Document ID: DOT-OST-2019-0182-0235
Agency: dot
Document Type: Rule
Title: Defining Unfair or Deceptive Practices
Posted Date: 2020-12-07T05:00Z

[Federal Register Volume 85, Number 235 (Monday, December 7, 2020)]
[Rules and Regulations]
[Pages 78707-78718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26416]

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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.

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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; f0929c919e95de879f829b9995b0949f84de979f86 (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.
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    \1\ ``Defining Unfair or Deceptive Practices,'' 85 FR 11881 
(February 28, 2020).
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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.
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    \2\ ``Notification of Regulatory Review,'' 82 FR 45750 (October 
1, 2017).
    \3\ See Comment of A4A, Docket DOT-OST-2017-0069-2753, available 
at www.regulations.gov.
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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

[[Page 78708]]

lawful, reasonable, and consistent with Administration policy.\6\
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    \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.
    \6\ 84 FR 71729-71733.
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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.
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    \7\ Letter 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).
    \8\ See, 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).
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    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.
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    \9\ FTC 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)).
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    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.
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    \10\ The 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.
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    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

[[Page 78709]]

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.
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    \11\ Travelers 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.
    \12\ Commissioners Rebecca Kelly Slaughter and Rohit Chopra.
    \13\ Senators Edward J. Markey, Tammy Baldwin, Maria Cantwell, 
and Richard Blumenthal and Representative Katie Porter.
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    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.
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    \14\ Airlines 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).
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    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.
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    \15\ Travel Tech and BCD Travel USA.
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    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 de-emphasis 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.
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    \16\ Comment 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.
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    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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    \18\ Southwest comment at 4, citing 49 U.S.C. 40101(a)(6), (12).

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[[Page 78710]]

    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.
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    \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).
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    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\
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    \20\ As 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.'')
    \22\ See 49 U.S.C. 40101(a)(1), (4), (6), (7), (9), and (12).
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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\
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    \23\ See 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).
    \24\ See 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)'').
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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.
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    \25\ For 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.
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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

[[Page 78711]]

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.
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    \26\ 85 FR 11885.
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    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\
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    \27\ Comment of A4A/IATA at 12.
    \28\ Id.
    \29\ Id. at 13.
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    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-and-comment 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\
---------------------------------------------------------------------------

    \30\ See 15 U.S.C. 57a (codifying the Magnuson-Moss Warranty--
Federal Trade Commission Improvement Act of 1975, Public Law 93-637 
(``Mag-Moss'').
    \31\ Comment of Commissioner Slaughter at 3.
    \32\ Id. at 4.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \33\ Comment 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-and-comment process.)''
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \35\ A4A 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.
---------------------------------------------------------------------------

    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

[[Page 78712]]

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 high-impact 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 high-impact 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 well-informed rulemaking, without unduly delaying the 
proceeding itself, and represent a reasonable and balanced approach 
consistent with the Department's rulemaking and enforcement policies.
---------------------------------------------------------------------------

    \36\ See 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.'')
    \37\ See 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.
    \39\ E.g., 77 FR 25105 (April 27, 2012).
---------------------------------------------------------------------------

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

[[Page 78713]]

recent final rule relating to enforcement.\40\
---------------------------------------------------------------------------

    \40\ See, 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.'')
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \41\ https://www.transportation.gov/individuals/aviation-consumer-protection/privacy.
---------------------------------------------------------------------------

    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-of-network 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 out-of-pocket.
---------------------------------------------------------------------------

    \42\ See https://www.regulations.gov/document?D=DOT-OST-2019-0182-0193.
    \43\ Association of Air Medical Services, Air Methods, and PHI 
Health, LLC.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \44\ For 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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \45\ See 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).
---------------------------------------------------------------------------

    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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    \46\ 49 CFR 5.89 (duty to disclose exculpatory evidence).

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[[Page 78714]]

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\
---------------------------------------------------------------------------

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

    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 
three-pronged analysis for unfairness or deception found in this final 
rule.\48\
---------------------------------------------------------------------------

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

    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.
---------------------------------------------------------------------------

    \49\ See 73 FR 74586 (December 8, 2008) (NPRM: ``Enhancing 
Passenger Airline Protections'').
---------------------------------------------------------------------------

    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

[[Page 78715]]

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

[[Page 78716]]

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

0
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

0
2. Section 399.75 is added to subpart F to read as follows:

Sec.  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 Sec.  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

[[Page 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 Sec.  399.79.

Subpart G--Policies Relating to Enforcement

0
3. Section 399.79 is added to subpart G to read as follows:

Sec.  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

[[Page 78718]]

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