Evidence of meeting #44 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 bureau.
A recording is available from Parliament.
4:05 p.m.
NDP
Glenn Thibeault NDP Sudbury, ON
Okay, thank you.
In relation to priority routing, we are hearing that when they come into the debit market, one of the two credit card companies will be using priority routing as a way to have their customers or consumers use that choice without necessarily knowing it.
In your opinion, do you find that priority routing would give an unfair advantage if a consumer is not necessarily aware they're being brought to that type of system?
4:05 p.m.
Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau
Routing in the debit card context is one of the issues on which the Senate banking committee made recommendations in its report. As you're aware, there has been a request for an official government response to the committee's report, and this is an ongoing process. We cannot make specific comments at this time as to what action the government should take.
What I can tell you is that routing is not a simple or straightforward issue; it's highly complex, involving a number of actors in the market and an intricate web of interrelated issues. Routing in the debit context is a process by which a given network--Interac, Visa, MasterCard's Maestro--is selected to transmit the electronic message to authorize a debit transaction.
There are questions as to who should make that decision--the network, the issuer, the acquirer, the merchant, or the consumer. Depending on whose network the transaction is conducted on, the cost to the merchant may vary. We don't have a position on which one of those should be the one that chooses. I think there will be a government response to that.
Would you like to add anything, Martine?
4:05 p.m.
Assistant Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau
No.
4:05 p.m.
Liberal
Anthony Rota Liberal Nipissing—Timiskaming, ON
Thank you, Mr. Chair.
I have a very simple question. I know I have a list of questions here, but I'm not sure I can ask them.
Mr. Taylor, are you appearing before this committee meeting maybe a couple of weeks too early? Can I have your comments on that?
4:05 p.m.
Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau
I'm appearing when I was called.
4:05 p.m.
Some hon. members
Oh, oh!
4:05 p.m.
Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau
I'd be happy to come back any time you'd like to have us back.
4:05 p.m.
Liberal
Anthony Rota Liberal Nipissing—Timiskaming, ON
Very good.
I'll concentrate on the process, then, more than the actual facts in this actual situation.
Abuse of dominance comes up quite often. Is it the role of the Competition Bureau to react to existing situations, or is it part of the bureau's duty to police and investigate what's out there? How does that work? How do you determine when there's abuse of dominance within a market?
4:10 p.m.
Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau
I should say that we don't just rely on complaints. In fact, some of our better cases have come from the newspapers. Say we read that some company has a large market share; we may proactively look into that. Sometimes a complainant, a small business, will come in and tell us about a big company that is beating them up, and that will start a complaint. So there are various ways. Sometimes parliamentarians raise issues on behalf of their constituents, and we will seriously look at those, though unfortunately not every complaint that comes in meets the definition under the act.
So those are the ways that we could intake complaints. So we have various ways. We're not restricted in any way.
On abuse of dominance, to get to your second question, we can act before the company becomes dominant, when the company is dominant, or after the company is dominant. The wording of the section says that we have that ability.
To the third part of your question, what is abuse, abuse is really three things. The wording is not very helpful in understanding what abuse is. It was a former monopolization provision that was amended by Parliament in 1986 to make it more effective, and there are really three elements. You have to be dominant, i.e., you have to have market power. Market power is a large share of the market and barriers to entry. You have to have a practice of anti-competitive acts, which can be anything that excludes or harms competitors. And finally, you have to show that in that market there's a substantial lessening of competition. So it's a three-part test.
4:10 p.m.
Liberal
Anthony Rota Liberal Nipissing—Timiskaming, ON
Very good. Thank you.
Now, if I could follow on that just a little bit more, when we're looking at the investigation that's going on presently, it's a result of Interac actually wanting to go from non-profit to profit, and that's something you're investigating. Now suddenly we have two other players as well. We have Visa and MasterCard who come into play.
You mentioned undue leverage, or leverage from outside the country or from other sources. How would you measure that? Could you give us a little bit of an explanation of how you would measure whether they were going to use leverage from outside the country or not? Is that part of your decision-making process now, or do you wait until after that takes place?
4:10 p.m.
Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau
Mr. Chairman, I think the concern was that they would leverage their position in Canada in the credit market to force merchants to accept their debit cards in the debit market, and we would measure that by talking to merchants to see whether it's actually happening. We would also investigate what they're doing internally to effect that, if that were indeed the case.
4:10 p.m.
Liberal
Navdeep Bains Liberal Mississauga—Brampton South, ON
I have just a quick question.
With respect to examples of other jurisdictions where you had the credit card companies enter the debit market, in terms of dominance and market share, do you have an example of how they've been able to leverage their brand, their other features that they have with their company, and in charge of the credit cards, to be able to encourage a greater use of the debit service and then eventually start to increase rates? Are there examples of that in other jurisdictions?
4:10 p.m.
Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau
I'll ask my colleague Martine to look at that. She has been charged specifically with looking at what's happening around the world.
4:10 p.m.
Assistant Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau
I don't have a specific example for you. I'll have to get back to you on that.
4:10 p.m.
Liberal
Navdeep Bains Liberal Mississauga—Brampton South, ON
In another jurisdiction where they've entered the debit market, how has their market share progressed or not progressed, and how is that correlated to the rates they charge?
4:10 p.m.
Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau
I think one area we can comment on is what happened in the U.S. That's an economy that we often use as the closest example. Star Alliance was in the debit market and dominated that market. Along came Visa, and they ended up, between 2002 and 2006, not dominating that market but overtaking Star Alliance. There were allegations at that time that part of the reason they did that was that they were leveraging.
But we're not experts on those facts. We shall certainly try to get them for you, if we can.
4:15 p.m.
Liberal
Navdeep Bains Liberal Mississauga—Brampton South, ON
In our notes here, I think there is an example of a fee increase. In the one that you cite for the U.S., I think they had indicated that it increased from 0.08¢ to 0.19¢ for Visa in terms of their transactions with respect to interchange fees for PIN debit card transactions in the period from 1998 to 2003. So there is a comparable example. Do you think that's a fair example?
4:15 p.m.
Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau
That may not be leveraging, and I would caution you that in the U.S. there are rewards on debit cards, which we have not heretofore had and we are starting to see now.
When you issue rewards—air miles, tow trucks, everything, and now 1% cash back—as those rewards increase, the fees tend to go up, because someone has to pay for them. That is part of the cycle. It's not the only part of the cycle, but it's an important consideration in looking at these markets, which makes them so complex.
The credit card companies want you to take their credit card and they issue you rewards, but some of those costs are passed on to the merchants.
4:15 p.m.
Conservative
November 18th, 2009 / 4:15 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Thank you, Mr. Chair.
I want to thank our guests for coming today. Whether it's early or not in the process, I think it's important for us to understand the process, and I appreciate your coming.
I do have a few process questions for you, actually.
On page 9, you talk about your decision whether to challenge the Interac application to the Competition Tribunal on their consent order. I want to be clear that there is no relationship between the Competition Bureau and the Competition Tribunal. Is that correct?
