Steve Ladurantaye

The Toronto Real Estate Board’s attempts to appease the country’s Competition Bureau have fallen flat, with the bureau filing updated complaints that lambaste the board’s plan to allow agents to set up private websites for their clients.

The board’s proposed policy falls short in two key areas, the Competition Bureau said, and does nothing to address its anti-competitive concerns. Under the new plan, real estate agents would not be allowed to post historical sales data on the websites, or information about commission fees.

Read the story in the Globe and Mail

Historical sales data are a key way for buyers to gauge a home’s value, because they can see how often the property has changed hands and for how much. If consumers could obtain all of the data online and save their agent some work, the Competition Bureau argues, they could expect to pay less in commission fees.

“If the proposed rules are enacted, they will continue to prevent member brokers from operating a [website],” the revised statement of claim states. “TREB will continue to thwart the development of new, innovative, and efficient models of providing real estate brokerage services using the Internet. The proposed rules will discriminate against brokers seeking to innovate, and will constitute a further anti-competitive act by TREB.”

The Toronto board already allows real estate agents to provide a great deal of information to buyers – such as the number of days a house has been on the market and previous selling prices – by hand, telephone or e-mail, but they are not allowed to create websites where customers can look up the information on their own.

The board was quick to react after the Competition Bureau filed its initial complaint, passing a policy that would allow agents to set up the sites as long as certain guidelines were followed – the sites must be password protected, available only to clients, TREB would be able to monitor who is using the site and how, sellers could opt out of having their home appear on the site and the seller’s name and contact information couldn’t appear in the listings.

But without sales data or commission information, the Competition Bureau said the board hasn’t gone far enough. That’s because the bureau wants brokers to be able to use all of the sales data generated by the board to create products that ultimately lower fees for consumers.

Any restriction on the flow of information is unacceptable, Competition Bureau Commissioner Melanie Aitken said. Real estate fees are artificially high in Toronto, she said, because brokers aren’t allowing their clients to do some of the legwork themselves.

Some brokerages in the United States offer their clients as much as 50 per cent off their commission fees if they use a website to do their own research, she said.

The real estate board’s executives have been working on a policy for its 30,000 members since last August, and met with the bureau several times prior to filing the allegations. Former TREB president Bill Johnston has spoken out strongly against Ms. Aitken’s office, accusing her of using her pulpit to advance her career at the expense of the country’s real estate industry.

Friday, the board said it stood by its new policy. If the two sides can’t find a way to break the impasse, the case will go to the Competition Tribunal, which is allowed to issue fines and could issue binding resolutions to force the board to make changes if it felt the complaints were warranted.

TREB president Richard Silver said the board’s main concern is that the bureau wants it to also publish sale prices for homes that have been sold, but haven’t officially closed yet. That could compromise the seller’s ability to get the same price if the deal falls through, he said.

“The Commissioner is pressuring TREB to make changes to its own property listing system that TREB believes would violate consumer privacy laws, reduce the quality of the system, and diminish protection for consumers who list their homes in the Greater Toronto real estate market,” he said.

“TREB appreciates that the Commissioner has a job to do, but TREB is the wrong target. The Commissioner obviously has recognized that her initial application back in May was faulty. Instead of working with TREB to find a practical solution for consumers, the Commissioner has today decided to pursue an additional legal process that will further delay improvements and further disadvantage consumers.”

The Competition Bureau says it felt compelled to move to block Air Canada’s partnership with United Continental because the two carriers have the clout to elbow out new competition on important Canada-U.S. routes.

In its notice of application released Tuesday, the bureau spelled out in further detail why it is attempting to stop the venture. It took aim at United Continental Holdings Inc.’s strength at air terminals such as Chicago O’Hare, Denver International, Houston’s George Bush Intercontinental, Cleveland’s Hopkins International, Los Angeles International and Washington Dulles. Air Canada is the leading airline at domestic airports such as Vancouver, Montreal and Toronto’s Pearson International.

Read the story in the Globe and Mail

The carriers insist their joint venture would lower airfares. The airlines’ schedules are co-ordinated, and consumers have an opportunity to amass frequent-flier points on a greater number of flights. But the Competition Bureau, which on Monday announced its move to quash the partnership, calls it a merger because the airlines would operate as one on some routes, sharing information on pricing and schedules.

In the documents made public Tuesday, the bureau suggested that the Air Canada-United Continental venture will drive up costs for consumers because it will be difficult, if not impossible, for other airlines to compete on those routes.

“Certain airports on the transborder routes have insufficient capacity to allow for sufficient access to take-off and landing slots, and/or may have other constraints based on the capacity of their existing facilities that increase barriers to effective entry or expansion,” the bureau said.

The bureau said the proposed deal is anti-competitive for other reasons, noting that the carriers “have highly developed flight networks that centralize large volumes of passenger traffic into hubs that impede or foreclose a potential competitor’s access to the volume of feeder traffic necessary to effectively compete on a transborder route.”

The Competition Bureau listed 10 “monopoly” routes: Calgary-Houston, Montreal-Houston, Montreal-Washington, Ottawa-Washington, Ottawa-New York, Toronto-Cleveland, Toronto-Denver, Toronto-Houston, Toronto-San Francisco and Toronto-Washington.

PI Financial Corp. analyst Chris Murray said Canada’s competition watchdog appears to be overstating the importance of market share and overlooking the harsh economics in the airline industry, especially in an era of high jet fuel costs.

He pointed to Air Canada’s move in May to cancel some of its own flights, including on the Montreal-Washington, Ottawa-Washington, Calgary-Chicago and Calgary-San Francisco routes.

“What really is the barrier to entry? Air Canada has already said those four routes are uneconomic,” Mr. Murray said.

He also said WestJet Airlines Ltd., which competes aggressively at Calgary International Airport against Air Canada, could start certain transborder routes if it chose to, but travel demand has to be strong enough to justify new flights.

United Continental emerged from last year’s merger of Chicago-based United Airlines and Houston-based Continental Airlines.

Last November, Air Canada’s transborder service overlapped with 13 of United’s routes and six of Continental’s, according to regulatory filings.

While the airlines see their loyalty programs as friendly toward consumers, the bureau said frequent-flier plans promote “exclusivity in corporate customer contracts, which create significant switching costs.”

On Monday, the carriers suspended their proposed joint venture, pending the outcome of its fight against the bureau.

Canada’s competition laws have been toughened in recent years as the government aims to crack down on predatory business practices, but the most transformative change for the Competition Bureau might have been the appointment of Melanie Aitken as the country’s top watchdog.

As Competition Commissioner, Ms. Aitken has taken aim at a host of high-profile industries – the Canadian real estate sector, credit card companies, gas cartels and cellphone providers.

Read the story in the Globe and Mail

Monday’s decision to target Air Canada – the country’s biggest airline – is an example of her strategy of pursuing cases that can set legal precedents and act as deterrents to executives in other industries.

“From a consumer perspective, she’s certainly picking all the right cases,” said Steve Szentesi, a competition lawyer at Vancouver’s Hakemi & Co. “She is perceived in the industry as an aggressive, no nonsense commissioner, and it’s fair to say she’s thought of as more capable than others have been in the role.”

Others suggest Ms. Aitken, 44, takes a rather American approach to the job. Former commissioners have kept a low profile, but Ms. Aitken is comfortable having her fights in public. A former litigator, she still pines for the courtroom and its confrontational setting.

Ms. Aitken came to the bureau after being seconded to the Justice Department from law firm Davies Ward Phillips & Vineberg LLP to work on competition files. Within two years, she was heading the bureau’s merger division, which would be thrust into the spotlight after a federal judge slammed the agency for overstepping its boundaries when investigating the Labatt Brewing Co. Ltd. takeover of Lakeport Brewing in 2008.

An independent review cleared Ms. Aitken’s department in 2009, and she was soon appointed commissioner. At the same time, Parliament handed the Bureau sweeping new powers, which allowed for fines up to $25-million for anti-competitive behaviours such as price fixing and gave commissioners the power to delay mergers by up to a year while reviewing them.

“There may be new rules, but the perception remains that her litigator background is what’s really driving the Bureau,” Mr. Szentesi said. “She’s had to choose the type of cases that can test the new rules and establish new precedents, and she’s been more than willing to do that.”

Her blunt approach has caused some of her targets to question her motives.

Bill Johnston, former president of the Toronto Real Estate Board, accused her of “career building” when she levelled fresh charges at his organization earlier this month, suggesting she was intent on grabbing headlines at the expense of his industry.

Others accuse her timing releases to gain maximum exposure – going after credit card companies at Christmas, or airlines the weekend before a busy long weekend of travel.

“We’re not that sophisticated,” she said on Monday. “I’m just a law enforcement official trying to do my job. We spend a lot of time trying to reach consensual agreements, it can take several months to do that work and determine what the outcome might be.”

Competition Bureau Commissioner Melanie Aitken is attempting to thwart Air Canada’s joint venture with United Continental on routes between Canada and the United States, warning it creates a monopoly that will raise airfares.

The airlines agreed last fall to form a partnership on transborder flights, sharing information on schedules, sales and pricing. United Continental Holdings Inc. and Air Canada say co-ordinating their routes allows consumers to take advantage of “more travel options and benefits.”

Read story with Brent Jang at the Globe and Mail

But Canada’s Competition Bureau says the joint venture is “effectively a merger” of the carriers’ Canada-U.S. operations.

The agency and the airlines have met several times to try to reach an agreement, but in the end, Ms. Aitken opted to seek an order blocking the partnership rather than continue to search for alternatives. The bureau filed an application Monday with the Competition Tribunal.

The case is the latest example of the bureau’s tougher stance under Ms. Aitken’s leadership, and follows other aggressive moves against the Canadian real estate industry, credit card companies, gasoline cartels and cellphone providers – solidifying her reputation as a steadfast protector of consumer interests.

In the case of the airlines, the bureau focuses on 19 routes, including 10 classified as monopoly service under the planned partnership between Canada’s largest airline and United Continental.

“It reduces choice, and it is happening on routes with particularly high traffic. There are serious concerns about substantial increases in fares,” Ms. Aitken said Monday.

She said similar partnerships in the United States caused fares to spike as much as 15 per cent. High barriers to entry in the airline industry will likely keep any other carriers from flying the routes targeted in the joint venture, she argues.

“There are so many factors,” she said. “They have airport access, they have scale, they control the major hubs, which makes it difficult for others to compete. And of course the frequent-flier miles we all love and corporate discounts provide incentives for customers to stick with the dominant carriers – it’s just not likely anyone else can come in.”

The Competition Bureau listed 10 “monopoly” routes: Calgary-Houston, Montreal-Houston, Montreal-Washington, Ottawa-Washington, Ottawa-New York, Toronto-Cleveland, Toronto-Denver, Toronto-Houston, Toronto-San Francisco and Toronto-Washington.

Ms. Aitken said the bureau has been studying the joint venture under the agency’s merger guidelines since it was announced last October. The airlines didn’t notify the bureau prior to striking the deal.

In its application to the tribunal, the bureau warned that the joint venture will lead to “increased prices and reduced consumer choice on key transborder routes.”

Air Canada said it has been closely co-operating with Ms. Aitken during the review process. “Air Canada strongly disagrees with the commissioner’s position. Air Canada and United Continental Holdings believe in the merits and consumer benefits of the proposed transborder joint venture and enhanced co-operation between the parties that builds on the existing relationship between Air Canada and United.”

Air Canada emphasizes that its stance on the joint venture “is consistent with the findings of regulatory agencies around the world, and supported by leading international economists, who have recognized and documented the benefits to consumers of such arrangements.”

The carriers said Monday that they suspended their proposed joint venture, “pending further developments relating to the outcome of the commissioner’s application.”

The planned revenue-sharing and cost-sharing partnership follows last October’s merger of United Airlines Inc. and Continental Airlines Corp.

The federal agency also opposes other, more informal co-ordination agreements between Air Canada and United Continental. “These agreements allow Air Canada and United Continental to co-ordinate key aspects of competition including, but not limited to, joint pricing and scheduling, as well as revenue sharing,” the bureau said. “Through these existing agreements, the companies currently have the power to charge passengers inflated fares.”

United Continental emerged from last year’s merger of Chicago-based United Airlines and Houston-based Continental Airlines. The combined entity features the United brand name.

“Airline co-operation and joint venture agreements have long been recognized by regulatory agencies around the world as providing enhanced benefits to customers,” United Continental said in a release. “The proposed U.S.-Canada transborder joint venture opposed by the bureau would increase existing customer benefits significantly via lower fares, better co-ordinated flight schedules and connection times, more route choices, and improved frequent flier benefits.”

Air Canada belongs to the Star Alliance of global carriers, which includes United Continental, Deutsche Lufthansa AG, US Airways Group Inc. and Singapore Airlines Ltd.

In 2009, Air Canada held an estimated 35 per cent of Canada’s total scheduled air market with the United States, followed by United Continental’s 20-per-cent share (combining United Airlines and Continental Airlines).

Others on Canada-U.S. routes include Calgary-based WestJet Airlines Ltd. at an estimated 13 per cent and American Airlines Inc. at roughly 10 per cent. Delta Air Lines Inc. and US Airways Group Inc. have smaller slices of the market.