Governmental Rules and More Rules: What’s An Advisor to Do? Part 3

As promised at the end of Part 2 in this series, it’s now time to get serious with the complicated DOT price regulations. These regulations were adopted more than a decade ago but remain among the most important “traps for the unwary.”

14 CFR § 399.84 governs “Price advertising and opt-out provisions” and has three major components. Sub-section (a) applies to “any advertising or solicitation” by an airline, a tour operator re-selling air as part of a package, and “an agent of either, or a ticket agent” in certain circumstances. The use of “agent of either, or a ticket agent” is an unusual and seemingly redundant use of terminology suggesting it is possible to be an “agent” of a tour operator re-selling air and somehow be different than a “ticket agent.”

For your purposes, the focus should be on the rest of the rule, noting that: (1) the covered tours may involve ground, cruise, or hotel accommodations promoted with the air component, and (2) the promotion must state a price “for such air transportation, tour, or tour component.” In such cases, the stated price must be the “entire price to be paid by the customer” for the air, the tour, or the tour component.” Thus, virtually anything you sell with air travel involved that states a price is covered by this rule.

Of particular interest regarding package sales involving air travel with a hotel component is the question of hotel resort fees. The rules do not expressly address this issue, but if the hotel/resort/destination/whatever-its-called fee/charge is mandatory, DOT’s rule seems clearly to require that it be included in the total price advertised for the package.

Note, however, that the final rule explanation at 76 FR 23166 says: “While a carrier or ticket agent generally is not required to include a booking fee in its advertised fare if there are other means for the passenger to obtain the air transportation ( e.g., a booking fee only applies for tickets that are purchased over the telephone), where airfares are advertised via an Internet site that permits consumers to purchase fares, the fares advertised on the site must include all charges required to make the purchase on the site.”

The explanation is now, however, what the rule says, and you should rely on the rule when advertising prices. The safest course, in my view, is that if you engage in advertising covered by the rule, you should always, always state the full all-in price before showing any separate components that may be part of that all-in price.

The rule provides that some elements of the total price may be shown separately in limited circumstances. Thus, any charges included within the “single total price” (giving the example of government taxes) may be shown separately (or through links or ‘pop-ups’ on websites) but those separate charges must comply with five (5) principles:

(1) not be false or misleading,
(2) may not be displayed prominently,
(3) must be in smaller type size than the total price,
(4) must state the cost on a per-passenger basis, and
(5) accurately state the cost of the charge.

To be very clear about this, again, the separate charges must first be included in the total stated price and may then be separated only if the five principles are applied to the separate charges.

Failure to comply with this rule means that the promotion is an unfair/deceptive practice and subject to DOT enforcement.

The second major component of the regulation, sub-section (b), applies to “any advertising” of an “each-way airfare” that is “available only when purchased for round-trip travel.” That form of advertising is an unfair/deceptive practice unless two principles are followed:

1. the ad discloses “clearly and conspicuously” that a round-trip purchase is required, and
2. the round-trip purchase requirement is stated, “prominently and proximately to the each-way fare amount.”

However, while “each-way” means “one-way” in normal industry parlance, the use of “one way” to refer to “each-way fares” that are only available as part of round-trip purchases is not an acceptable terminology. Each-way fares that are contingent on a round-trip purchase that is described as “one-way” fares are unfair/deceptive, even if accompanied by prominent and proximate disclosure of the round-trip purchase requirement.

If you are going to advertise one-way fares, you must be very careful how you label them in addition to the rule’s other requirements.

The third section of the price advertising rule deals with opt-out conditions in any form of promotion for a flight or a tour, cruise or hotel stay that must be purchased with the air. Opt-out conditions, where the charge attaches unless the consumer declines the service, are unfair/deceptive practices. To be legal, the consumer must “opt-in” to the optional service before the charge attaches.

The formal DOT rules on price advertising are supplemented by “guidance” documents issued from time to time. The guidance documents are not a model of clarity, mainly because regulating price advertising is inherently complex. And most of them have been superseded by later-adopted regulations.

For purposes of managing price advertising in your business, you should just focus on the formal regulations that I have discussed in this article, as they are the controlling law.

The next installment of this series will address the rules governing baggage fees and the rules governing changes in quoted prices.