We established as a basic principle that the nonsmoker should not be burdened unreasonably with smoke that he does not want to breathe and that right is prior to the right of the smoker on the airplane. Then we said to the airlines, "Look. You figure out how to accomplish this so that the nonsmoker's rights are prior to the smoker's rights, and you decide how to do it." We gave each airline the freedom to find their own way. With pipes and cigars we urged them to ban them completely. It would be very easy to say, "No, you can't smoke pipes and cigars." Instead, we chose to just tell them to further segregate pipes and cigars from nonsmokers than they are segregated now, or to ban them if they chose to ban them. Let the airlines decide how to do that. We are giving them flexibility. But we are also prepared to come on with more detail, prohibitions, if the airlines don't solve the problems themselves.

In the charter area we have had a problem with consumersSenator KENNEDY. How many airlines banned pipes and cigars? Do you know?

Chairman COHEN. I think that there were two airlines that had already banned cigars before we did this and I think four more have in the past month decided to ban cigars and pipes.

Senator DECONCINI. Does the chairman want the names of them? [Laughter.]

Chairman COHEN. They are free to advertise that after telling about their airline.

Mr. CHUMBRIS. I don't think you got the inference of Senator DeConcini's remark because the chairman of the committee is a great cigar smoker.

Senator KENNEDY. We were going to let that pass. [Laughter.] Chairman COHEN. I love to smoke cigars. I don't smoke them on airplanes.

Senator KENNEDY. I think you are right.

Chairman COHEN. It was a very difficult question for me. The board was split 2 to 2. I first wanted to ban them because people shouldn't be subject to that. Finally, in looking at it from the standpoint, is that the right way for Government to interfere with the way private industry operates. We decided not to ban it, but to leave it to the airlines to decide.

Senator KENNEDY. In our Health Subcommittee we are considering the Califano recommendation which bans smoking in all public places. Quite frankly, I doubt if the votes are there in the Senate to do that.

Chairman COHEN. We are going to find out in the next few months. We will be bringing along a detailed set of proposals, one of which is to ban all smoking on airplanes as a matter for us to consider. The airlines, I think, know that our getting into this in detail is coming along just behind what we have already done. I think they should have some incentive to address this problem more seriously than they have.

Senator KENNEDY. I think that the major point made by your testimony is that the analysis required by S. 382 will not place a significant burden on the agency in meeting its responsibilities to the public. I think that is what is most important.

Chairman COHEN. I think that is very true, Mr. Chairman. I agree. It has really expanded our way of looking at things, but not

really slowed us down and not created any great burden on us. I think it makes us more able to serve the public interest in making decisions.

When we first started applying the type of standard contained in S. 382, to our decisionmaking, our big worry was not that the courts would tell us to be more competitive but rather that they would not allow us to apply our competitive analysis to our decisionmaking at all. Without the Deregulation Act, our statutory mandate was unclear, and we feared a court telling us that we did not have the authority to adopt the section 3 (a) approach without new legislation. Since other agencies are today reforming themselves without new organic statutes-the ICC and FCC are two prominent examplesI suspect that S. 382 will provide a welcome and helpful statutory basis for what all agencies should be doing as a matter of course. In addition, the systematic analysis required in S. 382 will be far more effective in ensuring that agencies pay attention to antitrust policy than the past history of case-by-case review in the courts has been.

While the courts seem to agree in principle that the effect on competition should be a factor when regulatory agencies determine the overall public interest, the cases are sparse, vague, and differently worded. Each agency has a different precedent to work from if they have one at all. Also, it is not clear that agencies whose primary responsibilities are health and safety must evaluate the economic effects of their decisions. Thus, specific action by Congress would be a welcome clarification of the picture. I think everyone is now beginning to realize that all regulatory decisions will have some effect on competition, and that it is only sensible to try to evaluate that what effect will be before taking action.

This legislation would thus do two useful things that court decisions have not accomplished so far. It would establish a clear duty for all agencies to consider anticompetitive effects, and it would establish a uniform, workable verbal formula to guide them in their analysis, and courts in their judicial review. Mr. Chairman, critics of S. 382 have said that it will foster additional litigation and confusion in the regulatory process. I must emphatically disagree. In fact, had S. 382 been the law of the land when we were embarking on regulatory reform, there would have been less litigation, less uncertainty, more prompt and thus less costly regulatory proceedings.

We think it is crucial that the standard in S. 382 be subject to judicial review. If section 3(a) is worth applying to agencies, then it follows almost inevitably that agency decisions applying it should be subject to court review. I will skip over and turn to some of the more detailed provisions of S. 382. I elaborated on these in my prior testimony. I will just roughly outline the points here. One of the virtues of S. 382 is that it provides a flexible but uniform antitrust standard for government regulation. But that virtue will be lost if the application of S. 382 is exempted from judicial scrutiny. Those who argue that subjecting 3(a)'s application to court review will invite too much litigation are, in my view, raising a bright red herring.

The fact is that just about any agency decision of major importance raises competitive issues and gets appealed in the courts today. S. 382 does not I repeat, does not-add another layer of review of this inevitable appellate litigation, nor does it lengthen the appellate proc

ess. It simply means that another issue has to be briefed on appeal. If the agency has to defend the anticompetitive aspects of its action in court, it is likely to do a better job of deciding the matter before it gets to court.

Let me now turn to some of the more detailed procedural provisions of S. 382. Section 4 would require named independent agencies, of which the CAB is one, to notify the Attorney General of proceedings that might fall within the scope of the bill. We recognize that none of the independent agencies listed has dominant expertise in antitrust. matters. The Attorney General and the Federal Trade Commission can play a helpful role in coordinating the antitrust programs of all the agencies. We support the notification requirement in section 4 (a), and we look forward to cooperating with Justice and the FTC in this joint effort. At the same time, in the interests of fairness and administrative efficiency, we have objections to the other powers given the Attorney General and the FTC in section 4.

First, section 4(b) would apparently permit either the Attorney General or the FTC to intervene as a matter of right in the judicial review of an administrative proceeding, even if they were not a party in the administrative proceeding itself. Certainly, either agency should be entitled to participate as of right in any administrative proceeding within the scope of section 3 (a) and be able to appeal that decision to the courts. However, if they have not participated at the administrative level, it is unfair to the agency and the other participants to allow intervention at the judicial level. Judicial review as a matter of right should be reserved only for parties who participate at the administrative level.

We see a second problem in section 4 (c). It gives the Attorney General the right to demand a full evidentiary hearing at any time, if the agency has not already held one. I assume this extraordinary power was included to allow Justice to supervise the agencies' duties under this bill without resorting to time-consuming judicial review. This This unrestricted power is a bad idea. It may interfere with the ability of the agency to fulfill its statutory responsibilities. In regulating what is increasingly a fast-changing and competitive airline industry, the Board is often called upon to make decisions without the sort of timeconsuming, costly, and cumbersome evidentiary hearings that the Attorney General may prefer.

The Attorney General could impose considerable delay by requesting hearing under section 4(c) that must be honored. Such procedural delay may well be more damaging to competition than prompt decisionmaking. Since Justice has neither the expertise in the airline industry, nor the responsibility to uphold the Federal Aviation Act, the Attorney General is not in the best position to evaluate the need for a hearing. And if the section is read to allow the imposition of a hearing after final agency decision has been made, that power threatens fundamental notions of fairness and finality of decisions.

Section 5(a) has other ambiguities. How, if at all, is the burden of proof that is normally applicable to judicial review of administrative decisions affected by the provision? And what precisely is meant by "the requirements of section 3 (a)?" Clearly, there must be evidence in the record to support the findings of overriding statutory purpose, significant public benefit, and absence of better alternatives.

Another criticism or concern is in section 5. The standards for judicial review are somewhat confusing. There is now in the Administrative Procedures Act the standards that have worked fairly well for reviewing agency actions and we think those standards are adequate for review of actions taken under section 3(a). We suggest in our testimony some particular problems with that section on judicial review standards.

One final point, Senator. Developing a comprehensive antitrust policy in cooperation with Justice and the FTC, as prescribed by section 6, is basic to the whole purpose of the bill. We have already started that process at the CAB. Our only suggestion is to clarify the scope of the provision to specifically include enforcement actions. and certain other crucial agency decisions. Many Government grants of money, for example, have significant effects on competition and they should be included in the overall evaluation of antitrust policy. The present language can be read to include these types of actions, but a more specific statement might more effectively promote the broad sort of policy analysis that this section contemplates.

In summary, Mr. Chairman, let me reemphasize the Board's overall and enthusiastic support for this bill. Aside from our few reservations on procedural matters, the requirements of S. 382 reflect the same decisionmaking processes that the Board has been applying in recent years. In light of the sunset provisions of the Deregulation Act, I appreciate the opportunity to talk now. I'd be happy to answer any questions.

Senator KENNEDY. Well, I think you have covered the material very well, Mr. Chairman. I suppose the crucial question is whether the language of the bill provides a clear, uniform standard for the agencies to apply. What is your sense about that? Do you think we have achieved that?

Chairman COHEN. I think so. When I was looking at the bill, reading it, I summed it up from that standpoint of does this really state it broadly enough. It seems to me that it does. Particularly two things: Talking about overriding statutory purpose, so that if things need to be done pursuant to overriding statutory purpose they are able to be done. This really would not prevent agencies from fullfilling their particular statutory purposes. Yet, seeing that agencies have to look at whether this cannot be accomplished in substantial part by alternative means having lesser anticompetitive effects is crucial, of course, to the whole process. It is the same general standard that we have been following the past couple of years and I think has resulted in better procedures.

Senator KENNEDY. Where do you see the limitations of the application of this language to international agreements? For example, the Bermuda agreements have had a significant impact up in Massachusetts.

Chairman COHEN. It is hard to tell what would happen there if this bill had been in place and if the people who were looking at the issues had to stop and take a look at whether there was a less anticompetitive way of doing it. We think this language would apply in our International Aviation Policy and properly so.

Senator KENNEDY. Of course, the point is getting others to agree with it, clearly.

Chairman COHEN. Yes. We have two aspects to it, Senator. In a broad sense, the old way of doing things before we adopted a more procompetitive international litigation policy. The only way to do things was to take Bermuda I, which set the standard of how to deal with another country, back in 1948, and see how many other countries we could enter into a Bermuda I agreement with. It was a uniform process under the old way of doing things. In a very broad sense now, we are seeking more competitive ways to work things out with other countries. We are entering into diverse kinds of agreements in seeking more competition in different ways. In some countries we are successful and in some countries we are not. We are successful in varying degrees in trying to get more competition in international aviation.

Then on a microlevel, în single situations, and this would apply to the situation up in Boston, for instance, where there is only one U.S. carrier under a particular agreement, because the other country's requirements are limited to one carrier, how are we to deal with that one carrier in terms of regulation. Do we just leave them alone to do what they please? We don't think so because there is no check and balance of the marketplace to make sure that they act in the public interest.

Should we, on the other hand, regulate in detail as we have done in the past. That, to us, is not the least anticompetitive way to do things. We have chosen a third way to try to deal with this problem and that is to let that monopoly carrier-U.S. monopoly, at least-know that there is a threat of entry, that there is a threat that if they do not act in a competitive manner as if there was competition, that they may lose their certificate and somebody else may come in. So that they are at risk. They have had a little problem with adjusting to this. They would rather that we told them precisely what to do, but we won't do that. We say, "Look. You are at risk. You know how to run your business better than we can. You decide what to do and act as if there was a competitor there." They know we are breathing down their neck so that they really are at risk and we think that is a good substitute, a surrogate for competition to replicate the marketplace.

Senator KENNEDY. I just have one final question. Do you think the public interest might be jeopardized by requiring a competitive impact analysis of health and safety regulations?

Chairman COHEN. No, I don't think so at all, because under the terms of the act, and I think as it would be implemented by agencies, there is the overriding statutory purpose to protect the health and safety of the public that would be the overriding public purpose. And if they couldn't do it

Senator KENNEDY. In a way consistent with that provision.

Chairman COHEN. Yes. That particular provision is quite important. They detail requirements if they have to, but this bill requires them to look at alternative ways to see whether there is a less anticompetitive means of doing it and they still accomplish the purpose by less anticompetitive means. We think it is in the public interest to take that look. It doesn't sacrifice health and safety if you take a look and find that you might be able to accomplish the purpose by a less anticompetitive way.

Senator KENNEDY. Mr. Chumbris.