DOT Takes a Stab at Defining “Unfair” and “Deceptive”

Government Regulation

There’s an interesting rulemaking proposal rolling through the Department of Transportation (DOT) that caught my attention recently. DOT is looking to overhaul the way that it applies its consumer protection rules, and this new plan would tip the scales more toward the airlines. The thing is, it also tips the scales toward fairness. It just may be tipping a bit too far.

Do you have trouble sleeping? May I suggest a read through the 35-page rulemaking. No time? Ok, I’ll sum it up for you. It all circles around 49 U.S. Code §?41712 (a). That says:

On the initiative of the Secretary of Transportation or the complaint of an air carrierforeign air carrier, air ambulance consumer (as defined by the Secretary of Transportation), or ticket agent, and if the Secretary considers it is in the public interest, the Secretary may investigate and decide whether an air carrier, foreign air carrier, or ticket agent has been or is engaged in an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation. If the Secretary, after notice and an opportunity for a hearing, finds that an air carrier, foreign air carrier, or ticket agent is engaged in an unfair or deceptive practice or unfair method of competition, the Secretary shall order the air carrier, foreign air carrier, or ticket agent to stop the practice or method.

Now, you’ll notice a whole lot of links in there, and those will take you off to definitions. Notice, however, that “unfair” and “deceptive” do not have links. That’s because they aren’t defined, and that seems strange since DOT can not only tell the airline to stop practices but it can also levy fines.

Back in 2017, President Trump signed an order looking for regulations to ditch or modify, and the airline lobbying group Airlines for America (A4A) took note. They asked DOT to define these terms, because they felt that airlines had been wrongly punished in several instances where it didn’t make sense. What has been so bad? Well, A4A gave some examples in this document. For instance…

  • Back in 2017, there was a rule that almost went into effect which would have required airlines to display optional services/fees through every outlet which sold tickets. It also required baggage fee info to be disclosed during the search. DOT never said why it was unfair or deceptive to do it the way it was being done previously, but it used that statute as justification anyway.
  • Airlines have been required to only display pricing including all government fees and taxes for several years now, but no other industry has that requirement. Fuel surcharges, yes, that’s deceptive to leave those out, but if it’s just government add-ons, then it’s hard to see how that’s unfair or deceptive when consumers generally expect to have to add tax to an advertised price for everything else.
  • DOT also requires airlines to either hold a fare for 24 hours before purchase or allow someone to cancel and get a full refund for 24 hours after purchase without penalty as long as it’s at least 7 days before travel. That’s another strange rule that’s unique to the industry. You can’t call a hotel and tell them to hold the rate for you for 24 hours, nor can you buy a non-refundable prepaid hotel rate and get it refunded within 24 hours.

You can go through the document yourself to read the arguments in greater detail, but the basic point they’re trying to make is that the airline industry gets treated differently because the rules are different than the ones the FTC uses to police other industries.

In the public eye, this is a tough sell. If you look at those three examples above, they sound consumer-friendly. But then again, telling an airline it has to give a stuffed animal and back massage to everyone would be customer-friendly as well. But would it be fair? The question is, where does that line get drawn?

A4A made a seemingly sensible suggestion. Apparently the Federal Trade Commission (FTC) has a definition for the “unfair” and “deceptive” terms, so why not apply those to airlines?

What exactly do the FTC rules say? Well, “unfair” was defined under 15 U.S. Code §?45 (n) and “deceptive” was defined under a 1983 FTC policy. Instead of giving you those details (you can look them up yourself if you want to read the legalese), let’s see how DOT explains it in English:

First, it would define a practice as “unfair” if it causes or is likely to cause substantial injury, which is not reasonably avoidable, and the harm is not outweighed by benefits to consumers or competition. Second, the proposed rule would define a practice as “deceptive” if it is likely to mislead a consumer acting reasonably under the circumstances with respect to a material issue. Under the proposal, an issue is “material” if it is likely to have affected the consumer’s conduct or decision with respect to a product or service.

This sounds completely reasonable, and if it’s good enough for all the other industries, it should be good enough for the airline industry too. So why did I say this may have tipped the scales too far?

There’s another piece in this proposed rulemaking that talks about just how the process of declaring something “unfair” or “deceptive” will go. Once the decision has been made, there would be an opportunity for the airlines to ask for a formal hearing. Specifically, this would apply for “discretionary aviation consumer protection rulemakings… that are not defined as high-impact or economically significant.” This sounds like a great way for airlines to delay and disrupt, and that concerns me.

If we’re talking about something that’s economically significant or high impact, that should require more diligence, but for something that’s more minor, this is just going to bog down the process and waste everyone’s time. I think the comment period is good enough.

In the end, this does seem like an improvement overall. Having a set definition in line with the FTC should make for a more fair process. Let’s just see if the airlines find a way to abuse it.

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10 comments on “DOT Takes a Stab at Defining “Unfair” and “Deceptive”

  1. We live in a world, right or wrong, fair or not, where it’s all but impossible for any business entity to make an honest dollar. This extends to the broader economy as a whole and is by no means just limited to the airlines. Deception, trickery, bait-n-switch, and being deliberately opaque is every bit a matter of survival as it is greed. So-called “shrinkflation” and “planned obsolescence” being very closely related examples. Perhaps the real issues come down to: Are companies being too greedy? Or have people simply become a little too demanding and unrealistic in their expectations? Little of both maybe? But here is a case where public opinion and perception matter every bit if not more than numbers. You can wave numbers, charts, and historical data at both till you’re blue in the face. Doesn’t matter. Only thing that does is: do people feel happy and that they’re getting a good deal *today*? And that is what gets the attention of lawmakers, who are getting earfuls from seething voters.

  2. “Airlines have been required to only display pricing including all government fees and taxes for several years now, but no other industry has that requirement. Fuel surcharges, yes, that’s deceptive to leave those out, but if it’s just government add-ons, then it’s hard to see how that’s unfair or deceptive when consumers generally expect to have to add tax to an advertised price for everything else.”

    Untrue. There are several other industries where additional taxes are included in the retail price:
    – Alcohol
    – Tobacco
    – Gasoline
    – Coal
    – Health Insurance
    – Certain Prescription Drugs
    – Vaccines
    – Medical Devices
    – Certain automobiles
    – and … errr … Indoor Tanning, of all things

    Consumers certainly expect to pay something along the lines of a flat sales tax. For a product as heavily taxed as airline tickets, (and where the taxes can vary widely based on a particular itinerary), requiring the inclusion of taxes in the Large-Print quote makes perfect sense. Now, if an airline wants to emphasize how much of your ticket goes to tax, the rule certainly does not prohibit the airline making it quite obvious; the rule only says that the most-prominent price in the initial quote must be tax-inclusive.

    Not including the taxes until you get to the final payment screen makes comparing different vendors tedious, at best, and really serves no good purpose other than to annoy the customer.

    1. 1000% agree with SirWired. The current system works well, and I can’t understand the need for change. Certainly though I understand the net negative to the industry with the 24 hour hold with $0 upfront. That being said I love that also, but I don’t that is something that should be mandated.

      1. Yeah,

        Most other industries that have unique taxes are required to advertise ta inclusive prices. It one thing to leave taxes out when they a the same on every product in a jurisdiction (just sales tax), but airfare would be pretty difficult for consumer to calculate, the same base fare can even be a different total cost based on connection airport.

        Not requiring inclusive fares would mean the airlines are getting special treatment not afforded to other industries with special taxes.

    2. To be fair, if I am reading the original correctly its does state on page 12, “nearly all other consumer products” but I do agree with the points made.

    3. This is particularly important in markets like Los Angeles, San Fransisco, and New York where multiple airports will have different rates of taxes and fees. An airline may have a lower base fare into one area airport but a higher bottom line cost, making comparison shopping difficult.

  3. > Airlines have been required to only display pricing including all government fees and taxes for several years now, but no other industry has that requirement.

    Other industries aren’t required to show sales taxes, but those are pretty easy to understand and very easy to compare because they are a straight percentage. Airline ticket taxes can include a percentage component, a per segment component, a per one way trip component, an airport-specific component, and a per ticket component. That’s nearly impossible for a customer to know in advance and means that one $400 ticket could have quite a different total cost than a different $400 ticket (say, nonstop versus one segment via an airport with a high fee). Disclosing those fees is totally appropriate so customers know what they’re paying for, but nearly all customers care first about the charge to their credit card, not the amount of money the airline gets. Frankly, saying that it’s not at the very least confusing not to show the total price is remarkable airline industry apologizing.

    Beyond that, I’d think the industry would welcome this regulation. If Delta (or Spirit) advertises base fare without taxes, American has to too because most customers don’t know the ins and outs of airline regulation well enough to know otherwise. But if there’s a regulation, it’s a level playing field, so they can advertise the price honestly (and not get annoyed customers).

    Hotels and rental cars also deceptively advertise prices; it’s not ok there either. That doesn’t make it not deceptive in the airline industry.

    And outside North America, sales tax is always included in advertised price for everything (at least in Australia, with the tax component very clearly indicated on the receipt). It should be in North America too.

    1. Not sure it matters too much. Whatever the rules, Google Flights will almost certainly give people the ability to look with/without fees, which is another reason people will go to sites like that to start their travel searches.

  4. Thank you for your post. I’m not sure there are millions of people out there caring about rulemaking trying to define “unfair” or “deceptive” or even what a what a “practice” is. My guess is that you have many readers who do care. Consider me one. I wish DOT well. Given all of the airlines’ lawyers and the seemingly endless power of A4A, I’m not expecting much out of this.

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