Third Extension of Computer Reservations Systems (CRS) Regulations

AGENCY:

Office of the Secretary, Department of Transportation.

ACTION:

Final rule.

SUMMARY:

The Department is revising its rules governing airline computer reservations systems (CRSs), 14 CFR part 255, to change the rules' expiration date for a third time. This revision changes the date from March 31, 2000, to March 31, 2001, to keep the rules from terminating on March 31, 2000. The rules will thus remain in effect while the Department continues its reexamination of the need for CRS regulations. The Department finds that the current rules should be maintained because they are 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 Department previously extended the rules from December 31, 1997, to March 31, 1999, and from March 31, 1999, to March 31, 2000.

DATES:

This rule is effective on March 31, 2000.

FOR FURTHER INFORMATION CONTACT:

Thomas Ray, Office of the General Counsel, Department of Transportation, 400 Seventh St. SW., Washington, DC 20590, (202) 366-4731.

SUPPLEMENTARY INFORMATION:

To ensure that we periodically review the need for our CRS rules and their effectiveness, section 255.12 of the rules establishes a sunset date. The original sunset date was December 31, 1997. We have changed the rules' expiration date twice before, once to March 31, 1999, 62 FR 66272 (December 18, 1997), and then to March 31, 2000, 64 FR 15127 (March 30, 1999).

We are now changing the sunset date to March 31, 2001, because we have been unable to complete our reexamination of the current rules by March 31, 2000. Given our view that the current rules should be maintained pending our reexamination of the need for rules, we proposed to change the rules' expiration date to March 31, 2001, and gave interested persons an opportunity to comment on that proposal. 65 FR 11009 (March 1, 2000). We received comments from Delta Air Lines, Amadeus Global Travel Distribution, Worldspan, and the American Society of Travel Agents, all of which supported the proposal.

Background

We adopted our CRS rules because they are necessary to protect airline competition and to ensure that consumers can obtain accurate and complete information on airline services. 65 FR at 11010-11011. Because almost all airlines found it essential to participate in each CRS, market forces did not discipline the price and quality of service offered airlines by the CRSs. Travel agents relied on CRSs to provide airline information and bookings for their customers, and almost all airlines received a large majority of their bookings from travel agencies. Travel agencies typically used only one system (or predominantly used one system even if they had access to two or more systems). Each airline therefore had to participate in an agency's system if it wished to have its services readily saleable by that agency. Each system, moreover, was controlled by airlines or airline affiliates, who could use them to unreasonably prejudice the competitive position of other airlines or to provide misleading or inaccurate information to travel agents and their customers. For these reasons, we adopted rules regulating CRS operations in the United States, 57 FR 43780 (September 22, 1992). 65 FR at 11009-11010.

Our rules included a sunset date, December 31, 1997, to ensure that we would reexamine whether the rules remained necessary and whether they were effective. 57 FR at 43829-43830 (September 22, 1992). We have begun a reexamination of our current rules by publishing an advance notice of proposed rulemaking that invited interested persons to comment on whether we should readopt the rules and, if so, with what changes. 62 FR 47606 (September 10, 1997). Almost all of the parties responding to our advance notice of proposed rulemaking have urged us to maintain CRS rules, and many of them argued that various changes should be made to the rules to strengthen them. 65 FR at 11010.

Our Proposed Extension of the CRS Rules

Because we have been unable to complete our reexamination of the rules, we have twice changed the sunset date, most recently to March 31, 2000. 64 FR 15127 (March 30, 1999). We proposed again to change the expiration date for the rules to March 31, 2001, so that they would remain in effect pending our reexamination of our rules, since we could not complete that reexamination by March 31, 2000. 65 FR 11009 (March 1, 2000). The proposed temporary extension of the current rules would maintain the status quo until we determine which rules, if any, should be adopted. As we explained, maintaining the rules in effect appeared to be necessary to protect airline competition and consumers against unreasonable practices in view of our earlier findings on the market power of the systems and each airline owner's potential interest in using its affiliated CRS to prejudice the competitive position of other airlines. Furthermore, allowing the current rules to expire could 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. 65 FR at 11010-11011.

Finally, maintaining the rules in effect appeared necessary to comply with the United States' obligations under various treaties and bilateral air services agreements to assure foreign airlines a fair and equal opportunity to compete. 65 FR at 11011.

As we stated, our inability to complete the rules' reexamination is unfortunate due to the importance of adapting our rules to current industry conditions. This inability has stemmed from the need to address other airline competition issues that appeared to be more urgent. In addition, recent developments in airline distribution practices, most notably the growing importance of the Internet, are requiring additional study by the staff. As we noted, moreover, our existing rules appear to prevent the practices that present serious threats to airline competition and to the ability of consumers to obtain unbiased and accurate information through the systems. We have been aware, however, that several parties are alleging that the compelling need for certain additional CRS regulations requires us to act promptly on those issues without waiting for the completion of the overall reexamination of the rules. 65 FR 11010.

Because we needed to make the proposed amendment effective by March 31, 2000, we shortened the comment period to ten days. 65 FR at 11009.

Comments

We received comments from four parties: Delta Air Lines, Worldspan, Amadeus Global Distribution System (“Amadeus”), and the American Society of Travel Agents (“ASTA”). The commenters agree that the rules should be extended as we proposed. Amadeus, however, urges us to act on its request that we prohibit the tying of a travel agency's access to an airline's corporate discount fares with the agency's use of the system affiliated with that airline (Docket OST-99-5888). ASTA contends that we should act quickly on its proposal that systems be prohibited from selling marketing data derived from travel agent bookings to airlines, which would require the amendment of section 255.10. Worldspan, on the other hand, asserts that we should reexamine the rules in one comprehensive proceeding rather than address selected issues in separate proceedings.

Final Rule

We are changing the rules' sunset date to March 31, 2001, as we proposed. Delta, Amadeus, Worldspan, and ASTA support our proposal, and no one has objected to it. We based our proposal on the findings made by us in earlier CRS rulemakings and the position of almost all parties in the underlying rulemaking Docket OST-97-2881 that CRS rules are still necessary. 65 FR at 11011. In our overall reexamination of the rules we will, of course, consider whether recent developments, such as the divestiture by several airlines of their CRS ownership interests, indicate that there may be little need for some or all of the CRS rules.

ASTA and Amadeus each urge us to act quickly on the specific rule proposals of interest to it. We will consider their requests as part of our consideration of procedures for completing the reexamination of the rules and for updating the rules to reflect current industry conditions. We also plan to announce soon procedures for moving forward with the overall reexamination of the rules.

Effective Date

We have determined for good cause to make this amendment effective on March 31, 2000, rather than thirty days after publication as required by the Administrative Procedure Act, 5 U.S.C. 553(d), except for good cause shown. To maintain the current rules in force, we must make this amendment effective by March 31, 2000. Since the amendment preserves the status quo, it will not require the systems, airlines, and travel agencies to change their operating methods. As a result, making the amendment effective less than thirty days after publication will not burden anyone.

Regulatory Process Matters

Regulatory Assessment

This rule 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 (February 26, 1979).

In our notice of proposed rulemaking, we tentatively determined that maintaining the current rules should impose no significant costs on the CRSs. The systems' continuing compliance with the rules on displays and functionality should not impose a substantial burden, since they have already taken the steps necessary to comply with those requirements. Keeping the rules in effect would benefit participating airlines, since they would otherwise be subjected to unreasonable terms for participation, and benefit consumers, who might otherwise be given incomplete or inaccurate information on airline services. The rules also contain provisions that are designed to prevent abuses in the systems' competition with each other for travel agency subscribers. 65 FR at 11011.

Our last comprehensive CRS rulemaking included an economic analysis, and we stated our belief that that analysis remains applicable to our extension of the rules' expiration date. We concluded that no new economic analysis appeared to be necessary, but we stated that we would consider comments from any party on that analysis before we again revised the rules' sunset date. 65 FR at 11011.

No one filed comments on the economic analysis, so we are basing this rule on the analysis used in our last comprehensive CRS rulemaking. We will prepare a new economic analysis as part of our review of the existing rules, if we determine that rules remain necessary.

This rule does not impose unfunded mandates or requirements that will have any impact on the quality of the human environment.

Small Business Impact

Congress enacted the Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et seq., 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. and foreign airlines and smaller travel agencies. Our notice of proposed rulemaking set forth the reasons for our proposed extension of the rules' expiration date and the objectives and legal basis for that proposed rule. 65 FR at 11011.

We also noted that keeping the current rules in force would not change the existing regulation of small businesses. We referred to the final rule in our last comprehensive CRS rulemaking, which contained an analysis underlying our determination that the rules would not have a significant economic impact on a substantial number of small entities. In proposing to revise the sunset date to March 31, 2001, we reasoned that that analysis appeared to remain valid for that proposed extension. We therefore adopted that analysis as our tentative regulatory flexibility statement but stated that we would consider any comments filed on that analysis in connection with the proposal. 65 FR at 11011.

We tentatively concluded that maintaining our existing CRS rules would primarily affect two types of small entities, smaller airlines and travel agencies. The rules would also affect all small entities that purchase airline tickets, since airline fares may be somewhat lower than they would otherwise be, although the amount may not be large, if our CRS rules allow airlines to operate more efficiently than they otherwise would. 65 FR at 11011.

Keeping the rules in effect would benefit smaller airlines that have no ownership interest in a CRS, since the rules prohibit certain potential system practices that could injure the smaller airlines' ability to operate profitably and compete successfully. The rules, for example, bar display bias and discriminatory booking fees. Without the rules, the systems' airline affiliates could use them to prejudice the competitive position of other airlines. 65 FR at 11011-11012.

The rules additionally 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. 65 FR at 11012.

We invited interested persons to address our tentative conclusions under the Regulatory Flexibility Act in their comments submitted in response to this notice of proposed rulemaking. 65 FR at 11012.

No one filed comments on our Regulatory Flexibility Act analysis. We will adopt the analysis set forth in the notice of proposed rulemaking.

Our proposed rule contained 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.

I certify under section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 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, Pub.L. No. 96-511, 44 U.S.C. Chapter 35.

Federalism Implications

We stated that we had reviewed this rule in accordance with the principles and criteria contained in Executive Order 13132, dated August 4, 1999, and determined that it will 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. The rule will not limit the policymaking discretion of the States. Nothing in it would directly preempt any State law or regulation. We are adopting 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. In our notice of proposed rulemaking, we stated our belief that the policy set forth in the proposed rule is consistent with the principles, criteria, and requirements of the Federalism Executive Order and the Department's governing statute. We welcomed comments on our conclusions.

No one submitted comments on our federalism assessment. Therefore, we will make that assessment final. Because the rule will have no significant effect on State or local governments, as discussed above, no consultations with State and local governments on this rule were necessary.

List of Subjects in 14 CFR Part 255

• Air carriers
• Antitrust
• Consumer protection
• Reporting and recordkeeping requirements
• Travel agents

Accordingly, the Department of Transportation amends 14 CFR part 255, Carrier-owned Computer Reservations Systems, 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: