Industry Committee on Nov. 25th, 2024

[Matthew Boswell]

I think of some of the issues you touched on in previous hearings and information you indicated you'd like to get. I can't think of all the different things, but I know there were multiple things when I was reading it that I thought it would be very useful for you to have, like information on committee structure, decision-making and those sorts of things, for this particular issue.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

That's very helpful.

The other thing would be.... Throughout this study, we have bumped up against lack of transparency, particularly in governance matters. In certain federally regulated areas, when you're talking about the need for an overall structure, let's say at a memorandum to cabinet level, to have an analysis on competition, that's a great recommendation.

What about some sort of requirement for transparency in governance, when there is an identified potential abuse of dominance? I'm trying to put the thought together here. For the future, in areas where there's a potential abuse of dominance using a lack of transparency in governance, is there a principle or regulation we could consider recommending to the government that could be embedded in that review and that would prevent the potential issues we've seen arise in the course of this study?

[Matthew Boswell]

Transparency is always of benefit in situations that tend to be on the edge. If you can see from the outside exactly how things are structured and exactly how things work in a structural set-up that by its very nature could lead to problematic outcomes, it's very advantageous for everyone to know exactly how the inner machine works.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Thank you for your work, sir.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Gaheer for five minutes.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Thank you, Chair, and thank you to the Competition Bureau for the testimony today.

You said you have launched, or are launching, a preliminary investigation. Is it against Interac in general, or against Interac e-transfers?

[Matthew Boswell]

The best answer I can give is that it was to look into some of the issues that have been highlighted in this committee, in correspondence we've received and in the motion put in front of Parliament.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

When officials from Interac appeared before committee, my questions were mostly regarding e-transfers. As a private individual, I'm pretty happy with e-transfers. It has upped the limit to $10,000. Funds are available immediately, when they're transferred. You have to be careful with the name, number and email that you transfer to, again, because the funds are immediately available.

How familiar are you with the fee structures Interac uses for e-transfers and otherwise?

[Matthew Boswell]

Personally, I am not familiar with them at all, other than what I've heard lately. I know my own personal situation, my own personal bank account for e-transfers, but writ large I don't know.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

You really are at the preliminary stages.

Does the bureau have any evidence or concerns about Interac's transaction fees being inflated due to a lack of competition?

[Matthew Boswell]

I think that's to be determined.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Again, I understand this is very preliminary, but do you know how Interac's fee structure compares with international markets for e-transfers?

[Matthew Boswell]

I don't know.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Okay.

You've conducted a study before into Interac. Was that regarding e-transfers, or Interac in general? What were the main findings of that study?

[Matthew Boswell]

It wasn't a study.

Perhaps it's good for everyone to understand a bit of the history. Hopefully, I can do this relatively quickly.

In the 1990s, we alleged that Interac was engaging in exclusionary conduct that restricted access to what's called their “inter-member network”. More specifically, the inter-member network facilitated, at the time, ATM withdrawals and points of sale using debit cards. The three particular things we alleged Interac was doing were these: upholding strict eligibility requirements to become a member of the Interac Association, which, at the time, favoured members of the Canadian Payments Association; charging very high access fees to the network; and restricting network privileges such as voting rights to charter members only. Charter members were the large Canadian banks, as well as Desjardins, Credit Union Central and, at that time, Canada Trustco.

The Competition Tribunal ordered a consent order in 1996 under the abuse of dominance provision, resulting in opening up the Interac network beyond charter members and removing barriers to competition among network participants. It prohibited charter members from charging higher access fees to new members and guaranteed non-financial institution representation on the board of Interac. This consent order was varied twice, significantly, in 2013 and 2017. The 2017 version of what then became called a “consent agreement” required the creation of an independent committee of the board to oversee the Interac cash and debit parts of their business, known as shared services.

As Ms. McWhinnie alluded to, the bureau had a long involvement with Interac, up until 2020, in terms of these consent agreements requiring them to do certain things so they don't go back to the exclusionary conduct we alleged in 1996.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Thank you for that.

There's a preliminary investigation. You'll see whether an actual investigation is required. We look forward to the findings of that—again, if it's actually required.

If the bureau were to find anti-competitive behaviour in this space, what kind of action could it take?

[Matthew Boswell]

Generally speaking, we can take two types of action. We can call for structural reform—the sale of part of a business, or the sale of a whole subsidiary business—or behavioural orders, which compel the companies we're dealing with to behave in a certain way going forward and do certain things so the anti-competitive conduct doesn't continue.

I couldn't speculate right now on that particular issue in this matter, as we're literally at a preliminary investigation stage.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Thank you so much.

[The Chair, Liberal, Joël Lightbound]

Thank you, MP Gaheer.

Mr. Savard‑Tremblay for two and half minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you.

In your previous interventions, you mentioned some recommendations. Would you like to make any others? I was going to ask you that question earlier, but I ran out of time.

[Matthew Boswell]

Yes. Thank you.

If it's all right with you, I'll respond in English.

Recently, in a submission by the bureau to the ministry of finance called “Proposals to Strengthen Canada's Financial Sector”, in September, we actually recommended the repeal of paragraph 94(b) of the Competition Act. Paragraph 94(b) is a unique statutory override that allows the Minister of Finance to authorize an anti-competitive merger for public interest reasons. This override was established in 1986 and reflects an earlier perspective that anti-competitive mergers may need to be tolerated in the Canadian banking sector for financial stability reasons. However, we're of the view that concentration and consolidation could actually intensify systemic risks and raise the cost and complexity of resolution in a crisis if you have increased concentration.

We believe this provision in the Competition Act unnecessarily subordinates the bureau's role in reviewing major bank mergers, and that there are other avenues that allow the Minister of Finance to review those bank mergers and allow them to proceed or prevent them, for prudential reasons, for example.

That is a recommendation we hadn't made in the past, but these public interest overrides are very rare internationally. Given the other safeguards that exist in other regulated sectors as well, we don't believe it's necessary to have these public interest overrides on anti-competitive mergers in finance or in transportation. They both exist.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Savard‑Tremblay.

Mr. Masse, you have the floor.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Just to follow up on that, is there any other country that has this? I know you touched on it a little bit, but is there anybody left with this type of policy?

[Matthew Boswell]

I can't, off the top of my head, think of examples. As I said, it is relatively rare in the world to have these public interest overrides for anti-competitive mergers.

I'm sorry, MP Masse; I can't think of an example.

[Brian Masse, NDP, Windsor West, ON]

It's okay.

You mentioned transportation as well at the end of your comments. Can you elaborate a little bit on that? What parts of the transportation industry are protected in that way?