Self-Regulated Professions—Balancing Competition and Regulation — Chapter 5 to 7

Demand

Consumers who have eye injuries, diseases of the eye or poor vision generate the demand for eye care services, as do people seeking preventive care through general examinations. Demand for services from the eye care team ophthalmologists, optometrists and opticians depends on the same conditions that affect demand for general health care, such as health, income, health insurance coverage and government subsidies for health care.

When optometrists cannot provide the needed level of care, they refer patients to ophthalmologists (or other medical specialists) for surgery, prescription medication or other treatment. Most ophthalmologists only accept new patients on referral from optometrists or physicians. ^{Footnote 17} Optometrists generally see patients first, before ophthalmologists do, and provide the majority of primary eye care. ^{Footnote 18} An average optometric practice, which employs an average of 2.3 optometrists, handles about 2,800 patient consultations each year. ^{Footnote 19}

The geographic market for optometrist services is likely to be highly localized, since people do not usually travel great distances to consult an optometrist.

The amount of eye care coverage varies widely by jurisdiction. The Canada Health Act only allows physicians (ophthalmologists in the case of eye care) to be reimbursed and leaves each province and territory to decide which services to cover. ^{Footnote 20} While most provinces cover annual eye exams for residents younger than age 18 and older than age 65, Prince Edward Island, Northwest Territories, and Newfoundland and Labrador do not cover any optometry services. ^{Footnote 21} Several provinces, including British Columbia, Alberta, Manitoba and Ontario, cover medically necessary eye exams for all ages. ^{Footnote 22} Similarly, Saskatchewan and Quebec are among the majority of jurisdictions that provide extended coverage to those with limited incomes. ^{Footnote 23}

As illustrated in Table 1, average household spending on prescription eyewear varies by province and territory. For example, in 2005, it ranged from a low of $95 in Prince Edward Island to a high of $175 in Alberta, while the average across Canada was $135. ^{Footnote 24}

Supply

In 2001, there were approximately 3,720 optometrists in Canada, 89 percent of whom were self-employed and 89 percent of whom worked full time. ^{Footnote 25} In 2006, there were approximately 2,182 optometrists' offices in Canada. ^{Footnote 26} Table 2 shows the distribution of optometrists by province in 2001.

The schools of optometry in Canada have capacity for 533 optometry students (overall in the four or five years of the Doctor of Optometry program). Students from 17 U.S. schools of optometry may also qualify to work in Canada.

Entering the profession

Prospective optometrists must complete at least three years of prerequisite college or university courses, including those in mathematics, and the physical and biological sciences, as well as a four- or five-year university Doctor of Optometry (OD) program. ^{Footnote 27}

Graduates of the OD program must then satisfy the licensing requirements of a provincial or territorial college of optometry in order to practise. Included in these requirements are successful completion of a national examination (except in Quebec) and, typically, a province- or territory-specific jurisprudence examination.

Most provinces require practising optometrists to keep their skills and qualifications up to date by completing continuing education for licence renewal. For example, optometrists in Manitoba must complete 30 hours of continuing education every two years. ^{Footnote 28} In Nova Scotia, optometrists must complete 45 hours of continuing education every three years. ^{Footnote 29}

Successful completion of a province- or territory-specific jurisprudence exam and a national exam are reasonable licensing requirements and pose no concern from a competition standpoint. The current continuing education requirements are not particularly onerous and appear to be fairly similar across the country. As long as these requirements are directly linked to the need to update skills and are applied similarly to all optometrists, incumbents and new entrants alike, they do not raise competition concerns. However, education requirements and accreditation of optometry programs are another matter, in a number of regards.

The authority to accredit all OD programs in Canada and the United States rests with the U.S.-based Accreditation Council on Optometric Education, which comprises nine members of the American Optometric Association and two public members. ^{Footnote 30} While standardization may bring some benefits, from a competition perspective, the fact that an American organization accredits Canadian schools may pose a risk that the accreditation policies are formed and evolve based on conditions of supply and demand in the U.S. and do not necessarily reflect conditions in Canada. Therefore, it is critical that this accreditation process include a mechanism by which to feed in the relevant Canadian information. One such mechanism might be Canadian representation on the Council.

Recommendation

Provincial and territorial colleges of optometry should consider ways to ensure that conditions of supply and demand in Canada are taken into account in the formulation and development of the Accreditation Council on Optometric Education's accreditation policies .

In Canada, prospective optometrists face significant entry restrictions because of the limited number of accredited schools of optometry. There are 19 accredited schools in North America, only two of which are in Canada: the University of Waterloo (English program) and the Université de Montréal (French program). ^{Footnote 31} Although Canada recognizes the 17 accredited schools in the United States, the cost of studying optometry in the U.S. is nearly three times that in Canada , ranging from $175,000 to $200,000 there, compared to $60,000 to $70,000 here. ^{Footnote 32}In light of this substantial cost gap, the likely choice for many prospective Canadian optometrists is one of the two accredited Canadian schools. ^{Footnote 33}

With only two schools in Canada, competition for first-year spaces is substantial, and few students are admitted annually. For example, there were approximately 250 applicants in 2006 for the 85 first-year places in the University of Waterloo's program. ^{Footnote 34} The competition for a place in the program at the Université de Montréal is even more intense, since that school accepts only 43 out of the approximately 600 applicants each year. ^{Footnote 35} The Canadian Association of Optometrists has long advocated for a third school of optometry in western Canada and has written to provincial ministries of education in support of such a school. ^{Footnote 36}

Recommendation

The provincial ministries of education should review the current number of university places for optometry students to determine whether it is adequate to meet current and future demand for optometry services in Canada.

While the OD degree has been a four- or five-year program for some time, the prerequisite level of education has been increasing. To meet new ACOE standards, applicants to the School of Optometry at the University of Waterloo will require at least three years of pre-optometry university education (up from two years), as of 2008. ^{Footnote 37}

These rigorous minimum entry qualifications and the limited number of university places are barriers to entry to the optometry profession, since they increase both the direct and opportunity costs of pursuing a career in optometry. As such, any further increase in minimum entry qualifications combined with the restriction on university places protects incumbents from vigorous competition. Nonetheless, a certain level of qualification is most certainly required to ensure service quality and to protect consumers. Therefore, decisions surrounding entry requirements must involve a trade-off between consumer protection and sufficient supply of the service (which also protects consumers by ensuring access to the service). As entry requirements become more demanding, the incremental benefits to consumers in the form of quality control diminish. At the same time, the costs to consumers resulting from restricted competition and reduced access escalate.

Recommendation

The provincial and territorial colleges of optometry must justify any proposed increase in the required entry qualifications for prospective optometrists as being the minimum necessary for consumer protection.

Interprovincial mobility

The majority of the provincial colleges of optometry have signed a mutual recognition agreement (MRA) to remove unnecessary barriers to mobility of qualified optometrists and to establish the conditions under which optometrists licensed in one jurisdiction may have their qualifications recognized in another . ^{Footnote 38}

The signatories to the MRA have agreed to the following: that the basic scope of practice for optometrists is similar in each jurisdiction, that the requirements for licensing are having the OD degree from an accredited school and passing the Canadian Standard Assessment in Optometry, and that there are no residency requirements.

Those provinces and territories that have not signed the MRA impose restrictions on mobility that prevent optometrists from effectively responding to changes in demand across jurisdictions. Such restrictions may lead to a significant misallocation of optometrists in Canada.

Recommendation

Every province and territory should sign the Mutual Recognition Agreement (MRA) to facilitate the movement of optometrists throughout Canada. Non-signatories should clearly articulate the features of the MRA that are currently preventing them from signing on to the agreement so that all provincial and territorial colleges of optometry can co-operate in order to extend the MRA to the rest of the provinces and territories.

International mobility

To practise in Canada, optometrists with a degree from an accredited school in the United States must write the Canadian Standard Assessment in Optometry exam and comply with provincial or territorial licensing requirements. International practitioners who do not have a degree from an accredited school must have their qualifications assessed through the University of Waterloo's International Optometric Bridging Program (IOBP). ^{Footnote 39} The IOBP assesses candidates' academic qualifications and prior learning, and subsequently refers them to one of the following:

• a one-month orientation program (Bridging One);
• a year-long structured academic program (Bridging Two); or
• a four-year Doctor of Optometry program (when their academic qualifications are assessed as being inadequate). ^{Footnote 40}

The ultimate goal of the bridging program is to prepare foreign-trained optometrists for the CSAO exam, which is required for licensing in Canada.

All provinces and territories in Canada currently recognize the IOBP. ^{Footnote 41} That they have done so is encouraging, since it clarifies the qualification process for international practitioners. In general, when assessing foreign qualifications, there should be no discrimination between qualified domestic and foreign applicants other than on the grounds of competence; based on the information available to the Bureau, the international bridging program at Waterloo seems consistent with this objective. ^{Footnote 42}

Overlapping services and scope of practice

Every service optometrists offer is also available from either opticians or ophthalmologists. ^{Footnote 43} For example, optometrists and opticians may both fill prescriptions and sell eyeglasses and other eyewear. In addition, optometrists and ophthalmologists may both diagnose and treat certain eye pathologies and give eye tests. ^{Footnote 44} Given these areas of overlap, optometrists do not have an outright monopoly on any particular service. However, optometrists are the main providers of primary eye care and reportedly possess a majority market share in this area. ^{Footnote 45}

There is an ongoing debate in Canada about whether opticians should be allowed to conduct sight testing independently and use the test results to dispense eyeglasses. These services are currently the domain of optometrists and ophthalmologists. ^{Footnote 46} This debate has been fuelled by the development of accurate and reliable technology that allows for automated refraction, a computerized assessment of visual acuity and determination of the need for, and strength of, corrective lenses. ^{Footnote 47}

Optometrists do not have exclusive rights to conduct refraction (also known as sight testing); therefore, it is not outside of opticians' scope of practice. ^{Footnote 48} Rather, it is the prescribing of eyewear based on the results of a sight test that only optometrists and physicians, including ophthalmologists, may do. In British Columbia and Alberta, some opticians perform sight tests; however, opticians may only dispense eyeglasses based on the results of these tests when a medical practitioner reviews the results and authorizes them for use in the dispensing of eyewear. ^{Footnote 49}

A clear distinction between a sight test and an eye health exam is very important to this discussion. A sight test measures visual acuity, whereas a complete eye health exam, in addition to measuring vision, considers possible underlying health problems to provide a detailed evaluation of the patient's overall eye health. ^{Footnote 50}

Opponents of allowing opticians to perform sight tests do not claim there is any danger in the test itself and agree that measuring refraction is simply a data-gathering procedure that involves no medical expertise. Instead, their concern lies in missed pathology, since opticians conducting the sight test could assume that simple refractive error is the cause of blurred vision without doing more detailed investigation. ^{Footnote 51}

There is currently a proposal in British Columbia to allow opticians to perform independent automated sight testing that attempts to address the concern about missed pathology. ^{Footnote 52} This proposal includes a detailed screening process that carefully distinguishes between individuals with high and low risks for significant eye problems and establishes strict guidelines for eligibility. Through this screening process, opticians would be allowed to offer sight tests to healthy adults who have no risk factors for underlying health problems. Furthermore, if enacted the proposal would allow opticians, for the first time, to make small modifications to an eligible candidate's lens power. The proposal also includes rules that would require opticians to properly inform the public of the distinction between a sight test and a complete eye health exam.

The strength of this proposal lies in the screening process, which appears to be quite comprehensive and deserves a closer look. Under the existing guidelines of the College of Opticians of British Columbia, potential clients with the following conditions are screened out and not eligible for automated refractions:

• those older than 65, since the leading causes of visual impairment are age-related;
• those with specific illnesses and health conditions, such as diabetes, macular degeneration, cataracts and cardiovascular disease, unless already under a doctor's care;
• those at high risk for retinal detachment due to conditions such as hypertension, recent trauma to the head or recent pain in the eye, or people with lens prescriptions of greater than a specified strength; ^{Footnote 53}
• those with specific visual symptoms, such as the recent onset of floaters, halos, distortion, double vision or flashing lights; and
• those who have had any eye surgery. ^{Footnote 54}

Potential clients are also screened based on the results of their sight tests and referred to ophthalmologists or optometrists for eye health exams when they cannot achieve vision of at least 20/30 or when their vision shows a change of more than a predetermined acceptable amount. ^{Footnote 55}

Importantly, the Canadian Ophthalmological Society has issued recommendations for the frequency of eye examinations by age group and type of patient. ^{Footnote 56} For low-risk patients exhibiting no symptoms of underlying health problems, the following frequencies are recommended for the age groups eligible for sight testing under the B.C. proposal:

• age 19–40 years: at least every 10 years;
• age 41–55 years: at least every five years; and
• age 56–65 years: at least every three years.

Proponents of expanding opticians' scope of practice to include sight testing argue that it will increase the efficiency and accessibility of the eye care team and provide low-risk consumers with a convenient, low-cost option for getting their eyes checked. The majority of Canadians seeking optometric services do so because they want to update their eyewear and wish to know whether their prescription has changed before spending money on new corrective lenses. ^{Footnote 57} For clients with these demands, and who do not have underlying health problems or eye-health risk factors, it seems onerous and would be overly expensive to require them to revisit an optometrist or ophthalmologist for a complete eye health exam every time they want their vision tested. It is plausible that a process that is more expensive and involved than necessary would result in some individuals failing to update their eyewear or have their vision tested.

Recommendation

Regulators should determine the overall costs and benefits of extending opticians' scope of practice to include measuring refractive error for low-risk consumers and dispensing eyewear based on the results, including the potential costs in terms of public safety and the potential benefits in terms of lower prices, increased choice and consumer access to eye care services.

A second scope of practice issue concerns the initiative by optometrists to be permitted to prescribe therapeutic pharmaceutical agents (TPAs) throughout Canada. Optometrists are now permitted to prescribe TPAs in seven jurisdictions in Canada, while all 50 states in the United States allow it. TPAs are prescription medications used to treat glaucoma, eye infections, eye inflammation, eye allergies and superficial eye injuries. ^{Footnote 58}

Until recently residents of Ontario were among the four percent of the combined populations of Canada and United States that did not have access to prescriptions for TPAs through optometrists. ^{Footnote 59} In light of this, the Ontario Association of Optometrists recommended an amendment to the province's Optometry Act to authorize optometrists to prescribe TPAs and an amendment to the regulations governing optometrists' scope of practice to allow treatment with TPAs. This amendment recently became law. ^{Footnote 60}

Those remaining jurisdictions where optometrists are not authorized to prescribe TPAs should look to the experience of those jurisdictions that allow it. For example, optometrists in Alberta have been diagnosing, treating and managing glaucoma and other diseases, disorders and conditions of the eye since that province's TPA legislation passed in 1996, with not a single complaint or lawsuit filed. ^{Footnote 61}

Recommendation

Regulators in those provinces and territories that continue to prohibit optometrists from prescribing therapeutic pharmaceutical agents should assess the necessity of such restrictions in light of their relaxation in most of Canada and the United States. As with the recommendation to review the proposed extension of opticians' scope of practice, the costs and benefits of any such extension for optometrists should be carefully considered.

From a competition standpoint, expanding the scope of practice of a profession is favourable when it can be done safely and effectively. Such expansion directly benefits consumers whose range and choice of services and providers increases. Furthermore, as areas of professional overlap broaden, competition between service providers intensifies, placing downward pressure on prices and enhancing the environment for the promotion and maintenance of quality service and innovation.

Pricing and compensation

Several colleges and associations of optometry publish suggested fee schedules for optometry services, all of which are claimed to be non-binding. The nature of these fee schedules, as well as their effect on prices, varies by province. For example, the Alberta Association of Optometrists publishes a non-binding suggested fee schedule each year, although members do not always respect it in practice. ^{Footnote 77} In New Brunswick, the pricing guide is also non-binding, but members always respect it in practice. ^{Footnote 78} The Manitoba Association of Optometrists bases its suggested fees on surveys and reviews them annually. ^{Footnote 79} The Ontario Association of Optometry publishes a fee schedule as a guide but gives optometrists discretion to adjust fees on an individual basis. ^{Footnote 80} Nonetheless, it is professional misconduct to charge fees that are excessive or unreasonable or to neglect to notify patients prior to procedures when fees are higher than the suggested ones. ^{Footnote 81} Although Saskatchewan and Prince Edward Island have fee guides, actual fees are on average lower than the suggested ones, which are set by competition. ^{Footnote 82} As in Manitoba, there are no restrictions on contingency fees or other related pricing arrangements in Saskatchewan. ^{Footnote 83}

From the Bureau's perspective, suggested fee schedules do not contravene the Competition Act when they meet two conditions: the schedules are in no way directives with nothing more than voluntary adherence expected; and departure from the fee schedule does not result in professionals being disciplined or disadvantaged in any way.

Nonetheless, the suggested fee schedules that groups of optometrists establish remain a source of unease from a competition standpoint. Furthermore, the Bureau has not been made aware of any rationale for the publication of suggested fee schedules for optometry services that directly targets a public interest objective. Conversely, the Bureau has no concern about individual optometry offices establishing and advertising their own fees, a practice that would likely encourage competition.

The formulation and implementation of suggested fee schedules by colleges and associations of optometry potentially risk facilitating collusion (either overt or tacit) on prices or promoting adherence to specified fees. This risk is augmented in the optometry profession by restrictions on comparative price advertising. Furthermore, the ability of optometrists to successfully restrict entry into the profession further increases the likelihood that the collusion will continue.

Collusion reduces consumer welfare through higher prices and, possibly, lower quality services than what would likely result from unrestricted competition. Given the negative consequences of collusion for consumers, it is vital for regulators to assess the potential benefits of suggested prices against this backdrop.

Recommendation

Colleges and associations of optometry should discontinue publishing suggested price lists, given their potential harm to competition, in favour of allowing individual optometrists to set their own prices.

Business structure

Optometrists in Canada face an array of restrictions on the business structure of their optometry practices. For example, in Quebec, n o optometrist may keep more than one office unless each is under the control or management of an optometrist. ^{Footnote 84} In British Columbia, optometric corporations may not carry on any activity other than optometry and all voting shareholders must be optometrists. ^{Footnote 85} In Ontario, only members of the optometry profession may establish an optometric corporation. ^{Footnote 86} In Alberta and Quebec, optometrists are not allowed to divide, share, split or allocate fees for optometry services or materials with non-optometrists. ^{Footnote 87}

Restrictions discouraging or prohibiting optometrists from co-operating with non-optometrists are prevalent throughout Canada. Most troublingly, some provinces restrict the ability of optometrists to have any interest in, or agreement with, ophthalmic outlets, firms, dispensaries or laboratories. The colleges of optometry often justify these rules as protecting against conflict of interest; however, optometrists are permitted to sell eyewear within their practice, a fact that substantially weakens the conflict of interest argument against collaboration with ophthalmic dispensers.

The restrictions in Ontario in this regard are particularly illustrative. ^{Footnote 88} In Ontario, it is a conflict of interest for the public entrances and exits of optometrists' premises to be within or interconnecting with the premises of retailers, optical companies or ophthalmic dispensers. Furthermore, optometrists may not practise in association, partnership or otherwise with ophthalmic dispensers or any other persons or corporations except optometrists or legally qualified medical practitioners. Conversely, optometrists in Saskatchewan may operate as independent doctors of optometry within big-box dispensaries, such as those in Wal-Mart or Costco stores, "provided they maintain their professional identity and ensure ownership and confidentiality of the patient's clinical record." ^{Footnote 89}

Interestingly, rules preventing optometrists from entering into business arrangements with non-optometrists that sell optical services or products were challenged in court in 1998. Costco and two optometrists who had been found to be operating in association with optical product retailers appealed their case to British Columbia Supreme Court. ^{Footnote 90} In finding that the rules violated the freedom of association guaranteed by the Canadian Charter of Rights and Freedoms and were invalid, the court noted the following:

The Board appears to presume that optometrists who sell what they prescribe will adhere to the standards of conduct set for the profession and be free of any adverse public perception regarding the independence of the advice they give. There is no evidentiary justification for assuming that other optometrists who may associate with non-optometrists will conduct or appear to conduct themselves any less professionally. ^{Footnote 91}

Given the complementarities between the activities of optometrists and opticians, it would be natural for members of both professions to work under the same roof. Such multidisciplinary arrangements would likely result in efficiencies not available to professionals working separately. Thus, by not allowing these relationships, the optometry profession is blocking the potential development of more efficient business models and future innovation. Moreover, these restrictions may discourage prospective optometrists from entering the market and also protect inefficient incumbent optometrists from competition from more efficient rivals. Accordingly, costs are likely being kept inefficiently high, resulting in higher prices to the consumer. A further anti‑competitive result of these rules is that they force most optometrists into the same business model, thus ensuring that they all face a similar cost structure. This makes it less likely that meaningful competition or cost innovation will develop.

Recommendation

Colleges of optometry should remove restrictions that prohibit or discourage optometrists from working in multidisciplinary arrangements with opticians.

Demand

Pharmacist services are provided to patients receiving drugs in hospital or as outpatients; therefore, the demand for these services depends on the demand for prescription drugs. As noted, the profession itself is becoming involved in a broader spectrum of health care concerns than ever before. ^{Footnote 101}

The demand is influenced by various factors, including demographic changes, disease patterns, new drug products and prescribing practices. Overall, spending on both prescribed and over-the-counter drugs has steadily risen. According to the Canadian Institute for Health Information, drug expenditures grew by 9.7 percent annually from 1997 to 2004, when they reached $21.8 billion, and were expected to reach $25.5 billion by 2006. ^{Footnote 102}

The geographic market for pharmacist services is likely to be limited, since retail consumers usually fill prescriptions near their homes or receive prescription drugs while in hospital. The only exceptions to this are consumers who purchase drugs from Internet pharmacies.

Supply

Across Canada, as of January 1, 2007, there were 29,699 pharmacists licensed to practise in a patient care setting across Canada (see Table 1) and 7,889 licensed community pharmacies. ^{Footnote 103}

According to the National Association of Pharmacy Regulatory Authorities, "the majority of pharmacists work in licensed community pharmacies that are not part of the public health care system." ^{Footnote 105}

On average, there is slightly fewer than one pharmacist for every 1,000 Canadians. There is some variation in this ratio across provinces and territories, with Nunavut having the lowest and Saskatchewan the highest. ^{Footnote 106} The two most populous provinces, Ontario and Quebec, have the most pharmacists.

Entering the profession

Individuals wishing to practise as pharmacists in Canada must complete one year of predominantly pre-pharmacy science courses and then earn a bachelor's degree in pharmacy from a Canadian university. ^{Footnote 107} There are currently nine pharmacy schools in Canada, with a tenth set to open in Waterloo in January 2008. ^{Footnote 108} This will be the first new pharmacy school in Canada in 20 years; it will also feature the only co-op pharmacy program in Canada. ^{Footnote 109}

The pharmacy profession in Canada does not formally place quotas on the number of pharmacies or pharmacists. However, there are limits on the number of students admitted to the university pharmacy programs. For example, in the 2008 admission cycle at the University of Toronto, only 240 students will be accepted from an anticipated pool of more than 1,000 applicants. ^{Footnote 110}

Interprovincial mobility

There are no residency requirements to be licensed as a pharmacist in any province or territory. In addition, all provinces except Quebec (and the three territories) signed a mutual recognition agreement (MRA) on April 9, 2000, through the auspices of the National Association of Pharmacy Regulatory Authorities . ^{Footnote 115} The intention of the agreement is to remove unnecessary barriers to mobility of qualified pharmacists and establish the conditions under which pharmacists in good standing in one province may have their qualifications recognized in another.

Section 4 of the MRA guarantees mobility to all pharmacists who are licensed in good standing in any signatory province as of July 1, 2001, and to those who meet specific licensing requirements after that date.

The MRA facilitates movement of pharmacists between provinces by greatly reducing, if not removing, registration and licensing barriers. Under the agreement, the signatories must undertake periodic reviews no less than every two years after July 1, 2001, to explore ways to facilitate the non-signatories joining the agreement. Quebec attended the meeting in October 2003 but the territories did not. ^{Footnote 116} The fact that the territories have not signed the MRA does not, however, pose any obstacles to pharmacists outside the territories from relocating there, since to be licensed in each territory, they must already be licensed in a province and pay the prescribed licensing fee. ^{Footnote 117} No additional qualifying examinations are required.

Having all provinces sign the MRA would allow pharmacists to provide professional services seamlessly throughout Canada and, thus, respond to changes in demand quickly and effectively.

International mobility

A survey conducted in 2005 revealed that 90 percent of the pharmacists practising in Canada had received their pharmacy degree from a Canadian university. Of the remaining 10 percent, three percent were trained in the United States and seven percent were trained outside North America. ^{Footnote 118}

Pharmacists who were licensed outside Canada must meet varying admission requirements, depending on the province. Most provincial colleges and boards of pharmacy require either graduation from a pharmacy program that is recognized as equivalent to the one in their province or completion of Pharmacy Examining Board of Canada examinations. For example, the Prince Edward Island Pharmacy Board may accept a comparable pharmacy licence from another jurisdiction without additional requirements, whereas in Newfoundland and Labrador, foreign-trained pharmacists must complete a minimum of 32 weeks of practical experience in Canada. ^{Footnote 119} In Nova Scotia, foreign-trained pharmacists may be required to complete up to 12 months of practical experience before being licensed. ^{Footnote 120}

In addition to the standard registration requirements, all foreign-licensed pharmacists wishing to practise in Canada must be fluent or proficient in English or French, or demonstrate that they are proficient to specified standards in each province. ^{Footnote 121}

Pharmacists whose pharmacy degree is from a country other than Canada or the United States must take the Evaluation Examination before taking the Qualifying Examination. ^{Footnote 122} All provinces except Quebec (which administers its own examination) require applicants trained outside of Canada to pass the same qualifying examination, administered by the Pharmacy Examining Board of Canada. ^{Footnote 123}

Given that the roles and responsibilities of pharmacists are essentially the same across the country, there is no apparent reason for the variation in the admission requirements for foreign-trained pharmacists. When the requirements are higher than necessary, the cost of entry can be needlessly high, resulting in fewer pharmacists entering the profession and, as a result, domestic pharmacists being protected from legitimate competition from qualified foreign pharmacists.

Overlapping services and scope of practice

There are no other professions that are primarily involved in the same functions as pharmacists, principally because it is usually an offence for someone who is not registered and licensed as a pharmacist to practise pharmacy. It is also the case because pharmacists usually dispense all prescriptions, regardless of who writes them. ^{Footnote 125} However, some provinces and territories do have legislative exceptions that allow optometrists, physicians, nurse practitioners and dentists to dispense or administer particular drugs under certain conditions. ^{Footnote 126} In Manitoba, physicians in remote communities may compound and dispense drugs. ^{Footnote 127} In Nunavut, medical practitioners and dentists may supply drugs; nurses may also supply specified drugs when directed or supervised by a medical practitioner or dentist. ^{Footnote 128} From a safety perspective, restricting who may possess, handle and dispense drugs (some of which are poisons) meets a legitimate public safety objective. It also ensures that licensed pharmacists supervise the work of pharmacy technicians, who have fewer professional qualifications.

Pharmacy technicians may provide services that complement those of pharmacists. Pharmacy technicians help pharmacists fill prescriptions and operate pharmacies. ^{Footnote 129} Whether they have formal training (e.g. at a community college) or receive on-the-job training, pharmacy technicians are restricted by law as to what they may do and must perform their activities under the supervision and guidance of a pharmacist, who is responsible for their conduct. ^{Footnote 130}

In Alberta, pharmacy technicians working under the "indirect supervision" of pharmacists may help check repackaged drugs and may also compound drugs. ^{Footnote 131} In Quebec, pharmacy clerks (the functional counterpart of a pharmacy technician in that province) may sell medications under the supervision of pharmacists and may prepare medications when they have five or more years of experience. ^{Footnote 132}

In Ontario, pharmacy technicians are not permitted to perform any of the controlled acts that occur during the professional aspects of operating a pharmacy. ^{Footnote 133} However, recent amendments to Ontario's Pharmacy Act, 1991 (once they come into force) will create a new class of certificate of registration within the profession that allows the Ontario College of Pharmacists to license and regulate pharmacy technicians. ^{Footnote 134} The amendments will also protect the title of pharmacy technician in the same way that the title of pharmacist is now protected.

The role of technicians varies slightly depending on the specific location of employment. For example, in a traditional pharmacy setting "technicians help licensed pharmacists provide medication and other healthcare products to patients. Technicians usually perform routine tasks to help prepare prescribed medication for patients, such as counting tablets and labelling bottles. Technicians refer any questions regarding prescriptions, drug information or health matters to a pharmacist." ^{Footnote 135} However, in hospitals, nursing homes and assisted-living facilities, technicians have additional responsibilities, such as reading patient charts and delivering medicine to patients, after the pharmacist has checkedthe prescription. Specifics about hospital pharmacy operations vary slightly by province and territory.

In Canada, the permitted ratio of pharmacists to pharmacy technicians varies widely, from 1:1 (Saskatchewan, Newfoundland and Labrador) to 1:4 (Quebec). ^{Footnote 136} The reason for limiting the number of technicians working under a pharmacist is to ensure a pharmacist is not supervising too many technicians at once. ^{Footnote 137} However, p harmacy technicians are very adept at the mechanical tasks of filling prescriptions (such as counting pills and mixing lotions), since they do this regularly and often, and higher ratios allow pharmacists to devote more time to patient-oriented services, such as counselling. ^{Footnote 138} Further, at least one provincial regulator has adopted the position that "establishing an arbitrary pharmacist-technician ratio does not achieve" the goal of ensuring "safe, effective and quality pharmacy services," which is the intent of the restriction. ^{Footnote 139}

Changing patient demographics (i.e. an aging population that is increasing in size) and medical advances are placing greater demands on pharmacists' time and professional knowledge. This has caused pharmacists to become increasingly dependent on pharmacy technicians (who are increasingly performing more duties of pharmacists) to help them meet growing prescription drug demands and administrative needs. However, pharmacy technicians are largely unregulated in Canada, and the provincial colleges and boards of pharmacy that seek an expanded mandate to regulate pharmacy technicians are aware of the potential for conflict with pharmacists. ^{Footnote 140} Although the general movement appears to be towards direct regulation of pharmacy technicians by pharmacists, the further issue of the need to standardize the number of pharmacy technicians working under the supervision of a pharmacist is still being debated within the pharmacy profession. ^{Footnote 141} No matter whether or how pharmacy technicians are regulated or what the acceptable pharmacy technician to pharmacist ratio is, pharmacists are and will continue to be ultimately responsible, under the rules that govern them, for the work done by employees they supervise.

Within those parameters, though, employing a greater number of pharmacy technicians should allow pharmacists to spend more time on qualitative patient needs (such as counselling on drug use and interaction), thereby increasing the likelihood that the quality of pharmacists' services will correspondingly improve. It should also permit the pharmacy to fill more prescriptions, thereby increasing efficiency.

Advertising

The provincial colleges and boards of pharmacy tend to restrict advertising for pharmacists' services. None of the three territories has enacted rules governing advertising by pharmacists or pharmacies, so this activity is subject only to the restrictions under the federal Food and Drugs Act and Controlled Drugs and Substances Act relating to contraceptives, narcotics and other controlled substances. ^{Footnote 142}

Restrictions on price advertising are very broad across the provinces. In both Ontario, and Newfoundland and Labrador, price advertising of a single drug is prohibited. Advertisements in Newfoundland and Labrador must include prices for at least 15 drugs; a similar restriction in Ontario requires prices for 10. ^{Footnote 143} According to the Ontario College of Pharmacists, this restriction is intended to prohibit pharmacists from advertising a single drug as a loss leader. ^{Footnote 144} However, the net result has been that the restriction has diminished the effectiveness of the message drug advertisements convey and constrained consumers' ability to easily make price comparisons between competing pharmacies.

In Newfoundland and Labrador, Ontario and British Columbia, advertisements that list prices must also include the drug cost, markup, professional fee and total charge for the prescription. ^{Footnote 145} In Manitoba, and Newfoundland and Labrador, professional fees may not be listed on their own in advertisements. ^{Footnote 146} In Prince Edward Island, any markup must be stated in advertisements. ^{Footnote 147} Only the full retail price for prescriptions is allowed to appear in advertisements in New Brunswick. ^{Footnote 148} No price information is allowed in Saskatchewan, except on a sign provided or approved by the Council of the Saskatchewan College of Pharmacists. ^{Footnote 149}

Although coupons are mostly unregulated, Quebec prohibits all discounts, gifts, rebates, coupons or other bonuses when selling medicine. ^{Footnote 150} According to the Ordre des pharmaciens du Québec, the prohibition is designed to prevent pharmaceutical companies and pharmacists from using commercial incentives to promote the use of drugs, since pharmacists are required to be guided by patient needs rather than commercial interests. ^{Footnote 151} In Ontario, attaching bonus points, coupons or other incentives to the sale of prescription medication is prohibited. ^{Footnote 152} Manitoba allows coupons under certain conditions. ^{Footnote 153}

Recent court cases have clarified restrictions on coupons in the pharmaceutical industry in Ontario and New Brunswick. According to the outcomes of two cases, pharmacists may not distribute food coupons redeemable at grocery stores to their customers (Ontario), but they may provide rebate coupons redeemable at the pharmacy on the cost of prescriptions (New Brunswick). ^{Footnote 154}

Product price is the primary tool firms use to compete in open markets. Price restrictions inhibit this competition, thereby frustrating one of the purposes of the Competition Act, namely to provide consumers with competitive prices and product choices. No rationale justifying the prohibition on low price ads (and ads for a single product, in particular) was provided, and the Bureau is unaware of direct evidence of harm to consumers when pharmacists have been allowed to advertise low prices.

Pricing and compensation

Retail pharmacists derive their income in part from charging a handling or dispensing fee per prescription. Additionally, many health plans and drug formularies limit the fees pharmacists may charge health plan participants or are reimbursed by the health plan. ^{Footnote 163} While dispensing fees may vary by the location of the pharmacy, the overall average dispensing fee is $9.16. Table 2 shows the distribution of average dispensing fee by type of pharmacy in 2005.

Usually health plans reimburse pharmacists on a fee per prescription-dispensed basis, but in Saskatchewan, Prince Edward Island, Yukon and Northwest Territories, pharmacists are reimbursed as a percentage of the price of the prescription dispensed. ^{Footnote 164} Quebec pharmacists are reimbursed for the cost of the drug plus a professional fee. ^{Footnote 165}

In addition to dispensing prescription drugs, pharmacists are also qualified to provide a limited number of specialized services, such as weight loss or smoking cessation counselling, the fees for which vary widely, since, unlike dispensing fees, fees for other services are not capped by provincial drug plans or formularies. For example, the average fee for diabetes management is $18.59, $27.17 for medication management and $42.76 for smoking cessation; however, the vast majority of pharmacists do not charge fees for these services. ^{Footnote 166}

Several provincial pharmacy associations (including the Ontario Pharmacists Association) have created and promoted suggested fee schedules for professional services, although these fee schedules are not publicly available and their contents are unknown. ^{Footnote 167} Fee schedules that are entirely voluntary and do not carry adverse consequences for members who choose not to comply with them (e.g. discipline or financial disadvantage) do not contravene the Competition Act. However, their very existence causes concern about their influence on competition. Fee schedules can potentially facilitate collusion in price setting, either overtly or tacitly, by signalling acceptable prices and, thereby encouraging pharmacists to set their prices accordingly.

The costs imposed on consumers by these restrictions are higher than they would be in a free market, as is the potential for lower quality service. The Bureau is not aware of any rationale for the use of fee schedules that is linked to the public interest, which means that fee schedules impose costs without any apparent benefit to consumers.

Business structure

Restrictions on the business structure of Canadian pharmacies vary by province, but in general, govern who may own and manage pharmacies. Table 3, below, shows some of the restrictions on the business structure of Canadian pharmacies by province.

Of particular note are restrictions on who can participate in the ownership of a pharmacy: specifically, Nova Scotia restricts pharmacists to managing only one pharmacy, while Quebec requires the pharmacy to be owned by a pharmacist or pharmacist partnership, and British Columbia prohibits drug prescribers from having an ownership interest in a pharmacy.

Ontario has taken a step to foster competition by allowing pharmacies to be located in buildings that also house walk-in medical clinics, sometimes even sharing the same commercial space. Pharmacies in Ontario may also be located in supermarkets or department stores.

Restrictions on business structure are intended to maintain the independence of pharmacists from other professionals in order that commercial pressures associated with multidisciplinary ownership and management do not compromise pharmacists' professional practice or judgment. Aside from trying to avoid conflicts of interest when drug prescribers, such as doctors, dispense drugs, it is difficult to understand why some of these restrictions exist.

The concern about such rules from a competition perspective is that they force many pharmacists into the same business model. This has the effect of ensuring that pharmacists face a similar cost structure, making meaningful competition less likely to occur and possibly preventing entry of new market participants.

Demand

The demand for real estate agents depends on the demand for real estate transactions, which varies with economic factors such as the business cycle, unemployment, population growth and interest rates. The services of real estate agents are necessary only when buyers or sellers want to be represented in their real estate transactions, since they always have the option to represent themselves.

While neither buyers nor sellers are required to use agents, agents are the only people (besides lawyers, auctioneers and others noted above) that clients may hire to represent them throughout real estate transactions. ^{Footnote 186}

The geographic market for real estate agent services is typically limited, since buyers generally search for properties to purchase or rent in specific areas.

According to Statistics Canada, real estate agents and brokers across Canada had operating revenues in 2005 of more than $8.5 billion, up from $5.1 billion in 2001. ^{Footnote 187}

Supply

In 2005, there were 98,813 people licensed to buy and sell real estate in Canada. Almost half of these, 47,431, were located in Ontario. ^{Footnote 188}

Depending on the province or territory, real estate agents may specialize in residential, commercial or farm properties, or property management.

Real estate agents are licensed for a whole province or territory; however, within a province or territory they tend to specialize in relatively narrow geographic areas so that they can develop a reputation and brand image, and better understand local property markets, to more effectively serve their clients. In urban areas, for example, agents may just work in particular neighbourhoods.

In North America, the Internet is playing an expanding role in advertising real estate properties for both real estate agents and private sellers. ^{Footnote 189} According to the National Association of Realtors, a U.S.-based trade organization, 61 percent of agents used the Internet in 2006 to attract buyers to their listings, second only to yard signs (75 percent). ^{Footnote 190}It is reasonable to assume that the same trends are occurring in Canada. Furthermore, in 2003, a Canadian survey showed that 85 percent of those who had purchased a new home in the previous two years had used the Internet to look for information about houses for sale. ^{Footnote 191}

In Canada, the tool agents use most often to list information about properties is MLS®. Only licensed agents that are members of CREA through membership in their local real estate boards may list properties on MLS® and access the complete listings; however, some boards have contracts with third parties—appraisers, for example—that allow those third parties to view listings. The listings that only members may view contain, among others, instructions to co-operating brokers and personal information. The public may visit www.mls.ca to look for properties, but the information on this website is not as complete as the listings to which CREA members have access. The website is an advertising vehicle, just like newspapers and agents' websites.

According to a 2006 CREA survey, 64 percent of buyers and 68 percent of sellers said the property involved in their transaction was listed on MLS®. ^{Footnote 192}

Entering the profession

Table 1, below, lists some of the provincial and territorial licensing requirements. Exemptions from the requirement to obtain a real estate licence are set by provincial or territorial regulation. ^{Footnote 193}

The necessity for a real estate agent to have a business address or a business office in the province where he or she is licensed is there to ensure that agents keep their business records in the province and that those records are easily accessible, as is required by provincial law.

For international applicants, the requirement to be Canadian citizens or residents will create a barrier to entry. The requirement to be eligible to work in Canada will have the same effect. However, those requirements will not have a significant impact on competition because there is currently a large supply of real estate agents. The condition imposed by Yukon requiring that applicants reside in the territory three months before applying for a real estate licence raises concerns, though, which are discussed under "Mobility," below.

The criminal record check, fingerprints and good reputation requirements do not affect entry into the profession a great deal. Those requirements are there to protect the public, but regulators must be careful not to create artificial barriers to entry by unnecessary security requirements.

Regardless of the province or territory, all agents must complete pre-licensing professional courses and pass a qualifying exam. The courses last from about 90 hours (15 days) in Prince Edward Island and Nova Scotia to more than 200 hours in British Columbia, 240 in Quebec and 288 in Alberta (the Real Estate Council of Alberta is currently consulting members on a proposal to reduce the course length). ^{Footnote 194} Aspiring agents in some jurisdictions may take some of the existing courses by correspondence or via the Internet. ^{Footnote 195}The length of the mandatory pre-licensing courses varies significantly between jurisdictions, which the Bureau questions, since the jurisdictions with the least requirements do not seem to have a significantly poorer quality of real estate service.

It is noteworthy that Quebec will be implementing a new program in July 2008 based on the competencies the provincial real estate council has determined individuals need to become agents. Furthermore, Quebec's council is considering introducing non-mandatory pre-licensing courses; anybody could then write the examinations without having to take the courses. ^{Footnote 196} This would effectively eliminate education as a barrier to entry.

In most provinces, individuals wishing to become brokers or managing brokers must first complete the licensing requirements at the agent level (agents are also known as salespeople, associates and trading services representatives) and then complete a few years of work experience, additional coursework or both to achieve the advanced designation. For example, Nova Scotia requires agents to take the Brokers/Managers course and examination and have three years of work experience as salespeople before becoming brokers. ^{Footnote 197} Associates in Alberta must have been registered in Alberta for at least two of the previous five years before being allowed to become a broker. ^{Footnote 198} Once again, the Bureau found differences in the amount of work experience agents must accumulate before being allowed to apply for a broker's licence.

Real estate agents at all levels may also have to complete continuing education requirements. The type of continuing education courses and the frequency at which they must be taken varies across the country. For example, in Ontario, agents are required to complete additional educational courses within their first two years of practice to maintain their licence and must complete ongoing educational requirements thereafter. ^{Footnote 199} In Saskatchewan, agents must complete any continuing professional courses approved by the Saskatchewan Real Estate Commission. ^{Footnote 200}

Given the relatively short process individuals have to follow to become real estate agents, educational requirements are not a significant barrier to entry. However, the inconsistencies across provinces and territories in educational requirements do raise questions as to whether regulators have set the requirements at the minimum level necessary for real estate agents to be sufficiently qualified.

The proposal by Quebec's real estate council to introduce non-mandatory pre-licensing courses would have the effect of virtually eliminating barriers to entry in that province and, therefore, increasing efficiency and competition.

Interprovincial mobility

Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario and Saskatchewan have signed a mutual recognition agreement under which agents moving from one province to another or working in more than one province are evaluated only on knowledge specific to the province in which they wish to work, provided that their educational qualifications satisfy those of that province. ^{Footnote 201}

Restrictions on the mobility of real estate agents create an unnecessary barrier to entry for those wishing to work in another province or territory. Since each province and territory has its own licensing process and people may easily move between jurisdictions, it is essential that agreements and legislation facilitate the movement of real estate agents.

International mobility

Only a few provinces and territories have explicitly addressed international mobility. This is not a concern from a competition standpoint, because the requirements for becoming a real estate agent are not significant barriers to entry into the profession.

In Alberta, the real estate council may exempt agents from pre-licensing courses, the provincial qualifying examination, or both, when they are currently licensed or are eligible for licensing in Colorado, Georgia, Idaho, Montana, Oklahoma, Oregon, South Dakota, Utah or Wyoming. ^{Footnote 207} In Yukon, agents are exempt when they have experience and training equivalent to what they would have acquired by selling or managing real estate in a Commonwealth country or the United States for not less than two of the previous five years. ^{Footnote 208} In British Columbia, brokers who have held active real estate licences in the United States for not less than one year during the three years prior to applying for a licence are exempt from the Real Estate Trading Services Licensing Course but not from the examination. ^{Footnote 209}

Ontario's regulation does not list the countries or states from which applicants are exempt from some licensing requirements. It does mention that the registrar reserves the right to grant exemptions from the pre-licensing courses to applicants with an equivalent status to that of real estate or business broker, or salesperson in Ontario. ^{Footnote 210} As mentioned previously, Saskatchewan's policies on mobility include all jurisdictions. If the Quebec real estate council implements its proposed non-mandatory pre-licensing courses, agents from other jurisdictions would only need to pass the examinations to become licensed in that province. Furthermore, in Quebec agents may be exempted from the pre-licensing courses when their general or vocational college training is considered to be equivalent to what is required to be licensed in Quebec.

Even though the requirements for becoming a real estate agent are not significant barriers to entry, provinces and territories should strive to ensure there are no unnecessary barriers to entry and while still allowing the competencies of prospective agents to be evaluated.

Overlapping services and scope of practice

Six provinces (Alberta, British Columbia, Manitoba, New Brunswick, Ontario and Saskatchewan) and two territories (Northwest Territories and Nunavut) explicitly prohibit anyone but licensed real estate agents from collecting commission for real estate trading. Other provinces use terms such as salesperson and broker when referring to those who collect or pay a commission. ^{Footnote 211}

In addition, most provinces and territories stipulate that individuals may not trade real estate or otherwise hold themselves out as real estate agents, salespersons, brokers, associate brokers or associates unless they are licensed and properly registered with a brokerage. ^{Footnote 212} Only members of CREA are permitted to use the term REALTOR® in their designation. ^{Footnote 213} The use of this private, trademarked term is not a substitute for fulfilling the regulatory requirements professionals must meet. ^{Footnote 214} Agents may use it in addition to a provincial or territorial designation (such as licensed associate or broker).

Each piece of provincial and territorial legislation governing real estate agents includes a list of people who are exempt from holding real estate licences. These may include, depending on the jurisdiction, lawyers, notaries, auctioneers and property managers. However, the legislation usually requires that the real estate services such people offer be provided in the course of their regular practice or business. Lawyers and Quebec notaries also provide complementary services to those offered by real estate agents. Typically, lawyers and notaries are involved in closing real estate transactions. For example, in Quebec, notaries make mortgage documents official by depositing and preserving them in their notarial records (called a notarial act en minute ). ^{Footnote 215}

For sellers who choose not to use the services of real estate agents (since they are not mandatory), there are companies that offer tools to advertise their property. As discussed previously, only agents that are members of CREA and have mandates from sellers to act for them may list properties on MLS®. Property owners who choose not to be represented by real estate agents are not permitted to do so.

The word trade (as in agents being allowed to trade in real estate) is defined by each province and territory in the definitions or interpretation section of its real estate legislation. Those definitions usually describe trading as, among other things, disposing of, acquiring or transacting in real estate by sale, purchase, agreement for sale, exchange, option, lease, rental or otherwise. The legislation in some provinces and territories also includes the activity of listing or advertising real estate in the definition. ^{Footnote 216} However, these jurisdictions usually also have policies that state that they do not apply the definition of trade to businesses that advertise or list real estate but are not engaged in transactions. This means that "for sale by owner" companies, which only advertise properties, are exempt from licensing.

Since only real estate agents are allowed to trade in real estate, the scope and interpretation of the definition of trade are very important because they determine the limits of what real estate agents may do and, thus, affect all players in the industry. For example, firms that offer real estate advertising and marketing services would not be able to offer their services to customers to help them sell their properties if advertising were the exclusive right of real estate agents. This is an unnecessary limit on competition.

Advertising

Two advertising restrictions are common across all provinces and territories. First, advertising must not be false or misleading. Second, the name of the agent or broker and the associated brokerage must be displayed clearly, regardless of the type of advertisement. ^{Footnote 217} In addition, every jurisdiction, either specifically or implicitly, requires that agents have the consent of property owners to advertise. ^{Footnote 218} These restrictions are there to protect the public and do not cause any competition concerns.

There are other restrictions that are not as widespread that also seem to be acceptable from a competition perspective. For example, in Saskatchewan agents must submit all advertising to brokers or branch managers for approval prior to publication. ^{Footnote 219} Nova Scotia and Saskatchewan have additional rules requiring that advertising not be in bad taste, offensive or harmful to the public or the profession. ^{Footnote 220} In New Brunswick and Prince Edward Island, only listing brokers may place signs on properties for sale, rent or lease. ^{Footnote 221}

Although the Bureau did not find significant cause for concern about advertising restrictions, it is mindful that consumers are generally best served by open and free competition, which restrictions can undermine. As a result, restrictions on advertising should be kept to a minimum to ensure that real estate agents have access to the full range of ways to advertise their services to the public, and hence maximize the incentives they have to offer the highest quality service and to innovate.

Recommendation

Restrictions regarding any form of advertising should not go beyond protecting consumers from false or misleading advertising.

Pricing and compensation

In all provinces and territories, agents may only trade real estate on behalf of the brokerage that employs them and may receive compensation only from that brokerage. Brokerages may pay a commission only to employees who are licensed to trade real estate. Although the type of remuneration is negotiable, within the limits permitted by law, there has been a strong tendency towards fees that are a fixed percentage of the selling price of the property. ^{Footnote 222}

There have been no fixed or suggested prices in the real estate industry since the Competition Tribunal issued a prohibition order in 1988 prohibiting, among other things, collusion among agents to fix commission rates, fees or splits, or to boycott certain agents or advertising media. Even though the order ceased to apply in 1999, real estate regulators across the country continue to respect it and have incorporated many of its principles into their codes of conduct. ^{Footnote 223} It is important that the industry continues to let the market set the commission rates so that consumers have the opportunity to pay competitive prices for the services of real estate agents.

In 2003, the Competition Bureau reached a settlement with Re/Max Ontario-Atlantic Canada Inc., Re/Max of Western Canada (1988) and Re/Max International Inc. regarding commission rates. The consent order states that Re/Max may not prohibit its franchisees or sale associates in Canada from setting independent commission rates or advertising such rates. The settlement aimed at enhancing competition for real estate brokerage services and benefiting Canadian consumers by allowing Re/Max franchisees to advertise commission rates or fees to the public. ^{Footnote 224}

All the provinces and Yukon prohibit commission based on the difference between the listed or asking price and the actual selling price. ^{Footnote 225} In Alberta, this prohibition was originally introduced to prevent real estate agents from suggesting inaccurate list prices in order to mislead clients and increase their commissions. ^{Footnote 226} Quebec's real estate council sees the prohibition as protecting the seller, who could otherwise be deprived of a significant portion of the sale price. ^{Footnote 227} Since the intention of this restriction is, in fact, to protect the public, the Bureau does not have a concern about it from a competition perspective.

The legislation in New Brunswick, and Newfoundland and Labrador states that if no prior agreement has been made about the amount of commission, the prevailing rate in the community of the sold or purchased real estate is to be used. ^{Footnote 228} Yukon has a similar provision that limits the remuneration to five percent of the sale price when no prior agreement has been made. ^{Footnote 229}This type of rule protects the customer and does not raise any competition issue.

Since commission rates are usually based on the selling price of the property, it is clear that agents have a financial interest in those prices. The commission that an agent receives is not in proportion to the time spent working to sell the house. In addition, since the impact of a price increase on the agent's earnings is low relative to the impact on the seller, the agent's incentives may not be aligned with those of the seller. For example, at a six percent commission rate, the agent receives $12,000 in commission when the property is sold for $200,000. For a $205,000 selling price, the agent receives $12,300. As a result, the agent does not have the financial incentive to wait for a better price for his or her clients. Data from a 2005 study seems to support this: it showed that homes owned by real estate agents sold for about 3.7 percent more than other houses and stayed on the market about 9.5 days longer. ^{Footnote 230}

All provinces and territories, with the exception of Quebec, place restrictions on methods of remuneration and restrict remuneration to either a fixed amount or a percentage of the selling price. ^{Footnote 231} According to the Real Estate Council of Alberta, the restrictions on the method of remuneration ensure that consumers are aware of the exact or expected costs of hiring real estate agents. ^{Footnote 232}

Ontario goes even further and uses the phrase but not both in its restriction, meaning that real estate agents may not, for example, ask for a fixed amount for their initial work and then a percentage of the selling price at closing. ^{Footnote 233} Such a restriction disallows two-part fees, a type of pricing arrangement one would expect to arise in a competitive real estate market in which some fixed level of work is generally required, but anything beyond that is uncertain. Lawrence J. White elaborates on this point:

Further to the extent that there are fixed costs that are associated with the agent's efforts (say, the initial consultation with the sellers) and also costs that vary with the expected selling price (say, more advertising for a more expensive house), a two-part fee, e.g., $2,000 plus 3% of the selling price would be expected in a competitive environment. The total amount of this two-part fee, when expressed in a percentage of the selling price, would exhibit the expected taper.

(…)

Further, …, a fixed percentage fee announced by most or all brokers in a metropolitan area prevents the inherent quality differences that surely exist among brokers from being rewarded . ^{Footnote 234}

The Bureau finds it difficult to believe that, in the case of Alberta's rationale for its restrictions, consumers needing to be aware of exact or expected costs is inconsistent with permitting agents to charge a fixed amount and a percent of the sales price when pricing their services. With information on the markets being more accessible, consumers now have a better idea of the value of their properties and are able to make wiser and more informed decisions. This, along with more information about the options consumers have regarding the services the various players in real estate transactions offer, will also likely have an effect on consumer behaviour.

With regard to Ontario's approach, it prevents what would otherwise be a perfectly acceptable compensation arrangement that should spur competition among agents, since it maintains the incentive for them to work to get a higher selling price for their clients while ensuring that they will be fairly compensated for the preparatory work they do. At the same time, it is unlikely that consumers would suffer for not knowing the exact amount of commission they would pay, because, as is the case in the current system, the seller would know in advance the percentage of commission he or she would have to pay when the property sold. The only difference would be the fixed amount to be paid at the signing of the contract, an amount that would be known to the seller from the start.

Business structure

The restrictions on business structure for real estate agents are fairly general. For example, agents and brokers may only trade real estate for the brokerages that employ them (except in Alberta, where brokerages and agents may enter into contractual, non-employment relationships, and in Prince Edward Island, where independent contractors as well as employees are paid commissions). ^{Footnote 235} In addition, brokerages must be licensed.

However, some provinces have additional restrictions, such as requiring prospective brokers in British Columbia to have a minimum of cash hand as a condition of being licensed as a brokerage (applicants must have three months' operating expenses plus $5,000 cash in the bank), requiring receiving authorization from the Superintendent of Real Estate Agents and Salespersons before opening a branch office in Newfoundland and Labrador, and restricting the number of agents and brokers that a single manager may supervise in Quebec. ^{Footnote 236} When considering or reviewing restrictions of this type, regulators should always keep the protection of the public as the primary goal.

As noted, agents may trade real estate only on behalf of the brokerages that employ them and may receive compensation only from those brokerages. Consequently, only brokerage owners can really be self-employed and independent. However, in Alberta, brokerages and agents may enter into contractual and non-employment relationships that permit agents to be self-employed; however, agents must still operate in accordance with brokerage policies. ^{Footnote 237} A greater number of types of contracts would offer more possibilities for both agents and brokerages to have employment arrangements that meet their own needs and those of the businesses.

To become brokers, agents must have between two and three years of experience, depending on the province where they are licensed. In many provinces, they must also take at least one course and pass at least one examination. These requirements are barriers to new agents who would like to start their own businesses. They are also not typical of other professions. For example, lawyers may start their own businesses the day they are accepted to the bar after finishing a mandatory articling period, which varies from six months to one year; no additional courses are necessary. With some adjustments to the educational requirements for licensing, real estate agents could become brokers sooner. In addition, measures to protect real estate agents' customers from error, omissions and professional neglect, such as holding professional insurance, could easily be made mandatory. Such insurance is already mandatory in some provinces and in numerous other professions. ^{Footnote 238} At the moment, brokerages are liable for their employees and, therefore, hold the appropriate type of insurance.

One change in how the real estate industry is organized could help address concerns about independence. In Quebec, when the Real Estate Brokerage Act is eventually reviewed, the real estate council plans to recommend that no distinction be made between agents and brokers. Only one type of licence would exist. Each person holding a licence would be professionally independent, but brokers could still work in real estate brokerages if they wished. ^{Footnote 239} The council's recommendations would ensure that a greater number of agents are independent in the way they conduct their business. There is at least one precedent for this: there is no differentiation between brokers and agents in Ireland. Only the owner of the real estate practice must obtain a licence and a Client Bank Account for the practice to receive and hold all client monies. The practice may employ whomever it wishes and the employees do not require licences. ^{Footnote 240}

Although the Bureau does not know the current cost of the lack of independence of agents in Canada, it is reasonable to believe that such a cost exists. Many real estate agents work for the major franchises in the country and must follow franchise policies on various aspects of their work. More independence for real estate agents, and with a shorter waiting period, would mean that they could offer a greater variety of products and offer it sooner than is currently possible, without having to follow the directives of an already established broker. Consumers would then have access to more dynamic real estate services offerings.