Competition Tribunal weighs abuse of dominant position provision against privacy and copyright protection-Interesting Read
Competition Tribunal weighs abuse of dominant position provision against privacy and copyright protection
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November 14 2016 | Contributed by Smart & Biggar/Fetherstonhaugh
Introduction
The Competition Act aims to maintain and encourage competition, in part, to ensure that small and medium-sized enterprises have the opportunity to participate in the Canadian economy and to provide consumers with competitive prices and choices. The act includes provisions against abuse of dominant position, intended to prevent a dominant company from taking undue advantage of its position in the marketplace. Under these provisions, the commissioner of competition may apply to the Competition Tribunal to prohibit anti-competitive acts of a company that substantially or completely controls a market, if those acts substantially prevent or lessen competition within the marketplace.
Facts
The abuse of dominant position issue was brought before the Competition Tribunal and the Federal Court of Appeal in a case concerning the Toronto Real Estate Board's Multiple Listing Service (MLS). The MLS allows member realtors to access a database of active and past residential property listings, including historical data on home sale prices, to attract and provide services to clients. However, while the board allows realtors to disclose historical sale prices to their clients by fax, mail, email or in person, it prohibits them from posting this historical data online.
The commissioner of competition made an application to the Competition Tribunal in May 2011, alleging that the board's online use restrictions were an abuse of its dominant position in the market for supplying residential real estate brokerage services, and that this disproportionately harmed members which preferred to provide services online.
Decision
Initially, the tribunal found that the Toronto Real Estate Board was not abusing its dominant position because it was not a competitor of its member realtors.(1) However, on appeal, the Federal Court of Appeal disagreed with the tribunal's reasoning, and stated that it is not necessary to be a competitor to be in violation of the abuse of dominant position provisions.(2) The Court set aside the tribunal's decision and sent the application back to the tribunal for redetermination.
The tribunal released its reasons on April 27 2016(3) and a further order on June 3 2016.(4) It found that the board's online use restrictions were an abuse of its dominant position, and ordered that it may not restrict members' use of historical sales data online.
In attempting to justify its online use restrictions, the board raised two arguments that are of particular interest.
Consumer privacy
The tribunal weighed the anti-competitive effect of the board's online use restriction against its assertion that concerns about consumer privacy constituted a legitimate business justification.
In particular, the board relied on its obligations to consumers under the Personal Information Protection and Electronic Documents Act, which governs the collection, use and disclosure of personal information by private sector commercial organisations. Generally, the legislation requires organisations to collect, use or disclose personal information only with consent, and for purposes that are reasonably appropriate in the circumstances.
The board asserted that removing the online use restrictions would force home buyers and sellers to consent to the wide online distribution of sales data when buying or selling a home using the MLS system. The board also noted that, dating back to 2004, it had implemented privacy policies to ensure that its members' practices aligned with the requirements of the Personal Information Protection and Electronic Documents Act. It stated that its concerns stemmed partly from a 2009 decision of the privacy commissioner, which held that the publication of a realtor's advertisement stating that a property had sold for 99.3% of the asking price contravened the act because it enabled the public to calculate the sold price.
The tribunal rejected these arguments, finding that, based on the evidence before it, the board's online use restriction was primarily intended to limit or restrict disruptive competition from realtors offering services online and to retain full control of MLS data. Specifically, the tribunal found that there was a lack of consumer concern about privacy issues relating to historical sales data, and that privacy considerations were not a principal motivating factor behind the online use restrictions. It also noted that the board had taken steps in the past to reinforce consumer consent language to cover the display of interior home photos on the MLS, and there was no evidence that similar action had been considered to address historical sales data.
Copyright defence
The board also advanced a defence that its online use policy was simply a reflection of its copyright in the MLS data. Under the abuse of dominance provisions, an act engaged in pursuant only to rights exercised under a federal IP statute is not an anti-competitive act. However, the tribunal found that the MLS data was not protected under the Copyright Act, as the compilation of data from real estate listings amounted to a purely mechanical exercise. Further, the tribunal noted that the board's online use restriction would have been more than a mere exercise of IP rights.
Comment
The board is appealing the tribunal's ruling to the Federal Court of Appeal; this appeal is expected to focus on the privacy concerns raised before the tribunal. The court has stayed the tribunal's ruling pending disposition of the appeal, which is expected to be heard on December 5 and 6 2016.
For further information on this topic please contact Daniel Hnatchuk at Smart & Biggar/Fetherstonhaugh by telephone (+1 613 232 2486) or email (djhnatchuk@smart-biggar.ca). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.
The Competition Act aims to maintain and encourage competition, in part, to ensure that small and medium-sized enterprises have the opportunity to participate in the Canadian economy and to provide consumers with competitive prices and choices. The act includes provisions against abuse of dominant position, intended to prevent a dominant company from taking undue advantage of its position in the marketplace. Under these provisions, the commissioner of competition may apply to the Competition Tribunal to prohibit anti-competitive acts of a company that substantially or completely controls a market, if those acts substantially prevent or lessen competition within the marketplace.Facts
The abuse of dominant position issue was brought before the Competition Tribunal and the Federal Court of Appeal in a case concerning the Toronto Real Estate Board's Multiple Listing Service (MLS). The MLS allows member realtors to access a database of active and past residential property listings, including historical data on home sale prices, to attract and provide services to clients. However, while the board allows realtors to disclose historical sale prices to their clients by fax, mail, email or in person, it prohibits them from posting this historical data online.
The commissioner of competition made an application to the Competition Tribunal in May 2011, alleging that the board's online use restrictions were an abuse of its dominant position in the market for supplying residential real estate brokerage services, and that this disproportionately harmed members which preferred to provide services online.
Decision
Initially, the tribunal found that the Toronto Real Estate Board was not abusing its dominant position because it was not a competitor of its member realtors.(1) However, on appeal, the Federal Court of Appeal disagreed with the tribunal's reasoning, and stated that it is not necessary to be a competitor to be in violation of the abuse of dominant position provisions.(2) The Court set aside the tribunal's decision and sent the application back to the tribunal for redetermination.
The tribunal released its reasons on April 27 2016(3) and a further order on June 3 2016.(4) It found that the board's online use restrictions were an abuse of its dominant position, and ordered that it may not restrict members' use of historical sales data online.
In attempting to justify its online use restrictions, the board raised two arguments that are of particular interest.
Consumer privacy
The tribunal weighed the anti-competitive effect of the board's online use restriction against its assertion that concerns about consumer privacy constituted a legitimate business justification.
In particular, the board relied on its obligations to consumers under the Personal Information Protection and Electronic Documents Act, which governs the collection, use and disclosure of personal information by private sector commercial organisations. Generally, the legislation requires organisations to collect, use or disclose personal information only with consent, and for purposes that are reasonably appropriate in the circumstances.
The board asserted that removing the online use restrictions would force home buyers and sellers to consent to the wide online distribution of sales data when buying or selling a home using the MLS system. The board also noted that, dating back to 2004, it had implemented privacy policies to ensure that its members' practices aligned with the requirements of the Personal Information Protection and Electronic Documents Act. It stated that its concerns stemmed partly from a 2009 decision of the privacy commissioner, which held that the publication of a realtor's advertisement stating that a property had sold for 99.3% of the asking price contravened the act because it enabled the public to calculate the sold price.
The tribunal rejected these arguments, finding that, based on the evidence before it, the board's online use restriction was primarily intended to limit or restrict disruptive competition from realtors offering services online and to retain full control of MLS data. Specifically, the tribunal found that there was a lack of consumer concern about privacy issues relating to historical sales data, and that privacy considerations were not a principal motivating factor behind the online use restrictions. It also noted that the board had taken steps in the past to reinforce consumer consent language to cover the display of interior home photos on the MLS, and there was no evidence that similar action had been considered to address historical sales data.
Copyright defence
The board also advanced a defence that its online use policy was simply a reflection of its copyright in the MLS data. Under the abuse of dominance provisions, an act engaged in pursuant only to rights exercised under a federal IP statute is not an anti-competitive act. However, the tribunal found that the MLS data was not protected under the Copyright Act, as the compilation of data from real estate listings amounted to a purely mechanical exercise. Further, the tribunal noted that the board's online use restriction would have been more than a mere exercise of IP rights.
Comment
The board is appealing the tribunal's ruling to the Federal Court of Appeal; this appeal is expected to focus on the privacy concerns raised before the tribunal. The court has stayed the tribunal's ruling pending disposition of the appeal, which is expected to be heard on December 5 and 6 2016.
For further information on this topic please contact Daniel Hnatchuk at Smart & Biggar/Fetherstonhaugh by telephone (+1 613 232 2486) or email (djhnatchuk@smart-biggar.ca). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.
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