Case Documents

PUBLIC VERSION CT-2016-015 THE COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34, as amended;

AND IN THE MATTER OF certain conduct of Vancouver Airport Authority relating to the supply of in-flight catering services at Vancouver International Airport;

AND IN THE MATTER OF an application by the Commissioner of Competition for one or more orders pursuant to section 79 of the Competition Act.

BETWEEN: COMMISSIONER OF COMPETITION Applicant

– and – VANCOUVER AIRPORT AUTHORITY Respondent

MEMORANDUM OF FACT AND LAW OF THE COMMISSIONER OF COMPETITION TO THE RESPONDENT’S MOTION CHALLENGING THE ADMISSIBILITY OF CERTAIN EVIDENCE

PUBLIC VERSION PART I: OVERVIEW 1. In this application, Air Transat A.T. Inc. (“Air Transat”) provided a witness statement from Barbra Stewart dated October 31, 2017 (the “Air Transat Statement”) 1 and Jazz Aviation LP (“Jazz”) provided a witness statement from Rhonda Bishop dated November 10, 2017 (the “Jazz Statement”) 2 (together these two documents are referred to as the “Witness Statements”).

2. The Witness Statements testify to, among other issues, the fact that, in the ordinary course of business, Air Transat and Jazz each carried out competitive processes for in-flight catering. These companies analyzed the bids to determine what those bids would cost compared to what each company was currently paying for in-flight catering. Based on these analyses, Air Transat and Jazz made decisions about who to procure their in-flight catering from.

3. Vancouver Airport Authority (“VAA”) alleges that the portions of the Witness Statements that testify to savings from these competitive processes (the “Relevant Evidence”) is either opinion or hearsay evidence and should be struck.

4. The Relevant Evidence is not opinion evidence; rather it is evidence of the fact of what these companies expected to save. Even if it is opinion evidence, it meets the test to be admitted as Ms. Stewart and Ms. Bishop were well placed to report on the Relevant Evidence.

5. The Relevant Evidence is also not hearsay. Ms. Stewart and Ms. Bishop testify that they have personal knowledge of the matters to which they

1 Witness Statement of Barbara Stewart, Air Transat AT Inc, dated October 31, 2017, Motion Record of the Respondent, Tab 2 (“Air Transat Statement”). 2 Witness Statement of Rhonda Bishop, Jazz Aviation LP, dated November 10, 2017, Motion Record of the Respondent, Tab 3 (“Jazz Statement”).

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PUBLIC VERSION testify, including the Relevant Evidence. In the alternative, if the evidence is hearsay, it should be admitted because it is necessary and reliable. VAA will be able to test this evidence on cross-examination.

6. Finally, if the Competition Tribunal (the “Tribunal”) decides that the Relevant Evidence is hearsay or opinion, it should be admitted to reflect the reality of Tribunal proceedings which would be inefficient if every out of court statement and document had to be authenticated. VAA appears to acknowledge this reality because it has filed witness statements replete with hearsay and opinion evidence.

7. VAA’s motion should be dismissed with costs. PART II: SUMMARY OF FACTS A. The Air Transat Statement testifies to the fact of what Air Transat thought it could save as a result of a competitive process for in-flight catering

8. The Air Transat Statement is provided by Ms. Stewart who testifies at the beginning of her statement that she has personal knowledge of the matters in her witness statement except where she has otherwise indicated. Air Transat has authorized her to provide her witness statement on its behalf. 3 9. Ms. Stewart has 37 years of experience in the aviation industry. 4 From 2014 to 2017 she was Senior Director, Procurement. She testifies that she was responsible for all procurement activities at Air Transat as they relate to in-flight catering from 2014 to 2017. 5 3 Air Transat Statement, supra note 1 at paras 2-3. 4 Ibid at para 6. 5 Ibid at para 7. ~ 3 ~

PUBLIC VERSION 10. According to Ms. Stewart, in 2015, when she was responsible for procurement of in-flight catering, Air Transat conducted a competitive request for proposals (“RFP”) for in-flight catering at the eight stations in Canada, including YVR, where Air Transat obtained in-flight catering from Gate Gourmet Canada Inc. (“Gate Gourmet”). Air Transat conducted this process because, among other reasons, it was dissatisfied with the pricing and level of service that Air Transat received from Gate Gourmet. 6 11. What did Air Transat do once it had received the bids in response to the RFP? According to Ms. Stewart, who was responsible for this process, Air Transat carefully considered the bids it received from both a price and service prospective. 7 12. Ms. Stewart testifies that Air Transat combined the proposed pricing provided by the bidders with Air Transat’s flight schedules and volumes by airport. Air Transat was thus able to compare, on a station-by-station and overall basis, the proposed catering and galley handling pricing of each of the bidders. In this way, Air Transat determined that the lowest proposed pricing, from Optimum Stratégies Inc. (“Optimum”), represented an approximate % cost savings, or $ over years for stations across the country, over the proposed prices by . 8 13. It bears repeating that Ms. Stewart says she has personal knowledge of all the matters in her witness statement, unless otherwise indicated, including knowledge that, as a result of a process she was responsible for, Air Transat analyzed what it thought it could save as a result of the RFP process. This is the type of analysis that businesses conduct countless times in the ordinary course of business.

6 Ibid at para 23. 7 Ibid at para 28. 8 Ibid at para 29. ~ 4 ~

PUBLIC VERSION

14. Ms. Stewart states that Air Transat wanted to switch to Optimum at all stations across Canada but that because of VAA’s conduct, “Air Transat had no choice but to contract with Gate Gourmet for the supply of in-flight catering at YVR, despite Gate Gourmet not being Air Transat’s preferred provider”. 9 15. Air Transat had to contract with Gate Gourmet for in-flight catering only at YVR. Because of this, “Air Transat was forced to from Gate Gourmet, causing Air Transat – approximately – than what it would have paid to Optimum for service at YVR”. 10 16. VAA accepts that it is not hearsay for Ms. Stewart to testify to the RFP process. It objects that Ms. Stewart’s testimony about this process becomes hearsay or opinion once Ms. Stewart testifies about the amounts that Air Transat thought it would save because of this process and the amounts that Air Transat paid Gate Gourmet because it could not switch to Optimum.

17. The nub of VAA’s complaint is that the Relevant Evidence is hearsay and opinion because there is no indication as to how the figures were calculated or because documents were not attached to the Air Transat Statement.

18. As described above, Ms. Stewart does describe how Air Transat calculated the savings amounts in paragraph 29 of her witness statement. Air Transat combined the proposed pricing provided by bidders with Air Transat’s flight schedules and volumes by airport so it could compare respective pricing. As a result of this process, Ms.

9 Ibid at para 34. 10 Ibid at para 35. ~ 5 ~

PUBLIC VERSION Stewart has direct knowledge of the fact that Air Transat thought it could save $ . 19. Ms. Stewart also describes the basis for her knowledge of the fact that Air Transat would have to pay to Gate Gourmet than it would have to Optimum. Once Air Transat was forced to contract with Gate Gourmet at only YVR (because of VAA’s actions) it had and pay higher prices.

20. It is true that the Air Transat Statement does not attach the documents that contain or support the information of which Ms. Stewart said she has personal knowledge. VAA recognizes this because it has contacted Air Transat and asked for the information that will allow it to test these claims. Air Transat, to the best of its ability, has said it will respond to VAA’s request. 11 21. The absence of documentary support does not, as described below, make Ms. Stewart’s testimony about the fact of what Air Transat thought it would save hearsay or opinion. It simply goes to the weight the Tribunal will accord her testimony.

B. The Jazz Statement testifies to the fact of what Jazz thought it could save and did save through a competitive process

22. The Jazz Statement is provided by Ms. Bishop, who testifies at the beginning of her statement that she has personal knowledge of the matters in her witness statement except where she has otherwise indicated. 12 11 Affidavit of Amani Syed, dated September 17, 2018, Exhibits B and C, Commissioner’s Motion Record, Tab 2 (“Syed Affidavit”). 12 Jazz Statement, supra note 2 at para 2. ~ 6 ~

PUBLIC VERSION 23. Ms. Bishop has 26 years of experience in the aviation industry in a number of management roles. In particular, between 2010 and November 2017 (when she signed her statement) she was Director, In

-flight Services and Onboard Product. 13 Her responsibilities, among others, included negotiating, where possible, better products and services to reduce the cost of in-flight catering on board Jazz’s aircraft. 14 24. She testifies that in 2014 she provided strategic direction to the in-flight catering RFP process team with day-to-day responsibility for the 2014 RFP process. 15 25. Until the end of 2014, Jazz procured in-flight catering from Gate Gourmet at nine stations in Canada, including YVR. 16 Like Air Transat, Jazz was becoming dissatisfied with Gate Gourmet and in 2014 decided to go to the marketplace with a competitive RFP for in-flight catering. 17 26. Ms. Bishop testifies in detail about the RFP process Jazz undertook in paragraphs 31 to 40 of the Jazz Statement. These paragraphs include her testimony that Gate Gourmet submitted a non-compliant bid . 18 27. Jazz decided to recommend awarding its business at eight of the nine stations in Canada to other firms but requested that Gate Gourmet provide pricing at YVR only. 19 The end result of this negotiation was that Jazz awarded Gate Gourmet a contract at YVR only that reflects a % increase over the prices Jazz paid to Gate Gourmet at YVR in 2014. 20 Ms. Bishop explains that Jazz had no choice but to contract with Gate

13 Ibid at para 7. 14 Ibid at para 8. 15 Ibid at para 8. 16 Ibid at para 27. 17 Ibid at para 28. 18 Ibid at para 35. 19 Ibid at para 37. 20 Ibid at para 39. ~ 7 ~

PUBLIC VERSION Gourmet at YVR because only Gate Gourmet and CLS Catering Services Ltd. (“CLS”) were authorized to operate at YVR and . 21 28. Like Air Transat did, and is done in the ordinary course of business every day by businesses across the country, Jazz set out to analyze the result of the 2014 bids so that it could make a decision about which provider to choose.

29. Ms. Bishop testifies to how Jazz did this analysis. She states that “Jazz estimated the total costs of each bid by

. Jazz compared the costs of each bid , and to Jazz’s actual 2014 costs, under its then-existing arrangement with Gate Gourmet”. 22 30. Ms. Bishop attaches to her witness statement as Exhibit 10 information from the 2014 bid evaluation. Again, as the person who was providing the strategic direction for this competitive process, on its face it is clear that she would have personal knowledge of what Jazz believed it would save as a result of this process.

31. Jazz decided to switch providers and selected Newrest and Sky Café at eight of the nine stations. 23 Ms. Bishop testifies that switching stations, in absolute terms, translated into actual savings of $2.9 million or 16% in 2015 alone. 24 Ms Bishop identifies the source of this information and attaches it as an exhibit: Chorus’ 2015 Management’s Discussion and Analysis of Results of Operations and Financial Condition. 25 This exhibit 21 Ibid at para 44. 22 Ibid at para 41. 23 Ibid at para 49. 24 Ibid at para 50. 25 Ibid, Exhibit 12 at page 17. ~ 8 ~

PUBLIC VERSION is a public securities document, created in the ordinary course of business.

32. Finally, Ms. Bishop testifies that Jazz’s inability to switch to a new-entrant provider at YVR has increased the foregone in-flight catering cost savings from January 2015 to April 2017. She describes how this analysis was done by “multiplying Jazz’s actual flight volumes at YVR between January 1, 2015 and March 31, 2017 by the 2014 RFP pricing proposed by , and comparing it with Gate Gourmet’s actual pricing for the period.” The result of this analysis shows that Jazz paid approximately more for in-flight catering at YVR. 26 Ms. Bishop attaches a copy of this analysis as Exhibit 13.

33. Ms. Bishop is testifying that she has personal knowledge of these savings claims. It is reasonable that Ms. Bishop, Director, In-flight Services and Onboard Products, whose responsibilities include conducting a monthly review to maintain target and costs in all areas and overseeing the budget and billings for all in-flight catering, 27 would have personal knowledge of this information.

34. The nub of VAA’s complaint with Jazz is that because Ms. Bishop does not identify who prepared the documents and state that she did the calculations herself that it must be hearsay and opinion evidence.

35. The absence of this information does not, as described below, make Ms. Bishop’s testimony about the fact of what Jazz thought it would save and did save hearsay or opinion. It goes to the weight the Tribunal accords her testimony.

26 Ibid at para 54. 27 Ibid at para 8. ~ 9 ~

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PUBLIC VERSION PART IV: SUBMISSIONS A. The Relevant Evidence is observation of facts, not inference from facts, and even if it is opinion, it meets the low test for admissibility

40. Ms. Stewart and Ms. Bishop testify to the facts of what various options arising from a competitive process would cost their respective companies for in-flight catering and hence what their companies saved by the option the companies chose. 40 Ms. Stewart and Ms. Bishop are not inferring from facts but rather are testifying to observed facts.

41. To the extent there is an argument about whether this is fact or opinion, it illustrates what Justice Dickson said in R. v. Graat:

Except for the sake of convenience, there is little, if any virtue in any distinction resting on the tenuous, and frequently false, antitheses between fact and opinion. The line between “fact” and “opinion” is not clear. 41 42. If the Tribunal does find that the fact of what these two companies expected to and did save is opinion then it should still be admitted. The Tribunal articulated the test for admissibility of such evidence properly when it relied on Justice Dickson’s decision in Graat:

Justice Dickson then went on to say that the admissibility of such evidence is on a rather simple basis – the witnesses had an opportunity for observation, they were in a position to give the Court real help. And in The Law of Evidence in Canada, 2nd ed. (Toronto: Butterworths, 1999), at page 608, Sopinka and Lederman summarize the applicable rule in reference to Justice Dickson’s articulation: Couched in these terms, the modern opinion rule for lay witnesses should pose few exclusionary difficulties when based on the witness’s perceptions. The real

40 Air Transat Statement , supra note 1 at para 29; Jazz Statement, supra note 2 at paras 39-42, 50. 41 R v Graat [1982] 2 SCR 819 at page 835. (“Graat”). ~ 12 ~

PUBLIC VERSION issue will be the assessment and weight to be given to such evidence after it is admitted. 42 43. Ms. Stewart and Ms. Bishop have knowledge of the competitive processes that their companies undertook with respect to in-flight catering. In fact, Ms. Stewart directly ran the process as the Senior Director, Procurement, responsible for all procurement activities related to in-flight catering 43 and Ms. Bishop provided strategic direction to the team in her role as Director, In-flight Services and Onboard Product. 44 44. In the ordinary course of business, as any rational and reasonable business does, Ms. Stewart and Ms. Bishop have knowledge about what their companies could and did save as a result of these processes. They are well placed to provide the Tribunal with help given their positions.

45. Contrary to what VAA argues, Ms. Stewart and Ms. Bishop both testify to what these facts are with respect to the savings:

a. Air Transat. Air Transat carefully considered the bids it received. 45 With respect to price, Air Transat combined the proposed pricing provided by the bidders with Air Transat’s flight schedules and volumes by airport. Air Transat was thus able to compare, on a station-by-station basis, the proposed catering and galley handling pricing of each of the bidders. In this way, Air Transat determined that the lowest proposed pricing, from Optimum, represented an approximately % cost savings, or $ over years for stations across the country. 46 42 Commissioner of Competition v Imperial Brush Co Ltd, 2007 Comp Trib 22 at para 11 (“Imperial Brush”). 43 Air Transat Statement , supra note 1 at para 7. 44 Jazz Statement, supra note 2 at paras 7-8. 45 Air Transat Statement , supra note 1 at para 28. 46 Ibid at para 29. ~ 13 ~

PUBLIC VERSION b. Jazz. Jazz evaluated the bids received in response to the 2014 RFP from a financial perspective . 47 In analyzing the RFP responses, Jazz estimated the total costs of each bid by

each bid , and to Jazz’s actual 2014 costs, under its then-existing arrangement with Gate Gourmet. 46. The Federal Court of Appeal’s decisions in TREB support the admissibility of the Relevant Evidence. The FCA in Pfizer upheld the acceptance of a corporate executive’s testimony about what his pharmaceutical company would have done in the “but for” world in circumstances where the witness had actual knowledge of the company’s relevant, real world, operations. TREB provided the following guidance about opinion evidence:

Nevertheless, we think it is clear that lay witnesses cannot testify on matters beyond their own conduct and that of their business in the “but for” world. Lay witnesses are not in a better position than the trier of fact to form conclusions about the greater economic consequences of the “but for” world, nor do they have the experiential competence. While questions pertaining to how their particular business might have responded to the hypothetical world are permissible provided the requisite evidentiary foundation is established, any witness testimony regarding the impact of the VOW restrictions on competition generally strays into the realm of inappropriate opinion evidence 52 47 Jazz Statement, supra note 2 at para 41. Ms. Bishop describes earlier in her statement at para 22, the five different types of Catering Events, each of which is associated with a particular aircraft type and level of service. 48 Ibid at para 41. 49 Canada (Commissioner of Competition) v Toronto Real Estate Board, 2017 FCA 236 (“TREB”). 50 Pfizer Canada Inc v Teva Canada Ltd, 2016 FCA 161 (“Pfizer”). 51 Ibid at paras 105-108, 112, 121. 52 TREB, supra note 49 at para 81. ~ 14 ~

. Jazz compared the costs of 48 49 and Pfizer 50 also 51 Citing Pfizer, the FCA in

PUBLIC VERSION 47. Ms. Stewart and Ms. Bishop are providing evidence on an issue that they have experience with – savings generated from a competitive processes run by their companies. If Ms. Stewart and Ms. Bishop were speculating about market outcomes in light of their decisions from the competitive process this would be invalid opinion evidence, but they are not. They are not speculating about what their companies might have done in a “but for” world and they are certainly not providing opinion evidence beyond the conduct of their business.

48. VAA incorrectly argues that Ms. Stewart in particular has no basis for her opinion because Dr. Niels could not analyze the data that Optimum provided and Gate Gourmet provided about their charges to Air Transat. 53 However, Dr. Niels testifies it is not possible because Optimum data is . 54 49. VAA’s argument would only be material to the extent that Ms. Stewart was testifying that she undertook the type of analysis Dr. Niels contemplates. She is not. As described above, and is clear in Ms. Stewart’s statement, the analysis that Air Transat did to calculate savings was based on the bids it received in combination with Air Transat’s flight schedules and volumes. 55 50. The Relevant Evidence is not opinion evidence; rather it is fact. Even if it is opinion evidence, it should be admitted as both Ms. Stewart and Ms. Bishop were well placed to perceive the savings their companies achieved as a result of the competitive processes they undertook.

53 Memorandum of Fact and Law of the Respondent at paras 64-65. 54 Expert Report of Dr. Gunnar Niels, dated July 4, 2018, at para 4.52, Motion Record of the Respondent, Tab 4 (“Niels Report”). 55 Air Transat Statement, supra note 1 at para 29. ~ 15 ~

PUBLIC VERSION B. The Relevant Evidence is not hearsay, and even if it is, it should be admitted because it is necessary and reliable

1. The Relevant Evidence is not hearsay 51. Hearsay is testimony of a statement made to a witness by a person who is not called as a witness offered to show the truth of the matter stated therein. 56 52. If Ms. Stewart or Ms. Bishop were testifying that they were told by another airline that airlines saved costs from a competitive process, that would be hearsay. That is not the case with the Relevant Evidence.

53. The fundamental flaw in VAA’s hearsay argument is that the Relevant Evidence is hearsay because the specific paragraphs of the Relevant Evidence do not describe how the witnesses have personal knowledge of the Relevant Evidence.

54. The problem with this argument is that it ignores both witnesses’ statements that they have personal knowledge of what they are testifying to (unless otherwise indicated). 57 55. It is clear on the face of the evidence, as described in detail above, why these two individuals should be presumed to have personal knowledge of the Relevant Evidence.