Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Rules and Regulations 78707 

1 ‘‘Defining Unfair or Deceptive Practices,’’ 85 FR 

11881 (February 28, 2020). 

2 ‘‘Notification of Regulatory Review,’’ 82 FR 

45750 (October 1, 2017). 

3See Comment of A4A, Docket DOT–OST–2017– 

0069–2753, available at www.regulations.gov. 

4 ‘‘Administrative Rulemaking, Guidance, and 

Enforcement Procedures,’’ 84 FR 71714 (December 

27, 2019), amending 49 CFR part 5 and other 

provisions. 

5 84 FR 71718–71826. 

(Lat. 46°36′24′′ N, long. 111°59′0.0′′ W) 

That airspace extending upward from the 

surface within an area bounded by a line 

beginning at Lat. 46°34′18.57′′ N, long. 

111°51′30.319′′ W, to Lat. 46°38′5.89′′ N, 

Long. 111°51′24.53 ′′ W, to Lat. 46°37′12.53′′ 

N, long. 111°45′24.67 ′′ W, to Lat. 

46°32′22.72′′ N, Long. 111°46′31.44′′ W, to 

Lat. 46°33′24.13′′ N, Long. 111°54′20.01′′ W, 

then counter-clockwise along the 4.4-mile 

radius of the airport to Lat. 46°34′20.01′′ N, 

long. 111°53′22.03′′ W, then to the point of 

beginning, and within an area bounded by a 

line beginning at Lat. 46°38′39.95′′ N, long. 

112°06′47.50′′ W, to Lat. 46°36′47.49′′ N, long. 

112°07′53.41′′ W, to Lat. 46°37′22.52′′ N, long. 

112°11′37.80′′ W, to Lat. 46°39′19.40′′ N, long. 

112°10′58.64′′ W, then to the point of 

beginning west of Helena Regional Airport. 

Paragraph 6005. Class E Airspace Areas 

Extending Upward from 700 feet or more 

above the Surface of the Earth. 

* * * * * 

ANM MT E5 Helena, MT [Amended] 

Helena Regional Airport, MT 

(Lat. 46°36′24′′ N, long. 111°59′0.0′′ W) 

That airspace extending upward from 700 

feet above the surface within an 8.3-mile 

radius of the airport, and within 1 mile each 

side of the 103° bearing from the airport, 

extending from the 8.3-mile radius to 10.7 

miles east of the airport, and within 1.8 miles 

each side of the 281° bearing from the airport, 

extending from the 8.3-mile radius to 18.1 

miles west of the airport; and that airspace 

extending upward from 1,200 feet above the 

surface within a 36-mile radius of Helena 

Regional Airport. 

Issued in Seattle, Washington, on 

December 1, 2020. 

B. G. Chew, 

Acting Group Manager, Operations Support 

Group, Western Service Center. 

[FR Doc. 2020–26816 Filed 12–4–20; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF TRANSPORTATION 

Office of the Secretary 

14 CFR Part 399 

[Docket No. DOT–OST–2019–0182] 

RIN 2105–AE72 

Defining Unfair or Deceptive Practices 

AGENCY: Office of the Secretary (OST), 

U.S. Department of Transportation 

(DOT). 

ACTION: Final rule. 

SUMMARY: The U.S. Department of 

Transportation (DOT or Department) is 

issuing a final rule codifying its 

longstanding definitions for the terms 

‘‘unfair’’ and ‘‘deceptive’’ in the 

Department’s regulations implementing 

its aviation consumer protection statute. 

The final rule also describes the 

Department’s procedural requirements 

for its rulemaking and enforcement 

actions when based on the Department’s 

authority to prohibit unfair or deceptive 

practices. Most of the Department’s 

aviation consumer protection 

regulations, such as the Department’s 

rules on overbooking, are based on the 

Department’s authority to prohibit 

unfair or deceptive practices. This rule 

is intended to provide regulated entities 

and other stakeholders with greater 

clarity and certainty about the 

Department’s interpretation of unfair or 

deceptive practices and the 

Department’s process for making such 

determinations in the context of 

aviation consumer protection 

rulemaking and enforcement actions. 

DATES: Effective on January 6, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Robert Gorman, Kimberly Graber, or 

Blane Workie, Office of Aviation 

Consumer Protection, U.S. Department 

of Transportation, 1200 New Jersey Ave. 

SE, Washington, DC 20590, 202–366– 

9342, 202–366–7152 (fax); 

robert.gorman@dot.gov; 

kimberly.graber@dot.gov; blane.workie@

dot.gov (email). 

SUPPLEMENTARY INFORMATION: 

I. Rulemaking Background 

Much of the background information 

presented here also appears in the 

preamble to the Department’s Notice of 

Proposed Rulemaking on Defining 

Unfair and Deceptive Practices 

published on February 28, 2020.1 We 

have presented background information 

again here to assist the public in 

understanding the issues involved. 

A. The Department’s Unfair and 

Deceptive Practices Statute 

The Department’s authority to 

regulate unfair and deceptive practices 

in air transportation or the sale of air 

transportation is found at 49 U.S.C. 

41712 (‘‘Section 41712’’) in conjunction 

with its rulemaking authority under 49 

U.S.C. 40113, which states that the 

Department may take action that it 

considers necessary to carry out this 

part, including prescribing regulations. 

Section 41712 gives the Department the 

authority to investigate and decide 

whether an air carrier, foreign air 

carrier, or ticket agent is engaged in an 

unfair or deceptive practice in air 

transportation or the sale of air 

transportation. Under Section 41712, 

after notice and an opportunity for a 

hearing, the Department has the 

authority to issue orders to stop an 

unfair or deceptive practice. A different 

statute, 49 U.S.C. 46301, gives the 

Department the authority to issue civil 

penalties for violations of Section 41712 

or for any regulation issued under the 

authority of Section 41712. 

B. Request for Regulatory Reform 

On February 24, 2017, President 

Trump signed Executive Order 13777, 

Enforcing the Regulatory Reform 

Agenda, which requires each Federal 

agency to establish a Regulatory Reform 

Task Force to evaluate existing 

regulations, and make recommendations 

for their repeal, replacement, or 

modification. As part of this process, the 

Department is directed to seek input 

and assistance from entities 

significantly affected by its regulations. 

On October 1, 2017, the Department 

issued a Notice of Regulatory Reform 

seeking written input from the public on 

existing regulations and other actions 

that are good candidates for repeal, 

replacement, or modification.2 In 

response to the Notice, Airlines for 

America (A4A), an airline trade 

association, urged the Department to 

adopt policies defining unfairness and 

deception in Section 41712 consistent 

with principles articulated in Federal 

Trade Commission (FTC) and Federal 

court precedent interpreting those 

terms.3 A4A also urged the Department 

to adopt various procedures which 

would, in its view, ensure that the 

Department’s enforcement and 

rulemaking activities were rooted in 

fairness, due process, and an adequate 

factual foundation. 

C. Department’s Comprehensive Update 

of Rulemaking and Enforcement 

Procedures 

On December 27, 2019, the 

Department issued a comprehensive 

update and consolidation of its 

procedural requirements for the 

Department’s rulemaking and 

enforcement actions.4 This update 

reflects the Department’s policy that 

regulations should be straightforward 

and clear, incorporate best practices for 

economic analyses, and provide for 

appropriate public participation.5 It also 

reflects the Department’s policy that 

enforcement actions should satisfy 

principles of due process and remain 


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78708 Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Rules and Regulations 

6 84 FR 71729–71733. 

7Letter from the FTC to Hon. Wendell Ford and 

Hon. John Danforth, Committee on Commerce, 

Science and Transportation, United States Senate, 

Commission Statement of Policy on the Scope of 

Consumer Unfairness Jurisdiction (December 17, 

1980), appended to International Harvester Co., 104 

F.T.C. 949, 1070, 1073 (1984). 

8See, e.g., International Harvester, 104 F.T.C. 949 

(1984); Credit Practices Rule, Statement of Basis 

and Purpose, 49 FR 7740 (1984) (‘‘Credit Practices 

Rule SBP’’); Orkin Exterminating Co., Inc., 108 

F.T.C. 263 (1986); aff’d, FTC v. Orkin, 849 F.2d 

1354 (11th Cir. 1988). 

9FTC Policy Statement on Deception (Oct. 14, 

1983), 103 F.T.C. 174, 175 (1984) (appended to 

Cliffdale Assocs., Inc., 103 F.T.C. 110 (1984)). 

10The proposal recognized that if Congress 

directed the Department to issue a rule declaring a 

specific practice to be unfair or deceptive, then the 

Department would do so without reference to the 

Department’s own definitions. 

lawful, reasonable, and consistent with 

Administration policy.6

D. Summary of Notice of Proposed 

Rulemaking (NPRM) 

On February 28, 2020, the Department 

published an NPRM proposing to define 

the terms ‘‘unfair’’ and ‘‘deceptive’’ 

found in Section 41712, the 

Department’s aviation consumer 

protection statute. The NPRM also 

proposed a series of amendments to the 

Department’s aviation consumer 

protection procedures with respect to 

both regulation and enforcement. The 

proposals were issued to provide greater 

clarity, transparency, and due process in 

future aviation consumer protection 

rulemakings and enforcement actions. 

By way of background, the 

Department described the origin of 

section 41712 and explained how it was 

modeled on Section 5 of the Federal 

Trade Commission (FTC) Act. The 

Department explained that while 

Section 5 vests the FTC with broad 

authority to prohibit unfair or deceptive 

practices in most industries, Congress 

granted the Department the exclusive 

authority to prohibit unfair or deceptive 

practices of air carriers and foreign air 

carriers. The Department noted that 

DOT and FTC share the authority to 

prohibit unfair or deceptive practices by 

ticket agents in the sale of air 

transportation. 

Next, the Department explained that 

in December 1980, the FTC issued a 

Policy Statement to Congress, which 

articulated general principles drawn 

from FTC decisions and rulemakings 

that the Commission applies in 

enforcing its mandate to address 

unfairness under the FTC Act.7 These 

principles were applied in FTC 

enforcement cases and rulemakings, and 

approved by reviewing Federal courts.8

The FTC explained that unjustified 

consumer injury is the primary focus of 

the FTC Act. This concept contains 

three basic elements. An act or practice 

is unfair where it: (1) Causes or is likely 

to cause substantial injury to 

consumers; (2) cannot be reasonably 

avoided by consumers; and (3) is not 

outweighed by countervailing benefits 

to consumers or to competition. The 

FTC also considers public policy, as 

established by statute, regulation, or 

judicial decisions, along with other 

evidence in determining whether an act 

or practice is unfair. 

These principles are now reflected in 

the FTC Act itself. In 1994, Congress 

enacted 15 U.S.C. 45(n), which states 

that the FTC shall have no enforcement 

authority or rulemaking authority to 

declare an act or practice unfair unless 

it is likely to cause substantial injury to 

consumers which is not reasonably 

avoidable by consumers themselves and 

not outweighed by countervailing 

benefits to consumers or to competition. 

Congress further provided in Section 

45(n) that the FTC could rely on public 

policy, along with other evidence, for 

making a determination of unfairness, 

but public policy may not be the 

primary basis of its decision. 

Next, the Department explained that 

in 1983, the FTC issued a Policy 

Statement on Deception.9 Like the 1980 

Policy Statement on Unfairness, the 

1983 Policy Statement clarified the 

general principles that the FTC applies 

in enforcing its mandate to address 

deception under the FTC Act. As 

explained in the Policy Statement, an 

act or practice is deceptive where: (1) A 

representation, omission, or practice 

misleads or is likely to mislead the 

consumer; (2) a consumer’s 

interpretation of the representation, 

omission, or practice is considered 

reasonable under the circumstances; 

and (3) the misleading representation, 

omission, or practice is material. 

In the NPRM, the Department 

proposed to adopt definitions of 

‘‘unfair’’ and ‘‘deceptive’’ that echo FTC 

precedent. The Department explained 

that adopting these definitions would 

simply codify existing practice and 

would not reflect a change of policy, 

because the Department’s Office of 

Aviation Consumer Protection (formerly 

known as the Office of Aviation 

Enforcement and Proceedings), a unit 

within the Office of the General Counsel 

that enforces aviation consumer 

protection requirements, has often 

explicitly relied on those definitions in 

its enforcement orders. 

Next, the Department proposed a set 

of procedural rules that would govern 

the Department’s future discretionary 

rulemaking and enforcement efforts in 

the area of aviation consumer 

protection. With respect to rulemaking 

actions, the Department proposed three 

measures. First, future rulemakings 

declaring certain practices to be 

‘‘unfair’’ or ‘‘deceptive’’ would use the 

Department’s proposed definitions of 

those terms.10 In prior rulemakings, the 

Department tended to make a 

conclusory statement that a practice was 

unfair or deceptive and did not provide 

its reasoning for that conclusion. In 

arriving at these conclusions that certain 

practices were unfair or deceptive, DOT 

employed the same definitions that are 

set forth in this rule, though that 

analysis was done informally at the 

Department and not further described in 

rule preambles. 

Second, future discretionary 

rulemakings would be subject to a 

hearing procedure. Specifically, if the 

Department proposes that a practice was 

unfair or deceptive in a rulemaking, and 

that rulemaking raised scientific, 

technical, economic, or other factual 

issues that are genuinely in dispute, 

then interested parties may request an 

evidentiary hearing to gather evidence 

on those disputed issues of fact. Third, 

future rulemakings would explain the 

Department’s basis for finding a practice 

to be unfair or deceptive. 

With respect to enforcement, the 

Department proposed three measures. 

First, when taking enforcement action 

against an airline or ticket agent for 

unfair or deceptive practices, the 

Department would use the proposed 

definitions of ‘‘unfair’’ and ‘‘deceptive’’ 

set forth above (unless a specific 

regulation issued under the authority of 

section 41712 applied to the practice in 

question, in which case the terms of the 

specific regulation would apply). 

Second, in future enforcement actions, 

the Department would provide the 

airline or ticket agent with the 

opportunity to be heard and to present 

mitigating evidence. This final rule 

codifies the longstanding practice of 

allowing regulated entities to present 

mitigating evidence during the course of 

informal DOT enforcement actions. In a 

typical enforcement action, the Office of 

Aviation Consumer Protection issues an 

investigation letter to an airline or ticket 

agent, seeking information about the 

extent and nature of the violations. 

During that process, the Office also 

allows airlines and ticket agents to 

present mitigating evidence (e.g., that 

consumer harm was low, or that the 

airline or ticket agent has taken steps to 

mitigate the harm to consumers). While 

the rule now makes this process 

explicit, we do not expect an expansion 

in its usage; instead, we expect that it 


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Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Rules and Regulations 78709 

11Travelers United, Flyersrights.org, National 

Consumers League, Consumer Action, American 

Association for Justice (formerly American Trial 

Lawyers’ Association), Travel Fairness Now, 

Consumer Reports, Consumer Federation of 

America, and US PIRG. 

12Commissioners Rebecca Kelly Slaughter and 

Rohit Chopra. 

13Senators Edward J. Markey, Tammy Baldwin, 

Maria Cantwell, and Richard Blumenthal and 

Representative Katie Porter. 

14Airlines for America (A4A), International Air 

Transport Association (IATA), National Business 

Aviation Association (NBAA), U.S. Tour Operators 

Association (USTOA), Spirit Airlines, Southwest 

Airlines, and the Competitive Enterprise Institute 

(CEI). 

15Travel Tech and BCD Travel USA. 

16Comment of Commissioner Chopra at 2. He 

particularly noted that in the years after adoption 

of the Policy Statement, the FTC failed to take 

action against predatory lending and the deceptive 

practices of the tobacco industry; instead, states 

took the lead, and the FTC’s authority over 

consumer lending practices was transferred to the 

Consumer Financial Protection Bureau (CFPB), 

which has a broader standard for taking 

enforcement action than the FTC. Id. at 6–8. 

17 Id. at 10. 

18Southwest comment at 4, citing 49 U.S.C. 

40101(a)(6), (12). 

will continue unchanged after the 

issuance of this final rule. Third, in 

future enforcement orders, if a specific 

regulation does not apply to the practice 

in question, the Department would 

explain the basis for its finding that a 

practice was unfair or deceptive. The 

Department is of the view that these 

measures generally codify existing 

practice. 

In addition, the Department solicited 

comment on related matters. For 

example, the Department asked whether 

the term ‘‘practice’’ should be defined. 

The Department also noted that it relies 

on its general unfair and deceptive 

practices authority in certain 

specialized areas (e.g., privacy, frequent 

flyer programs, and air ambulance 

service) and asked whether the 

proposed general definitions of ‘‘unfair’’ 

or ‘‘deceptive’’ were sufficient to 

provide stakeholders sufficient notice of 

what constitutes an unfair or deceptive 

practice in these or other subject areas. 

The comment period for the NPRM 

was originally scheduled to expire on 

April 28, 2020. However, in response to 

a request by consumer advocacy 

organizations, the comment period was 

extended to May 28, 2020. 

II. Summary of NPRM Comments and 

the Department’s Responses 

A. Overview 

The Department received a total of 

224 comments by the end of the 

comment period. Approximately 180 

comments were filed by individual 

consumers, who almost uniformly 

opposed the NPRM. Individual 

consumers typically did not comment 

on any specific provision, but instead 

opposed the NPRM as a whole, viewing 

it as a weakening of aviation consumer 

protection. Many consumers noted with 

disapproval that the NPRM was 

initiated at the request of airlines, which 

in their view engage in practices that are 

anti-consumer. 

Consumer advocacy organizations 11

and two FTC Commissioners 12

generally opposed the proposals on the 

ground that they were either 

unnecessary or weakened consumer 

protection. Four Senators and one 

Member of Congress 13 urged the 

Department to discontinue the NPRM 

for many of the same reasons identified 

by consumer advocates and the FTC 

Commissioners. 

Airline associations, individual 

airlines, and a nonprofit public policy 

organization 14 broadly supported the 

proposals in the NPRM on the ground 

that they provided greater transparency 

and due process in the Department’s 

rulemaking and enforcement activities. 

Airlines also suggested that the 

Department adopt additional provisions, 

which will be discussed in greater detail 

below. 

Travel agent representatives and a 

large travel agency 15 generally 

supported the NPRM for the reasons 

expressed by airlines; however, they 

opposed the proposal to adopt hearing 

procedures relating to discretionary 

aviation consumer protection 

rulemakings. 

We will discuss the comments in 

further detail below. 

B. Definitions 

1. Definitions of ‘‘Unfair’’ and 

‘‘Deceptive’’ 

Consumer advocacy organizations 

generally recognized that the proposed 

definitions of ‘‘unfair’’ and ‘‘deceptive’’ 

mirror the FTC’s interpretation of those 

terms. They argued, however, that the 

Department should not limit itself to 

those specific definitions. They 

contended that the flexibility of 

undefined terms serves as a deterrent to 

engaging in practices that do not fit 

within the proposed definitions, but 

which may nevertheless be unfair or 

deceptive. 

They argued that this flexibility is 

especially important in the field of air 

transportation because the Airline 

Deregulation Act (ADA) prohibits States 

from regulating the unfair and deceptive 

practices of airlines. They contended 

that outside of the field of aviation, 

State consumer protection laws serve as 

a backstop to the FTC’s authority, and 

that many consumer protection agencies 

take aggressive and successful action 

under State law with respect to 

practices that would not qualify as 

unfair or deceptive under the FTC’s 

definitions. They also observed that 

because of ADA preemption, relief in 

court is generally limited to Federal 

class-actions or small claims. Consumer 

organizations concluded that the FTC 

definitions may be used for guidance, 

but should not be transformed into 

regulatory text. 

FTC Commissioner Chopra urged the 

Department not to adopt the FTC’s 

definitions, for many of the reasons 

identified by consumer advocacy 

organizations. He also raised several 

additional concerns. First, he argued 

that after the FTC adopted its Policy 

Statement on Unfairness in 1980, the 

Commission’s ‘‘number of enforcement 

actions and rulemakings plummeted, 

leaving a vacuum that hobbled 

development of the law.’’ 16

Commissioner Chopra also argued that 

‘‘the key planks undergirding the FTC’s 

unfairness definition—competitive 

markets, consumer choice, and a deemphasis on public policy—are poorly 

suited to airline regulation,’’ because the 

aviation market is not competitive, in 

his view, and because the 

Transportation Code affirmatively 

requires the Secretary to emphasize 

certain public policies.17 He also argued 

that the proposed definitions do not 

adequately take these policies into 

account. 

Airlines and travel agents supported 

the proposed definitions, arguing that 

they provide much-needed transparency 

and predictability to regulated 

industries. Southwest Airlines argued 

that the lack of clear definitions has led 

DOT to overreach in certain past 

rulemakings and enforcement actions. 

Southwest also argued that the third 

prong of the unfairness definition (i.e., 

that the harm of the practice ‘‘is not 

outweighed by countervailing benefits 

to consumers or to competition’’) 

correctly reflects departmental policy to 

place ‘‘maximum reliance on 

competitive market forces and on actual 

and potential competition.’’ 18 Spirit 

Airlines suggested that the proposed 

definition of ‘‘deceptive,’’ which 

currently refers to misleading a singular 

‘‘consumer’’ acting reasonably under the 

circumstances, should be written in the 

plural to reflect that the practice must 

be misleading to ‘‘consumers’’ in the 

aggregate. Travel agents argued that 

because DOT and FTC share jurisdiction 

over them, it is important for the two 

regulatory standards to be harmonious. 


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78710 Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Rules and Regulations 

19 84 FR 71716, citing Executive Order 13892, 

‘‘Promoting the Rule of Law Through Transparency 

and Fairness in Civil Administrative Enforcement 

and Adjudication’’ (October 9, 2019). 

20As noted above, pursuant to 15 U.S.C. 45(n), 

the FTC may rely on public policy, along with other 

evidence, for making a determination of unfairness, 

but public policy may not be the primary basis of 

its decision. 

21 49 U.S.C. 40101 (directing the Department, 

when engaging in economic regulation of air 

transportation, to consider 16 matters, ‘‘among 

others, as being in the public interest and consistent 

with public convenience and necessity.’’) 

22See 49 U.S.C. 40101(a)(1), (4), (6), (7), (9), and 

(12). 

23See 85 FR 11885 (intent is not required under 

Federal case law interpreting the FTC Act, and 

noting that the definition of ‘‘false advertisement’’ 

in the FTC Act makes no reference to intent to 

deceive). 

24See 49 CFR 5.97 (‘‘Where applicable statutes 

vest the agency with discretion with regard to the 

amount or type of penalty sought or imposed, the 

penalty should reflect due regard for fairness, the 

scale of the violation, the violator’s knowledge and 

intent, and any mitigating factors (such as whether 

the violator is a small business)’’). 

25For example, A4A/IATA asks the Department 

to define ‘‘substantial harm’’ as not involving 

merely trivial or speculative harm. A4A/IATA 

comment at 6, citing 1980 FTC Policy Statement on 

Unfairness. We are of the view that this clarification 

is unnecessary because the term ‘‘substantial harm’’ 

would necessarily exclude ‘‘trivial or speculative 

harm.’’ (We also observe, however, that in keeping 

with 15 U.S.C. 45(n), a practice is unfair not only 

if it causes substantial harm, but if also it is likely 

to cause substantial harm.) 

Similarly, A4A/IATA asks us to define ‘‘not 

reasonably avoided’’ as excluding circumstances 

where a consumer’s willful, intentional, or reckless 

conduct leads to harm (for example, by 

intentionally taking advantage of a mistakenly 

published fare). We are of the view that in general, 

the term ‘‘not reasonably avoided’’ would 

necessarily exclude the types of self-imposed harms 

described by A4A and IATA. We also note that 

mistaken fares are governed by a specific regulation 

relating to post-purchase price increases (14 CFR 

399.88). The Department has issued guidance with 

respect to mistaken fares at https://

www.transportation.gov/sites/dot.gov/files/docs/ 

Mistaken_Fare_Policy_Statement_05082015_0.pdf. 

Finally, A4A, IATA, Southwest, and Spirit all 

stress under the 1983 FTC Policy Statement on 

Deception, deception should be judged by reference 

to reasonable consumers as a whole, and that a 

single consumer’s unreasonable interpretation of a 

statement does not make it deceptive. We agree that 

deception is judged in reference to a reasonable 

consumer and believe that these concepts are 

adequately reflected in the phrase ‘‘acting 

reasonably under the circumstances,’’ regardless of 

whether the word ‘‘consumer’’ is singular or plural. 

After reviewing the comments, the 

Department remains of the view that it 

should adopt the definitions of ‘‘unfair’’ 

and ‘‘deceptive’’ as proposed. We are 

guided by the principles set forth in our 

recent final rule, ‘‘Administrative 

Rulemaking, Guidance, and 

Enforcement Procedures,’’ which seeks 

to provide greater transparency to 

regulated entities when conducting 

enforcement actions and 

adjudications.19 Offering clear 

definitions of ‘‘unfair’’ and ‘‘deceptive’’ 

will serve this goal. We note that 

transparency and clarity is particularly 

needed with respect to ticket agents, 

which are subject to both FTC and DOT 

jurisdiction. 

We stress that the definitions that we 

adopt do not reflect a substantive 

departure from past DOT practice. As 

we explained in the NPRM, DOT has 

traditionally relied on these definitions 

when taking enforcement and 

discretionary rulemaking actions. 

Therefore, the Department is not of the 

view that codifying these definitions 

will diminish the Department’s 

authority to take enforcement action or 

to regulate effectively. 

We recognize the argument of 

consumer advocacy organizations and 

Commissioner Chopra that the ADA 

preempts State consumer protection 

agencies from acting as a more 

aggressive backstop to DOT action. At 

present, however, we are of the view 

that the proposed definitions are 

adequate to ensure regulations continue 

to prohibit unfair and deceptive 

practices while at the same time 

providing necessary transparency to the 

regulated industry. We also recognize 

that under FTC practice, the role of 

public policy is explicitly 

deemphasized,20 while Congress has 

directed the Department to take into 

account a variety of policies in 

conducting economic regulation of air 

transportation.21 We are not convinced 

that this distinction compels a different 

result. While the definitions of ‘‘unfair’’ 

and ‘‘deceptive’’ will remain the guiding 

principles for regulation and 

enforcement, in doing so, the 

Department recognizes its statutory 

responsibility to consider the public 

policies enumerated by Congress. These 

policies include safety, ensuring 

economic competition, and preventing 

unfair and deceptive practices.22

2. Intent as an Element of Unfairness or 

Deception 

The proposed rule would clarify that 

intent is not an element of either 

unfairness or deception. We received 

relatively few comments on this issue. 

FTC Commissioners Chopra and 

Slaughter both expressed the view that 

the Department’s position was legally 

correct. A4A and IATA, however, urged 

the Department to adopt an ‘‘intent to 

deceive’’ standard for both unfairness 

and deception. In the alternative, they 

urged the Department to give lack of 

intent ‘‘significant weight’’ when 

exercising its enforcement discretion. 

We remain of the view that intent is 

not an element of either unfairness or 

deception.23 We also reject A4A and 

IATA’s suggestion to adopt an intent 

requirement. Such a requirement would 

place the Department’s view of 

unfairness and deception substantially 

out of step with FTC precedent. It 

would also limit the Department’s 

consumer protection actions to only 

those matters where parties establish 

and the Department can substantiate the 

private intent of carriers and ticket 

agents. In light of the revisions to the 

Department’s rulemaking and 

enforcement procedures adopted in this 

final rule to enhance the justifications 

for actions taken under the 

Department’s statutory authority, we 

view this as an unnecessary and 

unacceptably high bar. We also decline 

to include in the regulation the weight 

that lack of intent should be given in 

any future enforcement action, because 

the proper exercise of enforcement 

discretion generally involves an 

individualized consideration of a 

variety of factors.24

3. Definition of Additional Terms 

Airlines urged the Department to 

define further the component elements 

of unfairness and deception, such as 

‘‘substantial harm,’’ ‘‘likely to mislead,’’ 

‘‘reasonably avoidable,’’ and ‘‘acting 

reasonably under the circumstances.’’ In 

general, airlines asked the Department 

to adapt into regulatory text certain 

aspects (but not all of the aspects) of the 

FTC’s guidance on these terms, as found 

in the 1980 Policy Statement on 

Unfairness and the 1983 Policy 

Statement on Deception. We decline 

this invitation, because the regulatory 

text adequately explains the necessary 

elements of unfairness and deception.25

The Department will continue to look to 

the FTC Policy Statements, as well as 

FTC precedent and the Department’s 

own precedent, for guidance in 

determining whether any specific 

practice meets all of the component 

elements of unfairness and deception. 

4. Definition of ‘‘Practice’’ 

In the NPRM, the Department noted 

that neither the DOT nor the FTC Act 

defines ‘‘practice.’’ The Department 

indicated that it did not believe that a 

definition of ‘‘practice’’ was necessary, 

because its aviation consumer 

protection regulations are always 

directed to ‘‘practices’’ rather than 

individual acts. The Department also 

explained that its enforcement efforts 

include a determination that the 

conduct in question reflects a practice 

or policy affecting multiple consumers, 

rather than an isolated incident. We 

concluded that ‘‘in general, the 

Department is of the view that proof of 

a practice in the aviation consumer 


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26 85 FR 11885. 

27Comment of A4A/IATA at 12. 

28 Id. 

29 Id. at 13. 

30See 15 U.S.C. 57a (codifying the MagnusonMoss Warranty—Federal Trade Commission 

Improvement Act of 1975, Public Law 93–637 

(‘‘Mag-Moss’’). 

31Comment of Commissioner Slaughter at 3. 

32 Id. at 4. 

33Comment of Travel Tech at 6–7. 

34 Id. at 9 (‘‘Travel Tech thus proposes that a 

formal fact-finding hearing would only be 

appropriate in the very unusual circumstance when 

either Congress directs that a specific rule be 

adopted only after an on the record hearing or when 

the agency’s General Counsel finds that a specific 

factual issue critical to a claim that a particular 

practice is unfair or deceptive (and not an economic 

or policy consideration) is in dispute and cannot be 

adequately resolved through the usual notice-andcomment process.)’’ 

35A4A Comment at 16, citing 49 CFR 5.11 (before 

initiating a rulemaking, the Department should 

identify ‘‘the need for the regulation, including a 

description of the market failure or statutory 

mandate necessitating the rulemaking’’). See also 

comment of Spirit Airlines (arguing that the 

Department’s repealed NPRM on dissemination of 

ancillary fees to third party ticket sellers was based 

on conflicting/misleading information regarding 

passengers’ ability to get this information). Spirit 

also argued that the Department should engage in 

Advance Notice of Proposed Rulemaking (ANPRM) 

to gather comment on whether practices are unfair 

or deceptive. 

protection context requires more than a 

single isolated incident. On the other 

hand, even a single incident may be 

indicative of a practice if it reflects 

company policy, training, or lack of 

training.’’ 26 We sought comment, 

however, on whether a definition of 

‘‘practice’’ was necessary. 

We received relatively few comments 

on this issue. Consumer advocacy 

organizations largely did not address it. 

Spirit, Travel Tech, and FTC 

Commissioner Slaughter opined that a 

definition was not necessary. The 

NBAA and USTOA urged the 

Department to adopt a definition that 

reflected the Department’s current 

understanding, described above. A4A 

and IATA urged the Department to 

define ‘‘practice’’ as ‘‘a pattern of 

repetitive conduct that harmed multiple 

consumers rather than a single act.’’ 27

A4A and IATA stated that under this 

standard, one ‘‘mistaken advertisement’’ 

would not be a practice even if the same 

advertisement runs multiple times.28

Relatedly, A4A and IATA urged the 

Department to refrain from taking 

enforcement action with respect to ‘‘a 

single act or isolated acts by a carrier,’’ 

and instead take action only if the 

conduct is repeated after a warning.29

After reviewing the comments on this 

issue, we remain of the view that it is 

not necessary to define ‘‘practice.’’ The 

Department notes that this issue will 

arise in relatively rare instances where 

the Department seeks to take 

enforcement action in an area where no 

specific regulation applies, and where 

there is a reasonable disagreement over 

whether the conduct reflects a truly 

isolated incident. In such cases, 

regulated entities will have the 

opportunity to be heard and to present 

evidence that the conduct at issue does 

not constitute a practice, as set forth in 

this rule. 

C. Rulemaking Proposals 

In the NPRM, the Department 

proposed a hearing procedure that 

would be available when the 

Department proposed a discretionary 

aviation consumer protection 

rulemaking declaring a practice to be 

unfair or deceptive. To summarize, after 

the issuance of an NPRM, interested 

parties could request a formal hearing 

on the ground that the proposed rule 

raised one or more disputed technical, 

scientific, economic, or other complex 

factual issues. The General Counsel 

would have the authority to grant or 

deny the hearing using criteria set forth 

in this rule. If the hearing is granted, an 

Administrative Law Judge or other 

neutral hearing officer would conduct 

the formal hearing using procedures 

adapted from the Administrative 

Procedure Act (APA) or similar rules 

adopted by the Secretary. The hearing 

officer would issue a detailed report on 

the disputed factual issue(s), after which 

the General Counsel would determine 

whether the proposed rule should be 

continued, amended, or terminated. 

Consumer advocacy organizations 

strongly urged the Department not to 

adopt these hearing procedures. They 

argued that the Department did not 

demonstrate that the typical notice-andcomment procedures of the APA were 

inadequate to gather a proper factual 

basis for discretionary rulemakings. 

Some commenters noted that these 

hearing procedures were unnecessary 

given the updates to the Department’s 

general rulemaking procedures in 49 

CFR part 5. They also contended that 

formal hearing procedures will 

inevitably create lengthy delays and 

numerous opportunities for regulated 

entities to lobby against the proposed 

rule. Some commenters argued that the 

proposed rulemaking has more liberal 

standards for granting a hearing than 

there are for denying a hearing; as a 

result, hearings will threaten to become 

the norm. Other advocates observed that 

the proposal does not have a clear 

mechanism for consumers to argue that 

a hearing is not necessary. 

FTC Commissioner Slaughter 

commented on the FTC’s own 

experience with similar formal hearing 

procedures, which were imposed by 

Congress, known as ‘‘Mag-Moss’’ 

procedures.30 Commissioner Slaughter 

argued that such hearing procedures do 

not make rulemaking impossible, but 

‘‘the great difficulty of undergoing a 

Mag-Moss rulemaking compared with 

rulemaking under the APA should not 

be understated. The additional 

procedural requirements represent an 

enormous drain on staff resources, to 

say nothing of the additional time and 

effort they require of stakeholders.’’ 31

She argued that there is a growing 

bipartisan consensus for the FTC to 

issue privacy regulations not under 

Mag-Moss, but instead under APA 

procedures. Commissioner Slaughter 

argued that if the Department issues its 

own privacy regulations using the 

proposed formal hearing procedures, the 

Department will ‘‘create a regulatory 

incongruence in which the Department 

is the slowest and least capable 

regulator in the privacy arena.’’ 32

Ticket agents also urged the 

Department not to adopt formal hearing 

procedures, for many of the reasons 

cited by consumer advocates and 

Commissioner Slaughter. Travel Tech 

noted the incongruity of the Department 

requiring heightened hearing 

procedures only for its highest-cost 

rules and for discretionary aviation 

consumer protection rules, which 

generally do not impose nearly such a 

high economic burden.33 Travel Tech 

also argued that the Department’s 

institutional expertise in aviation 

consumer protection matters ensures 

that formal hearing will generally not be 

necessary. Travel Tech contended that 

formal hearings should only be required 

when directed by Congress or under 

very limited and unusual 

circumstances.34

Airlines generally favored the 

proposal on the ground that it provides 

regulated entities with an opportunity to 

test thoroughly the factual assumptions 

on which discretionary consumer 

protections are based. They argued that 

such hearings are helpful to determine 

whether a market failure has taken place 

such that regulation is necessary.35

After careful review of the comments 

in this area, the Department has decided 

to retain a hearing procedure that would 

be available when the Department 

proposes a discretionary aviation 

consumer protection rulemaking 

declaring a practice to be unfair or 

deceptive. This is consistent with 

section 41712, which requires notice 

and an opportunity for a hearing before 

a finding that an air carrier, foreign air 

carrier, or ticket agent is engaged in an 


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36See https://cms7.dot.gov/regulations/ 

rulemaking-process, under ‘‘May an agency 

supplement the APA requirements?’’ (‘‘We may use 

public meetings or hearings before or after a 

proposal is issued for a variety of reasons. Public 

meetings allow us to ask questions. They allow for 

interaction among participants with different views 

on the issues involved, and they provide a better 

opportunity for members of the public who believe 

they are more effective making oral presentations 

than submitting written comments.’’) 

37See https://www.regulations.gov/ 

document?D=RITA-2011-0001-0280. 

38 84 FR 43100 (August 20, 2019); see https://

www.regulations.gov/document?D=ATBCB-2019- 

0002-0001. 

39E.g., 77 FR 25105 (April 27, 2012). 

unfair or deceptive practice or an unfair 

method of competition. The Department 

sees value in offering additional hearing 

procedures for low-cost discretionary 

aviation consumer protection rules 

where scientific, technical, economic, or 

other factual issues are genuinely in 

dispute. At the same time, the 

Department recognizes the concerns 

raised by commenters that formal 

hearing procedures may add time to the 

rulemaking process. As such, the 

hearing procedures for discretionary 

aviation consumer protection rules set 

forth in this final rule differ from the 

procedures set forth in the Department’s 

general rulemaking procedures in 49 

CFR part 5 for the Department’s highimpact or economically significant 

rules. For example, under this final rule, 

the General Counsel would be free to 

adopt more flexible rules for the hearing 

than would be required for a highimpact or economically significant 

rulemaking. The General Counsel also 

has more flexibility with respect to 

appointing an appropriate hearing 

officer for such hearings. Finally, the 

presiding officer is not required to issue 

a report; the officer need only place on 

the docket minutes of the hearing with 

sufficient detail as to reflect fully the 

evidence and arguments presented on 

the disputed issues of fact, along with 

proposed findings addressing those 

issues. By adopting hearing procedures 

for discretionary aviation consumer 

protection rulemakings that are less 

stringent and more flexible than the 

formal hearing procedures for high 

impact or economically significant 

rules, the Department ensures that 

interested parties have an opportunity 

to test factual assumptions on which 

discretionary consumer protection 

rulemaking actions are based, consistent 

with the underlying statutory authority 

under which the Department is 

regulating, while minimizing the 

likelihood of extensive delays or a drain 

on staff resources. 

These procedures, as modified, reflect 

the Department’s continued view that 

interested parties should have the 

opportunity to be heard when the 

Department proposes discretionary 

rulemakings that may be based on 

complex and disputed economic, 

technical, or other factual issues. We 

also note that the ordinary notice and 

comment procedures of the APA remain 

the default process: To obtain a hearing, 

the party requesting the hearing has the 

initial burden of showing that, among 

other factors, the ordinary notice and 

comment procedures are unlikely to 

provide an adequate examination of the 

issues to permit a fully informed 

judgment. The rule retains the safeguard 

that the General Counsel may decline a 

hearing if it would unreasonably delay 

the rulemaking. We also generally 

disagree with commenters who stated 

that the standards for granting a hearing 

are necessarily more lenient than the 

standards for denying them. 

We also note that the Department’s 

use of similar procedures to supplement 

traditional notice-and-comment is not 

new.36 For example, in 2011, the 

Department’s Bureau of Transportation 

Statistics held a public meeting to 

gather information about industry 

practices for processing and accounting 

for baggage and wheelchairs, in 

connection with a pending 

rulemaking.37 More recently, the 

Department asked the Architectural and 

Transportation Barriers Compliance 

Board (Access Board) to hold a hearing 

to gather public input on potential new 

standards for on-board wheelchairs, also 

in connection with a pending 

rulemaking.38 The Department 

recognizes certain differences between 

the public meetings that sometimes 

were held in the context of earlier 

rulemakings 39 and the hearings 

contemplated by this rule. For example, 

hearings will be held before a neutral 

officer, who must make findings on the 

record, while public meetings were 

previously led by staff from the 

government office involved in the 

rulemaking and findings were not 

separately summarized and placed on 

the record but rather were noted in the 

preamble if they were relied on in the 

rulemaking. Moreover, this rule clearly 

identifies procedures to all interested 

persons that hearings may be requested, 

while previously there was no formal 

process to request a public meeting so 

they were more likely to have been 

instituted by the Department or 

requested only by those parties that 

knew that the Department was open to 

holding public meetings in appropriate 

instances. In sum, while the hearing 

procedures reflected in the final rule 

may result in some additional delays to 

the rulemaking process beyond what 

was experienced with public meetings, 

on the whole the new procedures will 

promote fairness, due process, and wellinformed rulemaking, without unduly 

delaying the proceeding itself, and 

represent a reasonable and balanced 

approach consistent with the 

Department’s rulemaking and 

enforcement policies. 

D. Enforcement Proposals 

In the NPRM, the Department 

proposed to codify certain enforcement 

practices. First, the Department 

proposed that before the Office of 

Aviation Consumer Protection 

determined how to resolve a matter 

involving a potential unfair or deceptive 

practice, it would provide an 

opportunity for the alleged violator to be 

heard and to present relevant evidence 

in its defense. Such evidence would 

include, but not be limited to, the 

following: (1) Evidence that the 

consumer protection regulation at issue 

was not violated; (2) evidence that the 

conduct was not unfair or deceptive (if 

no specific regulation applied); and (3) 

evidence that that consumer harm was 

limited or that the alleged violator has 

taken steps to mitigate the harm. The 

Department also proposed that when the 

Office issued a consent order declaring 

that a practice was unfair or deceptive, 

and no specific regulation applied to the 

conduct at issue, then the Office would 

explain the basis for its finding that the 

conduct was unfair or deceptive, using 

the definitions set forth in this rule. 

Finally, the Department clarified that if 

the Office took enforcement action 

against a regulated entity by filing a 

complaint with an Administrative Law 

Judge, then the entity would have the 

opportunity for notice and a hearing as 

set forth in 14 CFR part 302. We noted 

that these procedures reflected the 

longstanding practices of the Office of 

Aviation Consumer Protection. 

We received few comments on this 

element of the proposed rule. Most 

consumer advocates did not opine on 

the issue, while National Consumers 

League and Consumer Action advised 

that they were unnecessary. Travel 

Fairness Now generally did not object to 

the measures, but urged the Department 

to declare that an unfair or deceptive 

practice with limited consumer harm 

would still be subject to enforcement 

action. Airlines and ticket agents 

generally supported these proposals. 

In the final rule, we will adopt these 

measures as proposed in the NPRM. 

They reflect current practice, and afford 

reasonable due process to regulated 

entities. These specific measures are 

also consistent with the general 

principles set forth in the Department’s 


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40See, e.g., 49 CFR 5.57 (‘‘Enforcement 

adjudications require the opportunity for 

participation by directly affected parties and the 

right to present a response to a decision maker, 

including relevant evidence and reasoned 

arguments’’); 49 CFR 5.59 (Department’s 

enforcement action should conclude with, among 

other things, a ‘‘well-documented decision as to 

violations alleged and any violations found to have 

been committed.’’) 

41https://www.transportation.gov/individuals/ 

aviation-consumer-protection/privacy. 

42See https://www.regulations.gov/ 

document?D=DOT-OST-2019-0182-0193. 

43Association of Air Medical Services, Air 

Methods, and PHI Health, LLC. 

44For further information about the AAPB 

Advisory Committee, see https://

www.transportation.gov/airconsumer/AAPB and 

the Committee’s docket, available at https://

www.regulations.gov/docket?D=DOT-OST-2018- 

0206. 

45See Comment of Travel Fairness Now (urging 

the Department to clarify that it will not use this 

final rule as a vehicle for repealing existing 

regulations, because they were well justified). 

46 49 CFR 5.89 (duty to disclose exculpatory 

evidence). 

recent final rule relating to 

enforcement.40

E. Privacy, Air Ambulance, and 

Frequent Flyer Programs 

The Department solicited comment on 

whether the general definitions of 

‘‘unfair’’ or ‘‘deceptive’’ were sufficient 

to give notice to stakeholders of what 

constitutes unfair or deceptive practices 

with respect to the specialized fields of 

privacy, air ambulance service, and 

frequent flyer programs. While we did 

not receive specific comments related to 

frequent flyer programs, we did receive 

comment with respect to privacy and air 

ambulance service. 

A4A asked the Department to declare 

that the Department has exclusive 

jurisdiction over airlines with respect to 

privacy practices. A4A also asked the 

Department to adopt detailed privacy 

regulations. A4A’s proposal would 

declare that ‘‘mishandling private 

information may be considered an 

unfair or deceptive practice,’’ and that 

‘‘specific examples of unfair or 

deceptive practices with regard to the 

private information of consumers 

include’’ violating the terms of the 

airline’s privacy policy, failing to 

maintain reasonable data security 

measures for passengers’ private 

information, and violating various 

privacy statutes. 

We generally agree with the substance 

of A4A’s proposal; indeed, it appears to 

be adapted from the privacy page of the 

Department’s consumer protection 

website, which recites many of these 

principles.41 Nevertheless, we decline 

to adopt it for procedural reasons. As 

noted above, one of the Department’s 

stated policies is to improve 

transparency and public participation in 

the rulemaking process. If the 

Department were to adopt detailed 

privacy regulations affecting air 

transportation and the sale of air 

transportation, it should first engage in 

the full notice-and-comment procedures 

of the APA, as well as the procedures 

set forth in this final rule. 

Next, we received comments from 

insurers, air ambulance providers, and 

other interested parties about the 

regulation of air ambulance providers. 

The National Association of Insurance 

Commissioners and nine researchers on 

health law, economics, and policy 42

urged the Department to declare that 

balance billing is an unfair practice 

because it imposes substantial harm on 

patients who had no ability to avoid the 

charges, without countervailing benefits 

to consumers or to competition. 

Separately, the researchers urged the 

Department to find that charging full 

out-of-network prices for air ambulance 

service is an unfair practice, in part 

because of its effect on the private 

insurance market. Air ambulance 

operators 43 argued that specific 

regulation of air ambulance providers in 

this rulemaking would be premature at 

best, because the Air Ambulance and 

Patient Billing (AAPB) Advisory 

Committee has been established to 

address these issues comprehensively. 

Air ambulance operators also argued 

that balance billing should not be 

considered an unfair or deceptive 

practice. They contend that much of the 

consumer harm from balance billing 

arises from the practices of insurers, 

rather than air ambulance providers (for 

example, by under paying out-ofnetwork air ambulance bills, or denying 

claims that were medically necessary). 

They also argue that many patients who 

receive a large balance bill ultimately 

pay a small fraction of that amount outof-pocket. 

After consideration of the comments 

submitted on this issue, we decline to 

adopt specific regulations relating to air 

ambulance providers. Section 418 of the 

FAA Reauthorization Act of 2018 (FAA 

Reauthorization Act) requires the 

Secretary, in consultation with the 

Secretary of Health and Human 

Services, to establish an advisory 

committee to review options to improve 

the disclosure of charges and fees for air 

medical services, better inform 

consumers of insurance options for such 

services, and protect consumers from 

balance billing. The FAA 

Reauthorization Act also contemplates 

that the Advisory Committee’s report 

and recommendations will serve as the 

basis for future regulations or other 

guidance as deemed necessary to 

provide other consumer protections for 

customers of air ambulance providers.44

We agree that the most prudent course 

of action is to allow the work of the 

AAPB Advisory Committee to run its 

course, rather than to issue more 

detailed regulations relating to air 

ambulance providers in this final rule. 

F. Other Comments 

We will address briefly a number of 

comments that do not fall squarely 

within the categories described above. 

First, A4A and IATA urge the 

Department to adopt a ‘‘clear and 

convincing evidence’’ standard for 

enforcement of unfair and deceptive 

practices. We decline to enact such a 

burden of proof standard here, 

particularly in light of the fact that most 

enforcement cases are adjudicated not 

through the courts, but rather through 

voluntary consent orders. We also note 

that during these informal proceedings, 

regulated entities have the opportunity 

to present mitigating evidence as set 

forth above. 

Next, A4A and IATA urge the 

Department to require the Office of 

Aviation Consumer Protection to 

present evidence on all of the elements 

of unfairness and deception, even in 

cases where a specific regulation 

enacted under the authority of section 

41712 applies to the conduct in 

question. We decline this request 

because doing so would be unduly 

burdensome with limited or no benefit. 

By enacting a regulation under the 

authority of section 41712, the 

Department has already determined, 

after notice and comment, that the 

conduct in question is unfair or 

deceptive; in such cases, it should be 

sufficient to establish that the regulation 

itself was violated.45 A4A and IATA 

also urge that they should be able to 

present mitigating evidence with respect 

to all of the prongs of unfairness and 

deception. We note that in informal 

enforcement proceedings involving the 

violation of specific regulations, 

regulated entities would have the 

opportunity to present relevant 

evidence, including evidence that 

consumer harm was limited. 

Next, A4A and IATA argue that the 

Office of Aviation Consumer Protection 

should affirmatively furnish 

‘‘exculpatory evidence’’ in its 

possession. We agree with this practice, 

and the Office is required to do so under 

the Department’s existing enforcement 

procedures, which are set forth in 

another rule.46


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47 84 FR 71714 (Dec. 27, 2019). 

48See 76 FR 23110 (April 25, 2011). 

49See 73 FR 74586 (December 8, 2008) (NPRM: 

‘‘Enhancing Passenger Airline Protections’’). 

G. Formal Enforcement Proceedings 

In the NPRM, the Department 

proposed to clarify that if regulated 

entities do not enter into a negotiated 

settlement with the Office of Aviation 

Consumer Protection with respect to 

potential violations of section 41712, 

then the Office may initiate a formal 

enforcement proceeding, and that 

hearings are available through this 

process. The Department did not receive 

comments on this provision, which 

restates current procedures found in 14 

CFR part 302. In this final rule, the 

Department has made nonsubstantive 

editorial changes to the regulatory text 

such as adding a citation to a specific 

section of part 302. The Department has 

determined that good cause exists to 

dispense with notice and comment for 

these nonsubstantive editorial changes 

because they are ministerial in nature; 

therefore, public comment is 

unnecessary under 5 U.S.C. 553(b)(B). 

III. Regulatory Analyses and Notices 

A. Executive Order 13771 (Reducing 

Regulation and Controlling Regulatory 

Costs), Executive Order 12866 

(Regulatory Planning and Review), 

Executive Order 13563 (Improving 

Regulation and Regulatory Review), and 

DOT Regulatory Policies and Procedures 

(49 CFR Part 5) 

This final rule is a significant 

regulatory action under section 3(f) of 

E.O. 12866, ‘‘Regulatory Planning and 

Review’’ (Oct. 4, 1993), supplemented 

by E.O. 13563, ‘‘Improving Regulation 

and Regulatory Review’’ (Jan. 21, 2011). 

Accordingly, the Office of Management 

and Budget (OMB) has reviewed it 

under that Order. This final rule is 

issued in accordance with the 

Department’s rulemaking procedures 

found in 49 CFR part 5 and DOT Order 

2100.6. 

This rule primarily involves agency 

procedure and interpretation. It clarifies 

how the Department interprets the terms 

‘‘unfair’’ and ‘‘deceptive’’ and requires 

enhanced departmental procedures for 

regulation and enforcement in the area 

of aviation consumer protection. 

Clarifying and explicitly defining 

terminology advances the Department’s 

goal of improved transparency. 

Adopting enhanced procedures for 

future rulemaking and enforcement 

activities will help to ensure that the 

activities are rooted in fairness, due 

process, and an adequate factual 

foundation. These goals are described in 

the Department’s final rule, 

‘‘Administrative Rulemaking, Guidance, 

and Enforcement Procedures.’’ 47

This rule aligns the Department’s 

policies and rules involving unfairness 

and deception in aviation consumer 

protection explicitly with principles 

adopted by the FTC. In the Department’s 

view, aligning the terms ‘‘unfair’’ and 

‘‘deceptive’’ does not represent a 

substantive departure from past DOT 

practice. The definitions simply provide 

additional clarification to the public and 

regulated industries, and are not 

expected to affect the Department’s 

ability to prohibit unfair and deceptive 

practices. While clarifying the terms is 

not expected to lead to changes that 

would impact the Department, public, 

or any regulated entity, it provides a 

foundation for the other elements of this 

rule pertaining to future rulemaking and 

enforcement actions. 

Effects on Future Rulemakings 

This final rule will require the 

Department to use specific definitions of 

the terms ‘‘unfair’’ and ‘‘deceptive’’ 

when declaring certain practices to be 

unfair or deceptive in future 

discretionary rulemakings. 

Specifically, this final rule requires 

the Department to support a finding of 

an ‘‘unfair’’ practice by demonstrating 

that the harm to consumers is (1) 

substantial; (2) not reasonably 

avoidable; and (3) not outweighed by 

offsetting benefits to consumers or 

competition. Similarly, it requires the 

Department to support a finding that a 

practice is ‘‘deceptive’’ by showing that: 

(1) The practice actually misleads or is 

likely to mislead consumers; (2) who are 

acting reasonably under the 

circumstances; (3) with respect to a 

material matter. 

The Department has declared certain 

practices to be unfair or deceptive in 

several prior rulemakings, including the 

full fare advertising rule (14 CFR 

399.84) and oversales rule (14 CFR part 

250). In the supporting analysis for 

these rulemakings, the Department 

justified its finding of unfairness or 

deception without using the full threepronged analysis for unfairness or 

deception found in this final rule.48

In other instances, the Department has 

based its discretionary regulations on 

both section 41712 and other statutes. 

For example, the rule requiring on-time 

performance information during 

booking (14 CFR 234.11(b)) was based 

on both section 41712 and section 

41702 (requiring carriers to provide safe 

and adequate interstate air 

transportation).49 While the Department 

partly relied on a finding of consumer 

harm under section 41712 as the basis 

for that requirement, it did not engage 

in the full three-part analysis for 

unfairness found in this final rule. 

Demonstrating support for findings of 

unfairness or deception requires an 

analysis of data, which is generally 

collected and organized as part of a 

regulatory impact analysis (RIA). 

Factors such as potential harm to 

consumers, benefits to consumers or 

competition, whether a consumer can 

avoid harm, and whether a harm is 

‘‘material’’ relate to the economic 

benefits and costs of regulating a 

practice. These benefits and costs are 

analyzed in an RIA and offer a rationale 

for finding a practice ‘‘unfair’’ or 

‘‘deceptive.’’ 

The Department customarily prepares 

a RIA or other regulatory evaluation as 

part of the E.O. 12866 review process for 

rulemakings involving aviation 

consumer protection. Further, the 

Department’s final rule on 

‘‘Administrative Rulemaking, Guidance, 

and Enforcement Procedures’’ requires 

that all rulemakings including a 

supporting economic analysis. The 

Department will therefore need to 

continue to collect, organize, and 

analyze data and facts to address 

economic impacts. 

The Department’s current practice of 

collecting and analyzing data, either for 

E.O. 12866 or departmental review, 

allows it to generate the necessary 

factual basis to support an explicit 

discussion of unfair or deceptive 

findings with little additional effort. 

While this final rule may result in the 

Department expending additional 

resources to prepare future discretionary 

aviation consumer protection rules and 

supporting analyses, the resources are 

expected to be small and more than 

justified by better, more deliberative 

internal decisions. Better internal 

decisions will improve rulemaking 

efficiency by reducing the resources 

needed to follow E.O. 12866 processes. 

The additional procedures required by 

this rule are expected to result in 

improved regulations that achieve their 

goals of protecting consumers without 

imposing any more burdens on 

regulated industry than necessary. 

This rule does not require that the 

Department review existing rules to 

determine whether previous ‘‘unfair’’ or 

‘‘deceptive’’ declarations would have 

been supported by the criteria described 

above. Existing rules are subject to 

retrospective review requirements under 

the Department’s rulemaking 

procedures found in 49 CFR part 5, DOT 

Order 2100.6, and other legal 

requirements, as applicable. The 

Department will consider whether 


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existing discretionary aviation 

consumer protection rules such as full 

fare advertising, oversales and refunds 

meet the standards found in this rule 

when performing the retrospective 

reviews, but it is not possible to judge 

the impact of this rule on the rules until 

the Department conducts the reviews. 

The Department considers many factors 

when conducting its retrospective 

reviews, including the continuing need 

for the rule and whether the rule has 

achieved its intended outcomes. It is 

unlikely that an existing rule would fail 

the standards set forth in this rule 

without failing existing standards that 

would prompt the Department to revise 

or rescind the rule. Judging the impact 

of this rule is confounded further 

because some existing rules do not rely 

solely on section 41712, as is the case 

with the rule requiring on-time 

performance information during 

booking noted above. 

Under this rule, future discretionary 

rulemakings could be subject to a 

hearing procedure. The rule allows 

interested parties to request a hearing 

when the Department proposes a rule to 

classify a practice as unfair or deceptive, 

when the issuance of the NPRM raises 

one or more disputed technical, 

scientific, economic, or other complex 

factual issues, or when the NPRM may 

not satisfy the requirements of the 

Information Quality Act. Allowing 

interested parties an opportunity for a 

hearing ensures that they can test the 

information informing discretionary 

consumer protection regulations. 

However, following this rule’s 

requirements to provide a sufficient 

factual basis to support an ‘‘unfair’’ or 

‘‘deceptive’’ finding should reduce the 

need for the Department to hold such 

hearings. 

Nevertheless, requests for hearings are 

expected to occur occasionally. While 

the Department lacks data that would 

allow it to distinguish the costs and 

time of conducting the hearings from 

the costs of conducting its normal 

business operations, the Department 

believes that any incremental costs and 

time would be small relative to the 

baseline scenario in which the 

Department did not enact the rule. 

Previous discretionary rulemakings 

involving unfair and deceptive practices 

in aviation consumer protection have 

attracted substantial interest from 

consumer advocates, airline industry 

advocates, and the general public. The 

Department engaged with these 

interested parties without the benefit of 

a formal process, and the engagements 

required investments of time and 

resources by the Department and 

interested parties. Because these 

engagements were informal and with 

uncertain scopes, they were not as 

efficient as would be expected under a 

more formal process as would be the 

case under this rule. Without a formal 

process, parties tend to overinvest in 

preparation, incurring unnecessary 

costs, or underinvest, leading to 

additional engagements and 

administrative costs. For future 

rulemakings, establishing formal 

hearing procedures may reduce costs 

and time for both groups by increasing 

certainty about opportunities for 

engagement. 

The hearing procedures established in 

this final rule are less stringent and 

more flexible than the hearing 

procedures for high-impact or 

economically significant rules detailed 

in the Department’s general rulemaking 

procedures in 49 CFR part 5 and DOT 

Order 2100.6. In addition, the 

Department has experience using 

hearing procedures to supplement 

traditional notice-and-comment 

rulemaking, as described earlier for 

baggage and wheelchair accounting and 

for potential on-board wheelchair 

standards. Finally, the hearing 

procedures will provide consistency in 

the Department’s exercise of its 41712 

authority by mirroring the statute’s 

hearing requirement to ensure 

rulemakings enacted under the same 

authority ensure due process, and are 

grounded in fairness and supported by 

an adequate factual foundation. 

The Department believes that its 

experience with hearings, coupled with 

reduced complexity of the hearing 

procedures, will limit the additional 

staff resources needed to comply with 

the requirement and prevent it from 

leading to excessive delays in issuing 

aviation consumer protection rules. The 

General Counsel may also decline a 

hearing request if following the 

procedures would unreasonably delay 

the rulemaking. When deciding to 

decline a hearing request, the General 

Counsel will balance the impact of the 

hearing on departmental resources 

against the potential value of any 

information to be collected during the 

hearing process, and consider the 

quality of evidence presented, including 

but not limited to that presented by 

interested parties and in the 

Department’s RIA and other supporting 

analyses. 

Effects on Future Enforcement Actions 

This final rule adds requirements for 

future enforcement actions analogous to 

the requirements for discretionary 

aviation consumer protection 

rulemakings. The Department will use 

the same definitions of unfair and 

deceptive when taking enforcement 

action against an airline or ticket agent 

for unfair or deceptive practices. In 

future enforcement actions, the 

Department would also provide the 

airline or ticket agent with the 

opportunity to be heard and to present 

mitigating evidence. The opportunity 

for a hearing before a finding that any 

air carrier, foreign air carrier, or ticket 

agent is engaged in an unfair or 

deceptive practice or an unfair method 

of competition already exists under 

section 41712. Finally, in future 

enforcement orders, if a specific 

regulation does not apply to the practice 

in question, the Department would 

explain the basis for its finding that a 

practice was unfair or deceptive. 

As explained in the NPRM, the 

Department views these measures as a 

codification of existing practice, rather 

than a change in policy, because the 

Department has typically relied on the 

explicit definitions of ‘‘unfair’’ and 

‘‘deceptive’’ in prior enforcement 

orders. Applying these terms and 

providing an opportunity for a hearing 

in enforcement proceedings is largely 

noncontroversial, and the Department 

received few comments on this element 

of the rule at the NPRM stage. The 

Department does not expect to need to 

expend additional resources in aviation 

consumer protection proceedings due to 

this rule, or expect that the rule will 

increase the amount of time needed to 

come to resolution. The Department 

believes that regulated entities could see 

some benefit, however, from upfront 

clarification of the guidelines and 

criteria that the Department follows 

when enforcing aviation consumer 

protection regulations involving unfair 

and deceptive practices. 

This rule is not an E.O. 13771 

regulatory action because it is does not 

impose any more than de minimis 

regulatory costs. This final rule provides 

an additional mechanism for industry to 

provide input to the Department on its 

discretionary aviation consumer 

protection rulemakings. Private industry 

should not experience more than 

minimal additional costs relative to the 

status quo because it already engages in 

significant information exchange with 

the Department. Industry has the option 

of continuing use of historical 

mechanisms for providing input to 

discretionary aviation consumer 

protection, and is not required to make 

use of the alternatives set forth in this 

rule. The Department should not 

experience significant additional costs 

because it has considerable experience 

conducting analysis in support of 

aviation consumer protection rules as 

well as hearings analogous to those in 


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this rule. Such efforts are consistent 

with the Department’s normal business 

operations, and any additional resources 

needs could be accommodated through 

a simple and temporary realignment of 

internal resources. 

B. 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. A 

direct air carrier or foreign air carrier is 

a small business if it provides air 

transportation only with small aircraft 

(i.e., aircraft with up to 60 seats/18,000- 

pound payload capacity). See 14 CFR 

399.73. The Department has determined 

that this rule does not have a significant 

economic impact on a substantial 

number of small entities. 

C. Executive Order 13132 (Federalism) 

This final rule has been analyzed in 

accordance with the principles and 

criteria contained in Executive Order 

13132 (‘‘Federalism’’). This final rule 

does not include any provision that: (1) 

Has substantial direct effects on the 

States, the relationship between the 

national government and the States, or 

the distribution of power and 

responsibilities among the various 

levels of government; (2) imposes 

substantial direct compliance costs on 

State and local governments; or (3) 

preempts State law. States are already 

preempted from regulating in this area 

by the Airline Deregulation Act, 49 

U.S.C. 41713. Therefore, the 

consultation and funding requirements 

of Executive Order 13132 do not apply. 

D. Executive Order 13175 

This final rule has been analyzed in 

accordance with the principles and 

criteria contained in Executive Order 

13175 (‘‘Consultation and Coordination 

with Indian Tribal Governments’’). 

Because this final rule does not 

significantly or uniquely affect the 

communities of the Indian Tribal 

governments or impose substantial 

direct compliance costs on them, the 

funding and consultation requirements 

of Executive Order 13175 do not apply. 

E. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA) (44 U.S.C. 3501 et seq.) requires 

that DOT consider the impact of 

paperwork and other information 

collection burdens imposed on the 

public and, under the provisions of PRA 

section 3507(d), obtain approval from 

the Office of Management and Budget 

(OMB) for each collection of 

information it conducts, sponsors, or 

requires through regulations. The DOT 

has determined there are no new 

information collection requirements 

associated with this final rule. 

F. Unfunded Mandates Reform Act 

The Department has determined that 

the requirements of Title II of the 

Unfunded Mandates Reform Act of 1995 

do not apply to this rulemaking. 

G. National Environmental Policy Act 

The Department has analyzed the 

environmental impacts of this final rule 

pursuant to the National Environmental 

Policy Act of 1969 (NEPA) (42 U.S.C. 

4321 et seq.) and has determined that it 

is categorically excluded pursuant to 

DOT Order 5610.1C, Procedures for 

Considering Environmental Impacts (44 

FR 56420, Oct. 1, 1979). Categorical 

exclusions are actions identified in an 

agency’s NEPA implementing 

procedures that do not normally have a 

significant impact on the environment 

and therefore do not require either an 

environmental assessment (EA) or 

environmental impact statement (EIS). 

See 40 CFR 1508.4. In analyzing the 

applicability of a categorical exclusion, 

the agency must also consider whether 

extraordinary circumstances are present 

that would warrant the preparation of 

an EA or EIS. Id. Paragraph 10.c.16.h of 

DOT Order 5610.1D categorically 

excludes ‘‘[a]ctions relating to consumer 

protection, including regulations.’’ 

Since this rulemaking relates to the 

definition of unfair and deceptive 

practices under Section 41712, the 

Department’s central consumer 

protection statute, this is a consumer 

protection rulemaking. The Department 

does not anticipate any environmental 

impacts, and there are no extraordinary 

circumstances present in connection 

with this rulemaking. 

H. Privacy Act 

Anyone may search the electronic 

form of all comments received into any 

of OST’s dockets by the name of the 

individual submitting the comment, or 

signing the comment if submitted on 

behalf of an association, business, labor 

union, or any other entity. You may 

review USDOT’s complete Privacy Act 

Statement published in the Federal 

Register on April 11, 2000, at 65 FR 

19477–8. 

I. Statutory/Legal Authority for This 

Rulemaking 

This rulemaking is issued under the 

authority of 49 U.S.C. 40113(a), which 

grants the Secretary the authority to take 

action that the Secretary considers 

necessary to carry out 49 U.S.C. Subtitle 

VII (Aviation Programs), including 

conducting investigations, prescribing 

regulations, standards, and procedures, 

and issuing orders. 

J. Regulation Identifier Number 

A Regulation Identifier Number (RIN) 

is assigned to each regulatory action 

listed in the Unified Agenda of Federal 

Regulations. The Regulatory Information 

Service Center publishes the Unified 

Agenda in Spring and Fall of each year. 

The RIN set forth in the heading of this 

document can be used to cross-reference 

this action with the Unified Agenda. 

List of Subjects in 14 CFR Part 399 

Consumer protection, Policies, 

Rulemaking proceedings, Enforcement, 

Unfair or deceptive practices. 

For the reasons discussed in the 

preamble, the Department amends 14 

CFR part 399 as follows: 

PART 399—STATEMENTS OF 

GENERAL POLICY 

■ 1. The authority citation for part 399 

is revised to read as follows: 

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

Subpart F—Policies Relating to 

Rulemaking Proceedings 

■ 2. Section 399.75 is added to subpart 

F to read as follows: 

§ 399.75 Rulemakings relating to unfair 

and deceptive practices. 

(a) General. When issuing a proposed 

or final regulation declaring a practice 

in air transportation or the sale of air 

transportation to be unfair or deceptive 

to consumers under the authority of 49 

U.S.C. 41712(a), unless the regulation is 

specifically required by statute, the 

Department shall employ the definitions 

of ‘‘unfair’’ and ‘‘deceptive’’ set forth in 

§ 399.79. 

(b) Procedural requirements. When 

issuing a proposed regulation under 

paragraph (a) of this section that is 

defined as high impact or economically 

significant within the meaning of 49 

CFR 5.17(a), the Department shall 

follow the procedural requirements set 

forth in 49 CFR 5.17. When issuing a 

proposed regulation under paragraph (a) 

of this section that is not defined as high 

impact or economically significant 

within the meaning of 49 CFR 5.17(a), 

unless the regulation is specifically 

required by statute, the Department 

shall adhere to the following procedural 

requirements: 

(1) Request for a hearing. Following 

publication of a proposed regulation, 

and before the close of the comment 


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Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Rules and Regulations 78717 

period, any interested party may file in 

the rulemaking docket a petition, 

directed to the General Counsel, to hold 

a hearing on the proposed regulation. 

(2) Grant of petition for hearing. 

Except as provided in paragraph (b)(3) 

of this section, the petition shall be 

granted if the petitioner makes a 

plausible prima facie showing that: 

(i) The proposed rule depends on 

conclusions concerning one or more 

specific scientific, technical, economic, 

or other factual issues that are genuinely 

in dispute or that may not satisfy the 

requirements of the Information Quality 

Act; 

(ii) The ordinary public comment 

process is unlikely to provide an 

adequate examination of the issues to 

permit a fully informed judgment; and 

(iii) The resolution of the disputed 

factual issues would likely have a 

material effect on the costs and benefits 

of the proposed rule. 

(3) Denial of petition for hearing. A 

petition meeting the requirements of 

paragraph (b)(2) of this section may be 

denied if the General Counsel 

determines that: 

(i) The requested hearing would not 

advance the consideration of the 

proposed rule and the General Counsel’s 

ability to make the rulemaking 

determinations required by this section; 

or 

(ii) The hearing would unreasonably 

delay completion of the rulemaking. 

(4) Explanation of denial. If a petition 

is denied in whole or in part, the 

General Counsel shall include a detailed 

explanation of the factual basis for the 

denial, including findings on each of the 

relevant factors identified in paragraph 

(b)(2) or (3) of this section. 

(5) Hearing notice. If the General 

Counsel grants the petition, the General 

Counsel shall publish notification of the 

hearing in the Federal Register. The 

document shall specify the proposed 

rule at issue and the specific factual 

issues to be considered at the hearing. 

The scope of the hearing shall be 

limited to the factual issues specified in 

the notice. 

(6) Hearing process. (i) A hearing 

under this section shall be conducted 

using procedures approved by the 

General Counsel, and interested parties 

shall have a reasonable opportunity to 

participate in the hearing through the 

presentation of testimony and written 

submissions. 

(ii) The General Counsel shall arrange 

for a neutral officer to preside over the 

hearing and shall provide a reasonable 

opportunity to question the presenters. 

(iii) After the hearing and after the 

record of the hearing is closed, the 

hearing officer shall place on the docket 

minutes of the hearing with sufficient 

detail as to fully reflect the evidence 

and arguments presented on the issues, 

along with proposed findings 

addressing the disputed issues of fact 

identified in the hearing notice. 

(iv) Interested parties who 

participated in the hearing shall be 

given an opportunity to file statements 

of agreement or objection in response to 

the hearing officer’s proposed findings. 

The complete record of the hearing shall 

be made part of the rulemaking record. 

(7) Actions following hearing. (i) 

Following the completion of the hearing 

process, the General Counsel shall 

consider the record of the hearing, 

including the hearing officer’s proposed 

findings, and shall make a reasoned 

determination whether to terminate the 

rulemaking; to proceed with the 

rulemaking as proposed; or to modify 

the proposed rule. 

(ii) If the General Counsel decides to 

terminate the rulemaking, the General 

Counsel shall publish a document in the 

Federal Register announcing the 

decision and explaining the reasons for 

the decision. 

(iii) If the General Counsel decides to 

finalize the proposed rule without 

material modifications, the General 

Counsel shall explain the reasons for the 

decision and its responses to the hearing 

record in the preamble to the final rule. 

(iv) If the General Counsel decides to 

modify the proposed rule in material 

respects, the General Counsel shall 

publish a new or supplemental notice of 

proposed rulemaking in the Federal 

Register explaining the General 

Counsel’s responses to and analysis of 

the hearing record, setting forth the 

modifications to the proposed rule, and 

providing additional reasonable 

opportunity for public comment on the 

proposed modified rule. 

(8) Interagency review process. The 

hearing procedures under this 

paragraph (b)(8) shall not impede or 

interfere with the interagency review 

process of the Office of Information and 

Regulatory Affairs for the proposed 

rulemaking. 

(c) Basis for rulemaking. When 

issuing a proposed or final regulation 

declaring a practice in air transportation 

or the sale of air transportation to be 

unfair or deceptive to consumers under 

the authority of 49 U.S.C. 41712(a), 

unless the regulation is specifically 

required by statute, the Department 

shall articulate the basis for concluding 

that the practice is unfair or deceptive 

to consumers as defined in § 399.79. 

Subpart G—Policies Relating to 

Enforcement 

■ 3. Section 399.79 is added to subpart 

G to read as follows: 

§ 399.79 Policies relating to unfair and 

deceptive practices. 

(a) Applicability. This policy shall 

apply to the Department’s aviation 

consumer protection actions pursuant to 

49 U.S.C. 41712(a). 

(b) Definitions. (1) A practice is 

‘‘unfair’’ to consumers if it causes or is 

likely to cause substantial injury, which 

is not reasonably avoidable, and the 

harm is not outweighed by benefits to 

consumers or competition. 

(2) A practice is ‘‘deceptive’’ to 

consumers if it is likely to mislead a 

consumer, acting reasonably under the 

circumstances, with respect to a 

material matter. A matter is material if 

it is likely to have affected the 

consumer’s conduct or decision with 

respect to a product or service. 

(c) Intent. Proof of intent is not 

necessary to establish unfairness or 

deception for purposes of 49 U.S.C. 

41712(a). 

(d) Specific regulations prevail. Where 

an existing regulation applies to the 

practice of an air carrier, foreign air 

carrier, or ticket agent, the terms of that 

regulation apply rather than the general 

definitions set forth in this section. 

(e) Informal enforcement proceedings 

(1) Informal enforcement proceedings 

will be conducted pursuant to the 

policies and procedures found in 49 

CFR part 5, subpart D. Before any 

determination is made on how to 

resolve a matter involving a potential 

unfair or deceptive practice, the U.S. 

Department of Transportation’s Office of 

Aviation Consumer Protection will 

provide an opportunity for the alleged 

violator to be heard and present relevant 

evidence, including but not limited to: 

(i) In cases where a specific regulation 

applies, evidence tending to establish 

that the regulation at issue was not 

violated and, if applicable, that 

mitigating circumstances apply; 

(ii) In cases where a specific 

regulation does not apply, evidence 

tending to establish that the conduct at 

issue was not unfair or deceptive as 

defined in paragraph (b) of this section; 

and 

(iii) Evidence tending to establish that 

consumer harm was limited, or that the 

air carrier, foreign air carrier, or ticket 

agent has taken steps to mitigate 

consumer harm. 

(2) During this informal process, if the 

Office of Aviation Consumer Protection 

reaches agreement with the alleged 

violator to resolve the matter with the 


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78718 Federal Register / Vol. 85, No. 235 / Monday, December 7, 2020 / Rules and Regulations 

1 7 U.S.C. 1a(11). See also 17 CFR 1.3 (defining 

‘‘commodity interest’’ to include, inter alia, any 

contract for the purchase or sale of a commodity for 

future delivery, and any swap as defined in the 

CEA); Adaptation of Regulations to Incorporate 

Swaps, 77 FR 66288, 66295 (Nov. 2, 2012) 

(discussing the modification of the term 

‘‘commodity interest’’ to include swaps). The Act is 

found at 7 U.S.C. 1, et seq. (2018), and the 

Commission’s regulations are found at 17 CFR Ch. 

I (2020). Both are accessible through the 

Commission’s website, https://www.cftc.gov. 

issuance of an order declaring a practice 

in air transportation or the sale of air 

transportation to be unfair or deceptive 

to consumers under the authority of 49 

U.S.C. 41712(a), and when a regulation 

issued under the authority of section 

41712 does not apply to the practice at 

issue, then the Department shall 

articulate in the order the basis for 

concluding that the practice is unfair or 

deceptive to consumers as defined in 

this section. 

(f) Formal enforcement proceedings. 

When there are reasonable grounds to 

believe that an airline or ticket agent has 

violated 49 U.S.C. 41712, and efforts to 

settle the matter have failed, the Office 

of Aviation Consumer Protection may 

issue a notice instituting an enforcement 

proceeding before an administrative law 

judge pursuant to 14 CFR 302.407. After 

the issues have been formulated, if the 

matter has not been resolved through 

pleadings or otherwise, the parties will 

receive reasonable written notice of the 

time and place of the hearing as set forth 

in 14 CFR 302.415. 

Issued this 24th day of November, 2020, in 

Washington, DC, under authority delegated 

in 49 CFR 1.27(n). 

Steven G. Bradbury, 

General Counsel. 

[FR Doc. 2020–26416 Filed 12–4–20; 8:45 am] 

BILLING CODE 4910–9X–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 3 

RIN 3038–AE46 

Exemption From Registration for 

Certain Foreign Intermediaries 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final rule. 

SUMMARY: The Commodity Futures 

Trading Commission (CFTC or 

Commission) is adopting amendments 

(Final Rule) revising the conditions set 

forth in the Commission regulation 

under which a person located outside of 

the United States (each, a foreign 

located person) engaged in the activity 

of a commodity pool operator (CPO) in 

connection with commodity interest 

transactions on behalf of persons 

located outside the United States 

(collectively, an offshore commodity 

pool or offshore pool) would qualify for 

an exemption from CPO registration and 

regulation with respect to that offshore 

pool. The Final Rule provides that the 

exemption under the applicable 

Commission regulation for foreign 

located persons acting as a CPO (a nonU.S. CPO) on behalf of offshore 

commodity pools may be claimed by 

such non-U.S. CPOs on a pool-by-pool 

basis. The Commission is also adopting 

a provision clarifying that a non-U.S. 

CPO may claim an exemption from 

registration under the applicable 

Commission regulation with respect to a 

qualifying offshore commodity pool, 

while maintaining another exemption 

from CPO registration, relying on a CPO 

exclusion, or even registering as a CPO, 

with respect to its operation of other 

commodity pools. Additionally, the 

Commission is adopting a safe harbor by 

which a non-U.S. CPO of an offshore 

pool may rely upon that exemption, if 

it satisfies several enumerated factors 

related to its operation of the offshore 

commodity pool. The Commission is 

also adopting an amendment permitting 

U.S. affiliates of a non-U.S. CPO to 

contribute initial capital to such nonU.S. CPO’s offshore pools, without 

affecting the eligibility of the non-U.S. 

CPO for an exemption from registration 

under the applicable Commission 

regulation. The Commission is also 

adopting amendments to the applicable 

Commission regulation originally 

proposed in 2016 that clarify whether 

clearing of commodity interest 

transactions through a registered futures 

commission merchant (FCM) is required 

as a condition of the registration 

exemptions for foreign intermediaries, 

and whether such exemption is 

available for foreign intermediaries 

acting on behalf of international 

financial institutions. 

DATES: The effective date for this Final 

Rule is February 5, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Joshua B. Sterling, Director, at 202–418– 

6056, jsterling@cftc.gov; with respect to 

the finalization of the 2016 Proposal: 

Frank N. Fisanich, Chief Counsel, at 

202–418–5949 or ffisanich@cftc.gov; 

with respect to all other aspects of this 

release: Amanda Lesher Olear, Deputy 

Director, at 202–418–5283 or aolear@

cftc.gov; Pamela Geraghty, Associate 

Director, at 202–418–5634 or 

pgeraghty@cftc.gov; Elizabeth Groover, 

Special Counsel, at 202–418–5985 or 

egroover@cftc.gov, Division of Swap 

Dealer and Intermediary Oversight, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1151 21st Street NW, Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

A. Statutory and Regulatory Background 

B. Recent Regulatory Proposals Related to 

Commission Regulation 3.10(c) 

C. The 2020 Proposal 

II. Final Rule 

A. General Comments in Response to the 

2016 and 2020 Proposals 

B. Reconsidering the 2016 Proposal and 

Comments Received 

1. The 2016 Proposal’s Amendments to 

Commission Regulation 3.10(c) 

2. Responsive Comments Received 

Regarding the 2016 Proposal 

3. Finalizing the 2016 Proposal 

C. Pool-by-Pool Exemption 

D. Utilizing the 3.10 Exemption Concurrent 

With Other Regulatory Relief Available 

to CPOs 

E. The Safe Harbor for Non-U.S. CPOs With 

Respect to Inadvertent U.S. Participants 

in Their Offshore Pools 

F. Exception for Initial Capital 

Contributions by U.S. Affiliates of a NonU.S. CPO to Its Offshore Pools 

1. U.S. ‘‘Controlling’’ Affiliates 

2. The Timing of a U.S. Affiliate’s Capital 

Contributions to an Offshore Pool 

3. Additional Anti-Evasion Conditions: 

The Marketing Prohibition and 

Prohibiting ‘‘Bad Actor’’ U.S. Affiliates 

4. Analysis Under Section 4(c) of the Act 

G. Additional Relief for Commodity 

Trading Advisors 

H. Reorganization of Commission 

Regulation 3.10(c) 

III. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

C. Cost-Benefit Considerations 

1. Costs and Benefits Related to Finalizing 

the 2016 Proposal 

2. Commission Regulation 3.10 (c)(5)(i): 

Claiming the 3.10 Exemption on a Poolby-Pool Basis 

3. Commission Regulation 3.10(c)(5)(iii): 

Providing A Safe Harbor for Non-U.S. 

CPOs Whose Offshore Pools May Have 

Inadvertent U.S. Participants 

4. Commission Regulation 3.10(c)(5)(iv): 

Utilizing the 3.10 Exemption Concurrent 

with Other Available Exclusions and 

Exemptions 

5. Commission Regulation 3.10(c)(5)(ii): 

The Affiliate Contribution Exception 

6. Section 15(a) Factors 

D. Anti-Trust Considerations 

I. Background 

A. Statutory and Regulatory Background 

Section 1a(11) of the Commodity 

Exchange Act (CEA or Act) 1 defines the 

term ‘‘commodity pool operator’’ as any 


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