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Ottawa may get power to block future railway mergers

OTTAWA, Ont. -- Transport Minister David Collenette may table a bill this week that would give Ottawa the power to...

OTTAWA, Ont. — Transport Minister David Collenette may table a bill this week that would give Ottawa the power to block rail mergers and force Air Canada to provide services to smaller rivals.

The bill will propose dozens of changes to the Canada Transportation Act.

Sources say the bill will reflect the minister’s view that government intervention is sometimes necessary to ensure that the transportation system functions for the greater public good, the Globe and Mail reported on the weekend.

The bill will be accompanied by a broad policy document, essentially Collenette’s long-anticipated “transportation blueprint.”

The Globe and Mail sources say the legislation will give the government powers to veto any proposed railway merger deemed contrary to the public interest. This would give Ottawa the ability to negotiate with railways to preserve jobs and maintain regional service after a merger.

Under current rules, the government can review the competition implications of a merger through the federal Competition Bureau – but not the broader public policy issues. The government’s lack of power on the matter was put to the test in 2000, when Canadian National Railway Co. tried to merge with Burlington Northern Santa Fe Corp. The deal was scuttled by U.S. regulators while Canadian politicians stood by.

“There will be merger approval rules given to the Minister of Transport and the cabinet over and above the Competition Bureau process,” the Globe and Mail reports a source close to the bill as saying.

The bill will also push for increased competition with passenger-related transportation. It will force airlines to sell frequent-flier points to other Canadian carriers and to exchange passengers with them, according to the Globe and Mail. Current regulations require Air Canada to sell frequent-flier points only to its smallest rivals. But the proposed amendments would require the airline to sell Aeroplan points to any domestic carrier that wanted to buy them.

The proposed amendments also would allow small carriers to take advantage of Air Canada’s domestic and international route network by requiring the dominant airline to interline passengers with them.

However, the legislation does not take any steps toward promoting air competition by opening Canada’s skies to foreign carriers. Various government officials – from the commissioner of competition to Mr. Collenette’s own independent airline observer – have recommended an easing of foreign ownership restrictions.

The sweeping legislation also will include proposals to enhance transportation safety and to protect urban rail corridors for commuter services.

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