Evidence of meeting #17 for Industry, Science and Technology in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was interchange.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Kevin Stanton  President, MasterCard Canada
  • Andrea Cotroneo  Vice-President and Canada Region Counsel, MasterCard Canada
  • Tim Wilson  Head, Visa Canada
  • Bill Sheedy  Regional President, North America and Head of Interchange Strategy, Visa Canada

3:45 p.m.

Liberal

John McCallum Markham—Unionville, ON

So you accept the hypothesis, but you question whether the amounts are substantial. Is that what you're saying?

3:45 p.m.

President, MasterCard Canada

Kevin Stanton

I don't question the hypothesis at all. I just say that there's opportunity within the adjustments that occur to bring prices down and for prices to go up, all within the same merchant.

3:45 p.m.

Liberal

John McCallum Markham—Unionville, ON

Well, I have a follow-up question.

I think you would accept the point that all consumers.... If the interchange costs and other costs of debit or credit cards go up to some extent, the increased prices will be passed on to all consumers, or the retailer will have to absorb the additional cost. But for those purchasing, if you have a premium card, you'll have an offsetting benefit. If you pay with cash or an ordinary card, you will have none.

Does MasterCard have any objection if a merchant reflects those costs to customers so that someone paying with cash or an ordinary credit or debit card will pay a lower price than someone paying with the premium card? Is that allowed in the system or is that not allowed?

3:45 p.m.

President, MasterCard Canada

Kevin Stanton

Actually, thank you for adding that question, because I should have added it to the beginning of my answer. That is, we have always allowed cash discounts, and for merchants to advertise and promote those cash discounts. Or they can steer to lower-cost products to recoup the cost or give the advantage back to a cash user.

3:45 p.m.

Conservative

The Co-Chair James Rajotte

Thirty seconds, Mr. McCallum.

3:45 p.m.

Liberal

John McCallum Markham—Unionville, ON

What about discounts arising from the lower-cost ordinary credit cards as opposed to premium credit cards? Do you allow that too?

3:45 p.m.

President, MasterCard Canada

Kevin Stanton

I guess I don't.... You're saying allowing discount--

3:45 p.m.

Liberal

John McCallum Markham—Unionville, ON

The merchant has to pay a higher price to MasterCard if it's a premium card. Are merchants allowed to reflect that in higher prices for premium cardholders versus ordinary cardholders?

3:45 p.m.

President, MasterCard Canada

Kevin Stanton

Frankly, I'd have to look at it. It's never anything a merchant has suggested as a solution to these issues. It's not something I've considered before, I'm afraid.

3:45 p.m.

Conservative

The Co-Chair James Rajotte

Thank you, Mr. McCallum.

We'll go to Mr. Laforest, s'il vous plaît.

May 14th, 2009 / 3:45 p.m.

Bloc

Jean-Yves Laforest Saint-Maurice—Champlain, QC

Thank you, Mr. Chair.

Good morning to all of our witnesses.

Last Tuesday, at a joint meeting, the Standing Committee on Finance and the Standing Committee on Industry, Science and Technology heard from witnesses who represent an array of retailers and merchants' associations from across Canada and Quebec, including the Retail Council of Canada, and several coalitions of merchants and various groups.

These groups made presentations to the committee. They also made three recommendations, one of which was the importance of legislating in the credit card industry; it is important for the government to start regulating the credit card system. A second recommendation dealt with regulating for greater transparency among the various stakeholders that make up the credit card system.

I asked these associations and coalitions if they themselves had approached banks, Visa, MasterCard, issuers, and others concerned, directly to call for greater transparency. They replied that, indeed, requests had been made. Yet, when we asked them what you replied to them, they told us that you had not. In fact, the representative from the Retail Council of Canada told us that they were quite taken aback. Each year, the Retail Council of Canada holds three meetings, to which you are invited. When the last meeting occurred in September, MasterCard decided not to attend. This is what the representative told us.

Apparently, you had told them that there were problems with software that prevented you from answering their questions. Yet, in a letter sent to the chair of this committee, you claim that you are willing to discuss issues of common interest at least once a year. Since there currently are issues of common interest, why did you not attend the meeting?

On the one hand, there are associations that represent some 250,000 merchants; on the other hand, there is you. Who should we believe? You and your document, or the people who speak on behalf of 250,000 merchants and even more employees?

What degree of transparency are you willing to demonstrate, when merchants are claiming that they are totally unaware of why they are paying higher interchange fees and other fees they are forced to assume?

3:50 p.m.

President, MasterCard Canada

Kevin Stanton

Thank you for your questions.

It actually gives me an opportunity to make a couple of statements about the testimony from earlier this week.

I think there's no doubt that if you live through this experience that we've lived through, you have to ask yourself if there has been a breakdown in a system that we're very proud of. I think the breakdown happens to be in the notion of transparency and access to information about the system.

I actually don't think that's a problem that relates to large merchants as much as it relates to small merchants. One of the focuses that we want to take on, with the CFIB in particular, is making sure that...because large merchants know how to take care of themselves, and they do. They negotiate interchange rates with us and they understand the system quite well. Small merchants, in our view, should be empowered to operate on a level playing field against the larger competitors to our system, and that hasn't happened. We're taking specific measures to make sure they understand the transparency mechanisms we have in place, such as our website.

3:50 p.m.

Bloc

Jean-Yves Laforest Saint-Maurice—Champlain, QC

Perhaps you have taken measures. But if they were taken between Tuesday and today, there has not been enough time for them to take hold.

Nevertheless, that is not what these merchants told us. All of the coalitions said that they are having a hard time receiving information to help them better understand the fees.

This ties in to what Mr. McCallum was saying earlier. At the end of the day, there were increases because of the increase in premium cards issued. Everyone knows that for now, merchants are paying for the increases, but they will undoubtedly be passed on to the consumer later on.

Within this process, consumers also need transparency. So will they be better informed than merchants? To date, as regards the information you provide to merchants, I think your batting average has been dismal.

3:50 p.m.

President, MasterCard Canada

Kevin Stanton

Let me clarify something. We had our interchange rates on the web, in the open, for three years prior to last September. We refined the system prior to last September as well, because we knew we were adopting a more complicated regime and that too much information was as bad as not providing any. So we decided to go to a customized report regime.

As it relates to the meeting last September.... We've had a long-standing relationship with the RCC. Prior to September, they didn't pick up the phone on this matter. When we were invited in September, I received a call from a person associated with the RCC saying that we shouldn't go, that it was meant to be an ambush. So as it relates to that particular meeting, that's why the decision was made that it wouldn't be constructive to go.

But we've made ourselves available and we've invited the RCC on every occasion to discuss this issue.

3:55 p.m.

Bloc

Jean-Yves Laforest Saint-Maurice—Champlain, QC

Those representatives would be pleased to hear that, rather than think an ambush was laid for them.

I would like to ask you one last question.

The Australian example was also raised: the Australian government introduced legislation and began regulating the credit card system. My question to the representatives was, following regulation to set the interchange rate at 0.5%, rather than the 1.5% we see here, whether the banks, Visa, or MasterCard went bankrupt. I was told that this was not the case.

I would like to hear what you think about this.