Order 98-1-18 / American/Iberia, American/TACA, American/British Airways / Issued January 21, 1998 / Served January 27, 1998

Applications of

AMERICAN AIRLINES, INC. and IBERIA LINEAS AEREAS DE ESPANA, S.A.

for exemptions and Statements of Authorization (U.S.-Spain and beyond code-sharing) Docket OST-97-2965 97-2966 and Undocketed

OST-96-1700

Joint Application of

under 49 U.S.C. §§ 41308 and 41309 for approval of and antitrust immunity for alliance agreement

OST-97-2058

Joint Application of

for exemptions, certificate authority, undocketed foreign air carrier permit authority, and statements of authorization

Dockets OST-97-2054, 97-2055, 97-2056, 97-2057

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Delta's answer opposed the applications to the extent that American and Iberia proposed code-share services over routes not named in the U.S.-Spain Air Transport Agreement. Delta also requested that the Department consolidate the applications with the American/ British Airways application for alliance antitrust immunity in Docket OST-97-2058 and the American/TACA code-share applications in Docket OST-96-1700, to examine the combined effects of these arrangements on competition in Europe-U.S.-Latin American markets. Delta filed its answer in these other dockets as well.

In support of its motion, American states that it submitted its confidential material in Docket OST-97-2058 in reliance on the Department's affidavit procedure, which limits interim access to documents covered by a Rule 39 motion (pending action on that motion) to counsel and outside experts of interested parties who file affidavits with the Department promising to protect the confidentiality of the material by agreeing, among other things, to "use the information only for the purpose of participating in this proceeding." /1 American asserts that Delta's representatives filed such affidavits in Docket OST-97-2058, albeit belatedly in one case, but that its counsel then disclosed some of the

1/ Notice Granting Access to Documents, Docket OST-97-2058, July 31, 1997.

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specific confidential information obtained in that proceeding in a pleading prepared for and filed in two other proceedings. According to American, this constitutes "a serious, clearcut and inexcusable violation of the Department's orders and of Delta's own affidavits." /2

With regard to the second point, Delta states that "only those persons who filed confidentiality affidavits in the American/ British Airways case were served a copy of the confidential version of Delta's pleading." Delta asserts that, by limiting distribution of the version containing the confidential sections to the Department to "AA/BA affidavit holders" it "fully protected the confidentiality of this information." With regard to the individual who examined American's information in Docket OST-97-2058 without an affidavit on file, Delta indicates that he had completed an affidavit in January, but that the Department did not begin accepting filings until March, and that until he resubmitted the affidavit in September he "considered himself bound by and acted consistently with terms of the confidentiality affidavit commencing in January 1997."

Delta therefore claims that American's motion "lacks substance," and that it is "nothing more than an attempt to transform a procedural triviality into another false claim of abuse of the Department's confidentiality procedures."

2/ American also contends that Delta's answer should be stricken from the American[British Airways and American/TACA dockets for the independent procedural reason that it constitutes an untimely and unauthorized pleading in those proceedings.

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proceedings are formally consolidated, through the use of a common affidavit covering participation in any American alliance proceeding, and that parties in each case should be allowed to comment on the information already filed, subject to the standard confidentiality procedures.

Based on the facts as stated in the pleadings, we find that Delta, through its agents, has violated the Department's confidentiality procedures in several significant respects, and that the carrier's answer to the American/Iberia applications should be stricken, both the "confidential" and the redacted versions, in all dockets in which it has been filed. While we have considered other sanctions as well, we have decided against taking such action in light of certain mitigating factors that should be taken into account.

Delta's actions were a serious breach of our confidentiality procedures and Rules of Practice. As we have stated in other cases, it is the responsibility of those persons signing pleadings before this Department to ensure full compliance with our rules. In this case, an attorney did not file an affidavit to view confidential materials, yet gained access to the materials. That attorney states, however, that he did not divulge that material and used it only in accordance with the terms of our order.

In addition, Delta certainly used confidential information that had been filed in the American/BA proceeding in other cases, by its filing a pleading containing that information in those cases. It did not ask permission to do so, in contrast to other parties that sought consolidation of the proceedings in part to achieve this access legitimately. Delta, however, only provided that information to those persons in the other cases who had filed affidavits in the American/BA case.

In view of these circumstances, we believe that Delta did not intend to divulge confidential information inappropriately, and that no serious harmful disclosure occurred. Nevertheless, we perceive grave potential for erosion of the integrity of our confidentiality procedures in such lapses, unintentional though these may have been. We believe that striking the pleading in question from the records of all the dockets in which it was filed represents an appropriate response in view of the unusual and unprecedented character of this controversy. In any future cases, we may take more severe action, particularly if we discern any suggestion of intentional failure to comply with our confidentiality standards. Our rules (14 C.F.R. section 300.20) afford a broad range of sanctions for such offenses, including permanent disqualification from appearing before the Department and assessment of civil penalties. Practitioners and Parties are now on notice that lapses in adhering to our confidentiality procedures will not be tolerated.

With respect to the pleading filed by Delta, since the information included with that pleading was used inappropriately, we find that the public interest in

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preserving the integrity of our confidentiality procedures requires that the pleading be stricken.

ACCORDINGLY,

1. We grant the motion of American Airlines, Inc. to strike the answer of Delta Air Lines, Inc. in Dockets OST-97-2058, OST-97-2965, OST-97-2966, OST-97-2054, OST-97-2055, OST-97-2056, OST-97-2057, and OST-96-1700; and

2. We will serve this order on all parties to these proceedings, the Ambassador of Spain in Washington, D.C.; and the U.S. Department of State (Office of Aviation Negotiations).

By:

CHARLES A. HUNNICUTT

Assistant Secretary for Aviation and International Affairs