Industry Committee on Nov. 25th, 2024

[The Chair, Liberal, Joël Lightbound]

Good afternoon and happy Monday, everyone.

Welcome to meeting number 147 of the House of Commons Standing Committee on Industry and Technology.

Before we begin, I would like to ask all members and other in-person participants to consult the cards on the table for guidelines on using microphones and earpieces. This is a health and safety concern for everyone, especially the interpreters, whom we thank very much for their services.

Pursuant to the motion adopted on Thursday, September 19, 2024, and the order of the House referring back the twentieth report of the committee entitled “Potential Anti-Competitive Behaviour in Canada’s E-Transfer Ecosystem” the committee is resuming its study on credit card practices and regulations in Canada.

As a reminder to members, today's meeting will be extended by two hours to respect the terms of the motion referred to us by the House. Accordingly, we will have our second panel from 5:30 p.m. to 7:30 p.m.

We'll now start with our first panel of witnesses. It gives me great pleasure to welcome, from the Competition Bureau Canada, Matthew Boswell, commissioner of competition, accompanied by Anthony Durocher, deputy commissioner, competition promotion branch, and Krista McWhinnie, deputy commissioner, monopolistic practices directorate. They're back at our committee.

Thank you for taking part in this exercise.

Without further ado, Mr. Boswell, you have the floor for five minutes.

[Matthew Boswell, Commissioner of Competition, Competition Bureau Canada]

Thank you.

Good afternoon, Mr. Chair and members of the committee. Thank you for the invitation to appear before you all this afternoon.

As the chair said, my name is Matthew Boswell. I have the privilege of being the commissioner of competition at Competition Bureau Canada.

Joining me today are Krista McWhinnie, deputy commissioner of the monopolistic practices directorate; and Anthony Durocher, deputy commissioner of the competition promotion branch at the bureau.

As you know, the competition bureau is an independent law enforcement agency that protects and promotes competition for the benefit of Canadian consumers and businesses. We administer and enforce Canada's Competition Act, a law of general application that applies to all sectors of the economy. We investigate and combat abuse of dominance, anti-competitive mergers, price fixing and deceptive trade practices. We also promote competition-friendly rules and regulations.

I would like to acknowledge the work of the committee and its members, and thank them for bringing this particular issue to our attention through the letter from MPs Rempel Garner and Chambers, and the committee's report to the House of Commons.

Following receipt of your letter and testimony before your committee, we can confirm that we have launched a preliminary investigation into Interac's conduct with respect to e-transfers.

When firms are vertically integrated or work in multiple levels of a supply chain, competition risks can arise when the firms have both an ability and an incentive to harm their rivals through their position at multiple levels of the chain. In those cases, the bureau can investigate whether the conduct breaches the Competition Act, for example as the result of a merger, proposed merger or an abuse of dominance. In the context of a regulatory system, it is important to ensure that a player is not in a position to both dictate the rules of the game and benefit from them unfairly.

It is important to recognize that we are enforcers of our legislation and not adjudicators or regulators that set rules for companies. The Competition Act requires us to meet several thresholds and standards when we bring cases before the courts.

When we appeared before you last, we discussed the bureau's mandate as it relates to investigating and policing against monopolistic practices and guarding against deceptive practices, particularly in the context of the Canadian payment sector. We have also long promoted enhanced competition in the financial sector, including by encouraging a move toward consumer-driven banking or open banking, as it is also known. Consumer-driven banking has the potential to boost competition and innovation by challenging established providers and enabling new service providers. Parliament and the government's work on the file is crucial because, quite frankly, the need for progress is urgent.

Before answering your questions, I would like to point out that the act requires the competition bureau to conduct its investigations in private and to protect the confidentiality of the information we obtain. This obligation may prevent us from discussing certain details of our investigations.

I'd like to thank the committee once again for giving us the opportunity to appear here today. We look forward to answering your questions.

[The Chair, Liberal, Joël Lightbound]

Thank you, Commissioner Boswell.

To kick off the discussion, I'll give the floor to Mr. Chambers for six minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair. It's nice to be here.

It's nice to see you again, Commissioner. Thank you for attending with members of your team.

My understanding is that, in 2023, your office released a report showing that highly regulated sectors were more concentrated. They had fewer new entrants and higher profit margins. As kind of an overlay to this conversation we're going to have today, what would you say is your biggest recommendation on how to deal with that big problem facing Canadians?

[Matthew Boswell]

Our competitive intensity study was what we released in 2023. It looked at data from 2000 to 2020, and we made all those findings that you refer to.

Effectively, we believe that the solution in Canada is multipronged. We needed amendments to the Competition Act to make it a stronger tool for enforcement. We needed additional resources at the bureau to catch us up to where we should have been. Both of those things have happened in great measure in the last several years, with, as you know, several bills before Parliament and our budget being increased in 2021.

The third piece I would refer to as a whole-of-government approach in Canada to addressing competition problems arising from regulations and laws throughout our economy that may unintentionally hinder competition. This is a very big problem in Canada. We rank near the bottom of OECD countries in terms of regulations that hinder competition. This is something we've been advocating for for some time as part of the solution to what is a very significant competition problem in this country.

Hopefully that answers your question.

[Adam Chambers, Conservative, Simcoe North, ON]

It does. Thank you very much.

Before we get into Interac, I'll follow up on that last point.

Would you support, then, including in the mandates of some of these regulators in highly concentrated sectors or in highly regulated industries that they have a lens of competition on their regulations?

[Matthew Boswell]

I would go one step further, sir, and recommend that, in all areas of the government where policy-making, regulation-making, rule-making or law-drafting is done, there should be a competition lens applied, not just by the federal government but by every government in this country—provincial, territorial and municipal—because these regulatory barriers to competition exist throughout our economy.

As multiple commentators have said over the years, competition is the elephant in the room in Canada. People haven't paid attention to it, and look where we are.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much.

Let's zoom in now on Interac. My understanding, from some information that we've had—and I recognize that you may not be able to confirm or deny it—is that Interac is currently owned by financial institutions; therefore, it sets pricing strategies for the sector. I understand that the large incumbents receive about a seven-time reduction on the price they pay to send e-transfers, just as an example. I know there are other things Interac does. New entrants were paying seven times the price that the incumbents were paying. On its face, prima facie, that sounds highly anti-competitive and a potential abuse of power. That was what led to the letter to your office.

Is that one of the things you're looking at? Can you confirm that's something you're also interested in?

[Matthew Boswell]

I can't confirm specifics. As I said in my opening remarks, we've been paying close attention to what's been discussed at this committee with witnesses and with questions and answers. We're not aware of the specifics, in terms of having seen evidence with respect to the specifics, but those are issues that clearly came to our attention and caused us to initiate a preliminary investigation.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much for taking this on.

Do you have, within your powers today, the ability to get the information you need to do an investigation, or a preliminary investigation, to the level that you feel comfortable with?

[Matthew Boswell]

Yes.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay. How far back can you go on practices? If you do find that there was some impropriety, how far back are you able to assess those actions?

[Matthew Boswell]

Speaking generally, not in this particular case, we can go as far back as the alleged conduct goes.

[Adam Chambers, Conservative, Simcoe North, ON]

Then it wouldn't be like a typical statutory limitation period where you can only look at things from three years ago. Given the fact that this has been the case for a long time, if there was any finding of guilt, if you will, it would be in respect of the entirety of the alleged misuse of power.

[Matthew Boswell]

Yes, it would, provided the conduct was ongoing to today's date.

[Adam Chambers, Conservative, Simcoe North, ON]

I think I'm out of time, but as I understand it, when the pricing schedule was set, the two largest institutions in the country were co-chairing the board at the same time. One of the challenges we have with this committee and with Canadians is a lack of transparency around the ownership structure of Interac, but I assume we'll get to that later.

I don't want to take time from my colleagues, so thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you, MP Chambers.

I'll now turn it over to Mr. Turnbull for six minutes.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks, Mr. Boswell and team, for being here today. I appreciate your joining us.

I have quite a few questions about market concentration or market dominance. How concentrated is the credit card market in your view, Mr. Boswell?

[Matthew Boswell]

I don't have data on that particular point.

I don't know if any of my colleagues have data on that handy.

[Krista McWhinnie, Deputy Commissioner, Monopolistic Practices Directorate, Competition Bureau Canada]

Is it a question about the level of concentration among credit card networks or the issuance of credit cards?

[Ryan Turnbull, Liberal, Whitby, ON]

The credit card market in general.

[Krista McWhinnie]

Based on a case that we brought challenging conduct by Visa and Mastercard in 2010, we had a finding from the tribunal at that time that that network market is highly concentrated, with both Visa and Mastercard having market power.

In terms of the question about the level of concentration for issuing credit cards, that's not something we've specifically studied.

[Ryan Turnbull, Liberal, Whitby, ON]

Okay, thanks.

Does the bureau consider Interac's near-monopoly in the e-transfer market as hindering competition? If so, what steps do you think can be taken to encourage new entrants into the market?

[Matthew Boswell]

I think during your hearings on this issue you had an acknowledgement from a board member of Interac. I don't know if they used the word “dominant”, but they acknowledged that they were the principal player in this space, in terms of e-transfers in Canada.

In terms of how to enhance competition in the payment space or the transfer space, there are several things that would certainly go a long way to aiding in achieving that objective. The implementation of real-time rail, with open access to use the real-time rail system with fair and level pricing, would certainly enhance competition in this area, it would appear.

The implementation of open banking or a consumer-driven banking framework would also facilitate more competition in the banking area generally and perhaps give fintechs more of a toehold in the payment area.

I think what this committee is doing is the third piece, which is parliamentarians scrutinizing the financial sector for competition issues much more closely and on a regular basis to see what sort of changes could be brought about by you and your colleagues, sir.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you very much for that.

How do you think the exclusivity of Interac's agreements with Canadian banks impacts competition from alternative payment platforms? It seems that that might exclude them from participating. Is that exclusivity in terms of their agreements with Canadian banks something that concerns you? How does it impact competition?