Federal Register: November 15, 2002 (Volume 67, Number 221)
DOCID: FR Doc 02-28645
DEPARTMENT OF TRANSPORTATION
Veterans Affairs Department
CFR Citation: 14 CFR Parts 255 and 399
RIN ID: RIN 2105-AC65
DOCUMENT ID: [Dockets Nos. OST-97-2881, OST-97-3014, OST-98-4775, and OST-99-5888]
NOTICE: Part III
DOCUMENT ACTION: Notice of proposed rulemaking.
SUBJECT CATEGORY:
Computer Reservations System (CRS) Regulations; Statements of General Policy
DATES: Comments must be submitted by January 14, 2003. Reply comments must be submitted by February 13, 2003.
DOCUMENT SUMMARY:
The Department's rules governing airline computer reservations systems (``CRSs'' or ``systems'') obligate the Department to revisit the need for CRS rules. The Department initiated this proceeding to examine whether its existing CRS rules were still necessary and, if so, whether they should be modified. The Department believes that it may be possible to eliminate some of the rules in ways that may promote competition in the CRS business and that rules regulating the sale of airline service over the Internet appear unnecessary. The Department thus is asking for comments on proposals to reduce its regulations in ways that could give airlines more flexibility in bargaining with the systems. The Department tentatively is proposing to maintain some but not all of the existing rules. The Department is also proposing to review its Statements of General Policy to clarify the requirements for the disclosure of service fees by travel agencies.
SUMMARY:
Transportation Department,
SUPPLEMENTAL INFORMATION
Table of Contents
A. Introduction
B. Summary of Proposed Rules
C. Procedural Issues
D. Background
1. The CRS Business
2. The Travel Agency Distribution System
3. International CRS Operations
4. Our Readoption of CRS Rules
5. Major Developments Since the Last Overall Rulemaking E. Considerations That Support Maintaining CRS Rules
1. Overview
2. The Impact of the Internet on the Systems' Role in Airline Distribution
3. The Potential Existence of System Market Power
4. The Costs Imposed by System Practices
5. The Potential for AntiCompetitive Conduct
6. Potential AntiCompetitive Practices in an Unregulated Environment
F. The Department's Authority under Section 411 To Adopt CRS Rules
1. Our Authority To Regulate NonAirline Systems as Ticket Agents
2. Antitrust Principles Relevant to System Practices
3. Antitrust Principles Relevant to Airline Practices
4. The Continuation of Rules on Display Bias
G. Considerations Favoring Fewer Regulations
H. The Specific Rule Proposals
1. The Scope of the Rules
2. Definitions
3. ThirdParty Hardware and Software
4. Contract Clauses Restricting Airline Choices on System Usage
5. The Mandatory Participation Rule
6. Rules Barring Display Bias
7. Equal Functionality
8. Booking Fees
9. Marketing and Booking Data
10. Travel Agency Contracts
11. Productivity Pricing
12. The Tying of Marketing Benefits with System Subscriptions
13. Regulation of the InternetBased Airline Distribution Systems
14. Prohibit Tying of Internet Participation
15. Harmonization with Foreign Rules
16. Retaliation against Discrimination by Foreign Airlines and Systems
17. Enforcement Mechanisms
18. Sunset Date for the Rules
19. Effective Date of the Rules
20. Proposed Revisions to the Department's Policy on Fare Advertising
Regulatory Process Matters
Regulatory Assessment and Unfunded Mandates Reform Act Assessment
1. Unfunded Mandates Reform Act Assessment
2. Introduction to Regulatory Assessment
3. The Systems' Market Power
4. Proposed Rules
5. Preliminary Summary of the Rules' Costs and Benefits Initial Regulatory Flexibility Analysis
Paperwork Reduction Act
Federalism Implications
Taking of Private Property
Civil Justice Reform
Protection of Children
Consultation and Coordination with Tribal Governments
Energy Effects
Environment
Glossary
ACAA Air Carrier Association of America, a lowfare airline trade association
Airline system A system owned or controlled by one or more airlines ASTA American Society of Travel Agents
Board The Civil Aeronautics Board
Booking fees Fees paid by airlines and other travel suppliers when a travel agent makes or changes a booking in a system
CRS Computer reservations system
Efares (or webfares) Discount fares offered by an airline usually only
either on its website or on the airline's website and through one or more online travel agencies
IATA International Air Transport Association
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ITSA Interactive Travel Services Association
National Commission National Commission to Ensure Consumer Information and Choice in the Airline Industry
Network airlines The large airlines that operate hubandspoke route systems
Nonairline system A system that is neither owned nor controlled by any airline
OMB Office of Management and Budget
Participate To make the services of an airline or other travel supplier
available for sale through a system under a contract with that system
Parity clauses Clauses in participating airline contracts that required
a participating airline to buy at least as high a level of service from the system as it did from any other system
Productivity pricing Pricing formula used in subscriber contracts that
enables the subscriber to obtain lower CRS fees or other financial
benefits from a system if the travel agency meets minimum monthly booking quotas established by the contract
Screen padding Excessive listings of the same flight under different airline codes
Section 411 49 U.S.C. 41712, recodifying section 411 of the Federal Aviation Act
Subscriber A travel agency that obtains CRS services under a contract with the system
System Computer reservations system
A. Introduction
The Department's existing rules governing computer reservations systems (the ``CRSs'' or ``systems'') obligate it to reexamine the need for those rules. Such a reexamination is particularly appropriate at this time due to two developments that may enable us to reduce our regulation of the CRS business. Those developments are the growing role of the Internet in airline distribution and the diminishing airline ownership of the systems.
Historically travel agencies have primarily relied on the systems to investigate what airline services are available, to make bookings, and to issue tickets (although the systems now are also commonly called global distribution systems, or GDSs, we will continue to refer to them as CRSs). Each system was originally developed by an airline for the travel agencies' use. Since travel agencies traditionally have sold most airline tickets, the airlines that controlled the systems had the incentive and ability to use them to prejudice the competitive position of nonowner airlines and to provide information to travel agents that gave an undue preference to the services operated by the owner airlines.
The Civil Aeronautics Board (``the Board'') therefore adopted rules governing the systems operated in the United States. 49 FR 32540 (August 15, 1984). After we took over the Board's responsibility for economic regulation in the airline industry, we reexamined the rules and readopted them with changes in 1992 based on the industry circumstances at that time. 14 CFR Part 255 adopted by 57 FR 43780 (September 22, 1992). Our rules contained a sunset date, originally December 31, 1997, to ensure that we would reexamine the need for the rules and their effectiveness. We are carrying out that task in this proceeding. Our staff has also been informally studying CRS issues and other developments in airline distribution, including the Internet's impact during the past few years. See 65 FR 45551, 45555 (July 24, 2000).
We began this proceeding by issuing an Advance Notice of Proposed Rulemaking on those issues. 62 FR 47606 (September 10, 1997). We later issued a Supplemental Advance Notice of Proposed Rulemaking asking interested persons to update their comments, to comment on the impact, if any, of the recent changes in the systems' ownership and control, and to comment on whether any of the rules should be applied to the distribution of airline services over the Internet. 65 FR 45551 (July 24, 2000). We have extended the rules' sunset date, most recently to March 31, 2003, to ensure that they would remain in effect until we complete our reexamination. 67 FR 14846 (March 28, 2002).
In this proceeding we have received comments from the four systems, most of the U.S. airlines using large jet aircraft, a number of foreign airlines, many travel agency parties, and other persons interested in the issues, including the Consumers Union and the European Union (in referring to the commenters, we will use their common names, for example, Alaska, United and American Express, rather than Alaska Airlines, United Airlines, and American Express Travel Related Services Company).
On the first major issuewhether the rules should be maintaineda number of parties, primarily smaller airlines and travel agencies, contend that the rules remain necessary to protect airline competition and consumers. These commenters disagree over which rules, if any, should be strengthened or revised.
In their written comments or in meetings with OMB, Orbitz and the major airlinesAmerican, United, Delta, Northwest, and Continental have contended that the rules are no longer necessary, especially with regard to those rules requiring airlines with system ownership interests to participate in all systems and prohibiting discriminatory booking fees.
The second issuewhether the rules should govern airline distribution through the Internetgenerated more disagreement among the parties. A number of parties urge us to prevent online travel agencies from providing biased information, and many contend that rules preventing websites operated by two or more airlines from engaging in anticompetitive conduct are necessary. Other parties argue that any rules governing Internet operations would be unjustified.
After we began this proceeding, some parties asked us to resolve specific issues in separate proceedings that would be completed before we made a final decision in this rulemaking. America West Airlines filed a petition for rulemaking on booking fee issues, Docket OST97 3014, and the Association of Retail Travel Agents filed a rulemaking petition on certain travel agency contract issues, Docket OST984775. Amadeus Global Travel Distribution filed a petition asking that we interpret the existing rules as prohibiting the tying of a travel agency's access to an airline's corporate discount fares to the travel agency's choice of the CRS affiliated with that airline, Docket OST99 5888. We have included the issues raised by these three petitions in this proceeding. The discussion in this notice also relies on the comments submitted in response to our last proposal to extend the current rules' sunset date, 67 FR 71000 (February 15, 2002), in Docket OST200211577 and discusses ASTA's request in the proceeding for emergency relief on two issues, the systems' use of a pricing structure in their travel agency contracts that keeps travel agents from using the Internet for bookings and the systems' sale to airlines of detailed data on bookings made by individual travel agencies.
The creation of Orbitz, the online travel agency owned by the five
largest U.S. airlines, generated proposals in this proceeding for rule
amendments that would regulate Orbitz' operations. We also received
requests to investigate Orbitz and force it and its owner airlines to
abandon practices that assertedly would reduce competition in the airline
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and airline distribution industries. The controversy over Orbitz led us
to investigate it informally before it began operations to see whether
its business plans would reduce competition in the airline and airline
distribution businesses. We decided then that we did not have a basis
for preventing Orbitz from launching its service or requiring it to
change its business plans. See Letter dated April 13, 2001, from
McDermott and Podberesky to Katz. We began a further investigation of
Orbitz earlier this year and submitted a report to Congress on our
monitoring of Orbitz thus far. The report did not reach any definitive
conclusions, in part because of the continuing changes in the online
distribution business, and in part because the Department of Justice
has not concluded its own investigation into Orbitz. ``Report to
Congress: Efforts to Monitor Orbitz,'' Office of Aviation & International Affairs (June 27, 2002).
In addition, Orbitz' plans for giving consumers notice of its $5 fee for buying airline tickets required us to reexamine our rules on travel agency advertisements of airfares. We allowed Orbitz to carry out its plans, subject to several conditions, but stated that we would reexamine our standards for the disclosure of such travel agency fees. Order 2001127 (December 7, 2001). We are considering that issue in this proceeding.
B. Summary of Proposed Rules
In this rulemaking we must decide whether CRS practices still require regulation and, if so, which regulations are necessary, in light of the substantial changes in airline distribution and system ownership since our last reexamination of the rules. We seek comments on whether some of the rules could be eliminated or modified to create more scope for competitive market forces. We are in particular asking for comments on proposals to reduce regulations in ways that could give airlines more flexibility in bargaining with the systems. We are proposing not to adopt regulations covering the sale of airline services through the Internet.
We fully recognize the importance of the ongoing changes in airline distribution, particularly the growing importance of the Internet as a vehicle for selling airline tickets. These developments may make these rules unnecessary in the future. It may be that the continuing developments in airline distribution have already given airlines additional bargaining leverage with the systems. Several airlines have argued that the elimination of our mandatory participation rule and the rule barring systems from charging airlines discriminatory fees could enable airlines to bargain for better terms for system participation. While the record appears to suggest that the systems continue to have market power, it may be that the airlines would have some ability to obtain better participation terms through bargaining. We are therefore seeking comments on proposals to eliminate the mandatory participation rule and to end the rule against discriminatory booking fees.
At this time, it seems necessary to maintain at least some rules to prevent practices by firms with apparent market power that would reduce competition and the adoption of alternatives to the systems. We are therefore seeking comment on a tentative proposal to maintain some of the CRS rules and to apply them to all systems, whether or not owned or controlled by airlines. Despite important changes in the industry, there is evidence that each of the systems continues to have market power against most airlines that could be used to distort airline competition and competition in the business of electronically providing airline information and booking capabilities to travel agents. The systems also still appear to have the ability to engage in practices that would mislead travel agents and their customers about the availability, price, and quality of airline service options.
Nevertheless, given that there may be costs associated with maintaining the rules and that the rules may not be effective enough in promoting competition to warrant these costs, we seek comment on the possible benefits versus costs of sunset in March 2003. Specific discussion about the feasibility and costs of transition associated with full and immediate sunset in March 2003 would be helpful. We also seek views on whether this potential for bias and possible prejudicial conduct are sufficient to justify maintaining rules as proposed in this notice.
As was true in our last rulemaking, we are additionally concerned about system practices that seem unreasonably to keep airlines and travel agencies from using alternatives to the systems. These kinds of practices would drive up airline costs, keep travel agencies from using the most efficient means of obtaining information and making bookings, and discourage other firms from developing new technology that could replace the systems' services. We also believe that the large airlines' access to detailed data on each travel agency's routebyroute bookings on individual airlines could reduce competition in the airline industry, particularly by prejudicing the competitive position of the lowfare new entrant airlines. We are therefore proposing rules which would prevent all such practices. In developing our proposals we sought ways to enable market forces to work more effectively in the CRS business, to avoid potentially burdensome regulations, and to allow airline distribution practices to develop in ways that may eliminate the need for the rules.
As stated above, we are convinced that continuing changes in the airline and CRS businesses will likely require another examination of the need for the rules and their effectiveness in several years, if we ultimately decide in this proceeding to readopt the rules, with or without revisions. We will monitor industry developments closely and conduct further proceedings as necessary.
In addition, it may be that the continuing developments in airline distribution have given airlines more bargaining leverage with the systems than has been thought. Several airlines have argued that the elimination of our mandatory participation rule and the rule barring systems from charging airlines discriminatory fees could enable airlines to bargain for better terms for system participation. While the record suggests that the systems may continue to have substantial market power, it may be that the airlines would have some ability to obtain better participation terms through bargaining. We are therefore seeking comments on proposals to eliminate the mandatory participation rule and to ending the rule against discriminatory booking fees.
We have tentatively determined at this time that the rules should not be extended to cover distribution practices by airlines and travel agencies on the Internet. Such regulation seems unnecessary at this time. If online agencies engage in deceptive practices that harm consumers, we will consider taking action under our enforcement authority. As stated above, we have been informally investigating allegations that Orbitz and its owner airlines are engaged in anticompetitive conduct and if necessary will take action against them under our enforcement authority.
The findings and conclusions set forth in this notice are
tentative. We have not made a final decision on any of the proposals,
including the question of whether CRS regulations remain necessary. We
ask the parties to submit comments that thoroughly discuss the factual
and policy issues raised by our proposals. As to all proposals the
parties should provide detailed information on whether the rule would be necessary
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and beneficial and estimates quantifying its likely benefits and costs.
Comments will be due sixty days after publication of this notice, and reply comments will be due thirty days thereafter. After considering the comments, we will issue a final rule.
C. Procedural Issues
As we have done in all of our CRS rulemakings, we are following the noticeandcomment procedures established by the Administrative Procedure Act for informal rulemakings. 57 FR 43792; 62 FR 5979959800. These informal rulemaking procedures will give the parties a fair opportunity to present their evidence and policy and legal arguments and will enable us to resolve the issues rationally and efficiently.
We have largely based our proposals on the comments and the published sources cited in this notice. We have also relied on our informal investigations of airline distribution and the CRS business, as we planned to do. See 65 FR 45555. This notice reflects the staff's findings in its informal studies to the extent that we are using them. The parties now have the opportunity to comment on those findings as well as present any factual information and analysis of their own.
Some parties have filed motions for leave to file their comments or reply comments. We will grant all such motions.
As noted above, several parties have urged us to resolve some CRS issues before our completion of this proceeding. We have determined that it would be more efficient for us to consider all issues in this proceeding rather than decide issues piecemeal.
During the period since we issued our supplemental advance notice of proposed rulemaking, Department officials and members of the staff have met with a number of partiesOrbitz, Sabre and Travelocity, Expedia, Amadeus, Southwest, the Interactive Travel Services Association (``ITSA''), ASTA, and American Expresson the competitive and fairness questions presented by Orbitz that we have been informally investigating. These discussions focused on our informal investigation but also touched on issues involved in this proceeding. Before we issued the supplemental advance notice, Department officials and staff members met with ITSA, which asserted that the airlines were discriminating against online travel agencies. ITSA presented a written document on these issues, which it had filed in another docket, OST973713, and Department officials agreed to have the document treated as a comment in this proceeding and to consider here the concerns expressed by ITSA.
Department officials and staff members also held discussions with other interested parties on airline distribution and CRS issues, including issues related to this rulemaking.
The staff met with the Air Carrier Association of America (``ACAA'') and several of its member airlines to discuss their concerns with the systems' sale of marketing and booking data, which the larger airlines allegedly use to deter travel agencies from booking customers on lowfare airline competitors. The ACAA group was particularly concerned with the availability of data on bookings made by individual travel agencies. The ACAA group contended that airlines do not need the marketing and booking data for route planning purposes and legitimate marketing needs in domestic markets, since their own booking data and data available from the Department provide adequate information for those purposes. The ACAA members assert that large airlines to use the domestic data to find out which travel agencies are selling significant amounts of travel on smaller airlines and that they put pressure on those agencies to discourage them from booking those airlines. The ACAA representatives viewed the marketing and booking data as probably useful for planning international routes and marketing strategies, since comparable information may not be readily available from other sources. They suggested that the rules be amended to allow systems to sell data only on airlines willing to have their data be made available for this purpose.
Staff members have also met with Lawton Roberts of Uniglobe Country Place Travel, a travel agency, to discuss the widespread concern among travel agencies about the airlines' refusal to allow all travel agencies to sell fares offered by airline websites and Orbitz.
While our draft notice of proposed rulemaking was under consideration by the Office of Management and Budget (``OMB'') pursuant to Executive Order 12866, Sabre, Cendant (Galileo), Worldspan, Amadeus, Orbitz, American, United, and Continental, among others, asked to meet with that agency. OMB met or held conference calls with the named parties. While we did not attend those meetings, OMB provided to us the written material presented at these meetings for inclusion in the docket for this proceeding. We are inviting commenters to address several of the ideas presented by the parties at those meetings. D. Background
1. The CRS Business
Four systems are operating in the United States: Sabre, originally developed by American; Galileo, the product of a merger between United's Apollo system and a European system; Worldspan, the product of a merger between the PARS system owned by Northwest and TWA and Delta's DATAS II system; and Amadeus, a European firm that entered the United States by buying Continental's System One CRS. In 1999 the number of travel agency locations in the United States using each system was as follows: Sabre, 14, 961; Galileo, 11,840; Worldspan, 8,300; and Amadeus, 6,168. On a worldwide basis in 2001, Sabre was the largest, with about 65,000 locations, while Amadeus had 57,000, Galileo 45,000, and Worldspan 20,000. Travel Distribution Report (February 25, 2002) at 26; Travel Distribution Report (January 11, 2001) at 4. These figures do not precisely reflect market share, however, because one system may obtain substantially more bookings from its locations than other systems obtain from theirs. Sabre, for example, has claimed that it has a 48 percent share of CRS bookings in North America. Travel Distribution Report (May 31, 2001) at 2.
The systems have provided tremendous benefits for airlines, travel agencies, and consumers due to their efficiency. Transportation Research Board, Entry and Competition in the U.S. Airline Industry (1999) at 126. See also 57 FR 43781. Among other things, when an airline participating in a system enters a new city, the travel agents in that city that use that system will immediately learn of the airline's new service whenever they are checking service options for customers planning to travel on the route.
The practices followed by these systems have been important to
airline competition and consumer welfare because of the travel
agencies' dominant role in airline distribution and their reliance on
CRSs to meet their customers' needs for advice and bookings. In 1999
travel agencies sold almost threequarters of all airline tickets.
Bear, Stearns & Co., ``Point, Click, Trip: An Introduction to the On
Line Travel Agency'' (April 2000) at 17. Almost every travel agent uses
a system to investigate airline service options and make bookings for
the agency's customers (a travel agency using a system is called a
``subscriber''). One survey reported that travel agencies made 93
percent of their domestic airline bookings and 81 percent of their international airline bookings through a
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system in 1999. ``U.S. Travel Agency Survey 2000,'' Travel Weekly
(August 24, 2000) at 133. Travel agencies also use the systems to carry
out back office functions like bookkeeping and recordkeeping. Both
``brick and mortar'' and online travel agencies depend on the systems,
although Orbitz is planning to create direct connections between itself and many of its airline participants.
Travel agents have relied so much on the systems because they efficiently provide comprehensive information and booking capabilities on airlines and other travel suppliers. A CRS presents displays that integrate almost all services offered in a market. Each system shows the schedules and fares offered by airlines in each market that are available for sale through travel agents using that system and whether seats are available on specific flights at specific fares. A travel agent can compare the schedules and fares offered by different airlines and determine which would best meet a customer's needs. The agent can reserve a seat and issue a paper ticket or an Eticket. While the systems formerly offered almost complete information on airline services, airlines now offer some low fares through their websites (and some online travel agencies) that they do not sell through any system. Airline transportation is the most important service sold through a system, but the systems also provide information and booking capabilities for rental cars, hotels, and other travel services. Travel agents usually access a system through computer terminals linked with the system's database.
Each system provides information and booking capabilities on the airlines and other travel suppliers that ``participate'' in the system, that is, agree to make their services saleable through the system. The system obtains its availability information from the airlines' internal reservations systems, and it makes bookings in those systems, which are used by the airlines' own reservations agents and other staff members. Airlines typically either operate their internal systems themselves or arrange for another firm, often one of the systems, to operate it under contract.
Participation requires the airline to pay fees for each booking transaction (the fees paid by participating airlines and other travel suppliers are usually called ``booking fees''). Airlines can participate at different levels. At higher levels the information provided travel agencies will be more timely and so more reliable, and travel agents can carry out tasks like reserving specific seats for their customers. An airline participating at a higher level of participation must pay higher booking fees. 62 FR 59784, 59785 (November 5, 1997).
In 2000 the average airline booking fee for the highest level of system service, the level used by the network airlines, was $3.54 per segment. Testimony of Inspector General Kenneth Mead before the Senate Commerce Committee, July 20, 2000, at 17. Sabre estimates that the network airlines' total booking fee costs equal about two percent of the revenue obtained through CRS bookings. Sabre Supp. Reply Comments at 36. Northwest has estimated that its booking fee costs in 2000 equaled 2.1 percent of its system passenger revenues. Travel Distribution Report (June 14, 2001) at 4. The systems usually increase their booking fees annually; Sabre, for example, raised its fees by about nine percent in 2001 and three percent in 2002. Travel Distribution Report (January 11, 2001) at 6; Travel Distribution Report (December 13, 2001) at 1.
The systems display information on computer screens. Since each screen can display only a limited number of flights, a system must use criteria for ranking the available flights. Display position is important, since travel agents are more likely to book the flights that are displayed first. 61 FR 42208, 42209 (August 14, 1996). The number of flight options available in most markets also requires the systems to edit their displays, since many options will be unattractive to travelers (Los AngelesSan Francisco travelers, for example, will not choose connecting services over Denver or Salt Lake City). Systems display airline services in several different ways. The display traditionally used by travel agencies ranks flights in a market on the basis of the criteria developed by the system and shows whether seats are available on the listed flights. Some systems have ranked flights in this type of display by listing all nonstop flights first, then listing onestop flights and other direct flights, and ending with connecting services. Others have ranked flights on the basis of relative quality, such as each flight's elapsed time or its displacement time (the time difference between the departure time requested by the traveler and the time of each flight). 61 FR 42210 42211.
Every system also has a display that ranks flights on the basis of price, with the lowest being listed first. Travel agents commonly use that display for customers whose major concern is finding the cheapest fare.
Corporate travel departments and consumers, not just travel agents, use the systems. A corporate travel department, which books travel for its company's employees, benefits from the systems' efficiencies and information. Corporate users can access a system through the Internet or by Intranet. See, e.g., Sabre Comments at 4. Consumers using an on line travel agency to obtain schedule and fare information and make bookings are indirectly accessing one of the systems; Travelocity uses Sabre as its booking engine, while Expedia uses Worldspan, for example.
The fees charged airlines were not effectively disciplined by competition and may have exceeded system costs by a significant amount. 56 FR 12586, 12595 (March 26, 1991).
In past years the fees paid by airlines and other travel suppliers accounted for about ninety percent of total system revenues, while the fees paid by travel agencies made up only ten percent of the total. 62 FR 59784, 59788 (November 5, 1997); Sabre Holdings 10K reports for the years 1999 and 2000. The CRS business has economies of scale, so a system's profitability increases when travel agents use it for more bookings. Study of Airline Computer Reservation Systems, U.S. Dept. of Transportation (May 1988) at 2425.
The systems have been able to maintain high booking fees, because most airlines have concluded that participation in each system is necessary. The systems accordingly have had little need to compete for airline participants. Almost every U.S. airline, including most of the lowfare airlines, participates in each of the systems.
Although four systems operate in the United States, each travel
agency office has typically relied either exclusively or predominantly
on one system. A 1996 survey reported that less than four percent of
travel agency offices had more than one system. ASTA Comments at 19.
Other commenters allege that few travel agency offices use more than
one system. Alaska Supp. Reply at 6; Southwest Supp. Reply at 16. While
the services offered by each system are comparable, using multiple
systems could improve a travel agency's ability to serve its customers.
Travel agents then could acquire more accurate and complete information
on available airline flights, and the agencies' ability to use multiple
systems would encourage the systems to compete more on the quality and
range of their services. 57 FR 43797. Offsetting that factor, a travel
agency's use of multiple systems can create some inefficiencies, [[Page 69371]]
due to additional training needs and potential difficulties in keeping
track of customer records. 56 FR 12607. Each system also offers
inducements to travel agency customers to make most or all of their bookings on that system.
Travel agencies, unlike airlines, can usually choose which system to use. The systems' competition for travel agency customers has caused them to continuously improve the range and quality of services offered travel agencies. In addition, many large travel agencies obtain CRS services at little or no cost. Sabre has stated that competition among the systems for travel agency customers ``is particularly intense'' and that some systems ``aggressively pay economic incentives to travel agencies to obtain business.'' In addition, ``certain [Sabre] service contracts with significant subscribers contain booking fee productivity clauses and other provisions which allow subscribers to receive cash payments, and/or various amounts of additional equipment and other services from [Sabre] at no cost.'' Sabre Holdings 10K Report for FiscalYear 2000 at 24, 37. Galileo has similarly stated that competition for travel agency customers is intense, that fees are often waived for travel agency customers, and that some obtain incentive payments. Galileo International 10K Report for Fiscal Year 2000 at 5, 17. AAA and Apollo reportedly signed a fiveyear term contract that assumed that all AAA member clubs would use Apollo as their only system; AAA expected to earn $75 million from Apollo under the contract. Travel Weekly (September 25, 1997) at 46.
A system is willing to pay bonuses to capture a large agency's business in the expectation that it will capture all or almost all of the agency's business for a period of several years and thereby obtain a large and steady stream of airline booking fees. The large agencies have become more dependent on such payments due to the airlines' commission cuts. Sabre Holdings 10K Report for Fiscal Year 2001 at 31. On the other hand, smaller travel agencies complain that they are overcharged for system services and forced to accept unreasonable contract terms. See, e.g., ASTA Comments at 23, 10; ARTA Comments at 48; ARTA Emergency Petition. Furthermore, travel agencies located in cities dominated by one airline may feel compelled to use a system affiliated with that airline. These agencies depend on obtaining marketing benefits and access to corporate discount fares from the dominant airline to meet the needs and preferences of their customers. Large Agency Coalition Comments at 910.
2. The Travel Agency Distribution System
In the past the systems have been important because most airlines have depended on travel agencies for their distribution. Travel agencies have acted as agents for virtually all airlines and generally held themselves out to the public as sources of impartial advice on airline services and other travel services. 56 FR 12587. The travel agency system has traditionally provided an efficient means of distribution for most airlines. 57 FR 43782. As noted, in 1999 almost threequarters of all airline tickets were sold by travel agencies, while only onefourth of all bookings were made directly with an airline. Bear, Stearns & Co., ``Point, Click, Trip'' at 17. Even many lowfare airlines, the airlines that have tried hardest to distribute their tickets directly to consumers, have relied on travel agencies for a large share of their bookings. In the fourth quarter of 2001, AirTran, for example, obtained 33 percent of its bookings from travel agencies using a system. AirTran 10K Report for fiscal year 2001 at 8.
Travel agencies historically derived most of their revenue from the commissions paid by airlines and other travel suppliers. Due to the airlines' reductions in commissions in recent years, travel agencies began charging fees to their customers. Almost ninety percent of all travel agencies charge some fees. Travel Distribution Report (May 31, 2001); Travel Weekly (February 25, 2002) at 27. The fees average $13.21 per ticket. ``Web air fares unlevel the playing field,'' Chicago Tribune (February 16, 2002); ``Travel Agents Cry Foul over Internet Fare Deals,'' Los Angeles Times (February 16, 2002).
Travel agencies do not operate as franchisees of one or a few airlines. Transportation Research Board, Entry and Competition in the U.S. Airline Industry at 125. Individual airlines, however, encourage travel agencies to sell their services rather than their competitors' services. An airline will often offer travel agencies override commissions, a type of incentive commission, that give a travel agency a larger commission on all of its bookings on the airline if the airline's share of the agency's total bookings (or total bookings in specific markets) exceeds a specified percentage, which is often related to the airline's share of all travel agency bookings in the agency's area. Since override commissions enable the agency to obtain a higher commission rate on all its bookings with an airline, the airline dominating a metropolitan area can use override commissions more effectively than can its competitors. Secretary's Task Force on Competition in the U.S. Domestic Airline Industry, U.S. Department of Transportation, Airline Marketing Practices (February 1990) at 28.
Beginning in March 2002, the major airlines stopped paying base commissions to travel agencies in the United States and switched entirely to the use of incentive commissions. The incentive commission programs developed by these airlines, and the lack of any alternative pay from those carriers, will likely strengthen the travel agencies' interest in meeting the performance standards set by the airlines.
As discussed below in connection with proposals to bar travel agencies from creating biased CRS displays, some industry commentators and the Department's Inspector General have expressed a concern that override commissions can induce travel agencies to recommend airline services that will increase their commission payments rather than the services that best meet the needs of their customers. Office of the Inspector General, U.S. Dept. of Transportation, ``Report on Travel Agent Commission Overrides'' (March 2, 1999). The airlines' efforts to encourage travel agencies to give each airline a larger share of their business affect our analysis of several issues, including the systems' sale of marketing and booking data, but we are not addressing the override commission issue in this proceeding.
Not all travel agencies obtain override commission arrangements. In other respects as well, airlines have traditionally not treated all travel agencies the same since deregulation. A travel agency with a preferred supplier relationship with an airline can obtain marketing benefits, such as the ability to waive advance purchase restrictions and to book important clients on oversold flights, that are not available to other agencies. Airline Marketing Practices at 26. 3. International CRS Operations
Although U.S. airlines developed the first systems, the CRS business soon became international. European airlines, for example, created Amadeus, and Galileo is the product of the merger between United's Apollo system and the Galileo system developed by several European airlines. Sabre and Worldspan have no foreign airline owners but both compete for travel agency customers overseas.
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The importance of CRS operations overseas has led other governmental entities like the European Union and Canada to adopt rules regulating the CRS business. See, e.g., European Commission Comments. A number of the parties in this proceeding, primarily the European Union and several foreign airlines, have urged us to harmonize our rules with the rules applicable in the European Union.
CRS operations abroad concern the United States, since foreign systems and their owners could engage in practices that would prejudice the competitive position of U.S. airlines in international markets or the ability of U.S. systems to obtain travel agency customers in foreign countries. The United States accordingly has entered into a number of international air services agreements that require each party to ensure that the systems operating in its country and their owners do not subject airlines and systems from the other country to discriminatory treatment.
In addition, the United States has taken action in some cases to ensure that U.S. systems are not denied access to foreign markets by discriminatory conduct by foreign airlines and other travel suppliers that own or market a competing system. See, e.g., Orders 88711 (July 8, 1988) (American complaint against British Airways) and 90621 (June 8, 1990) (American complaint against Iberia).
Congress has stated its interest in preventing discriminatory practices by systems and affiliated airlines that would distort international competition. The Wendell H. Ford Aviation Investment and Reform Act for the 21st Century, Public Law 106181 (April 5, 2000), includes a provision, section 741, that expanded our authority under 49 U.S.C. 41310 to take countermeasures against an unjustifiably discriminatory or anticompetitive practice against a U.S. CRS or the imposition of unjustifiable restrictions on access by a U.S. system to a foreign market.
4. Our Readoption of CRS Rules
The CRS rules adopted by the Civil Aeronautics Board (``the Board'') in 1984 included an expiration date to ensure that we would reexamine the rules after they had been in force for several years. We conducted such a reexamination and, on the basis of the systems' continuing ownership by airlines and the airlines' continuing reliance on travel agencies for distribution, determined in 1992 that CRS rules remained necessary to safeguard airline competition and to help ensure that consumers did not receive inaccurate or misleading information on airline services. We based our decision on the systems' control by airlines and airline affiliates, which could still use their control of the systems to prejudice airline competition if there were no rules. 57 FR 4378343787, 43794. We reasoned as well that airlines had no practical ability to induce travel agencies to use systems charging lower fees, and we noted that travel agencies did not choose systems on the basis of their treatment of airlines. 57 FR 43831; 56 FR 12586, 1259412595.
Our revised rules governed the operations of systems owned or marketed by an airline or airline affiliate insofar as the system was providing services to travel agencies. In adopting these rules, we relied on our authority under section 411 of the Federal Aviation Act, later recodified as 49 U.S.C. 41712, to prohibit unfair and deceptive practices and unfair methods of competition in air transportation and the sale of air transportation (we will refer to the statue by its traditional name, section 411). 57 FR 4378943791.
One of the principal provisions that we readopted barred each system from using carrier identity as a factor for editing and ranking services. We did not, however, prescribe a display algorithm (the set of criteria for constructing displays), so each system was free to choose its own criteria for editing and ranking airline services. Secondly, the rules prohibited systems from charging discriminatory booking fees but did not set limits on the level of fees. Thirdly, each system had to make available to any participating airline the booking and marketing data generated by it from bookings for domestic travel made through the system. Finally, the rules proscribed certain types of restrictive contract provisions that unreasonably limited the travel agencies' ability to switch systems or use more than one system. For example, the rules limited the maximum length of subscriber contracts.
We modified the rules in several respects to strengthen them. Among other things, our revised rules required each system to provide non owner airlines with information and booking capabilities as accurate and reliable as those provided the owner airline. We gave each travel agency the right to use its own equipment in conjunction with a system and to access other systems and databases from the same terminals used to access its primary system, unless the agency used terminals provided by that system; we adopted this rule in part to spur the development of alternative ways of providing airline information and booking capabilities to travel agencies. We also required each airline with a significant CRS ownership interest to participate in other systems at as high a level of functionality as it does in its own system, if the terms for participation are commercially reasonable (this is the mandatory participation rule). We sought to prevent U.S. airlines from attempting to discourage travel agencies from choosing a competing system by limiting their participation in systems owned by other airlines.
We hoped that our revisions would enable airlines to develop alternative means of access to travel agencies and thereby begin to bring market forces to bear on the systems' terms for airline participation. We avoided rules that involved detailed management of system operations. 57 FR 43781.
We later adopted two additional rules to prevent system practices that distorted competition in the airline and CRS businesses. One rule prohibited systems from enforcing ``parity clauses'' against airlines that did not own or market a competing system. 62 FR 59784 (November 5, 1997). The parity clauses imposed by most systems on airline participants required each airline to buy at least as high a level of service from the system as it did from any other system. The parity clauses made it unnecessary for systems to compete for airline participation at higher levels of service. While almost all airlines must participate in each system for economic reasons, many airlines do not need to participate at the more expensive higher levels.
The second rule strengthened the rules prohibiting display bias by requiring each system (i) to offer at least one display that does not give online connections a preference over interline connections and (ii) to either list onestop and other direct flights before connecting services or use elapsed time as a significant factor in selecting flight options from the database. 62 FR 63837 (December 3, 1997). We acted in large part because of concerns that United had caused Galileo to create displays that prejudiced United's competitors. 62 FR 63840 63841.
5. Major Developments Since the Last Overall Rulemaking
As we stated in our supplemental advance notice of proposed
rulemaking, our decision in this proceeding must take into account two
major developments in the CRS business and airline distribution that
have occurred in recent years, the airlines' shrinking ownership of the systems and the
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growth of Internet usage. 65 FR 4555645557.
As noted above, when we last reexamined the rules, one or more airlines or airline affiliates owned each of the systems. That is no longer true, although the systems without airline ownership still have ties to their former owners.
Sabre, the largest system, which American developed, is now a publiclyowned company. Most of Galileo's airline owners sold their stock to the public by the end of 2000, although United continued to own eighteen percent of Galileo's stock, Swissair eight percent, and five other airlines 1.5 percent. Galileo Supp. Comments at 2. Cendant, a firm that owns Avis and several hotel franchises, bought Galileo in exchange for stock and cash in early October 2001. United received Cendant stock in exchange for its Galileo stock but has sold all of those shares. United April 19, 2002, and February 1, 2002, Press Releases.
Amadeus, a European system, entered the U.S. market by acquiring System One, the system owned by Continental. Continental thereafter sold its Amadeus shares. Amadeus is now controlled by three foreign airlines, Lufthansa, Air France, and Iberia. The public, however, now holds a significant portion of Amadeus' stock.
Worldspan is still owned entirely by airlines and airline affiliates. Its U.S. airline owners are Delta, Northwest, and American, since American acquired TWA's Worldspan stock when it bought TWA's assets.
Although some systems are no longer owned by airlines, every system still has marketing ties with one or more airlines. American and Southwest market Sabre, and United provides some marketing support for Galileo. Amadeus Supp. Comments at 45. Since our rules by their terms apply to systems owned or marketed by airlines, 14 CFR 255.2, Sabre and Galileo as well as Amadeus and Worldspan are subject to the rules.
The other major development is the growing use of the Internet for airline distribution. The Internet has given airlines and other travel suppliers new ways to obtain bookings and inform consumers of their services and to do so at significantly lower cost. See, e.g., Statement of A. Bradley Mims, Deputy Assistant Secretary for Aviation and International Affairs, U.S. Department of Transportation, before the Senate Commerce Committee (July 20, 2000); General Accounting Office, ``Effects of Changes in How Airline Tickets Are Sold'' (July 1999) at 13. A consulting firm estimated that Internet bookings would account for fourteen percent of all airline revenues in calendar year 2001. ``Web Sales of Airline Tickets Are Making Hefty Advances,'' New York Times (July 5, 2001).
Most U.S. airlines have websites, and many offer special discount fares (Efares or webfares) and other benefits to travelers who book seats through the airline's website instead of another distribution channel. For most airlines, their own individual websites have become their cheapest available distribution channel. GAO, ``Effects of Changes in How Airline Tickets Are Sold'' at 1718.
While airlines initially offered their Efares exclusively through their own websites, Delta allows travel agents to book its Efares through its website for travel agencies, although such bookings are noncommissionable. Travel Distribution Report (March 22, 2001) at 9; Delta Comments on Proposed Extension at 67. Other airlines have also created websites where travel agents may book their discount fares. Many airlines have agreed to give Orbitz the ability to sell their E fares in exchange for a rebate of part of the CRS booking fees paid on all of the airline's bookings made through Orbitz.
Travel agents can book Internet fares for their customers even if they are not offered through the system used by the travel agency or an airline website dedicated to travel agents. Some do so. ``Travel agents charting other routes to profit,'' Philadelphia Inquirer (March 27, 2002). When travel agents book such fares through an airline website created for consumers or Orbitz, they usually receive no commission and earn no credits towards the minimum monthly booking quota set by the systems' subscriber contracts that use productivity pricing. ``Web air fares unlevel the playing field,'' Chicago Tribune (February 16, 2002); ``Travel Agents Cry Foul over Internet Fare Deals,'' Los Angeles Times (February 16, 2002). In addition, searching several websites for E fares is less efficient for travel agents, complicates a travel agency's task of preparing reports for corporate customers, and makes it harder for corporate travel managers to manage travel programs. Susan Parr Travel Comments; NBTA Comments on Proposed Extension at 2. Several firms and the systems themselves are developing software that will enable travel agents to quickly search for fares on multiple websites and systems, however. ``Fare game: ``Beat the agent''', Travel Weekly (March 4, 2002) at 6. Orbitz'' agreement with Aqua should enable travel agents to use a program allowing them to simultaneously see the display of fares offered by a system and the fares available through Orbitz, including Efares. May 16, 2002, Orbitz press release.
The share of airline bookings produced by airline websites has been growing rapidly. Delta's online revenues in the March 2002 quarter were 64 percent higher than in the March 2001 quarter, and Delta expected to obtain fifteen percent of its tickets from its own website in 2002. Delta April 24, 2002, Press Release. The percentage of Alaska's bookings obtained from its website grew from 10 percent in 2000 to 16 percent in 2001. Alaska 10K Report for the year 2001. Continental reportedly expects forty to fifty percent of its bookings to come from Internet sites, including its own, Orbitz, and Hotwire, by 2005 or 2006. Travel Distribution Report (June 14, 2001) at 4. Most of the network airlines, however, have been obtaining a smaller share of their bookings from their websites. Thus, while consumer use of American's website is growing rapidly, the website produced only an estimated three percent of the airline's revenues in the first quarter of 2001. Aviation Daily (July 2, 2001).
Some lowfare airlines already obtain a large share of their bookings from their websites. JetBlue obtained 44 percent of its sales from its website in 2001. JetBlue Registration Statement on Form S1 (filed April 10, 2002) at 4142. Southwest's website produced forty percent of the airline's revenues in 2001. Southwest Airlines 10K Report for the year 2001. AirTran was obtaining over half of its bookings through the Internet by the end of 2001. January 29, 2002, AirTran Press Release. Frontier obtained 28 percent of its bookings in the quarter ended December 31, 2001, from its website, and Internet bookings from all sources made up 39 percent of its revenue in that quarter (the comparable figures for the December 31, 2000 quarter were six percent and fifteen percent). February 5, 2002, Frontier Press Release. The two major European lowfare airlines obtain a much larger share of their total sales from online bookings. Ryanair obtained 91 percent of its bookings from its website in January 2002, while EasyJet sells tickets only through its own reservations center and website, not through travel agencies. Ryanair February 4, 2002, Press Release; ``About Our Fares'' at www.easyjet.com.
Airlines have created Internet sites for use by travel agencies and
corporate customers as well. Delta has websites for travel agencies and
corporate customers. Employees of businesses that have corporate sales agreements with Delta can book the negotiated discount
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fares through that website, and corporate travel managers can track the
bookings made through the website. Aviation Daily (July 2, 2001).
Internet bookings made directly with an airline are less costly. Delta recently stated that the cost of bookings made through its own website is only onefourth the cost of bookings made through a travel agency using a system. Statement of Scott Yohe before the National Commission to Ensure Consumer Information and Choice in the Airline Industry (the ``National Commission'') at 11. Similarly, according to a 1999 study, each booking made through traditional travel agencies cost America West $23, a booking made through an electronic travel agency cost $20, a booking made through the airline's reservations agents cost $13, and a booking made through the airline's website cost $6. GAO, ``Effects of Changes in How Airline Tickets Are Sold'' at 17. Southwest states that a booking costs Southwest $10 when made through a travel agency, $5 when made through a Southwest reservations agent, and $1 when made through Southwest's website. Southwest Supp. Reply at 20.
Airlines have taken other steps to reduce their costs. Airlines encourage passengers to use Eticketselectronic ticketsinstead of paper tickets since Etickets involve no printing costs and lower handling and processing costs than paper tickets, which are negotiable documents. GAO, ``Effects of Changes in How Airline Tickets Are Sold'' at 8. Beginning in 1995 airlines also cut the travel agencies' base commissions several times, which led to a decline in the number of travel agencies; forced travel agencies to focus on other travel activities, such as cruise bookings, which are more remunerative; and caused most travel agencies to charge consumers fees for their services. GAO, ``Effects of Changes in How Airline Tickets Are Sold'' at 6, 911. In March 2002 the major airlines eliminated base commissions entirely and began paying travel agencies only incentive commissions.
These developments have significantly reduced airline costs. Delta has stated that its customers' use of the Internet saved Delta $45 million in commissions and booking fees in 2000, when thirteen percent of its tickets were sold through the Internet. ``Web Sales of Airline Tickets Are Making Hefty Advances,'' New York Times (July 5, 2001). Similarly, while Alaska's passenger revenue increased by 6.9 percent from the first quarter of 2000 to the first quarter of 2001, its commission expense increased by only 1.9 percent since a smaller share of its bookings were being made by travel agents, 61.6 percent in the first quarter of 2001 compared to 65.9 percent in the first quarter of 2000. Alaska 10Q Report for the quarter ended March 31, 2001. The GAO has estimated that the cuts in commissions lowered airline commission costs by about $4 billion between 1995 and 1998. GAO, ``Effects of Changes in How Airline Tickets Are Sold'' at 68.
Travel agencies also now provide information and make bookings over the Internet. Many traditional travel agencies ``brick and mortar'' agencieshave established websites for use by consumers. Other firms started business as online agencies. The two largest online travel agencies are Travelocity, owned by Sabre, and Expedia, developed by Microsoft. In addition to selling airline tickets as agents for the airlines, some online agencies also buy blocks of airline seats and hotel rooms at negotiated prices substantially below the supplier's published rates. Bear, Stearns, ``Point, Click, Trip,'' at 48, 49.
In addition, five major airlinesUnited, American, Delta, Northwest, and Continentalcreated Orbitz to compete in the online agency business. Orbitz is initially using Worldspan as its booking engine but will create direct links with many of the airlines participating in Orbitz. ``Et tu, Orbitz?'' Travel Weekly (March 4, 2002) at 6; Orbitz Supp. Comments at 35. Orbitz is offering airlines rebates on their booking fees if they agree, among other things, to give Orbitz access to all of their publiclyavailable fares, including their Internet fares. Orbitz Supp. Reply at 2425. Orbitz'' plans for gaining access to these fares, which airlines initially at least did not allow other travel agencies to sell, and Orbitz'' control by five major airlines have generated substantial controversy.
If an airline refuses to allow Orbitz to sell all of its publicly available fares, consumers can still book the airline if the airline participates in Worldspan, but the airline will not get a rebate on the CRS fees. Orbitz is unable to make bookings on those airlines, such as Southwest, that neither participate in Worldspan nor provide fare and availability information and booking capabilities to Orbitz through another channel.
Orbitz is currently operating as an online travel agency. Orbitz could make its services available to travel agencies for use in making airline bookings. Since it charges participating airlines a fee for such bookings, it would become a system subject to all of the rules applicable to the existing four systems if it offered its services to travel agencies. As noted, under Orbitz'' agreement with Aqua, the latter firm will develop a program that would enable travel agencies to access Orbitz'' displays and booking capabilities.
Other firms selling travel online have created new marketing strategies. Priceline operates a site that allows consumers to ``name their own price'' for airline seats; a consumer using Priceline, however, only learns which airline is operating the service and the routing and departure time for the trip after the consumer makes a bid and the bid is accepted by Priceline. While giving consumers an opportunity to bid on a ticket price, Priceline only sells seats obtained through negotiated deals with airlines and other suppliers. Airlines use Priceline for selling distressed inventory. Bear, Stearns, ``Point, Click, Trip,'' at 5355. Several major airlines have created another website, Hotwire, which offers a service like Priceline. Unlike Priceline, Hotwire tells the consumer what the fare will be for the trip before the customer decides whether to buy the ticket; like Priceline, Hotwire does not disclose the name of the airline, the routing, and the departure time until the consumer accepts Hotwire's offered fare. In 2001 Priceline and other opaque sites accounted for about two percent of all airline bookings. ``Web Sales of Airline Tickets Are Making Hefty Advances,'' New York Times (July 5, 2001).
While the growing use of the Internet and other changes in distribution practices will likely make it harder for some ``brickand mortar'' travel agencies to remain in business, the travel agency industry will not disappear. A Sabre official has predicted that travel agencies will account for 65 percent of all airline bookings in 2005 (45 percent by traditional travel agencies and 20 percent by travel agency websites). ``Sabre: Agents could retain 65% of air sales by 2005,'' Travel Weekly (April 3, 2000) at 10.
Travel agents provide services that benefit many consumers. Many
travelers value the personal service provided by travel agents and
their expertise with complex itineraries. ``Web Sales of Airline
Tickets Are Making Hefty Advances,'' New York Times (July 5, 2001). A
large proportion of the agencies' customers will probably continue to
rely on ``brickandmortar'' agencies because they wish to have
personal contact with a travel agent and will not use an Internet site
for buying tickets. Bear, Stearns, ``Point, Click, Trip,'' at 17. Many consumers also prefer using a travel agency website
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rather than an airline website since they believe that they are likely
to get a better price from a travel agency website. April 17, 2000,
PhoCusWright Press Release. In the past the GAO found that consumers
were more likely to obtain the lowest available fare from a travel
agent than from other sources of airline information. GAO, ``Effects of
Changes in How Airline Tickets Are Sold'' at 13. And travel agents can
offer expert advice not easily available elsewhere (and use the
Internet to reach customers interested in taking advantage of an
agency's special expertise). See, e.g., Travel Distribution Report (March 11, 2002) at 39.
While the recent continuing changes in airline distribution have provided substantial benefits for airlines (and consumers, when airlines pass on their cost savings), they may not have eliminated the need for CRS regulation, as we discuss next.
E. Considerations That Support Maintaining CRS Rules
In considering whether to readopt the rules with modifications, we must determine the extent to which our past findings remain valid, that is, whether the systems still have the power to distort airline competition and provide inaccurate or misleading information to consumers, and whether a system owned or controlled by an airline will have an incentive to use that power if not blocked by rules. The airlines' growing use of the Internet for distribution and the changes in the systems' ownership require us to reassess the valid
FOR FURTHER INFORMATION CONTACT
Thomas Ray, Office of the General Counsel, 400 Seventh St. SW., Washington, DC 20590, (202) 3664731.