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.

[Melissa Fisher, Associate Deputy Commissioner, Mergers Directorate, Competition Bureau]

Madam Chair, my name is Melissa Fisher. I'm the associate deputy commissioner in the mergers directorate at the Competition Bureau. I'm joined today by my colleague, Anthony Durocher, the deputy commissioner of the monopolistic practices directorate at the bureau.

Also present is Mark Schaan, director general of the marketplace framework policy branch at Innovation, Science and Economic Development Canada. He is in charge of competition policy, while the Bureau carries out the independent enforcement function.

I understand that the committee has questions about changes in the bureau's role in relation to the review of arrangements between air carriers, as set out in Bill C-49.

I'll begin by providing some context about the bureau and its mandate. I will then speak to the bureau's experience in reviewing agreements and arrangements between air service providers. Finally, I will address the provisions of Bill C-49 that would impact the bureau's role in examining these types of agreements or arrangements.

The Bureau is an independent law enforcement agency that ensures that Canadian consumers and businesses prosper in a competitive and innovative marketplace that delivers lower prices and more product choice. Headed by the Commissioner of Competition, the Bureau is responsible for the administration and enforcement of the Competition Act and three of Canada's labelling statutes.

The act provides the commissioner with the authority to investigate anti-competitive behaviour. The act contains both civil and criminal provisions and covers conduct such as false and misleading representations, abuse of a dominant market position, mergers, and price-fixing. Civil matters are resolved before the Competition Tribunal, a specialized adjudicative body that comprises Federal Court judges and laypersons with expertise in business, commerce, or economics, whereas criminal matters are resolved before the courts. The act also provides the commissioner with the ability to make representations before regulatory boards, commissions, or other tribunals to promote competition in various sectors. The basic operating assumption of the bureau is that competition is good for both businesses and consumers.

Today I am here to talk about the bureau's role in reviewing arrangements between air carriers and how that role would change if Bill C-49 were passed.

The bureau has a significant amount of experience reviewing arrangements, including mergers and joint ventures, in the air transport sector. From the development of the first broad airline alliances in the late 1990s to the acquisition of Canadian Airlines by Air Canada in 2000 and the entry, and sometimes exit, of a number of carriers since then, the bureau has examined a variety of arrangements between air carriers that could harm businesses and consumers who rely on air services through increased prices and reduced choice.

Notably, in 2011, the bureau challenged before the tribunal a proposed joint venture between Air Canada and United Continental that involved co-operation on certain key aspects of competition, including pricing, capacity setting, frequent flyer programs, and revenue and cost sharing. After conducting an in-depth review, the bureau determined that the proposed joint venture would have resulted in the airlines' jointly monopolizing 10 key Canada-U.S. transporter routes and substantially reducing competition on nine additional routes. In turn, this would have likely led to increased prices and reduced consumer choice. Ultimately, the bureau reached a negotiated resolution with the parties. The consent agreement entered into prohibits Air Canada and United Continental from implementing their joint venture agreement on 14 transborder routes.

The Air Canada-United Continental matter is an example of how the bureau might review an air services arrangement under the Competition Act. The bureau typically examines this type of arrangement in the context of either the merger or the competitor collaboration provisions in the act, depending on how the arrangement is structured. These arrangements can have positive effects, such as increasing efficiency and competitiveness, in turn allowing Canadians to benefit from lower prices and better product choice. However, they can also raise competition concerns. If the commissioner determines that an arrangement is likely to result in a substantial lessening or prevention of competition, which is the statutory threshold, he may, subject to an exception for notifiable transactions under the act, challenge it before the Competition Tribunal, or alternatively, seek a consensual resolution with the parties in the form of a consent agreement.

With respect to the factors considered in reviewing mergers or agreements among competitors, the bureau undertakes an exhaustive, fact-intensive and evidence-based review, including quantitative analysis. In analyzing an airline joint venture, the bureau will focus on routes where there is overlap or potential overlap in the service by the parties.

In particular, the bureau typically considers whether the joint venture partners provide competing air passenger services on specific origin-destination city pairs, such as Toronto to Chicago or Winnipeg to North Bay. The bureau also assesses whether consumers view, for example, non-stop or one-stop service, or business and leisure travel as substitutes for one another. The bureau also considers whether there are competitors serving the parties' overlapping routes, any barriers to entry, and whether existing or potential competitors may constrain the ability of the parties to the arrangement to raise prices.

A joint venture that reduces the number of competitors or potential competitors on an already concentrated route will raise concerns. For any particular overlapping route, the bureau will want to ensure that consumers have access to competitive prices and services, and that a proposed arrangement would not result in any route being captive to one or more airlines with enhanced market power.

To assess the competitive impacts of a proposed joint venture, the bureau can require significant amounts of data and other market information from the parties to the joint venture and other market participants. This information is necessary for an informed and credible review based on sound economic principles. The bureau may seek such information on a voluntary basis from the parties to the arrangement, from third parties with knowledge of the industry, or from consumers. At times, it may also seek the issuance of a court order requiring that certain information be produced.

Bill C-49 establishes a new process for the review and authorization of arrangements involving two or more transportation undertakings providing air services. This process will cover all types of arrangements among air carriers, other than arrangements that would be considered notifiable transactions under the Competition Act. Notifiable transactions are transactions that meet specific financial thresholds regarding the size of the parties and the size of the transaction, and that cannot be completed until the commissioner has had an opportunity to review. Notifiable transactions have been subject to a potential public interest review by the minister of transport since 2000.

Bill C-49 proposes a new process for arrangements involving air services that will enable air carriers to voluntarily seek authorization of a proposed arrangement from the minister of transport. The commissioner will receive a copy of any notice of an arrangement that is provided to the minister, along with any information required by the guidelines.

If the minister determines that the proposed arrangement raises significant considerations with respect to the public interest, then the commissioner is required, within 120 days of receiving the initial notice, to report to the minister and the parties on any concerns regarding the potential prevention or lessening of competition that could occur as a result of the proposed arrangement. A summary of the commissioner's report may be made public. I would note in this respect the bureau's ongoing commitment to transparency within the limits of our confidentiality obligations, and that this commitment would continue under this process as well.

The bureau will carry out its usual competitive analysis, but to the extent that the arrangement raises competition concerns, it will not have the option of settling those concerns with the parties directly through the negotiation of remedies or by applying for a remedial order from the tribunal. The final decision in these matters will rest with the minister of transport, and the minister will consult with the commissioner on any remedial measures relating to competition.

In cases where the parties do not seek an authorization from the minister, or where the minister does not trigger a public interest review, the bureau will assess the arrangements under the Competition Act in the usual manner and without any change from its current process. The bureau will make its staff available to consult with the minister of transport to develop guidelines as required by the bill, and is committed to working with transport, including taking steps to ensure that the guidelines require parties to produce the information that the bureau needs to undertake an informed competition analysis.

While the bureau and the minister will work together to share information, the bureau's review of arrangements will remain separate and independent from the public interest review conducted by the minister.

[The Chair, Liberal, Judy Sgro]

Basically, your time is up, Mr. Hardie.

Minister Garneau, thank you so much for spending two hours with us. I think you will have heard that the committee has functioned extremely well, and I believe we all have the very best interests for Canada in mind and we are working very well together to ensure that Bill C-49 is the very best it can be.

Thank you to you and your staff for being here.

[Lisa Raitt, Conservative, Milton, ON]

It's back to me again, Minister. It's more like a conversation than it is anything else, I think. The officials around you are probably thinking that this feels like the briefings they used to give me all the time in terms of questions.

Briefly, I want to say that I understand—I know that I'm talking to somebody who understands this—that there is a delicate balancing act when it comes to the portfolio. In the air sector you have to balance airlines, airports, and consumers. You have the bill of rights with that one. In marine you have cargo carriers, ports, shippers. All those guys are important.

In rail you have a different balancing act. It's a very difficult one, I will tell you. You know it's difficult. On one side it's farmers, forestry, mining, containers, and all that. On the other side it's rail companies, and then throw in a little dash of unions. It's a very difficult area. Any time you move off the status quo, which Bill C-49 does, you're going to have people who are winners and people who are losers. Our attempt here is to try to figure out what the best balance is.

I'd like to go back to something you said to I think Mr. Sikand or Mr. Fraser. It had to do with whether or not we need in Bill C-49 the ability, again, for the CTA to do self-implementation. This time I'll give the example of forestry, which is very different.

FPAC came to this committee and asked to have the ability for the agency to intervene so that they will be able to study something. I think it comes from a real place, because as my colleague Mr. Chong pointed out, we have seen this movie before in terms of having emergencies in the transportation of grain and transportation of commodities. Sometimes the politics that invariably are in a minister's office can cloud the quickness by which you can make a direction for a study to happen. It happens in all parties. It's not a partisan issue here. This happens in all parties.

I'm trying to understand, Minister, why you don't think it's a good idea for the CTA to have that experience, to be those people who are the knowledge people in the business, seeing a certain situation happening again where they can actually take action and get in there quicker in order to resolve these disputes because they have the ability to look at it themselves.

That's an area where I'm really concerned about the balance. I don't see the purpose in having the minister hold the only power to start off an investigation by means of a notice of direction. I have used that and you have used that in the past, but we're not always going to be.... I'm not going to be the transport minister, and one day you won't be the transport minister. We have to make the system work for everybody forever.

You have to bear in mind that sometimes ministers just won't take action, so why not have the CTA have that power?

[Marc Garneau, Liberal, Notre-Dame-de-Grâce—Westmount, QC]

The short answer is yes. We're always looking at how we can improve transportation, and it is—as you know very well, because you have been particularly focused on it, as I know it's a strong interest of yours—a very complex set of files, and when we do come forward with a project like Bill C-49, which does actually have concrete measures in it, there's a tendency to ask about the stuff we didn't put in there. We're working on it. We're working on a whole bunch of things ultimately to make transportation safer, greener, more innovative, and economically as efficient as possible. All of these things touch on that. We continue to work at Transport Canada, and I want to give a shout-out to my ministry. We have more than 5,000 people who are very competent people and who are working very hard to try to make our transportation system the best in the world, and we are the best in the world on some of it.

[Vance Badawey, Liberal, Niagara Centre, ON]

Madam Chair, I have to say, it's been an enjoyable process, as I said earlier, because not only are we dealing with how Bill C-49 is going to enhance the overall transportation strategy and transportation 2030, but what we also accrued over the last few days was, I'll use the word “residual” discussion, dialogue, and therefore objectives. We spoke about asset management and how overall within the transportation 2030 recommendations and the movement of that it's going to breathe, how it then lends itself to integrating our distribution and logistics system, and the integration of transportation between the four methods of transportation—road, rail, water, or air—how they come closer together.

As we look at the Emerson report and now bring it into a manner of being pragmatic and really take on some of the recommendations that Mr. Emerson made, with that is the...I won't say smaller in terms of size, but I'll say they don't recognize in the Emerson report how we now have to bring things like short-line railways into the bigger picture. It will be my intent today to actually ask for a report, to then proceed with recommendations, all of us working together as we have been for the last few days, to look at short-lines as becoming a larger part of the overall integration of those transportation methods.

I have to zero in on one question, Minister, and I fully respect the efforts that all governments in the past have made with respect to the passenger bill of rights. I have to ask, one, how it evolved. Two, and most important, and I know the NDP put forward a private member's bill in the last session, how does the passenger bill of rights proposed now, differ from the previous approaches and the previous dialogue that we had with the industry, differ from the PMBs and the discussion of past Parliaments? How is this approach now different and how is it going to be more pragmatic, workable, and of course, advantageous to the priority, the customer, the passenger?

[Christine Moore, NDP, Abitibi—Témiscamingue, QC]

Okay.

Will your party be open if the NDP puts forward amendments to improve Bill C-49 and clarify compensation measures, specifically as regards overbooking in order to limit the removal of passengers from aircraft, for example? Can we expect your government to take a collaborative approach?

[Sean Fraser, Liberal, Central Nova, NS]

On the issue of short-line railroads, we've heard a number of witnesses. Though it didn't necessarily relate specifically to provisions included in Bill C-49, we talked about the economic importance of short-line railroads to their communities in representing an area that's defined by small towns and rural communities in a province that's really only served by short-line infrastructure.

I'm curious as to whether the rail corridor funding available through your portfolio would help short-line railroads accomplish what they need to in order to ensure they're serving these smaller communities.

[Marc Garneau, Liberal, Notre-Dame-de-Grâce—Westmount, QC]

There is no mention in Bill C-49 of discontinuing rail lines or of allowing a railway company to discontinue an existing line within 60 days. If a line was active, however, the service level could be raised by the Canadian Transportation Agency. In many cases, the lines that railway companies decide to shut down have not been used for a number of years. It costs them money to maintain those lines. The bill does not cover this issue, but if a line is in active use, it is certainly in the interest of our category 1 rail companies to maintain it, as that gives them better access to transportation business.

[Marc Garneau, Liberal, Notre-Dame-de-Grâce—Westmount, QC]

Thank you for your question, Mr. Graham.

When I was in opposition, I became aware of the issues with the Mont Tremblant International Airport. The issue at that time was the availability of CBSA services for incoming flights, usually charter flights with American passengers on board.

Bill C-49 addresses increasing refundable fees for airports that need this service in order to expand. There are a number of small airports all over Quebec and elsewhere that do not have that service and would like to, but they are not designated airports. In fact, this has been available for a while. What is new in a sense is that major airports, such as the Toronto airport, want to pay for additional CATSA resources in order to speed up security screening.

This bill seeks to increase CATSA services for airports that choose to do so. It will not remove services that already exist.

[David Graham, Liberal, Laurentides—Labelle, QC]

Thank you, Minister Garneau, for taking this significant step in modernizing the framework that governs transportation. From what the witnesses have said, Bill C-49 is very positive on the whole, but I would like to clarify a few points with you.

The Mont Tremblant International Airport in La Macaza is located in the riding of Laurentides—Labelle, which you know well. Commercial service is seasonal and is not very reliable. There are already problems with CBSA services, which are offered under a cost-recovery agreement. This has effectively killed international flights, since the costs are more than $1,000 per incoming international flight.

CATSA fees are currently the same as at other airports with a fixed cost per passenger. Can you reassure us that the cost recovery rates proposed by CATSA will not hurt small airports such as the one in La Macaza and small airports that are essential to survival in the North?

[Lisa Raitt, Conservative, Milton, ON]

I have one last question.

On the topic of the cameras in cabs, I have a quick story. On my first day on the job that you now hold, which I was honoured to hold for a while, I was told I needed to have an emergency meeting with the major rail line in the country, which I did. Minister, the very first topic they brought up was the notion of having these cameras in the cab. It was something that took a lot of my time and energy over the last two years. However, I was always troubled by one particular issue, and I don't have clarity on it from your Bill C-49. It has to do with the utilization of this information for purposes other than safety management.

Your speech is clear. Your speech says very clearly that this is about safety management, that proactive safety management is what the tapes are going to be for. This week in testimony, rail companies and transport officials indicated that the tapes could also be used for discipline, which is where I have concerns.

Can you help me understand whether or not we are going to be allowing CN and CP, and any other rail company that puts cameras in the cabs, to utilize them for non-safety related disciplinary purposes?

[Christine Moore, NDP, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair.

Mr. Garneau, you visited Rouyn-Noranda recently and made an announcement about the airport. The airport expansion should sort things out, but right now Air Canada is the only carrier with flights to Montreal, meaning that there is no competition and the fares are very high. It could easily cost me $1,200 to fly from Ottawa to Rouyn-Noranda return, even though the distance between the two cities is less than 500 km as the crow flies. This shows that the lack of competition has a huge impact on prices.

In Bill C-49, however, you are giving yourself the power to approve joint ventures between air carriers even if the Commissioner of Competition is of the opinion that the agreement will weaken competition and increase costs for passengers.

Once again, Air Canada's profits seem to take precedence over consumers' rights. After introducing a bill that cost 2,600 workers in Quebec their jobs, you are at it again with a bill that removes powers from the Commissioner of Competition.

Moreover, the register of the Office of the Commissioner of Lobbying of Canada shows that Air Canada has been in contact with your government numerous times to discuss the legislative framework for international air carrier joint ventures.

In short, it looks like Air Canada is pressuring your government to weaken the powers of the Commissioner of Competition and passenger rights. Air Canada's lobbyists must be proud to have your support.

I would like to know how diminishing the powers of the Commissioner of Competition will serve air passengers.

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

Minister, from what I understand, Bill C-49 does not have enough teeth and is just so much window dressing. I will quickly go over three elements I would remove from this bill.

First, the Canadian Transportation Agency will establish rules about the charter of passenger rights. A bill is drafted and action is urgently needed, but the agency will be given the responsibility to write the regulations.

Second, guidelines are included for joint ventures by increasing foreign ownership to 49%, but the minister will have the power to oversee and authorize that. So what will be the point of the legislation once it has been adopted?

Third, railway companies will have to provide on the Internet information on those of their lines that are operational and those they no longer use. What is the benefit of that for Canadians?

With all due respect, Minister, I feel that this bill is empty; it is just window dressing.

What do you have to say to that?

[Marc Garneau, Liberal, Notre-Dame-de-Grâce—Westmount, QC]

I can't say this with complete certainty, but I think that Transport Canada is the department with the most responsibility when it comes to implementing regulations. Our department is very technical. Transportation regulations are complex. At Transport Canada, we are used to those processes.

I think that Bill C-49 expresses what we want to do, while mandating the Canadian Transportation Agency to do what I mentioned. Next year, when we present this charter of passenger rights, I believe that most Canadians will agree that it reflects the intent of Bill C-49. I am confident about that and will make sure to do what is necessary, since our department will have the last word in terms of what will be proposed.

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

Thank you, Madam Chair.

Minister, thank you for being here this morning and for participating in this exercise.

We all have the will to create laws that will improve the lives of Canadians. I think that is your intent with Bill C-49.

I will repeat the expression used earlier by my NDP colleague and say that, as far as I understand, the bill has a philosophical intention. I would like us to go further and implement more concrete measures.

You want to bring into force legislation whereby the Canadian Transportation Agency would draft the charter of passenger rights. I find that, by doing so, you are just delaying. The situation could already be described in the legislation. I think that the bill is very broad. I'm under the impression that the government is stalling.

If the House of Commons passes this bill, I would like Canadians to feel that their quality of life has finally been improved. But that is not how I see this bill.