The Competition Bureau's letter to financial institutions—Duality and dual Governance of credit card networks in Canada

List of recipients

  • BMO Financial Group
  • Canadian Tire Bank
  • The Bank of Nova Scotia
  • CIBC
  • Banque Laurentienne du Canada
  • Banque Nationale du Canada
  • President's Choice Bank
  • RBC Financial Group
  • TD Bank Financial Group
  • Amex Bank of Canada
  • Citibank Canada (U.S.A.)
  • HSBC Bank Canada
  • J.P. Morgan Bank
  • MBNA Canada Bank (U.S.A.)
  • Capital One Bank
  • Wells Fargo Financial
  • Retail Council of Canada
  • Canadian Federation of Independent Business
  • Consumers Council of Canada
  • Canadian Restaurant and Foodservices Association
  • ATB Financial
  • GE Money
  • CUETS Financial
  • Home Trust Company
  • Le Mouvement Desjardins
  • Vancity
  • Visa Canada Corporation
  • MasterCard Canada Inc.

November 7, 2008

Dear Recipient:

The purpose of this letter is to advise you of the Competition Bureau's (the "Bureau") views regarding the issue of credit card duality and dual governance. These views are based on recent developments in the credit card industry, and more particularly, the recent transitions of Visa and MasterCard (the "major credit cards") from member-owned associations to publicly held corporations that are not controlled by their issuers or acquirers (the "restructurings").

The Bureau is an independent agency that contributes to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice.

In the past, the potential for credit card issuers and acquirers to issue credit cards or acquire transactions for more than one of the two major credit card networks had been restricted by the rules of the Canadian credit card associations. These rules addressed potential concerns of the Bureau because they eliminated any likelihood of conflict that either issuers or acquirers could be a member of both associations and thereby be able to simultaneously influence the corporate governance and competitive decisions of both associations ("dual governance"). Entities, whether issuers or acquirers, had to choose which of the major credit cards they would issue to consumers or use for merchant acquiring. In light of the restructurings and subsequent information obtained from various industry participants, the Bureau is no longer concerned that there is a potential for a member, or group of members, of one credit card network to negatively influence the competitive operations of another card network through dual governance. Because of the restructurings, issuers and acquirers are no longer involved in most of the governing decisions of the major credit card networks. As a result, the Bureau will not pursue enforcement action under the Competition Act against a credit card network or its issuers and acquirers who enter into an agreement to simultaneously issue multiple credit card brands or acquire transactions for multiple credit card networks.

I would note, however, that the Bureau would be concerned if a dominant or major supplier in a market, for instance a payment systems network, induces a customer (e.g., an issuer) to deal exclusively with the supplier such that competition is likely to be lessened substantially in a market. Also, the Bureau may take enforcement action if it finds that the governance structure of a payment system network is such that one or more issuing or acquiring customers of a network can materially influence the decisions of more than one credit card network.

By allowing banks to issue multiple credit cards, consumers will benefit from increased choice and better service.

A copy of this letter will be made available on the Bureau's website.

Thank you for your assistance in this matter.

Yours truly,

Sheridan Scott

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