By: Paul Emanuelli
This article is an extract from the 5th edition of Government Procurement.
In its October 2019 decision in The Commissioner of Competition v Vancouver Airport Authority, Canada’s Competition Tribunal found that the Vancouver Airport Authority (VAA) did not breach competition rules when it limited the number of catering companies eligible to bid on airline catering contracts. The Tribunal found that the decision to limit the number of companies was made for the valid business reasons of maintaining two viable operators for competition, since opening competition to other operators for only part of the overall work (galley delivery but not catering) could undermine competition and disrupt service to airlines if an incumbent left the market due to the entry of another supplier.
Much of the decision turned on the definition of the relevant marketplace. While the Commissioner of Competition argued that the market in question was for galley delivery, meaning the delivery of third-party food products onto the airplanes, the Tribunal determined that the market also included catering services where the supplier prepared and delivered the food for international flights. The Tribunal agreed with the Airport Authority that the inclusion of more suppliers for only galley services could undermine the viability of the current operators that also provided catering services, which would be highly disruptive to the services provided for international flights that relied on those catering services. The Tribunal therefore concluded that the limitation of competition was justified based on legitimate operational requirements:
For the reasons set forth above, the Tribunal concludes that the Exclusionary Conduct is not anti-competitive in nature. Although VAA has consistently intended to exclude, and has in fact excluded, Newrest and Strategic Aviation from the Galley Handling Market since April 2014, it has provided legitimate business justifications for such exclusion. VAA has also established that those justifications were more important in its decision-making process than any subjective or deemed anti-competitive intent, or any reasonably foreseeable anti-competitive effects of the Exclusionary Conduct. In other words, the evidence that was adduced in support of the alleged legitimate business justifications that VAA has demonstrated outweighs the evidence of subjective anti-competitive intent and reasonably foreseeable exclusionary effects of the impugned conduct. Accordingly, the overall character, or overriding purpose, of the Exclusionary Conduct was not anti-competitive, as contemplated by paragraph 79(1)(b).
The Tribunal’s conclusion in this regard is reinforced by its view that VAA’s business justifications for limiting the number of in-flight caterers made economic and business sense. In this regard, the Tribunal was provided with persuasive evidence demonstrating that, leaving aside the anti-competitive effects of VAA’s Exclusionary Conduct, its decision to exclude in-flight caterers conferred what were considered to be important benefits to the Airport (TREB CT at paras 430-431).
The Tribunal therefore dismissed the Competition Bureau’s application.
As this case illustrates, in addition to being subject to potential trade treaty challenge, contracting procedures that limit competition may also be subject to anti-competition actions initiated by authorities responsible for enforcing general competition laws. In either instance, the scoping of contractual requirements, and their impact on competition, remains a critical concern. To the extent that contract scoping decisions have the effect of limiting competition, purchasing institutions should ensure that those decisions are supportable based on legitimate operational requirements.
