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Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 7 - Evidence, December 7, 2010

OTTAWA, Tuesday, December 7, 2010

The Standing Senate Committee on Transport and Communications met this day at 9:34 a.m. to continue its study on emerging issues related to the Canadian airline industry.

Senator Dennis Dawson (Chair) in the chair.


The Chair: Honourable senators, I declare this meeting of the Standing Senate Committee on Transport and Communications in session. Thank you for being here today.

This morning, we continue our study of the Canadian air transport sector.


Appearing before us this morning on behalf of the Competition Bureau are Martine Dagenais, Assistant Deputy Commissioner of Competition, Mergers Branch and Donald Plouffe, Assistant Deputy Commissioner of Competition, Criminal Matters Branch.

Ms. Dagenais, you have the floor.


Martine Dagenais, Assistant Deputy Commissioner of Competition, Mergers Branch, Competition Bureau: Mr. Chairman, I am an assistant deputy commissioner of competition of the Mergers Branch at the Competition Bureau. With me today is Donald Plouffe, assistant deputy commissioner in the Criminal Matters Branch.

Thank you for inviting us to appear today as you study emerging issues in the Canadian airline industry.

The Bureau has handled a number of different matters related to the airline industry over the years. In my opening comments, I would like to give a brief overview of the Bureau's merger review process and the conspiracy provisions of the Competition Act, and then we would be happy to answer your questions.

It is an exciting time at the Competition Bureau. As you know, almost two years ago, Parliament passed significant amendments to the Competition Act. The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative work place. We are aware that high prices are a concern for all consumers. However, the bureau is not a price regulator and does not have the authority or the mandate to set prices in any industry.

The 2009 amendments strengthened the commissioner's ability to challenge those types of practices that are clearly anti-competitive and harmful to the economy. These amendments are now in force, and the commissioner's top priority is the effective implementation and enforcement of our new law.


I understand that one of the areas the committee would like to discuss today is the bureau's role in merger review. Mergers of all sizes and in all sectors of the economy are subject to review by the commissioner to determine whether they will likely result in a substantial lessening or prevention of competition.

The 2009 amendments established a new, more efficient two-stage merger-review process. Our analytical approach has not changed, nor has our goal of protecting competition in the affected markets. However, we now have a framework that allows us to review transactions more effectively and in a timelier manner to achieve stronger remedies and keep seriously problematic mergers from closing.

When the bureau reviews a merger, we do an analysis of the likely impact of the merger on competition in the relevant markets, which involves three general steps. First, we define the affected markets. Next, we consider the competitive impact of the merger, determining whether as a result of the merger the merged entity would have the ability to exercise market power. Finally, we consider any efficiencies that might result from the merger.

The bureau uses the same approach to merger review in the transportation sector. However, following amendments to both the Competition Act and the Canada Transportation Act in 2007, the Governor-in-Council, on the recommendation of the Minister of Transport, Infrastructure and Communities, has the final authority to approve mergers involving transportation undertakings that raise public interest issues.

Those amendments established a process whereby, if the Minister of Transport is of the opinion that a notifiable merger raises issues with respect to the public interest as it relates to national transportation, the bureau has 150 days to review the merger and report on its findings to the Minister of Transport and to the parties. During the same period, the Minister of Transport may direct the Canadian Transportation Agency or another person to examine public interest issues related to national transportation arising from the merger.

The minister makes a recommendation to cabinet after obtaining the commissioner's assessment of any competition concerns and after considering the public interest. This process does not change the bureau's analytical approach to merger review, and mergers in the transportation sector are given the same rigorous review as mergers in any other sector.


Honourable senators may also be interested in discussing the bureau's role in combating collusion. The 2009 amendments created a significantly more effective criminal enforcement regime for the most harmful forms of cartel agreements.

Under the old law, the Crown faced the burden of proving beyond a reasonable doubt that cartel agreements cause undue economic harm.

Now, the amendments have made it per se illegal to engage in agreements to fix prices, divide markets between competitors or to restrict output, regardless of the impact on competition in that market.


Penalties for criminal cartel behaviour were also increased under the amendments. The maximum term of imprisonment for individuals was increased to 14 years, while the maximum fine per violation was increased to $25 million.

The changes to the cartel provisions came into force just eight months ago, in March 2010, so it should be noted that the majority of our ongoing investigations are being pursued under the previous conspiracy provisions.

One example of the work the bureau is doing to combat collusion is our ongoing investigation into the price-fixing conspiracy on international air cargo surcharges. Thus far, six parties have pled guilty in Canada, and $17 million in fines have been ordered.

Due to the confidentiality provisions of the Competition Act, we are not able to comment on the details of this particular investigation, or any other investigation that the bureau may be involved in, other than the information that has already been made public.


To conclude, the 2009 amendments to the Competition Act have enhanced the bureau's ability to prevent legitimate businesses and consumers from falling prey to anti-competitive activity, and to ensure that those who engage in these harmful activities are held to account.

Thank you again for inviting us here today. We would be happy to answer your questions.


Senator Johnson: I understand that Canada's transportation policy primarily looks to market forces, particularly competition, to determine what and how air transportation services are supplied to the marketplace. First, from your perspective, could you elaborate on why market forces, including competition, are generally considered the most efficient and least costly means to achieve outcomes?

Second, do you believe there are sustainable levels of competition in air travel within Canada?

Ms. Dagenais: Generally, the bureau does not monitor the level of competition in any Canadian sector, including airlines. Usually, when we look at our enforcement investigation, we become knowledgeable, or we have some expertise in different fields. When you have more competition, your price will definitely go down; you will have greater choice; your consumers will have higher quality; and there will be more innovation in the marketplace. In general, competition will bring all those elements together.

It is part of the objective of the Competition Act to promote competition, to enable small and medium-sized enterprises to compete in the marketplace and to enable Canadian enterprises to compete in the international market as well. It is also the objective of the act to bring competition to the market.

Senator Johnson: Are there sustainable levels then?

Ms. Dagenais: Yes.

Senator Johnson: In terms of our Blue Sky policy in Canada, which we have talked about with other witnesses, the goal is to negotiate and conclude air transportation agreements with other countries that are open, to the extent possible, without compromising our interests. Again, do you believe there are sustainable levels of competition in air travel to and from Canada?

Ms. Dagenais: On the state of competition in Canada, I do not want to sound repetitive — I apologize in advance — but the role of the bureau is to enforce and administer the Competition Act, so we do not generally look at it in any Canadian sector, including airlines.

In our submission to the Red Wilson panel, we made some recommendations to increase competition, for example, having more open skies agreements is certainly one way to promote competition. There is also progress on reducing the foreign-ownership of airlines to 49 per cent. We have long supported this change — I know it is not in place yet.

Also, we included in our recommendations to allow foreign carriers cabotage rights in Canada, namely, to let them combine stops within Canada with stops in foreign countries. That could also promote competition.

Ideally, the liberalization of the foreign ownership and the cabotage right together would be done on a reciprocal basis so that our Canadian airlines can also benefit from expanding their operation into foreign countries as well.

We know, as of today, that more open skies agreements have been negotiated with more countries since we appeared five years ago to discuss open skies. There have been important changes in the marketplace already, but we believe competition can be promoted in other ways. As I said, it was part of our submission to the Red Wilson panel.

Senator Johnson: Do you envision it becoming more open?

Ms. Dagenais: What do you have in mind, exactly?

Senator Johnson: Canada's open policy, do you see it as an advantage or a good idea to keep expanding?

Ms. Dagenais: As I said before, with competition, it is always good to provide opportunities for people to compete within Canada but also to compete in foreign markets.

Senator Mercer: Thank you, witnesses, for being here. I have a number of questions.

You said that the penalties for criminal cartel behaviour were increased under the amendments, the maximum term of imprisonment was increased to 14 years, and the fine for a violation increased to $25 million. You then went on to tell us that there had been six parties who pled guilty to price-fixing, and the fines were $17 million. Where does that $17 million go?

Ms. Dagenais: On this matter, I will turn to my colleague, Mr. Plouffe.

Donald Plouffe, Assistant Deputy Commissioner of Competition, Criminal Matters Branch, Competition Bureau: Whenever there is a fine imposed under the Competition Act, it returns to the Governor-in-Council. It returns to the government.

Senator Mercer: It goes to general revenue of the government?

Mr. Plouffe: Yes.

Senator Mercer: I think we are all in favour of competition, but one of my concerns is that we end up having mergers of airlines in this country because of predatory pricing. Has the mergers branch looked at what happens prior to the point where there will be a merger if predatory pricing is taking place? I think of airlines such as Air Canada and CanJet who are no longer with us in the form they were before. I think that some of those officials would refer to the predatory pricing of the airline that remains behind.

Ms. Dagenais: If I understand your question correctly, you want to know if we look at predation prior to any merger taking place. Yes, we have a specific provision under the act to deal with predation, the abuse-of-dominance provision. We have a detailed approach to deal with predation.

As you have mentioned, our leading case in that field was when the commissioner filed an application against Air Canada before the tribunal, in 2001. The action of the commissioner was prompted by the filing of two complaints by CanJet and WestJet who argued, at the time, that Air Canada had allegedly matched or undercut its prices in response to their competition. We looked at that.

That file was heard in two phases. The first phase was to determine what constitutes the test of predation. It was the first time that we tested that before the tribunal. It is a really complicated approach called the avoidable-cost test, which means that we obtain the cost incurred by the airlines industry and look at whether they are below their avoidable cost.

The tribunal rendered its decision in July of 2003, saying that Air Canada had operated under the avoidable cost, which means that they had engaged in predation.

The second phase was never heard because Air Canada at the time, following September 11, had financial difficulties, and it was decided not to pursue the application further. Therefore, we have not decided whether or not the predation engaged in by Air Canada had an impact on competition.

Senator Mercer: We have heard evidence that new airlines are flying into Iqaluit, for example, and that as soon as they start flying into Iqaluit, the prices dropped significantly. We understand that that is one of the benefits of competition, but we are also concerned about predatory pricing.

I will not stay on predatory pricing because I want to ask about your statement in answer to Senator Johnson's questions. You said that more competition is better, especially in international flights, if we can compete internationally. The way we compete internationally is to have someone to compete against. Recently two airlines from the United Arab Emirates, UAE, asked to increase their landing rights in Canada. Was the opinion of the Competition Bureau sought by the government on this issue to determine whether, in your opinion, opening the two United Arab Emirates airlines to more landing times and landing sites in Canada would have been detrimental to the Canadian airline industry?

Ms. Dagenais: Specifically to my knowledge, no, we were not consulted on that matter.

Senator Mercer: That is although you are experts in understanding competition in the airline industry.

Ms. Dagenais: Again, we expressed our position on competition in our submission to the Red Wilson panel. We just said that even though we support extension of landing rights, at the end of the day, there are more air negotiation processes that are managed, to my understanding, by the Ministers of Transport and Foreign Affairs. This is what I can give you. I cannot give you more insight on this.

Senator Mercer: I do not expect you to become involved in the political debate because of your position, and I am trying to respect that. I want to determine if the opinion of the professionals was that having more landing sites for the UAE would be good competition or provide a better platform for competition. You have told me that you do not think that the government asked for that advice, even though the advice may be there. I am not asking you to give an opinion. I cannot ask you to give an opinion that was not asked for.

You mentioned the $17 million from fines. You said the following in your presentation:

Due to the confidentiality provisions of the Competition Act, we are not able to comment on the details of this particular investigation, or any investigation that the bureau may be involved in, other than the information that has already been made public.

Is the information that has been made public on the commissioner's website? Does it detail who the fines have been levied against?

Mr. Plouffe: Yes, senator. Usually, it is the practice of the bureau to issue a press release when there is a conviction obtained in a case. In this case, we had issued four press releases because the first guilty plea involved three carriers — Air France, KLM and Martinair — and when guilty pleas were obtained from other carriers, there was a press release. There is also a link within the press release that provides information as to the status of the pleading so far and provides information on the amount of fine of each of the parties. It also usually provides a court number for people who want to have access to public information because, as you know, when a guilty plea is obtained the Director of Public Prosecutions is representing the Crown and makes his case in front of the judge. At the end of the day, it is the judge who decides if the fine recommendation by both parties is accepted or will be modified, but it is public.

Senator Mercer: For our television viewers, I should underscore that this is air cargo transportation as opposed to passenger transportation.

Mr. Plouffe: You are right. The pleas obtained so far relate to air cargo transportation, the same type of investigation that has been taking place in many other jurisdictions around the world.

Senator Raine: I am not sure if you are the right people to ask this question, but it is important to bring it up.

We talk about competition setting prices by having healthy competition in the industry, but there are many other costs that are added on to our airlines in Canada and airlines serving Canada that diminish our ability to compete with other destinations in the tourism area. I am particularly interested in tourism because since 2002, Canada has dropped from the eighth most frequented destination for tourism in the world to fifteenth. Our tourism deficit has gone from a $1.7 billion deficit in tourism spending in 2002 to $12.6 billion in 2008. Since 2008, it has become even worse.

Everything we can do to have the airlines providing good service and good pricing based on competition is well and good.

If you are looking at airline competitiveness, do you look at what could be classed as avoidable costs? These are such things as landing fees, NAV CANADA charges, passenger fees for airport ground rents and all these other costs that Canadian airlines and any airline landing in Canada have to deal with, which makes our product very uncompetitive.

Ms. Dagenais: I can understand those are important factors to take into consideration. I recognize that, but as you mention, the bureau's mandate is to enforce and administer the act. We do not monitor the level of competition in any Canadian sector on a regular basis. It could be a difficult message, but high prices are not by themselves illegal under the act. Businesses are generally free to charge whatever level the market will bear, and that on its own, as I said, does not contravene the act.

However, if high prices are the result of any act such as the cartel behaviour for which we obtained guilty pleas, we can take action in those cases. We do not hesitate to take action whenever we become aware of business practices that contravene the act.

Senator Raine: In other words, you do not really have anything to do with creating a level playing field for the industry in Canada versus other countries.

Ms. Dagenais: As I said, our role is to enforce and administer the act. If there is something contravening the act, we will act on it.

Senator Raine: Does the risk of dumping exist in the context of air services? How could it work?

Ms. Dagenais: I will turn to Mr. Plouffe to answer that.

Mr. Plouffe: Any company that does business in Canada is subject to the legislation. If you are talking about dumping, it is considered predation, and as Ms. Dagenais mentioned, there is a provision under the legislation that allows us to look at it. However, every case must be looked at on a case-by-case basis. Anyone doing business in Canada is subject to the provisions under the act.

Senator Raine: It is unfortunate because in the U.S., they have many advantages that we do not have such as airport improvement fees and all of these things, the way airports are built. The result is that Canadian companies and Canada becomes uncompetitive as a destination.

Mr. Plouffe: We understand that. As we previously said, it is not something that is under our control. I am sure there are people in this country that do control that, and I am sure they have probably considered the question many times.

Senator Cochrane: Thank you for coming. I would like to know what prompts the bureau to investigate certain activities.

Mr. Plouffe: If you allow me, I will go first. I am talking about cartel provisions, such as conspiracy provisions or any agreement among competitors to rig bids. We all know when competitors get together and decide on a price to charge, it has a huge effect on consumers, everyone in this room and businesses who are trying to stay on a legal playing field.

Depending on the case, the situation and the history of the industry, if we have information that leads us to believe that someone has contravened or is likely to contravene the legislation, we will likely initiate an inquiry and proceed with gathering information and taking appropriate action to restore the situation.

Senator Cochrane: How does a complaint make it to your radar?

Mr. Plouffe: Complaints reach us by various means. Many times, consumers will provide us with information about a situation through our information centre on our website. It is easy to access; there is a phone number to call.

We also receive complaints from competition. Of course, if competition feels anti-competitive behaviours are happening in the industry, they will approach us either under the civil provision or the criminal provision.

We are proactive, so we monitor certain industries. For example, with Quebec retail gasoline pricing, this case was prompted not following complaints but by us, where we decided to be proactive. We are more proactive in certain industries than in others, and we obtained information that led to what we know today. Those are the means of hearing complaints.

Senator Cochrane: What about pricing of airline tickets and issues such as that?

Mr. Plouffe: With respect to the pricing of airline tickets, as Ms. Dagenais mentioned, we do not have any power over what is a fair price or not a fair price. We do not have the power to regulate pricing in the airline industry, such as in many other industries. As was mentioned, we are concerned if prices are determined by agreement among competitors. That is all I can say about pricing.

Senator Cochrane: Do you have the power to investigate all the prices?

Mr. Plouffe: If we have reason to believe that the prices were reached by agreement, we have great tools available to us to gather information. We could seek permission through the court to obtain search warrants or to utilize a wiretap. We could ask the court to subpoena people with relevant information to provide testimony under oath or to produce documents.

Over the years, we have also developed expertise in certain areas of certain industries. We have built up our own knowledge over time, which helps us in putting a case together. We may need industry experts to help us. There are some industries where, unfortunately, we do not have full exposure to all of the expertise in that industry. These are some of the ways in which we will put our cases together.

Senator Cochrane: About how many complaints do you receive per year?

Mr. Plouffe: It depends. If you will allow me, I brought a little table here to assist me.

If we look at the criminal provision, meaning the cartel provision, the agreement to fix prices — the price maintenance provision and the predation provision were our responsibility at the criminal matters branch until a few years ago — in the last 10 years, we have had about 40 complaints about the cartel.

When we talk about civil behaviour, such as abuse of dominant positions or activities in the merger branch, I would say that about a dozen complaints have been received in the last two or three years.

If we talk about misleading advertising — the bureau is also responsible for enforcing provisions dealing with false or misleading representation — in the last two years, about 60 complaints have been received.

Our people in the fair business branch that handle misleading advertising receive between 12,000 and 15,000 complaints per year. That is the overall picture of the numbers and the types of complaints we receive.

Senator Cochrane: How many complaints have been resolved?

Mr. Plouffe: It is hard to provide a precise number. In fair business, our people dealing with misleading advertising, I believe there were a couple of cases in recent years that involved Air Canada, where they were promoting flights from Toronto Island Airport when that was not the case. There was some false misrepresentation made to the public there.

Also, when they instituted their new policy on second baggage, there were issues on their website. In those situations, there are different ways of looking at cases; you can either go full throttle with a criminal investigation that can go on forever and will be expensive, or you can use what we call alternative case resolution, where we speak to the people concerned who will then take appropriate action to correct the situation.

Ms. Dagenais: If you allow me, maybe I can add something as an example. Recently in the civil matters branch, we received a complaint — and this is one case where we took action, and it was resolved quickly.

Porter Airlines filed a complaint against one of the largest carriers in Canada, saying that they had engaged in predation on a specific route. We started an inquiry and talked to the marketplace, made our market contacts, as we do on a regular basis, to get the stories straight. At the end of the day, the target took action to resolve our issues. It was completed very quickly. The pricing, which was below the avoidable cost, went up a little.

Senator Cochrane: Ms. Dagenais, you mentioned ways to promote competition, such as with open skies agreements and foreign-ownership restrictions. You said that there were many others. Could you elaborate on that?

Ms. Dagenais: By many others, I meant negotiation of more open skies agreements. I realize that just in the past five years, we have negotiated 35 open skies agreements with 52 countries. My personal view is that that is quite impressive. Cabotage, as I said, could be another way. Let us say, for example, that you are en route from Paris to Toronto on Air France. We will allow them to take passengers to Toronto and continue their flight to Vancouver. That is one example, and currently that is not allowed. As I said, that would be done on a reciprocal basis so that our Canadian carriers would be able to do that also.

Senator Cochrane: Are any of these issues now being put forward and dealt with, some of those ideas and suggestions you had?

Ms. Dagenais: We made recommendations before the Red Wilson panel, but it is not really part of our mandate, which is more to enforce provisions of the act.

Senator Cochrane: They are suggestions.

Ms. Dagenais: Yes, they were our recommendations in 2008.

Senator Zimmer: I apologize for being late. As a supplementary question to what the senator asked, which was a good question on the fares, what about the fees? They advertise these great fares, and then all of a sudden, in very small print, you get the fees, which turn out to be 60 per cent to 70 per cent. Who would have thought that some day we would pay for water? Soon we will have to pay for the air we breathe.

My question is do you have any power over the fees, as far as investigating? It seems as though they have free reign to charge whatever they want. Do you receive complaints about the fees?

Ms. Dagenais: I will turn to my colleague on this.

Mr. Plouffe: As I mentioned earlier, under the Competition Act, there is a general provision that deals with false or misleading advertising. The issue of non-disclosure of certain information is not, by itself, a violation under the Competition Act.

We also understand that some recent modifications have been made to the National Transportation Act that will deal with this type of issue whereby consumers, when they buy airline tickets, will be in a position to get a clear, consistent, transparent approach on what price to expect through advertising. I believe it is in the hands of the Minister of Transport. I do not believe this provision has been enforced yet; it is a question of time. I presume he would likely be in a better position to answer that question.

I know in Quebec, the Office de la protection du consommateur has in its legislation something similar to what has been proposed under the revised National Transportation Act. Basically, a person who sees an advertisement in Quebec with respect to air transport activities has a clear, consistent, transparent price. What you see is what you pay.

Right now, as I said, the legislation is not in force. If we get a complaint, we will look at it on a case-by-case basis, but likely this case would be referred to the Minister of Transport.

Senator Martin: I apologize for being a little late myself. I want to start first with reference back to Senator Mercer's question of the UAE and the negotiations that take place with other jurisdictions, with agreements that are in place.

You did not mention the specifics of that case; but in the 35 agreements that you have seen in the last 5 years, what role have you played, or how would you weigh in? Is it through reports you submit? Are you at the table during any of the negotiations during the process? Are you consulted on a regular basis?

I am curious about the role you play because you have quite an insight in the lay of the land — in Canada, with the airline industry and the competitive nature and the challenges that the airline industry is facing. What role have you played in the past with some of these negotiations?

Mr. Plouffe: I do not believe that we were consulted. I could double-check that information.

As you know, this responsibility is under Foreign Affairs and International Trade Canada, DFAIT, and the Minister of Transport. They have a chief negotiator-adviser who takes care of all those negotiations and is supported by many policy advisers who probably know about the Competition Act.

If they require some information, we are always open to provide them with any view that we may have. However, I do not believe there is a formal process where the bureau needs to be consulted whenever there is a negotiation.

Senator Martin: With respect to the role of foreign competition, in your enforcement of the act, one of your mandates would be to expand opportunities for Canada abroad as well as consider the role of foreign competition in Canada. It has been suggested that to foster competition in the Canadian airline industry, perhaps there is a greater role for foreign ownership and that the limits should be raised.

Do you have any position on that, whether this is a viable option for increasing domestic competition?

Ms. Dagenais: In our submission before the Competition Policy Review Panel, one of our recommendations was liberalization or reduction of foreign-ownership restrictions on airlines. As you know, right now, it is still at 25 per cent, but there are amendments that will probably bring it to 49 per cent. It has yet to be brought into force.

We also recommended having foreign-owned carriers that would operate strictly in Canada. On that, Canada will probably have the possibility to do the same abroad.

As also mentioned in our submission, cabotage rights will be an option as well. Those were the main recommendations we made at the time.

Senator Martin: I am thinking about this very important balance of maintaining the strength of our Canadian industry yet competing worldwide and inviting that foreign competition, as well as going abroad and competing on the international stage. In a country such as ours, where we have a great space and airline travel is a necessity but a population that cannot compete with other jurisdictions, that is a very fine balance. Your perspective must be such that you see the need to do both. How do we maintain that balance in Canada to really foster the competition?

Ms. Dagenais: Something I should raise is that when we review a merger, we look at the level of foreign competition in the relevant market; we look not only at existing competition here in Canada but also abroad. We look at the potential competitors that could enter into the relevant market, as well.

Essentially, I support Canadian competition and the ability to expand in foreign countries. However, you must keep in mind that, for us, it is competition. Whether or not it is a net benefit for Canadians is more for the Investment Review Division of Industry Canada to review than for the bureau.

Senator Mercer: In your presentation, you made continued reference the 2009 amendments. We have had a short passage of time; we are still in 2010, almost in 2011. I assume you are doing an ongoing analysis of the amendments to see if they have done what you thought they would do, if they have done what Parliament thought they would do when we passed those amendments. I assume that I am correct. Do you see a need in the future to make further amendments to refine the amendments we made in 2009?

Ms. Dagenais: On your first question, as you know, some of them came into force in March 2009, while half of the remaining amendments came into force in March 2010. Some of them have been in place for only eight months and have not been fully tested. I can say for certain that in my view, they are stronger, and we have a better Competition Act. It has put us in line with our major trading partners, particularly the U.S.

Senator Mercer: Thank you. You talked about agreements and gave the example of Air France flying from Paris to Toronto and wanting to fly on to Vancouver, which they cannot do at this time. I believe that Air France is a member of the Star Alliance, as is Air Canada. The airline is in the same family of world airline alliances.

When you look at the international aspect, do you find that the role played by alliances, such as Star Alliance, has a positive or negative effect on competition?

Ms. Dagenais: The Competition Bureau has reviewed the formation changes in membership as well as the operation of certain alliances under the new civil provisions in section 90 of the Competition Act, which came into force this year. Some of those alliances bear many similarities to mergers. In some cases, we can review them under the cartel provisions. The changes modernize the Competition Act such that the commissioner is able to examine those alliances in three different ways. That is all I can say about it for now.

Senator Mercer: In response to one question, you made a brief reference to Toronto Island Airport. It is an important airport, which Air Canada abandoned to someone else to create a market. Now, Air Canada wants back in. Has a complaint been made against Porter Airlines by Air Canada or vice versa?

Mr. Plouffe: In my understanding of the issue of landing rights for Air Canada at Toronto Island Airport, decisions have been made by the airport authorities such that Porter Airlines is not in the same position as it was before. It is losing its monopoly on all the slots available at Toronto Island Airport. I understand that 30 landing and take-off rights have been awarded to Air Canada and 16 to Continental Airlines. I believe that Porter Airlines still has about 150.

The decision by the airport authorities to allocate who will land and take off is their decision to make. The Competition Bureau was not involved in that process.

I believe that when Porter Airlines wanted to use the Toronto Island Airport before launching their activities, they sought the commissioner's opinion. Under the Competition Act, a person is able to seek advice on a proposed business plan to determine whether it raises an issue under the Competition Act. I believe that at the time, Porter Airlines sought such an opinion from the commissioner on exclusive landing and take-off rights at Toronto Island Airport.

When our advice was provided, Porter Airlines was informed that we did not perceive those rights to be an issue under the exclusive-dealing provision under the civil provisions of the act mainly for two reasons. We believed that Porter Airlines was not dominant in the market. When analyzing such cases, we define the geographic market. Our position at the time, based on the facts we knew, was that Toronto Pearson International Airport was in the same geographic market, so Porter Airlines was not dominant in that market. The commissioner took the position at the time that it would not raise an issue under the Competition Act.

Senator Mercer: Air Canada has 30 spots and Continental Airlines has 15 spots, with Porter Airlines having the remaining, making it dominant at Toronto Island Airport. The terminal, as it exists, and the ferry would seem to be owned or leased by Porter Airlines. "Porter Airlines'' is stamped all over it.

Mr. Plouffe: Certainly there will be much more competition at the Toronto Island Airport.

Senator Mercer: Indeed. Returning to my first question, I am worried that we will see predatory pricing from our friends at Air Canada. Porter Airlines is providing a much-needed service at Toronto Island Airport as well as a regional service in Eastern Canada as they fly to Ottawa and Ottawa to Halifax and Halifax to St. John's.

The Chair: We have a second item.


Ms. Dagenais and Mr. Plouffe, I would like to thank you for being here this morning. Your views were very interesting.


The second item on the agenda is the budget. This is an extravagant committee, as you know, and we are asking the budget committee for $420 to visit Ottawa Macdonald-Cartier International Airport. We must submit the budget for this to the Senate Standing Committee on Internal Economy, Budgets and Administration for approval. I am optimistic that they will accept our budget.

It is basically for a visit to the Ottawa airport. We will do other visits. However, this one, on a practical basis, is local. At the beginning of February, probably on a Tuesday morning, we will go to the airport. It is likely that we will not have to spend all of our money if people are flying in and are able to wait at the airport for the others to meet them there. It will be a fact-finding mission, so we will not have to travel with a whole bunch of services. It will be fact-finding only and will last a few hours, after which we will have to see what we can do in terms of other activities, such as visit to the airport in Gatineau. May I have a motion?

Senator Mercer: I so move.

The Chair: Are there questions on the budget? The trip will be in February. It will be on a Tuesday morning to the airport. If there are no objections to the budget, we will move to another item with Senator Raine.

Senator Raine: I wonder if you could make a request. There is a new consortium in the tourism industry called the National Travel and Tourism Coalition. They have done good research on the issue of the competitiveness in the industry with respect to the fee structures in Canada. Would it be appropriate to have them appear before the committee?

The Chair: Have we had any discussions with them?

Senator Raine: I am not a regular member of the committee.

The Chair: We have heard from some of their members, who talked about the report. We could consider that in the new year. I say this because we will basically focus on the airport issue for the next phase, but we will be moving on to other issues, as well.

Senator Raine: It is the way the airports are financed. Airport improvement fees rest 100 per cent on the backs of the travellers, whereas in most countries, airports are recognized as economic development tools, and revenue flows into them from property tax and other areas.

The Chair: We have had many witnesses making that proposal, but we will look at availability.

This is our last meeting, and I am seeking guidance from the committee. The Liberals have not spoken on Bill C-28, the anti-spam bill. However, we might need to have a meeting next Tuesday morning on the bill. We have no witnesses slated for next year, so I am giving honourable senators a heads-up that the steering committee will have to meet once the bill has been sent to committee.

Right now, we have no indication as to when that will be.

Senator Johnson: Can you give the committee any idea yet of a plan for travel in the coming year?

The Chair: We will go to the Ottawa International Airport. The steering committee will have to talk about it. Once we have done that airport visit, we will have a better idea of how we can look at other airports.

Senator Johnson: Those of us who travel four times a week can give you opinions on how we should look at airports.

The Chair: We have heard about taxis at the airports. However, we will be looking at preparing a budget for more substantial travel in the new year.

Senator Johnson: The issues at airports are getting bigger and bigger, and I would refer our researchers to Australia and what they are doing for security issues.

Senator Housakos: There is a problem we have with this committee, though it is not really a problem. When we start to structure how to go about the study, we have to extract security from it because it was already done last year by the house. Any time you set foot in any airport, security seems to be the major issue.

Senator Johnson: It is the only issue in terms of the public.

The Chair: We can study the cost side of it, but getting into a second study on airport security that has already been done would overlap. However, we can talk about how that fits into the pricing.

Senator Johnson: We ought to include it as a sidebar. Since that study came out last year, things have changed again with what happened.

The Chair: Our visit to the Ottawa International Airport will give us the opportunity to see what effect that has had on their airport and how they are managing it. The cost transfer, as Senator Raine mentioned, always goes to the customer.

Senator Mercer: If you recall, the Atlantic Canada Airports Association appeared before us last week and made reference to 20 touch points that influence passenger experience as they were talking about the complex management model that they have to work with. In that process, they outline 10 of those touch points. We should see what the other 10 are.

However, it seems there might be a basis upon which we can move forward. There were many things in that. Security is there; it has to be. There is no way we can avoid talking about security, although we do not need to do an in- depth study. In the study last year, everything from the taxi service to the baggage retrieval was talked about.

I do not think we should be afraid to talk about security, but it should not dominate the discussion.

The Chair: Are there any other comments or questions?

We will rise to the call of the chair for Bill C-28.

(The committee adjourned.)

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