Decision No. 370-W-2006

June 30, 2006

File No. W9150-6

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TRIBUNAL

Guy Delisle - Member and Panel Chairman, Canadian Transportation Agency

Marian  Robson - Member and Chairman of the Canadian Transportation Agency

Beaton Tulk - Member, Canadian Transportation Agency

PARTICIPANTS

Robert W. Grant - Kenmore Air Harbor Inc., 547471 BC Ltd. (Formerly Amigo Airways Corp.) and Seair Seaplanes Ltd.

Simon R. Wells - Nanaimo Port Authority

BACKGROUND

[1] On October 11, 2005, Neil Surry filed a form complaint with the Canadian Transportation Agency (hereinafter the Agency) alleging that the different fees levied by the Nanaimo Port Authority (hereinafter the NPA) on different passenger transportation services were unjustly discriminatory contrary to section 50 of the Canada Marine Act (hereinafter the CMA). Following the receipt of the first complaint, an additional 51 form complaints were filed during the period of October 12, 2005 to January 3, 2006.

[2] On October 17, 2005, a joint complaint was filed with the Agency by Amigo Airways Corporation (hereinafter Amigo) and Kenmore Air Harbor Inc. (hereinafter Kenmore). These companies are float plane operators offering passenger services into and out of the port of Nanaimo.

[3] Following the filing of the joint complaint by Amigo and Kenmore, Seair Seaplanes Ltd. (hereinafter Seair) informed the Agency that it had bought Amigo's assets and that it wished to be added as a complainant in the current proceedings. Seair indicated that it agreed with all of Amigo's pleadings and that it would assume all outcomes of these proceedings. Given the continuity of Seair's interest in the subject matter, the Agency granted it the status of complainant in these proceedings.

[4] On December 5, 2005, Nanaimo Harbour Link Corporation (hereinafter HarbourLynx), which at that time, operated a high speed ferry between Nanaimo and Vancouver, requested and was granted intervener status with respect to the complaints filed against the NPA. HarbourLynx supported the complaints.

[5] Following a request from the NPA to clarify the status of Amigo and HarbourLynx given their respective assets sale and filing for bankruptcy, the Agency ruled in its Decision No. LET-W-81-2006 dated March 23, 2006, that both Amigo and HarbourLynx maintain their respective status of complainant and intervener.

[6] The Agency advised the parties in these proceedings of its intention to hold a three day hearing commencing on May 9, 2006 as part of its investigation arising from complains filed pursuant to subsection 52(1) of the CMA. Procedural directions were issued on March 23, 2006 and the oral hearing was held in Nanaimo, British Columbia, on May 9, 10 and 11, 2006.

ISSUE

[7] The issue to be addressed is whether the different "passenger fees" being levied by the NPA on certain scheduled passenger services are unjustly discriminatory within the meaning of the CMA.

FACTS

[8] The air carriers Amigo, Kenmore and Seair (hereinafter the complainants) operate passenger seaplane services into the Nanaimo Harbour. They do not currently use any NPA facilities for their passengers or operations.

[9] In December 2004, the NPA notified some seaplane operators, including Amigo and Kenmore, that effective March 1, 2005, they would be required to pay a new "passenger fee" to the NPA. The "passenger fee" would be $1.50 for each passenger transported into or out of Nanaimo Harbour on a passenger seaplane, even if the seaplane did not use any NPA facilities.

[10] Prior to March 1, 2005, the complainants were not charged any fees by the NPA for entering or leaving the Harbour, unless they used the public seaplane terminal operated by the NPA. When they used the public seaplane terminal, they were charged a berthage fee and a fee of $1.50 for each passenger embarking or disembarking at the public facility.

[11] The "passenger fee" would not, however, be charged to Harbour Air Ltd. or Baxter Aviation Limited (Harbour Air and Baxter), although they also operate passenger seaplane services into the Nanaimo Harbour and are direct competitors of Seair and Amigo. Harbour Air and Baxter were already paying a passenger fee under long-standing lease agreements with the NPA for the use of port facilities at the public seaplane terminal.

[12] The NPA also entered into an agreement with BC Ferries for the payment of a "passenger fee". Like the complainants, BC Ferries does not use NPA facilities for its passengers or operations. Under the agreement, BC Ferries collects a fee of $0.15 per paying adult and $0.10 per paying child. No fees are collected from complimentary passengers. Under the agreement, BC Ferries charges the "passenger fee" to its clients, deducts an undisclosed commission and remits the balance to the NPA.

[13] The NPA also introduced new "passenger fees" for "Passenger Only Fast Ferry" operators. The fee would begin at $0.65 for each passenger transported into or out of Nanaimo Harbour on a fast ferry, rising to $1.00 for each passenger in October 2006. The fast ferry "passenger fee" would not, however, be imposed on the only fast ferry operator, HarbourLynx, as long as HarbourLynx continued to lease facilities from the NPA. HarbourLynx was already paying a passenger fee under an existing lease agreement with it for the use of NPA facilities at the fast ferry terminal.

[14] Finally, the NPA did not impose any "passenger fee" on commercial operators carrying passengers entirely within the Nanaimo Harbour, including B.C. Ferries Gabriola Island ferry, the Protection Connection ferry to Protection Island and the Newcastle Island ferry to Newcastle Island.

LEGISLATIVE REFERENCES

[15] Under the CMA, port authorities are empowered to set fees for their services in accordance with the following provisions:

49.(1) A port authority may fix fees to be paid in respect of

(a) ships, vehicles, aircraft and persons coming into or using the port;

(b) goods loaded on ships, unloaded from ships or transhipped by water within the limits of the port or moved across the port; and

(c) any service provided by the port authority, or any right or privilege conferred by it, in respect of the port.

(2) A port authority may fix the interest rate that it charges on overdue fees.

(3) The fees fixed by a port authority shall be at a level that permits it to operate on a self-sustaining financial basis and shall be fair and reasonable.

50.(1) A port authority shall not unjustly discriminate among users or classes of users of the port, give an undue or unreasonable preference to any user or class of user or subject any user or class of user to an undue or unreasonable disadvantage.

(2) It is not unjust discrimination and it is not an undue nor an unreasonable preference or disadvantage for a port authority to differentiate among users or classes of users on the basis of the volume or value of goods shipped or on any other basis that is generally commercially accepted.

[16] Under the CMA, the Agency has a mandate to investigate complaints concerning fees set by port authorities as follows:

52.(1) Any interested person may at any time file a complaint with the Agency that there is unjust discrimination in a fee fixed under subsection 49(1), and the Agency shall consider the complaint without delay and report its findings to the port authority, and the port authority shall govern itself accordingly.

PRELIMINARY MATTERS

1. Type of fees

[17] In its Decision No. LET-W-15-2006 dated January 19, 2006, the Agency issued a preliminary ruling in this matter suggesting that while the complainants Kenmore and Amigo (at the time) were commercial users of the port they did not, themselves, pay the impugned port fees. Rather, the Agency indicated in that Decision that it concluded, based upon the evidence before it, that the passengers of the float plane operators paid the fee upon their making use of the transportation services provided. This, in turn, led the Agency to find that the float plane passengers are not commercial users within the meaning of the CMA and that accordingly, section 50 of the statute did not apply.

[18] The Agency invited comments from hearing participants on this preliminary finding. The submissions received, including those presented to the Agency during the oral hearing as well as in final argument, all asked the Agency to reconsider its earlier finding. Specifically, the parties asked the Agency to find that the port fees in issue were "user" fees rather than passenger fees. The gist of their arguments was that the carriers paid the fee by routinely remitting it to the NPA - with total payment in each case being based upon the numbers of passengers carried. This fee, they argued, represents a cost of doing business that the carriers could pass on to passengers, or not.

[19] Even though they are adverse in interest to each other on the merits of this case, the complainants and the NPA are consistent in that they all assert that the fees in dispute are user fees. The Agency rescinds the preliminary ruling and acknowledges this common position - that is, that the fees are user fees - and will move on to the next hurdle under the law.

2. Section 49 of the CMA - "Coming into or using the port"

[20] Paragraph 49(1)(a) of the CMA permits a port authority to fix fees in respect of, "... ships, vehicles, aircraft and persons coming into or using the port" (emphasis added). During the course of the proceedings, it was acknowledged that this language may be restrictive as it only references fees for coming into the port - and fails to refer to a fee for "leaving the port". Basically, it became an issue because further to a restrictive reading of the provision, a portion of the NPA tariff could be ultra vires as it purports to levy a charge on passengers going out of the port. In other words, the extension of the tariff to passengers "leaving the port" could be beyond the legal fee fixing powers of the port authority set out in paragraph 49(1)(a) of the CMA.

[21] The complainants argue that the omission of the phrase "leaving the port" in paragraph 49(1)(a) of the CMA is deliberate. They acknowledge that a disembarking passenger is someone who is coming into the port - and that an embarking passenger, who for example, enters the port from the city of Nanaimo, also enters the port. Yet, they assert that an "in transit" passenger enters the port only for the stopover purpose. They do not re-enter it for the continuation of the journey when the carrier departs to final destination. Accordingly, they maintain that the "passenger fee" in the tariff that is applicable to in-transit seaplane passengers leaving the port is not authorized under section 49 of the CMA.

[22] The NPA countered this by stating that a contextual reading of the provision allows a port authority to fix fees for persons coming into the port and departing it. In support, it refers to the decision of the Supreme Court of Canada in Bell ExpressVu Limited Partnership v. Rex 2002 S.C.R. 26 as well as E.A. Dreidger in Construction of Statutes (2nd ed. 1983).

[23] The NPA claims that section 49 of the CMA is ambiguous given the subsequent reference in paragraph (a) to fees being levied broadly on persons "using" (as well as coming into) the port and that if there is such an ambiguity, it ought to be resolved in favour of the overall purposes of the CMA - which is to broadly sanction the levying of fees that will help the commercial viability of the port.

[24] This issue was raised by the Agency at the hearing and it is hereby resolved in favour of a broad reading of the statute. While a strictly grammatical reading of paragraph 49(1)(a) of the CMA suggests an intention to restrict fees to persons coming into the port, the real breadth of the fee-making power here ought to be examined in light of more than just the bare words used.

[25] The wording which follows in paragraph 49(1)(a) of the CMA is important when trying to understand the policy foundation of the provision. The subsequent text is broad as it permits fees for "using" the port. The breadth or scope of a charging authority over "using" the port is clearly consistent with the general scheme of the statute which favours port autonomy and financial sustainability (see for example section 4 as well as subsection 49(3) of the CMA). In other words, the port authority is given a wide latitude to charge for any of the services or facilities it can offer. The narrower reading of permitting a charge for entry only simply does not accord with this objective as it would mean that the port authority could only charge an arrival or entry fee at the gate - and this would foreclose as a potential revenue source, those port users who enter the port in order to leave Nanaimo.

[26] The Agency has already pronounced on its interpretation of the charging policy under the CMA in the course of describing the evolution of Canada's port policy in Harlequin Cruises Inc. et al, v. the Toronto Port Authority (Agency Decision No. 437-W-2003 dated July 31, 2003) (hereinafter the Harlequin Decision) where it concluded:

Apart from these legislated exceptions, and subject to any overriding safety or navigational requirements, the port authority is free to operate and to manage its day to day commercial affairs. This freedom is relatively new and is to be compared to the historical port management in Canada where ports were owned and managed by the government.

[27] The "exceptions" identified in the above excerpt refer to restrictions on dealing with port property in sections 44 to 48 of the CMA and in respect of the manner in which a port authority may fix fees (sections 49-53).

[28] Finally, and in addition to all of the above, paragraph 49(1)(c) of the CMA references the charging of fees by a port authority for any service it provides or for any right or privilege conferred by it. An exit fee levied on port users, which is fundamentally what exists in the present case, is a fee being levied on those who directly benefit from infrastructure and services supplied by a port authority. As such, it is a fee that is contemplated by paragraph 49(1)(c) of the CMA.

[29] Placed in the overall context of the legislative provisions under the CMA and an evolving port strategy in Canada that favours autonomy and financial self-sufficiency, the Agency finds that the impugned tariff in this case complies with paragraph 49(1)(a) of the CMA to the extent that it imposes a fee for "leaving the port".

3. Onus - Burden of proof

[30] In their written submissions, the complainants argued that section 52 of the CMA represents a "reverse onus" provision in the law to the extent that all a complainant has to do under it is to establish a prima facie case of discrimination. Thereafter, the onus shifts to the port authority to provide an explanation for the discrimination - failing which, the Agency must find in favour of the complainants.

[31] In support of this proposition, they asserted that in cases under the CMA, port users like the complainants are never in a position to know any detail regarding a port authority's reasons for imposing particular charges. Thus, and as in discrimination cases in the human rights area, the onus shifts to the respondent to provide the justification.

[32] The Agency finds that human rights policies and jurisprudence should not automatically determine the manner of treatment of cases that arise under the CMA. Unlike human rights laws, the CMA is a law of economic regulation which has been designed, as set out earlier, to offset the potential for abuse of market power held by a port authority. Nevertheless, there is a point of similarity between the two that merits comparison. In both kinds of cases, human rights and economic, complainants can be at a disadvantage in terms of adducing evidence on the possible justification for purported discrimination. In both instances, the evidence relative to justification is readily available to the respondent.

[33] In the present case, the complainants bear the overall burden under section 52 of the CMA of convincing the Agency, on a balance of probabilities, that the NPA's fees are unjustly discriminatory. This is a legal burden and it remains on them as complainants. It does not shift to the port authority further to any presumption or inference following the complainants presenting a prima facie case to the Agency.

[34] The burden that is on the port authority is an evidentiary one. This basically obligates it to respond to the complainants case by adducing evidence that justifies any of the purported discrimination. The Agency then undertakes an assessment of the evidence and legal argument filed by each side and determines whether or not the case for unjust discrimination under section 52 of the CMA has been made.

4. Individuals filing form complaints

[35] As was noted earlier in this Decision, a total of 52 form complaints were filed with the Agency alleging that the "passenger fees" levied by the NPA were unjustly discriminatory. None of these individuals responded to any of the Agency correspondence, none of them submitted any additional written comments or arguments when given the opportunity to do so and none of the individuals participated in the oral hearing held in Nanaimo. Accordingly, the Agency concludes that the extent of participation of these individuals in this proceeding was limited to the filing of the form complaint. As none of these individuals had an active interest throughout the proceeding or any active participation in the various steps in the proceeding, the Agency will not make any further reference to these individuals in this Decision.

ANALYSIS AND FINDINGS

Overview of unjust discrimination

[36] The Agency has issued two previous decisions under the CMA outlining its understanding of the legislative context of this statute, both in terms of its evolution and its present policy foundation. These decisions are the Harlequin Decision and Adventure Tours Inc. vs the St. John's Port Authority (Decision No. 656-W-2005 dated October 31, 2005) (hereinafter the Adventure Tours Decision).

[37] Both of those Decisions dealt with complaints filed with the Agency pursuant to section 52 of the CMA and both are useful references in an analysis of the instant complaint against the NPA.

[38] The Agency will not repeat these findings here, but reiterates as a basic proposition that the management of federal ports in Canada has evolved over the past number of years from ports being operated on a day-to-day basis by the federal government to being run today with individual port autonomy and with little government interference. The clear policy of the new law, established in 1998, is that of individual port commercial viability having regard to matters of safety and security - which are set out under the national marine policy.

[39] This operating autonomy is not absolute. For example, Parliament has placed a restriction on the fees that may be charged by a port authority in respect of, "... any right or privilege conferred by it, in respect of the port" (sections 49 to 53 of the CMA). These provisions give to port users a remedy or safeguard against certain kinds of rate abuse, which in theory, can arise from a port authority's use of its market power.

[40] Accordingly, section 52 of the CMA protects users from "unjust discrimination", the meaning of which is expanded upon in section 50 of the CMA where the proscription is identified as including protection from undue or unreasonable preference and undue or unreasonable disadvantage among users or classes of users.

[41] The previous Agency decisions under this section have also established that the law is aimed at unjust discrimination - simple discrimination, without more, is not enough to contravene the statute. The same applies to fee preference or disadvantage, which only becomes an issue when the preference or disadvantage is "undue" or "unreasonable".

[42] As an overall policy matter, the Agency finds that discrimination in fees (or the preference or disadvantage in respect of fees) becomes unjust (or undue or unreasonable) when the fees are not functionally and rationally connected to the costs of providing the service or, as in the Adventure Tours Decision, are not otherwise integral to some established broader economic strategy of the port authority. On this latter point, for example, Member Tulk found that it was commercially acceptable for the St. John's Port Authority to offer tour boat operators a choice of renting a Pier 7 kiosk or paying a levy per passenger for the use of Pier 7 as a reasonable solution to the commercial viability of Pier 7.

[43] The Agency finds that the opposite of "unjust fees" are fees that are "just" or "justifiable". In the context of sections 49 to 53 of the CMA, this means that the fees must at a minimum be part of a cogent financial plan, one that is accepted as a general commercial practice which, as far as a port is concerned, balances port commercial viability, safety, security and fairness to port users. If the evidence in any particular case shows that the fees in issue are random or arbitrary, even if issued with the best of intentions, then they may run afoul of section 50 of the CMA.

Discrimination - inner-Harbour float plane operators

[44] The complainants argued that there was unjust discrimination between themselves and the two float plane operators (Baxter and Harbour Air) using port facilities at the seaplane terminal due to the fact that the "passenger fee" did not apply to either of these two carriers. The complainants argued that this created a situation of undue preference and undue disadvantage with respect to Baxter and Harbour Air as they were direct competitors with the complainants. The NPA argued that Baxter and Harbour Air were already paying the "passenger fee" as part of the payments under the lease agreement for the use of the seaplane terminal. Furthermore, the NPA argued that the passenger fees paid by Baxter and Harbour Air were not related to the use of port facilities.

[45] The evidence before the Agency indicates that Baxter has paid a passenger fee as part of a lease agreement for over 20 years and that Harbour Air has been paying the same fee under a lease agreement since it began its operations in 1999. When questioned at the hearing, the NPA did not know how the fee of $1.50 per passenger had been set for Baxter. The evidence before the Agency establishes that when Amigo approached the NPA to lease space at the seaplane terminal, the NPA would only allow Amigo to operate from that location if Amigo did not compete directly with Baxter and Harbour Air. Subsequently, Amigo decided to lease facilities from McCully Aviation Ltd. located elsewhere within the port. As this was a private facility, Amigo did not make any payments to the NPA for the use of facilities.

[46] The evidence from the NPA indicates that when the new "passenger fees" were developed prior to their implementation in March 2005 that the NPA decided to charge the complainants the same $1.50 charge per passenger that Baxter and Harbour Air have been paying for many years. The NPA argued that levying "passenger fees" on the complainants would rectify a discriminatory situation that existed whereby Baxter and Harbour Air were paying a passenger fee while the complainants were not doing so. In the NPA's opinion, the complainants would now be treated the same as Baxter and Harbour Air. From an economic perspective, the Agency does not accept this line of reasoning by the NPA. The payments made by Baxter and Harbour Air under their leases have long formed part of the cost structure for these two carriers. The complainants, competitors to Baxter and Harbour Air, also have an established cost structure for their operations. The NPA's decision to exclude Baxter and Harbour Air from the new "passenger fees" introduced to raise additional revenue placed the complainants at a disadvantage. The complainants faced an added cost element while their competitors did not.

[47] Regarding payments made under leases, both the complainants and the NPA have presented their views on this issue. The Agency is guided in this matter by the position of the Federal Court in its decision on Westshore Terminals vs the Vancouver Port Authority ([2002]F.J.C. 260) where the Court concluded that payments made under leases are not fees as fixed by a port authority under section 49 of the CMA. Applying this reasoning to the payments made by Baxter and Harbour Air under their respective leases, such payments are not fees.

[48] The Agency does not accept the NPA's argument that the passenger fee payments made by Baxter and Harbour Air under their leases are not in any way related to the use of port facilities, i.e., the fees would apply regardless of whether or not a float plane operator used port facilities. If such an assertion were true, the NPA should have imposed this same passenger fee on the complainants when each of them began their float plane operations into/out of the port. The Agency therefore concludes that all the payments made by Baxter and Harbour Air under their lease agreements are for the use of port facilities.

[49] The Agency finds that the NPA has discriminated against the complainants by excluding Baxter and Harbour Air from having to pay the "passenger fee" imposed in March 2005. This discrimination is unjust because it creates a situation of undue preference for Baxter and Harbour Air and one of undue disadvantage for the complainants.

Discrimination - HarbourLynx

[50] Although HarbourLynx, the former operator of the high speed ferry between Nanaimo and Vancouver, ceased operations in late February 2006, the Agency is of the opinion that an assessment of this former port user is useful.

[51] The evidence before the Agency indicates that HarbourLynx had a lease agreement with the NPA for the use of port facilities. Part of the payments under the lease agreement were based on the volume of passengers carried by HarbourLynx into and out of the port. The passenger fees paid by HarbourLynx under its lease were used by the NPA as the basis for the "passenger fees" that were introduced in March 2005 and were applicable to fast ferry operators.

[52] The NPA indicated that the lease agreement with HarbourLynx was based on a previous lease agreement that had been drawn up with Royal Sealink in 1992 when that operator started a high speed ferry service between Nanaimo and Vancouver. Royal Sealink subsequently ceased operations in June 1993 after operating for 11 months.

[53] The NPA was not able to provide an explanation of how the amount of the "passenger fees" payable by fast ferry operators had been determined nor was it able to explain if the "passenger fees" were related to the extent of services provided to fast ferry operators other than to say that the "passenger fees" reflected the burden that fast ferry operators impose on the port.

[54] The NPA argued that the new "passenger fees" introduced in March 2005 were not applicable to HarbourLynx as the operator already paid passenger fees under its lease. Related to this, the NPA stated that if HarbourLynx had decided to build its own terminal and not use port facilities, HarbourLynx would still have been subject to the same level of passenger fees and not to the lower rate that was applicable to BC Ferries. Furthermore, if HarbourLynx had decided to sell its ferry to BC Ferries, the higher fee for a fast ferry would have applied rather than the lower fee applicable to BC Ferries.

[55] As noted by the Agency previously, payments made under lease agreements are not fees as fixed by a port authority under section 49 of the CMA. As such, the Agency is of the opinion that any payments made by a fast ferry operator under a lease agreement cannot be equated to the payment of fees fixed in accordance with section 49 of the CMA. As a new fast ferry operator would be subjected to the "passenger fees" introduced in March 2005 but an existing operator with a lease agreement would not, the Agency is of the opinion that this creates a situation of unjust discrimination in the manner in which the "passenger fees" are applied.

[56] The Agency finds that the "passenger fees" applicable to fast ferry operators were set in an arbitrary fashion, i.e., based on fees that had been set some years previously without knowledge of how the level of the fee had been determined. The Agency recognizes that the "passenger fees" were levied on fast ferry operators by the NPA to generate additional revenue. The Agency finds, however, that the manner in which the "passenger fees" were developed along with the manner of application of these "passenger fees" is unjustly discriminatory.

Discrimination - intra-Harbour ferry services

[57] The "passenger fees" introduced by the NPA in March 2005 do not apply to the three intra-Harbour ferry services; namely the BC Ferries Gabriola Island ferry, the Newcastle Island ferry and the Protection Island ferry. In the view of the complainants, these ferry services impose greater demands on port services than do the float plane operators. The complainants also argued that the NPA did not attempt to justify the exclusion of these ferry services from the "passenger fees".

[58] The NPA stated in its written submission that the scope of the "passenger fee" policy is to impose fees on operators of regular scheduled passenger services taking people into and out of the port. The NPA stated that the intra-Harbour ferry services were outside the scope of the "passenger fee policy". Moreover, the NPA argued that these ferry services did not compete in any manner with the float plane services.

[59] The Agency notes that the intra-Harbour ferry services benefit from the many services provided by the NPA as do the float plane operators, a fast ferry operator and the BC Ferries services to Departure Bay and Duke Point. As such, the intra-Harbour ferry services generate a part of the burden on the NPA.

[60] The BC Ferries Gabriola Island ferry can be classed as an essential service for the Island's approximately 5,000 permanent residents. The ferry provides the main link to Vancouver Island and provides about 14 daily return trip sailings on a year-round basis and special weekly sailings for hazardous/dangerous goods. Newcastle Island is a provincial park served by the passenger ferry on a seasonal basis with daily sailings from the beginning of May until October. Protection Island has a small number of permanent residents along with the Dingy Dock Floating Pub which are served by the passenger ferry on a year-round daily basis.

[61] The foregoing description of the intra-Harbour ferry services indicates that they serve very different purposes and markets than served by the float plane operators, a fast ferry operator and the BC Ferries services to/from Departure Bay/Duke Point. While there is no doubt that there is discrimination in the application of the passenger fees through the exclusion by the NPA of the intra-Harbour ferry services, the Agency is of the opinion that there is no unjust discrimination. The fact that the NPA does not recover revenue to offset some of its operating costs from these three ferry services is, in the opinion of the Agency, consistent with the NPA's objective of promoting the Nanaimo area and contributing to community life in the area.

Discrimination - BC Ferries

[62] BC Ferries is an independent corporation operating coastal ferry services on behalf of the Government of British Columbia under a 60 year Coastal Ferry Services Contract which came into force on April 1, 2003. The preamble to this contract contains, inter alia, the following statements:

The coastal ferry system is integral to economic growth and development of British Columbia and getting people and goods to their destination safely, efficiently and on time is essential ....

BC Ferries is an integral part of British Columbia's coastal ferry system, linking Vancouver Island to the mainland of British Columbia and linking many other coastal communities.

[63] The foregoing illustrates that BC Ferries provides essential transportation services to link Vancouver Island to the mainland and to link many other coastal communities. As such, BC Ferries can be contrasted with the float plane operators and a fast ferry service at Nanaimo as none of these are essential services; rather they are services provided for the convenience of travellers and to satisfy demand for service alternatives to travel to/from the Vancouver area.

[64] The "passenger fee" applicable to BC Ferries is the least amount of any of the "passenger fees" levied by the NPA as of March 2005. The NPA stated that it had a revenue target in mind for BC Ferries and the fee was set at a level to generate this amount of revenue. In view of the fact that the NPA admitted that the "passenger fees" were unrelated to specific port costs and that no analysis had been carried out to determine the burden imposed on the NPA by various services, the setting of the level of the fee for BC Ferries appears to the Agency to be arbitrary. The BC Ferries "passenger fee" is discriminatory in comparison with the level of "passenger fees" imposed on other passenger service providers. This in itself is not in contravention of the provisions of the CMA, however, the Agency is of the opinion that the arbitrary fashion of fixing the "passenger fees" introduces an element of unjust discrimination.

Discrimination - passenger service providers

[65] The foregoing discussion of the individual passenger service providers has brought forward a number of arguments advanced by the parties regarding unjust discrimination. There are, however, additional arguments from the parties that were considered by the Agency and that formed an important part of the Agency's examination of unjust discrimination in the "passenger fees" fixed by the NPA.

[66] At the outset, the NPA stated that the imposition of the "passenger fees" was a means to generate additional revenue to cover operating losses that had been incurred in recent years due to a loss in revenue from the declining forestry industry. With respect to the complainants, the NPA stated that it wanted to end the discrimination in passenger fees against Baxter and Harbour Air and that it wanted to treat all float plane operators the same.

[67] The NPA argued that the float plane operators, HarbourLynx and BC Ferries were three separate classes of users. As such, the NPA reasoned that it had the right to discriminate between these operators as this was specifically allowed under the CMA. Related to this, the NPA has maintained from the outset that the volume of passengers is a legitimate basis for discriminating between users and is expressly allowed under section 50 of the CMA.

[68] The complainants acknowledged from the outset that the NPA needed to have sufficient revenue to cover operating costs so that the port was financially self-sufficient. The complainants also acknowledged the NPA's right to impose fees to generate revenue but that any such fees must not contravene the prohibitions contained in the CMA. The complainants argued that the reference to "volume or value of goods" in section 50 of the CMA does not refer to passengers and cannot be implied to include passengers. Accordingly, the complainants asserted that discrimination in fees applicable to passengers must therefore come under what is generally commercially accepted. In this regard, the complainants maintained that the NPA did not produce any evidence to show that such a practice is used elsewhere and can therefore be deemed to be generally commercially accepted.

[69] A further argument brought forward by the complainants is that the "passenger fees" unjustly discriminate between users that are direct competitors for the same passenger market. The complainants reasoned that if a passenger is going to make a choice between transportation services, there would be a tendency to select the service with the lowest passenger fee. The complainants noted that tour operators and travel agents could not understand the different level in "passenger fees" for the different transportation service providers.

[70] The Agency notes that Baxter and Harbour Air operate services to/from the inner Vancouver Harbour and to/from the south terminal of the Vancouver International Airport. HarbourLynx used to provide service to/from the inner Vancouver Harbour. Seair operates services to/from the south terminal of the Vancouver International Airport. As such, there was direct competition between Harbour Air, Baxter and HarbourLynx for passenger traffic to/from the inner Vancouver Harbour area and between Baxter, Harbour Air and Seair for passenger traffic to/from the south terminal of the Vancouver International Airport.

[71] Regarding BC Ferries, the statement was made by the complainants that they faced competition from BC Ferries. Given that BC Ferries is the main provider of transportation services between Vancouver and Nanaimo, there is competition between BC Ferries and the other transportation service providers that have established themselves in the Vancouver-Nanaimo market. As such, the float plane operators, a fast ferry operator and BC Ferries all compete for passenger traffic between Vancouver and Nanaimo.

[72] While section 50 of the CMA does allow discrimination in fees between classes of users, the Agency is of the opinion that where the classes of users are in direct competition with one another, there cannot be any undue preference or undue disadvantage for one competitor over another. If the notion that a fast ferry, BC Ferries and a float plane operator are separate classes of users is accepted and the passengers carried by each are used as a basis for a fee, then there should be equitable treatment of these passengers. The Agency is of the opinion that the fact that the NPA fixed a "passenger fee" for fast ferry operators that was lower than the "passenger fee" fixed for float plane operators and a "passenger fee" for BC Ferries that was much lower than the "passenger fees" for these two users introduced undue preference and undue disadvantage between direct competitors. The Agency finds that this created an additional element of unjust discrimination in the passenger "passenger fees".

Conclusion

[73] After considering all the written and oral submissions and presentations, the Agency is of the opinion that the NPA made an attempt in good faith to generate additional revenue by introducing new passenger fees in March 2005. The Agency does not find that there was any deliberate attempt by the NPA to create situations of undue preference or undue disadvantage between the various port users. However, the Agency finds that the manner in which the NPA applied the new "passenger fees", together with the arbitrary way in which fees were determined resulted in situations which contravened the provisions of the CMA regarding allowable discrimination in fees between users or classes of users. The Agency finds that the current "passenger fees" applicable to float plane operators, fast ferry operators and BC Ferries contained in the NPA's passenger tariff introduced in March 2005 are unjustly discriminatory.

[74] After giving careful thought to the situation faced by the NPA where it is not possible to establish any direct relationship between some costs and individual port users and where an assessment of the relative burden imposed on the NPA by these different users is difficult, the Agency is of the opinion that a more reasonable approach would be to treat all users equitably. In other words, if a port authority is faced with this set of circumstances and is going to focus on passenger volumes carried by different users as a basis for generating additional revenue, then all passengers should be treated the same. This approach has been suggested by the complainants where all passengers would be charged the same fee regardless of the type of passenger service utilized. Such an approach would be a straightforward means of generating additional revenue to cover revenue shortfalls. As well, such an approach would not result in situations of undue preference or undue disadvantage.

Recommendation

[75] The Agency recommends that the NPA replace its current passenger fee tariff that was introduced in March 2005 with a revised passenger fee tariff wherein the passenger fees applicable to float plane operators, fast ferry operators and BC Ferries are not unjustly discriminatory. In developing a new tariff of passenger fees, the NPA must be mindful of the fact that payments under lease agreements cannot be equated to the payment of fees that are fixed under section 49 of the CMA.

Members

• Guy Delisle
• Marian L. Robson
• Beaton Tulk