Air Canada welcomed a decision today by
the Quebec Court of Appeal striking down as unconstitutional a provision of
the Competition Act introduced in 2000 which provided the Commissioner of
Competition with unfettered power to issue cease and desist orders against
alleged anti-competitive acts of a dominant air carrier.

The Court issued the declaration requested by Air Canada that
Section 104.1 of the Competition Act is inoperative in that it conflicts with
the due process provisions afforded by the Canadian Bill of Rights.

Section 104.1 afforded the Commissioner of Competition the ability to
issue a temporary order against a dominant carrier for alleged anti-
competitive behavior without any requirement to first obtain the approval of
an impartial and independent adjudicative authority and without having allowed
Air Canada the opportunity to be heard prior to issuing such an order.

Air Canada has consistently asserted, from the introduction of the
legislation in 2000 through the passage of Bill C-23 in 2002, that this
unfettered power residing with the Commissioner was inappropriate and indeed
unconstitutional.

“We welcome and embrace the decision of the Quebec Court of Appeal and
its ruling that the Commissioner cannot, in effect, act as both investigator
and judge,” said John M. Baker, Senior Vice-President & General Counsel of Air
Canada. “It fully supports the position that we and others interested in the
protection of due process in Canada have expressed to legislators since the
introduction of this overreaching, highly damaging and completely unchecked
power granted to the Commissioner,” he said. “We hope that this represents an
important first step in reasserting the need for judicial safeguards to
protect the legitimate interests and conduct of parties engaged in appropriate
and necessary competition,” Mr. Baker concluded.

BACKGROUND:

In October 2000, in response to a complaint by an air carrier, the
Competition Commissioner issued a temporary order against Air Canada`s
offering of certain competitive fares on five specific routes: Ottawa-Halifax,
Ottawa-Windsor, Toronto-Windsor, Halifax-St. John`s and Halifax-Montréal. The
order required that Air Canada cease and desist from offering certain specific
discounted fares on those routes on the grounds that offering these fares
could possibly constitute an anti-competitive act and that the complainant
could be eliminated as a competitor in the absence of a temporary order.
Air Canada stated that its fare initiative on the five routes in question
was entirely consistent with its longstanding policy of offering competitive
pricing in all markets served. The fares were introduced on a limited, flight-
specific basis only, consistent with similar initiatives to maintain
competitive fares in the marketplace, which are of benefit to consumers.
Air Canada stated at that time its intent to vigorously challenge the
issuance by the Commissioner of Competition of the temporary order before the
Quebec Superior Court.

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