1

UNITED STATES OF AMERICA 

BEFORE THE 

DEPARTMENT OF TRANSPORTATION

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Agreement Adopted by the Passenger )

Services Conference of the International ) Docket OST-2013-0048

Air Transport Association )

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

COMMENTS OF THE 

AMERICAN ANTITRUST INSTITUTE

I. Introduction

The AAI files these comments in the above-captioned proceeding regarding the 

application by the International Air Transport Association (IATA) for approval of the

agreement, “Resolution 787” (Enhanced Airline Distribution).1 The AAI’s interest in this 

matter pertains to the competitive issues potentially raised by the IATA Resolution 787 

proposal. The AAI is an independent and nonprofit education, research, and advocacy 

organization whose mission is to advance the role of competition in the economy, protect 

consumers, and sustain the vitality of the antitrust laws.2 The AAI has extensive 

experience analyzing competition policy and regulatory issues in the commercial airline 

industry, including frequent congressional testimony and white papers analyzing the 

competitive effects of most major airline mergers. The AAI also has been active in 

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1 International Air Transport Association, Application for Approval of an Agreement (Resolution 787) by 

the International Air Transport Association (IATA Application), U.S. Department of Transportation Docket 

OST-2013-0048, March 11, 2013 (hereinafter “Application”).

2 The AAI is managed by its Board of Directors, with the guidance of an Advisory Board consisting of 

approximately 130 prominent antitrust lawyers, law professors, economists, and business experts. The 

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

Advisory Board may differ from AAI positions.
2

analyzing dynamic pricing, pricing transparency, standard setting, and the competitive 

effects of agreements among competitors. As an independent competition advocacy 

organization with this history, the AAI is uniquely qualified to comment on the 

Resolution 787 matter.

The AAI files these comments to identify and address competitive concerns raised 

by Resolution 787, particularly insofar as Resolution 787 serves as an agreement among 

some of IATA’s largest member airlines to impose a new distribution standard in the 

commercial airline industry. Section II provides background on the two symbiotic 

dimensions of Resolution 787 – the technical data exchange standard and the distribution 

standard. Section III asks what IATA is actually seeking approval for in submitting 

Resolution 787 to the Department of Transportation (DOT). Section IV explores 

competitive issues potentially raised by Resolution 787, including (1) whether the process 

of crafting the technical standard was open and inclusive of all stakeholders and (2) 

whether the distribution standard constitutes a potentially anticompetitive agreement 

among competitors on the “rules” of competition. Section V concludes with 

recommendations for further DOT inquiry.

II. Resolution 787 Embeds a Technical Standard within an Airline-Mandated 

Distribution Standard in an Effort to Fully Embrace Dynamic Pricing

On March 11, 2013, IATA filed with the DOT an agreement (Resolution 787) 

adopted by its Passenger Services Conference (PSC) in October 2012 to become effective 

in June 2013. IATA frames Resolution 787 as a request for the DOT’s approval of a

technical standard, upon which electronic data interchange (communications or 

messaging protocols) between the airlines and other members of the industry would be 
3

based. For example, the Application states that Resolution 787 “establishes high-level 

objectives for and a process for developing a new electronic data interchange standard for 

airline distribution communications using Extensible Markup Language (XML), the 

modern programming language of the Internet.”

3 The Application characterizes the 

current model of information exchange involving airline products and services as an 

outdated system while explaining that there have been some efforts to update messaging 

protocols.

4 For example, the airlines themselves currently use XML on their own 

websites when implementing the “direct-connect” model, and Global Distribution 

Systems (GDSs) use a variety of protocols (including XML) for data exchange. The 

Application states that the purpose of Resolution 787 is to implement XML as the 

industry standard, whereby all price, quality, and availability information pushed by the 

airlines would be in a uniform data exchange format, to be used by industry participants 

and across distribution channels. 

Resolution 787 explains that the XML technical standard is essential for the 

purpose of facilitating a new standard for the distribution of airline pricing and product 

information. Indeed, Resolution 787 tightly weaves together XML and what IATA 

identifies as the New Distribution Capability (NDC). The Application acknowledges this 

relationship, explaining that “NDC is an aspirational description of various improvements 

in distribution which, if adopted in the market, the new XML standard would be capable 

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3 IATA Application, supra note 1, at 1.

4 Another data exchange system is “EDIFACT” (Electronic Data Interchange For Administration, 

Commerce and Transport).
4

of supporting.”5 NDC represents a fundamental change in how consumers will be able to 

shop for airfares by using the concept of “authentication,” which is essentially the 

development of tailored/targeted offers based on the collection of extensive consumer 

information.6 Under NDC, airline offers would consider price, but also potentially bundle 

in a variety of additional ancillary products and services (e.g., more legroom, lie-flat 

seats, etc.) that airlines have come to offer in recent years. The new XML-NDC standard 

would cover the range of current distribution channels. These include the airlines’ own 

websites, the GDSs, and third party data aggregators that are the source of fare and 

availability information for both online and offline retail and corporate travel agencies. 

The intent of Resolution 787 is relatively easy to decipher. Namely, it establishes 

a technical standard embedded in a new airline-mandated distribution model. The 

overarching proposal seems designed to more fully embrace dynamic airline pricing by

linking the collection of personal consumer data to the provision of tailored information 

on fares and ancillary services. Such tailored offers are generally considered a 

sophisticated form of price discrimination. Dynamic pricing, as practiced in a number of 

industries, is powered by detailed information on consumer characteristics. The IATA 

Application clearly embraces this goal in “describ[ing] one anticipated business model 

[NDC] in which the pricing and product offer is assembled dynamically by the airline 

upon request . . .”.

7

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 5 IATA Application, supra note 1, at 3.

6 While the AAI does not intend to comment on consumer protection issues raised by Resolution 787 (NDC 

in particular), we note that a number of commenters in this proceeding have raised consumer privacy 

concerns about the nature of consumer information proposed to be collected. 

7 IATA Application, supra note 1, at 8.
5

The dynamic pricing concept that underlies NDC is fundamentally different than 

the current industry approach – so-called “drip pricing” – where consumers search 

primarily on price and availability but are subjected to additional fees for services at the 

end of their shopping experience. Under drip pricing, consumers only see add-on fees

after they have incurred substantial search costs and are thus less likely to initiate new 

searches. The Resolution 787 agreement cannot achieve its objective of moving the 

industry off of drip pricing and onto a dynamic pricing platform without packaging the 

technical XML standard with a standardized distribution platform (NDC).

III. The Application Begs the Fundamental Question – For What Is IATA 

Seeking Approval?

Despite the symbiotic relationship between XML and NDC, IATA asserts that the 

current Application pertains only to the matter of the technical standard and that IATA 

seeks approval of Resolution 787 “only insofar as it describes a means to modernize 

distribution communications technology with a new XML standard . . . [;] IATA is not 

seeking an endorsement of the stated business requirements or marketplace aspirations of 

NDC.”8 Yet by IATA’s own admission, DOT approval for the XML technical standard is 

not necessary. The Application explains that Resolution 787 could have been filed for 

“information only” under DOT Order 2012-4-18 (Tier 1).9 Indeed, IATA emphasizes that 

Resolution 787 is “principally an articulation of goals and a template for future work and 

has no immediate effect on airline distribution practices, competition or passengers.”

10

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8 Id., at 2.

9 Id., at 17.

10 Id.
6

The most obvious interpretation of IATA’s filing an application with the DOT 

that does not require the agency’s approval is that it has some trepidation about whether 

the DOT will accept the NDC proposal, which has generated significant controversy. The 

Application confirms this interpretation:

“Nevertheless, IATA recognizes that movement toward any significant 

coordinated change in the technical standards for selling airline services is likely 

to warrant fuller scrutiny by the Department . . . and recognizes that any 

additional conference agreements on standardization of distribution practices 

would need to be filed with DOT before becoming effective.”

11

While this filing approach allows IATA to provide the DOT with a “sneak peek” at the 

NDC, the filing itself is its own best argument against DOT approval, particularly where 

the applicant attests that it is not obligated to obtain the only approval it purports to seek. 

Under the circumstances, the filing invites obvious confusion about whether DOT

approval of Resolution 787 can be construed as approval of the NDC model, or any 

aspects of the NDC model. 

In light of the above, the AAI respectfully submits that solely as a matter of 

jurisdiction and statutory compliance, there is confusion over exactly what is being 

sought from the DOT in regard to IATA’s Application for approval of Resolution 787. If 

the intent – as the Application states – is limited to implementing a new technical 

standard governing data interchange, then IATA should withdraw its Application and 

issue such a standard without requesting DOT approval. If IATA does not withdraw its 

Application, the DOT should not assume the risk of accidentally “smuggling in” any 

aspects of the NDC model by granting unneeded approval for the XML standard. 

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 11 Id.
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Approval of the NDC standard is a separate matter for purposes of regulatory 

oversight and should be presented to the agency at another time, subjected to separate 

notice requirements, and opened up for comment. Anything less than a separation of 

dockets serves to muddy the waters around the Resolution 787 proposal, risks confusing

the public on the scope and breadth of the competitive issues surrounding NDC, and

seriously threatens to short circuit full DOT review. The AAI submits, therefore, that the 

DOT cannot approve Resolution 787 in its current form. The DOT should place the 

burden on IATA to resolve the tension between Resolution 787 and the language in 

IATA’s Application for which it seeks approval. Specifically, IATA must take the 

necessary steps to eliminate confusion as to whether it now seeks approval of the XML 

standard (which it believes it does not need), the NDC standard (which it believes it does 

not currently seek), neither, or both. 

IV. Resolution 787 Raises Important Policy Issues Relating to Potential 

Anticompetitive Coordination Among Rivals

As a standalone technical standard-setting exercise, adopting XML may well 

generate efficiencies and benefits to consumers. By embedding the XML standard in a

new distribution standard (NDC) for the industry, however, Resolution 787 strays outside 

a technical standard-setting exercise. Resolution 787 raises important policy issues 

relating to IATA as a standard-setting trade association versus a group of competitors that 

have agreed on a new distribution model for their industry. Taken together, the XML and 

NDC proposals could potentially affect two important forms of competition: head-tohead competition between airlines and inter-distribution channel competition. Given the 

apparent lack of public interest benefits associated with transitioning to a technical 
8

standard together with the rollout of a new distribution standard, the AAI suggests that 

the DOT further probe into a number of important competitive issues.

A. The DOT Should Ensure that the Stakeholder Process for Developing 

Resolution 787 Was Open, Transparent, and Inclusive

Technical standard setting is important in any industry that depends on physical or 

electronic networks to facilitate technical coordination among market participants to 

facilitate commerce. Examples of such industries include electricity, financial networks, 

telecommunications, and airlines. Standards affect key parameters such as 

interoperability, compatibility, reliability, and efficiency. Industry efforts to set new 

technical standards and develop frameworks for the transition to such platforms are thus 

typically inclusive of all industry stakeholders. This includes manufacturers, distributors, 

retailers, consumer groups, and trade groups. Regulatory authorities are routinely called

upon to participate in and/or approve standard setting processes. For example, the Federal 

Energy Regulatory Commission has played an integral role in the development of 

standards for Smart Grid technologies.12

The AAI suggests that in its review, the DOT should ensure that IATA’s crafting 

and adoption of Resolution 787 reflected an open and inclusive industry stakeholder 

process. If not, the Application raises fundamental concerns about the intent of the XMLNDC proposal as a competition-neutral or competition-enhancing process. The record 

evidence indicates that IATA’s adoption of Resolution 787 may not reflect an open and 

inclusive stakeholder process. IATA’s Passenger Distribution Group (PDG), within its 

PSC, began the process for crafting and adopting Resolution 787 in July 2011. The PSC 

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 12 See, e.g., Federal Energy Regulatory Commission, Smart Grid, ferc.gov, http://www.ferc.gov/industries 

/electric/indus-act/smart-grid.asp#skipnav.
9

has historically taken responsibility for developing communications standards for the 

industry. The PDG – which endorsed the NDC standard – is made up of representatives 

from 11 of the largest airlines in the world, which constitute a tiny proportion of the 

IATA membership.

13

The PDG subgroup responsible for the technical work on XML-NDC is the 

Distribution Data Exchange Working Group (DDXWG). Over the period July 2012 to 

November 2012, the DDXWG held two meetings that included a variety of stakeholders:

airlines, the three major GDSs, online travel agents, traditional travel agents, and industry 

technology service providers.14 The PDG therefore took 12 months to deliberate

internally before producing the initial proposal, and it opened the process to stakeholders 

for three months. It is notable that based on information contained in the Application, 

Resolution 787 was adopted in October 2012. However, the second meeting of 

stakeholder groups, in November 2012, occurred more than one month after the vote to 

adopt, thus begging the question of whether all stakeholder input was considered.15

Needless to say, the AAI and some other commenters have not been privy to the 

internal workings of the IATA groups charged with promulgating Resolution 787. In 

light of the apparent anomalies in IATA’s stakeholder process, coupled with the 

competitive issues raised by the XML-NDC proposal discussed below, the AAI urges the 

DOT to issue a data request to the parties to divulge all internal documents related to the 

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 13 IATA Application, supra note 1 at 15. Those airlines are: Air Canada, Alitalia, United Airlines, 

Inc., Delta Air Lines Inc., Air France/KLM, British Airways p.l.c., Deutsche Lufthansa AG, Swiss 

International Airlines Ltd, Korean Air Lines Co. Ltd, Cathay Pacific Airways Ltd, and Singapore 

Airlines Ltd.

14 IATA Application, supra note 1, at 16. 

15 Id.
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Resolution 787 process. Such discovery would allow the DOT to examine the openness 

and inclusiveness of IATA’s stakeholder process. Deviations from an inclusive process 

would cast a shadow on the intent of Resolution 787, potentially raising pressing policy 

questions or even – if the outcome is anticompetitive – antitrust liability.

B. NDC May Constitute a Potentially Anticompetitive Agreement 

Among Competitors on the “Rules” of Competition

By intertwining the XML technical standard with the rollout of a new airlinecrafted distribution model (NDC) that is the product of an agreement among the world’s 

largest airlines, Resolution 787 exits the realm of a technical standard setting exercise and 

enters the arena of potentially restraining competition. A number of issues deserve the 

DOT’s consideration. First, as noted earlier, the apparent intent of the XML-NDC model 

is to allow the airlines to implement dynamic pricing through sophisticated information 

collection and development of tailored, consumer-specific offers. Arguably, this objective 

can be fulfilled through means that stop short of an agreement among the 11 members of 

IATA’s PDG to impose a new distribution standard on the industry. For example, IATA 

could promulgate a new uniform XML standard and offer a new menu of information on 

fares, availability, and ancillary products and services to GDSs and third party data 

aggregators that service the range of online and brick-and-mortar industry travel 

agencies. 

Second, going the additional step of standardizing distribution under a model that 

has been agreed to by the very rivals who compete for consumer travel dollars potentially 

constitutes an anticompetitive agreement on the “rules” of competition. The nature of an 

agreement on rules – which is not new to competition policy – is generally to reduce the 
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number of variables or dimensions across which rivals compete. Legal-economic analysis 

of anticompetitive agreements among competitors typically parses agreements into one of 

three categories: (1) agreements on price, (2) agreements to disadvantage rivals, and (3) 

agreements on rules.16 Unlike naked price fixing, an agreement on rules is a more subtle 

form of competitive restraint whereby rivals agree on and implement practices that 

“insulate cartel members to some degree from hard competition.”17

Rule “fixing” often is found in situations such as the one under discussion, where

straightforward price fixing is unduly difficult because the competitors compete along 

many dimensions in addition to price. Afterwards there still will be price competition, but

the price competition will be softer or less vigorous because the rule fixing will have 

collusively altered the competitive environment. The ultimate effects of fixing the rules 

of competition, however, often will be the same as the effects of price fixing or other 

forms of cartelization – higher prices and restricted consumer choice in terms of nonprice competition.

Imposition of a uniform distribution model (NDC) that is the product of an 

agreement among the largest airlines could soften existing competition between airlines

and between the airlines’ direct-connect distribution channel and other channels of 

distribution, such as online and offline retail and corporate travel agencies. The current 

model for purchasing airfares, particularly on the Internet, is widely acknowledged to be 

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 16 Robert H. Lande & Howard P. Marvel, "The Three Types 

of Collusion: Fixing Prices, Rivals, and Rules," 2000 Wisconsin L. Rev. 941 (2000), at 2-3.

Available http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1134820&download=yes.

17 Id.
12

transparent and to generate stiff price competition.18 This is immensely valuable to 

consumers. 

NDC’s potential to allow airlines to escape this competition and erode existing 

consumer benefits highlights why the DOT should exercise caution in considering

IATA’s assertion that Resolution 787 will enable increased competition among airlines 

“seeking to entice customers with enhanced service offerings in addition to price.”19

Under agreements on rules, airlines’ decisions on price and output may still be made 

independently, but the agreement effectively creates the space for rivals to have some

degree of pricing freedom.

20 The DOT might consider whether that will facilitate the 

isolation of consumers who can then potentially be exploited through higher prices.

21

Other comments in this proceeding have raised concerns about consumers’ ability

to comparison shop for fares under NDC in a way that lends itself to maximum 

transparency. For example, consumers will be furnished tailored or targeted offers from 

airlines based on the provision of detailed information under “authentication.” Contrary 

to IATA’s claim that NDC supports comparison shopping and enhanced consumer 

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 18 See, e.g., written testimony (dated March 12, 2012) of Daniel Kasper in the American Airlines 

bankruptcy proceeding: “In addition, other factors such as Internet-based airline search and booking tools 

have also put downward pressure on airfares by increasing price transparency for both business and leisure 

passengers.” (at 21) “Quoting Airlines & Academics About Comparison Shopping,” Business Travel 

Coalition, available http://businesstravelcoalition.com/documents/quoting-airlines--academics.html.

19 IATA Application, supra note 1, at 18.

20 There is a burgeoning literature on privacy as a term of competition. See e.g. Julie Brill, The Intersection 

of Consumer Protection and Competition in the New World of Privacy, 7 Competition Policy Int’l. 7 

(Spring 2011); Pamela Jones Harbour & Tara Isa Koslov, Section 2 in a Web 2.0 World: An Expanded 

Vision of Relevant Markets, 76 Antitrust L. J. 769 (2010). One of the concerns with NDC is that potential 

privacy competition may be absorbed in the “cushion” provided by a rules agreement. NDC has the 

potential to mandate uniformity in the terms of data collection, thereby threatening to eliminate incentives 

for airlines to compete by offering less intrusive booking opportunities. 

21 Lande & Marvel, supra note 16, at 4. 
13

choice, a standardized distribution model may well undermine the ability of consumers to 

assess their options, leading to undesirable outcomes, even if price competition in the 

industry continues. In other words, authentication could affirmatively reduce 

transparency.

Finally, IATA asserts that a major role for distributors under NDC will be to add 

the necessary dimensions to allow consumers to comparison shop. For example, the 

Application states that NDC will open the “existing distribution market to strong 

competition from new distribution channels (e.g., travel agents) . . . to evolve to better 

meet customer needs.”

22 However, by mandating a standard industry distribution model, 

NDC removes many of the dimensions and opportunities that currently facilitate interchannel competition. In fact, NDC may well facilitate further distribution standardization 

that could ultimately eliminate the need for GDSs or other data aggregators. These 

entities could be replaced with airline joint ventures that use airline data, together with 

detailed consumer information, under an algorithm that would help airlines set their 

prices for individual customers.

The efficiency with which the airline industry migrates to a dynamic pricing 

model is, of course, a central issue for any trade association in a standard setting exercise. 

There is nothing to prevent any individual airline from developing and implementing 

dynamic pricing on its own, and we would have no objection to individual airlines doing 

this unilaterally. There is, however, no need for the airlines to do this collectively. On the 

contrary, it is their collective action that has the potential to be as anticompetitive as more 

straightforward forms of collusion. In light of these concerns, the AAI suggests that the 

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 22 IATA Application, supra note 1, at 18.
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DOT carefully scrutinize the Resolution 787 proposal to determine if an agreement 

among airlines to impose a standardized distribution model is necessary to achieve 

reasonable commercial goals within the confines of fair competition and the public 

interest. If it is not, then IATA should go back to the drawing board to explore other ways 

to modernize the airlines’ delivery of pricing and other information to consumers.

V. Policy Issues and Recommendations

The foregoing analysis highlights a fundamental tension surrounding the airline 

industry’s efforts to update their business model and move toward a more sophisticated 

system where they compete not only on price but also on other dimensions of service and 

quality. It is very likely possible to implement such changes without the steps proposed 

by Resolution 787, particularly an agreement on new rules of competition embodied in 

the NDC proposal. However, IATA is asking the DOT to sign off to a large degree on a 

proposal that has not been articulated with sufficient specificity or clarity to evaluate its 

potential upsides or downsides. In light of the fundamental questions raised by the 

proposed IATA Resolution 787 agreement, the AAI suggests that the DOT pursue further 

avenues of inquiry to determine if the proposal is in the public interest. The AAI 

respectfully suggests the DOT should:

1. Issue a data request for all internal IATA documents relating to the

Resolution 787 crafting and adoption process. Were all relevant stakeholders 

in the supply chain invited to participate in the process in a timely and 

meaningful way? How was input from various stakeholders processed and 

included in the final recommendation? 

2. In conjunction with the DOJ, determine the extent to which the NDC 

agreement among rivals will disable or soften competition between 

airlines or between the direct connect distribution channel and other 

distribution channels. Even though airlines will continue to compete 

on price, will the agreement allow airlines to compete less vigorously 
15

on price and along other non-price dimensions of competition, 

resulting in higher overall prices and restricted consumer choice?

3. Determine whether the XML-NDC model will deliver benefits to competition 

and consumers that cannot be achieved in any other feasible way. Absent the 

NDC could XML – in conjunction with other changes to how airlines provide 

information on products and services – achieve the same goals toward 

improving how consumers are able to shop for travel? Can this be done 

without sacrificing competition and consumer choice?

Respectfully submitted,

Diana L. Moss, Ph.D.

Vice President

American Antitrust Institute

720-233-5971

dmoss@antitrustinstitute.org

Randy M. Stutz

Senior Counsel and Director of Special Projects

American Antitrust Institute

202-905-9420

rstutz@antitrustinstitute.org

May 1, 2013