Q: In late April, Travel Weekly reported that the DOT fined an OTA $300,000 for deceptive practices. What were the violations for which the fine was imposed? Our agency is not an OTA, but does the case have any lessons for us?
A: Technically speaking, the DOT did not impose a fine but rather entered into a settlement agreement under which the OTA's parent, called FlightHub Group, agreed to pay the DOT without admitting any wrongdoing.
The DOT singled out one OTA but meant the case to be a lesson for the entire agency industry. It stated that the penalty "establishes a strong deterrent to future similar unlawful practices by FlightHub Group and other ticket agents and sellers of air transportation."
So what did the OTA allegedly do wrong?
First, FlightHub's subsidiary, JustFly, ran ads claiming free cancellations, even though the OTA itself charged cancellation fees, even for cancellations within 24 hours after booking.
Note that it is legal for agencies to impose cancellation penalties, even on cancellations within 24 hours of booking, while airlines are not allowed to do so under the DOT's 24-hour rule. The OTA's problem was not that it charged such a fee but that it misleadingly stated that cancellations were free.
Second, JustFly also advertised phone-only fares but told callers that such fares were not available until the consumer rejected higher fares. The DOT's rule requires both agencies and airlines to ensure that, when they advertise a particular fare, there must be a "reasonable number" of seats available at that fare.
Finally, although DOT rules require correct baggage allowance information on confirmations, JustFly's confirmations erroneously stated that the first checked bag was free, even when the airline charged for all checked bags.
Every so often, the DOT goes on a rampage against travel agencies that violate the DOT's advertising and solicitation regulations. As veteran Travel Weekly readers will undoubtedly recall, some years ago, the DOT hit travel agencies with large penalties for violating the full-price and code-share rules in phone quotes and confirmations.
Now, the DOT is signaling that it will also be going after misleading fare advertising and solicitations that fail to disclose cancellation penalties and baggage rules. Even if you don't advertise, your agency could violate these rules when it quotes airfares (or packages with air as a mandatory component) by email or phone or when it issues confirmations that have misleading statements about fares.
The lesson of the FlightHub case is that if a travel agency or advisor consistently misrepresents cancellation penalties, fare availability, baggage rules or anything else dealing with air transportation (or packages with air as a mandatory component), you could be hit with penalties if someone complains to the DOT.
Since most travel advisors are now independent and home-based, it is possible that the DOT would go after a host agency for an independent agent's misrepresentations. In such a case, the burden would be on the host to prove that it was not responsible.