ARCHIVED — Vol. 146, No. 26 — June 30, 2012

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Regulations Amending the Air Transportation Regulations and the Canadian Transportation Agency Designated Provisions Regulations

Statutory authority

Canada Transportation Act

Sponsoring agency

Canadian Transportation Agency

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

1. Background

Interest in addressing air service price advertising in Canada began to emerge a number of years ago. In 2007, Bill C-11, An Act to amend the Canada Transportation Act and the Railway Safety Act and to make consequential amendments to other Acts, proposed several changes to the Canada Transportation Act (the Act). One of the proposed changes, section 86.1, which mandated the development of air price advertising regulations, was included in this bill but was not put into force due to industry and other concerns at the time.

Since 2007, there have been significant developments in the air services pricing regimes of Canada’s major economic partners. Regulations governing the advertisement of the price of air services were established in the European Union in 2008. The United States, which has had air fare advertising regulatory rules in place since 1992, updated its regime in January 2012 to require air price advertising to be based on the display of a single total price. Provincial legislation also exists in both Ontario and Quebec, which regulates the manner in which travel agents and wholesalers may advertise the price of travel services.

In keeping with these worldwide trends, many of the key players in the Canadian air industry have either begun to employ or have transitioned to some form of an all-inclusive air fare advertising format.

In its role as an economic regulator and aeronautical authority, the Canadian Transportation Agency (the Agency) administers regulations which govern the Canadian air transportation marketplace. Based on the January 2012 enactment of section 86.1 of the Act, the Agency is proposing the following amendments to the Air Transportation Regulations pertaining to the advertisement of the price of air services.

2. Issue

A significant number of Canadians have expressed their displeasure with regard to the manner in which the price of air services is represented in advertisements.

Specifically, they have indicated that it is

  • difficult to determine the total price of an air service being offered in an advertisement when fuel surcharges, taxes, charges and other fees are not included in the advertised price;
  • frustrating to investigate purchasing an air service only to find out that the actual price of the air service would be significantly greater than the advertised price; and
  • difficult and time-consuming to make comparisons between the advertised prices of different players which could lead to inappropriate choices based on perceptions of advertised prices.

At the industry level, stakeholders have also indicated that they would welcome rules that would level the playing field and be applicable to anyone involved in the air market. Accountability would also be enhanced with the disclosure of third party taxes, fees and charges in the advertised price.

3. Objectives

The proposed Amendments to the Air Transportation Regulations (the Amendments) would support two key objectives:

Objective 1 — Enable consumers to readily determine the total price of an advertised air service

The display of the total price in air service price advertising would reduce confusion and frustration as to the total price and increase transparency. It would also allow consumers to more readily conduct price comparisons and make informed choices.

Objective 2 — Promote fair competition between all advertisers in the air travel industry

Regulation of all-inclusive air price advertising would promote competition by achieving a level playing field for all persons who advertise the price of air services within, or originating in, Canada.

4. Description

The proposed Amendments to the Air Transportation Regulations (SOR/88-58) [the ATR] would require all persons who advertise the price of an air service to display the total price, inclusive of all fees, charges and taxes. The intent of the proposed Amendments is to provide greater transparency in air price advertising for consumers while providing a level playing field for all air service advertisers.

Scope

The proposed Amendments would apply to any person who advertises the price of air services within, or originating in, Canada, regardless of media. Given the wide breadth of advertising of air fares in the air industry, the proposed Amendments would not specify categories of stakeholders subject to the regulation (i.e. air carrier or travel agent), but rather focus more broadly on any person who engages in the activity of advertising the price of an air service.

Exclusions

The proposed Amendments would not apply to air cargo services, to services which are only offered “business to business” or to the general public. In addition, the proposed Amendments would not apply to packaged travel services, which in addition to an air service include other features such as accommodation, cruise, tours or car rental.

In keeping with the scope of the Act, air services which are excluded from the application of the Act would also be excluded from the proposed Amendments. Examples of such excluded activities are aerial surveying, aerial inspection and aerial fire-fighting. A complete list of excluded air services is provided in section 56 of the Act and section 3 of the ATR.

In order to retain the regulatory focus on the air industry, the proposed Amendments would not apply to any person whose sole involvement in the advertising of an air service is the provision of the advertising medium, for example newspaper publishers or radio stations.

Representation of total price

The proposed Amendments would require the price represented in any advertisement

  • to be the total price, inclusive of all taxes, fees and charges that a customer must pay in order to obtain and complete the air service;
  • to include a minimum level of description of the air service offered, including
  • origin and destination,
  • whether the service is one way or round trip, and
  • limitations with respect to booking or travel availability periods; and
  • to provide the customer with a breakdown of the taxes, fees and charges that are paid to a third party.

In acknowledgement of the technical differences of the various media, some flexibility would be provided in the proposed regulatory text to accommodate the limitations of certain media by allowing the required breakdown of information in the advertisement to be provided at another location. For example, in the case of an announcement of the total all-inclusive price of an air service via a brief radio advertisement, the advertiser would be in compliance with the proposed regulatory text if the advertisement included the mention of a location where a breakdown of necessary information (e.g. taxes, fees and charges) could be obtained (e.g. Web site or toll-free telephone number.)

The proposed Amendments will also require that a consumer have access to a listing of any optional services offered by the service provider for a fee or charge, and that the price of each service be displayed using an all-inclusive price format.

Proposed Amendments to the Canadian Transportation Agency Designated Provisions Regulations

To ensure enforcement of the proposed Amendments, the Designated Provisions Regulations would also be amended to permit the issuance of administrative monetary penalties. The proposed text also includes the sections of the proposed Amendments which the Agency proposes to designate, and the maximum amount of the penalty that could be applied to either a corporation or an individual.

5. Consultation

In order to inform the development of the proposed Amendments, the Agency undertook a broad consultation process in January and February 2012, to obtain input from various stakeholders, including air carriers, travel and advertising industry experts, public interest advocacy groups and citizens.

The Agency’s consultation process employed a variety of techniques such as the following:

  • face-to-face consultations and teleconferences with selected industry stakeholders, industry experts and consumer interest organizations;
  • email solicitation of comments to an even larger group of stakeholders and industry representatives; and
  • an online consultation that included both the possibility for individuals to comment on the consultation and an interactive forum for discussion, which allowed individuals across Canada to provide their personal views.

Through the consultation process, the Agency received a number of comments specific to air service price advertising practices as well as topics outside the regulatory scope pertaining to business practices (e.g. approaches to baggage fees or points for travel reward programs) of the air industry. The following four points represent the most common topics noted during the consultations specific to the regulation of air services price advertising and are described in greater detail below:

  • Total all-inclusive price — Price includes all costs necessary to complete travel;
  • Consistent representation of advertised price — Regulations to apply to all persons who advertise the price of air services;
  • Consistent regulatory regime — Harmonization with similar provincial regulations and with regulations in the United States and European Union; and
  • Details of included costs and optional services.

Total all-inclusive price

Participants in the consultation process, including individual consumers and consumer advocacy groups, indicated that the price shown in the advertisement should include all costs necessary to complete the travel. Participants wanted the advertised price to present the entire cost of travelling from point A to point B.

The air travel industry, including representation from both air carriers and travel agents, was also in agreement with the concept of the total price being the all-in total price, inclusive of all taxes, fees and charges.

Consistent representation of advertised price

Participants indicated that regulation of air service pricing should apply to all forms of advertising and to any person or entity that advertises air fares, including travel agents and their agencies, loyalty programs and vacation package providers.

The air travel industry was also in agreement with the concept that regulation of air services pricing should apply to all who advertise the price of air services in order to provide for a level playing field.

Consistent regulatory regime

Participants indicated that the Government of Canada should base regulation of air services pricing on the approaches currently in place in the United States and the European Union. They were of the opinion that by using a comparable regulatory approach, the consumer would know what to expect on nearly every airline and flight in the world. Compatibility with other international practices would also minimize confusion with respect to ticket pricing and fare rules when comparing fares.

The air travel industry was also in agreement with the concept of harmonizing regulation of air services pricing with the regulatory approaches of our major markets and competitors in order to reduce the need to develop and maintain different compliance mechanisms in an integrated world marketplace.

Details of included costs and optional services

Participants expressed a strong interest in an itemization of the charges which make up the total price, provided either in the advertisement or easily accessible at a specified location, i.e. posted online. Most agreed that listing of the basic price along with other fees and charges (e.g. fuel, airport improvement, taxes, security) and the total price would be optimal. Respondents also indicated they would welcome such an approach since showing a breakdown would alleviate confusion associated with hidden costs and make it easier to calculate the total cost of the air service.

The air carriers also felt there were business or marketing reasons to show the detail of costs collected on behalf of others with respect to the provision of the air service. Other members of the air travel industry, perhaps due to the nature of their business models, were less concerned with the need to detail or break out the costs — except for optional services or upgrades. However, there was general acceptance of the proposal to provide access to a breakdown of the taxes, fees and charges collected on behalf of a third party.

In addition, the Agency held discussions with other governments, both within Canada and abroad.

6. Small business lens

In light of the progress to date and continued evolution of the air industry towards some form of a single price format, the Agency has determined that any costs of compliance with the proposed Amendments would be minor, non-recurring and would not have a disproportionate effect on small businesses in Canada.

Given the frequency with which the air travel industry makes pricing changes in advertisements and produces new advertisements, any costs associated with changes required by the proposed Amendments would be minor and could be absorbed as part of the regular business cycle.

It is anticipated that some advertisers that offer online booking of air services may need to make minor changes to back-office systems to comply with the proposed Amendments. The Agency researched a sample of small businesses across Canada based on data obtained from Statistics Canada. This research, which focussed on industry practices and systems, revealed that these costs would be minor.

The new regulatory requirements would not impose any additional administrative burden on businesses in relation to the reporting of information or the completion of forms or schedules by industry for submission to the Agency.

7. Rationale

Objective 1 — Enable consumers to readily determine the total price of an advertised air service

With respect to meeting the first objective, the proposed Amendments would provide consumers with the total price, inclusive of all taxes, fees and charges, which must be paid to obtain and complete travel. This would alleviate consumer confusion or surprise as to the total cost of an advertised air service.

In addition, the proposed Amendments would allow the consumer to have access to a breakdown of taxes, fees and charges collected on behalf of a third party with respect to an air service. Flexibility would be provided to the advertiser as to where this information would be made available depending on the limitations of the advertising medium.

The proposed Amendments would provide consumers with a uniform representation of the format and level of detail of advertised prices, regardless of where they live in Canada, and ensure an appropriate level of harmonization with air price advertising formats found in the American and European markets.

It is anticipated that there would be no cost to consumers as the result of the proposed Amendments.

While not part of the proposed Amendments, it should be noted that in Canada, the advertising of products and services is subject to consumer protection legislation of general application at the federal level through the Competition Act and through provincial and territorial legislation. Therefore, any advertising or advertisements will continue to be subject to regulations pertaining to deceptive acts or practices and the making of representations to consumers that are not truthful.

Objective 2 — Promote fair competition between all advertisers in the air service industry

With respect to the second objective, to the extent possible, the proposed Amendments would harmonize the Canadian air fare advertisement regime with those of its major economic partners and provincial governments. For air carriers and other advertisers who also advertise in the American or European markets, the proposed Amendments would be in keeping with these regimes and are not expected to impose additional requirements.

Following the Government of Canada’s announcement in December 2011 of its intention to develop regulations in the area of air services price advertising, a number of the major air carriers proactively adopted some form of a “single price” advertising format. Several of the large travel agencies and tour operators were either already using or have recently adopted similar “single price” advertising practices.

Based on the Agency’s consultations with the air service industry and taking into account the experience of both the United States and the European Union, the Agency has determined that the cost of changing key forms of advertising materials to align with the proposed Amendments would be minor and would have no effect on the price of purchasing space in advertising media.

In determining the impact on the industry, the Agency noted that the majority of travel agents and wholesalers are based in Ontario and Quebec and are already subject to provincial legislation which governs the manner in which advertising of the price of travel services may be performed. The proposed Amendments would not conflict with these existing provincial regimes as the proposed federal requirements would require compliance with a comparable or higher standard. As well, the scope of the proposed Amendments would exclude packaged travel services that are within the domain of provincial travel and/or consumer protection-related legislation.

Given the frequency with which air service prices change due to market forces, it is assumed that any minor costs associated with the updating of pricing formats could be absorbed as part of the regular business cycle.

8. Implementation, enforcement and service standards

Compliance with the Regulations and a program of effective enforcement are crucial to the success of the regulatory regime. The Agency will begin monitoring compliance with the proposed Amendments as soon as they are registered and will enforce the Regulations using its authority under the Act through monitoring and enforcement mechanisms.

In order to support enforcement, the Canadian Transportation Agency Designated Provisions Regulations would also be amended as indicated in the proposed text to set out the provisions of the Act and the ATR which, if contravened, may apply administrative monetary penalties. The Agency may impose fines of up to $5,000 for an individual and $25,000 for a corporation where either has been found guilty of an offence as a result of contravening these Regulations. As with all Agency enforcement actions, the determination of what corrective measures and/or penalties are required in the case of contravention is based on a number of different factors including the frequency and nature of the offence.

In addition, in its role as a quasi-judicial tribunal, the Agency may order a person to make the changes necessary to conform with the legislation and regulations to bring about compliance.

As with all of its enforcement actions, the Agency’s primary objective is compliance. To support compliance, the Agency will work with advertisers of the price of air services to provide educational and other guidance materials to assist in the transition to the new regime.

9. Contacts

Karen Plourde
Director
International Agreements and Tariffs Directorate
Industry Regulation and Determinations Branch
Canadian Transportation Agency
15 Eddy Street, 18th Floor
Gatineau, Quebec
K1A 0N9
Telephone: 819-997-6643
Fax: 819-994-0289
Email: karen.plourde@otc-cta.gc.ca

Greg Eamon
Manager
Regulatory Projects
International Agreements and Tariffs Directorate
Industry Regulation and Determinations Branch
Canadian Transportation Agency
15 Eddy Street, 15th Floor
Gatineau, Quebec
K1A 0N9
Telephone: 819-953-9795
Fax: 819-994-0289
Email: greg.eamon@otc-cta.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Canadian Transportation Agency, pursuant to subsection 86(1) (see footnote a), sections 86.1 (see footnote b) and 86.2 (see footnote c) and subsection 177(1) (see footnote d) of the Canada Transportation Act (see footnote e), proposes to make the annexed Regulations Amending the Air Transportation Regulations and the Canadian Transportation Agency Designated Provisions Regulations.

Interested persons may make representations concerning the proposed Regulations within 75 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part Ⅰ, and the date of publication of this notice, and be addressed to Karen Plourde, Director, International Agreements and Tariffs Directorate, Industry Regulation and Determinations Branch, Canadian Transportation Agency, 15 Eddy Street, 18th Floor, Gatineau, Quebec K1A 0N9 (tel.: 819-997-6643; fax: 819-994-0289; email: karen.plourde@otc-cta.gc.ca).

Ottawa, June 19, 2012

JURICA ČAPKUN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE AIR TRANSPORTATION REGULATIONS AND THE CANADIAN TRANSPORTATION AGENCY DESIGNATED PROVISIONS REGULATIONS

AIR TRANSPORTATION REGULATIONS

1. The definition “toll” in section 2 of the Air Transportation Regulations (see footnote 1) is repealed.

2. The Regulations are amended by adding the following after section 2:

2.1 For the purposes of these Regulations, “toll” means any fare, rate or charge established by an air carrier in respect of the shipment, transportation, care, handling or delivery of passengers or goods or of any service that is incidental to those services.

3. The Regulations are amended by adding the following after Part V:

PART V.1

ADVERTISING PRICES

INTERPRETATION

135.5 The following definitions apply in this Part.

“air transportation charge” means, in relation to an air service, every fee or charge that must be paid upon the purchase of the air service, including the charge for the costs to the air carrier of providing the service, but excluding any third party charge. (frais du transport aérien)

“third party charge” means, in relation to an air service or an optional incidental service, any tax or prescribed fee or charge established by a government, public authority or airport authority, or by an agent of a government, public authority or airport authority, that upon the purchase of the service is collected by the air carrier or other seller of the service on behalf of the government, the public or airport authority or the agent for remittance to it. (somme perçue pour un tiers)

“total price” means

  • (a) in relation to an air service, the total of the air transportation charges and third party charges that must be paid to obtain the service; and

  • (b) in relation to an optional incidental service, the total of the amount that must be paid to obtain the service, including all third party charges. (prix total)

135.6 For the purposes of subsection 86.1(2) of the Act and this Part, a prescribed fee or charge is one that is fixed on a per person or ad valorem basis.

APPLICATION

135.7 (1) Subject to subsection (2), this Part applies to advertising in all media of prices for air services within, or originating in, Canada.

(2) This Part does not apply to an advertisement that relates to

  • (a) an air cargo service;

  • (b) a package travel service that includes an air service and any accommodation, surface transportation or entertainment activity that is not incidental to the air service; or

  • (c) a price that is not offered to the general public and is fixed through negotiation.

(3) This Part does not apply to a person who provides another person with a medium to advertise the price of an air service.

REQUIREMENTS AND PROHIBITIONS RELATING TO ADVERTISING

135.8 (1) Any person who advertises the price of an air service must include in the advertisement the following information:

  • (a) the total price that must be paid to the advertiser to obtain the air service, expressed in Canadian dollars and, if it is also expressed in another currency, the name of that currency;

  • (b) the point of origin and point of destination of the service and whether the service is one way or round trip;

  • (c) any limitation on the period during which the advertised price will be offered and any limitation on the period for which the service will be provided at that price;

  • (d) the name and amount of each tax, fee or charge relating to the air service that is a third party charge;

  • (e) each optional incidental service offered for which a fee or charge is payable and its total price or range of total prices; and

  • (f) any published tax, fee or charge that is not collected by the advertiser but must be paid at the point of origin or departure by the person to whom the service is provided.

(2) A person who advertises the price of an air service must set out all third party charges under the heading “Taxes, Fees and Charges” unless that information is only provided orally.

(3) A person who mentions an air transportation charge in the advertisement must set it out under the heading “Air Transportation Charges” unless that information is only provided orally.

(4) A person who advertises the price of one direction of a round trip air service is exempt from the application of paragraph (1)(a) if the following conditions are met:

  • (a) the advertised price is equal to 50% of the total price that must be paid to the advertiser to obtain the service;

  • (b) it is clearly indicated that the advertised price relates to only one direction of the service and applies only if both directions are purchased; and

  • (c) the advertised price is expressed in Canadian dollars and, if it is also expressed in another currency, the name of that other currency is specified.

(5) A person is exempt from the requirement to provide the information referred to in paragraphs (1)(d) to (f) in their advertisement if the following conditions are met:

  • (a) the advertisement is not interactive; and

  • (b) the advertisement mentions a location that is readily accessible where all the information referred to in subsection (1) can be readily obtained.

135.9 A person must not provide information in an advertisement in a manner that could interfere with the ability of anyone to readily determine the total price that must be paid for an air service or for any optional incidental service.

135.91 A person must not set out an air transportation charge in an advertisement as if it were a third party charge or use the term “tax” in an advertisement to describe an air transportation charge.

135.92 A person must not refer to a third party charge in an advertisement by a name other than the name under which it was established.

CANADIAN TRANSPORTATION AGENCY DESIGNATED PROVISIONS REGULATIONS

4. The schedule the Canadian Transportation Agency Designated Provisions Regulations (see footnote 2) is amended by adding the following after item 96:

Item

Column 1

Designated Provision

Column 2

Maximum Amount of Penalty — Corporation ($)

Column 3

Maximum Amount of Penalty — Individual ($)

96.1

Paragraph 135.8(1)(a)

25,000

5,000

96.2

Paragraph 135.8(1)(b)

25,000

5,000

96.3

Paragraph 135.8(1)(c)

25,000

5,000

96.4

Paragraph 135.8(1)(d)

5,000

1,000

96.5

Paragraph 135.8(1)(e)

5,000

1,000

96.6

Paragraph 135.8(1)(f)

5,000

1,000

96.7

Subsection 135.8(2)

5,000

1,000

96.8

Subsection 135.8(3)

5,000

1,000

96.9

Section 135.9

5,000

1,000

96.91

Section 135.91

5,000

1,000

96.92

Section 135.92

5,000

1,000

COMING INTO FORCE

5. These Regulations come into force on the day on which they are registered under section 6 of the Statutory Instruments Act.

[26-1-o]

Footnote a
S.C. 2007, c. 19, ss. 26(1) and (2)

Footnote b
S.C. 2007, c. 19, s. 27

Footnote c
S.C. 2007, c. 19, s. 27

Footnote d
S.C. 2007, c. 19, ss. 49(1) and (2)

Footnote e
S.C. 1996, c. 10

Footnote 1
SOR/88-58

Footnote 2
SOR/99-244