TRAVEL AGENTS OF AMERICA
DEPARTMENT OF TRANSPORTATION Office of the
Secretary 14 CFR Part 255 [Docket No.
OST–2002–11577] RIN 2105–AC75 Extension of
Computer Reservations Systems (CRS) Regulations AGENCY: Office of the Secretary, Department of Transportation. ACTION: Notice of proposed rulemaking. SUMMARY: The Department is proposingto amend its rules governing airline computer
reservations systems (CRSs), 14 CFR part 255, by changing the rules’ expiration
date from March 31, 2002, to March 31, 2003. If the expiration date is not
changed, the rules will terminate on March 31, 2002. The proposed extension of
the current rules will keep them in effect while the Department carries out its
reexamination of the need for CRS regulations. The Department has tentatively
concluded that the current rules should be maintained because they appear to be
necessary for promoting airline competition and helping to ensure that
consumers and their travel agents can obtain complete and accurate information
on airline services. The rules were previously extended from December 31, 1997,
to March 31, 1999, then to March 31, 2000, then to March 31, 2001, and most
recently to March 31, 2002. DATES: Comments must be submitted on or before March 18, 2002. Late filed
comments will be considered to the extent possible. ADDRESSES: To make sure your comments and related material are not entered more
than once in the docket, please submit them (marked with docket number
OST–2002–11577) by only one of the following means: (1)
By mail to the
Docket Management Facility, U.S. Department of Transportation, room PL–401, 400
Seventh Street SW., Washington, DC 20590–0001. (2) (2) By hand delivery to room PL–401 on the Plaza level of the Nassif Building, 400 Seventh Street SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The telephone number is 202–366– 9329. (3) (3) Electronically through the Web Site for the Docket Management System at http://dms.dot.gov. Comments must be filed in Docket OST–2002–11577. However, due to security procedures in effect since October 2001 on mail deliveries, mail received through the Postal Service may be subject to delays. Commenters should consider using an express mail firm to ensure the timely filing of any comments not submitted electronically or by hand. FOR FURTHER
INFORMATION CONTACT: Thomas Ray, Office of the General Counsel, 400
Seventh St., SW., Washington, DC 20590, (202) 366–4731. Electronic Access You can view and download this document by
going to the webpage of the Department’s Docket Management System (http://dms.dot.gov/).
On that page, click on ‘‘search.’’ On the next page, type in the last four
digits of the docket number shown on the first page of this document. Then
click on ‘‘search.’’ An electronic copy of this document also may be downloaded
by using a computer, modem, and suitable communications software from the
Government Printing Office’s Electronic Bulletin Board Service at (202) 512–
1661. Internet users may reach the Office of the Federal Register’s home page
at: http://www.nara.gov/fedreg and the Government Printing Office’s
database at: http://www.access.gpo.gov/ nara/ index.html. SUPPLEMENTARY
INFORMATION: The Department adopted its rules governing CRS
operations, 14 CFR part 255, because almost all airlines operating in the
United States relied on the CRSs in marketing their airline services and each
system was then controlled by one or more airlines or airline affiliates. 57 FR
43780 (September 22, 1992). We concluded that the rules were necessary to
ensure that each of the airlines and airline affiliates that controlled the
systems did not use them to unfairly prejudice the competitive position of
other airlines and to ensure that travel agents and their customers could
obtain accurate and unbiased information from the systems. CRS rules were
necessary because almost all airlines received most of their bookings from
travel agencies and because travel agents relied on the systems to obtain
airline information and make bookings for their customers. Our rules as revised
will expire on March 31, 2002, unless we readopt them or extend the expiration
date. We began a proceeding to determine whether the rules are necessary and
should be readopted and, if so, whether they should be modified, by issuing an
advance notice of proposed rulemaking. 62 FR 47606 (September 10, 1997). We are
proposing here to extend the rules’ expiration date to March 31, 2003, so that
they will remain in force while we complete that proceeding. The Department
expects to issue a notice of proposed rulemaking regarding the substantive
issues that might be addressed in revised CRS rules later this year. We are
allowing thirty days for comments on this proposal. That comment period will
enable us to publish a final decision on this proposal before the rules’
current expiration date. Our advance notice of proposed rulemaking and our
supplemental advance notice of proposed rulemaking have given interested
persons an opportunity to comment on whether the rules should be maintained. The CRS Business A CRS provides information and booking
capabilities on airline services and other travel services sold through it to
its users, who are primarily travel agents (both traditional agencies and
on-line agencies). Consumers using Internet reservations services and corporate
travel departments also use the systems. Users access the systems through
computer terminals. Someone using a CRS can investigate what airline seats and
fares are available and can book a seat on each airline that ‘‘participates’’
in the system, that is, that makes its services saleable through the CRS. Four
CRSs operate in the United States. Two of them—Worldspan and Amadeus—are owned
in whole or part by one or more U.S. or foreign airlines, and the other
two—Sabre and Galileo— are marketed by one or more U.S. airlines and until
recently were also controlled by one or more airlines. The systems charge
participating airlines and other travel suppliers fees when a user books travel
services through the system or changes an existing booking (these fees are
called ‘‘booking fees’’). The fees paid by travel suppliers produce most of
each system’s revenues. Many travel agencies also pay fees for using a system,
although other travel agencies obtain system services without charge. Since the
systems compete for travel agency customers (‘‘subscribers’’), market forces
usually discipline subscriber fees. Regulatory
Background The Civil
Aeronautics Board (‘‘the Board’’), the agency formerly responsible for the
airline industry’s economic regulation, initially adopted CRS rules because the
systems had become essential for airline distribution due to the travel agents’
reliance on them for investigating and booking airline services. 49 FR 32540
(August 15, 1984). Each system then operating in the United States, with one
minor exception, was owned by a single airline, and each owner airline was
using its system to prejudice competing airlines and to give consumers biased
or incomplete information in order to obtain more bookings. The Board
determined that regulations were necessary to keep the systems from
substantially injuring airline competition and from misleading consumers. The
Board adopted the rules under the authority granted it by section 411 of the
Federal Aviation Act, later recodified as 49 U.S.C. 41712, to prevent unfair
methods of competition and unfair and deceptive practices in air transportation
and the sale of airline transportation. The Board’s rules were affirmed on
review. United Air Lines v. CAB, 766 F.2d 1107 (7th Cir. 1985).
The Board’s rules required each system to make participation available to all
airlines on non-discriminatory terms, to offer at least one unbiased display,
and to make available to each airline participant any marketing and booking
data that the system chose to generate from bookings for domestic travel. The
rules also prohibited certain CRS contract terms that unreasonably kept travel
agencies from switching systems or using more than one system. The Board’s
rules contained a sunset date, December 31, 1990, to ensure that we would
reexamine the rules after we assumed the Board’s responsibilities for airline
economic regulation. We conducted such a reexamination and concluded that the
rules remained necessary and should be strengthened in certain respects. 57 FR
43780 (September 22, 1992). The rules were still necessary, because market
forces did not discipline the price or level of service offered participating
airlines by the systems. CRS owners could use their control of the systems to
prejudice airline competition, and the systems could bias their displays of
airline services, if there were no rules. 57 FR at 43783–43787. Our rules also
included a sunset date, December 31, 1997. 14 CFR 255.12; 57 FR at 43829–43830
(September 22, 1992). We began our current reexamination of the rules by
publishing an advance notice of proposed rulemaking requesting comments on
whether we should readopt the rules and, if so, whether they should be changed.
62 FR 47606 (September 10, 1997). We thereafter published a supplemental
advance notice of proposed rulemaking that asked the parties to update their
comments in light of recent developments and to comment on whether any rules
should be adopted regulating the use of the Internet in airline distribution.
65 FR 45551 (July 24, 2000). We have also been conducting informal studies of
recent developments in airline distribution and of the proposed business plan
and operational strategy of Orbitz, a travel website owned by five major U.S.
airlines. Almost all of the parties responding to our advance notice of
proposed rulemaking and supplemental advance notice of proposed rulemaking have
urged us to maintain CRS rules, although many have argued that the rules
required changes. Few parties have argued that we should eliminate the rules or
that the continued regulation of the CRS business is unnecessary. An extension
of the current rules pending completion of the current reexamination of those
rules would be consistent with the positions taken by most of the commenters. Previous Extension
of the Rules’ Sunset Date Previously,
we have extended the sunset date four times, first to March 31, 1999, and most
recently to March 31, 2002. 62 FR 66272 (December 18, 1997); 64 FR 15127 (March
30, 1999); 65 FR 16808 (March 30, 2000); and 66 FR 17352 (March 30, 2001). We
concluded that these extensions were necessary to prevent the harm that would
arise if the CRS business were not regulated and in view of the fact that
extending the rules would not impose substantial costs on the industry. The
only party that commented on the first proposed extension—America West
Airlines— supported it, as did three parties that commented on the second
proposed extension—Amadeus Global Distribution System, America West, and the
Association of Asia-Pacific Airlines. Worldspan’s comment on the second
proposed extension did not oppose the extension. The parties that took a
position on the third proposed extension—Delta, Amadeus, Worldspan, and the
American Society of Travel Agents—all supported the proposal. Worldspan, Delta,
America West, and Orbitz supported our fourth proposed extension, while the Air
Carrier Association did not oppose it. The Air Carrier Association, Delta, and
America West urged us to revise the rules on some issues as soon as possible. Status of Our
Review The Department
recognizes that our reexamination of the rules should be completed as soon as
possible, and the staff is moving forward promptly to bring the rulemaking to
completion. Our rules must be updated to reflect current industry conditions,
and we must consider whether the rules should be extended to the Internet,
which is becoming increasingly important in airline distribution. CRS-related
issues may arise that may require a decision before we complete our overall
reexamination of the rules. The importance of some issues related to Orbitz,
for example, caused us to review Orbitz’ business plan before it launched its
service to the public, and we are conducting a further review of Orbitz to see
whether its actual operations present competitive issues. When expedited action
is needed on other issues, we will address them promptly. We are aware that
several parties have requested expedited action on specific proposed revisions
to the CRS rules, such as rules limiting airline booking fees and giving travel
agency subscribers additional rights to cancel CRS contracts. See, e.g.,
the petition filed by America West on airline booking fees; the Emergency
Petition for Rulemaking filed by the Association of Retail Travel Agents in
Docket OST–98– 4775 on travel agency contracts; the petition filed by Amadeus
in Docket OST–99–5888 on the tying of an airline’s corporate discount fares
with the agency’s use of that airline’s CRS; and the comments filed by several
travel agency parties and the Association of Air Carriers of America requesting
expedited action on an amendment that would bar or restrict systems from
providing booking and marketing data to airlines. While we currently intend to
address all of the rulemaking issues in the overall reexamination, and to do so
promptly, we will consider acting more quickly on specific issues as necessary.
Our Proposed
Extension of the CRS Rules We
are again proposing to extend the expiration date for our CRS rules by one
year, to March 31, 2003, to maintain the rules while we complete our
reexamination of the need for the rules and their effectiveness. Our overall
reexamination of our rules, including the need to give parties an adequate
opportunity to file comments and reply comments in response to our future
notice of proposed rulemaking, cannot be completed within the several weeks
remaining before the current expiration date, March 31, 2002. Our proposed
amendment would preserve the status quo until we determine which rules, if any,
should be adopted. Allowing the current rules to expire would be disruptive,
since the systems, airlines, and travel agencies have been conducting their
operations in the expectation that each system will comply with the rules.
Systems, airlines, and travel agencies, moreover, would be unreasonably burdened
if the rules were allowed to expire and we later determined that those rules
(or similar rules) should be adopted, since they could have changed their
business methods in the meantime. We are proposing to maintain the rules for
another year primarily in order to protect airline competition and consumers
against unreasonable and unfair practices. In our past reviews of the need for
CRS rules, we found that CRSs were still essential for the marketing of the
services of almost all airlines. 57 FR 43780, 43783–43784 (September 22, 1992).
We concluded that rules were necessary because travel agencies were the
airlines’ principal method of distribution, because travel agencies relied on
CRSs, because most travel agency offices used only one CRS, because airlines
and other firms had not successfully encouraged travel agencies to use
alternatives for CRSs, and because non-owner airlines were unable to induce
agencies to use CRSs that provided better or less expensive service to the
airlines. 57 FR at 43783–43784, 43831. If an airline did not participate in a
system used by a travel agency, that agency was less likely to book its
customers on that airline. The importance of marginal revenues in the airline
industry meant that no airline could afford to lose access to a significant
source of revenue. An airline (or other firm) could not practicably create a
system that could compete with the existing systems. Almost all airlines
therefore had to participate in each CRS, and CRSs did not need to compete for
airline participants. 57 FR at 43783– 43784. These findings still appear to be
valid. Travel agencies still make most airline bookings in the United States,
travel agencies still rely heavily on CRSs to obtain information on airline
services and to make bookings, and most travel agency offices rely entirely or
predominantly on one system to carry out these tasks. The decisions of most
low-fare airlines to participate in each system, even though several initially
believed that they could reduce their costs while not forfeiting much traffic
by declining to participate in the systems, support these findings. 62 FR at
47608. As noted above, most of the parties that responded to our advance notice
of proposed rulemaking and supplemental advance notice of proposed rulemaking
have stated that the rules remained necessary, and most of them have urged us
to strengthen them further to protect against potential abuses by system
owners. Thus, while we have not made a determination that the rules should be
readopted, we tentatively believe that our past findings on the need for CRS
rules are still valid, at least for the purpose of a short-term extension of
the rules’ expiration date. Maintaining the current rules will protect airline
competition and consumers against the injuries that would otherwise occur,
given our earlier findings on the market power of the systems and the systems’
ability to engage in practices that could prejudice airline competition and
lead to consumer deception. Continuing the rules in effect should not impose
significant costs on the systems and their owners, since they have already
adjusted their operations to comply with the rules and since the rules do not
impose costly burdens of a continuing nature on the systems. Furthermore, our
obligation under section 1102(b) of the Federal Aviation Act, recodified as 49
U.S.C. 40105(b), to act consistently with the United States’ obligations under
treaties and bilateral air services agreements further supports our
continuation of the rules. Many of those bilateral agreements assure the
airlines of each party a fair and equal opportunity to compete. We have held
that the fair and equal opportunity to compete includes, among other things, a
right to have an airline’s services fairly displayed in CRSs. Our rules against
display bias and discriminatory treatment help to provide foreign airlines with
a fair and equal opportunity to compete in the United States. 57 FR at
43791–43792. We recognize that the airline distribution system and the CRS
business are changing. The Internet’s role in airline distribution is growing
rapidly. Two of the systems—Sabre and Galileo—are no longer controlled by
airlines. American and Southwest market Sabre, however, and United markets
Galileo, so these two systems each have significant airline ties which could
potentially lead to deceptive or unfair competitive practices if our rules
expired. Whether the rules should be readopted in light of the changes in
system ownership is, of course, an issue that we are carefully considering in
our reexamination of the rules. 65 FR at 45554, 45556. As stated above, we
recognize the importance of updating the rules to reflect all such
developments. Regulatory Process
Matters Regulatory
Assessment This rulemaking is
a nonsignificant regulatory action under section 3(f) of Executive Order 12866
and has not been reviewed by the Office of Management and Budget under that
order. The proposal is also not significant under the regulatory policies and
procedures of the Department of Transportation, 44 FR 11034. Maintaining the
current rules should not impose significant costs on the systems. They have
already taken the steps necessary for compliance with the rules’ requirements
on displays and functionality, and complying with those rules on a continuing
basis does not impose a substantial burden on the systems. Keeping the rules in
force will benefit participating airlines, since otherwise they could be
subjected to unreasonable terms for participation, and consumers, who might
otherwise obtain incomplete or inaccurate information on airline services. The
rules also prevent some types of abuses by systems in their competition for
travel agency subscribers. When we conducted our last major CRS rulemaking, we
included a tentative economic analysis in our notice of proposed rulemaking and
made that analysis final when we issued our final rule. We believe that
analysis remains applicable to our proposal to extend the rules’ expiration
date. As a result, no new regulatory impact statement appears to be necessary.
However, we will consider comments from any party on that analysis before we
make our proposal final. This rule does not impose unfunded mandates or
requirements that will have any impact on the quality of the human environment.
Small Business Impact The Regulatory Flexibility Act of 1980, 5
U.S.C. 601 et seq., was enacted by Congress to ensure that small
entities are not unnecessarily and disproportionately burdened by government
regulations. The act requires agencies to review proposed regulations that may
have a significant economic impact on a substantial number of small entities.
For purposes of this rule, small entities include smaller U.S. airlines and
smaller travel agencies. Our notice of proposed rulemaking sets forth the
reasons for our proposed extension of the rules’ expiration date and the
objectives and legal basis for that proposed rule. Furthermore, maintaining the
current rules will not modify the existing regulation of small businesses. Our
final rule in our last major CRS rulemaking contained a regulatory flexibility
analysis on the impact of the rules. As a result of that analysis, we
determined that this regulation did not have a significant economic impact on a
substantial number of small entities. Our analysis appears to be valid for our
proposed extension of the rules’ termination date. Accordingly, we adopt that
analysis as our tentative regulatory flexibility statement and will consider
any comments filed on that analysis in connection with this proposal. The
continuation of our existing CRS rules will primarily affect two types of small
entities, smaller airlines and travel agencies. To the extent that airlines can
operate more efficiently and reduce their costs, the rules will also affect all
small entities that purchase airline tickets, since airline fares may be
somewhat lower than they would otherwise be, although the difference may be
small. Continuing the rules will protect smaller non-owner airlines from
several potential system practices that could injure their ability to operate
profitably and compete successfully. No smaller airline has a CRS ownership
interest. Market forces do not significantly influence the systems’ treatment
of airline participants. As a result, if there were no rules, the airlines
affiliated with the systems could use them to prejudice the competitive
position of other airlines. The rules provide important protection to smaller
airlines. For example, by prohibiting systems from ranking and editing displays
of airline services on the basis of carrier identity, they limit the ability of
each system to bias its displays in favor of its owner airlines and against
other airlines. The rules also prohibit charging participating airlines
discriminatory fees. The rules, on the other hand, impose no significant costs
on smaller airlines. The CRS rules affect the operations of smaller travel
agencies, primarily by prohibiting certain CRS practices that could
unreasonably restrict the travel agencies’ ability to use more than one system
or to switch systems. The rules prohibit CRS contracts that have a term longer
than five years, give travel agencies the right to use third-party hardware and
software, and prohibit certain types of contract clauses, such as minimum use
and parity clauses, that restrict an agency’s ability to use multiple systems.
By prohibiting display bias based on carrier identity, the rules also enable
travel agencies to obtain more useful displays of airline services. Our
proposed rule contains no direct reporting, record-keeping, or other compliance
requirements that would affect small entities. There are no other federal rules
that duplicate, overlap, or conflict with our proposed rules. Interested
persons may address our tentative conclusions under the Regulatory Flexibility
Act in their comments submitted in response to this notice of proposed
rulemaking. I certify under section 605(b) of the Regulatory Flexibility Act (5
U.S.C. et seq.) that this regulation will not have a significant
economic impact on a substantial number of small entities. Paperwork Reduction Act This proposal contains no collection-of-
information requirements subject to the Paperwork Reduction Act, Public Law
96–511, 44 U.S.C. Chapter 35. Federalism Assessment This proposed rule has been reviewed in
accordance with the principles and criteria contained in Executive Order 13132,
dated August 4, 1999, and it has been determined that this action does not have
a substantial direct effect on the States, on the relationship between the
national government and the States, or on the distribution of power and
responsibilities among the various levels of government. This proposed rule
will not limit the policymaking discretion of the States. Nothing in this
proposal would directly preempt any State law or regulation. We are proposing
this amendment primarily under the authority granted us by 49 U.S.C. 41712 to
prevent unfair methods of competition and unfair and deceptive practices in the
sale of air transportation. We believe that the policy set forth in this
proposed rule is consistent with the principles, criteria, and requirements of
the Federalism Executive Order and the Department’s governing statute. Comments
on these conclusions are welcomed and should be submitted to the docket. List of Subjects in 14 CFR Part 255 Air carriers, Antitrust, Consumer protection,
Reporting and record keeping requirements, Travel agents. Accordingly, the
Department of Transportation proposes to amend 14 CFR Part 255 as follows: PART 255—[AMENDED] 1. The authority citation for Part 255
continues to read as follows: Authority: 49 U.S.C. 40101, 40102, 40105, 40113, 41712. 2. Section 255.12 is revised to read as
follows: § 255.12. Termination. The rules in this part terminate on March 31,
2003. Issued in Washington, DC on
February 12, 2002, under authority delegated by 49 CFR 1.56a (h) 2. Read C.
Van de Water, Assistant Secretary for Aviation and
International Affairs. [FR Doc. 02–3924 Filed 2–13–02; 1:03 pm] |