Australia and Canada have reached opposite conclusions about the need for tougher competition laws to rein growing dominance by their leading airlines.

The collapse of Ansett Australia and Canada 3000 have boosted domestic market shares for Qantas Airways and Air Canada to at least 80%. The two nations' transport ministers have contrasting views about a response. Australia is leaning toward a voluntary code of conduct proposed by Qantas; Canada is moving to add teeth to its law against predatory conduct, which is already tougher than the law of Australia.

The major airlines in both countries disclaim any role in the demise of their rivals. They argue that dominance was thrust upon them - not the result of their own conduct. What's more, even if Ansett or Canada 3000 failed due to competitive pressures instead of mismanagement or the effects of 11 September, those competitive pressures were legal.

Canada's competition bureau counters that Air Canada's low-cost airline Tango drove Canada 3000 to the ground. But the focus now is on the future. As Clive Beddoe, chief executive of WestJet, told a committee of Canada's parliament: "Start-up airline investors must be assured that the [competition] act will not allow a dominant existing player to run new entrants out of business."

The Ansett consortium wants to see Australia's competition agency given the power to issue cease and desist orders during investigation of a complaint. They also want the test for illegal conduct relaxed from one of anticompetitive intent to anticompetitive effect.

Qantas railed against these proposals and Canberra has shelved them. As an alternative it is studying a voluntary code of conduct proposed by Qantas. Transport minister John Anderson says passengers, not the government, should determine an airline's market share.

Canada's competition bureau already has cease and desist powers, but transport minister David Collenette wants to broaden them and add higher fines. Parliament is reviewing both proposals.

This divergence may reflect more a difference in approach than aims. Australia appears more comfortable with structural solutions than with regulating conduct. The government that has rejected a tougher competition law is the same one that earlier invited subsidiaries of foreign-owned airlines into Australia, resulting in Virgin Blue. Canada so far has opted only to regulate conduct.

Source: Airline Business