Mistake fares are, once again, mistakes

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Money talks at the US Department of Transportation and the airline lobbyists have once again taken control over the consumer relations.

In 2011 airlines doing business in the United States faced new regulations requiring them to honor so-called “mistake fares” pretty much in every situation imaginable. Known as 49 CFR 41712 § 399.88(a) or, more commonly, 399.88, the Department of Transportation regulation prohibits any seller of airfare from changing the fare once payment is accepted.

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 … to increase the price of that air transportation … 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.

At the time this was adopted the DoT enforcement arm issued guidance explicitly calling out “mistake” fares as being covered by this rule:

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.”

As of 8 May 2015 that guidance is no longer valid. The DoT has been studying this issue since May 2014 and chose last week to change its stance on the issue:

As a matter of prosecutorial discretion, the Enforcement Office will not enforce the requirement of section 399.88 with regard to mistaken fares occurring on or after the date of this notice so long as the airline or seller of air transportation: (1) demonstrates that the fare was a mistaken fare; and (2) reimburses all consumers who purchased a mistaken fare ticket for any reasonable, actual, and verifiable out-of-pocket expenses that were made in reliance upon the ticket purchase, in addition to refunding the purchase price of the ticket.

Or, put more succinctly, mistake fares are mistakes once again and the US DoT will no longer require these mistakes to be honored.

Each of the “Big 3” airlines in the US has seen a few mistake fares during the four year period in which honoring the mistakes was required. A number of foreign carriers did as well. And during the term the enforcement has slowly softened from a “100%, no questions asked” position to one where the airlines were permitted to make a claim to the DoT and find ways out of some of their errors. The pendulum has now swung fully back in the other direction: Airlines are permitted to make mistakes so long as they make a customer “whole” when they admit such.

There are still some open questions about the new policy, most notably around what defines a “mistake” and how the airlines will prove that is what happened. The statement also leaves open the possibility that the enforcement will resume at some point in the future, pending review of comments received between May and September 2014 by the Department in response to the suggestion that “mistakes” might not need to be honored. The statement did not give any timeline nor indication which way the Department is leaning on the topic, though it could be argued that choosing non-enforcement now is an indicator.

Yes, consumers lose a bit with this latest policy shift. Airlines once again have full discretion to make changes or claim a “mistake” while consumers are quite limited on that front. It is not all bad for consumers – in most cases there is a 24-hour window available to claim a mistake was made – but the airlines do not face similar time constraints, or if they do that is not clear in the DoT statement. And that is unfortunate.

I have long claimed that there should probably be some sort of middle ground in between the two extremes we have seen in the past few years. I do not believe that this current “non-enforcement” position from the DoT is that middle ground; hopefully the final ruling from the May 2014 NPRM will set things a bit more centered. There is a middle ground in there somewhere. I’m just not sure we’ll find anyone to agree on the definition of what a “mistake” fare is versus a really good sale. And the Potter Stewart “I know it when I see it” definition is going to be much harder to apply in this industry because there are so many examples of real fares which look a lot like mistakes some days.

In the mean time, however, customers need to be aware that the government no longer has their back.

And before anyone gets out the pitchforks to blame blogs, remember that the DoT specifically names “postings on aviation and travel websites, forums, and blogs” for the change in policy. All of the groups are included.

Thanks to DS for pointing out the news to me; not surprisingly I missed it in the “Friday dump” of news.

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9 Responses

  1. Patrick
    Patrick at |

    So according to the “rules” which state “…and (2) reimburses all consumers who purchased a mistaken fare ticket for any reasonable, actual, and verifiable out-of-pocket expenses that were made in reliance upon the ticket purchase,.. ” if you purchased all sorts of other goods and services (train tickets, tours, etc) based on using the mistake fare ticket, the airline would be required to reimburse you for those?

    1. Seth Miller
      Seth Miller at |

      That is my read of the guidance. Presumably only the expenses incurred between when you bought the now cancelled fare and when you are notified that it will not be honored, but, yes.

      Previously when playing the “game” the rule was to never book anything nonrefundable just in case. Now it seems the opposite is true, assuming you’re willing to replace the mistake fare ticket at normal prices.

      1. Eric
        Eric at |

        Or through miles… and probably better to do it through another airline or the original airline could argue that you do not need to be made whole on those expenses if you’re still taking the trip. Likewise, they might want to request proof that you’ve actually canceled these services prior to reimbursing you (seems reasonable and a good way for them to quash that incentive/loophole).

  2. Ryan E
    Ryan E at |

    I’ve always felt that what’s good for the goose is good for the gander… if consumers have 24 hours to refund their ticket purchase, then also give an airline 24 hours to claim a mistake and refund the purchaser’s ticket. After that they’re locked in just the same as the passenger is.

    1. DaveS
      DaveS at |

      I think that this would be a whole lot simpler for DOT to do than trying to field multitudes of inquiries and complaints about what are “reasonable, actual and verifiable” expenses – a loophole big enough to drive all kinds of shenanigans through.

  3. Bel Ami
    Bel Ami at |

    @Ryan E, except consumers have 24 hours to cancel a ticket for any reason, not just when there’s been a mistake. Are you ready to give airlines that leeway as well?

    1. Kenny
      Kenny at |

      That would be preferable. At least then we would know at what point we have a meaningful contract. As now (un)written, there is nothing to prevent an airline from deciding a discounted fare is ‘mistaken’ and reselling your seat at a higher price as late as the day of travel.

  4. Tom
    Tom at |

    A few thoughts:
    The rule is too broad since it allows airlines to determine what a mistake is. I think the rules should be identical for consumers and airlines. Both should have 24 hours to cancel a booking for any reason. Airlines would need to get an affirmative response from the consumer that they know the fare has been cancelled, they can’t just do it unilaterally.

    If the airline can cancel a fare months after it has been booked because it was a mistake, consumers should be able to do the same. I’ve booked flights on the wrong day before and didn’t realize it until much later. It seems like I should get a free pass to make a change as well.

    Someone needs to take one for the team after the next mistake fare happens they should book a $20,000 nonrefundable resort stay or cruise and then file a DoT complaint when the fare gets cancelled and ask the airline to pay.

  5. ardwar
    ardwar at |

    I am not sure that booking a 20000 dollar non refundable cruise (that one wouldn’t have paid 20000 dollars ) on a one hundred dollar mistake fare (on a ticket that ordinarily costs 1500 dollars, but that one wouldn’t have paid 1500 dollars for) would work out that well — the airline would just “generously” make an exception to the cancellation and allow you to fly for the ticketed one hundre dollars.

    Might or might not get away with it, depending on when one filed the expense claim etc. , or saying changed plans once one received the cancellation, but it would be a messy unpleasant experience.