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Report to the Minister of Transport and the Parties to the Transaction Pursuant to Subsection 53.2(2

Report to the Minister of Transport and the Parties to the Transaction Pursuant to Subsection 53.2(2) of the Canada Transportation Act

Proposed Merger of Bradley Air Services Limited, d.b.a. First Air, and Canadian North Inc.

Executive Summary

Introduction

This report is being provided to the Minister of Transport ("the Minister") further to the Minister’s determination that the proposed merger between Canadian North Inc. ("Canadian North") and Bradley Air Services Limited ("First Air") (the "Proposed Transaction") (each of Canadian North and First Air will be referred to individually as a "Party" and collectively, as "the Parties") raises issues with respect to the public interest as it relates to national transportation pursuant to subsection 53.1(5) of the Canada Transportation Act ("CTA"). Subsection 53.2(2) of the CTA requires that the Commissioner of Competition ("the Commissioner") report to the Minister and the Parties within 150 days on any concerns regarding potential prevention or lessening of competition that may occur as a result of the transaction. The Commissioner has determined that the Proposed Transaction is likely to result in significant competition concerns with respect to the provision of scheduled passenger and cargo services on all of the Parties’ overlapping routes with the exception of Edmonton — Yellowknife. The merged entity is likely to have the ability and incentive to materially raise prices and lower the quality of service to passengers and cargo customers on all affected routes except Edmonton-Yellowknife if the Proposed Transaction proceeds in its current contemplated form.

Approach

In assessing the potential competitive effects of a merger, whether under the Competition Act or pursuant to subsection 53.2(2) of the CTA, the Commissioner assesses whether a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially. The Bureau’s analytical approach to merger review is set out in its Merger Enforcement Guidelines. The Commissioner assesses the potential competitive effects of a merger transaction by applying the test set out in section 92 of the Competition Act, having regard to the factors identified under section 93 of the Competition Act. The CTA does not contemplate an efficiencies analysis consistent with section 96 of the Competition Act. The Bureau’s assessment of the Proposed Transaction included review of a variety of sources of information, including the Parties’ strategic, marketing and business planning documents, data received from the Parties and other market participants, and interviews with over 60 market participants, including approximately 15 in-person interviews. The Bureau also retained two independent experts:

  1. an economic expert, who provided views on the competitive effects likely to result from the Proposed Transaction, and
  2. a financial expert, who provided views on the financial viability of the Parties and their respective operations.

Concerns Regarding Potential Prevention or Lessening of Competition

First Air and Canadian North are airlines providing passenger and cargo services to, from and within Nunavut and the Northwest Territories. Air services play an important role in economic development, interconnectedness among communities, and the supply of food, healthcare and other goods and services in Canada’s North.

The Commissioner’s analysis has raised the following concerns with respect to a potential prevention or lessening of competition that may occur as a result of the Proposed Transaction:

  1. The Proposed Transaction is likely to result in a substantial lessening of competition with respect to the provision of passenger travel and cargo services on all overlapping origin-destination pairs except Edmonton-Yellowknife, including on the Ottawa–Iqaluit route and the Trans-Arctic route, and within the Kitikmeot region, the Qikiqtaaluk region, and the Mackenzie Valley region; and
  2. The Proposed Transaction is not likely to result in a substantial lessening or prevention of competition for the Edmonton-Yellowknife origin-destination pair due to competition from national carriers.

In particular, in the Kitikmeot region, the Qikiqtaaluk region, the Mackenzie Valley region, the Ottawa–Iqaluit route and the Trans–Arctic route, the Parties are the only airlines offering scheduled service on the overlapping routes and as a result, the Proposed Transaction represents a merger to monopoly on a significant number of overlapping origin-destination pairs.

On each of these routes, the Bureau did not find that entry or expansion by competitors would likely constrain an exercise of market power. The Bureau concluded that barriers to entry or expansion in the relevant passenger and cargo markets are high, and also relatively distinct from those found in air transportation markets outside Northern Canada. Potential entrants face challenges such as unpredictable weather, requirements for specialized equipment, regulatory requirements, access to feed traffic, and capital costs associated with acquiring or leasing aircraft as well as securing infrastructure such as hangars, cargo handling facilities, and other equipment. The Bureau found that major contracts, such as those with large cargo customers or governments, represent a significant proportion of revenues on the relevant routes, and are therefore key to viable operations. The Bureau recognizes that major customer contracts, including those relating to governmental travel and recurrent cargo deliveries, may be important to potential competitors, and perhaps even necessary to make entry viable in the short term.

The effects of the transaction are likely to include reductions in passenger and cargo capacity, increases in price, and reductions in flight schedules. The Bureau’s economic expert found that the Proposed Transaction was likely to result in significant and material price increases for passenger and cargo customers in the Kitikmeot region, the Qikiqtaaluk region, the Mackenzie Valley region, and on the Ottawa-Iqaluit and Trans-Arctic routes. The Bureau also found that the Proposed Transaction may result in decreases in the frequency of passenger and cargo services on certain routes in the Qikiqtaaluk region, the Kitikmeot region, and the Mackenzie Valley region. The Bureau did not find that business failure was probable or likely to impact the Commissioner’s conclusions.

As a result, the Commissioner has concluded that the Proposed Transaction is likely to result in a substantial lessening of competition with respect to provision of passenger travel and cargo services in a variety of origin and destination pairs within the following regions: the Kitikmeot region, the Qikiqtaaluk region, the Mackenzie Valley region, the Ottawa-Iqaluit route and the Trans-Arctic route.

Should the Parties wish to inform the Commissioner of certain measures they are prepared to undertake to address these concerns pursuant to subsection 53.2(5) of the CTA, the Commissioner will provide an assessment of such measures to the Minister, pursuant to subsection 53.2(6) of the CTA.

1. Introduction

The Competition Bureau (the "Bureau") is an independent law enforcement agency that is responsible for, among other things, the administration and enforcement of the Competition Act. The Bureau’s mandate is to ensure that Canadian businesses and consumers prosper in a competitive and innovative marketplace. The Bureau recognizes that the airline industry plays a critical role in the Canadian economy, and that air travel is of particular importance in Canada’s North.

The Bureau has considerable experience and expertise assessing competition considerations in the airline industry, and has pursued enforcement cases before the Competition Tribunal and the Courts relating to air services under the Competition Act to safeguard competition in this pivotal industry. These include applications under the abuse of dominance provisions (sections 78 and 79), merger provisions (section 92), competitor collaboration provision (section 90.1), and provisions that prohibit cartels (section 45). A summary of key Bureau reviews in the airline sector is provided in Appendix A. In assessing the impacts of a merger to determine if it is likely to result in a substantial prevention or lessening of competition, the Bureau assesses the likely effects of the merger on price, output, and other dimensions of competition, such as quality, product choice, and service in accordance with its Merger Enforcement Guidelines, as informed by jurisprudence from the Competition Tribunal and the courts and accepted approaches in economic theory and practice related to the review of merger transactions.

Under the Canada Transportation Act ("CTA"), where the Minister of Transport (the "Minister") directs a public interest assessment of a proposed transaction pursuant to subsection 53.1(5) of the CTA, the Commissioner of Competition ("the Commissioner") is required to provide a report to the Minister and the parties on any concerns regarding potential prevention or lessening of competition that may occur as a result of the transaction. The Commissioner is also to provide an assessment to the Minister of the adequacy of any undertakings that may be proposed by the merging parties to address competition concerns raised in the Commissioner’s report. The Minister will then make a recommendation to the Governor in Council regarding whether the merger is in the public interest, taking into account both the Commissioner’s assessments and the Minister’s own review of public interest factors.Footnote1

This report outlines the Commissioner’s concerns relating to a potential lessening of competition resulting from the proposed merger of First Air and Canadian North (the "Proposed Transaction"), as contemplated by subsection 53.2(2) of the CTA (in this report, each of Canadian North and First Air will be referred to individually as a "Party" and collectively, as "the Parties").

As is outlined further below, the Commissioner’s views are the following:

  1. The Proposed Transaction is likely to result in a substantial lessening of competition with respect to the provision of passenger travel and cargo services on all overlapping origin–destination pairs except Edmonton–Yellowknife, including on the Ottawa–Iqaluit route and the Trans–Arctic route, and within the Kitikmeot region, the Qikiqtaaluk region, and the Mackenzie Valley region; and
  2. The Proposed Transaction is not likely to result in a substantial lessening or prevention of competition for the Edmonton–Yellowknife origin-destination pair due to competition from national carriers.

In particular, the Commissioner is of the view that the Proposed Transaction can be characterized as a merger to monopoly in the vast majority of the Parties’ overlapping origin and destination pairs and is likely to lead to significant and materially higher prices and lower quality services for air passengers and cargo customers. The Bureau did not find that business failure was probable or likely to impact the Commissioner’s conclusions.

The following sections describe the Bureau’s analytical framework, provide background information on the relevant air services markets in the North, and summarize the Commissioner’s analysis of concerns regarding competition and the Proposed Transaction.

2. LegislationFootnote2

Under the Competition Act, the Commissioner of Competition has jurisdiction to review merger transactions of any size and in any industry to determine whether they have, or are likely to have, the effect of preventing or lessening competition substantially. During the past three fiscal years, the Commissioner has conducted a review of an average of 219 transactions per year across all industries in Canada. Pursuant to Part IX of the Competition Act, parties to proposed transactions that exceed certain statutory and regulatory thresholds (and are not subject to any exemptions) are required to notify the Bureau and provide prescribed information prior to completing their transaction. After analysing a proposed transaction, the Commissioner:

  1. may allow the proposed transaction to proceed,
  2. may apply to the Competition Tribunal seeking an order to prohibit all or part of a merger or a remedy to address the competition concerns arising from the merger, or
  3. may enter into a consensual resolution with the parties to address competition concerns that is registered with the Competition Tribunal and has the force of a Competition Tribunal order.

Where a proposed transaction involving a transportation undertaking is subject to mandatory pre-merger notification under the Competition Act, the Minister must also be notified under the CTA. If the Minister is of the opinion that the proposed transaction raises issues with respect to the public interest as it relates to national transportation, the Minister may direct the Canadian Transportation Agency or another person to examine those issues. Further, subsection 53.2(2) of the CTA requires the Commissioner to report to the Minister and the parties to the transaction on any concerns regarding potential prevention or lessening of competition that may occur as a result of the transaction within 150 days after the Commissioner is notified of the proposed transaction under the Competition Act.

After receipt of the Commissioner’s report, the merging parties are to inform the Commissioner of any measures they are prepared to undertake to address the Commissioner’s concerns, if any, and the Commissioner shall provide an assessment of the adequacy of those measures to the Minister. The parties must also confer with the Minister on any measures they are prepared to take to address public interest concerns relating to national transportation. On the recommendation of the Minister, if the Governor in Council is satisfied that it is in the public interest to approve the proposed transaction, taking into account any revisions to it proposed by the parties and any measures they are prepared to undertake, the Governor in Council may approve the transaction and specify any terms and conditions that it considers appropriate. The Governor in Council shall indicate those terms and conditions that relate to potential prevention or lessening of competition and those that relate to the public interest as it relates to national transportation. Where a transaction has been approved under subsection 53.2(7) of the CTA, the Competition Tribunal cannot make an order under section 92 of the Competition Act in respect of that transaction.

The CTA requires the Commissioner to report to the Minister and the parties to the transaction on any concerns regarding potential prevention or lessening of competition. The Commissioner assesses the potential competitive effects of a merger transaction by applying the test set out in section 92 of the Competition Act, having regard to the factors identified under section 93 of the Competition Act. The CTA does not contemplate an efficiencies analysis consistent with section 96 of the Competition Act. In reporting to the Minister and the parties on concerns regarding potential prevention or lessening of competition pursuant to subsection 53.2(2) of the CTA, the Bureau has not conducted an efficiencies assessment consistent with section 96 of the Competition Act.Footnote3 Under section 92 of the Competition Act, the Bureau assesses whether a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially. A substantial prevention or lessening of competition results only from mergers that are likely to create, maintain or enhance the ability of the merged entity, unilaterally or in coordination with other firms, to exercise market power. Section 93 includes an assessment of acceptable product substitutes, barriers to entry, effective remaining competition, or any other factor which is relevant to competition in a market. The Bureau’s analytical approach to merger review, including its assessment of the section 93 factors, is set out in its Merger Enforcement GuidelinesFootnote4, and informed by jurisprudence from the Competition Tribunal and the Courts, and may include the following considerations:

  1. Market definition, including definition of both the relevant product and geographic markets. The Bureau defines markets in order to identify the set of products that customers consider to be substitutes for those offered by the merging parties, and the set or sets of buyers that could potentially face increased market power owing to the merger;
  2. Calculation of market shares and concentration in the relevant markets. The Commissioner generally is not concerned about the unilateral exercise of market power when the post-merger market share of a merged firm would be less than 35 percent;
  3. Analysis of anti-competitive effects based on quantitative techniques and evaluation of various factors including: the effectiveness of remaining competitors, countervailing power held by buyers, whether the business of a party to the proposed merger (or a part thereof) is likely to fail, and the likelihood that the transaction will result in the removal of a vigorous and effective competitor; and
  4. Analysis of barriers to entry and of the likelihood that timely entry by potential competitors would occur on a sufficient scale and with sufficient scope to constrain a material price increase (or other exercise of market power) in the relevant market.

In preparing this report, the Bureau collected a variety of information about air services in Northern Canada, in order to apply its framework to the particular nature of this region.

3. Sources of Information on which this Report is Based

The Bureau’s assessment of the Proposed Transaction included review of the following:

  • Submissions relating to the Proposed Transaction provided by the Parties, including statutory merger notifications under the Competition Act;
  • Documents provided by the Parties in response to a supplementary information request issued by the Bureau, including strategic, marketing and business planning documents relating to pricing, schedules and other dimensions of competition;
  • Data received from the Parties and other market participants, including financial statements, as well as transaction, ticketing, and flight data;
  • Strategic documents and business records provided by certain third parties; and
  • Interviews with over 60 stakeholders, including approximately 15 in-person interviews, in the relevant markets, including competitor airlines, various government representatives, passengers, cargo customers, and Inuit community representatives.

The Bureau also retained two independent experts:

  1. an economic expert, who provided views on the competitive effects likely to result from the Proposed Transaction, and
  2. a financial expert, who provided views on the financial viability of the Parties and their respective operations.

Information obtained by or provided to the Bureau in the course of its review is protected by section 29 of the Competition Act. The Bureau has the discretion to communicate such information only in limited circumstances as provided in section 29, and even when permitted, minimizes the extent to which confidential information is communicated. The Bureau recognizes that maintaining the confidentiality of information is essential to its ability to pursue its responsibilities, and to its integrity as a law enforcement agency.

3.1 Expert Analysis

3.1.1 Anti-Competitive Effects

The economic expert retained by the Bureau conducted an empirical analysis of the airlines’ passenger and cargo data, in order to quantify the likely anti-competitive effects of the Proposed Transaction. The expert’s analysis included an estimation of price and quantity effects in the relevant overlapping origin-destination pairs in which both Parties operate. The results of this analysis for each region are set out below in sections 7.4 to 7.9 of this report.

Data analyzed by the Bureau’s economic expert included flight data, ticketing and shipment data, and transaction-level information on the Parties’ pricing and revenues. Based on this information, the expert conducted a merger simulation analysis which included specifying a model of competition among airlines in the relevant origin-destination pairs, estimating key parameters such as customer demand, and simulating the price effects of the Proposed Transaction. The expert’s analysis considered key characteristics of passenger and cargo markets in the North. Despite the fact that the CTA does not contemplate an efficiencies analysis consistent with section 96 of the Competition Act, the Bureau’s economic expert concluded that the types of cost savings the Parties claimed were likely to result from the Proposed Transaction would not likely affect the results of the merger simulation analysis and predicted price effects.

3.1.2 Financial Analysis

The financial expert engaged by the Bureau conducted an analysis of the Parties’ respective networks through a review of financial statements, route-level revenue and cost data, and other information. The Bureau’s expert reported on key financial metrics at the corporate and route level, and provided views on the viability of the Parties’ operations. The expert’s views also informed the Bureau’s analysis of whether the Proposed Transaction was likely to result in the removal of a vigorous and effective competitor in the relevant origin-destination pairs, which is set out below in section 7.3 of this report.

4. Parties to the Proposed Transaction

Bradley Air Services Limited, operating as First Air, is an airline with headquarters in Kanata, Ontario. First Air operates a route network which includes 32 northern communities in the Northwest Territories, Nunavut and Nunavik, as well as the cities of Edmonton, Ottawa, and Montreal. Using its fleet of 13 turboprop and four jet aircraft, First Air offers scheduled passenger and cargo services throughout its network, as well as charter flights in a variety of regions. First Air reports carrying approximately 250,000 passengers and over 22 million kilograms of cargo and mail over its route network on an annual basis.

First Air is a wholly-owned subsidiary of Makivik Corporation. Makivik is a not for profit corporation which was incorporated on June 28, 1978 to

  1. administer the funds associated with the James Bay Northern Quebec Land Claim Agreement (JBNQA), a treaty under section 35 of the Constitution Act, 1982 as well as
  2. improve the means of action of Inuit Communities of Nunavik and the well-being of Nunavik Inuit on the whole.

Makivik Corporation participates in the Inuit Tapiriit Kanatami and the Inuit Circumpolar Council. Makivik Corporation also wholly owns Air Inuit, an airline with operations focused on the Nunavik region of Quebec.

Canadian North is an airline headquartered in Calgary, Alberta. Canadian North’s route network includes 16 communities in the Northwest Territories and Nunavut, as well as service to Edmonton and Ottawa. In addition to passenger and cargo services in these communities, Canadian North offers charter services to a variety of customers across North America, including resource customers, cruise and vacation lines, and sports teams. Canadian North operates a fleet of four turboprop and 12 jet aircraft, including aircraft in combi configuration.Footnote5

Canadian North is a wholly-owned subsidiary of the Inuvialuit Development Corporation ("IDC"), which is a subsidiary of Inuvialuit Regional Corporation ("IRC"). IRC was established in 1984 to represent Inuvialuit pursuant to the Inuvialuit Final Agreement, a land claims agreement within the meaning of section 35 of the Constitution Act, 1982. IRC participates in the Inuit Tapiriit Kanatami and the Inuit Circumpolar Council. IDC also has interests in two other providers of transportation services, Aklak Air and Canadian Helicopters Limited.

5. The Proposed Transaction

On July 6, 2018, Makivik and the Inuvialuit Corporate Group, which includes IRC and its subsidiaries, announced that they had signed an agreement in principle to merge First Air and Canadian North. On September 28, 2018, Makivik and IDC signed a definitive agreement to merge the two businesses. The Parties announced their intention to operate the new airline under the name "Canadian North" after the Proposed Transaction, while making use of the recently-updated First Air livery.

The Parties to the Proposed Transaction submit that the Proposed Transaction will result in various benefits including enhanced safety, improved schedules, better connectivity, and significant efficiency gains due to reductions in duplicate, under-capacity flights (and rationalization of other costs). When reporting to the Minister pursuant to subsection 53.2(2) of the CTA, the Bureau’s analysis is limited to concerns regarding competition, and it does not conduct an assessment of other public interest factors, or claimed or potential efficiencies other than those relevant to determining whether the Proposed Transaction is likely to result in a substantial prevention or lessening of competition.

6. Background: Air Transportation in Northern Canada

First Air and Canadian North are airlines with operations focused on Nunavut and the Northwest Territories. The Bureau’s analyses, and the findings presented herein, were informed by evidence of the unique nature of air transportation services in Canada’s North, as well as of the essential role of air services in Northern communities. The large geographic areas and limited road infrastructure in certain areas of the North result in a significant reliance on air services, and many of the communities served by First Air and Canadian North are accessible only by air for much of the year. Air services play an important role in economic development, interconnectedness among communities, and the supply of food, healthcare and other goods and services in much of Canada’s North.

The following sections discuss certain key aspects of the services provided by First Air, Canadian North, and other airlines in Northern Canada.

6.1 Geography of Air Transport in Nunavut and the Northwest Territories

First Air and Canadian North are among the largest airlines offering scheduled air services in Nunavut and the Northwest Territories, and operate route networks which connect these territories to cities in Southern Canada. The areas in which they operate can more precisely be outlined as follows:

  • Nunavut contains three administrative regions, the Qikiqtaaluk, Kivalliq, and Kitikmeot. The Qikiqtaaluk region is the most eastern region and includes the communities of Cape Dorset, Kimmirut, Iqaluit, Pangnirtung, Hall Beach, Igloolik, Qikiqtarjuaq, Clyde River, Pond Inlet, Arctic Bay, Resolute, Sanikiluaq and Grise Fiord. The central Kivalliq region includes the communities of Arviat, Baker Lake, Chesterfield Inlet, Coral Harbour, Naujaat, Rankin Inlet and Whale Cove. The Kitikmeot in the west includes Gjoa Haven, Kugaaruk, Taloyoak, Kugluktuk, Umingmaktok, and regional centre Cambridge Bay. The Proposed Transaction primarily affects the Qikiqtaalukand Kitikmeot regions, as well as the largest community in the Kivalliq, Rankin Inlet, as both Parties operate in these areas.
  • The Northwest Territories contains five administrative regions, the Dehcho, Inuvik, North Slave, Sahtu, and South Slave regions. The regions most relevant to the Bureau’s competition analysis are the Inuvik and North Slave regions, which include the communities of Inuvik and Yellowknife in the Mackenzie River Valley. The area including these two communities, where both Parties currently operate, will be referred to as the "Mackenzie Valley" region in this report.

As in other parts of Canada, air carriers in the North have developed "hub-and-spoke" networks for movement of passengers and cargo. Three primary hubs have been established for services in Nunavut and the Northwest Territories: Yellowknife (from which service is provided to the Kitikmeot and Mackenzie Valley regions, among others); Rankin Inlet (hub for services in the Kivalliq region); and Iqaluit (hub for service to the Qikiqtaaluk region). Airlines operate "trunk" routes in order to transport passengers and cargo among these hubs, as well as to and from destinations in Southern Canada including Edmonton, Winnipeg, and Ottawa.

6.2 Services Provided by Airlines in Northern Canada

Airlines in the North play an important role in the transportation of both passengers and cargo to remote communities. Carriers operating in Nunavut and the Northwest Territories serve various types of passengers, including:

  • Patients travelling for specialized medical care, pursuant to contracts between territorial governments and the airlines;
  • Territorial government employees travelling for their official duties, pursuant to contracts between governments and the airlines;
  • Passengers travelling pursuant to a variety of corporate contracts, which may provide discounts on prevailing fares or specific contracted fares;
  • Beneficiaries of the Nunavut Land Claims Agreement and the Inuvialuit Final Agreement, who may have access to fare discounts in certain circumstances (sometimes called "Pivut" or "Ilak" fares); and
  • Private customers purchasing tickets for personal travel, according to publicly available fare categories at the time of purchase.

Passenger travel in First Air and Canadian North’s networks includes a significant number of customers travelling to and from Southern gateways such as Edmonton, Ottawa, or Winnipeg (whether for personal, medical, or business reasons). From these gateways, interline agreements with carriers including Air Canada and WestJet allow passengers to travel to numerous additional destinations.

The majority of air cargo volume carried by airlines in Nunavut and the Northwest Territories relates to shipment of goods from Southern Canada to communities in the North. The transported cargo includes regular shipments of food, including deliveries of fresh or perishable products. Retailers and suppliers contracting with the airlines to transport nutritious food and certain other essential goods to isolated communities in Northern Canada may benefit from cargo subsidies provided by the Government of Canada through the Nutrition North Canada program. During fiscal year 2016–2017, for example, Nutrition North reports that 8,615,788 kgs of subsidized food and other goods were shipped to the Qikiqtaaluk and Kitikmeot regions of Nunavut, while 1,278,157 kgs were shipped to the Northwest Territories. Airlines in Nunavut and the Northwest Territories also transport more limited amounts of cargo among Northern Communities, including, for example, country foods.Footnote6

A significant proportion of cargo delivered to communities in Nunavut and the Northwest Territories by Canadian airlines is initially lifted from Southern airports (such as Ottawa and Winnipeg) to Northern hubs (including Iqaluit and Rankin Inlet) in combi jet aircraft or, where volumes are sufficient, in more efficient specialized cargo aircraft such as Boeing 767s. From these Northern hubs, final deliveries are often made to communities using turboprop aircraft in either combi or full-cargo configurations.

6.3 Market Dynamics in Northern Canada

The provision of air services in the North is unique as compared to other parts of Canada. The Commissioner’s assessment of competition included consideration of a number of particular characteristics of Northern air markets, including the following:

  • Operating conditions in the North may be more challenging than those in other regions, for a number of reasons. The climate of the North has challenging and unpredictable weather, which may result in an increased number of cancelled or redirected flights. The North covers large geographic areas with limited population density, which may result in lower demand on certain routes. Certain Northern airports offer shorter or unpaved runways, which require specific equipment, and operators may face additional hurdles including increased fuel costs and limited availability of staff. The Bureau remained mindful of these operating challenges throughout its analysis, and assessed evidence regarding their impact on competition.
  • Cargo represents a significant portion of air services provided to Northern communities, and operations often include aircraft in combi configuration in order to efficiently transport both passengers and cargo. Flight schedules may therefore be affected by demand for both passenger and cargo services.
  • A significant proportion of cargo deliveries in the relevant communities are made on behalf of relatively few large customers, including major retailers. Major customers make such purchases via contracts resulting from formal bidding or request for proposal processes, or through negotiations with airlines operating in the North. The loss of a major contract, or reductions in such business, may affect the viability of a particular service schedule in a given community.
  • A significant proportion of passenger travel to certain Northern communities can be attributed to a few large customers, including various governments. The Government of Nunavut, for example, reports spending $60,448,455 on medical travel with the airlines in 2017-2018, while the Government of the Northwest Territories maintains standing offer agreements with airlines relating to medical and duty travel. It is also commonplace to negotiate contracts with large corporate customers leading to discounted fares, and a large number of passenger purchases are made using "discount codes" for the relevant origin-destination pairs.

As will be described further below, the Commissioner considered these and other specific characteristics of Northern air markets which would be relevant to the analysis of the competitive effects of the Proposed Transaction.

7. Competitive Analysis

7.1 Relevant Markets

The Bureau defines markets in order to identify the set of products that customers consider to be substitutes for those offered by the merging parties. Defining markets allows the Bureau to identify participants in a relevant market to determine market shares and concentration level. Where the Bureau finds that a merger may raise competition concerns, it will typically identify one or more relevant markets in which competition is likely to be prevented or lessened.

First Air and Canadian North are among the primary airlines offering service to, from, and within Nunavut and the Northwest Territories. More specifically, both airlines currently provide scheduled services to the following communities within their networks:

Qikiqtaaluk (NU)

  • Iqaluit (YFB)

  • Cape Dorset (YTE)

  • Hall Beach (YUX)

  • Igloolik (YGT)

  • Pond Inlet (YIO)

  • Qikiqtarjuaq (YVM)

  • Pangnirtung (YXP)

Kitikmeot (NU)

  • Kugluktuk (YCO)
  • Cambridge Bay (YCB)
  • Gjoa Haven (YHK)
  • Taloyoak (YYH)
  • Kugaaruk (YBB)

Kivalliq (NU)

  • Rankin Inlet (YRT)

Mackenzie Valley (NWT)

  • Yellowknife (YZF)

  • Inuvik (YEV)

Southern Gateways

Throughout their networks, the Parties offer both passenger and cargo services, which constitute separate relevant product markets.

In previous reviews of airline markets, the Bureau has also generally considered different modes of transportation – e.g. air, rail, road, and marine – to belong to separate product markets. The Bureau found that this approach was also appropriate in the relevant areas of the Northwest Territories and Nunavut. The routes operated by the Parties often connect communities separated by great distances. Furthermore, throughout Nunavut, the affected destinations are "fly in/fly out" communities, where transport by road or rail is not available to customers as an alternative.

In many of the relevant communities, dry cargo may, in some circumstances, be seasonally transported from Southern ports via sealift. This approach is typically much more economical than air cargo, when available. The Bureau assessed documentary evidence and interviewed market participants concerning the use of sealift for cargo transport, and concluded that it was not typically substitutable with air cargo because, for example, air cargo is often used for perishable goods or time-sensitive deliveries, and sealift is available only on an annual basis for a short period. As a result, the Bureau concluded that air passenger services and air cargo services constituted separate relevant product markets in the overlap areas.

The Bureau has typically defined relevant geographic markets in transportation industries according to origin-destination pairs (e.g. Ottawa to Iqaluit), as service to an alternative origin-destination pair is generally not considered an adequate substitute. This approach has been adopted for both passenger and cargo markets. In the present case, the Bureau concluded that this was also the appropriate market definition for the relevant destinations in the Northwest Territories and Nunavut. Passenger and cargo purchases are typically made with origins and destinations predetermined, and include medical travel, deliveries of essential goods and other services for which itinerary changes due to small but significant and non-transitory price increases are unlikely to occur. Furthermore, as the relevant origins and destinations in the North are often geographically remote, and not connected to alternative airports by other means of transportation, the Bureau found that substitution to another origin-destination pair was typically not possible, for either passenger or cargo travel.

As a result, the relevant markets are comprised of origin-destination pairs offered on the Parties’ networks, for each of passenger and cargo services.

7.2 Barriers to Entry

The Bureau examined barriers to entry in the relevant markets, in order to assess whether timely entry or expansion would likely be sufficient to constrain a potential post-merger exercise of market power. The Bureau also sought to identify any potential poised entrant, or airline positioned to expand its operations in any relevant overlap market.

The Bureau concluded that barriers to entry or expansion in the relevant passenger and cargo markets are high, and also relatively distinct from those found in air transportation markets outside Northern Canada.

Airlines operating in the North face certain unique challenges, including:

  • Unpredictable weather which may result in cancelled or redirected flights with little notice;
  • Requirements for specific equipment, such as combi aircraft or aircraft adapted to shorter or unpaved runways; and
  • High fuel costs, challenges finding and retaining staff, costs associated with transporting equipment and resources from Southern suppliers, and other hurdles faced by Northern businesses.

Airlines wishing to enter markets in Canada’s North also face standard regulatory processes, reputational barriers, the need to establish feed traffic, the impact of frequent flyer programs (while the merging Parties are Aeroplan participants or operate their own rewards programs), and significant capital costs associated with leasing or purchasing aircraft. The merged entity is likely to represent the only potential interline partner for an entrant on the majority of the relevant routes, potentially restricting an entrant’s access to feed traffic. The Bureau’s review also found that successful entry into the relevant markets may require combi aircraft on certain routes, which are not typically operated by Southern carriers and may be costly to acquire or convert.

The Bureau reviewed evidence and conducted interviews regarding access to key inputs which may be required by entrants in the relevant markets, such as ground handling services, de-icing equipment, hangars, maintenance facilities, and cargo handling facilities, among others. In some cases, these facilities represent major investments which must be duplicated by potential entrants. While Northern airports typically have sufficient capacity for additional airlines, in some markets First Air and Canadian North are the only operators of particular infrastructure, such as de-icing, ground equipment or cargo facilities. In Iqaluit, for example, the lack of a cargo facility available to third parties may act as a barrier to entry into scheduled service in the Qikiqtaaluk region. Costs and delays associated with establishing such infrastructure may act as a significant barrier to entry.

Finally, the Bureau found that airlines in the North (and operating in the relevant markets) serve large geographic areas that are not densely populated, resulting in limited demand on many routes. As a result, economies of scope and scale may be difficult to achieve for new entrants. The Bureau recognizes that major customer contracts, including those relating to governmental travel and recurrent cargo deliveries, may therefore be important to potential competitors, and perhaps even necessary to make entry viable in the short term.

The Bureau also conducted interviews with, and requested information from, airlines across Canada in order to assess whether existing operators had plans to expand into the relevant markets, or may be poised for entry into the areas operated by the Parties. The Bureau did not find evidence that competitors were likely to establish a schedule service network in the relevant markets on a scale sufficient to constrain a potential exercise of market power by the Parties post-merger.

7.3 Removal of a Vigorous and Effective Competitor

The broad areas of overlap between the Parties prior to the transaction can be summarized as follows:

  • The Qikiqtaaluk Region, with regional hub Iqaluit;
  • The Kitikmeot Region, served from the Parties’ hubs in Yellowknife and with regional centre Cambridge Bay;
  • The Mackenzie Valley Region, also served from the Parties’ hubs in Yellowknife;
  • The Ottawa-Iqaluit Route, which is the primary trunk route (by passenger and cargo traffic) connecting to the Qikiqtaaluk region;
  • The Edmonton-Yellowknife Route, which connects the Parties’ hubs in Yellowknife to Southern Canada; and
  • The Trans-Arctic Route, which links Yellowknife to Rankin Inlet and Iqaluit, thus connecting the various regions of Nunavut with the Northwest Territories.

The Bureau reviewed a variety of evidence, including documents and data and conducted interviews with market participants, which confirmed that First Air and Canadian North were close competitors in the overlap areas. This included reviewing strategic and business documents relating to multiple dimensions of competition between the Parties, such as:

  • Passenger fares and cargo rates;
  • Auxiliary fees (e.g. baggage fees, surcharges) and service levels (e.g. delivery times); and
  • Scheduling and flight frequencies.

The Bureau found that the Parties were each other’s closest competitors with respect to services offered to the general public, as well as for corporate and governmental contracts concluded through negotiation or tender processes. Evidence indicated that seat sales and promotional efforts were frequently driven by competition between the Parties, and that baggage allowances, surcharges, and other passenger offerings were affected by such competition. Similar evidence was found with respect to rates offered to cargo customers. The Bureau conducted a systematic review of tender processes and negotiations relating to major passenger and cargo contracts, which account for a significant proportion of customer purchases, and found that the Parties were close competitors in such cases.

In each relevant market, the Bureau conducted an assessment of the likely competitive effects of the transaction. This assessment included an examination of price and non-price effects, including, where possible, an analysis of the likely effects of the Proposed Transaction on frequencies of service to communities within the Parties’ networks. The Bureau’s economic expert also conducted a merger simulation in order to estimate the competitive effects of the Proposed Transaction in each relevant market. The expert found that the Proposed Transaction would likely lead to significant and material price increases for passenger and cargo customers in the relevant markets. The Bureau does not base its conclusions regarding whether a transaction is likely to result in a substantial lessening of competition on a specific numerical threshold for price increases, but considers such analyses together with its assessment of factors likely to constrain price post transaction.

The Bureau also considered evidence (including expert analysis) relating to the viability of the Parties’ businesses. The Bureau does not attribute the loss of the actual or future competitive influence of a failing firm to the merger if imminent failure is probable and, in the absence of a merger, the assets of the firm are likely to exit the relevant market. The Bureau did not find that business failure was probable or likely to impact the Commissioner’s conclusions.

The Bureau’s findings with respect to competitive effects in the relevant markets are summarized on a regional basis below.

7.4 Analysis of the Ottawa-Iqaluit Route

7.4.1 Overview

The Ottawa-Iqaluit route is the highest-volume route in the overlapping areas. It serves as the primary passenger gateway between Southern cities and Canada’s Eastern Arctic, and is also used for the transport of significant volumes of cargo to and from Iqaluit and the Qikiqtaaluk region. Iqaluit is a primary hub for the receipt and handling of cargo, including food, ultimately delivered to more remote communities.

Both First Air and Canadian North operate a daily return service between Ottawa and Iqaluit, with flights travelling northward in the morning, and returning to Ottawa in the afternoon. Canadian North operates a daily combi service using a Boeing 737-300 aircraft, while First Air primarily uses a mix of 737-400 combi and passenger aircraft. First Air also supplements its cargo capacity on this route through the use of CargoJet 737-600 aircraft for heavy lift.

Table 1 provides an overview of the Parties’ schedules on the Ottawa-Iqaluit route.

Table 1: Flights Offered by First Air and Canadian North on the Ottawa-Iqaluit RouteFootnote7
Origin Destination Airline Mon Tues Wed Thurs Fri Sat Sun Aircraft
Ottawa Iqaluit First Air 915 915 915 915 915 915 915 737-400/400c
Canadian North 915 915 915 915 915 915 915 737-300c
Iqaluit Ottawa First Air 1345 1345 1345 1345 1345 1345 1345 737-400/400c
Canadian North 1330 1330 1330 1330 1330 1330 1330 737-300c

7.4.2 Market Concentration and Effective Remaining Competitors

First Air and Canadian North are the only airlines offering regularly scheduled service between Ottawa and Iqaluit. There are no alternatives to the Parties’ flights on this route for both passenger and cargo services.

7.4.3 Barriers to Entry and Expansion

Given the more substantial passenger and cargo volumes on this route, it is recognized as the route most likely to attract entry or expansion. Notwithstanding these increased volumes, the Bureau’s analysis, which included a review of strategic documents, interviews with market participants and potential competitors, and consideration of the history of entry in the relevant market, did not uncover evidence that entry or expansion by competitors would be likely, timely, or sufficient to constrain a potential exercise of market power on the Ottawa-Iqaluit route. Both a major national carrier (Air Canada) and a start-up airline (GoSarvaq) have failed in attempts to sustainably enter the Ottawa-Iqaluit market since 2010.

7.4.4 Anticompetitive Effects

The Bureau found that Ottawa-Iqaluit was among the routes most impacted by rivalry between the Parties. Evidence indicates that the Parties’ seat sales, pricing and marketing initiatives are frequently focused on Ottawa-Iqaluit. Both First Air and Canadian North offer significant cargo capacity on the route using combi or cargo aircraft, and are each other’s closest competitors in attracting corporate cargo customers. Stakeholders contacted by the Bureau regarding the Ottawa-Iqaluit route expressed concerns primarily relating to price, as opposed to concerns of a potential reduction in flight schedules.

The Bureau’s economic expert performed a merger simulation in order to estimate the effects of the Proposed Transaction on the Ottawa-Iqaluit route for each of passenger and cargo service. The expert found that the Proposed Transaction would result in significant and material price increases for passengers and cargo customers.

The Bureau’s analysis of non-price dimensions of competition on the Ottawa-Iqaluit route, including potential changes to flight schedules, indicates that the Proposed Transaction will likely lead to reductions in passenger or cargo capacity; however, the Bureau did not find evidence indicating that the Proposed Transaction was likely to result in a significant deterioration in the scheduling options offered to customers. Both the evidence reviewed by the Bureau and the Parties’ historical operations in the market indicate that the Proposed Transaction may lead to a staggering of flight times and increased consumer choice.

7.5 Analysis of the Qikiqtaaluk Region of Nunavut

7.5.1 Overview

Both First Air and Canadian North offer service connecting Iqaluit with various communities in the Qikiqtaaluk region of Nunavut. While First Air operates a broad network in the region, Canadian North’s coverage is more limited, with the result that the following communities are currently served by both Parties: Iqaluit, Pangnirtung, Qikiqtarjuaq, Pond Inlet, Igloolik, Hall Beach, and Cape Dorset. Canadian North serves the Qikiqtaaluk region with Dash 8 combi aircraft, while First Air operates using a combination of ATR 42-300 combi aircraft and ATR 42-500 passenger aircraft.

While the Parties offer similar service in most of the overlap communities, in some cases their current schedules are significantly differentiated, with the airlines offering staggered flight times or days of service. In several of the overlap communities, only First Air offers direct flights to and from Iqaluit, while both First Air and Canadian North offer flights connecting through other Qikiqtaaluk communities.

The Parties’ networks act as the primary means of transport for passengers and cargo between communities within the region, as well as to and from the regional hub in Iqaluit. There is no road access to the relevant communities in the Qikiqtaaluk region. The Parties operate cargo facilities in Iqaluit that allow for the storage of food and dry cargo, and the transfer of such cargo from large airplanes to smaller regional aircraft for delivery to communities.

Table 2 provides an overview of the Parties’ schedules in the Qikiqtaaluk region.

Table 2: Flights Offered by First Air and Canadian North in the Qikiqtaaluk Region
Origin Destination Airline Mon Tues Wed Thurs Fri Sat Sun Aircraft
Iqaluit Cape Dorset First Air 830 1430 830 1430 830   1600 ATR 42-300/500
Canadian North   1345 800 1415 900     Dash 8
Iqaluit Qikiqtarjuaq First Air     900   1500     ATR 42-300/500
Canadian North               Dash 8
Iqaluit Pangnirtung First Air 900
1500
1500   800 800 1330 900 ATR 42-300/500
Canadian North 1345 730   730 1345   1345 Dash 8
Cape Dorset Iqaluit First Air 1000 1600 1000 1600 1000   1700 ATR 42-300/500
Canadian North 1055 1535 1440 1605 1055     Dash 8
Qikiqtarjuaq Iqaluit First Air     1110         ATR 42-300/500
Canadian North               Dash 8
Qikiqtarjuaq Pangnirtung First Air   1745   1045 1700 1615   ATR 42-300/500
Canadian North   1025   1025     1640 Dash 8
Pangnirtung Iqaluit First Air 1045 1155
1850
1915 1150 1815 1720 1045 ATR 42-300/500
Canadian North 1520 1145   1145 1520   1800 Dash 8
Pangnirtung Qikiqtarjuaq First Air   1635   935   1505   ATR 42-300/500
Canadian North   945   945     1520 Dash 8
Iqaluit Igloolik First Air 1415   1515   1415   800 ATR 42-300/500
Canadian North               Dash 8
Iqaluit Pond Inlet First Air 1400 1500 1400 1400 715
1400
1400   ATR 42-300/500
Canadian North               Dash 8
Iqaluit Hall Beach First Air   730   730       ATR 42-300/500
Canadian North 1405 1405   1405 1405   1405 Dash 8
Igloolik Iqaluit First Air   1050   1050     1055 ATR 42-300/500
Canadian North           1020   Dash 8
Igloolik Pond Inlet First Air               ATR 42-300/500
Canadian North 1740 1740   1740 1740   1740 Dash 8
Igloolik Hall Beach First Air 1645       1645     ATR 42-300/500
Canadian North 945 945 945   945     Dash 8
Pond Inlet Iqaluit First Air   945
1830
945 945 945
1045
945 945 ATR 42-300/500
Canadian North               Dash 8
Pond Inlet Igloolik First Air               ATR 42-300/500
Canadian North 800 800 800   800 835   Dash 8
Hall Beach Iqaluit First Air 1735       1735     ATR 42-300/500
Canadian North 1040 1040 1040   1040     Dash 8
Hall Beach Igloolik First Air   955   955       ATR 42-300/500
Canadian North 1645 1645   1645 1645   1645 Dash 8

7.5.2 Market Concentration and Effective Remaining Competitors

First Air and Canadian North are the only airlines offering a scheduled service network including the relevant routes within the Qikiqtaaluk region. While airlines based outside the region may perform cargo deliveries from Manitoba or other regions of Nunavut to certain western areas of the Qikiqtaaluk (e.g. Cape Dorset, Hall Beach, Igloolik), no alternatives to the Parties’ networks exist for scheduled passenger and cargo service among the relevant communities.

7.5.3 Barriers to Entry and Expansion

In examining barriers to entry and expansion in the relevant markets, the Bureau notes that, in certain cases, competitors may be able to provide limited cargo services to communities in the west of the Qikiqtaaluk (e.g. Cape Dorset, Igloolik, Hall Beach) from bases located outside the region; however, in order to offer a regularly scheduled service comparable to that of the Parties on a competitive basis and on similar routes, as well as service passenger and small cargo customers, a base in Iqaluit would likely be required. This would likely require investments in infrastructure such as cargo facilities or ground equipment. Ultimately, there was no evidence gathered during the review indicating that entry or expansion by competitors would be likely, timely or sufficient to constrain a potential exercise of market power in the Qikiqtaaluk.

7.5.4 Anticompetitive Effects

Following termination of the codeshare between the Parties in May 2017, Canadian North announced an expansion of its operations in the Qikiqtaaluk, including new flights to Pangnirtung, Qikiqtarjuaq and Pond Inlet. Based on its review of documentary evidence related to passenger fares, schedules and non-price factors, as well as interviews with market participants the Bureau found that the Parties are each other’s closest competitors for both passenger and cargo customers in this region.

The Bureau’s economic expert conducted a merger simulation analysis with respect to each relevant market within the Qikiqtaaluk region. The expert found that the Proposed Transaction would likely lead to significant and material price increases for passenger and cargo customers in the relevant markets.

The Bureau’s analysis with respect to non-price dimensions of competition in the Qikiqtaaluk, including information relating to flight schedules and frequencies, indicates that the Proposed Transaction will likely lead to reductions in flight frequencies in certain overlap communities, and may result in decreases in consumer choice on certain overlap routes. In particular, the Proposed Transaction may result in a reduction in the flight times, or days of the week, available to customers on certain overlap routes in the Qikiqtaaluk.

7.6 Analysis of the Kitikmeot Region of Nunavut

7.6.1 Overview

Both First Air and Canadian North offer flights connecting communities in the Kitikmeot region with the regional centre, Cambridge Bay, as well as Yellowknife. Specifically, the Parties both offer service to each of Kugluktuk, Cambridge Bay, Gjoa Haven, Taloyoak, and Kugaaruk. First Air serves the Kitikmeot region using a combination of ATR 42-500 passenger aircraft and ATR 42-300 and ATR72 cargo aircraft.Footnote8 Canadian North operates in the Kitikmeot using 737-200 and Dash 8 combi aircraft.

While the Parties operate similar networks in the Kitikmeot, for some communities the Parties offer differing flight times or days of service. The Parties’ networks act as the primary means of transport for passengers and cargo between communities, as well as to and from Yellowknife and Southern Canada. There is no road access to the relevant communities in the Kitikmeot.

Table 3 provides an overview of the Parties’ schedules in the Kitikmeot region.

Table 3: Flights Offered by First Air and Canadian North in the Kitikmeot Region
Origin Destination Airline Mon Tues Wed Thurs Fri Sat Sun Aircraft
Kugaaruk Gjoa Haven First Air                
Canadian North   1450       1725   Dash 8
Kugaaruk Taloyoak First Air             1350 ATR 42-500
Canadian North 1505     1439       Dash 8
Kugaaruk Yellowknife First Air 1645   1530   1645     ATR 42-500
Canadian North             1605 Dash 8
Cambridge Bay Kugluktuk First Air     1315       1720 ATR 42-500
Canadian North 1257 1340           737-200c
Cambridge Bay Gjoa Haven First Air 1315       1315     ATR 42-500
Canadian North                
Cambridge Bay Taloyoak First Air                
Canadian North     1305     1415   Dash 8
Cambridge Bay Yellowknife First Air   1415   1415       ATR 42-500
Canadian North 1815   1750 1450 1350   1340 737-200c/Dash 8
Kugluktuk Cambridge Bay First Air   1245   1245       ATR 42-500
Canadian North       1245 1155 1230   737-200c/Dash 8
Kugluktuk Yellowknife First Air 1500   1450   1500   1900 ATR 42-500
Canadian North 1447 1530           737-200c
Gjoa Haven Kugaaruk First Air                
Canadian North 1335     1323       Dash 8
Gjoa Haven Cambridge Bay First Air             1550 ATR 42-500
Canadian North     1612         Dash 8
Gjoa Haven Taloyoak First Air 1445   1330   1445     ATR 42-500
Canadian North             1335 Dash 8
Gjoa Haven Yellowknife First Air                
Canadian North   1600       1850   Dash 8
Taloyoak Kugaaruk First Air 1545   1430   1545     ATR 42-500
Canadian North   1330       1607 1445 Dash 8
Taloyoak Cambridge Bay First Air                
Canadian North 1620             Dash 8
Taloyoak Gjoa Haven First Air             1450 ATR 42-500
Canadian North     1457         Dash 8
Taloyoak Yellowknife First Air                
Canadian North       1545       Dash 8
Yellowknife Kugaaruk First Air             1030 ATR 42-500
Canadian North                
Yellowknife Cambridge Bay First Air 1045   1045   1045     ATR 42-500
Canadian North 1010 1045 1015       1100 737-200c/Dash 8
Yellowknife Kugluktuk First Air 1020 1045   1045 1020     ATR 42-500
Canadian North       1040 945 1015   737-200c/Dash 8
Yellowknife Gjoa Haven First Air     1030         ATR 42-500
Canadian North 1015     1015     1015 Dash 8
Yellowknife Taloyoak First Air                
Canadian North   1015           Dash 8

7.6.2 Market Concentration and Effective Remaining Competitors

First Air and Canadian North are the only airlines offering a scheduled service network in the Kitikmeot region. While airlines based outside the region perform large cargo deliveries from Manitoba or other regions of Nunavut to certain areas of the Kitikmeot, and Yellowknife-based airlines perform charter cargo deliveries to certain communities in the Kitikmeot, no alternatives to the Parties’ networks exist for scheduled passenger or cargo service among the relevant communities. The Bureau found that for large cargo customers, non-scheduled cargo operators such as Buffalo Airways and Summit Air effectively compete with the Parties for certain shipments into the region.

7.6.3 Barriers to Entry and Expansion

The Bureau’s review did not uncover evidence indicating that entry or expansion by competitors would be likely, timely or sufficient to constrain a potential exercise of market power in the Kitikmeot, particularly with respect to passenger services and the supply of scheduled cargo services to small customers.

7.6.4 Anticompetitive Effects

The Bureau found that First Air and Canadian North are each other’s closest competitors on the Kitikmeot region routes. In making this determination, the Bureau reviewed documentary evidence related to rates and fares for both passenger and cargo services. In particular, the Bureau found that close rivalry existed between the Parties for movement of cargo from Yellowknife into certain Kitikmeot communities.

The Bureau’s economic expert’s merger simulation analysis in the region indicated that the Proposed Transaction would likely lead to significant and material price increases for passenger and cargo customers in the Kitikmeot.

The Bureau’s analysis with respect to non-price dimensions of competition, including flight frequencies and schedules offered to customers, and the aircraft operated in the Kitikmeot indicates that the Proposed Transaction may lead to reductions in the days or times of service available to passengers on specific routes. The Bureau also found that the Proposed Transaction will likely result in reductions in passenger capacity on a number of overlapping origin-destination pairs.

7.7 Analysis of the Yellowknife-Rankin Inlet-Iqaluit Route

7.7.1 Overview

Both First Air and Canadian North offer a "Trans-Arctic" service connecting the hubs of Yellowknife, Rankin Inlet and Iqaluit. The Trans-Arctic route is the primary trunk route traversing the Northwest Territories and Nunavut, and the only means of direct connection between the Kitikmeot, Kivalliq and Qikiqtaaluk regions for both passengers and cargo.Footnote9

First Air currently offers Trans-Arctic service four times per week using Avro RJ85 passenger jet aircraft.Footnote10 First Air’s offering involves flights leaving Yellowknife for Rankin Inlet and Iqaluit in the morning, and a return service in the evening. Canadian North, for its part, operates a twice-weekly Trans-Arctic service on two of the days operated by First Air, at similar schedules. Canadian North’s service is conducted using 737-200 combi aircraft.

Table 4 provides an overview of the Parties’ schedules on the Trans-Arctic route.

Table 4: Flights Offered by First Air and Canadian North on the Trans-Arctic Route
Origin Destination Airline Mon Tues Wed Thurs Fri Sat Sun Aircraft
Yellowknife Rankin Inlet First Air 1010   1010   1010   1010 RJ85
Canadian North 955       955     737-200C
Rankin Inlet Yellowknife First Air 1940   1940   1940   1940 RJ85
Canadian North 1910       1910     737-200C
Rankin Inlet Iqaluit First Air 1350   1350   1350   1350 RJ85
Canadian North 1355       1355     737-200C
Iqaluit Rankin Inlet First Air 1750   1750   1750   1750 RJ85
Canadian North 1755       1755     737-200C

7.7.2 Market Concentration and Effective Remaining Competitors

First Air and Canadian North are the only airlines offering Trans-Arctic service between Yellowknife, Rankin Inlet and Iqaluit. No alternatives to the Parties’ networks exist for the transport of passengers or cargo between these three communities.

7.7.3 Barriers to Entry and Expansion

The Bureau’s review did not uncover evidence indicating that entry or expansion by competitors would be likely, timely or sufficient to constrain a potential exercise of market power on the Trans-Arctic route.

7.7.4 Anticompetitive Effects

First Air and Canadian North are each other’s closest competitors on the Trans-Arctic route, both with regard to pricing and scheduling of service. As noted above, on the two days a week that Canadian North offers service, its schedule reflects that of First Air.

Cargo service on the Trans-Arctic route is unique as compared to most other parts of the Parties’ networks, as the route is not a primary means of transporting goods (including food) from Southern Canada. The Trans-Arctic is an important route for the transport of country foods across the North. A primary concern raised by stakeholders was the availability of sufficient cargo capacity on the Trans-Arctic. First Air’s capacity to carry cargo on the route is limited by its use of RJ85 aircraft and First Air has, in some cases, contracted with third parties or added charter flights to carry cargo across the territories.

The Bureau’s economic expert conducted a merger simulation in order to estimate the effects of the Proposed Transaction on the Trans-Arctic route. The expert found that the Proposed Transaction would likely lead to significant and material price increases for passenger and cargo customers in the relevant markets.

The Bureau also analyzed the likely impact on non-price dimensions of competition, including flight frequencies and schedules offered to customers. The Bureau did not find evidence indicating the Proposed Transaction would likely lead to significant reductions in scheduling options for passengers. The Bureau does note, however, that evidence suggested the Proposed Transaction is likely to result in reductions in passenger or cargo capacities on the route.

7.8 Analysis of the Mackenzie Valley

7.8.1 Overview

Both Canadian North and First Air operate a single route in the Mackenzie Valley between Inuvik and Yellowknife. Canadian North’s service involves six weekly flights with a stopover in Norman Wells, as well as one direct Yellowknife-Inuvik return flight per week. First Air operates a direct service between Yellowknife and Inuvik six times per week. Canadian North services the Mackenzie Valley with a Boeing 737-300 combi, whereas First Air uses an ATR 42-500 passenger aircraft.

Table 5 provides an overview of the Parties' schedules between Yellowknife and Inuvik.

Table 5: Flights Offered by First Air and Canadian North between Yellowknife and Inuvik
Origin Destination Airline Mon Tues Wed Thurs Fri Sat Sun Aircraft
Yellowknife Inuvik First Air 1010 1010 1010 1010 1010   1010 ATR42-500
Canadian North 1030             737-300c
Inuvik Yellowknife First Air 1330 1330 1330 1330 1330   1330 ATR42-500
Canadian North         1348     737-300c
Yellowknife Norman Wells First Air                
Canadian North   1030 1030 1030 1030 1030 1030 737-300c
Norman Wells Yellowknife First Air                
Canadian North 1425 1530 1530 1530   1530 1530 737-300c
Norman Wells Inuvik First Air                
Canadian North   1230 1230 1230 1220 1230 1230 737-300c
Inuvik Norman Wells First Air                
Canadian North 1300 1410 1410 1410   1410 1410 737-300c

7.8.2 Market Concentration and Effective Remaining Competitors

The only other airline operating a scheduled passenger service network within the Mackenzie Valley between the relevant communities is North-Wright Air. Although its service links Inuvik and Yellowknife, such an itinerary requires multiple stops and overnights in other communities. North-Wright Air tends to cater to local traffic using small aircraft and in the Bureau’s view does not closely compete with the Parties in the Mackenzie Valley. The Bureau considered data on passenger traffic between the relevant communities, as well as documentary evidence relating to the determination of the Parties’ fares, schedules and other dimensions of competition.

First Air’s capacity to carry cargo in the Mackenzie Valley is limited by its use of ATR42-500 aircraft. Unlike many of the other communities served by the Parties, Inuvik is accessible by road much of the year, resulting in fewer large air shipments. The Bureau found that for large cargo contracts, operators of cargo and charter flights in the Mackenzie Valley, such as Buffalo Airways and Summit Air were likely effective competitors to the Parties.

7.8.3 Barriers to Entry and Expansion

The Bureau’s review did not uncover evidence that entry or expansion by competitors would be likely, timely, or sufficient to constrain a potential exercise of market power on the relevant route.

7.8.4 Anticompetitive Effects

The Bureau found that competition between First Air and Canadian North was important in determining pricing and scheduling of service in the Mackenzie Valley region. Evidence indicates that the Parties compete most closely with regard to passenger services, as First Air’s daily cargo capacity is limited by its use of ATR 42-500 aircraft.

The Bureau’s economic expert conducted a merger simulation in order to estimate the effects of the Proposed Transaction on the Mackenzie Valley route. The expert found that the Proposed Transaction would likely lead to significant and material price increases for passenger and cargo customers in the relevant markets.

The Bureau’s analysis with respect to non-price dimensions of competition, including flight frequencies and schedules offered to customers, determined that the transaction would likely result in reductions in passenger capacity, and may result in decreases in the frequency of direct flights between Yellowknife and Inuvik.

7.9 Analysis of the Edmonton-Yellowknife Route

7.9.1 Overview

Both First Air and Canadian North offer passenger and cargo service between Edmonton and Yellowknife. The Edmonton-Yellowknife route is the main trunk route connecting communities in the Kitikmeot region and Mackenzie Valley with Southern Canadian airports. First Air provides morning service from Edmonton to Yellowknife, and evening service from Yellowknife to Edmonton, six days per week using ATR 42-500 passenger aircraft. First Air also offers an additional evening service between Yellowknife and Edmonton Monday through Thursday using RJ85 aircraft operated by Summit Air. For its part, Canadian North offers daily service from Edmonton to Yellowknife in the morning, and from Yellowknife to Edmonton in the evening, using 737-200C/300C aircraft. In light of the aircraft employed, Canadian North offers more than double the passenger capacity and more than ten times the cargo capacity of First Air on the Edmonton-Yellowknife route.

The Edmonton-Yellowknife route is the only route in the overlap areas where First Air and Canadian North face competition from scheduled passenger carriers. Air Canada and WestJet both provide year-round passenger service between Edmonton and Yellowknife, using aircraft such as the Bombardier Q400, as well as limited cargo service.

Table 6 provides an overview of the Parties’ schedules on the Edmonton-Yellowknife route.

Table 6: Flights Offered by First Air and Canadian North on the Edmonton-Yellowknife Route
Origin Destination Airline Mon Tues Wed Thurs Fri Sat Sun Aircraft
Edmonton Yellowknife First Air 715 715
1800
715 715
1800
715   715 RJ85/ATR42-500
Canadian North 715
745
745 745 745 715
745
745 745 737-200c/300c
Yellowknife Edmonton First Air 1700
2130
1700 1700
2130
1700 1700   1700 RJ85/ATR42-500
Canadian North 1645
2055
1725 1725 1725 1645
2055
1725 1725 737-200c/300c

7.9.2 Market Concentration and Effective Remaining Competitors

The passenger services offered by WestJet and Air Canada between Edmonton and Yellowknife vary in frequency according to the season. In assessing the effectiveness of these national carriers on this route, the Bureau examined the Parties’ strategic documents and competitive responses over time to WestJet and Air Canada. The analysis indicates that WestJet and Air Canada are effective competitors to the Parties, particularly for passenger services. In particular, First Air and Canadian North’s pricing and marketing initiatives are influenced by competition from the national carriers, including seat sales launched by Air Canada or WestJet. The Bureau also found that Air Canada and West Jet hold a significant share of sales of itineraries with an Edmonton-Yellowknife origin-destination pair.

First Air’s capacity to carry cargo on the Edmonton-Yellowknife route is limited by its use of ATR42-500 and RJ85 aircraft. Unlike many of the other communities served by the Parties, Yellowknife is accessible by road, resulting in fewer large air shipments.

7.9.3 Barriers to Entry and Expansion

The Bureau found that barriers to entry into the Edmonton-Yellowknife market were high while barriers to expansion of capacity by existing competitors were lower.

7.9.4 Anticompetitive Effects

First Air and Canadian North compete closely on the Edmonton-Yellowknife route, particularly with regard to pricing of passenger services. In assessing potential anticompetitive effects, the Bureau also considered the degree of competition between the Parties and competitors Air Canada and WestJet. The Bureau found that these two major national carriers were effective competitors to the Parties on the Edmonton-Yellowknife route, and could increase capacity on the route.

The Bureau’s analysis with respect to non-price dimensions of competition did not indicate that schedules offered to customers were likely to be significantly affected by the Proposed Transaction.

The Bureau concluded that the Proposed Transaction was not likely to result in a substantial prevention or lessening of competition with respect to the Edmonton-Yellowknife origin-destination pair.

8. Summary of Concerns

The Commissioner of Competition has conducted an assessment of the Proposed Transaction between First Air and Canadian North, in order to report to the Minister and the Parties on any concerns regarding a potential prevention or lessening of competition as contemplated by subsection 53.2(2) of the CTA.

The Commissioner’s analysis has raised the following concerns with respect to a potential prevention or lessening of competition that may occur as a result of the Proposed Transaction:

  1. The Proposed Transaction is likely to result in a substantial lessening of competition with respect to the provision of passenger travel and cargo services on all overlapping origin-destination pairs except Edmonton–Yellowknife, including on the Ottawa–Iqaluit route and the Trans–Arctic route, and within the Kitikmeot region, the Qikiqtaaluk region, and the Mackenzie Valley region; and
  2. The Proposed Transaction is not likely to result in a substantial lessening or prevention of competition for the Edmonton–Yellowknife origin-destination pair due to competition from national carriers.

The Bureau has attempted to fully explain the basis for its concerns in the foregoing report, while taking into account the confidentiality provisions in the Competition Act, and the Commissioner’s mandate under the CTA. The Commissioner’s concerns are the result of an assessment consistent with that conducted when applying section 92 of the Competition Act to transportation undertakings.

Should the Parties to the transaction wish to inform the Commissioner of certain measures they are prepared to undertake to address these concerns pursuant to subsection 53.2(5) of the CTA, the Commissioner will provide an assessment of such measures to the Minister, pursuant to subsection 53.2(6) of the CTA.

Appendix A: Competition Bureau Matters in the Airline Industry

Over several decades, the Bureau has performed numerous reviews relating to air services, including several resulting in applications to the Competition Tribunal under multiple sections of the Competition Act. These include applications under the abuse of dominance provisions regarding unilateral conduct (sections 78 and 79), merger provisions (section 92), and competitor collaboration provisions (section 90.1). In addition, the Bureau has investigated and prosecuted criminal price-fixing conspiracies under section 45 of the Competition Act. Select examples of the Bureau’s reviews in this sector are summarized below.

Canadian Airlines Corporation/Air Canada Merger

In December of 1999, one of Canada’s major airlines, Canadian Airlines, had become insolvent and Air Canada proposed to acquire it. To gain regulatory approval and address the Bureau’s concerns regarding this merger, Air Canada made certain binding undertakings to the Minister of Transport and the Commissioner. A number of these undertakings were aimed at fostering entry. For example, Air Canada was required to relinquish takeoff and landing times at slot congested airports and to refrain from operating a discount carrier in eastern Canada for a period of time.

Having determined that Canadian Airlines was facing imminent insolvency, the Commissioner of Competition decided that the merger, with undertakings, was more competitively preferable to a liquidation through bankruptcy proceedings.

Air Canada — Investigation Regarding Predatory Conduct

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 decision in the first part of the case clarified the application of an avoidable cost test to assess predatory pricing in the airline industry, while the second part of the case was ultimately not pursued due to significant changes within the industry after the application was filed.

Air Cargo Conspiracy Investigation

In 2006, the Bureau began an investigation under section 45 of the Act into a conspiracy among international air cargo carriers in relation to international air cargo transportation on routes to and from Canada and elsewhere. This investigation into the fixing of fuel and other surcharges resulted in over $25 million in criminal fines by the end of 2013, with nine companies convicted:

Air Canada/UnitedContinental Holdings – Merger and Strategic Alliancee

In October 2010, Air Canada and United Continental Holdings announced their intention to enter into a joint venture that would have resulted in a merger of their operations on trans‐border routes between Canada and the United States. The Bureau reviewed the joint venture as well as three pre‐existing coordination agreements. It concluded that the joint venture would lead to a monopoly on ten transborder routes, and substantially reduce competition on several others. The Bureau filed an application with the Tribunal in June 2011 challenging the proposed joint venture under the merger provisions of the Act, and seeking to unwind the three prior coordination agreements under section 90.1 of the Act (which allows the Commissioner to challenge anti–competitive agreements — whether existing or proposed — between competitors). In October 2012, a Consent Agreement was reached, pursuant to which the parties are prohibited from implementing their joint venture agreement, or coordinating pursuant to their prior agreements, with respect to 14 high–demand trans–border routes.

Northern Airline Investigations

In 2017, the Bureau completed investigations relating to air passenger and cargo services in Northern Canada under the merger, abuse of dominance and civil competitor collaboration sections of the Act. This included investigations of:

  • a merger between First Air and Calm Air relating to air passenger and cargo services in central Nunavut;
  • a codeshare agreement between First Air and Canadian North relating to air passenger and cargo services on 16 Northern routes, including the Iqaluit-Ottawa route; and
  • allegations of predatory pricing against First Air and Canadian North on the Iqaluit-Ottawa route.

During the course of the Bureau’s investigation, First Air and Canadian North terminated their codeshare agreement, resolving concerns regarding its potential impact on competition.

With respect to the merger between First Air and Calm Air and the investigation into allegations of predatory pricing by First Air and Canadian North, following a detailed investigation and analysis, the Bureau did not find that there was sufficient evidence to challenge the airlines’ actions under the Act.

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Appendix B: Relevant Provisions of the Competition Act and Canada Transportation Act

Canada Transportation Act (S.C. 1996, c. 10)

Review of Mergers and Acquisitions

Notice

53.1 (1) Every person who is required to notify the Commissioner of Competition under subsection 114(1) of the Competition Act of a proposed transaction that involves a transportation undertaking shall, at the same time as the Commissioner is notified and, in any event, not later than the date by which the person is required to notify the Commissioner,

(a) give notice of the proposed transaction to the Minister; and(b) in the case of a proposed transaction that involves an air transportation undertaking, also give notice of the transaction to the Agency.

Information

(2) A notice given to the Minister or to the Agency shall, subject to the regulations, contain the information required under subsection 114(1) of the Competition Act. The notice shall also contain any information with respect to the public interest as it relates to national transportation that is required under any guidelines that shall be issued and published by the Minister. After receipt of a notice, the Minister may require the person who has given the notice to provide further information.

Guidelines

(2.1) The guidelines referred to in subsection (2) shall be elaborated in consultation with the Competition Bureau and shall include factors that may be considered to determine whether a proposed transaction raises issues with respect to the public interest as it relates to national transportation.

Not statutory instruments

(3) The guidelines referred to in subsection (2) are not statutory instruments within the meaning of the Statutory Instruments Act.

No public interest issues

(4) If the Minister is of the opinion that the proposed transaction does not raise issues with respect to the public interest as it relates to national transportation, the Minister shall, within 42 days after a person gives notice under subsection (1), give notice of the opinion to that person, in which case sections 53.2 and 53.3 do not apply in respect of that transaction.

Public interest issues

(5) If the Minister is of the opinion that the proposed transaction raises issues with respect to the public interest as it relates to national transportation, the Minister may direct the Agency to examine those issues under section 49 or appoint and direct any person to examine those issues under section 7.1 of the Department of Transport Act.

Report

(6) The Agency or person, as the case may be, shall report to the Minister within 150 days after being directed under subsection (5), or within any longer period that the Minister may allow.

Prohibition

53.2 (1) No person shall complete a proposed transaction referred to in subsection 53.1(1) unless the transaction is approved by the Governor in Council and, in the case of a transaction that involves an air transportation undertaking, the Agency determines that the transaction would result in an undertaking that is Canadian as defined in subsection 55(1).

Commissioner's report

(2) The Commissioner of Competition shall within 150 days after the Commissioner is notified of the proposed transaction under subsection 114(1) of the Competition Act, or within any longer period that the Minister may allow, report to the Minister and the parties to the transaction on any concerns regarding potential prevention or lessening of competition that may occur as a result of the transaction.

Report to be made public

(3) The report shall be made public immediately after its receipt by the Minister.

Concerns relating to public interest and competition

(4) After receipt of the Commissioner's report and any report given under subsection 53.1(6), but before the Minister makes a recommendation for the purposes of subsection (7), the Minister shall

(a) consult with the Commissioner regarding any overlap between any concerns that the Minister has in respect of the proposed transaction with regard to the public interest as it relates to national transportation and any concerns in respect of the transaction that are raised in the Commissioner's report; and(b) request the parties to the transaction to address
(i) with the Minister any concerns that the Minister has in respect of the transaction with regard to the public interest as it relates to national transportation, and(ii) with the Commissioner any concerns that the Commissioner has regarding potential prevention or lessening of competition that may occur as a result of the transaction.

Measures to address concerns

(5) The parties to the transaction shall

(a) after conferring with the Minister regarding concerns referred to in subparagraph (4)(b)(i), inform the Minister of any measures they are prepared to undertake to address those concerns; and(b) after conferring with the Commissioner regarding concerns identified under subparagraph (4)(b)(ii), inform the Commissioner of any measures they are prepared to undertake to address those concerns.

The parties may propose revisions to the transaction.

Preconditions to recommendation

(6) Before making a recommendation for the purposes of subsection (7), the Minister shall obtain the Commissioner's assessment of the adequacy of any undertaking proposed by the parties to address the concerns that have been identified under subparagraph (4)(b)(ii) and the effects of any proposed revisions to the transaction on those concerns.

Approval of Governor in Council

(7) If the Governor in Council is satisfied that it is in the public interest to approve the proposed transaction, taking into account any revisions to it proposed by the parties and any measures they are prepared to undertake, the Governor in Council may, on the recommendation of the Minister, approve the transaction and specify any terms and conditions that the Governor in Council considers appropriate. The Governor in Council shall indicate those terms and conditions that relate to potential prevention or lessening of competition and those that relate to the public interest as it relates to national transportation.

Variation of terms and conditions

(8) On application by a person who is subject to terms and conditions specified under subsection (7), the Governor in Council may, on the recommendation of the Minister, vary or rescind the terms and conditions. If the terms and conditions to be varied or rescinded affect competition, the Minister shall consult with the Commissioner before making the recommendation.

Commissioner's representations

(9) If the Minister directs the Agency under section 49 to inquire into any matter or thing to assist the Minister in making a recommendation under subsection (7) or (8), the Agency shall give notice of the inquiry to the Commissioner and allow the Commissioner to make representations to the Agency.

Compliance with terms and conditions

(10) Every person who is subject to terms and conditions shall comply with them.

Competition Act (R.S.C., 1985, c. C-34)

Order

92 (1) Where, on application by the Commissioner, the Tribunal finds that a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially

(a) in a trade, industry or profession,(b) among the sources from which a trade, industry or profession obtains a product,(c) among the outlets through which a trade, industry or profession disposes of a product, or(d) otherwise than as described in paragraphs (a) to (c),

the Tribunal may, subject to sections 94 to 96,

(e) in the case of a completed merger, order any party to the merger or any other person
(i) to dissolve the merger in such manner as the Tribunal directs,(ii) to dispose of assets or shares designated by the Tribunal in such manner as the Tribunal directs, or(iii) in addition to or in lieu of the action referred to in subparagraph (i) or (ii), with the consent of the person against whom the order is directed and the Commissioner, to take any other action, or
(f) in the case of a proposed merger, make an order directed against any party to the proposed merger or any other person
(i) ordering the person against whom the order is directed not to proceed with the merger,(ii) ordering the person against whom the order is directed not to proceed with a part of the merger, or(iii) in addition to or in lieu of the order referred to in subparagraph (ii), either or both
(A) prohibiting the person against whom the order is directed, should the merger or part thereof be completed, from doing any act or thing the prohibition of which the Tribunal determines to be necessary to ensure that the merger or part thereof does not prevent or lessen competition substantially, or(B) with the consent of the person against whom the order is directed and the Commissioner, ordering the person to take any other action.

Evidence

(2) For the purpose of this section, the Tribunal shall not find that a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially solely on the basis of evidence of concentration or market share.

Factors to be considered regarding prevention or lessening of competition

93 In determining, for the purpose of section 92, whether or not a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially, the Tribunal may have regard to the following factors:

(a) the extent to which foreign products or foreign competitors provide or are likely to provide effective competition to the businesses of the parties to the merger or proposed merger;(b) whether the business, or a part of the business, of a party to the merger or proposed merger has failed or is likely to fail;(c) the extent to which acceptable substitutes for products supplied by the parties to the merger or proposed merger are or are likely to be available;(d) any barriers to entry into a market, including
(i) tariff and non-tariff barriers to international trade,(ii) interprovincial barriers to trade, and(iii) regulatory control over entry,
and any effect of the merger or proposed merger on such barriers;(e) the extent to which effective competition remains or would remain in a market that is or would be affected by the merger or proposed merger;(f) any likelihood that the merger or proposed merger will or would result in the removal of a vigorous and effective competitor;(g) the nature and extent of change and innovation in a relevant market; and(h) any other factor that is relevant to competition in a market that is or would be affected by the merger or proposed merger.

Exception

94 The Tribunal shall not make an order under section 92 in respect of

(a) a merger substantially completed before the coming into force of this section;(b) a merger or proposed merger under the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act or the Trust and Loan Companies Act in respect of which the Minister of Finance has certified to the Commissioner the names of the parties and that the merger is in the public interest — or that it would be in the public interest, taking into account any terms and conditions that may be imposed under those Acts; or(c) a merger or proposed merger approved under subsection 53.2(7) of the Canada Transportation Act and in respect of which the Minister of Transport has certified to the Commissioner the names of the parties.

Exception where gains in efficiency

96 (1) The Tribunal shall not make an order under section 92 if it finds that the merger or proposed merger in respect of which the application is made has brought about or is likely to bring about gains in efficiency that will be greater than, and will offset, the effects of any prevention or lessening of competition that will result or is likely to result from the merger or proposed merger and that the gains in efficiency would not likely be attained if the order were made.

Factors to be considered

(2) In considering whether a merger or proposed merger is likely to bring about gains in efficiency described in subsection (1), the Tribunal shall consider whether such gains will result in

(a) a significant increase in the real value of exports; or(b) a significant substitution of domestic products for imported products.

Restriction

(3) For the purposes of this section, the Tribunal shall not find that a merger or proposed merger has brought about or is likely to bring about gains in efficiency by reason only of a redistribution of income between two or more persons.

This press release was sourced from Government of Canada on 25-Feb-2019.