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 (LS-361E)

This document was prepared by the staff of the Parliamentary Research Branch to provide Canadian Parliamentarians with plain language background and analysis of proposed government legislation. Legislative summaries are not government documents. They have no official legal status and do not constitute legal advice or opinion. Please note, the Legislative Summary describes the bill as of the date shown at the beginning of the document. For the latest published version of the bill, please consult the parliamentary internet site at www.parl.gc.ca.

HOUSE OF COMMONS		SENATE
Bill Stage	Date	Bill Stage	Date
First Reading:	17 February 2000	First Reading:	16 May 2000
Second Reading:	31 March 2000	Second Reading:	30 May 2000
Committee Report:	11 May 2000	Committee Report:	15 June 2000
Report Stage:	15 May 2000	Report Stage:
Third Reading:	15 May 2000	Third Reading:	20 June 2000

Royal Assent: Statutes of Canada N.B. Any substantive changes in this Legislative Summary which have been made since the preceding issue are indicated in bold print.

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

On 17 February 2000, the Minister of Transport introduced in the House of Commons 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 legislative initiative is the final step in a four-step process of which the first took place on 13 August 1999, when the Governor in Council issued an order pursuant to section 47 of the Canada Transportation Act to establish a 90-day process to facilitate the orderly restructuring of Canada’s airline industry in light of the financial position of Canadian Airlines International Limited.

The second step took place on 26 October 1999 with the Minister of Transport’s release of the government’s Policy Framework on Airline Restructuring in Canada. The Minister of Transport’s 21 December 1999 announcement that, following certain undertakings made by Air Canada to the Commissioner of Competition, the federal government was prepared to approve the Air Canada transaction to purchase Canadian Airlines, represented the third step in the process.

In announcing the Policy Framework, the Minister stated that implementation of some framework principles would require legislative action. Bill C-26 would implement those principles. In particular, the bill would amend the Canada Transportation Act, the Competition Act, the Competition Tribunal Act, the Air Canada Public Participation Act and the Access to Information Act.

In general terms, the proposed amendments to the Canada Transportation Act would:

The proposed merger and acquisition review process is consistent with the approach outlined in the Policy Framework on Airline Restructuring in Canada, although it would not implement the recommendation made by the House of Commons Standing Committee on Transport regarding mechanisms for expeditious decision making in extraordinary situations. Proposed changes related to passenger fares and exit provisions are consistent with the spirit of the recommendations made by the House of Commons Standing Committee on Transport and the Standing Senate Committee on Transport and Communications.

Clause 2 would add proposed sections to the Canada Transportation Act to provide a process for the review of mergers and acquisitions of air transportation undertakings. Section 114(1) of the Competition Act currently requires any person or corporation contemplating acquisitions or mergers to so notify the Commissioner of Competition. Proposed section 56.1(1) would require that person also to give notice, at the same time or earlier, to the Minister of Transport and the Canadian Transportation Agency (CTA); however, the Governor in Council could make regulations exempting certain classes of transaction from the obligation to give notice.

Subject to regulations that could be made by the Governor in Council pursuant to proposed section 56.6, the notice would have to contain the information required under section 114(1) of the Competition Act. Proposed section 56.7 would provide penalties for contravening proposed section 56.1(1), being a maximum of $25,000 for summary conviction or $50,000 for conviction on indictment.

If, after receiving the notice, the Minister felt that the proposed transaction raised no public interest concerns with respect to national transportation, he or she would give notice of this within 42 days and proposed sections 56.2 and 56.3 would not then apply to the proposed transaction.

Proposed section 56.2(1) would prohibit the completion of the proposed transaction unless it was approved by the Governor in Council and unless the CTA determined that the result would be an air transportation undertaking that was Canadian. A person violating this proposed section would, pursuant to proposed section 56.7, be guilty of an indictable offence and liable to imprisonment for a maximum term of five years or to a maximum fine of $10 million, or to both. In the event of contravention of the proposed section and on application by the Minister, after notifying the Commissioner of Competition, a superior court could order the person to cease the contravention or to do any thing required to be done. The court could also make any other order it considered appropriate, including that assets be divested.

Under proposed section 56.2(2), the Commissioner of Competition would report to the Minister and the parties to the transaction any concerns about the potential prevention or lessening of competition that could result from the transaction. After receiving the Commissioner’s report and before making any recommendation to the Governor in Council, the Minister would inform the Commissioner and the parties of any of his or her own national transportation concerns with respect to the proposed transaction and of any of the Commissioner’s concerns that he or she believed the parties should address with the Commissioner. After conferring with the Minister and the Commissioner, the parties would inform them of any measures they were prepared to take to address the Minister’s and the Commissioner’s concerns, including revisions to the transaction.

Proposed section 56.2(5) would require the Minister, prior to making any recommendation to the Governor in Council, to obtain the Commissioner’s assessment of the adequacy of any undertaking proposed by the parties to address the Commissioner’s concerns and the effects on those concerns of any proposed revisions to the transaction.

If satisfied that it would be in the public interest to approve the transaction, the Governor in Council could approve it and specify any appropriate terms and conditions, indicating those that related to the potential prevention or lessening of competition and those that related to national transportation concerns (proposed section 56.2(6)). Approval would take the form of an order made on the recommendation of the Minister after taking into account any revisions to the proposed transaction made by the parties and any measures they were prepared to take.

According to proposed section 56.7(2), parties subject to terms and conditions in an order would be obliged to comply with them or be guilty of an indictable offence and liable to imprisonment for a maximum five-year term or to a maximum fine of $10 million, or to both. As well, where there was a violation of any term or condition related to national transportation concerns, a superior court could, on application by the Minister after his or her notifying the Commissioner of Competition, order the person to cease the contravention or do any thing that was required to be done. The court could also make any other order it considered appropriate, including the divestiture of assets. Similarly, where the contravention related to potential prevention or lessening of competition, the Commissioner of Competition, after notifying the Minister, could make an application to a superior court, which could take similar actions.

Under proposed section 56.2(7), the Governor in Council could, on application by a party and on the recommendation of the Minister, vary or rescind the terms and conditions in the order to which the party was subject. If, however, these terms affected competition, the Minister would consult with the Commissioner of Competition prior to making the recommendation.

Proposed section 56.2(8) provides that if the Minister directed the CTA, under section 49, to inquire into any matter or thing to assist him or her in making a recommendation to the Governor in Council under proposed sections 56.2(6) or 56.2(7), the CTA would give notice of the inquiry to the Commissioner of Competition, who would be allowed to make representations to it. Section 49 of the Canada Transportation Act enables the Minister of Transport to direct the Canadian Transportation Agency to inquire into any matter or thing related to transportation that is under the legislative authority of Parliament, and to report its findings to the Minister.

Proposed section 56.3 would require the CTA to determine whether a proposed transaction would result in an air transportation undertaking that was Canadian.

Finally, proposed section 56.6 would allow the Governor in Council, on the recommendation of the Minister, to make regulations exempting classes of transactions from the application of proposed sections 56.1 through 56.3.

Proposed section 56.4 would address circumstances - other than those involving a merger or acquisition - that would result in substantial or complete control over domestic air services. In particular, if the Governor in Council felt that a licensee and its affiliated licensees had acquired, or were about to acquire, substantial or complete control over domestic services, it could order them to take any action considered reasonable and necessary to protect the public interest from the consequences of that control, and could require the divestiture of assets. The proposed provision would apply to circumstances that arose after 26 October 1999 and that involved a transaction other than a merger or acquisition approved under proposed section 56.2. The order would be made on the recommendation of the Minister, on the condition that he or she obtained an assessment of the state of competition in the domestic airline industry from the Commissioner of Competition.

A person contravening the order would be guilty of an indictable offence and liable to imprisonment for a maximum five-year term or a maximum $10 million fine, or both. As well, a superior court could, on application by the Minister, after notifying the Commissioner, order the person to cease the contravention or do any thing that was required to be done. The court could also make any other order considered appropriate, including the divestiture of assets.

The Governor in Council could vary or rescind the order, on application by a person subject to it and on the recommendation of the Minister. If the change affected competition, however, the Minister would have to consult with the Commissioner before making the recommendation.

Clause 3 would amend sections 64(2) and (3) with respect to the notice that would have to be given by air carriers wishing to discontinue service. At present, sections 64 and 65 of the Canada Transportation Act require that the second to last and last carriers withdrawing services must give 60 days’ notice, although less notice may be required in certain circumstances. Under proposed section 64, a 120-day notice period would be restored and a carrier would have to give notice where more than 50% of weekly passenger seats were to be withdrawn, regardless of how many other carriers would remain serving that route.

In particular, under proposed section 64(1.1), a licensee would be required to give notice where it proposed to discontinue its year-round, non-stop scheduled air service between two points in Canada and such discontinuance would result in a reduction (compared to the week before the proposal was to take effect) of at least 50% of the weekly passenger-carrying capacity of all licensees operating between these two points. This notice would have to be given in the prescribed form and manner to the prescribed persons.

As soon as practicable after giving this notice, or the notice currently required by the Act for the second last and last carrier out of a market, the licensee would have to provide an opportunity for elected officials of the municipal or local government of the affected community or communities to meet with it and discuss the impact of the proposed discontinuance or reduction (proposed section 64(1.2)).

A licensee would be prohibited from implementing its proposal to discontinue or reduce service until the expiry of 120 days after the notice was given, or until the expiry of any shorter period that the CTA might specify by order, on application by the licensee. According to an amendment by the House of Commons Standing Committee on Transport, however, the 120-day period would be 30 days if the service had been in operation for less than one year. The 120-day period, an increase from the 60-day notice period currently in the Act, would apply with respect to proposed section 64(1.1) and existing section 64(1).

In deciding whether to specify a shorter period, the CTA would, in addition to observing existing guidance, also have to consider whether the licensee had complied with the proposed obligation to provide an opportunity to meet with elected officials of the affected community or communities.

Clause 4 would amend section 66 regarding the ability of the CTA to review fares. At present and on complaint, the CTA reviews basic passenger fares and fare increases on monopoly routes; it can disallow or reduce fares, or order refunds if appropriate. As amended, under section 66 the CTA would be able to review and take action with respect to a licensee’s and affiliated licensees’ cargo rates and rate increases on monopoly routes, as well as all passenger fares on monopoly routes. Moreover, the CTA would acquire rights regarding an inadequate range of passenger fares and cargo rates on monopoly routes.

On complaint, the CTA could take certain actions if it found that a licensee or its affiliated licensees was the monopoly provider of a domestic service between two points and that a passenger fare or cargo rate or an increase in either of these was unreasonable. For example, the CTA could, by order, disallow the passenger fare, cargo rate or increase; direct the licensee to lower any of these by the amounts and for the periods the CTA considered reasonable in these circumstances; or direct the licensee, if practicable, to refund specified amounts, with interest, to those it determined had been overcharged. Before making a direction about reducing fares, rates or their rate of increase, however, the CTA would be required to consider any representations by the licensee about what was reasonable in the circumstances. Proposed section 66(1) would differ from the current section in that it would recognize extended CTA authority regarding affiliated licensees, all passenger fares on monopoly routes, and cargo rates on monopoly routes.

If, on complaint, the CTA found that a licensee or its affiliated licensees was the monopoly provider of a domestic service between two points and was offering an inadequate range of passenger fares or cargo rates for that service, the CTA could direct the licensee, for a period it considered reasonable, to publish and apply one or more additional fares or rates it considered reasonable. Before making a direction, the Agency would consider any representations made by the licensee about what was reasonable in the circumstances.

Pursuant to proposed section 66(4), the CTA could deem a licensee to be the monopoly provider of domestic service between two points if it considered every alternative domestic service between those points to be unreasonable. In making this determination, the Agency would have to consider the number of stops, the number of seats offered, the frequency of service, the flight connections and the total travel time.

In determining whether a fare or rate or its rate of increase was unreasonable, or whether the range of rates or fares was inadequate, the Agency would have to consider: historical data on fares or rates applicable to domestic services between those two points; fares or rates applicable to similar domestic services offered by the licensee and one or more other licensees using similar aircraft (including the terms and conditions of carriage and the number of seats available at those fares); any other information provided by the licensee. According to an amendment by the House of Commons Standing Committee on Transport, if the determination was in respect of a cargo rate, an increase in a cargo rate or a range of cargo rates, the competition from other modes of transportation would also have to be taken into account.

While these proposed provisions would apply where a complaint was made, the Agency could, for two years after proposed section 66(6) came into force, make a finding without having received a complaint. This two-year period could be extended by order of the Governor in Council for a maximum of an additional two years. For the duration of the period, every licensee operating a domestic service between two points in accordance with a published timetable or on a regular basis would have to keep the Agency informed of its existing tariffs in respect of that service. As well, on request, the licensee would have to inform the Agency of the tariffs it had applied in respect of any of its domestic services during the previous three years, as well as providing the Agency with any information considered necessary and that was in support of those tariffs or related to the passenger seating or cargo capacity offered, or proposed to be offered, in relation to the fares or rates set out in those tariffs (proposed section 66(7)).

The Agency could take any measures, or make any order, it believed necessary to protect the confidentiality of certain information being considered in proceedings related to proposed section 66. In particular, this would apply to information that constituted a trade secret and that if disclosed would be likely to cause material financial loss to or prejudice to the competitive position of the person providing it (or on whose behalf it was provided), and that if disclosed would be likely to interfere with contractual or other negotiations being conducted by the person providing it (or on whose behalf it was provided).

Clause 6 would also add proposed section 67.1 regarding fares and rates not set out in a licensee’s tariffs. Whether or not a complaint had been made, the Canadian Transportation Agency could take action if it found that, contrary to proposed section 67(3), the holder of a domestic licence had applied a fare, rate, charge or term or condition of carriage to its domestic service that was not set out in its tariffs. The Agency could order the licensee to: apply a fare, rate, charge or term or condition of carriage set out in its tariffs; compensate any person adversely affected for expenses incurred as a result of the licensee’s failure to apply a fare, rate, charge or term or condition of carriage set out in its tariffs; and take any other appropriate corrective measures.

Furthermore, if, on written complaint, the Agency found that the holder of a domestic licence had applied unreasonable or unduly discriminatory terms or conditions of carriage to its domestic service, it could suspend or disallow those terms or conditions and substitute others. The holder of a domestic licence would not be permitted to advertise or apply any term or condition of carriage that had been suspended or disallowed.

Clause 7 would amend section 68 to forbid exclusive use contracts. In particular, a contract between a holder of a domestic licence and another person could not include provisions for the other person’s exclusive use of a domestic service operated by the domestic licence holder between two points in accordance with a published timetable or on a regular basis unless the contract was for all or a significant portion of the capacity of a flight or a series of flights. As amended, a domestic licence holder that was a party to such a contract would be required to retain a copy of it for at least three years after it had ceased to have effect and during that time would have to provide the CTA with a copy, on request.

Clause 8 would extend the regulation-making authority of the Canadian Transportation Agency. It would amend section 86(1)(h) to enable the Agency to make regulations with respect to its authority to direct a licensee to take appropriate corrective action (including suspension, disallowance or substitutions to the terms and conditions of carriage) and to pay compensation to a person for expenses incurred by the licensee’s failure to apply the fares, rates, charges or terms or conditions of carriage applicable to its service as set out in its tariffs.

Under proposed amendments to the Competition Tribunal Act, a member of the Competition Tribunal sitting alone could hear and dispose of any application for review against a temporary order issued by the Commissioner of Competition respecting anti-competitive acts affecting domestic air services. Proposed changes to the Competition Act would:

The proposed changes to the Competition Act would implement certain principles in the government’s Policy Framework for Airline Restructuring in Canada, as well as certain recommendations made by the House of Commons Standing Committee on Transport and the Standing Senate Committee on Transport and Communications.

Clause 11 would add proposed section 4.1 to the Competition Act to give travel agents the right to "negotiate" commissions with air carriers in certain circumstances. Under the proposed section, sections 45 and 61 of the Competition Act would not apply to a contract, agreement or arrangement between or among travel agents dealing solely with the negotiation of travel agents’ commissions on ticket sales for domestic flights paid by an airline which, with its affiliates, represented at least 60% of the revenue passenger-kilometres of all domestic air services over the 12 months immediately before the contract, agreement or arrangement was entered into. Sections 45 and 61 respectively address the issues of conspiracy and price maintenance.

If, on application by an airline, the Competition Tribunal found that an airline and its affiliates had represented less than 60% of the revenue passenger-kilometres of all domestic services over the 12 months immediately prior to the application, it would issue a certificate to that effect. Sections 45 and 61 of the Competition Act would then apply in respect of that airline. If, on application by a travel agent, the Competition Tribunal found that an airline holding a certificate and its affiliates had represented at least 60% of the revenue passenger-kilometres of all domestic services over the 12 months immediately prior to the application, it would revoke the certificate. Prior to issuing or revoking a certificate, the Competition Tribunal would give the Commissioner of Competition a reasonable opportunity to be heard; in the latter case, the affected airline(s) would also be afforded this opportunity.

Clause 16 would amend the Competition Tribunal Act to permit the hearing of applications by travel agents and airlines with respect to whether an airline had held more or less than 60% of the revenue passenger-kilometres of all domestic air services over the immediately preceding 12 months.

Clause 12 would add proposed section 29.1 to the Competition Act regarding the sharing of information. Clause 20 would make a consequential amendment to the Access to Information Act.

Under proposed section 29.1 and notwithstanding section 29(1), the Commissioner of Competition could, if so requested by the Minister of Transport, communicate or allow to be communicated to him or her: the identity of any person from whom information had been obtained under the Act; any information obtained in the course of an inquiry under section 10; any information obtained under section 11, 15, 16 or 114; any information obtained from a person requesting a certificate under section 102; whether notice had been given or information supplied in respect of a particular proposed transaction under section 114; and any information collected, received or generated by or on behalf of the Commissioner, including compilations and analyses.

Requests by the Minister of Transport would have to be in writing, specify the information required, state that the Minister of Transport required the information for the purposes of proposed section 56.1 or 56.2 of the Canada Transportation Act, and identify the transaction being considered. The information communicated to the Minister could be used only for the purposes of proposed section 56.1 or 56.2. To ensure confidentiality, no person who performed or had performed duties or functions in the administration or enforcement of the Canada Transportation Act would be able to communicate information disclosed to the Minister of Transport, or allow such to be communicated, to any persons other than those performing duties or functions under proposed section 56.1 or 56.2.

Although the Competition Act already contains provisions regarding predatory behaviour, further provisions would be added with respect to such behaviour within the airline industry. Clause 13 would amend section 78(1) and add proposed section 78(2) to permit the Governor in Council, on the recommendation of the Ministers of Industry and of Transport, to make regulations specifying anti-competitive acts or conduct by a person operating a domestic air service and, as amended by the House of Commons Standing Committee on Transport, facilities or services essential to the operation of an air service. According to an amendment by the Committee, anti-competitive acts on the part of a person operating a domestic service could include denial of access to facilities on reasonable commercial terms or refusal to supply such facilities or services on reasonable terms.

Moreover, proposed section 104.1, regarding temporary orders to prohibit such acts or conduct, would be added (clause 15). In particular, the Commissioner of Competition could make a temporary order prohibiting a person operating a domestic air service from doing an act or thing that the Commissioner felt could constitute an anti-competitive act. The Commissioner could also require the person to take steps to prevent injury to competition or harm to another person. These provisions would apply where the Commissioner had started an inquiry under section 10(1) of the Act as to whether the person had engaged in conduct that was reviewable under section 79, and where the Commissioner believed either that the absence of a temporary order would cause injury to competition that could not adequately be remedied by the Competition Tribunal or that a person would likely be eliminated as a competitor, suffer a significant loss of market share or revenue, or suffer other harm that could not be adequately remedied by the Tribunal. The Commissioner would file the order with the Registry of the Competition Tribunal and, once registered, the order would be enforceable as if it were an order of the Tribunal. When an order was in effect, the Commissioner would proceed as expeditiously as possible to complete the investigation arising out of the conduct that had given rise to it.

Before making a temporary order, the Commissioner would not be obliged to give notice to, or receive representations from, any person, but would be required to give written notice promptly of the order and the grounds for it to every person against whom it was made or who was directly affected by it. A temporary order would have effect for 20 days; this order could be extended for one or two periods of 30 days each, or could be revoked, in which case the Commissioner would promptly give written notice of the extension or revocation to the relevant parties.

Moreover, a person against whom a temporary order had been made could, within the 20-day period, apply to the Competition Tribunal to have the order varied or set aside; the Commissioner’s order would remain in effect until the Tribunal made an order. The Tribunal would have to make an order confirming the temporary order, with or without variation as it considered necessary and sufficient for the circumstances or (in an amendment by the House of Commons Standing Committee on Transport) setting the temporary order aside; the period of this order would be a maximum of 60 days after the day it was made. The decision of the Tribunal would be based on whether or not it believed that there was likely to be injury to competition that it could not adequately remedy or whether a person was likely to be eliminated as a competitor, suffer a significant loss of market share or revenue, or suffer other harm that it could not adequately remedy. The applicant would give notice of the application to all relevant parties. At the hearing and before any order was made, the Tribunal would have to provide the applicant, the Commissioner (the respondent) and any person directly affected by the Commissioner’s order with a full opportunity to present evidence and make representation.

Clause 16 would amend the Competition Tribunal Act to permit the hearing of applications by a person against whom the Commissioner of Competition had made a temporary order.

The proposed changes to individual share ownership in Air Canada, and the foreign ownership limit, are less than the limits recommended by the House of Commons Standing Committee on Transport and the Standing Senate Committee on Transport and Communications. The proposed change related to official languages, however, as well as the commitments and undertakings made by Air Canada and Canadian Airlines International Limited to the Minister of Transport and the Commissioner of Competition, are consistent with many of the recommendations made by the Committees about airport slots and facilities, interlining, surplus aircraft, service to small and remote communities, travel agent remuneration and protection for airline employees.

Clause 17 would amend sections 6(1)(a) through (c) of the Air Canada Public Participation Act to increase to 15% from 10% the voting shares that could be held by any one person, and to allow the Governor in Council, by regulation, to increase beyond 25% the voting shares in Air Canada that could be held by foreign entities. The definition of the term "Canadian" in section 55 of the Canada Transportation Act already contains a reference to the Governor in Council’s ability to alter by regulation the 25% foreign ownership limit. These proposed provisions on individual share ownership and the possibility for the Governor in Council to increase the 25% foreign ownership restriction would be included in the articles of continuance of Air Canada.

Clause 18 would add proposed section 10(2) to the Air Canada Public Participation Act regarding the provision of services in either of Canada’s official languages. In particular, where an Air Canada subsidiary provided or made available air services, including incidental services, Air Canada would have a duty to ensure that customers could communicate with the subsidiary about, and obtain, those services in either official language where these would be so provided by Air Canada pursuant to Part IV of the Official Languages Act.

One year after the proposed section came into force, it would apply in respect of air services, including incidental services, provided or, (according to an amendment by the House of Commons Standing Committee on Transport) made available by an Air Canada subsidiary at a facility or office in Manitoba, British Columbia, Saskatchewan, Alberta, the Yukon Territory, the Northwest Territories or Nunavut, or on a route wholly within those provinces, if it had been a subsidiary on the day that it came into force. It would apply in the other provinces immediately on coming into force. An entity that became a subsidiary after the proposed section came into force would have three years to comply and the Governor in Council could, by order made on the recommendation of the Minister of Transport, extend the period to a maximum of four years. According to an amendment made by the House of Commons Standing Committee on Transport, these periods for compliance would also apply to Canadian Airlines International Ltd. and Canadian Regional Airlines Ltd. if they became subsidiaries of Air Canada before proposed section 10(2) of the Air Canada Public Participation Act came into force.

According to an amendment made by the House of Commons Standing Committee on Transport, with respect to a subsidiary referred to in proposed sections 10(2) or (7): "incidental services" would include ticketing and reservation services; information, including notices and announcements, that it published or caused to be published to inform its customers about its routes or tariffs; services provided or made available to customers at an airport, including the control of passengers embarking and disembarking, announcements directed at customers, and counter services; and services related to baggage or freight claims and client relations.

These obligations on Air Canada would also apply if Canadian Airlines International Limited, Canadian Regional Airlines Ltd. or an Air Canada subsidiary replaced Air Canada or one of its subsidiaries in providing an air service that Air Canada or its subsidiary had provided on or after 21 December 1999.

Clause 19 would amend the Air Canada Public Participation Act by adding proposed section 10.1, under which the acquisition discussed in a 21 December 1999 letter from 853350 Alberta Ltd. and Air Canada to the Minister of Transport would be deemed a transaction approved by the Governor in Council under proposed section 56.2(6) of the Canada Transportation Act on the day the proposed section came into force.

Moreover, the commitments made in that letter would be deemed to be terms and conditions of an order made under proposed section 10.1 and relating to national transportation concerns; they would be binding and enforceable. As well, the undertakings provided by the two companies to the Commissioner of Competition, as set out in Annex A to a letter from the Commissioner dated 21 December 1999, would be deemed to be terms and conditions of an order made under proposed section 56.2(6) relating to potential prevention or lessening of competition; they would be binding and enforceable.

These commitments and undertakings require Air Canada to take action in a number of areas, including: surrendering slots and offering facilities at airports for a certain period; providing service to communities currently served by Air Canada, Canadian Airlines International Limited and their wholly owned subsidiaries for a three-year period; making a commitment for no involuntary layoffs or relocation of unionized employees of Air Canada, Canadian Airlines International Limited or their wholly owned subsidiaries for a two-year period; offering, on a right of first refusal basis, surplus aircraft for sale to Canadian air carriers for a three-year period; offering Canadian Regional Airlines Ltd. for sale for a 60-day period; providing Canadian air carriers access to Air Canada’s frequent flyer program for a five-year period; providing access to interlining and joint fare agreements; changing the manner in which incentive override commissions are paid to travel agents for a five-year period; and not starting any discount air carrier offering domestic service flights originating and terminating in Eastern Canada before 30 September 2000, if no other Canadian air carrier (other than WestJet) commenced such service, and before 30 September 2001, if another Canadian air carrier did so.

It is understood that 853350 Alberta Ltd., Air Canada and the Commissioner of Competition will review the undertakings three years after the transaction date to determine whether the companies should be relieved of any undertakings or whether any undertakings should be altered.