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by the Deregulation Act, a $1,000 penalty for each day of unauthorized suspension is unlikely to be an important economic deterrent for a major airline; in fact, paying a $1,000 fine may often be cheaper than operating uneconomic service for another day. A larger potential penalty would provide greater incentive for the airline to maintain service at the community as long as it is legally required to do so. As you know, the chief beneficiaries of that kind of incentive are smaller and medium-sized communities.
Another situation in which a higher civil penalty ceiling would be useful is where an airline violates the Board's consumer protection rules, such as those governing oversold flights. If a carrier bumps numerous passengers from a flight without complying with the rules, we may have to treat each denial of boarding as a separate offense to yield a meaningful economic penalty. By the time an enforcement proceeding can go to trial, some, or perhaps many, of the passengers may not be available as witnesses, and therefore we may not be able to establish enough violations for a significant penalty. A $25,000 maximum penalty would enable the Board to vindicate the public interest in such cases without having to prove multiple instances of violations.
An increased civil penalty would also enable us to deal more satisfactorily with violations of our rules of conduct and procedure. As matters now stand, persons involved in such a violation can only be subjected to a $1,000 penalty. The proposed $25,000 maximum provides a much more effective sanction and would improve our ability to safeguard the integrity of the Board's processes.
The Board is highly sensitive to the fact that additional civil penalty authority, if exercised indiscriminately, could have a disproportionate impact on smaller companies, such as commuter operators or small certificated carriers. As we do even now, the Board would, of course, take into account the size and financial resources of the respondent in determining what amount of penalty is appropriate in a given case. Moreover, nothing in H.R. 7488 would diminish the procedural rights to which any respondent is entitled in a CAB enforcement proceeding or the mitigating factors that may be considered in fixing the amount of a penalty.
The Board also favors increasing the criminal penalties for knowing and willful violations of title IV of the act or orders issued under its authority. This provision, which increases the maximum penalty for each offense to a fine of $25,000 and imprisonment for up to 1 year, should significantly improve the deterrent effect of section 902. It is sensible and logical, in our view, that the maximum fine for criminal convictions under section 902 be at least equal to the civil penalty authorized by section 901. Accordingly, we believe that the criminal provisions should be modified as proposed in sections 3 and 4 of H.R. 7488. We also note that section 4 of the bill would extend the sanctions for knowingly and willfully, failing to file required reports or falsifying records to "any person. This change would strengthen our ability to enforce the new power given to the Board in the International Air Transportation Competition Act, which was signed into law early this year, to require reports from foreign air carriers—as well, I might add, as our ability to obtain information from persons who may be in control of an air carrier for purposes of the act, but not within the officer,
agent, employee, or representative classifications that are currently contained in the language of section 903.
Section 6(b) of the bill would also clarify that ultimate findings of liability and the amount of penalties by the Board are not subject to relitigation before the district courts in any action to collect a penalty that has been assessed. Section 1006 of the Federal Aviation Act provides that the Board's orders are subject to review exclusively in the Federal circuit courts of appeal, and its factual determinations, if supported by substantial evidence, are conclusive. The new section 903(b)(1) that would be added by H.R. 7488 is consistent with the present law and provides a useful clarification that this procedure applies to orders in which the Board has assessed civil penalties for violations of the act or its regulations or orders.
Finally, as a technical point, I note that the bill proposes to add "a new fifth sentence,” concerning notice and an opportunity to be heard in DOT proceedings, to section 901(a)(1) of the act. We understand, of course, that this addition is to be part of the first paragraph of the subsection and is not intended to repeal or replace the next sentence, beginning the second paragraph, which contains the Board's civil penalty authority. Although we believe the intent is clear, it may be useful to insert the words in the first paragraph” in line 8, page 2 of the bill to eliminate any possible question.
Thank you for your attention.
Mr. Fary. Some witnesses have suggested that it would not be appropriate to increase civil and criminal penalties for violations of regulations of an agency that is not going to be around after 1985. Do you think sunset should be a consideration when we evaluate the need for increased CAB penalties?
Mr. ROBERTSON. No; I really do not, because our policy is that the law is still the law. Congress has carefully worked out the timing and the progression of the sunset provisions, and I think it would be unfortunate if carriers or anyone else thought that simply because someday the CAB is going to go out of business, or it will lose certain responsibilities in 1981 and 1983, that they do not have to worry about complying with those legal requirements anymore.
I think there have been cases in which carriers have more or less taken that position to start with. We have made every effort to encourage them to a different view, that they still have the obligation to comply with the tariff filing requirement and route certification requirements as far as the Board procedures require. In view of the state of flux of the industry and the intense competition that is going on there, really it is very important for us to have strong enforcement powers, and I think Congress properly recognized that in the Deregulation Act by enhancing our enforcement strength.
Mr. FARY. It is our understanding that CAB has generally been able to obtain adequate civil penalties by charging multiple offenses. Are there cases in which you feel you have not been able to obtain adequate civil penalties?
Mr. ROBERTSON. Yes. The cases that I described to you, the three or four cases I mentioned in the prepared statement, are taken from real kinds of situations that come to our attention. For example, an unauthorized airline operation is not sufficiently dealt with
by a $1,000 penalty, and yet we are faced with this from time to time. We do not have any stronger measures as far as economic sanctions are concerned. That would be one kind of case. We have not brought these cases to trial. I am thinking of ones that are currently under investigation.
Where service is suspended in a community without authorization, our view has been that the $1,000 per day is probably not adequate. We have had some settlements in these cases in which we have imposed or accepted civil penalties in the area of several thousands of dollars, based on the analysis of how many days they were out of service, but I think this is another case in which the penalties probably could be more substantial to encourage greater compliance. And that is a very important area for the Board today, to make sure that the carriers are giving notice to the communities and are complying with their legal requirements to provide that service that they have to.
The third area that I think is important is in the area of the ex parte rules and the other rules of conduct. If someone should tamper with the Board's process, and interfere with our ability to decide a case on the record impartially and fairly—and attempts have been made in the past from time to time—the damage to the process can be far, far greater and the possible benefits to the person performing such an act could be far greater than $1,000, so I think again that is a case in which there is no way to find multiple violations. There is simply one act, but one that might interfere fundamentally with the process.
I would like to clarify one other point. There has been a considerable discussion this morning about compounding penalties. That has been the word they have used, Mr. Chairman. What I believe we are talking about here is finding in an investigation a number of different violations. It is our view, and our policy at the CAB, that there are due process and other limits on charging multiple violations for a single incident or a single act, and we do not do that as a matter of policy. If one act can be defined as a violation of several different provisions, we are only going to charge $1,000 for that act, and we believe that is consistent with proper administrative practice. So there is no case in which we are piling up legal definitions to increase the level of penalty for a single act. If the FAA has gone out and found 500 different violations, I am not sure that even there, I do not think there is anything wrong at all with them going for the maximum for the $500,000 that has been discussed.
Mr. Fary. You say that one of the purposes of increasing the fines for violation of CAB regulations would be to prevent unauthorized air transportation by persons without CAB authority. Is this a widespread problem or is this something that happens rather infrequently?
Mr. ROBERTSON. I would say it happens rather infrequently, in part because there are very few cases in which we have denied operating authority. But it has happened, and we have had cases in which carriers have operated without exemption authority or certificate authority. We think that we ought to be able to respond to these cases, and there may be other cases that we are looking into.
Mr. Fary. Along the same line as my last question, is the unauthorized suspension of service by an air carrier a recurring problem?
Mr. ROBERTSON. It has been, Mr. Fary. We have had that occur in a number of different markets—and in some cases we have worked out compromise civil penalties and understandings with the carrier. It may be a transitional problem in that carriers have not yet gotten used to the community notice requirements, but we have had that problem on a number of occasions.
Mr. FARY. You mention that section 4 of H.R. 7488 would strengthen the CAB's ability to enforce the powers given to the Board to require reports from foreign air carriers under the International Air Transportation Competition Act.
Since enactment of this legislation, how has the foreign air carrier reports provision worked out?
Mr. ROBERTSON. To my knowledge, and this is, of course, a brand new act, I cannot think of any case in which we have required a special report from a foreign air carrier under section 407(a), which is where the change occurred. So there has been 100-percent satisfaction with it since we have not had to use that power yet. When we do use it, I think we will be quite sensitive to any international ramifications. We can, of course, bring foreign air carriers in for an investigation before an administrative law judge under subpena power, and we have had that ability for some time. This change simply balances the equation and gives us the same power with respect to foreign air carriers as domestic carriers, and will I think provide a somewhat greater flexibility for
Mr. FARY. There is another part to this question. Would it be feasible to use criminal penalties if foreign airlines refused to file reports?
Mr. ROBERTSON. Yes; it is feasible to do that. We have had some cases in the past of refusal to comply with subpenas, and we have prevailed in the U.S. courts with regard to these cases generally. I think what we would probably do in that kind of case is go to the district court and get some kind of mandate or enforcement orders, and that would be punishable by a criminal contempt. We would certainly hope to resolve these kinds of problems without going to the criminal courts, though.
Mr. Fary. That will conclude my questions. Counsel for the minority, do you have any questions?
Mr. FILLER. No questions.
Mr. HEYMSFELD. I wanted to get your view on an item that has been called compounding. One of the FAA practices that I think has come under this label, they would take a maintenance violation, say one improper maintenance practice, and they would then say every time you operated a flight with improperly maintained aircraft that is a separate violation. Would you do the same thing, suppose a carrier misinterpreted the no-smoking regulations? Would you say that every flight they operated under the improper interpretation was a separate violation?
Mr. ROBERTSON. I think we would in that case, but of course the whole point of our enforcement program is to obtain compliance. Really we have not had much of a problem with the smoking
regulation in terms of getting the carriers to state that they are willing to comply, and if there is a misinterpretation of the regulation, we would take that into account, if there is a genuine misunderstanding in any enforcement procedure. But if there were let us say 20 different passengers on a given flight, all of whom were denied seats in the no-smoking area contrary to our regulation, yes, we would treat each one as a separate violation because it is a separate passenger.
Mr. HEYMSFELD. I think that is one of the main approaches FAA has used to build up penalties. You can get hundreds or thousands of flights.
Mr. ROBERTSON. Yes.
Mr. ROBERTSON. I think that is a proper exercise. You would have to look at each case to make sure exactly what they were doing. We spend a lot of time, when we are analyzing a case we are about to bring, in trying to decide what are our civil-penalty objectives in the case, and what is the rationale for the kinds of numbers we are looking at. But generally, if an air carrier has been denied authority by the Board to operate a given service, and takes that flight 20 times with passengers on it, we would at least go for 20 different violations, because they are discrete violations of the law.
On the other hand, let us say, for example, that an exempt commuter carrier violated one of the terms of part 298 in its exemption. We could penalize him $1,000 for that. What we would not do is say that act also removed your exemption and constitutes a violation of section 401 of the act, and so you owe us $2,000 for that single violation. That is what I am talking about in terms of compounding the penalties, but to the extent that they are separate, discrete incidents, I think that that is quite proper to count
One of the things that an enforcement program looks at is the bottom line number-does it sound like and is it the kind of number that is going to get the attention of top management of the company and bring about a change in the practice? You know $500 or $1,000 is often paid out of petty cash accounts, and it may be that the type of violation you are dealing with really deserves $20,000 to $25,000 to get to the level you are satisfied with in terms of your compliance program. You simply have to invest a lot more resources in going out and digging up new violations, and you can do it in many cases to get to the levels you are satisfied with. I think there is an inefficiency to that, and by the same token you have to put all those cases on and you have to prove all those separate violations in a proceeding before an administrative law judge. While we do it from time to time, I think it raises questions about the efficiency of the $1,000 level.
Mr. HEYMSFELD. Since you are given authority at CAB to assess your own civil penalties, have there been any cases that have gone through the hearing process and ended up with penalties being assessed?
Mr. ROBERTSON. Yes; we have had a number of cases that have.