Department of Transportation (DOT) consumer protections – new rules to watch
As we begin the new year, the aviation industry is closely following certain Department of Transportation (DOT) Notices of Proposed Rulemakings (NPRM) published in 2022. These proposed rulemakings relate to consumer protections, including ancillary fees and airline ticket refunds. In contrast to the NPRM relating to ancillary fees, the NPRM relating to ticket refunds arguably codifies existing DOT enforcement practices.
Ancillary fees
In this alert, we focus on the NPRM relating to ancillary fees, a term used to describe charges for items such as checked baggage and changing or cancelling travel itinerary. DOT issued the NPRM in 2022 pursuant to its statutory authority in 49 U.S.C. 41712 to prohibit unfair and deceptive practices in air transportation and the sale of air transportation.[1] The comment period for the NPRM was initially December 19, 2022, but was extended by DOT to April 6, 2023. This extension occurred to allow parties to comment after a public hearing that occurred on March 30, 2023.[2] Currently, DOT is likely adjudicating the over 700 comments that have been submitted relating to the NPRM.[3]
Background
On July 9, 2021, President Biden signed Executive Order 14036, on promoting competition in the American economy. The Order included 72 initiatives for more than a dozen federal agencies to address competition issues affecting the economy. One such initiative directed the DOT to “consider initiating a rulemaking to ensure that consumers have ancillary fee information, including “baggage fees,” “change fees,” and “cancellation fees,” at the time of ticket purchase, and do so no later than 90 days after issuing the Order.
Subsequently, on September 25, 2022, DOT issued the NPRM Enhancing Transparency of Airline Ancillary Services Fees. Incidentally, this is not the first ancillary fee-related NPRM issued by DOT. In 2014 DOT issued a NPRM addressing disclosure requirements for fees, which was followed by a supplemental NPRM in 2017. However, DOT withdrew the SNPRM later that year, indicating that the withdrawal was consistent with Executive Order 13771, Reducing Regulation and Controlling Regulatory Costs.[4]
Highlights of proposed rule
The current NPRM (2022) applies to airlines (U.S. and Foreign), ticket agents and “metasearch sites” that display airline flight search options directly to consumers. Under the NPRM, these entities would need to list certain fees at the first point in a search process[5] where a fare is listed with a specific itinerary, including:
- First and second checked bag fee
- Carry-on bag fee
- Fees for changes and cancellations, along with applicable policies
- Fees for the adjacent seating of minors 13 and under[6]
The specific fee information above would have to be disclosed on airlines’ and ticket agents’ website and mobile websites, in addition during an in-person or telephone inquiry. Moreover, the fee information above would need to be “passenger specific,” meaning that it accounts for the passenger’s characteristics that may impact the fees charged (such as military status, frequent flier status, and method of payment).
Airlines would be required to distribute the fee information to ticket agents selling or displaying fare information, to ensure the information is “usable, accurate and accessible in real-time.” Entities subject to the disclosure rules would have six months to comply with the requirements of the proposed rule. Finally, any fee collected without the requested disclosures would be deemed an unfair and deceptive practice in violation of the law.
Reactions
With 2024 being an election year, there may be incentive for DOT to take final action on the NPRM this year. The question remains as to whether the rulemaking is necessary. Industry group Airlines for American (A4A) issued comments to the NPRM, arguing that the rulemaking will result in less transparency.[7] A4A maintains that the NPRM could lead to consumer confusion by providing optional and mandatory fees together when airfare is listed. Static and dynamic fees could also be listed in tandem, creating further hurdles for consumers to understand what price they will pay.
Despite DOT’s focus on airline fees, Airlines for America also notes the relative affordability of domestic airline travel today. In fact, domestic air travel (including ancillary fees) was 55% less expensive in 2021 than it was in 1979[8]. A record number of Americans can afford domestic travel since airline fares were deregulated in the late 1970s. As DOT considers and adjudicates the comments, time will tell whether DOT determines that issuance of the rule is warranted.
[1] A practice is “unfair” to consumers 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. A practice is “deceptive” to consumers if it is likely to mislead a consumer, acting reasonably under the circumstances, with respect to a material matter. A matter is material if it is likely to have affected the consumer’s conduct or decision with respect to a product or service. 14 CFR 399.79(b)(1). It is not necessary to establish intent for the purposes of this regulatory provision. 14 CFR 399.79(b)(2).
[2] DOT Docket No. DOT-OST-2022-0109-0721.
[3] As of January 5, 2023, the DOT docket system indicated that 723 comments had been submitted.
[4] DOT Docket No. DOT-OST-2017-0007, Notice of withdrawal of proposed rulemaking (Dec. 5, 2017).
[5] According to DOT, this is “typically the first page of search results.” (Cite to federal register).
[6] In 2023, the Secretary of Transportation submitted a legislative proposal to require that airlines provide fee-free family seating.
[7] DOT Docket No. DOT-OST-2022-0109-0727.
[8] When adjusted for inflation.