Keep airline advertising honest by keeping the Full Fare Advertising Rule in force.
As the Senate and House get closer to negotiating the final FAA Reauthorization Bill, consumer groups are focusing on a provision in the House version that will eliminate the Full Fare Advertising Rule. If the House version prevails, airline passengers will find that total airfares including taxes and fees will increase.
Rolling back the Full Fare Advertising Rule will harm consumers.
For consumers, rolling back the Full Fare Advertising Rule can allow airlines to advertise airfares without the mandatory taxes and fees would harm consumers and make comparison shopping and competition among airlines almost impossible.
In 2012 airlines were required by a DOT rulemaking to include all mandatory taxes and fees in their advertised fares. DOT’s instructions allowed the airlines to separate out taxes and fees from their airfares. However, the total advertised price had to include all mandatory taxes and fees. Travelers United was the lead consumer advocacy group working with DOT on this new rule. It was a part of Travelers United’s efforts to make airfares and ancillary fees more transparent.
In a previous post, I noted that Section 405 (included below) of the current House Version of the FAA Reauthorization Bill will allow airlines to return to misleading and deceptive advertising. Ultimately, it will remove the current ability for consumers to comparison shop among airlines by aircraft routing and total price.
Back in 2012, before DOT mandated the Full Fare Advertising Rule to control deceptive advertising, airlines advertised transatlantic flights for $65. Of course, after reading the fine print a consumer found that the least expensive ticket cost more than $750.
The basic consumer motivation is to comparison shop and then choose the lowest-priced airline route option that includes all the additional taxes and airline fees. Travelers United’s efforts fell short when it came to disclosure of optional ancillary fees. However, this Full Fare Advertising Rule provided the first opportunity for consumers to shop based on the total cost of travel -— airfare plus all mandatory taxes and fees.
The Full Fare Advertising Rule saves consumers millions of dollars every year.
A recent study or international airfares shows the importance of this rule for consumers — The Full Fare Advertising Rule (FFAR) saves consumers millions of dollars every year. After careful analysis, the study concludes:
…we find that the more prominent presentation of tax-inclusive air fares following the implementation of FFAR is associated with a sharp decline in pass-through rates for unit ticket taxes. Prior to FFAR, airlines passed through nearly the entire tax onto consumers in the form of higher base and total fares, while in the post-FFAR period, only about 25 cents of every dollar of unit taxes is passed onto consumers.
In other words, when consumers have the opportunity to comparison shop across all airlines and all available routes based on the full price of travel, the total price paid by consumers decreases. Overall, passengers pay less. When passengers are provided with the option of selecting a route with higher taxes or with lower taxes and the total price is clearly noted, travelers will select the lower-taxed option with the lower total price.
Needless to say, airlines have been fighting this consumer-friendly and competition-friendly provision for years. After the implementation of the Full Fare Advertising Rule in January of 2012, a group of airlines took DOT to court to force a rollback of the new rule. They lost.
Then, in the next FAA Reauthorization Bill of 2016, the current House language was passed. However, the airlines did not succeed in getting any companion bill in the Senate. And now, in 2018, the airlines again have managed to get this same language in the current FAA Reauthorization Bill of 2018. And again, there is no companion provision in the current Senate version of the bill.
When the two different versions of the FAA Reauthorization Bill are hashed out in a conference, hopefully, the current rule will remain in force. Travelers United’s efforts have been focused on keeping the Full Fare Advertising Rule in place.
This is the current text of the attempt by the House to eliminate the Full Fare Advertising Rule.
SEC. 405. ADVERTISEMENTS AND DISCLOSURE OF FEES FOR PASSENGER AIR TRANSPORTATION.
(a) Full Fare Advertising.—
(1) IN GENERAL.—Section 41712 of title 49, United States Code, is amended by adding at the end the following:
“(d) Full Fare Advertising.—
“(1) IN GENERAL.—It shall not be an unfair or deceptive practice under subsection (a) for a covered entity to state in an advertisement or solicitation for passenger air transportation the base airfare for the air transportation if the covered entity clearly and separately discloses—
“(A) the government-imposed fees and taxes associated with the air transportation; and
“(B) the total cost of the air transportation.
“(2) FORM OF DISCLOSURE.—
“(A) IN GENERAL.—For purposes of paragraph (1), the information described in paragraphs (1)(A) and (1)(B) shall be disclosed in the advertisement or solicitation in a manner that clearly presents the information to the consumer.
“(B) INTERNET ADVERTISEMENTS AND SOLICITATIONS.—For purposes of paragraph (1), with respect to an advertisement or solicitation for passenger air transportation that appears on an internet website or a mobile application, the information described in paragraphs (1)(A) and (1)(B) may be disclosed through a link or pop-up, as such terms may be defined by the Secretary, that displays the information in a manner that is easily accessible and viewable by the consumer.
“(3) DEFINITIONS.—In this subsection, the following definitions apply:
“(A) BASE AIRFARE.—The term ‘base airfare’ means the cost of passenger air transportation, excluding government-imposed fees and taxes.
“(B) COVERED ENTITY.—The term ‘covered entity’ means an air carrier, including an indirect air carrier, foreign air carrier, ticket agent, or other person offering to sell tickets for passenger air transportation or a tour or tour component that must be purchased with air transportation.”.
(2) LIMITATION ON STATUTORY CONSTRUCTION.—Nothing in the amendment made by paragraph (1) may be construed to affect any obligation of a person that sells air transportation to disclose the total cost of the air transportation, including government-imposed fees and taxes, prior to purchase of the air transportation.
(3) REGULATIONS.—Not later than 120 days after the date of enactment of this Act, the Secretary of Transportation shall issue final regulations to carry out the amendment made by paragraph (1).
(4) EFFECTIVE DATE.—This subsection, and the amendments made by this subsection, shall take effect on the earlier of—
(A) the effective date of regulations issued under paragraph (3); and
(B) the date that is 180 days after the date of enactment of this Act.
(b) Disclosure Of Fees.—Section 41712 of title 49, United States Code, as amended by this section, is further amended by adding at the end the following:
“(e) Disclosure Of Fees.—
“(1) IN GENERAL.—It shall be an unfair or deceptive practice under subsection (a) for any air carrier, foreign air carrier, or ticket agent to fail to include, in an internet fare quotation for a specific itinerary in air transportation selected by a consumer—
“(A) a clear and prominent statement that additional fees for checked baggage and carry-on baggage may apply; and
“(B) a prominent link that connects directly to a list of all such fees.
“(2) SAVINGS PROVISION.—Nothing in this subsection may be construed to derogate or limit any responsibilities of an air carrier, foreign air carrier, or ticket agent under section 399.85 of title 14, Code of Federal Regulations, or any successor provision.”.