On June 26, 2014, the Commissioner of Competition John Pecman gave a speech at the 2014 Canadian Payments Association’s Payment Panorama in Charlottetown, Prince Edward Island. Mr. Pecman reiterated many of the key issues and initiatives that the Competition Bureau (the “Bureau”) has been focusing on recently, such as the 2014-2015 Annual Plan, restructuring of the Bureau, and transparency and advocacy initiatives. Mr. Pecman also specifically touched on some of the recent work that the Bureau has done in the payment sector, as well as issues and developments relating to interchange fees and mobile payments. Below are some of the key points that Mr. Pecman discussed in his speech.
2014-2015 Annual Plan
As further covered by this blog’s posting on the 2014-2015 Annual plan, the the Bureau’s four priorities for the upcoming year are as follows:
- Apply effective and integrated enforcement and administration of the Competition Act and labelling statutes.
- Increase competition promotion efforts to advance a culture of compliance and competition advocacy.
- Align with and deliver on Government of Canada priorities.
- Increase organizational synergies through the Bureau’s personnel, planning and systems.
Through what Mr. Pecman calls “realignment”, the Bureau will undergo restructuring to leverage its current resources and enhance collaboration, with the goal of increasing its impact in the economy while maintaining the same size and vision. The most significant element of the realignment process will involve combining the Bureau’s existing eight branches into four branches, in the following fashion:
- The Fair Business Practices Branch and the Criminal Matters Branch will be combined into a single branch.
- The Mergers Branch and the Civil Matters Branch will be combined into a single branch.
- The Economic Policy and Enforcement Branch, the Legislative and International Affairs Branch and the Public Affairs Branch will be combined into a single branch.
- The Compliance and Operations Branch would continue to operate as a separate branch.
On the same day as Mr. Pecman’s speech, The Bureau issued a new Bulletin, Communication during Inquiries in furtherance of its objective of making its administrative practices more transparent. Details about this bulletin are discussed in this blog’s posting Bureau Issues Bulletin on Inquiry Communications.
The Payments Sector – Major Cases
Mr. Pecman highlighted two major matters handled by the Bureau in the past two years that directly impacted the payments industry. In 2013, after an extensive analysis of the rapidly evolving payments industry and discussions with market participants, the Bureau agreed to Interac Association’s request to amend the consent agreement among the Bureau and other Canadian financial institutions that controlled Interac Association. The Bureau concluded that there had been material changes in circumstances that warranted the requested variation to the consent agreement, which would allow Interac to restructure itself to be more flexible and cost-effective in terms of serving merchants in an increasingly competitive marketplace. Also in 2013, the Competition Tribunal dismissed the Commissioner of Competition’s application in The Commissioner of Competition v. Visa Canada Corporation and MasterCard International Incorporated seeking an order under section 76 of the Competition Act (price maintenance) prohibiting Visa and MasterCard from implementing or enforcing certain rules including a rule prohibiting merchants from applying a surcharge to customers who pay with credit cards. The Commissioner of Competition did not appeal the decision, but the Bureau chose to shift its focus to identifying other ways to address competition issues in credit card services, such as working with the federal government and other stakeholders to advocate for changes in this sector. For example, Finance Canada is presently looking at refreshing its Code of Conduct for the Credit and Debit Card Industry in Canada.
The Payments Sector – Interchange Fees and Mobile Payments
Interchange fee typically represents at least 80% of the total card acceptance fee for Canadian merchants, whom would often pass such fees onto their customers in the form of higher retail prices for goods and services. The Bureau, as well as numerous antitrust agencies around the world have looked at interchange fees and the rules put in place by credit card networks that limit or prevent competition in respect of such fees. Similarly, antitrust regulators are looking closely at the competition issues (such as competitor joint ventures) surrounding the up-and-coming industry of mobile payments. Mr. Pecman characterizes the use of mobile devices to make payments and conduct financial transactions as a “financial revolution”, and his message to the market is that people need to always keep the Competition Act in mind when transitioning into new forms of payment.