Competition tribunal’s decision to not hear “scraping” and “crawling” case upheld

This post is in: September 21, 2017

Company alleged competitor engaged in anti-competitive conduct and abused copyright claims

The Federal Court of Appeal, in CarGurus, Inc. v. Trader Corporation, has dismissed an appeal brought by an online advertisement aggregator arising from a competition Tribunal Decision that denied leave to formally bring its against a competitor under the Competition Act.

The Appellant, CarGurus, is a Massachusetts company operates a “Digital Marketplace” for car advertising. It acquires and aggregates advertisements for new and used cars from vehicle manufacturers, automobile dealers, private sellers, and the other marketplaces. Some marketplaces are also in the business of providing or syndicating these ads to other marketplaces. The respondent is the operator of AutoTrader, another digital marketplace that also creates ads on behalf of car dealerships. Their employees of contractors visit dealerships, take photos and complete the particulars for car ads that appear on both the dealer’s own website and on AutoTrader. AutoTrader may also syndicate these ads to other marketplaces.

Prior to June 2015, CarGurus had been acquiring advertisements from the AutoTrader site to place on its own site. In response to dealers’ complaints, AutoTrader sent CarGurus a letter demanding that they cease “scraping” or “crawling” the site to take its advertisements. AutoTrader claimed it owned the copyright to the photos of the vehicles. The cease and desist letter also included a draft syndication agreement whereby CarGurus could license the AutoTrader ads. CarGurus rejected the draft agreement and claimed that it would have prevented it from effectively competing with AutoTrader in the Canadian market.

In December 2015, AutoTrader sued CarGurus for copyright infringement in the Ontario Superior Court of Justice and ultimately prevailed (see Trader v. CarGurus, 2017 ONSC 1841). In the meantime, CarGurus commenced a proceeding before the Competition Tribunal. Under the Competition Act, CarGurus claimed that AutoTrader “engaged in anticompetitive conduct, including refusing to licence Trader’s Vehicle Listings to CarGurus on the usual trade terms, instructing third parties not to deal with CarGurus, and improperly asserting copyright.”

Before the Tribunal, CarGurus claimed a number of harms caused by AutoTrader:

[10] CarGurus had argued that removal of the Trader photographs and its inability to display the Trader Vehicle Listings led to less traffic and was generating less leads to dealers, which has negatively affected its revenue realization. More particularly, CarGurus had submitted to the Tribunal that: 1) the number of multiple leads CarGurus can generate for dealers has diminished significantly; 2) CarGurus has lost 60% of leads for dealers whose Vehicle Listings are related to Trader; 3) CarGurus has lost approximately 25% of its overall lead volume; 4) CarGurus’ conversion rate (i.e. the percentage of visitors to the CarGurus website who contacted at least one dealer about a car for sale) has decreased by 16%; and 5) detailed views of CarGurus’ pages have dropped by 31%, leading to a corresponding 31% drop in advertising revenues.

The claimed harms were rejected by the Competition Tribunal and leave was not granted to proceed to a full hearing.

Appeals to the Federal Court of Appeal from the Tribunal can only be on questions of law unless it grants leave to engage in questions of fact. The appeal court is bound by the factual determinations made by the Tribunal. The Appellant attempted to frame its first ground of appeal as a mixed question of fact and law. It claimed that the Tribunal misapprehended the evidence put forward regarding AutoTrader’s market share. This was rejected as a question of fact:

[17] Whatever the merit of this argument, there is no doubt in my mind that the question of whether Trader controls 42.5% of the upstream market is a pure question of fact. There is no legal component in the alleged error made by the Tribunal. As such, this issue is not properly before us, as subsection 13(2) of the Competition Tribunal Act requires leave of this Court in order for it to engage with questions of fact. Even if the first question could somehow be characterized as a question of mixed fact and law, it would be of no help to the appellant as this Court is bound by the findings of facts of the Tribunal.

CarGurus also alleged that the Tribunal misapplied the appropriate test and threshold for leave decisions. The Court of Appeal found the Tribunal’s conclusion was reasonable and dismissed the overall appeal.