Biden’s competition EO mandated review of airline practices
On July 9, 2021, President Biden issued an Executive Order (EO) designed to promote competition in the U.S. economy. The OE targets a wide range of industries – from agriculture and information technology to prescription drugs (to name a few) – and leads or promotes several federal agencies, in the as part of a “whole-of-government” approach, to use their authorities to tackle “over-concentration, monopolization and unfair competition” in these industries. The provisions relating to the airline industry are among the broadest in the OE, directing the DOT to carry out the mandates of the OE on specific issues, including, but not limited to: operations slots at congested airports; ticket refunds, delayed baggage delivery and unused ancillary services; access to information on flight costs; and new aeronautical technologies. It remains to be seen how this initiative will affect the airline industry, especially as it continues to recover from the impact of COVID-19 on domestic and international travel.
Specifically, the DOT must take the following actions:
- COVID-19 Refunds: Report to a new White House Competition Council on DOT efforts “to address airlines’ inability to timely reimburse canceled flights” due to COVID-19. The DOT investigated a number of airline ticket reimbursement policies during the pandemic and, in June 2021, announced it would seek $ 25.5 million in civil penalties from Air Canada for failing to reimburse in time required.
- Baggage refunds and other charges: Publish a Notice of Proposed Rulemaking (NPRM) that would require airlines to reimburse (1) baggage charges when a passenger’s baggage is “significantly delayed” and (2) other incidental charges when passengers pay for a service that is not provided. The DOT issued a pre-copy of this NPRM on the same day as the IB. Congress imposed these requirements in 2016, and although the DOT towards the end of the Obama administration initiated the development of the required rules and solicited public comment on baggage fee reimbursements, no specific regulations have been made. was proposed under the Trump administration.
- Access to information on flights and incidental charges and related practices: Improve “consumer access to airline flight information so that consumers can more easily find a wider set of available flights, including from newer or lesser known airlines” and “ensure that Consumers are not exposed or subject to advertising, marketing, pricing and charging of incidental charges that may constitute an unfair or deceptive practice or method of unfair competition. The EO further encourages the DOT to initiate regulations that would require the provision of information on incidental charges to consumers at the time of ticket purchase, including baggage, change and cancellation charges. In 2017, during the last days of the Obama administration, the DOT issued an NPRM “Airline Incidental Fee Transparency” that reportedly required (i) airlines to report “Basic Incidental Fees” ticket agents; and (ii) airlines and ticket agents to present this information in a specified manner on all Internet postings. The information on ancillary charges identified in the OE is broader than in the 2017 NPRM (which the Trump administration withdrew later in the year).
- Competition policy – DOJ / DOT: Consult with the Department of Justice regarding “ways to improve effective coordination between the Department of Justice and the Department of Transport to ensure competition in air transport and the capacity of new entrants [airlines] gain access. ”Although the DOT is legally required to consult with the DOJ to avoid double reviews of joint venture agreements between US carriers and the DOJ has given its opinion on antitrust immunity requests filed with the DOT for international alliances, the two agencies have often disagreed, especially regarding the need and scope of remedies.
- Airport congestion: “Consider measures to support the development and increase in airport capacity and improve the management of airport congestion, access to boarding gates, the implementation of airport competition plans” as well as ” the administration of time slots ”. The directive follows a long history of attempts to “reform” the slot system at New York area airports – a goal that has eluded several jurisdictions, including an NPRM released in 2015, withdrawn in 2016, and which would have allowed airlines to permanently transfer slots. between them, with the DOT examining some of these transfers for anti-competitive effects. Since the withdrawal, slots have been removed in Newark but remain in place at JFK and LaGuardia, and cannot be transferred permanently without an FAA exemption.
- Change the DOT “unfair and deceptive” rule: “Begin development” of proposed changes to the DOT definitions of “unfair” and “misleading” which are essential to the fundamental regulatory authority of DOT under 49 USC § 41712 to prohibit airlines from engaging in a breach. unfair and deceptive conduct. As noted below, this move may result in a dismantling of Trump-era regulations that were widely supported by the airline industry and that had codified DOT definitions to formally align them with decades of Federal precedent. Trade Commission.
- New aeronautical technologies: Support new aeronautical technologies by[ing] action ”for (1)“ facilitate innovation that promotes US market leadership and market entry to promote competition and economic opportunity and resist monopolization, while ensuring safety, security and privacy , environmental protection and promotion of equity; and (2) “ensure vigilant oversight of market participants”.
- Aviation Consumer Protection Programs: Appoint / re-appoint members to the existing Aviation Consumer Protection Advisory Committee (ACACP) to “ensure fair representation of consumers, national and local interests, airlines and airports in the evaluation of programs consumer protection in aviation and convene a meeting of the Commission as soon as possible. The ACACP was created by statute in 2012 and, after a hiatus during the first half of President Trump’s term, was reconvened in 2018 under the leadership of Congress. The EO also directs the DOT to convene a task force within the DOT “to assess the effectiveness of existing commercial aviation programs, consumer protection and Federal Aviation Administration rules.”
Impact on airlines
The OE says the Biden administration has two key areas of focus when it comes to airlines: consumer protection and competition.
First, the OE asks DOT to assess whether DOT consumer protection regulations adequately protect consumers. To this end, the DOT is not only required to promulgate new regulations to address perceived regulatory loopholes – such as reimbursements for baggage and incidentals – but must also assess existing regulations – even recently published regulations. For example, in January 2021, the DOT passed regulations clarifying the DOT’s interpretation of its fundamental authority to regulate unfair and deceptive airline practices. The DOT is now required to revisit this work and “begin developing” amendments to the definitions of “unfair” and “misleading” just months after completing a three-part regulatory review and rule-making process. years – with multiple opportunities for public comment – that led to the definitions in force today. (This is in addition to a recent DOT initiative, identified before the publication of the OE, to change Trump-era regulations that allow interested parties to request hearings when the DOT offers discretionary regulations (as opposed to mandated by Congress) under its general authority of Section 41712 to prohibit deceptive and deceptive practices. The DOT says the amendment is necessary to ensure that the conduct of the hearing “does not unduly delay the development of rules. “)
Second, the OE seeks to determine whether the consolidation of the airline industry has had negative competitive effects on consumers. While the unspoken assumption underlying this competition review is that such negative effects have occurred, airlines argue that the industry is more competitive than ever, noting the increased investment in technology and workforce, improved performance metrics, and steady growth in nonstop routes over the decade leading up to the Covid Pandemic. Additionally, Airlines for America, the industry trade organization of major US airlines, says that “air travelers today enjoy strong competition in the industry” and enjoy “unprecedented levels of affordability and accessibility ”.