Competition Bureau settles case with Air Canada

The Competition Bureau and Air Canada have resolved their litigation before the Competition Tribunal concerning allegations that Air Canada had engaged in anti-competitive practices directed against low cost carriers WestJet and CanJet, in 2000 and 2001. In March 2001, the Bureau filed an application with the Tribunal seeking an order prohibiting Air Canada from operating flights on certain routes in eastern Canada at fares that did not cover their avoidable costs. The case was divided in two parts: phase one dealt with the application of the avoidable cost test and phase two would have determined if Air Canada had engaged in an abuse of dominant position under section 79 of the Act. The Tribunal’s phase one decision was released in June 2003. The Bureau believes that the principles established by the Tribunal will be relevant for future cases, which may arise in similar circumstances. “In light of the passage of time and the significant changes in the industry, we have concluded that it would not be in the public interest to pursue the second part of this case,”said Sheridan Scott, Commissioner of Competition. There have been significant changes to Canada’s airline industry since the litigation began in 2001, including the entry and growth of low cost carriers. Any future complaint of predatory pricing in the airline sector will be considered in the context of current competitive conditions. The Bureau has recently clarified its approach to enforcing these provisions in an open letter published on its web site on Sept. 23, 2004. In a release, Air Canada said it is pleased the matter has been settled and that an agreement has been reached that preserves its longstanding commercial relationship with alliance partner United Airlines, while providing the flexibility to continue building on the relationship for the benefit of both airlines and customers. “This agreement re-confirms that the long-standing alliance relationship between Air Canada and United which has provided more efficient and convenient service to customers will continue to be conducted in accordance with all applicable laws,”said Ben Smith, Air Canada’s executive vice-president and chief commercial officer. “In addition, this agreement provides the flexibility to implement a Canada-US transborder joint venture, an increasingly common practice in the global aviation industry, and one that is an important competitive consideration as the industry continues to evolve.”