Second Extension of Computer Reservations Systems Regulations

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 255

[Docket No. OST-99-5132]

RIN 2105-AC75

Second Extension of Computer Reservations Systems Regulations

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule.

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SUMMARY: The Department is revising its rules governing airline

computer reservations systems (CRSs) to change the rules' expiration

date for a second time. This revision changes the date from March 31,

1999, to March 31, 2000, to keep the rules from terminating on March

31, 1999. The rules will thus remain in effect while the Department

continues out 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.

DATES: This rule is effective on March 31, 1999.

FOR FURTHER INFORMATION CONTACT: Thomas Ray, Office of the General

Counsel, U.S. Department of Transportation, 400 Seventh St. SW.,

Washington, DC 20590, (202) 366-4731.

SUPPLEMENTARY INFORMATION: Our CRS rules have always had an expiration

date to ensure that we would periodically review the need for the rules

and their effectiveness. In a 1997 rulemaking we changed the rules'

expiration date from the original sunset date, December 31, 1997, to

March 31, 1999. 62 FR 66272 (December 18, 1997).

We will not be able to complete our reexamination of the current

rules by March 31, 1999. Because we believed 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, 2000, and

gave interested persons an opportunity to comment on that proposal. 64

FR 9457 (February 26, 1999). We received comments from Amadeus Global

Travel Distribution, Worldspan, the Association of Asia Pacific

Airlines, and America West Airlines, all of which supported the

proposal, as did Southwest Airlines, which filed a late reply.

Background

As explained in our notice proposing to revise the rules'

expiration date, we have found that CRS rules are necessary to protect

airline competition and to ensure that consumers can obtain accurate

and complete information on airline services. 64 FR 9458-9459. CRSs

have become essential for the marketing of airline services for almost

all airlines operating in the United States, and market forces do not

discipline the price and quality of service offered airlines by the

CRSs. Travel agents rely on CRSs to provide airline information and

bookings for their customers, and almost all airlines receive most of

their bookings from travel agencies. The travel agencies' typical

exclusive or predominant use of one system compels each airline to

participate in an agency's system if it wishes to have its services

readily saleable by that agency. Each system, moreover, is 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). 64

FR 9458-9459.

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 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, although these parties also argued that various

changes should be made to the rules, mostly to strengthen them. 64 FR

9458.

Our Proposed Extension of the CRS Rules

Our inability to complete our reexamination of the rules by the

original sunset date, December 31, 1997, caused us to change the sunset

date to March 31, 1999. 62 FR 66272 (December 18, 1997).

We proposed again to change the expiration date for the rules to

March 31, 2000, so that they would remain in effect pending our

reexamination of our rules, since we could not complete that

reexamination by March 31, 1999. 64 FR

[[Page 15128]]

9457 (February 26, 1999). The time and procedures required for that

process made it impossible for us to meet that deadline. 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. A short-term extension of the rules would protect airline

competition and consumers against the injuries that would otherwise

occur, given 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. 64 FR 9458.

Finally, we noted that maintaining the rules in effect appeared

necessary to meet the United States' obligations under various treaties

and bilateral air services agreements to assure foreign airlines a fair

and equal opportunity to compete. 64 FR 9459.

We stated that we regret our inability to finish the reexamination

of the rules by March 31, 1999. Recognizing the importance of having

CRS rules that reflect current industry conditions, we explained that

our review has taken more time than anticipated, in part due to recent

developments in airline distribution. In addition, we have had to

address other airline competition issues that appeared to be more

urgent. We recognize that several parties were alleging that the

compelling need for certain additional CRS regulations required us to

act promptly on those issues without waiting for the completion of the

overall reexamination of the rules. We are considering whether there

were issues that should be addressed before we complete our overall

reexamination of the rules. 64 FR 9458.

Due to the need to make the proposed amendment effective by March

31, 1999, we shortened the comment period to fourteen days. 64 FR 9457.

Comments

Four parties filed comments. The commenters are Amadeus Global

Distribution System (``Amadeus''), Worldspan, America West Airlines,

and the Association of Asia-Pacific Airlines (``Asia-Pacific

Association''). Worldspan does not object to the proposed extension of

the current rules, and the other three parties endorse our tentative

conclusion that CRS rules remain necessary. Worldspan and the Asia-

Pacific Association agree that our on-going review of our current rules

will be a complex process and must be done carefully.

Three of the commenters urge us, however, to act promptly on some

CRS issues before we complete our overall review of the rules. Amadeus

contends that we should adopt a rule prohibiting the tying of a travel

agency's ability to sell corporate discount fares with its choice of

the system affiliated with the airline offering the discount fares.

Worldspan objects to a piecemeal revision of the current rules;

Worldspan asserts, however, that, if any issue is considered before the

completion of the rules' overall reexamination, that issue should be

the extension of the mandatory participation rule, 14 CFR Part

255.7(a), to cover airlines like Southwest that market one system

without participating in other systems. America West argues that we

should act immediately on its pending petitions for rules addressing

the systems' high booking fees and the problems created for airlines by

Internet booking services.

Southwest filed a reply which supports our proposed extension of

the rules and argues that Worldspan's proposed rule would injure both

Southwest and airline travellers.

Decision

We will change the rules' sunset date to March 31, 2000, as we

proposed. Amadeus, Worldspan, America West, the Asia Pacific

Association, and Southwest support our proposal, and no one has

objected to it. The analysis underlying our proposal is consistent both

with the findings made by us in earlier CRS rulemakings and with the

position of almost all parties in the underlying rulemaking (Docket

OST-97-2881) that CRS rules are still necessary. We will consider,

however, whether CRS regulations are still needed as part of our

overall reexamination of the CRS rules.

America West, Amadeus, and Worldspan each urge us to act quickly on

the specific rule proposals of interest to it. We will consider their

requests as part of our review of the comments and reply comments filed

in the proceeding for reexamining all of the CRS rules. While we

appreciate their interest in obtaining expedited action on certain

issues, we note that their requests are generally controversial and

opposed by other commenters.

Effective Date

We have determined for good cause to make this amendment effective

on March 31, 1999, rather than thirty days after publication as

required by the Administrative Procedure Act, 5 U.S.C. 553(d), except

for good cause shown. Maintaining the current rules in effect on a

continuing basis requires us to make this amendment effective by March

31, 1999. 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. Since the systems have already taken all the steps

necessary to comply with the rules' requirements on displays and

functionality, continuing to comply with those rules would not impose a

substantial burden on the systems. Keeping the rules in effect would

benefit participating airlines, since they would otherwise be subjected

to unreasonable terms for participation, and 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. 64 FR 9459.

In our notice we also pointed out that our last comprehensive CRS

rulemaking included an economic analysis that we believe 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. 64 FR 9459.

No one filed comments on the economic analysis. We will therefore

base this rule on the analysis used in our last comprehensive CRS

rulemaking. We will prepare a new

[[Page 15129]]

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

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. 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. We also noted that keeping the

current rules in force would not modify the existing regulation of

small businesses. We referred to the final rule in our last

comprehensive CRS rulemaking, which contained an analysis that we used

to determine 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, 2000, 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 this proposal. 64 FR 9459-9460.

We tentatively concluded that maintaining our existing CRS rules

would primarily affect two types of small entities, smaller airlines

and travel agencies. We further noted that the rule 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 allowed airlines to operate more

efficiently than they otherwise would. 64 FR 9459.

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 their ability to operate

profitably and compete successfully. The rules provide important

protection to smaller airlines, for example, by barring display bias

and discriminatory booking fees. If there were no rules, the systems'

airline owners could use them to prejudice the competitive position of

other airlines. Ibid.

The CRS 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. 64 FR 9459-9460.

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. 64 FR 9460.

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, 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.

The Department certifies 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 rule contains no collection-of-information requirements

subject to the Paperwork Reduction Act, Public Law 96-511, 44 U.S.C.

Chapter 35.

Federalism Implications

This rule will have no substantial direct effects 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. Therefore, in accordance with Executive Order 12812, we

have determined that the proposed rule does not have sufficient

federalism implications to warrant preparation of a Federalism

Assessment.

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.

Unless extended, the rules in this part shall terminate on March

31, 2000.

Issued in Washington, D.C. on March 25, 1999, under authority

delegated by 49 CFR 1.56a (h) 2.

Patrick V. Murphy,

Deputy Assistant Secretary for Aviation and International Affairs.

[FR Doc. 99-7753 Filed 3-29-99; 8:45 am]

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