BURST
For the past two years, the federal Competition Bureau has been investigating the rules around how real estate agents are paid in Canada.
The purpose for the investigation is to determine whether policies that require the seller’s agent to provide compensation to the buyer’s agent may reduce competition among agents.
A recent court order allowed the bureau’s investigation to gather information from the Greater Vancouver Realtors industry group.
Here’s what to know:
What is the Competition Bureau?
The Competition Bureau is a federal law enforcement agency that promotes market competition by preventing cartels, monopolies and false marketing. It works to encourage lower prices and innovation for economic growth. It investigates price fixing, bid rigging and illegal agreements across all industries and during mergers and acquisitions.
What is the Greater Vancouver Realtors?
The Greater Vancouver Realtors represents 15,000 real estate agents in the Lower Mainland. It used to be known as the Real Estate Board of Greater Vancouver and is one of the many member boards in the Canadian Real Estate Association, a national association.
The national association has rules for how real estate boards and associations run databases that contain real estate listings of properties for sale, known as the Multiple Listing Service. When a real estate agent becomes a member of Greater Vancouver Realtors, they also become a member of Canadian Real Estate Association and have to follow its rules.
What’s behind the investigation by the bureau?
The bureau first got a court order in 2024 to investigate the national group’s rules.
Last week, the bureau got a court order allowing it to gather information from the Vancouver body, which is one of the larger boards in the country, to see whether the national association’s rules are allowing the industry to break the bureau’s “abuse of dominance” rules. These rules are intended to curtail a dominant business or group of businesses from activity that stops or reduces competition in a market.
The bureau said its investigation continues and there has been no finding of wrongdoing.
Why is the investigation expanding to B.C.?
The bureau said it needs more information to determine how Greater Vancouver Realtors enforces the rules and whether those rules discourage buyers’ agents from competing by offering lower commission rates or alternative pricing models; whether the rules encourage ‘steering,’ a practice where agents are motivated to steer buyers toward homes that offer higher commissions; and whether the rules affect competition in other ways, which could result in higher costs for both buyers and sellers.
What are ‘alternative pricing models?’
“Alternative pricing models refer to any fee structure other than those widespread in the industry. The term is not intended to refer to any single practice. For example, a flat fee for an agent to represent a buyer could be considered an alternate pricing model,” said Rosalie Leblanc, a communications adviser with the bureau.
In most cases, the seller pays their agent, who then compensates the buyer’s agent, she said.
“The bureau is investigating concerns that rules … may affect competition among members by limiting the ability to offer additional choices and fee structures that differ from those commonly used in the marketplace,” said Leblanc.
The bureau did not directly answer Postmedia’s questions about cash bonuses that are in addition to standard commissions paid to real estate agents and have been in the spotlight in the past.
They are sometimes offered by a seller’s agent to a buyer’s agent in flat dollar amounts such as a $5,000 on top of a typical commission of 3.255 per cent on the first $100,000 and 1.15 per cent on the rest of the sale amount.
They can also be arranged to reward a buyer’s agent in tandem with a sale price increasing.
The bonuses have been considered legal as long as they are properly disclosed, but they also have tended to be included only in fine print within MLS database postings that are only seen by real estate agents and not buyers and sellers.
Postmedia reported on these cash bonuses in 2016, when the real estate market was hot and prices were rising rapidly.
At the time, the deputy executive officer at the Real Estate Council of B.C. said these cash bonuses are more typically seen when there is more supply than demand.
The CEO of Greater Vancouver Realtors, Jeff King, said in a statement that it “takes its competition law obligations seriously and is fully co-operating with the bureau.
“We are committed as an organization to following the letter of our legal and regulatory obligations and to demonstrating that our practices and business operations reflect this commitment over time.”