Competition Bureau 'failed to protect the public' in Northern airlines investigation, says advocate

An airline passenger rights advocate says the federal Competition Bureau 'failed to protect the public' in its acquittal of northern airlines amid allegations of predatory pricing.

Gabor Lukacs says the bureau was 'overly generous' with First Air and Canadian North

An airline passenger rights advocate says the federal Competition Bureau 'failed to protect the public' in its acquittal of Canadian North and First Air amid allegations of predatory pricing. (Patrick Nagle/CBC)

An airline passenger rights advocate says the Competition Bureau "failed to protect the public" in its acquittal of northern airlines amid allegations of predatory pricing.

On Tuesday, the bureau released its findings from a lengthy investigation into First Air and Canadian North's business practices, prompted by a one-of-a-kind seat sale by the airlines last year.

The sale saw the airlines drop their prices to an unprecedented below-$500 fare for a one-way ticket along the Ottawa-Iqaluit route, undercutting the brand new discount air service GoSarvaq. The newcomer folded shortly thereafter, without making any flights, and the airlines returned their prices to the normal $1,200. Passengers haven't seen such a discounted sale since.

The bureau noted the alleged predatory pricing likely had an impact on GoSarvaq's demise, but found the seat sale to be within the law since the airlines weren't making less money than not flying at all — formally known as operating above the "average avoidable cost."

"I have no doubt that if an airline is engaging in a business activity where the revenue is below the average avoidable cost, that would be predatory pricing. But I don't think this is the only way of predatory pricing when there's a direct link between your sale and the announcement of entry [into the market]," says Gabor Lukacs, an airline passenger rights advocate.

Airline passenger rights advocate Gabor Lukacs says GoSarvaq may have had a poor business plan, but it never got a fair chance to try it out. (CBC)

Lukacs added he thinks the bureau was "overly generous" with First Air and Canadian North in this case, highlighting how the sale wasn't normal practice before GoSarvaq launched, and how GoSarvaq did eventually go out of business.

"That shows that, effectively, the bureau failed to protect the public here. Whether it's the law being too strict, or the law being interpreted too strictly, that's for someone else to form an opinion on," Lukacs said.

"I don't think GoSarvaq was viable, but I don't think they had a fair chance to try their business model in this situation. Something doesn't add up."

Findings 'frustrating,' GoSarvaq says

On Wednesday, GoSarvaq's vice-president Al Hayward reitered his thanks to the bureau for taking on the investigation.

"It's a little frustrating, but we acknowledge their decision," Hayward said, when asked if it's the finding he'd expected.

As for the findings on the avoidable costs, Hayward said it's telling.

"I can't speak to the profit motives or the business plans of the legacy carriers, but I can tell you that since we exited the market, when we tried to get in there, we haven't seen prices as low as $299 since our exit. So that says a lot."

Codeshare agreement out of bureau's jurisdiction after dissolving

Meanwhile, many northern travellers took to social media to question why the Bureau didn't following through on its investigation into the codeshare agreement between First Air and Canadian North after the agreement was dissolved in May.

In its report, the bureau said ending the agreement "resolved the bureau's concerns with respect to the codeshare."

In fact, the bureau had no jurisdiction to finish its investigation once the agreement was over.

Canada's Competition Act — specifically the section which deals with competitor collaborations — only gives investigators jurisdiction over proposed and existing agreements. 

"Unless the Commissioner [of competition] has initiated proceedings before the courts, we no longer have jurisdiction to take action with respect to agreements that occurred in the past," said Anthony Durocher, the deputy commissioner of monopolistic practices at the Competition Bureau.

Even though the bureau went to Federal Court to obtain an order for the airlines to provide more information for its investigation, Durocher said that was only for the investigation part of the process, not the enforcement part, and therefore it wasn't far enough into the process to see the investigation through.

Durocher also said the bureau hadn't yet completed its investigation into the codeshare agreement.

About the Author

Nick Murray

Nick Murray is a CBC reporter, based in Iqaluit since 2015. He got his start with CBC in Fredericton after graduating from St. Thomas University's journalism program. He's also worked two Olympic Games as a senior writer with CBC Sports. You can follow Nick on Twitter at @NickMurray91.

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