Vol. 147, No. 1 — January 2, 2013

Registration

SOR/2012-298 December 14, 2012

CANADA TRANSPORTATION ACT

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

P.C. 2012-1751 December 13, 2012

His Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsection 36(1) of the Canada Transportation Act (see footnote a), approves the annexed Regulations Amending the Air Transportation Regulations and the Canadian Transportation Agency Designated Provisions Regulations, made by the Canadian Transportation Agency.

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 The definition “toll” in section 2 of the Air Transportation Regulations (see footnote 1) is repealed.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

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

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 (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 (Agency) administers regulations which govern the Canadian air transportation marketplace. Based on the December 2011 enactment of section 86.1 of the Act, the Agency is amending the Air Transportation Regulations (ATR) pertaining to the advertisement of the price of air services.

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.

Objectives

The amendments to the ATR (amendments) 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 reduces confusion and frustration as to the total price and increases transparency. It also allows consumers to more readily conduct price comparisons and make informed choices.

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

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

Description

The amendments 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 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 amendments 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 amendments do 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 amendments do not apply to air cargo services or to services which are only offered “business to business” rather than to the general public. In addition, the amendments do 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 that are excluded from the application of the Act are also excluded from the Amendments. Selected examples of such excluded air services 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 person responsible for the content of the advertisement, the amendments do 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 amendments require the price represented in any advertisement

  • to be the total price, inclusive of all taxes, fees and charges which 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 which are paid to a third party.

In acknowledgement of the technical differences of the various media, some flexibility is provided in the 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 announcement of the total all-inclusive price of an air service via a brief radio advertisement, the advertiser would be in compliance with the 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 amendments 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, or range of prices for each service be displayed as the total amount that must be paid to obtain the service, including all third-party charges.

Amendments to the Canadian Transportation Agency Designated Provisions Regulations

To ensure enforcement of the amendments, the Canadian Transportation Agency Designated Provisions Regulations are being amended to permit the issuance of administrative monetary penalties. The text also includes the designated sections of the amendments and the maximum amount of the penalty that can be applied to either a corporation or an individual.

Consultation

Prior to prepublication of the proposed amendments in the Canada Gazette, Part I, the Agency undertook an extensive consultation in January and February 2012 with air industry stakeholders, consumer associations and members of the general public. Input gathered from these consultations was carefully considered in the development of the draft Regulations.

The proposed amendments were prepublished in the Canada Gazette, Part I, on June 30, 2012, followed by a 75-day consultation period ending on September 13, 2012. In addition, identified stakeholders were targeted with direct mailings to inform them of the prepublication and the opportunity to comment. This direct mailing was further supported by a concerted effort to engage electronic and print media outlets. In response, a total of 18 comments were received, 13 from industry stakeholders and 5 from the general public.

All submissions received expressed support for the overall objectives of the proposed amendments. The comments received fell into six categories:

  1. Scope;
  2. Publishing fees, taxes and charges not collected by the carrier;
  3. Implementation costs;
  4. Penalties;
  5. Optional incidental services; and
  6. Clarifications.
1. Scope
  • The majority of air industry stakeholders were strongly supportive of including advertising by travel agencies within the scope of the Regulations. However, a single commenter advocated excluding them altogether.
  • Three air industry stakeholders stated that they were in favour of including packaged travel services in the Regulations.

Subsection 86.1(1) of the enabling legislation directs the Agency to make regulations respecting advertising, in all media, of prices for air services within, or originating in, Canada. As some provinces regulate the manner in which travel agents advertise their services, the Agency will consult with those provinces as part of the implementation and enforcement of the Regulations.

With respect to packaged travel services, subsection 86.1(1) of the Act only refers to the advertisement of “air services.” As packaged travel services include an assortment of travel services including car rentals, hotels and holiday cruises among others, the advertising of such packaged services is beyond the legislative scope of these amendments.The Agency also notes 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 packaged travel services may be presented.

  • The Agency received one comment which identified loyalty programs as “misleading advertising” that should be subject to regulation. The Agency also received one submission which recommended that loyalty programs be specifically excluded from the proposed Regulations.

As noted in the RIAS which accompanied the prepublication, the Agency remains of the opinion that loyalty programs constitute a business practice and are not within the regulatory scope of the proposed amendments. After consideration of both comments received, the Agency does not recommend any change to the proposed amendments and will proceed with them as originally prepublished in the Canada Gazette, Part I.

  • Three air industry stakeholders commented that under the Regulations, U.S. air carriers would be permitted to advertise in Canada flights that occur entirely in the United States without adhering to the Canadian Regulations.

As was recognized by several commenters, the legislative authority found in section 86.1 of the Act extends only to air services “within, or originating in” Canada. Therefore, expansion beyond the existing authority provided in the Act to flights outside Canada is beyond the scope of the amendments.

  • One commenter indicated that the Agency had inadequate remedial and enforcement mechanisms. Specifically, the commenter noted that
  • the Agency does not have the power to order a payment of compensation to any person affected by a failure to comply with the proposed amendments; and
  • the proposed fines are unreasonably low and would fail to serve as a deterrent to breaching the provisions or to provide an incentive for compliance.

This commenter recognized that neither of these two points falls within the scope of the proposed amendments and that changes to the enabling legislation would be necessary to address these elements.

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. The Agency will monitor compliance with the proposed amendments and will conduct enforcement using its authority under the Act.

As with all Agency enforcement actions, the determination of what corrective measures and/or penalties are assessed for a contravention is based on a number of factors, including the frequency and nature of the offence.

The Agency is of the opinion that it has sufficient enforcement and education mechanisms to effectively implement the proposed amendments.

2. Publishing fees, taxes and charges not collected by the carrier
  • Several air industry stakeholders were not in favour of including paragraph 135.8(1)(f) of the regulatory text, a paragraph that refers to “any tax, fee or charge not collected by the advertiser” but paid by the air traveller. The comments also suggested that compliance costs associated with the creation and ongoing updating of a database of such charges on a worldwide basis could be significant.

The Agency is confident that existing industry manuals, tools and databases provide appropriate reference material to inform the industry of such published charges to support them in conveying these additional costs to the consumer. It was also noted that no quantitative evidence was provided by those who made this comment to substantiate the claim of significant compliance costs.

3. Implementation costs
  • Two air industry stakeholders suggested that the costs of implementing the computer system changes required to comply with the Regulations could require a significant investment in terms of time, resources and programming.

The Agency noted that no documentation was provided by those who made this comment to support their assertion that a significant investment would be required in order to comply with the proposed amendments. The Agency notes the air industry has already moved towards some form of all-inclusive price format, in part due to similar regulatory regimes in the European Union and the United States. In light of the progress made to date by the industry, the Agency is of the view that any additional costs of compliance would be minor and non-recurring.

4. Penalties
  • A single member of the general public commented that the maximum administrative monetary penalties associated with the Regulations are too low to provide a reasonable deterrent.

To enforce the Agency’s proposed amendments, the Agency may levy an administrative monetary penalty up to the existing maximum value of a penalty as specified in the Act. The Agency has made comparisons and found that the value of the administrative monetary penalties it may apply are in keeping with the value found in other international regimes.

5. Optional incidental services
  • One member of the general public suggested that a definition of “optional incidental service” be included in the Regulations to eliminate any confusion as to what charges/fees should be included in the total price advertised. The same commenter advocated that carry-on and baggage fees should be specifically included in the advertised price.

The Agency remains of the view that the purpose of the regulatory regime is to foster transparent pricing and not to dictate business practices. The Agency notes that market conditions and consumer demand create a wide scope to what may constitute an optional incidental service and whether or not this service may be subject to a charge. The proposed amendments require the advertiser to make the purchaser aware of these charges and require that the advertised price for any optional incidental charge be presented in the total price format.

6. Clarifications
  • A small number of comments were received from both air industry stakeholders and members of the general public seeking clarification on certain elements of the Regulations.
  • One stakeholder specifically requested the addition of the word “carrier” to be added in addition to the term “advertiser.”

In addition to specific wording changes to expand or reduce the scope of the proposed amendments, as noted above, the Agency also received a small number of comments which either questioned the meaning of the proposed text of the amendment or which suggested changes to proposed definitions. The Agency has carefully reviewed the regulatory text and determined that no changes are required; however, to provide further clarity, the Agency has developed, informed by these consultations, additional guidance material which it will make available via its Web site to all advertisers and to the Canadian public.

The Agency is confident that the definition of advertiser is sufficient to encompass any person who advertises, including a “carrier.”

Therefore, in conclusion, after careful consideration of all comments received, the Agency is of the view that no changes to the regulatory text are required. The Agency will, however, work with air industry stakeholders and other interested parties to provide clarification and to facilitate compliance.

“One-for-One” Rule

The “One-for-One” Rule does not apply as the Regulations are not expected to result in any incremental administrative burden on business.

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 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 amendments would be minor and could be absorbed as part of the regular business cycle.

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.

Rationale

The consultation process following prepublication in the Canada Gazette, Part I, confirmed broad support for the objectives of the amendments from both industry stakeholders and consumers.

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

The amendments will require advertisers to provide consumers with the total price, inclusive of all taxes, fees and charges, which must be paid to obtain and complete travel. The objective is to provide consumers with the ability to readily compare advertised prices for air services, regardless of where they live in Canada and also to 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 amendments.

The advertising of products and services is subject to consumer protection legislation of general application at the federal level through the Competition Act and at the provincial level through provincial legislation. Certain matters respecting misleading and deceptive acts and practices fall under the purview of the Competition Bureau.

It is the advertisers’ responsibility to ensure that they comply with all applicable legislation respecting advertising of prices, not just the ATR.

Objective 2 — Promote fair competition in the air service industry

With respect to the second objective, to the extent possible, the amendments harmonize the Canadian air fare advertisement regime with those of its major economic partners and provincial governments. For air carriers and other advertisers that also advertise in the American or European markets, the amendments are in keeping with these regimes.

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 either were already using or have recently adopted similar “single price” advertising practices.

As noted, one air carrier did mention that financial costs for compliance with the amendments could be significant but did not provide any evidence to support this position. Based on the Agency’s previous consultations with the air service industry, however, and taking into account the experience of both the United States and the European Union, the Agency remains of the opinion that the cost of changing key forms of advertising materials to comply with the 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 amendments do not conflict with these existing provincial regimes as the federal requirements would require compliance with a comparable or higher standard. As well, the scope of the amendments excludes 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.

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 amendments as soon as they are registered. The Agency will bring about compliance by monitoring industry behaviour, increasing awareness through outreach activities, working collaboratively with advertisers and, when necessary, by using enforcement mechanisms.

In order to support enforcement, the Canadian Transportation Agency Designated Provisions Regulations have also been amended as indicated in the text to set out which of the proposed amendments, if contravened, may result in 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 factors including the frequency and nature of the offence.

In addition, the Agency may order a person to make changes to its air services advertising practices as necessary in order to conform to the Regulations and to bring about compliance.

Contact

Karen Plourde
Director
International Agreements and Tariffs Directorate
Industry Regulation and Determination 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