Odds are you don’t know the answer to this question. I know that I have no certain answer to it. But I do know that the most recent revisions to it carry tremendous potential impact on passengers, travel agents and airlines. The most recent rules took effect only earlier this year, meaning there haven’t been many opportunities for test cases. It looks like a pretty significant test case has just shown up. The above referenced cite is the rule the DoT uses to handle unfair and deceptive advertising practices. While it is focused on truly misleading or bait-and-switch actions where one price is advertised and then the fare changes after a ticket is purchased, it also appears to have potential impact on mistake fares.
Here’s the text of 49 U.S.C. 41712 § 399.88(a) :
It is an unfair and deceptive practice within the meaning of 49 U.S.C. 41712 for any seller of scheduled air transportation within, to or from the United States, or of a tour (i.e., a combination of air transportation and ground or cruise accommodations), or tour component (e.g., a hotel stay) that includes scheduled air transportation within, to or from the United States, to increase the price of that air transportation, tour or tour component to a consumer, including but not limited to an increase in the price of the seat, an increase in the price for the carriage of passenger baggage, or an increase in an applicable fuel surcharge, after the air transportation has been purchased by the consumer, except in the case of an increase in a government-imposed tax or fee. A purchase is deemed to have occurred when the full amount agreed upon has been paid by the consumer.
Airlines have, with some frequency, cited clauses in their Contract of Carriage when they load mistake fares into the GDSes and sell them. Korean Air canceled a whole bunch of flights to Palau last year and British Airways did the same to customers who were ticketed to India (self included) prior to that. In each case the airline claimed that the fares were simple and obvious errors and therefore they could absolve themselves of their obligations simply by refunding the charge.
The DoT seems to feel otherwise these days. In fact, this specific type of case is directly addressed in their Second Final Rule on Enhancing Airline Passenger Protections FAQ:
Does the prohibition on post-purchase price increases in section 399.88(a) apply in the situation where a carrier mistakenly offers an airfare due to a computer problem or human error and a consumer purchases the ticket at that fare before the carrier is able to fix the mistake?
Section 399.88(a) states that it is an unfair and deceptive practice for any seller of scheduled air transportation within, to, or from the United States, or of a tour or tour component that includes scheduled air transportation within, to, or from the United States, to increase the price of that air transportation to a consumer after the air transportation has been purchased by the consumer, except in the case of a government-imposed tax or fee and only if the passenger is advised of a possible increase before purchasing a ticket. A purchase occurs when the full amount agreed upon has been paid by the consumer. Therefore, if a consumer purchases a fare and that consumer receives confirmation (such as a confirmation email and/or the purchase appears on their credit card statement or online account summary) of their purchase, then the seller of air transportation cannot increase the price of that air transportation to that consumer, even when the fare is a “mistake.”
A contract of carriage provision that reserves the right to cancel such ticketed purchases or reserves the right to raise the fare cannot legalize the practice described above. The Enforcement Office would consider any contract of carriage provision that attempts to relieve a carrier of the prohibition against post-purchase price increase to be an unfair and deceptive practice in violation of 49 U.S.C. § 41712.
Seems like good news for consumers, right? Well, that depends on whether the airlines are actually held to the rule. Both Korean Air and ANA, among others, are now facing just such a question after a “mistake” fare for travel from Burma/Myanmar to pretty much anywhere in the world was available last week. The “mistake” came about due to a currency devaluation, essentially causing a few zeroes to disappear from fares. When just a few were being purchased here and there it was no big deal. Once the deal was widely publicized, however, hundreds were purchased and the airlines realized they had a problem.
They managed to pull most of the fares pretty quickly though some were still available several days later. But what to do about the hundreds of tickets already issued? For obvious reasons the airlines want to cancel them; in many cases the costs to cater for the passengers, much less carry them, are greater than the fare paid. The airlines are going to lose money on these fares. But does that give them the right to unilaterally cancel the flights?
At least for now, the carriers seem to be erring on the side of “Yes” for that question. Both Korean and ANA have contacted the booking agents and most tickets booked at the mistake rate have been canceled. But that doesn’t mean the DoT actually approves of such an approach. Korean seems to be taking the approach that since they never changed the fare and instead simply canceled the tickets they are not in violation of the rule. ANA has similarly responded that the “genuinely regret the circumstances that prompted [a complaint]” and that they are “now in contact with the appropriate agencies and departments.” Vayama, one of the booking agents which was party to many of the tickets issued has claimed, in part,
The DOT Ruling was set up in part to prevent unfair and unethical business practices associated with pricing on the part of airlines… [T]he cause of the dramatic decrease in fares out of Rangoon was not the result of unfair or unethical business practices on the part of the airlines.
… Although we have no way of knowing at this time how the DOT will rule on this case, we are confident that the actions taken were NOT in an effort to unfairly or unethically impact any customers.
All three seem to be of the opinion that, because it was truly an accident that they should be excused from the rule. I can certainly understand the position of the airlines in this case. Maybe they shouldn’t be held responsible for a country devaluing its currency by a few decimal points. Then again, they’re the ones who publish the fares and they’re the ones who have control over such things, so maybe they should be held accountable. After all, what is the threshold for really an accident versus not?
One thing is certain: the DoT has quite a doozy of a first test for their revised rule. They’ve shown little sympathy with respect to fines handed out relative to the 3-hour tarmac rule since that went into force so perhaps that is a hint as to their consumer-friendly leanings these days.
- Taking responsibility for a pricing error
- Reaching a settlement with British Airways
- The wheels of justice grind slowly on
- More coverage of the British Airways/India fare fiasco
- US DoT smacks British Airways around
- My $20 worth of fun with British Airways
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