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Travel Protection Initiative slams airline advertising decision

(June 20-2008)—Today the Travel Protection Initiative, a coalition of Canada’s travel industry and consumer groups, responded to federal Transport minister’s Lawrence Cannon’s submission this week to the House of Commons Standing Committee on Transportation, Infrastructure and Communities that he would not bring into effect the provision of Bill C-11 passed in June of last year that would mandate that airline advertising feature an all-in price.

In a letter to Standing Committee Chair, Merv Tweed, the groups note the overwhelming public support for the measure as well as the rules in other jurisdictions including the United States and Europe that prevent the misleading practice of advertising one price and then charging another which is many times the advertised price. The letter also submits that Transport Canada has chosen to favour several airline constituents over the interests of thousands of travel agents that are bound to observe rules that oblige them to advertise an all-in price.

Text of the Letter:

June 20, 2008

Mr. Merv Tweed, M.P.
Chair
Standing Committee on Transport,
Infrastructure and Communities
House of Commons
Ottawa, ON K1A 0A6
Dear Mr. Tweed:

Re: Bill C-11, Secs. 27 and 64, Correspondence of Minister Cannon
We are writing to respond to the correspondence recently directed to you, as Chair of the Standing Committee on Transport, concerning the progress in enabling sec. 27 of Bill C-11, An Act to amend the Canada Transportation Act and the Railway Safety Act and to make consequential amendments to other Acts to come into force. This provision would mandate the issuance of regulations to provide all-in airfare pricing for the benefit of consumers. As Minister Cannon points out in his correspondence, the onus is on him and his department to set the date upon which the Canadian Transportation Agency (CTA) will regulate airfares. Minister Cannon has concluded that a national consensus is necessary before imposing advertising rules, although the names of the stakeholders who must consent seems to be obscure.

In our view, it is necessary to provide some additional background and clarification to the submissions of Minister Cannon, and to draw to the Committee’s attention the plain consequences of the current position of the Minister. As representatives of the Travel Protection Initiative, a coalition of consumer and industry groups with concerned with air travel in Canada, we are disappointed, but not surprised with the Minister’s response that appears to have derived from his department’s previous and longstanding position on this issue.

First of all, as Minister Cannon notes, Transport Canada officials were opposed to the amendment of Bill C-11 to require the making of regulations regarding airline advertising by CTA. In fact, one of the reasons that the language of the section was changed from permissive to mandatory was the opposition of department officials to the issuance of regulations following passage of legislation with permissive language. The Committee and the House, at first instance, decided that such “sober second thought” was unnecessary and non-productive in this instance. After the Senate amendment was made and approved, it also appears clear that the members approving the amendment were not supporting some process by which the airline industry could veto regulation by their simple failure to agree to its issuance.

As his letter makes clear, the Minister’s course of action, taken since the passage of the legislation, has been directed solely to consulting with the industry stakeholders previously opposed to regulating airline advertising. The unsurprising news that they are still against such a measure is hardly grounds for lethargy in its promulgation.

As the members of your Committee may recall, the issue of airlines advertising misleading fares has been the subject of much discussion before the Consumer Measures Committee, (CMC) the federal-provincial-territorial forum for national co-operation on marketplace issues. The CMC issued a consultation paper in 2004, setting out the ramifications of the issue for consumers. It detailed the regulatory response in Ontario and Quebec with respect to travel agency advertising as well as the airline advertising restrictions by U.S. Department of Transport that have been in place since 1992. The document also noted that provincial capacity to discipline misleading travel advertising appeared to be possessed by the provinces of British Columbia, Alberta and Manitoba.

We are not aware of any province that advanced the position that there should not be federal efforts to compel airlines to advertise in a manner that discloses the true price of air travel to customers. We are not aware of any province that refused to cooperate in any effort to ensure a unified front to ensure that travel advertising is presented in a transparent manner to consumers that would enable informed competition between airlines. We are, however, aware that Transport Canada opposed such measures, as they do now, notwithstanding that they have the support of some 93% of Canadian respondents to a 2004 survey taken by the Environics Research Group for Options consommateurs, a well-known Quebec based consumer organization. No progress was made at that time by CMC in arriving at a solution.

Indeed, the vehemence of Transport Canada’s opposition is an outlier in every respect. In testifying before this Standing Committee on this issue on October 5, 2006, Mr. Fred Gaspar, executive director of the Air Transport Association of Canada (ATAC) said in relation to the advertising regulation:

“Is it a total showstopper for us? Is it a horrible, horrible thing if it happens? No. We’ll deal with it. We’ll learn to deal with it. Ultimately, it’s giving consumers what they want that’s most important. We just don’t think it makes a lot of sense in the broader perspective of giving consumers what they actually want, which is access to lower costs and to the right mix of service and price.”

The Minister’s fear of contrary practices in markets outside Canada is somewhat puzzling given the current state of foreign markets. In the United States, existing U.S. Department of Transportation all-in rules apply to all airline advertising in that jurisdiction. The European Union has also been moving to prevent irresponsible and misleading advertising exhibited by airlines. In November 2007, under the Unfair Consumer Practices Directive, 200 airlines were ordered by the EU Consumer Protection Commissioner to take down internet advertising that was misleading consumers by failing to clearly advertise the full prices and conditions of their flight offers. New airline advertising rules go into effect in Europe in the autumn of this year that will make it necessary to advertise full-flight prices with relevant sanctions for failure to do so.
In the United Kingdom, the Office of Fair Trading (OFT) has used the provisions of the Enterprise Act 2002 to compel compliance of airlines with all-in pricing practices. The Association of British Travel Agents, whose members are responsible for about 90% of sales of foreign packaged holidays, have incorporated such advertising restrictions into their Code of Conduct and intend to take firm action against miscreants.

In Canada, travel agencies are also moving to comply with all-in advertising rules with or without provincial sanction. The CAA agency in British Columbia has adopted this practice as standard operating procedure and the Association of Canadian Travel Agencies has urged it as a best practice.
Price component complexity is also raised by the Minister as a barrier to effective regulation. As Minister Cannon notes, there are numerous charges that are associated with the final cost of an airline ticket, and it is somewhat difficult to calculate the same. This is, however, a task that travel agencies in Ontario and Quebec have been able to do for several years now without incurring financial ruination or widespread complaints of inaccuracy from customers. We are certain the airlines could muster the same degree of proficiency exhibited by these travel agencies with a little effort.

As well, the patterns of airline ticket purchasing do not lead to the conclusion that the airlines would be unfairly disadvantaged by the imposition of reasonable standards in the form of all-in pricing. First, most travel agency websites do not advertise scheduled airline fares, and adoption of similar practices of all-in advertising could easily be adopted pursuant to any agreements between the airlines and those travel agencies selling their products, that are unregulated by advertising restriction.

Secondly, we fail to see how travel agencies operating in provinces without effective means of travel advertising regulation will be able to muscle the airlines out of their Internet ticketing operations. As well, we do not understand why all carriers licensed by the CTA, would not be bound to follow the CTA regulations for advertising, as a condition of carriage.

Finally, the search for consensus that has been commenced by the Minister serves to obscure the real consequences of the Department’s failure to act. First of all, passengers of the approximately 80 million flights per year in Canada will continue to be subject to a disgraceful shell game of airlines advertising one price, and then selling a ticket for an amount which may be many times greater than the advertised price. Secondly, the practice carried on by airlines is strongly opposed by the overwhelming majority of Canadians who want it changed. Thirdly, the government has taken sides with the airlines against close to 15,000 travel agents working at over 3500 outlets in Ontario and Quebec, many of them small family businesses. The government is content to allow any cost of misrepresentation by airline advertising to fall on them. Fourthly, it is inexcusable that a government would adopt a policy that allows misleading and deceptive marketplace conduct to continue in order to allow certain preferred constituents to thrive.

It is hard not to come to the conclusion that the coming into force of sec. 27 is only seriously opposed by a small cadre of bureaucrats who have chosen the route of indifference to Canadian airline customers, and the travel agents that serve them rather than adopting a policy that is in line with any realistic appraisal of the correct limits for advertising airfares.
We would request that the Committee urge further action by the Minister in the form of bringing into effect section 27 of Bill C-11.

Yours truly,
The Travellers’ Protection Initiative / La Coalition pour la protection des voyageurs

Michael Pepper, President and CEO Travel Industry Council of Ontario
Michael Janigan, Executive Director and General Counsel, Public Interest Advocacy Centre

Christiane Théberge, President and CEO Association of Canadian Travel Agencies
Stephanie Poulin Director of Legal Department Option consommateurs

APPENDIX A

Travellers’ Protection Initiative
Membership

The Travel Industry Council of Ontario (TICO) is a not-for-profit corporation wholly-financed by Ontario-registered travel agents and wholesalers. It administers the Ontario Travel Industry Act and the Ontario Travel Industry Compensation Fund. The Ontario Travel Industry Compensation Fund is wholly-financed by the industry to protect consumers who do not receive the travel services for which they paid due to the insolvency or bankruptcy of an Ontario-registered travel agent or travel wholesaler, or due to the cessation of an end supplier airline or cruise line. The Fund only covers consumers who have booked through an Ontario-registered travel agent. TICO may be contacted at (905) 624-6241 or 1-888-451-TICO
or www.tico.on.ca,email tico@tico.on.ca

The Public Interest Advocacy Centre (PIAC) is a national non-profit organization working to advance the interests of individuals and groups who are generally unrepresented, or under-represented, in issues of major public concern. PIAC focuses primarily on consumer issues concerning telecommunications, travel, energy, privacy, the information highway, electronic commerce, financial services, broadcasting, and competition law. PIAC undertakes legal and research services on behalf of consumers and seeks to ensure that the public interest is served, and not neglected, by decision-makers in government and the private sector, when decisions are made about consumer issues. PIAC may be contacted at (613) 562-4002 or www.piac.ca , email piac@piac.ca

Option consommateurs is dedicated to defending and promoting the interests of consumers, primarily those with low incomes. To that end, it is active in various industry sectors through its credit counselling, legal, press, research and advocacy divisions. The association team is made up of about twenty individuals working in a variety of professions such as law, finance, journalism, and research. Option consommateurs directly reaches up to 10,000 consumers annually, and conducts more than 400 media interviews. In addition to sitting on numerous task forces and taking part in various consultations, the association team publishes research reports, memoranda, practical guides and news articles. Option consommateurs may be contacted at (514) 598-7288, 1-888-412-1313 or www.option-consommateurs.org

The Association of Canadian Travel Agencies (ACTA) is a national trade
association representing the retail travel sector of Canada’s tourism industry which handle 30 G$ of sales per year. ACTA is an industry-led, non profit, membership-based organization. Its members include retail travel agencies and suppliers such as tour operators, travel wholesalers, airlines, hotels, destination marketing organizations, cruise and rail lines, and automobile rental companies. ACTA represents the interests of Canadian travellers through approximately 2,600 members employing 18,000 travel professionals. ACTA may be contacted at: (613) 237-3657 or www.acta.ca

The Canadian Association of Airline Passengers (CAAP) is a coalition of consumer organizations formed in 1999 to respond to the pending restructuring of the Canadian airline industry, and to advocate policy and regulatory requirements which are fundamental to protect passengers’ rights. PIAC and Option consommateurs are both founding members of CAAP.

 

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