On June 27, 2011, the Competition Bureau announced that the Commissioner of Competition (the “Commissioner”) is seeking to prohibit the proposed joint venture between Air Canada and United Continental Holdings Inc. (“United Continental”) under the merger provisions of the Competition Act (the “Act”). The Commissioner is challenging the merger on the grounds that it would likely lead to a substantial prevention or lessening of competition in direct passenger air transportation services between specific city pairs involving an end point in each of Canada and the U.S.
In October 2010, soon after the merger between United Air Lines, Inc. and Continental Airlines Inc. (which resulted in the merged entity United Continental), Air Canada and United Continental announced their intention to enter into the joint venture. According to the Commissioner, the proposed joint venture would lead to a monopoly on ten transborder routes.
In addition to challenging the joint venture, the Commissioner takes issue with three existing “coordination agreements” between Air Canada and United Continental. The Commissioner alleges that these agreements allow the parties to coordinate price, inventory, marketing and scheduling across their networks, share net revenues, and provide reciprocal access to each of their respective frequent flyer programs. According to the Commissioner, these agreements will reinforce the potential anticompetitive effects of the joint venture.
The Commissioner’s challenge of the “coordination agreements” is the first time the Commissioner has applied to the Competition Tribunal under the new civil provision relating to agreements between competitors that likely substantially lessen or prevent competition in a market.
The Commissioner’s application to the Competition Tribunal can be found here.