Industry Committee on Nov. 25th, 2024

[Matthew Boswell]

If the Minister of Transport determines that a merger involves a national transportation undertaking, then the minister can indicate they are going to conduct a public interest review of the merger, at which point the commissioner's role becomes one of providing advice to the Minister of Transport. The first stage of advice is competition concerns with respect to the merger, and then, if we provide advice that there are competition concerns, the parties provide proposed solutions to those concerns, at which point the bureau's commissioner is to opine to the Minister of Transport on whether those proposed solutions are adequate to address the competition problems. The Minister of Transport then makes a recommendation to cabinet as to whether or not to approve the merger.

This has happened multiple times in my time as commissioner. With respect to WestJet and Sunwing, we indicated significant competition concerns. It was approved. Regarding Air Canada and Air Transat, we indicated significant competition concerns. It was approved in Canada, but blocked in Europe. On Canadian North and.... Sorry, I'm drawing a blank on the other airline, which was to provide service primarily to far northern parts of Canada. I indicated significant competition concerns. It was approved.

[Brian Masse, NDP, Windsor West, ON]

I'd ask our analysts to provide us with that material in terms of the specific amendment required in legislation to cease that policy, please.

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Masse.

Mr. Chambers, you have the floor again for approximately five minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

Sometimes when you see a bad actor, or when something bad happens on television, the police or the authorities say that the perpetrator was “known to authorities”. In the context of Interac, you have a long and storied relationship with Interac. Would you say they are known to you? You know their business. You've had compliance agreements with them in the past. You know about them.

[Matthew Boswell]

Yes. I think that's a fair question.

Just to be more precise, our jurisdiction, if we can call it that, was limited to what I referred to as these two shared services, ATM withdrawals and point-of-sale debit card transactions. Just those two areas governed our entire oversight of Interac for 24 years.

[Adam Chambers, Conservative, Simcoe North, ON]

Right, but this instance is not the first time you've had concerns about Interac's practices generally.

[Matthew Boswell]

That's correct. We alleged that it was exclusionary and an abuse of dominance in 1995.

[Adam Chambers, Conservative, Simcoe North, ON]

In that case, since there's been some previous history, the solutions that you may recommend could be more drastic. They're not necessarily potentially an alleged first-time offender in an abuse of dominance, at least in respect of previous allegations. Would it be within your authority to recommend to the government that, to clean up the governance issues, the entity be spun out of ownership from the financial institutions themselves?

[Matthew Boswell]

Off the top of my head, I don't know if that would be within the scope of remedies that we could seek. I don't believe so.

[Anthony Durocher]

The way the abuse of dominance provision works is that, to seek a remedy, we would have to either make an application to the Competition Tribunal, which is a specialized federal court, or have an agreement on consent with the parties. There are remedies under the abuse of dominance provision to seek structural relief to remedy competition, but everything flows from the results of an investigation and whether you can conclude that there is an offence.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay. I'll just say that I would be interested in the bureau's position on whether, in order to prevent future conflicts of interest, one measure that the government might consider would be to free the entity of the conflict of interest with the large owners, the incumbents.

You mentioned real-time rail. It's really convenient that we're behind and delayed on real-time rail. By the way, it's really convenient that Payments Canada gave a sole-source contract to Interac, which is owned by the banks, whose own delays will only ensure their profit pool exists for a little bit longer. I would welcome the bureau's recommendations on that front.

There's an issue about competition, no doubt. One of the ways that new entrants were trying to accumulate customers was to talk about free e-transfers. If it is true that the pricing structure was such that these new entrants were significantly harmed with higher prices to offer that service, to me that's a direct decision to limit the competitive landscape by incumbents to prevent entrants from coming in. That's one thing that I would leave with you.

The final thing is that, on e-transfers themselves, they weren't always free. Many people get free e-transfers today, but they're often paying $1.50. Are you able to look at price gouging in a situation where you know that a financial institution is paying six cents for that fee but then charging someone $1.50 on the other side? Is price gouging something you're able to look at?

[Matthew Boswell]

Generally, no, we don't look at price gouging. Generally, companies in the Canadian economy are entitled to charge whatever price they want for their products, provided that in doing so they are not engaging in what we call “predatory pricing”, which is a very different thing from what we're talking about here. When we talk about predatory pricing, it's pricing very, very low to drive competitors out of the market.

[Adam Chambers, Conservative, Simcoe North, ON]

This is my last question. One of the bank CEOs said that there is a “ruthless oligopoly” and that banks are under pressure. Do you agree that there's a ruthless oligopoly and that the banks are under pricing pressure from within their own ruthless oligopoly?

[Krista McWhinnie]

I was just going to say that the term “ruthless oligopoly” is a bit odd to me.

[The Chair, Liberal, Joël Lightbound]

You're saved by the clock.

You're out of time, Mr. Chambers.

Go ahead, Mr. Arya.

[Chandra Arya, Liberal, Nepean, ON]

The ruthless oligopoly's combined income last year was between $45 billion and $60 billion, equal to the entire deficit of the federal government. Let's start with that.

I'm glad to see the commissioner and his colleagues here.

When it comes to competition, I'm in sort of a big dilemma here. Let's take the example of the steel sector, where there's open competition and there's no restriction on investment, foreign direct investment. Today, all companies in the steel industry are foreign-owned. What is the result? There has been no increased manufacturing capacity of steel in Canada for the last 20 years. They don't export to any market other than the U.S. and Mexico, even though we have signed agreements, around 15 to 20 free trade agreements, across the world. That is the drawback of having free competition and free ownership by foreign actors.

When it comes to the banking sector and the ruthless oligopoly where there has been $50 billion or $60 billion in profit, every single dollar comes from hard-working Canadians. We see what is happening there.

I want to ask you a question on Interac or e-transfer. Let's take e-transfer for a moment. If I want to transfer $11,000 from one bank, CIBC, on one end of the street, to Scotiabank at the other end of the street, it takes one week. In countries in the global south, it can be done in seconds. The countries in the global south are still developing and have low literacy. We are supposed to be the most developed country among the G7 countries.

I don't know whether those sorts of things come into play when you look at banking practices. Do you have the power to compel divestment, or do the existing owners of Interac have the power to sell their shares if you find that there are deceptive practices there?

[Matthew Boswell]

Under our abuse of dominance provisions, if we were to prove, after bringing a case—or on consent, but I can't imagine this would happen on consent—that there had been a significant abuse of dominance, divestiture is an option, but I can't speculate at this point in time.

[Chandra Arya, Liberal, Nepean, ON]

On the question of an anti-competitive merger and the power of the minister to use public interest overrides, again I have a bit of concern. One is this concept that we had to move away from the power that is vested with ministers to use the public interest option to approve a merger that you deem to be anti-competitive. There was a good case for that until a few years back, when we had real free trade, international trade. Now international free trade is dead. Now we are moving toward onshoring, friendshoring, alliances and things like that. When that is the case, each country has its own policy to protect its own industry.

I know the negative aspects of protecting an industry like the banking industry we have here or the telecom industry we have here. With the changing global scenario, I'm not sure whether we should continue to be a boy scout when it comes to competitive practices. I don't know. I'm still in a dilemma. If you can add some comments on that, that would be great.

[Matthew Boswell]

I was raising it in the context of what some of the earlier questions were about: concentration in the financial sector and the resulting harms that are perceived to take place from that. I indicated that this was an aspect of our overall legal framework that allowed more concentration even if, after a thorough review, the bureau was of the view that there were significant competition issues with a banking merger. It does allow them to go ahead, and that is a bit of an international outlier.

If we're talking about concerns with competition in our financial sector, then this is something I thought was important to at least bring up for your consideration.

[Chandra Arya, Liberal, Nepean, ON]

In one of your earlier recommendations, I think you suggested amendments to the act.

Obviously, you always ask for additional resources for the bureau. That, I think, is a constant.

You also mentioned, on the whole-of-government approach, that the regulations are preventing competitive behaviour. Is that what you said?

[Matthew Boswell]

Effectively, we should undertake the work in this country to examine existing regulations or new regulations. We could also be aided by all sorts of small and medium-sized enterprises, which see these barriers to competition all the time. They are aware of them, but they can't get the regulations to change and they can't get the bylaws or the provincial laws to change. They're out there and they can be identified. We can undertake the hard work, as a country, to fix them in order to allow more people to compete in the marketplace and to bring their ingenuity and their great Canadian education to offer new products and services.

It can be done. Australia did it. Australia reviewed 1,800 laws and regulations in the nineties as part of its push on productivity. As a result of that work, the conservative estimate, in the after-the-fact examination of it, is that it raised the average income per Australian household in the nineties by $5,000 Australian. That work enhanced competition in the Australian economy by removing regulatory barriers to competition.

I should say that Australia is very much engaged in doing that again, because it realizes how important it is for its productivity as a nation to drive GDP growth and to give people more money in their pockets through a more vibrant, competitive economy.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Arya.

Mr. Généreux, you have the floor for approximately five minutes.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chair.

Thank you to the witnesses.

Mr. Boswell, if my colleagues Ms. Rempel Garner and Mr. Chambers hadn't requested an investigation into Interac transfers, in particular, we wouldn't be here today.

Have I got that right?

[Matthew Boswell]

Thank you for the question.

I'll respond in English.

I think what has taken place here is that the Competition Bureau pays attention to what's happening at this committee. In addition to that, we received a letter directly, encouraging us to look into the issue.

There are many different ways that cases at the bureau can begin. One way is through people coming to us and saying, “Hey, here's a problem.” We consider those types of issues on a case-by-case basis.

In this case, we looked at the testimony and we decided it would be appropriate to commence a preliminary investigation.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

What prior testimony surprised you the most and led you to accept the request by my colleagues and the committee? Ms. Rempel Garner referred earlier to some testimony where there was very little transparency, or even none, in some cases.

What testimony struck you the most and convinced you that it was the right thing to do?