SBA: DOT Overlooked Agency Impact

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.