti-competitive, Competition Act, s. 79(5) precluding reliance on copyright as defence to anti-competitive act –– This holding sufficient to dispose of appeal in respect of copyright.

This was an appeal from two decisions of the Competition Tribunal holding that certain information-sharing practices of the appellant prevented competition substantially in the supply of residential real estate brokerage services in the Greater Toronto Area (GTA). The appellant maintains a database of information on current and previously available property listings in the GTA making some of this information available to its members via an electronic data feed.

However, some data available in the database is not distributed via the data feed and can only be viewed and distributed through more traditional channels. The respondent said that this disadvantages innovative brokers who would prefer to establish virtual offices resulting in a substantial prevention or lessening of competition in violation of subsection 79(1) of the Competition Act . The appellant claimed in particular that the restrictions do not have the effect of substantially preventing or lessening competition and that such restrictions are due to privacy concerns.

The appellant is a not-for-profit corporation and is Canada’s largest real estate board. It operates an online system for collecting and distributing real estate information among its members. This “Multiple Listing Service” or MLS system is not accessible to the general public. Part of the MLS system is a database (the MLS database) of information on properties including current listings. Many brokers

operate sections of their websites called “virtual office websites” or VOWs. The appellant’s data feed delivers information to brokers to populate these sections of their websites. Importantly, not all information in the MLS database is included in the data feed. The respondent first applied to the Tribunal, under subsection 79(1) of the Act, for an order prohibiting certain behaviours relating to the appellant’s restrictive distribution of digitized data, but this application was dismissed by the Tribunal. However, on appeal, the matter was referred back for reconsideration.

The Tribunal made an order granting in part the respondent’s application and made another order on the issue of remedy. Those were the decisions under appeal herein. The Tribunal concluded that the VOW restrictions had adversely affected non-price competition in the relevant market to a degree that was material. In particular, it stated that the aggregate adverse impact of the VOW restrictions on non-price competition had been substantial. It also found that the duration and scope of the restrictions was substantial.

Thus, the Tribunal found that all three of the subsection 79(1) requirements had been met and that the VOW restrictions were substantially preventing competition for residential real estate brokerage services in the GTA. Turning to copyright, the Tribunal found that the appellant did not lead sufficient evidence to demonstrate copyright in the MLS database.

The issues were whether the Tribunal erred in finding that the appellant had substantially reduced competition within the meaning of subsection 79(1) of the Act; whether the Tribunal erred in failing to conclude that the appellant’s privacy concerns or statutory obligations constituted a business justification within the scope of paragraph 79(1)(

b) of the Act; and whether subsection 79(5) of the Act precluded the appellant and intervener from advancing a claim in copyright in the MLS database. Held , the appeal should be dismissed. Subsection 79(1) of the Act sets out the three requirements necessary to establish an abuse of dominant position. Most of the appellant’s arguments focussed on paragraphs 79(1)(

b) and (

c) of the Act. There was no dispute that the appellant’s VOW policies constitute a practice in accordance with paragraph 79(1)(b). The Tribunal applied the correct framework respecting paragraph 79(1)(b), stating that it was looking for a predatory, exclusionary, or disciplinary effect on a competitor.

The Tribunal found that the evidence of subjective anti- competitive intent and reasonably foreseeable exclusionary effects outweighed the very limited evidence that was adduced in support of the alleged legitimate business justifications that the appellant claimed underpinned the development and implementation of the VOW restrictions and its analysis was not unreasonable. The requirements of paragraph 79(1)(

c) were examined. The alleged anti-competitive practices in this case related to what the appellant does with some of the data from the MLS system and what it allows its members to do with this data. The Tribunal correctly understood the significance of the word “substantially” in paragraph 79(1)(

c) and the test it had to apply in determining whether or not, on the facts of this case, the appellant’s practice regarding the disputed data was a practice that had the effect of preventing competition substantially in the GTA. The respondent, in seeking a determination under subsection 79(1), did not have a legal obligation to quantify all effects which could be quantified. The Tribunal understood the difference in nature between quantitative and qualitative evidence.

On the basis of the qualitative evidence put forward by the respondent, the Tribunal made findings of a number of anti-competitive effects caused by the VOW restrictions. It was the Tribunal’s opinion that, “but for” the VOW restrictions, such anti-competitive effects would be considerably lower; it concluded that, when considered in the aggregate, these anti-competitive effects on non-price dimensions amounted to a substantial prevention of competition. The arguments of the appellant and intervener regarding the Tribunal’s reliance on qualitative evidence were without merit.

In relying on qualitative evidence for its findings of anti-competitive effects and its ultimate conclusion on substantiality, the Tribunal made no reviewable error and there was no basis to interfere with its determination under paragraph 79(1)(

c) of the Act. The appellant sought to justify its restriction on disclosure of the disputed data on the basis that the privacy concerns of vendors and purchasers constituted a business justification sufficient to escape liability under paragraph 79(1)(

b) of the Act. It also asserted that it was required to comply with the Personal Information Protection and Electronic Documents Act (PIPEDA) contending that this statutory requirement constituted a business justification. However, the Tribunal concluded that there was little evidentiary support for the contention that the restrictions were motivated by privacy concerns of the appellant’s clients. The Tribunal also found that the privacy concerns were a pretext for the appellant’s adoption and maintenance of the VOW restrictions.

Regarding the establishment of a business justification within the meaning of paragraph 79(1)(b), in this case the Tribunal assessed the evidence before it according to the correct principles and found it lacking. It concluded that the appellant was motivated by a desire to maintain control over the disputed data in an effort to forestall new forms of competition and not by any efficiency, pro-competition, or genuine privacy concerns. The Tribunal also examined the nature and scope of the consent clause in the Listing Agreement the appellant used and concluded that the consents were effective.

The role of the Tribunal was to interpret the scope of the consents under the ordinary law of contract, as informed by the purpose and objectives of PIPEDA . This is what it did and there was no error in the conclusion reached. PIPEDA requires that individuals consent to the collection, use, and disclosure of their personal information. The Listing Agreement at issue contained a clause governing the use and distribution of information. This clause was broad and unrestricted. Nothing in the text implied the data would only be used during the time the listing was active.

PIPEDA only requires new consent where information is used for a new purpose, not where it is distributed via new methods. The introduction of VOWs was not a new purpose. There was nothing in the evidence that would suggest that the appellant considered that the consents were inadequate or that the appellant drew a distinction between the means of communication of information. When the consents were considered in light of the nature of the privacy interests involved, the Tribunal’s conclusion that they were sufficient took on added strength. This ground of appeal therefore failed.

With respect to the issue of copyright in the MLS Database, the ground of appeal that the Tribunal erred in finding that the appellant did not have copyright in the database failed. In light of the determination that the VOW policy was anti-competitive, subsection 79(5) of the Act precludes reliance on copyright as a defence to an anti-competitive act. This was sufficient to dispose of the appeal in respect of copyright. Moreover, although the Tribunal applied the incorrect legal test to determine whether copyright exists, it was an error of no consequence. STATUTES AND REGULATIONS CITED

Competition Act, R.S.C., 1985, c. C-34, ss. 78, 79, 92, 96(1). Competition Tribunal Act, R.S.C., 1985 (2nd Supp.), c. 19, s. 13(1),(2). Competition Tribunal Rules, SOR/2008-141, rr. 68(2), 69(2). Copyright Act, R.S.C., 1985, c. C-42, ss. 2 “compilation”, 5. Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5, s. 6.1, Sch. 1, clauses 4.3.1, 4.3.2. CASES CITED FOLLOWED: Tervita Corp. v. Canada (Commissioner of Competition), 2015 SCC 3, [2015] 1 S.C.R. 161. APPLIED: Tervita Corporation v.

Canada (Commissioner of Competition), 2013 FCA 28, [2014] 2 F.C.R. 352 (as to standard of review); Canada(Commissioner of Competition) v. Canada Pipe Co., 2006 FCA 233, [2007] 2 F.C.R. 3, leave to appeal to S.C.C. refused [2007] 1 S.C.R.vii; Canada (Director of Investigation and Research, Competition Act) v. NutraSweet Co. (1990), 32 C.P.R. (3d) 1, [1990] C.C.T.D. No.17 (QL) (Comp. Trib.); CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13, [2004] 1 S.C.R. 339. CONSIDERED: The Commissioner of Competition v. The Toronto Real Estate Board, 2013 Comp. Trib. 9, 2013 CACT 9 ; Commissioner ofCompetition v.

Toronto Real Estate Board, 2014 FCA 29, 456 N.R. 373, leave to appeal to S.C.C. refused [2014] 2 S.C.R. ix; NadeauPoultry Farm Limited v. Groupe Westco Inc., 2011 FCA 188, 419 N.R. 333; Tele-Direct (Publications) Inc. v. American BusinessInformation, Inc., (FCA), [1998] 2 F.C. 22 (1997), 154 D.L.R. (4th) 328 (C.A.), leave to appeal to S.C.C. refused[1998] 1 S.C.R. xv; Pfizer Canada Inc. v. Teva Canada Limited, 2016 FCA 161, 400 D.L.R. (4th) 723; Ellis-Don Ltd. v. Ontario (LabourRelations Board), 2001 SCC 4, [2001] 1 S.C.R. 221; Sattva Capital Corp. v.

Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633;Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23; Canada (Office of the InformationCommissioner) v. Calian Ltd., 2017 FCA 135, 414 D.L.R. (4th) 165; Investors Compensation Scheme v. West Bromwich BuildingSociety, [1997] UKHL 28, [1998] 1 All E.R. 98; Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, [2017] 1 S.C.R. 688, 411D.L.R. (4th) 385; ING Bank N.V. v. Canpotex Shipping Services Ltd., 2017 FCA 47; Royal Bank of Canada v. Trang, 2016 SCC 50,[2016] 2 S.C.R. 412; Édutile Inc. v.

Automobile Protection Assn., (FCA), [2000] 4 F.C. 195, (2000), 6 C.P.R. (4th)211 (C.A.); Red Label Vacations Inc. (redtag.ca) v. 411 Travel Buys Ltd. (411travelbuys.ca), 2015 FC 18, 473 F.T.R. 38; Delrina Corp.(cob Carolian Systems) v. TrioletSystems Inc. (2002), (ON CA), 58 O.R. (3d) 339, 17 C.P.R. (4th) 289, leave toappeal to S.C.C. refused, [2002] 4 S.C.R. v; Harmony Consulting Ltd. v. G.A. Foss Transport Ltd., 2011 FC 340, 92 C.P.R. (4th) 6, affd2012 FCA 226, 107 C.P.R. (4th) 1; Geophysical Service Inc. v. Encana Corp., 2016 ABQB 230, 38 Alta. L.R. (6th) 48; Distrimedic Inc.v.

Dispill Inc., 2013 FC 1043, 440 F.T.R. 209. REFERRED TO: Canada (Commissioner of Competition) v. Superior Propane Inc., 2001 FCA 104, [2001] 3 F.C. 185; CarGurus, Inc. v. TraderCorporation, 2017 FCA 181; Graat v. The Queen, (SCC), [1982] 2 S.C.R. 819, (1982), 144 D.L.R. (3d) 267; Hunt(Litigation guardian of) v. Sutton GroupIncentive Realty Inc. (2002), (ON CA), 60 O.R. (3d) 665, 215 D.L.R. (4th)193 (C.A.); Benhaim v. St-Germain, 2016 SCC 48, [2016] 2 S.C.R. 352; WIC Radio Ltd. v. Simpson, 2008 SCC 40, [2008] 2 S.C.R. 420;Edmonton (City) v.

Edmonton East (Capilano) Shopping Centres Ltd., 2016 SCC 47, [2016] 2 S.C.R. 293. AUTHORS CITED Bryant, Alan W. et al. The Law of Evidence in Canada, 4th ed. Markham, Ont.: LexisNexis Canada, 2014. Delisle Ron et al. Evidence: Principles and Problems, 11th ed. Toronto: Thompson Reuters, 2015. Paciocco, David and Lee Stuesser. The Law of Evidence, 7th ed. Toronto: Thompson Reuters, 2015. APPEAL from two decisions (2016 Comp. Trib. 7; 2016 Comp.

Trib. 8) of the Competition Tribunal holding that certain information-sharing practices of the appellant prevented competition substantially in the supply of residential real estate brokerage services in theGreater Toronto Area. Appeal dismissed. APPEARANCES William V. Sasso, Jacqueline Horvat and Carol Hitchman for appellant. John F. Rook Q.C., Andrew D. Little and Emrys Davis for respondent. Sandra A. Forbes and Michael Finley for intervener. SOLICITORS OF RECORD Strosberg Sasso Sutts LLP, Windsor, Spark LLP and Gardiner Roberts LLP, Toronto, for appellant.

Bennett Jones LLP, Toronto, for respondent. Davies Ward Phillips & Vineberg LLP, Toronto, for intervener. The following are the reasons for judgment rendered in English by Nadon and Rennie JJ.A.: I. Introduction [1] This is a statutory appeal from two decisions of the Competition Tribunal (the Tribunal) which held that certain information-sharing practices of the Toronto Real Estate Board (TREB) prevented competition substantially in the supply of residential real estatebrokerage services in the Greater Toronto Area (GTA): The Commissioner of Competition v. The Toronto Real Estate Board, 2016Comp.

Trib. 7 (Tribunal Reasons, TR) and The Commissioner of Competition v. The Toronto Real Estate Board, 2016 Comp. Trib. 8 (theorder). [2] TREB maintains a database of information on current and previously available property listings in the GTA. TREB makes someof this information available to its members via an electronic data feed, which its members can then use to populate their websites.However, some data available in the database is not distributed via the data feed, and can only be viewed and distributed through moretraditional channels.

The Commissioner of Competition says this disadvantages innovative brokers who would prefer to establish virtualoffices, resulting in a substantial prevention or lessening of competition in violation of subsection 79(1) of the Competition Act, R.S.C.,1985, c. C-34 (Competition Act). TREB says that the restrictions do not have the effect of substantially preventing or lesseningcompetition. Furthermore, TREB claims the restrictions are due to privacy concerns and that its brokers’ clients have not consented tosuch disclosure of their information.

TREB also claims a copyright interest in the database it has compiled, and that under subsection79(5) of the Competition Act, the assertion of an intellectual property right cannot be an anti-competitive act. [3] For the reasons that follow, we would dismiss the appeal. II. Background and Procedural History [4] TREB, the appellant, is a not-for-profit corporation incorporated under the laws of Ontario. With approximately 46 000members, it is Canada’s largest real estate board.

TREB itself is not licensed to trade in real estate and does not do so. [5] TREB operates an online system for collecting and distributing real estate information among its members. This “MultipleListing Service” or MLS system is not accessible to the general public. Part of the MLS system is a database (the MLS database) ofinformation on properties, including, inter alia: addresses, list prices, interior and exterior photographs, length of time for sale, whetherthe listing was withdrawn or expired, etc.

The information is entered by TREB’s member brokers into the system and appears almostinstantly on the MLS database. When inputting information, some fields are mandatory and others are optional. The MLS databasecontains both current listings and an archive of inactive listings going back to 1986. TREB’s members have full access to the database atany time. [6] Many brokers operate sections of their websites where their clients can log in and view information, called “virtual officewebsites” or VOWs. TREB’s data feed delivers information to brokers to populate these sections of their websites.

Importantly, not allinformation in the MLS database is included in the data feed. Certain data is excluded (the “disputed data”). However, TREB’s VOWPolicy contains no restriction upon how its members can communicate the same disputed data to their clients through other deliverymechanisms.

Consequentially, some information cannot be shared with clients in a VOW, but can be shared with them by other methods,such as in person, by email, or by fax. [7] In May 2011, the Commissioner first applied to the Tribunal, under subsection 79(1) of the Competition Act, for an orderprohibiting certain behaviours related to TREB’s restrictive distribution of digitized data.

The Commissioner alleged that TREB’spolicies excluded, prevented, or impeded the emergence of innovative business models and service offerings in respect of the supply ofresidential real estate brokerage services in the GTA. [8] In April 2013, the Tribunal dismissed the Commissioner’s application, finding that the abuse of dominance provisions of theCompetition Act could not apply to TREB because, as a trade organization, TREB did not compete with its members (The Commissionerof Competition v. The Toronto Real Estate Board, 2013 Comp. Trib. 9, 2013 CACT 9 ).

However, on appeal in February 2014,this Court set aside the Tribunal’s order and referred the matter back for reconsideration, finding that subsection 79(1) of theCompetition Act could apply to TREB (Commissioner of Competition v. Toronto Real Estate Board, 2014 FCA 29, 456 N.R. 373 (TREBFCA 1), leave to appeal to S.C.C. refused, 35799 (24 July 2014) [[2014] 2 S.C.R. ix]). [9] The matter was reconsidered by a different panel of the Tribunal in the fall of 2015.

On April 27, 2016, the Tribunal issued itsreasons on the merits and made an order granting, in part, the Commissioner’s application (The Commissioner of Competition v. TheToronto Real Estate Board, 2016 Comp. Trib. 7 [cited above]). The issue of remedy was the subject of a further hearing and order of theTribunal on June 3, 2016 (The Commissioner of Competition v. The Toronto Real Estate Board, 2016 Comp.

Trib. 8 [cited above]).Those two decisions are now on appeal before this Court. [10] The intervener in this case is the Canadian Real Estate Association (CREA), a national organization representing the real estateindustry in Canada. TREB is a member of CREA. CREA owns the MLS trademarks. The MLS system is operated by local boards (inthis case, by TREB) under license from CREA. III. The Tribunal Decision [11] The Tribunal first addressed the abuse of dominance issue by defining the relevant market to be “the supply of MLS-basedresidential real estate brokerage services in the GTA” (TR, at paragraph 161).

The Tribunal then addressed the three-part test in

subsection 79(1) of the Competition Act . For ease of reference, we reproduce the provision here: Prohibition where abuse of dominant position 79

(1) Where, on application by the Commissioner, the Tribunal finds that (

a) one or more persons substantially or completely control, throughout Canada or any area thereof, a class or species of business, (

b) that person or those persons have engaged in or are engaging in a practice of anti-competitive acts, and (

c) the practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market, the Tribunal may make an order prohibiting all or any of those persons from engaging in that practice. [ 12 ] The Tribunal found that TREB “substantially or completely controls the supply of MLS-based residential real estate brokerage services in the GTA” and therefore the terms of paragraph 79(1) (

a) were met (TR, at paragraph 162). [ 13 ] With respect to paragraph 79(1)(b), the Tribunal found that TREB had engaged in, and continued to engage in a practice of anti- competitive acts (TR, at paragraph 454).

TREB took the position that its actions were motivated by concern for the privacy of real estate buyers’ and sellers’ information, and that this concern constituted a legitimate business justification for the VOW restrictions which had to be balanced against the evidence of anti-competitive intent (TR, at paragraphs 21, 285–287 and 321). [ 14 ] In this context, the Tribunal found TREB’s concern with privacy to be unpersuasive.

We will turn to this issue in greater detail later in these reasons; suffice to say at this point that, looking at the record before it, the Tribunal found little evidence that TREB’s VOW committee had considered or acted upon privacy concerns before establishing TREB’s VOW Policy (TR, at paragraphs 321, 360 and 390). [ 15 ] Turning to paragraph 79(1)(c), the Tribunal found that the VOW restrictions prevented competition substantially in the market.

After describing this branch of the test (TR, at paragraphs 456–483), the Tribunal adopted a “but for” approach to this analysis, comparing the real world with the hypothetical world in which the VOW restrictions did not exist.

Thus, in the Tribunal’s view, it was the burden of the Commissioner to adduce evidence to prove “a substantial difference between the level of actual or likely competition in the relevant market in the presence of the impugned practice and the level of competition that likely would have prevailed in the absence of that practice” (TR, at paragraph 482). [ 16 ] In describing the applicable test, the Tribunal made the point that the Commissioner could bring either quantitative or qualitative evidence, or both, to meet his burden.

Because of its view that “dynamic competition is generally more difficult to measure and to quantify”, there may be a greater need for the Commissioner to rely on qualitative evidence. This is particularly so in innovation cases.

However, the Tribunal also recognized “that it may be more difficult to meet this burden when the Commissioner relies largely on qualitative evidence” (TR, at paragraphs 471 and 470). [ 17 ] After reviewing the parties’ submissions on the evidence with respect to a lessening of competition (TR, at paragraphs 484–499), the Tribunal noted that “there is a high degree of competition in the Relevant Market, as reflected in considerable ongoing entry and exit, a significant degree of discounting activity with respect to net commissions, and a significant level of ongoing technological and other innovation, including with respect to quality and variety and through Internet-based data-sharing vehicles” (TR, at paragraph 501). [ 18 ] Nonetheless, in addressing the “but for” question, the Tribunal found that the VOW restrictions prevented competition in five ways: by increasing barriers to entry and expansion; by increasing costs imposed on VOWs; by reducing the range of brokerage services available in the market; by reducing the quality of brokerage service offerings; and by reducing innovation (TR, at paragraphs 505–619). [ 19 ] However, the Tribunal found that the Commissioner had failed to prove that the VOW restrictions were preventing competition in three other manners: by reducing downward pressure on broker commission rates; by reducing output; and by maintaining incentives for brokers to steer clients away from inefficient transactions (TR, at paragraphs 620–638). [ 20 ] After satisfying itself that the VOW restrictions were preventing competition in five ways, the Tribunal then addressed the substantiality of those anti-competitive effects.

Turning first to magnitude and degree, the Tribunal framed the question as whether “full- information VOW brokerages likely would be hired by significantly more clients as a real estate brokerage, ‘but for’ the aggregate impact of the three components of TREB’s practice of anti-competitive acts” as a result of being able to display the disputed data (TR, at paragraph 646 (emphasis in original)). [ 21 ] TREB had argued that without conversion of website viewers into clients, the popularity of a website was irrelevant (TR, at paragraphs 645 and 648).

However, the Tribunal found that website innovation could also be relevant if it spurred other competitors to compete (TR, at paragraph 649). [ 22 ] After noting that the Commissioner had failed to conduct an empirical assessment with regard to local markets where sold information (the final price at which a house sold) was available through VOWs and other local markets where such information was not available through VOWs, the Tribunal declined to draw the adverse inference against the Commissioner which TREB argued it should draw.

The Tribunal noted that “as a statutory authority, the Commissioner has to be prudent with, and make difficult decisions regarding the allocation of, the limited public funds available for administering and enforcing the Act at any given time” (TR, at paragraph 656). [ 23 ] The Tribunal also considered, in refusing to draw the inference, the fact that the Commissioner’s expert, Dr. Vistnes, had advised the Commissioner that an empirical assessment would be costly, difficult, and of little value.

Notwithstanding its refusal to draw the adverse inference sought by TREB, the Tribunal made it clear that the Commissioner continued to bear the burden of proving that the required elements of his application were met which “may well be a more challenging task in the absence of quantitative evidence” (TR, at paragraph 656).

[ 24 ] The Tribunal then stated that it was prepared to draw an adverse inference against the Commissioner in regard to the testimony of two of its witnesses, Messrs. Nagel and McMullin, whose brokerages (respectively Redfin Corporation and Viewpoint Realty Services Inc.) conducted business in areas where the disputed data was available and in other areas where such data was not available (Nova Scotia and parts of the United States).

Because neither witness presented evidence with regard to these other markets, the Tribunal inferred that the conversion rates of those websites would not be helpful to the Commissioner’s case. However, the Tribunal then noted that it would not give much weight to its inference because of Dr.

Vistnes’ opinion that the low conversion rates could be the result of local differences in the relevant markets. [ 25 ] The Tribunal also commented that “even a limited comparison between one local U.S. market where sold information is available and one local U.S. market where such information is not available may have been at least somewhat helpful”, adding that the same comment applied to Nova Scotia with respect to pending sold prices. The Tribunal also commented that the absence of such a comparison made its task with regard to the “substantiality” element of paragraph 79(1)(

c) much more difficult.

The Tribunal concluded by saying that the absence of such comparison “resulted in this case being much more of a ‘close call,’ than it otherwise may have been” (TR, at paragraph 658). [ 26 ] However, the Tribunal highlighted the little weight it gave to the low conversion rates [TR, at paragraph 662]: The Tribunal does not accord much significance to the fact that the low conversion rates of firms such as ViewPoint, Redfin and TheRedPin suggest that many consumers are evidently treating the information available on their websites as complements to the information available from the (different) broker they ultimately use to list or purchase their home.

The fact remains that the innovative tools, features and other services available on those websites is assisting them to compete, and is forcing traditional brokerages to respond. In other words, if we understand the Tribunal correctly, it was not prepared to, in effect, give any weight to the fact that the conversion rates of ViewPoint, Redfin, and TheRedPin were not significant.

However, later in its reasons, the Tribunal makes the finding that if the disputed data were available to these firms in the GTA, they likely would have been successful in converting “an increasing and significant number of website users into clients.” Paragraph 676 reads: The Tribunal concludes that being able to obtain sold information from the VOW Data Feed, and to work with that data as they see fit, would likely enable full-information VOWs, including ViewPoint and those such as TheRedPin who would like to become full- information VOWs, to convert an increasing and significant number of website users into clients. [ 27 ] Then, in dealing with the issue of qualitative evidence, the Tribunal made six observations based on the evidence adduced on behalf of the Commissioner [TR, at paragraphs 666–670 and 672]: First … the Disputed Data is very important, if not critical, in assisting Internet-based brokerages to distinguish themselves from incumbent traditional brokerages.… Second, home purchasers and sellers value being able to obtain information with respect to sold prices, the conditional sale status of homes in the market, firm “pending sold” information, [withdrawn, expired, suspended or terminated] listings and cooperating broker commissions prior to meeting with their broker/agent, or in any event prior to finalizing the listing price of their homes or making an offer on a home.

Third, an inability to display and use the Disputed Data to develop innovative products has been preventing, and is likely to continue to prevent, ViewPoint from entering the Relevant Market. This has also prevented Realosophy and TheRedPin from growing as much as they likely would have grown …. this also prevented Sam & Andy from expanding within the Relevant Market, and prevented their brokerage customers from doing the same.

Fourth, ViewPoint, Realosophy and TheRedPin are Internet-based innovative brokerages that, in aggregate, likely would have introduced a considerably broader range of brokerage services, increased the quality of some important services (such as CMAs), benefited from lower operating costs and considerably increased the overall level of innovation in the Relevant Market, “but for” the VOW Restrictions. … Fifth, the VOW Restrictions have erected barriers to the entry and expansion of innovative brokers in the Relevant Market.… … Sixth, the VOW Restrictions have stifled innovation in the supply of Internet-based real estate brokerage services in the GTA. [Emphasis in original.] [ 28 ] The Tribunal then discussed the importance of the disputed data fields to brokers and consumers, finding that sold data, pending and conditional solds, and withdrawn, expired, suspended or terminated listings were valued by home buyers and sellers (TR, at paragraphs 675–685).

In the Tribunal’s opinion, making cooperating broker commissions available would also increase transparency in the market and would allow brokers to distinguish themselves by providing more information (TR, at paragraphs 686–690). [ 29 ] The Tribunal then reviewed counterarguments to its above findings. The Tribunal did not find significant that some VOW operators in Nova Scotia, which does not have any VOW restrictions, had abandoned their VOWs (TR, at paragraph 693).

Likewise, the Tribunal did not find significant the fact that statistics from the National Association of Realtors in the United States indicated that customers did not value the disputed data fields that highly (TR, at paragraphs 694–696). The Tribunal noted that in the United States, where sold information was “widely displayed by competitor websites”, the National Association of Realtors had started displaying sold information on what appeared to be its official website (TR, at paragraph 700).

In addition, the Tribunal was satisfied that the fact that brokers displayed the disputed data when permitted indicated that that information was of value to home buyers; otherwise brokers would not display it (TR, at paragraph 701).

[ 30 ] The Tribunal stated its conclusion on the magnitude of the effect of the VOW restrictions on competition in the following way [TR, at paragraph 702]: For the reasons set forth above, the Tribunal concludes that the VOW Restrictions have adversely affected non-price competition in the Relevant Market to a degree that is material.

Indeed, the Tribunal concludes that the aggregate adverse impact of the VOW Restrictions on non-price competition has been substantial, having regard to the considerable negative effect on the range of brokerage services, the negative effect on the quality of service offerings, and the considerable adverse impact on innovation in the Relevant Market . In the absence of an order, this substantial adverse impact is likely to continue.

The Tribunal has reached this conclusion despite the fact that, the quantitative evidence on commission rates does not indicate that net commissions for real estate brokerage services were, are or likely would be, materially higher than in the absence of the VOW Restrictions. [Emphasis added.] [ 31 ] Then, turning to duration and scope, the Tribunal found that, as the VOW restrictions had been in place since 2011, the duration was substantial.

Likewise, as the effects were present throughout the GTA, a substantial part of the market was impacted (TR, at paragraphs 703–704). [ 32 ] Thus, the Tribunal found that all three of the subsection 79(1) requirements had been met and that the VOW restrictions were substantially preventing competition for residential real estate brokerage services in the GTA. At paragraphs 705 to 715 of its reasons, the Tribunal summarized its views on the three elements of subsection 79(1). [ 33 ] Turning to copyright, the Tribunal found that TREB did not lead sufficient evidence to demonstrate copyright in the MLS database.

Copyright in a database exists where the “selection or arrangement of data” is original (TR, at paragraph 732). The Tribunal found that TREB’s evidence did not speak to skill and judgment in compiling the database, but rather illustrated that it was a more mechanical exercise.

The Tribunal pointed to many facts including: TREB did not present witnesses on the arrangement of the data; a third party corrects errors in the database; contracts referencing copyright are not evidence that copyright exists; members provide the information which is uploaded “almost instantaneously” to the database; TREB’s database is in line with industry norms across Canada; and creating rules on accuracy and quality of the information does not reflect the originality of the work (TR, at paragraph 737). [ 34 ] In the alternative, the Tribunal found that, even if TREB had copyright in the database, it would not enjoy the protection offered by subsection 79(5) because TREB’s conduct amounted to more than the “mere exercise” of its intellectual property rights (TR, at paragraphs 720–721 and 746–758).

IV. Issues [ 35 ] In order to dispose of this appeal, we must determine the three following issues: 1. Did the Tribunal err in finding that TREB had substantially reduced competition within the meaning of subsection 79(1) of the Competition Act ? 2. Did the Tribunal err in failing to conclude that TREB’s privacy concerns or statutory obligations constituted a business justification within the scope of paragraph 79(1) (b)? 3. Does subsection 79(5) of the Competition Act preclude TREB and CREA from advancing a claim in copyright in the MLS database?

If not, did the Tribunal err in its consideration of TREB’s claim of copyright? V. Analysis A. Standard of Review [ 36 ] Before addressing the three issues, a few words on the standard of review are necessary. [ 37 ] There is a statutory right of appeal to this Court from decisions of the Tribunal. Subsection 13(1) of the Competition Tribunal Act , R.S.C., 1985 (2nd Supp.), c. 19 ( Competition Tribunal Act ) provides that any decision or order can be appealed “as if it were a judgment of the Federal Court.” In Tervita Corporation v.

Canada (Commissioner of Competition) , 2013 FCA 28 , [2014] 2 F.C.R. 352 ( Tervita FCA ), our Court held that questions of law arising from decisions of the Tribunal were to be reviewed on the standard of correctness (TR, at paragraphs 53–59; see also Canada (Commissioner of Competition) v. Superior Propane Inc. , 2001 FCA 104 , [2001] 3 F.C. 185, at paragraph 88 ). That determination was upheld by the Supreme Court of Canada in Tervita Corp. v.

Canada (Commissioner of Competition ), 2015 SCC 3 , [2015] 1 S.C.R. 161 ( Tervita SCC ). [ 38 ] As to questions of mixed fact and law, the Supreme Court in Tervita SCC also upheld this Court’s determination in Tervita FCA that such questions were to be determined on the standard of reasonableness. With regard to questions of fact, leave of this Court is required ( Competition Tribunal Act , subsection 13(2)). In the present matter, no such leave was sought and consequently we cannot interfere with the Tribunal’s findings of fact (see CarGurus, Inc. v.

Trader Corporation , 2017 FCA 181 , at paragraph 17 ; Nadeau Poultry Farm Limited v. Groupe Westco Inc. , 2011 FCA 188 , 419 N.R. 333 ( Nadeau Poultry Farm ), at paragraph 47 ). B. Substantial Reduction in Competition

(1) TREB’s and CREA’s Submissions [ 39 ] TREB submits that the Tribunal erred in finding that the test under subsection 79(1) of the Competition Act was made out. In its view, the Commissioner bore the burden of proving each element of the test and did not discharge that burden on any of the three elements. [ 40 ] TREB asserts that since it does not control the relevant market, paragraph 79(1) (

a) has not been established.

[ 41 ] TREB submits that it did not act with the necessary anti-competitive purpose, therefore the Tribunal erred in finding that paragraph 79(1) (

b) was made out. In its view, the VOW Policy was meant to allow its members to offer VOWs and thus reach a greater range of potential buyers. The exclusion of some data from the data feed was made for legitimate privacy related reasons. [ 42 ] With respect to paragraph 79(1)(c), TREB submits that the Tribunal erred in accepting speculative qualitative evidence. Actual quantitative evidence was available and should have been brought forward by the Commissioner. His failure to do so should have led the Tribunal to make an adverse inference against him.

CREA, the intervener, agrees with TREB’s submissions on these three points. [ 43 ] CREA further argues that the Tribunal read out, for all intents and purposes, the requirement of “substantiality” from the subsection 79(1) test. In its view, statements by brokers are insufficient to establish that access to the disputed data would increase competition substantially. While access to the disputed data may help brokers improve their services, this is not equivalent to a competitive benefit.

CREA points to other evidence it claims demonstrates that brokers operating with the current VOW data feed are equally or more competitive than those with access to more data. Furthermore, CREA asserts that there is no proven link between broker success and receiving more data.

(2) The Commissioner’s Submissions [ 44 ] The Commissioner asserts that TREB’s policies regarding the disputed data comprise at least three acts that constitute an anti- competitive practice, as quoted by the Tribunal at paragraph 320 of its reasons: i. The exclusion of the Disputed Data from TREB’s VOW Data Feed; ii. Provisions in TREB’s VOW Policy and Rules that prohibit Members who want to provide services through a VOW from using the information included in the VOW Data Feed for any purpose other than display on a website; and iii.

Prohibiting TREB’s Members from displaying certain information, including the Disputed Data, on their VOWs…. This prohibition is reinforced by terms in TREB’s Data Feed Agreement that limit the use of the MLS data in the VOW Data Feed to a purpose that is narrower than the corresponding provision in the [authorized user agreement] that applies to Members using the Stratus system. [ 45 ] In other words, the Commissioner argues that it is anti-competitive to prohibit the disputed data from being distributed via the data feed. [ 46 ] The Commissioner further submits that the Tribunal’s paragraph 79(1)(

b) analysis is reasonable, entitled to deference, and supported by the evidence. The Tribunal applied the correct legal test, and its finding regarding TREB’s purpose in implementing the VOW restrictions is one of fact, and therefore not reviewable on this appeal. In the alternative, the Commissioner submits that the facts indicate that the Tribunal’s finding on this point was reasonable. The Tribunal looked at the evidence as a whole and determined that, while privacy concerns were mentioned at TREB’s VOW taskforce meetings, they were not a principal motivating factor.

Furthermore, this finding turned on a credibility assessment of the testimony of Mr. Richardson, TREB’s CEO, which is entitled to deference. [ 47 ] Regarding paragraph 79(1)(c), the Commissioner submits that the Tribunal once again applied the correct legal test. TREB and CREA misstate the law when they say that the Commissioner must provide quantitative evidence to prove a substantial lessening or prevention of competition. In the Commissioner’s view, this position is not supported by the case law.

The Commissioner differentiates Tervita SCC , which found quantification necessary for a merger test under a different

section of the Competition Act , namely subsection 96(1) . Indeed, according to the Commissioner, non-price effects such as service quality, range of products, and innovation are not amenable to quantification. The Commissioner submits that TREB and CREA are de facto arguing that he has a legal burden to quantify the substantial lessening or preventing of competition. In addition, the Commissioner says that the Tribunal’s refusal to draw an adverse inference against him on this point is entitled to deference.

(3) The Abuse of Dominance Framework [ 48 ] Subsection 79(1), which is reproduced at paragraph 11 above, sets out the three requirements necessary to establish an abuse of dominant position. The Commissioner bears the burden of establishing each of these elements ( Canada (Commissioner of Competition) v.

Canada Pipe Co. , 2006 FCA 233 , [2007] 2 F.C.R. 3 , 268 D.L.R. (4th) 193 ( Canada Pipe ), at paragraph 46 , leave to appeal to S.C.C. refused, 31637 (10 May 2007) [[2007] 1 S.C.R. vii]).The burden of proof with respect to each element is the balance of probabilities ( Canada Pipe , at paragraph 46; TR, at paragraph 34). [ 49 ] Once the Commissioner establishes each element of subsection 79(1), the person or persons against whom the Commissioner’s proceedings are directed, in this case TREB, can avoid sanction if they demonstrate that the impugned practice falls under one of the statutory exemptions.

The only provision relevant to this case is subsection 79(5) of the Competition Act , which states that “an act engaged in pursuant only to the exercise of any right or enjoyment of any interest” derived under certain legislation pertaining to intellectual or industrial property, including the Copyright Act , R.S.C., 1985, c. C-42 ( Copyright Act ), is not an anti-competitive act. [ 50 ] TREB says, in its written submissions, that it “does not control the relevant market(s)” (TREB’s memorandum of fact and law, at paragraph 66). However, this is the extent of its submissions on the issue.

As TREB’s substantive arguments clearly focus on paragraphs 79(1)(

b) and (c), we continue on to examine in more depth the requirements of those provisions. (4) Paragraph 79(1)(b) [ 51 ] Paragraph 79(1)(

b) requires that the person or persons “have engaged in or are engaging in a practice of anti-competitive acts”. There is no dispute that TREB’s VOW policies constitute a practice. An indicative list of anti-competitive acts is provided in the Competition Act at

section 78 . None of those acts are directly relevant to this appeal. However, that list is non-exhaustive. [ 52 ] This Court in Canada Pipe found that an anti-competitive act is defined by reference to its purpose. Drawing on the Tribunal’s decision in Canada (Director of Investigation and Research, Competition Act) v. NutraSweet Co. (1990), 32 C.P.R. (3d) 1 (Comp. Trib.)

(NutraSweet), this Court said that the requisite purpose is “an intended predatory, exclusionary or disciplinary negative effect on acompetitor” (Canada Pipe, at paras. 66 and 74. See also NutraSweet, at page 34). [53] To be more precise, NutraSweet pointed out that the “purpose common to all acts [listed in

section 78], save that found inparagraph 78(f), is an intended negative effect on a competitor that is predatory, exclusionary or disciplinary” (at page 34). Indeed,paragraph 78(1)(

f) cannot apply to a competitor, as it reads: Definition of anti-competitive act 78

(1) For the purposes of

section 79, anti-competitive act, without restricting the generality of the term, includes any of the followingacts: … (

f) buying up of products to prevent the erosion of existing price levels. [54] In TREB FCA 1, Sharlow J.A. determined that the “on the competitor” language from NutraSweet and Canada Pipe could notmean “on a competitor of the person accused of anti-competitive practices” (at paragraphs 19–20). On that premise, requiring apredatory, exclusionary, or disciplinary negative effect on a competitor in all cases would render paragraph 78(1)(

f) meaningless.Paragraph (

f) reflects a self-serving intent, not a relative one intended to harm a competitor. Yet it has been defined by Parliament toconstitute an anti-competitive act. [55] With this in mind, we believe that the Tribunal applied the correct framework with respect to paragraph 79(1)(b). The Tribunalstated that it was looking for a predatory, exclusionary, or disciplinary effect on a competitor (TR, at paragraph 272).

Acting on thedirection given by TREB FCA 1, the Tribunal defined competitor to mean “a person who competes in the relevant market, or who is apotential entrant into that market” and not a “competitor” of TREB (TR, at paragraph 277 [emphasis in original]). [56] The Tribunal correctly noted that subjective or objective intent could be used to demonstrate the requisite intent (TR, atparagraphs 274 and 283; Canada Pipe, at paragraph 72). It closely scrutinized the evidence of TREB’s subjective intent (TR, atparagraphs 319–431).

The Tribunal also looked to the “reasonably foreseeable or expected objective effects of the act (from whichintention may be deemed …)” (TR, at paragraphs 432–451) as instructed by Canada Pipe, at paragraph 67 (see also Tele-Direct(Publications) Inc. v. American Business Information, Inc., (FCA), [1998] 2 F.C. 22 154 D.L.R. (4th) 328 (C.A.)(Tele-Direct), leave to appeal refused, 26403 (21 May, 1998) [[1998] 1 S.C.R. xv]).

The Tribunal conducted a balancing exercisebetween the exclusionary effects (evidenced by subjective intent) and TREB’s alleged legitimate business justifications (TR, atparagraphs 319–431; Canada Pipe, at paragraph 73). [57] The application of this test to the facts is a question of mixed law and fact.

Ultimately, the Tribunal found that “the evidence ofsubjective anti-competitive intent and reasonably foreseeable exclusionary effects outweighs the very limited evidence that was adducedin support of the alleged legitimate business justifications that TREB claims underpinned the development and implementation of theVOW Restrictions” (TR, at paragraph 452). This is a very fact-driven analysis. The Tribunal weighed the evidence, heard competingwitnesses, and made findings of credibility. We see no error that would make this analysis unreasonable. (5) Paragraph 79(1)(c) [58] Paragraph 79(1)(

c) requires that “the practice has had, is having or is likely to have the effect of preventing or lesseningcompetition substantially in a market” (underlining added). The market in question is not contested. The Tribunal defined the market tobe “the supply of MLS-based residential real estate brokerage services in the GTA” (TR, at paragraph 161). We now turn to address thefive other elements, as underlined above, in turn. (

a) The Practice [59] The Commissioner’s notice of application was filed in May 2011, before TREB’s current VOW Policy and Rules were in place.In November 2011, TREB enacted its new rules. The Commissioner accordingly amended her statement of claim. Nonetheless, thestatement of claim remains broadly worded and does not specify which particular parts of TREB’s rules and policies the Commissioner isimpugning. [60] The alleged anti-competitive practices relate to what TREB does with some of the data from the MLS system and what TREBallows its members to do with this data.

This “disputed data” is defined by the Tribunal, at paragraph 14 of its reasons, to include fourtypes of information: • sold data • pending sold data • withdrawn, expired, suspended, or terminated listings (WESTs) • offers of commission to the successful home buyer’s real estate broker, also called the cooperating broker. The utility of this data is described in the Tribunal’s reasons at paragraphs 675 to 691, which fall within the “Substantiality”

section ofthe reasons. [61] The parties’ submissions and the evidence centred almost entirely on three particular practices, which the Tribunal collectivelyrefers to as the “VOW Restrictions” (TR, at paragraph 14). Those practices were the focus of the Tribunal’s reasons and, after separatewritten and oral submissions on remedy, these restrictions remained the focus of the Tribunal’s order. The following chart provides an

overview of the restrictions, as listed in the Tribunal’s reasons, at paragraph 14, and their sources. Restriction Source The exclusion of the disputed data from the VOW Datafeed Policy articles 17, 15, 24 The prohibition on the display of the disputed data on a VOW Rule 823; Datafeed Agreement clause 6.3(

a) The prohibition on the use of the VOW Datafeed information for any purpose other than display on a website Datafeed Agreement clause 6.2(f), (g) [ 62 ] It is worth noting that the following TREB rules and policies are not affected by the Tribunal’s order. Restriction Source An individual needs the permission of their broker of record to establish a VOW Datafeed Agreement clause 6.3(

g) Before viewing listing information on a VOW, a consumer must enter a lawful broker-consumer relationship with the brokerage; this includes agreeing to terms and conditions acknowledging entering into such a relationship and declaring that the consumer has a bona fide interest in the purchase, sale or lease of residential real estate Rules 805, 809(i), (iii) Policy articles 1, 6, 7(iii) Any listings other than TREB’s MLS listings must be labelled as such and searched separately by consumers Rules 828, 829 (

b) Temporal Requirement [ 63 ] The temporal aspect of paragraph 79(1)(

c) is not in issue. The effect on competition can be past, present, or future ( Canada Pipe , at paragraph 44) The Tribunal found that the VOW restrictions had anti-competitive effects in the past, present and future (TR, at paragraph 706). [ 64 ] A duration of two years will usually be sufficient to establish an effect ( Tervita FCA , at paragraph 85). Here, TREB’s VOW restrictions came into force in November 2011 and the Tribunal found the anti-competitive effects had been occurring for a substantial period of time (TR, at paragraphs 703 and 708). (

c) Preventing or Lessening [ 65 ] Paragraph 79(1)(

c) refers to either a prevention and/or lessening of competition. The Tribunal found a prevention of competition (TR, at paragraph 705). This means that there is no past time that the Tribunal can look at to compare with the present: the Tribunal must look at the present state of competition compared to a hypothetical world in which the VOW restrictions did not exist. This approach is not contested. (

d) Competition [ 66 ] Paragraph 79(1)(

c) looks to the level of competition, as opposed to any effects of the behaviour on competitors ( Canada Pipe , at paragraphs 68–69). A “but for” inquiry is an acceptable method of analysis ( Canada Pipe , at paragraphs 39–40). This is a relative assessment: the current intensity of competition is not relevant in isolation. [ 67 ] Two questions must be asked regarding the nature of the competition element. The first is: competition for what? Here, the relevant competition is over real estate brokerage clients (TR, at paragraphs 645–646).

It is important to distinguish this competition from other, related, competition: for example, all websites want to attract web traffic in order to compete for advertising dollars. [ 68 ] Second, we must ask: competition between whom? This case is about competition in the “the supply of MLS-based residential real estate brokerage services in the GTA” (TR, at paragraph 161). In order to supply MLS-based services, a broker must be a member of TREB.

Therefore, we are really discussing competition between segments of TREB members. [ 69 ] The use of imprecise terminology sometimes makes it difficult to distinguish between competing TREB members. The Tribunal uses the terms “full information VOW-based brokerages” or “full information VOW brokerages” in contrast to “traditional ‘bricks-and- mortar’ brokerages.” The Commissioner uses the terms “genuine VOWs” and “innovative brokers” in contrast to “VOWs.” Dr.

Vistnes, the Commissioner’s expert witness, uses the terms “innovative VOW-based brokers” or “VOW-based brokers” in contrast with “traditional brick-and-mortar brokers”. [ 70 ] However, for the purpose of the legal analysis required by paragraph 79(1)(c), the current competition between any two groups is not important per se. Rather, it is the general competition in the defined market between all participants now (with the VOW restrictions) and in the hypothetical “but for” world (without the VOW restrictions). (

e) Substantiality [ 71 ] The final element requiring elaboration is substantiality: the difference between the present and “but for” worlds must be substantial ( Canada Pipe , at paragraph 36). In its reasons, the Tribunal addressed substantiality in a separate

section of its reasons (TR, at paragraphs 640–704).

(

i) Overview of the Evidence on Paragraph 79(1)(c) [72] There were eight expert reports in evidence before the Tribunal, four from the initial hearing in 2012 and four from theredetermination hearing in 2015. [73] Generally, the Tribunal found the evidence of the Commissioner’s expert Dr. Vistnes to be credible and persuasive. However, onthe particular issue of 79(1)(

c) the Tribunal found that his evidence had missed the mark, saying that “Dr. Vistnes did not have a goodunderstanding of the legal test for what constitutes a ‘substantial’ prevention or lessening of competition, as contemplated by paragraph79(1)(

c) of the Act. For this reason, the Tribunal refrained from accepting Dr. Vistnes’ evidence on that particular issue” (TR, atparagraph 108). [74] The Tribunal found Dr. Church, called by TREB, “to be less forthright, objective and helpful than Dr. Vistnes or Dr. Flyer.” TheTribunal also found Dr. Church “to be evasive at several points during his cross-examination and to have made unsupported, speculativeassertions at various points in his testimony and in his written expert reports” (TR, at paragraph 109). Dr.

Church’s evidence on the issueof whether the prevention of competition was “substantial” is neither referred to nor mentioned in the Tribunal’s reasons. [75] The Tribunal found Dr. Flyer, called by CREA, to be generally objective and forthcoming. However, it also found that “histestimony often remained general and high-level, and that he did not immerse himself in the details of the Canadian real estate industryand in the specific evidence and matters at issue in this proceeding to the same degree as Dr. Vistnes and Dr. Church” (TR, at paragraph110) (We note, parenthetically, that given the Tribunal’s view of Dr.

Church’s evidence, the criticism of Dr. Flyer on the basis that hisevidence was not as detailed as Dr. Church is somewhat incongruous.) Dr. Flyer focused on the economic impact of the requestedremedy on CREA, with considerable attention to the impact on CREA’s trademarks. In our view, his reports are of little help inanalyzing paragraph 79(1)(c). [76] In addition, there are a total of 23 witness statements from 15 witnesses.

The names and the firms of the witnesses whosetestimonies (and statements) are most relevant to the Tribunal’s determination of substantial prevention of competition are the following: • William McMullin, Chief Executive Officer of ViewPoint Realty Services Inc. (Viewpoint) • Shayan Hamidi and Tarik Gidamy, co-founders of TheRedPin.com Realty Inc. (TheRedPin) • Joel Silver, Managing Director of Trilogy Growth, LP (Trilogy) • Mark Enchin, Sales Representative of Realty Executives Plus Ltd. (Realty Executives) • Scott Nagel, Chief Executive Officer of Redfin Corporation (Redfin) • Sam Prochazka, Chief Executive Officer of Sam & Andy Inc. (Sam & Andy) • Urmi Desai and John Pasalis, co-founders of Realosophy Realty Inc. (Realosophy) [77] TREB and CREA do not challenge the admissibility of the statements and testimonies of the lay witnesses on which the Tribunalrelies for the findings which form the basis of its conclusion that the anti-competitive effects resulting from the VOW restrictions lead, orare likely to lead, to a substantial prevention of competition in the GTA.

Nevertheless, we believe that some guidance with respect to theevidence of lay witnesses in the context of a case like the one now before us might be useful. [78] Generally, the evidence of lay witnesses is limited to facts of which they are aware (David Paciocco and Lee Stuesser, The Lawof Evidence, 7th ed. (Toronto: Irwin Law, 2015) at page195; Ron Delisle et al., Evidence: Principles and Problems, 11th ed. (Toronto:Thompson Reuters, 2015), at page 874).

This principle is reflected in subrules 68(2) and 69(2) of the Competition Tribunal Rules,SOR/2008-141, which are identical, and read “[u]nless the parties otherwise agree, the witness statements shall include only factevidence that could be given orally by the witness together with admissible documents as attachments or references to those documents.” [79] However, opinion evidence from lay witnesses is acceptable in limited circumstances: where the witness is in a better positionthan the trier of fact to form the conclusions; the conclusions are ones that a person of ordinary experience can make; the witnesses havethe experiential capacity to make the conclusions; or where giving opinions is a convenient mode of stating facts too subtle orcomplicated to be narrated as facts (Graat v.

The Queen, (SCC), [1982] 2 S.C.R. 819, at pages 836–839, 144 D.L.R. (3d)267; Hunt (Litigation guardian of) v. Sutton GroupIncentive Realty Inc. (2002), (ON CA), 60 O.R. (3d) 665, 215D.L.R. (4th) 193 (C.A.), at paragraph 17, quoting with approval Alan W. Bryant, Sidney N. Lederman & Michelle K. Fuerst, The Law ofEvidence in Canada, 4th ed. (Markham, Ont.: LexisNexis Canada, 2014), at page 12.14.

See also Paciocco and Stuesser, above, at pages197–198 and Delisle et al., above, at pages 874–876). [80] The question of opinion evidence given by lay witnesses was recently addressed by this Court in Pfizer Canada Inc. v.

TevaCanada Limited, 2016 FCA 161, 400 D.L.R. (4th) 723, where Stratas J.A., writing for this Court, upheld the Federal Court’s acceptanceof a corporate executive’s testimony about what his pharmaceutical company would have done in the “but for” world in circumstanceswhere the witness had actual knowledge of the company’s relevant, real world, operations (at paragraphs 105–108, 112 and 121). [81] Nevertheless, we think it is clear that lay witnesses cannot testify on matters beyond their own conduct and that of theirbusinesses in the “but for” world.

Lay witnesses are not in a better position than the trier of fact to form conclusions about the greatereconomic consequences of the “but for” world, nor do they have the experiential competence. While questions pertaining to how theirparticular business might have responded to the hypothetical world are permissible provided the requisite evidentiary foundation isestablished, any witness testimony regarding the impact of the VOW restrictions on competition generally strays into the realm ofinappropriate opinion evidence. (ii) Substantiality Analysis

[ 82 ] Before addressing this important issue, it will be helpful to consider what the Supreme Court and this Court have said in regard to the expression “the effect of preventing or lessening competition substantially” found in paragraph 79(1) (

c) of the Competition Act and the test relevant to a determination of substantial lessening or prevention of competition. [ 83 ] First, in Tervita SCC , albeit in the context of the merger provisions of the Competition Act , the Supreme Court made the following comments at paragraphs 44 to 46 of its reasons: Generally, a merger will only be found to meet the “lessen or prevent substantially” standard where it [here, the “it” means the practice at issue] is “likely to create, maintain or enhance the ability of the merged entity to exercise market power , unilaterally or in coordination with other firms” ….

Market power is the ability to “profitably influence price, quality, variety, service, advertising, innovation or other dimensions of competition” …. Or, in other words, market power is “the ability to maintain prices above the competitive level for a considerable period of time without such action being unprofitable” …; where “price” is “generally used as shorthand for all aspects of a firm’s actions that have an impact on buyers ….

If a merger does not have or likely have market power effects, s. 92 will not generally be engaged … The merger’s likely effect on market power is what determines whether its effect on competition is likely to be “substantial”. Two key components in assessing substantiality under the “lessening” branch are the degree and duration of the exercise of market power ( Hillsdown , at pp. 328-29). There is no reason why degree and duration should not also be considered under the “prevention” branch. What constitutes “substantial” will vary from case to case.

The Tribunal has not found it useful to apply rigid numerical criteria: What will constitute a likely “substantial” lessening will depend on the circumstances of each case... .Various tests have been proposed: a likely 5% price rise sustainable for one year; a 5% price rise sustainable over two years; a small but significant and non-transitory price rise.

The Tribunal does not find it useful to apply rigid numerical criteria although these may be useful for enforcement purposes. ( Hillsdown , at pp. 328-329) [Emphasis added; references omitted.] [ 84 ] Then, at paragraphs 50 to 51 of Tervita SCC , the Supreme Court indicated that the words of paragraph 79(1) (

c) of the Competition Act and those of subsection 92(1) were similar and thus conveyed the same idea: Canada Pipe was a case involving abuse of dominance under s. 79(1)(

c) of the Act. The words of s. 79(1)( c ) ― “is having or is likely to have the effect of preventing or lessening competition substantially in a market” ― are very close to the words of s. 92(1) ― “likely to prevent or lessen” ― and convey the same ideas. In Canada Pipe , the Federal Court of Appeal employed a “but for” test to conduct the inquiry: … the Tribunal must compare the level of competitiveness in the presence of the impugned practice with that which would exist in the absence of the practice, and then determine whether the preve nting or lessening of competition, if any, is “substantial”... . The comparative

interpretation described above is in my view equivalent to the “but for” test proposed by the appellant. [paras. 37-38] A similar comparative analysis is conducted under s. 92(1). A merger review, by its nature, requires examining a counterfactual scenario: “... whether the merger will give the merged entity the ability to prevent or lessen competition substantially compared to the pre-merger benchmark or ‘but for’ world” (Facey and Brown, at p. 205).

The “but for” test is the appropriate analytical framework under s. 92 . [ 85 ] Lastly, at paragraph 60 of its reasons in Tervita SCC , the Supreme Court made the following remarks regarding the “but for” test: The concern under the “prevention” branch of s. 92 is that a firm with market power will use a merger to prevent competition that could otherwise arise in a contestable market. The analysis under this branch requires looking to the “but for” market condition to assess the competitive landscape that would likely exist if there was no merger.

It is necessary to identify the potential competitor, assess whether but for the merger [here “but for” the anti-competitive practice] that potential competitor is likely to enter the market and determine whether its effect on the market would likely be substantial. [Emphasis added.] [ 86 ] In Canada Pipe , at paragraphs 36 to 38 and 45 to 46, this Court, in addressing the test required to make a determination under paragraph 79(1)(c), observed that the test is relative in nature.

Rather than assessing the absolute level of competition in the market the Tribunal must assess the level of competition in the presence of the impugned practice and compare this with the level of competition that would exist in the absence of the practice. This difference can occur in the past, present or future and the test will be made out where the difference is substantial.

This Court noted that it is the role of the Tribunal to adapt this assessment to the case before it. [ 87 ] At paragraph 46 of Canada Pipe , this Court explicitly indicated that it was not dictating the type of evidence required, rather it wrote: “Ultimately, the Commissioner bears the burden of proof for each requisite element, and the Tribunal must be convinced on the balance of probabilities.

The evidence required to meet this burden can only be determined by the Tribunal on a case-by-case basis.” [ 88 ] It is clear from Canada Pipe that what will constitute a “substantial” lessening or prevention of competition depends on the facts of the case and that the Tribunal is not bound to apply a particular test in determining the issue.

However, it is clear that in order for the Tribunal to find that a substantial lessening of competition has been established, it must be able, on the evidence before it, to conclude that were it not for the anti-competitive effects of the practice at issue, the market at issue would be substantially more competitive.

In other words, in the present matter, would there be a substantial incremental benefit to competition arising from the availability of the disputed data in TREB’s VOW data feed? [ 89 ] In the present matter the Tribunal turned its mind to both the meaning of “substantiality” and the appropriate test to be applied.

The Tribunal noted, at paragraph 461 of its reasons, that substantiality is an assessment of the exercise of market power. Market power, as the Tribunal defines it in paragraph 165 of its reasons, is the ability to control either prices or non-price dimensions of competition for a significant time. Non-price dimensions of competition include innovation and quality of service, among others. [ 90 ] At paragraph 480 of its reasons, the Tribunal acknowledges that the test for substantiality is relative in nature.

That is, the Tribunal is to compare the level of competition that exists in the actual world with the level of competition that would exist, but for, the impugned practices. The test then, is to assess whether the difference between these two worlds is substantial. The Tribunal indicates that this test will be met where either price is materially higher, or one or more non-price dimension are materially lower than in the absence of the practices. [ 91 ] In making this assessment the Tribunal will have regard to the overall economic conditions of the relevant market.

As explained in paragraph 468 of its reasons, this means that the duration of the impact will be considered along with the relative size of impact to determine whether the impact is substantial. [ 92 ] In our view, the Tribunal correctly understood the significance of the word “substantially” and the test which it had to apply in determining whether or not, on the facts of this case, TREB’s practice regarding the disputed data was a practice which had the effect of preventing competition substantially in the GTA. [ 93 ] With these comments in mind, we now turn to TREB’s and CREA’s submissions as to why we should intervene.

Their principal submission on substantiality is that it was improper for the Tribunal to determine whether the anti-competitive effects led to a substantial prevention of competition on the basis of qualitative evidence only. In their view, this led the Tribunal to determine the issue on “speculative opinion evidence unsupported by available empirical evidence” (TREB’s memorandum of fact and law, at paragraph 14). [ 94 ] In making this submission, TREB and CREA put forward two arguments.

The first is that in Tervita SCC , the Supreme Court held that the Commissioner had an obligation to quantify any quantifiable anti-competitive effect and that failure to do so would prevent him from relying on qualitative evidence in respect of effects which could have been quantified.

Thus, in the view of TREB and CREA, anti-competitive effects can be considered qualitatively by the Tribunal only if they cannot be quantitatively estimated. [ 95 ] TREB and CREA further say that the Tribunal erred in concluding (TR, at paragraphs 469–470) that the aforementioned principle, enunciated by the Supreme Court in Tervita SCC at paragraph 124 of its reasons, did not apply to a determination made under

section 92 of the Competition Act or under subsection 79(1) thereof. In other words, they submit that the Tribunal erred in finding that the Supreme Court’s holding in Tervita SCC , on which TREB and CREA rely, was limited to determinations under subsection 96(1) . [ 96 ] More particularly, TREB and CREA say that the rationale underlying the Supreme Court’s statement of principle in Tervita SCC not only applies to determinations under subsection 96(1) , but also to determinations arising under both

section 92 and subsection 79(1). In support of this view, they rely on that part of paragraph 124 of Tervita SCC which we have underlined herein below. The Commissioner argues that quantification is not a legal prerequisite to considering anti-competitive effects (R.F., paras. 84 and 88). On the contrary, the Commissioner’s legal burden is to quantify the quantifiable anti-competitive effects upon which reliance is placed. Where effects are measurable, they must be estimated. Effects will only be considered qualitatively if they cannot be quantitatively estimated.

A failure to quantify quantifiable effects will not result in such effects being considered qualitatively ( Superior Propane IV , at para. 35). This approach minimizes the degree of subjective judgment necessary in the analysis and enables the Tribunal to make the most objective assessment possible in the circumstances ( Superior Propane IV , at para. 38).

An approach that would permit the Commissioner to meet her burden without at least establishing estimates of the quantifiable anti-competitive effects fails to provide the merging parties with the information they need to know the case they have to meet. [Emphasis added.] [ 97 ] TREB’s and CREA’s second argument is that the Tribunal should have drawn an adverse inference against the Commissioner by reason of his failure to adduce empirical evidence concerning competition on price and dynamic competition in markets (United States and Nova Scotia) where full information VOWs exist and in respect of which it was possible to measure the actual effects on competition.

They say that the Commissioner deliberately decided not to perform a quantitative analysis of competition effects in these markets.

More particularly, TREB and CREA argue that the Tribunal should have drawn the only inference possible resulting from the Commissioner’s failure to adduce quantitative evidence, “namely that there was no substantial prevention or lessening of competition, dynamic or otherwise, that could be demonstrated on a balance of probabilities” (TREB’s memorandum of fact and law, at paragraph 77). [ 98 ] TREB and CREA then address the reasons given by the Tribunal for not drawing an adverse inference against the Commissioner, namely that the Commissioner had to be prudent with regard to the spending of the funds under his authority and because of Dr.

Vistnes’ advice to the Commissioner that a study of the United States’ experience would constitute a difficult and expensive endeavour that would likely not yield useful answers. (TREB and CREA say that Dr. Vistnes’ testimony on this point constitutes an off the cuff response to a question posed by the Tribunal during the hearing.) TREB and CREA say that the reasons given by the Tribunal for refusing to draw the adverse inference are improper and cannot be right. [ 99 ] In our respectful view, TREB’s and CREA’s submissions cannot succeed.

First in Tervita SCC , the Supreme Court did not, contrary to TREB’s and CREA’s assertion, make any pronouncement pertaining to

section 92 of the Competition Act regarding the necessity

[…]