Government Affairs DOT’s increased focus on advertising fines draws criticism By Michael Fabey / September 16, 2009 Share 1 -- DOT draws authority from series of policy statementsThe legal authority the Department of Transportation cites as underpinning its right to hunt and punish online advertising infractions is cobbled together from a federal regulation that doesn’t specifically mention Internet advertising at all and a series of policy statements, particularly one that was intended to merely offer guidance on notifying passengers of fuel surcharges.The regulation states that "any advertising or solicitation by a direct air carrier, indirect air carrier or an agent of either for passenger air transportation, a tour or a tour component" must state the "entire price to be paid by the customer." To present another price, the regulation says, would be "an unfair or deceptive practice."The regulation doesn’t mention online sellers of travel, and the DOT has no actual regulations about what it does or does not consider deceptive.Asked how the agency determines the size of the fines or whether there is some DOT template to which companies can refer to make sure their online pages meet agency standards, DOT officials suggested a link on its website to its "guidance on fare advertising on the web."That link is a 2001 policy statement titled "Prohibition on Deceptive Practices in the Marketing of Airfare to the Public Using the Internet."Such policy statements are not actual regulations and need not undergo the same rigorous rule-making procedures that govern the DOT adoption of or change to a regulation regarding, for example, issues such as denied boarding or carriage of the handicapped. The agency can essentially interpret or amend such policies as it sees fit.The DOT has employed this policy to negotiate fines and set precedent for levying more penalties for similar infractions. The DOT said its 2001 policy statement was an attempt "to point out a particular problem involving so-called ‘fuel surcharges’ that has come to our attention regarding the holding out of fares over the Internet."Samuel Podberesky, head of the agency’s Aviation Enforcement office, wrote: "Just as is the case with the marketing of airfares via print media, marketers of airfares using the Internet must comply with department regulations and enforcement precedent with respect to their Internet sites. "This includes not only adherence to the department’s full-fare advertising rule, but also rules and enforcement case precedent in other areas concerning deceptive practices, such as disclosure of code-share relationships and critical purchase and travel restrictions."The DOT has recognized certain exceptions to the "full fare" advertising standard, the policy acknowledged. For example, the agency has allowed taxes and fees collected by carriers and other sellers of air transportation, such as passenger facility charges and departure taxes, to be stated separately in fare advertisements as long as the charges meet certain standards and the fees’ "existence and amount are clearly indicated in the advertisement so that the consumer can determine the full fare to be paid."At that time of the policy statement, again focusing on the fuel surcharges, the DOT found that most of the site problems existed in "searches where the consumer indicates no preference for travel dates but selects a flexible search."That type of search, the DOT said, "produces a fare display in which a so-called ‘fuel surcharge’ is mentioned either 1) in a separate screen, under "more rules" or 2) at the bottom of the display as a footnote, together with other applicable charges. The footnote merely states that a fuel surcharge may apply, and the consumer cannot find out whether it in fact does apply to a particular purchase until he or she goes to the booking page."Since such ‘fuel surcharges’ are not government fees imposed on a per-passenger basis, their exclusion from the advertised fare and separate display (even where the amount is stated) does not fit within the exceptions to the full-fare advertising rule," Podberesky wrote. — Michael FabeyThe Transportation Department’s proposal earlier this year to fine online travel company Ultimate Fares more than $1 million for what the agency said were "deceptive advertising" practices was widely seen as excessive.But travel lawyer Alexander Anolik said the fine had one upside: It helped persuade his clients to negotiate with the DOT to settle their own cases."It’s helped me with my own possibly reluctant clients," Anolik said. DOT enforcement officials said they hoped the $1 million fine would send a message, and Anolik said the agency accomplished its mission: "That’s exactly what it was."But some wonder what kind of message the DOT is sending the industry by focusing so much on deceptive online advertising.Other lawyers agree that the DOT focuses too much time and energy on online flight-cost representations. The lawyers, who asked not to be named because they feared reprisals against their clients, said the agency seemed fixated on such infractions, diminishing its capacity to tackle other problems.Fines collected for such infractions account for about 20% of the $1.1 million collected from settled cases this year as of Aug. 18, according to a Travel Weekly tabulation of the fines. The Ultimate Fares case is scheduled to be reviewed this fall by an administrative law judge, but if the DOT prevails in its penalty, advertising violations could account for about 57% of all fines tallied so far this year by the DOT.Yet the agency only reported 22 consumer complaints about advertising, out of 4,354 total complaints, through the first half of this year. Last year, for the same time period, there were also 22 consumer advertising complaints, out of 6,002 total complaints.Indeed, DOT officials fully acknowledge that few of their investigations into such practices are triggered by consumer complaints. Most, they say, are the agency’s own initiative."They get most of their tips by reading the Washington Post during their lunch hour," Anolik said.Lately, DOT officials have turned down interview requests to discuss the topic because of the pending Ultimate Fares proceedings. But in interviews earlier this year, agency officials said they were zeroing in on online advertising practices because of the growing use of the Internet to make reservations and other travel plans.The DOT said its policy on advertising practices was "designed to ensure that consumers receive accurate and complete fare information on which to base their air travel plans."More than that, the DOT said, "The provisions help protect consumers against ‘bait and switch’ or similar tactics that may lead consumers into examining what appears to be a lower airfare only to discover later additional charges that should have been disclosed initially."At issue are other fees that the DOT said some airlines, online agencies or other Web-based companies failed to show properly on the first page listing the fares. The DOT has been hunting for such practices online recently. Its goal is to discourage efforts by online travel sites and carriers to lure Internet customers to their sites with prices that exclude required fees and other charges and fail to reflect the total price for the flights, said Samuel Podberesky, head of the agency’s Aviation Enforcement office."The Internet has permitted a lot of smaller companies to get involved in the sale of transportation," said Dayton Lehman, Podberesky’s deputy.DOT spokesman Bill Moseley said of the agency’s focus on online fare representation: "We give it a high priority, because deceptive ads take money out of consumers’ pockets without their knowledge, and it destroys honest competition. Those who comply and want to comply with our ad rules do not complain."The DOT contended that there were few complaints because most consumers either give up after a few clicks or simply go through the transaction having invested so much time in navigating through the site.But DOT critics said that, especially absent any apparent consumer concern about this problem, there are issues and violations more deserving of the agency’s time and resources.Anolik, for example, agreed with the DOT that many sites need cleaning up, but he said that frequent flyer abuse is a much bigger problem.A 2006 report by the DOT’s own inspector general lends support to that assertion.The DOT’s Office of Aviation Enforcement and Proceedings, the report stated, "needs to be vigilant of the promises airlines are making to consumers regarding their frequent flyer programs and their actual ability to deliver."DOT officials said they disagreed with the argument that infractions of the price advertising rules are less important than frequent flyer issues. The inspector general acknowledged that the DOT needed to be looking into advertising issues but recommended that the department focus on the availability of advertised fares.In the 10-year period preceding the report, the inspector general said, the DOT had "taken action in only two instances of insufficient capacity at the lowest advertised fare."Worse yet, the report said, the DOT apparently didn’t have enough resources to monitor violators to make sure they later complied with the laws as the companies were supposed to.That’s important, the report noted, because the DOT would often offset the penalties in return for commitments to fix the online issues to prod the companies into compliance. Of about $15 million the DOT had assessed for selected cases between 1996 and 2006 reviewed by the inspector general, only about $2 million had actually been collected, investigators said.Ultimate Fares officials found that part of the report ironic. They said they have tried to change their site to comply with DOT standards, only to find themselves now facing one of the largest fines ever levied by the DOT.In September 2008, the DOT had proposed a settlement penalty of $100,000. In a letter responding to the proposed fine, Ultimate Fares’ lawyers called the amount "neither reasonable nor warranted," adding, "Your proposed ‘settlement’ would amount to approximately 100% of Ultimate Fares’ annual revenue."The average fine amount over the past two years for DOT fines for such infractions is about $50,000. DOT officials have maintained that their main objective is to get the airlines and other distributors to comply with the regulations, not to make money from fines.But, while the settlements acknowledge that the violators all made the necessary changes to bring their sites into compliance, the DOT still felt more "enforcement action" was warranted.Ultimate Fares and other companies are finding out the same thing discovered by the Congressional Research Service, which provides reports and analysis for lawmakers. The service reported last year that the DOT "has significant authority … to investigate and take enforcement action against air carriers that engage in unfair or deceptive practices and unfair methods of competition. This power is broader than might be assumed at first glance."