Food For Thought? What The Grounding Of The Competition Bureau's Airline Catering Case Means For Competition Compliance In Canada

The supply of airline food might not be the first image that springs to mind when one considers potential competition issues facing Canada's economy. Yet that market fell squarely into the sights of the federal Commissioner of Competition (Commissioner) when, starting in 2016, he brought proceedings against the Vancouver Airport Authority (VAA) under the civil "abuse of dominance" provisions in section 79 of the Competition Act. The Commissioner alleged that the not-for-profit VAA had harmed competition by limiting the number of in-flight caterers authorized to operate at its complex.

In an October 17, 2019 decision, however, the Competition Tribunal judged the challenge to be less than airworthy—accepting the VAA's business reasons for its decision and dismissing the case. As one of only two fully-litigated section 79 cases in the last decade, VAA provides important guidance for businesses seeking to manage their competition law risks in this evolving and increasingly important area.

1. Section 79 and the Commissioner's challenge

   As detailed in the Competition Bureau's recently amended Abuse of Dominance Guidelines,1 section 79 of the Competition Act (Act) is a broadly-drafted provision allowing the Commissioner to seek relief before the Tribunal where: (1) a person or entity "substantially or completely controls" a market, alone or with others (i.e., has market power); (2) engages in a practice of anti-competitive acts affecting a competitor in a market; and (3) this practice prevents or lessens, or is likely to prevent or lessen, competition substantially in that market. Depending on the circumstances, the Tribunal can order parties to cease conduct, divest assets and pay penalties as high as $10 million, among other remedies.

   When the Commissioner filed its VAA application, only two firms had access to the area beyond the airport security perimeter of the Vancouver International Airport (YVR), or its "airside," to load and unload meals and related items on planes (known as "Galley Handling"). These incumbents had served the airport since 1992. Starting in 2014, however, two additional catering companies requested—but were refused—airside access from the VAA. VAA expressed concern that the catering market at YVR could not economically accommodate new competitors.2

   Fresh from a victory in similar proceedings involving the Toronto Real Estate Board (on which we commented here), the Commissioner characterized airside access as a "critical input" in the downstream Galley Handling market, and the VAA's decision as the "total and complete exclusion" of new entrants from the airport. The Commissioner described his goals to the Tribunal as follows:

   Ultimately, what the Commissioner seeks in this case is to maintain and encourage competition, by allowing airlines and In-flight Catering firms that wish to do business with each other to do so, such that all In-flight Catering firms - both incumbents and new-entrants - are afforded an opportunity to succeed or fail on the basis of their respective ability to compete.3

2. The evidentiary battle: "Exclusionary" or pro-competitive conduct?

   Any section 79 case must be premised on "anti-competitive acts," which courts have interpreted as acts intended to have a "predatory, exclusionary or disciplinary" effect on a competitor. Conversely, courts have recognized the ability of a respondent to justify its...