[Federal Register Volume 67, Number 60 (Thursday, March 28, 2002)]
[Rules and Regulations]
[Pages 14846-14852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-7510]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 255

[Docket No. OST-2002-11577]
RIN 2105-AD09


Extension of Computer Reservations Systems (CRS) Regulations

AGENCY: Office of the Secretary, Department of Transportation.

ACTION: Final rule.

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SUMMARY: The Department is amending its rules governing airline 
computer

[[Page 14847]]

reservations systems (CRSs), by changing the expiration date from March 
31, 2002, to March 31, 2003. If the expiration date were not changed, 
the rules would terminate on March 31, 2002. This 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 
concluded that the current rules should be maintained for another year 
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 
most recently extended from March 31, 2001, to March 31, 2002.

DATES: This rule is effective on March 31, 2002.

FOR FURTHER INFORMATION CONTACT: Thomas Ray, Office of the General 
Counsel, 400 Seventh St. SW., Washington, DC 20590, (202) 366-4731.

SUPPLEMENTARY INFORMATION:

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.
    Section 255.12 of the rules establishes a sunset date for the rules 
to ensure that we will reexamine the need for the rules and their 
effectiveness. The original sunset date was December 31, 1997. We have 
changed it four times, and the current sunset date is 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 that extending the 
rules would not impose substantial costs on the industry.
    We are now changing the sunset date to March 31, 2003, because we 
have been unable to complete our reexamination of the current rules by 
March 31, 2002. Since we believed that the rules should remain in 
effect until we complete that process, we proposed that additional 
extension of the rules' expiration date. 67 FR 7100 (February 15, 
2002). We are continuing to work actively on completing our overall 
reexamination of the rules. Upon completion of the rulemaking process, 
we will decide whether the rules are necessary and, if so, how they 
should be updated.
    Comments were filed by Worldspan, Amadeus Global Travel 
Distribution, United, Delta, Northwest, America West, the Air Carrier 
Association of America (``ACAA''), the American Society of Travel 
Agents (``ASTA''), RADIUS, the National Business Travel Association 
(``NBTA''), and a number of individual travel agents. The commenters 
disagree over whether the rules should be extended, as discussed below.

Background

    We adopted our rules governing CRS operations, 14 CFR part 255, on 
the basis of our findings that they were necessary to protect airline 
competition and to ensure that consumers can obtain accurate and 
complete information on airline services. 57 FR 43780 (September 22, 
1992). Market forces did not discipline the price and quality of 
services offered airlines by the systems, because almost all airlines 
found it essential to participate in each system. Travel agents relied 
on CRSs to obtain airline information and make bookings for their 
customers, and typically each travel agency office entirely or 
predominantly used one system for these tasks. Moreover, one or more 
airlines or airline affiliates owned each of the systems and could 
operate the system in ways designed to prejudice the competitive 
position of other airlines.
    Our rules included a sunset date to ensure that we would reexamine 
whether the rules were necessary and effective after they had been in 
force for several years. 14 CFR 255.12; 57 FR 43829-43830 (September 
22, 1992). To conduct that reexamination, 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 later 
published a supplemental advance notice of proposed rulemaking that 
asked the parties to update their comments in light of recent 
developments, primarily the changes in the systems' ownership, which 
meant that airlines had little or no control over some systems, and the 
increasing importance of the Internet in airline distribution, and to 
comment on whether any rules should be adopted regulating the use of 
the Internet in airline distribution. 65 FR 45551, 45554-45555 (July 
24, 2000). Almost all of the parties responding to our supplemental 
advance notice of proposed rulemaking (and the initial advance notice 
of proposed rulemaking) contended that CRS rules remained necessary. 
Some of the parties argued that the continued regulation of the CRS 
business would be harmful and unnecessary.
    In addition to issuing the two advance notices of proposed 
rulemaking, we have been informally studying recent developments in 
airline distribution. We have also been investigating the business plan 
and operations of Orbitz, the on-line travel agency developed by five 
major U.S. airlines.

Our Proposed Extension of the CRS Rules

    We have been unable to finish our overall reexamination of our 
rules by March 31, 2002, their current expiration date. We therefore 
proposed to change the rules' expiration date to March 31, 2003, so 
that they would remain in effect while we complete our reexamination of 
the need for the rules and their effectiveness. 67 FR 7100 (February 
15, 2002).
    We reasoned that changing the rules' sunset date to March 31, 2003, 
would preserve the status quo until we determine whether the rules 
should be readopted and, if so, how they should be modified. Keeping 
the current rules in place would be consistent with the expectations of 
the systems and their users that each system would operate in 
compliance with the rules. The systems, airlines, and travel agencies, 
moreover, would be unreasonably burdened if we allowed the rules to 
expire and later determined that those rules (or similar rules) should 
be adopted, since they could have changed their business methods in the 
meantime.
    We tentatively determined that extending the rules appeared 
necessary to protect airline competition and consumers against 
unreasonable and unfair practices. 67 FR 7103. Our past examinations of 
the CRS business and airline marketing showed that CRSs were still 
essential for the marketing of the services of almost all airlines. 67 
FR 7102, citing 57 FR 43780, 43783-43784 (September 22, 1992). CRS 
rules were necessary because the airlines relied heavily on travel 
agencies for

[[Page 14848]]

distribution, because travel agencies relied on CRSs, because most 
travel agency offices used only one CRS, because creating alternatives 
for CRSs and getting travel agencies to use them would be difficult, 
and because non-owner airlines were unable to induce agencies to use a 
CRS that provided airlines better or less expensive service instead of 
another that provided poorer or more expensive service. 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. As a result of 
the importance of marginal revenues in the airline industry, an airline 
could not afford to lose access to a significant source of revenue. 
Almost all airlines therefore had to participate in each CRS, and CRSs 
did not need to compete for airline participants. We believed that 
these findings were still valid despite such developments as the 
increasing importance of the Internet for airline distribution. 67 FR 
7102. We noted that most of the commenters that responded to the 
advance notice of proposed rulemaking and the supplemental advance 
notice of proposed rulemaking contended that the rules remained 
necessary. 67 FR 7102. We therefore tentatively concluded that our past 
findings on the need for CRS rules are sufficiently valid to justify a 
short-term extension of the rules' expiration date. 67 FR 7103.
    We additionally noted that an extension would be consistent with 
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. Many of the United States' bilateral agreements assure the 
airlines of each party a fair and equal opportunity to compete. Our 
rules provide an assurance of fair and nondiscriminatory treatment for 
foreign airlines. 67 FR 7103.
    We stated, however, that we have not determined in our review of 
the current rules whether they should be readopted. 67 FR 7102.

Comments

    Amadeus, America West, ACAA, ASTA, NBTA, and RADIUS either 
explicitly support the proposed extension or implicitly do so by urging 
us to modify the existing rules in ways that would assertedly promote 
competition and protect consumers. Several travel agencies and travel 
agents argue that we must strengthen the rules to protect travel 
agencies and their customers. United, Delta, and Northwest oppose the 
proposed extension. Worldspan contends that we should suspend the rules 
for two years on an experimental basis.
    Amadeus Global Travel Distribution, one of the systems, supports 
the proposed extension of the rules. Amadeus asks us to act promptly on 
one issue, the alleged tying by some airlines that own or market a 
system of access to their corporate discount fares with the use by a 
travel agency or corporate travel department of their affiliated 
systems. Amadeus additionally argues, among other things, that we have 
the statutory authority to regulate all systems, whether or not owned 
or controlled by an airline.
    America West states that it supports our proposed extension of the 
rules, since ``the current CRS regulations remain necessary to protect 
airline competition and to protect consumers from unreasonable and 
unfair practices.'' America West Comments at 1. The airline argues that 
we should address the booking fee issue promptly, since the systems 
have been increasing the fees imposed on airline participants.
    ACAA, a trade association commenting on behalf of low-fare 
airlines, argues that we should immediately suspend section 255.10(a) 
of our rules, which requires each system to make available to all 
participating airlines any marketing and booking data generated from 
the bookings made through the system. ACAA asserts that the data sold 
by the systems enable the large airlines to eliminate competition from 
low-fare airlines.
    ASTA, the largest travel agency trade association, supports the 
proposed extension of the rules, which are assertedly essential for 
maintaining competition and preventing abuses of market power in the 
system-travel agency subscriber relationship. ASTA also asks us to take 
immediate action on two CRS issues due to Delta's recent elimination of 
base commissions for all travel agencies. ASTA urges us to ban 
productivity pricing provisions in contracts between systems and travel 
agencies that effectively penalize travel agents for making bookings 
through the Internet instead of the system used by the agency 
(productivity pricing clauses typically require travel agencies to pay 
substantially higher fees for CRS service if they do not make a minimum 
number of bookings each month through the system). The productivity 
pricing clauses deter travel agents from booking tickets through the 
Internet, often the only source for the airlines' E-fares, which are 
usually the lowest available fares. Secondly, ASTA asks us to prohibit 
systems from selling marketing and booking data to airlines that show 
the bookings made by individual travel agencies.
    RADIUS, which states that it is the world's largest travel 
management company, argues that we should apply the rules to all 
Internet sites used for the sale of airline tickets. RADIUS contends 
that we should also require airlines to make available through the 
systems all of the fares offered to the public through airline 
websites. RADIUS agrees with ACAA and ASTA that we should prohibit 
airlines from obtaining data showing bookings made by individual travel 
agencies.
    The NBTA, which represents corporate travel managers at large 
companies, urges us to rule that travel agencies and corporations 
should have full access to the airlines' E-fares by requiring airlines 
to make those fares saleable through the systems. Each airline now 
typically makes its E-fares available only through its own website and 
Orbitz. NBTA additionally asks us to prohibit systems from enabling 
large airlines to get data on the bookings made by individual travel 
agencies and corporate travel departments.
    Several individual travel agencies and travel agents have submitted 
comments in this docket urging us to require airlines to give travel 
agencies the ability to sell their E-fares. Worldspan, one of the 
systems, suggests that we suspend the operation of the rules for two 
years so that we can see from experience whether the rules are still 
needed. Such an experimental suspension would additionally eliminate 
the anomalies allegedly now created by the rules. One such anomaly is 
that the rules' continuing applicability to Sabre and Galileo depends 
on whether they continue to be marketed by airlines; Worldspan, in 
contrast, is clearly subject to the rules, since it is owned and 
controlled by three airlines. Worldspan's three owners--American, 
Delta, and Northwest--are the only U.S. airlines still subject to the 
mandatory participation rule, since the U.S. airlines that formerly 
held an ownership interest in other systems have divested their CRS 
stock (the mandatory participation rule requires airlines with a 
significant ownership interest in one CRS to choose the same level of 
participation in competing systems that they choose in their own 
system, if the competing systems' terms for participation are 
commercially reasonable). Worldspan further contends that there is no 
evidence that a system would be operated in a way that would prejudice 
airline competition or mislead consumers.

[[Page 14849]]

    Delta alleges that the Internet and other developments have 
substantially eroded the original basis for the rules' adoption. Delta 
agrees with those parties supporting the rules' abolition due to the 
requirement that Delta, as a system owner, participate in each system 
competing with Worldspan while other airlines that market a system have 
no obligation to participate in systems competing with their affiliated 
system. As an alternative, Delta supports Worldspan's proposal that we 
suspend the rules for a two-year period. Delta also opposes suggestions 
for regulating the Internet, particularly proposals that airlines must 
make their E-fares (or webfares) available for sale by travel agents 
through the systems. Delta points out that travel agents can book 
Delta's E-fares through the website created by Delta for travel agent 
use.
    United argues that we no longer have a legal or factual basis for 
regulating the systems. United asserts that the rules were originally 
adopted because airlines controlled each of the systems and that two of 
the four systems are no longer controlled by any airlines. While 
conceding that the rules by their terms cover systems marketed by an 
airline, United asserts that no evidence exists showing that a 
marketing relationship between an airline and system creates a risk of 
anticompetitive conduct. United additionally argues that the other two 
systems' ownership by three airlines means that they are also unlikely 
to engage in anticompetitive conduct. The growth of the Internet has 
assertedly given airlines alternatives to CRS participation and thereby 
ended the systems' market power as to airlines. Finally, United 
contends that the rules in effect protect the systems from competition 
and enable them to impose high fees on participating airlines.
    Northwest contends that letting the rules sunset would better serve 
competition and the public interest than would their continuation. If 
we nonetheless maintain the rules, Northwest argues that we must repeal 
the mandatory participation rule, clearly require all systems to comply 
with the same rules, prohibit systems from tying access to their travel 
agency subscribers with the airlines' provision of other fares and 
services, and not regulate use of the Internet in airline distribution.

Final Rule

    We are changing the rules' sunset date to March 31, 2003, as we 
proposed. Although we have not determined whether we should readopt the 
rules at the end of our reexamination of them, our past findings on the 
need for the rules and evidence submitted in Docket 2881, the docket 
for the reexamination of the rules, indicate that allowing the rules to 
expire now could create a significant risk that the systems and their 
airline owners would engage in unfair methods of competition and that 
the systems would engage in unfair and deceptive practices by biasing 
their displays of airline services, as explained below. That possible 
risk justifies another short-term extension of the rules while we 
finish our reexamination of the need for the rules and their 
effectiveness.
    The comments submitted on our proposed extension of the rules 
underscore the need to complete our review of the rules promptly and 
determine on the basis of the extensive record in the proceeding 
whether the rules should be readopted (with or without changes) or 
allowed to expire. Our staff is moving forward expeditiously to bring 
the rulemaking to completion. In our reexamination we are doing what 
Delta requests--we are ``carefully examin[ing] each section and subpart 
of the current rules one-by-one to determine if it is essential to 
protect airline competition in today's marketplace.'' Delta Comments at 
4.
    Among the issues that we are addressing are those raised by 
commenters in this docket: whether we should keep, expand, or abolish 
the mandatory participation rule, whether we should regulate the 
Internet, whether airlines should make their E-fares saleable through 
the systems used by travel agents, whether the systems should be able 
to sell detailed marketing and booking data to airlines, and whether we 
should regulate booking fee levels. Although some of the commenters 
assert that individual rulemaking issues require action by us before we 
complete our overall reexamination of the rules, we think that we can 
most efficiently resolve the issues by addressing all of them in a 
single proceeding, which we are now doing. For the same reason we will 
consider there whether the rules should be temporarily suspended, as 
suggested by Worldspan and Delta. Since we did not propose a two-year 
suspension of the rules in our notice, we doubt that we could adopt 
their suggestion as our final decision in this docket. We will consider 
the parties' comments in this docket along with those filed in Docket 
2881 in our review of the current rules.
    As stated above, we have not determined whether all or some of the 
rules should be kept. We are nonetheless unwilling at this time to 
allow the rules to expire, as requested by United, because the record 
suggests that the Internet, the changes in the systems' ownership, and 
other airline distribution developments may not have eliminated the 
potential for anticompetitive conduct or deceptive practices by the 
systems. We also are unwilling at this point to agree with United that 
we have no jurisdiction to regulate systems not owned and controlled by 
one or more airlines. The current rules govern systems owned or 
marketed by an airline, and require each airline that owns or markets a 
system to ensure that the system complies with the rules. The rules by 
their terms also directly impose requirements on the systems. No one 
challenged our decision in our last overall rulemaking to apply the 
rules to systems owned or marketed by airlines.
    The fundamental basis for our readoption of the rules was each 
system's market power with respect to almost all airlines. Most 
airlines rely on travel agencies for the sale of the majority of their 
tickets, travel agents rely on the systems to determine what airline 
services are available and to make bookings, and few travel agency 
offices make extensive use of more than one system, as we stated when 
we proposed the extension. 67 FR 7102-7103. For the purposes of a one-
year extension of the rules, these findings still seem valid. 
Northwest, which opposes the extension, agrees that the systems still 
have market power, Northwest Comments at 6:

    There continue to be only four computer reservation systems used 
by U.S. travel agents. Sales to consumers over the Internet, via 
both airline websites and online agents, have provided significant 
new competition to CRSs, but each CRS typically remains the only 
means by which to reach the travel agents who use that system. Each 
CRS therefore continues to have significant market power based on 
the travel agents to which it has exclusive access.

    United has not persuaded us that the Internet has ended the 
systems' ability to engage in anti-competitive conduct. Consumers are, 
of course, increasingly using the Internet for airline bookings, and, 
as United asserts, some low-fare airlines are now obtaining a large 
share of their total revenues from Internet bookings. All of the on-
line travel agencies, however, use one of the systems at least for some 
booking functions. Furthermore, even the low-fare airlines, except for 
Southwest and JetBlue, have found it necessary to continue 
participating in the systems, notwithstanding the high fees charged by 
the system. 62 FR 47608. The network airlines like United thus far have 
not succeeded as well in encouraging consumers to use the Internet. 
United itself does not claim

[[Page 14850]]

that the Internet has made it possible for United to end its reliance 
on participation in the systems, and United admits that most airline 
tickets are still sold by travel agents. United Comments at 12. As long 
as travel agencies are an important distribution channel, most airlines 
will need to participate in the systems used by the agencies, since 
airlines cannot afford to lose access to any important distribution 
channel. 57 FR 43783; Orbitz Supp. Reply, Daniel Kasper Statement at 7 
(Docket 2881); 62 FR 59789, quoting comments submitted by the Justice 
Department.
    Since we are not convinced yet by United's argument that the 
systems no longer have market power, we do not agree with United's 
contention that the rules themselves enable the systems to impose high 
fees on airline participants, because the rules allegedly eliminate any 
need for the systems to negotiate with airlines over the price and 
terms of airline participation. United Comments at 8-9. United's own 
conduct seems inconsistent with its claim that airlines could obtain 
better terms without the rules. United is no longer subject to the 
mandatory participation rule and so could lower its level of 
participation in any of the systems, or withdraw entirely, if it 
believes that the price and terms for participation are unreasonable. 
United has not done that. That suggests that United is not free for 
business reasons to withdraw, since its services would then no longer 
be readily saleable by the travel agents using the system. We are not 
persuaded by United's claim that any withdrawal by United would be 
ineffective due to our rule barring systems from discriminating against 
some airline participants. United is so large an airline that its 
insistence on obtaining better terms should have an effect, even if the 
system would have to apply the same terms to other airline 
participants. However, one of the key issues in our overall 
reexamination of the rules is the extent of the systems' market power 
and whether that would justify maintaining all or some of the current 
rules.
    We are also not persuaded that we have no legal basis to maintain 
the rules. United may err in assuming that we may regulate only 
airlines and travel agencies under 49 U.S.C. 41712, recodifying section 
411 of the Federal Aviation Act (``section 411''). Section 411 
authorizes us to regulate ``ticket agents'', and the statutory 
definition of ``ticket agent'' may include the systems. Whether it does 
is an issue we are considering in our overall reexamination of the 
rules. While United relies on Official Airline Guides, Inc. v. FTC, 630 
F.2d 920 (2nd Cir. 1980), for the ruling that section 411 does not 
cover the Official Airline Guide, a publisher of airline schedules, 
United Comments at 3, n.2, that decision does not resolve the issue of 
whether section 411 would cover the systems, which do more than just 
publish schedules. United additionally overstates the court's holding 
on the scope of the Federal Trade Commission's comparable authority to 
prohibit unfair methods of competition in other industries. United 
claims that the FTC (and thus this Department) could never regulate a 
monopolist's conduct on the basis of that firm's impact on a second 
industry in which it does not compete. United Comments at 17. However, 
the Second Circuit suggested that the FTC could regulate a monopolist's 
conduct in one industry in order to prevent that firm from carrying out 
an intent to restrain competition in a second industry or from acting 
coercively. 630 F.2d at 927-928. See also LaPeyre v. FTC, 366 F.2nd 117 
(5th Cir. 1966).
    Although United argues that the antitrust principles used to 
support the rules' original adoption by the Civil Aeronautics Board 
(``the Board'') and their readoption by us could never be validly 
applied to the systems, United Comments at 4, 6, the Seventh Circuit 
held that these antitrust principles did justify the Board's decision 
to regulate the systems. United Air Lines v. CAB, 766 F.2nd 1107 (7th 
Cir. 1985). Whether the principles would again support a readoption of 
the rules is a question that we are considering in our reexamination of 
the rules.
    As we noted in our proposal, we have an obligation under 49 U.S.C. 
40105(b) to act consistently with the United States' obligation under 
treaties and bilateral air services agreements. Those agreements 
typically assure the airlines of each party a fair and equal 
opportunity to compete, and many have provisions designed to ensure 
that the systems operating in one country do not discriminate against 
the airlines of the other party. We think the extension of the rules is 
the most effective way to carry out those provisions, even if the 
existing rules may not be the only way of doing so.
    Despite United's claim to the contrary, there has been evidence 
that systems marketed by airlines or owned by more than one airline 
would engage in behavior requiring regulation. Ownership by several 
airlines in the past has not prevented anti-competitive or deceptive 
conduct. After United ceased to be the sole owner of Galileo, for 
example, Galileo gave United access to booking data that were not made 
available to other participating airlines, in violation of our rules. 
57 FR 43788. United also caused Galileo to adopt a display algorithm 
that unreasonably downgraded the position of single-plane service in 
order to improve the display position of the connecting services 
operated by United and other airlines that followed a hub-and-spoke 
route strategy. Galileo kept using that algorithm even though travel 
agents then could not easily find the services that best met their 
customer's needs. 61 FR 42208, 42212-42213 (August 14, 1996).
    Similarly, a marketing relationship between an airline and a system 
may lead to a distortion of competition. There have been cases where an 
airline marketing a system denied competing systems complete access to 
its fare data and booking features in order to compel travel agencies 
in areas where that airline was the dominant airline to use the system 
affiliated with that airline. 61 FR 42197, 42206 (August 14, 1996). 
Several of the parties, including Amadeus and some travel agencies, 
have alleged that some airlines that own or market a system often force 
travel agencies and corporate travel departments to use the airline's 
affiliated system in order to obtain access to its corporate discount 
fares.
    The systems, moreover, could potentially engage in deceptive 
conduct even without any ties to travel suppliers. Northwest alleges, 
for example, that systems not owned by airlines could sell display bias 
to individual airlines. Northwest Comments at 7. One of the commenters 
in the overall rulemaking has alleged that one of his clients, a rental 
car company, was harmed because a system sold a preferential display 
position to a competing rental car company. Marshall A. Fein Comments 
(Docket 2881). United's assertion that publicly-owned systems would 
have no incentive to create misleading displays for travel agents, 
United Comments at 7, n. 10, thus is not necessarily valid.
    In addition, United's opposition to the proposed extension ignores 
one basis for our rules, the systems' past adoption of contract 
practices with their travel agency subscribers that deterred or 
prohibited travel agencies from using more than one system or from 
using other databases for obtaining airline information and making 
bookings, such as the Internet. When we readopted the rules, we found 
it necessary to prohibit some such contract practices. 57 FR 43822-
43826. In addition, the systems had generally required travel agency 
subscribers to use equipment provided by the system and barred them 
from

[[Page 14851]]

accessing other systems or databases from that equipment. Since keeping 
separate equipment for accessing different systems was usually 
impracticable for travel agencies, these practices prevented travel 
agency offices from making extensive use of more than one system. We 
accordingly adopted a rule giving travel agencies the right to acquire 
their own equipment and to access any system or database from that 
equipment. 57 FR 43796-43797. And to give airlines a greater ability to 
choose which level of service they would purchase from each system, we 
barred each system from enforcing certain contract clauses that deny 
participating airlines that ability, as long as the airline does not 
own or market a competing system. 62 FR 59784 (November 5, 1997). We 
adopted these rules in order to reduce the systems' market power and 
enable airlines to use alternative means of communicating 
electronically with travel agencies.
    We are also not prepared now to accept United's suggestion that we 
can eliminate the rules by relying instead on our section 411 
enforcement authority on an ad hoc basis to keep systems and affiliated 
airlines from engaging in anti-competitive practices. Since the system 
practices that we have found could constitute unfair methods of 
competition or unfair and deceptive practices have generally been 
industry-wide practices, maintaining industry-wide rules would be the 
more efficient method of addressing potential problems while we 
complete our reexamination of the rules.
    Finally, United implicitly concedes that maintaining the rules for 
another year will not impose significant costs on the systems and their 
users, if we do not accept its theory that the rules enable the systems 
to charge higher fees. United Comments at 8.
    We recognize the point of the Worldspan owners' complaint about the 
applicability of the mandatory participation clause, since the rule 
currently covers only the owners of Worldspan and Amadeus and does not 
cover airlines marketing a system. Whether that rule should be kept, 
and, if so, whether its reach should be extended or narrowed, are 
issues that we are considering in our review of the rules. In our 
judgment, the Worldspan owners' continuing obligation to participate in 
competing systems would not justify allowing the CRS rules to expire. 
The mandatory participation rule by its terms exempts an airline owner 
from the obligation to participate in a competing system's feature or 
functionality if the terms for participation are not commercially 
reasonable. That should enable Delta and Northwest to avoid 
participating in system services when the fees are too high or the 
quality of service is too low. And Delta and Northwest have not shown 
that the mandatory participation rule is currently causing them harm, 
for example, by forcing them to participate in expensive and 
unnecessary system features. In addition, some parties have alleged in 
the overall rulemaking (Docket 2881) that Northwest and Delta have 
limited their participation in competing systems, or denied users of 
competing systems access to the airlines' corporate discount fares, in 
order to give Worldspan an unfair competitive advantage in areas where 
Delta or Northwest is the dominant airline. System One Comments at 3-4, 
6-7; Galileo Supp. Comments at 12, n. 11; Continental Reply to Amadeus 
petition at 2. Those allegations (which we are reviewing along with the 
responses by Delta and Northwest) make us unwilling to suspend the 
mandatory participation rule before we complete our reexamination of 
all of the rules.
    We are not suspending or amending section 255.10(a) as requested by 
ACAA, ASTA, RADIUS, and NBTA. That rule requires each system to make 
available to all participating airlines any data that it chooses to 
generate from the bookings made by travel agents. Suspending the 
section would not prevent large airlines from gaining access to the 
marketing and booking data produced and sold by the systems. Suspending 
the section would only end the systems' obligation to make the data 
available to all participating airlines. Unless we adopted a rule 
prohibiting the release of the data, the systems could continue selling 
it to airline and non-airline firms. We recognize the importance of 
reexamining the provision, as we stated in our advance notice of 
proposed rulemaking, 62 FR 47610, and we are doing so in the context of 
our overall reexamination of the rules.
    Several travel agencies have submitted comments that argue, like 
NBTA's comments, that we should require each airline to allow travel 
agencies to sell all of the low fares available on the airline's own 
website or through on-line travel agencies like Orbitz. The current 
rules do not impose such a requirement on the airlines. Whether the 
rules should do so is one of the issues we are now examining.
    Finally, we are not taking immediate action on ASTA's request that 
we bar systems from enforcing productivity pricing clauses in 
subscriber contracts. Whether and how we should continue regulating 
subscriber contracts is an issue that we are exploring in the overall 
rulemaking.

Effective Date

    We have determined for good cause to make this amendment effective 
on March 31, 2002, rather than thirty days after publication as 
required by the Administrative Procedure Act except for good cause 
shown. 5 U.S.C. 553(d). To keep the current rules in force, we must 
make this amendment effective by March 31, 2002. Since the amendment 
preserves the status quo, it will not require the systems, airlines, or 
travel agencies to change their operating methods. Making this 
amendment effective on less than thirty days notice accordingly will 
not impose an undue burden on anyone.

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 (February 26, 1979).
    In our notice of proposed rulemaking, we tentatively concluded that 
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 would 
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 would also prevent some types of abuses by systems 
in their competition for travel agency subscribers.
    In our last major CRS rulemaking, we published a tentative economic 
analysis with our notice of proposed rulemaking and included a final 
analysis in our final rule. Our notice proposing to extend the rules to 
March 31, 2003, stated that the analysis should be applicable to our 
proposal and that no new regulatory impact statement appeared to be 
necessary. We stated that we would consider comments from any party on 
that analysis before we make our proposal final. 67 FR 7103.
    No one filed comments on the economic analysis, so we are basing 
this rule on the analysis used in our last

[[Page 14852]]

overall CRS rulemaking. We will prepare a new economic analysis as part 
of our reexamination of our existing rules, if we determine that CRS 
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 keep small entities from being 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 set forth the reasons for our 
proposed extension of the rules' expiration date and the objectives and 
legal basis for that proposal. We also pointed out that maintaining the 
current rules would not modify the existing regulation of small 
businesses. We noted that the final rule in our last major CRS 
rulemaking contained a regulatory flexibility analysis on the impact of 
the rules. Relying on that analysis, we tentatively determined that 
this regulation would not have a significant economic impact on a 
substantial number of small entities. We stated that that analysis 
appeared to be valid for our proposed extension of the rules' 
termination date. We therefore adopted that analysis as our tentative 
regulatory flexibility statement, and we stated that we would consider 
any comments filed on that analysis in connection with the proposed 
extension of the rules. 67 FR 7103-7104.
    While maintaining the 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. If the 
rules enable airlines to operate more efficiently and to reduce their 
costs, airline fares may be somewhat lower than they would otherwise 
be, although the difference may be small.
    Continuing the rules would 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 
therefore 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 affiliated 
airlines and against other airlines. The rules also prohibit the 
systems from 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. Since the rules prohibit 
display bias based on carrier identity, they also enable travel 
agencies to obtain more useful displays of airline services.
    We invited interested persons to address our tentative conclusions 
under the Regulatory Flexibility Act in their comments on the notice of 
proposed rulemaking. 67 FR 7104.
    Since no one commented on our Regulatory Flexibility Act analysis, 
we are adopting the analysis set forth in the notice of proposed 
rulemaking.
    This rule contains no direct reporting, recordkeeping, 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. et seq.) that this regulation will not have a significant 
economic impact on a substantial number of small entities.

Paperwork Reduction Act

    This rule contains no collection-of-information requirements 
subject to the Paperwork Reduction Act, Public Law No. 96-511, 44 
U.S.C. chapter 35.

Federalism Assessment

    We stated that we had reviewed our proposed rule in accordance with 
the principles and criteria contained in Executive Order 13132, dated 
August 4, 1999, and determined that it would 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 rule will 
not limit the policymaking discretion of the States. Nothing in this 
rule will 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. Our notice of proposed 
rulemaking stated our belief that the policy set forth in this rule is 
consistent with the principles, criteria, and requirements of the 
Federalism Executive Order and the Department's governing statute.
    We invited comments on these conclusions. 67 FR 7104. No one 
commented on our federalism assessment. We will therefore make it 
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 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:


Sec. 255.12.  Termination.

    The rules in this part terminate on March 31, 2003.

    Issued in Washington, DC on March 25, 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. 02-7510 Filed 3-27-02; 8:45 am]
BILLING CODE 4910-62-P