WASHINGTON -- The Transportation Department arguably didn't comply
with certain government regulations requiring it to fully consider
the impact of its proposed revised GDS rules on small travel
agencies, according to witnesses testifying June 26 before the
House subcommittee on regulatory reform and oversight.
Specifically, the DOT was required under the Regulatory
Flexibility Act (RFA) provision of the Small Business Regulatory
Enforcement Fairness Act of 1996 to analyze the impact of the
long-delayed, proposed GDS rules on small business, in this case
travel agencies, before it made them available for public comment
on Nov. 15, according to Thomas Sullivan, chief counsel for
advocacy for the U.S. Small Business Administration.
His office monitors whether government agencies are in
compliance with the RFA. Consequently, the DOT proposal makes
certain assertions that are not fully substantiated, said
Sullivan.
"For example, the DOT states that the proposal to restrict or
prohibit productivity pricing may increase CRS costs for some
agencies, but the affected travel agencies would be larger
agencies," Sullivan testified. But he added the DOT, which didn't
have representatives present at the hearing, provided little data
to support that assertion.
"Upon reviewing the proposal, [Sullivan's office] became
concerned about the potential harm to the travel industry and small
business and the lack of analysis to justify the DOT's findings,"
Sullivan said. The DOT "should provide insight into how this
assumption was made and what those potential costs could be," he
said.
Sullivan proposed the DOT publish a supplemental proposal that
includes more impact analysis.
Travel agents testifying before the panel argued the potential
costs of curtailing agency productivity incentives as proposed by
the DOT would be considerable.
"Under our present CRS contracts, the more productively we use
the CRS system the more money we either make or save depending on
volume," said Norma Pratt, president of Philadelphia-based Rodgers
Travel. "Without this income, we will be forced again to raise
[fees for booking] an airline ticket to those who can least afford
it. Or, the travel agency will be out of business."
"Since the airlines reduced our commissions to zero, these
incentives, which the CRS pays to us for reaching specified booking
volume targets, are extremely important source of revenue for small
agencies," added Richard Cooper, president of Lubbock, Texas-based
National Travel Systems.
David Rojahn, president of DTR Travel in Englewood, Colo.
disagreed with a portion of the DOT proposal indicating travel
agents would gain greater flexibility under the new rules to, for
instance, operate multi-GDSs in their agencies.
"It doesn't make sense for a small travel agent to use more than
one CRS, for the training would be costly and unproductive, not to
mention the additional technical costs to support multiple network
connections," said Rojahn, who also serves as president of the ASTA
Rocky Mountain Chapter.
Paul Ruden, ASTA staff senior vice president of legal and
industry affairs, contended that the DOT simply didn't do its
"basic homework."
"This is not mysterious stuff," Ruden said, arguing the DOT
could gather information from GDSs, agencies and other parties to
prepare an analysis on how the rules would impact small
businesses.
"This is simply not right," Ruden said. "Congress didn't intend
the Regulatory Flexibility Act required impact analysis to be an
empty formality followed by general assurances that all will be
well. But that's pretty much what we have in this rule making."
Instead of developing new GDS rules, the witnesses generally
advocated eliminating them.
David Schwarte, Sabre's executive vice president and general
counsel, called the DOT's proposed rules "pork barrel regulating at
its worse."
He argued that there are laws already on the books that the
Justice Department and the Federal Trade Commission can use to
discipline the industry in the absence of the GDS rules.
In March, the DOT extended the GDS rules for a fifth time
through March 31, 2003, to consider its proposed revisions.