Posted on: December 17, 2012
DOT ad rule could face the Supreme Court
Three low-fare carriers have asked the U.S. Supreme Court to throw out the Transportation Department’s new price-advertising rule, claiming that the DOT is violating the First Amendment by prohibiting airlines from advertising base prices net of taxes and fees.
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The carriers — Spirit, Allegiant and Southwest — also claim that the DOT has been violating the Airline Deregulation Act by imposing unique requirements such as “the size of typeface and the length of mandatory refunds — in an industry that Congress expressly chose to deregulate.”
The three airlines lost those arguments in a 2-1 decision at the U.S. Court of Appeals for the District of Columbia circuit earlier this year.
But citing the dissenting opinion of Appeals Court Judge A. Raymond Randolph and various precedents, the carriers claim that the Supreme Court has grounds to overrule the DOT.
In their petition to the court, the airlines said the DOT had failed to justify a restriction on truthful speech — the advertising of pretax prices — that is “not even slightly misleading” and that is “standard operating procedure in U.S. commerce.”
They noted that the Federal Trade Commission, the federal agency specifically tasked with monitoring deceptive practices, adopts “a flexible approach that allows base prices to be advertised with conspicuous separate disclosures of additional taxes.”
The DOT’s price-advertising regulation for air travel was adopted in 2011 as part of a package of consumer protection initiatives and became effective in January. It marked what the carriers called “a stark departure from long-standing policy.”
Previously, the DOT permitted airlines and travel sellers to exclude some government taxes and government fees from advertised fares and Internet displays. The new rule requires that advertised prices include all taxes and mandatory fees, regardless of their source.
The DOT rule allows carriers and travel sellers to state the base fare and/or tax amounts separately, but the DOT insists that any such explanatory disclosure may not be “prominent” and must be presented in “significantly smaller type” than the all-in price.
The three carriers assert that these restrictions amount to an infringement on commercial speech and on political speech, because it prevents airlines from “drawing conspicuous attention to the magnitude of ... government-imposed fees.”
Although the appeals court said the airlines still have numerous other avenues for political speech about taxes, the carriers cited a 1974 Supreme Court precedent that said an “inhibition” on the freedom of expression cannot be justified because there might be “other means available ... for the dissemination” of the information.
The airlines also noted that while the Court of Appeals for the D.C. Circuit upheld the DOT, the Appeals Court for the Sixth Circuit in Kentucky reached a different result in a similar case in the telecommunications industry.
In that case, the state of Kentucky imposed a tax on telephone carriers but barred them from stating it separately on customers’ bills. The court struck it down as a first amendment violation because it restricted the “disclosure of accurate information about taxes.”
The airlines also stated that the DOT rule restricts their ability to use social media such as Facebook and Twitter, both of which display a single uniform font size.
“In order to avoid violating the total price rule and its typeface-regulations, an airline advertising on Facebook or Twitter would have to either omit all information about taxes — to avoid giving that information undue ‘prominence’ — or decline to advertise prices altogether,” the carriers said.
Part of a pattern
The three airlines characterized the DOT’s pricing rule as part of a pattern of overzealous regulation. They singled out the DOT’s 24-hour refund rule as an example.
That rule, also adopted last year, requires airlines to hold a reservation without payment for 24 hours or allow consumers to cancel any booking within 24 hours for a penalty-free refund if the ticket was booked a week or more before departure.
The airlines said that in adopting this rule, the DOT “did not even attempt to argue” that it is deceptive for an airline to have cancellation and refund policies other than these.
The DOT has claimed that its rule “strikes the right balance between a consumer’s desire to make travel plans and shop for a fare that meets his or her needs, and the carrier’s need for adequate time to sell seats on its flights.”
The three airlines, however, said the deregulation act did not give the DOT “a roving mandate to establish ‘best practices’ or to ‘strike balances’ concerning consumer preferences and carrier needs. Congress left it to the market — not the regulators — to strike the right balance. In a competitive industry, the seller of a product has no obligation to facilitate a customer’s ability to buy a competitor’s product.”
When the matter was before the Court of Appeals, Airlines for America participated as an amicus or “friend of the court,” while ASTA intervened on the side of the Transportation Department.
According to an attorney participating in the case, those parties will have an opportunity to file their views before the Supreme Court decides whether it will take up the case, a decision that is expected early next year.
The vast majority of initial petitions are denied, often without comment.