The Reuben H. Donnelley Corporation

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Complaint operating pursuant to Part 298 of the Economic Regulations of the Civil Aeronautics Board without regulation of routes or fares ("commuter air carriers ); and (3) air carrers whose routes and fares are regulated in varying respects hy exclusive authority of the individual State in which each such carrer s operations are limited and confined intra-state air carrers (3) 6. Certificated air carrers consist of Htrunkline" air caers whose routes include service between and among major metropolitan airprt facilities in the United States and North America; "local service carriers" whose operating authority is limited to short-haul service as distinguished from service rendered by trunkline air carriers; and foreign air carriers" which inter alia also offer short-haul service in North America pursuant to recognized certificates or equivalents issued by their sovereign governments, A substantial portion of passengers nying local service and foreign air carrers begin or end their journey on connecting fJghts with trunkline air carrers. 7. Commuter air carriers operate either short-haul service between major metropolitan airport facilities and surrounding smaHer community airport facilities, or between such smaHer communities, or both. A substantial portion of passengers nying commuter air caers either begin or end their journey on connecting fJghts with trunkline air carriers.

8. Intra-state air carriers operate direct flight service over routes between major metropolitan airport facilities and smaller communities or between such smaller communities, or both, within the same state. 9, Except to the extent that competition has been restrained lessened and eliminated by the acts and practices of respondent as aHeged by this complaint, in many instances individual commuter air carriers are engaged in substantial competition with one or more certificated air carriers by offering both direct and connecting fJght schedules between the same city pairs, and individual intra-state air carriers are engaged in substantial competition with one or more certificated air carriers by offering direct flight service between the same city pairs.

10, Significant clements of competition between certificated air carriers and commuter air carriers and between certificated air carriers and intra-state air carriers include flight departure times in relation to nights of each other, inclusion of these schedules in the OAG, and the sequence in which such schedules are published in the OAG, 11. At all times hereinafter referred to, publication policies of the OAG have been formulated and/or modified by respondent fonowing consultations with certifcated air carrier members of the Air Traffic Complaint 95 F, Conference of America, a division of the Air Transport Association of America, and the OAG continuously has represented itself as being the Standard Reference of the Air Traffic Conference of America, (4) V, Acts, Practices, and Methods of Competition 12, For many years, and at least since 1969, respondent has maintained a publication policy with respect to the content and format of the OAG pursuant to which schedules of available flights between city pairs are published in separate categories in the following sequence when and where applicable: (1) direct flights of certificated air carriers; (2) connecting flights of certificated carrers; (3) direct flights of intra-state carriers, and (4) direct flghts of commuter air carriers, Within each such category, flights are listed chronologically by order of departure.

13. For many years, and at least since 1971, respondent has refused to accept for publication any schedules of connecting flghts of commuter air carriers, even though commuter air carriers offer and sell such service to the public and have made requests of respondent for inclusion of said schedules in the OAG. 14. For many years, and at least since 1971, respondent has refused requests of intra-state and commuter air carriers to publish their direct flight schedules in the OAG on the same terms and conditions as apply to the publication of direct flight schedules of certificated air carriers by integrating the schedules of all air carrers serving given city pairs into single chronological listings, 15. In refusing to modify its OAG publication policies as aforesaid respondent has solicited and relied upon the views of certificated air carrier competitors of commuter and intra-state air carrers acting under the auspices of the Airline Guides Committee of the Air Traffic Conference of America, 16, The effects of respondent's OAG publication policies as aforesaid arc and have been to foreclose commuter air carriers from disseminating information as to available connecting flight schedules to the public; to suggest and/or advise the public that direct flights of certificated air carriers arc to be given preference over those of intrastate and commuter air carriers; and to lessen the competitive significance of schedules of direct flght departure times of intra-state and commuter air carriers in relation to those of certificated air carriers, (5) 17. As a result of the acts, practices, and methods of competition as alleged, competition in the development, advertising, offering of sale and sale of scheduled passenger air transportation in the United States ( REUBEN H. DONNELLEY CORP, Initial Decision has been, or may be, stabilized, controlled, hindered, lessened, forecclosed or restrained.

VI. Violation 18. The acts, practices, and methods of competition alleged herein by respondent, both individually and in combination with others constitute unfair acts or practices and unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act. INITIAL DECISION BY JAMES P. TIMONY, ADMINISTRATIVE LAW JUDGE MARCH 6, 1979 PRELIMINARY STATEMENT By a complaint issued on April 13, 1976, The Reuben H, Donnelley Corporation ("Donnelley ) is charged with a violation of Section 5 of the Federal Trade Commission Act, 15 U. C. 45, (2) Respondent Donnelley is a subsidiary of the Dun & Bradstreet Companies, 1nc" which in 1974 had combined operating revenues of over $500 milion and total assets of about $345 million. Donnelley is a publishing company which publishes the "Official Airline Guide- North American Edition OAG"), a directory of flght schedules and fares for scheduled air transportation, The OAG is published twice monthly and is sold to air carriers, travel agents, businesses and the general public, The complaint alleges that the OAG is the only publication sold in the United States that combines the passenger flight schedules of all domestic air carriers and that it is the standard reference for ascertaining flght schedules between city pairs in North America, Scheduled air passenger transportation in the United States is provided by three categories of airlines: certificated air carrers commuter air carriers, and intrastate air carrers. The complaint alleges that Donnelley has refused to publish flght schedules for commuter and intrastate air carrers on the same terms as apply to the publication of flght schedules of certificated air carrers, More specifically, the complaint alleges that respondent has refused: (1) to publish in the OAG schedules of connecting flghts involving commuter air carriers ' and (2) to chronologically integrate schedules of commuter air carrers and intrastate air carriers with those of certificated air earners.

1 In Decmbe 1976, respondent sta publishing the connecting flghts of commute air caern. Initial Decision 95 F, The complaint further alleges that Donnelley violate Section 5 individually and in combination with others:' stating that Donnelley policies have been formulated and modified by respondent "following consultations" with certain certificated air carriers, and that Donnellcy has "solicited and relied upon the views of certificated air carrier competitors" in refusing to change its publication policies, (3) By an answer filed May 28, 1976, respondent admitted some but denied many of the allegations of the complaint. Among the more important issues raised by the answer, respondent: (1) denied that significant competition exists among the three categories of air carriers; (2) stated that there arc numerous sources of passenger flght schedule information other than the OAG; (3) stated that it had solicited the views of certificated air carriers concerning separate listing of certificated air carriers, commuter air carriers, and intrastate air carriers, but that it has neither relied nor acted upon those views; (4) stated that these matters are not subject to the jurisdiction of the Federal Trade Commission; and (5) stated that the relief sought compelling Donnelley to publish flight schedule listings in a manner conflicting with Donnelley s judgment, would violate the First Amendment to the United States Constitution, Pursuant to prehearing orders, counsel for the parties stipulated that (1) the complaint does not allege unlawful monopolization in the publication and sale of passenger flight schedules of domestic air carriers; and (2) the complaint does not allege unlawful effects on companies other than air carriers, including potential competitors of the respondent in the sale and distribution of passenger flght schedules for domestic air carriers. (Joint Statement fill'! September , 1976, After issue was joined, respondent filed a motion to dismiss asserting that the Commission lacks subject matter jurisdiction over the acts of a publisher who sells and distributes information about air carriers who are themselves subject to CAB jurisdiction, The claim was based on Section 5(a)(2) of the Federal Trade Commission Act, 15 C, 45(a)(2), which provides that carriers subject to the Federal Aviation Act of 1958 are exempt from the Commission s jurisdiction, By an order dated September 21, 1976, I invited the CAB to file an amicus brief commenting on the issues presented by the complaint. On February 2, 1977, the General Counsel of the CAB filed an amicus brief denying, in effect; that the CAB had primary jurisdiction over this matter, or that the CAB had sanctioned the conduct alleged in the complaint, The amicus brief states that it is "clear that the (4)exercise of Commjssion jurisdiction would not cause a collsion with the Board' jurisdiction over air carrier competition. " After further briefing, I REUBEN H, DONNELLEY CORP, Initial Decision denied the motion to dismiss by an order dated March 30, 1977. By an order dated July 12, 1977, the Commission denied Donnelley s petition for extraordinary review, holding that there had been no abuse of discretion.

Respondent Donnelley sued in the United States Court for the Northern District of Ilinois to prevent further action in the administrative proceeding, I set hearings in the administrative case to begin on September 9, 1977. Well into the defense of the case, I received on November 13, 1977, an order from United States District Court Judge Bernard M, Decker, finding lack of Federal Trade Commission jurisdiction, enjoining further hearings, and ordering that the Commission dismiss the complaint, Donnelley Car, v, FTC 1977-2 Trade Cases 721 (N, D. Ill. 1977),2 By an order dated December 20, 1977 Judge Decker vacated his previous order enjoining further administrative proceedings, holding that Donnelley had failed to exhaust its administrative remedy, DonneUey Car, v, FTC 1977-2 Trade Cases 783 (N. D, Il 1978), (5) This interruption in the administrative proceeding resulted in an eleven month delay' Defense hearings in Donnelley resumed on October 16, 1978, and ran through November 17, 1978, Complaint counsel had rebuttal on December 1, 1978, The findings of fact include references to supporting evidentiary items in the record. Such references are intended to serve as guides to the testimony and the exhibits supporting the findings of fact. They do not necessarily represent complete summaries of the evidence supporting each finding. The following abbreviations have been used: CX - Complaint counsel' s exhibit, followed by its number and the referenced page(s);

- Respondent's exhibit, followed by its number and referenced page( s);

CPF - Complaint counsel's proposed findings; RPF - Respondent's proposed findings. (6) 2 I therefore set Dkt. 9080 Kai$ Aluminum Chemicl C'". for tral, to commence Dember 1, 197. 3 On cr(appeal, the Unite State Court of Appeals for the Seventh Ciruit held on Augut 2, 1978, tnat venue in Chicago was improper and trnsferr the ca to the district cour in WWlhingtn, D.C. Dunelle Co. v. FTC, 58 F.2d 26 (7th Cir. 1978). Ruling from the bench, Judge Ge1l dismiss Donnc!ley a complaint on September 28 1978.

. Before the admini3t.tive heang! in the Donelley ca could remme, I fini3hed the tral in Kaisthe wrote the initial deci3ion Amwuyin Cvio Dkt. 90, which I ha defeIT to 3ta the DvneUe heangs (initial ded3ion fied June 23, 1978), IInd wrte the initial decision in the Karr ca (initial decion tied October 18 1978).

Initial Dccision 95 F, FINDINGS OF Fact Glossary 1. A certificated air carrier" is an air carrier that holds a certificate of public convenience and necessity issued by the Civil Aeronautics Board ("CAB") authorizing the air carrier to fly its routes in commerce in the United States. (Fugere 210; 49 U. C. 1371-72) 2. The CAB has created by regulation a classification of air carriers known as Hait taxi operators" which operate smaller airplanes (not more than 7 500 pounds payload and having thirty or fewer passenger seats) but which do not hold a CAB certificate, (14 CFR 298) 3. "Commuter air carriers" do not hold CAB certificates. An air taxi which flies passengers on at least five round trips per week between two or more points and publishes flight schedules which specify the times, days of the week and places between which such flghts occur, is a "commuter air carrier," (14 CFR 298,2(f)) An air carrier may operate as a commuter air carrier on some of its routes while holding CAB certification on other routes. (CX 188A-F; Nelson 4395) 4. An "intrastate air carrier" is an air carrier which operates solely within a state of the United States and which does not hold a certificate of public convenience and necessity or foreign air carrier permit issued by the CAB. (Griffin 884) An air carrer may operate an intrastate air carrier on some of its routes while operating as a commuter air carrier on other routes, (Dzendolet 262426) 5, A foreign air carrer is any person, not a citizen of the United States, who engages in air transportation between any place in the United States and any place outside thereof. (49 U, C, 1301(38)) (7) 6. " Trunk air carriers" are certificated air carriers which operate across the country. An example of a trunk air carrier is American Airlines. (CX 196D; CX 196Z80-Z81) "Local service air carrers" are certificated air carriers, In the late 1940's the CAB started certifying these carriers to provide air service to smaller cities. A federal subsidy payment program was instituted for these carrers. They have since evolved from "feeder" airlines into "regional" carriers with only certain of their operations eligible for subsidy, An example of a local service or regional carrier is Piedmont Airlines, (CX 108 at 7; CX 196Z77) 7. " Replacement carriers" are commuter carriers which agree to substitute for local service carriers on routes that the certificated carriers are obligated to serve but are not doing so at a profit. (CX 107 at 9) Initial Decision 8, A "city pair" is two cities between which there is scheduled airline service. (Fugere 211) 9, A "direct flght" is a flght between a city pair, either nonstop, , if there are stops, normally involving no change of aircraft or flight number. (Complaint and Answer 1; Fugere 211) 10, A "connecting flght" is two or more direct flights used in conjunction with each other to provide transportation between a city pair. (Answer '11; Fugere 212) 11. "On-line connections" are connections between two or more direct flights of the same air carrier, (Fugere 211) 12. "Interline connections" arc connections involving direct flights of at least two separate air carriers, (Fugere 212), 13. "Interline agreements" are agreements among and between carriers, involving a variety of business arrangements such as ticketing, reservation procedures, joint use of facilities, joint reservations. Such agreements are filed with and approved by the CAB. (Fugere 212-13) 14. "Free or industry connections" are connections submitted by air carriers to respondent and published by respondent without charge to the air carrier based on limitations established by respondent, (RX 66Z18-Z62; Fugere 213-14; Nelson 2487) (8) 15. "Paid connections" are connections which do not qualify as free connections under the limitations established by respondent, and they are published by respondent at the expense of the air carrier that requests the listing, (RX 66Z18-Z62; Fugere 215; Nelson 252-3) Resporunt 16, Respondent, The Reuben H. Donnelley Corporation ("Donnelley ), is a corporation organized, existing, and doing business under the laws of the State of Delaware, with its principal office and place of business at 825 Third Ave., New York, New York. It is a wholly-owned subsidiary of Dun & Bradstreet Companies, Inc., 299 Park Ave., New York, New York. Donnelley is engaged in the publication, distribution and sale of publications relating to travel, including the Official Airline Guide-North American Edition ("OAG"), a twice-monthly publication which combines into one directory the passenger flght schedules and fares of substantially a1l the scheduled air carriers in the United States, Mexico, Canada and the Caribbean, (Complaint 2; Answer 2)5 In 1962, Donnelley acquired the OAG from its publisher, American Aviation Publications, Inc. (CX 24A; Reich, 1181) Effective Januar I, 1979, Offici,,1 Airline Guides, Inc., II Delaware corpration and Ii wholly-owned subsidiar of Dun & Brastrt Companies, Inc., a8umed responsibility for publication of the Official Ailine Guide, Connerly published by the Trl1porttion Guides and Service Divisionof The Reuben H. DonneHcy Corpration. (RPF p. 7) 3)4-971 n -81-- 2 QU Initial Decision 95 F, Interstate Commerce 17, Respondent is now and has been at all relevant times engaged in sellng and distributing the OAG to subscribers located throughout the United States, from its offices located at 200 Clearwater Drive Oak Brook, Ilinois, and from other Donnelley facilties. Respondent is therefore engaged "in commerce" and its business activities "affect commerce " within the meaning of the Federal Trade Commission Act. (Complaint and Answer, 4; Fink 1370; Budzic 3092; Davidoff 3170) (9) Official Airline GuUl 18. The OAG was first published as early as 1943 under the title Universal Airline Schedules." (CX 52C) At first it merely reproduced timetables of each scheduled air carrier, (RX 19D, RX 572, RX 573) 19, In 1958, the OAG started publishing flght schedule listings in the "to-city" format which currently is used in the OAG, rather than simply in a series of individual air carrier s timetables, (RX 19D) The OAG organized flight schedule listings by displaying in alphabetical order the cities to which there was scheduled air carrier passenger service, displaying under each of these cities in alphabetical order the cities from which there was scheduled air carrer passenger service to the city of destination, (RX 258, 571, 573, 574) Publishing Policy 20, Before December I, 1976, respondent published in the OAG four separate categories of airline schedules in the following sequence: Certificated Air Carrer - direct flights (published with no heaings). Certificated Air Carrier - connecting flights (published under the heaing Connections Intrastate Air Carrer - direct flghts (published under the heading "Intra-State" Commuter Air Carrer - direct flghts (published under the headng "Commuter Air Carrers (Complaint and Answer 12; CX 174; RX 7A; RX I6A) (10) 21. Before December 1 , 1976, respondent published in the OAG three categories of direct flight schedules: certificated carriers (including foreign and replacement carriers), intrastate, and commuter carriers, with each category separate and in chronological order: Se ex 113, PI'. 1101- 02 ror letter 8ymboj of airlines; ex 113, PI'. 1107- 11 for explan"tion of other abbrevi"tioil. (Firnt 9Line. under "Lo Angeles" in above ochedolcdeal with fare infOn1ation. ;...,..,,.,,,!,,,,.,, ,::\,,:::.:,,.,,,,,,,,,,...,..(..,,.. !,,,.,,&,,;, (.,, ,,,,,, REUBEN H, DONNELLEY CORP.

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(Jo' rom CX 113 at 951, showing certificated carriers (here Hughes Airwest (RW)) Jisted above intrastate carriers (here Air California (OC)) and commuter air carriers (here Goiden West (GW)).) (11) 22, Before December 1, 1976, respondent published in the OAG scheduies for connecting flights for certificated carriers only, Connections on commuter carriers were not published in the OAG, (Complaint and Answer 13):

To!UmoR1lC f11BDl DTY\ I "'Of !1!11.""' .. II II fn, . un l r U( tH JUIJ: I I f' 'U' 1,1 L11 I I K JU'l.. L Lli, P,I Ilbkol "'" U 11' 1"1 !ttrt \ It;." " HI r,1 In I I"" U HI1'1 '(1",;\JCII iI I, ra Illu!." L lJJ.. (.) U ;;'r \:t :' ;i; tJIo UJ, r. HI(i.I;ril""l,. 111 . "10 L l'I,,!! !QO 1.10 1m . ;:, . 1\1 I'l !fr.II.11 I. 'fX ''' 11,,,. I'" tt/t" j 0' I IJ'" L It ,,,J In. H.I iw 11 I GI IV U" L tl"". '" II I (From CX 113 at 401, showing connecting flght listings for certificateed carriers placed before direct flght listings of commuter air carriers (here Pilgrim (PM), 23, On December 1, 1976, respondent began publishing two addi- ::;.. \ ) .. .. . ...: ..,:: Initial Decision 95 F, tional categories of service, commuter air carrier connections and intrastate air carrier connections, and changed the order of display. (Complaint and Answer 13; RX 214; Woodward 4189) (12) 24, On December I, 1976, the display of categories and service in the OAG was changed to the following order; Certificated Air Camera direct flights (published with no heading). Commuter Air Carrer direct flghts (published under the heading "Commuter Air Carriers Intrastate Air Carrer direct flights (published under the heading "Intra-State Ai Carriers Certificated Air Carrier connections (published under the heading "Connections Connections involving Commuter Air Carrers or Commuter Air Carers/Certificated Air Carriers (published under the heading "Commuter Ai Carrer Connections Connections involving Intrastate Air Carers or Intrastate/Certificate Air Carriers or Intrastate/Commuter Air Carers (published under the heang Intra-State Air Carrier Connections (RX 214; RX 258) FOTeign A iT CarrTs 25, Though they hold no CAB certificate, foreign air carriers have their schedules chronologically merged in the certificate air carrer columns in the OAG, (Complaint and Answer n5, 12; Ceresa 987, 988 1000, 1004) (13) 26, Connecting flight information for foreign air carrers was in the OAG even before December 1976 (CX 174) and is included with certificated air carrier connections:

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Initial Decision 27. Of the 118 air carriers now listed by the OAG as certificated, 79 arc foreign air carriers, (RX 517 at 1498) Replacement Carrirs 28, In 1967, the CAB approved a contract between Allegheny Airlines (a certificated carrer) and an air taxi operator pursuant to which the air taxi operator provided service over routes which were certificated to Allegheny. (14)(RPF 68) This arrangement (known as Replacement Flights") permits Allegheny to maintain its route authority and provide service to smaller communities with small aircraft at much lower cost than would be incurred using Allegheny larger aircraft, (Howard 2727- , 273ih6) At present, Allegheny has CAB-approved contracts with twelve commuter air carrers ("Allegheny commuters ) pursuant to which such commuter air carriers provide service on behalf of Allegheny to some 27 communities. (Howard 2714 2727) 29. Allegheny commuters' schedules in the OAG have been since 1967 and stil are merged chronologically with certificated air carrier direct flights and certificated air carrier connecting flights, (CX 190; Nelson 3414) Prior to December 1 , 1976, Allegheny commuters connecting flight information was in the OAG, (CX 174) 30, Since September 1, 1969, the flight schedules for Allegheny Commuters, both direct and connecting, have been chronologically merged in the certificated air carrier columns in the OAG with a symbol in tbe shape of a square following the flight number (CX 174 at 3; RX 130; RX 131, RX 132):

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Initial Decision 95 F, (From CX 112 at 1109,) (15) In the "Abbreviations and Reference Marks" section of the GAG, the symbol is defined as follows:

(Symbols Following Io'light Number Indicate A Replacment Flight Operate By A Commuter Air Carrer On Behalf or A Certificate Air Carer Pursuant To A CAB Approved Agreement. (RX 571 at 4) 31. In addition to the Allegheny commuters, 30 commuter air carriers operate replacement flights for certificated carrers Alaska Airlines and Wien Air Alaska, Inc, and receive the same display treatment as Allegheny Commuters in the OAG, (Nelson 3462)7 hJ.. AWU v:( .u - .u!'-.:!IO.."" tll IJ./I Ll.. ' Co'?1I"ftt1b" '"tADllla': ! I Ilil L" ,. I J... \. '"u.I I:".t M (From RX 258 at 85, showing commuter replacement flights for Wien Air Alaska, 32, About 700 of the 50 000 direct flights listed in a recent issue of the GAG were replacement flights operated by commuter air carrers but listed in the certificated air carrier category. (Nelson 2521) (16) 33. Certificated airlines are obligated to serve smaller communities pursuant to a CAB route authorization even though they do so at a loss, In that event, the CAB may authorize payment to the certificated carrier of a subsidy, Since 1954, such subsidy payments have amounted to well over $1 bilion, (CX 107 7 n, 34, Replacement service allows the certificated carrers to fulfill their obligation by delegating the route to a commuter carrier, These replacement carriers, with their more fuel efficient airplanes, serve these smaller communities at a profit, (CX 106 at 16, 76) They cannot receive a federal subsidy, (CX 107 pp, 9-13) In 1975, there were 27 commuter carriers operating replacement service for 11 certificated carriers, (CX 107 p,10) 1 Not al1 commuter ciers operating replacment servico for other certificate carrero reive "AJlegheny treatment" (RX 135A; Nc1f!n 3466; Britt ZM')) REUBEN H, UUNNELLEY CURP, Initial Decision Relevant Market 35, Respondent advertises that the OAG is the "standard reference of the Air Traffic Conference of America, 8 (CX 113, front covcr) The OAG is the only complete listing of schedulcd flights in North Amcrica, (CX 203B(1); CX 204A(1); CX 113 leaf between 2-) The OAG is the primary source of flight schedulc information to the flying public and the primary marketing tool for carriers, (May 565; Fugere 220) It is referred to in the airline industry as the "Bible," (Kyzar 1575; Griffin 851; CX 28B) (17) 36, In addition to the OAG, there are four competitive sources of information about scheduled passenger air transportation, These four sources are the ABC World Airways Guide ("ABC"); computerized schedule information; individual airlines' printed schedules; and radio television and newspaper advertising. The record reveals that none of these sources offer a real alternative, (McKenna 904; Kyzar 1612; Muse 812) When asked if he could name any actual competitors of the OAG other than ABC, the former Executive Vice President of the OAG testified that there were no significant competitors, (Reich 1299) 37, The ABC is a listing of scheduled flights much in the same format as the OAG but is directed toward international travel. (CX 202B-C; Fugere 2.'38) 38, In 1973 ABC had a total circulation of 1 792 in the United States and Canada while in that same year the OAG had a total circulation of 137 796 in the United States and Canada, (CX 45A) 39, A witness with 14 years experience in the airline industry had only seen one copy of ABC in his life. (May 567) Another representative of a certificated air carrier testified he had never seen a single copy while employed by that carrier, (Mueller 1525) Some air carrier witnesses had never heard of ABC, (Muse 814; Britt 2597) 40, The ABC does not compete with the OAG in providing domestic flight information, (May 567; Jaques 656, 660; McKenna 904; Fink 1410; Mueller 1525; Budzic 3093; Davidoff 3178; Howe 1868; Reich 1295, 1300; CX 202C) 41. SCIP is the acronym for Schedule Change Input Package, (Lobach 4125) SCIP tapes are computer tapes upon which airline schedule information has been coded, When the information on the SCIP tapes is called for by the operator of the computer terminal it is electronically displayed on a cathode ray tube ("CRT"). (Whiteside 45; McKenna 904) (18) 42, While many scheduled air carriers have access to SCIP tape 8 The Air Traffic Conference of America is the tre lIialion of certificate air cacl". (CX 20 (54); ex 20 (54)) Initial Decision 95 F, capabilities, only a very small percentage of travel agencies and corporate travel offices use SCIP tapes, (May 568; McKenna 90&46; Ceresa 1012; Reich 1301-D2; Davidoff 3153, 3154; Lobach 4219) SCIP tapes are not a marketing substitute for the OAG, (Autry 714; Griffin 854; Ceresa 1012) 43, The cost of a CRT for an office that does about three milion dollars a year in business would be about fifteen thousand dollars a year, (Jaques 657) The cost of subscribing to the OAG is currently $98,44 annually. (RX 571, advertising leaf between pp, 2-) 44, The use of computerized schedule displays has not changed the growth rate of the OAG, (Lobach 4231; Reich 1208) 45. Even those airlines, travel agents and corporate travel offices that do have computer scheduling capability also subscribe to the OAG. (Kyzar 1613; Budzic 3094) 46, The limited use of CRTs is due in part to the fact that SCIP tapes contain less flght schedule information than the OAG. (Budzic 3085; Lobach 4125; Fink 1428) 47, Most scheduled air carriers print their own individual flght schedules which they furnish to their passengers. These schedules contain only the carriers' own flghts, (Fugere 237; McKenna 903; Ceresa 1011-12) The schedules usually have only local or limited distribution, (May 566; Whiteside 432; Autry 710; Muse 814; McKenna 903;48,BrittIndividual2598) (19)timetables are also expensive. One witness testified that it cost his company approximately $,50 per schedule, (Muse 840) 49, Airlines, travel agents and corporate travel offices do not normally use individual flght schedules to obtain flight information and book flights, (Jaques 660; Fink 1415, 1416; Fugere 237; Autry 710; Griffin 852; Ceresa 1011-12; Davidoff 3154) 50. Scheduled air carriers sometimes use radio, television and newspapers to advertise their flights. In some instances those advertisements contain limited flight schedule information. Where flight schedule information is advertised, it is only shown for the individual carrier and even tben it is limited to a few city pairs, Commuter carriers cannot afford to advertise nationally. (Fugerc 23 7; Whiteside 433; May 566; Autry 710; McKenna 904) 51. Airlines, travel agents and corporate travel departments do not rely on radio, television or newspaper advertisements to obtain flight information and book flights, (Jaques 659; Fugere 237; Autry 710; Griffin 852; Davidoff 3154) , ( , Initial Decision Consracy 52, The Airline Guides Committee is a eommittee of the Air Traffic Conference of America ("ATC"), a division of the Air Transport Association of America ATA") the trade association of certificated airlines, (CX 203(43); CX 204(43); CX 89A) At Airline Guides Committee meetings, each certificated carrer was entitled to send one authorized representative and each representative had one vote. (Mueller 1497) The only persons entitled to vote at Airline Guides Committee meetings were authorized representatives of certificated air carriers, (Mueller 1500) (20) 53, On September 10, 1971, OAG staff sent a telegram to the A TC. The OAG stated that at the next meeting of the Airline Guides Committee the: "OAG would like to discuss the merger of Certificated Commuter and Intrastate Air Carrier sehedules. OAG thoughts will be presented October 7, We would appreciate carriers coming to the meeting prepared to discuss their respective management opinions. (CX14) 54, On September 13, 1971, the A TC sent out to all members of the Committee the agenda of the meeting of the Airline Guides Committee to be held October 7, 1971. (CX 89) 55. Item 7 on the agenda Merger of Schedules," was proposed by Mr, Howe, the Publication Manager of the OAG, with the approval of Robert Parrish, the Publisher of the OAG. (Howe 1912-13; Reich 4218; Woodward 4216; CX 14; CX 89C) 56, Item 7 on the agenda of that meeting reads: GAG Staff has suggested that the Airline Guides Committe consider the merger of Certificated, Commuter and Intra..'Itate carrers schedules in the guide publications. Direct flght listings would be listed together chrnologically as currently shown. Additionally, Commuter and Intrastate carrers would have the opportunity to purchas online connections and Commuters would purchase connections with Certificate carrers and visa-versa (sick. Only two categories of listings, direct and connections would be required instead of the present four- OAG plans to provide furher details at the meeting. Members, however, should be prepared to discuss their respective management opinions. (CX 89C) 57. Members of the committee did seek management opinions, (CX 102) 58. The meeting took place on October 7, 1971, at the Mayfower Hotel in Washington, D, C, (CX 89) (21) 59. Item 7 was discussed during that meeting. (Howe 1698; Mueller 1501-12) Representatives of the OAG were present during the discussion, (Mueller 1508; CX 9A- 60, The offcial minutes of the meeting, published by the ATC and Initial Deision 95 F, distributed to all certificated carrer member,. and to the OAG, state that "During discussion (of Item 7J it became obvious that there was no support for the proposal, therefore, no further action WaB required. (CX9H) 61. Notes of the meeting taken by Mr. Howe, the Publications Manager of the OAG, state that: "the carrie,. were with the exception of (American and National Airlines J against the merger of schedule listings." (CX 10D) He also stated that "(mJost carriers felt that noncertificated carrie,. could be included in connections, though, this of course, would weaken our argument against keeping them out of (mergedJ schedule listings," (CX 10D) 62. Mr, Howe s notes also state that one certificated carrier was concerned at the meeting that "non-certifieated carrer(sJ had no restrictions on routes and therefore could parallel the (routes of) certificated carriers at wil." (Howe 1769; CX 19C) 63, At the October 7, 1971 meeting the certificated carriers voted not to change the OAG's method of separate, descending listings of the schedules for certificated, commuter and intrastate carriers. (Howe 1872; CX 89C; CX 66A; Mueller 1502, 1508) 64, In 1975 of the 118 commuter carrie,. publishing schedules in the OAG, 78 purchased 408 subscriptions to the OAG. The remaining 40 may have purchased some additional subscriptions under individual rather than corporate names, (CX 135A) During that year certificated air carriers purchased over 30 000 subscriptions to the OAG, (CX 30) 65. Certificated air carriers are substantial customers of Donnelley products and services including subscriptions to the OAG and other puhlications, paid connections, and SCIP tapes, (e,g, CX 82B; CX 71) In 1975, seven certificated carriers paid Donnelley well over $3 million, (CX 71D; CX 73C; CX 77C; CX 80B; CX 82B)" (22J 66, Some certificated carriers attempt to use their position as large customers to influence respondent' s publishing policies, (CX 118; CX 87) Competition Commuters 67. On April 15, 1975, there were 432 city pairs served by direct flights of both commuter and certificated air carriers, (CX 135E; CX 203(5)) 68, In the year ending June 30, 1974, commuter air carriers served 9 This figure doe not include several of the larr air cael" such II American, EMtem, and Pan American, al well al other certificate cae!", who refuse to 60pjJly this information, nor d0e it include aubet.ntial amounts pad by other certificate caero. (eX 70; ex 74; ex 75; ex 78B ex 8IB; ex 90; ex 91) Initial Decision 514 city-pair markets in which passengers totaled 1 00 or more, Eighty-two of those markets were also served hy certificated carriers. In those 82 markets, commuters accounted for 872 300 passengers and the certificated carriers 4 053 760. The commuter share was 17.7%, The 872 300 passengers represented 19.6% of the 4 440 762 commuter passengers in 48 states that year. (CX 62B) 69, In that year there were 19 markets in which commuters had 000 or more passengers in 'competition with certificated carriers. (CX 62C) 70, In that same year there were 25 markets in which certificated carriers had 50 000 or more passengers in competition with commuter carriers, (CX 62C) 71, Certificated carriers generally operate large jet aircraft carring 100 or more passengers and flying at more than 500 miles per hour, Commuter carriers typically operate two-engine, propeller-drven aircraft seating no more than 30 passengers ('4commuter aircraft" such as the Beech-99 (15 passengers, 280 mph), Cessna 402 (10 passengers, 239 mph), Douglas DC- (28 passengers, 193 mph), DeHaviland DHC-6 Twin Otter (20 passenger, 209 mph), Piper P A-'1 (8 passengers 270 mph), Britten-Norman Islander (10 passengers, 260 mph), DeHavilland Heron (four engine, 17 passengers, 195 mph), and Nord 262 (27 passengers, 240 mph), (RX 571, p, 30; RX 225F) Here are pictures of commuter aircraft (CX 106 at 2, 38): (23) \\,. ( : ,....,;.,,......,... ,,,..,,,,,. ,,..,..,..,.\\,,.,.,.,,,,,,,..); ...,,.......,.,..,.,.......,,,,,..,,\ .. .., ...,,,,,,,.::;..., ,, ,..........,.::::,,,,,,,,,.,.. ,....,,,,,,,,,,,,..,.....,.,,._,,,.jj.,.(;. Initial Decision 95 F, AwuoJ the world. the blliest )n1!1U!l r Jir!iners arc rheairliners built Beechcraft Airliners fly with h" l "xh 49 oq:ani;:ations worldwde. It. Ni to see why. when you check 1... ""0 11;0u.. h.. (S (If' (he Baxhcrafr B99,.. the 1atesr ,,,,t...,,,,(J"'''4''''' 11"'. 1... I_,... 1t111'", lTk..s 2b) mrh cnlise and an 832 1",,,,,(,,,';i. M" 5"H5,... ''',m, IIII !': 1.111,;.. . A u.set111Ioad of 5 I... "',N.- 100 Ibs. 5.f"".L.JS'.-.,.. f.,.", .!lrd inrerior '-"III h"""' ":r.s 15 passcngers and a I.. 5"".,,,.... w.. 1-" ",,,,,,,,,1.... lh" ' d 2 On a 2 20.") .m",,,',.. year Ph". hours-per ..I, PI",",",". 5.""""''''''0'' 'Ilill, tH)n s...hcJule. (hedirct(cosr-per-.st- B.,jl., 11",,,,,,..,.. h".". k. i lI; L..""" uny 3-3 (ems J'."" I." I"J.."" C4",h,,, U"" U..P,""I- The B,- x:hcrJft 899 is a versatile c.", . "d . A,, 0"". , L 'f L' I,\: L.... o; rertoffing a variery of missions C....... J,,,... "d."..G.s. ola.,""-T,.. .. C",".,.. t, 'I 111. ,ny Liifferl:nr organizations, The ,. r W,.I.",--D.C. . e,.". "L.A'.. . , JJI,....". Ch.m..' P.,,,,,I... i'\1ullle.\.ibi\iryp.Jssiblewithits Coi..",,; ...e",.. --f; ...,C... M.",l)llt :I1Jij) combination eommm, of speed, range I"" X.,.....s.,c.",ro"".c..,- ',1"J!1J r\lyl: 1;IJ m lke. it the most air trn's- C""rio.o"'d, .e.",....,,,....,.. ;l, ;:U' .."" I.... "L.L.-"'IP". jU..!', In 'ndn per dullar in its class. nun f.."_,.(' )o"''' 1,,",,-, DC 11..".. rur full infoffJrion on the Beehcrfr f,.,. f.. 1... A.I."...C.n".R..' M." fn. S.J',j,,, bnN..c.Ii' )c), wrire ofed!:). M. Cook,Jr. , Manager "."'OO"o.. A"..," r,,," 8"...",,", rline Sale, BClXh Aircrdft Corprntion l.;;",J..c,,,",.,..,...o.... I\"","" G,."J '... h,,", K"n"" 67201. (316) 689.7071 j.".h. fL..,,"""" 8.._5.n.S"... "..'"'''''' COm,"",". fmm.b."' 5- ,,IJ W C. ,,.,,.. C"",.'" 0_'''' L.C."- :::1:;;;;: S-- ,"0"""".''''' n.,. f"""", kN.- r,,. S."..", '''''m. P'M"I.."".

o"o A', "T..- , f'n, I..., I T_,o.n.T""d.. (CX 106 at 2) /j REUBEN H, DONNELLEY CORP, Initial Decision Your commuter service is programmed for profit.

f1 f"1 fJ f1 fRllJdJ ?Dl"hU is designed to help you increase it.

Wil!lhu MOl'" II , you 9'" on air~ralrde5l!1noo "ally;u an 8' FfOm""alol1. lnsleadolocompromj.B'o'do'mooor. yougalallth..laoturesacommute,plano.houldha.oto hulpyogetabanarbollOmllna!igufI, Andmoll lJi11!'j$, il:: lie ...,utllity,let ..ampl. You Coni"'Tdl pass9rlo:!urtoc:goope,aIIGr.inl""9Ihan30minus9.. I'QUcalG pas,"mge's and urgn s.mull;,neosly. Arid tho Malra II i. coppa"' sall-.onlainll. 50 you na"a, n..oootl-slu "'u lpm""t Youal'lg8ltM Iowa"lual consumplion In tho busina... High utilizatioo, ""o,JO blrx houro ya" rl y"" CU 5j,.., Tho higho.1 (;Otn\'l.

urne, Thog,eol8S"angu in '10 do",. And 9 hdl) U1iso spell ot 'Duoo300mpl All ot wh,c canl"bulB'O lower operat,ng COST.. An hi9'.' p,ol,.., Wit outlT""IJon,nglel-egBCQmTQr\like"-rCQOrton ing and 7.0 p_ i. pr..s""nlallo, Or incomparable d si9" sUUClural solely- NeetJ mo,,, ,reason.? Give Ee Manon. cal 12JB24-9421. He lipuia MelrO It on YOC"oullI, t'l/U'BWBly "P.Iu. andcompuleil.coslsotup",,,hon. Thenyoucan"MlriyorwN lngsYOl"vB be..n mos,ng.

B'ImetroSWEARINGE.N (CX 106 tit 38) Initial Decision 95 F, (25)72. Some commuter carrers operate, pursuant to CAB authorization, four engine, pressurized, turboprop aircraft capable of carrng 50 passengers. (RX 571, at 30, 373; CX 107, at 46-7; CX 106 at 9091) 73. Foreign air carriers listed as certificated air carrers in the OAG often fly "commuter aircraft" similar or inferior to the planes used by commuter carriers, (CSC Reply, at 57) Foreign air carrers are not subject to FAA safety regulation, (Ceresa 1002-3) 74, Allegheny commuter carrers operate commuter aircraft. (Bcech 99, DeHaviland Twin Otter, DeHavilland Heron and Nord 262-CX 182L; Short SD3-0-RX 571 at 1058, CX 106 at 56-7) 75, Certificated air carrers sometimes fly commuter aircraft. (Mueller, 1515, 1517; CX 12C; Lang 312--0; CX 112 at 205, 713, 624 1129) They also fly some larger propeller driven aircraft, (Autry 697 Griffin 84; RX 258 at 976, 977; CX 112 at 91, 93, 34, 752, 1129; Mueller 1517) New York Airways flies helicopters and is listed with the certificated carriers in the OAG. (CX 258 at 783) 76, The airplanes used by commuter caers are sometimes equivalent, identical or even superior to those flown by carriers listed with certificated carriers in the OAG, (CPF 98-101; CX 106 pp, 89-91) Some commuter air carriers arc starting to use jet or turbojet airplanes. (CX 106 at 8, 84; Autry 774-75) 77. Commuter air carriers normally fly short route averaging about 75 miles, Local service certificated carrers average 182 miles and trunk certificated carrers average 578 miles. (CX 106 at 92; McKenna 952) Most certificated carrers, with their larger planes, offer amenities (e. food service, lavatories) not offered by commuter carriers, (RPF 184) In short flghts, those amenities are not as important to passengers as the time schedule of the flight and tl1 kind of airplane. (Jaques 669, 68; Autry 707) (26) 78, To many people, especially those on business trips, the time a flght leaves and arrves is the most important consideration. (Fugere 320; McKenna 958; Griffin 850--1; Jaques 660, 686; Nelson, 3472) Passengers can sometimes save. time by using commuter connections rather than certificated connections. (CPF 95; May 577) 79, . Of 665 airport, in the country, 256 are served solely by certificated carriers, 210 solely by commuters and 199 jointly by both classes of carrers. (CX 107 at 34) Commuter facilities at airprt are often not as good as those for certificated carrers. (CX 2OF; CX 107 at 53-55) Some commuters share terminal space with certificated carrers. (CX 106 at 37, 74-75, 83) Commuter carrers sometimes use more favorably located airport than competing certificated caers, (CPF 96; Autry 702; Dzendolet 2629) 80, The number of commuter carriers has been increasing. In 1960 REUBEN H. DONNELLEY CORP, Initial Decision there were five in the OAG, 1966 - 36, 1967 - 50, 1968 - 75, 1969 - 110 1974 - 140, 1976 - 163. (CX 106 at 5) 81, Passengers carried hy commuters increased from about 4 million in 1969 to over 7 milion in 1975, (CX 106 at 3; RX 328D; RX 344Z22) 82. Since at least 1971, all certificated carriers have had interline agreements with most commuter carriers. These agreements provide for joint fares (at a discount), and through ticketing and luggage handling arrangements. (CX 106 at 62-75; CX 12B; CX 22B; CX 20D) Many commuters now share the computerized reservation systems of major airlines, (CX 106 at 68, 94; CX 20D) 83. Pilgrim, a commuter air carrier, competes with Delta, Eastern United, TW A, Allegheny and American, all certificated air carriers, as well as an "Allegheny commuter" which is integrated with certificated carriers in the OAG, (Fugere 215- , 240, 287; CX 112 at 5) (27) 84. Royale, a commuter air carrier, competes with Texas International, Delta Airlines, Southern and Braniff, all certificated air carriers, (May 554; CX 112 at 5) 85. Prinair, a commuter air carrier, competes with Eastern, a certificated carrier, (Ceresa 976, 1027; CX 112 at 5) Prinair competes as well as LIAT, ALM, Winair, Air BVI, Air France, Air Guadaloupe, (Ceresa 100O-1) These are all foreign air carriers which are integrated with certificated air carrers in the OAG, (CX 112 at 5; CPF 25) 86. Metro, a commuter air carrer, competes with Frontier Airlines Texas International and Delta, all certificated air carriers, (McKenna 899 902; CX 112 at 5) 87, Rocky Mountain, a commuter, competes with Aspen Airways Frontier, Continental Airlines and Braniff, all certificated carriers, (Autry 693, 709; CX 112 at 5) 88, Allegheny, a certificated carrer competes with Altair, a . commuter, (Howard 2855, 2857; CX 112 at 5) Altair also competes with Allegheny commuters" which are treated as certificated carriers in the OAG, (Howard 2855; CPF 27) 89, Frontier, a certificated air carrier, competes with Rocky Mountain, Metro, Scheduled Skyways and other commuter carriers, (Mueller 1509, 1514; CX 112 at 5) 90. Texas International, a certificated air carrer, competes with commuters, (CX 41; CX 112 at 5) 91, Air New England, Inc" a certificated carrer, competes with commuter carriers, (CX 188B) 92. Commuter carriers competing with certificated carriers set their fares based on the fares charged by certificated carers flying the same city pairs, (Fugere 379; Autry 695, 702; McKenna 901; May Initial Decision 95 F, 562; Whiteside 411; Ceresa 1035) These certificated carriers also react to fares charged by the commuters. (Whiteside 411; Mueller 1510-11 1514) (28) Intrastate 93. Intrastate and certificated carrers often have served the same city pairs. For example, Southwest Airlines, which was an intrastate air carrier, competed on all its city pairs (over 25) with certificated carriers, (Muse 809-12) Air Florida and Air California, which were intrastate carriers, also competed with certificated carriers in various city pairs, (Griffin 849; Davis 1439) 94. Intrastate carrers fly airplanes comparable to certificated carriers, (Muse 807; Griffin 847; Davis 1430; Cooke 3333) 95, Certificated carriers have lost market share in various city pair markets as a result of intrastate competition, (Muse 890; Cooke 3327) 96. Intrastate carriers compete with certificated carrers. (Nelson 3394; Cooke 3326-29) 97. Prior to November 9, 1977, intrastate carrers were prohibited from exchanging passengers and luggage with certificated air carrers. On that date, by statute, some such interlining was allowed, 49 U, 1371(d)(4). The Airline Deregulation Act of 1978, Pub. Law 95-04, 92 Stat. 1706 (eff. Oct, 24, 1978) provides that intrastate air carrers may now become, in effect, certificated carrers providing interstate transportation upon receiving CAB authorization. Four (Air California, Pacific Southwest Airlines, Southwest Airlines and Air Florida) have already done so and their schedules wil now be listed under certificated air carriers in the OAG. (RX 576) One air carrer in Ilinois and three carriers in Alaska continue to operate as intrastate carrers, (RPF 328) Safety 98, Regulations promulgated by the Federal Aviation Administration (FAA) govern the safe operation of aircraft with a gross weight of 500 pounds or less. (Schwind 3524) Most aircraft operated by commuter carriers are in this category, (Schwind 3573-74) (29) 99. The FAA has different, more stringent, regulations governing the operation of the larger aircraft usually operated by certificated carriers and by most intrastatc carrers. (RX 196P- 100. The certificated air carrer industry has a better safety record than the commuter air carrier industry, (RPF 203-8; 211-13) The largest 50 commuter air carriers, which carry about 90% of all REUBEN H DONNELLJtY tJU.or.

Initial. Decision commuter traffic, are statistically safer than the certificate air carriers, (Dzendolet 2666) Reliabilty 101, Reliability of an air carrer measures whether it fles published schedules on time with listed equipment. The percentage of complaint letters received by the CAB regarding flights of certificated and commuter air carriers is about the same. (CX 135B) Commuters operated over 96% of flghts scheduled in 1974, which is comparable with certificated carrers. (CX 107 p.5; CX 189B; McKenna 9481) Certificated carrers and larger commuter carrers are more reliable than smaller, newer commuter carrers in performing flghts at the scheduled time. (McKenna 920-21; Dzendolet 264; Salfen 3272) Some commuters have better reliability records than almost all certificated carriers, (CX 20B) Injury Connections 102. The OAG publishes certain connections free based on varous time and frequency factors, If a carrer wishes to have a connection that does not qualify as a free connection published in the OAG, it must pay the OAG to list that connection. These connections are known as "paid connections." (Findings 14, 15) Prior to December 1, 1976, the OAG would not publish free or paid connections for commuter air carriers, (RX 214) (30) 103. Paid connections cost approximately $2.30 per month per connection, (Whiteside 416) In 1975, Delta paid respondent over $160 000 to list paid connections in the OAG. (CX 69) TW A paid over $181 000 (CX 71); Braniff over $115 00 (CX 72); Allegheny over $280,000 (CX 73); Continental over $150 00 (CX 77); Northwest Airlines over $216 000 (CX 82B); and United Airlines over $300 000 (CX 80B; see also CX 23A(4); CX 70; CX 74; CX 75; CX 78; CX 81; CX 82; CX91) 104. "Constructing a connection" refers to obtaining a connecting flght by using two direct flights listed in the OAG. "Constructing a connection" is difficult and time consuming. (Kyzar 1618; Ceresa 981- 84; Fink 1353-8, 1371; Budzic 3107418) 105, Before December 1, 1976, respondent refused to publish commuter air carrier connecting flght schedules in the OAG, (Complaint and Answer 13) At least as early as 1969 the OAG refused requests by commuter air carriers and their trade association to ... , \ ...g :: \, .. . . .. .. \)?. .,. \, \, $ . . ..... \$.\: .\ .., ,\.()(j ,, # ; , ,\.\.().(j,. \\).. . . .. ,\\). . . . .. $\01\" -rC, SJ11C- . . . .. 9 \$$\O $.e1\1\'" ;I C01o -r\\to .. .. "pi . . , '1'''' \.\.,v ~\,1\e 11SJ11\\I\\o '1't; ... \"i,i"\SJ X". 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",\c\l lC* 1\U:~:o. \l\1\g" ' ,,~e" 2()\) "s\l\1\~ ,;p\''' \1\"eS ,,\.\4o\), ct\1\g ,,\ce ,s ..t\le~e .. d\s$C~ ""ect\O" lCJ11\ . "p,' ""e" ~ t\le d lttJ' u:\~': :( $"" ~ \$su:e "u::o\\s:,co,,1\e \1\ U:'I :e\ c..f1e e 0" ",'I . ~s \" t\le~e~"' \"t \ ) \)01\1\ ..",,0U: lo~ 1\0~ c"' ;: "\le 'I~ .." ~ t\le cO 4o\'1o:\ J\' ~ 1" ~",,,~ 0 ,'co~,,, ",\)O""e. ~ co "ect\O '3\\) eS,,\te, 00 \\stil\ "-,,\l1" :O\\$\l11\ $t.."":- ".\l 4J' yoP d ..1~ tltt* 2\ ' .~ e.. :du:\e \2'1'3i.\g"c\le\\)'1 v."sf:t.~'I c\,pe~ o ..,..1\"c" \l~ " ~..s",'I to~ J\" '1 2?, \)ece~ ~. 1"t . ~u:\e$ \e~S 0" c" ,,,'I..- ....t\O" ~u:'I~ "' \le sc\le co~ . "\\)o\), \"te..- M\e ';c 'o"t J\G to \''3, ,p." "e 0 e$t\1\t' ~e'l" REUBEN H. DONNELLEY CORP, Initial Decision carriers-to list the flghts of all scheduled air carrers in chronological order for each city pair, (Autry 718; McKenna 908; Reich 1194-96) (32) 114. Users of the OAG select the first acceptable flight listed in the OAG for the city pair, (McKenna 907) Even experienced users of the OAG read from the top of the page to the bottom and select the flght listed first ("first listing ) (Ceresa 980; Lang 3135; Whiteside 406) The user of the OAG usually makes a choice of flght before ever reaching the commuter or intrastate categories. (Fugere 309-12; May 572; Muse 816; Griffin 851-52; Fink 1412) Airline sales personnel will book the first convenient flght in chronological order, even when that flght is not on their own airline. For this reason, some carrers have arranged to have their own custom schedules printed, showing their own flights first, (Fugere 352-54) 115, Being listed below certificate carriers in the OAG's flght listings results in an injury to commuter air carrers (Fugere 232-; Whiteside 404-8; May 617-18; Autry 703 71&-18 725; McKenna 943 47; Ceresa 980, 1032-), intrastate carriers (Muse 8 25; Griffin 851), and to the travellng public, (Autry 702-3; Fugere 349-51) 116, The OAG lists certificated air carrers within any city pair in order of their time of departure. Where two flights leave at exactly the same time, the one that arrives first is listed first in the OAG, Prior to 1971, the carriers were listed alphabetically when flghts had identical departure and arrival times, Thus, if an American Airlines flight and an United Airlines flght had identical departure and arrival times, the American Airlines flght would have been listed before that of the United Airlines flght. (CX 89B) 117. Because of complaints received from certificated air carriers respondent started to consider randomizing direct flght listings in the OAG, For example, where two or more certificated flights had identical departure and arrival times, one flight would be selected at random to be listed first rather than alphabetical listing. (eX 9H, ex 123B) (33) 118, In an Airline Guide committee meeting in 1971, all carriers whose codes began with A-M opposed randomizing and all carrers except one whose codes began with N-Z favored randomizing. (Northwest was the exception, United is its main competitor,) All of the certificated carriers recognized the competitive advantage in being listed first, (CX 31-35; ex 88A-D; ex 98; Kyzar 1615) The publisher of the OAG also recognized this competitive advantage, (CX 36C) 119, In early 1972, respondent changed its policy and startd randomizing direct flght listings where the flghts left at about th, same time (still keeping separate categories for certificate, commute Initial Decision 95 F, and intrastate carriers), (CX 123) An IBM program was used to insure fairness in the random selection. (CX 123B) The OAG later similarly randomized connections, (CX 49G) 120, Allegheny insists on having Allegheny commuters listed with certificated carriers and not below with other commuters because first listing is a better marketing tool. (CX 128; Howard 281213) 121. Prior to the randomization controversy, certificated carrers tried to achieve first listing by changing their flght time to leave one minute earlier than their competition in order to be listed fiest, (CX 34 CX 35, CX 36A, CX 88A, CX 98N-Q; CX 185) 122. The importance of first listing is also indicated by the fact that several air carriers have commissioned the OAG to publish custom guides for use by the airlines' own reservation agents. (CX 52Z; Lobach 4129-'0) These custom guides follow the OAG format, but list the flights of that carrier ahead of the flghts of competing carrers. (CX 153, 154) 123. The ABC World Airways Guide, the OAG's competitor outside the United States, randomizes flight listings as well as integrating the schedules of commuters, intrastate and certificated carriers. (CX 36A CX 39B; CX 12C) 124. SCIP tapes integrate the schedules of commuters and certifi. cated carriers, (Fugere 277, 387; CX lib) 125. The OAG international edition integrates flight schedules of foreign commuter airlines with those of foreign certificated airlines. (CX 12A) (34) DISCUSSION The following discussion summarizes and supplements the findings of fact and presents conclusions of law, Intmductwn Scheduled passenger air transportation in this country is conducted )rimarily by air carriers holding certificates of public convenience and lecessity from the Civil Aeronautics Board. "Trunk" certificated arriers usually fly between large cities and average almost 600 miles a -ip, "Local service" certificated carriers usually fly between smaller ties and between small and large cities and avcrage about 200 miles a ip. (Finding 77) These certificated carrers usually fly large jets rrying 100 or more passengers.

(n the last two decades commuter air carriers have become reasingly important in passenger air transportation, These carrers REUBEN H, DONNELLl'Y leUK,..

Initial Decision are not certificated by the CAB and they pick their own routes and set their own fares, They generally fly between small communities and between those towns and larger airports connecting with certificated carriers. Generally they fly smaller planes;o and average about 75 miles per trip, (Finding 77) The number of commuters has increased from 36 in 1966 to 163 in 1976, (Finding 80) They carried over 7 milion passengers in 1975, (Finding 81) Because commuters can choose to entcr or leave markets without CAB authorization, some of them have entered some heavy traffic markets in competition with certificated air carrers. (Findings 6870 83-91) About 20% of the passengers in these markets are carried by commuters, (Finding 68) Commuters have been successful in the "feeder" role of carrng passengers to and from Jarger airports where they (35)can connect with certificated carriers, They do this so well that eleven local service certificated carriers have withdrawn from these routes, with CAB authorization, by entering into "replacement agreements " whereby the commuter carriers take over the route, Even though the local service carrier may have been losing money on these city pairs, and often was receiving a federal subsidy, the commuters, with their fuel efficient planes, can usually perform this serviee at a profit, ll In 1975 there were 27 commuter carriers operating replacement service for 11 certificated carriers, (Finding 34) Commuter air carriers are now an important part of the scheduled passenger air transportation industry.

Respondent publishes the Official Airline Guide. The OAG is the only complete list of scheduled airline flghts in North America. (Finding 35)12 It is the size of the Washington, D.C. "Yellow Pages" telephone book and it comes out monthly, with a mid-month supplement, It costs about $100 a year and is used by ticket agents for airlines, travel agents, and scheduling personnel for corporations, While there are other specialized sources of fligbt information, there is no substitute for the OAG, (Finding 36) 10 The Airline Deregula.tion Act of 1978 incr the mliimum siz of commuter plane tn thos having & capacity of les than fifty-IiJtplln l". 49 U. C. 1371, 92 Stat. 1782 (Oct. 24, 197). 11 TcxlI International, a certificate air caer, char a fare of $21 between Colleg Station, Texas, and r. Davis Airline., a commuter, cha $31 and mae a profit. (CX 107 P. 9; CX 174 p.Dallas, and lost $41 per pan 155) 12 Tbe OAG also provides information about far, equipment, airprt, mea, stopa, and grund trnsporttion. (RX571) Initial Decision 95 F, The OAG is arranged alphabetically by the city the passenger is going to; under each such city the cities from which the pagsengers are coming are also listed in alphabetical order, The schedules are divided into direct flghts (without changing planes) and conneetions (involving a change of planes), Until December 1, 1976, respondent did not publish connections for commuter air carriers, (Finding 22) As a direct result of the Federal Trade Commission investigation in this cage respondent started publishing commuter connections on December I 1976, (Finding 112) The OAG city pair format is further divided into categories by clags of carrier: certificated carriers, commuter carrers, and intrastate carriers, The schedules of certificated (36)carrers have always come first, (Findings 2 24) The flghts within each category are in chronological order. Users of the OAG choose a flght by reading the schedule from the top down and generally choose a flght before ever reaching the commuter or intrastate categories, (Finding 114) Being close to the top of the schedule ("first listing ) is competitively very important. For example, certificated air carriers, whose names placed them alphabetically below their competitors when both left at the same time, insisted that the listings be selected at random rather than alphabetically, (Findings 11&-19) Respondent' s discriminatory policy has competitively injured commuter air carriers, especially respondent's refusal to publish connections since 70% of the commuters' passengers are connecting with other carriers. (Findings 10&-10, 115) Rather than the result of objective editorial decision, this policy has resulted from respondent's economic affiliation with the certificated carriers (Findings 6466, 103) and from a conspiracy, At a meeting with OAG representatives on October 7, 1971, a committee of about twenty certificated carrier representatives voted to continue the OAG policy of separate carrier categories and of refusing to publish commuter and intragtate carrier connections, (Findings 52-63) Respondent's main arguments for the discriminatory publishing policy have been that commuters were not reliable in flying according to their announced schedules and that they were not as safe ag certificated carriers.13 (Reich 1206) The record in this case shows that those arguments are baseless. (Findings 98-101) The only accurate relevant comparison of safety and reliability of air carrers can be made when they use similar airports and are flying over similar terrain in similar weather. 14 (37) 1J NDthing in the l".ord shows that intratate Clern, which fly the same large jeblas competing certificate carrern (Finding 94), ar any les reliable than certificate caeNl. H (Dzendulct 2116.) The CAB qua.lifies its Schedule Arva.l Perfonnnce publication for Januar 1979 with this Btatement.

(Coinue) . ,.... _. _.

..u.

IJitial Decision Furthermore, respondent does indeed publish schedulesior nonClrtificated carriers. To be consistent, then, respondent can only use the safety and reliabilty argument to show. that the schedules of noncertificated carriers should be designated in some way. Respondent already designates replacement carrers such as the "Allegheny commuters and. publishes their schedules among the certificated carriers. (Findings $.0) The same system could. easily be used to designate noncertificated carrers.

Respondent fears that, if the schedules were merged, passengers would buy tickets on commuter flights without realizing that they would be flying on smaner aircraft. While this is possible in some cases it is unlikely to happen frequently. Travel agents generally inform their customers whenever a smaller aircraft is involved in a flight, (RPF 242) Furthermore, this argument is not consistent with respondent' s practice of publishing schedules of replacement and foreign carriers with certificated carriers '5 even though those flights involve small aircraft. (Findings 28, 73) But for the conspiracy found in this case, there is no good reason why respondent should not merge schedules in the OAG for certificateed and noncertificated carriers, Respondent already does . so in other publications. Respondent merges the schedules of similar carrers in the International edition of the OAG, In 1971 the Publisher of the OAG wrote (CX 12A--B):

There isa question in our mind as to why we should continue separation of commuter air carrers in the U nit€dState when. we actually merge the schedules of similar operations in our International OAG Many of the small oversas caersoperate airraft similar to tho!;e used by U.S. Commuters. Why penalize our own "small" airlines? Another example of this inconsistent behavior exists, The 1978 Washington; D ,C. commercial telephone directory ("Yellow Pages contains a.listing for airline . companies;" The airline . companies. listed alphabetically thereunder include both certificated and commuter airlines, FOr example, American Airlines, Braniff International, Continental (38JAirlines and Delta Air Lines arc certificated airlines. (RX 571 p. 1498) Altair Airlines, Inc. '6 Colgan Airways Corp" C01nmuter Airlines, Cumberland Airlines, and Pioneer Airlines Inc, are commuter Since these data do not constitute a reprentative sampleo! any caer s total flights or of the industry 88 a whoJe, they should not be we for intererrer compa'Ins in any W8.yexoeptill individual rikets. The results shown shall not be "extrapo!atL-." to obtain a syatem" avera for any CRer. '5 &.mecertifieate carrel' also fly smaJ! a.ireraft.. (Fiilding 75) 16 Altair beme certificate in 1978.but at the time of the printing of the Yellow Pag it Wil a commuter. 258p. 121.

, Initial Decision 95 F, airlines, (RX 571 pp, 1499-1500) The publisher of the Yellow Pages is respondent Donnelley, (CX 24A)'7 Other sellers of passenger air schedules also merge the certificated and noneertificated listings, The ABC World Airways Guide, the OAG' s competitor outside of the United States, does so. (Finding 123) Computerized systems do .0, (Finding 124) Respondent's reason for not merging the schedules was without doubt based on the conspiracy found herein, and not on the differences in the carrers they suggest. Tlu Meeting In 1971 commuter air carriers were carrying over 4 milion passengers, 70% of whom were connecting with certificated airlines. The OAG did not print commuter connections nor did it integrate their schedules with certificated airlines. Mr, Howe, the Publications Manager of the OAG, and Mr, Parrish, the Publisher, became convinced that this should cease and put their reasons in wrting. (CX , CX 12, CX 15, CX 19) They found: that some certificated carriers wanted to purchase connections to noncertificated caers; that noncertificated carriers were anxious to purchase connections (which would result in increased OAG sales); that this was a "critical problem for nonccrtificatcd carriers; that commuter carriers may be " far superior" to small foreign airlines which appear in OAG and other international air schedule publications; that (39Jchanging the format to eliminate the separation of classes of carrier would save lines of copy and give the OAG a less confusing format; and that since foreign carriers, replacement carriers and some certificated carriers were flyjng small planes equipment is now a weak argument for continued separation," (CX 12C) The executives concluded that when the policy of separation of schedules was first established it was justified: "The scheduled Air Taxi or Commuter type of service was quite new, it was unregulated, at times it was unreliable, and there were many differences between the two services," (CX 12A) They stated that now however: " Over the intervening years these differences have been reduced in number and we are now convinced that in the interest of our subscribers and the future growth of the nation s air transportation system, these schedules should be merged as soon as it is feasible to do so. (Im, The only reasons against the merger of the schedules 17 Neither the Yellow Page nor the CAB publication in footno number 14 ar in thi rerd. While thea documents at moot are alternative evidence Safcway Stna, FTC 36 F.2 795, 80 (9th Gir. 196), ce. rrnUd 386 U.S. 932, respondent will have tbe opportunity to how to the oontr," 5 D. C. 56e), in a motion for reooll$ideration or before the Commi..ion which hWl the ultimate factfinding fCponsibilty in this proing. Administrative agncies should not "ignore the relities of life and di!regu common knowled" in rehing their decisioi1. Crmtimmta Can u,. v UniWl Sts, 272 F.2 312, 315 (2d Cir. 1959). REUBEN H, DONNELLEY CORP, Initial Decision noted by the executives were the "certificated carrier objection?! and possible subscriber objections, (CX HB) They put the matter of merged schedules and commuter connections as "Item 7" on the agenda of the next meeting of the Airlines Guide Committee, for consideration by the certificated carriers, (Findings 52- 56) The notice requested the representatives to seek management opinions of the subject. (Findings 56-7) The meeting took place on October 7, 1971 at the Mayflower Hotel in Washington, D.C, (Finding 58) Item 7 was the most important and primary subject discussed at the meeting, (Howe 1691-92) Peter E. McKenna attended the mceting representing Texas International, a certificated carrier. Mr. McKenna testified as to his recollection of the meeting (McKenna 910):18 Q. And can you real any speific converstion or statement by any representative of the Reuben Donnelley Corpration relating to the question of the integration of commuter schedules into the DAG and the listing of commuter connections in the GAG? A. Yes, I can. I recall a statement by Reuben Donnelley s Bob Parsh or Re Howe. I don t rccalJ speifically who made the statement. (40) The statement, I do recll, was in substance a statement to airline personnel-that they should detemine-the airlines should determine whether they were going to do business with commuters or not.

That on the one hand, airlines were entering ticketing and baggage agreements, joint fares, a variety of interline activities, while on the other hand, he was being told to keep commuters out of the bok.

The representatives of the certificated air carriers discussed the matter. A symbol next to the flight number would have satisfied some carriers, (CX I9C) One carrier "was concerned in that the noncertificated carriers had no restrictions on routes and therefor could parallet the certificated carrirs at will, (Finding 62; emphasis added. The carriers voted. (Finding 63) Except for American and National Airlines, the carriers voted "against the merger of schedule listings. (Finding 61; ex 66A) They also agreed that to include commuter connections in the OAG would weaken their argument against merged schedules, (Finding 61) After the Airline Guides Committee meeting, Mr, Howe and Mr, Parrish changed their minds about merging schedules and printing commuter connections, (Howe 1829-32) When the Airline Guides Committee was officially disbanded in 1973 because of allegations of conspiracy, the representatives of the certificated carriers agreed to continue to meet with the OAG in an unofficial capacity, (CX 67) '" From hib demeanor on the stand, and ba upon his whole testimony, I believe Mr. McKenna is II crible witness. While respondent produce other witness whose rellection WII diferent 11 to this !Ipet of the meeting, I disbelieve thos witness beuse of their bill, lac of rellection, or general appence. . ;. . .

Initial Decision 95 F.

Conspiracy Respondent has combined and conspired19 with certificated air carriers to publish the schedules of the noncertificated cariers in the OAG in a discriminatory manner. (41) This conspiracy injured the noncertificated carriers and had the purpose and effect of a per Be ilegal group boycott. Two analogous cases make the point KloTS, lnc, v, Bruadway-Hale Stos, Inc., 359 S, 207 (1959), involved a vertical conspiracy among manufacturers distributors and Broadway-Hale, a retailer of household appliances whereby the sellers agreed not to sell to the retailer s competitor Klors, or to sell to it only at discriminatory prices and unfavorable terms, (359 U.S. at 213) Broadway-Hale "used its ' monopolistic' buying power to bring about this situation, " (359 U.S. at 209) The Court held the conspiracy to be a group boycott and per Be illegal, and that such group boycotts have not been "saved by allegations that they were reasonable in the specific circumstances " because /Osuch agreements no less than those to fix minimum prices, cripple the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment." (359 U, S, at 212) The commuter carriers here have received discriminatory treatment because of a conspiracy between their competitors, the certificated carriers, and respondent. In Broaway-Hale Klors received discriminatory treatment as the result of a conspiracy between its competitor Broadway-Hale, and the suppliers. Both show per se ilegal group boycotts, In Silver v, New York Stock Exchange 373 U,S, 341 (1963); two Texas broker-dealers arranged with members of the New York Stock Exchange for direct-wire telephone connections used for trading securities over the counter. This private wire connection facilitated communication with other traders by (42)providing instantaneous market information about the latest offers to buy and sell, The temporary approval was rescinded pursuant to the rules of the Exchange, The Court held this to be a per Be violation of the Sherman Act since it was a group boycott depriving petitioners of a valuable 19 The complaint and notice of contemplate relief herein involve, in pa, allegations of an unlawful combination between respondent IInd certificated air caers (8e parphH 11, 15 and 18 of tbe complaint; l(c) of the paphnotice of contemplate relief; Tr. 49- '1). The complaint doe not contain the WON "collpirny." As use in the language of antitrst law, the tenJ "conspiracy" and "combination" ar derived from the Sherman Act which, in part, prohibits every "eont.t, combination. or oonspirny in retrint of tre " 15 U. C. 1. The gist of both terms is "whether or not there is a coHaborntive element parent." Perl B'lng Co. v. Anh-B1Lh, 1m. 33 F. Supp. 94, 951 (S.D. Tex. 1972). It has ben suggete that the tert ar synonymous. 1d. at 950 n. 1. Since there ia a presumption against the use of reundant word in a statute FTC &tou Creit Co., 515 F.. , 99 (D.C. Cir. 1975), the terms probably have slightly different meanings. It may be that an unlawful "combination ow be egtablished by evidence falling somewhat short of that necry to establish an unlawful "oonapiry." Oppenheim Federal Antitnwt Laws, p. 178 n. 1 (3rd Ed. 196). REUBEN H. DONNELLEY CORP, Initial Decision business service which they needed in order to compete effectively as broker-dealers in the over-the-counter securities market. The member firms remained willing to deal with the petitioners for the purchase and sale of securities, but the Court held that this did not excuse the collective decision to deny petitioners the private wire connections: " valuable service germane to petitioners' business and important to their effective competition with others was withheld from them by collective action, That is enough to create a violation of the Sherman Act," (373 U.S, at 348-9 n, 5) Respondent here provides the airline industry with the OAG, In Silver the New York Stock Exchange provided the direct wire telephone connections. Commuter carriers can do business - though not as well - without fair treatment in the OAG's publication policy, In Silver the Texas hroker-dealers could conduct business without the direct wire service, The illegality springs from the collective denial of a valuable marketing tool.

Alrse of Econmnic Power In addition to the unlawful combination, the complaint charges that the OAG is the only publication in the United States that has all of the passenger flight schedules of air carriers, and that respondent has abused its duty to treat in a nondiscriminatory manner all of those who rely on that service, The complaint does not allege unlawful monopolization in the publication and sale of passenger flght schedules of domestic air carriers, nor does it allege unlawful effects on companies other than air carriers, No injury is alleged to potential or actual competitors of respondent in the publication and sale of passenger flight schedules of domestic air carriers,20 Instead, the theory of competitive injury is that respondent has misused the OAG to discriminate against noncertificatcd air carriers.

The classic misuse of economic power has the purpose and effect of injuring competition in the market in which the (43Jlaw violator is engaged,21 Here, by contrast, the theory of the individual violation of Section 5 involves respondent's misuse (by discriminatory publishing policies) of economic power (the OAG) to the detriment of nonccrtificated air carriers- a market in which respondent does not compete. The competitive injury of this theory, then, involves the use of economic power in one market with the effect of curtailing competition in another market, This theory has precedent, In Atlantic .0 Stipulation filed Septemoor24, 1976.

Z1 Otter Tail P&Wlr 0,. v. United Sfs, 410 U.S. 366, 377 (197); Unite Stte v. Grfj, 33 U.S. 100, 109 (194).

Initial Decision 95 F, Refining Co, v. FTC 381 U,S, 357 (1965), the Cour upheld a Commission order prohibiting a similar misuse of economic power. There, the oil company agreed to "sponsor" Goodyear tires, batteries and accessories ("TBA") to independent gasoline stations to which it sold gasoline, In return for this sponsorship the oil company was paid a commission on the TBA Goodyear sold to the gasoline station, Among the sources of Hleverage" in Atlantic s hands, by which it influenced the buying decisions of the Atlantic gas station dealers, were its lease and equipment loan contracts with short term and cancellation provisions. (381 U ,S, at 368) The TBA sold to the Atlantic gasoline stations was the market foreclosed by the arrangement. Atlantic used its economic power over the gas stations and injured competition in a market in which it did not compete. Similarly, here, respondent uses its economic power - control of the OAG - and injures competition in a market in which it does not compete - air passenger transportation. La Peyre v. FTC 366 F,2d 117 (5th Cir, 1966) is another analogous case. There the circuit court upheld a Commission order prohibiting, under Section 5, the leasing to shrimp canners of a patented shrimp peeling machine on a discriminatory basis, Respondents there were engaged in shrimp canning and leased the shrimp peeler to West Coast shrimp canners at twice the rate it charged Gulf Coast canners. The court upheld the finding that this was the. use of monopoly power in one market (the patented sbrimp peeler) resulting in discrimination and the curtailng of competition in another market (shrimp canning). (366 F, 2d at 121) Respondent here has also used its economic power in one market to discriminate and injure competition in another market, (44) Relevant Market There was no dispute in this record that the geographic market is the United States. (Complaint 4; Answer H) The parties vigorously contest, however, the relevant product market. In Brown Shoe Co. v, United States 370 U.S. 294, 325 (1962), the Court stated the relevant product market test under Section 7 of the Clayton Act:

The outer boundaries of a product market arc determined by the reasonable interchangeability of use or cross-elasticity of demand between the product itslf and substitute for it. However, within this broad market, well-defined submarkets may exist which, in themselves, constitute product markets for antitrust purpse. The Court then described the criteria to be applied in determining the existence of a submarket ibi:

REUBEN H. DONNELLEY CORP.

Initial Decision The boundaries of such a submarket may be determined by examining such practical indicia as industry or public recognition of the suhmarket as a separate economic entity, the product's peculiar characteristics and uses, unique prouction facilities, distinct customers, distinct prices, sensitivity to price changes, and speialized vendors. This test for submarket criteria may appropriately be used to define the relevant product market in a case under Section 5 involving abuse of economic power by control of a market, Borden, 1nc" Vol. 3 Trade Reg, Rep, 21,490, p, 21,498 (FTC Final Order, Nov. 7, 1978 (92 F. 669J).

Respondent argued that there are four services available to users of the OAG which compete with it: (1) advertising-radio, television and newspaper, (2) individual airline schedules, (3) computerized schedule information, and (4) the ABC World Airline Guide, (45) Computerized schedule information comes the closest to competing with the OAG, This system involves a computer tape of schedule information and is used generally by one of the certificated airlines, The information is displayed at the counter of the ticket agent on a cathode ray tube, The tapes contain only the schedule information ordered by the airline and do not contain all of the flight schedule information available in the OAG. (Finding 46) The system is much more expensive than the OAG, (Finding 43) Only a small percentage of those needing access to flight schedule information have a computer system, (Finding 42) Even those who have a computer system still subscribe to the OAG, (Finding 45) The growing use of the CRTs by airline reservation agents has not diminished the growth of the sales of the OAG, (Finding 44) The submarket analysis of Brow Sho shows that the OAG is a distinct economic market, Neither computerized schedule information nor the other services are reasonable substitutes for the information published in the OAG.

Industry Recognition Industry witnesses testified that they do not recognize as a substitute for the OAG advertising of flight schedules on the radio television or print media (Finding 51), individual airline timetables (Findings 47, 49), computerized information (Finding 42), or the ABC World Airline Guide (Findings 39, 40), Even respondent's former Executive Vice President testified that there are no significant competitors of the OAG, (Finding 36) It is recognized in the airline industry as the primary marketing tool for air carrers and is referred to as the "Bible," (Finding 35) Unique Characteristics , Initial Decision 95 F, The OAG is the only complete listing of all scheduled flights in North America, Its cover proclaims that it is the "Standard Reference of the Air Traffic Conference of America " which is the trade association for certificated air carriers, (Finding 35) Advertising, individual airline timetahles and computerized information do not have the massive detail available in the OAG, (Findings 45-7) (46) The ABC World Airline Guide provides different information, (Finding 37) Where these services are used, they supplement the OAG, not substitute for it, (Findings 45, 51) Price There are substantial price differences between the OAG and the purported substitutes, Computerized information and individual timetables are vastly more expensive. (Findings 43, 48) Commuter earriers cannot afford to advertise outside o( the areas in which they fly, Advertising is not a financially viable alternative to the OAG, (Finding 50) The OAG is also the relevant market using the traditional market definition of monopolization case law.

The ultimate objective of the market analysis is to deliniate a market which conforms to an area of effective competition and to the realities of competitive practices, G, Balfour v, FTC 442 F,2d 1, 11 (7th Cir. 1971), A single product may be a relevant market. In United States v. Grnnell Corp. 384 D,S, 563 , 572-73 (1966) (dicta) the Court said that in monopolization cases under Section 2 of the Sherman Act as in Section 7 cases under the Clayton Act there may be submarkets that are separate economic cntitics. 22 (47) Where, as here, a conspiracy is found, the relevant product market may be narrow indeed, Interntional Boxing Club of New York United States 358 D,S, 24 (1959) (championship boxing matehes); United St,ates v, YeUow Cab Co" 332 D.S, 218 (1947) (the replacement market for taxicabs in four cities); United States v. Pulman 50 F, Supp. 123 (E.D. Pa, 1943) (furnishing and servicing sleeping cars for railroads); United States v, Great Lakes Tawing Co" 208 Fed, 733 (N, Ohio 1913) (tugboats in 14.of the 50 Great Lakes harbors), The market alternatives argument is irrelevant where, as here, there was a conspiracy to boycott, In Gameo, Ine, v. PrO'nee Fruit Produce Bldg" 1m" 194 F,2d 484, 487 (1st Cir, 1952), the plaintiff wholesaler fresh fruit and vegetables had been denied renewal of a lease in a building used as a market:

22 Market dcliniation under Seti"n 5 of the Federal Trae Commision Act may be even le1 fonn thn under the Shennan or Claytn Acts.Cf. FTCv. Bru Sho Co. 38 U. S. 316, 32-22(196). );

REUBEN H, DONNELL"'Y CUUP.

Initial Decision Defendants contend. . . that a discriminatory policy in regard to the lesses in the Produce Building can never amount to monopoly beuse other alternative sellng sites are available. The short answer to this is that a monopolize resourc seldom lacks substitutes; alternatives will not excuse monopolization. The OAG is a flight schedule information service for which there is no substitute, Respondent has conspired to discriminate in the publishing of information in the OAG to the detriment of noncertificated air carriers and the trave1ling public. The OAG is, therefore, the relevant product market in this case, (48) Intent Respondent argues that its publishing policy was intended only to insure the "integrity" of the OAG, and that it separates the classes of air carriers to avoid misleading the public. In fact, however, respondent has a substantial financial incentive to follow the will of the certificated carriers. This economic incentive distinguishes respondent' s intent from the altruistic intent exonerating collective action, The classic rule is that proof of specific intent in a monopolization case is not always required, United States v. Griffith 334 D,S, 100, 105 (1948); United States v. Paramount PU:tures, 1nc" 334 U.S. 131 , 173 (1948), The use of economic power may not be unlawful, however, if it is for an altruistic purpose.23 Respondent' s purpose therefore must be considered in deciding the individual conduct theory of the complaint. Complaint counsel argue that "regardless of motive" it is the duty of a monopolist to conduct its business in such a way as to avoid inflicting competitive injury on a class of customers, (Brief p, 105) Complaint n Ahseru of anticompetitive motive may exonerate monopolistic or group conduct.Josh E. &agm &&m Ho' waiia71 Olr & , Ltd. 416 F.2d 71 80 (9th Gir. 1%9), ce. denred 39 U.S, 1062. Se also; Li" E. k MCQuR Tours, hu; Crm.sotidted Air Tout Manum Crnmittee 467 F.2d 178 (5th Gir. 1972), re tkn' 40 U.S. 1109 (1973). (A committe of certificate air caiers ""fuse list McQuae s tours in it.. tour program manlla1. The court refuse to apply the per li tet of collecliverefusals to deal OOUBe thos arrngements have the purpe or effect of excluding or coercing competitors 1u.d here none of the members of the committe were in compelition with McQuade aTHI thereWR.. no evidence suGGC5t that the committe applied its standards to McQuade in a discriminatory fashion." (467 F.2d at 187--)). Brief Cm-, of A.neria v. America D.lract Brief ull, lne. 42 F.2d 136f (9th Gir. 1970), cert. denie, 401 S. 940 (1971). (Defendants' purple WR.. not to injure plaintiff but to proved the integrty of bridge tournamenls.

f)esen v. The ProfessW Golfers ' Ass 358 F.2d 165 (9tfJ Cir. cert. denred 385 U.S. 846 (196) (PGA' tandards needed to prevent tournaments from being bogge down by grt numbers of players of inferior ability.

Stnff &search A, '!tes, Inc. v. Trilm-n Co., 346 F.2d 872 (7th Cir. 196) (Newspaper refuse to ahow employment agencies to adverti'! under " help wanted" section of cllLified ads but allowed ad under "help wanted.cmploymentservicCO.

Ameri;; s B...t (,'ine1' Crn-I' V. For Way-n Newsp;ms, Inc. 347 F. Supp. 328 (N,D Ind. 1972), (Newspapern r"strict. X-rat('dmovie ads to the name and telephone number of the theater. Initial Decision 95 F, (49)counsel cite for this proposition La Peyre, supra. There the Commission s majority opinion held that, by discriminatory leasing of the shrimp peeling machines, respondents were injuring their own competitors since they also were engaged in shrimp canning, Commissioner Elman, in a separate opinion, stated that respondents were not discriminating in price to protect their interests as shrimp canners but rather to maximize their profits on the shrimp peeling machines, The Circuit Court held that under either finding24 of motive respondents violated Section 5 (366 F,2d at 121). (50)However, Commissioner Elman s theory of the motivation does not disregard intent as an element of a Section 5 violation, He specifically stated that respondents' conduct " substantially and unjustifiably injured competition in the shrimp canning industry. " (65 F. C, 799, 869 (1964) (Emphasis added.)) This reasoning leaves room for any altruistic purpose which might make a monopolist' s conduct justifiable. La Peyre does not hold that motive is irrelevant to a Section 5 monopoly case, As found herein, however, respondent conspired with the certificateed carriers to discriminate against the noncertificatcd carrers, and even without an overt conspiracy respondent had a great economic incentive to please its largest customers whose cooperation makes possible the publishing of the OAG.25 This motivation surely does not justify the unlawful acts by respondent.

Injury to Competition Commuter airlines carry passengers in numerous city pairs also served by certificated carriers (Findings 67-70), While they generally fly smaller planes (Finding 71), commuters in some markets fly equivalent or even superior planes to those used by certificated carriers or foreign and replacement carriers listed with certificate carriers in the OAG. (Findings 72-76) Commuters competing with certificated carriers are sometimes able to win substantial market share by more frequent schedules, (Finding 78) For example, a commuter carried 92% of the 140 000 passengers flying between Los Angeles and Ontario, California in 1973 (CX 61E), by scheduling 30 daily flights while the certificated carriers had five. (CX 174 p, 335) Commuter carriers flying city pairs served by certificated carriers set their fares based on the fares charged by certificated carriers flying the same city pairs. Those certificated carriers also react to fares 2. The Ciruit Court erroo in stating that: "We nee not re1ve thes contr findings WI to motive." The cour was bound 1. accept the majority Commis. ion finding of the Commision as to motive, if it W8. bwd on suootantial evidence. Univerwl Came1U Ca. v. NLRB 34 U.S. 474, 487-8 (1951). .. (Ne!lIn241) N n. UVN \.U.L.!.

Initial Decision charged by commuters. Such pricing decisions indicate competition. United States v. dupont 351 U,S. 377, 400 (1956) (51) Intrastate carriers often serve the same city pairs as certificated carriers, (Finding 93) They fly the same type of airplanes, (Finding 94) There is no doubt that intrastate and certificated carriers compete. (Findings 95-96) Since 1962 when it acquired the OAG, respondent has published schedule information showing connecting flghts for certificated carriers. (Findings 20, 22, 112) Respondent also published connections for replacement flights and for foreign air carriers during that time, (Findings 26, 29, 108, 109) Until December 1, 1976, and after the Federal Trade Commission started the investigation which led to the complaint in this case, respondent refused to publish free or paid connections for commuter air carriers. (Findings 14, 15, 102, 112) Commuters rely heavily on passengers who are connecting to or from certificated airlines, (Finding 107) When connecting flight information is not listed in the OAG, the availability of that service is often not known to those hooking flights, (Finding 106) Respondent's failure to publish connections for commuter air carriers was a discriminatory abuse of economic power and caused injury to commuters and to the travellng public, (Findings 107 109) After the OAG started publishing commuter connections, commuters received a substantial increase in connecting passengers. (Finding 110) Commuters also started buying a substantial numher of paid connections in the OAG, For example, after the respondent finally allowed commuters' connections to be published, one commuter bought about 200 paid connections in the OAG monthly at $2,30 per connection. (Whiteside 416) The OAG has for many years published schedules in separate categories for certificated, intrastate and commuter air carriers, with the certificated carrier schedule always being listed first, (Findings 20- 24) Within each category, the flights arc listed chronologically, (Finding 21) Foreign carriers are listed in the OAG with certificated carriers. (Findings 25-27) Most commuter carriers which have (52) entered replacement agreements with certificated carriers are listed in the OAG with certificated carriers, (Findings 28) Users of the OAG, reading from the top down, typically select the first acceptable flight listed in the OAG for the city pair, This means that the choice of a flght is usually made before the user of the OAG rcaches thc categories for commuter or intrastate carrers. (Finding 26 In the few months since the Airline Deregulation Act of 1978, almost all of the I r int.tate Clen have beme certificate CleOJ. (Finding 97 Such interchangebilty clearly demonlltrt. an ar of effective rompEtition. United State!!v. Contine Can u.., 378 U.S. 441, 457(196) :\24 g71 0-RI_-4 01 l , Initial Decision 95 F, 114) Even experienced users of the OAG overlook commuter listings. (Fugere 232-34) Respondent performed a study for American Airlines and found that: "(w)hen American salesmen use the OAG they are prone to quote the first service displayed--even though it is competitive to American, (CX 52Z20) In selling its customer guide respondent refers to being listed first as presenting "the host carrier s service in the most advantageous manner," (CX 52D; CX 122) The OAG refers to being listed first as "preferential display of schedules." (CX 52Z) Prior to 1971 carriers were listed alphabetically when flghts had identical departure and arrival times, A TW A official, M,A, Brenner felt that this created an unfair advantage for carriers whose codes began with letters at the beginning of the alphabet. (CX 43) When this was brought to their attention at an Airlines Guides Committee meeting, the certificated airlines whose codes were toward the beginning of the alphabet opposed the change; those whose codes were toward the end of the a1phabet were in favor of randomizing such listings, (CX 118) Being listed below certificated carriers in the OAG's flght listings resulted in injury to noncertificated carriers, (Finding 115) One commuter carrier representative testified that he would pay $100 000 to be treated in the same manner as competing forei!,YJ air carriers which arc listed as certificated air carriers (Ceresa 1014) A witness from a certificated carrier called by respondent testified that in the Dallas-Albuquerque market, up to 20 passengers per flight are gained by first listing, (Kyzar 1617) (53) Injury to the Publi.;

The complaint alleges that the effects of respondent's OAG publication policies have been, in part to suggest and/or advise the public that direct flights of certificated air carriers arc to he given preference over those of intra-state and commuter air carriers." (Paragraph 16) The complaint further alleges that respondent' s acts and these effects constitute a violation of Section 5, (Paragraph 18) While injury to the noncertificated carriers was the main part of complaint counsel's case this allegation of injury to the consumers was also sustained. When commuter connections were not published in the OAG, travel agents and airline booking agents often did not know of the existence of the commuter flight and therefore did not inform passengers who would wait for a certificated connection, sometimes losing an extra z' One of pondO!r\t s expert witne!\cs describe Mr- Brenner II the "world' s leading authority on airline scheJul"s." (Coke 33 35) REUBEN H. DONNELLEY CORP.

Initial Decision business day in doing so, (CX 20E, CX 113 p. 817) If no certificated flight was available, tbe passengers would rent cars to go to their final destinations, (CX 189C) Passengers were overcharged because, the ticket agents were not aware of the discount available through joint fares available in many markets. (CX 107 p, 14 n, Respondent' s policy of separate listings also injures the traveling public who may take more expensive, and inconvenient nights with certificated airlines merely because they were not informed of the commuter flight, (Finding 115; Autry 702-3) Respondent' s discriminatory practices in the publication of the OAG evolve from its close business relationship to, and financial dependence , the certificated air carriers, (Findings, 103) With this motivation, respondent cannot use its economic power ethically to inflict injury on consumers, regardless of whether competition has been injured, This conduct is morally objectionable and detrimental to consumers and violates Section 5 of the Federal Trade Commission Act. FTC v, Sperr Hutchinson Co" 405 D,S, 233 n, 5 (1972), 24 Jurisdutwn Section 5 exempts from Commission jurisdiction "air carriers and foreign air carriers subject to the Federal Aviation Act of 1958, " 15 C, 45(a)(2), (54jRespondent is not an air carrier.28 The competitive injury here, however, is to air carriers, and respondent argues that the exemption is for the business of air transportation and not for the status of being an air carrier, In FTC v, Miller 549 F,2d 452 (7th Cir, 1977), the court held that the similar exemption in Section 5 for common carriers subject to the Interstate Commerce Act was in terms of status and not business activities. (549 F,2d at 455) The court pointed out that, in contrast, Congress exempted the business activities-and not the status-of those subject te the Packers and Stockyards Act, 29 (549 F,2d at 455-.56) Principles of statutory construction show that the exemption should be limited solely to air carriers. The FTC Act is remedial legislation. Sears, Roelrk Co, v. FTC 258 Fed, 307, 311 (7th Cir, 1919). As such it should be construed broadly so as to effectuate its purpose, FTC Mandel Bros" 1m" 359 D,S, 385, 389 (1959). The exception to a broad grant of authority is to be narrowly construed, St, Regis Paper Co, Und.ed StALtes 368 D,S, 208, 218 (1961), The "burden of proving justification or exemption under a special exception to the prohibition 28 Respondent admitted that: "Donne1Jey i not an air caer or an indiret air caer. . . ." Attahment A, p. 2, Answer to Motion of Respondent to Dismi&" the Complaint for Lak of Juriiction, filed herein on September 1, 1976. ," The Packcr' and Stokyari Act exemption to Section 5 is only for "pemorw, paneniip8, or COrpratiOlU insofar as they ar subjed to" the Act. 15 U. C. 45aX2). FEDERAl, TRADE COMMISSION DECISIONS Initial Decision 95 F.

. a statute generally rests on one claiming its benefits, FTC Mffton Salt Co" 334 U.S, 37, 445 (1948), In Branch v, FTC 141 F.2d 31 (7th Cir, 1944), the United States Court of Appeals for the Seventh Circuit recognized these principles, The Commission there found a correspondence school had violated Section 5 by unfair practices in the sale of text books to students residing in Latin America, The school argued that it was exempt from Commission jurisdiction since it was engaged in foreign commerce. The court upheld the Commission s jurisdiction, stating (114 F,2d at 36): This is a remedial statute implementing national policy. By it Congrss is seeking to fre foreign commerce of unfair trade practice, just as it has attempted to free (55) commerce between the States from such practices. We cannot asume that Congres intended to free only some of jtg foreign commerce from unfair trade practice. We are bound to give to the generic words used by Congress just as liberal a constrction as the words are capable of in order to prevent such a partial protetion to foreign commerce. Similarly, Section 5 should be given a broad construction and the exemption for air carriers should not be extended to protect the unfair practices of respondent.

Congress has created no express exemption from FTC jurisdiction for the acts of respondent, Cf" Perpetual Fed€ral Savings Lon Ass FTC Dkt. 9083 , Vol. 3 Trade Reg, Rep, 371 , at p, 21 291 (1977) (90 F, C, 608). Nor has there been an implied exemption to the strong national policy expressed in the Federal Trade Commission Act,30 CAB regulation is not so pervasive that Congress is assumed to have determined competition to be an inadequate means of vindicating the public interest, This case does not conflct with CAB regulation of air carriers.31 Furthermore, the CAB has not exercised explicit authority over the challenged practice itself (as distinguished from the general subject matter) in such a way that antitrust enforcement would interfere with regulation,'" (56) As noted above, in the memorandum opinion issued October 31, 1977 Judge Bernard M. Decker of the United States District Court for the Northern District of Ilinois decided that the FTC lacks jurisdiction of this matter, Rwuben H. Donnelley CO"rp, v, FTC 1977-2 Trade Cases 31 The t. t for implied immunity i 2tate in Uniud Sta8 v. AT&T OJ., 1978-2 Trade C '162,27 at p. 75,57 (D. 1978).

31 In an amicu2 letter filed herein on Februar 7, 1977, the General CoulIl of the CAB sw.te tlut: ". . . (The Board doe not believe that it: own jurisdiction over air caer competition would be compromill if the Federa Trade Gommis:ion Act were construed to give the Commision subject matter jurisdiction in thi ca." Puuant to the Airline Deregulation Act of 1978, much of whatever authority of the CAB hw ha, including!i 414 of the Federa Aviation Act, 49 U. C. 138 (providing antitrust immunity) is trnsferr to the Department of JWltice or abolished over the next few yearn. Pub. Law 95- , Section 1601 (Oct. 24, 1978). '" While the agrments crting the Air Trfic Conference Committe have ben fied with the CAB, the discriminawry publishing practice at is:ue in thi2 ca have not reived CAB approval In fact, the certificate carrenl could oot reive such approval beu the agrments speifcally exempte from the authority of the committe any subject affecting oompetitorn. (RX 28A, Z-- , 7.- , REUBEN H, DONNELLEY CORP, Initial Decision 721. I respectfully decline to follow Judge Decker s analysis, for the above reasons and for those in the order denying the motion to dismiss issued herein on March 30, 1977, First Amendment The order issued here requires respondent to publish schedules of commuter and intrastate air carriers on the same terms and conditions as it publishes sehedules of certificated earriers, This would require Donnelley to publish the OAG in a format that differs from its present format, Respondent argues that this requirement constitutes impermissible censorship of the press in violation of the First Amendment to the Constitution: "Congress shall make no law. . ' abridging the freedom of speech, or of the press. . . . "33 Recent decisions of the Supreme Court have accorded some measure commercial speech. Baws v. Stawof First Amendment protection to Bar of Arizuna 433 D, S, 350 (1977); Virginia Staw Board of Pharmy Bigelo v. Virginia Citizens Consumer Council 425 D,S, 748 (1976); Virginia 421 U,S, 809 (1975), The Court has not raised commercial speech on the same level of protection as noncommercial speech. Ohralik v, Ohin Staw Bar Ass 436 U,S, 447, 456 (1978). Furthermore, the Court has reaffirmed the necessity of regulating false deceptive or misleading speech, Virginia Board 425 D.S, at 771 72. The First Amendment. ' , does not prohibit the state from insuring that the stream of commercial information flows dearly as well as freely, , . , The Court has made it dear that the press is not exempt from the antitrust laws, Assuciawd Press v, Uniwd States 326 U. S. 1, 20 (1945): It would be strange indeed. . . if the grave concern for freeom of the press which prompted adoption of the First Amendment should be rea as a command that the government was without power to (57Jprotet that freedom. . . . Surly a command that the government itslf shall not impede the free flow of idea does not afford nongovernmental combinations a refuge if they impose retraints upon that constitutionally guaranteed freedom. . . . Freeom of the press from governmental interference under the First Amendment doe not sanction repression of that freeom by private interets. In Loain Journl v, Uniwd Staws 342 U,S, 143 (1951) the Court held that a newspaper had violated Section 2 of the Sherman Act and inter alia fromupheld an injunction preventing a newspaper refusing to publish any advertisement. . . or discriminating as to. . arrangement, location. . . or any other terms or conditions of publication of advertisement or advertisements where the reason for .3 Tha.t the OAG is a direwry and not Ii newspaper doc not limit Fi"t Amendment prot.t;on. PrncWn nit1/ Pho Book, Inc. Y. Bate 582 F.2d 706, 710-11 (3rd Cir. 1978). ., .. .. ,.. , ,. . ..,. , ., ,. ,,,. . ,,, . ,,, ,,,,, ,. .\ , , ,,, . ,.,., , ,,$,, .. .., ,,!.. .. . .,., ,,,,,, ...,,,,,,,,,,,,.....,,, . ,.,.. ,. ..,, ,,,,, /,, ,.. ,.,...,,,,,,,,,,.,,. ,., ,.,,,,.,,,,,,.., ,,.;;. ,., ,,; .,,,;;:; .,,,,,. ..,.,., ,..j,.,,,;.,. ,.. ,,.., ,.,::...,,,_.,,,..,,,,.. .,..,.,,,,., ..,.,, ,.. . , .,;; ,,,,,.,,,,,. .: ,. ..... ,,,,.,,,..,,,,,,.,. ,,, ..,.:.. .,, . ,, ; , ,,,,, ., ,,;... ,,,,, , ., ) . ,,,,, .. . . ., . .. ,,,.. C\$IO 9' .'t, \.I'\.\\O&\O " "',.. 0' "'1' 't\\t. vtP ~"ert\Se",e1\t "", ,oW'''''''' ' 1\ ",\lO\e O~ ,1\ \''' .

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,,0' ,,,"' S1\'oect t\l \\e~ ""S '" t\l"t t\l" ",\rst . " ol O\ct\01\ \\ \)01\1\e COBCL\JSIOt'S, . 1\ \l"'s )1\1'S,\\le. tt\1\l1\ hC~e, '\these..1\0 s\lO . . t '\ oe Co~"'\ss\O ",,,..1\\1\g k' th "~,,ct\ces c\l..~g, G '" .,.,'''' "" or..t\01\' 0 t. , "" O,G, . 0' of''' t;t""" '" ,0'"" ",v"" " m"" ':, . :' ,0' eo' ..' ,,,, ",' ,. ,o",.' ",,;e' . .,:"J,, ' .,r1'ers ",' . .w"" 't\\ ...u,\)ece,,' . ..ers' , k'O lo~ cert\hc..te ..W ..r1'e~s,,,""" "'.eo'"\1\,.".,,". ..1\" " \1\g\lts lo~ col\,g" I,,) "'o~ ~,,1\~01\1\ect\1\"~ . u."' k \~ c"r1'er P ."b ,,1\~ others' e"rs ~eS\,o1\ e1\ ,m' "" ,r . 'b) ... "'::.1. "..1\ o\1\traSt'te ,,\r c"r1' w . ,(0) "" ,.,, .." \...)",,cO"''',,, ",..''' . f s1\ch., \,o\\c\eseo ",1\ter ..1\ .. resi\' 0 ""," eo.;;"':' Co r'" oer"

\11\ "W I t\le ",e r"s1\ 1\oe1\t:s, \ 'I sect\01\ ;, 0 6. \ts\'o t ' r \,r"ct\ces eo11tferce oe$\st t\le \11\ ..\ C, 4,;,), \,; "'\CvCie ,,1\0 \J , oroereo to ceas 1\St b ltes\,01\oe1\t o here"" o.esc~\be REUBEN H, DONNELLEY CORP.

Initial Decision Respondent argues that, even assuming that its refusal to publish connections for noncertificated carriers violated Section 5, it has been publishing this information since December 1, 1976, and there is no evidence to show that it might revert to that practice if a cease and desist order is not issued. Contrary to respondent's assertion, there is evidence that but for this proceeding respondent might resume its former policy. There is evidence that the conspiracy proved in this case could easily be resumed, The representatives of the certificated airlines agreed to continue to meet with the OAG in an unofficial capacity, (CX 67) Further, respondent continues to discriminate against commuters by refusing to merge the schedules, (Finding 24) There exists some cognizable danger of recurrent violation, SCM Cor, v, FTC 565 F, 807 813 (2d Cir, 1977), Respondent changed its policy only after and because the Federal Trade Commission started the investigation which led to the issuance of the complaint in this case. (Finding 112; Reich 1273-74; Woodward 4170-71) Stopping a practice after the government investigation starts does not show permanent abandonment. United States v. Parke, Davis & Co., 362 U,S, 29, 47-48 (1960); Cothermn v, FTC 417 F,2d 587, 594- 95 (5th Cir, 1969); Coro, Inc, v, FTC 338 F,2d 149, 153 (1st Cir. 1964), cert, denied 380 U. S, 954 (1965); Gint Food, Inc, v, FTC 322 F,2d 977 986-87 (D. C, Cir, 1963), ", . . (N)o assurance is in sight that (respondent), if it could shake (the Commission s) hand from its shoulder would not continue its former course. Sears, Roebuk Co. v, FTC 258 Fed, 307, 310 (7th Cir. 1919), Although not raised as a defense, respondent has transferred responsibility for the publication of the OAG, effective January 1 1979, to a related corporation. (Finding 16) The cease and desist order should, nevertheless, be directed at respondent. P.F, Collier Cor. v, FTC 427 F.2d 261, 271 (6th Cir, 1970). The question whether Official Airline Guides, Inc., is the successor to respondent, and therefore liable under the order, can be determined in a compliance proceeding. Id, at 272. (60) ORDER For the purpose of this order, the following definitions shall apply: A. "OAG" refers to the Official Airline Guide - North American Edition.

B. "Certificated air carrier" refers to an air carrer that holds a certificate of public convenience and necessity issued by the United States Civil Aeronautics Board ("CAB") authorizing it to fly its routes. Initial Decision 95 F, c. "Commuter air carrier refers to an air carrier wl1ich flys pursuant to an exemption set forth in Part 298 of the CAB' regulations.

D. "Intrastate air carrer" refers. to an air- carrier which operate solely within a state of the United States pursuant to the authority of the Federal Aviation Administration and state regulation and which performs scheduled flight service, but which does not hold a certificate of public convenience and necessity or foreign air carrer permit issued by the CAB.

It is ordered That respondent, The Reuben H, Donnelley Corporation; its parent; subsidiaries; any concern controlled by respondent including joint ventures; its successors and assigns; and its officers agents, representatives, employees, (61)directly or indirectly, through any corporate or other device, individually or in combination, in the publication of flght listings in the OAG or successor publications shall forthwith cease and desist:

1. From discriminating among the flght listings of commuter air carriers, intrastate air carriers and those of certificated air carrers in the order of listing of those carriers in any city pair in the OAG, 2, From discriminating among the flght listings of commuter air carriers, intrastate air carriers and those of certificated air carrers in the opportunity offered those carrers to receive free connection listings or to purchase paid connection listings in theOAG. 3, Nothing in Paragraphs 1 and 2 of this order shall prohibit respondent from designating certificated, intrastate and commuter air carriers by appropriate symbols.

It is further ordered That respondent (as that term is used in Section II) shall notify the Commission at least thirty (30) days prior to any proposed change in the corporate respondent or its successors or assigns which may affect compliance obligations arising out of the order, such as dissolution, assignment, or sale resulting in the emergence of a successor corpration, or the creation or dissolution of the parent, subsidiaries or joint ventures of respondent, (62) It is further ordered That within sixty (60) days from the date of service of this order, and on a periodic basis thereafter, respondent (as REUBEN H, DONNELLEY CORP, Opinion that term is used in Section II) shan submit, in wrting, to the Federal Trade Commission reports setting forth in detail the manner and form in which respondent is meeting its compliance obligations. OPINION OF THE COMMISSION By PITOFSKY Commissioner:

1. INTRODUCTION In April 1976 the Federal Trade Commission issued a complaint charging The Reuben H. Donneney Corporation ("Donneney ) with violations of Section 5 of the FTC Act, 15 U, C. 45, Donneney, a wholly-owned subsidiary of Dun & Bradstreet Companies, Inc" is engaged, among other things, in publishing and distributing various publications relating to travel and transporttion. The practices chanenged in the complaint involve a Donneney publication caned the Official Airline Guide-North American Edition (the "OAG"), The OAG eombines into one directory the flght schedules and fares of an scheduled air passenger transportation in the United States, Mexico Canada and the Caribbean, The complaint focuses on the different treatment accorded in the OAG to the three different classes of United States air carriers furnishing scheduled air passenger transportation. The three different classes of domestic air carriers are certificated carriers, commuter carriers, and intrastate carriers. Certificated carriers operate pursuant to ucertificates of convenience and necessi- " issued hy the Civil Aeronautics Board (the "CAB"). One consequence of obtaining such a certificate is being subjected to extensive regulation by the CAB, espedany with regard to routes and fares. Certificated carers are authorized to fly large (2Jjet aircraft, and pursuant to route authority given them by the CAB, they provide serviee between the major cities of the nation, as wen as between some smaner cities. Generany speaking, the large, wen-known airlines in this country--such as American, TW A etc. are certificated carers. Commuter carriers do not obtain certificates of convenience and necessity from the CAB, and they operate free of most of the regulations applied to certificated carrers, They are not required to apply to the CAB for route authority, which means that they ean provide air service between whatever cities they choose. Many of the routes they fly are between two smaner, outlying communities, or between a smaner community and a major city. Commuter carriers typicany provide scheduled service between cities which are relatively close, with the average route being only seventy-five miles, The main reason for this is that CAB regulations require commuter carrers to FEDERA TRADE COMMISSION. DECISIONS Opinion 95 F, use aircraft which are much smaller than those t ically used by certificated carriers.

Like commuter carriers, intra-state carriers do not obtairt certificates of convenience and necessity from the CAB. They operate solely withirta state and do not engage in interstate air transporttion, They are regulated solely by the individual states within which they operate. There are a handful of intra-state carriers operating in Florida, Texas California, Ilinois and Alaska.

Complaint counsel alleged in the hearings below that certain aspects of the manner in which Donnelley lists or has listed flight schedule information in the OAG favor certificated carrers over non-certificateed carriers and result.rt serious competitive injury to non-certificated carriers, Responding to their arguments, the presiding administrative law judge (the "ALJ") held that the challenged listing practices violate Section 5 on two different grounds: (1) Donnelley has maintained them as the result of an ilegal agreement between it and certain certificated carriers; and (2) Donnelley is a monopolist in the providing of flght schedule information, and as such it has a duty not to arbitrarily place one class of carriers at a significant disadvantage vis a vis a competing class of carriers, This second ground raises a policy issue which has perplexed antitrust cogrwscenti for decades-whether antitrust liabilty may attach to practices of a monopolist which are not related to achieving or maintaining its monopoly power, but which are arbitrary and result in competitive injury to customers, suppliers, or others vulnerable to its monopoly power. We reverse the ALJ's holding that Donnelley entered into an illegal agreement, and we reverse in part and affirm in part his holding regarding Donnelley s duty as a monopolist, (3) II, FACTS The OA According to Donnelley, the OAG "(c)ombines the flghts of all scheduled airlines in (the) U. , Mexico, Canada and the Caribbean into one convenient souree," CX 113.1 In fact, it is the only complete listing of scheduled flights in North America, As such, the OAG is the main source of flight schedule information for the flying public and a primary marketing tool for air carriers. The December 15, 1978 issue of the OAG runs to over 1500 pages and contains thousands of flight listings. RX 571. A full annual subseription, which entities the purchaser to two updated editions per month 1 Complaintcounsc!'s exhibits have ben labeled "CX" and respondent s exhibits "RX" REUBEN H, DONNELLEY CORP.

Opinion was seiling in December 1978 for $98.44. In June 1975 the OAG had a total circulation of over 169 000, and in November 1978 the total circulation of the first-of-the-month issue was 208 000, Most of the OAG' s circulation goes to air carriers, travel agents, and businesses (which typically use it in connection with work-relate travel by employees), The predecessor publication to the OAG was published at least as early as 1943, under the title "Universal Airline Schedules, Donnelley acquired the OAG from its then-publisher in 1962, From its inception until 1958 the OAG simply reprodueed the timetables of each seheduled air carrier which submitted this information for publication. In 1958 the OAG commeneed publication of the "Quiek Reference Edition which embraced a new format stil in use today the "to-city" format, In the "to-city" format, all cities to which there is scheduled air carrier passenger service are listed in alphabetical order, each representing a destination point. Beneath the listing for each of these cities, all the cities from which there is scheduled air carrier passenger service to the destination city are listed in alphabetical order, Under each "from" city are listed all the nights departing there and arrving in the particular " city, with information about departure time, arrival time, fare type of aircraft, name of airline, ete, (4) From the time it purchased the OAG until after the complaint in this case was filed, Donnelley listed all the flights under each "from" city in separate groupings reflecting the class of carrier involved eertificat- , commuter, or intra-state and whether the flght was "direct" or connecting 2 The greatest number of categories listed under any from" city was four, The categories and the sequence in which they were listed was as follows:

1, Certificated carrier direct flghts (published with no heading). 2, Certificated carrier connecting flghts (published under the heading "Connections 3. Intra-state carrier direct flights (published under the heading Intra-State 4. Commuter carrier direct flghts (published under the heading Commuters direct flght is a flght between two cities which doe not involve a change of airft; II dirt flght may be non"stop or there may be one or more stops. A connecting flght u. two or more direct flgbta w; in conjunction with each other to provide trnsporttion ootween two cities3; a connecting flght involvet changng planea at some intermediate point between the point of origin and the final deslination point. 3 Thes four categories of air caer seice were always! published in lhe Ime seuence (or if one or more of the categories WB. not availableDetw the city-pair involved, in the same seuence minus the catery or cateries not offered).

. ;) .. $\\ ...). . .;...\ .,,\)\\::\,\\\\..,.\%\: , ..\\,... .\..\... \;,.\,,\\\, . , ,... ..\.\\. \. , ,,,,, ,,. ,.. ,.,;;\,:.\\\. ..;. \\:\\,\\: ,.,,, ,., ...,.. \.,\ .... ,,,,,,,.,, ,.. ,.,.. ;;;,..:: .\\,,\,,;, , .. ,.,,,, .\\,\\\\\\\\\::.\\::\.\;%...\)\ .... :;::;,.\,,\.... \ ,.,., ,:;;;: ,.,,,(,,,,... :::: . ,,.,, ,. ..,,.:;: .. ,,#,.;; , .. /;;. .... . \ : . ,..\. \., . ,.,,,,,..,,,, .., ,.. . , ;::::,. .,). 1$$10l' 1)1icl$1Ol'$ ilj 'tit O\\i11\01\ ..1\ 0\0. i$S"e ll t"o~ e", m\'l 'Je",~e~. \.\JL- 10\\O",i1\g \\ t\l\$ $ /e-'rll \~ ",,,,,e .. ",'I' i.! '-;-.u"n ,, (I ,,-,.o- . \ i .. t \' '" 't\m 1" \ . \\\\W, \ \\\ . )\11\' \1''' (j ' ,,: . 1\' . \I' t\. l \11 0.'" -;. . t' \W. :; '1JI . ' ,I'" '? ' c\\r \I"' . 'J 1 \ \\t\ . . t't ' ' \. I 1\"" W. \ \W. . I ",..1\t.. ,, i'" to . I "to ' c..\ilo \i$tl1\\t 0 \ I\' " \\,,,..\ltlcO , 1 \i$ti1\\t o ii. "0$ Jo1\ge\e$, . 1 in t\le " o'" , ing to f\~ l ""t\ll""e \1\ t.. Jo1\'" " e..,o" ' C".',," . ..1\d t\le1\,,,,W"" 0"'" . "W; ,,,'" 0" ".. . "" .." d ,t:: " '" d M"' :g- "".,,- \3' M" ,.,0-'' f' QC. ., '0""'" .W"' #P' ,0"".' ~ \.61 $1\c\l f\ig\lts l"o \ e .."e 1\0 ceit\ 0' G . 'r\l l ce ' 01\\)'"."" co~~1\G ,hO '11 t\le ""te Jo1\"" ",,,1\"'" e 'pew''''\\1\5t~"te$\ist\1\g\lo'". 10~~..t. 'r\le e"'''~\' ' (its i1\tO t\li5 e"'\' C.. 01\ c01\necti1\g f\\g\l .. ::,... , . :\ . . , ! REUBENH, DONNELLEYCORP, QPiiIon .. W': tO uu. UlnL , tj rIWr .\01'. ' O! "'.. , '04' , Hi rt I !- II"" ' !I1. "lj, IW " " 111,. I OC' 1111 I' , fl' , icf' , Hhle 11\1 t. It! I ' ff I Itc. :' III'" I tt . '1' UI . (QY: lI:hlQ.II....h IJ:,'..11\1/ II LI\. .. . . IJI, ,. 0,' ill, t! ,,: I t 11Im: !II' " JI.a U".I', II'!, m:; n: .t!lMo "t' i:111\0. :;t .. " II' .. ii5 1j,. I tI. I .. The fact that the first heading is "Connections" means there are no certificated carrier direct flghts from Montreal to Hartford. Certificated carrer connecting flghts are listed under the heading "Connections . The first eight lines under that heading contain fare information. In the lines below those, each two-line pair lists a connecting flight from Montreal to Hartford; all the air carrers involved in those flghts are certificated carrers. Commuter carrers' direct flghts are listed separately below, under the heading "Commuters . There would obviously be no intra-state carrer flghts between these two cities. B. The Alleged Discrminato Prtices, Complaint counsel assert that two aspects of Donnelley s listing policy, as ilustrated above, have unreasonably restrained competition between certificated carriers and non-certificated carrers. First, they point to the fact that no connecting flights aye listed for commuter or intra-state carriers, even though both have such flghts; they claim Donnelley s failure to list these flights in the OA(j limited users knowledge that such flghts existed arid thereby caused commuter and intra-state carrers to suffer (7)competitive injury.' Second, complaint counsel claim Donnelley has injured non-certificated carrel" by listing the flights of the three classes of carrers in separate groupings in the OAG, with the certificated carrers' first. They argue that listing certificated carriers' flghts before the other carrers ' flghts has led users to believe certificated carriers are preferable to the other two classes of caers, and to choose the flghts of certificated carriers over the flghts of commuter and intra-state carrers in situations where 4 Though oollplaitii oounsl8srl on appe tht DOnnclley's Cailiu to llt intnt.te ca' oonnecng fJighta bas injur thos caeri (Complaint QmnBl'a Anawering Brief, at 19), Donelley il Corr when it 81)' tht the AL did not make suc.h a finding (Respondent s Appe Brief!, a.t 51 n.45). Iri oodition th compllint maes no mention of intr-sl&te Caer oonnecioni, alleging only thatDOnncley "hB refus to aopt for public.tion B.y ScedUles of connecting flght. of comrnuterai caers" (Parph13), and tht the effed of this poJicyhe ben "toforelO& commute(Parph.aircaera16). Everi thoughcOmpJa.ntf.tom mi1Utingcounsl'sinfonntionuPrpotoFindingsavailaleoonn(jngof Fac at 40,flghtdo cont8nscheu1esan tOtbaSoripublictht Donne!iey refuB to lilt intr"Btate caers' connecting flights in Uli,; OAG, ther ar no citations futhrerdwhieh establilh competitive injury to intr-Ite caer For thc8reli iri th diUsion tht f01l0W8 we diUB only commuter connecting flghts.

FEDERA TRADE COMMISSION DECISIONS Opinion 95 F, T.

they otherwise would not. They also argue that users of the OAG usually read the listings from top to bottom and chooe the first convenient flght. Since certificated carriers' flghts are listed first many users pick one of their flights without even looking at the flghts of non-certificated carrers, 1, Failure to list connecting flghts of commuter carrers. From before the time respondent acquired the OAG until December 1976, the OAG did not list connecting flghts involving commuter carriers-that is, commuter flights which connected with either a certificated flight or another (8)commuter flght,5 With no such information listed in the OAG, the only way a user could discover and purchase a commuter. connecting flight was by "constructing a connection . This involves looking up two separate direct flghts--one from the point of origin to some intermediate point, and one from that intermediate point to the desired destination and putting them together sO as to achieve the desired connection, To construct a connection, a user of the OAG must figure out for himself what cities in between the city of origin and the city of destination would be likely places to catch a connecting flght going to the city of destination. It was established at the hearing that constructing a connection is a difficult and time consuming process. Initw.l DeciiMn at page 30 Finding 104. The ALJ found that where the OAG does not list connecting flghts between a city-pair, there is little chance that their availability wil be known, Id, at Finding 106, It follows that if a certifieated carrier s connecting flight is listed between a city-pair in the OAG and a commuter carrier s connecting flight is not, the certificated carrier has a significant competitive advantage, Donnelley s publishing policy has always been that some connecting flghts wil be listed in the OAG free, depending on their convenience and frequency; all other connecting flght listings must be paid for by the carriers involved, By the amounts they have paid to obtain connecting flight listings in the OAG, certificated carrers have shown that they consider such listings to be an important competitive device, In 1975, Delta paid Donnelley over $160 00 to list connecting flghts; TWA over $181 000; Braniff over $115 000; Allegheny over $280 00; Continental over $150 00; Northwest over $216 00; and Unite over DonneUey change the GAG'a formt in thisrega in Dember 1976, eight month. aftetheoomplaint in this proing ilued. The changed format, still u.1' toay, lists six!lpate categorie. of .ar serv (rather than the orginal four) in the fonowing 5euence: 1) certifiC!te air caer dit flghts; 2)oommuter air caer direct flghts; 3) intrBtateair caer dirt flght:; 4)connecting flght. involving onlycertcatecaer; 5) cininecting flghts which involve only commuter caers or both oommuter caern and certcate caer; and 6) ronmicting flights which involve onlyintra-state cael". Se the dition of the effect of that change on this prong at pa 46 41itifr- REUBEN H, DONNELLEY CORP, Opinion $300 000. Seventy percent of (9)commuter carriers' passengers are connecting to or from certificated carriers, Id, at F'finding 107. Thus the failure to list connecting flight information for commuter carriers deprived them of a primary marketing tool with respect to a large portion of their business.

This view was confirmed in a petition fied with the CAB by that agency s Office of Consumer Advocate:

When such scheduled servces (commuters' connecting flights) are not listed in the GAG there is little chance that the availability of such servce. w:ll be known outside the immediate geographical' area. Carrer personnel and travel agents may not be dirting the traveling public towards the use of such servces simply because they (the carrer personnel and travel agents) are not aware of the existence of the commuters air service. The general public, which to a large extent must rely on such industry professionals in such matters, will not be able to take advantage of commuter services, and air travel to numerous destinations appears to be far less convenient than it may be in fact. ex 28. The importance of connecting flight listings was also ,,_'Cognized by various Donnelley officials, For example, Donnelley s present Senior Vice-President in charge of the OAG, Mr, Woodward, wrote in 1975 that a "disservice is being done" to commuters by refusing to publish their connecting flight listings. CX 201; see also CX 12B; CX 19A, On appeaJ , Donnelley has offered no justification at all for this policy. During the hearings, it was established that in 1972 Donnelley had conducted a study on how much it would cost to begin listing separate groupings of commuter carrier connecting fJghts and intrastate carrier connecting flights, This study revealed that it would cost approximately $6000, RX 16A, The memo recording these findings goes on to say that adding the two additional groupings of flghts "would be extremely detrimental" to the OAG, Id, But it gives no reason why this should be so, And, indeed, there is no evidence that Donnelley decision to add the new connecting flight listings in 1976 has been detrimental at all. (10) Failure to combine the listings of certificated, commuter, and intra-state carriers.

Since 1969 or thereabouts, commuter and intra-state carriers have urged Donnelley to "merge" the direct flight schedule listings of certificated, commuter, and intra-state carriers into a single chronological listing for each city-pair. Initial Decision at p. 31, Finding 113. Donnelley has refused to do so, Complaint counsel claim Donnelley s practice of listing the flghts the three classes of carriers in three separate groupings, with certificated carriers first, gives certificated carriers a significant competitive advantage over the other two. They say this happens, in . .

Opinion 95 F, part, because listing tbe fligbts of certificated carrers before the flights of commuter and intra-state carrers suggests to the OAG' users that certificated fligbts are to be preferred over commuter or intra-state flights. But tbe main reason why Donnelley s separate listing policy bas injured non-certificated carriers, we are told, is that users of tbe OAG read tbe flight listings from the top of the page to tbe bottom and pick the first flgbt leaving at a convenient time. Thus since the flghts of commuter and intra-state carrers are listed below those of certificated carriers, it is probable that a user will choose a certificated flight before he even gets to the flight listings for commuter and intra-state carriers.

The certificated carriers themselves have long recognized the advantage of having one s flghts listed above those of competitors. Donnelley bas always listed tbe flghts of certificated carrers in chronological order, But prior to 1972, when different carrers' flights between a particular city-pair had identical departure and arrival times, tbe flights were listed according to the alphabetical order of the carriers offering them, Thus if an American Airlines flght and a United Airlines flight had identical departure-arrval times between a city-pair, the American flight would have been listed first. If the two flights had identical departure times but one arrived before the other the one arriving first got first listing. This policy led to what was known as "jockeying" of flght times: carriers would change the departure time of a flight so as to leave one (llJminute before a competing carrier, or speed up the flight time so as to arrive one minute before." See Initial Dedswn at p, 33, Finding 121. Some certificated carriers became increasingly dissatisfied with this alphabetizing policy and began to call for a policy of randomizing flights with similar departure-arrival times, TW A and United-both of which come toward the tail end of the alphabet-led the fight for this proposed change,7 Finally, the Airline Guides Committee, which is part of the trade association of certificated carriers and which was in close contact with Donnelley officials regarding the content of the OAG placed a proposal to change to randomization on the agenda for its October 1971 meeting. At the meeting, Mr, Parrish (then the Publisher " One extreme example of jockeying ocurr in 1971 between American and TWA, on flghta depaing Angcle at 9:00 A.M. for Boton. TW A's flght arrved at 5:13 P.M. while American s flght arrved at 5:15 P. ; 00 the TW A flight got fimt listing. In June, AmeriClfi mince ite flght time by two minute &I that it arved at 5;18 al; this meant American got firstIi. ting since flghts were listed acrding to the alplwbetica!order of the cael' when they had identical departur(rrva! times. In August, TW A had reduce its flght time so that it WII arving at 5:08 while American had only gotwn doWI to 5:09; so TWA got fint listing agin. In September, American had furer reduce its flight time so that it was arTving at 5:08 to; the tie went to American. , TW A conducted a study of the matter and compiled a report, which state: "First listingis a significant advanta. " ex 981.

. Much more will be said regaing this committe in the diBllion of the allege conspiray, at pa 29infr. , UtSJ:.N 11. UU.NN.lll.lY CUHP.

Opinion of the OAG) asked for a show of hands of carriers favoring randomization and carrers opposing it, The result was that Donnelley found itself on the horns of a dilemma, as the following notation of one certificated carrier s representative shows: (12) All carners whose coes began with A-M oppose randomizing and all caers except one whose codes began with N-Z favored randomizing. Northwest was the exception and this is easily understo since United is their prime competitor. ex 88A. After considerable tugging and pullng by the A-M camp and the Ncamp,9 the OAG changed its policy in 1972 and started randomizing direct flight listings where the flghts left at roughly the same time, Initial Decision at p, 33, Finding 119.

All of this leads us to conclude that listing the flghts of certificated carriers in a separate grouping before the flights of commuter and intra-state carriers has put commuter and intra-state carriers at a competitive disadvantage.

Alleged justifications for the separate listing policy. Of course, it does not follow that a listing policy which distinguishes between the three types of carriers is arbitrary, or flows from a bad motive, Donnelley vigorously defends its policy of separate groupings, claiming it is justified and even required. Donnelley argues that the (13)policy is based on the fact that each of the three c1assets of carriers has a different legal status-that is, each is subject to different laws and regulations-and provides a fundamentally different level of service. Separate grouping is therefore necessary, we are told, because Donnelley has a responsibility to make it as clear as possible what kind of air service is being offered.

Complaint counsel deny that the differences in the three c1assets of carriers are as extreme as Donnelley represents, And they claim that even if there are differences in the three c1assets of carriers so that it is necessary to put users of the OAG on notice as to what class of carrier they are choosing, the separate listing policy is unacceptable because it is exclusionary; a less restrictive alternative could be chosen-like listing all three classes of carriers' flights together and placing some symbol next to the commuter and intra-state carriers ' listings, 9 Roth groups suggte the OAG would suffer economic repercWlions if they did not getir way. For example a vicepreident of American Airlines said in a letter to Parsh (The 'paid connection' progr which brings in an additional amount of rovenue to your corpration may be drtically curtled or perhaps disntinued by anumber of the caers should this plan (randomiztionl materialize. " ex 118. Meanwhile, an official of Unite Airlines met with Mr. Reich, who was then Senior VicePresident of Dunnelley in char of the OAG, and gave him a similar mes. The Unite official describe it as follows in a memo to his superior: "(Rich said) that TW A is convince that it is at a disadvantage beus of the alphabetica! listing. I frankly told Bil (Reich) thatto arwe unhppy and as a lar customer of Reuben Donnelley, want them to know what our position is." ex 87. 10 The OAG later randomize eonneetiona as well. 324"971 0-81--5, QL3 Opinion 95 F, Complaint counsel also argue that even if one accepts the argument about the three classes of carriers providing different levels of service Donnelley s separate listing policy docs not put users of the OAG on notice as to the type of service they are choosing because Donnelley allows "commuter-type" foreign carriers and some "favored" commuter carriers to be listed with the certificated carriers, These arguments raise close factual issues about the nature and degree of the differences between the three classes of cariers. They are subject to different statutory provisions and differing degrees of government regulation, Section 401(a) of the Federal Aviation Act of 1958 (the "Act"), 49 U, C. 1371(a), provides that no air carrier shall engage in air transportation unless it has a certificate from the CAB authorizing it to do so, Section 401(d)(1) of the Act, 49 U, 1371(d)(1), states that the CAB shall issue the required certificate to the air carrier only;

if it finds that the applicant is fit, willng and able to perform such trdnsporttion properly, and to conform to the provisions of this Chapter and the rules, regulations, and requirement. 'I of the (CAB) hereunder, and that such transfXrttion is reuired by the public convenience and necessity. . . .

The air carriers which receive certificates issued under 401 are certificated carriers. The CAB has adopted extensive regulations regarding how a 401 certificate may be obtained, as well as how where, and when the holder of such a certificate shall operate. (14) Intra-state air carriers have traditionally not been subject to the Act or to CAB regulation. During the period with which the complaint is concerned, to retain its intra-state status-that is, to avoid becoming involved in interstate air transportation- an intra-state carrier could not accept passengers or baggage engaged in an inter-state journey, even though it would transport such passengers or baggage wholly within the borders of a single state,l1 Because of this fact, intra-state carriers have refused to accept passengers whose tickets showed them to be engaged in an interstate journey. Donnelley claims that these differences make intra-state carriers unique and require that their flights be listed separately, 11 Legislative development3 ocurrng since 197 have nulically diminished the difference between certifkate air carrers and moat intro-st.te carren. In November 1977 II new 1:tion was added to the Act providing that intrstate air carrel' in Califomia IInd Florida couldpt pa.ngers and bagg from certificatecael' IInd that joint fare, rate, and servces between such carrel' were subject to CAB reguh tion. Section 401(d)(4), 49 D. 1371(d)(4). Thia provision was broadcned to include intno.t.tc carte!" in all st.te by Section 9 of the Airline Deregulation Act of 1978, Pub. Law 95-, 92 Stat. 2705 (efe. (kt. 24 2978). In addition, the Airline Deregulation Aet amendCfJ tile Federal Aviation Act to provide that intra-state cael' were entitled to apply to the CAB for certin intcntate routeB and, if their reuClt3 were granted, to beme certificate air caers. Of theaeven intn-state airlines in existence in 1977, thre have now reived grant. of il1tcrst.te route 8.l1d beme certficate caers; al a result, all of their flghts ar now listed as certificated caer flights. The Dcmher 15, 1978 issue of the OAG (RX 571) shows only six intn-state air caers operating in the Unite State; their flghts are listed sepaately from thoa oftheothertwoc\ ofcaers.

REUBEN H, DONNELLEY CORP.

Opinion Section 416(a) of the Act, 49 U, C, 1386(a), permits the CAB to establish classifications of air carriers " as the nature of the services performed shall require; and 416(b), 49 U. C, 1386(b), permits the CAB to exempt any air carrier or class of air carrers from the Act or rules or regulations adopted thereunder. Under 416, the CAB has (15) created by regulation a classification of air carrers called "ait taxi operators, of which commuter air carriers arc a part. 14 CFR 298. Briefly, the regulations require that such carriers: (a) operate aircraft having thirty or fewer seats and a maximum "payload" capacity of not more than 7 500 pounds; (b) register with the CAB as an air taxi operator; and (c) maintain certain minimum liability insurance limits. The CAB has exempted commuter air carriers from virtually all the requirements of the Aet and from the regulations applicable to certificated carriers, Donnelley argues that because certificated carrers are subject to strict regulation while commuters arc not, certificateed carriers are much more reliable than commuters in providing accurate flight schedule information; are safer than commuters; fly Jarger aircraft which are generally superior to those flown by commuters; provide amenities not available on many commuter flights; majntain superior airport facilities; and have special consumer protection obligations, These alleged differences will be taken up and discussed in order.

Donnelley has stated that it "is vitally concerned with the accuracy of the information contained (in the OAG) and with tbe reliability of the air carriers which list their services in the OAG," RX 221. Donnelley claims commuters have caused special problems in this regard because they frequently cease operations without notifying Donnelley,J2 When this happens, they say, listings for tbe discontinued flights may be published in the OAG for weeks or months before it is discovered that the airline has gone out of business, Complaint counsel point out correctly that several certificated carriers have also gone out of business, In addition, the ALJ found that the largest fifty commuter air carriers carry about 90% of all commuter traffic (InitwJ Decisio at p, 29, Finding 100), and there is no evidence that any of these carriers have been guilty of ceasing operations without informing Donnelley. Nevertheless, it appears that unannounced exit from the field does occur among smaller, newer commuter carriers. (16) Donnelley argues that commuter carriers have a lower safety level than certificated carriers. Preliminary data for 1977 published by the National Transportation Safety Board reveal that the passenger 11 Donnelley butt.H this IWrtion with the following facts: (1) M of 196 approximately 25% to 30 of the "air 4xi" iodustry (of which commutero ar a par) turned over eth year; (2) from 1970through 1972 an average of thiy CQmmuter cariers '''a&xI operations eah YCi; and (3) during the period from 1970 until October 17 , 1978 the flght !lhedu!e listing" of 168 commuter caero hlld beo removed from the GAG. EDERAL TRADE COMMISSION DECISIONS Opinion 95 F.

fatality rate for commuter carriers was 1.48 per 100 millon miles flown, while the corresponding passenger fatality rate for certificated carriers was 0,04, RX 563. Complaint counsel argue that these figures are not comparable because measuring safety in terms of fatalities per milion miles flown is misleading, They say commuters fly much shorter routes than ccrtificated carriers and consequently have many more takeoffs and landings per million miles flown than do certificated carriers, and it is during takeoff or landing that accidents usually occur, But according to other National Transportation Safety Board statistics which were cited and relied upon in a report by the Committee on Government Operations of the House of Representatives '3 the accident rate for commuter airlines during 1976 was 1.57 accidents per 100 000 departures while the certificated carriers accident rate was only 0,44 accidents per 100 000 departures, Complaint counsel argue that even accident rates based on number of departures are unreliable measures of the comparative safety of commuter and certificatcd carriers because commuters frequently fly to remote outlying areas where certificated carriers are unwiling or unable to fly, These areas may have relatively worse terrain and weather conditions, and smaller, less-safe airports. They argue that to get a truly accurate comparison of the safety records of the two types of carriers, one would have to compile statistics regarding the safety records of commutcr and certificated carrers for those city-pairs where the two compete, Though we agree that such a study would provide a more accurate statement of the comparative safety of the two, we are persuaded by the statistics cited above and by other evidence!4 that Donnelley had cause to believe that certificated carriers, on the average, are safer than commuter carriers. Cf. Initial Deciswn at p. 29, Finding 100, (17) Generally, certificated carriers fly larger, faster planes than commuters, One "'Olson for this is that CAB regulations limit commuter air carriers to planes which have a capacity of no more than thirty seats and a "maximum payload" of 7500 pounds,15 14 CFR 298. Such planes usually fly at speeds between 200 and 300 miles per hour, Initial Deciswn at p, 22, Finding 71. The larger jets typically operated by certificated carriers, on the other hand, carry 100 or more passengers and fly at speeds over 500 miles per hour. Id, However, the ALJ found " Aidine Deregu!ation and Aviation Safety, H.R. IWpl. No. 930, 95th Cong., 21. Seas. (1978) (hereinafter refcrr to as " R. Rept. on Aviation Safety ). RX 34. " Ccrtifieate carrers and commuter carrCJ" ar governed inBafely matters by different setions of the Fedel'J Aviation Regulations, and the regulations governing certificate caers ar more strngent. Initia lJe at p. 29 Finding 99.

' The Airline Deregu!ation Act of 1978 , Pub. Law 95-90, 92 Stat. 1705, incre the siz of thc airct which CQmmuter air carrers may operate to a maximum capacity of fifty-six pw;ngers. ..... _.

fi1.uuJCu.

Opinion that certificated carriers Hsometimes" fly commuter type aircraft. Id. at p. 25, Finding 75.

Certificated carriers' flights frequently offer amenities which are not available on many commuter flghts, like on-board meals, lavatories, etc. But the ALJ found that since commuter carriers normally fly short routes averaging only about seventy-five miles, these amenities are not as important to passengers as other factors such as the time schedule of the flight. Id, at p, 25, Finding 77, Certificated carriers often have better ground facilities-like ticket, baggage, and boarding areas- than commuter carriers. Id. at p, 26, Finding 79, In addition CAB regulations impose on certificated carrers certain consumer protection obligations which commuters do not have; these include denied boarding compensation, baggage liability, and I'no smoking sections.

Granting that some differences do exist, complaint counsel claim Donnelley s argument about all the differences among certificated commuter, and intra-state carriers is a red herrng. They say Donnelley does not really honor the strict legal categorizations which are said to produce these differences. Specifically, complaint counsel say that Donnelley lists the flghts of commuter-type foreign air carrers and certain favored commuter carriers with the flights of certificated carriers, (18) Donnelley does list the flights of foreign air carriers with the flights of certifieated earriers.'6 Complaint counsel argue that foreign carriers f1y no larger aircraft, are no safer, are no more reliable and are no more preferred by passengers than are commuter and intrastate carriers," Complaint Counsel's Answering Brief, at 27, The ALJ found that foreign carriers frequently fly small aircraft like the ones flown by commuter airlines, and that they are not subject to safety regulations issued under the Federal Aviation Act. Initial Decision p, 25, Finding 73, Donnelley responds that foreign carriers have a legal status very similar to that of domestic certificated carriers. They point to 402 of the Federal Aviation Act, 49 U. C, 1372, which is more or less parallel to 401 (governing certificated air carriers), Section 402(a) provides that "(n)o foreign air carrier shall engage in foreign air transportation unless there is in force a permit issued by the CAB 17 Underauthorizing such carrier to so cngage, 402(b), the CAB may issue a permit to a foreign carrier only:

16 In fact. the AU found that of the 118 caers now IisWd in the OAG as certificate caers, 79 foreign aUcatrers. Id. at p. 13 Finding27.

IT "Foreign air caer" is defined in, 101(19) of the Act as "any person, not a citizn of the Uniwd State, who undertkes. . . to enga in foreign air tnl.1Sporttion." 49 use 1301(19). Section 101(21) defines "foreign ail' tnmsporttion" as "the carrage by airct of persru or property. . . in commerce between. . a plac in the Unite States and any plac outside therof." 49 D. C. 1301(21). Opinion 95 F.

if it finds that such carrer is fit, wiling, and able properly to perform such air transportation and to conform to the provisions of this chapter and the rules, regulations and requirements of the CAB hereunder, and that such transporttion will be in the public interest.

Donnelley argues that the fact that a foreign air carrier must obtain a permit from the CAB and subject itself to some CAB regulation means that it is like a domestic certificated carrier rather than like a commuter, Donnelley also claims that except for "a handful" of Caribbean foreign carriers, the foreign carriers listed in the certificateed carrier section of the OAG include well-known overseas carrers like Air Canada, Air France, British Airways, etc. (19) Complaint counsel also point to the fact that the flghts of certain commuter "replacement" carriers are listed with the flights of certificated carriers in the OAG. A replacement carrier is a commuter carrier which enters into an agreement with a certificated carrier whereby the commuter provides service in place of the certificated carrier over some of the certificated carrier s routes to smaller cities. Such an arrangement allows the certificated carrier to maintain its route authority to the smaller communities and simultaneously serve those areas at the lower cost associated with operating smaller commuter" aircraft. The main example of this is the replacement carriers serving Allegheny, These "Allegheny commuters" have had their flghts listed with those of the certificated carriers since 1969, They are marked with a symbol in the shape of a square next to the flight number. In the "Abbreviations and Reference Marks" section of the OAG the symbol is defined as follows: "(Symbol) Following Flight Number Indicates A Replacement Flight Operated By A Commuter Air Carrier On Behalf Of A Certificated Carrier Pursuant To A CAB Approved Agreement,"19 Thirty commuter carriers operate replacement flights for certificated carriers Alaska Airlines and Wien Air Alaska, Inc. and receive the same display treatment as Allegheny commuters in the OAG, Altogether about 700 of the 50 000 direct flghts listed in a recent issue of the OAG were replacement flights operated by commuters but listed in the certificated section, Initw.l Deciswn at p, 15, Finding 32, Donnelley argues that listing these commuter replacement carriers with the certificated, carriers is not inconsistent with its previously stated policy on separate groupings because the replacement flights are listed with certificated flights only if the replacement arrangement arises pursuant to an agreement approved by the CAB. Donnelley also 18 Cupare Section 401(d)(1), relating to certificate caera, at pn 13 wpm. 19 It is complaint counsel' s contention that if the listings of al! thr c111 of caer: we.. combined, a marking like this one would be a sufficient means of putting I! user of the OAG on nOlice that a flght WIl a oommuter or intrstateOight.

. . .

J...'-v.u..

Opinion claims that it enforces strict requirements concerning the operation of the replacement flights, including one that both the commuter replacement carrier and the certificated carrier identify the replacement flight as that of the certificated carrier. In this regard, Donnelley makes much of the fact that Allegheny commuters are flown under Allegheny s logo and colors, and that even their ticket counters and other ground facilities are made to look like Allegheny s. And they also point out that other commuter replacement carriers have been denied listing in the certificated section of the (20)OAG despite the fact that they operate their replacement flights pursuant to a CAB approved contract; the reason given by Donnelley for this in at least one case was that the commuter replacement flghts were "operated under the name and in all appearances as a commuter. There is no requirement similar to the Allegheny requirement that the airplanes ticket counters and other facilities, ete" be made to look like (the certificated carrier being replacedJ." CX 131A. It was established at the hearings, however, that at least one Allegheny commuter flght is flown under the commuter airline s colors and logo, rather than Allegheny s. Transcript, at 2572-75, In addition, it appears that the Alaska replacement carriers do not fly under the certificated carriers colors and logo, but merely place a card or placard announcing the name of the replaced certificated carrier at the ticket counter and on the aircraft, Donnelley has offered no explanation for this inconsistency.

III. DISCUSSION OF LAW A. Rdevant Market.

Since one of the theories of violation in this case involves an allegation that Donnelley is a monopolist, we must determine the relevant market within which Donnelley operates, There is agreement between the parties that the relevant geographic market in this case is the United States, Initial Deciswn at p, 44. Though the parties disagree over the relevant product market, the ALJ found that there are no substitutes for the OAG, and that it therefore comprises a separate product market in the providing of flight information about scheduled passenger air transporta ion service in the United States, Id. at pp, 1&-19, Findings 3&-51, and pp, 44 47. We believe this finding is correct. The OAG is the only complete listing of scheduled flights in North America; it is the primary source of flght schedule information for the flying public and the primary marketing tool for carriers, ld, at p, 16, Finding 35, It is referred to in the airline industry as the "Bible, Citing United States v, E.l Dupont Opinion 95 F, de Nenwrs Co" 351 U.S. 377 (1955), Donnelley argues that the ALJ wrongly excluded several reasonably interehangeable substitutes for the OAG; specifically, Donnelley mentions media advertising, eomputerized schedule information, and system timetables published by individual air carriers. But a review of the record convinces us that none of theseis an effective substitute for the OAG, (21) Air carriers do sometimes use radio, television, and newspapers to advertise their flights, and in some instances those advertisements contain limited flght schedule information, But when flght information is included in an advertisement, it is only for the flghts of the particular carrier purchasing the advertisement and even then it is normally limited to a few city-pairs. Initial Decisi at p. 19, Finding 50, In addition, travel agents and corporate travel departments-a major sub-category of "purchasers see United States v. Grnnell Cor" 384 U.S, 563 (1966)-do not normally use radio, television, or newspaper advertisements to obtain flight information and book flights, Initial Decision at p, 19, Finding 5l. Many air carriers rely to some extent on computer tapes upon which airline schedule information has been coded. These are called "SCIP" tapes; SCIP is an acronym for Schedule Change Input Package. When the information on a SCIP tape is called for by the operator of the computer terminal, it is displayed on a cathode ray tube. Using SCIP tapes is much more expensive than using the OAG: the annual cost of a cathode ray tube for an office doing between $2 500 000 to $3, 000 per year in business would be $15 000 to $16 000, while a year subscription to the OAG costs $98,44. Consequently, very few travel agencies or corporate travel offices can justify the cost of SCIP tapes. And even those airlines, travel agents, and corporations which have access to SCIP tapes also subscribe to the OAG and use it in conjunction with the SCIP tapes; this is because SCIP tapes normally contain less flght schedule information than does the OAG, Moreover Donnelley itself is a major supplier of this purported substitute to the GAG as it supplies SCIP tapes to twenty-five certificated carriers. Transcript, at 4127, Most air carriers print and distribute their own individual timetables containing flight schedule information. These timetables generally contain flight schedule listings only for the carrier distributing them and they usually have only local or limited distribution. These timetables are expensive: one witness testified that each timetable cost his company approximately $,50. Transcript, at 840, Airlines, travel .0 q. lnt' Barng Club v. United Stltes 35 U.S. 24 (1959), where significant price difference were emph!.iz in carving Ollt asepartc product market.

, , , . UJ:.rl fi. UV..

Opinion agents, and corporate travel offices normally do not use airlines individual timetables to obtain flgbt information. (22) The OAG is recognized in the industry as being unique and indispensable; there are substantial price differences between the OAG and its purported substitutes; and there are distinct users of the OAG for whom no other product wil do. For these reasons, we hold that the OAG comprises a separate product market. See Brown Shoe Co, United States 370 D,S. 294 (1962), B. Competition Between Certificated and Non-Certificated Carrrs, The ALJ found that commuter and intra-state carriers compete with certificated carriers, Initial Decision at pp, 2227, Findings 67-92, Donnelley asserts that there is only de minimis competition between certificated and non-certificated carriers and that the AL' s finding should be reversed, We believe the ALJ' s finding is supported by the record.

In April 1975 there were 432 city-pairs served by direct flghts of both commuter and certificated carriers, CX 135E. In the one-year periods ending June 30, 1973 and June 30, 1974, commuter and certificated carriers competed in eighty-two city-pair markets in which passengers totaled 1 000 or more, For the period ending in June 1973 commuters accounted for almost 1 000 000 passengers in those eightytwo markets, while certificated carrers accounted for over 4 000 000 passengers. The passengers flying on commuter air carrers in those eighty-two markets during that period represented 17.5% of all commuter traffic in the contiguous forty-eight states for the period. For the period ending in June 1974 commuter carrers had almost 900 000 passengers in the eighty-two markets, and certificated carriers had over 4 000 000. The 900 000 commuter passengers represented 19,6% of all commuter traffic in the forty-eight states for that period. A report prepared by the CAB entitled "Commuter Carrier-Certificateed Carrier Competition" states that there were "twenty-four markets in which commuters generated 10 000 or more passengers in (fiscal year J 1973 in competition with certificated carriers, . ' " and " markets in which certificated carriers generated 50 000 or more, , , passengers in (fiscal years 1973 in competition with commuter carriers CX 61 (emphasis added,) The report went on to say that (cJommuter market shares ranged from 0.49% to 35.31%. "21 (23) Donnelley argues that competition is de minimis because the total number of passengers carried by commuter carriers in the period 21 A CAB report by the same name prepar for the yea ending June 30, 19'4 had 6irni!at findingl. Opinion 95 F, ending in June 1974 comprised less than one-half of 1% of the 190 000 000 passengers carried by certificated air carrers in scheduled domestic passenger service in 1974, But the same argument advanced by Donnelley here was rejected by the Second Circuit in United States v. Consolidted Laundris 291 F,2d 563 (2d Cir. 1961), In that case linen suppliers were charged with violating 1 of the Sherman Act by allocating out-of-state customers. The court stated: Appellants semingly rely on a d€ minimis exception; they argue that interstate customers' service amounts to only 1% of all servce. But (even accepting appellants' figures) such 1% amounted in 1954 to $523 168 worth of busines, a "volume of busines . . . (whichl cannot be said to be insignificant or insubstantial." That this substantial amount of interstate commerce amounted to only 1% of the total industry s volume is without significance. Id. at 573 (citations omitte). See also Interntional Salt Co, v, United States 332 D, S, 392 (1947), If $500 000 is more than de minimis competition, then forio the tens of milions of dollars of revenues involved in the carrying of passengers by commuter and certificated carriers in the city-pairs in which they compete is not de minimis.

The ALJ also found that there has been substantial competition between certificated and intra-state carriers. See Initial Decisin at p. , Findings 93 97, We concur in this finding, Certificate and intrastate carriers often serve the same city-pairs. Southwest Airlines, an intra-state carrier, competes in all twenty-five of its city pairs with certificated carriers, Air Florida and Air California, two other intrastate carriers, also compete with certificated carriers in various citypairs, In addition, both an expert witness called by Donnelley and Donnelley s own Publication Manager testified that intra-state carriers compete with certificated carriers, Transcript, at 332&.29, 3394, (24) C, Jurisdiction, Donnelley has urged strongly throughout this proceeding that the FTC lacks jurisdiction over the "subject matter" of the complaint, Upon review we conclude that the FTC does have jurisdiction in this proceeding, FArly in the proing, Hunnelley moved to dismiw. the complaint on the grounds of lac of juriiction. The ALJ denied this motion and refu'l to ify the que;tion to the Commi0!ion; and the Commi.ion denied Donnelley extraordinary appel. Respondent thereupon $Ought injunctive relief in the Unite State District Court for the Northern District of llinois. That court held that the FTC lacked juri&liction and enjoined the Commi!;;"n from further proinWi. The Ren /l /J"Wltey Wr. v. FTC, (1977-2) Trae Ca. (CCR) '!61 721 (N. D. Ill. 197). Shortly therefter the same court vacte its order on the grounds that DonneUey had failed to exhaust its administrative remedies.Th Reuln fl. Di"Wlky Cm. v. FTC, (197-2) Trae Ca. (CCH) '161 783 (N.D. Il 197). Both sides appeled and the Court of Appeals for the Seventh Cinuit held that venue Wil improper in the Northern District of Illnois.Th Reuln H. Do"WUe Cm. v. FTC 58 F.2d 26 (7th Cir. 1978). The ca was then trnsferr t. the Unite Stal. District Court for the District of Columbia, where the cour di.mi. Donnelley s complaint for faiJuretoexhaustadminhJtrativeremedies.

, , . , REUBEN H. DONNELLEY CORP, Opinion Section 5(a)(I) of the FTC Act, 15 U, C. 45(a)(I), bans unfair methods of competition and unfair or deceptive acts or practices. Section 5(a)(2), 15 U, C. 45(a)(2), states that the FTC is empowered to enforce this ban against persons, partnerships, or corporations "except banks, common carriers subject to the Acts to regulate commerce air carrirs, aru foreign air earners subject to thr Federal A 'Itin Act of 1958, and persons, partnerships, or corporations insofar as they are subject to the Packers and Stockyards Act, , , , " (Emphasis added, On its face, this section appears to answer the question of whether the FTC has jurisdiction over Donnelley and its acts, practices, and methods of competition, Donnelley is not an air carrer or a foreign air carrier, and therefore the Commission apparently has jurisdiction. But Donnelley argues that the issue is not that simple. The key language of Section 5(a)(2) docs not just exclude air carriers from in personam jurisdiction, Donnelley contends; rather, it excludes the whole subject of competition among air carriers from the FTC's Hsubject matter jurisdiction, And this means that the FTC has no jurisdiction over this proceeding, because it " is limited exclusively to competition among air carriers," Respondent' s Appeal Brief, at 8, (25) Donnelley relies entirely on the 1921 case of Fruit Growers' Expess Inc. v, FTC 274 F, 205 (7th Cir. 1921), cert, dismissed 261 U,S. 629 (1923), In that case the FTC struck down an exclusive dealing clause in a contract between Fruit Growers Express (which was not a common carrier) and certain railroads, claiming that it violated Section 3 of the Clayton Act, J5 U, C, 14, On appeal, the court noted that under Section 11 of the Clayton Act, 15 U, C. 21, jurisdiction to enforce Section 3 is divided among the FTC and certain other agencies. In relevant part, Section 11 states that jurisdiction is "vested in the Interstate Commerce Commission where applicable to common carrrs subject to the Interstate Commerce Act ' , . and in the Federal Trade Commission where applicable to all other character of commerce " (Emphasis added,) Turning to the challenged exclusive dealing clause, the court noted that striking it from the contract would remove the railroads' only obligation to provide consideration, thus destroying the mutuality of the contract and rendering it unenforceable, This led the court to observe: "Such being the effect of the (FTC's) finding and order, the carriers were necessary parties." 274 F. at 207. The court continued:

The words 'where applicable to common carriers' in section 11 of the Claytn Act must mean that where the facts involve common carrers, or the business of common caers then the jurisdiction is solely in the Interstate Commerce Commission. The action complained of involved common carriers and tended to very grtly affect their busines. Respondent was therefore without jurisdiction. Id. . . , , Opinion 95 F, The court's holding turns on its finding that the cariers were necessary parties to an action which would impair their contractual rights, and on the fact that the "where applicable to common carrers language of Section 11 is ambiguous and suggests subject matter jurisdiction.

The jurisdictional question on appeal before us now is different, Jurisdiction to enforce the TC Act is vested solely in the FTC, but language in Section 5(a)(2)- except air carrers and foreign air carriers operates in personam to exempt a very narrow class of businesses from the FTC's jurisdiction, A cae more closely analagous to this case is FTC v. Miller 549 F.2d 452 (7th Cir, 1977), involving an investigation of Morgan Drive A way, Inc., a common carrer subject the Interstate Commerce Act. The FTC had adopted a resolution authorizing the use of compulsory process to (26)determine whether Morgan had violated Section 5 of the FTC Act- including false or misleading advertising or misrepresentation in connection with the solicitation of persons to become owner-operators in the nationwide mobile-home transporting industry." 549 F,2d at 454, Morgan assertd that the FTC lacked jurisdiction to investigate it because it was a common carrier, pointing to Section 6(a) of the FTC Act, 15 U, 46(a), which states that the FTC shall have the power to investigate persons, partnerships, or corporations "excepting hanks a'Y comnw carriers subject to the Act to regulate commerce, 23 (Emphasis added,) The FTC argued that this language did not deprive it of jurisdiction over Morgan because the investigation focused on Morgan s promotional activities, which were not subject to regulation under the Interstate Commerce Act. That is, the FTC argued that the jurisdictional exemption created in Section 6 did not operate personam to exclude common carriers from FTC jurisdiction altogeth- , but rather only operated to exclude the FTC from "subject matter jurisdiction over "acHvities" which were subject to regulation under the Interstate Commerce Act. The Court of Appeals rejected this argument, saying: "The exemption is in terms of status as a common carrier subject to the Interstate Commerce Act, not activities subject to regulation under that Act."" 549 F,2d at 455, The court's language is equally applicable to the jurisdictional Thll Section 6 language excepting. common cael" ) il wmoot identical to the Section 5 language quote above ("except common caers ) ILnd to the Section 5 language about air cael" ("except. . . ai caenl ). But all of this language from Section 5 ILnd Section6 il different from the language of Section 11 of the Claytn Act- where ILpplieahle to common caers 2. The court did state ellJwhere: "We nee not decide whether the FTC is corrt in its statement that the nonearicr activities of a common caer do not fall within the !!pe of the Section 6 exemption." 549 F. 2d at 45. Thus, the court saved for another day thcquC8tion of whether II company which enga in acivities 11 a common carrier and in activities which ar unrlate to being a common caer would be entirely exempt from the FT' jurisdiction, or whether iw non-eer activities might be rehed hy the FTC. nLOutl.L,..I' .L.L. UV.I'.I'CO.L.L.l-l \.vn.r. Opinion exemption in Section 5 for "air carriers and foreign air carriers subject to the Federal Aviation Aet": the exemption is in terms of status as an air carrier suhjeet to the Federal Aviation Aet, not activities subject to regulation under that Act, (27) In the injunction action regarding this proceeding in the Northern District of minois (see page 24 n, supra), the court held that "the phrase 'prevent corporations. . . except air carriers . . . from using unfair methods of competition' should be read to mean ' exercise jurisdiction over unfair methods of competition, except among air earriers, 25 (1977-2) Trade Cas, (CCH), at p, 72 943. The court relied entirely on Fruit Growers ' Expess and did not even mention Miller except for a citation on a side issue, Id. at p, 72 944, This total reliance on Fruit Gro"wers ' Expess prompted the court to "redraft" Seetion 5(a)(2) of the FTC Act so as to make it identical to Section II of the Clayton Act, thereby making Fruit Growers ' Expess the controlling precedent." The court explained that the FTC Act and the Clayton Act were both enacted in 1914 and are in pari materi; the purpose of Section 5(a)(2) is parallel to that of Section II; there is some overlap between the substantive provisions of the two acts; and it would be an incongruous result for Section II to be different in any way from Section 5(a)(2). While the court applied a rigorous logic in its analysis we believe it was pulling in the wrong direction, Given the fact that the Miller case is much more recent and is based on an additional sixty years' experience with the regulatory scheme in question, we believe Section 11 and Fruit Growers ' Expess should be brought into line with Section 5(a)(2) and Miller rather than vice versa, It appears that the against the grain" construction engaged in by the district court may have resulted from the following misstatement of who has the burden of establishing the contours of a special exception to a regulatory scheme:

Defendnt. (the FTC) have advancd no areas why Congress should have exempte the subject of competition between air caiers from the FTC's jursdiction under (28)the Clayton Act, and have given the same subject back to the FTC under 5(a)(2) of the FTC Act while simultaneously depriving it of jurisdiction over the carrers themselves.2 Id. at 72 943. (Emphasis added).

. As we note at page 24 fn. 22 81pr, the district cour subsuently vacte il. order bang the FTC from proing against Donnelley.

a The Cour tok this approach in the fac of iU! IIvowal that "Section 11 of the Claytn Act is more clearly phrad in subject matter jurisdiction term than is Section 5(a)(2), and CUI18equently Fruit Gr' Exs8 doe not diretly control this ca." r1977J Trade C!l. (CCH), at p. 72 27 The cour s statement that Gongr "exempte the subject of competition between air caers from the FT' jurisdiction under the Claytn Act" is almD!t certinly incoJTt in itslf. Tbe statement is appantly bas on the court' s belief that Frit Gmer IJ mearm that under the Claytn Act, the FTC doe not have jurisdction over E;rsi turned on the fact that certin common caers were adjudge to beanyGr'acts (by whomsver) whid1 affect competition among air caers. But as we aad before. the decision Fritin nec paies to thataction. No one has even suggste that any air cacrs ar nec paies to thisproing. , Opinion 95 F.

Placing the burden on the FTC in this manner runs directly contrary to the Supreme Court's pronouncement that the "burden of proving justification or exemption under a special exception to the prohibitions of a statute generally rests on one who claims its benefits, , , ." FTC v, Moron Salt Co" 334 D.S, 37, 445 (1948), Even if we accept the court's approach to the jurisdictional issue, its finding of lack of jurisdiction in this proceeding is based on an erroneous factual assumption. The court stated: Defendants now seek to characterize the complaint as being basd in par on plaintiff's abuse of its monopoly position, and the court agres that there may be ca in which the FTC may properly exercise jurisdiction over restraints of trade in a non-cxempt line of commerce despite their effect upon an exempt line. But in this ca. . . (i)t is clear from the complaint that plaintiff is accuse of working in coperation with the major air carrers to stifle competition by smaller carriers. (1977-2) Trade Cas. (CCH), at 72, 94. Thus the court's holding is based on an assumption that this is exclusively a conspiracy case. But the complaint alleges that Donne!- Icy s acts both individually and in combination with others " are in violation of Section 5. Complaint 17, As (29)will be seen in the pages that follow, our finding of liability here is not based upon a finding of unfair competition "among air carriers." Rather, liability is based upon Donnelley s abuse of its monopoly position, D, Alleged Unfair MetJ8 of Competitwn.

The Alleged Conspiracy.

Complaint counsel allege that in 1971 Donnelley had decided to begin to publish eonnecting night listings for commuter and intra-state carriers, and to combine the listings of all three classes of carriers into only two categories for each city pair direct and connecting, They say key Donnelley officials then arranged to confer with certifieated air carrier representatives at a formal meeting to determine whether the plan met with the certificated carriers' approval. At the meeting the certificated carriers voiced strong opposition to the proposal. Complaint counsel claim the Donnelley officials who attended the meeting carried this message back to their superiors, and a decision not to go through with the changes resulted, All of this adds up to an allegation that Donnelley and the certificated carrers agreed that Donnelley would not change its format so as to dispense with the listing practices challenged in this action, If these allegations were proved, they could add up to an ilegal conspiracy in restraint of trade. However, a close review of the evidence convinces us that there is some doubt whether anyone from REUBEN H, DONNELLEY CORP, Opinion Donnelley entered into 'j an agreement, tacit or express, with the certificated carriers, Theater Enterpses v. Para'Yunt Jilm Distrib, Cor" 346 U,S. 537, 540 (1954), The question is so close that a detailed summary of the events transpiring at the time must be set out. As of 1971 the OAG had for many years published the direct flights of certificated, commuter, and intra-state carriers under three separate headings, And as of 1971 the OAG did not publish connecting flight listings for commuter and intra-state carrers at all, Prior to 1971 representatives of a trade association of commuter air carriers had urged Donnelley to change these policies, but Donnelley had refused, In 1971 Parrish, who was then the Publisher of the OAG, and Howe tbc Publication Manager " changed their minds and concluded that commuter and intra-state connecting (30)flight listings should be published and that the listings of all three classes of carriers should be merged, In an August 18, 1971 memorandum entitled "Merge (sic) of Commuter Air Carrier Flights With Certificated Air Carriers ,29 Howe made a list of the "pros" and "cons" of changing Donnelley s format to incorporate these changes. He listed seven Hpros, among which were simplification of the format (there would have been only two listings under each city-pair direct flights and connecting flights-rather than the four they had then); "line savings that is, space saved by removing the headings "Commuters" and "Intra-state" everywhere they appeared in the OAG; "more paid connex potential" -, that is extra revenues realized from payments made to the OAG for the additional connecting flight listings; and "eventual change . Only two cons" were listed: "certificated carrier objection" and "subscriber objections(?)"

In early September 1971 Howe and Parrish decided to discuss their idea for changing the OAG's format with representatives of the certificated carriers, They decided to go about this by presenting their proposal to the Airlines Guide Committee (the "AGC") of the Air Traffic Conference of America, which was a part of the Air Transport Association of America (the trade association of certificated carriers). The AGC had scheduled a meeting for October 7, 1971, and Howe sent the following teletype message to the AGC on September 10 , 1971: OAG would Jike to discuss the merger of Certificated, Commuter and Intra-State Air Carrier schedules. OAG thoughts will be presented October 7. We would appreciate carriers coming to the meeting prepared to discuss their respective management opinions. Direct flight listings would be together chronologically as currntly shown. Commuter and Intra-State Air Carrers would have the option to purcha."le on.line os Howe report directly to Parrsh.

0" It is clear ftom the contents of this memo that it is concerned with thc listinj; of commuter and intra-state rrerr.ormectionsaswell.

. .

Opinion 95 F.

conne'cions with Certificated Carrers and vice versa. Only two categories of listings, direct and connections, would exist rather than the present four. (31 JOn September 13, 1971 a bul1ctin containing the agenda for the October 7 meeting was sent to all members of the AGC, See CX 99. Item 7 on the agenda was entitled "Merger of Schedules . The description of this item on the agenda was in al1 material respects like the description in Howe s teletyp message, It concluded with the statement that members "should be prepared to discuss their respective management positions.

At the AGC meeting Parrish presented the proposal for changing the format of the OAG and discussed it with the certificated carrer representatives present. At the end of the discussion, a vote was taken. See Initial Decision at p. 21, Finding 63. Various persons present recorded the outcome, The official minutes of the meeting, which were distributed to al1 certificated carrier members and the Donnelley officials present, described it as follows: "During discussion (of Item 7J it became obvious that there was no support for the proposal therefore, no further action was required," ex 9H. Howe s own notes state that "the carriers were with the exception of (American and National Airlines), against the merger of schedule listings." CX 10D. A subsequent memo prepared by him states that "(0 )ne (certificated) carrier was concerned in that noncertificated carrier(s) had no restrictions on routes and therefore could paral1e! the (routes of) certificated carriers at wil, " CX 19C. The notes of the Allegheny representative at the meeting state: "No mix(,) vote very heavy," CX 89C, TW A' s representative to the meeting wrote in a report to his superior: "(Ilt was agreed not to merge the schedules," CX 66A, Reich, who was then the Senior Vice President of Donnelley and the man with the final word on any changes in the format of the OAG (Transcript 1183-), testified that he first learned of the October meeting shortly after it took place. He stated that he had no idea that plans had been made to discuss changes in the format of the OAG with certificated carrier representatives, and that he was surrised and distressed when he learned that this had been done, Transcript 1204 , 1250, This testimony was not contradicted, He further testified: I was very unhappy with Mr. Parrsh beuse I had considered this subject to be thoroughly decided and. while there had been arguments advance in favor of making this merger, I thought they had ben resolved and, therefore, a proposal to change that, it seemed to me to be out of order. Transcript 12. (32)After he learned that the meeting had occurred, Reich conducted an investigation to determine what had gone on, Transcript 1775, 1889. After the AGC meeting, and after the internal Donnelley discussions REUBEN H, DONNELLEY CORP, Opinion which occurred when Reich learned of the October 7 meeting, both Parrsh and Howe urged that the proposed changes in the OAG' format be made,30 In effect, they urged that action be taken contrary to what they are accused of having agreed to with the certificated carriers. On November 29, 1971 Parrish sent a formal memo to Reich recommending that the listings of all three classes of carrers be merged, and that commuter flghts be marked with a square beside the flight number. 31 See ex 12, By letter of December 10, 1971 Reieh answered him, stating that he was opposed to merging the listings, RX 111. He stated:

I am much concerned about the reliability of the servce performed by the commuter carrers as of this date both from a standpoint of adherence to schedules and safety. It would seem to me that our best present policy would be to wait until the CAB has taken a grater responsibilty in connection with thes carrers and has, in effect, given its sel of approval to their operations.

This letter from Reich constituted the last word on the subject, and the changes were not made.

(33)In determining whether Donnelley was influenced not to change the OAG's format as a result of the October 7 meeting, we must determine whether some person at Donnelley was influenced by the meeting and can be said to have agreed, expressly or tacitly, with the certificated carriers not to change the format, Since Parrish and Howe who attended the meeting "on behalf" of Donnelley, came away from the meeting urging that the format be changed, it is impossible to say that they were influenced by the meeting or that they agreed not to make the changes, even though some of the certificated carriers represented at the meeting believed they had agreed. Therefore, we must focus on Reich and what we can infer about his state of mind, as he was the person who had ultimate responsibility for deciding whether to go through with the proposed changes, He testified that when he first learned of the meeting and began to investigate, he was informed that the certificated carrier representatives at the meeting didn t all feel strongly one way or the other" about the proposed changes in the format of the OAG (Transcript at 1250), and that "there was evidence that (the certificated carriers) were on both sides. (Transcript at 1218). However, Howe testified that when Reich found out about the meeting he sought out background documents to "" Howe testified at the hean that he change hi mind back and forth on this matter many times. Trnspt at lis,Q2. But ooveral daya after the October 7, 1971 meeting he sent a memo to Parh remmending merg. Se RX 10.

31 It is clear from the memo that Parh was aso remmending that the OAG publish connecting flight infonnation for commuter and intrn-statcrrcr. 32 Except that the GAG did begin to li2t connecting night infonnation for commuter and intr-Btate C&era in December 1976. Se the discussion ofthis at pag 8 fn. 8Up7. , Opinion 95 F, discover what had gone on (Transcript at 1889); and given the flavor of the notes and memos prepared by Howe concerning the meeting, it is unlikely that Reich could have been told anything other than that the certificated carriers strongly opposed the proposed changes. But in any event Reich testified that even if the certificated carriers had been for the proposed changes, he stil would have refused to make them: We would have adopted exactly the same policy we did. We were not concerned with (the certificated carrersJ. That was one of the reasons I was unhappy with Parsh. This was a decision we wanted to make without any input from other sourcs. We were jealous you might say of our privacy in publishing the guide. Transcript at 1208. There is no evidence that Reich, who made the decision not to change the format of the OAG, was even considering any proposed changes, or was influenced to retain the OAG's previous listing policy because of the certificated carriers' expressed desire. In light of Reich's uncontradicted (34)testimony that he made the decision on his own, we conclude that there is not adequate proof to demonstrate that a conspiracyexisted.

In reaching this finding, we reverse the ALJ's determination that Donnelley did conspire with certificated air carrers, The ALJ based his holding that a conspiracy existed on a finding that after the October 7 meeting with the certificated carriers Mr, Howe and Mr, Parrish changed their minds about merging schedules and printing commuter connections (id, at p, 40), and on a finding that air carriers are substantial customers" of Donnellcy and pay it several milion dollars a year for various goods and services (id, at p. 21, Finding 65). The evidence conclusively establishes, however, that Howe and Parrish continued to urge the changes in the OAG's format even after the October 7 meeting. And the fact that the certificated carriers had substantial leverage over Donnelley, because of their many (35) purchases from it, does not prove that Donnelley entered into an illegal agreement with those carriers, Finally, we think it is crucial that the ALJ , in settng out the evidence relating to the alleged conspiracy, 33 Complaint cou"lil puint to the fact that Donnc!!ey failed to can Parrsh WI a witness, noting that he actually attended the meeting"" the Publisher of the OAG. They are that thi. failure to call him should give rise to an inference unfavorable to Uonnelley, and Intet8tatecite Circit v. United States 30 U.S. 20(1939), lI support. In that , the Supreme Court did draw an inference unfavorable to the defendant. ba on their failure to call pef'ns with key knowledge of the events to testify.See o./. GoUkn State &Ruling Co. v. NLRB 414 U.S. 168, 175 (197); NLRB V. Lkrr s Trons- Coo, 405 lo' 2d 706, 713 (2d Cir. 196). But inlnUrstate Circuit the defendant. "failed to tender the testimony, at their command, of any officer or agent. . . who knew, or w8. in a position to know, whether in fact an agrement had ben rea.hed among them for concert action." 30 U.S. at 22. By contract, in this procding Reich and Howe, who may be said to have had information equal to Parrsh in rega to the fact. in question, testified at length. This is important beusc "there is a genera! limitation... that the inference cannot fairly be drawn except from the mm-prouction of witness whose testimony would be IfUiperi in repet to the fact to he proved. Wig"" on Evince 287, at pp- 286-7 (Littl, Brv Co. 1977) (emph""is in the original); /l NLRB v. Du' s Tromi. Coo, ItUpr, at 713 (the testimony of the person who was not called was "crtical"). We se no ba. is on which to conclude that Parrish, if he had testified, would have provided informati"n "superior" to that of Howe and Reich.

..... _._.

l\.Lu.u......

Opinion failed to consider Reich's role at all. As we said earlier, Reich was the pivotal figure in the conspiracy drama, and his decision not to carry out the proposed changes in the OAG was not shown to be the product of an agreemen t.

E, Duty of a Monolist, The legal standard.

Since we find that a conspiracy between Donnelley and the certificated carriers was not established, we must turn to the question of whether Donnelley, as a monopolist, had some duty under the FTC Act not to discriminate unjustifiably between the competing classes of carriers so as to place one class at a significant competitive disadvantage. Stated another way, we must determine whether, as a matter of law, the owner of a Hscarce resource here, the OAG-must exploit that resource in a manner which creates no unjustified or invidious distinctions among competitors seeking access to that scarce rcsource," If it is determined that Donnelley did have such a legal duty, then we must consider whether Donnelley breached this duty and thereby violated the FTC Act, by failing: (a) to publish connecting flght information for commuter carriers; and/or (b) to combine the flight schedule listings of all three classes of carriers, (36) It is important to note how this case differs from ordinary monopolization cases where challenged acts or practices were engaged in to benefit the monopolist competitively, either in the market in which the monopoly power existed or in some adjacent market into which the monopolist had extended its operations. In United States United Shoe Machinery Cor. 110 F. Supp, 295 (D, Mass 1953), aff'd per curiam 347 U, S. 521 (1954), the court held that Unite Shoe had monopolized the market in shoe machinery in violation of Section 2 of the Sherman Act, 15 U, C. 2, The court's holding was based on a finding that United Shoe had obtained its monopoly power by, inter alia engaging in practices which had Hoperated as barriers to competition, 110 F. Supp. at 297. Foremost among these was its lease-only" policy, under which it refused to sell its machines, Because this policy eliminated a "second-hand" market in shoe machinery and 34 Prvious discussions of whether a monopolist has some duty not 1. discriminate have typically state the issue !j IL 1.involve a monopolist' s trtment of it. customer" oruppliel", In this C8, air e&e1' li reuir to pay for most connecting flight listings, so with regard to Donnelley s failure to list certin connections, we li considering it! behavior toward customern of a sort. Direct flight listings, on the other hand, ar published in the GAG fre; thf!fore with regard to Donnelley s failure to combine the tin&' of al! thre clas of caen, we cannot say that the air C!rreno ar customern Or suppliers. But whether the affected caers sell 1. Donnelley or pun:hu. from it is relatively unimportnt. What is important is that, due to Donne!ley's monopoly power in the market of information about scheduled pasnger air trnsporttion, the GAG is Ii Bearc reuro to which an air e&er must have ac if it is to compete effective!y.

), Opinion 95 F, raised barriers to new entrants, it was found to have injured United Shoe s actual and potential competitors in the production of shoe machinery and, in turn, to have helped maintain United Shoe s existing monopoly power, Here, by contrast, none of Donnelley s challenged acts is alleged to have maintained or enhanced its monopoly power in the market the OAG dominates, In Otter Tail Power Co, v. United States 410 U,S, 366 (1973), Otter Tail was a vertically integrated company which generated electric power, transported it over its electric transmission Jines, and distributed it "at retail" to towns in its geographic area, Otter Tail had monopoly in electric transmission lines in the area. When several towns refused to renew Otter Tail's franchise to distribute power at retail (having chosen to undertake this operation for themselves), Otter Tail refused to supply electric power at wholesale to the towns or to allow its electric transmission lines to be used to transport power from elsewhere. The Supreme Court found a violation of Section 2 of the Sherman Act. One of the grounds for this holding was that Otter Tail had used its monopoly power in one market (transmission lines) to enhance a monopoly in another market (retail distribution), (371In this case though, Donnelley s policies, which have affected competition in the air transportation market, were not intended to benefit Donnelley in that market, The question we are presented with is outside the mainstream of law concerning monopolies and monopolization, Indeed, there is very little law squarely on point. The seminal case regarding our question is (1964), affd sub rwm.Grand Caillo.u Packing Co" 65 F, C. 799 In LaPeyreLaPeyre v, FTC 366 F,2d 117 (5th Cir, 1966) Lapeyre the Peelers Company held certain patents which gave it a monopoly in manufacturing and distributing machinery which peeled shrimp, This machinery was virtually indispensable in the shrimp canning industry because of the high cost of peeling shrimp by hand, Peelers had a leaseonly policy, and their leasing charge was two times higher for canners located in the Northwest United States than for those located on the Gulf Coast, Peelers explained that the reason for this difference was that the Northwest shrimp were smaller than the Gulf Coast shrimp and required twice as much hand labor to process. Peelers argued that even though a machine to process the smaller Northwest shrimp cost no more to build or maintain than a machine to process the larger Gulf 35 Se lltoo Bi Twenty-Nine Prudio, Inc. v. Roi iW! Te!eca. ting, Inc. 365 F.2d 478 (5th Cir. 196), where the court upheld a cau3e or action alleging that the only licens televisionstation in a Florida town ha use iu monopoly in broadcating to further its plan to crete a monopoly in the preparation of television advertising. The court state: The tht!ory is that (defendants) used their legal monopoly power in a separate but relate field in which II monopolistic re late industry is not the national policy." G1. Uniwd States v. Grffth 33 U.S. 100 (194), for an example of horinta1 extension of market power from one grphic market to another. ,,,::. ,. , ,, ; . , ,, . . ;; .. .. ,,, .,, \, p \?q\.. ,..., ,,,,, ., ., ,..,.. ,,, ,,,, .. , : .. .. ,. .. ;. ( #,..... ,,. .: ,\.\\\.. .. .. ,. .., , ,...... ... ..\,, , . ,\,,,. .., , ,., ,;..,,...:: ,, ,,.\,:\,, .. ,,,....... ,.,, .. . .:,.,,.. ,,,,,, ,... ,.. ,:.. ... , .. ..,, .,... ..:.. ,. ... ,,.. ,&,, ,, ....p .,:,..,., ,..;, ,.;.... . ..., . , ,,,...,.. :.. ...,# ,,.., ,, .;:. ..,... , :.. .. .,. ,.....,... ., . ..,\,.., . ..,,..,,.,,;.......,,.., .. .., .., ..,..,... ;:::;; .,,,., ,;,.., ,.. .,.. ,..... ,... ,,. ,...,,. . ,.,... .. . ,, . .. #,,. ..... .., .:,,..,,....., ...; . . . ,., ,. .. .. ... ... ,. .... , . .,..... ,.. .., , , ., . , .. .. .. , .. .... ... ., , ,. , .. ,. ,. .. , ""e'3 "' . ..'i~~ei\eeX- "..~ '" $0 t \; \, to~ "u, 0" ' 1\e '1' ,,\" se'" e ,"1\ e$ e ~ ~ e~e ~~e e\"" ,1\ ~ c,~'" ,01\ e1\ee,",1\~""e ;)$0 CO ""..e 1\e$ '" e eS-o ,,\\e' t ,,\" ",'3 .. ~"e '1\ ,,, '" ""e ~ $ i,t$ ..~. e\e~$ c,1\S ' ' 1\'" "- ""- , ~ o.",'i ,4' " . 'W; . 01\ " e",t':01\ '" " 'o v . e \)i\ .4 ' 00 0 ,,,e -' .. .., o' ;W' ,, 'S'" ~G ",. ,,, H' "' , ",v" ,.' ' rl' , .0;"". . r '.

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Opinion 95 F, and the curtilment of competition in another. (T)here is abundant evidence in the record in support of the Commission s conclusion that Peelers leasing proure is innately discriminatory and anti-cmpetitive in its effect and that in circumstance of the instant cae, the refusal to treat the Northwest and the Gulf Coast shrmp canners on equal terms has substantially and unjustifiably injured competition in the shrmp canning industry. It is therefore an unfair method of competition forbidden by Section " 366 F,2d at 1 21.

In the recent case of Fulton v, Hecht 580 F.2d 124 (5th Cir. 1978), the Fifth Circuit reaffirmed the Commission s approach in Lapeyre, There, a South Florida dog-track operation, the alleged monopolist refused to renew its racing contract with the plaintiff, who raised and raced greyhounds, Plaintiff claimed this action was taken because of unfavorable testimony he had given about defendant before tbe state board which regulated dog tracks, Sidesteppil!g the issue of whether defendant possessed monopoly power, the court held that plaintiff had failed to make out a conventional Section 2 case "because he did not present any evidence that (defendant) used its power to enhance or maintain its position, Id. at 1247, The court then moved to plaintiff's alternative claim that under Section 2 "a monopolist has a duty to deal fairly with anyone who seeks to compete in an adjacent market. Id, The court held that defendant had no such duty. But it said: This is not to say that a monopolist's behavior having inevitable anticompetitive or other undesirable economic effects solely in an adjacent market can never violate any of the antitrust statutes. E. , this court has held that of the Federal Trade Commission (FTC) Act, 15 V. C. , prohibits a monopolist from discriminating between buyers in the price he charges for his product. Se LaPeyr v. FTC 366 F. 2d 117 (5th Cir. 196). Thus, under 5 of the FTC Act, a monopolist may be reuired to use uniform and reasonable criteria when dealing with those who compete in an (40Jadjaent market. Such a duty is no help to the instant plaintiff because his action is bas on of the Sherman Act, and there is no private cause of action for violation of the FTC Act. Id. 129 fn.

See also Laitrim Corp, v, King Crab, Inc" 24 F, Supp. 9 (D. AI. 1965); cf. Peelers Co. v. Wendt 260 F, Supp, 193 (W,D. Wash. 1966), Aside from the precedent cited above, there are collateral lines of authority which support imposition of some duty on a monopolist not to discriminate in dealing with persons who compete with one another in an adjacent market. Such a duty which we will call a duty not to be arbitrary 36 -would be consistent with common law principles of fair dealing, such as those that apply to innkeepers, common carriers, and businesses affected with a public interest. See Sullivan Antitrust at p. 125 (West 1977), Judge Learned Hand once stated that "Congress has incorporated into the Anti-Trust Acts the changing standards of 36 &e pages 44 45 infra for a discussion of what we mcnn by the term arbitra. REUBEN H. DONNELLEY CORP, Opinion the common law, and hy so doing has delegated to the courts the duty of fixing the standard for each case, United States v, Associated Press 52 F, Supp, 362, 373 (S, Y, 1943), aiid 326 D, S, 1 (1945), Imposing on a monopolist a duty-whether the standard is not to be unreasonable or not to be arbitrary-would also be consistent with action taken by the Supreme Court in important joint venture cases, In United States v, Terminal Railroad Ass n" 22 D,S, 383 (1912), several railroad companies had joined together to form the Terminal Railroad Association, which had gained control of all the rail routes of access to St. Louis, These "proprietary companies" agreed among themselves that unanimous consent would be required before a non-member railroad could be admitted to the Association or use the facilities. The Supreme Court held that the combination of all the routes of access under the exclusive ownership and control of less than all the railroad companies needing to use them constituted a violation of both Section 1 and Section 2 of the Sherman Act, Significantly, from the point of view of the case now before us, the Court ordered the Association to provide that all other railroads could become members of the Association, or use the Association s facilities, on reasonable and nondiscriminatory terms. In Associated Press v. United States, supra more than 1200 newspapers belonged to Associated Press ("AP"), a cooperative (41Jassociation engaged in the collection, assembly, and dissemination of news, AP By-Laws prohibited al1 members from selling news to non-members, and granted each member power to block its nonmember competitors from membership, The Court found that, although AP did not have a monopoly in its field, it was the largest news agency and denial of an opportunity to acquire news from it could be a significant disadvantage to "the publication of competitive newspapers, Id, at 13, The Court held that the restrictive By-Laws constituted a violation of Section 1 and entered an order stating that AP could not maintain By-Laws which permitted discrimination against applicants-for-membership who competed with existing members.

Those two cases are different from the case at hand in that they both involved an association of horizontal competitors who controlled a competitively important facility that "unassociated" competitors lacked and could not reproduce, See III Areeda and Turner Antitrut Law 729g, at p, 24 (Little, Brown & Co, 1978). Nevertheless, the Court' s orders demonstrate a concern that "scarce resources" be made available on a non-discriminatory basis, Cf, Silver v, New York Stock Exchange 373 D, S, 341 (1963). And if a duty not to discriminate unreasonably can be imposed on a joint venture conferring significant competitive advantages on its competitor-members, it is a small step to Opinion 95 F, impose a duty not to be arbitrary on a monopolist who controls a scarce resource which cannot be duplicated by the joint efforts of companies seeking to use it.

Policy reasons for imposing a duty not to be arbitrary are compelling, Since we are dealing with a monopolist, the victimized customer or supplier cannot turn to an alternative sourcc. Thus, a refusal by the monopolist to deal, or to deal otherwise than on discriminatory terms, essentially means the disfavored person suffers a competitive disadvantage which cannot be avoided, Such a result should not come about from an arbitrary decision by the monopolist. Moreover, arbitrary decisions may affect resource allocation in the adjacent market-that is, favor onc competitor over another for reasons entirely divorced from considerations of efficiency or wilingness of the disfavored seiler to compete effectively, See Sullivan supra, at p. 131. It is inconsistent with the fundamental goals of antitrust to permit such results if they can be avoided at acceptable costs, (42) Formidable policy reasons have been advanced in opposition to the existence of such a duty, For example, it has been argued that banning arbitrary refusals to deal by monopolists would place antitrust enforcers in the undesirable position of determining the legality of refusals based on social, political, or even personal reasons. The example has been given of a monopoly movie theater which refuses to admit men with long hair, or a monopoly newspaper which refuses to publish advertising from cigarette manufacturers, See III Areeda and Turner sup-ra 736a, pp, 270-71. But under the standard we are enunciating now, neither of these examples would trigger antitrust scrutiny. Presumably there is no competition among persons who attend movies, and therefore arbitrarily excluding one group of patrons or another would not inflict a competitive injury. Similarly, refusing to publish ads for all cigarette companies would not place any of those companies at a disadvantage vis vis a competitor. Certainly, it would be unwise to offer antitrust enforcement as a knight errant bound to right every wrong inflicted by dominant companies; the goal here rather is to protect a competitive process by outlawing arbitrary But even whenmonopoly behavior that inflicts a competitive injury,37 it is so limited, it is probably true that imposing a duty not to be "' The result here may be incon istent to !\rne extent with the theory ofColgatthe doctrne Units StkB Colgl1k & Co., 25 U.S. 30 (1919). InCo!gak the court regnize the right of IL trer "frely to exerci!! his own independent discretion 11 to parie. with whom he wih deal", at least in the absence of any purp to crete or maintain a monopoly. Here there is no such purp, but we believe the philo8phy ofColgak t give way to a limited extent where the busine3judgment is exercised by a monopolist in an arbitr way. , .

Opinioil arbitrary will require antitrust enforcers to occasionally pass on the legality of refusals based on social, political, or personal reasons. However, notions of fair dealing are part of the inheritance antitrust '9law received from (43)the common law. Cf, United States Associated Press 52 F, Supp, 362 (S. Y. 194); Sullivan supra at p. 125, And this inheritance should not be shunned beause it may produce hard cases.

Another reason often advanced in opposition to imposing a duty not to be arbitrary is that refusals to deal at all wil not be the only question presented; rather, there wil be questions concerning discriminatory terms which do not amount to a total refusal to deal. Such questions, it is argued, wil inevitably lead court into complex issues regarding what constitutes a reasonable price, whether terms are really comparable, and so on. Thus, an order directing a seller to deal on reasonable terms, or to not be arbitrary, wil lead a cour or agency to specify what constitutes reasonable terms and to police compliance over time-a regulatory role that courts have wisely shunned whenever possible. Since these problems are seen as unavoidable, it is urged that this problem should be left to the legislature. We agree that it is generally undesirable for court to place themselves in a position of monitoring the pricing activities or other variable; on:-goillg activitiesofamonopolist. But.. we .arereviewinga refusal by Donnelley to list certain connecting flght information, and to group the listings of all carriers together-matters not involving pricing questions at all. As is demonstrated in the application of the law to the facts of this case infra we feel comfortable scrutinizing Donnelley's conduct on the two challenged issues to determine whether the policies were arbitrary, and drafting an order which will not involve (44)unusual supervisory burdens.40 In addition, we feel that this is not necessarily an area that should be left to the legislature. There are too many varied bottleneck monopolies in this country to expect that the problem would lend itself to resolution through a single sweeping formulation. On the contrary, this is a prime area for the 3" (Ansider, for example, ir monopoly newspaper refusng tot.e ad from a paicullU dgatteoompay beu! of the style of prior ad or the politi views of its president. 39 Indee faiJ'es" is the expre standar mandate by Congr iil Section 5 of tlw F"C Ad. SincethiB proeeing WIW institute under Setions, we have riODCon tOdedde whether any similar duty not tobearitr can be iirpoon monopolists under Section 2, We se no pel1ua.ive ren, hm..ever why a Simihi.r duty would not arse under the Shermai1Act:

.. Itisirnportrit to notethequalifying coriditionsthatapply here. A1 alrey note, the aritr action by II monopolist must caus( a. ccmpetitive injury, and the dOetrinemore Clily applied where it doe not put the cour in an on-goingregulatOryroJe.In addition, this is not II C3 where aseJler ll attempting to go out ofbusinea and the court iaasked to mandate continued operatioJl;here it' sdeathat thtiOAG will continue to publifh and the onlyJsaue involve\ its format: Finally, an order mandating it certn fonntin pubiicationwOuld not reuire the OAGtO incr its capacity significantJyor incur other major expenSs. There, toia courlriightbere!uetantto8CtBince it could notguarante the monopolist .a return on investment nec fu eJlpandcapaity or mae major inopetiorl. SeeHI Areda & Turner, mpr, 729ga.tp. 7A n.25. ;DERAL TRADE COMMISSION DECISIONS Opinion 95 F, case-by-case approach embodied in the common law and carried out by adjudicative tribunals, Moreover, by commanding the Commission to seek out and stop "unfair methods of competition, the legislature has already spoken, That standard, like the common law, was meant to be flexihle and capable of application to new and changing economic conditions.

We come finally to the question of how to define the term arbitrary, " In spite of the broad language in Lapeyre and Fulton Hecht, supra we do not suggest that a monopolist must always deal on precisely equal terms or that a court or the Commission should measure the reasonableness of a monopolist's conduct vis--vis those with whom it deals against an inflexible standard. Rather, we should limit ourselves to a concern with conduct which results in a substantial injury to competition and lacks substantial business justification. In examining the question of business justifications, the economic self interest of the monopolist would be the major but not the exclusive consideration, Where there is little justification for a business policy, the antitrust laws can require that the monopolist take into account the effect on competition of its actions in the line of commerce made up of its customers, suppliers, or others wishing to deal with it. (45) Of course, we cannot in this opinion anticipate and react to the multitude of fact situations that could arise, Our application of this standard to the facts of Donnelley s publication policies should provide some indication of what we mean by "arbitrary Applying the legal standard to Donnelley s acts, We believe Donnelley s failure to list connecting flight information for commuter carriers was arbitrary and in violation of the standard set out above,4t The discussion at pages 7- supra demonstrates that the failure to list this information caused commuter air carriers significant competitive injury, On appeal, Donnelley has offered no explanation whatsoever for its refusal to list commuter connecting flights, and we can conceive of no reason, particularly in light of the fact that Donnelley changed its policy on this score with apparent ease and no il effects after the complaint in this ease was issued, From documents introduced at the hearing, it appears that Donnelley viewed the issue of listing commuter and intra-state connecting flghts as being tied to the issue of merging the listings of all three classes of carriers (see, e,!J" CX 11; CX 12B), and decided not to list such connecting flights (until 1976, at least) because it had decided not to , As we said at p. 7 fn.4=pr, there was 110 showing that DonneHey s fu.ilure to list intrs-st.te connecting flights cause thos carrers any competitive injury, and therefore we do not hold that such failure cOrntitut. u violation of Section 5.

REUBEN H. DONNELLEY CORP.

Opinion merge the listings of all three classes of carrers. But in an internal Donnelley report prepared in 1972, it was revealed that commuter and intra-state connections could be included in the OAG in separate groupings for only $6000. Yet Donnelley did not change its format to include them until December 1976, eight months after this suit was brought, Furthermore, as we said before, Donnelley has made no mention (46)of any adverse effects resulting from the 1976 change in this policy, We hold that Donnelley s failure to list commuter connecting flights was arbitrary, caused commuter air carrers significant competitive injury, and constituted a violation of Section 5. Donnelley s failure to merge the listings of non-certificated carriers with those of certificated carriers has also caused significant competitive inj ury to non-certificated carriers. This is so because most users of the OAG read the listings of flghts between a city-pair from top to bottom and pick the first convenient flght; therefore, listing the flghts of certificated carriers before the flights of non-certificated carriers often results in users picking a certificated flight without even looking at the listings for non-certificated carriers. See pages 13supra. (47) We cannot say, however, that the failure to merge the listings of all three classes of carriers was arbitrary. Donnelley states that its separate listing policy is justified because each of the three classes of carriers has a different legal status and provides a fundamentally different level of service. They argue that separate listing is therefore required to put the OAG's users on notice as to what level of service is being offered in connection with a particular flght. In rebuttal complaint counsel established that the differences between the three classes of carriers are less extreme than Donnelley claimed, See pages 12-17 , supra. Complaint counsel also showed that Donnelley has been Jess than perfectly pure in carrying out its separate listing policy, as it lists the flights of commuter replacement carriers and some commutertype foreign air carriers with the flights of certificated carrers, See pages 17- supra.

On balance, we find that Donnelley had a substantial business 42 On appel, Dormelley 8rgu that no order should be entered regaing the publishing of connecting flight information1, beuse it began to publish such information in 1976 and the ia no evidence that it is likely to stop. But we do not believe that the discontinuance of a practice eight months after a complaint is illued against it is anything more than a reaction to the Buit.Cf. United Stotesv. ParJa, Duvi & OJ., 362 U.S. 29 48 (1960). According!y, we have entered an order provi,ion regaring the listing of connecting flght information. And although we do not hold that Donnelley s failure to publish intra-state connections violate Section(Bee pag5 7 fn.4 Inpr), the orner in this prohibits Donnelley from arbitrnrily di!lnmina\.ng agaimt4-ny caer or eJao of caen in the listing of connecting flght information. We believe it is rea. on(lble to extend the order to an air caers beuse, even though complaint ('.(unsel did not attempt to show that intra-state carrers had ben 111jur hy not having their connecting flights listed it is reasonable to asume that a failure to list the eonnecting flights of any ellI of air carrer would rent in a competitive injury to that elass. Extending the order in this way wiJJ serve to prevent future violation1 similar to thos found here and IS justified under our wide discretionfMhion "relief to retnin other like or related unlawful acts. TCv. Matl Bro. 1=., 359 U.S. 38, 392 (1959). Opini()D 95 F.

justification for its separate listing policy. The decision notlo merge commuters' listings was based on Donnelley s belief that certificated carriers provide more reliable flght information for listing in the OAG, and are generally faster; safer, and more comfortable than cOllnmter carriers. And with respect to intra-state carriers, it appears that the legal requirement that these carriers not accept passengers or baggage engaged in an interstate journey led Donnelleyofficialstq arefullynoted inthe OAG:conclude that intra-state carriers should be ,jgbeing different from other carrers. While we might have decided that it would be better and fairer to combine the listings of all three classes of carriers and denote commuter and intra-state flghts by the use of some symbol, We cannot say that the different course Donnelley chose was so completely lacking in reasoned support asto be arbitrary, F. The First Amerument, The order entered by the ALJ in this case prohibited DOImelley from discriminating. among the three classes. of carrers in the order of listing of their flights or in the publication of connecting flght information, On appeal, Donnelley asserts that both of these prohibitions abridge their First Amendment rights and are unconstitutional. Since we reverse the ALJ' s finding that Donnelley s failure to merge the listings of all three classes of carriers was in violation of the antitrust laws, Wee concern ourselves only with Donnelley s cl:..im regarding connecting flght listings, And. we reject. Donnelley contention that an order provision which relates to the content of the OAG is unconstitutional. (48) Donnelley has engaged in conduct which violates Section 5 of the FTC Act, 15 U. C, 45. Given this fact, we are required to devise " reasonable method of eliminating the consequences of the ilegal rs v. United States 435 U, conduct." Nat' ! Soc y of Professional! Eng 679, 697 (1978). The only conceivable method of reemedying the conseequences of Donnelley s prior ilegal conduct is to order them not to discriminate arbitrarily against any air carrier or class of air carriers in the listing of connecting flghts. The effect of this order may be to require Donnelley to publish information in the OAG which it might otherwise choose not to (as, indeed, it has in the past); but that does not mean that the FTC, as an arm of the state, has impermissibly intruded on Donnelley s First Amendment rights, In Nat' ! Soc y of Professional! Eng, supra the district court had found the Society guilty of a violation of the antitrust laws for promulgating an ethical canon which prohibited competitive bidding; accordingly, it entered an order prohibiting the Society from adopting any policy statement, guideline REUBEN H, DONNELLEY CORP, OpinHm etc., which stated or implied that competitive bidding is unethical. The Society argued before the Supreme Court that this order abridged its First Amendment rights. The Court dismissed this argument in short order:

Having found thesQCiety guilty of a violation oftheShenran Achthe District Cour Was ernpoweredto fashion a.appropriate restraints on the Soiety future activities both to avoid a recurrnce of the violationand oo elimillate its consuence; While the resulting order ma.y curtilthe exercise-of liberties thattl1eSoiety might otherwse enjoy, that is a necessar and in cases - such as this; unavoidable - consuence of the violation. J ustasan injunction against price fixing abridges the freedom of businesmen to talk to one anotheralx)Utprice; sO too the injunction in this cae must i-trictthe Society's range of cxpressionontheethicsofcompetitive bidding.The First Amendment doe "not make it ;:. impOible e!Jorc lawsagainst agreements in: retraint trade;; ." In fashioning a remedy, the District Cour may, ofcourse, wnSiderthefact its injunction may infringe. upon rightsthat\Vould. otllerwisebe constitutionally protected, bufthose pro tionSdq n()tprevent (49)it from remedying the antitrust violations. ld. at 697 (citations omitted). Cf. Inain JrYrn! v.. Uniwd Staws 34 U, . 143 155--6 (1951). We bclieye this language is dispositive of the First Amendment issue raised by Donnelley.

In reaching this conclusion, we reject Donnelley s contention that Miami Herald Pub!ishirrCo, ToriU.o 418 U.S.. 241 (1974), is controlling, In that case the Court was required to pass upon the constitutionality of a Florida statute requiring any newspaper which assai1ed the personal character or official record of any candidate for political offce to print free of cost any reply the candidate might wish to make. The Courtfollnd the statute violative of the First Amendment, but the language it used in doing so left it clear that the. COurt was talking about "political" speech and the special role of newspapers in the dissemination of such speech:

(UJnder:theo rationof the Floridastltute, political . arid electoral coverage would be blimtedor reduced; Gov rmnent-nforcd right of acss inespably dampens the vigor arid limits the variety: Of public debate; ;;Anewspaper is more than a pasive reCeptale or conduit fornews, comment andadvertising. ld. at 257-5R The OAG, by contr"st, is not a newspaper, and it is not even a "passive and advertising itisreceptacle orc()nduit for news COffrnent, passive receptacle only for "commercial" speech,43 Qf coure, the fact that the OAG (50)is not a newspaper and contains only colImercial speech does not mean that it is not entitled to First Amendment 4J ThoughriotaUoflhcliating! contained in the OAG ar paid fof by thl) caef involved webelievi!the information cont.iried therein stilqualififf ascornIrcl"ia! speh bellit il infonnation WIto who ia offenngwhat SCM'ice and atwhatpriCe. Se Virynia Stare Ed. DfPhArmV; Virgnia Citi Come Oml, Jne. 42 748(1976). Furthennore, the information contained in the OAG serves WIthe basis on which minions ofprivaw ecnomicdecisionH ar made, which inthe aggrgate have a Bubatantia! I)ffec on how certin reurc ar allocte. Seeid.

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The majority found that respondent's failure to merge competing certificated, commuter and intrastate flights was not arbitrary because, , , "on balance " it finds that "Donnelley had a substantial business justification for its separate listing policy. Thus the majority has found a lack of substantial business justification in a situation where no justification at all was advanced. In order therefore to explore the meaning of the phrase "substantial business justification" beyond such a situation, it is necessary to examine respondent' s reasons, which the majority finds to be "substantial " for not merging the listings of competing certificated, commuter and intrastate carriers.

The Opinion states:

The decision not to merge commuters' listings was based on Donnelley s belief that certificated carrers provide more reliable flght information for listing in the OAG, and are generally faster, safer, and more comfortble than commuter carrers. And with respect to intra-state carrers, it appears that the legal requirement that these caers not accept passengers or baggage engaged in an interstate journey led Donnelley officials to conclude that the intra-state carrers should be carefully note in the OAG as being different from other carrers.

It is unclear to me which one of these arguments or whether all in combination constitute the "substantial business justification" found by the majority. I therefore examine them separately. 1. Certificated air carriers are gen€mlly faswr and moe comforable than rwn-certificawd earners, It is true that CAB regulations limit commuter air carriers to planes which have a capacity of no more than thirty seats and a "maximum payload" of 7500 pounds,s Such planes usually fly at speeds of 200 to 300 miles per hour," As a result of CAB regulations, then, commuter carriers, generally, are smaller and do not fly as fast as certificated carriers, It is also true, as the AU noted, that commuter carriers normally fly routes averaging only about 75 miles, and that therefore "comfort" factors may not be as important to travelers as other factors such as departure and arrival times.'o There (3)arc intrastate carriers which, generally, fly planes of Respon-equivalent size at equivalent speeds as certificated carriers.ll dent now discloses in the OAG through the use of symbols such things as departure and arrival time (which implicitly discloses speed); the 6 S!ipOpinionat47.

T S!ipOpinionat47.

8 Slip Opinionat 17-14 Cf' R 298.

Initial Decision, at p. 22 Finding71.

LO initial Decision, at PI'. 25 - Findings 77, 78. " Initial Dci"ion, at p. 25, Findings 72--76. Concurrng and Dissenting Opinion 95 F. number of intermediate stops, the type of aircraft, and the availability of meals or snacks (which discloses comfort factors). The relatively sophisticated consumers wbo use the OAG are thus apprised of speed and comfort factors, whether the flights are merged or separately listed, 2. Certificated carrrs are generally safer than rwn-certificated carriers, Two government-dponsored studies (RX 196, RX 563) show that the fatality rate per 100 million miles flown and per 100 000 departures is slightly higher for commuters than for certificated carriers, There is no safety comparison study of certificated and noncertificated carriers for the city pairs in which they compete yet it is obvious that the area of the country flown in, weather and the airports involved are major factors in air safety, 12 Though the validity of what safety evidence exists is contested, safety is plainly a major concern to air travelers. If the purpose of separate listings were to apprise travelers that a safety risk might be involved in dropping down from the first category to select a flight, it is conceivable that even the contested evidence provides a justification for respondent' s listing practice. However, respondent does not list individual carners on the basis of their safety records, nor does the OAG in any way suggest that safety is involved in the way carriers are listed, The OAG (RX 571) contains at least forty pages of prefatory material explaining the various listings and symbols used in the guide. Safety is not mentioned. Thus the relatively sophisticated consumers who use the OAG are not apprised of comparative safety factors, whether the flights are merged or separately listed, infartian far 3. Certificated carrrs provide rrre reliabl. flight listing in the GAG, There are two questions here. The first is whether non-certificated carriers are less likely to fly scheduled flights listed in the OAG than arc certificated carrers, The three studies of scheduling reliability in the record13, two of which were prepared by respondent reveal that certificated and commuter reliability in this sense is roughly equivalent. Indeed, when measured by consumer complaints fied with the CAB (CX 135), commuters come out ahead of certificated carriers. The evidence available in the record shows that in 1974 96% of scheduled commuter flights operated, which is "comparable with certificated carriers, !4 The second reliahility question posed is whether commuters so often go out of business without notifying respondents that consumers are inconvenienced by the unreliability (4)of commuter listings in the OAG. There is ample evidence that small ,. Initial Dcdaion, at p. 36, Transript 2662-, 26. .3 ex 135, ex 189, ex 187 It InitialDecision, at p. 29 finding 101. REUBEN H, DONNELLEY CORP, Concurrng and Dissenting Opinion commuter lines regularly enter and exit the market. However testimony establishes that approximately 90 to 95% of passengers carried by commuters travel on 50 to 60 commuter lines, firms which respondent's own documents identify as stable. 15 In any event respondent nowhere in the guide instructs users to be wary of any scheduling unreliability on the part of its separately listed noncertificated carriers or that the listings may no longer be valid. Thus the relatively sophisticated consumer who uses the OAG is not apprised of any "reliability" factor, whether the listings are merged or separated, 4. Intrastate ca.,rs are listed separately because of legal restritions barrng these carriers from accepting passengers or bagage involved in interstate Journeys. This legal restriction no longer exists. 5, The justifications consUkred as a group, None of these reasons which Donnelley has advanced in justification of its separate listing practice seems to me substantial enough to justify the admittedly substantial anti-competitive effects of that practice, Neither do I believe that this is an instance in which these insubstantial reasons when added together, become substantial. What Donnelley has shown in sum, is that there may be some differences between a certificated and a non-certificated carrier: an intrastate carrier, while it may fly planes as fast and as comfortable as a .certificated carrer, only fles intrastate; ' a commuter aircraft is generally smaller, flies at a slower speed and may not be as "comfortable" as a certificated carrer. It is also conceivable, though I am unpersuaded by the evidence in this record, that in city pairs where they compete (which is the only case in which the listings would be merged) certificated carriers are safer. Even if I were to consider the differences in service, singly or in combinations to justify a substantial anti-competitive injury1 respondent' s failure to adhere to practices consistent with its own arguments undercuts their substantiality in my mind. Respondent lists any commuter serving as a "replacement" carrier for a certificated airline with the certificated carriers and denotes it by use of a symbols Significant numbers of foreign carriers, some of which fly no larger aircraft than commuters, are undocumented as being safer, are no more or less reliable, and surely are no more preferred by travelers, yet are listed with the certificated carriers, " Respondent also publishes the OAG international edition in which it merges all types of carriers engaged in foreign flights, !9 Respondent also supplies SCIP tapes, in 10 Transript at 94, 266; ex 135.

,. Slip Opinion at 14, Note 11; Initial Dcci!iol . at p. 28, Finding97. 11 Slip Opinion a.t 19-20.

'8 Initial Dci ion. atpp. 12-- , 25, J.'indings Z527 , 73. 19 Initial Decision, at p. 33 Finding 12.

lJ4-Q71 rL., Final Order 95 F, which it (5)apparently merges the listings, to twenty-five certificated carriers.

In sum, then, I find myself in general agreement with the majority in this case, but would only go further on the question of merging the listings, The majority says:

While we might have decided that it would be better and fairer to combine the listings of all three cl38ses of carrers and denote commuter and intrastate flights by the use of some symbol, we cannot say that the different course Donnelley chose was so completely lacking in reasoned support as to be arbitrary. It is a very close question, But for the reasons outlined here, I would find Donnelley s separate listing practice to be arbitrary. FINAL ORDER This matter having been heard by the Commission upon the appeal of respondent from the Initial Decision, and upon briefs and oral argument in support thereof and opposition thereto, and the Commission for the reasons stated in the accompanying Opinion having determined to affirm in part and reverse in part the Initial Decision: It is ordered That the Initial Decision of the administrative law judge be adopted as the Findings of Fact and Conclusions of Law of the Commission, except to the extent inconsistent with the accompanying Opinion.

Other Findings of Fact and Conclusions of Law of the Commission arc contained in the accompanying Opinion.

It is further ordered That the following order to cease and desist be and it hereby is entered:

It is rdered That respondent The Reuben H, Donnelley Corporation, and its parent, subsidiaries, successors and assigns, officers agents, representatives, employees, and any concern controlled by it (including joint ventures), directly or indirectly through any corporate or other device, in connection with the. publication of the Official Airline Guide - North American Edition or any successor publication shall forthwith cease and desist from failing to publish connecting flight listings for commuter air carriers pursuant to whatever guidelines govern the publication of connecting flight listings for certificated carriers, (2) 20 Initial Decision atp. Finding 124.

21 S!ipOpinionat47.

REUBEN H. UU.NN Ll.r vU.l"'.

Final Order II.

It i8 further ordered That respondent The Reuben H. DDnnelley Corporation, and its parent, subsidiaries, successors and assigns officers, agents, representatives, employees, and any concern controlled by it (including joint ventures), directly Dr indirectly through any corporate Dr Dther device, in connection with the publication Df the Official Airline Guide - N Drth American Edition Dr any succeSSDr publication, shall forthwith cease and desist from otherwise arbitrarily discriminating against any air carrier or class of air carriers in the publication Df connecting flght listings fDr air carriers providing scheduled passenger air transportation, II.

It is furtlwr O'rdered That respondent The Reuben H, DDnnelley Corporation and its successors and assigns shall notify the Commission at least thirty (30) days prior to' any proposed change in the corporate respondents such as dissolution, assignment Dr sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries Dr any Dther change in the cDrpDratiDn which may affect compliance DbligatiDns growing Dut Df this Drder. Interlocutory Order 95 F, IN THE MA TIER OJ' KELLOGG COMPANY, ET AL, 14, 1980 Doket 888.'. Interlouto Orr, Jan. ORDER DIRECTING ISSUANCE OF COMPULSORY PROCESS By order of November 13, 1979, the Commission directed Chief Judge Daniel Hanscom, Deputy Chief Judge Ernest Barnes, and Deputy Executive Director Barry Kefauver to file affidavits concerning the circumstances of former ALJ Harry R. Hinkcs' retircment and the negotiations leading to the execution of a eon tract with Judge Hinkes, In that order, and in a letter sent the fonowing day, the Commission further requested that Judge Hinkes file an affidavit concerning this matter. Judge Hanscom, Judge Barnes, and Mr. Kefauver have complied with the Commission order, Judge Hinkes has not responded to the Commission request.

1979 order, the For the reasons stated in its November 13, Commission requires the evidence of Judge Hinkes. We aceordingly determine, pursuant to Section 9 of the r'ederal Trade Commission Aet to require by subpoena thc appearance of Judge Hinkes for purposes of responding to the questions posed to him in our letter of November 14 1979, Thc General Counsel is hereby directed to prepare and issue such a subpoena, and to seek enforcement of it if necessary. Judge Hinkes shah be deemed to have complied with such subpoena if he submits within 20 days of the date of service, the affidavit requested by our letter of November 14, Upon receipt of Judge Hinkes' affidavit or upon the taking of his statement, the Commission intends to invite the views of the parties as to the additional information, if any, that is necessary for the resolution of this matter, It is so ordered, Commissioner Pitofsky not participating.

R. GRACIC & CU, Complaint