Decision No. 680-C-A-2001

December 31, 2001

December 31, 2001

IN THE MATTER OF a complaint by Richard Zuker against Air Canada concerning its prohibition against back-to-back ticketing applicable to the domestic services it offers.

File No. M4370/A74/00-672


COMPLAINT

On October 19, 2000, Richard Zuker filed with the Air Travel Complaints Commissioner the complaint set out in the title. However, due to the regulatory nature of the complaint, it was referred to the Canadian Transportation Agency (hereinafter the Agency).

On December 14, 2000, Agency staff requested that Air Canada address the complaint within the context of sections 111 and 113 of the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR), with respect to travel to and from Canada, and subsection 67.2(1) of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA), relating to domestic travel.

By letter dated January 15, 2001, Air Canada requested an extension until January 26, 2001 to file its answer to the complaint, and by Decision No. LET-A-23-2001 dated January 18, 2001, the Agency granted the request. On January 26, 2001, Air Canada filed its answer, and on February 3, 2001, Mr. Zuker filed his reply to the answer.

In its answer, Air Canada addressed the complaint in the context of subsection 111(1) of the ATR, stating that Mr. Zuker made no claim under either subsection 111(2) or (3) of the ATR, or subsection 67.2(1) of the CTA. In his reply, Mr. Zuker indicated that his complaint pertained to travel between Saskatoon and Ottawa.

On February 19, 2001, Air Canada requested permission to respond to Mr. Zuker's reply of February 3, 2001, stating that, as the complainant had clarified that the complaint related to domestic travel, it would be highly prejudicial for Air Canada not to be able to respond to the reply. By Decision No. LET-A-112-2001 dated March 8, 2001, the Agency allowed Air Canada fifteen days from the date of the decision to file comments on Mr. Zuker's reply, and Mr. Zuker was allowed ten days from the date of receipt of Air Canada's comments to file a response with the Agency. On March 23, 2001, Air Canada filed its comments with the Agency, and on March 26, 2001, Mr. Zuker replied to the comments.

Pursuant to subsection 29(1) of the CTA, the Agency is required to make its decision no later than 120 days after the application is received unless the parties agree to an extension. In this case, the parties agreed to an indefinite extension of the deadline.

PRELIMINARY MATTER

Although Air Canada appended a statement by Professor William J. Baumol to its January 26, 2001 answer, by letter dated February 19, 2001, the carrier requested this statement's withdrawal, maintaining that the statement had been submitted in error, and that its retraction would not impact on the substance of Mr. Zuker's reply. Air Canada further requested that the Agency and Mr. Zuker "treat Prof. Baumol's statement on a confidential basis given it contains confidential information that is consistently treated as confidential by Air Canada".

By Decision No. LET-A-112-2001 dated March 8, 2001, the Agency advised the parties that Professor Baumol's statement would be treated as confidential.

ISSUES

The issues to be addressed are:

  1. whether Air Canada applied a term or condition of carriage applicable to the domestic services it offers that is unreasonable or unduly discriminatory within the meaning of subsection 67.2(1) of the CTA; and, if so,
  2. whether the Agency should suspend or disallow that term or condition and substitute another term or condition in its place.

POSITIONS OF THE PARTIES

Mr. Zuker states that Air Canada refused to sell him a published fare because he was "double-booking", or attempting to purchase what is commonly referred to as back-to-back tickets. He maintains that Air Canada has no "legal basis" for refusing to sell such tickets.

Air Canada explains that back-to-back ticketing "refers to a situation where a traveller circumvents a minimum Saturday stay requirement as required in lower priced fares. This involves the combination of two or more round-trip excursion fares end-to-end and the use of coupons from two or more tickets, issued at round-trip fares, for the purpose of circumventing applicable tariff rules, such as advance purchase, or the minimum stay requirement." Air Canada states that it prohibits this practice, and that this prohibition applies only to restricted fares but is not applied to fares without minimum stay requirements. Air Canada adds that such requirements are needed to protect its seat inventory management system and to differentiate between various price options. Air Canada argues that for a seat inventory management system to be effective, air carriers must be able to segregate their customers into different market segments, including those comprised of consumers willing to pay higher fares and consumers who will only travel at lower fares.

Air Canada states that it is generally acknowledged that differential pricing assists air carriers with fixed costs to recover their outlays, and that by placing restrictions on certain fares, such as a minimum Saturday night stay, air carriers are able to adopt differential pricing. Air Canada indicates that minimum stay requirements represent "an effective way to screen out business travelers who wish to spend weekends with their families or in other leisure pursuits not at their business destination". The carrier states that a prohibition against back-to-back ticketing is common in the air transport industry, and that eliminating this prohibition would undermine all carriers' ability to control their seat inventory management systems and to differentiate prices, resulting in "dramatic" losses. Air Canada further states that it did not refuse the sale because Mr. Zuker had purchased another ticket, or because he was seeking to minimize costs. The carrier further states that it did not discriminate by refusing to sell Mr. Zuker a ticket, as its refusal was solely based on Mr. Zuker violating the terms and conditions of carriage of the tariff.

Mr. Zuker indicates that he does not challenge Air Canada's right to apply differential pricing, or to set fares and associated terms and conditions of carriage so as to maximize revenues. Mr. Zuker, however, does object to Air Canada's practice of denying the purchase of a ticket solely on the grounds that another ticket was sold. He alleges that this refusal is "unreasonable, unjust, and/or discriminatory behaviour", and suggests that Air Canada believes it has an "inherent right" to compel consumers to select the most costly fares.

Mr. Zuker submits that, when the terms and conditions relating to the sale of a specific service are extended to create restrictions that apply to the purchase of other services, such as a prohibition against back-to-back ticketing, these restrictions may infringe on a consumer's right to privacy. Mr. Zuker also notes that, where competition exists on a route, a consumer could purchase return tickets from one air carrier, and other return tickets from a competing carrier, without each carrier knowing of the purchase from its rival.

Mr. Zuker argues that acceptance of a carrier's prohibition against back-to-back ticketing, where a market is only served by one air carrier and certain information is available to that carrier because of its position, would appear to condone restraint of trade. Mr. Zuker submits that, if Air Canada wishes to eliminate or curtail back-to-back ticketing, it could use its fare structure and the terms and conditions applicable to fares to achieve the same results. In this regard, Mr. Zuker suggests that the change fee could be increased, or the minimum stay requirement reduced. Mr. Zuker maintains that Air Canada has not provided evidence that prohibiting back-to-back ticketing is essential to achieving objectives relating to inventory control and differential pricing. He states that the carrier has reported the potential "losses" it could incur if the practice of back-to-back ticketing were permitted, but he contends that such "losses" are unsubstantiated.

ANALYSIS AND FINDINGS

In making its findings, the Agency has carefully considered all of the evidence submitted by the parties, including the comprehensive arguments raised by the complainant. The Agency has also examined Air Canada's tariff provision on back-to-back ticketing, set out in Rule 100 (G) of the Canadian General Rules Tariff (CDGR), published by the Airline Tariff Publishing Company, Agent, which states that:

AC [Air Canada] specifically prohibits the practices commonly known as:

Back to back ticketing - the combination of two or more round-trip excursion fares end to end for the purpose of circumventing minimum stay requirements;

The Agency's jurisdiction over complaints concerning domestic tariffs is set out in sections 67, 67.1 and 67.2 of the CTA. Pursuant to subsection 67.2(1) of the CTA, the Agency may take certain remedial action following receipt of a complaint where the Agency finds that the holder of a domestic licence has applied terms or conditions of carriage applicable to the domestic service it offers that are unreasonable or unduly discriminatory. More particularly, subsection 67.2(1) states that:

If, on complaint in writing to the Agency by any person, the Agency finds that the holder of a domestic licence has applied terms or conditions of carriage applicable to the domestic service it offers that are unreasonable or unduly discriminatory, the Agency may suspend or disallow those terms or conditions and substitute other terms or conditions in their place.

As a preliminary matter, the Agency finds that Air Canada applied this tariff provision by refusing to sell to Mr. Zuker back-to-back tickets.

Is Air Canada's prohibition against back-to-back ticketing applicable to transportation between points in Canada "unreasonable" within the meaning of subsection 67.2(1) of the CTA?

According to the principles of statutory interpretation, words of a statute are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme and object of the statute as well as the intention of Parliament. As stated by M. Justice Rouleau of the Federal Court Trial Division in ECG Canada Inc. v. M.N.R., [1987] 2 F.C. 415:

There is no question that the literal approach is a well established one in statutory interpretation. Nevertheless, it is always open to the Court to look to the object or purpose of a statute, not for the purpose of changing what was said by Parliament, but in order to understand and determine what was said. The object of a statute and its factual setting are always relevant considerations and are not to be taken into account only in cases of doubt.

The term "unreasonable" is not defined in either the CTA or the ATR, and it has not been considered by the Agency in the context of an air carrier's domestic tariff. The Canadian Oxford Dictionary defines the word "unreasonable" as "going beyond the limits of what is reasonable or equitable; not guided by or listening to reason". Black's Law Dictionary defines "unreasonable" as meaning "irrational; foolish; unwise; absurd; silly; preposterous; senseless; stupid".

Although the scope of the word "unreasonable" as it relates to terms and conditions of carriage has not been judicially considered in Canada, the meaning of the word has repeatedly been examined by the courts in contexts such as judicial review 445-R-2000 dated June 30, 2000

Subsection 67.2(1) of the CTA appears under the heading entitled "Licence for Domestic Service" found in Part II of the CTA, "Air Transportation". This heading encompasses 10 statutory provisions which provide specific statutory remedies to the travelling public, while imposing obligations on domestic licensees as part of an effort to redress instances where a fare, rate, charge or term or condition of carriage unilaterally established by an air carrier is found to be unreasonable, unduly discriminatory or not applied by the carrier. In the Agency's opinion, the specific wording of subsection 67.2(1) of the CTA reflects a recognition by Parliament that regulation was needed in order to attain the stated objective of the national transportation policy found in section 5 of the CTA which provides, in part, that:

...each carrier or mode of transportation, as far as is practical, carries traffic to or from any point in Canada under fares, rates and conditions that do not constitute an unfair disadvantage in respect of any such traffic beyond the disadvantage inherent in the location or volume of the traffic, the scale of the operation connected with the traffic or the type of traffic or service involved.

This position is also in harmony with section 12 of the Interpretation Act, R.S.C., 1985, c. I-21 which provides that:

Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

In determining whether a term or condition of carriage applied by a carrier is "unreasonable" within the meaning of subsection 67.2(1) of the CTA, the Agency must, therefore, ensure that it does not interpret the provision in such a way that impairs or jeopardizes the ability of the travelling public to efficiently use the recourse put in place by Parliament to protect it against the unilateral setting of terms and conditions of carriage by air carriers.

Conversely, the Agency must also take into account:

  1. the operational and commercial obligations of the particular air carrier which is the subject of the complaint;
  2. the other consumer protection provisions found under Part II of the CTA which compel air carriers to publish, display or make available for public inspection tariffs that contain the information required by the ATR and only apply the terms and conditions of carriage set out in those tariffs; and
  3. the fact that air carriers are required to establish and apply terms and conditions of carriage designed to apply collectively to all passengers as opposed to one particular passenger.

The Agency is, therefore, of the opinion that, in order to determine whether a term or condition of carriage applied by a domestic carrier is "unreasonable" within the meaning of subsection 67.2(1) of the CTA, a balance must be struck between the rights of the passengers to be subject to reasonable terms and conditions of carriage, and the particular air carrier's statutory, commercial and operational obligations.

With respect to the issue of whether Air Canada's prohibition against back-to-back ticketing is unreasonable within the meaning of subsection 67.2(1) of the CTA, the Agency is of the opinion that the prohibition is imposed by many air carriers, and is mainly intended to prevent the circumvention of the Saturday night minimum stay requirement, a condition applied to many discounted fares. The Agency also recognizes that Air Canada's prohibition against back-to-back ticketing constitutes a fundamental element of the carrier's seat inventory management system, a feature of which is the application of differential pricing to the carrier's fare structure, which is designed to segregate specific consumer segments. Within this segregation, unrestricted fares, which are priced at higher levels, are intended for the business traveller, are the most flexible and cover the carrier's fixed costs, while restricted fares are designed for the leisure traveller, are the least flexible and maximize the carrier's yield. The Agency recognizes that the Saturday night minimum stay requirement applied by Air Canada to its discounted fares allows for the isolation of the traffic generating the highest yield. The Agency also recognizes that Air Canada's inventory management system, as currently constituted, allows the carrier to predict, with a certain degree of accuracy, anticipated load factors, and to calculate the optimal number of seats to allocate to each fare. The absence of a prohibition against back-to-back ticketing would, in the Agency's opinion, distort Air Canada's fare structure.

The Agency therefore finds that Air Canada's prohibition against back-to-back ticketing is a legitimate means by which Air Canada controls the segregation of markets into various price options and the management of its seat inventory. Further, the Agency finds that the elimination of Air Canada's prohibition against back-to-back ticketing would undermine the integrity of the carrier's fare structure, to the possible detriment of Air Canada.

Is Air Canada's prohibition against back-to-back ticketing applicable to transportation between points in Canada "unduly discriminatory" within the meaning of subsection 67.2(1) of the CTA?

As with the word "unreasonable", the phrase "unduly discriminatory" is not defined in the CTA or the ATR, and it has not been considered by the Agency in the context of an air carrier's domestic tariff.

With respect to the meaning of the word "discriminatory", the Supreme Court of Canada, in Andrews v. Law Society (British Columbia), [1989] 1 S.C.R. 143, held that "discrimination may be described as a distinction, whether intentional or not but based on grounds relating to personal characteristics of the individual or group, which has the effect of imposing burden, obligation, or disadvantages on such individual or group not imposed on others, or which withholds or limits access to opportunities, benefits, and advantages, available to other members of society".

Further, in O'Connell v. Canadian Broadcasting Corp. (1988), 88 C.L.L.C. 17, 017, the Canadian Human Rights Tribunal held that: "a practice or rule may be found to be discriminatory, whether it involves ... "direct discrimination" (a practice or rule which is on the face of it discrimination) or "adverse impact" (a practice or rule which is on the face of it neutral, applying equally to all employees, but which has a discriminatory effect upon a discriminatory ground on an individual employee or group of employees).".

The above judicial interpretations of the word "discrimination" are well recognized in Canada and have been used by various courts and tribunals1. The Agency notes, however, that, contrary to the human rights and labour relations contexts in which those decisions were rendered, where the overriding principle is that no discrimination is tolerated, the CTA provides that "discriminatory" terms or conditions of carriage may be tolerated provided that they are not "unduly discriminatory" [Emphasis added].

The determination of whether a term or condition of carriage applied by a carrier on a domestic route is "unduly discriminatory" is, therefore, a two step process. In the first place, the Agency must determine whether the term or condition of carriage applied is "discriminatory". In the absence of discrimination, the Agency need not pursue its investigation. If, however, the Agency finds that the term or condition of carriage applied by the domestic carrier is "discriminatory", the Agency must then determine whether such discrimination is "undue".

The meaning of the word "undue" was the subject of a detailed analysis by the Federal Court of Appeal in Via Rail Canada Inc. v. National Transportation Agency and Jean Lemonde, [2001] 2 F.C. 25. In that case, the Court stated that:

While "undue" is a word of common usage which does not have a precise technical meaning the Supreme Court has variously defined "undue" to mean "improper, inordinate, excessive or oppressive" or to express "a notion of seriousness or significance". To this list of synonyms, the Concise Oxford Dictionary adds "disproportionate".

What is clear from all of these terms is that undue-ness is a relative concept. I agree with the position expressed by Cartwright J., as he then was:

"Undue" and "unduly" are not absolute terms whose meaning is self-evident. Their use presupposes the existence of a rule or standard defining what is "due". Their interpretation does not appear to me to be assisted by substituting the adjectives "improper", "quot;, ", "quot;inordinate", "quot;, ", "quot;excessive", "quot;, ", "quot;oppressive" or "wrong", or the corresponding adverbs, in the absence of a statement as to what, in this connection, is proper, ordinate, permissible or right.

The proper approach to determine if something is "undue", then, is a contextual one. Undue-ness must be defined in light of the aim of the relevant enactment. It can be useful to assess the consequences or effect if the undue thing is allowed to remain in place.

The Supreme Court has also recognized that the term implies a requirement to balance the interests of the various parties. In a case dealing with whether an employer had accommodated an employee's right to exercise his religion beliefs up to the point of undue hardship, Wilson J., writing for the majority, found it helpful to list some of the factors relevant to such an appraisal. She concluded by stating: "This list is not intended be exhaustive and the result which will obtain from a balancing of these factors against the right of the employee to be free of discrimination will necessarily vary from case to case".

The Agency is, therefore, of the opinion that, in determining whether a term or condition of carriage applied by a domestic carrier is "unduly discriminatory" within the meaning of subsection 67.2(1) of the CTA, it must adopt a contextual approach which balances the rights of the travelling public not to be subject to terms and conditions of carriage that are discriminatory, with the statutory, operational and commercial obligations of air carriers operating in Canada. This position is also in harmony with the national transportation policy found in section 5 of the CTA.

The first question for the Agency to consider, then, in determining whether a term or condition of carriage applied by an air carrier is "unduly discriminatory" within the meaning of subsection 67.2(1) of the CTA is whether the term or condition of carriage is discriminatory.

The Agency finds that there is no evidence before it to suggest that Air Canada's prohibition against back-to-back ticketing in and of itself is discriminatory or that the prohibition has been applied in a discriminatory manner.

Given that Air Canada's prohibition against back-to-back ticketing is not "discriminatory" within the meaning of subsection 67.2(1) of the CTA, the Agency need not examine the question of whether the prohibition is "unduly" discriminatory.

Accordingly, the Agency has determined that Air Canada's prohibition against back-to-back ticketing is neither unreasonable nor unduly discriminatory.

CONCLUSION

Based on the above findings, the Agency hereby dismisses the complaint.


  1. Brooks v. Canada Safeway Ltd., [1989] 4 W.W.R. 193; Canada (Attorney General) v. George, [1991] 1 F.C. 344; Headley v. Canada (Public Service Commission), [1987] 2 F.C. 235.
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