September 6th - 2004

“Loose language” a concern for competition compliance

It's known as “loose language”; any conversation or phrase that can be interpreted as anti-competitive by nature. REALTORS who use "loose language" in their dealings with customers

It's known as “loose language”; any conversation or phrase that can be interpreted as anti-competitive by nature. REALTORS who use "loose language" in their dealings with customers and clients can be almost as dangerous as those who actually do fix commissions or conspire to boycott other real estate practitioners. Investigations can be time-consuming and extremely expensive. For this reason alone, compliance with the Competition Act involves avoiding both conduct that creates the appearance of illegal activity and conduct that actually constitutes illegal activity.

In relations with customers and clients, brokers and salespeople should explain and justify their pricing and other business policies in terms of the value their office provides. Promote your firm's track record, detail your marketing or negotiating expertise, explain the functions and the value of the services performed by a real estate professional, defend your qualifications– use the language of competition, not conspiracy.

Also avoid making statements in the course of soliciting or showing a listing which imply that commission rates have been fixed or that a particular broker has been or will be boycotted.

These are examples of statements that can suggest or imply that real estate practitioners are engaged in anti-competitive activity:

"I'd like to lower the commission rate, but the Board has a rule...".
"This is the rate that everyone charges."
"I'd like to lower the commission, but no board member will show your house unless the commission is X%."
"Before you list with ABC Realty, you should know that no one will work on their listings."

Comments made between competitors in the course of their day-to-day dealings can easily implicate members and their Board/Association in claims of anti-competitive conduct. Brokers, agents REALTORS and salespeople should recognize and avoid statements that suggest anti-competitive activity amongst firms. These are examples of words and phrases that can give the impression of anti-competitive activity:

"The best way to deal with John Doe is to boycott him."
"Let him stay in his own market. This is our territory."
"We should co-operate more with each other and all charge the same commission."
"What are your firm's commission rates?"
"We should agree to co-operate with XYZ Realty only if they agree to a higher commission split."
"Our firm offers ABC Realty a lower commission split because they’re a discount broker."
"ABC Realty shouldn't be allowed to join our Board. Their 'flat fee' marketing approach just wouldn't fit in with the way we do business around here."

Any of this type of comment may initiate an investigation by the Competition Bureau into suggestions or allegations of anti-competitive behaviour.

Tips for Competition Act compliance

  • Avoid any discussion with competitors about the brokerage firm's "intentions" to modify fees or commission splits.
  • If a brokerage firm is modifying its rates (i.e. commissions or fees for services), document the business reasons for the decision. This correspondence should be clear in stating the decision was made unilaterally, based upon particular or specific economic circumstances. Any distribution of the memo should be limited to members of that brokerage firm.
  • Salespeople working for a particular brokerage firm should be able to explain the services provided for the fees charged and never infer or suggest that fees were "fixed" in co-operation with other firms or that they are standard for all brokerage offices.
  • Brokers/agents must determine their co-operative compensation policies, also known as (commission splits) in a unilateral and independent manner.
  • Salespeople should be instructed never to suggest to others in the real estate industry, including competitors, potential clients or customers that they should not do business with a particular competitor because other brokers/agents will not co-operate with that firm.
  • Do not discriminate against discount brokers because of their low pricing policy.

The fact is, complying with the Competition Act is the law and ignorance of the law is no excuse. REALTORS can learn all about competition law by logging on to the Realtor Link web site at www.realtorlink.ca and accessing the Real Estate Competition Guide.

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Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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