UNITED STATES OF AMERICA
Office of the Secretary
May 13, 1998
Paul M. Ruden
Burton J. Rubin
Re: Petition of American Society of Travel Agents, Inc. For Rulemaking
Dear Messrs. Ruden and Rubin:
This is in response to the above-referenced Petition requesting that the Federal Trade Commission initiate a rulemaking proceeding aimed at adopting a trade regulation rule to address what the American Society of Travel Agents ("ASTA") believes are unfair or deceptive acts or practices by those who sell travel agent credentials to individuals without a recent, documented history of selling travel services.(1)
The Commission recognizes that the Petition identifies a valid consumer protection concern: the existence of businesses that market travel agent training programs and travel agent identification cards by misrepresenting the benefits available to consumers who purchase the programs and credentials. The Petition asserts that such businesses injure consumers by misrepresenting the extent of the benefits that consumers who purchase the programs and credentials will obtain in the form of travel agent perquisites, commissions from their own andtheir friends and colleagues travel bookings, and discounts on travel packages offered by the businesses to program purchasers. At the same time, the Petition asserts that such businesses injure traditional travel agents and travel service providers because some credential purchasers do manage to receive some of the limited perquisites intended for more traditional travel agents. To address this alleged conduct, the Petition seeks promulgation of a trade regulation rule that would make it an unfair or deceptive practice to issue travel agent credentials to any individual who does not have a documented history of selling travel services in the immediate past.
The Commission has authority, under Section 18 of the FTC Act, to commence a rulemaking to prescribe "rules which define with specificity acts or practices which are unfair or deceptive acts or practices in or affecting commerce." 15 U.S.C. § 57(a)(1)(B). In determining whether to conduct a rulemaking the Commission considers not only the nature of the practices at issue but also the prevalence of those practices, the extent of the harm caused by those practices, and the likely reduction of harm should the proposed rule be adopted, and the Commission compares the likely costs of undertaking rulemaking and ultimately enforcing the proposed rule to the benefits of the proposed rule.
The Petition alleges that a significant number of businesses sell travel agent credentials to the detriment of consumers, although it provides little to identify the extent of the harm to consumers allegedly caused by this activity. Moreover, there is serious doubt that the remedy advanced by the Petition, restricting issuance of travel agent identifications to persons with a recent history of selling travel, would effectively address the harm to consumers identified by the Petition without imposing economic costs, ultimately borne by consumers, that would outweigh the benefits of such a remedy. In view of this, the Commission has determined that the present record provides an insufficient basis to initiate a rulemaking proceeding. Instead, the Commission has determined that it can more efficiently and effectively protect the interests of consumers by aggressively continuing to direct law enforcement activities against particular businesses that falsely represent the extent of the benefits consumers can realize from purchasing travel agent business opportunities and travel agent identification cards.(2)
Indeed, the Commission believes that individual law enforcement actions are particularly suited to addressing the deceptive practices identified by the Petition. The Commission has authority under Section 13(b) of the FTC Act to seek preliminary and permanent injunctive relief and related equitable remedies in instances in which it has reason to believe that an individual or entity is violating any law administered by the Commission. The case law is clear that administrative agencies have broad discretion in determining whether to proceed by rulemaking or administrative adjudication. See NLRB v. Bell Aerospace, Co., 416 U.S. 267, 292-94 (1974);
SEC v. Chenery Corp., 332 U.S. 194, 203 (Chenery II), rehg denied, 332 U.S. 783 (1947). The Commission believes this discretion applies equally to decisions to proceed by court action. Enforcement actions in federal court provide opportunities for the courts to enjoin unlawful conduct. In addition, such actions enable the Commission to seek extraordinary remedies, including bans on participating in the industry and performance bond requirements with respect to those whose past activities may have resulted in appreciable consumer injury. Relief may be tailored to the facts of each case.
Although the information and analysis provided by ASTA and the other submitters have contributed significantly to the Commissions consideration of the issues raised by the Petition, the Commission denies the Petition for the reasons stated above. The Commission appreciates the concerns raised by ASTA and looks forward to ASTAs continued cooperation with our law enforcement efforts in this area.
By direction of the Commission.
Donald S. Clark
(1) In reaching its decision, the Commission has considered the Petition and the additional material presented by ASTA as well as the additional submissions received by the Commission relating to this matter. Submissions were received from Global Travel International, Inc. (Sept. 25, 1997 and Jan. 28, 1998); the American Hotel & Motel Association (July 16, 1997); and the National Tour Association, Inc. (Oct. 2, 1997).
(2) The Commission already has taken enforcement action against one such allegedly fraudulent travel agent credential firm. FTC v. World Class Travel Network, SA CV-97-162 AHS (C.D. Cal., February 28, 1997). This action was one of three cases filed against so-called "credential mills" by the Commission and state officials as part of a larger travel fraud law enforcement sweep called "Operation Trip Up."