Mr. Speaker, first of all, I would like to say that the question of privilege just raised appears to be very worrisome. I am sure that once the Speaker has heard the views of each party, he will make a very enlightened decision.
Today we are debating the 20th report of the Standing Committee on Industry and Technology. It deals with interchange fees, the fees that credit card companies charge businesses. This is a very important issue. As soon as I was elected to the House, businesses in my riding asked me about it. Convenience stores, gas stations and grocery stores say it makes no sense. Their business model relies on a high volume of sales with small profit margins. The share of their costs that goes to credit cards is high, because every time a transaction is paid for with a credit card—whether it is a full tank of gas, some groceries or a chocolate bar—the fee charged is very high. The fee is much higher than elsewhere in the world, in many countries. I will be citing at least one case soon.
This erodes the revenues of merchants. We know that grocers, convenience store owners and small businesses operate in a highly competitive environment, while credit card companies practically form a duopoly or oligopoly. Apart from Visa, Mastercard, and maybe American Express, there are practically no other cards in use. As a result, these credit card companies can band together and charge exorbitant rates.
The Standing Committee on Industry and Technology has started studying the issue. After hearing testimony from certain witnesses, and before even drafting a full report and getting to the bottom of the issue, it decided that the situation was serious enough to immediately send the House a report entitled “Potential anti-competitive behaviour in Canada's e-Transfer ecosystem”. The website of the Standing Committee on Industry and Technology states the following:
Pursuant to Standing Order 108(2), your Committee has considered the matter of Credit Card Practices and Regulations in Canada.
The report simply contains the following sentence, which reads:
Following testimony from banking executives, your committee recommends that the Competition Bureau be encouraged to investigate potential anti-competitive behaviour in Canada’s e-Transfer ecosystem, and if deemed necessary, the broader electronic payments industry in general.
The members of the committee realized how big of a problem this is and determined that the Competition Bureau needed to quickly address it while the committee continued its study. That is what we are debating today.
Obviously, we are strongly in favour of this. I would be surprised if there were any member of this House who is not favour of it because, as I said, as soon as I was elected, many businesses in my riding and across Quebec began asking me about this and continue to do so. I am sure that all members of the House are being asked about the credit card fees being imposed on consumers and the fees that businesses have to pay. This is still happening.
A little after 2015, Liberal member Linda Lapointe introduced a private member's bill. She received a rather choice spot in the order of precedence when her name was picked out of the hat. Ms. Lapointe ran a grocery store in her riding. She thought that this was so important that she used her round to raise the issue. The Liberal government ended up pushing back her turn to speak until it opted to make her a parliamentary secretary, the immediate effect of which was to strip her of her private member's bill. This was the first action the Liberal government took on the question of fees charged to merchants. The party had among its ranks a member who had a grocery store and who chose to use her parliamentary privilege to appeal to the House for changes to be made. I repeat, I do not see who could be against this, since it affects all businesses in our ridings. In the end, the government found a strategy to ensure that the question never came up for debate.
At the same time, in the Bloc Québécois, my colleague from Lac-Saint-Jean introduced a bill on the same topic, with basically the same effects, but with the election and the minority government, it never came up for debate. It is time that that changed.
In 2022 there was a ray of hope when the Minister of Finance indicated in her budget that she was setting the situation right. We thought we had a nice victory to celebrate, and that at last the minister had gotten off her high horse and seen the light.
She said that the matter of interchange fees on Visa and MasterCard transactions would be settled, but as we get more experience we are beginning to understand the way things work. They say all the right things and they say they are going to solve the problem. The fine print at the bottom of the page, however, says that the government will start by asking the credit card companies to fix the problem on their own. If they do not, the government will settle the matter and create a law. Thus, the Minister of Finance and the government are fine with the temporary, rather symbolic measures that the credit card companies have taken, which change nothing for grocery stores. In fact, grocers have appealed to us. I will return to this.
There is a link between what the credit card companies are doing, the fees they charge merchants and the price for a basket of groceries. This is highly significant. We have been living with inflation for years now, and for years the government has said it would take action. Last year, shortly before Thanksgiving, the Minister of Innovation, Science and Industry said that he had spoken to grocery store representatives and that turkeys were on sale. The thing is, though, that every year on the eve of Thanksgiving, grocery stores offer a deal on turkeys, since Thanksgiving is right around the corner. The minister said it was thanks to his intervention, but we could see that his intervention did not fix the problem.
There is one specific thing the government can do to solve the problem: address interchange fees and the fees that credit card companies charge grocery stores. This how the government can intervene to bring grocery prices down. What is it actually doing? The Minister of Finance and the government are settling for the voluntary measures Visa and Mastercard chose for themselves. Grocery store owners reached out to us and told us that it is not working. They say credit card companies' voluntary measures are not doing anything for them, so the government needs to step in. I forwarded that letter along with a summary of their demands to the minister more than two months ago. As we can see, nothing has changed.
What is the problem? In Australia, for example, the fees that merchants can be charged are set through regulations and laws. They are capped at 0.5%. Here, the average is 1.4%, three times higher. Why are our fees three times higher? Are credit card fees, transactions and administrative expenses higher in Canada and Quebec than in Australia? I do not think so. I think that Australians had the necessary political will to intervene and pass legislation. They saw an oligopoly, and they knew that the free market only works if there is competition. They saw that companies were using their oligopoly to get more value and decided that that was unacceptable, so they reduced the fees to 0.5%. Here, the fees are 1.4%, three times higher. Some credit card companies even charge merchants up to 4% in fees, while, in Australia, they pay eight times less, or 0.5%.
I studied economics. In economics 101, we are taught how companies react. Companies will do whatever it takes to maximize their profits. If they have an oligopoly, they will use their power to increase fees, get more value and earn more profits. I taught that every semester in the introduction to economics class I used to teach at CEGEP. The government knows this, so it is up to the government to intervene by making regulations or passing laws capping these fees.
The government says that it is doing everything it can to lower the cost of groceries. However, there is one change it could make that it has known about for years. A Liberal member even tabled a bill on the subject. If, for example, fees were set at 0.5% instead of 1.4%, that would be almost a full percentage point lower. Grocery prices would fall by almost one percentage point. The major credit card companies would make normal profits rather than excessive profits. However, the government refuses to make that happen. What did the government do? As I was saying, in the 2022 budget, the minister said that the government was going to do something, but that the companies would have to tell the government what they wanted to do first.
Here is what these credit card companies did. They crunched the numbers. Keep in mind that, just a few years earlier, we had been talking about the free market, duopolies and oligopolies. The retail sector has some really big players, starting with Walmart. Walmart decided to capitalize on its strong market position. The company was so dominant in its sector that it told the credit card companies that the days of 4% transaction fees on certain cards, or even 1%, 1.5% or 2%, were over. Walmart instructed them to do as it said, meaning that they would have to charge a reasonable rate or Walmart would refuse to accept their cards. Walmart's market position gave it the clout to make such a move. Walmart even refused to accept Visa for a few months, just to show that it was serious. Visa and Mastercard decided to lower the transaction fees they were charging Walmart. Walmart had pushed back hard, and it worked.
Following the minister's request to help out SMEs, the credit card companies crunched the numbers and said they were going to offer the same rate they give Walmart, but only to small businesses with low sales volumes. They crunched the numbers and said they did not want to include grocery stores because that is where they make their money. I do not want to misspeak, but I believe that Mastercard said that if a company's annual sales were lower than $175,000, it would charge it the same rates as Walmart. Visa set its limit at $300,000.
If a company makes $175,000 or $300,000 in sales per year and takes in a 10% profit, that means it clears $17,000 or $30,000 in profit per year. That would not even pay the median wage. Obviously, this measure would only cover very small businesses. Grocery stores, like convenience stores and gas stations, have a low-margin business model. It is something like a 1% to 2% profit margin, but on a huge volume of sales. They are therefore excluded from the voluntary temporary measures Visa and Mastercard put in place at the minister's request. The minister and the government gleefully tooted their own horms, claiming they had won.
They won all right, but only at the rhetoric game. All morning, they have been saying that they are protecting SMEs. However, these are temporary measures. What is more, businesses that rely heavily on credit card payments are excluded.
As I was saying, my colleague from Abitibi—Témiscamingue, who was the industry critic at the time, and I received a request late last summer that we immediately forwarded to the minister. It came from the Quebec Food Retailers Association. Founded in 1955, this association represents food retailers who support the development of the food industry. It reiterates exactly what I am saying, that in the 2021-22 federal budget, the government had promised to “[l]ower the average overall cost of interchange fees for merchants” and “[e]nsure that small businesses benefit from pricing that is similar to large businesses”, such as Walmart. This is what the association says:
Unfortunately, the agreement that followed between the government and credit card issuers states that a merchant must have an annual Visa sales volume of $300,000 and an annual Mastercard sales volume of $175,000 to benefit from reduced rates, but this excludes almost every food retailer.
The agreement is therefore useless. It does not reduce the price of groceries, which are a necessity. The association notes that its members have low profit margins, and it gives an example. I mentioned Australia, which has capped fees at 0.5%. Grocery stores there say they pay $155,000 per year on average in interchange fees to credit card companies, while a similar grocery store in Europe only pays $30,000, five times less. This $120,000 per grocery store could help lower the price of groceries, but the credit card duopoly keeps it for itself. Why? It is because these two companies are taking advantage of their dominant position and the government is refusing to act on the root cause, which is obviously unacceptable, hence the committee's report and our interventions.
When my colleague from Lac-Saint-Jean presented his bill, we immediately received calls from the credit card companies saying that we did not know what we were talking about and that we were threatening the economy, the environment and, at the very least, the solar system, if not our galaxy, the Milky Way. Obviously, it is in these companies' interest to hire lobbyists to tell us not to do that. The thought that we could cut their profit margins, their revenues, by a third makes them nervous.
We know that they put a lot of pressure on the government, and we know that the government has given in to their demands. Rather than defending consumers and merchants, it decided to listen to the duopoly, which is highly organized and which told the government that it must not do that. I do not know whether the government believed that it would threaten the galactic balance of the Milky Way, but, in any case, it gave in. It asked the companies to submit a proposal, since it only wanted to save face. This way, everyone saves face, merchants pay, consumers pay, and groceries are more expensive. The government has leverage it could use to intervene, but it will not do it, and that is obviously unacceptable.
I have a few more points to raise. The number of credit card transactions is growing. As we know, the pandemic and the lockdown changed the way we consume. People are buying more online. Even groceries can be bought online now, and more and more people are doing it. The habit stuck, and now more and more purchases are being made online. According to the most recent figures, in 2022, there was a 17.5% increase in Canada, and an even larger increase in Quebec, 18.4%. Clearly, this is a problem that is getting worse. We are therefore joining the Standing Committee on Industry and Technology in asking the government to intervene. We are asking the government to intervene for the sake of grocery stores and retailers like convenience stores and gas stations, but it is not doing anything. My colleages can rest assured that the Bloc will continue to press this issue.
I would like to point out an interesting detail to my colleagues. Quebec has its Consumer Protection Act, but the rest of Canada does not have such a law. In the rest of Canada, when someone goes to the grocery store and pays with their credit card, the merchant can charge the customer, the consumer, the interchange fees. There is a line on the receipt indicating that the credit card fee is $2, for example. That is the way it is. In Quebec, the law prohibits businesses from passing those fees on to the consumer. The cost of these interchange fees is passed on to all consumers, even if the customer pays with cash, a debit card or a cheque. I do not know anyone still uses cheques. It was very common in Europe. People used to go to the grocery store and pay by cheque. In Quebec, the cost of interchange fees is spread out and passed on to all consumers. The government could intervene and do what Australia did. It could also set rates similar to those in the European Union. Even the U.S. Federal Reserve is looking into this right now. At the very least, this would reduce the cost of groceries and convenience store purchases by about one percentage point. In the current situation, that is not insignificant.
I would also like to remind members of the technical details.
Visa and Mastercard are two U.S.-based multinational financial services companies. Originally, they were part of a co-operative of financial institutions. Visa and Mastercard became full-fledged companies in 2008 and 2006 respectively. These companies do not offer credit. They are tech companies that use transaction networks to act as intermediaries between financial institutions, merchants and customers. I could go into a lot more detail on this. I would remind members that these companies make a lot of profit because they are a duopoly, so they are able to make a lot of money on the market. What we are asking and what the committee is asking is for this to be regulated. We do not want rhetoric and mini-measures that will allow the government to save face. We want to see real changes to the situation, particularly when it comes to grocery prices.