Client Alert

Competition Law: U.S. DOT Issues Request for Information Regarding Potentially Unfair Business Practices

24 Oct 2016

On Tuesday, October 18, 2016, the White House and the United States Department of Transportation (DOT or the “Department”) announced a suite of actions to enhance protections for consumers who travel by air. While almost all of the actions pertain only to the aviation industry, there is one notable exception that has potentially broad implications for all companies subject to competition regulation in the United States. Specifically, DOT issued a Request for Information (RFI) “Exploring Industry Practices on Distribution and Display of Airline Fare, Schedule and Availability Information.” Available at https://www.transportation.gov/airconsumer/RFI-exploring-industry-practices-impacting-distribution-display-of-airline-fare. The RFI seeks information on whether DOT should mandate that airlines provide certain information to online travel agents, metasearch sites and other entities purportedly to avoid unfair or deceptive trade practices that harm consumers by limiting their ability to comparison shop for airline services. The RFI has potentially far-reaching effects across all industries.

DOT requests responses to the RFI 60 days after publication of the RFI in the Federal Register. Although Federal Register publication has not yet occurred, stakeholders should expect the deadline to fall before Christmas.

What’s Notable About the RFI?

Throughout the Obama Administration, DOT has successfully exercised its statutory authority to enhance protections for airline travelers (e.g., reducing lengthy tarmac delays and mandating full fare advertising and transparency of ancillary fees). The October 18 announcement builds on that legacy. For the most part, DOT’s actions appear to fall squarely within the Department’s existing authority. The RFI, however, hints at a possible attempt to expand the Department’s authority beyond recognized limits.

Pursuant to 49 U.S.C. § 41712(a), DOT has the authority to prohibit unfair and deceptive practices and methods of competition by air carriers and ticket agents. The key question raised by the RFI is whether restricting the marketing of an airline’s products through online ticket agencies (OTAs) or metasearch entities constitutes an unfair or deceptive practice or method of competition within the meaning of Section 41712(a) and should be prohibited by DOT.

As the RFI notes, certain OTAs and metasearch entities that operate flight search tools maintain that some airlines have placed restrictions on the distribution and display of airline fare, schedule and availability information or refused to provide any information at all to the OTAs and metasearch entities. They further claim that such actions amount to an unfair or deceptive practice or method of competition that impedes consumers’ ability to comparison shop for the most competitive fares and services and that DOT should promulgate regulations to prohibit such practices in the future. The aviation industry, on the other hand, asserts that an airline should be able to decide as a business matter the terms and conditions, if any, under which it will provide information to OTAs and metasearch entities and that the airlines’ conduct is neither unfair nor deceptive. Although DOT has had informal discussions with interested stakeholders over the past year, the Department explains it is interested in learning more:

[DOT is] requesting information on whether airline restrictions on the distribution or display of airline flight information harm consumers and constitute an unfair and deceptive business practice and/or an unfair method of competition. The Department is also requesting information on whether any entities are blocking access to critical resources needed for competitive entry into the air transportation industry. Finally, [DOT] is requesting information on whether Department action is unnecessary or whether Department action in these areas would promote a more competitive air transportation marketplace or help ensure that consumers have access to the information needed to make informed air transportation choices.

In basic terms, the RFI is asking the public to opine on what is “unfair” or “deceptive.” Can conduct be unfair or deceptive simply because it limits the flexibility of consumers to access information, goods and services as they wish to shop for them? Consider, for example, a shoe designer who wants to sell shoes to consumers but wants to control how and by whom the shoes are marketed. Can the designer market the shoes directly to consumers or must she do business with any entity who wishes to distribute her shoes? Would direct or restricted marketing be unfair to consumers because they may prefer to be able to purchase her shoes through multiple sources? Would direct or restricted marketing be unfair because it might be harder for consumers to obtain the shoes directly from the designer or a limited number of marketers?

Although the RFI focuses exclusively on the marketing of airline services, a DOT decision to prohibit current practices may have an impact on other industries given that the Federal Trade Commission, the Consumer Finance Protection Bureau and other federal and state agencies employ similar language regarding unfair and deceptive practices. For this reason, companies doing business in the United States should consider submitting information in response to DOT’s RFI.

What’s Next?

Stakeholders who have an interest in informing DOT’s thinking on this important competition issue should consider filing responses with the Department within 60 days of publication of the RFI in the Federal Register. Publication is expected the week of October 24, 2016. Responses will likely be due before the end of 2016; however, given the limited time remaining for the Obama Administration, DOT will likely not take further action on this issue until mid- to late 2017.

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