Transport Committee on May 9th, 2024

[Melissa Fisher]

It's not something we would do in the normal course of an investigation, reaching out to them to ask them why they failed, but that kind of interaction with them is certainly something that could be part of a market study.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

I just wonder whether the rules of the Competition Bureau and other rules that they have to follow have a significant impact on their success or failure.

[Melissa Fisher]

I don't think so. The enforcement part of the act is geared toward anti-competitive behaviour or anti-competitive mergers, so unless they fit into one of those buckets, we wouldn't be interfering with or investigating what they're doing.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Rogers.

Thank you, Ms. Fisher.

Mr. Barsalou‑Duval, you have the floor for two and a half minutes.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you, Mr. Chair.

Mr. Callaghan, I'm going to circle back to the question I asked you earlier.

A few years ago, when I dug into the regulations and the amendments to the Competition Act, I discovered that the Competition Bureau had once had the power to issue orders as a preventive measure to stop anti-competitive practices and ensure that it did not have to complete its investigation and then go before the Competition Tribunal. It could therefore prevent major harm and make a big difference.

Is that on your list of recommendations to modernize the Competition Act?

[Bradley Callaghan]

We did not recommend an independent power to become an adjudicator, so we are still fundamentally an enforcer of the law. We take the law as it's given to us, and ISED is the policy lead in terms of what the Competition Act looks like. We go to the Competition Tribunal as an adjudicator, or other courts if appropriate. Our institutional framework has not changed in terms of being the enforcer of the Competition Act, but getting resolutions to cases can happen if they are consensual. In other words, if we raise concerns to the parties about violations of the Competition Act or concerns that we have with a transaction, we can obviously come to a resolution, and we try to register those resolutions with the Competition Tribunal so that it has the force of law.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you.

There's something else I'd like you to comment on. Earlier, you said that you had already submitted a list of amendments to be made to the Competition Act to enhance the impact of action taken by the Competition Tribunal or the Competition Bureau.

Would it be possible to get us that list, with whatever applies to air travel? It could be very instructive for our study.

I will be generous and return the favour by yielding the rest of my time to my colleague.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Barsalou‑Duval.

Mr. Bachrach, the floor is yours, sir. You have two and a half minutes.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

Thanks to my colleague. Is this anti-competitive behaviour? I'm not sure. We'll get the commission to look into it.

I want to ask about the abuse of dominance framework. I was also reflecting on the comments we heard from Flair about the actions of the bigger airlines. As I mentioned before, in smaller markets I think we see some similar behaviour. At least we see price wars in communities that have competition, and in other communities we don't see that kind of behaviour.

Can you talk a bit about the abuse of dominance framework, how it's defined and how it can be used to avoid that kind of behaviour?

[Bradley Callaghan]

Sure, I can take a crack at it.

Essentially, what we are trying to protect against is dominant firms being able to exercise more market power because of specific conduct. This has undergone a recent change from the recent modernization of the Competition Act. In a nutshell, the old framework was a requirement to prove three things: first, market power, in other words, that the firm was big; second, conduct, the practice of an anti-competitive act; and third, the effect on competition.

After the changes to the Competition Act, we can now seek a prohibition order to stop the conduct if we have the first aspect, that the firm is dominant, and then we have one of two things: either a practice that was intended to harm competition or a competitor, or an effect. We'd be able to have a broader set of remedies if we could prove all three, but that is now a change that I think opens things up a bit for a prohibition order.

Predatory pricing is a bit particular, because we're looking at low prices, and we're mindful to approach these cases carefully to make sure we are not taking away from customers' competition on the merits and the benefit of low prices. However, the theory in the case of predatory pricing is a concern that it's a short-term low pricing, below the costs of the dominant firm, with a long-term effect of raising prices above the competitive level once they've been able to exclude or discipline their competitor.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Callaghan and Mr. Bachrach.

Next, we have Mr. Strahl.

Mr. Strahl, the floor is yours. You have five minutes, sir.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Thank you, Mr. Chair.

I'll just follow up on Mr. Bachrach's line of questioning. Has the Competition Bureau ever been asked to investigate or ever considered investigating the choices of airlines to remove themselves from a market? I guess it's about scheduling and route selection. There are concerns that when a dominant player leaves a market, obviously, competition is reduced.

You have the power to investigate mergers and make recommendations, but for companies that are already operating in the federally regulated space, do you actually have the ability to investigate their ongoing business decisions to determine whether or not they are anti-competitive? If a company leaves a market or chooses to focus on a specific region when they have been players in another market, thereby reducing competition, is that something within your purview to investigate?

[Bradley Callaghan]

Certainly we can investigate alleged conduct that may touch on those issues. This can happen in a variety of ways. It can come from complaints from the marketplace, but the Competition Bureau can also start investigations on its own, if we're aware of things that we may see in the news or the industry press. Certainly there is an ability to investigate those things. The outcome always depends on the evidence. We would be doing an in-depth review to try to understand what the conduct was, what happened, what the intention was of the players in play, and what the effects might be in the marketplace.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Without getting into the details, are there any active investigations of that nature currently before the Competition Bureau?

[Bradley Callaghan]

Mr. Chair, we cannot comment on that, just owing to the confidential nature of our work. It's a specific confidentiality provision that's written into our legislation that we apply.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Okay.

When you're evaluating competition and the impact of the actions of a company, either just in their operations or in terms of proposed mergers, are you constrained to considering only the Canadian market?

We've heard much testimony about Canadians using U.S. airports and U.S. airlines to fly similar routes, because of the cost. Are you able to examine competition, for instance, in the Fraser Valley or the Lower Mainland that would include driving across the border and flying from Bellingham or Seattle-Tacoma Airport? Do you ever consider that when doing your analysis about whether a merger or the actions of a company would impact competition?

[Melissa Fisher]

Yes, that was was a relevant consideration in our two most recent reviews.

Just to remind you again, in a merger review we're looking at competition on specific OD pairs. In the Air Canada and the WestJet reviews, it was competition for vacation packages, not just the flight. In the context of those reviews, we looked at OD pairs and whether border airports might be substitutes for passengers. The evidence that we collected indicated that there would have to be a large price differential before a passenger would incur the time and the added transportation costs to substitute a way to a border airport.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

We heard evidence that up to seven million Canadians use the proximity to the border to travel out of U.S. airports on U.S. carriers.

This will be my final question. In terms of mergers, there's often a remedy proposed by the companies when they are proposing the merger to offset concerns about a lack of competition. What enforcement mechanisms do you actually have, or do those go into the political realm? What happens if a merger is approved by the minister and then subsequently the companies that have merged, or the new entity, go back on what they promised they would do to maintain competition?

[Melissa Fisher]

I'm not completely familiar with it, but there is a process in the CTA to seek redress when there's concern that the terms or conditions have been breached. I believe it involves going to court.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Okay.

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Ms. Fisher. Thank you, Mr. Strahl.

Next, we have Mr. Badawey.

Mr. Badawey, the floor is yours. You have five minutes, sir.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you, Mr. Chairman.

I'll start off with the first question.

What are the bureau's thoughts on the claims that regulations such as APPR and the additional fees have an impact on competition or within competition?

[Bradley Callaghan]

There's no specific perspective that we take in terms of fees. Our view is really about how regulation may impact competition. I think there was some commentary in our 2015 submission on the Canada Transportation Act on the fees that go to those regulations.

Generally speaking, obviously, as I said earlier, our general perspective is that regulation is used only when necessary to address market failures. Certainly we recognize that there are times when it is necessary. Our goal as advocates for competition is to try to make sure that competition can work to the fullest extent possible while regulators can achieve their objectives. Typically we're not experts in terms of the other public policy interests that a regulator might be trying to address, whether it's safety or anything else.

What we try to do is work with regulators to try to understand that competing public policy objective and make recommendations on how competition can work to the fullest extent possible at the same time.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you.

We are going to be embarking on a study focusing on northern communities, as well as those that are more remote. Of course, for them, the level of service is a lot less than for those that are more populated. Given Canada's unique geography and low population density, travel demand at regional airports is scarce.

Does the bureau have any thoughts on how to viably stimulate more competition in Canada and ensure connectivity for regional and more remote communities?