Introduction

The US Department of Transportation (DOT) has denied three petitions to initiate rulemakings on various consumer protection issues proposed by FlyersRights, a consumer advocacy group. The DOT's decision to refuse to propose new regulations is consistent with the Trump administration's efforts to reduce regulatory burdens on industry. Nonetheless, the DOT appeared to be sympathetic to consumer protection concerns raised by FlyersRights. The DOT believes that it already has sufficient authority to take enforcement action against airlines that violate existing consumer protection laws and regulations.

Common themes run throughout the DOT's responses to FlyersRights' petitions, including that:

  • the DOT relies on the premise that consumers are sufficiently protected by its statutory authority under 49 USC Section 41712 to prohibit airlines from engaging in unfair or deceptive practices and unfair methods of competition and implementing regulations;
  • the DOT believes that airlines' DOT-mandated customer service plans, contracts of carriage and other commonly occurring carrier notices adequately inform consumers of their rights; and
  • market conditions adequately incentivise carriers to avoid predatory or misleading business practices that would harm consumers.

Petition to regulate change fees in foreign air transportation

What FlyersRights requested

FlyersRights petitioned the DOT to regulate change and cancellation fees (ie, change fees) in foreign air transportation. The petition noted that change fees have "progressively gone up" in recent years – rising from as little as $50 before 2000 to as much as $300 in 2013. FlyersRights requested that the DOT impose a $100 cap on international change fees and only allow higher fees where airlines can demonstrate an administrative cost to the airline greater than $100. The petition stated that the DOT has the "authority and the obligation" under 49 USC Sections 41501 and 41509 to determine whether a "rate, fare, or charge" in the provision of foreign air transportation is unreasonable or unreasonably discriminatory.

DOT's decision

Although federal law requires airlines offering foreign travel to file a tariff with the DOT describing the prices and rules of travel, the DOT regulations (14 CFR Part 293) exempt many carriers from this requirement. These exemptions were prompted by the growing liberalisation of international air policy and open skies agreements, which guarantee carriers engaged in international air transportation the right to set their own prices. The DOT stated that any regulation of change fees would be inconsistent with US obligations under the current open skies agreements. The DOT's order noted that change fee regulations are unnecessary because the DOT already has regulations that protect consumers regarding the disclosure of cancellation policies and change fees, including:

  • the direct notice of certain terms (14 CFR 221.107(d) and 14 CFR 253.7);
  • a 24-hour post-reservation cancellation rule (14 CFR 259.5(b)(4));
  • a customer service plan disclosure of cancellation policies (14 CFR 259.5(b)(9));
  • the posting of customer service plans on airlines' websites (14 CFR 259.6); and
  • the disclosure of optional services (14 CFR 399.84(d)).

The DOT rejected the arguments that it had authority under 49 USC Sections 41501 and 41509 to set universal international change fees, "even if [it] were inclined to do so". Further, the DOT contended that regulatory interference with airline pricing structures, including change fees, could have "unintended consequences" for consumers that could result in higher base fares.

Petition to regulate how carriers notify passengers of their Montreal Convention rights

What FlyersRights requested

FlyersRights petitioned the DOT to draft regulations that would dictate how carriers provide notice of passenger rights on international flights under the Montreal Convention. The convention, among other things, provides carrier liability limitations in the event of passenger delay, injury or death or the delay, damage, destruction or pilferage of baggage in international travel. The petition alleged that airlines regularly engage in unfair or deceptive business practices and unfair methods of competition because they have a "policy and practice" of "misinforming passengers by falsely alleging passengers have no compensation right[s]" under the Montreal Convention. As a result, the petitioners urged the DOT to require airlines to disclose Montreal Convention compensation rules in a "conspicuous plain language notice" to passengers, including during the booking process, check-in and delay situations. FlyersRights also argued that the DOT should require airlines to publish a consumer awareness outline to give consumers:

  • information about their rights to delay-related compensation;
  • instructions on how to apply for delay-related compensation;
  • a link to the full text of the Montreal Convention;
  • information on the limits of liability in US dollars; and
  • a brochure at every check-in desk used for international flights that expands on the information provided in the outline.

DOT's decision

The DOT cited insufficient evidence that carriers are failing to fulfil their notice obligations under the Montreal Convention or are otherwise attempting to conceal information regarding delay compensation. To reinforce its position that consumers are properly informed about their Montreal Convention rights, the DOT stated that it has updated its own fly rights webpage, which educates consumers about their rights. The DOT considered that carriers provide necessary information via their contracts of carriage, advertising media and disclosure on passengers' tickets such that there is insufficient consumer confusion on the matter to require a rulemaking on the issue.

Petition to require airlines to put passengers on next available flight

What FlyersRights requested

FlyersRights petitioned the DOT to reinstate the 'reciprocity rule', which would require airlines to place passengers on the next available flight (even if operated by another carrier) at no cost in the event of cancelled or excessively delayed flights (two or more hours). The reciprocity rule existed prior to deregulation. Since deregulation, and in the absence of a requirement to do so, few airlines guarantee that passengers will be accommodated on the flights of other carriers in the event of a cancellation or extended delay. FlyersRights suggested a new rule that would require air carriers to coordinate transportation for passengers in the event of a cancellation or an excessive delay on another carrier, without a stopover, and within the same class of travel, at no additional cost. FlyersRights further suggested that, if acceptable to the passenger, the carrier can offer a partial refund and transport the passenger in a lower class of service. FlyersRights argued that the regulation is needed to combat "predatory and anticompetitive" airline practices that are unfair and deceptive to consumers. The petition cites a significant recent increase in airline computer outages that have left airlines unable to operate, thus leaving passengers stranded until the systems return online.

DOT's decision

The DOT determined that information provided to consumers by carriers and competitive market conditions sufficiently protected consumers in situations where they experienced cancelled or delayed flights, and additional regulations would not enhance those protections. The DOT reasoned that the type of harm alleged by FlyersRights regarding re-accommodation did not warrant the reintroduction of the reciprocity rule because it retains authority to enforce violations of unfair or deceptive business practices and methods of unfair competition pursuant to 49 USC Section 41712. Further, the DOT's rules under 14 CFR Part 259 require carriers operating to, from or within the United States to adopt and adhere to a customer service plan that must include provisions to mitigate passenger inconveniences resulting from cancelled or delayed flights. The customer service plans, which are required to be posted on carriers' US-marketed websites, can also be included in a carrier's contract of carriage. The DOT determined that although carriers may not guarantee re-accommodation, the availability of the information allows consumers to be informed in the event of a cancellation or an extended delay. The DOT also stated that tarnished brand image, bad publicity and other negative impacts resulting from cancelled or delayed operations provide a significant incentive for airlines to re-accommodate affected passengers as quickly as possible. The DOT's existing regulations and free-market conditions properly serve to protect consumers in situations where they experience flight cancellations or extended delays. Specifically, 14 CFR Section 259.5 requires carriers to:

  • notify consumers of known delays, cancellations and diversions (14 CFR § 259.5(b)(2));
  • notify consumers in a timely manner of changes in their travel itineraries (14 CFR § 259.5(b)(10)); and
  • identify the services they provide to mitigate passenger inconveniences resulting from flight cancellations and misconnections (14 CFR § 259.5(b)(12)).

Finally, the DOT posited that a rulemaking would be an intrusion into the operational and financial decisions of carriers and contrary to a primary goal of deregulation.

For further information on this topic please contact Robert F Foster at Cozen O'Connor by telephone (+1 202 912 4800) or email (rfoster@cozen.com). The Cozen O'Connor website can be accessed at www.cozen.com.

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