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Statement of Need: The Department's existing rules require the Department to reexamine whether the rules are necessary and effective. In addition, two developments since the Department's last review of rules necessitate a reexamination. Those developments are the growing role of the Internet in airline distribution and the decline in airline control of the systems. A number of airlines obtain a large share of their bookings from their own Web sites, online travel agencies account for a significant share of all airline bookings, and the two largest systems operating in the United States are not owned by any airline.

Summary of the Legal Basis: The Department has the authority under 49 U.S.C. 41712 to prohibit unfair and deceptive practices and unfair methods of competition in the sale of air transportation by airlines and ticket agents. The Department accordingly may prohibit conduct by airlines and ticket agents that is likely to cause deception or violate the antitrust laws or antitrust principles. The original CRS rules were affirmed in United Air Lines v. CAB, 766 F.2d 1107 (7th Cir. 1985).

Alternatives: The Department will consider alternatives ranging from allowing some or all of the rules to expire at their sunset date to readopting the rules with some additional provisions. The Department has issued two advance notices of proposed rulemaking asking for comment on whether the rules remain necessary in light of the developments in airline distribution and the systems' declining airline control and on whether rules are necessary for governing the sale of airline services through the Internet. The rules can be phased out or eliminated, along with comment on whether the rules should be strengthened in several respects raised by the comments on the advance notices of proposed rulemaking.

Anticipated Costs and Benefits: The Department will include a preliminary regulatory evaluation in its notice of proposed rulemaking.

Risks: The Department found in its last overall review of the rules that the systems had the ability and potential incentives to engage in conduct that could prejudice airline competition and cause consumers and their travel agents to receive misleading and inaccurate information on airline services. Systems could also engage in practices that would deny airlines and travel agencies a reasonable opportunity to use alternative electronic services that would provide information and booking capabilities. The rules may also impose costs on the systems and airlines. The Department will ask for comment on whether the risks still exist and, if so, whether the costs imposed by the rules outweigh the benefits provided by the rules.