Mark Pestronk
Q: Every summer, our agency escorts a group of students and their chaperones to Europe for a couple of weeks. We don't make much money from this group, and we think of the project as more of a charitable or nonprofit endeavor than anything else. In years past, we divided our costs by the number of participants, which meant that if fewer students than expected signed up, we increased the price per head for every participant by way of a surcharge a few weeks before departure. Can we continue to operate this way, or will we be violating the DOT rule against price increases? What if we obtained the students' or parents' advance, written permission for the surcharge? If that would still be illegal, can we structure this program so that we don't run afoul of the DOT rule?
A: If the participants have paid you in full, you cannot legally increase the price unless: (1) the increase is solely for a pass-through of higher taxes or government fees, and (2) you have already obtained (before any deposits were taken) the participants' written consent to such an increase.
In your case, the proposed increase is not for any additional taxes or government fees, so you cannot increase the price. It would not make any difference if the participants had already consented in writing.
Obviously, this is a very unfair rule, as most participants would probably willingly pay the surcharge if they knew why you needed to increase the price and if they had consented to that possibility.
For this summer, it looks like you'll have to absorb the loss. For next year, I can think of three legal ways around the rule:
First, since the DOT rule only applies if air transportation is a mandatory part of the package that is sold at one price, you could structure the program so that the air is optional, so that students could get their tickets from you or from any other source. However, most student group organizers require everyone to travel together for safety and educational reasons, so this option is probably not viable, unless you require those who book on their own to pick the same flights as the group.
Second, you could structure the payments so that final payment is made only after you set the final price, including the surcharge. You could advertise the trip as costing "approximately $1,000 to $1,200, depending on the number of participants that sign up." The DOT has stated that ranges of prices are allowed in ads, as long as they are not misleading.
To make this work, you would need each participant to give you written (or recorded oral) consent to increase the price after the initial deposit. You would need to get that consent before or at the same time as the initial deposit is made.
Finally, instead of taking payments directly from participants, you could have the school collect and hold them and then pay you in full once you establish the final price. The DOT rule applies only to sales to consumers, and the school is not a consumer.
Even if the school pays you, be sure to obtain a disclaimer (such as the ones at www.pestronk.com/free.html) from every participant 18 and over and every parent of a minor.