1 

UNITED STATES OF AMERICA 

BEFORE THE 

DEPARTMENT OF TRANSPORTATION

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Agreement Among Member Carriers of the ) 

International Air Transport Association ) Docket OST-2013-0048 

Concerning an Agreement (Resolution 787) ) 

of the Passenger Service Conference )

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COMMENTS OF THE AMERICAN ANTITRUST INSTITUTE ON TENTATIVE 

FINDINGS AND CONCLUSIONS, TENTATIVE DECISION, AND TENATIVE 

CONDITIONS ON APPROVAL ISSUED BY THE DEPARTMENT OF 

TRANSPORTATION

 The American Antitrust Institute (AAI)1

 appreciates this opportunity to comment on the 

Tentative Findings and Conclusions, Tentative Decision, and Tentative Conditions on Approval 

set forth in Order 2014-5-7 (“Order to Show Cause”). With respect to the competition issues 

raised in this proceeding, we understand the Department to have broadly concluded (1) that 

adoption of a voluntary, nonexclusive Extensible Mark-Up Language (XML) messaging 

standard, alone, is competitively unobjectionable,2 and (2) that an agreement to standardize 

distribution would, at a minimum, require further scrutiny insofar as the structure of distribution 

in the airline industry should “ultimately be determined in the marketplace.”3

 While we agree 

with these overarching substantive conclusions, the Department’s Tentative Findings and 

Conclusions, Tentative Decision, and Tentative Conditions on Approval require important 

changes to avoid problematic misinterpretation, as discussed in this submission. 

                                                       

1

 The AAI’s Board of Directors alone has approved this filing for AAI. The individual views of 

members of the Advisory Board may differ from the AAI’s positions. 

2 See Order to Show Cause at 10. 

3 Id. 
2 

I. THE DEPARTMENT FACES A DIFFICULT ADMINISTRATIVE CHALLENGE 

BECAUSE IT MUST CARVE THE NDC DISTRIBUTION STANDARD OUT OF 

ITS APPROVAL OF RESOLUTION 787 

 Many stakeholders, including IATA, apparently embrace the substantive conclusions 

reflected in the Department’s Order to Show Cause, and thus the Department is now in the more 

agreeable position of being asked only to effectuate an accord between IATA and one of the 

leading critics of the original Resolution 787 proposal.4

 Because the Department has tentatively 

approved this accord, subject to certain modifications and clarifications,5

 its primary challenge at 

this stage of the proceedings is to clearly articulate the nature and scope of its approval in 

writing. This task is made very difficult, and critically important, by the iterative nature of 

IATA’s request for approval, which is cumulatively incorporated into a series of disparate 

submissions, including Resolution 787 itself, IATA’s original application seeking approval of 

Resolution 787, the modifications to IATA’s proposal reflected in IATA’s reply to public 

comments, and the modifications to those modifications reflected in IATA’s Joint Motion with 

Open Allies for Airfare Transparency (“Joint Motion”).6

 

 The AAI offers these brief comments to make two suggestions to clarify the nature and 

scope of approval that would be conferred in the Department’s written final order. First, insofar 

as the Department has determined that the agreement to institute a new distribution standard 

described in IATA’s New Distribution Capability (NDC) proposal is not part of the overall 

Resolution 787 proposal that is before it for approval, but rather is merely a description of 

“goals,” the Department should ground its approval of Resolution 787 in the public benefits that 

                                                       

4 See IATA and Open Allies’ Joint Motion for Leave to File Agreed Limitations Concerning 

Resolution 787. 

5 See Order to Show Cause at 9. 

6 See AAI Response to IATA Reply at 3-4 (discussing problems associated with submitting a 

“moving target” for approval). 
3 

would flow from the modernized communication standard it is approving, not any claimed 

benefits that would flow from the NDC distribution standard. Second, to avoid problematic 

misinterpretations of the scope of its approval, and the attendant tax on Department resources 

that would flow from future disputes caused by the ensuing confusion, the Department should 

state affirmatively that approval of Resolution 787 constitutes approval only to implement a new 

communications standard. 

II. THE DEPARTMENT’S BASES FOR APPROVAL SHOULD BE GROUNDED IN 

THE PUBLIC BENEFITS OF THE XML MESSAGING STANDARD IT IS 

APPROVING, NOT ALLEGED PUBLIC BENEFITS OF NDC 

 In its Order to Show Cause, the Department’s Summary states that Resolution 787 

establishes a process for developing a technical standard for data exchange using XML, and that 

it “additionally establishes certain goals associated with using the new technical standard . . . . 

These goals are called the ‘New Distribution Capability’ (NDC).”7

 It then states that “IATA 

seeks Department approval of IATA Resolution 787.”8

 According to this formulation, IATA 

implicitly seeks approval of NDC, but only insofar as it describes “goals” rather than a formal 

agreement to standardize distribution. 

 In its Tentative Decision, the Department rules only on IATA’s concrete proposal to 

institute a new technical standard for data exchange, and it does not accept IATA’s invitation to 

approve any abstract “goals,” let alone a new distribution standard. However, the Department’s 

Tentative Decision is susceptible to misinterpretation, namely as embracing the purported 

“goals” of NDC, rather than the goals of the new XML messaging standard, as its bases for 

                                                       

7

 Order to Show Cause at 1. 

8 Id. 
4 

approving the XML messaging standard.9

 In the “Public Benefits” subsection, for example, the 

Department explains the second of two “broad categories of public benefits” justifying overall 

approval of Resolution 787 as follows: 

[T]he use of common technical standards could facilitate the marketplace development of 

distribution practices and channels that would make it easier for consumers to compare 

competing carriers’ fares and ancillary products across multiple distribution channels, 

make purchasing more convenient, allow carriers to customize service and amenity 

offers, and increase transparency, efficiency, and competition.10

 AAI submits that this second category of public benefits should be eliminated, or altered, 

as a basis for approving Resolution 787, because IATA claims this category of benefits would 

arise from implementing NDC, not from adopting an XML messaging standard. In a subsection 

of its application describing NDC as “A Vision for the Future,” IATA’s application clearly 

states, optimistically, that the same benefits quoted in the Department’s language above would 

arise upon implementation of NDC, after XML has already been adopted, which process “is 

expected to take at least a full year to complete.”11 By grounding approval of Resolution 787 in 

a purported benefit of implementing NDC, yet expressly not approving NDC insofar as it 

describes an agreement to institute a new distribution standard, the Department’s Tentative 

Decision threatens to convey the mistaken message that adoption en masse of a single, industrywide distribution standard, other than by express agreement, would be beneficial for consumers. 

The Department can correct for this problem by eliminating this second category of benefits as a 

basis for approving Resolution 787, or altering it to clarify that such benefits are capable of being 

                                                       

9 Id. at 9. 

10 Id. 11 See IATA Application at 5-6 (asserting “hope” that post-XML implementation of NDC would 

lead to three benefits: “(1) allowing a customer to shop, select and purchase ancillary services or 

fares packaged with ancillaries, (2) the ability to see and weigh differences in competing 

products, such as more leg room, lie-flat premium seats, in-flight entertainment or WiFi along 

with price, and (3) customized service and amenity packages and pricing based on attributes such 

as loyalty program status that the customer is willing to share in the shopping process.”) 
5 

realized insofar as the Department’s Conditions on Approval help ensure they do not come at the 

expense of distribution competition. 

III. ADEQUATE COMPETITION AND CONSUMER PROTECTION WITHIN A 

DISTRIBUTION SYSTEM IS NOT A FUNCTION OF WHETHER THAT 

SYSTEM EMPLOYS AN XML MESSAGING STANDARD 

 After the airline industry institutes modern, industry-wide technical standards and 

protocols for data exchange, the current mechanisms for distribution of airline products could 

undergo a wide variety of changes. As the Order to Show Cause expressly states, one result of 

instituting XML “could” be that procompetitive distribution practices emerge through 

“marketplace development.”12 As the Order to Show Cause also implicitly recognizes, however, 

another result is that the industry could use the adoption of a new technical standard as an 

occasion to collusively agree to institute a single new distribution model, which would soften or 

eliminate intra-channel and inter-channel distribution competition to the detriment of 

consumers.13 We note that, importantly, this result is foreclosed by Section 1(a) of the 

Department’s Tentative Conditions on Approval, which expressly states that no formal 

agreement as such would be hereby approved. 

 Still other results are possible, however. A third result could be that the industry 

coalesces around a single distribution model through tacit rather than express coordination. The 

airlines, for example, could use the plain text of Resolution 787 as a roadmap to individually but 

uniformly adopt the industry-wide distribution model contemplated by NDC, with only a (tacit) 

wink and a nod rather than a formal agreement approved by the Department. Collusion has been 

                                                       

12 Order to Show Cause at 9. 

13 See id. (adopting language from Joint Motion in response to concern that NDC “would 

establish a mandatory business process for all airlines that wish to distribute enhanced content”). 
6 

called “the supreme evil of antitrust,”14 but “[t]acit coordination is feared by antitrust policy even 

more than express collusion, for tacit coordination, even when observed, cannot easily be 

controlled directly by the antitrust laws.”15 If the airlines were to “individually” switch to 

NDC’s single, industry-wide distribution model in unison, the competitive effects on intrachannel and inter-channel distribution likely would be indistinguishable, from the consumer’s 

perspective, from the competitive effects that would result after an express agreement. Even 

worse, they would be more difficult to prosecute under the antitrust laws. 

 If a distribution system that constrains competition is allowed to develop after the 

institution of common technical standards, the higher prices and reduced choice flowing from the 

softening or elimination of distribution-channel competition likely would dwarf any public 

benefits flowing from easier comparison shopping, customized offers, and increased 

transparency. Consumers likely would be comparing, customizing, and discovering degraded 

and more expensive products. If the Department’s approval of Resolution 787 could be 

misinterpreted as approval of the goals or aspirations of NDC, the Department would send a 

dangerous message that could signal approval of the NDC vision for a single, coordinated 

distribution standard. As many parties noted in earlier comments, this is one of the alarming 

NDC “aspirations” under the plain text of Resolution 787. Whether improved comparison 

shopping, customization and transparency are a net public benefit depends entirely on the 

competitive characteristics of the distribution system that develops in the wake of the new XML 

messaging standard. As the Department has noted, any such system(s) should be the product of 

market forces. The Department should take care to ensure that its final written order does not 

                                                       

14 Verizon Communs., Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408 (2004). 

15 FTC v. H.J. Heinz Co., 246 F.3d 708, 716 (D.C. Cir. 2001). 
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encourage the airline industry to pursue the functional equivalent of the NDC model insofar as 

that model contemplates a single, non-competitive distribution system. 

IV. THE DEPARTMENT’S FINAL ORDER SHOULD AFFIRMATIVELY STATE 

THAT IT APPROVES ONLY THE XML STANDARD 

 The complexities posed by the Department’s approval of Resolution 787 flow from the 

dissonance between the text of the resolution and the text of IATA’s application for approval. 

The latter insists that IATA seeks approval only for a technical messaging standard, whereas the 

former intertwines that messaging standard with “[b]usiness . . . standards . . . to distribute 

products.”16 The Department’s Tentative Decision treats NDC as an explanation of “goals,” and 

not as an agreement to institute a new distribution standard. It has determined that an agreement 

to institute a new distribution standard is not part of the overall Resolution 787 proposal, and 

accordingly, is not before the Department for approval. The Department’s Tentative Conditions 

on Approval also go a long way toward alleviating the most obvious concerns posed by the 

overall proposal. However, the Department’s Tentative Conditions primarily address what 

approval of Resolution 787 does not constitute,17 and legitimate questions remain, including 

those discussed above, as to precisely what it does constitute. 

 To avoid unintentionally communicating approval of any aspects of a potentially 

anticompetitive distribution system, and creating confusion which leads to disputes that 

unnecessarily tax the Department’s resources, the Department should affirmatively describe – in 

positive, rather than only negative, language – the boundaries of its approval of Resolution 787. 

                                                       

16 Resolution 787, Sec. 1.2.1 (“Key Principles”). 

17 See, e.g., Appendix at 1(a), 2, 3(b)-(c), 4, 5 (repeatedly referring to what agreement “does not 

constitute approval of”). 
8 

This could be accomplished through an addition to the Tentative Conditions on Approval in the 

Appendix as follows: 

Resolution 787 is approved only insofar as it constitutes a request to implement a 

voluntary, non-exclusive XML messaging standard that could have been filed under 

Tier 1 of the Department’s three-tiered system for the filing and implementation of 

IATA agreements, and would have qualified for an exemption to Condition #2 to the 

IATA by-laws under Order 2012-4-18. 

Respectfully submitted, 

Randy M. Stutz 

Senior Counsel & Director of Special Projects

American Antitrust Institute 

202-905-9420 

rstutz@antitrustinstitute.org 

Diana L. Moss, Ph.D. 

Vice President 

American Antitrust Institute 

720-233-5971 

dmoss@antitrustinstitute.org 

June 11, 2014