Competition and FinTech: Update on the Competition Bureau's Market Study and Upcoming Workshop

On February 21, 2017 the Competition Bureau (Bureau) is hosting a workshop on competition and FinTech (technology-driven innovation in the financial services sector) in Ottawa. For more information, see Competition Bureau, Announcement, Does Canada offer a competitive environment where FinTech innovation can flourish? (February 14, 2017).

During its workshop, key members of the FinTech community, including Canadian start-ups, banks, provincial and federal regulators and international experts, will discuss the connections between competition, innovation and regulation in the FinTech sector. The Bureau will be posting real-time updates during the workshop on its X page (@CompBureau) and will have a live webcast for the event.

The Bureau's upcoming workshop is part of its ongoing FinTech market study in which, in general, it is looking to understand whether Canada offers a competitive environment where FinTech innovation can flourish and whether it should make recommendations to regulators to increase competition in the sector.

The Bureau first announced its review of FinTech and competition in a speech by the Commissioner of Competition and related announcement last May. See Remarks by John Pecman, Commissioner of Competition, Innovating to Succeed (May 19, 2016) and Competition Bureau Announcement, Competition Bureau launches FinTech market study (May 19, 2016).

The Bureau decided to engage in advocacy in the FinTech sector based on its public consultation on advocacy initiatives, the fact that it is an important part of the Canadian economy and the significant role of financial technology in the daily activities of Canadians (for example, relating to wages, rent, saving, borrowing and investing). The Bureau has also expressed a concern that Canada is lagging other countries in the adoption of financial technology.

Since it launched its FinTech market study last year, the Bureau has interviewed stakeholders including FinTech start-ups, received FinTech related submissions, engaged with consumer groups and released a Market Study Notice. See Remarks by John Pecman, Commissioner of Competition, Strengthening Competition: Innovation, Collaboration and Transparency (October 6, 2016) and Market Study Notice, Technology-led Innovation and Emerging Services in the Canadian Financial Services Sector (May 19, 2016) (Market Study Notice).

Some of the Bureau's past financial services related activities have included a 2015 submission to the federal Department of Finance on mobile payments, price maintenance application against Visa and MasterCard and abuse of dominance proceedings involving the Interac Association and member financial institutions. For more information, see Annex A, Market Study Notice. See also, Practice Notes, Resale Price Maintenance Under the Competition Act, Abuse of Dominance (Sections 78 and 79 of the Competition Act) and Unilateral Refusals to Deal Under the Competition Act.

The Bureau's past efforts in the financial services sector have been, however, relatively sporadic, unlike other high consumer impact sectors such as telecom, and its enforcement record somewhat mixed. For example, it was unsuccessful in its price maintenance challenge of Visa and MasterCard in 2013 and more recently discontinued its financial services related LIBOR investigation. There have also been relatively few financial services related cases heard by the federal Competition Tribunal – either private applications or matters commenced by the Bureau.

The Tribunal did indicate, however, in the Visa/MasterCard case that some competition issues in the financial services sector were better approached through legislative reform than enforcement. See Commissioner of Competition v. Visa Canada Corp., 2013 CarswellNat 11422 (Competition Trib.), at paragraphs 394-95. This may be one impetus for the Bureau's advocacy approach to FinTech.

At the center of the Bureau's advocacy work in this area is its FinTech market study, which, once complete, is intended to help the Bureau advise and guide financial sector regulators on how to ensure that regulation does not unnecessarily impede innovation and competition in the FinTech sector.

The Bureau's FinTech market study is part of its competition advocacy efforts more broadly, which has included work over the past several years in the health care, Internet, taxi and wireless markets, among others. For more information, see Competition Bureau, Advocacy.

In this respect, the Bureau has both formal enforcement powers and, where they are limited, such as in regulated sectors, may also engage in formal or informal advocacy with regulators to encourage greater competition. See sections 125 and 126, Competition Act, R.S.C. 1985, c. C-34. For more information about Bureau enforcement, see Practice Notes, Criminal Competition Law Enforcement and Competition Bureau Investigations.

While advocacy is not new for the Bureau, its advocacy efforts have markedly increased since it created a standalone Competition Promotion branch in 2015.

The three specific topics that the Bureau is reviewing through its market study are:

In its study, the Bureau is focusing on technology-led innovations in three categories:

Several key points that FinTech industry participants have made to the Bureau to date include the following:

Following its workshop on February 21, 2017, the Bureau plans to publish a summary of workshop panel discussions. It will then work on its draft study over the summer with the intent to release its full study in late 2017.

It is not yet clear, however, whether and to what extent the Bureau will advocate that financial regulators make changes to increase FinTech competition in Canada or if it will commence any enforcement following its review.

The Bureau's ongoing FinTech industry review does, however, generally reflect the Bureau's increasing advocacy efforts in key consumer related sectors over the past several years and clearly a renewed interest in competition and financial services in particular.

The following are some of the key Bureau FinTech related resources: