D.C. Circuit Grounds Competition Challenge To FAA Regulations For Lack Of Standing
08/13/2019On August 2, 2019, the United States Court of Appeals for the District of Columbia Circuit dismissed an airline technology company’s petitions for review of regulations that petitioner alleged both restricted competition for airport flight slots and limited petitioner’s market opportunity for lack of standing. Exhaustless Inc. v. FAA, Case No. 18-1304 (D.C. Cir. 2019). The panel—Judges Karen Henderson, Sri Srinivasan and Cornelia Pillard—ruled that petitioner failed to show that it was injured or would incur injury from the Federal Aviation Association’s regulations limiting the number of flights out of LaGuardia and JFK Airports.
In 2000, based on concerns about restrictions on competition among airlines, Congress passed legislation requiring the FAA to phase out flight-limiting regulations known as the “High Density Rule” by 2007. This phase-out led to immediate increases in congestion at LaGuardia and JFK airports. The FAA responded by imposing interim orders reinstating the High Density Rule at the two airports on a temporary basis. The FAA extended these orders several times, with the most recent extension to October 2020. During this time, petitioner developed patent-pending technology that was designed to enable competition for scarce airport flight slots through an electronic auction system. Its two petitions alleged that the FAA regulations limiting the number of flights out of LaGuardia and JFK exceeded its statutory authority under the Administrative Procedure Act, and that it was injured because the regulations eliminated its “market opportunity.”
The Court found that petitioner failed to establish the element of injury necessary for standing. The Court noted that where the regulated party is not the petitioning party, establishing that the petitioner’s injury is (i) traceable to the challenged conduct and (ii) likely to be redressed by a favorable decision is “substantially more difficult.” The opinion turned on redressability—in considering the market for petitioner’s technology, the Court found that in a world without the FAA’s interim orders, there would be no federal regulation limiting the number of takeoff and landing slots. According to the Court, this deregulation of flight slots would mean there would be “no scarce resource for the FAA to auction,” and, therefore, no market would exist for petitioner’s new product. The Court pointed out that the proper avenue for petitioner to seek relief is a petition for rulemaking with the FAA, which petitioner had already filed and is currently pending.
Petitioner argued that it was injured because, without the FAA interim regulations, local authorities would control flight schedules and elect to use petitioner’s technology. The Court found this argument speculative. The loss of an opportunity to compete for business in a market becomes a redressable injury, the Court explained, only when there is a “realistic possibility” of “winning the eventual competition.” The Court then pointed out a number of practical obstacles to local authorities adopting petitioner’s model (which entailed, among other things, charging congestion “premiums” to consumers). These included the untested nature of the technology and the potential conflicts between petitioner’s model and other regulations, obligations arising from airport grants, federal tax law and international treaty obligations. Based on these hurdles to adoption of petitioner’s technology, the Court found that the argument that the challenged regulation deprived it of a market opportunity was “mere conjecture” and petitioner lacked standing.
Notably, the Court concluded by pointing out that an entity directly subject to the regulations, such as an airline or airport authority, “likely” would have standing to challenge the regulations, and that the absence of a challenge from the parties with the most direct stake in the outcome suggested they accepted the regulations. Thus, one lesson for other technology providers who wish to challenge regulations that inhibit competitive opportunities for their products is to attempt to persuade directly regulated parties who would benefit from the product to support the challenge.