Transport Committee on Sept. 14th, 2017

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

I know you may not have wanted to answer that question about price-fixing by the railroads, but that's a little over the top. Just kidding.

Seriously, though, what role has the Competition Bureau played to address the fact that we've had to introduce extraordinary new measures in order to generate at least pseudo-competition from our two railways?

[Anthony Durocher]

Thank you for the question.

I agree. Someone, somewhere, did not want me to answer that question.

By and large, the bureau has an advocacy function, in addition to enforcement. As I was stating before we left, in the context of the 2015 review panel, the Competition Bureau provided a detailed submission providing advice, based on its competition expertise, on how to try to inject competition as much as possible in the rail system while acknowledging that market forces, which we would typically want to rely on, may not be appropriate in all instances.

With respect to our investigatory function, for issues such as price-fixing or abuse of dominance, the bureau investigates matters confidentially when there's reason to believe that an offence under the act has occurred. Price-fixing is obviously a major component of any antitrust policy in any country. In Canada these are criminal offences under the Competition Act which we take very seriously.

There is an immunity program in place that may prompt people to bring a bid-rigging matter or a price-fixing matter to the bureau's attention. These are matters that we would investigate in due course and take the appropriate action on, acknowledging that we reference such matters to the PPSC for prosecution as well.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Monsieur Aubin, for five minutes.

[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.

[Anthony Durocher]

Thank you for your question.

First of all, I would like to explain what happened in the case of Air Canada and United Continental. The Bureau referred the matter to the Competition Tribunal, alleging competition issues on 19 routes. The Tribunal never issued a decision on this matter. There was an agreement between the Bureau and the parties to resolve the competition issues on 15 of the routes. It was resolved by an out-of-court settlement.

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

I understand that example, but to put it more plainly, the minister's authority takes precedence over a potential decision by the Tribunal.

[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]

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?

[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.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Greer.

Sorry, Mr. Aubin.

Mr. Badawey, you have five minutes.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you to the panellists for coming out this morning and afternoon. It's a pleasure to have you.

This process, as I said earlier, has been very fruitful in terms of a lot of the information that's come out. There's no question it's going to be a work in progress. We had an environment that we lived in yesterday, and now we're going to have a new environment that we're going to live in tomorrow. I see this bill, in adding to the overall bigger strategy, as becoming more of an enabler, more a plan of action, being very pragmatic. With that, once it reaches royal assent, it will be able to execute a lot of the recommendations that are contained therein.

My question first of all is for Mr. Greer. Speaking of yesterday's environment, a competitive air transportation environment, as you well recognize, is a key economic driver, creating economic growth not only within relevant regions vis-à-vis those that have airports, but also the ones that they cater to that might be some distance away.

In your view, and this is again a work in progress, does this bill bring a proper direction forward in comparison to the way it was, and streamline the process, make it more user friendly, therefore customer friendly? Do you find that, again, we're moving in a more positive direction in comparison to what we had?

[Ryan Greer]

I think, on air travel specifically, moving from a regime that was very unpredictable and very difficult to navigate, both for consumers and for airlines to understand the penalties that could be levelled against them, moving to a clear, more transparent system where everybody understands what is expected of them and what the consequences of potential actions are, is going to be helpful moving forward.

That said, the devil is in the details. With the air passenger bill of rights, most of those provisions will be established through regulations, so if they're overly punitive, if they're, perhaps, penalizing airlines for things that are out of their control, then we may end up with a system that is less competitive or actually ends up resulting in additional traveller costs when airlines have to recoup some of these. I think the framework set out is a good one, but I think the details, the regulations themselves, will tell us whether we sort of get it right.

[Vance Badawey, Liberal, Niagara Centre, ON]

That is the reason we're having this dialogue now and the reason I actually asked the question. I think the minister was clear that we don't want to make it punitive. we want to ensure that if it's out of the control of the airlines that of course it wouldn't apply.

I'll ask the Competition Bureau the same question.

Mr. Durocher, do you find today's environment and the direction which the minister is moving in are going to streamline the process, in which you and the folks in your organization of course play a key role? Do you find that tomorrow it is going to be a lot more streamlined than it was yesterday?

[Melissa Fisher]

With respect to the proposed legislation around joint ventures, it will certainly implement a well-defined timeline in terms of reviewing those proposed arrangements. Under our current process, if we were to review an arrangement under the competitor collaboration guidelines, there's a bit less certainty in terms of timing for the commissioner's review, although we strive to conduct our reviews as efficiently as possible, given that we're certainly well aware of the business community's desire to move quickly in negotiating and implementing transactions. Under the merger regime, we have a fairly well-defined time period with statutory waiting periods and service standards relating to user fees.

[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?

[The Chair, Liberal, Judy Sgro]

Could we have a short answer, please.

[Mark Schaan]

You bet. We're interested in this bill both because we think it's good for competition policy and because it's good for innovation and science and economic development. I think the interest is that a clearer, transparent internationally competitive joint venture process will allow for our air carriers to increase connectivity, particularly to trading zones or regions to which we may not currently have access.

[The Chair, Liberal, Judy Sgro]

Thank you.

Mr. Hardie.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

With respect to the pricing mechanisms, it always puzzles people that you can fly from Vancouver to London for a lot less than you can fly from Vancouver to Winnipeg. It gives rise to the suspicion that in fact there's cross-subsidization, that perhaps the domestic fares we're paying here in Canada are helping to offset fares or make them more competitive on those very competitive routes. Is this something the bureau has looked into?

[Melissa Fisher]

When the bureau conducts its investigations, we look at a particular transaction or a particular merger. We don't tend to look at industries as a whole, but in the context of looking at a particular arrangement, we would look at the competition on specific origin-destination city pairs. We would be looking at the pricing on that specific route to assess whether the transaction was likely to substantially lessen or prevent competition on that route, so whether the prices on that route would be increased or consumer choice would be decreased as a result of the proposed arrangement.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Mr. Schaan, do you have any comment on that?

[Mark Schaan]

No, other than that there are considerable powers afforded in the Competition Act for the commissioner of competition to examine the Canadian marketplace for any zones in which there's potentially anti-competitive behaviour. Whether that's abuse of dominance, price-fixing, deceptive marketing, or otherwise, there are clear processes in place for the commissioner to investigate.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

I get the impression that nobody has really thought of that one yet.

Let's talk about the Department of Industry. The legislation provides for a review of a joint venture within two years. I think the airlines would say sometimes it takes about two years for everything to settle into place. For their benefit as well as for the consumer, what would your department be looking for within that two years that might spark some kind of reopening of a review?

[Mark Schaan]

It won't be our department but the minister of transport and the Department of Transport will have the capacity after two years to revisit the transaction as it was initially proposed. That's not the end of immunity; that's the potential for the reconsideration of the arrangement. I just want to make the distinction that it's not two years and then a re-review; it's two years potentially and much longer. One of the things they would be looking for is whether the public interest benefits that were promised or that were part of the overall undertakings or remedies manifest themselves. If it wasn't realistic that those public interest benefits could have manifested themselves in the time period allotted, that would be one of the factors that the minister of transport would need to weigh before deciding to re-examine the transaction.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Mr. Greer, you brought up the issue of the impact of various fees on the cost of air travel. It seems to be that never-ending balance between how the user pays or, if the fee is taken away, how everybody pays through some form of government subsidy. Your reflections on what would be a proper balance generally, please, but can you reflect on the challenges of serving the north and the enormously large airfares that it takes to get back and forth there?