The Competition Bureau will not allow Interac Association to convert to a for-profit business from a non-profit association.

The debt payment processing association wanted to restructure from a not-for-profit association structure to a for-profit model to compete with credit card giants Visa and MasterCard, both of which are expected to begin offering debit card services.

Interac had requested that the Commissioner of Competition vary a 1996 Consent Order, that was issued by the Competition Tribunal to prevent Interac from engaging in anti-competitive practices, a move that would allow Interac to restructure from a not-for-profit association structure to a for-profit model.

“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, which are effective in protecting consumers from potentially anti-competitive activity,” the Bureau said Friday.

“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.”

The Bureau maintains that, since its implementation, the 1996 order “has promoted competition and, in particular, increased consumer choice.” Nevertheless, it says that it conducted a comprehensive assessment of Interac’s request, including obtaining information from Interac and other market participants, as well as consultations with a number of experts.

The Bureau added that while it doesn’t currently support varying the order, “the Commissioner is prepared to re-examine Interac’s request in the future if there is new information or material changes in the marketplace, or if Interac advances an alternative proposal, all provided that any changes would preserve the effectiveness of the key elements of the current Consent Order.”

“To provide Interac with greater flexibility to respond to any material entry in the future by a competitor, the Bureau also evaluated other changes to the governance structure and corporate status of Interac. Those changes would allow Interac to continue as a not-for-profit corporation with independent directors. The Bureau has concluded that such changes would be acceptable, as they would maintain the necessary safeguards against anti-competitive activity that are contained in the Order,” it adds.

The association, which includes Canada’s banks, trust companies, credit unions, caisses populaires, merchants, and technology and payment related companies, said it was disappointed with the ruling, but was optimistic that further talks may help it make needed changes.

“We have always believed that arriving at an effective business model requires a number of changes to the Consent Order beyond a for-profit status, particularly in the areas of governance, funding and our organizational structure,” said Mark O’Connell, President and CEO, Interac Association. “We are pleased that the Competition Bureau will engage in discussions with us regarding these critical issues.”

IE