Monday, 13 February 2006

Are incomplete "prices" in airline advertisements misleading?

Inquiring minds at the USA Department of Transportation (DOT) want to know your opinion today: Should the DOT continue to allow airlines to advertise "prices" that are actually less than the total amount that you have to pay for a ticket?

The Department [of Transportation] is considering amending its rule on price advertising, and it is seeking comment on several options. Under the existing rule, the Department considers any advertisement that states a price for air transportation that is not the total price the consumer will pay to be unfair or deceptive in violation of the statute under which this provision was adopted in 1984.

Although it has not amended the codified rule, in practice the Department has long allowed an exception to it for certain taxes, fees, and other charges that are imposed by a government entity. As a matter of prosecutorial discretion, the Department does not take enforcement action against any advertisement that omits these charges from the quoted fare, provided that the charges are collected on a per passenger basis and are not ad valorem in nature, and provided further that the advertisement clearly indicates the existence and amount of these charges so that consumers can easily [sic] calculate the total fare....

[T]he Department has ... decided that the time is ripe after 21 years of marketing innovations for a reexamination of the fare-advertising rule and its long-time enforcement policy. Therefore, the Department is asking interested persons to comment on four alternative options:

  1. Maintain the current practice either with or without codifying all of its elements in the rule;
  2. end the exception for government-imposed charges and enforce the rule as written;
  3. revise the rule to eliminate most or all requirements for airfare advertisements but to require that consumers be apprised of the total purchase price before the purchase is made;
  4. or eliminate the full-fare advertising rule in its entirety.

Comments must be received by February 13, 2006.... All submissions must include the agency name and docket number [OST-2005-23194] for this rulemaking. Note that all comments received will be posted without change to http://dms.dot.gov , including any personal information provided.

Today's the deadline. To submit your comments, go here , enter "23194" in the "Docket ID" box, and select "OST" from the "Operating Administration" pull-down menu. Everything else is optional. The DOT notice doesn't mention it, but you can submit comments anonymously, and many people have done so.

The DOT has already received hundreds of comments , virtually unanimous in calling for stricter, not laxer, enforcement of the rules that already prohibit advertising of "prices" at which you can't actually buy a ticket.

Have a look at my comments if you want to know what I think about this, or want some ideas for what to say.

It's especially important for the DOT to do the right thing, because any attempt by state and local consumer protection officials to police airline fraud or enforce truth-in-advertising laws is preempted by Federal law, as I've talked about previously and as state attorneys general have complained about to Congress .

[Addendum, 14 February 2006: In my comments to the DOT, I said, "Option II in the NPRM -- enforcement of the current rules, and an end to the Department's policy of allowing price advertising which the Department knows to be in violation of the current Federal regulations -- would also be the option most responsive to the desire of state and local officials responsible for consumer protection that airlines be subjected to a degree of policing against unfair or deceptive business practices more comparable to that applied to other industries. I urge the Department to consider, in deciding how to act on this NRPM, the bi-partisan letter on this subject from 45 state and territorial Attorneys General to the Congressional leadership of 8 September 2000 .

The same day, unbeknownst to me, the National Association of Attorneys General (NAAG) was filing comments (not obvious in the docket, since they are listed by the name of the individual filer rather than the organization, but signed by the Attorneys General of 42 states, the District of Columbia, and Guam) reiterating their opposition to Federal preemption of their ability to protect their states' consumers against airline fraud, urging the DOT to adopt Option II in the NPRM (stricter enforcement of the current unenforced Federal truth-in-advertisng rule), and supporting exactly the analysis I had given with respect to advertising of less-than-inclusive prices and of "half roundtrip" prices.

The NAAG says categorically that, "Advertisement of a one-way fare that is not available for one-way travel is deceptive and is an unnecessarily cumbersome method of advertising the price of a round-trip ticket, which gives no benefit to the round-trip traveler." One can only wonder whether a Federal administration that claims to believe in deference to states' rights will listen to state officials, or to the comments from airlines supporting a lifting of even the current lax and unenforced rules.]

[Further addendum, 5 March 2006: Christopher Elliott picked up on this with a story in the New York Times on 25 February 2006, A Move to Add Still More Fine Print to Advertised Airfares , which led to a belated editorial in the Times today, 5 March 2006:

The rationales for any change are ludicrously flimsy -- a presumption that consumers in the Internet age are more sophisticated and do not need as much protection, a belief that a deregulated industry no longer needs this vestige of regulation, and a desire by some airlines to have greater "flexibility" in designing their ads.

One does not have to be a cynic to expect bad behavior if the rules for airlines are weakened. Several low-fare airlines have warned that their higher-cost competitors might create a host of "fictional surcharges," like fees to compensate for congestion or delays, which could be split out to make the fares look lower than they really are.

Some analysts suspect that this antiregulation administration may indeed weaken the rules. But one option under consideration would actually tighten the rules by making the airlines include even government fees and taxes in their advertised ticket prices. How fitting it would be, albeit hard to imagine, if the final result of this effort to gull the public were a regulation that insisted on full, prominent disclosure of the total price, with no exceptions.

The Department of Transportation still appears to be accepting comments after the deadline, both from airlines and the public. This is getting interesting. Keep up the comments and the pressure on the DOT and Congress!]

[Further addendum, 5 October 2006: The DOT has decided to keep the current rules -- neither enforcing them, nor weakening them.]

Link | Posted by Edward on Monday, 13 February 2006, 11:08 (11:08 AM) | TrackBack (2)
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