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• The DOC failed to base the Information or advice contained in a analyzing the agreements and initiation of its sunset review on comment submitted, other than business conducting an extensive informal sufficient evidence that the termination confidential information, may be investigation, the Department has of the antidumping duty order would determined by USTR to be confidential determined that the agreements, if likely lead to a continuation or in accordance with section 135(g)(2) of implemented as presented by the three recurrence of dumping; the Trade Act of 1974 (19 U.S.C. , could result in a significant • The use by the United States of a de 2155(g)(2)). If the submitting person adverse impact on competition, minimis standard of 0.5 percent in a believes that information or advice may unless the airlines formally accept and sunset review; qualify as such, the submitting person— abide by certain conditions that are • The DOC’s misapplication of the (1) Must so designate the information intended to limit the likelihood of ‘‘likelihood’’ standard; or advice; competitive harm. If the airlines choose • The U.S. standard for determining (2) Must clearly mark the material as to implement the agreements without whether the termination of antidumping ‘‘SUBMITTED IN CONFIDENCE’’ in a accepting those conditions, the orders would be ‘‘likely’’ to lead to the contrasting color ink at the top of each Department will direct its Aviation continuation or recurrence of injury; page of each copy; and • Enforcement office to institute a formal The failure by the ITC to conduct an (3) Is encouraged to provide an non- enforcement proceeding regarding the ‘‘objective examination’’ of the record confidential summary of the matter. and its failure to base its determination information or advice. of ‘‘positive evidence’’; and Pursuant to section 127(e) of the FOR FURTHER INFORMATION CONTACT: • The U.S. statutory requirements URAA (19 U.S.C. 3537(e)), USTR will Thomas Ray, Office of the General that the ITC determine whether injury maintain a file on this dispute Counsel, 400 Seventh St. SW., would be likely to continue or recur settlement proceeding, accessible to the Washington, DC 20590, (202) 366–4731. ‘‘within a reasonably foreseeable time’’ public, in the USTR Reading Room, SUPPLEMENTARY INFORMATION: On August and that the ITC ‘‘shall consider that the which is located at 1724 F Street, NW., 23, 2002, as required by 49 U.S.C. effects of revocation or termination may Washington, DC 20508. The public file 47120, Delta, Northwest, and not be imminent, but may manifest will include non-confidential comments Continental (‘‘the Alliance Carriers’’) themselves only over a longer period of received by USTR from the public with submitted code-sharing and frequent- time’’. respect to the dispute; if a dispute flyer program reciprocity agreements to Requirements for Submissions settlement panel is convened, the U.S. us for review. That statute requires such submissions to that panel, the agreements between major U.S. airlines Interested persons are invited to submissions, or non-confidential to be submitted to us more than 30 days submit written comments concerning summaries of submissions, to the panel before they are implemented. We may the issues raised in this dispute. Persons received from other participants in the extend that waiting period by up to 150 submitting comments may either send dispute, as well as the report of the days for code-sharing agreements and 60 one copy by U.S. mail, , panel; and, if applicable, the report of days for other types of agreements. The postage prepaid, to Sandy McKinzy at the Appellate Body. An appointment to airline parties to a joint venture the address listed above, or transmit a review the public file (Docket No. WT/ agreement may implement the copy electronically to [email protected], DS–268, Argentina Sunset Dispute) may agreement without obtaining our with ‘‘Argentina Sunset Dispute’’ in the be made by calling the USTR Reading approval once the waiting period has subject line. For documents sent by U.S. Room at (202) 395–6168. The USTR expired. mail, USTR requests that the submitter Reading Room is open to the public Our authority to extend the waiting provide a confirmation copy, either from 9:30 a.m. to 12 noon and 1 p.m. period enables us to conduct an electronically, to the electronic mail to 4 p.m., Monday through Friday. informal investigation and make a address listed above, or by fax to (202) preliminary determination as to whether 395–3640. USTR encourages the Daniel E. Brinza, the agreement may unreasonably reduce submission of documents in Adobe PDF Assistant United States Trade Representative competition and therefore constitute an format, as attachments to an electronic for Monitoring and Enforcement. unfair method of competition that mail. Interested persons who make [FR Doc. 03–1529 Filed 1–22–03; 8:45 am] would violate 49 U.S.C. 41712, formerly submissions by electronic mail should BILLING CODE 3190–01–M section 411 of the Federal Aviation not provide separate cover letters; Act.1 If we determine that an agreement information that might appear in a cover violates section 411, we may bar the letter should be included in the DEPARTMENT OF TRANSPORTATION airlines from implementing it. Unfair submission itself. Similarly, to the methods of competition include airline extent possible, any attachments to the Office of the Secretary agreements and other practices that submission should be included in the Termination of Review Under 49 U.S.C. violate the antitrust laws or antitrust same file as the submission itself, and principles. See United Air Lines v. CAB, not as separate files. Comments must be 41720 of Delta/Northwest/Continental Agreements 766 F.2d 1101 (7th Cir. 1985). A in English. A person requesting that complaint that an airline practice is an information contained in a comment AGENCY: Office of the Secretary, unfair method of competition would be submitted by that person be treated as Department of Transportation. resolved after a hearing before an confidential business information must ACTION: Termination of review of joint administrative law judge. certify that such information is business venture agreements. Rather than institute a formal confidential and would not customarily enforcement proceeding, we may also be released to the public by the SUMMARY: As required by 49 U.S.C. ask the airline parties to make changes submitting person. Confidential 41720, , Northwest to their agreement to address our business information must be clearly Airlines, and concerns about the agreement’s impact marked ‘‘BUSINESS CONFIDENTIAL’’ submitted code-sharing and frequent- in a contrasting color ink at the top of flyer program reciprocity agreements to 1 This notice will refer to the section as section each page of each copy. the Department for review. After 411, its traditional name.

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on airline competition. In an earlier because of the much greater overlap (9) preventing unfair, deceptive, predatory, case, we obtained the airline parties’ between the route systems of these three or anticompetitive practices in air agreement to make such changes in their airlines and their possession of a transportation, agreement. In this case, we have substantially larger share (10) avoiding unreasonable industry concentration, excessive market domination, proposed conditions to the three airlines (approximately 35 percent) of the monopoly powers, and other conditions that that would alleviate our immediate national airline market. We invited would tend to allow at least one air carrier competitive concerns with their them to propose ways that they could * * * unreasonably to increase prices, proposed alliance. If the Alliance alleviate our concerns. We reviewed reduce services, or exclude competition in air Carriers formally accept these their proposals and concluded that they transportation, and conditions, we would not now need to were not adequate. We therefore (13) encouraging entry into air institute a formal enforcement presented specific comments to the transportation markets by new and existing proceeding to determine whether the three airlines that were intended to air carriers and the continued strengthening of small air carriers to ensure a more effective airlines’ agreements violate section 411. address our primary competitive and competitive airline industry.2 The Department’s Investigation. With concerns while preserving the alliance’s Consistent with these provisions, particular attention to our statutory principal benefits for the traveling Congress has charged us with a responsibilities under 49 U.S.C. 40101, public and the airlines. We have had responsibility to review anti- we reviewed the agreements as lengthy further discussions with the competitive conduct in the airline presented to us under our governing airlines about the terms of proposed industry. This Department’s authority statutes to analyze their likely impact on conditions and have considered their under section 411 to prohibit airlines airline competition if fully concerns. If the Alliance Carriers from engaging in unfair methods of implemented. We have given outside formally accept and agree to abide by competition was intended to parties the opportunity to review the conditions set forth herein, we supplement, but in no way to supplant unredacted copies of the agreements would not seek to block their or interfere with, the Justice and to submit comments based on that implementation of their alliance Department’s authority to enforce the review and other information available agreements at this time. antitrust laws. As the Supreme Court to such commenters. 67 FR 69804 The conditions we have developed has stated, ‘‘[S]ection 411 * * * was (November 19, 2002). We received are intended to lessen the likelihood of designed to bolster and strengthen written comments from a number of unlawful collusion, to prevent the three antitrust enforcement.’’ Pan American parties, including other U.S. airlines, airlines from hoarding facilities World Airways v. United States, 371 civic parties, and the American at their hubs and to make underutilized Antitrust Institute. We have reviewed facilities available to competitors, to U.S. 296, 307 (1963). When Congress deregulated the the comments, along with material address the three airlines’ potentially airline industry in 1978, Congress obtained by us from the three airlines, dominant combined market share at retained the pre-existing authority of we have met with the three Alliance many cities and the resulting our predecessor agency, the Civil Carriers and with parties opposed to detrimental effect on entry by Aeronautics Board, to prevent unfair their alliance, and we have analyzed the competitors and therefore on competition in the airline industry. The proposed alliance’s potential impact on consumers, and to prevent anti- Airline Deregulation Act did not reduce the basis of that material and the data competitive practices involving joint presently available to us. marketing. We have developed these or modify the Board’s authority to The proposed agreements, and their conditions in furtherance of our prohibit unfair methods of competition. potential effects, are unusually complex. statutory responsibilities under 49 Similarly, when Congress enacted the To allow sufficient time to complete our U.S.C. 40101 and our authority under Civil Aeronautics Board Sunset Act of analysis, we extended the waiting section 411 to prevent unfair methods of 1984, Public Law 98–443, 98 Stat. 1703, period as to the code-sharing agreement competition in the airline industry and it reaffirmed its intent that deregulation for a total of 120 days, and we extended on the basis of our analysis of the must be coupled with the authority to the waiting period for the frequent flyer alliance’s potential impact on airline prevent anticompetitive conduct. agreement for 60 days. 67 FR 59328 competition. Our conditions, designed Section 3 of that statute transferred to (September 20, 2002); 67 FR 64960 to address this Department’s present this Department the Board’s authority to (October 22, 2002); 67 FR 69804 concerns under our unique statutory prohibit unfair methods of competition (November 19, 2002); 67 FR 78036 scheme, are in addition to, and in the airline industry. Congress (December 20, 2002). The airlines have independent of, any conditions that may explained that maintaining that not implemented either of those be required by the Department of authority was both necessary and agreements. Justice, pursuant to its separate and consistent with airline deregulation, In our meetings with the Alliance distinct statutory authority to enforce H.R. Rep. No. 98–793, 98th Cong., 2d Carriers, we advised them that the the antitrust laws, and its own Sess. (1984) at 4–5: agreements as presented to us raised independent review of the proposed There is also a strong need to preserve the serious competitive issues. We alliance’s competitive effects. Board’s authority under Section 411 to explained that this proposed alliance Public Policy Background. In carrying ensure fair competition in air transportation presents more serious competitive out our responsibilities in this matter, * * *. Although the airline industry has concerns than did the United/US we are mindful that Congress has been deregulated, this does not mean that Airways alliance, which we allowed to mandated that the Department ‘‘shall there are no limits to competitive practices. take effect subject to conditions consider’’ the factors enumerated in 2 49 U.S.C. 40101(a). Congress added these goals imposed independently by the section 40101. For purposes of this to the statutory statement of public policy goals Department of Justice, in carrying out its proceeding, a number of these factors when it enacted the Airline Deregulation Act of separate statutory authority are particularly relevant. We must 1978, P.L. 95–504, 92 Stat. 1705, 1707 (1978). The responsibilities to enforce the antitrust analyze the potential effects of the statute’s public policy goals provide the context for our enforcement of the prohibition against unfair laws. This proposed alliance is Alliance Carriers’ proposal in the methods of competition in the airline industry. Pan fundamentally different from that context of the express statutory goals, American World Airways v. United States, 371 U.S. presented to us by United/US Airways, among others, of 296, 307–309 (1963).

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As is the case with all industry, carriers must will independently set its own fares and as well that the fares paid by passengers not engage in practices which would destroy schedules. They assert that they will on flights operated under the code-share the framework under which fair competition engage in some discussions on subjects arrangement will go to the airline operates. Air carriers are prohibited, as are such as flight arrival times, operating the flight, even if the firms in other industries, from practices locations, and certain other service passenger bought the ticket under the which are inconsistent with the antitrust laws or the somewhat broader prohibitions of features in order to provide ‘‘more other airline’s code. This should give Section 411 of the Federal Aviation Act seamless service.’’ Delta, Continental, each airline some incentive to compete (corresponding to Section 5 of the Federal and Northwest also contend that they with its partner by operating its own Trade Commission Act) against unfair have structured their alliance so that flights. competitive practices. they will continue to compete Nonetheless, based on all the facts Subsequently, Congress expressly independently. That contention is based presented to us, our independent determined that this Department should primarily on the fact that the ticket price knowledge of and long experience with implement special procedures to ensure paid by a traveller would go to the the airline industry, and our detailed that the potential anti-competitive operating airline, even if the passenger analysis under our governing statute, effects of code-share agreements and bought the ticket from a marketing the Delta/Continental/Northwest other joint venture agreements between airline. Since the marketing airline does alliance presents serious competitive major airlines are thoroughly analyzed not share in the ticket revenue, that concerns. It is substantially different from previous alliances between U.S. before the agreements may go into airline assertedly should have an airlines, both in terms of the combined effect. Congress implemented that incentive to operate its own flights. In size of the three partners and the extent determination by enacting 49 U.S.C. addition, their agreements would not authorize any discussions prohibited by of overlap between their route systems. 47120. Congress enacted section 47120 First, in contrast to earlier alliances, after several announcements of the antitrust laws. Our Authority under Section 411. Our the Delta/Continental/Northwest proposed code-share arrangements review of this proposed alliance has alliance involves three airlines that between major U.S. airlines, including been conducted under this Department’s together have a large share of the the existing arrangement between unique statutory scheme. Under our national market. Northwest and Northwest and Continental.3 governing statutes, any determination Continental together have a national The Airlines’ Proposed Relationship. that the agreements should be market share of 18 percent as measured The proposed Delta/Continental/ prohibited would be based on a finding by domestic revenue passenger miles, Northwest alliance is a comprehensive that they constituted an unfair method and Delta has 17 percent of the national marketing arrangement that would of competition. Section 411 authorizes market. The proposed three-airline involve code-sharing, frequent flyer us to prohibit conduct that does not alliance would therefore have a national reciprocity, and reciprocal access to violate the Sherman Act. See, e.g., Pan market share of 35 percent. In contrast, airport lounges. The alliance agreements American World Airways v. United the largest of the previous alliances, have a ten-year term. Each airline would States, 371 U.S. 296, 303–308 (1963). As United/US Airways, resulted in a put its code on each of its partners’ discussed above, our statutory authority combined market share of 23 percent, flights to the extent possible given the under section 411 must be exercised in and that share may be expected to limited number of available flight the context of the mandates to protect decline if the two airlines’ financial numbers. The airline operating the flight the public interest enumerated in 49 difficulties ultimately lead to a would obtain the revenue paid by the U.S.C. 40101. shrinkage of their route systems. passenger. Members of each airline’s The leading case on the scope of our More significantly, both the existing frequent flyer program could earn award authority under section 411 is United Continental/Northwest alliance and the miles and use them on flights operated Air Lines v. CAB, 766 F.2d 1107 (7th recent United/US Airways alliance by the other two airlines. Members of Cir. 1985) (Posner, J.). This Department involved airlines whose route systems each partner’s program inherited from the CAB the same overlapped relatively little. In 2001, will have access to the other two statutory provision that was at issue in Continental and Northwest overlapped airlines’ airport lounges. The three that case. In United Air Lines, the Court in 558 markets, accounting for 6.5 airlines would engage in joint marketing affirmed the Board’s computer million annual passengers. The United/ programs whereby they would make reservations system rules US Airways alliance involved 543 joint contract proposals to corporate notwithstanding the absence of any overlapping markets accounting for 15.1 customers to the extent allowed by the finding that the systems’ practices million annual passengers. United has a antitrust laws and create joint violated the antitrust laws. The Court largely east-west route system, while US agency incentive commission programs. held that the Board could nonetheless Airways has a largely north-south route The three airlines have vigorously regulate CRS practices, because the system along the East Coast. In dramatic asserted that their alliance will benefit Board ‘‘can forbid anticompetitive contrast, the three alliance partners’ consumers by providing on-line services practices before they become serious services overlap in 3,214 markets to travellers in markets that now have enough to violate the Sherman Act.’’ accounting for approximately 58 million no on-line service and improved access United Air Lines, 766 F.2d at 1114. annual passengers. to frequent flyer programs and airport Competition Analysis. In reviewing Thus, the Delta/Continental/ lounges. They contend that each of them the agreements between Delta, Northwest alliance is not an end-to-end Continental, and Northwest, we are alliance, unlike most of the other 3 Because Northwest and Continental mindful that their joint venture domestic and international alliances implemented their code-share proposal before the enactment of 49 U.S.C. 47120, the Justice relationship will not be the equivalent reviewed by us, which typically have Department reviewed that agreement pursuant to its of a merger, that they do not now intend expanded the network of each alliance authority to enforce the antitrust laws. That to significantly integrate their partner. Contrary to the three airlines’ Department determined that it would not challenge operations, and that each airline has representations regarding new on-line the code-share arrangement if the two airlines complied with certain conditions, but challenged represented that it will independently service, Delta’s code-share with Northwest’s simultaneous acquisition of the major establish its fare levels and capacity Continental would give Delta access to block of Continental voting stock. levels in its city-pair markets. We note only eleven domestic not now

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served by Delta, all of which are small. competitive harm. We presently believe extremely difficult, it appears, for other While Delta’s code-share with that that experience does not provide a carriers to respond effectively, and thus Northwest would give Delta access to valid basis for comparison. It appears forcing those competing carriers to exit significantly more domestic airports, it that the Delta/Continental/Northwest some markets. Unaligned carriers could appears that the total number of new on- alliance would create far fewer new on- be particularly vulnerable to the line markets created by the alliance line service opportunities, involve much unprecedented market power of the would still account for only 89,530 more overlapping service, and pose a Delta/Continental/Northwest alliance, annual passengers, far less than one- greater danger of collusion than did the and many could be weakened or cease tenth of one percent of all domestic Continental/Northwest alliance. to exist. Accordingly, we have a number passengers. Thus, the value of the Our decision to allow United and US of specific concerns with the alliance, alliance for the partners would come Airways to proceed with their alliance which we would attempt to address from capturing passengers now traveling is not inconsistent in any way with our through the conditions described below. on other airlines, rather than the present view that the Delta/Continental/ We would, of course, monitor the stimulation of traffic in new ‘‘online’’ Northwest alliance presents serious alliance’s effects on competition, and markets. As a result, the proposed competitive issues. We expressed would retain the power to take further alliance would not provide substantial reservations about the United/US action if necessary. network extension benefits, unlike other Airways alliance, even though United Potential Collusion. First, the alliance domestic alliances. and US Airways have a significantly agreements authorize a wide range of It also appears that the Delta/ smaller share of the national market and discussions between the partners, since Continental/Northwest alliance would their route systems overlap much less the three airlines intend to make their create neither substantial operating than do the route systems of Delta and services as seamless as possible. Given efficiencies nor substantial cost the existing Northwest/Continental the broad nature of the discussions that reductions for the three airlines. The alliance. We allowed United and US will be required to implement the alliance instead would benefit the three Airways to go forward, without alliance, we are concerned that the partners by increasing their ability to imposing conditions additional to those communications among the carriers may attract passengers away from competing imposed by the Justice Department, lead to collusion, either tacit or explicit, airlines. Their ability to take passengers based on the airlines’ representations on such matters as fares and service away from competing airlines would in that they would continue to compete levels, notwithstanding the partners’ part result from their improved service, independently, our analysis of the representation that they would remain such as an increased ability for likelihood that the alliance would independent competitors. The face-to- travellers to earn frequent flyer awards, reduce competition, and our analysis of face oral discussions of scheduling, use and, in part, from the significant the potential public benefits of the of facilities, and joint pricing proposals advantages created when an airline (or alliance. 67 FR 62846 (October 8, 2002). to corporate travel departments and ) dominates a city. Importantly, we did not find that the travel agencies would provide new We recognize that the alliance could United/US Airways alliance would not opportunities to exchange information benefit a number of travellers. Travellers reduce competition. Instead, we stated: that could facilitate tacit collusion to in some markets will have a greater ‘‘At the present time, the material we restrain competition. In addition, the choice of flights, and the members of the have reviewed is not sufficient for us to airlines’ stated goal of harmonizing their three airlines’ frequent flyer programs conclude that an enforcement service standards, which would will gain a greater ability to earn and proceeding under 49 U.S.C. 41712 strengthen the alliance’s ‘‘brand,’’ seems use frequent flyer awards. Some would be warranted.’’ 67 FR 62847. likely to dampen the partners’ interests markets, albeit very small markets, that In sum, based on the information in competing with each other on service now have no on-line service could, if provided to us, we presently believe factors, such as terms of their frequent the Alliance Carriers choose to code- that the Delta/Continental/Northwest flyer programs. In order to develop a share in those markets, obtain such alliance proposal raises several serious multi-carrier ‘‘on-line’’ seamless service service. In analyzing the three carriers’ competitive issues. Consumer access to alliance, the partners may reduce the proposal, we must weigh the potential low fares and adequate service cannot differences in their respective service benefits of the alliance against its be assured without adequate features; consumers typically use potential anti-competitive effects. The competition. The goal of maintaining differences in service features, such as conditions set forth herein, while not competition requires (i) that the partners frequent flyer program terms, to choose preventing the airlines from continue competing with each other to between airlines. Collusion, whether implementing their alliance, would the maximum extent possible and (ii) explicit or tacit, harms consumers, attempt to ensure that the alliance that unaffiliated airlines continue because it reduces or eliminates provides the benefits that its partners serving the three partners’ markets or competition and enables firms to charge promised to the public. The conditions can enter those markets without higher prices or offer poorer service would attempt to limit the anti- artificial barriers. than they would in a competitive competitive harm that could result from Our concerns with this alliance market. the alliance without interfering with the proposal flow directly from our Increased Market Presence. The three partners’ ability to code-share in most responsibilities under our unique airlines plan to take advantage of their markets, to offer reciprocity to each statutory scheme. We do not seek to combined presence at the cities they airline’s frequent flyer and airport protect favored airlines. Competition serve by code-sharing, offering frequent lounge program members, and to engage works when individual competitors find flyer program reciprocity, and making in joint marketing efforts in most cities. ways to improve their lot relative to joint offers to corporate customers and In analyzing the alliance’s potential others, thus forcing others to respond. travel agencies. This would extend the impact on airline competition, we have The end result is more efficient airlines, same types of competitive advantages considered the data available to us better service, lower fares, and possessed by the dominant airline in a regarding the Continental/Northwest economic growth. Here, however, city to a number of spoke cities, and this alliance, which the three airlines multiple carriers would join forces in may substantially undermine the ability contend has caused no discernible many different ways, making it of competing airlines to maintain

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service in, or enter, markets served by market share that would accrue to them markets or increase service in existing the alliance partners. That potential through a merger. markets if they cannot obtain access to harm would result primarily from the Joint Marketing. As noted, the three the necessary airport facilities. Facilities combination of the three airlines’ airlines plan to offer corporate are presently unobtainable at a number increased market presence and the customers joint contracts and to offer of important airports, such as Boston. consequent marketing advantages travel agencies joint incentive programs. The alliance partners may have an created by their dominance of many In general, the airline that offers the incentive and the ability to ‘‘hoard’’ markets, rather than because the broadest range of services will be the their existing facilities or terminate their alliance will enable the partners to offer most attractive bidder for a competitors’ use of subleased facilities substantially better service. Historical corporation’s business, and the airline at airports where gates are otherwise evidence and analysis support the that operates the most service at a city unobtainable to reduce competition. conclusion that an airline that has a will offer the most attractive incentive Such actions could worsen a situation large market share at a city typically has program to travel agencies in that city. that already exists, resulting ultimately An airline that dominates a city substantial competitive advantages over in higher fares and less service for typically structures its corporate other airlines that the latter often cannot consumers. contracts and incentive CRS Displays. If the Alliance Carriers offset, even by offering lower fares and programs in ways that leverage its fully implemented their proposed code- attractive service features. An airline’s existing dominant market share to gain sharing agreement, each of their flights possession of a dominant market share an even larger share of the business of could be listed three times in the in a city, accordingly, will give it some the corporate accounts and the bookings displays offered to travel agents by most ability to charge supracompetitive fares of the travel agencies. See e.g. General of the computer reservations systems and to reduce service. See, e.g., U.S. Accounting Office, ‘‘Airline (‘‘CRSs’’). Multiple listings of the same Department of Transportation, Findings Deregulation: Barriers to Entry Continue number of physical flights would move and Conclusions on the Economic, to Limit Competition in Several Key many of the services offered by other Policy, and Legal Issues, Enforcement Domestic Markets’’ (October 1996) at airlines to later CRS display screens, Policy Regarding Unfair Exclusionary 15–19; U.S. Department of with the likely result that many travel Conduct in the Air Transportation Transportation, Findings and agents would not find and book those Industry (January 17, 2001) at 22–26. Conclusions on the Economic, Policy, services. The multiple listings of the This is particularly true at airline hubs, and Legal Issues, Enforcement Policy same physical flights under the codes of including the hubs operated by the three Regarding Unfair Exclusionary Conduct all three partners could thus, by itself, airlines. The three airlines’ proposed in the Air Transportation Industry have the effect of reducing the number alliance would enable them to extend (January 17, 2001) at 23–24. If the of bookings obtained by competitors these hub advantages to spoke cities, proposed alliance is implemented, these from travel agents using a CRS, without which could deter new entry and may three airlines could do the same. The any actual improvement in capacity or cause existing competitors to end their partners’ joint marketing plans threaten reduction in price. In some markets, that services in some markets. The resulting competition in two respects. First, if phenomenon could undermine a reduction in competition may lead to they make joint offers, they are less competitor’s ability to maintain any higher fares and poorer service. likely to compete individually for service at all. Similar concerns have We recognize that the alliance corporate customers and travel agency caused us to consider, in a presently proposed by Delta, Continental, and patronage. Second, they could leverage pending proceeding, amending our CRS Northwest would not give any single their combined market share in ways rules to limit the number of times any airline a dominant market share and that preclude any effective competition flight can be displayed under different that the three airlines represent that from unaffiliated airlines. For example, . 67 FR 69366, 69396– the Alliance Carriers could offer a 69397 (November 15, 2002). The they will continue to compete corporate customer discounts on European Union’s CRS rules allow a independently on fares, capacity, and Northwest’s transpacific services only if single service to be displayed under no scheduling. Nonetheless, we believe the customer booked most of its more than two codes, even if more than that at many cities the alliance’s impact domestic travel on a particular domestic two airlines sell seats on the service on the prospects of entry by competing route on Delta rather than on a under their codes. 67 FR 69397. airlines would be substantially competing airline. The tying of the Proposed Conditions. Utilizing all of equivalent to the impact that a single partners’ services in this way could the information presently available to airline’s dominance would have at that make it extremely difficult for other us, we have conducted an independent city. Indeed, the documents provided to airlines, especially those that do not analysis of the proposed alliance under us confirm that the three airlines seek have a worldwide network like that our unique statutory authority. As noted through the alliance to increase their operated by the proposed alliance, to earlier, as a result of that analysis, we collective market share in ways that compete. presently believe that unless the would undermine the competitive Airport Facilities. The alliance Alliance Carriers formally accept and position of other airlines. They intend to partners have represented that they plan agree to certain conditions, the offer joint corporate discount contracts, to consolidate their operations at proposed alliance poses a serious joint travel agency incentive programs, airports when doing so would be danger to competition. The conditions and, from the traveller’s perspective, feasible, a step which could free a discussed herein would not affect the combine their frequent flyer programs. number of gates for use by others. operation of the existing Northwest/ Their proposed code-sharing would also Opposing parties have expressed a Continental alliance. We have increase their dominance through the concern that the Alliance Carriers developed them, after careful and simple fact of multiplying the apparent would not make underutilized gates thorough consideration of all of the number of flights offered by each of available to competitors and would relevant issues, in an attempt to them. In these respects, the three instead ‘‘hoard’’ gates at airports where alleviate the competitive concerns airlines seek to secure the same other facilities for new service are not raised by the Delta/Continental/ competitive advantages of a dominant obtainable. Airlines cannot enter new Northwest alliance without the need for

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formal enforcement action. We would or Boston (BOS), each Alliance Carrier agrees review within sixty (60) days following not now take enforcement action against to maintain records of daily gate usage at receipt from the Alliance Carriers of the the three airlines’ implementation of the those airports and to retain those records information necessary to complete its review. until one year after the termination of the Any request for modification shall not alliance if they formally agreed to the Marketing Agreement. Notwithstanding any constitute a new agreement for the purposes conditions. If the three airlines do not lease provision to the contrary, the Alliance of 49 U.S.C. 41720. promptly notify us of their agreement to Carriers further agree to release, within sixty 4. The following condition is intended to accept the conditions set forth herein, (60) days of request by an airport sponsor at encourage continued independent we will direct our Aviation Enforcement an airport that does not have a gate available competition and reduce the possibility of office to institute a formal enforcement for use on reasonable and competitive terms, joint marketing arrangements that reduce proceeding to determine whether the any underutilized leased gate, along with competition: airlines’ agreements constitute unfair related facilities (including overnight Joint Corporate and Travel Agency positions) but excluding gates used only for Contracts: If the Alliance Carriers wish to methods of competition in violation of international flights, for use by a domestic offer joint bids to corporations or travel section 411 and, if so, what remedies non-Alliance Carrier or for common-use. A agencies, the corporation or travel agency would be required. gate is underutilized if it is used less than an shall be given the option of dealing with each We have developed six conditions, average of six turns per day during any two Alliance Carrier separately or of receiving a after considering the three airlines’ consecutive calendar months. Subleases to joint bid from two or more of the Alliance responses to our stated concerns. For non-Alliance Carriers shall not be cancelled Carriers. Only after the corporation or travel convenience, our conditions are set to release gates under this condition. No agency has requested a joint bid in writing forth below, along with a short summary Alliance Carrier shall be required to release shall such a bid be developed and submitted. an underutilized leased gate pursuant to this In addition, the Alliance Carriers shall not of the basis for each of them: condition if it will be required to continue to offer a joint bid to any corporation or travel 1. The following condition is intended to pay rentals or charges to the airport sponsor agency that has a principal place of business reduce the possibility of collusion that would for the gate. This condition shall not apply or headquarters in a city 8 where all three be inconsistent with 49 U.S.C. 40101 or if a gate is underutilized due to an event of carriers (themselves or through regional unlawful under 49 U.S.C. 41712: force majeure.6 affiliates) operate scheduled service and their Steering Committee: The Alliance Carriers 3. The following condition is intended to combined market share 9 exceeds fifty shall not establish the Steering Committee as ensure that the Alliance Carriers implement percent as of the August prior to the offering defined in Section 10.1 of the Marketing their representations of consumer benefits of the joint bid. In any joint bid, the Alliance Agreement.4 The Alliance Carriers shall not due to on-line service expansion: Carriers shall not make the contractual coordinate or agree upon pricing, scheduling Codesharing: As referenced in the discounted fares or commissions dependent (except for minor schedule adjustments to Marketing Agreement, Domestic, Canadian, on satisfaction of minimum purchase or existing schedules to improve connectivity), and Caribbean codesharing shall be limited booking requirements, whether based on capacity, route entry or exit, revenue/ to six hundred fifty (650) flights per two- threshold or percentage, for specific domestic inventory management, frequent flyer terms, carrier combination for a total of twenty-six markets or for domestic services offered by or upon any other matter as to which an hundred (2,600) flights. Not less than twenty- one of the Alliance Carriers. This condition agreement among competitors would be five percent (25%) of each marketing carrier’s shall not apply to joint bids involving only inconsistent with 49 U.S.C. 40101 or new codeshare flights must be to or from Northwest and Continental. unlawful under 49 U.S.C. 41712. To ensure airports the carrier and its regional affiliates 5. The following condition is designed to compliance with those sections, counsel either did not directly serve or served with limit the potential anti-competitive effects of shall monitor any communications no more than three daily roundtrip flights as multiple listings of one service under concerning the above-specified topics. of August 2002. An additional thirty-five different codes, i.e. CRS ‘‘screen clutter,’’ Monitoring by counsel shall not confer percent (35%) of each marketing carrier’s while that issue is under active review in the attorney-client privilege upon such new codeshare flights must either meet the Department’s CRS rulemaking proceeding. At communications. The Alliance Carriers shall above requirement or be to or from small hub the conclusion of the proceeding, the same maintain written records of all such and non-hub airports.7 Beginning one year CRS rules applicable to all other codeshare communications among themselves regarding after the commencement of codeshare arrangements would be applicable to this the Marketing Agreement and shall retain operations, any Alliance Carrier may request codeshare agreement as well: them until one year after the Marketing review of this condition. The Department CRS Displays: In the current CRS Agreement’s termination. will exercise its best efforts to complete the rulemaking the Department is soliciting 2. The following condition is intended to comments on whether it should limit the implement the Alliance Carriers’ agreement Detroit (DTW), Houston (IAH), Memphis (MEM), number of times that codeshare services are to release ‘‘Surplus Gates’’ and reduce the Minneapolis/St. Paul (MSP), Newark (EWR), and displayed (67 FR 69396–97). The European possibility that the Marketing Agreement will Salt Lake City (SLC). Union CRS rules limit the number of codes impede competition due to ‘‘hoarding’’ 6 For the purposes of this agreement, an ‘‘event of displayed on a flight and CRSs operating in underutilized facilities at certain congested force majeure’’ is defined as follows: Acts of God; EU member states must comply with that airports: fire; damage to or destruction of aircraft or other limit. The Alliance Carriers shall make a Airport Facilities: The Alliance Carriers flight equipment; riots or civil commotion; strikes, good faith request in writing to each CRS that agree that due to co-location the following lockouts or labor disputes (whether resulting from the CRS, during the pendency of the CRS disputes between the carrier and its employees or rulemaking, not display an Alliance Carrier’s gates, along with related facilities (including between other parties); U.S. military or airlift overnight positions), shall be released to the emergency or substantially expanded U.S. military service under more than two codes in any airport sponsor upon its request for lease to airlift requirements as determined by the U.S. integrated display offered by the CRS. The domestic non-Alliance Carriers or for government; activation of the U.S. Civil Reserve Air requests and any responses thereto shall be common use: (a) Four gates at IAH, (b) two Fleet; war or hazards or dangers incident to a state submitted to the Department by the Alliance gates at DTW, (c) five gates at CVG, and (d) of war; acts of terrorism; or any other acts, matters Carriers. two gates at DFW. Additionally, if the or things, whether or not of a similar nature, which 6. The following condition is intended to Alliance Carriers choose to implement any are beyond the control of the carrier and which limit the duration of the potential anti- provision of the Marketing Agreement at any shall directly or indirectly, prevent, delay, competitive effects of the exclusivity clauses interrupt, or otherwise adversely affect the 5 of the Marketing Agreement to its proposed of the hub airports of any Alliance Carrier furnishing, operation or performance of a carrier; provided, however, that the carrier so affected shall term: 4 For the purposes of these conditions, the term take all commercially reasonable steps to cure such ‘‘Marketing Agreement’’ includes all of the exhibits nonperformance or delay. 8 For the purposes of this agreement, ‘‘city’’ is to the Marketing Agreement. 7 For the purposes of this notice, ‘‘small hub’’ and defined as a primary metropolitan statistical area. 5 For the purposes of this condition, ‘‘hub ‘‘non-hub’’ airports are defined by the Airport 9 For the purposes of this agreement, ‘‘market airports’’ are defined as Atlanta (ATL), Cincinnati Activity Statistics published by the Department of share’’ is determined by scheduled departing seats (CVG), Cleveland (CLE), Dallas/Ft. Worth (DFW), Transportation, Bureau of Transportation Statistics. on domestic flights.

VerDate Dec<13>2002 15:47 Jan 22, 2003 Jkt 200001 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 E:\FR\FM\23JAN1.SGM 23JAN1 Federal Register / Vol. 68, No. 15 / Thursday, January 23, 2003 / Notices 3299

Exclusivity Provisions: After the Date: Filed January 6, 2003. DEPARTMENT OF TRANSPORTATION termination of the Marketing Agreement, no Parties: Members of the International Alliance Carrier shall attempt to enforce any Coast Guard provision of the Marketing Agreement that Air Transport Association. would restrict any other Alliance Carrier Subject: Mail Vote 257, PTC23 ME– Maritime Administration from entering into an international or TC3 0163 dated December 23, 2002, domestic marketing relationship with any [USCG–2003–14294] other carrier. Resolution 010m, TC23/TC123 Middle East–TC3, Special Passenger Amending Conclusion. If we are notified El Paso Energy Bridge Gulf of Mexico, Resolution between China (excluding promptly that the three carriers agree to LLC Deepwater Port License Hong Kong SAR and Macao SAR) and implement the alliance subject to the Application conditions set forth above, we would points in the Middle East. Intended effective date: January 15, 2003. AGENCY: Coast Guard, DOT. Maritime not now institute an enforcement case Administration, DOT. under our governing statute. Given our ACTION: Notice of application. strong concern that the agreements Dorothy Y. Beard, Chief, Docket Operations & Media could have anti-competitive results, SUMMARY: The Coast Guard and the Management, Federal Register Liaison. however, we would continue to monitor Maritime Administration (MARAD) give closely the implementation of the [FR Doc. 03–1480 Filed 1–22–03; 8:45 am] notice, as required by the Deepwater agreements. We, of course, reserve the BILLING CODE 4910–62–P Port Act of 1974, as amended, that they right, if we obtain evidence that leads us have received an application for the to believe that the joint venture is licensing of a deepwater port, and that adversely affecting competition, to refer DEPARTMENT OF TRANSPORTATION the application appears to contain the the matter for enforcement action. required information. The notice Office of the Secretary Further, if the three airlines at any time summarizes the applicant’s plans and decide that they will no longer comply Motor Vehicles; Alternative Fuel the procedures we will follow in with a formal agreement accepting our considering the application. conditions, they will have created a new Vehicle (AFV) Report DATES: Any public hearing held in agreement that must be submitted to us connection with this application must under 49 U.S.C. 41720, subject to all of AGENCY: Office of the Secretary, DOT. be held not later than September 22, the provisions of the statute, including ACTION: Notice of Availability—Fleet 2003. The application will be approved the prescribed waiting period. Under (AFV) Report. our established interpretation of 49 or denied within 90 days after the last U.S.C. 47120, the same will be true if public hearing held on the application. SUMMARY: In accordance with the Energy they materially modify the terms of the ADDRESSES: The mailing address for the agreements submitted by them on Policy Act of 1992 (EPAct) (42 U.S.C. clerk in this proceeding is: Commandant August 23. 13211–13219) as amended by the (G–M), U.S. Coast Guard, 2100 Second Energy Conservation Reauthorization Street SW., Washington, DC 20593– Issued in Washington, DC on January 17, Act of 1998 (Pub. L. 105–388), and E.O. 2003. 0001. Public docket USCG–2003–14294 13149, ‘‘Greening the Government is maintained by the Docket Read C. Van de Water, Through Federal Fleet and Management Facility, U.S. Department Assistant Secretary for Aviation and of Transportation, Room PL–401, 400 International Affairs. Transportation Efficiency,’’ the Department of Transportation’s annual Seventh Street SW., Washington, DC [FR Doc. 03–1528 Filed 1–17–03; 2:20 pm] alternative fuel vehicle reports are 20590–0001. The Docket Management BILLING CODE 4910–62–P available on the following Department Facility office maintains a Web site, of Transportation Web site: http:// http://dms.dot.gov, and can be reached DEPARTMENT OF TRANSPORTATION osam.ost.dot.gov. by telephone at 202–366–9329 or fax at 202–493–2251. Office of the Secretary FOR FURTHER INFORMATION CONTACT: Kurt Anyone is able to search the T. Ettenger, Departmental Fleet electronic form of all comments Aviation Proceedings, Agreements Manager, Office of Security and received into any of our dockets by the Filed the Week Ending January 10, Administrative Management, 400 7th name of the individual submitting the 2003 Street SW., Washington, DC 20590; comment (or signing the comment, if submitted on behalf of an association, The following agreements were filed telephone (202) 366–2093. business, labor union, etc.). You may with the Department of Transportation Dated: January 15, 2003. review the Department of under the provisions of 49 U.S.C. 412 Richard Pemberton, Transportation’s complete Privacy Act and 414. Answers may be filed within Associate Director, Office of Security and Statement in the Federal Register 21 days after the filing of the Administrative Management. published on April 11, 2000, (Volume application. [FR Doc. 03–1481 Filed 1–22–03; 8:45 am] 65, Number 70; Pages 19477–78) or you Docket Number: OST–2003–14203. Date Filed: January 6, 2003. BILLING CODE 4910–62–P may visit http://dms.dot.gov. Parties: Members of the International FOR FURTHER INFORMATION CONTACT: If Air Transport Association. you have questions on this notice call Subject: PTC COMP Fares 0273 dated Robert Nelson, U.S. Coast Guard, (202) December 17, 2002, TC12/TC123 North 267–0496, [email protected]. Atlantic—Resolution 015n—USA Add- SUPPLEMENTARY INFORMATION: Receipt of on Amounts. Report—PTC COMP 990 application; determination. On dated December 20, 2002. Intended December 20, 2002, the Coast Guard and effective date: February 1, 2003. MARAD received an application from El Docket Number: OST–2003–14208. Paso Energy Bridge Gulf of Mexico LLC,

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