EXTRA Vol. 138, No. 5

Canada Gazette

Part II

OTTAWA, FRIDAY, MAY 7, 2004

Registration
SOR/2004-91 27 April, 2004

AERONAUTICS ACT

Regulations Amending the Canadian Computer Reservation Systems (CRS) Regulations

P.C. 2004-488 27 April, 2004

Whereas the Government wishes to promote aeronautics, in accordance with the Aeronautics Act, by ensuring that air carriers offering passenger air services that are displayed or sold in Canada are guaranteed fair and neutral presentation of those services in any computer reservation system operated in Canada for the purpose of displaying or selling air services;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsection 4.3(2) (see footnote a) and section 4.9 (see footnote b) of the Aeronautics Act, hereby makes the annexed Regulations Amending the Canadian Computer Reservation Systems (CRS) Regulations.

REGULATIONS AMENDING THE CANADIAN
COMPUTER RESERVATION SYSTEMS
(CRS) REGULATIONS

AMENDMENTS

1. (1) The definitions "consumer", "obligated carrier" and "system owner" in section 2 of the Canadian Computer Reservations Systems (CRS) Regulations (see footnote 1) are repealed.

(2) The definitions "display", "distribution facilities", "service enhancement", "subscriber" and "system" in section 2 of the Regulations are replaced by the following:

"display" means the presentation by a system of carrier schedules, fares, rules or availability to a subscriber by means of a video display terminal; (affichage)

"distribution facilities" means facilities provided to subscribers by a system vendor for the provision of information about carrier schedules, fares, rules, availability and related services and for making reservations, issuing tickets or providing any other related services; (infrastructures de distribution)

"service enhancement" means any additional product or service related to air transportation that is offered by a system vendor to participating carriers and made available to subscribers in conjunction with a system, and may include access links providing last seat availability, seat selection and the issuing of boarding passes; (service supplémentaire)

"subscriber" means a travel agent or other entity that holds itself out to the public as a source of information about the air service industry, that makes reservations or issues tickets for air services and that contracts with a system vendor to use a system; (abonné)

"system" means a computer reservation system that is offered by a system vendor to subscribers, that contains information about the schedules, fares, rules or availability of more than one carrier and that provides subscribers with the capability to make reservations or to issue tickets for air services; (système)

2. Sections 4 and 5 of the Regulations are replaced by the following:

4. These Regulations do not apply in respect of systems that are used by a carrier and its affiliates or a charterer, in their own offices and at their own sales counters, or to carrier Internet websites.

5. Nothing in these Regulations exempts any person from the operation of the Competition Act or the Personal Information Protection and Electronic Documents Act.

3. The heading before section 6 and sections 6 to 8 of the Regulations are repealed.

4. (1) Subsection 9(1) of the Regulations is replaced by the following:

9. (1) A system vendor shall ensure that all displays in a system respecting information provided by the participating carrier about the schedules, fares, rules or availability of that participating carrier meet the requirements of these Regulations.

(2) Subsection 9(2) of the French version of the Regulations is replaced by the following:

(2) Sauf en réponse à des demandes de données restreintes à des transporteurs particuliers, le serveur de système doit faire en sorte que ces affichages soient détaillés, neutres et non discriminatoires.

5. Subsection 10(5) of the Regulations is replaced by the following:

(5) Subject to subsection (6), a system vendor shall include charter air services in these displays and shall clearly indicate that they are charter air services.

6. Subsection 11(4) of the Regulations is repealed.

7. Subsections 14(1) and (2) of the Regulations are replaced by the following:

14. (1) Every participating carrier shall ensure that the information that it has agreed to supply to a system vendor is accurate and non-misleading.

(2) Every participating carrier shall ensure that flights involving stops en route, changes of aircraft, carrier or airport or segments carried out by other modes of transportation are clearly identified to the system vendor.

8. Subsections 15(2) to (4) of the Regulations are repealed.

9. Section 16 of the Regulations is repealed.

10. Subsection 17(1) of the Regulations is replaced by the following:

17. (1) A system vendor shall allow any carrier the opportunity to participate in its distribution facilities and service enhancements, subject to any technical constraints that are outside the control of the system vendor.

11. Sections 19 and 20 of the Regulations are replaced by the following:

19. A system vendor is not required to display information provided by a carrier that will not enter into a contract with the system vendor in accordance with these Regulations.

12. Paragraph 21(2)(g) of the Regulations is replaced by the following:

(g) the IATA/ARC/BSP agency identification code, or other information identifying the agency;

13. Section 23 of the Regulations is repealed.

14. Section 25 of the Regulations is replaced by the following:

25. Where a system vendor adds any improvement to distribution facilities, service enhancements or the equipment used to provide distribution facilities or service enhancements, it shall offer, and provide information about, that improvement to all participating carriers, subject to any technical constraints that are outside the control of the system vendor.

15. The portion of section 26 of the Regulations before paragraph (a) is replaced by the following:

26. A system vendor shall not make available to subscribers the internal reservations system display of a participating carrier unless

16. The heading before section 27 and sections 27 and 28 of the Regulations are repealed.

17. Section 36 of the Regulations and the heading before it are repealed.

COMING INTO FORCE

18. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

Part I: The Canadian Computer Reservation Systems (CRS) Regulations

The Canadian Computer Reservation Systems Regulations (the Regulations) came into force on June 6, 1995. At that time, CRSs and travel agents were the primary means by which airlines distributed and sold their air services. Access to CRSs was critical to airlines to distribute their air services and to travel agents to sell these services. Since that time, the emergence of alternative distribution channels such as the Internet has led to new, innovative and low cost distribution options for the air travel sector.

Today, there are a variety of means available to airlines, CRSs, travel agents and consumers to distribute, sell or purchase air services. The amendments to the Regulations lessen the current regulatory requirements and recognize that greater reliance on market forces in the distribution system could lead to market efficiencies, greater innovation and work to minimize the costs of distribution and sales for airlines. Consumers will benefit from a more competitive and efficient airline industry and from the broad choice offered by the various distribution channels.

Background

CRSs were originally developed by airlines in the United States in the early 1960s and later made available to travel agents. A CRS is a distribution channel used by airlines to provide information about their air services (flight schedules, seat availability and fare information) to travel agents selling on their behalf. Travel agents consult the information in the CRS to book and sell flight inventory from those airlines that participate in the system. CRSs also distribute information from other travel suppliers such as hotels, car rental and cruise companies. Until recently, CRSs were the primary means by which airlines distributed their air services. As a critical component of the distribution system, travel agents earn commissions from airlines and incentive rebates from the CRSs.

The marketing and distribution of air services through a CRS is a significant product distribution cost for airlines. In recent years, increasing competition from low cost carriers, rising operating costs and greater consumer confidence to self-book travel through the Internet have compelled airlines to reduce the costs associated with the distribution and sales of their air services. These measures included reducing or eliminating commissions paid to travel agents for sales through CRSs as well as significant investments in technology to develop their own websites that allow travel agents and consumers to book travel arrangements. Travel agency portals give travel agents special direct access to airline flight inventories on these websites.

These developments led travel agents to introduce fees for their services and to adjust their business model to incorporate Internet technology. Today, Internet-based travel websites and bookings on an airline's website are important alternatives to the traditional CRS, particularly for domestic travel.

In 1995, when the Regulations came into force, it was important that large airlines distributed their air services through all CRSs to ensure that travel agents could access this inventory for consumers, and to prevent anti-competitive behaviour by airlines. As a result, the Regulations included an "obligated carrier" provision. An obligated carrier was an airline that had an ownership interest in a CRS or had a domestic market share that exceeded ten percent and participated in a CRS. If an airline met these criteria, it was required to participate in all CRSs operating in Canada.

While the advent of the Internet provided new distribution options for airlines, the obligated carrier requirement limited the flexibility of these airlines to choose the most efficient means to distribute their air services.

The 1995 Regulations also required that the fees charged by CRS vendors for their distribution services be the same for all airlines that distribute their air services through a CRS. In effect, airlines (not only obligated airlines) and the CRS vendors were prevented from negotiating CRS fees. This has led to a situation where CRS fees are higher than they would otherwise be in the absence of this regulatory requirement, despite competition from alternative channels of distribution.

CRS services provided by system vendors were also required to be offered to all participating airlines on a non-discriminatory basis to ensure that no airline had an undue competitive advantage over other airlines participating in the CRS. However, CRS vendors argue that the non-discriminatory treatment of participating airlines for CRS services, particularly for service enhancements impedes their ability to innovate and better tailor their services to the airlines' needs.

Finally, the 1995 Regulations limited the ability of CRS vendors and travel agents to freely negotiate the terms and conditions of their business relationship. These regulatory provisions have resulted in restrictive subscriber contracts that limit the ability of the CRS vendors to tailor agreements to travel agents' needs and the ability of travel agents to be innovative, dynamic and to adapt to changing market conditions and other new, low cost sales technology.

The obligated carrier requirement, the limitation on the ability of airlines and CRSs to freely negotiate fees, the inability of travel agencies and CRSs to freely negotiate contract terms, along with non-discriminatory provisions regarding CRS services have served to limit flexibility, stifle innovation and prompt airlines to withdraw inventory from CRSs to pursue alternative distribution channels to gain more control over their distribution costs.

At the same time, it is recognized that CRSs and travel agents will continue to play an important role in the distribution and sale of air services. Therefore, certain regulatory provisions, specifically those provisions requiring that the information available through any CRS operating in Canada is displayed in a comprehensive, unbiased and neutral manner, must be maintained. Indeed, most airlines in Canada participate in CRS systems at some level and the display provisions ensure that airlines are not disadvantaged in CRS displays. The display requirements also remain important to ensure that travel agents, acting on behalf of consumers, continue to have access to unbiased information. As more Canadian airlines expand into transborder and international markets, the CRS is expected to become a more important distribution channel for these airlines.

On December 31, 2003, the U.S. Department of Transportation announced that it was amending its CRS rules, eliminating most of the existing provisions on January 31, 2004 and phasing out the remaining provisions at the end of July 2004. In particular, the U.S. readopted the rules prohibiting display bias during that period. In December 2002, the European Commission (EC) released a proposal regarding the modification of its CRS regime. The EC indicated that it was moving toward lessening its regulatory requirements while maintaining some important safeguards.

By maintaining display requirements, the Regulations are in keeping with the U.S, which is maintaining display requirements until July 31, 2004, as well as with the EC's proposal. Overall, the Regulations give way to market forces in many areas previously regulated and allow for stakeholders to negotiate on more commercial terms.

Amendments to the Regulations

The intent of the Regulations is to ensure that the information about air services made available for purchase through any CRS operating in Canada is comprehensive and neutral, while providing a framework that promotes competition in air services. The amendments to the Regulations reflect federal policy to regulate only when and if necessary, given that competition and other market forces may provide equal, if not better, market discipline to matters that are regulated. Accordingly, the following provisions are being repealed or amended.

The definition of "subscriber" in section 2 is being amended to reflect technological changes in the distribution of airline tickets, such as the use of e-ticketing and to ensure that all intended persons meeting the terms of the definition are covered under the Regulations. Subscribers will therefore be defined as having the capability to make reservations or to issue tickets. The definition of "distribution facilities" in section 2 is also being amended to reflect this change. These amendments are consistent with the wording of the defined terms "system" and "participating carrier" in section 2.

Section 4 is being amended to exclude Internet-based, airline websites in order to clarify the scope of the Regulations. When visiting an airline's website, consumers expect that the services of that particular airline along with its allied partners will be promoted and displayed. Therefore, the risk of consumers being misled is low, since these websites are clearly branded. At the same time, the sale of air services by Internet-based on-line travel agency websites will not be subject to the Regulations as comparison shopping by consumers on different travel websites appear to provide the necessary market discipline.

Section 5 of the 1995 Regulations stated that nothing in the Regulations exempted any person from the operation of the Competition Act. Given the recent application of the Personal Information Protection and Electronic Documents Act (PIPEDA) to businesses in Canada, this section is amended to expressly include this Act, along with the Competition Act.

Sections 6 to 8 of the Regulations, concerning the system participation requirements for obligated carriers, are being repealed due to the emergence of the Internet as an alternative distribution channel. The Internet has greatly increased the choices available to airlines for distributing their air services, to consumers who are searching for and purchasing these services, as well as to travel agents acting on their behalf. With competition provided by alternative channels, this amendment should provide all parties with the incentive to negotiate better arrangements. Indeed, there is already evidence that the CRS vendors have responded to the competition from the Internet with more favourable pricing, terms and conditions to current and potential CRS participating airlines. Airlines subject to mandatory participation, along with certain CRS vendors and travel agency groups supported the proposed repeal of these sections. Airlines should have the freedom to select the channels of distribution and levels of participation that they believe best serve their operations. Therefore, under the amended Regulations, airlines will no longer be obligated to participate in all CRS operating in Canada. As a consequence, the defined term "obligated carrier" is being repealed.

The 1995 Regulations included requirements for CRS vendors to ensure that display of air travel information is comprehensive, neutral and non-discriminatory. CRS displays are not directly available to consumers. Therefore, in order to clarify the scope of the Regulations, the definition of "consumer" in section 2 is repealed and references to the term "consumer" are removed from the defined terms "display", "service enhancement" and "system", as well as from subsection 9(1) of the Regulations. For greater consistency, reference to the term "consumer" in the definition of "distribution facilities" in section 2 is also removed.

Subsection 9(1) of the 1995 Regulations was developed to oblige the CRS vendor to ensure the accuracy of its flight inventory. The provision does not, however, make clear that the liability of the CRS vendor is limited only to the information provided by the participating carrier. Therefore, subsection 9(1) is being amended to clarify that the system vendor shall only make assurances regarding information provided by the participating carrier. This amendment will continue to ensure that travel agents have access to comprehensive, unbiased and non-discriminatory information and would allow them to convey this information to consumers in order for them to make an informed booking or purchasing decision.

Section 20 of the 1995 Regulations obliged a CRS vendor not to discriminate in the prices that it charges airlines participating in its system. This obligation prevented airlines and CRS vendors from freely negotiating CRS fees on strictly commercial terms. This has led to a situation where CRS fees are higher than would otherwise be in the absence of this regulatory requirement. With the emergence of the Internet as an alternative distribution channel, airlines can, and should be able to, take advantage of low cost distribution channels. In addition, as there is no longer any ownership of CRS by airlines in North America, the potential threat of an airline owner having a competitive (price) advantage does not exist. Most airlines and CRS vendors support the proposal to repeal section 20 as it would permit them to negotiate CRS fees on commercial terms. With the ability to select from various channels of distribution and vary their levels of participation in CRSs, airlines should be able to negotiate more favourable pricing terms with CRS vendors. Section 20 of the Regulations is therefore being repealed. To reflect the repeal of section 20, consequential amendments are made to subsection 10(5) and section 19.

Originally, the proposed amendments continued to require a CRS vendor to treat its participating airlines in a non-discriminatory manner with respect to CRS services, including service enhancements. CRS vendors indicated that continuation of a requirement to provide CRS services on a non-discriminatory basis would be inconsistent with the repeal of non-discriminatory pricing provisions and would stifle innovation along with their ability to better tailor CRS services to airlines' needs. Therefore, sections 17 and 25 are being amended to remove references to non-discriminatory treatment of airlines regarding participation in, and improvements to their distribution facilities and service enhancements.

Subsection 11(4) of the 1995 Regulations was developed to oblige the CRS vendor to make available a display based on elapsed flight time. This requirement was put in place to ensure that consumers were aware of flights with the shortest possible trip time. Display technology, however, has evolved to the point where this and other types of displays are widely available and include features that are responsive to consumer demands. Therefore, subsection 11(4) is repealed.

Subsection 14(1) of the 1995 Regulations was developed to oblige a participating carrier to ensure that only complete, accurate and non-misleading information about its air services is provided to the CRS vendor. This provision is being replaced in order to make clear that the obligation of the participating carrier only extends to the information that it has agreed to supply to that system vendor. In this respect, subsection 9(2) of the French language version of the amended Regulations removes the reference to the term complets and is replaced with détaillés.

Subsection 14(2) of the 1995 Regulations was developed to oblige the participating carrier to provide information to the system vendor in certain detail. This provision is replaced to eliminate the redundant reference to tourist products, which is included in subsection 10(7) of the Regulations.

Subsections 15(2) to (4) and section 16 of the 1995 Regulations concerning how CRS vendors construct connecting flights are repealed. These provisions were originally intended to ensure that the greatest range of flight options would be displayed in a CRS. However, with the emergence of alternative distribution channels, CRS vendors now have an additional economic incentive to ensure that all possible flight connections are displayed in a clear, comprehensive and unbiased manner. The Regulations continue to require CRS vendors not to use carrier identity when constructing connecting flights for the purposes of the display. As well, the Regulations continue to require CRS vendors to provide information, on request, about certain criteria and their importance in the construction and ordering of flight information regarding connecting flights.

Billing and fee information is addressed in section 21. In particular, paragraph 21(2)(g) requires a system vendor to provide to the participating carrier the IATA/ARC/BSP agency identification code. This paragraph is amended to ensure that information about agency identification codes continue to be provided to airlines. In addition, the amendment to paragraph 21(2)(g) addresses the issue of missing booking information from non-IATA/ARC/BSP agents.

Section 23 of the 1995 Regulations was intended to oblige the CRS vendor to accommodate its subscribers i.e., travel agents in respect of non-distribution services. These matters do not directly impact consumer protection or competition in air services. Therefore, section 23 of the Regulations is repealed.

Section 27 of the 1995 Regulations addressed marketing, booking or other sales data generated by the CRS, known as Marketing Information Data Tapes (MIDT). MIDT information is a commercial matter to be negotiated by CRS vendors and airlines outside the scope of the Regulations. It should be noted that the repeal of this section does not constitute a prohibition on the sale of MIDT nor does it affect the ability of an airline to negotiate with a CRS vendor for the acquisition of MIDT data. Therefore, section 27 of the Regulations is repealed.

Although, the sale of MIDT information becomes an unregulated commercial matter, any party may file a complaint with the Competition Bureau in the event of anti-competitive behaviour. A party may also consider filing an application with the Competition Tribunal pursuant to sections 75 or 77 of the Competition Act, with respect to reviewable practices including refusal to deal, market restriction, exclusive dealing or tied-selling, as it pertains to the negotiation or sale of MIDT information. Parties may also continue to seek recourse before a court of competent jurisdiction in the event of contractual or legal disputes.

Section 28 of the 1995 Regulations regarding personal information is considered redundant given the force and effect of the PIPEDA, and is therefore repealed. Section 5 is amended to include reference to the application of PIPEDA to these Regulations.

Under section 36 of the 1995 Regulations, the Minister of Transport could make an order prohibiting airline participation in a CRS when the CRS vendor's contract with the travel agent contained certain elements. The emergence of competitive alternative distribution channels, however, not only provides an airline with distribution options, but alternatives for the travel agent to gain access to that airline's inventory, as well as to other travel suppliers outside the CRS distribution channel. It would appear that competitive alternative distribution channels may provide equal if not better market discipline to the substance of the CRS vendor's contract with the travel agent. Therefore, section 36 is repealed.

Part II: The Designated Provisions Regulations

The Designated Provisions Regulations detail administrative monetary penalties for contraventions to provisions of the Aeronautics Act, and therefore to the Regulations. The Designated Provisions Regulations are amended in accordance with the repeal of provisions in the Regulations.

Alternatives

The changed circumstances have been of such scope and magnitude as to have a structural impact on the key stakeholders and their relationships with each other. Therefore, no alternative to regulation was considered other than the degree to which market forces should prevail. The amendments to the Regulations have been evaluated using the following criteria.

First, regulation is used only when and if necessary in order to induce market discipline. In formulating the changes to the Regulations, consideration was given to demonstrated market failure, or to the high risk of market failure, before continued or enhanced regulation of the matter was considered.

Second, regulation, when chosen, should be enforceable. Matters that would be regulated were, therefore, also selected on the basis of whether evidence of alleged contraventions could be gathered and verified, as well as the adequacy of the deterrents.

Benefits and Costs

The Regulations retain some provisions from the 1995 Regulations, revise several provisions to provide greater clarity and repeal provisions that are no longer deemed necessary. No new provisions are being introduced.

The Regulations support market developments underway in the travel sector and air industry and move toward a substantially deregulated distribution system while at the same time, retaining some important safeguards. As such, the Regulations are not expected to introduce any new or significant costs. At the same time, all stakeholders are expected to benefit from the increased commercial freedom to provide or receive competitive travel distribution and sales solutions.

CRS vendors: By removing the obligated carrier provision, CRS vendors will not have guaranteed access to the inventories of airlines (i.e., obligated carriers). However, allowing CRS vendors to negotiate with airlines on more commercial terms regarding elements such as fees and service enhancements will enable them to compete more effectively with alternative distribution channels. Furthermore, CRS vendors will have greater flexibility to innovate under less prescriptive Regulations. Together, these changes are expected to prompt CRS vendors to offer better terms and technological solutions and, in turn, may encourage airlines to reintroduce content that is being sold exclusively through alternative channels.

Travel agents: Travel agents have been adapting to technological and structural changes in the travel distribution industry. In a more deregulated environment, travel agencies gain the ability to be more dynamic and innovative and to take full advantage of alternative distribution channels such as the Internet. They are increasingly turning to this channel to book travel for their customers, to advertise specials and to attract consumers who would otherwise be outside their immediate geographic vicinity.

Some travel agencies have raised concerns over their ability to meet productivity thresholds in their agreements with CRS vendors because of increased bookings outside of the CRS environment. At the same time, CRS vendors are recognizing that travel agents are increasingly booking directly with airlines. Therefore, they are adapting to this new environment by proposing to introduce more flexible agreements to reflect current market realities. Travel agents will continue to play an important role in the sale of air services and will continue to have access to airlines' inventory through various channels.

Airlines: By removing the obligated carrier provision, the Regulations will permit airlines to choose the most efficient means to distribute their air services. At the same time, the ability to negotiate fees with CRS vendors on commercial terms should also work to lower their distribution costs and may prompt them to reintroduce certain classes of fares in the CRS systems.

Enforcement costs will continue to be borne by Transport Canada. However, in the past, the distribution, display and disclosure of air travel information subjected to the amendments to the Regulations have been largely self-correcting and have required very little government intervention. Monitoring will be carried out as an integral part of the on-going review of the air transportation sector and complaints will be reviewed using existing resources.

Consultation

Over the past year and a half, key stakeholders representing all of the industry sectors (including large and small airlines, CRS vendors, retail, corporate and on-line travel agents) were consulted extensively to understand their perspective on the changes in the travel distribution sector, their ability to respond to these changes and finally, their views on the effectiveness of the 1995 Regulations in the current environment.

In addition, the U.S. Department of Transportation (Office of the Secretary of Transportation), the U.S. Department of Justice (Anti-trust Division), the U.S. Office of Management and Budget, and the EC (Directorate of Transportation and Energy) were consulted in respect of the reviews of their respective CRS rules. Transport Canada officials consulted officials in the Electronic Commerce Branch of Industry Canada and worked closely with officials from the Canadian Transportation Agency and the Competition Bureau to develop the changes to the Regulations.

Industry stakeholders were not asked to submit written comments during these preliminary consultations, although some did. Stakeholders understood that they would have an opportunity to formally comment following publication of the proposed amendments to the Regulations in the Canada Gazette, Part I. All stakeholders recognized the profound changes underway within the air travel distribution industry. Furthermore, stakeholders acknowledged that these trends are expected to continue. Stakeholders cautioned that in a regulated environment, their ability to be dynamic and to embrace change was reduced. Finally, while stakeholders expressed a range of views regarding whether certain provisions in the Regulations should be strengthened or repealed, they were fully aware of the reviews underway in the United States and the European Union of their CRS rules and acknowledged that the proposed Canadian Regulations would need to take into consideration the proposed amendments to the CRS rules in these jurisdictions.

Recognizing that changes to the Regulations would have differing impacts on stakeholders, Transport Canada committed to this proactive consultation of key stakeholders in advance of publishing the proposed amendments. Following the publication of the proposed amendments to the Regulations in the Canada Gazette, Part I, in October 2003, stakeholders and the public at large had a period of thirty days to submit formal comments. Transport Canada received submissions from all sectors of the industry and met with key stakeholders to discuss their positions and concerns regarding the proposed amendments.

Furthermore, in order for Transport Canada to complete its consultation process, the Parliamentary Secretary to the Minister of Transport invited members of the travel distribution industry to a public meeting on February 9, 2004.

The meeting was intended to provide all stakeholders and other interested Canadians a final opportunity to present their views on the proposed amendments to the Regulations and to hear the views of other stakeholders. Sixteen individuals representing the airlines, CRS vendors, travel agents, tour operators and the business community made oral presentations. All stakeholder groups were well represented at the meeting. Comments, presentations and submissions were subsequently posted on the Transport Canada website and made available to the public.

Although most presenters were in favour of full or partial deregulation of the CRS industry, a range of comments and proposals were advanced. Some of the positions provided by presenters are discussed below.

Several airlines made presentations at the meeting. While some airlines favoured a more or fully deregulated environment, some specific concerns were raised by the airline industry during the meeting. Canadian airlines recognized that while most of the domestic bookings in Canada were completed on the Internet, the provisions regarding display bias remained important. One of the carriers noted that, in the short term, removing the requirements on display information could negatively affect airlines that could not pay for better screen placement.

Generally, CRS vendors advocated a fully deregulated CRS industry in keeping with changes to the new U.S. CRS Rules (i.e., full deregulation on July 31, 2004) as they viewed that Regulations create inefficiencies and that market forces can provide better results. In addition, CRS vendors argued that government should not adopt special sectoral rules that limit a CRS vendor's ability to freely negotiate with airlines and to develop more innovative solutions for airlines and travel agencies. However, some CRS vendors stated that within the context of continued regulation, the obligated carrier requirement should be retained.

Several travel agency associations, along with individual travel agencies, also made presentations to the Parliamentary Secretary and to Transport Canada. Some presenters stated that the Regulations should ensure that travel agents have access to comprehensive airline inventory through all CRS systems and to that end, obligated airlines should not have the possibility to withdraw from CRSs, a possible result of the amendments. Some travel agents urged Transport Canada to withdraw the proposed amendments and conduct further research and consultations. Other independent travel agencies also voiced concerns with respect to access to airlines' content in the CRS, although most recognized that they nevertheless used the Internet to make bookings.

During the meeting, other travel agency presenters argued in favour of substantial deregulation with the exception of modified provisions regarding the sale of MIDT information and a modified display rule, ensuring clear disclosure of any bias on a display. In addition, some members of the travel agency community requested that an industry observer position be created to monitor the activities in the CRS industry after the Regulations come into force, and to hear complaints regarding anti-competitive practices.

On the question of the effect of a more restrictive and distinct Canadian CRS regulatory environment, most presenters recognized that Canadian stakeholders could be at a disadvantage if Canada maintained a significantly more restrictive CRS environment than that of the United States.

Transport Canada carefully considered all presentations and reviewed all written comments along with submissions to ensure that it balanced the views of all stakeholders.

The question of whether a transition period should be implemented was raised at various levels of the consultation process. Some stakeholders took a position that a transition period was necessary, allowing for parties to adjust to a more deregulated environment. Most stakeholders, however, stated that a delay in the application of the Regulations would be unnecessary, particularly in light of the recent announcement of planned full deregulation in the United States.

Transport Canada began its review of the 1995 Regulations in 1999, and has been in consultation with stakeholders since then. It is confident that due to the breadth and scope of the most recent consultations following the publication of the proposed amendments on October 25, 2003, members of all sectors of the CRS industry have been given sufficient notice to adequately prepare for the Regulations. The Regulations will therefore take effect on the date of registration.

Given the rapid changes in the travel distribution industry and the proposed deregulation of the U.S. CRS industry at the end of July 2004, Transport Canada will continue to actively monitor developments in the CRS industry following the coming into force of the amended Regulations. It will consult with members of the industry and will accept written submissions that parties wish to present to the department regarding the effects of the Regulations. Following its careful examination of the CRS industry, Transport Canada intends to present recommendations to the Minister of Transport, indicating its findings and analysis regarding the state of the CRS industry and of the effect of the Regulations in order to modify the Regulations, when and as appropriate.

Compliance and Enforcement

The amendments to the Regulations will be enforced as provided for in the Aeronautics Act under sections 7.6 to 8.2.

A person who contravenes a designated provision may be subject to the administrative monetary penalties, which are listed or designated, in the Designated Provisions Regulations. This administrative compliance mechanism is an alternative to court prosecutions. A person who is dissatisfied with a penalty has recourse to the Transportation Appeal Tribunal of Canada (TATC).

The purpose of this administrative compliance mechanism is to provide those affected by administrative enforcement decisions with an opportunity for a fair hearing before an independent body.

Where the Minister of Transport believes on reasonable grounds that a person has contravened a designated provision, that person is notified of the assessment of a monetary penalty not exceeding the amounts specified in the Designated Provisions Regulations. The person has the option of paying the penalty or appearing before a member of the TATC to make representations in respect of the allegations. When payment is made, further proceedings are precluded.

Failure to pay in accordance with the requirements of the notice results in the Minister of Transport forwarding to the TATC, within fifteen days following the deadline, copy of the notice. The TATC sets a time and place for a hearing and advises both the Minister of Transport and the person. Regardless of whether the person chooses to appear before the member of the TATC, the member hears the information presented on behalf of the Minister of Transport and makes a finding that is communicated to the person. When a person elects to appear before the member of the TATC, the Minister of Transport (or his official) and the person are provided a full opportunity, consistent with procedural fairness and natural justice to present evidence and make representations in relation to the alleged contravention. The burden of proof is on the Minister of Transport and the person is not required to give evidence of testimony.

Either side may appeal the determination of the member of the TATC within ten days after the determination. A panel of members of the TATC, excluding the member who originally heard the case, hears the appeal. The appeal will be on the merits, based on the record of the proceedings before the member, but the panel will allow oral argument and hear evidence not previously available. The appeal may be dismissed or allowed and, in allowing an appeal, the TATC can substitute its decision for the original determination.

When the right of appeal has not been exercised or an appeal has been dismissed, payment of the monetary penalty is due. If unpaid, a certificate of the amount will be produced in the superior court of any province and once registered becomes recoverable along with all reasonable costs and charges related to the registration of the certificate.

Contact

Nada Vrany
Director
National Air Services Policy
Transport Canada
Ottawa, Ontario
K1A 0N5
Telephone: (613) 998-8242
FAX: (613) 991-6445
E-mail: vranyn@tc.gc.ca

Footnote a

R.S., c. 33 (1^st Supp.), s. 1

Footnote b

S.C. 1992, c. 4, s. 7

Footnote 1

SOR/95-275

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