Bill C-49 (Historical)

Transportation Modernization Act

An Act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts

This enactment amends the Canada Transportation Act in respect of air transportation and railway transportation.
With respect to air transportation, it amends the Canada Transportation Act to require the Canadian Transportation Agency to make regulations establishing a new air passenger rights regime and to authorize the Governor in Council to make regulations requiring air carriers and other persons providing services in relation to air transportation to report on different aspects of their performance with respect to passenger experience or quality of service. It amends the definition of Canadian in that Act in order to raise the threshold of voting interests in an air carrier that may be owned and controlled by non-Canadians while retaining its Canadian status, while also establishing specific limits related to such interests. It also amends that Act to create a new process for the review and authorization of arrangements involving two or more transportation undertakings providing air services to take into account considerations respecting competition and broader considerations respecting public interest.
With respect to railway transportation, it amends the Act to, among other things,
(a) provide that the Canadian Transportation Agency will offer information and informal dispute resolution services;
(b) expand the Governor in Council’s powers to make regulations requiring major railway companies to provide to the Minister of Transport and the Agency information relating to rates, service and performance;
(c) repeal provisions of the Act dealing with insolvent railway companies in order to allow the laws of general application respecting bankruptcy and insolvency to apply to those companies;
(d) clarify the factors that must be applied in determining whether railway companies are fulfilling their service obligations;
(e) shorten the period within which a level of service complaint is to be adjudicated by the Agency;
(f) enable shippers to obtain terms in their contracts dealing with amounts to be paid in relation to a failure to comply with conditions related to railway companies’ service obligations;
(g) require the Agency to set the interswitching rate annually;
(h) create a new remedy for shippers who have access to the lines of only one railway company at the point of origin or destination of the movement of traffic in circumstances where interswitching is not available;
(i) change the process for the transfer and discontinuance of railway lines to, among other things, require railway companies to make certain information available to the Minister and the public and establish a remedy for non-compliance with the process;
(j) change provisions respecting the maximum revenue entitlement for the movement of Western grain and require certain railway companies to provide to the Minister and the public information respecting the movement of grain; and
(k) change provisions respecting the final offer arbitration process by, among other things, increasing the maximum amount for the summary process to $2 million and by making a decision of an arbitrator applicable for a period requested by the shipper of up to two years.
It amends the CN Commercialization Act to increase the maximum proportion of voting shares of the Canadian National Railway Company that can be held by any one person to 25%.
It amends the Railway Safety Act to prohibit a railway company from operating railway equipment and a local railway company from operating railway equipment on a railway unless the equipment is fitted with the prescribed recording instruments and the company, in the prescribed manner and circumstances, records the prescribed information using those instruments, collects the information that it records and preserves the information that it collects. This enactment also specifies the circumstances in which the prescribed information that is recorded can be used and communicated by companies, the Minister of Transport and railway safety inspectors.
It amends the Canadian Transportation Accident Investigation and Safety Board Act to allow the use or communication of an on-board recording, as defined in subsection 28(1) of that Act, if that use or communication is expressly authorized under the Aeronautics Act, the National Energy Board Act, the Railway Safety Act or the Canada Shipping Act, 2001.
It amends the Canadian Air Transport Security Authority Act to authorize the Canadian Air Transport Security Authority to enter into agreements for the delivery of screening services on a cost-recovery basis.
It amends the Coasting Trade Act to enable repositioning of empty containers by ships registered in any register. These amendments are conditional on Bill C-30, introduced in the 1st session of the 42nd Parliament and entitled the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act, receiving royal assent and sections 91 to 94 of that Act coming into force.
It amends the Canada Marine Act to permit port authorities and their wholly-owned subsidiaries to receive loans and loan guarantees from the Canada Infrastructure Bank. These amendments are conditional on Bill C-44, introduced in the 1st session of the 42nd Parliament and entitled the Budget Implementation Act, 2017, No. 1, receiving royal assent.
Finally, it makes related and consequential amendments to the Bankruptcy and Insolvency Act, the Competition Act, the Companies’ Creditors Arrangement Act, the Air Canada Public Participation Act, the Budget Implementation Act, 2009 and the Fair Rail for Grain Farmers Act.

[Ryan Greer]

I think that's a bit of a broad statement.

Our membership is very wide and has a lot of different interests within the Canadian chamber. There are some aspects of Bill C-49 which we view as good and necessary, and we are still waiting to see some of the details.

There are other issues, on the rail side, where we're not as certain. Often the chamber, with the size and scope of our network, comes at it from a broad approach, and we have some broad concerns about the creeping regulation into the sector and what that may mean for investment, for productivity, and for the effectiveness of all Canadian supply chains.

We like a lot of what's in Bill C-49. With some parts, we still need to see what's in the regs, and there are other parts where we have some concerns.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Madam Chair, I have a very quick question. Thank you for letting me ask it.

My question is for the official from the Canadian Chamber of Commerce.

Here is what I understood from your comments today. On the whole, your members are satisfied with Bill C-49. Have I understood you correctly today?

[Anthony Durocher]

Once again, from the Competition Bureau's point of view, our role is clearly defined in Bill C-49.

[Robert Aubin, NDP, Trois-Rivières, QC]

So the answer is no. On the other hand, it is very easy to lobby a minister's office. That is even part of lobbyists' work. I have the feeling that the measure in Bill C-49 that gives the minister this new power is probably the result of lobbying.

So I come back to the same question. By virtue of his new powers, can the minister circumvent all the Competition Bureau's work?

[Ryan Greer]

As Bill C-49 is currently drafted, both major class Is stand to lose some business in southern Alberta and southern Manitoba. That's what the current exemptions of the bill provide in Ontario, British Columbia, and Quebec.

I think my comment in my remarks was that in the absence of those exemptions, both those railways would stand to lose a significant amount of rail business, and then Canada would lose a significant amount of port business in both Vancouver and Montreal. As it currently stands, there will be a loss of traffic. The railways would have to give you a more precise description of what that loss of traffic in Alberta and Manitoba will be. With the exemptions, which would be maintained, a massive loss of traffic in some of our major centres won't be had.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you to our witnesses for appearing. I appreciate the candour of your opening remarks and testimony.

In addition to failing to introduce market forces in grain handling in Canada by lifting the maximum revenue entitlements, thereby failing to address the underlying cause of the grain-shipping crises over the last 20 years, based on your testimony it looks like the government is also weakening the competition in another area by weakening the power of what is a law enforcement agency, the Competition Bureau.

I found it really interesting that in your opening remarks, Madam Fisher, you elaborated at length about the bureau's 2011 case where you went after Air Canada and United Airlines and their proposed joint venture, and ultimately required that they exempt 14 transborder routes from the joint venture in order to ensure greater competition for Canadian consumers and ultimately lower prices for Canadian families.

It's clear to me that the bill in front of us today weakens the bureau and weakens law enforcement by introducing a new process that would allow the minister to essentially bypass the bureau. Had the 2011 case been introduced under this proposed law, it's clear to me what would have happened. Air Canada and United Airlines would have applied directly to the minister for this new process and very likely the minister would have approved the joint venture, possibly without the exemptions for the 14 routes. That ultimately would have led to less competition and to higher prices for Canadian consumers.

I think it's safe to say that Bill C-49 weakens law enforcement. It weakens the powers of one of our premier law enforcement agencies when it comes to competition. Would you agree with that statement?

[Ryan Greer]

Just to step back to one of your earlier questions about the cost of air travel in Canada, I think all of these extra taxes and fees and the airport rents are one of the reasons why it is more expensive to fly in Canada. Obviously there's the density of our population, but there are also our carriers that serve a lot of routes that aren't as profitable, including into the north, where some of their bigger haul routes actually can cross-subsidize and get into smaller communities the flights that may otherwise not make commercial sense for them. I expect that there is some cross-subsidization when it comes to making sure that Air Canada, WestJet, and other carriers are actually getting into smaller communities where there's maybe not a lot of potential to make money.

The user fee principle built into air travel makes sense, but again, only if those fees are used for what they're determined for. The problem with the air travellers security charge is that not all of that money is put back into CATSA screening. One of the things that Bill C-49 will do in allowing airports to contract out new services from CATSA is that inevitably those authorities will end up recouping those costs through their landing fees and other mechanisms, which are then built into ticket costs. That means consumers could end up double-paying for security fees. They're paying the air travellers security charge, and then they're going to be paying whatever fees end up getting built into tickets because of these additional costs that are being contracted out.

We think it's time for a review of all of the government-imposed costs. We're not saying to get rid of all of them. We're not saying that there shouldn't be a security charge. We're saying to make sure that we're accountable for how those fees are used and that they're invested in what they're supposed to be invested in. Also, then, there's looking to see if there are ways in which we can make the sector as a whole more competitive. Again, airport rents are an area where we impose very high costs, which then of course have to be recouped through the end users.

[Vance Badawey, Liberal, Niagara Centre, ON]

My last question is for Mr. Schaan.

Over the past week, I've really tried to attach Bill C-49 to the bigger picture when it comes to the transportation 2030 strategy. That, of course, has a balance attached to it when it comes to customers, especially with air, in terms of their rights, as well as with business, with industry, with really injecting this bill into that strategy with respect to trade corridors and enhancing those trade corridors when it comes to our infrastructure investments following those recommendations and strategies. How do you see this, as well as the bigger strategy, actually fitting into the overall strategy to bring Canada to a better performance globally?

[Ryan Greer]

Yes, thank you for the question.

You've raised what is one of, I think, a few different challenges with the current CATSA funding model and how CATSA operates as a whole. At its most basic level, the fact that we have an air traveller security charge, which funds general revenues of the government and not all of which is put back into security services—it does fund other things, but the fact is that not all of that is reinvested—already puts CATSA on its back foot when it comes to meeting its obligations in airports. I think that's one of the reasons that Bill C-49 in the interim seeks to allow airports to set up these arrangements.

As I said in my remarks, I think the ability of airports to enter into these arrangements should be viewed as a stopgap at best, and a band-aid, until the CATSA funding model can be dealt with in a more reasonable manner. It's not just airports in Quebec; it's small and medium-sized airports across the country, especially for peak tourism season. They get demand for some very high-end travellers or people on charter flights who want to come and spend a lot of money in their community, but for scheduling reasons, they have trouble getting CATSA staff, or funding reasons.

I think you've identified an inequity that is worth having a discussion about. However, before I think that can be addressed, the overall CATSA funding model and how the air travel security charge is actually used to fund CATSA is something that needs to be dealt with because now, as we're seeing, some of the big airports can't meet all their obligations with CATSA's current service provision. They're having to contract for additional provisions at Pearson and another airport.

[Robert Aubin, NDP, Trois-Rivières, QC]

You can see the problem though. Competition has quite a clear meaning to all members of the public. Public interest, however, is vague, to say the least.

I will now turn to my second topic before my time runs out. I would like to speak to the official from the Canadian Chamber of Commerce. I will offer a different example this time. I think we are more likely to agree on the issue of economic development.

In my riding of Trois-Rivières, there is a regional airport that has expanded steadily over the years, first to accommodate those travelling for pleasure, then for a pilot school, an aircraft painting company and now to perform maintenance on some Air Canada aircraft. In short, there has been steady investment in an airport that is growing and contributing to regional development. There are even agreements with airline companies to schedule charter flights.

There is a problem, however, since Bill C-49 stipulates that if we want access to security measures for international travel, we have to pay for them ourselves.

With regard to regional economic development, does it seem fair to you that there should be two types of airports, those for which the cost of services is covered and those that have to pay to offer the same services to their customers?

[Anthony Durocher]

As to Bill C-49, if the transport minister deemed something to be in the public interest, that would indeed be the case. It would be left to his discretion, while also bearing in mind the analysis by the Office and the Commissioner.

[Robert Aubin, NDP, Trois-Rivières, QC]

Madam Chair, I will limit myself to two topics in order not to go over the five minutes I am allowed.

My first question is for Ms. Fisher or Mr. Durocher.

Your presentation about the Competition Bureau was very well done, although it was a bit technical. For those who are following our work, I will try to be as clear as possible.

You mentioned the example of a potential joint venture between Air Canada and United Continental. After a series of negotiations and studies, the Competition Tribunal systematically blocked this agreement. It did not come to pass.

As I understand it, in view of the powers devolved to the minister in the current Bill C-49, that is over, the Tribunal will no longer be able to block anything. At most, it can recommend that the minister do so. If the minister decides otherwise on the basis of poorly defined public interests, there is no further recourse.

[Mark Schaan]

Public interest considerations can mean a number of things. The way Bill C-49 is laid out is there will be a guideline-setting process that will essentially be open for consultation to allow for parties to help inform that, but that can include things like safety, tourism, connectivity, economic benefits, and a number of other considerations that potentially provide both increased economic impact and connectivity for Canadian passengers.

[Mark Schaan, Director General, Marketplace Framework Policy Branch, Strategic Policy Sector, Department of Industry]

I'll start, and my bureau colleagues may want to intervene.

One of the reasons we introduced the joint venture provisions in Bill C-49 as they are now is that currently joint ventures in this country actually don't have any set timelines necessarily, because they are subject to the commercial collaboration provisions of the Competition Act, which the commissioner of competition can initiate at any time and invoke a review of at any time. That does not allow for any certainty or predictability for proponents unless it's a notifiable merger.

We've taken the merger provisions that currently live under the CTA, which allow for a public interest consideration, and we have actually made those timelines more explicit and shorter. If I take the merger timelines, for instance, it's important to think about the time that leads up to a merger notice being given, but essentially you can take that same time frame and, say, 42 days to inform parties, and, where there is public interest, another 150, and then there's a TBD on all of the steps that follow thereafter.

With respect to the joint venture provisions, one point I want to clarify is that the 120 days for the commissioner of competition are parallel to the 150 days for the minister of transport. Really, in this particular set of time frames we are trying to balance providing predictability and certainty with the need for a robust competition consideration by the commissioner of competition and a robust public interest consideration by the minister of transport. We actually think this particular measure right now allows for an international competitiveness that Canada currently can enjoy like its other comparators.

To your point on the two-year minimum immunity period, I would stress that it's a two-year minimum period, so unless it is otherwise stipulated in the terms and conditions, joint ventures will not have an expiry date and will continue to operate in perpetuity while being monitored annually. That being said, we believe the two-year minimum is sufficient. It's worth noting that in other jurisdictions, such as the United States, antitrust immunity can be reconsidered at any point by the transportation authorities, and so there is actually no certainty to pardon. Therefore, in the joint venture provisions in Bill C-49, we've tried to provide for a balanced and thoughtful consideration of competition and public interest considerations and as much predictability and certainty to parties as possible while ensuring that at all times there's due process.

[Ryan Greer]

I think we all appreciate the challenge of continuing your work on a difficult day like today, so thank you for having us here.

Thank you for inviting the chamber to take part in your study on Bill C-49. The package of legislative amendments before you affects chamber members of all sizes across our network of 200,000 members.

I'd like to start by commending Mr. Emerson and the review panel for their work on the Canada Transportation Act review report. The report is a comprehensive landmark piece of work. It made important recommendations toward helping to modernize Canada's trade and transportation networks. Bill C-49 touches on some key issues raised by the review.

The lens by which the chamber considers the individual components of Bill C-49 and offers comments is how we see the proposed changes affecting Canadian competitiveness overall. I'll start briefly on the rail side before jumping over to a few remarks on air travel as well.

Canada's historical trend of privatization in rail is a tremendous success story that has resulted in significant private sector investment leading to some of the lowest freight rates and highest levels of service in the world.

To that end, the chamber offers caution about the urge to expand regulation into Canada's supply chains. In a global economy where connectivity has become a key determinant of economic performance, the objective of any transportation system reform should be on continuous improvement to the efficiency of our supply chains. This was a major theme of Mr. Emerson's review.

The network nature of these supply chains, including our rail system, is such that providing a regulated advantage to one customer, one sector, or one part of the network will inevitably take something away from other parts of the network. This is one of the reasons that the last two Canada Transportation Act review panels, in 2001 and again in 2016, recommended against increased interswitching limits and maintaining a system based principally on commercial relationships and market forces.

Specifically, the chamber has concerns about the proposed new long-haul interswitching provisions. I think we should be wary of unintended consequences, including disincentives to investment and reduced productivity. In particular, the economics around remote branch lines serving resource industries is already difficult. LHI could threaten to reduce the income that railways make on these lines, which makes their future even a little more perilous.

Another consequence of long-haul interswitching is allowing U.S. railways to take advantage of Canadian lines without reciprocity. As currently drafted, Bill C-49 includes some geographical exemptions for U.S. access and, at a minimum, those exemptions should be maintained. Without the exemptions, Canada would stand to lose a large amount of rail and port business to the U.S., particularly through Vancouver and Montreal.

Broadly, supply chain competitiveness is better served by having a commercial marketplace that has sufficient provisions in place to protect customers in the event of a dispute. Bill C-49 does include some reasonable amendments to existing dispute resolution mechanisms.

On the issue of level of service decisions from the CTA, the chamber would suggest that the CTA should take into account the impact of decisions on all aspects of a supply chain and not just a single customer in making their decisions.

Moving on, we are supportive of provisions in the bill that will change the framework of the maximum revenue entitlement to remove some of the disincentives that have discouraged the acquisition of new hopper cars. We are also supportive of the measures for supply chain data transparency and some of the additional steps that the government has already taken in this regard.

We also support Bill C-49's provisions on locomotive video and voice recorders, including the proactive use of this data by railway companies. The minister has repeatedly said that his number one priority is safety, and this will help accomplish that.

Last, on rail, the chamber is supportive of increasing the individual share ownership limit for CN from 15% to 25%. This is an issue for fairness compared to other carriers and other modes and is important for accessing the necessary capital for long-term investment for the railway.

Moving on quickly to the air transportation sections of the bill, the chamber is supportive of a new framework for consumer rights. The current complaint-based system is a bit of a mess. It leads to inconsistent application of rules between carriers. A simplification and standardization of those rules is overdue, both for those travelling on the airlines and the airlines themselves. Like all business, our carriers can operate more effectively and efficiently when they have greater certainty of the environment in which they're operating.

As regulations under the framework are developed, we'd recommend that they clearly reflect the fact that airlines are one part of the air transportation system. For instance, security screening delays remain one of the top complaints from air travellers.

The bill also requires more information and data regarding air carrier service. I would offer that increased data requirements should not be limited to our carriers, but specifically include government entities within the network that affect system performance, including CBSA and CATSA.

We are also supportive of the joint venture provisions in the bill and setting up the new approval process for the minister of transport. Moving the authority or creating this new process will allow joint venture decisions to be made with a broader public and economic interest in mind.

We do recommend that some of the joint venture provisions in the bill be amended. Specifically, the allowance of a ministerial review of a joint venture after two years following its approval should be lengthened. The two-year clock begins following the ministerial approval of the joint venture, not from when the joint venture actually commences its operation. Once it's actually off the ground, so to speak, we believe that the two-year time frame will probably not provide sufficient enough time to test the joint venture in the market.

The chamber is also supportive of the CATSA cost-recovery section of this bill, with the major caveat that this is very much a band-aid solution, while the government continues to correct or tries to correct the CATSA funding model. We must look to end the chronic underfunding of CATSA to ensure that air travellers can receive the efficient screening services that they are already paying for on their tickets.

We are also in favour of the foreign ownership provisions for airlines in this bill. The minister has stated that the objective of this change is to help promote more competition and bring down airfares. I would just add that if Canada wants to get serious about lowering airfares, it is time to review the government-imposed costs on ticket prices. This of course includes airport rents, security charges, Nav Canada fees and other taxes, all of which impact the competitiveness of Canadian air travel.

I'll wrap up by commending the minister, his team, and the department for the work they've put into transportation 2030 and Bill C-49, and this committee for all the work that you are doing this week. As the minister said this morning, Bill C-49 is only the first step in a long-term transportation plan and the Canadian Chamber of Commerce looks forward to continuing to work with the government on improving Canada's trade and transportation competitiveness.

Thank you.