The Costs of Regulatory Redundancy: Consumer Protection Oversight of Online Travel Agents and the Advantages of Sole FTC Jurisdiction
29 Pages Posted: 17 Mar 2015 Last revised: 18 Jul 2015
Date Written: March 15, 2015
Every administration in recent history has attempted to reduce regulatory redundancies. One area of regulatory redundancy that deserves attention is the FTC’s and Department of Transportation’s (DOT) consumer protection authority over online travel agents (OTAs), which generated $111 billion in revenue last in 2013. This regulatory redundancy guarantees that two agencies will oversee OTAs, prevents harmonization of online consumer protection policy, and is likely to impose unnecessary costs on OTAs to adhere to two separate regulatory regimes. The importance of this conflict will grow as privacy and data security become preeminent consumer protection issues and DOT expands its jurisdiction to online information providers. Efficiency suggests the FTC as the sole consumer protection overseer of OTAs. Only the FTC has the current capacity to regulate all OTA activities, and it enjoys unrivaled expertise with respect to e-commerce consumer protection. Further, in contrast with FTC’s ex post enforcement approach, which focuses on actual or likely consumer harm, DOT’s ex ante regulatory approach is ill-suited for the fast moving world of e-commerce. Finally, the FTC faces more serious internal and external constraints on its enforcement authority, which tends to temper the potential for regulatory overreach. There are several possible ways to effect this regulatory reform, ranging from the complete abolition of DOT’s aviation consumer protection authority and the FTC Act’s common carrier exemption, to a memorandum of understanding between FTC and DOT that harmonizes policy.
Keywords: air travel, consumer protection, data security, Department of Trade, DOT, e-commerce, efficiency, enforcement, Federal Trade Commission, hotels, online travel agent, privacy, regulation, regulatory capture, rental cars
JEL Classification: K23, D18
Suggested Citation: Suggested Citation