Question Period Note: BUSINESS PRACTICES IN THE E-TRANSFER MARKET

Is the Government concerned that certain conditions set by the major banks could be limiting competition in the market for electronic transfers?

• Competition drives lower prices and innovation while fueling economic growth.
• The Government of Canada is committed to protecting and promoting competition for the benefit of Canadian consumers and businesses.
• The Competition Bureau is the independent law enforcement agency responsible for administering and enforcing the Competition Act.
• An increased budget and recent reforms to strengthen the Act have equipped the Competition Bureau with the tools it needs to take action in the event of anti-competitive conduct.

Interac was founded in 1984 as a cooperative venture between RBC, CIBC, Scotiabank, TD, and Desjardins. It operates a non-profit interbank network that allows financial institutions and other enterprises to conduct electronic financial transactions.

In 1996, the Commissioner of Competition and Interac members agreed to a Competition Tribunal order in response to a potential abuse of dominance under the Competition Act. The order (later converted into a consent agreement) set out details for Interac’s governance structure, required that the network be opened up beyond its charter members, and removed barriers to competition between the network participants. Critically, Interac had to be managed on a not-for-profit basis. Fees for use of the inter-member banking network would be limited to cost recovery. In 2005, the Tribunal agreed to a variation, allowing Interac to impose a minimum annual fee and to recover costs associated with significant system changes.

In 2009, Interac (now with broader membership) approached the Commissioner seeking to amend the agreement to allow it to operate on a for-profit basis. This request was refused by the Commissioner. However, a 2013 amendment to the agreement allowed Interac to restructure from an unincorporated association to a corporation with an independent board, operating under a cost-recovery model.

The consent agreement was again varied in 2017, allowing Interac more flexibility to invest in and develop innovative products and services, in recognition of significant evolution in the payments sector. Interac would be able to restructure to a corporation with a board consisting of both independent directors and directors appointed by financial institutions. This allowed Interac to amalgamate with Acxsys, the members’ for-profit company that created Interac’s branded services. Interac noted that the merger would allow it to better compete against the major credit card companies.

The consent agreement finally expired in 2020, a development that Interac characterized as a “new
Chapter” allowing the company “to grow and diversify our product offerings for Canadians while continuing our commitment as a low-cost solution for merchants.”

The activities of Interac and its members remain subject to the provisions of the Competition Act. Several recent amendments are relevant should the Competition Bureau decide to investigate Interac’s activities and/or seek a new consent agreement. Notably:

• Anti-competitive agreements can be subject to financial penalties if competition is harmed or likely to be;
• The scope conduct that may be characterized as an abuse of dominance was broadened, and prohibition orders are now possible if a dominant firm engages in actions with anti-competitive intent or effects, rather than both;
• Maximum penalty amounts are now scalable based on the benefit derived from anti-competitive conduct rather than capped at a fixed amount;
• Private parties can now bring abuse of dominance claims directly to the Competition Tribunal, and as of summer 2025 will be able to bring cases for anti-competitive agreements as well.

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