The U.S. Court of Appeals in Washington has upheld the Transportation Department’s full-fare advertising and fare refund rules that had been challenged by Allegiant, Spirit and Southwest. The rules went into effect last year.
The decision locks the airline industry into an “all-in” pricing rule that requires airlines and travel sellers to quote full prices with all taxes and mandatory fees included.
Taxes and other item can be broken out and stated separately, but they cannot be displayed more prominently than the total.
All three airlines had challenged that provision on the grounds that there is nothing “inherently” deceptive about showing taxes separately, as is commonly done in most other industries.
They claimed that the DOT arbitrarily sought to impose a single standard on the airlines with little proof of consumer confusion; they also claimed it was an unconstitutional restriction on freedom of speech.
The court upheld the DOT’s reasoning on the rule, but one member of the three-judge panel, Senior Circuit Judge A. Raymond Randolph, dissented on the constitutional question, saying he does not believe the government should require airlines to put taxes in a smaller typeface.
The majority saw this as a permissible regulation of commercial speech, but Randolph's dissent said there is “not a shred of evidence” that the requirement is necessary to meet the DOT’s purpose of preventing consumer confusion.
Randolph concurred with the majority on upholding the two other rules challenged by Allegiant and Spirit — one requiring that carriers offer penalty-free refunds if passengers wish to cancel a reservation within 24 hours, and another prohibiting the post-purchase increases in fares or fees for ancillary services.
On the post-purchase rule, the airlines were particularly critical that it would bar increases in all optional services, such as in-flight meals, that are not even sold with the ticket.
The carriers said it was unreasonable for the DOT to ban price increases for optional services that might not be purchased for weeks or months. After the court case began, the DOT agreed to suspend enforcement of that portion of the rule pending a review and possible rewrite.
The court said it would “take the DOT at its word” and not address that issue. The core of the rule, which prohibits increases in fares or baggage fees after booking, was upheld.
As a procedural matter, the court is giving the airlines seven days to request a rehearing.