By Paul Feuer
The real estate industry is highly competitive, and no one knows this better than a REALTOR®. From the moment you wake up, your phone is in your hand and clients are on your mind. And competition is fiercer than ever: many new and innovative brokerages compete with traditional full service brokerages in a wide spectrum of business models.
A good description of this spectrum is that on one end, there are mere posters who only offer to put a seller’s listing up on an MLS® System and REALTOR.ca; on the other end, there is the traditional full service model. And then there is a lot of everything in between. It is up to you and your brokerage to determine what services you will offer, the price you will charge for your services, and how you will advertise your services.
We all participate in Canada’s competitive free market economy. When you act for a buyer or seller, you usually have to cooperate with one of your competitors who represents their client on the other side of the deal. This sort of cooperation is natural and a normal part of a real estate transaction.
But what happens if competitors in our industry start doing things to limit or reduce competition? For example, what if you were to enter into a conspiracy, such as:
- Bob’s brokerage tries to get other brokerages to agree to a fixed or minimum cooperating commission rate.
- Allison’s brokerage agrees with Tim’s brokerage to divide up geographic market territories or not compete for certain clients.
- A few traditional-type brokerages agree to boycott a low-priced competitor’s listings.
If a REALTOR® gets involved in anti-competitive conduct, there will be serious consequences. This means you need to know what you can and cannot do legally under the federal Competition Act. The purpose of Canada’s competition law is to protect free market competition.
If you get involved in conduct of the type set out above, the Commissioner of Competition, who heads the Competition Bureau and is responsible for enforcing the Competition Act, might start an investigation that could lead to a trial. These “hard core” cartel conspiracies, which include price fixing, market division and group boycotts, are criminal offences punishable by fines up to $25 million and up to 14 years of jail time.
So it’s serious. And the Commissioner has made the real estate industry an enforcement priority, and has been willing to pursue individual REALTORS®, brokerages, and boards and associations under both the criminal or civil provisions of the Act. So what do you need to do to stay on the right side of the law?
You need to understand what kinds of conduct cross the line from legal, aggressive and acceptable over to potentially anti-competitive and illegal. The good news is that CREA has what you need - on REALTORLink.ca, easy-to-use resources await you. In addition to written materials, the best place to start are four short videos outlining the basics: Collusion & Conspiracy, Setting Your Prices, Doing Business With Competitors, and Don’t Mislead.
We are a competitive industry, and you compete hard every day. This is the first of a series of articles on Competition Law and You.
Paul Feuer is the Senior Competition Counsel of the Canadian Real Estate Association.