Transport Committee on May 9th, 2024

[Melissa Fisher]

Unfortunately, no, we cannot.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

Okay.

How has the 49% foreign ownership cap affected competition and air services in Canada, particularly since Lynx Air closed down?

[Bradley Callaghan]

We haven't talked about competition recently. However, the most recent element of our analysis on the subject is in our 2015 report, which my colleague Ms. Fisher mentioned. In fact, it was our submission to the Canada Transportation Act review process.

There, we do look at foreign ownership restrictions as an aspect of a barrier to entry in the market. That is one of our fundamental recommendations that came out of our submission in that work, that it is a barrier to entry and ultimately something that we recommended liberalizing and negotiating with our trading partners to try to encourage more competition.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

In order to meet the current economic challenges, what strategy are Canada's major airlines adopting to remain competitive and viable?

[Bradley Callaghan]

We'll try to assess that when we do our market study.

What companies are doing generally, day to day, is something that we would be studying mostly in our enforcement mandate when we review the specific facts of a case. Our reviews of mergers, for example, are obviously based on evidence and facts, but they're looking at very specific conduct that is happening in the marketplace. I don't think we're in a position to make a general statement today in terms of a trend in the industry, but certainly it's something that we'll be thinking about if our proposed market study moves forward.

[The Chair, Liberal, Peter Schiefke]

Thank you.

Mr. Barsalou‑Duval, you have the floor for six minutes.

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

Thank you, Mr. Chair.

I'd like to thank the representatives of the Competition Bureau for being with us today.

Ms. Fisher and Mr. Callaghan, I see that you are already working on a study on the state of competition in the air sector. Had we invited you a little further down the line, we would have been able to get more information. I don't know if we'll have a chance to see you again.

The topic I wanted to come back to was raised by one of my colleagues earlier. There have been several proposals to sell or merge airlines in recent years. For example, Sunwing was acquired by WestJet and Air Canada wanted to acquire Air Transat. I think there was another case a few years ago. In both of those situations, the Competition Bureau raised serious concerns, particularly when it came to Air Canada and Air Transat. In fact, if I'm not mistaken, even the European competition network said it wasn't a good idea, and yet the Government of Canada still approved the transactions.

What mechanisms could we put in place to ensure more oversight in terms of how the government proceeds when it makes a decision that hurts competition?

For example, could we introduce measures to help ensure greater transparency in the way the government makes its decision?

In terms of how you do your review, we have a document that's very clear, very explanatory. However, on the government side, it's harder to understand what decisions are based on.

[Melissa Fisher]

I think what you're describing is the current process, where the commissioner is providing his report to the Minister of Transport, who is also getting a report with respect to public interest issues as they relate to national transportation. The commissioner's role is limited in these kinds of circumstances to providing that report on the competition concerns. Then, to the extent that there are concerns, and the parties propose measures to address those concerns, again the commissioner is required to provide the minister with his advice as to the effectiveness of those proposed measures. In each of the mergers you referred to, we did provide the minister with our views of those measures, but that's the extent of our involvement in the process.

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

Okay. Thank you for that.

My next question is more specifically about access to boarding gates and time slots at airports. This issue has come up a number of times in our study so far. It happens in certain airports that have limited space.

Could the Competition Bureau step in in sticky situations? Let's suppose all the time slots and boarding gates were taken. Unfortunately, that would significantly undermine competition, a new competitor or a new business that may have trouble obtaining a time slot or access to a boarding gate.

If a legislative framework gave the bureau the power to free up certain time slots or provide access to certain boarding gates, do you think that would help competition?

[Bradley Callaghan]

Thank you very much for the question.

The first thing to say is that the access at airports and gates would be a part of our process to understand how competition is being affected in our cases already. In the cases that Ms. Fisher is describing, it's about understanding what kinds of barriers to entry would be part of our assessment of the process, and it would feed into recommendations that would be made to the Minister of Transport.

There is a broader set of conduct the Competition Bureau is responsible for beyond mergers. For example, if there were allegations about conduct between airlines and an airport that may be anti-competitive—in other words, a strategic behaviour to try to exclude competitors in that space or try to prevent competition—we would obviously look at those kinds of allegations and determine whether it might raise issues under other parts of our act, such as abuse of dominance.

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

I'd like to address the issue of your investigative powers in the event of allegations or when you suspect abuse of a dominant position or anti-competitive practices.

In my work as the Bloc Québécois transport critic, I've had the opportunity to speak on a very regular basis with people from the regions, regional airports and small airlines.

They almost all agreed on one thing. They told me they would often experience situations where, trying to start up a new flight service or a new route to a given destination, a big player would come in, slash the fares, and then jack them back up a few months after they had withdrawn.

They also complained that if they filed a complaint with the Competition Bureau, they unfortunately got the impression that nothing was done because it took years for a report to come out. They also told me that they had to gather up so many documents that they got discouraged. In addition, they don't have the financial means to compete unfairly for months, if not years.

Are there any solutions that would more effectively resolve the issue I've just brought up?

[The Chair, Liberal, Peter Schiefke]

Unfortunately, Mr. Barsalou‑Duval, you don't have enough time left for the witness to respond, but you will have a chance to come back to this in the next round of questions.

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

I'm happy to give 15 seconds of my time.

[The Chair, Liberal, Peter Schiefke]

It was a very thorough question.

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

He'll give it back to me later, so it's all good.

[The Chair, Liberal, Peter Schiefke]

Okay.

Mr. Callaghan, please answer the question, and try to do it in 20 to 30 seconds, if you can.

[Bradley Callaghan]

Okay.

Perhaps what I can say is that one encouraging thing is the modernization of the current Competition Act. This is something the Competition Bureau has been quite public about in terms of asking for a change, and there has been very meaningful change over the last two to three years, a series of modernizations, including our abuse of dominance framework. We're certainly encouraged that with some of these modernizations and those that are still proposed and before Parliament, the Competition Bureau will be able to move as quickly as possible. We always aim to do that.

I'm not sure of the exact case you may be referring to, but obviously, we always take a good, hard look at our own work as well and try to move as quickly as we can.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Callaghan.

Mr. Bachrach, the floor is yours, sir. You have six minutes.

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

Thank you, Mr. Chair.

Thank you to our witnesses for being here and contributing to this study.

Maybe I misheard, but I think that earlier in your testimony you mentioned a previous market study you had done on the air sector. Is this upcoming study—the comprehensive one—the first market-wide study you've done, or is there a previous one?

[Bradley Callaghan]

To clarify, the earlier study I mentioned was more of a submission that we did to the legislative review of the Canada Transportation Act. What we are envisioning, in terms of a new market study, would aim to be a little more in-depth and also specific to the airline sector. The Canada Transportation Act review covered rail, airlines and marine as well, so it's a little broader and different from a market study.

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

Specific to the legislative review and your recommendations around the air sector, how many of those recommendations were implemented by the government?

[Bradley Callaghan]

I believe one of the recommendations was about foreign ownership restrictions and putting into force a proposal that was already either in regulation or legislation about going up to 49% in terms of foreign ownership restrictions. My understanding is that this has since been done. We obviously keep in mind other recommendations that we make.

I should say that we are mindful of the broader public interest considerations that the minister has. Our focus really is central to competition. We have a singular lens, which is liberating, in the sense that we are strong advocates for it, and we think there should be more priority put on this factor. Certainly, the Minister of Transport has a broader set of factors that he's considering.

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

We heard in previous testimony about different empirical approaches for measuring competitiveness in different sectors. Is there a methodology that the competition commissioner uses when assessing competition in the air sector or in any other sector?

As a follow-up to that, are there benchmarks or targets? We talk about more competition being better because it creates more affordable goods and services for consumers, but we never really talk about where we're trying to get to. Is there any defined sense of what we're trying to achieve?

[Melissa Fisher]

I'll start on the merger side, on the enforcement side. There, we're looking at the potential anti-competitive effects of a particular transaction. Generally, you're looking at whether there will be an increase in market share that exceeds 30% or 35%. That's what is set out in our guidelines, but that's specific to each market. We'd be looking at that with respect to each OD pair and looking at the market share and the concentration on each route, not a broader industry view of what competition should look like.

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

I'm particularly interested in smaller regional markets representing a rural part of Canada. We see a real lack of competition, and we see high prices as a result.

Will your upcoming market study include a focus on regional routes, regional markets and the impact on rural Canada?