[Federal Register Volume 85, Number 40 (Friday, February 28, 2020)]
[Proposed Rules]
[Pages 11881-11890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03836]


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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: Notice of proposed rulemaking.

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SUMMARY: The U.S. Department of Transportation (Department or DOT) is 
seeking comment in this Notice of Proposed Rulemaking (NPRM) on a 
proposal that would codify definitions for the terms ``unfair'' and 
``deceptive'' in the Department's regulations implementing its aviation 
consumer protection statute. While codifying these definitions into the 
Department's regulations would be new, the proposed definitions of 
``unfair'' and ``deceptive'' reflect the Department's longstanding 
interpretation of the terms. This proposal would also require the

[[Page 11882]]

Department to articulate in future enforcement orders the basis for 
concluding that a practice is unfair or deceptive where no existing 
regulation governs the practice in question, state the basis for its 
conclusion that a practice is unfair or deceptive when it issues 
discretionary aviation consumer protection regulations, and apply 
formal hearing procedures for discretionary aviation consumer 
protection rulemakings. In addition, this proposal would codify the 
longstanding practice of the Department's Office of Aviation 
Enforcement and Proceedings to offer airlines and ticket agents the 
opportunity to be heard and present relevant evidence before any 
determination is made on how to resolve a matter involving a potential 
unfair or deceptive practice. The proposal is intended to provide 
regulated entities and other stakeholders with greater clarity and 
certainty about the Department's interpretation of unfair or deceptive 
practice in the context of aviation consumer protection rulemaking and 
enforcement actions.

DATES: Comments should be filed by April 28, 2020. Late-filed comments 
will be considered to the extent practicable.

ADDRESSES: You may file comments identified by docket number DOT-OST-
2019-0182 by any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov and follow the online instructions for submitting 
comments.
     Mail: Docket Management Facility, U.S. Department of 
Transportation, 1200 New Jersey Ave. SE, West Building Ground Floor, 
Room W12-140, Washington, DC 20590-0001.
     Hand Delivery or Courier: West Building Ground Floor, Room 
W12-140, 1200 New Jersey Ave. SE, between 9:00 a.m. and 5:00 p.m. ET, 
Monday through Friday, except Federal holidays.
     Fax: (202) 493-2251.
    Instructions: You must include the agency name and docket number 
DOT-OST-2019-0182 or the Regulatory Identification Number (RIN) for the 
rulemaking at the beginning of your comment. All comments received will 
be posted without change to https://www.regulations.gov, including any 
personal information provided.
    Privacy Act: Anyone can search the electronic form of all comments 
received in any of our dockets by the name of the individual submitting 
the comment (or signing the comment, if submitted on behalf of an 
association, business, labor union, etc.). You may review DOT's 
complete Privacy Act statement in the Federal Register published on 
April 11, 2000 (65 FR 19477-78), or you may visit www.dot.gov/privacy.
    Docket. For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov, or to the street 
address listed above. Follow the online instructions for accessing the 
docket.

FOR FURTHER INFORMATION CONTACT: Robert Gorman, Senior Trial Attorney, 
or Kimberly Graber, Deputy Assistant General Counsel, or Blane Workie, 
Assistant General Counsel, Office of Aviation Enforcement and 
Proceedings, U.S. Department of Transportation, 1200 New Jersey Ave. 
SE, Washington, DC 20590, 202-366-9342, 202-366-7152 (fax); 
robert.gorman@dot.gov; e2898b8f8087908e9bcc859083808790a2868d96cc858d94; 16747a777873386179647d7f735672796238717960 
(email).

SUPPLEMENTARY INFORMATION:

I. Introduction

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 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 agency actions that are good candidates for 
repeal, replacement, or modification.\1\ In response to the Notice, 
Airlines for America (A4A), an airline trade association, urged the 
Department to adopt policies defining unfairness and deception 
consistent with principles articulated in Federal Trade Commission 
(FTC) and Federal court precedent interpreting those terms.\2\
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    \1\ See Notice of Regulatory Review, available at 82 FR 45750.
    \2\ See Comment of A4A, Docket DOT-OST-2017-0069-2753, available 
at www.regulations.gov.
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    A4A stated that the Department has relied on the phrase ``unfair 
and deceptive practice'' to issue detailed regulations and to take 
enforcement action without sufficient evidence that the practice at 
issue was actually unfair or deceptive. With respect to rulemaking, A4A 
stated that many of the Department's past consumer protection 
rulemakings were not based on evidence that the benefits of the rules 
outweighed their cost. More specifically, they recommended that DOT 
issue new regulations only where objective evidence shows that: (1) The 
regulation is necessary to prevent deceptive practices that are 
occurring or are reasonably likely to occur; (2) the practice is 
causing or would cause significant consumer harm if it did occur; and 
(3) market forces are unlikely to provide a remedy to such consumer 
harm.
    With respect to enforcement, A4A similarly claimed that the 
Department's Office of Aviation Enforcement and Proceedings 
(Enforcement Office) has aggressively pursued enforcement action in 
cases involving minor infractions, inadvertent errors, or isolated 
incidents with little evidence of a ``practice'' or of significant 
consumer harm. A4A recommended that the Department should align its 
policies on unfairness and deception with the policies of the FTC, use 
evidence for its determinations, and not merely speculate or assume 
that actual consumer harm took place.

C. Clarification of Department Interpretation of Statutory Terms in 
Aviation Consumer Protection Rules and Enforcement

    The Department has considered the issues raised by A4A. In 
addition, the Department recently issued updated procedural 
requirements for its rulemaking and enforcement actions. The 
Department's recently issued updated policies and procedures governing 
the development and issuance of regulations are set forth in

[[Page 11883]]

Subpart B of 49 CFR part 5 on Administrative Rulemaking, Guidance, and 
Enforcement Procedures.\3\ Rules issued under the authority of Section 
41712 must be consistent with the Department's recently updated 
rulemaking procedures, including the policy that rules should be 
straightforward and clear, incorporate best practices for economic 
analyses, and provide for appropriate public participation.
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    \3\ See Subpart B, ``Rulemaking Procedures,'' 49 CFR part 5, 
which was recently updated in a final rule published at 84 FR 71714 
(December 27, 2019).
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    Further, enforcement actions taken pursuant to Section 41712 should 
be consistent with Subpart D of 49 CFR part 5, which includes the 
Department's procedural requirements for enforcement actions.\4\ As 
stated in the preamble to the Department's final rule codifying these 
procedures, all Department enforcement actions should satisfy 
principles of due process and remain lawful, reasonable, and consistent 
with Administration policy.\5\ Consistent with the Department's 
enforcement policies and procedures, enforcement orders finding 
violations of Section 41712 should explain the specific factors 
considered and the basis for concluding that a practice either does or 
does not violate Section 41712. Similarly, the standards for unfairness 
and deception should be specified and an explanation of how any 
prohibited or required actions meet those standards should be provided 
for clarity and to ensure consistency with the statute.
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    \4\ See Subpart D, ``Enforcement Procedures,'' 49 CFR part 5, 
which was recently updated in a final rule published at 84 FR 71714 
(December 27, 2019).
    \5\ See 84 FR 71715.
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II. Background

A. The FTC and the Department's Statutes Regulating Unfair and 
Deceptive Practices

    The Department's unfair and deceptive practices statute, Section 
41712, is closely modeled after Section 5 of the FTC Act, 15 U.S.C. 45 
(``Section 5''). As originally enacted in 1914, Section 5 granted the 
FTC authority to prohibit ``unfair methods of competition'' but did not 
address unfair or deceptive practices. Some early Supreme Court cases 
held that Section 5's prohibition on unfair methods of competition 
required a showing of harm to competitors and competition, but was not 
focused on addressing harm to consumers.\6\ In response, Congress 
amended Section 5 of the FTC Act in 1938 to proscribe ``unfair or 
deceptive acts or practices'' in order to better protect consumers.\7\
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    \6\ See, e.g., FTC v. Raladam Co., 283 U.S. 643, 649 (1931).
    \7\ Wheeler-Lea Act, Public Law 75-447, 3, 52 Stat. 111, 114 
(1938), amending FTC Act Sec.  5, 52 Stat. 111, 114.
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    Section 5 grants the FTC broad enforcement authority to address 
unfair or deceptive acts or practices across a wide range of 
industries, but excludes the common carrier activities of air carriers 
and foreign air carriers from the FTC's jurisdiction. In 1938, the same 
year that Congress amended the FTC Act to proscribe unfair and 
deceptive practices, Congress passed the Civil Aeronautics Act. Section 
411 of the Civil Aeronautics Act granted to the Civil Aeronautics 
Authority (CAA) the exclusive power to prohibit unfair and deceptive 
practices in air transportation. Section 41712 was previously codified 
as Section 411 but in 1994, as part of a comprehensive non-substantive 
reorganization of the Transportation Code, Section 411 was re-codified 
as Section 41712. Neither Section 5 of the FTC Act, nor Section 41712 
(formerly Section 411), specifically defines ``unfair or deceptive 
practices.'' In 1940, the CAA's authority was transferred to the Civil 
Aeronautics Board (CAB). In 1952, Congress expanded the CAB's authority 
to include unfair or deceptive practices in the sale of air 
transportation, not just air transportation itself.
    The Federal Aviation Act of 1958 created the Federal Aviation 
Administration (FAA). This statute transferred safety authority to the 
FAA, but the CAB's authority over unfair or deceptive practices 
remained intact. In 1978, the Airline Deregulation Act (ADA) 
substantially deregulated the U.S. airline industry by prohibiting 
regulation of rates, routes, and services. The ADA did not alter the 
CAB's authority to prohibit unfair or deceptive practices, however.
    Effective January 1, 1985, the CAB was abolished, and the CAB's 
authority to regulate unfair and deceptive practices was transferred to 
the Department.
1. Jurisdiction of FTC and DOT
    Section 41712 grants the Department the authority to prohibit 
unfair or deceptive practices, and jurisdiction over air carriers and 
foreign air carriers lies exclusively with the Department because those 
entities were carved out of FTC jurisdiction in Section 5. However, the 
FTC's general Section 5 authority to prohibit unfair and deceptive 
practices applies to ticket agents in the sale of air transportation. 
As a result, the Department and the FTC have concurrent authority over 
ticket agents in the sale of air transportation.
2. FTC's Definitions of Unfair and Deceptive Practices
    The FTC Act does not specifically define ``unfair or deceptive acts 
or practices,'' but authorizes the FTC to define such acts and 
practices through enforcement and rulemaking. 15 U.S.C. 45; 15 U.S.C. 
57a.
i. Unfairness
    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.\8\ These principles were applied 
in FTC enforcement cases and rulemaking and approved by reviewing 
Federal courts.\9\ 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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    \8\ 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).
    \9\ 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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ii. Congress Codifies FTC's Approach to Unfairness
    In 1994, Congress codified existing case law defining the elements 
of unfairness. Specifically, 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,

[[Page 11884]]

but public policy may not be the primary basis of its decision.
iii. FTC's Definition of Deception
    In 1983, the FTC issued a Policy Statement on Deception.\10\ 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. Practices that have been found misleading or deceptive in 
specific cases include false oral or written representations, 
misleading price claims, sales of hazardous or systematically defective 
products or services without adequate disclosures, failure to disclose 
information regarding pyramid sales, use of bait and switch techniques, 
failure to perform promised services, and failure to meet warranty 
obligations.
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    \10\ 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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    Congress has not enacted the FTC's 1983 Policy Statement on 
Deception into law, unlike the FTC's 1980 Policy Statement on 
Unfairness, but the Policy Statement was adopted by the FTC in formal 
adjudication, see In the Matter of Cliffdale Assocs., Inc., 103 F.T.C. 
110, 174 (1984), and has been regularly cited by Federal courts.\11\
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    \11\ See, e.g., FTC v. Pantron I Corp., 33 F.3d 1088 (9th Cir. 
1994), cert. denied, 514 U.S. 1083 (1995); Novartis Corp. v. FTC, 
223 F.3d 783, 786 (D.C. Cir. 2000).
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3. Rulemaking Authority of FTC and DOT
    The FTC enforces a broad range of consumer protection laws 
affecting most of the country's commercial entities, with some 
exceptions such as airlines. The FTC Act prescribes several specific 
statutory requirements for issuing rules prohibiting an act or practice 
as unfair or deceptive. As described above, to issue a rule defining an 
act or practice as unfair, FTC must first determine that the act or 
practice 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.\12\ The FTC may 
consider public policy as evidence to be considered with all other 
evidence, but public policy considerations may not serve as a primary 
basis for its determination. Moreover, Section 18 of the FTC Act, 15 
U.S.C. 57a, specifies particular procedures for the promulgation of FTC 
rules that define with specificity acts or practices which are unfair 
or deceptive.\13\ Before issuing binding regulations defining specific 
acts or practices to be unfair or deceptive, the FTC must provide an 
opportunity for an informal hearing, and provide in the rule's 
statement of basis and purpose: (1) A statement as to the prevalence of 
the acts or practices treated by the rule; (2) a statement as to the 
manner and context in which such acts or practices are unfair or 
deceptive; and (3) a statement as to the economic effects of the rule, 
taking into account the effect on small business and consumers.\14\
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    \12\ 15 U.S.C. 45(n).
    \13\ Section 18 rulemaking procedures apply to FTC rules to 
define ``unfair or deceptive acts or practices'' prohibited under 
Section 5 of the FTC Act unless Congress grants the agency authority 
to issue rules under the Administrative Procedure Act in a specific 
context. See, e.g., Children's Online Privacy Protection Act, 15 
U.S.C. 6501-6508; Fairness to Contact Lens Consumers Act, 15 U.S.C. 
7601-7610.
    \14\ 15 U.S.C. 57a.
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    There are no comparable statutory requirements for rulemaking by 
the Department finding a practice to be unfair or deceptive. Under 49 
U.S.C. 40113, Congress granted the Secretary of Transportation the 
authority to take action that he or she considers necessary to carry 
out his or her statutory duties, including prescribing regulations and 
issuing orders. Like other Federal agencies, the Department is subject 
to the general provisions of the Administrative Procedure Act when 
issuing regulations. The Department is also subject to the rulemaking 
procedures found in Subpart B of 49 CFR part 5.

III. Proposal for New Procedural Requirements

    This rulemaking would codify the Department's definitions of 
``unfair'' and ``deceptive'' when engaging in aviation consumer 
protection rulemaking or enforcement action under the authority of 
Section 41712. This rulemaking would also require the Department to 
follow certain procedures when engaging in aviation consumer protection 
rulemaking and enforcement. For example, this rulemaking would require 
the Department to provide an explanation of how specific conduct meets 
the standard for an ``unfair'' or ``deceptive'' practice when engaging 
in an aviation consumer protection rulemaking or enforcement action, as 
further described below.

A. Defining Unfairness and Deception in Rulemaking and Enforcement 
Proceedings

    When the Department issued its existing aviation consumer 
protection rules, the Department followed the Administrative Procedure 
Act and related statutory and administrative requirements to ensure 
that these rules are authorized by law and justified on a benefit-cost 
basis. However, more can be done to better inform the public and 
regulated entities how the Department determines what constitutes an 
unfair and deceptive practice when issuing discretionary aviation 
consumer protection rulemakings under the authority of Section 41712 
and when issuing enforcement orders based on Section 41712 where there 
has not been a regulation that already specifies required or prohibited 
conduct.
    This proposed rule would define the terms ``unfair'' and 
``deceptive'' for aviation consumer protection enforcement or 
rulemaking actions brought pursuant to Section 41712. First, it would 
define a practice as ``unfair'' 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. Second, the 
proposed rule would define a practice as ``deceptive'' if it is likely 
to mislead a consumer acting reasonably under the circumstances with 
respect to a material issue. Under the proposal, an issue is 
``material'' if it is likely to have affected the consumer's conduct or 
decision with respect to a product or service. These definitions mirror 
the definitions used by the FTC.
    The Department has used its general authority to prohibit unfair or 
deceptive practices of air carriers, foreign air carriers, and ticket 
agents to conduct oversight in the area of airline privacy \15\ and 
frequent flyer programs.\16\ Also, in the FAA Reauthorization Act of 
2018, Congress specified that the Department's authority to prohibit 
unfair or deceptive practices covers air ambulance providers and 
authorized the Department to investigate air ambulance

[[Page 11885]]

complaints.\17\ Because the Department has not issued specific 
regulations with respect to complex and specialized issues, including 
privacy, frequent flyer programs, and air ambulances, it relies on the 
general provisions of section 41712. Are the general definitions of 
unfairness and deception proposed in this NPRM sufficient to provide 
the regulated entities, consumers and other stakeholders sufficient 
notice of what constitutes an unfair or deceptive practice in these or 
other specialized subject areas?
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    \15\ The Department considers the mishandling of private 
consumer information by airlines or ticket agents to be an unfair or 
deceptive practice. See https://www.transportation.gov/individuals/aviation-consumer-protection/privacy.
    \16\ Section 408 of the FAA Modernization and Reform Act of 2012 
authorized the Department to investigate complaints relating to 
frequent flyer programs. Public Law 112-95; 126 Stat. 87 (2012). See 
also https://www.transportation.gov/individuals/aviation-consumer-protection/frequent-flyer-programs.
    \17\ Public Law 115-254, 132 Stat. 3186, section 419 (2018).
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    The proposal makes clear that proof of intent is not necessary to 
establish unfairness or deception. In other words, the Department is 
not required to find that an air carrier or ticket agent acted with the 
intent to cause harm before finding a practice to be unfair to a 
consumer. Likewise, it is not necessary for the Department to find that 
an air carrier, foreign air carrier, or ticket agent acted with the 
intent to deceive before finding such a practice is deceptive. These 
principles are reflected in Federal case law applying Section 5 of the 
FTC Act. In addition, under the FTC Act, disseminating false 
advertisements, or causing false advertisements to be disseminated, is 
an unfair or deceptive act or practice. 15 U.S.C. 52. The FTC Act, and 
its definition of ``false advertisement,'' make no reference to intent 
to deceive.
    Section 5 of the FTC Act prohibits unfair ``acts or practices'' in 
or affecting commerce, while Section 41712 grants the Department 
authority over unfair or deceptive practices in air transportation or 
the sale of air transportation. The FTC Act and FTC regulations do not 
define ``practice.'' It is possible that a definition is not necessary 
in the FTC context because the FTC's authority applies to specific 
acts, even if they do not rise to the level of a practice. At present, 
the Department does not believe that it is necessary to define 
``practice.'' The Department's rules with respect to unfairness or 
deception in air transportation or the sale of air transportation are 
always directed to practices of air carriers, foreign air carriers, and 
ticket agents, rather than to individual acts. In the aviation consumer 
protection enforcement context, when analyzing complaints, the 
Department regularly seeks to determine the extent to which one or more 
unfair or deceptive acts actually reflects a broader ``practice'' (for 
example, by investigating to determine whether multiple consumers have 
been harmed at different times by the same repetitive conduct, or by 
finding that a single act reflects company policy and therefore 
concluding that the policy is likely to have affected more consumers 
than just the individual complainant). In general, the Department is of 
the view that proof of a practice in the aviation consumer 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. The Department 
solicits comment on the question of whether a definition of 
``practice'' is necessary, and if so, what the proposed definition 
should be.
    This proposed rule would add a new section 399.75 to 14 CFR 399 
Subpart F (Policies Relating to Rulemaking Proceedings). The proposed 
rule would state that when the Department issues a new discretionary 
aviation consumer protection rulemaking declaring that a specific 
practice in air transportation or the sale of air transportation is 
unfair or deceptive within the meaning of Section 41712, the Department 
shall employ the definitions of ``unfair'' and ``deceptive'' that are 
set forth in new Section 399.79. These definitions are consistent with 
the Department's past practice and are based on FTC case precedent and 
policy.

B. Establishing Procedures for Aviation Consumer Protection Rulemaking 
Proceedings

1. Formal Hearing Procedures
    In this NPRM, the Department proposes to apply formal hearing 
procedures for discretionary aviation consumer protection rulemakings 
issued under the authority of Section 41712 that are not defined as 
high-impact or economically significant within the meaning of the 
Department's regulatory procedures found in 49 CFR 5.17(a). Any such 
high-impact or economically significant rulemakings are subject to the 
special procedures outlined in 49 CFR 5.17.
    The Department proposes to adopt formal hearing procedures for 
discretionary aviation consumer protection rulemakings similar to the 
formal hearing procedures that apply to high-impact and economically 
significant rulemakings. These procedures would allow interested 
parties to request a formal hearing before the Department issues a 
final aviation consumer protection rule. These formal hearing 
procedures would not apply to rulemakings specifically mandated by 
Congress. Rather, they would apply to discretionary aviation consumer 
protection rulemakings, where the Department proposes to declare 
specific practices to be unfair or deceptive. The addition of formal 
hearing procedures is also consistent with Section 41712(a), 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 
unfair or deceptive practice or unfair method of competition.
    The purpose of the formal hearing would be to address disputed 
issues of fact through the presentation of testimony and written 
submissions in front of a neutral administrative hearing officer. The 
Department is proposing to allow interested parties to request a formal 
hearing if one or more scientific, technical, economic or other factual 
issues are in dispute. Interested parties would be permitted to make 
such a request to the Department's General Counsel after the notice of 
proposed rulemaking is filed, but before the end of the comment period. 
In general, the purpose of the formal hearing is to ensure that rules 
are based on facts and not unfounded assumptions. The formal hearing 
would provide an opportunity to explore complex or disputed factual 
issues before proceeding beyond the proposed rule stage. The Department 
would use the developed factual record of the formal hearing to 
determine whether the rulemaking should proceed as originally proposed, 
be modified, or be terminated entirely.
    Under this proposal, for a formal hearing to be granted, the 
interested party would be required to make a plausible initial showing 
that the rulemaking concerns one or more specific scientific, 
technical, economic, or other factual issues that are in dispute, that 
the ordinary notice and comment process is insufficient to provide an 
adequately informed judgment on the issue, and that resolution of the 
issue would have a material effect on the costs and benefits of the 
rule. Under the delegation of authority to the General Counsel to 
conduct rulemakings on these matters found in 49 CFR 1.27(n), the 
General Counsel would be authorized to deny a hearing, even if the 
interested party makes the plausible initial showing described above, 
so long as the General Counsel determines that the requested hearing 
would not in fact advance the consideration of the proposed rule, or 
that the hearing would unreasonably delay completion of the rulemaking. 
The General Counsel would explain in writing the basis of that 
decision.
    Under this proposal, if the Department grants the request for a 
hearing, the Department would publish

[[Page 11886]]

a notice, specifying the proposed rule at issue and the specific 
factual issues to be considered in the hearing. The Department proposes 
that the rules for conducting the formal hearing itself would be 
adopted from relevant sections of the Administrative Procedure Act 
relating to hearings, or similar rules adopted by the Secretary.
    Also, the NPRM specifies that after the formal hearing and after 
the record is closed, the presiding hearing officer would render a 
report containing findings and conclusions addressing the disputed 
issues of fact identified in the hearing notice. Interested 
participants in the formal hearing would have the opportunity to file 
statements of agreement or objection in response to the hearing 
officer's report. The Department would then consider the record of the 
formal hearing and determine whether to terminate the rulemaking, 
proceed with it as proposed, or modify the proposed rule. If the 
Department decides either to proceed with the rule as originally 
proposed, or to terminate the rulemaking, the Department would explain 
those decisions in writing. If the Department decides to modify the 
proposed rule in light of the formal hearing, then the Department would 
issue a new or supplemental NPRM, and explain its decision in the 
preamble to that modified proposal. Finally, this NPRM clarifies that 
the formal hearing procedures shall not impede or interfere with the 
interagency rulemaking review process of the Office of Information and 
Regulatory Affairs. The Department solicits input on whether the public 
and regulated entities find the Department's utilization of this type 
of process for the promulgation of unfair and deceptive regulations to 
be helpful and, if so, how. Further, if this process would not be 
helpful, the Department solicits comment on what elements of these 
proposed procedures should be modified, and why.
2. Explaining Findings of Unfairness and Deception
    This proposal states that when the Department issues a 
discretionary aviation consumer protection rulemaking declaring a 
practice to be unfair or deceptive, it shall explain the basis for its 
conclusion that the practice is unfair or deceptive. The intent is to 
ensure that when issuing new aviation consumer protection regulations 
under the authority of Section 41712, the Department provides greater 
transparency to the public and to regulated entities about the reasons 
supporting the Department's finding that a practice is unfair or 
deceptive. For example, if the Department proposes a final rule 
determining that a particular practice is unfair, the Department would 
be required to explain how the practice is likely to cause substantial 
injury, which is not reasonably avoidable, and that the harm is not 
outweighed by benefits to consumers or to competition. The Department's 
explanation would provide its basis for reaching that conclusion. 
Similarly, when proposing a rulemaking finding a particular practice 
deceptive, the Department would follow the same practice of outlining 
the factors of deception and the basis for its conclusion.
    The Department solicits comment on the support needed for 
rulemakings finding a practice unfair or deceptive. The proposed rule 
does not specifically indicate the type or extent of evidence that 
would be necessary to support a finding of unfairness or deception. In 
many instances, the Department identifies issues that may be 
problematic and addresses them in an aviation consumer protection 
rulemaking as an unfair or deceptive practice based on information in 
the Department's consumer complaint database. In other instances, 
aviation consumer protection rulemaking is instituted in response to 
recommendations from entities such as consumer advocates or advisory 
committees. The Department envisions that the formal hearing procedures 
described above will provide another means of gathering information, 
data, and evidence that may be helpful in making these determinations. 
What type of evidence should be necessary to demonstrate that a 
practice is unfair or deceptive to support the Department issuing a 
rule prohibiting that practice? How should the Department gather that 
information? During the rulemaking process, consumers may comment that 
a practice is harmful while regulated entities may disagree. In those 
instances, how should the Department determine whether a practice is 
harmful?

C. Establishing Procedures for Aviation Consumer Protection Enforcement 
Proceedings

1. Providing Opportunity To Present Evidence
    The Department is proposing to codify a longstanding practice of 
the Department with regard to aviation consumer protection enforcement 
proceedings. Specifically, proposed paragraph 399.79(e) states that, 
before issuing an order finding that an air carrier, foreign air 
carrier, or ticket agent violated any regulation issued under the 
authority of Section 41712, or Section 41712 itself, the Department 
shall afford the party the opportunity to present evidence in support 
of its position. For example, under current practice, the party is 
permitted to present evidence tending to establish that: (1) The 
regulation at issue was not violated; (2) the violation took place, but 
mitigating circumstances apply; (3) the conduct at issue was not unfair 
or deceptive (in cases where a consumer protection regulation does not 
already apply to the conduct at issue); and (4) consumer harm was 
limited, or that the party has taken steps to mitigate past or future 
consumer harm (for example, by issuing compensation and/or refunds to 
affected passengers, or by implementing innovative practices and 
procedures to ensure that the violations will not recur). This list is 
intended to provide examples, but not to be complete or exhaustive. The 
Enforcement Office considers all information provided when determining 
whether a violation of aviation consumer rights took place and, if a 
violation took place, the appropriate civil penalty to seek for the 
violations at issue. The Department has incorporated the opportunity to 
present relevant evidence and mitigating circumstances into its 
proposal.
    Paragraph 399.79(e) applies to informal nonpublic investigations of 
potential violations of aviation consumer rights, which represent the 
overwhelming majority of the Enforcement Office's enforcement 
efforts.\18\ These investigations typically conclude with the 
Enforcement Office issuing a consent order, a warning letter, or other 
appropriate disposition that does not involve the filing of a complaint 
with an Administrative Law Judge (ALJ). The Department is aware that 
paragraph 399.79(e) does not propose a formal ``hearing'' for the 
regulated entity to present evidence. The Department is also aware that 
Section 41712(a) requires the Department to provide air carriers, 
foreign air carriers, and ticket agents with the opportunity for a 
``hearing'' before declaring that a practice is unfair or deceptive. 
The Department is of the view that a hearing is not required in the 
course of informal nonpublic investigations, because full hearings are 
already available at a later stage.

[[Page 11887]]

Specifically, where the Department and the regulated entity cannot 
agree on a disposition of a dispute regarding a potential aviation 
consumer rights violation, the Enforcement Office has the option of 
filing a formal complaint with an ALJ.\19\ These procedures are set 
forth in 14 CFR part 302, subpart D (14 CFR 302.407-302.420), and they 
include the opportunity for a hearing before an ALJ. See 14 CFR 
302.415. The Department seeks comment on all aspects of this proposal.
---------------------------------------------------------------------------

    \18\ 14 CFR part 305 sets forth additional rules of practice in 
informal nonpublic investigations. Part 305 does not explicitly 
state that regulated entities have the opportunity to present 
mitigating evidence, but the opportunity to present such evidence 
traditionally has been available to regulated entities during 
investigations by the Enforcement Office and prior to any 
determination to take enforcement action.
    \19\ Since 2014, the Enforcement Office has filed one formal 
complaint with an ALJ. See Docket DOT-OST-2014-0229.
---------------------------------------------------------------------------

2. Explaining Findings of Unfairness and Deception
i. Current Practice for Enforcement of Regulations Issued Under Section 
41712
    Many of the Department's aviation consumer protection regulations 
that are issued under the authority of Section 41712 state that a 
violation of the rule amounts to an unfair and deceptive practice. For 
example, the tarmac delay rule states that covered carriers must adopt 
and adhere to contingency plans providing various assurances to 
consumers in the event of a lengthy tarmac delay.\20\ The rule 
explicitly states that failure to comply with the required assurances 
is considered an unfair and deceptive practice within the meaning of 
Section 41712.\21\ Similarly, the Department has issued regulations 
explicitly declaring that it is an unfair or deceptive practice within 
the meaning of Section 41712 to engage in certain types of post-
purchase price increases.\22\ Other regulations issued under the 
authority of Section 41712 (e.g., the oversales/denied boarding 
compensation rule and the requirement that carriers issue and comply 
with a Customer Service Plan) do not specifically declare that a 
violation of the regulation also constitutes a violation of Section 
41712.\23\
---------------------------------------------------------------------------

    \20\ 14 CFR 259.4(a).
    \21\ 14 CFR 259.4(f).
    \22\ 14 CFR 399.88(a).
    \23\ 14 CFR part 250; 14 CFR 259.5.
---------------------------------------------------------------------------

    In instances where an enforcement action is based on regulations 
issued under the authority of Section 41712, the Department's 
enforcement orders set forth the relevant regulation or regulations, 
describe the facts of the case, including the problematic conduct, and 
identify the manner in which the regulation has been violated. In such 
orders, there is typically a statement that a violation of the 
regulation is also considered an unfair and deceptive practice in 
violation of Section 41712. In such cases, the orders have not 
explained in detail how the practice is unfair and deceptive, because 
the underlying regulation was issued under the authority of Section 
41712.
ii. Current Practice for Enforcement of ``Standalone'' Violations of 
Section 41712
    The Department also has the authority to investigate and enforce 
where an air carrier, foreign air carrier, or ticket agent may be 
engaging in conduct that does not violate a specific consumer 
protection regulation, but which may nevertheless be unfair or 
deceptive to consumers. These are potential ``standalone'' violations 
of Section 41712 and such cases are infrequent. When deciding whether 
to take enforcement action in these matters, the Department has relied 
on the FTC's approach to both unfairness and deception. Departmental 
orders issued in cases where the Department declined to take action 
have explicitly recited FTC precedent in the course of explaining why 
the acts were not unfair or deceptive. For example, in a case against a 
large airline, DOT Order 2016-12-11 (2016), a passenger filed a formal 
complaint alleging that the airline improperly penalized him 60,000 
frequent flyer miles when it wrongly accused him of manipulating the 
airline's website to gain favorable seating upgrades. The passenger was 
flagged by the airline's security department for engaging in suspicious 
activity on its website. While no regulation covered the airline's 
behavior, the Department applied the standard articulated in the FTC's 
Policy Statement on Unfairness and relevant precedent and found that 
the harm of losing miles, while substantial, could have been reasonably 
avoided by not logging into the airline's website in suspicious and 
unusual ways.\24\ The Department also found that it was not deceptive 
for the airline to fail to warn the passenger that he was subject to a 
penalty before imposing that penalty. Applying the standard articulated 
in the FTC's Policy Statement on Deception and relevant precedent, the 
Department reasoned that the passenger was not acting as a reasonable 
consumer would. The Department dismissed the formal complaint. 
Similarly, in another case, DOT Order 2018-2-18 (2018), a passenger 
missed the check-in deadline for a multi-city itinerary and was 
informed his reservations for the remaining flights would be cancelled 
if he did not change his reservation and pay the applicable fees. After 
outlining the relevant facts, the Department applied the standard for 
unfairness and found that the alleged practices were not unfair. In 
addition, using the FTC standard for deception, and noting that the 
consumer was not actually deceived, the Department also found that the 
airline's practice at issue was not deceptive and the complaint was 
dismissed.
---------------------------------------------------------------------------

    \24\ The airline presented evidence that in the 96 hours prior 
to the flight, the passenger created 28 bookings using fictitious 
names, while omitting the passenger's frequent flyer number. This 
laborious process created temporary passenger name records that took 
upgraded seats out of inventory. While the passenger contended that 
he simply wanted to view the available seating to see if upgraded 
seats were available, the airline presented evidence that its 
website had a simple method to view available seating that did not 
take seating out of inventory; he could have also simply called the 
airline.
---------------------------------------------------------------------------

    The Department has also issued orders finding that violations of 
civil rights laws constitute violations of Section 41712, without 
explaining in detail how the violations were either unfair or 
deceptive, e.g., DOT Order 2012-5-2 (2012); DOT Order 2011-11-2 (2011). 
The resulting consent orders reflect the unfair/deceptive determination 
of the Department but do not provide the underlying description of how 
the relevant standard was met. Department aviation consumer protection 
enforcement orders should provide valuable information for regulated 
entities; accordingly, this rulemaking proposes that going forward, 
such orders would contain a more detailed statement of the relevant 
standard and how the particular facts of the case met the standard.
iii. Explaining Findings of Unfairness and Deception in Aviation 
Consumer Protection Enforcement Proceedings
    In this NPRM, we propose that when the Department issues an 
enforcement order relying on Section 41712, and where no existing 
regulation governs the practice in question (where the Department 
relies solely on the phrase ``unfair or deceptive'' in Section 41712), 
then the enforcement order must articulate the Department's basis for 
concluding that the practice is unfair or deceptive, as defined in this 
rule. For example, if the Department issues an order declaring that a 
particular practice is unfair, the Department would be required to 
explain that the practice is likely to cause substantial injury, which 
is not reasonably avoidable, and that the harm is not outweighed by 
benefits to consumers or competition. The Department would be required 
not only to recite these conclusions, but also to recite the basis for 
how it arrived at those conclusions. The proposed rule makes clear that 
when the conduct of an air carrier, foreign air carrier, or ticket 
agent also violates a regulation that was

[[Page 11888]]

issued under the authority of Section 41712, then the explanation of 
unfairness or deception is not required. Instead, by establishing a 
violation of the regulation, the Enforcement Office has necessarily 
established a violation of Section 41712. Nevertheless, the Department 
seeks comment on whether such an order should reiterate the explanation 
of unfairness or deception as well.
    The Department is undertaking this rulemaking because it is 
appropriate to provide an explanation, in enforcement orders, of the 
basis for concluding that a practice either does or does not violate 
Section 41712. Specifically, this rulemaking proposes that enforcement 
orders will identify the factors used to determine whether a practice 
is unfair or deceptive and will identify the facts and conduct relevant 
to each factor, so that the rationale for the determination is clear in 
the order. This is particularly important in orders based on Section 
41712 alone, where there has not been a regulation that already 
specifies required or prohibited conduct. In cases involving conduct 
that violates a regulation that was issued under the authority of 
Section 41712, enforcement orders should continue to identify the 
relevant facts and conduct that violates the regulation at issue. For 
example, in a case involving a violation of the Department's oversales 
rule, the specific facts and conduct at issue should be stated and the 
rationale for a determination that the oversales rule has been violated 
should be clear. However, this rulemaking is not proposing changes to 
enforcement orders regarding violations of existing regulations. The 
new proposed requirement regarding explaining the standards for 
unfairness and deception that are stated in this rulemaking and rely on 
FTC precedent are reflected in new proposed Section 399.79.
    The proposed rule does not specifically indicate the type or extent 
of evidence that would be necessary to support a finding of unfairness 
or deceptiveness for standalone violations of Section 41712. The 
Department solicits comment on this question.
    Finally, the Department seeks comment on the benefits and costs of 
this rule. The Department's description of the benefits and costs are 
described immediately below in Section A of the Regulatory Analyses and 
Notices section.

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

    This proposed rule is not a significant regulatory action under 
section 3(f) of E.O. 12866 (58 FR 51735, October 4, 1993), Regulatory 
Planning and Review, as supplemented by E.O. 13563 (76 FR 3821, January 
21, 2011), Improving Regulation and Regulatory Review. Accordingly, the 
Office of Management and Budget (OMB) has not reviewed it under that 
Order. It is also not significant within the meaning of DOT regulatory 
policies and procedures. This NPRM is issued in accordance with the 
Department's rulemaking procedures found in 49 CFR part 5 and DOT Order 
2100.6.
    The Department does not anticipate that this rulemaking will have 
an economic impact on regulated entities. This is primarily a rule of 
agency procedure and interpretation. The NPRM would clarify how the 
Department interprets the terms ``unfair'' and ``deceptive,'' and 
potentially require enhanced departmental procedures in analyzing, 
enforcing, and regulating in this area. This rulemaking could impose a 
social cost on the public if increased procedural requirements are 
adopted, as the opportunity cost of these enhanced procedural 
requirements could translate into the Department performing fewer 
enforcement and rulemaking actions. In addition, enhanced procedures 
would likely lengthen the time needed to complete these actions. 
However, the Department anticipates that these social costs would be 
outweighed by the benefits associated with improved and more 
transparent departmental decision making, informed by enhanced analyses 
and public participation. The Department seeks comment on the costs, 
benefits, and cost savings associated with this rulemaking.
    This proposed rule is not expected to be an E.O. 13771 regulatory 
action because this proposed rule is not significant under E.O. 12866.

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 does not expect this rule to have a significant economic 
impact on a substantial number of small entities. However, we invite 
comment on the potential impact of this rulemaking on small entities.

C. Executive Order 13132 (Federalism)

    This NPRM has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132 (``Federalism''). This NPRM 
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 NPRM has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13175 (``Consultation and 
Coordination with Indian Tribal Governments''). Because this NPRM 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 NPRM.

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.

[[Page 11889]]

G. National Environmental Policy Act

    The Department has analyzed the environmental impacts of this 
proposed action 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 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.

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 proposes 
to amend 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).

0
2. Add Sec.  399.75 to Subpart F to read as follows:

Subpart F--Policies Relating to Rulemaking Proceedings


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 follow the 
following procedural requirements:
    (1) Request for a hearing. Following publication of a proposed 
regulation, and before the close of the comment period, any interested 
party may file in the rulemaking docket a petition, directed to the 
General Counsel, to hold a formal 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 paragraphs (b)(2) or (b)(3) of this section.
    (5) Hearing notice. If the General Counsel grants the petition, the 
General Counsel shall publish a notice of the hearing in the Federal 
Register. The notice 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 formal hearing under this section shall 
be conducted using procedures set forth in sections 556 and 557 of 
Title 5, United States Code, or similar procedures as approved by the 
Secretary, 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 an administrative judge 
or other neutral administrative hearing officer to preside over the 
hearing and shall provide a reasonable opportunity to question the 
presenters.
    (iii) After the formal hearing and after the record of the hearing 
is closed, the hearing officer shall render a report containing 
findings and conclusions 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 report. The complete record of the 
hearing shall be made part of the rulemaking record.
    (7) Actions following hearing. (i) Following the completion of the 
formal hearing process, the General Counsel shall consider the record 
of the hearing 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 notice 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.

[[Page 11890]]

    (8) The formal hearing procedures under this paragraph 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.
0
3. Add Sec.  399.79 to Subpart G to read as follows:

Subpart G--Policies Relating to Enforcement


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) 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 Enforcement and Proceedings 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); 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 
Enforcement and Proceedings reaches agreement with the alleged violator 
to resolve the matter with the 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 Enforcement and Proceedings may issue a notice instituting 
an enforcement proceeding before an administrative law judge. After the 
issues have been formulated, if the matter has not been resolved 
through pleadings or otherwise, the administrative law judge will give 
the parties reasonable written notice of the time and place of the 
hearing as set forth in 14 CFR 302.415.

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

    Issued this 19h day of February 2020, in Washington, DC, under 
authority delegated in 49 CFR 1.27(n).
Steven G. Bradbury,
General Counsel.
[FR Doc. 2020-03836 Filed 2-27-20; 8:45 am]
 BILLING CODE 4910-9X-P


