Airfare Prices Could Get More Confusing As DOT Moves To Weaken Full Fare Advertising Rules

The Department of Transportation announced a proposed rulemaking to weaken “full fare” advertising requirements for airfare.

Airlines would still have to show the total price to be paid, including taxes and mandatory charges, whenever they display fares. However, the Department of Transportation proposes letting fare components like government taxes and fees be shown as prominently as the total price, including in the same font size (just not more prominently, and not in misleading ways).

Today, an airline has to make the total price the most prominent and components of a ticket price can’t be in the same size. Under this new rule an airline might say:

• Fare: $100
  
• Taxes/fees: $25
  
• Total: $125

They also want to make a number of other changes.

DOT Wants To Rescind Outdated Guidance Documents

The agency has issued 9 documents explaining their view of the law which it wants to rescind. These aren’t rules themselves and don’t have legal force exactly but outline DOT’s position on what current rules mean in specific situations. Their argument is that some are outdated and unnecessary and others acted like legal requirements without having gone through the regulatory process to make them so.

• Use of “Free” when talking about award travel. 2012 guidance says an airline cannot call travel “free” if the customer has to pay any cash amount to get it. Even domestic awards usually pass on TSA security taxes, but that would include carrier surcharges, partner award booking fees, etc. That’s why we see “X miles plus from $5.60 in government fees.” Under DOT guidance, “free” means no money due.

• Rounding in fare displays. 2012 guidance says airfare sellers may show either the exact full fare or a fare rounded up. They cannot round down, because that understates the actual amount payable. That’s why you see $99 fares, click through and it turns out to be $98.10.

• Government taxes have to be clearly distinguished from carrier surcharges. 2012 guidance says that prices can break out taxes and carrier charges, but must accurately distinguish government taxes and fees from carrier-imposed fees. They may not lump fuel surcharges, convenience or technology fees, or other airline-required fees into a bucket labeled “taxes” or “taxes and fees” (“taxes and carrier-imposed fees” is acceptable).

  It also says a “fuel surcharge” must reflect a reasonable estimate of per-passenger fuel costs above some reasonable baseline, not just be a disguised fare component. That’s why we rarely see things called fuel surcharges anymore, and they just called them ‘carrier-imposed surcharges’ instead. British Airways actually settled a class action lawsuit over this.

  The guidance also says advertising one-way pricing when roundtrip purchase is required must clearly and prominently disclose that requirement, and that it is deceptive to make the outbound artificially cheap and the return fare huge to bait consumers into a roundtrip.

• Social media airfare advertising rules. DOT said in 2011 that ads in social media still had to meet full requirements, even when there are length or character limits. So a tweet mentioning an airfare still must show the all-in fare, including tax and surcharge disclosures.

  This guidance is archived, and already says that continued reliance on archived guidance is not advised. The proposed rulemaking argues that withdrawing this guidance doesn’t change what’s actually required by the underlying rule.

• FAQ for the 2011 Full Fare Rule. Since the proposed rulemaking targets the 2011 rulemaking directly, they want to withdraw guidance on following that rule.

  The FAQ says airfare sellers must always list the total price, inclusive of taxes, fees, and mandatory charges; that taxes/fees can be broken out but that cannot be prominent; that the total price should be in larger font and components of the price should not be highlighted, bolded, underlined, italicized, or placed ahead of the total price; award pricing must show both miles and cash costs with equal prominence; per-leg fare displays must show the full price for that leg and prominently state that prices are quoted per leg but only available with roundtrip purchase; “from” pricing is allowed only if the low-end price is actually available in reasonable quantity and reflects the full price; internet fare listings must be updated immediately when inventory disappears; Social posts should be updated or removed when a reasonable number of seats is no longer available.

  Specific fare advertising turns out to be very hard if not impossible to do when advertised prices must be immediately updated as inventory disappears. And that makes it harder to do internet sales, actually, eliminating one form in which lower fares could be available.

• Disclosure that fares may vary in different channels. 2004 guidance says fares available in a specific channel only (like an airline’s website or mobile app) but must prominently disclose that the fare is available only through that channel and that other channels cost more (DOT said it would be useful to state the amount of the increase, but in fare ads the increase may not be characterized as a separate “service fee,” because carrier-imposed fees are part of the fare).

• Surcharges that may be listed separately in advertisements This appears to be the same 2004 notice under a different title, but DOT treats it as a separate item in the proposed rulemaking. It said “government-approved” surcharges could no longer be separately listed outside the fare, because they were not really government-imposed charges in the relevant sense.

  This is mostly superseded by the Full Fare Rule anyway (that DOT seeks to change), because the first advertised fare must already include taxes and mandatory charges.

• Older guidance on advertising free tickets from 2003 said if an advertised fare was not the full fare, the ad had to clearly disclose excluded taxes and fees in close placement and readable size. For “free” tickets, conditions and required taxes and fees had to be disclosed prominently and proximately, at least with an asterisk or similar symbol pointing to readable terms. For internet ads, DOT allowed a single hyperlink to a full explanation, as long as “taxes, fees, and restrictions apply” or similar language appeared adjacent to the fare.

  This was superceded by 2011 guidance that you cannot call a ticket “free” if any mandatory cash payment is required.

• Portions of a 1994 letter to major airlines and industry groups related to price advertising. It said two-for-one fares were deceptive if the qualifying paid fare is higher than other fares in the market unless that fact is prominently and clearly disclosed. Percentage-off fares were considered deceptive unless the benchmark fare was actually offered in reasonable quantities for a reasonable period immediately before the promotion (and the benchmark is clearly identified or comparable to the advertised fare). Ads had to disclose if seats are limited or unavailable on every flight. Advertised fares must be available in reasonable numbers in each listed market. Repeat ads require reasonable availability each time. Lengthy blackout periods or unavailable days of week must be specifically disclosed.

Additionally, DOT says that the Biden administration’s airline fee rule was blocked by the courts so they want to do cleanup and actually remove it, even though (and because) it doesn’t have any legal effect.

DOT Is Considering Whether To Rescind The Full Fare Rule Entirely

While the disclosed proposal keeps all-in pricing requirements, but allow taxes, fees, and fare components to be shown as prominently as the total price (but not more prominently), DOT is asking for comment on whether it should just repeal the full fare rule entirely. They say,

• It may not be legal. Te rule was tested in court at the time, but Supreme Court doctrine has moved against ‘compelled speech’ and the rule survived largely on the basis of deference to DOT’s expert judgment (Chevron doctrine) which after Loper Bright is no longer good law.

• The IRS already has an airfare tax-advertising rule. 26 U.S.C. § 7275 requires air transportation ads to state the total of fare plus taxes, and says that if fare and taxes are separately stated, the total must be at least as prominent as the most prominent component. Congress wrote this into law, so DOT probably shouldn’t have a stricter overlapping rule.

• They’re trying to deregulate as a matter of policy.

If they repealed the rule, airlines would be looking to the Internal Revenue Code’s tax display rule plus general unfair and deceptive-practices enforcement. And the major airline lobby groups love this.

Airlines Want Looser FTC-Style Regulation, And DOT Partially Buys That

Airlines have argued for years that they should be more strictly regulated than other businesses, especially since they were ‘deregulated’. But the Airline Deregulation Act gave them their own regulator in DOT, and DOT creates rules that often exceed burdens placed on other industries. They would prefer to simply have to abide by the same federal rules as everyone else rather than being under stricter requirements than hotels, rental cars, and event tickets

The problem with this theory is that airlines also get federal preemption of state regulation regarding schedules, pricing and service. So states can regulate hotel price advertising, but they cannot regulate airfare price advertising. ‘FTC regulation’ means ‘FTC plus states’ in most cases. Here it would be FTC-only, and that’s not actually being treated the same as other industries.

Nonetheless, the FTC’s 2025 junk fee rule requires a displayed “total price but lets sellers exclude government charges from the advertised total. The airline lobbies (Airlines 4 America and IATA) want that as the model, saying that the airline rule is stricter than other industries and forces airlines to “hide” government taxes/fees inside the fare. That isn’t wrong.

However, DOT isn’t proposing to let airlines advertise fares excluding taxes – yet They say the current rule is too prescriptive about prominence and font size and want airlines to be able to show taxes, fees, and fare components as prominently as the total price (but not more prominently).

In fact, FTC requires the total price to be more prominent than other pricing information. DOT’s proposal – even without repealing the Full Fare Rule – would allow the airfare total to be equally prominent with its parts. DOT says this tracks the Internal Revenue Code’s air transportation tax ad rule (that total price must be shown “at least as prominently” as the components).

Airlines for America argues that airlines should be able to display taxes and fees later in the booking process, and do so separately like other industries, “because taxes are generally uniform across purchases.” This is not actually true because connections impose additional costs and airport costs vary.

(HT: Airline Information Research)