Court dismisses challenge to airline advertising rules

A Washington, D.C. appeals court ruled Tuesday that the Department of Transportation can regulate the advertising of airline tickets prices.

A petition for a review of the regulations had been filed by Southwest, Spirit and Allegiant airlines after the companies received fines from the transportation department.

The U.S. Court of Appeals District of Columbia Circuit said Tuesday that the rules the fines were levied under were valid, however.

"Prior to 1978, the federal government regulated the fares airlines could charge and the routes they could fly, and had authority to take administrative action against certain deceptive trade practices," Judge David Tatel wrote for the appeals' court.

"That changed in 1978 when Congress passed the Airline Deregulation Act….which, among other things, eliminated the government’s ability to set airfares on the theory that 'maximum reliance on competitive market forces would best further efficiency, innovation, and low prices as well as variety and quality of air transportation services,'" Tatel continued. "Notwithstanding these changes, the government, through the Department of Transportation (DOT), retained authority to prohibit 'unfair or deceptive practice[s] . . . in air transportation or the sale of air transportation.'” 

The requirement that advertisements include all taxes and fees in ticket prices for flights was included in a Passenger's Bill of Rights was implemented on behalf of the Obama administration by Transportation Secretary Ray LaHood. Other requirements include refunding fees for checked luggage that is lost and fines for airlines keeping passengers on grounded airplanes for delays that last more than three hours.

The airlines had argued in their lawsuit that the price advertising requirements make the rules for their industry more stringent than any other.

But Tatel said in his opinion that "[S]ince 1984, DOT has required that any advertised price for air transportation disclose the 'entire price to be paid by the customer to the air carrier.'

"Prior to the rulemaking at issue here, DOT allowed airlines to advertise the pre-tax price of tickets provided that the advertisement clearly disclosed the amount of the tax," he said. "But in the challenged rule, DOT, citing consumer confusion, revised its policy to require airlines to state the total, final price. Under this so-called 'Airfare Advertising Rule,' airlines remain free to provide an itemized breakdown (displaying to the customer the amount of the base fare, taxes, and other charges), but they may not display such price components 'prominently' or 'in the same or larger size as the total price.'

The trade association for the airline industry, Airlines for America, said its members would abide by the advertising rules, but disagreed with the judge's conclusion.

“Our members support full transparency, and customers have always known exactly what they were paying for before they bought a ticket," A4A said in written statement. "We continue to believe that this rule enables the government to effectively hide the ball regarding how high airfare taxes are.”

The full court ruling can be read here.

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