SCHEDULE "A" THE COMPETITION TRIBUNAL CT-95-02
IN THE MATTER OF an application by the Commissioner of Competition unde1· section 79 and 105 of the Competition Act, R.S.C. 1985, c.C-34, as amended;
IN THE MATTER OF an abuse of dominant position in the supply of shared electronic network services for consumer-initiated shared electronic financial services;
IN THE MATTER OF a Consent Order granted by the Competition Tribunal datecl June 20, 1996, varied on March 25, 1998, further varied on September 8, 2000 ancl varied and restated as a consent agreement on January 10, 2003;
AND IN THE MATTER OF an application by Bank of Montreal, et al., under sections 10ti and 106(1 )(b) of the Competition Act, R.S.C. 1985, c.C-34, as amended, to vary on consent the Amended Consent Agreement made by the Competition Tribunal on January 10, 2003.
BETWEEN: Bank of Montreal The Bank of Nova Scotia Canada Trustco Mortgage Company Canadian Imperial Bank of Commerce La Confederation des caisses populaires et d'economic Desjardins du Quebec Credit Union Central of Canada National Bank of Canada Royal Bank of Canada The Toronto-Dominion Bank lnterac Inc. Applicants
- and -The Commissioner of Competition Respondent
STATEMENT OF GROUNDS AND MATERIAL FACTS
- 2 -I. STATEMENT OF GROUNDS 1. The requested variation has no negative effect on competition in any relevant market identified in the original Statement of Grounds and Material Facts filed December 14, 1995 and raises no competitive concerns in any other relevant ma1·ket. 2. The requested variation avoids the inequities caused by cross-subsidization of certain members under the existing user pay fee structure, by implementing a minimum annual fee. II. MATERIAL FACTS 3. The Applicants allege the following material facts of the basis for this application. The Commissioner of Competition (the "Commissioner") does not contest these facts for the purpose of this application and for any proceeding relating to the Amended Consent Agreement, as varied by this application. A. THE PARTIES 4. The Commissioner is the authorized official appointed under section 7 of the Competition Act (the "Act") and is charged with administration of the Act. 5. The Respondents Bank of Montreal, having its head office at 129 St. Jacques Street, Montreal, Quebec, H2Y 1L 6; The Bank of Nova Scotia, having its head office at 1709 Hollis Street, P.O. Box 2146, Halifax, Nova Scotia, B3J 1M l; Canadian Imperial Bank of Commerce, having its head office at Commerce Court, Toronto, Ontario M5L 1A2; National Bank of Canada, having its head office at 600 de la Gauchetiere W., Montreal, Quebec, H3B 4L2; Royal Bank of Canada, having its head office at 1 Place Ville Marie, P.O. Box 6001, Montreal, Quebec, H3C 3A9; and
- 3 -The Toronto-Dominion Bank, having its head office at Toronto-Dominion Centre, P 0. Box 1. Toronto, Ontario, M5K 1A2; are banks incorporated under and govemed by the Bank Act, S.C. 1991, c. 46. 6. The Respondent, Canada Trustco Mortgage Company, having its head office at 275 Dundas Street, London, Ontario, M6B 3L 1, is a loan company continued under the Loan Companies Act, R.S.C. 1985, c. L-12 and is subject to the provisions of the Trust and Loan Companies Act, S.C. 1991, c. 45. 7. La Federation des caisses Desjardin du Quebec ("Desjardins Group") is the successor to the Respondent, La Confederation des caisses populaires et d'economie Desjardins de Quebec. Desjardin Group has its head office at 100 Ave des Commandeurs, Levis, Quebec, G6V 7N5 and is a cooperative continued under la Loi sur les caisses d'epargne et de credit, R.S.Q. c. C-4, 1 ;S.Q. 1988, c. 64. 8. The Respondent, Credit Union Central of Canada, formerly the Canadian Co-operative Credit Society Limited and having its head office at 300 The East Mall, Toronto, Ontario, M9B 687, is an association within the meaning of the Cooperative Credit Associations Act, S.C. 1991, c. 48. 9. The Respondent, lnterac Inc., having its head office at 121 King Street VI/est, Suite 1905, P.O. Box 109, Toronto, Ontario, M5H 3T9, is a corporation continued pursuant to the laws of Ontario. 10. Two versions of the IMN software are now owned by Acxsys Corporation ("Acxsys"), an affiliate of lnterac Inc. Acxsys and lnterac Inc. have common shareholders, which are the other Respondents. A third version of the IMN software
- 4 is owned by Oasis Technologies Ltd. ("Oasis"). Acxsys and Oasis have each granted lnterac Inc. a master license for the IMN for shared electronic financial services in Canada. lnterac Inc. in turn sub-licenses members of the lnterac Association for use of the IMN in connection with any Service in the Association. lnterac Inc. also owns the lnterac trademarks used by the lnterac Association in connection with the Shared Services, and licenses those trademarks on a royalty-free basis to the members of the lnterac Association. B. THE INTERAC ASSOCIATION 11. The Association is a dynamic enterprise. Since the Consent Order (now the Amended Consent Agreement) was entered into in June of 1996, there have been dramatic changes both in the membership of the Association and in the market place in which the members compete. Once comprised solely of large financial institutions, today the membership includes non-financial institutions as well as community-based credit unions. This diversity results in members taking part in the Association's shared services to varying degrees. However, the Association must provide a common bundle of core services to all members, regardless of transaction volumHs. 12. The Amended Consent Agreement requires the lnterac Association (the "Association") to recover its costs by charging per transaction switch fees. 13. Certain members are very small. These members have a small volume of transactions, such that the switch fees that they pay do not cover the common bundle of core services that they consume. Consequently, their membership in the Association is being subsidized by their competitors.
- 5 -14. The Amended Consent Agreement also provides that the Association and its members may recover any direct administration and certification costs incurred by a new member to connect to the IMN. However, it does not permit recovery of the same kinds of costs from an existing member that fundamentally changes its system. Thus, these members are currently permitted to externalize these costs and be subsidized by their competitors. 15. See the Affidavit of Kirkland Morris to the Notice of Application, which is attached as Schedule "B" dated April 27, 2005, for further material facts on these points. C. THE NEED FOR THE REQUESTED VARIATION 16. The material facts on these points are set out in the Affidavit of Kirkland Morris, which is attached as Schedule "B". Ill RELIEF SOUGHT 17. The Applicants request that the Amended Consent Agreement be varied in accordance with the terms of the draft consent variation order, attached to the Notice of Application as Schedule "C".
Coutt File No. CT-95-02 THE COMPETITION TRIBUNAL
IN THE MATTER OF an application by the Commissioner of Competition under section 79 and 105 of the Competition Act, R.S.C. 1985, c.C-34, as amended;
IN THE MATTER OF an abuse of dominant position in the supply of shared electronic network services for consumer-initiated shared electronic financial services;
IN THE MATTER OF a Consent Order granted by the CompetitiJn Tribunal dated June 20, 1996, varied on March 25, 1998, further varied on s~ptember 8, 2000 and vaned and restated as a consent agreement on January 10, 2003;
AND IN THE MATTER OF an application by Bank of Montreal, ct al., under sections 105 and 106(l)(b) of the Competition Act, R.S.C. 1985, c.C-34, as amended, to vary on consent the Amended Consent Agreement rr ade by the Competition Tribunal on January 10, 2003.
BETWEEN: Bank of Montreal, The Bank of Nova Scotia Canada, Trustco Mortgage Company Canadian Imperial Bank of Commerce, La Confederation des caisscs populaires et d'economic Desjardins du Quebec, Credit Union Central of Canada, National Bank of Canada, Royal Bank of Canada, The Toronto-Dominicn Bank, lnterac Inc.
A~plicants and
The Commissioner of Competition Re:;pondent
STATEMENT OF GROUNDS AND MATERIAL FACTS Mark J. Nicholson Cassels Brock & Blackwell LLP 2100 Scotia Plaza 40 King Street West Toronto, Ontario M5H 3C2
Phone: 416.860.6513 Fax: 416.642.7168 Counsel for the Applicants