How Will DOT’s New Rule on Consumer Protection Hearings Affect Advisors & Travelers?by Paul Ruden /
In early December 2020, I reported on a new Department of Transportation rule that was finalized in the closing days of the Trump administration. The new rule, called the UDP Final Rule, defined the term “unfair and deceptive practices” in the Federal Aviation Act and adopted some procedural changes related to its enforcement practices. Those changes, you may recall, were condemned by some leading consumer organizations.
My view was that, despite strong efforts by the airlines to make enforcement more difficult, “the essence of the codified definitions of “unfair and deceptive practice” were as DOT claimed: merely restatements of existing practice. They neither raised nor lowered the enforcement bar for government or industry. I also noted that DOT was breaking new ground regarding one class of consumer protection rulemaking, the “discretionary” ones not required by a specific federal statute.
The new rule allowed an “interested party,” which would almost certainly be an airline, to request a formal hearing when “the proposed rule raised one or more disputed technical, scientific, economic, or other complex factual issues.” An elaborate decisional structure was established. It conferred much discretion on the DOT General Counsel and an Administrative Law Judge or “other neutral hearing officer” who would manage the hearing under the formal procedures of the Administrative Procedure Act or other rules that might be adopted by the Secretary of Transportation.
The consumer groups opposing the rule believed it would lead to extensive delays and unnecessary complexity that would defeat or slow the adoption of needed consumer protections. My experience at DOT suggested that “formal hearings, if adopted, will pose huge challenges to proponents of new rules.”
In early January 2021, I explained some of the details that apply to findings by DOT of unfair and deceptive practices, focusing on enforcement actions against travel advisors.
DOT’s New Regulation
Spurred by the President’s Executive Order 14036, July 9, 2021, DOT has reviewed once again both the definition of “unfair and deceptive practice” (as to which an interpretive rule is promised “in the near future”) as well as the procedures for hearings in discretionary rulemakings. It has been concluded that “the overly particularized rigidity of the existing procedures in the UDP Final Rule may have the unintended consequence of causing unnecessary delay.”
DOT has therefore undertaken to “clarify” its previously announced procedures for deciding when a formal hearing is necessary and how such a hearing should be conducted to minimize procedural delays. It did this without a process for inputs because the rule was judged to be one of internal procedures not requiring such input under the Administrative Procedure Act.
For now, we know a couple of things to be true.
First, Consumer Reports, one of the organizations that had objected to the UDP Final Rule, has issued a strong endorsement of DOT’s latest action. Second, the elements of the new rule are inevitably going to be the subject of intense debate when they are applied in a case. Several factors make this inevitable.
DOT has “simplified the standard for holding a formal hearing to a “public interest” standard” that will itself “turn on a number of factors including but not limited to the novelty and complexity of the issues, the degree to which a public hearing would illuminate those issues beyond what could be accomplished in the notice-and-comment process, and the degree to which a public hearing would delay the underlying proceedings.” DOT explained that the “public interest standard” was intended to cover not only the elements from the UDP Final Rule but also “any other unique factors that may be relevant to the specific rulemaking at issue.”
I count at least five elements about which airlines, for example, could make arguments in favor of a public hearing that would require process – and time, much time – to resolve. But that’s not all. DOT said.
The Department has also amended the level of proof necessary for the grant of a public hearing from a “plausible” standard to a “credible and convincing” standard; the petitioner [asking for a formal public hearing] would be required to make a “credible and convincing prima facie showing that granting the petition is in the public interest.”
The new rule also provides greater discretion in the DOT General Counsel regarding when to hold hearings and how to justify doing so. And, surprisingly, it allows the use of persons outside the Department as neutral hearing examiners. The hearing officer will have more than usual discretion “to determine whether testimony, written submissions, and/or cross-examination are appropriate given the unique circumstances of each hearing,” an authority whose exercise will inevitably lead to conflict and still more process.
Impact of New Rule on Travel Advisors
In the final analysis, we should give DOT credit for trying to facilitate processes that typically consume much time and money on the part of private parties in an area where the historical record shows that consumer protection rulemakings, even without formal hearings, have taken far too long to complete. For example, the Enhancing Airline Passenger Protections rulemaking, which admittedly covered a multitude of subjects, was initiated in November 2007 and was concluded with final rules becoming effective in August and October 2011. Changes to decisional criteria inevitably lead to disputes about what is required, what is permitted, and what has been done. I, therefore, fear that the initial optimism about these changes may be overstated. I hope not, and only time and experience will tell.
The good news for travel advisors is that these new rules will not affect the rare enforcement cases in which they are directly involved as targets of DOT enforcement. As for rulemakings affecting travel advisor responsibilities, it would be a rare case indeed that would justify the costs of a formal hearing on the record, not to mention the battle over whether it was justified under the new criteria. The new rule applies only to the case of “discretionary” rulemaking, in which the rule is not expressly required by a statute.
An example might be a new rule addressing the obligation of airlines to make refunds of cash payment when, for example, they cancel flights booked and paid for by consumers. The new rule could be used to expedite a hearing if one were deemed necessary, but it’s hard to see why such a finding could be justified. In any case, the reality is that this rule is most likely the stuff of future fights between DOT staff and airlines who may, at least in some cases, want to delay any consumer protection initiatives as long as possible.