On May 19, 2016, Canada’s Competition Bureau (“Bureau”) announced that it is launching a “market study” into technology-led innovation in the Canadian financial services sector, also referred to as “FinTech”. The Bureau’s study will focus on how innovation is affecting the way consumers and businesses use financial products and services; barriers to entry faced by FinTech companies; and whether there is a need for regulatory reform to promote greater competition while maintaining consumer confidence in the sector. The ultimate objective of the study is to help the Bureau advise and guide financial sector regulators and other relevant authorities on how to ensure that regulation does not unnecessarily impede innovation and competition in the sector. The Bureau intends to conduct its information-gathering and analysis over the course of the balance of 2016 and to publish its report in the Spring of 2017. Interested stakeholders are invited make submissions as part of this process. Details on how to participate are available here.
The Bureau’s current perspective on “FinTech” is quite apparent from the materials published in conjunction with the announcement of its market study and from speeches by Commissioner John Pecman discussing this initiative. The Bureau views the innovations engineered by FinTech companies as offering the potential for greater consumer choice, more efficient services, lower fees and greater savings for Canadians. As such, its operating premise insofar as regulation is concerned is that the rules governing the financial sector should be structured so as to nurture an environment that allows Canada’s FinTech companies to innovate, grow and compete globally. This means that regulation should be minimally intrusive on market forces and used only for legitimate policy objectives, such as to prevent certain market conduct or outcomes that impede competition or are harmful to the public interest.
Why a market study on “FinTech” for the Bureau? There are several reasons.
First, the financial services sector represents an important aspect of the Canadian economy and plays a significant role in the day to day life of Canadians. Yet Canada appears to be lagging other countries when it comes to the development and adoption of FinTech products and services. The Bureau wants to know why that is and what steps can be taken to improve the situation.
Second, other authorities are showing a similar interest in FinTech. Most notably, the U.S. Federal Trade Commission (“FTC”) has organized and will host a forum series exploring the implications of FinTech for consumers. The first FTC forum on FinTech was held on June 9, 2016 and addressed marketplace lending. The next forum will take place in the Fall of 2016.
Third, the “FinTech” market study fits well with several key priorities of Commissioner Pecman. These include a focus on the digital economy, strengthening the Bureau’s role as a competition “advocate” (in addition to its law enforcement functions), and encouraging a more robust incorporation of competition law principles in the regulated sectors of the Canadian economy. Most recently, the Bureau pursued the same priorities with the release of a “White Paper” on the impact of Uber and other “disruptive” technologies/services on the taxi industry in Canada. The central thesis of the White Paper was that regulations governing the taxi industry must be modernized and overhauled to allow taxis and ride sharing services to compete on a more level playing field, and that policy makers should go no further than necessary to achieve legitimate public policy outcomes. Further, it noted that consumers stand to benefit from lower prices, reduced waiting times and higher quality services if regulators allow the forces of innovation and competition to shape the industry. It does not take a gigantic leap of imagination to believe that the same or similar conclusions will figure prominently when the Bureau issues its FinTech report in 2017.
Finally, and somewhat ominously, the Bureau has used the launch of its “FinTech” market study to repeat the longstanding view that it requires new – and coercive – powers to properly conduct market studies on the Canadian economy. In his speech commenting on the “FinTech” study, the Commissioner lamented that the Bureau is limited to collecting information for market studies on a voluntary basis whereas its counterparts in other jurisdictions – including the European Union, the United States, the United Kingdom and Mexico – have access to formal investigative powers to compel information from regulators and companies. The last time the Bureau lobbied for such coercive powers it was turned down by the Canadian government of the day because the Bureau could not persuasively demonstrate that such powers were necessary. Nothing has changed since then and, as the Bureau’s recent White Paper on taxis demonstrates, the Bureau seems quite capable of conducting useful market studies without the power to subpoena information and individuals. Here is hoping that the Commissioner’s musings go no further and that we do not have to revisit this debate once more.