Transport Committee on May 9th, 2024

[Bradley Callaghan]

It's certainly something we are mindful of. We've taken note of the particular features of markets, especially in northern Canada, because it's been a part of our past reviews. Particular features there include things like weather or particular equipment that may be needed to serve those areas. Transportation is also important for people to connect with broader centres and essential facilities. We're certainly mindful of it.

If I can make a plug for one other thing in terms of how we assess competition, there is a more holistic study that we did on the intensity of competition in Canada over the last 20 years. These were not competition markets but more industries using NAICS codes. We looked at aspects like the amount of concentration in some of these sectors, as well as what we call rank stability—who's in first place in the market, whether those ranks are moving around, and entry and exit—to try to get a better sense of how competition might be working.

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

I'd like to fit in one more question. Thinking about rural Canada and rural markets—and we see this in telecommunications, as well—the government's focus in terms of delivering affordability is always competition, but in really small markets, is it reasonable to expect multiple carriers to provide that competition? In rural areas, we usually see just one provider of a service, and that monopoly creates really unaffordable situations.

Are there limits to what the focus on competition can deliver for consumers in certain markets?

[Bradley Callaghan]

As a starting point, it's certainly where we hope the market can deliver its benefits. We trust that the market is going to bring all of those things that the member mentioned, namely, low prices and service. However, we recognize there are times when markets can fail. We're not an organization that is against regulation. What we try to advocate for is to make sure that where regulation might be necessary, we keep as much room as possible for competition to work.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Bachrach.

Thank you, Mr. Callaghan.

Next, we have Mr. Williams, for five minutes.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Mr. Chair.

To either Ms. Fisher or Mr. Callaghan, has a merger ever been blocked in Canada, yes or no?

[Melissa Fisher]

No.

[Ryan Williams, Conservative, Bay of Quinte, ON]

In all the years, we've never had a merger blocked.

I know we don't just look at airlines. We look across all industries, including telecommunications and banking. We had Ms. Jeanne Pratt at the industry committee not too long ago, who did state that after the merger of Rogers and Shaw there was no evidence seen that prices were going down.

We had WestJet and Sunwing merge. Do we have any evidence, so far, that prices are going down, or that we're seeing any benefits to that merger?

[Melissa Fisher]

It wouldn't be in our normal course to track the outcomes of something like that. It could be done in a.... Sometimes we do what we call ex post studies of remedies, looking at whether the measures that were taken to ensure that the market remained competitive were effective.

[Ryan Williams, Conservative, Bay of Quinte, ON]

The bureau does not track after-effects. Is that something you'll be studying and looking at in the upcoming study?

[Bradley Callaghan]

Unfortunately, because of where we are in the process at the moment, until we complete this phase of consulting with the minister, I can't comment on whether that's something we would specifically be looking at.

[Ryan Williams, Conservative, Bay of Quinte, ON]

I guess what I'll look for, then, is generality. We have had recent mergers, namely, HSBC-RBC and Rogers-Shaw.

How do mergers, in general, when you've done your studies, impact consumer prices and services?

[Melissa Fisher]

We have a very well-established process that we use when we identify competition concerns to ensure that we resolve those concerns. Typically, we're able to negotiate a resolution with the parties that we feel addresses the concerns through structural means, such as by divesting assets or parts of a business. That becomes an agreement that's registered with the tribunal, and it is quite effective.

[Ryan Williams, Conservative, Bay of Quinte, ON]

You recommended a divestiture, or you would have, with Rogers-Shaw, and it ended up going to the tribunal. When you made a recommendation for Rogers-Shaw, it went to the tribunal. The tribunal then overturned your decision.

Can you comment on the effectiveness of the tribunal? Are there other nations across the world that don't have a tribunal and that give more power to the competition bureau?

[Melissa Fisher]

To clarify, the commissioner's role in that instance is to bring an application to the tribunal. He is not an adjudicator. We filed an application seeking to block that transaction, but, at the end of the day, it's the Competition Tribunal's decision.

Globally, there are different models in terms of how competition agencies are run. There are some competition agencies that are both the investigator and the decision-maker.

[Ryan Williams, Conservative, Bay of Quinte, ON]

There have been some amendments to the Competition Act. The Conservative Party does support the NDP amendments that give a bit more power in terms of looking at merger remedies, bringing that 35% down to 30%, for instance.

Are these amendments really going to help the Competition Bureau look at mergers with a better lens to be able to block a merger for once in Canada?

[Melissa Fisher]

Those are significant amendments that have been proposed.

With respect to competition in the airline sector, there really won't be much of an effect because of the process that is currently in place under the Canada Transportation Act where we're feeding into the minister's decision.

[Ryan Williams, Conservative, Bay of Quinte, ON]

That's right.

It is unfortunate that the minister did not feel that this was an important enough topic to be in front of committee on. We're really disappointed with that. I know a lot of members have commented on that.

In terms of going back to the industry as a whole in Canada, my colleague did mention rural Canada. There are some topics such as looking at open skies or other ways, like the 49% threshold, to maybe have one shot where a foreign investment could be put up to 49% instead of the 25% threshold.

Are there other initiatives that you've seen across the globe that we should be studying or something that you feel will add to competitiveness in the airline industry in Canada?

[Bradley Callaghan]

I know there has been work done by agencies similar to ours in other countries. Australia and the U.K. come to mind. I know that Australia is often thought of as something worthwhile to compare ourselves to because of distances between major centres and because of our landmass.

There may be particular features in those examples where the agency might have more of a hands-on regulatory function. For example, they might be monitoring prices on more of a day-to-day basis. I believe that, in the case of both Australia and the U.K., they responded to consultations by their transport departments in terms of how they can improve competition. One aspect that I think was central to it was about access to slots at the airports and recommendations on how they can improve those for competition.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Callaghan. I appreciate that.

Next we have Mr. Rogers.

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

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

Thank you, Mr. Chair.

Welcome to our guests today.

We all pay close attention to problems in the air industry, particularly in rural Canada. When you fly in and out of Atlantic Canada, as I do—and Mr. Bachrach flies into rural areas in his riding as well—you realize that there are a lot of problems that we need to address. Whether it's accessibility or the cost of airline tickets and so on, it's really challenging.

In Atlantic Canada, for example, if you're flying into St. John's, it's much better in terms of accessibility, but if you're flying into Gander, Deer Lake or some of the smaller airports, it's really difficult getting a flight, first of all. Second, the cost is extremely high compared to some other flights that you would do.

Looking at these airlines, you mentioned the merger earlier. Wasn't there an issue with Air Canada and Air Transat where there was a proposed merger that got blocked?

[Melissa Fisher]

Yes, there was. They proposed to merge. The Minister of Transport commenced a public interest review. The commissioner provided a report that identified significant competition concerns on 83 routes to either sun destinations or Europe. Subsequent to that, the parties proposed certain measures to address those competition concerns. In response, the commissioner provided a letter to the minister, which is public, indicating that the proposed measures were insufficient, in his view, to address the competition concerns.

Ultimately, the European competition agency also had to look at that transaction because of the transatlantic flights. My understanding is that Air Canada was not prepared to accept the remedies that were being required by the European Commission. That was one of the reasons they stated for abandoning the transaction.

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

Thank you for clarifying that.

We've heard from the airline industry that they're subject to a specific set of rules. Would you be able to share with this committee what these rules are and how they apply to small, medium and larger airlines? Is it just a one-size-fits-all approach?

[Melissa Fisher]

I can start on the enforcement side.

Those rules are not something that we would look into unless they constituted a barrier to entry. There aren't any specific rules that are identified in our reports that would be different among carriers of different sizes.

[Bradley Callaghan]

To speak from the perspective of promoting competition, we tend to approach those kinds of issues in terms of whether they are having any effect on competition. It goes to the earlier point about recognizing that regulation is needed in some circumstances. How can we encourage as much competition as possible within it? We have a tool kit that we always recommend to regulators to consider whether regulations and rules are having an undue impact on competition. Is it favouring one supplier over others? Is it creating barriers to entry? Is it giving customers as much ability as possible to compare prices and what's being offered to them?

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

I think about the airlines that have failed: low-cost airlines, upstarts that have lasted for weeks or months, for short periods. When they fail, in the cases of some recent airlines, do they report to you as to why that happened? Do you reach out to them and ask what the issues were that prevented them from being successful in the airline industry in Canada?