Decision No. 8-A-2014

January 13, 2014

APPLICATION by Scandinavian Airlines System for a review of a warning of alleged violations of paragraph 135.8(1)(a), subsections 135.8(2) and (3), and section 135.91 of the Air Transportation Regulations, SOR/88-58, as amended.

File No.: 
L4352/13-05321

INTRODUCTION

[1] Scandinavian Airlines System (SAS) is licensed to operate a non-scheduled international service to transport traffic between points in Sweden, Norway and Denmark and points in Canada. SAS is also licensed to operate a scheduled international service in accordance with the Agreement between the Government of Canada and the Government of the Kingdom of Norway on Air Transport, initialled ad referendum, on February 17, 1989, and scheduled international services in accordance with the Agreement on Air Transport between Canada and the European Community and its Member States, signed on December 18, 2009.

[2] In 2012, amendments to the Air Transportation Regulations (ATR) came into effect which govern the regulation of air services price advertising. These provisions are set out in Part V.1 of the ATR.

[3] A compliance verification was conducted on July 10, 2013 by an enforcement officer designated by the Canadian Transportation Agency (Agency), pursuant to paragraph 178(1)(a) of the Canada Transportation Act, S.C., 1996, c. 10, as amended (CTA). The designated enforcement officer (DEO) found that SAS contravened paragraph 135.8(1)(a), subsections 135.8(2) and (3), and section 135.91 of the ATR with respect to its online booking system found at www.flysas.com.

[4] In particular, the DEO found that when selecting a flight, the prices are not total prices as a service fee is added and the prices are not in Canadian dollars. Further, the DEO found that there are no headings on SAS’s online booking system as required by subsections 135.8(2) and (3) of the ATR. In addition, the DEO found that an amount for fuel surcharges on SAS’s online booking system is set out as if it were a third party charge, contrary to section 135.91 of the ATR.

[5] Accordingly, on July 16, 2013, the DEO issued a formal warning that SAS had contravened paragraph 135.8(1)(a), subsections 135.8(2) and (3), and section 135.91 of the ATR.

[6] On July 29, 2013, SAS requested an extension until September 16, 2013 to file an application for a review.

[7] On September 16, 2013, SAS filed an application for a review of the warning. On September 30, 2013, the DEO filed comments on SAS’s application for a review. On October 10, 2013, SAS filed a reply to the DEO’s comments.

ISSUE

[8] Was the warning of alleged violations of paragraph 135.8(1)(a), subsections 135.8(2) and (3), and section 135.91 of the ATR warranted?

POSITIONS OF THE PARTIES

SAS

Application of Part V.1 of the ATR

[9] SAS refers to the Agency’s Air Transportation Regulations – Air Services Price Advertising: Interpretation Note (Interpretation Note) which states that where a carrier has multiple geographic specific versions of its Web site, the ATR only applies to the carrier’s Canadian version of its Web site. SAS states that it has no Canadian version of its Web site that would trigger a requirement to comply with Part V.1 of the ATR.

[10] SAS submits that it has relied on the Agency’s Interpretation Note for the proposition that as it does not maintain a Canadian version of its Web site – and does not operate flights to and from Canada with its own aircraft or hold out code-share flights from Canada on its Web sites, it is not required to comply with the price advertising provisions of the ATR. SAS submits that Part VI of the Interpretation Note states that advertising requirements do not apply to advertising where the Canadian public has not been targeted.

[11] SAS contends that the DEO reached the conclusions with respect to the violations after examining SAS’s Web site (flysas.com) using the “Other countries” version of the Web site which is not advertising to or targeting the Canadian public.

[12] SAS submits that it is not offering on its Web sites any of its own flights today to the Canadian market. SAS adds that it does no advertising of its flights in Canada either on the Internet or in print media. SAS submits that although it owns the rights to the domain name flysas.ca, this Web site is currently not in use.

[13] SAS argues that Interline flight routings that were displayed on its “Other countries” Web site online booking engine when viewed by the DEO showed SAS flights operating from points in the United States to Denmark, Norway or Sweden only, not from any Canadian city.

[14] SAS states that Canadian cities appear on the pull-down menu on the SAS “Other countries” Web site so that European customers can book round-trip itineraries to Canadian cities that begin with a westbound flight on SAS. SAS asserts that if the Agency were to uphold the DEO’s view that the “Other countries” Web site’s offering of interline flights constitutes a targeting of the Canadian public, SAS would have to permanently delete all Canadian cities from its pull-down menu so that no Europe to Canada interline routings would be displayed on the “Other countries” Web site. SAS submits that this would deprive SAS’s European customers who rely on the “Other countries” Web site from booking Europe-Canada interline itineraries where a SAS flight is displayed on the initial sector out of Europe.

[15] SAS contends that there is no factual support that the SAS “Other countries” Web site is targeting the Canadian public.

[16] SAS states that imposing these Canadian price advertising regulations on the “Other countries” Web sites of European carriers like SAS that do not serve Canada with their own aircraft (or even hold out code-share flights from Canada on their Web sites), and only sell interline itineraries for travel from Canada via the United States, will also limit competition in fares and routings in the Canada-Europe air transportation market to the detriment of consumers. As is the case for SAS, such carriers will find the investment necessary to establish and maintain a separate Web site dedicated to the Canadian market to be prohibitively expensive and they will be forced to cease offering interline flights from Canada on their “Other countries” Web sites. Thus, SAS argues that these regulations, as currently applied, effectively discriminate against European carriers like SAS that do not serve Canada with direct flights.

[17] SAS submits that with no direct flights into and out of Canada, the revenue that SAS earns from the interline bookings from Canadian customers is insufficient to justify the expense involved in creating and maintaining a new Canadian version of the SAS Web site.

[18] SAS advises that, as an interim measure pending the Agency’s review of the DEO’s warning, it has removed all Canadian cities from the booking engine on its “Other countries” Web site so that customers are no longer able to use the Web site to book itineraries that include an origin or destination in Canada.

Paragraph 135.8(1)(a) of the ATR

[19] SAS submits that while the Web site is in English, the prices are displayed in euros consistent with what the Web site is: a generic Web site primarily for customers in Europe who want to book flights on SAS in English because SAS does not offer a Web site version in their native language or home country. SAS argues that its Web site is a global Web site on which it would be practically impossible to reflect all currencies that could conceivably be used in all parts of the world and to comply with the various regulatory requirements of individual jurisdictions.

[20] SAS asserts that other than showing prices in Canadian dollars for Canadian originating itineraries, the “Other countries” Web site is in substantial compliance with the price advertising provisions of the ATR.

[21] SAS asserts that establishing and maintaining a separate Canadian Web site that displays fares in Canadian dollars would be an expensive undertaking.

[22] SAS points out that while a service fee is added during the booking process, the “total price” of the ticket, including the service charge and other fees and taxes, is provided on the right hand side of the same screen.

Subsections 135.8(2) and (3) of the ATR

[23] SAS submits that establishing and maintaining a separate Canadian Web site that meets the specific heading requirements (“Taxes, Fees and Charges” and “Air Transportation Charges”) would be an expensive undertaking considering that there are no direct flights into and out of Canada and the revenue that SAS earns from Canadian customers is insufficient to justify the expense involved in creating and maintaining a new Canadian version of the SAS Web site.

Section 135.91 of the ATR

[24] SAS disagrees that its fuel surcharge is set out as if it were a third party charge. SAS submits that, to the contrary, its fuel surcharge is included with the amount described on its Web site next to the heading “Of which includes taxes and carrier-imposed fees”. SAS explains that a hyperlink with the text “Breakdown of taxes and carrier-imposed fees” is included directly below this heading leading to a pop-up screen, which again includes the heading “Breakdown of taxes and carrier-imposed fees”. The pop-up screen provides a description of each of the taxes and carrier-imposed fees, such as the “fuel and security surcharge” applicable to the ticket being purchased. SAS thus contends that no reasonable reading of the SAS “Other countries” Web site displays would lead to the conclusion that the SAS fuel surcharge is being portrayed as if it were a third party charge or a government tax.

The DEO

Application of Part V.1 of the ATR

[25] The DEO submits that a Canadian version of a Web site will only be considered if such a version exists. Numerous domestic and international carriers as well as travel agencies have only one version of their Web site. The DEO states that not having a Canadian version of a Web site does not remove the advertiser from an obligation to comply with the price advertising regulatory requirements.

[26] The DEO states that the following factors suggest that the “Other countries” version of SAS’s Web site is targeting the Canadian public:

  • under the “Need Help?” link, there is a drop down list of all countries where contact details are available for consumers. Canada is listed and there is a 1-800 customer service telephone number available to Canadians;
  • prior to the current interim measure, Canadians could book a flight originating in Canada using a Canadian credit card and a Canadian address;
  • SAS is required under section 116.1 of the ATR to display its terms and conditions of carriage on its Web site. This document can be found on SAS’s United States Web site. As SAS posts its Canadian terms and conditions of carriage on a Web site, the DEO is of the view that SAS is targeting Canadians.
  • SAS admits that it does get business and revenues from Canadian consumers.

[27] The DEO states that the ATR apply to “Any person who advertises the price of an air service within or originating in Canada”. The DEO submits that the fact that SAS does not operate direct flights from or to Canada is irrelevant. The person advertising does not necessarily have to be a carrier or even operate flights. For example, travel agencies must comply with the ATR even though they do not operate flights.

[28] The DEO submits that it is not necessary for SAS to establish and maintain a Canadian Web site to comply with the ATR.

Section 135.91 of the ATR

[29] With respect to the alleged violation of section 135.91 of the ATR, the DEO refers to Decision No. 320-A-2013 regarding a similar issue raised by British Airways Plc carrying on business as British Airways (British Airways). In that Decision, the Agency stated that:

[28] The Agency finds that by setting out the amount for fuel surcharges under the heading “Taxes, fees and carrier charges per person,” British Airways has contravened section 135.91 of the ATR.

[30] The DEO contends that because the phrase “taxes and carrier-imposed fees” used by SAS is very similar to the phrase “Taxes, fees and carrier charges per person” used by British Airways, SAS has contravened section 135.91 of the ATR.

SAS’s reply to the DEO’s comments

Application of Part V.1 of the ATR

[31] SAS submits that the application of the price advertising provisions of the ATR advanced by the DEO would render meaningless the Agency’s Interpretation Note that defines the scope of the rules. SAS states that the Interpretation Note expressly states under Part VI “What is Not Subject to the Advertising Requirements” that “for carriers having multiple geographical specific versions of their Web sites, the Canadian version would need to comply.” SAS contends that the Interpretation Note does not state, as the DEO argues, that a carrier’s global Web site, such as SAS’s “Other countries” Web site, must comply with the price advertising provisions of the ATR if it has no Canadian version of its Web site. In SAS’s view, this is especially critical as SAS does not hold out on its global Web site flights from or to Canada operated with its own aircraft or even on a code-share basis.

[32] SAS states, as it has stated before, that it has multiple geographical versions of its Web site but no Canadian version that would trigger application of the price advertising provisions of the ATR. SAS submits that its “Other countries” Web site is a generic Web site created by SAS primarily for its customers in Europe who want fares quoted in euros and who want to book flights in English in countries where SAS does not have a Web site specific to that country. SAS adds that prior to the interim measure that removed the Canadian interline connecting flights from the “Other countries” Web site, SAS showed interline connecting flights to and from Canada for such SAS customers originating their journey in Europe who wanted to travel on SAS for the transatlantic portion of their trip and connect in the United States to a flight to Canada operated by a Canadian or an American carrier. SAS reiterates that it does not operate flights to or from Canada with its own aircraft and does not even hold out Canadian code-share flights on its global “Other countries” Web site.

[33] SAS submits that the unintended consequence of the DEO’s expansive reading of the Interpretation Note – if not rejected by the Agency – would be to prevent SAS from selling tickets for travel to Canada on its global “Other countries” Web site as it is impossible for technical reasons to remove only Canadian originating itineraries from the Web site, which cannot be what the Agency intended.

[34] SAS maintains that its “Need help?” link is not evidence that SAS is targeting the Canadian public. SAS adds that the 1-800 number on the “Other countries” Web site is for all SAS customers who may need to contact SAS while in Canada and not just for Canadians who are using the “Other countries” Web site to book flights. SAS submits that the presence of the 1‑800 number on its Web site adds nothing to the DEO’s argument in support of a violation.

[35] SAS states that it is correct that prior to removing the Canadian cities from its “Other countries” Web site, SAS received a very small amount of revenue from Canada from the tickets sold on the “Other countries” Web site for travel originating in Canada. SAS asserts that the amount of such revenue was however de minimis as the primary reason the Web site displayed Canadian cities was to sell tickets to European-originating passengers who wanted to travel to Canada.

[36] SAS submits that the DEO’s reading would require SAS’s “Other countries” global Web site to comply with both SAS’s own national authorities and the Agency’s advertising provisions. SAS maintains that requiring it to apply Part V.1 of the ATR is a classic regulatory overreach that would require carriers that do not even serve Canada to comply not only with the fare advertising rules of their home countries, but also with the Agency’s price advertising provisions. SAS contends that such an application may very well subject such carriers’ global Web sites to conflicting regulatory requirements or, at the very least, impose two sets of requirements that would be difficult to comply with on a single Web site.

[37] SAS states that while the DEO asserts that it is not necessary for SAS to establish and maintain a Canadian Web site to comply with the price advertising provisions of the ATR, SAS sees no options other than creating and maintaining a Canadian version of its Web site (which SAS is not prepared to do given the costs involved) or continuing to cease offering interline connecting flights to or from Canada on its “Other countries” Web site lest it be in conflict with either the European or the Agency’s price advertising rules.

[38] SAS asserts that placing international carriers like SAS in such a position makes no sense. SAS submits that the Agency’s Interpretation Note struck the right balance between protecting Canadian consumers and limiting the extraterritorial reach of the Agency’s price advertising regulations to advertisers that are targeting the Canadian public. SAS states that the Agency should reaffirm its Interpretation Note regarding the extent of its jurisdiction under the price advertising provisions of the ATR and reject the DEO’s overly expansive reading of it.

Section 135.91 of the ATR

[39] SAS maintains that its fuel surcharge is set out in substantial compliance with the ATR. SAS points out that its fuel surcharge is not set out on its “Other countries” Web site as if it were a third party charge as the surcharge is described on the Web site next to the heading “Of which includes taxes and carrier-imposed fees”. With respect to Decision No. 320-C-A-2013, SAS maintains that there are significant differences between that case and this case. SAS states that in Decision No. 320-C-A-2013 the case involved the Canadian edition of British Airways’ Web site on which British Airways was holding out extensive service to and from Canada with its own aircraft and on a code-share basis. SAS states that on the other hand, it has no Canadian version of its Web site and prior to the interim measure, it only showed interline connecting flights operated by other carriers on its global “Other countries” Web site.

[40] SAS argues that its global “Other countries” Web site is in substantial compliance with section 135.91 of the ATR and that exacting compliance with the price advertising provisions of the ATR should not be required of SAS’s Web site given the very limited nature of the Canadian service displayed on the Web site.

LEGISLATION

[41] Subsection 135.7(1), paragraph 135.8(1)(a), subsections 135.8(2) and (3), and section 135.91 of the ATR provide that:

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.

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.

135.8(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.

135.8(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.

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.

ANALYSIS AND FINDINGS

Application of Part V.1 of the ATR

[42] Pursuant to subsection 135.7(1) of the ATR, the price advertising provisions of the ATR apply to advertising in all media of prices for air services within, or originating in, Canada. It is therefore irrelevant whether or not SAS operates flights to or from Canada as the issue is one of advertising. In that sense, an air carrier does not have to “operate” a service to or from Canada in order to fall under the purview of Part V.1 of the ATR; it need only advertise air services available to the Canadian public.

[43] Where a person or, in the case of SAS, a carrier, has no Canadian Web site or no Canadian page on its global Web site, if advertising is done for air services within, or originating in, Canada, that global Web site must comply with Part V.1 of the ATR.

[44] The Agency notes that SAS admits that it did receive a very small amount of revenue from Canada from tickets sold for travel originating in Canada. The fact that the revenue received was “de minimis” is irrelevant; the obligation to comply with Part V.1 of the ATR is not dependent on the amount received by the person advertising the air services.

[45] Therefore, the Agency finds that SAS must comply with Part V.1 of the ATR.

Paragraph 135.8(1)(a) of the ATR

[46] The DEO found that when selecting a flight, the prices are not total prices as a service fee is added.

[47] SAS argues that while a service fee is added during the booking process, the total price of the ticket is provided on the right hand side of the same screen.

[48] It should be noted that Part V.1 of the ATR supports two key objectives: (1) to enable consumers to readily determine the total price of an advertised service; and (2) to promote fair competition between all advertisers in the air travel industry.

[49] The Agency finds that the initial price that appears on SAS’s Web site for each leg of the trip does not include the total price of the air service as the service fee is not included in that price. As a result, the Agency finds that SAS is in contravention of subsection 135.8(1) of the ATR.

[50] The DEO also found that the prices on SAS’s Web site are not in Canadian dollars, in contravention of paragraph 135.8(1)(a) of the ATR.

[51] SAS maintains that the prices on its Web site are displayed in euros consistent with what the Web site is: a generic Web site primarily for European customers who want fares quoted in euros and who want to book flights in English because SAS does not offer a Web site version in their native language or home country. SAS submits that it is not targeting the Canadian public.

[52] The Agency finds that it is irrelevant which consumers a Web site is primarily geared toward; if Canadian consumers may purchase air services through SAS’s global Web site, then SAS is marketing the air services to the Canadian public.

[53] The Agency finds that SAS’s Web site lists the air transportation charges in euros and not in Canadian dollars as required by paragraph 135.8(1)(a) of the ATR. Accordingly, the Agency finds that SAS has contravened paragraph 135.8(1)(a) of the ATR.

Subsections 135.8(2) and (3) of the ATR

[54] Subsections 135.8(2) and (3) of the ATR clearly set out the requirements that all third party charges are to be listed under the heading “Taxes, Fees and Charges” and all air transportation charges are to be set out under the heading “Air Transportation Charges”. However, neither heading is used by SAS as required by Part V.1 of the ATR. Rather, SAS’s online booking system contains only one heading, “Breakdown of taxes and carrier-imposed fees”, under which all air transportation charges, taxes, fees and surcharges are listed. SAS simply argues that meeting the specific heading requirements would be an expensive undertaking.

[55] The fare is an air transportation charge, as is the fuel surcharge, yet the two charges are not grouped together on SAS’s Web site. Further, these two charges are not grouped together under the heading “Air Transportation Charges” as required by the ATR. The ATR are clear that the appropriate headings are to be used and that the relevant charges are to be found under the appropriate headings.

[56] The Agency therefore finds that SAS has contravened subsections 135.8(2) and (3) of the ATR.

Section 135.91 of the ATR

[57] Section 135.91 of the ATR states that 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.

[58] SAS argues that it is in substantial compliance with Part V.1 of the ATR and exacting compliance should not be required because of the very limited nature of the Canadian air services displayed on its Web site. There are no varying levels of compliance; a person complies with Part V.1 of the ATR or does not comply. The fact that the air services advertized are limited in nature is irrelevant.

[59] SAS’s fuel surcharge is set out on its Web site as “Fuel and security surcharge” and is included under the broader heading “Breakdown of taxes and carrier-imposed fees” and not under a heading “Air Transportation Charges” as required by subsection 135.8(3) of the ATR. As fuel surcharges are considered to be air transportation charges, these must not appear under third party charges as was done by SAS on its Web site.

[60] The Agency finds that by setting out the amount for fuel surcharges under the heading “Breakdown of taxes and carrier-imposed fees”, SAS has contravened section 135.91 of the ATR. As a result, the Agency finds that SAS has failed to comply with the requirements set out in section 135.91 of the ATR.

CONCLUSION

[61] In light of the above, the Agency finds that SAS did contravene paragraph 135.8(1)(a), subsections 135.8(2) and (3), and section 135.91 of the ATR and, as such, the formal warning issued by the DEO was warranted. The Agency dismisses SAS’s application for a review.

[62] The Agency shall retain a record of SAS’s violations, bearing the date of the original warning. If SAS contravenes paragraph 135.8(1)(a), subsections 135.8(2) and (3), or section 135.91 of the ATR within four years of the date of the original warning, the record of the original warning shall constitute evidence of a first violation, and a designated enforcement officer may then issue an administrative monetary penalty.

Member(s)

Geoffrey C. Hare
Date modified: