[Federal Register Volume 68, Number 52 (Tuesday, March 18, 2003)]
[Proposed Rules]
[Pages 12883-12886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6448]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 255 and Part 399

[Dockets Nos. OST-97-2881, OST-97-3014, OST-98-4775, and OST-99-5888]
RIN 2105-AC65


Computer Reservations System (CRS) Regulations; Statements of 
General Policy

AGENCY: Office of the Secretary, Department of Transportation.

ACTION: Denial of petition for fact hearing.

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SUMMARY: The Department has issued a notice of proposed rulemaking on 
whether it should readopt or amend its existing rules governing airline 
computer reservations systems (CRSs). The notice includes a detailed 
discussion of the tentative factual findings and analysis underlying 
the Department's proposals. The public will have an opportunity to 
submit comments and reply comments on those proposals. Sabre, a CRS, 
has filed a petition asking for a ``fact hearing'' where the commenters 
could cross-examine each other and members of the Department's staff. 
The Department is denying Sabre's petition.

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

SUPPLEMENTARY INFORMATION: The Department is conducting a rulemaking 
reexamining whether its existing rules governing CRS operations are 
necessary and, if so, are effective. We issued a notice of proposed 
rulemaking that set forth our tentative proposals regarding the 
existing rules and our tentative belief that we should not extend the 
rules to cover the sale of airline tickets through the Internet. 67 FR 
69366, November 15, 2002. Comments and reply comments on our notice of 
proposed rulemaking are now due March 16 and May 15, 2003, 
respectively, because we granted a request by Sabre and eighteen other 
persons to extend by three months the period for preparing comments and 
reply comments. 67 FR 72869, December 9, 2002.
    On December 23, Sabre, a CRS, filed a petition asking us to hold a 
``fact hearing.'' Sabre asserts that our notice did not provide an 
adequate factual basis for our tentative findings and proposals. Sabre 
seeks a hearing at which Sabre and other interested persons could 
cross-examine Department staff members on the notice's factual findings 
and could question persons designated by each commenter as 
knowledgeable about the facts in its comments. Sabre Petition at 5. We 
invited the public to file responses to Sabre's petition. 68 FR 1172, 
January 9, 2003.
    Two of the other systems, Galileo and Amadeus, and the American 
Society of Travel Agents (``ASTA''), the largest travel agency trade 
association, support Sabre's petition insofar as it seeks oral 
testimony on the issues, although they do not urge us to give 
commenters the ability to cross-examine Department staff. Six 
airlines--American, Continental, Delta, Northwest, United, and America 
West--and Orbitz, an on-line travel agency owned by five of those 
airlines (all but America West), oppose Sabre's petition. They contend 
that we have no legal obligation to hold a hearing, that notice-and-
comment procedures can create an adequate record, and that a hearing 
would only delay our final decision in the proceeding, which would be 
contrary to the need to update the rules as soon as possible.
    In its reply Sabre alleges that it does not wish to delay the 
proceeding but does seek to test the data on which we relied in 
preparing our notice of proposed rulemaking. Sabre claims that the 
hearing would not require much time.

Summary of Decision

    We are denying Sabre's petition for a ``fact hearing'' that would 
give each commenter the opportunity to interrogate Department staff 
members about the basis for the notice of proposed rulemaking's 
tentative findings and proposals and to cross-examine representatives 
from the other commenters. Such a hearing would be neither necessary 
nor useful. Our notice discussed in detail the basis for our proposals, 
and we have given the public the opportunity to file both comments and 
reply comments, which will enable them to present their evidence and 
arguments on the issues.
    We agree with several of the commenters that a hearing where they 
can present their factual and legal arguments may be useful. We 
therefore plan to hold such a hearing between the end of the comment 
period, March 16, and the end of the reply comment period, May 15.

Discussion

    The notice-and-comment procedures established by the Administrative 
Procedure Act, supplemented by our proposed hearing, should provide an

[[Page 12884]]

adequate record for our final decision. Interested persons will have an 
ample opportunity to present their views on the relevant factual, 
legal, and policy issues and to respond to the arguments made by other 
commenters, particularly since we have authorized the commenters to 
submit reply comments. Our notice of proposed rulemaking set forth a 
detailed analysis underlying our tentative findings and proposals, 
which we based on the most current data available to us. Interested 
persons can therefore see the rationale for our proposals.
    We and the Civil Aeronautics Board (``the Board'') used the notice-
and-comment procedures in all past CRS rulemakings. See 57 FR 43792; 62 
FR 59799-59800. Those procedures allowed us and the Board to resolve 
material factual disputes without holding any kind of hearing. As 
discussed below, the Seventh Circuit held that the Board could adopt 
the initial CRS rules without holding a hearing. United Air Lines v. 
CAB, 766 F.2d 1107 (7th Cir. 1985). Furthermore, we rejected a claim by 
Sabre in our earlier rulemaking on CRS parity clauses that the notice-
and-comment procedures authorized by the Administrative Procedure Act 
were inadequate and must be supplemented with a formal hearing. We 
determined that Sabre's argument had no merit. 62 FR 59784, 59800, 
November 5, 1997.
    Furthermore, as noted, we have determined to hold a hearing where 
commenters can orally present their arguments. That hearing will give 
the commenters an additional opportunity to present their position and 
enable us to develop a better record.
    Sabre, however, urges us to hold a ``fact hearing'' where the 
commenters can question each other's experts and can cross-examine 
Department staff members on the tentative analysis and findings 
presented in the notice of proposed rulemaking. We are denying Sabre's 
request, because the kind of hearing sought by Sabre is not necessary 
for the development of a complete record on the rulemaking issues.
    The comment process will give interested persons an opportunity to 
address our tentative factual findings and analysis. They do not need a 
``fact hearing'' to present updated information. We enhanced their 
opportunity to respond to our proposals by authorizing reply comments 
as well as comments and, at Sabre's request, by extending the entire 
comment period by three months.
    Sabre asserted that such information as the percentage of airline 
bookings made through a travel agency using a CRS, the percentage of 
travel agency subscribers who own their own equipment, and the travel 
agents' ability to access other systems and databases from their CRS 
equipment may be critical to our decision-making. Sabre Petition at 3-
5. We agree that such factual information may well be useful. Sabre can 
include recent data on these points in its written and oral comments, 
and we invite the other commenters to present their own data on these 
issues.
    In addition, Sabre's ``fact hearing'' would not significantly 
improve the rulemaking record, because it would include an examination 
of our staff. Sabre Reply at 8. We do not plan to base our final 
decision solely on the information known to our staff when the notice 
of proposed rulemaking was issued. We will also fully consider all 
factual information and argument provided by the comments and reply 
comments. The commenters' familiarity with the current state of the 
airline distribution and CRS businesses will enable them to provide 
current and accurate information on industry conditions and 
developments.
    Furthermore, holding a ``fact hearing'' could substantially delay 
our final decision in this proceeding despite Sabre's claims to the 
contrary, without necessarily improving the quality of the record for 
our decision. As noted, Sabre proposed that we allow staff members to 
be cross-examined by the commenters and allow each of them to question 
experts designated by the others. Sabre also proposed to present its 
own evidence at the hearing. Sabre Petition at 4-5. Sabre additionally 
listed 73 factual statements that it intends to challenge. Sabre 
Petition at 27-32. Other commenters presumably would use a hearing to 
challenge other factual findings that Sabre will not contest. Given 
these conditions and the number of commenters in this proceeding, a 
``fact hearing'' would likely require a substantial amount of time.
    Sabre noted that, in 1976, the Administrative Conference of the 
United States recommended that agencies consider, among other things, 
providing for cross-examination procedures in some rulemakings. Sabre 
Petition at 22-23, citing Recommendation 76-3, Procedures in Addition 
to Notice and the Opportunity for Comment in Informal Rulemaking, 41 FR 
29654, July 19, 1976. That Conference recommendation suggested that 
agencies consider doing more than just issue a notice of proposed 
rulemaking and provide one round of comments in informal rulemakings. 
The Conference suggested that agencies in appropriate cases should 
consider using additional procedures such as, among other things, 
issuing an advance notice of proposed rulemaking with an opportunity to 
comment and allowing commenters to submit written responses to each 
other's comments on a notice of proposed rulemaking. 41 FR 29655. As 
noted, we have taken both of these steps. The Conference also suggested 
that agencies could consider providing an opportunity for cross-
examination of the commenters and agency staff, but it did not 
recommend doing so in all complex rulemakings. The Conference instead 
stated, ``An agency should * * * permit cross-examination only to the 
extent that it believes that the anticipated costs (including those 
related to increasing the time involved and the deployment of 
additional agency resources) are offset by anticipated gains in the 
quality of the rule and the extent to which the rulemaking procedure 
will be perceived as having been fair.'' 41 FR 29655. The Conference 
recommendation grew out of a study of several court decisions that had 
required agencies to create an opportunity for cross-examination in 
specific rulemakings, Stephen F. Williams, `` `Hybrid Rulemaking' under 
the Administrative Procedure Act: A Legal and Empirical Analysis,'' 
published at 42 U. Chicago L. Rev. 401 (Spring 1975). The study 
concluded that cross-examination in these rulemakings had been of 
``questionable efficacy'' and that ``cross-examination may actually 
tend to frustrate its own supposed goal: elucidation of the issues.'' 
Id. at 445, 444. We believe that a ``fact hearing'' of the kind sought 
by Sabre would not significantly improve the quality of our final 
decision but probably would substantially delay the completion of this 
rulemaking. Our experience with past CRS rulemakings shows that we may 
fairly and accurately resolve disputed factual issues in the context of 
a rulemaking proceeding without an opportunity for cross-examination.
    In addition, we have no legal obligation to hold a ``fact 
hearing.'' Sabre initially argued that we were required by law to grant 
its petition for a ``fact hearing.'' Sabre Petition at 11-19. Sabre has 
apparently abandoned that claim, for Sabre's reply contended only that 
the ``fact hearing'' would be the best way to obtain current and 
correct information necessary for our final decision in the rulemaking. 
Sabre Reply at 6. Our issuance of a notice of proposed rulemaking that 
set forth in detail the basis for our tentative findings and proposals 
clearly satisfies all legal requirements. The Administrative Procedure 
Act ``makes clear that notice

[[Page 12885]]

of the scope and general thrust of the proposed rule, and an 
opportunity to submit written comments, are all the procedure that an 
agency engaged in `informal rulemaking' is required to provide.'' 
United Air Lines v. CAB, 766 F.2d at 1116.
    When United challenged the Civil Aeronautics Board's use of 
informal rulemaking procedures in the first CRS rulemaking, the Seventh 
Circuit expressly held that the Board was not required to hold a formal 
hearing before adopting the original CRS rules, notwithstanding the 
nature of the issues in that rulemaking and the existence of factual 
disputes. United Air Lines v. CAB, 766 F.2d 1107 (7th Cir. 1985). As 
the court stated, ``the weight of authority * * * is overwhelming 
against forcing an administrative agency to hold an evidentiary hearing 
to resolve disputed issues of antitrust fact.'' 766 F.2d at 1119. 
``Agencies, without having to conduct an evidentiary hearing, have been 
allowed to decide such antitrust questions as whether a particular firm 
or group of firms has or is abusing or is likely to abuse market power 
* * *.'' 766 F.2d at 1120. Furthermore, requiring evidentiary hearings 
would probably not improve the quality of rulemaking decisions by much, 
for ``cross-examination is perhaps not a terribly useful tool for 
extracting the truth about what are at bottom complex economic 
phenomena.'' 766 F.2d at 1121.
    Sabre nonetheless asserted that this proceeding involves disputed 
issues of material adjudicative fact that cannot fairly be resolved 
through notice-and-comment rulemaking procedures. Sabre Petition at 18-
19. Since this is a rulemaking, our decision will not involve 
adjudicative fact-finding. Moreover, even if the proceeding did involve 
disputes over adjudicative facts, Sabre's position would be erroneous. 
As we pointed out in the parity clause rulemaking, we have decided 
adjudicatory cases without holding a formal hearing, and the courts 
have upheld such procedural choices. 62 FR at 59800, citing City of St. 
Louis v. DOT, 936 F.2d 1528, 1534, n.1 (8th Cir. 1991). In adjudicatory 
proceedings, we have resolved factual disputes over antitrust issues, 
even in controversial cases, through show-cause procedures that 
provided no opportunity for cross-examination. See, e.g., U.S.-U.K. 
Alliance Case, Orders 2001-12-5 (December 4, 2001) and 2002-1-12 
(January 25, 2002); American Airlines v. Iberia, Lineas Aereas de 
Espana, Order 90-6-21 (June 8, 1990) at 13-14. Because the presence of 
material antitrust issues in an adjudication does not mandate an 
evidentiary hearing, the presence of such issues in this rulemaking 
similarly cannot mandate such a hearing.
    Sabre primarily grounded its petition for a ``fact hearing'' on a 
charge that our notice of proposed rulemaking set forth no factual 
support, based on recent data, for our tentative findings and 
proposals. Sabre thus complained that the notice of proposed rulemaking 
``is virtually devoid of information reflecting developments since the 
1992 modifications of the rule,'' such as ``new Internet technology, 
increasingly `Web-savvy' air travelers (and travel agents); airlines' 
divestiture of their CRS ownership; and airlines' attempts to reach 
consumers via direct marketing promotions.'' Sabre Petition at 15. 
These allegations ignore the lengthy discussions of these matters in 
the notice of proposed rulemaking. See 67 FR 69373-69375, 69376-69378, 
69379-69380, 69411-69415 (airline, travel agent, and consumer use of 
the Internet); 67 FR 69373, 69382-69383, 69384-69385 (system ownership 
changes). For example, we considered whether the Internet and other 
changes in airline distribution would give airlines some bargaining 
leverage against the systems. We tentatively found that the travel 
agencies' ability to access Web sites for airline information and 
bookings should give airlines some ability to bypass the systems, 
although the possible inefficiency of using multiple sources of 
information might deter travel agents from routinely booking airline 
tickets outside of a system. We based this factual analysis on, among 
other things, comments submitted last year by travel agency parties in 
a related rulemaking and recent press articles. 67 FR 69373, 69379, 
69391. We also suggested that the Internet in some respects may not 
have weakened the systems' market power. 67 FR 69376-69377. We further 
noted, however, that the airlines' ability to deny the systems access 
to their E-fares (or webfares) could give airlines some bargaining 
leverage against the systems, due to the systems' economic interest in 
obtaining those fares so that travel agents could book them through a 
system. 67 FR 69381. Some systems have since offered airline 
participants lower fees in exchange for access to the airlines' E-
fares. See, e.g., October 25, 2002, U.S. Airways Press Release; January 
21, 2003, Galileo Press Release; and September 25, 2002, American Press 
Release.
    Furthermore, we gave the public notice of our intent to consider 
these issues by issuing a supplemental advance notice of proposed 
rulemaking that specifically asked interested persons to file comments 
addressing the impact of the systems' ownership changes and the growing 
use of the Internet in airline distribution. 65 FR 45551, July 24, 
2000. Sabre, like all other interested persons, had the opportunity to 
submit comments on these issues with recent factual information.
    Sabre additionally argued that the courts in reviewing the validity 
of our final decision in this proceeding would consider whether the 
notice of proposed rulemaking satisfied the substantial evidence 
standard. Sabre Petition at 11-12. This argument has no merit even if 
the substantial evidence standard would be the applicable standard for 
judicial review. The substantial evidence standard does not require 
agencies to adopt rulemaking procedures in addition to those required 
by the Administrative Procedure Act. Moreover, on review the courts 
would consider whether our final decision, not the notice of proposed 
rulemaking, has the necessary support in the record. Sabre's argument 
also assumes that our notice of proposed rulemaking did not provide a 
factual basis for our proposals. As shown, that assumption is false.
    Sabre wrongly contended that a ``fact hearing'' is necessary to 
satisfy our obligations under section 515 of the Treasury and General 
Government Appropriations Act, 2001, Pub. L. 106-554. Sabre Petition at 
23. Pursuant to that statute on data quality, agencies provide a 
process allowing affected persons to seek and obtain corrections of 
information disseminated by an agency that does not meet applicable 
guidelines for quality, objectivity, utility, and integrity.
    Sabre's suggestion that a fact hearing should be held to ensure 
compliance with the data quality statute is contrary to our guidelines. 
There is nothing in the statute or our guidelines or those of the 
Office of Management and Budget on the subject that require a ``fact 
hearing.'' Moreover, our guidelines specifically state that we comply 
with the statute in informal rulemaking proceedings when interested 
persons have the opportunity to file comments in response to a notice 
of proposed rulemaking containing alleged factual misstatements, 
Department Guidelines at 24-25:

    When the Department seeks public comment on a document and the 
information in it (e.g., a notice of proposed rulemaking * * *.), 
there is an existing mechanism for responding to a request for 
correction. This mechanism is a final document that responds to 
public comments (e.g., the preamble to a final rule).


[[Page 12886]]


    Sabre's comments on our notice of proposed rulemaking may ask us to 
correct factual statements in the notice, and we will do so in our 
final rule if warranted. Sabre has conceded that that is all that our 
guidelines require in rulemakings. Sabre Petition at 23, n.10.
    Finally, Sabre demanded that we supplement the public record with 
studies considered or available to us during our preparation of the 
notice of proposed rulemaking, including the report that was to be 
prepared as a result of the CRS study begun in 1994. Sabre Reply at 4-
5. We have already identified the reports that we relied on in 
preparing the notice of proposed rulemaking, since we cited the sources 
for each factual statement made in the notice. Since the staff did not 
prepare a final or draft report on the study begun in 1994, the 
document sought by Sabre does not exist, except insofar as the notice 
of proposed rulemaking itself reflects the staff's study and analysis. 
67 FR 69369; 65 FR 45551, 45555, July 24, 2000. We will base our final 
decision in this proceeding on the public record and the material cited 
in the notice of proposed rulemaking.
    Amadeus has asked us to place in the docket the source materials 
cited by the notice of proposed rulemaking so that the public can more 
easily prepare comments. Amadeus Reply at 7-8. We have already placed 
in the docket some of that material, and we are placing additional 
cited sources in the docket.

    Issued in Washington, DC on March 12, 2003.
Read C. Van de Water,
Assistant Secretary for Aviation and International Affairs.
[FR Doc. 03-6448 Filed 3-17-03; 8:45 am]
BILLING CODE 4910-62-P