Wednesday, 28 August 2013

Airlines claim they are already allowed to "personalize" prices

In response to my objections to airlines' proposal to replace publicly-disclosed tariffs of airfares with personalized price discrimination, the airlines now claim that they are already exempt from all requirements to have, use, or make public any tariff of prices.

This bombshell comes in the latest filing by the International Air Transport Association (IATA) in support of its application for approval by the U.S. Department of Transportation (DOT) of a resolution adopted by IATA's member airlines describing a "new distribution model" (NDC) for airfares: personalized air ticket prices.

IATA joint resolutions are the sort of collusion that would normally be prohibited by antitrust law. As a condition of the DOT allowing airlines to participate in IATA, DOT requires that these agreements between airlines be submitted to the DOT for its approval.

DOT rules provide for an opportunity for the applicant to state its case, and then for other interested parties and members of the public to comment. After that, the DOT makes its decision.

But apparently IATA didn't anticipate the extent of the opposition to DOT approval of IATA Resolution 787, and expected it to be rubber-stamped by the DOT. Faced with opposition not just from consumer advocates but from travel agencies ("Let’s call a spade a spade: NDC appears to involve a group of airlines attempting to collectively impose a new business model ... founded on the use of opaque fares ... to make real comparison shopping difficult, if not impossible.... to supplant the current model ... of transparent fares that any consumer can easily compare anonymously... The real elephant in the room ... is 'personalised pricing'."), computerized reservation systems, and others within the air travel industry, IATA petitioned the DOT for "leave to file an otherwise unauthorized document" to respond to its critics -- in other words, for a second chance to make the case for price discrimination it had failed to make in its initial application.

In that follow-up filing on 21 June 2013, IATA says this (numbered page 17, page 20 of the PDF):

Commenter Edward Hasbrouck argues that airlines "are required to sell tickets according to publicly-disclosed, impersonal tariffs." Hasbrouck (DOT-OST-2013-0048-0337), p. 4. Prior to deregulation that was largely true, but it is not the law today. The U.S. negotiated liberal air transport agreements with most of its aviation partners and DOT exempted airlines from filing tariffs in these markets. 14 CFR section 293.10(a) ("Air carriers and foreign air carriers are exempted from the duty to file passenger tariffs with the Department of Transportation"). So long as the liberal intergovernmental agreements remain in place, DOT is required to maintain that tariff filing exemption. 49 USC section 40105(b)(A) (providing that the Department "shall act consistently with obligations of the United States Government under international agreement").

There are two fundamental problems with IATA's argument:

First, it erroneously conflates exemption from the requirement to file a tariff with the government with exemption from any requirement for an airline to have a tariff of fares for air transportation, make it public, or sell tickets according to it.

It's common for businesses to be required to have certain policies, or to follow rules of a certain type, without those businesses being required to file those policies with the government.

The exemption cited by IATA is clearly and explicitly limited to exemption from the duty to file tariffs. Neither this regulation nor any of the international agreements on tariff filing referred to by IATA says anything about, or changes in any way, the status of airlines as common carriers required to sell tickets on the basis of publicly-disclosed tariffs.

Second, in calling for U.S. adherence to international treaties IATA ignores the provisions of aviation and human rights treaties (and those of U.S. law) that require that airlines be licensed, regulated by the DOT, and operated as "common carriers" (an essential element of the definition of which is nondiscriminatory pricing according to an impersonal public tariff) and that travel by common carrier be treated as a right.

It's particularly ironic that IATA raised the issue of treaty compliance in response to my comments, since IATA completely ignores the objections I raised on the basis of these treaties.

The DOT has yet to rule on IATA's application. IATA insisted on having the last word, so it's up to the DOT to spot the fallacies in IATA's arguments and its failure to respond to its critics.

Link | Posted by Edward on Wednesday, 28 August 2013, 12:02 (12:02 PM) | TrackBack (0)
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