Competition law protects competition, not competitors: timely reminder from the Federal Court of Appeal

800px-Toronto_1894largeEarlier this week the Federal Court of Appeal overturned a decision of the Competition Tribunal that had dismissed the Commissioner of Competition’s case against the Toronto Real Estate Board last year.

The case involves an Application made by the Commissioner of Competition pursuant to section 79 of the Competition Act (dealing with ‘Abuse of Dominant Position’) for orders prohibiting the Toronto Real Estate Board (TREB) from engaging in a practice of anti-competitive acts in the Greater Toronto Area and requiring TREB to take steps which will overcome the effects of that practice.

The TREB is an incorporated trade association, with more than 35,000 members, who are competing realtors who operate in the GTA. The TREB operates a multiple listing service that employs a database of active and past residential property listings, including ‘historical data’, namely the agreed sale prices of residential properties from past listings. While some realtors (or perhaps the majority of realtors) conduct their business in the traditional manner, which involves interacting with clients and potential clients in person, some realtors have in recent years began adopting a different model in which their business is conducted online through a virtual office website. The resulting efficiencies enable those realtors to offer their services at a lower cost to clients.

All members of the TREB have access to the Board’s multiple listing service database, including the historical data. They are permitted to disclose the historical data to their clients in person, by fax, by mail or by email. However, the TREB has adopted a rule prohibiting members from posting historical data on a virtual office website. The Commissioner alleged that the effect of that rule is that a member who operates through a virtual office website cannot enable clients to access the historical data online. This rule is binding on all TREB members. Breach of a rule may have serious consequences for a member. The consequences may include being barred from access to the TREB’s multiple listing service, or from being a member of the TREB. The restrictions on how realtors can use the data was at the heart of the Commissioner’s allegation of abuse of dominance by the TREB., because those restrictions discourage realtors from offering the cheaper an innovative online services, preserve the traditional model, and hurt consumers who might be interested in taking advantage of the online services and the associated cost savings.

Last April the Competition Tribunal dismissed the Commissioner’s case summarily, without deciding whether the alleged anti-competitive practices have taken place, or whether they constituted abuse of dominance under the Competition Act. Rather, the Tribunal held that as a matter of law, section 79 was inapplicable because, section 79 requires a finding that the dominant firm has engaged in or is engaging in a practice of ‘anti-competitive acts’, a term defined in section 78. Although the definition in section 78 was indisputably non-exhaustive, the Tribunal interpreted section 78 as limiting the term ‘anti-competitive acts’ only to anti-competitive acts directed against a competitor. Therefore, since the TREB was not a ‘competitor’ of the realtors, section 79 was, according to the Tribunal, inapplicable and the Commissioner’s Application had been dismissed.

On appeal, the Federal Court of Appeal held that the Tribunal misinterpreted the abuse of dominance provisions of the Competition Act and referred the Commissioner’s Application back to the Tribunal for reconsideration on the merits. The Court reasoned that while many of the examples mentioned in section 78 are indeed acts directed against a competitor, Parliament did not intend the scope of subsection 79(1) to be limited in such a way that it cannot possibly apply to the TREB in this case.

While the Court did not mention section 1.1 of the Competition Act, its ruling is consistent with this section, which states the Act’s purpose,

to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.

The Court’s ruling is also consistent with–and a timely reminder of–the old-age maxim that competition law’s concern is with the protection of competition, not competitors (Brown Shoe Co. v. United States, 370 U.S. 294, at 320 (1962)).

As the case proceeds to be considered on the merits, it has the potential of dealing with issues that hitherto has been given only scant attention in Canadian law. At the heart of the case are concerns about anti-competitive acts in connection with restrictions on the use of data and databases. Data, as such, is not subject matter eligible for copyright or any other intellectual property rights. Databases, however, as compilations of data, may be copyrightable subject matter. Moreover, even though the law does not grant exclusive rights in data, access to and use of data can be limited by contract or technological measures (that’s why you can access and read this blog online, but you can’t read the data in my bank account, I hope).

Thus, databases, whose use sits at the intersection of such sometimes-conflicting legal principles, have yielded some of the most interesting cases at the intersection of competition law and intellectual property. Notable cases in the US are Feist Feist Pubs., Inc. v. Rural Tel. Svc. Co., Inc., 499 U.S. 340 (1991) (mostly known for setting the standard of ‘originality’ in US copyright law, but which also had an interesting and less-known parallel antitrust history, which Paul-Erik Veel and I discuss here), ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th. Cir. 1996), or Assessment Technologies of WI LLC v. Wiredata, Inc., 350 F.3d 640 (7th Cir. 2003) (which actually deals with real estate data). Two notable cases in the EU are RTE v. EC Commission (Magill), and IMS Health v. EC Commission.

Regardless of how that case is determined on the merits, the current ruling of the Federal Court of Appeal, which overrules the Tribunal unnecessarily restrictive interpretation of the Act, is an important victory for Canadian consumers and the Canadian economy.

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Posted in Antitrust / Competition Law, Blog, Copyright

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