Bureau axes Interac request to become for-profit
The Canadian Press
Published Friday, February 12, 2010 7:38PM EST
OTTAWA - A request by the Interac Association to allow the debit payment processor to become a for-profit business was turned down by the federal Competition Bureau on Friday.
"Based on currently available information, including Interac's current dominant position in the market, the bureau cannot support changing or removing the safeguards in the consent order," the federal regulator said in a statement.
"In particular, the bureau does not agree that the removal of the restriction against for--profit activities by Interac would be pro-competitive, or is necessary to allow Interac to remain competitive."
Interac is governed by a consent order issued by the Competition Tribunal to prevent the company from engaging in anti-competitive practices. Interac's desire to restructure from a not--for--profit association structure to a for--profit model requires a change to that order.
The federal regulator suggested that Interac could make other changes, including to its governance structure while maintaining its non-profit status, that would allow it to remain competitive to new challenges in the market.
However the bureau said it would be open to revisiting its rulings if things change in the future.
Visa and MasterCard have been eyeing the Canadian debit card market, which is dominated by Interac.
MasterCard has also been actively expanding its Maestro debit program in Canada and has been working since late 2008 to increase acceptance.
The Interac Association said it was disappointed with the ruling, but hoped that further talks may help it make what it sees as needed changes.
"We remain optimistic that further discussions in the areas that (the Competition Bureau) has outlined can result in other variances or changes to the consent order that will help us move the ball down the field in the right direction and create a more effective organization," said Mark O'Connell, Interac Association's president and CEO.
O'Connell said Interac needs the consent order to be changed to improve its governance and funding structure and to unify the company under a single corporate structure.
"I'm optimistic if we have changes in these critical areas that Interac is going to be much stronger moving forward. But I would say to you that it is not the full solution that Interac needs to ensure that we can respond to the evolving marketplace," he said.
The Canadian Federation of Independent Business suggested the Competition Bureau decision was troubling for small businesses.
"When VISA and MasterCard have entered the debit markets in other countries, the result has typically been to eliminate the domestic incumbent debit provider in one way or another, following which debit costs would be ratcheted up to merchants," CFIB president Catherine Swift said in a statement.
"Interac absolutely needs to be able to restructure so that it can not only survive, but ideally expand and thrive in this rapidly changing marketplace."