he Transportation Department proposes
to regulate the way agents disclose their fees to clients.
We'll be blunt. We don't think the DOT has any business poking
its nose into travel agency service fees in this way. As we see it,
the plan is unnecessary, unjustified, and a good example of how a
well-intentioned effort at regulation can get out of control.
Here's why:
In conjunction with its review of the GDS regulations, the DOT
plans to revise its policy statement on airline advertising. For
some time, the DOT has required airlines, and their agents, to
state "the entire price to be paid" when quoting or advertising the
price of an airline ticket or any tour package that includes air.
You can't say "$1,000 plus tax," and you can't say "$1,000 plus our
service fee."
The DOT now proposes to reverse itself and allow agents to state
their service fees separately, provided they also state "the entire
price to be paid," with the service fee included.
However, the DOT is also declaring that agency service fees must
be a fixed dollar amount and may not be expressed as a percentage
of the fare, even if the agency has a business reason to do so.
Why? Because the DOT concluded that "percentages are difficult
for consumers to calculate." If the DOT has any evidence to support
that conclusion, it didn't bother to put it on the public
record.
Ironically, the DOT also determined that if a service fee is
over $25 or 10% of the price, it must be "prominently" disclosed.
The DOT offered no explanation as to how it arrived at the $25 or
10% figure.
The DOT's aversion to percentage-based service fees can be
traced to an unfortunate practice that prevailed in the charter
industry two decades ago, when several tour operators started
advertising low-ball prices with the phrase "plus 15% in taxes and
service fees" buried in a footnote.
Few operators bothered to explain just what those taxes and fees
were, and why they always seemed to add up to 15%, regardless of
the destination.
That's when the government stepped in and imposed the
"entire-price-to-be-paid" requirement.
But it's one thing to step in and correct an abuse, and quite
another to categorically restrict travel agency practices when
there is absolutely no evidence that they are causing any
problem.
The federal government has failed to justify why it must
micromanage the way brick-and-mortar travel retailers handle these
disclosures.
The DOT said in its explanatory material that the goal of its
policy statement is to ensure that agents "fully disclose ... the
agency service fee, and the total price -- in a way that is useful
and practical to the consumer -- early in the transaction
process."
As a policy statement, that sentence would suffice. The DOT
should have stopped right there.