Disclosure of Code Sharing and Long-Term Wet Lease Arrangements, 2372-2375 [05-737]

Agencies

• Office of the Secretary
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 70, Number 9 (Thursday, January 13, 2005)]
[Proposed Rules]
[Pages 2372-2375]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-737]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 257

[OST Docket No. 2004-19083]
RIN 2105-AD49


Disclosure of Code Sharing and Long-Term Wet Lease Arrangements

AGENCY: Department of Transportation; Office of the Secretary.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: The Department of Transportation (Department or DOT) is 
proposing to amend its rule governing the disclosure of code-share and 
long-term wet lease arrangements in print advertisements of scheduled 
passenger services to permit carriers to disclose generically that some 
of the advertised service may involve travel on another carrier, so 
long as they also identify a list of all potential carriers involved in 
serving the markets being advertised. This proposed action is being 
taken in response to a petition for rulemaking filed by United 
Airlines, Inc.

DATES: Comments must be received on or before March 14, 2005. The 
Department will consider late-filed comments only to the extent 
practicable.

ADDRESSES: You may submit comments identified by DOT DMS Docket Number 
2004-19083 by any of the following methods: Web Site: https://
dms.dot.gov. Follow the instructions for submitting comments on the DOT 
electronic docket site.
    Fax: 1-202-493-2251.
    Mail: Docket Management Facility; U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, 
Washington, DC 20590-001. Hand Delivery: Room PL-401 on the plaza level 
of the Nassif Building, 400 Seventh Street, SW., Washington, DC, 
between 9 a.m. and 5 p.m., Monday through Friday, except Federal 
holidays.
    Federal eRulemaking Portal: Go to https://www.regulations.gov. 
Follow the online instructions for submitting comments.
    Instructions: All submissions must include the agency name and 
docket number or Regulatory Identification Number (RIN) for this 
rulemaking. For detailed instructions on submitting comments and 
additional information on the rulemaking process, see the Public 
Participation heading of the Supplementary Information section of this 
document. Note that all comments received will be posted without change 
to https://dms.dot.gov including any personal information provided. 
Please see the Privacy Act heading under Regulatory Notices.
    Docket: For access to the docket to read background documents or 
comments received, go to https://dms.dot.gov at any time or to Room PL-
401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., 
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Trace Atkinson or Blane Workie, Office 
of the Assistant General Counsel for Aviation Enforcement and 
Proceedings, Office of the General Counsel, U.S. Department of 
Transportation, 400 7th Street SW., Room 4116, Washington, DC 20590, 
(202) 366-9342 (Voice) or (202) 366-7152 (Fax).

SUPPLEMENTARY INFORMATION:

[[Page 2373]]

Background

    The Secretary of Transportation has the authority to define unfair 
or deceptive practices or unfair methods of competition. 49 U.S.C. 
41712. Since 1985, it has been the Department's stated policy to view 
the failure of U.S. carriers to provide reasonable and timely notice to 
consumers of the existence of a code-share arrangement as an unfair and 
deceptive practice. 50 FR 38508. The Department further strengthened 
its consumer notification rules and policies to ensure that consumers 
would have pertinent information about airline code-sharing 
arrangements and long-term wet leases in domestic and international air 
transportation through the adoption of 14 CFR part 257 on March 15, 
1999. 64 FR 12838. Section 257.5(d) of that part requires carriers in 
any print advertisement for service in a city-pair market that is 
provided under a code-sharing arrangement or long-term wet lease to 
clearly indicate the nature of the service in reasonably sized type and 
identify the transporting carrier[s] by corporate name and by any other 
name under which the service is held out to the public.

Petition for Rulemaking

    United Airlines, Inc., (United) filed a petition for rulemaking 
with the Department on September 7, 2004, asking that we amend 14 CFR 
257.5(d). United asserts that the current print advertisement 
disclosures have become increasingly burdensome on network carriers 
while failing to provide meaningful off-setting consumer benefits. 
United points out that a network carrier typically publishes print 
advertisements offering service for travel in multiple domestic and 
international city pairs over a large number of alternative routings, 
some of which would be provided by carriers other than the advertising 
carrier pursuant to a code-share or a wet lease arrangement. Presently, 
in order to comply with section 257.5(d), such a carrier must provide 
consumers with a detailed set of disclosures that will vary depending 
on the number of alternative routings that may be available for travel 
in a specific city-pair. This results in print advertisements that 
include numerous footnotes relating exclusively to the disclosure of 
code-share and wet lease arrangements. According to United, not only do 
such disclosures impose a significant burden on carriers, but these 
disclosures may also serve to increase consumer confusion and, at best, 
provide only limited information to consumers about the carrier that 
would be operating a particular flight the consumer desires.
    To ease the burden on carriers, United requests that section 
257.5(d) be reinterpreted to permit carriers to provide a generic 
disclosure in print advertisements indicating that some of the service 
offered may involve travel on one or more of its listed partner 
carriers. United contends that if its proposal is adopted, the 
information consumers obtain in practical terms would not change and 
the burden on carriers would be eliminated. United emphasizes that 
print advertisements serve only as the first opportunity to inform 
consumers about an airline's service offerings and consumers will 
continue to receive more detailed disclosures about any code-sharing 
arrangement that may be relevant to their travel plans before making 
any travel purchase decisions through telephone inquiries to 
reservation offices or by reviewing Internet flight listings.

Comments on the Petition

    Four carriers, an airline association and, Orbitz, LLC (Orbitz) 
submitted comments on United's petition for rulemaking. The Air Carrier 
Association of America (ACAA) and Southwest Airlines (Southwest) filed 
comments opposing the petition while American Airlines, Inc. 
(American), Delta Air Lines, Inc. (Delta), US Airways, Inc. (US 
Airways), and Orbitz filed comments in support of the petition.
    In addition to supporting United's petition, two carriers and 
Orbitz seek additional relief. American asks that United's requested 
change to DOT's rule governing the disclosure of code-share and long-
term wet lease arrangements in print advertisements also apply to 
Internet advertisements. US Airways requests that the Department act 
expeditiously on United's petition by limiting the comment period for 
this NPRM to 30 days and/or moving directly to issue an interim final 
rule on this matter. Orbitz urges that any amended rule apply not just 
to carriers, but explicitly to travel agents as well; however, it also 
cautions against a common standard applicable to both print and 
Internet advertising for all of the Department's rules. Orbitz contends 
that rules designed specifically for the static print medium may 
artificially restrain the ability of electronic advertisers to provide 
complete fare information to consumers in a dynamic, intuitive, and 
interactive way.

A. Print Advertisements

    Commenters supporting an amendment to DOT's rule governing the 
disclosure of code-share and long-term wet lease arrangements in print 
advertisements agree with United that the current disclosure 
requirements may actually serve to confuse customers rather than inform 
them that advertised services may involve travel on code-share 
partners. According to Delta, without knowing a customer's specific 
itinerary, it is impossible to determine whether transportation will be 
provided by the advertising carrier or by one or more code-share 
partners. Delta, like United, asserts that once enough details are 
known about a customer's actual travel plans, carriers can and do 
provide accurate and detailed disclosure information about any actual 
code-sharing involving particular flights. All four carriers that filed 
in support of United's petition also argue that the increased burden of 
the current code-share disclosure rule on carriers that rely 
extensively on code-sharing to serve their customers adds significant 
costs without providing corresponding benefits to consumers. Orbitz 
agrees that the current rule is onerous and fails to offer off-setting 
consumer benefits and protections. United further contends that those 
opposing its petition are interested not in protecting consumers, but 
in preventing the Department from reducing the regulatory burden on 
such network carriers. In addition, US Airways argues that an 
unintended consequence of the current rule is to create incentives for 
carriers not to advertise in smaller markets because of the high cost 
of compliance with the rule as now written.
    On the other hand, Southwest and ACAA argue that the Department 
should not amend its rule governing the disclosure of code-share and 
long-term wet lease arrangements in print advertisements because, they 
assert, there is no empirical evidence to show that the Department's 
reasons for requiring route-specific disclosure requirements are any 
less valid today than they were when they were first adopted. They note 
that the very carriers who initially argued for the rule requiring the 
disclosure of code-share and wet-lease arrangements are now seeking a 
change in the rule because they have increased their own code-share 
relationships. ACAA appears to be concerned that the adoption of 
United's proposal would result in advertisements that would increase 
the market dominance of large carriers. ACAA explains that customers 
seeing such an ad, even if told later that the flight will be operated 
by a code-share partner, will remember the ad and focus on the largest 
carrier in a particular city-pair

[[Page 2374]]

market which will in turn allow a larger carrier to increase its market 
dominance. ACAA requests that the Department undertake a thorough 
review of the impact of code-sharing on consumers and competition 
before considering United's petition, while Southwest argues that 
rather than weakening the current rule respecting disclosure of code-
share and long-term wet leases in print advertisements, the current 
requirements should be strengthened, as violations of the current rule 
persist despite the fact that these requirements have been in place for 
several years.
    ACAA and Southwest also assert that the market-specific disclosure 
currently required provides consumers with valuable information 
concerning who will actually provide the air transportation on the 
specific flights the passenger is considering. They stress that this 
policy correctly recognizes that consumers are best served when they 
are given relevant information about travel choices at the beginning of 
their decision-making process rather than at the end of it when they 
have already narrowed their choices. Accordingly, they argue that it 
would be contrary to the public interest for carriers to suggest that 
they offer multiple flights in a particular market when in actuality, 
many of the flights advertised are operated by code-share partners. 
ACAA contends that under United's proposal, members of the public would 
have no way of knowing which flights are operated under code-share 
arrangements and which carriers operate those flights. In addition, in 
support of its argument against United's proposal, Southwest cites the 
Department's earlier findings that a general disclosure does not 
suffice to properly inform consumers about the particular flights they 
are considering for travel and that a failure to disclose such a 
relationship is deceptive and can result in confusion, hardship, and 
inconvenience to consumers.

B. Internet Advertisements

    In asking that we change our rule governing the disclosure of code-
share and long-term wet lease arrangements not only with regard to 
print advertisements, but with respect to Internet advertisements, as 
well, American argues that the same difficulties in constructing print 
advertisements that United identifies in its petition also arise with 
respect to Internet advertising. American also asserts that there is 
longstanding DOT policy that Internet listings provide code-share 
disclosures in a manner required of print media fare ads. US Airways 
joins American in asking that the code-share disclosure rule change 
requested by United be extended to Internet advertisements. Orbitz 
agrees with American that the Department should amend 14 CFR 257.5(d) 
to explicitly state that the amended rule applies to both print and 
Internet advertising. Orbitz claims that for online ticket agents, the 
problems posed by the current rule are more acute in that a single Web 
page may advertise multiple city-pairs operated under code-share or 
wet-lease arrangements by different carriers.

C. Expedited Review of Petition

    In support of its request for expedited review of United's 
petition, US Airways claims that code-sharing is not a novel practice, 
but is well understood by airline passengers, and that the Department 
is capable of determining whether consumers require extended verbiage 
in the code-sharing notification. Secondly, US Airways states the 
Department should act expeditiously because code-share advertising has 
become more burdensome as the industry has evolved, particularly for 
carriers like US Airways that have multiple code-sharing partners. No 
other comment was received on this point.

Agency Review of Petition

    As noted above, the Department has a long history of requiring 
code-share and wet lease disclosures in print advertisements. Many of 
the reasons for requiring such disclosures were discussed in the notice 
of proposed rulemaking dated August 10, 1994, and the final rule dated 
March 15, 1999. 59 FR 40836 and 64 FR 12838, respectively. However, 
since that time, there have been many changes in the marketplace, 
including an increase in the number of carriers providing service in 
multiple domestic and international city-pair markets over a large 
number of alternative routings, many of which are provided by carriers 
other than the advertising carrier pursuant to a code-share or a wet 
lease arrangement. The unintended practical effect of current section 
257.5(d) is that carriers that rely extensively on code-sharing to 
serve customers must now include numerous footnotes relating 
exclusively to the disclosure of code-share and wet lease arrangements 
in print advertisements.
    We are tentatively of the opinion that the benefits of the 
additional specific notice provided consumers in a print advertisement 
under the present rule may not outweigh the detriment to carriers and 
the public of continuing to require such detail. We not only agree that 
these footnotes are burdensome for carriers, but we also see merit in 
the argument that the many separate footnotes now required where 
multiple markets are contained in a single advertisement may also 
confuse customers rather than inform them of advertised services. 
Therefore, while we will continue to consider a failure to disclose 
code-share and wet lease arrangements in print advertisements to be an 
unfair and deceptive trade practice and to vigorously enforce any such 
violations, we are tentatively of the opinion that continuing to 
require that carriers identify each specific partner carrier that 
serves each particular city-pair route or market being advertised is 
not necessary for consumers adequately to be informed of the advertised 
service. Accordingly, we are proposing to grant United's petition for 
rulemaking and amend our rule governing code-share and long-term wet 
lease disclosure in print advertisements to permit a generic statement 
indicating that some of the advertised service may involve travel on 
another carrier, so long as such advertisements also include a list of 
all potential code-share or wet lease carriers involved in serving the 
markets being advertised. We specifically request comments from the 
public, particularly air travel consumers, as to the benefits, if any, 
of the market-specific disclosures currently required in print 
advertisements and whether any such benefits outweigh the burdens on 
carriers and the potential confusion for consumers from including such 
additional information in print advertisements.
    The Department further believes that it is important, as has been 
suggested by ACAA, that the current rule not be amended without careful 
consideration and full opportunity for comment, but we are aware of no 
reason why other aspects of the code-share rule need to be reviewed at 
this time, as ACAA would have us do. Therefore, we will limit our 
review of the rule to the issue raised by United, and not grant US 
Airway's request for expedited review but will instead provide for a 
full 60-day comment period on this NPRM. All interested parties are 
encouraged to comment.
    With regard to American's request to change DOT's rule governing 
the disclosure of code-share and long-term wet lease arrangements in 
Internet advertisements, the Department is not persuaded that the same 
burdens and potential consumer confusion that may exist in constructing 
and reading print advertisements that United and other commenters 
assert exist also arise with respect to Internet advertising. With 
regard to Internet advertisements, it

[[Page 2375]]

appears to us that entities soliciting air transportation via the 
Internet can easily and clearly disclose information to consumers 
regarding each specific partner carrier that serves each particular 
city-pair route or market being advertised by using hyperlinks or other 
techniques. Accordingly, we have not proposed here to expand United's 
petition for a change in our code-share and wet lease disclosure rule 
to include Internet solicitations. However, we recognize that there may 
be cost burdens to carriers associated with market-specific disclosure 
of code-share and long-term wet lease arrangements through Internet 
advertising of which we are not aware and encourage all interested 
parties to comment. We are particularly interested in receiving 
comments on possible benefits or detriments of not expanding United's 
petition for a change in our code-share and wet lease disclosure rule 
to include Internet advertising as well as reasons for the Department 
to view Internet advertising differently or the same as print 
advertising.

Regulatory Analysis and Notices

Executive Order 12866 (Regulatory Planning and Review) and DOT 
Regulatory Policies and Procedures

    The Department has determined that this proposal, if adopted as a 
final rule, would not be a significant regulatory action under 
Executive Order 12866 or under the Department's Regulatory Policies and 
Procedures. The proposed rule would require the disclosure of less 
information than is required by the current rule and the Department 
expects an adoption of the proposed rule to reduce the regulatory 
burden imposed by the current rule. Therefore, this rule is expected to 
have a minimal economic effect and further regulatory evaluation is not 
necessary.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires an 
agency to review regulations to assess their impact on small entities 
unless the agency determines that a rule is not expected to have a 
significant economic impact on a substantial number of small entities. 
The Department certifies that this proposed rule, if adopted, would not 
have a significant economic impact on a substantial number of small 
entities. The proposed rule would reduce the regulatory burden on 
network carriers that rely extensively on code-sharing to serve 
customers but does not impose any additional burdens on either small or 
large carriers. The Department seeks comment on whether there are small 
entity impacts that should be considered. If comments provide 
information that there are significant small entity impacts, the 
Department will prepare a regulatory flexibility analysis at the final 
rule stage.

Executive Order 13132 (Federalism)

    This NPRM has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132. The Department has 
determined that this proposal would not have a substantial direct 
effect on the States, on the relationship between the National 
Government and the States, or on the distribution of power and 
responsibilities among the various levels of government, and therefore 
would not have federalism implications.

Executive Order 13084

    This proposed rule has been analyzed in accordance with the 
principles and criteria contained in Executive Order 13084 
(``Consultation and Coordination with Indian Tribal Governments''). 
Because this proposed rule, if adopted, would not significantly or 
uniquely affect the Indian tribal communities, and would not impose 
substantial direct compliance costs, the funding and consultation 
requirements of the Executive Order do not apply.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (the Act), 
enacted as Public Law 104-4 on March 22, 1995, requires each Federal 
agency, to the extent permitted by law, to prepare a written assessment 
of the effects of any Federal mandate in a proposed or final agency 
rule that may result in the expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more (adjusted annually for inflation) in any one year. The 
proposed rule does not contain any Federal mandate that would result in 
such expenditures. Therefore, the requirements of title II of the Act 
do not apply.

Paperwork Reduction Act

    The proposed rule does not contain information collection 
requirements that require approval by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 2507 et 
seq.). There is a current OMB control number assigned to this 
rulemaking, and the OMB number is 2105-0537.

List of Subjects in 14 CFR Part 257

    Air carriers, Consumer protection, Foreign air carriers.

    For the reasons set forth in the preamble, the Department of 
Transportation proposes to amend 14 CFR part 257 as follows:

CHAPTER II--OFFICE OF THE SECRETARY, DEPARTMENT OF TRANSPORTATION

PART 257--DISCLOSURE OF CODE-SHARING ARRANGEMENTS AND LONG-TERM WET 
LEASES

    (1) The authority for 14 CFR part 257 would continue to read as 
follows:

    Authority: 49 U.S.C. 40113(a) and 41712.

    (2) Section 257.5(d) would be revised to read as follows:


Sec.  257.5  Notice requirement.

* * * * *
    (d) In any printed advertisement published in or mailed to or from 
the United States for service in a city-pair market that is provided 
under a code-sharing arrangement or long-term wet lease, the 
advertisement shall prominently disclose that the advertised service 
may involve travel on another carrier and clearly indicate the nature 
of the service in reasonably sized type and shall identify all 
potential transporting carriers involved in the markets being 
advertised by corporate name and by any other name under which that 
service is held out to the public. In any radio or television 
advertisement broadcast in the United States for service in a city-pair 
market that is provided under a code-sharing or long-term wet lease, 
the advertisement shall include at least a generic disclosure 
statement, such as ``Some services are provided by other airlines.''

    Issued this 5th Day of January, 2005, at Washington, DC, 
pursuant to 49 CFR 1.56a.
Karan K. Bhatia,
Assistant Secretary for Aviation and International Affairs.
[FR Doc. 05-737 Filed 1-12-05; 8:45 am]
BILLING CODE 4910-62-P