Governmental Rules and More Rules – What’s An Advisor to Do? Part I

Travel is complicated. For various historical reasons, using its statutory authority to prevent unfair or deceptive practices and unfair methods of competition, the Civil Aeronautics Board adopted various regulations to govern how travel agents operate.

You are “ticket agents” in the language of the law, even if you’re now known as travel advisors. The CAB was replaced by the Department of Transportation (DOT) when air travel was “deregulated.” The DOT has continued most of those rules and added to them. Enforcement is erratic but hangs over the industry as a continuing challenge.

Unnoticed to a large degree are another set of regulations adopted by the Federal Trade Commission (FTC) for application to all retailers in interstate commerce. While mainly focused on other lines of commerce, the FTC is technically vested with jurisdiction to prevent unfair and deceptive practices by travel advisors (though not by airlines who are exempt from FTC authority). Enforcement by the FTC is even spottier, but periodically it has engaged in “sweeps” that included travel retailers engaged in fraudulent practices harmful to consumers.

In this series, TMR discusses DOT and FTC regulations to serve as a reminder to travel advisors that their obligations to comply with those rules are serious. Not only are advisors exposed to enforcement by the government, but you also have compliance duties to your customers and to the consortia/host agencies with whom you may be aligned. Failure to comply can expose you to civil liability in some cases.

These articles will cover the highlights of the major regulations, first of DOT and then of the FTC. These articles are not substitutes for the regulations or your obligation to know and comply with them. The articles will be a general guide and, hopefully, a useful alert to your responsibilities.

We will begin with the specific provisions of the Federal Aviation Act, move to DOT “policy statements” and DOT-specific regulations and guidance documents for travel advisors, and finally to the FTC rules that may apply.

The central source of DOT’s authority is in the US Code: 49 USC §41712. That law empowers DOT to “investigate and decide” whether a “ticket agent [again, a travel advisor in industry terms] has been or is engaged in an unfair or deceptive practice or an unfair method of competition in … the sale of air transportation.” Many of the terms in the law have their own definitions but for our purposes you may use your common sense to understand that “ticket agents” refers to someone that, as a principal or as an agent, books and sells airplane tickets to consumers. For most purposes the key language is “unfair or deceptive practice” to which we will return many times.

For a variety of reasons, the statute goes further into specific rules in a few cases:

• You must disclose any expiration dates for e-tickets;
• Before the purchase, you must disclose the name of the carrier for each flight segment (disclosure may be verbal, in writing or by email/text [the Code-Share Rule];
• When offering to sell tickets on a website, carrier names must be disclosed “on the first display … following a search of a requested itinerary in a format that is easily visible to a viewer.”

Everything else of concern to travel advisors is found in DOT’s Policy Statements, other regulations and guidance documents issued on specific issues from time to time. The published policies are mainly intended to elaborate or explain the elements of “unfair or deceptive practice” as used in the statute and applied by DOT in specific cases.

In this series of articles, we will focus on the substantive requirements rather than the procedures involved in DOT’s bringing charges and a ticket agent’s asserting defenses.

Thus, 14 CFR §399.79(b) states that a practice is “unfair” if:

• it causes or is likely to cause substantial consumer injury,
• the injury is not reasonably avoidable, and
• the harm is not outweighed by benefits to consumers or competition.

A practice is “deceptive” if:

• it is likely to mislead a consumer,
• acting reasonably under the circumstances, and
• the deception likely affected the consumer’s conduct or decision with respect to a product or service.

Proof of intent to treat the customer unfairly or to deceive is irrelevant. The rule is based on consequences.

Returning to the Code-Share Rule mentioned above, DOT has adopted a separate regulation that amplifies the governing statutory rules:

1. The Code-Share Rules apply to travel advisors that:

• sell scheduled passenger services in the United States
• involving code-sharing arrangements or long-term wet leases

[Note: a long-term wet lease is a lease providing both aircraft and crew dedicated to a particular route(s), and which, alone or together with other such leases, lasts more than 60 days.]

2. Those advisors must ensure that each flight segment on which the designator code is not that of the operating carrier is clearly and prominently identified, and

• on desktop browser-based websites or applications in response to a requested itinerary search, the corporate name of the transporting carrier, and any other name under which the service is held out to the public, must:

1. appear prominently in text format,
2. in font size not smaller than the font size of the flight itinerary itself,
3. on the first display following the input of a search query,
4. immediately adjacent to each code-share flight in that search-results list.

The rule is the same for mobile browser-based websites or applications except that the “other name under which the service is held out to the public” need not be shown.

In both cases, roll-over, pop-up, and linked disclosures may not be used.

• For static written schedules, code-share segments must be identified by an asterisk or other easily identifiable mark that leads to disclosure of the corporate name of the operating carrier and any other name under which that service is held out to the public.

The code-share rules become more problematic when applied to oral communications between the advisor and the consumer:

In any direct oral communication in the United States with a prospective consumer, and in any telephone call placed from the United States by a prospective consumer, during which a customer asks about a code-share/wet-lease flight to or from the United States or such a flight is “offered,” the travel advisor must inform the consumer that

• the operating carrier is not the carrier whose name or designator code will appear on the ticket, and
• the transporting carrier is [corporate name and any other name under which that service is held out to the public].

Given the volume of information that an advisor is often providing to a prospective traveler, the best approach to code-share/wet-lease disclosures is to prepare a formal statement to be read to the consumer in every case, with a space for noting the date, time, and person to whom the disclosure was provided. Memories are short. Write it down!

The above requirements for code-share/wet-lease disclosures are, however, insufficient to satisfy all DOT requirements. The rules further demand that at the time of purchase, the advisor must inform the consumer in writing of the identity of the actual operator of the flight. For each such flight, the notice must state: “Operated by” followed by the corporate name of the transporting carrier and any other name in which that service is held out to the public.

DOT has approved a form of statement that meets the requirement:

Important Notice: Service between XYZ City and ABC City will be operated by Jane Doe Airlines d/b/a QRS Express.

The written notice may, at the purchaser’s request, be delivered in person, or by fax, email, or any other reliable method of transmitting written material.

The best practice is to follow up the oral conversation with an email repeating the disclosures in the approved form. Keep all these records with the consumer’s file for future use if needed.

One final pair of code-share/wet-lease rules provides:

1. Every written advertisement distributed in or from the United States (including websites marketed to U.S. consumers) must:

• “prominently state” that the service may involve travel on another carrier,
• “clearly indicate” the nature of the service
  • in “reasonably sized type,” and
  • identify all “potential operating carriers” in the markets being advertised by corporate name and by any other name under which that service is held out to the public.

2. Any radio or television ad broadcast in the United States for a code-share/wet-lease service, must include at least a generic disclosure statement, such as “Some flights are operated by other airlines.”

The next article in this series will begin to explore the other DOT regulations that impose specific duties on travel advisors.