TRAN Committee Meeting

STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 13, 2000

• 0903

[English]

The Chair (Mr. Stan Keyes (Hamilton West, Lib.)): Good morning, colleagues.

Pursuant to an order of reference of the House dated March 31, 2000, we are meeting today for consideration of Bill C-26, An Act to amend the Canada Transportation Act, the Competition Act, the Competition Tribunal Act and the Air Canada Public Participation Act, and to amend another act in consequence.

This morning we're joined by our first witness, Mr. Terry Ruffel, president of the Canadian Professional Sales Association.

Good morning, Mr. Ruffel. It's good to see you again.

Mr. Terry Ruffel (President, Canadian Professional Sales Association): Good morning, Mr. Chairman.

The Chair: We look forward to a presentation from you of five to eight minutes. Then we can ask some questions.

Mr. Terry Ruffel: Terrific. I thank you very much.

The Canadian Professional Sales Association appreciates the opportunity to address the standing committee this morning on Bill C-26.

Over the last few days the committee has heard Canada-wide concerns from municipal governments, the academic community, organized labour, and the Competition Bureau. All of these views are important and deserve serious consideration. The CPSA, however, has another perspective on Bill C-26, as we represent Canadians who travel extensively and who rely heavily on air passenger travel for business purposes.

As our submission points out, the CPSA is a national association that counts some 30,000 people as members throughout Canada. These men and women range from self-employed entrepreneurs to sales and marketing personnel of major corporations.

• 0905

Our members, often referred to as the “must-go” travellers, are obliged to rely heavily on Canada's airline companies for intercity travel on business trips. The air passenger service we need, as a business necessity, is reliable, efficient, economical, and widespread.

The CPSA's commitment to representing the views of Canadian business travellers is long-standing. Our organization was founded in 1874, and was known for many years as the Commercial Travellers Association of Canada.

In those days, before the invention of airplanes and internal combustion, the association represented its members on issues of rail and ship. But passenger ships long ago ceased to be an option in business travel, and trains, although we do commend the commitment to reinvest in VIA as a viable alternative, will hopefully become a future viable alternative for business travellers.

Before turning to our submission, it first should be noted that the CPSA is not interested in opposing the acquisition of Canadian Airlines by Air Canada. As the competition commissioner has correctly pointed out, the proposed merger is preferable to the liquidation of Canadian Airlines through bankruptcy proceedings.

Our brief will comment on five topics. I look forward to discussing those with you.

First, we have expressed concern about the use of phases such as “public interest” and “national transportation concerns”, which appear frequently in Bill C-26. We suggest that a mechanism should be established in advance to make it possible to obtain speedy and accurate public opinion when proposed transactions are received by the government.

Second, our submission argues that Bill C-26 makes it unreasonably easy for a carrier to discontinue service to a community. As currently provided in the bill, if a carrier can demonstrate that service will not decrease by more than 50% compared with the week before it's making its proposal, or that meetings with local officials will be sought as soon as practical, and that alternative public transportation services will be available in the vicinity, then its exit can be quickly approved. For a community to lose air service is a serious issue, and the CPSA believes these types of regions need strengthening.

Third, we cannot imagine that the standing committee is pleased with the treatment of pricing issues in Bill C-26. Provisions in the bill are appropriate in the case of sole providers. However, if the Minister of Transport is serious in saying that the government will not tolerate price gouging, then the price gouging recommendations of the standing committee should be incorporated into Bill C-26.

Our submission states that the CPSA does not favour the reintroduction of a heavy regulatory regime for the airline industry. The lack of incentive that a dominant or monopoly carrier would have to control costs is a concern for us. For that reason, we feel justified in asking the standing committee to recommend that a dominant or monopoly carrier be required to seek approval for their proposed air fares from, possibly, the Canadian Transportation Agency.

I remember appearing before a committee about 12 years ago. One of the lawyers approached us and said, “Surely, Mr. Ruffel, if our costs go up, then we put our prices up, right?” We think there is, within the act, some provision on the monopoly situation, but we really have a concern that in this situation—that is, costs go up and prices go up, costs go up and prices go up—we may not be talking about price gouging here but we don't see much of an incentive for Air Canada to control their costs. That is a real concern for us.

Fourth, the CPSA is concerned that Bill C-26 does not address most issues related to competitiveness. These have apparently been dealt with in a letter of understanding from Air Canada to the Minister of Transport and the competition commissioner.

If the ten specific matters listed on pages 6 and 7 of our submission are not the undertakings that have been made by Air Canada, then they should be identified and addressed by the standing committee.

What we're seeing, Mr. Chairman, is that many undertakings have been made, but we have some concerns that these undertakings will happen. We'd like reassurance that they will happen.

Thousands of business travellers who have accumulated frequent flyer points from Canadian Airlines would argue there should be an eleventh assurance from Air Canada. I'm glad that Mr. Milton will be appearing early in May, as I thought I heard you say.

We would like an understanding from Air Canada that they be required to transfer Canadian Airlines' frequent flyer points to Air Canada's Aeroplan at close to par. We believe ten of thousands of Canadians have accumulated these points with Canadian, worth tens of thousands of millions of dollars, and we'd like some assurances that this matter will be addressed and there will be another undertaking by Air Canada.

Finally, Mr. Chairman, the CPSA endorses the sections of the government's response to the standing committee dealing with monitoring of the impact of airline restructuring on important stakeholders. We wonder, however, about the seriousness of the monitoring process if they're not included in the bill.

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We question the legitimacy in terms of how Air Canada's compliance with these undertakings will be enforced when neither the undertakings nor the monitoring process are specifically enshrined in the legislation.

I draw to your attention the final two pages. Some other associations have endorsed our proceedings and our submission.

I'm now, Mr. Chairman, open to any questions you might have.

The Chair: Thank you very much, Mr. Ruffel, for your presentation. I've already had a couple of my colleagues come up to me and say this is the way you make a presentation: You list the issues and then you make your recommended changes for the bill. We much appreciate that. It's very clear, very concise, and very to the point.

As far as the airfare and cargo rates are concerned, I wonder if you could clarify something for me. As I understood it, as it exists, the Bill C-26 legislation we're examining right now does make four provisions such that the CTA can respond to airfares and cargo rates that may seem to be getting out of line with whatever the airline says caused their increase, etc.

Are you aware of this, and are you saying that doesn't go far enough?

Mr. Terry Ruffel: I guess our major concern on the whole pricing issue is the fact that I think you do a reasonably good job, and the legislation does a reasonably good job, protecting Canadians from price gouging where there's a sole provider of air services. Our concern—and we happen to agree with your recommendations—is that where you're getting a dominant position you have very solid protection in there for monopoly situations.

So it's in terms of those dominant positions or near-monopoly positions that we think the legislation should have some strengthening, with the opportunity for the agency to roll back prices, if unjustified.

The Chair: Point taken. Thank you.

Roy Bailey.

Mr. Roy Bailey (Souris—Moose Mountain, Canadian Alliance): Thank you for appearing before us. I too thank you for your concise and brief introduction, which allows us to ask you more questions.

The organization has 30,000 members, and the function of your organization historically has been to bring forth a clientele within Canada that is forced to travel. They have no choice but to do travelling, is that correct?

Mr. Terry Ruffel: They're the must-go travellers, that's right.

Mr. Roy Bailey: In your organization, does your consistency of travel make it possible that you can have specific dates, and therefore book in advance?

Mr. Terry Ruffel: Typically, if you're the must-go traveller, you're the one who's leaving Monday morning and coming back Tuesday on your business trips. You really don't get significant price decreases with that type of arrangement.

As you know, if you're willing to sacrifice your personal life and get a Saturday night stay-over, then you really do get significant price reductions, but it's probably asking a lot of Canadian business travellers to leave Saturdays and to have Saturday night stay-overs for business-related trips.

They're the must-go travellers, and they generally pay full freight.

Mr. Roy Bailey: Do you have any idea of the expenditures your organization makes on a yearly basis in terms of air travel?

Mr. Terry Ruffel: I'm not sure, Mr. Bailey. It's very significant.

Mr. Roy Bailey: It's big.

Mr. Terry Ruffel: Yes, very big. We do monitor hotel accommodation, and we know they spend a million-plus nights on the road.

I remember a survey we undertook a number of years ago. They were generally doing 12 flights a year, on average. So these people were doing at least one a month. In many cases, if you had a wide territory, you could be on the road quite a bit, on the road weekly.

Mr. Roy Bailey: Are you aware of the communication Air Canada has had with the Air Miles people as to what they want to do? Air Miles, of course, had a contract into 2006, I believe, with Canadian. As you had suggested, there is no smooth transition of that to be accepted by Air Canada but a curtailed usage, rather, that will terminate in the year 2002.

Are you aware of this?

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Mr. Terry Ruffel: No, I'm not. I'm aware of some undertakings they've made that they will continue these programs, but our concern is the tens of thousands of business travellers who have accumulated points with Canadian. As we say in our report, Air Canada has made ten undertakings, and we would like to hear about an eleventh undertaking, that they will assure the many Canadians that something will be done.

Mr. Roy Bailey: It seemed to me when we had Air Canada before this committee prior to the starting up of the bill under discussion now, Bill C-26, that these would be transferable. It seemed all was going to be easy. Now we have a cutoff date, a dropping out four years in advance, and then on top of that some curtailment of and even some regulations on the free use of that. In your opinion, that would hurt your members severely?

The Chair: Can I just interject for a second?

We have to be careful, Roy, to identify what we're talking about here.

Mr. Roy Bailey: Okay.

The Chair: You said Air Miles, and they're very different from Canadian Airlines points.

Mr. Roy Bailey: Frequent flyer points.

The Chair: Mr. Ruffel, I think, was referring to those points that passengers with Canadian Airlines would accumulate to transfer, and I think Air Canada is even on the record as saying they will be brought together under one point system. But the Air Miles, which is the Loyalty Group, which is the marketing tool—if you buy a bottle of booze, you get a point, that kind of thing—that's a whole different point structure that I don't think Air Canada has any responsibility for taking over.

Mr. Terry Ruffel: Mr. Chairman, our point is, again, we'd like some assurance that they will be undertaken and the rules will be clarified before you seek approval. I think it's fair to the travelling public that they know how it will be addressed and that this committee receive some assurances on how they'll be addressed.

I agree with your comment, Mr. Bailey. There was certainty at the beginning, but now things are wavering a little bit. Certainty would be important to the Canadian travelling public.

Mr. Roy Bailey: I have just one last comment, Mr. Chairman.

There are millions of dollars out there that people have saved and so on, and if this is going to be curtailed in any way, even though there's no guarantee, it seems to me you're placing on the Canadian public from coast to coast a real degree of disappointment. They're going to lose what they've saved for, it sounds like, and that's not good news across Canada in the air industry.

Mr. Terry Ruffel: It's certainly not good news for the business public and the travelling public. But I do agree with your observation that there should be clarity as to what's happening.

Mr. Roy Bailey: Thank you.

The Chair: Thanks, Roy.

Murray Calder, please.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

Terry, this is a really good brief you've put in front of us here. In recommendation 2 you're saying where Bill C-26 makes reference to an assessment of public interest in national transportation concerns, a mechanism should exist to obtain public input quickly and accurately. What type of mechanism do you foresee should be in place to do that?

Mr. Terry Ruffel: Well, I'm not sure, but certainly the CTA should put some thought into having that happen, and certainly there should be input from the public—there are provisions in here—and input from elected officials. We even volunteered, near the end of the brief, that since we're a business travel association, we can quickly survey our members on impact.

Our comment is if you're going to have some speedy rule changes and have things change rather quickly, then the government has to put something in place to monitor the public reaction very quickly as well, be it meetings, surveys, or working with other affected groups, such as travel agencies, etc.

Mr. Murray Calder: Yesterday we asked Konrad von Finckenstein from the Competition Bureau whether or not they would be interested, and he quite frankly said, “It's not our job to find lost luggage or deal with customer complaints.”

What about this idea? What about, for instance, putting an extra appointee on the CTA, and that appointee's specific job would be to be an ombudsman, to listen to these complaints and to report back to the minister and/or to the CTA itself, depending on what the problems are? What about something like that?

Mr. Terry Ruffel: It sounds like a good idea. It does.

I was recently in the United States, and I know the complaints about the airline industry down there have doubled, tripled, or quadrupled. It's turning out to be a huge problem. So an ombudsman and some of your monitoring provisions in here are excellent suggestions on how to monitor complaints and the impact on business communities and small communities.

Mr. Murray Calder: Okay.

Thank you very much, Mr. Chair.

The Chair: Thanks, Murray.

Michel Guimond.

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[Translation]

Mr. Michel Guimond (Beauport—Montmorency—Côte-de- Beaupré—Île-d'Orléans, BQ): Mr. Ruffel, I too would like to join with the chairman of our committee in his initial comments.

The Chair: Pardon-me, the microphone...

A voice: You're going to have to talk...

Mr. Michel Guimond: I'm going to have to talk? It would be like talking to say nothing. I'm not used to that.

Voices: Oh, oh!

Mr. Michel Guimond: Is the clock running?

A Voice: Absolutely.

Mr. Michel Guimond: This is another attempt by the Liberals to gag us, the poor mistreated members of the opposition. We are gagged. We are forced to talk to say nothing. We are forced to kill time.

Voices: Oh, oh!

Mr. Michel Guimond: Everyone is familiar with my customary humility.

[English]

Voices: Oh, oh!

The Chair: Mr. Ruffel, I wonder if you could indulge us just by moving to where Murray Calder is sitting, so that you can answer Monsieur Guimond.

[Translation]

Mr. Michel Guimond: Everyone knows my pleasant personality. I was prepared not to get angry this morning.

[English]

The Chair: In the meantime we'll have maintenance look at the end of the table.

A voice: [Inaudible—Editor]...four and a half hours straight.

The Chair: No, around here we quickly learn it's usually—

Mr. Michel Guimond: On Bill C-20 I made a filibuster of five hours and 45 minutes. If everybody agrees, I can start right now.

The Chair: You know what? You go right ahead and do what you like. It's Thursday.

Voices: Oh, oh!

The Chair: You have one minute left, Michel.

Voices: Oh, oh!

The Chair: I'm teasing.

[Translation]

Mr. Michel Guimond: Mr. Ruffel, at the outset, I would like to tell you that I support the comments made by the committee chair, Mr. Keyes. I understand that the witnesses are appearing before us at this stage to suggest ways to improve the Bill. If you have personally taken this upon you, I would like to congratulate you. Otherwise, please congratulate your company or the lobbyist who works for you. He has understood his role perfectly.

Mr. Calder asked the question I had in mind with respect to the mechanism and the ombudsman. You gave a very good answer and I think that it will help guide the committee.

I would like to hear you talk about recommendation number 5, found on page 5 of the English version of your brief. This is the recommendation that deals with fares and rates. I'm going to ask you a rather pointed question. I am not doing this to be impolite, but to find out how we could improve clause 66 of the bill. First of all, you give a very good boost to the committee when you say that the government should simply adopt recommendations 22 to 25 of the committee report. This is all very flattering to us, and I would like you to tell us what there is in clause 66 that does not go far enough or that does not provide adequate protection to the members of your association.

[English]

Mr. Terry Ruffel: Well, thank you very much. I appreciate the compliments, by the way. Merci beaucoup.

Our feeling, expressed at the top of page 5, is the bill does a very good job when dealing with sole providers. Where there is a monopoly position, you have in place some pricing mechanisms and monitoring mechanisms that protect the Canadian public.

Our concern is, as I was reading in the paper this morning, those near-monopoly positions. I think the committee has done a good job in dealing with dominant-carrier positions and then empowering the CTA to roll back price increases in those positions. Bill C-26, as we read it, does a good job on monopoly positions. It doesn't do a very good job, or it's incomplete, in dealing with the dominant-carrier position or near-monopoly position.

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Our recommendation is that the committee's recommendations are a better solution to protecting the Canadian public than actually what the bill is doing. You say the government, as a condition of approval, should say that a dominant carrier freeze air fares, that the CTA act be amended to allow the agency to approve or disapprove fare increases requested by a dominant carrier. Mr. Chairman and committee members, I think the committee has a better solution than the act itself.

Mr. Roy Bailey: We often do, of course.

[Translation]

Mr. Michel Guimond: My second question is more of a comment. Perhaps you would like to add something to it. We know that Air Canada, in a letter dated December 21, made certain undertakings. You listed 10, and I believe that this is accurate. In recommendation 6, you state:

In the event any of the 10 undertakings by Air Canada identified above are not included in proposed subsection 10.1(2) of the Air Canada Public Participation Act, they should be publicly identified by the Standing Committee.

I have problems with the wording “should be publicly identified”. I think that any member of the committee could do this. You are more or less saying that we should amend subsection 10.1(2) to include these 10 undertakings. Is that what you mean? Perhaps I have misunderstood you, but I would like to hear what you have to say on the matter.

[English]

Mr. Terry Ruffel: That's exactly what we're getting at. Our opening comment was that if they are undertakings, what assurance does this committee have that the undertakings will happen? Certainly from the Canadian public.... We happen to agree with the undertakings, by the way, but what assurances do you have and what assurances do we, the travelling public, have that we're going to see these undertakings happen?

If the assurances or the undertakings were in the bill, that makes us happy, but certainly if there's some other mechanism that will assure that the undertakings will happen.... I've seen mergers before in which commitments were made about job levels and unemployment levels, and then two years later those commitments were not satisfied. I've seen it in many cases.

My concern, and our travelling public's concern, is how do we assure that the undertakings happen? They're good undertakings, but how do we assure that they happen?

The Chair: Are there any further questions?

Val.

Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance): Thank you, Mr. Chair.

I'm interested in your responses to recommendation 2, the discontinuation of service. You quite clearly specify that you think 120 days' notice is not good enough, that there has to be communication with the municipality or the area they're pulling away from. You make mention that you're not sure that the 50% reduction in service as stipulated in the bill is adequate. You have some problem with it.

You represent businessmen. Straightforwardly, as a business person, do you think your clientele would like to be put into a position where the government was insisting they carry on their business even though they were losing money, even though it might mean it would eventually bring the company down?

What we've heard from the airline industry, the smaller airline industry, is that the 120 days might do several things. One, it keeps you in a marketplace where you're losing money and jeopardizing and putting your company at risk. Secondly, it prohibits the introduction of new trial service. In other words, you're not going to go into that marketplace if you have to stay there for at least four months. You may want to try it to see if there's the market to feed the service, but if you have to be there for four months, you're not going to take the chance, because you can't afford to put that much money at risk.

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So representing business people, do you honestly think the government should be putting those kinds of conditions on a company in providing a business service to the people?

Mr. Terry Ruffel: Certainly, generally, most business people I know take a longer perspective of life—when you're doing your business plans, your market research. So if any company has concerns where they're entering a market and will be in and out within four months, and they want the flexibility to announce a service and withdraw rather quickly, I would question the business planning and the marketing research they've done. So I happen to agree that at least 120 days is the minimum there.

You have to weigh that versus the commitment to the community, so that the community knows there's some surety of service and that there is a mechanism in place in which changes will be discussed with the community, particularly in these monopoly situations where a withdrawal of service could really severely hurt the community.

I think it's that judgment call where you have to have some protection, you have have to have consultation measures. When I hear somebody saying we want much much more flexibility, it seems to me those companies have not done their homework.

Ms. Val Meredith: Would you not agree, though, that airlines are a little bit more capital intensive than the ordinary business? A person can't go into an airline and provide service without putting out millions of dollars in capital expenditures on aircraft, plus there are changing conditions that they have no control over, like a 50% increase in fuel.

We have a trucking industry that is in crisis because of costs that have gone way beyond what they could ever plan for over a long-term planning period. These things happens.

If you are insisting that a business...and, yes, it's a carrier, but in a lot of monopoly situations we're talking small carriers. We're not talking the Air Canadas of the world. We're talking First Air; we're talking the smaller airline. They're very concerned that if this 120 days is put into place, it is going to prohibit competition in the service of communities.

I see some conflict there between what you're saying in representing the business community and what other businessmen who are trying to provide service are saying to us.

Mr. Terry Ruffel: That's the compromise that committees have to look at—the commitment of the community, the notice to the community, versus the capital investment.

You're probably right. When we looked at the legislation, we were always thinking Air Canada, but there could be other considerations for smaller airlines that you should certainly consider.

The Chair: Roy, do you have one question?

Mr. Roy Bailey: My question was much like Val's question. We have, at the present time, instances where, in contracts between the airlines, they're given 30 days, and of course I think that's ridiculous. As we mention here, if 120 days is applicable to one end of the industry, it sounds like it should be applicable to the other. It seems highly unfair for a company to behave in this way.

But let's say your clientele or your business happens to be in the Northwest Territories, so you go and deal. Without 120 days notice to your company, if it was only 30 days, your company would be scrambling as to how you're going to service that market. Right?

Mr. Terry Ruffel: Absolutely.

Mr. Roy Bailey: What I'm trying to say here in terms of the time restraint in contracts between airlines, between Air Canada, the dominant carrier, and the others—I don't think they should be able to issue that this service is going to be discontinued in 30 days. I don't think they should be allowed to get away with that, because of the smaller companies that were depending upon services that are there, or the smaller independent business companies serving an area.

So what I'm saying is that across the board in Bill C-26 maybe we should be looking at some uniformity within the bill, which isn't there now.

Mr. Terry Ruffel: I agree with your observation.

Mr. Roy Bailey: Thank you.

The Chair: Thank you, Roy.

Mr. Ruffel, thank you again for your very clear and concise report and its recommendations, and please pass along our thanks to your colleagues at the Canadian Professional Sales Association.

• 0935

Mr. Terry Ruffel: Thank you very much. And we do appreciate the compliments and the effort that was put into it.

I think the message coming out of our report, Mr. Chairman, is very much that the committee has some solid recommendations that would improve the bill, and we strongly urge you to push those forward. And we strongly urge you, when you have the opportunity to meet with Mr. Milton, to take the opportunity to talk about the eleventh undertaking and some certainty on the frequent flyer points for the Canadian public, which would certainly be deserved and probably needed.

So thank you very much. I appreciate the opportunity. Merci beaucoup.

The Chair: Thank you.

Can we now have members of the International Association of Machinists come forward, please. We may have to do a seat realignment here.

Wait until the minister sees what our recommendations are. He's going to think we're sitting over there.

Sorry, gentlemen. We'll just give this one minute. They're making technical adjustments.

• 0936

• 0940

The Chair: I want to welcome members of the International Association of Machinists and Aerospace Workers in Canada.

Mr. Ritchie, it's nice to see you back again, as the Canadian vice-president, and Ron Fontaine, the president of the airline district. Also with you are Steve Vodi, who is the Canadian airline coordinator, and Mr. Erlichman, who is the Canadian research director.

Gentlemen, welcome back to the Standing Committee on Transport. We look forward to your presentation of five to eight minutes so that we can get right to the questions. Thank you very much.

Mr. Ron Fontaine (President, Airline District, International Association of Machinists and Aerospace Workers in Canada): I'm going to start off. My name is Ron Fontaine. I'm the national president of Transportation District 140 of the machinists' union.

On behalf of the 52,000 Canadian members of the International Association of Machinists and Aerospace Workers, we'd like to thank this committee for the opportunity to appear once more before you to present our views on Bill C-26.

The IM is the largest union representing workers in the air transport industry in Canada and in North America. We represent 18,500 members working in the Canadian air transport sector at Air Canada, Canadian Airlines, regional charter and smaller airlines, as well as the air transport service providers.

When we last appeared before you in November we urged this committee and the government to take a broad view of this industry, to look beyond the merger of the two big carriers and to provide a long-term framework for all parts of the industry. We urged you and the government to take an active stance to reverse the passive-reactive posture of the previous 15 years and present clear guidelines for building a strong Canadian industry to provide a safe, reliable service at fair prices all across this country.

We are disappointed that Bill C-26 continues the essentially passive government policy with respect to this industry that has brought us to our current situation. Bill C-26 provides a set of narrow, short-sighted defensive responses to the evolution of this industry. A marginal extension of the CTA fare review and the route exit notification processes, and some expansion of the powers of the competition commissioner, fall well short of an active strategy to deal with the future of this crucial sector.

We are, however, pleased that the government has not acted on some of this committee's recommendations. Maintaining the 25% limit on foreign ownership in this sector is important to ensure domestic control of this vital industry. We'd be even happier if the government removed from the act the government's authority to waive these restrictions by Order in Council.

Bill C-26 raises the limit on individual ownership in Air Canada from 10% to 15%. We are pleased that the requirement for broad ownership of Air Canada will remain. In the light of Air Canada's dominance of this sector, it is essential that no single interest be allowed to take control.

We are also glad that the government is not proposing to open the domestic air transport market to the foreign carriers. Such action would be disastrous for the industry and for Canada. While Air Canada is a large carrier, it is small compared to the dominant U.S. carriers. We have seen that this sector tends to monopoly and concentration.

If let loose in the Canadian market, the big U.S. carriers, with their huge financial marketing resources, could rapidly destroy Air Canada and any other significant Canadian competitors. There would be a loss of thousands of Canadian jobs. Canadian communities and consumers would be at the mercy of the big U.S. carriers for whom our market would be of only marginal concern. We'd be facing, particularly outside of a couple of major centres, poorer service and higher fares.

While the government is not acting at this point to allow foreign carriers into our domestic market, we are still concerned that in their response to this committee they suggested that this could in the future be a response to concerns about domestic competition. We need to deal with concerns about domestic competition domestically, not by importing foreign monopolies.

I'll now turn this over to Dave Ritchie.

Mr. Dave Ritchie (Canadian Vice-President, International Association of Machinists and Aerospace Workers in Canada): We are particularly disappointed that the government has not responded to our recommendations to provide a broad workers' protection program to deal with the impact of restructuring in this industry. The commitment to all workers in this industry has been forgotten.

• 0945

Bill C-26 does endorse the protections for our members at Air Canada, Canadian, and their affiliates that we had previously negotiated with Air Canada. However, it presents no long-term process for worker protection in industry restructuring, which will be ongoing for many years. It does not provide for the many workers—about a third of all the workers in this industry—who are not employed by the two major carriers and their affiliates. Fuellers, contract workers, and many others will be seriously affected by industry restructuring.

Already our members working for Hudson General Aviation Services, providing baggage-handling services to Canadian Airlines at the Calgary, Ottawa, and Halifax airports, face layoffs as Air Canada takes over the work. These 350 members, many of whom have invested many years in this industry, face an uncertain future beyond the layoff notices. For them and many others who will be affected over the next several years, the government must commit to a program to protect and assist all workers in the air transport industry.

We have called these protections an air transport workers bill of rights. As we presented to you in November, these would include: in the coming restructuring, no involuntary layoffs or relocation of workers in major or regional carriers; surplus employees identified in the restructuring will have their economic future secured through attrition, early retirement incentives, voluntary severance options, leave of absence programs, voluntary transfers, or mitigating programs to be offered on a fair basis across the sector; a long-term program of worker assistance, with public support, to provide income support, training, job search, and relocation assistance, as well as priority access to jobs in the industry for displaced workers; current collective agreements to be honoured and pension rights protected in the restructuring; no export of jobs from Canada; and a process that will provide for full consultation with affected workers and the speedy resolution of disputes resulting from this bill of rights.

Bill C-26 falls well short of providing these protections. We have been able to negotiate some elements with Air Canada, but many parts of the sector are not, and will not be, the responsibility of the dominant carrier. We ask the government to take the responsibility for ensuring fairness to all workers in this industry across Canada.

We are currently surveying our air transport members to assess their needs and desires with regard to transitional programs. We hope we can obtain government support for a broader survey of this industry.

We ask you to recommend to the government a program to protect and assist all workers in the Canadian air transport industry, as we have proposed.

Respectfully submitted by myself, Dave Ritchie, general vice-president.

The Chair: Thank you, Mr. Ritchie and Mr. Fontaine.

Val Meredith.

Ms. Val Meredith: Thank you for appearing before us. One of the concerns I've heard over the last couple of weeks has been mainly from the employees of Canadian.

My questions to you are: Who do you represent? Is it the ground service people at the airports? Do you have separate divisions for Canadian Airlines and Air Canada. Have those employee groups reached decisions and agreements as to how they're going to come through this merger?

Mr. Dave Ritchie: First of all, we represent the mechanics, the ramp people, agents—the whole spectrum of the industry.

At Air Canada and Canadian we have ratified collective agreements with both particular groups. The ratified collective agreements really talk about Air Canada and Canadian, as it was proposed, operating as two separate entities at least for the period up to and including June 22, 2002. That's when those agreements were in fact to come up for renegotiation. That was what we had agreed to in November. They were ratified by both prospective Air Canada and Canadian memberships. In fact, that's where we are today.

• 0950

The truth of the matter is it would appear that the company is going to merge in a very quick manner, and we are at the stage today with two separate collective agreements. So we have not gone in to bargain with the employer on what we would call an intermingling process.

Ms. Val Meredith: You have two separate agreements with the two airlines. Is there quite a difference between the two? Do you foresee problems with trying to integrate all of the workers into one employer status?

Mr. Dave Ritchie: There's no question that there's going to be a major problem in dealing with seniority. I think it's fair to say that at this point the Air Canada people have a difference of opinion as to whether dovetailing should occur. They believe it's more like entailing. The Canadian Airlines people believe dovetailing is the only way to go. There's no question that issue is going to be a major problem to the unions and in fact to the employer.

Ms. Val Meredith: From the outside looking in, it's hard for me to understand how one union representing what's best for the workers can take two different approaches to it. Where are the workers in Canadian Airlines any different from the workers in Air Canada? How is it possible that in one union structure you can have this difference of treatment from one airline to the other when they're doing the same job?

Mr. Dave Ritchie: I don't quite understand your question.

Ms. Val Meredith: How could you not merge the seniority list? How could you say that an employee in the same union with 25 years experience at Canadian is not of equal value as an employee with a different company?

Mr. Dave Ritchie: Who said we said that?

Ms. Val Meredith: There was a letter that went out to the Canadian Airlines flight attendants, I believe it was. You may not represent—

Mr. Dave Ritchie: I don't represent the flight attendants.

Ms. Val Meredith: Okay. I just wasn't sure where the cut-off was. But a letter did go out to them where the Air Canada division of the union was saying they wanted it entailed and the Canadian division of that same union was saying no, it was to be dovetailed, the very same thing you said there was a problem with. How can the same union representing the same type of employee have this problem? Shouldn't it be in the best interests of all of the employees on an equal basis?

Mr. Dave Ritchie: It is, but democracy is a bitch at times.

Ms. Val Meredith: I agree with that one.

Mr. Dave Ritchie: The truth of the matter is that these are two separate entities. In fact, up until there is an actual merger, they are two separate entities. You represent these people and you represent those people, and these people have their destiny in their hands, and those people have their destiny in their hands. When the two meet, that's when the clash develops. Up till now they haven't had to meet because there is not a merge scenario out there.

Ms. Val Meredith: There is a merge scenario out there. So how are your employees going to come through this in the end? How do you as a union bring the two parties to the table and get them through this process so that it's done in the fairest way possible for all the employees of both of the airlines?

Mr. Dave Ritchie: I'll tell you the position our particular union has taken. There would appear to be an appearance of a conflict of interest, because of the two sides of the matter. We've taken the position that not only does something have to be fair, but also it must be perceived to be fair. Therefore, we believe the issue of seniority needs to be put to a third party from the CLRB so that the Air Canada employees, represented by their local lodge presidents, and the Canadian/Air Canada employees, again represented by their presidents, with two separate lawyers, would argue the merits for and against their particular positions, and a third party would come out with that decision.

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At least then people wouldn't believe somebody had made a unilateral decision that it would be one way or another. In fact, they could honestly believe their feelings had been expressed. The end result they would have to live with, because it would have to be a binding process. At least it would allow them to know they'd had a fair hearing and somebody weighed the pros and the cons of both and came out with a decision.

That's how we are going to tackle it.

Ms. Val Meredith: Thank you. I appreciate that response.

The Chair: Mr. Drouin.

[Translation]

Mr. Claude Drouin (Beauce, Lib.): Mr. Ritchie, members of the Association, thank you and welcome to the Transport Committee.

Mr. Ritchie, you talked about protecting employees. I think that you will agree with me that if there had been a bankruptcy instead of a merger, many jobs would have been lost. We are talking about tens of thousands of lost jobs. Did the union verify, in the proposal that you may make to Air Canada, wether or not there is a more pleasant way of going about this, if I can use those words, to allow employees who have worked for many years for these two companies to retire through attrition. Has your Association thought about this possibility?

[English]

Mr. Dave Ritchie: We have an agreement with both Air Canada and Canadian on that exact issue. We have negotiated avenues for this to occur, so the answer to your question is yes—for Air Canada and Canadian. But as my brief explains, that hasn't happened for a number of folks out there, such as those at Hudson General Aviation Services. A lot of them have records of long service. Some of the folks here in Ottawa have worked for Hudson General for 22 years, and they are going to lose their jobs. There is nothing there for those people. There is no attrition for them. They're out.

We've asked that a process be put into place so we can give those people a transition of training and/or whatever, for them to look out in this industry. Keep in mind that Air Canada has said over and over again that this is a growth industry, and down the road they're going to need other people in other areas. That's why we're doing our survey right now, to find out and get that needs analysis.

In addition, we need funding to find out where it's going to be in the future, so we can be up and running and have some of those people who are affected by the restructuring up and running when those jobs come available. The question is twofold. Yes, we have it with Air Canada and Canadian, but with anybody else the answer is no. We have not been able to sit down under the restructuring because they believe they are a victim of circumstance.

[Translation]

Mr. Claude Drouin: Thank you. In your workers' bill of rights, you suggest measures that you feel are essential for workers. Did you estimate how much these measures would cost and did you determine who should foot the bill?

[English]

Mr. Dave Ritchie: We haven't assessed the costs yet because you really need to do the needs analysis before you can do that. I suggest the employment insurance program should pay for it. That's where the money is; that's what the program was set up to do. That money is there to get people back into the workforce and put them there. We're sitting with huge surpluses in that area. This is exactly what that money is meant for, and I suggest to you that's where that money should come from.

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[Translation]

Mr. Claude Drouin: Thank you, Mr. Chairman.

The Chair: Michel Guimond, please.

Mr. Michel Guimond: Gentlemen, thank you.

At the outset, I'd like to tell you that I fully agree with the approach you have outlined on page 1, where you state that you are pleased to note that the government has not followed up on the committee's majority recommendation to increase foreign ownership in Air Canada from 25 to 49%. I say that this is a majority opinion because my colleague, Gérard Asselin and I, on behalf of our party, recommended that we maintain the 25% limit on foreign ownership. You probably remember this.

I also agree with the last sentence, where you state:

We would be even happier if the Government removed from the Act the Government's authority to waive these restrictions by order-in- council.

I agree with the approach taken by your union.

On another topic, I would like to ask you a brief question about the Hudson General Aviation Services employees in Calgary, Ottawa and Halifax. You say: "They face layoff as Air Canada takes over the baggage handling services." Is another contractor providing this service to Air Canada or is the work being done by Air Canada employees? What union do these workers belong to? They must belong to another union, if you are criticizing the situation. Even if they are your union members, I would imagine that you would lament the loss of jobs.

I will conclude on that note. With the scenario making Air Canada a dominant carrier, we knew that jobs would be lost. I think that they had said that this would be the case. It is true that they emphasized job loss in both companies and this is why you asked for a commitment to all workers in the industry, regardless of whether they were working on board the planes or on the ground, including employees working in related sectors, such as the Hudson employees.

[English]

Mr. Ron Fontaine: On that issue, we've had some success. We've had success negotiating with the new Air Canada. The Hudson General employees and other employees will have first opportunity for employment. The work that was done for Canadian Airlines in Ottawa, Calgary, and Halifax was done by Hudson General. They are now shifting that to Air Canada, and Air Canada is hiring as a result of it. We have negotiated with Air Canada to give those people first opportunity.

Some of those individuals have families and have been there for 22 years, and various things. Air Canada is hiring some of them; 50% of the people they're hiring in Ottawa are from Hudson General. The problem is, they're going from an $18-an-hour job to the bottom of a new hiring pay scale, which may give them $9 an hour. They will have to support families, after working for 22 years, on $9 an hour.

This is an issue where we think, in the restructuring of the industry, EI should step in and make these people whole. They will eventually get up to that wage rate through their experiences at Air Canada. But again, you're taking a family man with 22 years of experience, providing for a family, going back to start at $9 an hour.

We have had some success in getting them jobs. We've also had some success in dealing with Air Canada to get them to raise the pay scale to $11 an hour because of their experience, but they're not going to take them up to the full wage until they've gone through a number of years with the corporation.

They're not taking older people. As sad as it may seem, someone 50 years old is basically being hired to load and unload airplanes and go into the belly of an aircraft, where, let's face it, it's hard on the back and the knees. When you get a 50-year-old coming for new employment, his or her medical examination will not be the same as that of a 22-year-old new hire, and they are considered to be new employees.

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[Translation]

Mr. Michel Guimond: Mr. Fontaine, you made some very relevant comments however, are the employees who provide baggage handling services to Air Canada in these three cities unionized members of your association?

[English]

Mr. Ron Fontaine: Yes, they're all unionized.

[Translation]

Mr. Michel Guimond: Consequently, since employees are being hired, you try to give priority to these employees and to hire them, to the extent possible, under the same conditions that they enjoyed with Hudson, because once they are hired, they go to the bottom of the seniority list, right?

[English]

Mr. Ron Fontaine: Quite frankly, they will get the same conditions eventually. In some cases, it will be better. There will be a pension plan, where there is not a pension plan at Hudson General. Maybe the medical plan will be a little bit better in the long term. The problem is at the beginning. They're starting at a lower rate, at $11 an hour or $9 an hour, versus the $18 an hour they were making before. Eventually they'll get to $19, but it may take five years.

[Translation]

Mr. Michel Guimond: I have one final question. This is the type of case that you want to cover when you say, in the previous paragraph: “The commitment to all workers in this industry has been forgotten”.

I was surprised to see that your brief did not mention Inter- Canadien workers. More than a thousand workers lost their jobs when operations ceased on November 28, and bankruptcy was confirmed about a month or a month and a half ago. Do you think that Inter- Canadien workers could have benefited from certain conditions enabling them to keep their jobs and give their preference when resuming work? That's my first question.

You don't talk about Inter-Canadien. Were any of the Inter- Canadien workers your union members?

[English]

Mr. Ron Fontaine: Yes, they were unionized. There were 450 people with InterCanadian who were unionized. We have also met with Air Canada regarding those people. Some of those people in Quebec City, for example, and Montreal have been hired by Air Canada.

Again, they fall into the same situation. They have to pass through the medical exams. Not all of them have passed the medical exams—the pre-employment exams that Air Canada gives, as if they were hiring off the street. They are getting priority interviews and some are being hired, but again, not all.

In Quebec City we've been fairly successful, because of the demand Air Canada had, so a number of InterCanadian people have been hired. The people with maintenance backgrounds have been very successful, but that is because there is just a demand for maintenance people; there is a shortage of maintenance people. Right now in Canada, we're fighting to get qualified people.

Mr. Dave Ritchie: The other thing is that the InterCanadian folks did not lose their jobs because of restructuring; they lost their jobs because of the bankruptcy. We've dealt with that in two different folds. We are still in the court system representing those 450 people. In fact, we'll be suing Canadian Airlines over their employment. Our union is taking those steps, so we are still taking measures to do so.

The other thing I want you to know is it's not that the Hudson General people will be laid off; they have been laid off already. Their jobs are terminated and will be terminated. These people have in fact lost their jobs because Air Canada is taking over that work.

The Chair: Thanks, Michel.

We can always hopefully see the glass half full as well. Maybe somebody will come along and buy InterCanadian, and as a result we'll see those jobs come back again and those people rehired.

Mr. Dave Ritchie: InterCanadian is being bought?

The Chair: No, I'm saying—

Mr. Dave Ritchie: You live in optimism, and there's no question it's about.... They are now in the forum of actually selling the assets, so there is a possibility that it can be picked up.

The Chair: Roy Bailey.

Mr. Roy Bailey: Thank you.

It comes as no surprise to you folks, I'm sure, and with this restructuring in this industry, you were able to look ahead and see some of these problems ahead. I think this committee, of course, and obviously the department, in all their wisdom, are looking at some of these things too. I mean, you can't have the vast reduction in the number of flights each day without having some pilots, flight attendants, or ground crews not as busy as they used to be. We all foresaw what happened.

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Having said that, do you feel that up to this point, the original commitment, although an oral commitment, made by the airline industry at the time we interviewed them all last fall has been honoured, or do you see that there is some shading back or fading away from those original commitments?

Mr. Dave Ritchie: No, I think they honoured their commitments to the respective employees of both. What they didn't do within that area is talk about other areas. They said there would be 2,500 jobs lost. We still don't have those exact figures. We don't have anyone from the major airlines on layoff.

What they didn't talk about was the other jobs that were going to be impacted on, jobs that we said to this committee would be impacted on. That's where the impact is. In fact, a number of those folks have lost their jobs directly as a result of this restructuring, because Air Canada has brought some of the work that they used to contract out—which is what these workers were, contract workers—back home. And in this case, there are a number of them who will be indirectly affected.

Mr. Roy Bailey: You wouldn't deny...in your case here, you mentioned Hudson, wasn't it? Now they were under contract with Air Canada, right?

Mr. Dave Ritchie: Canadian, yes.

Mr. Roy Bailey: Canadian really is Air Canada, and therefore they've squashed that contract. The difficulty of course is that you can't deny the company doing that. They have a right to do that. But—and herein you have the buts of this thing—you feel your responsibility is to those people. I would agree with that, but not to the point that we can't all realize that there will be a large number of layoffs in this industry, right? We agree to that.

Mr. Dave Ritchie: No.

Mr. Roy Bailey: It's how we handle it.

Mr. Dave Ritchie: No, we haven't agreed that there will be a large number of layoffs. What we've agreed to is that there will be a reduction of 2,500 people and that it will be done in every form other than layoff. It will be done through attrition, early buyouts, and whatever. So please do not confuse those issues with layoff.

Mr. Roy Bailey: All right. I can see, however, that the companies will change or terminate contracts; they're doing it now, and they have the right to. I don't think we can take that away from them. Whether it's ethically right or not is another question.

What do you propose in your air transport workers' bill of rights? Is it in its completion, or are you just working on it?

Mr. Dave Ritchie: Well, I presented it to this committee.

Mr. Roy Bailey: I meant are there any changes to that?

Mr. Dave Ritchie: No. There are no changes. What we thought was right then, we think is right today. In fact, we even did a video that was sent to every member of Parliament.

Mr. Roy Bailey: I'll admit I didn't see it.

Mr. Dave Ritchie: Yes, well, you'll want to ask your assistant. Maybe it went to file 13, but it did go out to everybody.

I would suggest to you that what we're thinking of is a long-term approach, which means we are in a growth industry. If all the things Air Canada have told us come true—I'm optimistic and I believe, given the right circumstances, they will occur—then we will see growth in this industry.

The growth means there is potential for job growth. I'm saying, if that's the case, let's get these people who are directly affected and train them. Let's get the replacements we need to get so that as the industry grows, we'll have the people ready to move into these jobs and functions. They'll be available.

• 1015

Some of these people who are going to have to go out of the industry.... Maybe with some of the timeframe we have, for example, to become a mechanic or a tradesperson, we can do it through the EI program and give them that opportunity. So when they are finished, they're ready to go to work. We'll have trained them for that particular job.

The Chair: Thank you, Roy.

Gentlemen, thank you very much for your submission and for answering our questions.

Colleagues, we're recessed for five minutes.

• 1018

• 1023

The Chair: Colleagues, we'll resume, with representatives of the Canadian Bar Association. Mr. Tim Kennish is the vice-chair, policy, national competition law section.

Mr. Kennish, welcome to the Standing Committee on Transport. We look forward to your submission of five to eight minutes, and then we'd like to ask you some questions. Thank you.

Mr. Tim Kennish (Vice-Chair, Policy, National Competition Law Section, Canadian Bar Association): Good morning, Mr. Chair. My thanks to you and members of the committee. The national competition law section of the Canadian Bar Association is pleased to have the opportunity to present its views and comments on Bill C-26.

I'm sorry to say that Joan Bercovitch, the senior director, legal and governmental affairs, of the Canadian Bar Association, planned to be here this morning but is prevented from doing so because of a need to attend a funeral this morning.

I also wish to apologize for the fact that the brief we hope you will have an opportunity to review is only being delivered to you today, and at this stage there is not a full translation of the brief. There is a French translation of the executive summary. We were advised of this opportunity to speak to you on relatively short notice, which really explains why we're late in getting this to you.

By way of background, the Canadian Bar Association is a national association representing about 36,000 members of the Canadian legal profession. Its primary objectives include improvements in the law and administration of justice. Our section, the national competition law section, comprises lawyers who are either practitioners in the competition law field or who have an interest in it. The membership is about 800 strong, and it's drawn from across the country.

• 1025

Given this particular perspective, it's our section that's making this presentation. Our comments are focused primarily on the proposed amendments to the Competition Act in this package and related amendments in other statutes that have a bearing on competition law.

Given the process that is involved in Canadian Bar Association submissions being developed and approved, what is in our submission really represents all we can say at this stage with the approval of our section on the subjects in question. So if there are issues or questions that go beyond this, I will have to decline commenting, simply because we haven't fully considered these other issues. But hopefully the main points will be addressed in our submission.

Time constraints will constrain my reviewing the submission in its full length, but I invite you to review it at your opportunity.

To get to the main points, the first issue we would like to surface is that the Competition Act is a statute of general application that prescribes standards of competitive behaviour, which generally apply across the board, and the remedies for deviations from the standard also apply to most businesses in Canada, without particular reference to any industries in particular.

We know Bill C-26 was prompted by the airline merger and to deal with its consequences. Most of its provisions really have application in one narrow circumstance—that is, one company. We consider it inappropriate to deal with that one situation in the context of this general legislation. We think it would be better dealt with under the Transportation Act, and we have some other suggestions that I will be getting to in a minute. I don't think there's a need, from a constitutional point of view, to place it in the Competition Act for the purposes of giving it appropriate legal authority.

The second reason we object to the inclusion of these provisions is the fact that they establish different, higher, more extreme legal standards and give more extensive powers than are presently contained in the act in regard to firms in a dominant position. The reason we think that is a problem is that there's an implication that the regular provisions of the Competition Act are insufficient in these areas to deal with the situation, and we don't agree that this is the case.

In dominance cases, the bureau has been successful in securing remedial orders in every contested abuse of dominance case they've brought—and there have been six or seven of these. We think the introduction of these exceptional remedies in the context of this broad legislation will lead to a demand for the generalization of these kinds of powers beyond the scope of the airline business, into other areas. Indeed, this has already happened.

Last week, a private member's bill, Bill C-472, was introduced, which proposes that the provisions of Bill C-26, effectively, that relate to and authorize the commissioner to issue temporary orders apply in all abuse situations, not confined to the airline situation. I think it exemplifies how provisions of this type could undermine public confidence in the adequacy of the existing provisions.

In the brief we suggest some alternatives. We think the new authority in the bill, which would propose the right to make orders under sections 56.2 and 56.4 of the Canada Transportation Act, could be a place where these provisions could appropriately reside.

Alternatively, there is a procedure under the Competition Act, the consent order procedure, which can apply in regard to mergers under section 105 of that legislation, where specific rules of this type could be made applicable to Air Canada as a consequence of this merger.

• 1030

I'd just mention that in our brief we deal with the collaboration amongst airline travel agents in certain circumstances, what merger transactions involving airline undertakings ought to be the subject of proposed new rules under section 64 of the Canada Transportation Act, and our views on the proposed amendments to the provisions of section 29 of the Competition Act respecting confidentiality. I'm going to pass over those—and I refer them to you for reading—to get to our two remaining points.

The first of these is that section 78 would be amended to permit the enumeration of specific additional anti-competitive acts by regulation, rather than, as at present, as part of the statute. While the proposal is to specify those acts only in connection with the dominant airline's behaviour, in fact the act's present definition of “anti-competitive acts”, while it enumerates specific examples, is not exhaustive or definitive. The Competition Tribunal has stated that anti-competitive acts can also be other forms of behaviour not specifically mentioned, and they have in fact applied that principle in several cases already.

So we would say it's not necessary to amend the law specifically for this, in that if it is truly of an anti-competitive nature, it can be embraced within the present law.

Secondly, we have a concern about amending the legislation by regulation. That is a new principle that is not applicable to other provisions of the Competition Act, and we're not in favour of that.

The importance of what is an anti-competitive act for this purpose is underscored when you look at the temporary order provisions of the act. Under the temporary order provisions of the act, the commissioner may issue an order to have a party cease and desist certain behaviour if it is an anti-competitive act and he considers there may be harm to a third party. This is considerably beyond the scope of what the Competition Tribunal could order in its present circumstances, because for an order to be made now, there must be a substantial lessening of competition.

The way this would work under the proposed legislation is the commissioner merely has to decide. If there's an anti-competitive act and there may be harm possibly to a third party, he can then enjoin that activity for up to eighty days. The behaviour branded as an anti-competitive act for this purpose might simply be equivocal behaviour that may or may not be anti-competitive in the circumstances. Under the abuse provision, in addition to having an act that is apparently anti-competitive, you have to have an anti-competitive effect.

Finally—and this is really our main point—we make considerable objection to the commissioner's power to make temporary orders. There's the problem I just alluded to, that he may make an order on different grounds from the grounds the tribunal can use in the ultimate result. Secondly, the way it is provided, there is no notice to an affected party and no entitlement on the part of the party against whom the order is going to be made to make representations as to why the order should not be made. It's quite exceptional. In most order-making situations, they aren't made ex parte. Notice is given and there is an opportunity to make representations. So it's quite an incursion on the idea of due process.

• 1035

That is important, because this is an order that has the same force as a court order, and a breach of it is punishable by fines or imprisonment. As I mentioned, the order, although initially for 20 days, may simply be extended by the commissioner for two further periods of 30 days, for a total of 80 days, and if it's appealed it may have a longer duration.

The Chair: I'm going to have to ask you to summarize, Mr. Kennish.

Mr. Tim Kennish: Yes, the final point: the position the commissioner is in is he's acting effectively as the enforcement officer engaged in an investigation of conduct and as a judge or judicial official in issuing the order.

As Chief Justice Dickson of the Supreme Court of Canada said in a case decided about 15 years ago, in his view, investing the official with significant investigatory functions—the body was the Restrictive Trade Practices Commission—had the result of vitiating the ability of the members of that commission to act in a judicial capacity. In that situation, the Restrictive Trade Practices Commission did both: they did investigations, and when they needed to get a search warrant, it could be issued by another member of the commission. The court found that constitutionally improper, and I submit that there is a similar situation here.

Whether or not this contravenes the charter or is otherwise illegal, we think it's so close to the line that it invites legal challenge, and these issues could be tied up in the courts for some time.

I want to thank you very much for your attention.

The Chair: Thank you for your submission, Mr. Kennish.

Val Meredith, please.

Ms. Val Meredith: Thank you very much, Mr. Chairman.

Thank you for appearing. It's a good brief and it certainly addresses a number of issues.

There's a real conflict here between due process and the time due process takes in regard to a highly capitalized industry not being able to survive that kind of timeframe.

I could be wrong, but I think that's what they were trying to accommodate in these amendments to the Competition Act: to recognize that in this industry, this being the airline industry, there are anti-competitive practices that take place, which some would call predatory practices, and that unless you provide some mechanism for that practice to stop immediately, by the time you go through due process, through the courts, and through any kind of judicial hearings, the effects of that practice have done their job. It doesn't take too long in a highly capitalized industry for predatory practices to have the result they wanted them to have—and that's to drive their competition out of business.

I hear what you're saying, where there's an encroachment upon process, which in our country is very important. How else would you allow somebody to stop the practices immediately and then allow the process to take place? How else would you do it if you didn't give the Competition Bureau, through the Competition Act, those kinds of powers?

Mr. Tim Kennish: There is an interim order power of authority on the part of the Competition Tribunal. I think it has been a bit of a sluggish procedure, but nevertheless it does provide for independent decision on whether or not the order ought to issue. That's a concern we have: that the commissioner is not sufficiently independent in this matter to make that call, and the issuance of an order really does deprive the parties against whom it's made, of liberty, and it involves legal rights.

If there were an amendment to be made, I think it would be to the Competition Tribunal Act or the rules under it, which would expedite these hearings on interim orders being obtained.

• 1040

I don't practice in the courts myself, so I couldn't tell you by number of days how long it takes to get an interim order, but I'm sure it could be expedited.

Ms. Val Meredith: When you're in the public policy area, you have to look at the big picture and not just at one individual. When you look at the big picture, you have the protection of the Canadian travelling public to consider when you start talking about trying to speed up the process.

You talk about the fact that there are interim processes, and you're not sure how long they take. In this particular instance, the government stepped in, the minister stepped in, and put the Competition Act on hold for 70 days, I believe, rightly or wrongly, I guess, because he felt the time it would take to go through processes would not help the situation but would harm it. That's where you get a conflict between public policy having to look out for the greater good rather than just one specific client. How can you resolve that?

Mr. Tim Kennish: I would say that in this area, apart from procedural slowness, perhaps, which I think is correctable, the experience has been that the coverage of the law here is adequate, that abuse of dominance is a remedy that would likely be available in this situation, given the control of the market that Air Canada has, and that the description of “any competitive acts” is broad enough that it would appropriately cover anything that would interfere with the proper operation of the marketplace.

Ms. Val Meredith: Basically what you're telling us, if I hear you correctly, is that we should not be looking at amending the Competition Act, that it has at present the statutes in it, the processes in it, that would allow us to deal with this situation.

Mr. Tim Kennish: We have suggested that instead you issue specific orders referable to this situation under the—

Ms. Val Meredith: Transportation Act.

Mr. Tim Kennish: —proposed new order-making provisions of the Canada Transportation Act. That, I think, would be a preferred approach.

This is a singular situation. It comes about as a result of a merger. There's a specific authority under the Competition Act for consent orders to be entered into that take care of concerns or consequences arising out of a merger, and those are frequently entered into. There's an example in the airlines sector, where the computer reservation industry is in part governed by rules that were established by consent order applicable to a company that was established by Air Canada and Canadian Airlines back in the late 1980s.

Ms. Val Meredith: So I repeat my question: you don't feel there's any requirement to amend the Competition Act...?

Mr. Tim Kennish: No, we don't. We think it would be undesirable to amend it. We think the law in this area is adequate. Procedurally there might be some basis for improvement, but I don't think it's a procedural improvement to have the commissioner deciding when an order ought to be issued. I think he should make a case to somebody that it warrants the exercise of the state's power.

Ms. Val Meredith: So what we would have to do is get the process to allow a change in process, to speed it up in some instances...?

Mr. Tim Kennish: Yes, I think that might well be very desirable—

Ms. Val Meredith: Thank you.

Mr. Tim Kennish: —and not just in this circumstance, but probably in other cases.

The Chair: Thank you, Val.

Just before we go to Claude, I want to interject for a second.

Mr. Kennish, we just don't have the luxury of ignoring the extraordinary circumstances that threaten—and that's a word I'll qualify. What it is we fear for the consumer is a single monopoly airline taking over the business in this country. Because of the extraordinary circumstances, we believe—and I think our study reflected—that extraordinary measures have to be put in place in order to protect the consumer.

• 1045

As you stated, I think liberty has to be weighed in this particular case. One of the fundamental arguments to your suggestion that the competition commissioner not be given these expanded powers or changes not be made to the Competition Act is that procedural slowness is correctable.

Quite frankly, Mr. Kennish, I don't know if you've ever been involved in that process or whether you've ever witnessed any of the work that goes on in that process, but I will challenge you on that and say that procedural slowness is not correctable, because of what it takes to bring forward the information, what it takes for a competition commissioner to first locate, talk to, and glean information, and have it photocopied. In some cases, these parties are not always prepared to hand over exactly what he wants, when he wants it. So there is a procedural problem here that is not correctable.

Mr. Tim Kennish: This is like an interim injunction situation, and you're not required to make a full-blown case out for it but you are required to demonstrate to some judicially acting third party that it's appropriate in the circumstances to have an order put in place pending an opportunity to consider it in full.

The Chair: Who does that?

Mr. Tim Kennish: It's done by the Competition Tribunal for orders under that act.

We're not talking about waiting a year before all the preliminaries have been done.

The Chair: Would we wait three or four months? Quite likely.

Mr. Tim Kennish: There's a certain amount of investigation that's always done, and I don't think even the commissioner would act until he's satisfied the circumstances that would prompt the action are there.

The Chair: But I'll argue that—

Mr. Tim Kennish: So all this is doing is simply going the further step of asking a judicial official for the authority to issue that order on a temporary basis pending the hearing of the matter.

The Chair: If you can demonstrate to me that this process can take a week, I'd have to say there is no choice in this matter, because as Ms. Meredith has already stated, we're dealing with an airline and those who would compete against. If it's a monopoly we are going to have in this country, I dare say the competition doesn't have the luxury of waiting more than two or three days without it having a huge financial impact on its operation. That's why we have to take these extraordinary measures to allow this to happen.

It's well and good—and I can get into the lawyer jokes here, but I won't; I'm pulling back from it—but we can't allow ourselves the luxury of suggesting what you might suggest as far as the injunction is concerned, or all that process, to take place. There isn't the time for that process to take place.

Mr. Tim Kennish: As I said, one of our concerns is that we think the law in this area is generally adequate. It will undermine the public confidence in the existing law, and that has already happened, as reflected in the private member's bill asking for those extreme powers to be extended across the whole sector of—

The Chair: I don't want to tell you what the success rate of private members' bills is, but that's another subject.

Mr. Tim Kennish: This one might have a bit more of an opportunity—

The Chair: In any event, I suppose we'll agree to disagree on this particular issue.

Mr. Tim Kennish: All right.

The Chair: Claude Drouin.

• 1050

[Translation]

Mr. Claude Drouin: Mr. Kennish, I would like to welcome you and thank you for your presentation. You dealt with many aspects in your executive summary. Some of these aspects are, in my opinion, contradictory. You start by saying that the Competition Act is legislation of general application and that it may not be the tool required at this level. You then give the example of the Canada Transportation Act. Is this legislation not too specific? Does it have the required provisions to govern a merger? Do you believe that the provisions of the Canada Transportation Act can resolve the situation?

[English]

Mr. Tim Kennish: My suggestion is that if you wish to deal with an industry-specific situation, and indeed one company, it would be more appropriate to do it with an order under the Canada Transportation Act, which is more focused on the transportation sector. That was my point.

[Translation]

Mr. Claude Drouin: Yes, but although you claim that the Competition Act is too general, would it not be the case that the Canada Transportation Act, on the contrary, is not specific enough to resolve the current issues? Do you believe that the Act, as currently designed, is capable of responding to that situation which, as you indicated in your arguments, is a singular one? Had the possibility of such a situation been provided for in the transportation Act? Does the Act contain all the necessary elements to respond to it?

[English]

Mr. Tim Kennish: There's a provision in the proposed amendments to the Canada Transportation Act that would allow a court to make an order against an industry player like Air Canada. It seems to me that's the more appropriate place to have these rules, if you wish to have a special set of rules for Air Canada set forth. By putting them in the Competition Act, you set up an entirely different set of standards and remedies than are generally applicable to all other industry. That was the point we were trying to make there.

[Translation]

Mr. Claude Drouin: You initially said that the Act was too general, and then that the measures contained in the bill threatened to undermine public confidence. Are we not, on the contrary, demonstrating here just how flexible the government is being in adjusting to special situations?

[English]

Mr. Tim Kennish: I would say that the Competition Act, in general, in relation to this area, is an effective instrument. By having in this situation a set of different, more extreme rules, particular powers, suggests to people, well, when we get a problem in this area, the existing law is not enough to deal with it and we need special powers. That is going to make people turn to the act and say the present act is not sufficient; it's obvious when they got into a situation where you have a dominant player that we had to have special rules brought in, and those special rules should apply in all dominant situations. We've said there isn't a case for that.

[Translation]

Mr. Claude Drouin: I am not sure that I understand you correctly, Mr. Kennish. You seem to be saying that whenever Parliament adopts a bill that is designed to amend existing legislation, it means that the legislation was not effective and could have been challenged. On the contrary, if we identify missing elements or situations that were not spelled out before and should be added in the public interest, I think that we have the duty to bring corrections. This will perhaps not prevent people from challenging the legislation, but a government or a Parliament has the obligation to make the necessary adjustments and to improve statutes and regulations with a view to satisfying the public.

[English]

Mr. Tim Kennish: What we're saying is even if you accept that more extreme measures are needed in this particular case, the implication of bringing them into the Competition Act in this one situation raises the question about the adequacy of the provisions for dealing with other cases. We don't think there's a demonstrated need for change in the abuse of dominance provisions or in the interim injunction arrangements—subject to possibly speeding up the process—that is warranted.

• 1055

[Translation]

Mr. Claude Drouin: You therefore maintain that nothing justifies a change and that we have available all the elements to prove that... everything is in place to deal with the situation.

[English]

Mr. Tim Kennish: In general, we think the law has been effective in this area.

The Chair: Thanks, Claude.

[Translation]

Mr. Claude Drouin: Thank you, Mr. Chairman.

The Chair: Mr. Asselin.

Mr. Gérard Asselin (Charlevoix, BQ): The Competition Commissioner came before our committee to testify. I was somewhat reassured to learn that the Competition Bureau, and its commissioner in particular, had a role to play with regard to anti- competitive and unfair practices that are specifically aimed at eliminating another airline, which is something that takes place mainly in the regions.

In the French version of your simplified executive summary, you seem to be warning us that the Commissioner's powers, including his authority to issue this kind of order, are limited. This does not reassure me because the Competition Bureau representatives and Commissioner told us yesterday that problems related to the quality of services—for example, lost baggage and late flights—were not in their area of responsibility. The Competition Bureau becomes involved only when a complaint is filed, and then it conducts an investigation.

In the meantime, however, some small airlines may be in financial difficulty. Before filing a complaint, they try to weather the storm. They are facing competition that was not there before, which started with the arrival of Air Canada.

I could give you an example, Mr. Chairman. I live in Baie- Comeau. Air Nova, a subsidiary of Air Canada, offered one flight daily from Baie-Comeau to Montreal. A Baie-Comeau passenger who wished to travel to Quebec city had to land first in Montreal and then take another flight to Quebec city, and there was no possibility of returning the same day, which meant that the cost was considerable. This led Regionair to offer us daily flights from Baie-Comeau to Quebec city, with daily return flights.

Then came the merger of Canadian Airlines and Air Canada, and the departure of Inter-Canadien. Regionair was offering us round trip, same-day service from Baie Comeau to Quebec city, and then Air Nova decided to offer us two round trip flights daily from Baie-Comeau to Quebec city to Montreal. What will happen to Regionair with all this? It will disappear. Air Nova, the Air Canada subsidiary, will develop a monopoly and afterwards we will probably see a reduction in services. When that happens, the company will tell us that we have no other choices.

We Bloc Québécois members tabled a minority report in which we called for the appointment of an ombudsman or watchdog who would look at complaints from users and attempt to find solutions to the problems brought forward. The ombudsman would also be responsible for finding ways to improve the quality of the services provided by airlines and the services provided at each airport.

Do you agree with what I have said? Are my concerns justified? Is it reasonable to ask such questions? Bill C-26 does not provide me with many assurances in these areas.

[English]

Mr. Tim Kennish: One of the aspects of competition law in situations where there's an existing dominant player, arguably a monopolist, is that competition law at least tries to prevent the dominant player from preventing others from emerging as competitors. So a lot of the anti-competitive acts that are listed in the statute are directed toward the dominant person not taking action that disadvantages other competitors from entering the marketplace or competing.

The order-making authority comes right out of those sorts of situations. But in terms of what prices are charged and what sort of service is provided, that's really a function of the level of competition. Presumably, if there is inadequate competition, there will be an interest on the part of other people serving that marketplace, and the law is there to permit them to enter without interference from the major player. If you are concerned about prices in the absence of competition, I think you have to regulate to maintain limits on them or to try to establish other standards of service. This is why our law tries to prevent the emergence of parties in a monopoly position.

• 1100

The Chair: Very short, Mr. Asselin.

[Translation]

Mr. Gérard Asselin: On another subject, in paragraph 5 on page 2, you say that you do not agree that travel agents should be exempt from the provisions of the Competition Act when they negotiate their commissions collectively with airlines such as Air Canada.

[English]

Mr. Tim Kennish: There are very few groups that the legislation currently exempts from the prohibition on excessive collaboration, price fixing. Collective agreements are one area. I think fishermen as well have an exemption. But there are a lot of other groups of widely dispersed members in the industry, such as pharmacists and dentists, who would love to be able to get together and establish common pricing or common service levels, but they're not permitted to do so. It seems to us that there isn't any greater justification for the travel agents being in this position than these other groups. It's generally directionally contrary to where you want to be in competition law.

The Chair: Mr. McTeague, please.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you, Mr. Chairman.

Mr. Kennish, I apologize for not being here for your initial remarks.

I note that your submission on Bill C-26 does not reflect some of your verbal comments with regard to my Bill C-472. It's for that reason I find it important to actually hear from you in terms of some of the issues you think are important as far as changes in Bill C-26 with regard to cease and desist.

Am I correct in understanding that you have consulted widely with your membership on their position reflecting your position here today on cease and desist with regard to the airline industry?

Mr. Tim Kennish: As I explained earlier, Mr. McTeague, our views are set forth in the submission, and to the extent that we've gotten into other areas that go beyond what we've said, I can't speak for our section because we haven't consulted on that. But we have agreed views on these issues within the section. This is a presentation from the national competition law section of the Canadian Bar Association, and these are the views of the executive, that is, the representatives of the section.

Mr. Dan McTeague: Would the executive be made up of members from such firms as Davies, Ward & Beck, including Mr. Cal Goldman—

Mr. Tim Kennish: He's not a member.

Mr. Dan McTeague: —McMillan Binch, William Rowley, QC—

Mr. Tim Kennish: He is not a member.

Mr. Dan McTeague: —and finally, Madam Francine Matte from—

Mr. Tim Kennish: Stikeman Elliott, no.

Mr. Dan McTeague: —Stikeman Elliott? Okay.

Then my question is severalfold. You seem to have considerable concern about the commissioner having the right to make a temporary cease and desist order, not a permanent cease and desist order. Your concern, if I understand it, is no notice to parties.

I think you are concerned more generally about injunctions. Mr. Kennish, my reading of the Competition Act and the Clayton Act in the United States says they allow for a general injunctive application on almost any issue, including parties that may bring a matter to a court or have the FTC, the Attorney General of the United States, or the justice department involve themselves in that. Why do you have problems with the issue of injunction when other nations we do business with and for which your organization has been prominent in advocating a level playing field between us and them are resisting something that is patently available in U.S. law?

• 1105

Mr. Tim Kennish: Well, I think the unusual feature here is that these orders are being issued by the law enforcement official who's responsible for investigation in this area. As I quoted from the judgment of Chief Justice Dickson in the Hunter and Southam case, there is an incongruity between an official charged with enforcement responsibilities also having oversight of the authority to issue orders. He held in that case, and the court held, that it was contrary to due process to have that situation.

Mr. Dan McTeague: In that case, in 1995, the director of investigation then took the issue of Southam before the tribunal and ultimately before the court. The most interesting part of that was they found, in this case, a need to stop the merger. Ultimately, it's an interesting case you cite, but ironically, the outcome was very different. They stopped the merger with respect to Southam.

I'm interested in the comments of Mr. Dickson, but I'm more interested in the concerns of not providing equivalent rights and powers to our own commissioner that are otherwise available in the United States on the direction of the Attorney General, who has the same jurisdiction and who is an appointed official.

Mr. Tim Kennish: I'm not an expert, Mr. McTeague, on the U.S. process, but I believe they have to get orders from courts. At least the Department of Justice does.

Mr. Dan McTeague: Do you think the Commissioner of Competition would do his homework before issuing a cease and desist order? Why do you think he would do it willy-nilly without any evidence to strongly suggest something untoward is happening?

Mr. Tim Kennish: I think he would act responsibly, but on the other hand, the party who is on the receiving end doesn't have an opportunity to present its perspective on it or bring facts forward that the commissioner perhaps does not know, and is stuck with an order that it really only has the alternative of appealing.

Mr. Dan McTeague: Finally, I have a question.

Several of your members were involved in the global competition review. Was that something that was also undertaken by the Canadian Bar Association?

Mr. Tim Kennish: No. I believe that publication independently sponsored the survey, and I don't know how widely it was distributed or how extensively it was responded to. I know that lawyers in other jurisdictions were also invited to comment on their perceptions about that.

Mr. Dan McTeague: Mr. Kennish, I think you'll appreciate that we have a lot of work ahead of us, and that you and I and this House of Commons have a date with destiny. I think the position you're taking on cease and desist, and more alarmingly, the fact that you've introduced my bill, ensures that the status quo for most of us here on the Hill is not acceptable. We are looking for change. The changes for once include the interests of consumers and Canadians, not simply those who advocate or may for whatever reason be acting on behalf of certain vested interests in this country.

Mr. Tim Kennish: Well, there are other provisions of that bill—I can speak only personally on this—that I'm fully supportive of. This one I have trouble with.

Mr. Dan McTeague: Thank you.

The Chair: Thank you, Mr. McTeague.

Mr. Bailey.

Mr. Roy Bailey: Thank you, Mr. Kennish, and I accept your apology for not having the material here earlier. I have a very personal appreciation for a portion of what you find on page 13 of your presentation dealing with confidentiality. I don't know whether any other members of this committee were struck in the same way when this was part of the presentation by the Commissioner of Competition, but I thought—I'm not a lawyer—some of the material there was a bit unusual.

We often hear it said in the public or the press that they can't comment because this is at present before the courts. But after that decision is made, that information they're withholding becomes public information at that time, I would assume.

In this case you are talking about here, particularly in the second paragraph, it says that under this provision, the commissioner has the discretion not to turn over confidential information to other agencies. I find that a bit strange in dealing with the situation of this bill. I also find it a bit strange that he does not have to share that information with the minister. I find it a bit strange that the two may keep that information totally within themselves in the range of a public interest that we have in this bill. I don't know whether this is a common thing within a bill such as this, but I'd like your comment because I'm really concerned about this confidentiality bit.

• 1110

Mr. Tim Kennish: The present law permits the commissioner to decide whether he wishes to release the confidential information. Parties who provide confidential information clearly are most concerned about it becoming public.

That is one reason there's a certain amount of hype around this. Much of this information is actually in the commissioner's hands because it's required to be furnished by law. There may have been a search warrant or a subpoena; there may have been a filing required in connection with a merger. So this material is in his hands. Under the present law, I suppose the minister could ask for it and it could be provided. But this law changes that and in effect requires the commissioner to turn over that information.

Mr. Roy Bailey: Even though it was supplied in a confidential nature?

Mr. Tim Kennish: Yes. There is no reciprocity in the sense that while the commissioner is looking at the same issues and with a view to developing his comments, if the minister has confidential information, there is no necessary sharing; there is no similar reciprocal obligation. This is not a big point with us. We have made the point because we think there isn't a need for a change in the law here; if the commissioner wishes to turn over confidential information, if he thinks it's appropriate to do so, he's entitled to under the present law.

The Chair: Thank you, Roy.

Mr. Kennish, thank you very much for your submission to the committee and for answering our questions. We appreciate it.

Mr. Tim Kennish: Thank you very much for your time.

The Chair: Thank you.

Mr. Guimond, on a point of order.

Mr. Michel Guimond: I don't know....

The Chair: Maybe it's a point of information.

[Translation]

Mr. Michel Guimond: I would just like to give you notice of motion for our meeting on Tuesday, May 2. May I read it out immediately, Mr. Chairman, so as to notify my colleagues of the nature of this motion?

[English]

The Chair: Agreed.

[Translation]

Mr. Michel Guimond: This motion arises out of the meeting we held last Tuesday on the ADM. It is my opinion that neither a trusteeship nor a public enquiry would be warranted.

However, I have been told that the Transport Minister yesterday asked his departmental officials to go through the ADM's books, and in light of this, I table a notice of motion that reads as follows:

That the committee meet in six months and invite the management of the Aéroports de Montréal to appear again before it, in order to review this organization's management and assess the measures implemented to correct the labour relations, transparency and ethical problems raised during the committee's meeting of April 11.

[English]

The Chair: Your motion is filed with the clerk and will receive its 48 hours, but due to the fact that we're on a two-week break, we'll deal with it at the first meeting of our committee in May.

Are there any other interventions on this motion? I see none.

Colleagues, can you do me a favour, please? We have one witness at 3:30 p.m. today. It will only take about a half an hour. If we could make sure we have quorum here for us to hear the witness...I don't want to embarrass the witness by having none.

Mr. Drouin.

[Translation]

Mr. Claude Drouin: I would like Mr. Guimond's motion to specify that ADM representatives would be asked to appear in six months only if required. As Mr. Guimond indicated, the Department of Transport has already begun checking certain things. If the departmental officials conclude that the necessary work has been done, I do not think that it would be useful to invite ADM representatives back.

• 1115

[English]

The Chair: We're not going to get into the discussion on it now. It's just a notice of motion. We will have this discussion when we come back after the break.

Colleagues, we're adjourned until 3:30 p.m., in this room, please.