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Consumer Protection of Air Travelers in the USA

Consumer Protection of Air Travelers in the USA. Samuel Podberesky, Assistant General Counsel Office of Aviation Enforcement and Proceedings Presentation to Seminario Internacional Sobre La Protecci ón al Consumidor Bogota, Colombia — August 19, 2008. Agenda.

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Consumer Protection of Air Travelers in the USA

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  1. Consumer Protection of Air Travelers in the USA Samuel Podberesky, Assistant General Counsel Office of Aviation Enforcement and Proceedings Presentation to Seminario Internacional Sobre La Protección al Consumidor Bogota, Colombia — August 19, 2008

  2. Agenda • Office of Aviation Enforcement & Proceedings (AEP) • Consumer protection statutes & regulations enforced • Enforcement procedures, penalties, & settlement practices • Public education & outreach • Contact information • Questions

  3. Consumer Complaints by Type

  4. AEP Staffing & Structure • One of Six Offices in OST’s Office of the General Counsel • Enforcement • Legal aspects of Airline Economic Licensing • Aviation Consumer Protection • Legal Division • 16 attorneys, including one assistant general counsel • 2 support staff • Aviation Consumer Protection Division • 15 professionals, including one director • 1 support staff

  5. Jurisdiction We do not handle: • Aviation Safety(this is regulated by the Federal Aviation Administration) • Aviation Security(this is administered by the Transportation Security Administration)

  6. Jurisdiction We do handle: • “Air Transportation” • Direct and Indirect Air Carriers • Ticket Agents

  7. Division of authority among Federal agencies & preemption of state law To a great extent DOT's consumer protection enforcement powers are exclusive. • Federal Trade Commission • The FTC's consumer protection authority does not extend to air carriers. See 15 U.S.C. 45(a)(6). • DOT regulates travel agents that advertise air transportation • FTC regulates non-air transportation advertising by travel agents, such as hotel accommodations and cruises • Preemption of state law • No state may enact or enforce any law that relates to the rates, routes, or services of any air carrier having economic authority under Subtitle VII. See 49 U.S.C. 41713, but also see 49 U.S.C. 40120. • In a case involving a state attorney general's attempt to enforce state deceptive practice laws against airline fare advertising, the Supreme Court construed the Act's preemption provision broadly and held that state enforcement action was prohibited. Morales v. TWA, 949 F.2d 141 (5th Cir. 1991), remanded, 112 S. Ct. 2031, 119 L. Ed. 3d 157 (1992). • However, the Supreme Court refused to review a case in which the U.S. Court of Appeals for the Ninth Circuit held that a traveler with a ticket and confirmed reservation, who was denied boarding by an airline because of aircraft capacity limitations, could sue the airline for compensatory (but not punitive) damages in state court. See West v. Northwest Airlines, 995 F.2d 148 (9th Cir. 1993), cert denied, 114 S. Ct. 1053 (1994). • The Department has taken the position that consumers are not precluded from suing airlines in state courts to enforce contractual obligations. See, e.g., the last paragraph of the notice included in 14 CFR 250.9 on oversales. • In 1995, the Supreme Court agreed with the Department's position in American Airlines, Inc. v. Wolens, 115 S. Ct. 817 (1995), a case in which consumers were allowed to challenge, under contract law, an airline's change to the benefits of its frequent flyer program.

  8. 49 USC 41712: The “Keystone” Provision • Broadly prohibits unfair and deceptive practices and unfair methods of competition in the sale of air transportation • Provides DOT with enforcement authority involving competition that exceeds that of the Department of Justice in some respects. • Enforceable in its own right but it is even more important as the basis for DOT rulemaking and policymaking. • Examples of consumer protection rules issued at least in part based on section 41712: • Full fare advertising (14 CFR 399.84) • Unrealistic scheduling / Chronically delayed flights (14 CFR 399.81) • Disclosure of on-time performance (14 CFR 234.11) • Denied Boarding Compensation/Oversales (14 CFR Part250) • Notice of Terms of Contract of Carriage (14 CFR Part 253) • Disclosure of Codeshare Arrangements, Long-term Wet Leases, and Change of Gauge (14 CFR Parts 257 and 258) • Public Charter Programs and Special Event Air Tours (14 CFR Parts 380 and 381) • Refunds (cash/check refunds enforced directly from section 41712; 14 CFR part 374 for credit refunds) • Pre-Licensing sales – sales by carrier applicants before authority is final (14 CFR 201.5)

  9. Advertising: Full Fare Disclosure (14 CFR 399.84) • Fare advertisements must disclose the full price to be paid. See, e.g., Order 2006-9-19. However, certain taxes/fees may be listed separately from the advertised base-fare if they are: • imposed by a government (U.S. or non-U.S.), NOT by the airline itself (e.g., airline-imposed fuel surcharge); • levied on a per person basis (e.g., international departure tax), NOT as a percentage of the value of the ticket (e.g., 7.5% U.S. federal government excise tax); and • clearly disclosed (including their amount) in the advertisement. • This rule also applies to anything advertised in conjunction with the airfare. For example, charges for hotel stays, tours, ground transfers and rental cars become subject to the DOT price advertising rule if advertised in conjunction with air transportation. • Fare advertisements necessitate the availability of a reasonable number of tickets at the advertised fare and such ads must disclose important restrictions on the availability of the advertised fares. For example: • Lengthy blackout periods must be specifically disclosed. General statements such as "seats may not be available on all flights" or "restrictions apply" are inadequate. See Order 93-2-25. • A reasonable number of seats must be made available for sale at the advertised fare and general disclosure statements such as "seats are limited" do not absolve airlines of this responsibility. See Order 93-10-49. • Airlines must monitor seat availability during sale periods to ensure that when advertisements are repeated later in the sale a reasonable number of seats remain available. See Order 93-9-1 • Fare advertisements must disclose important fare restrictions, such as limited availability of seats, non-refundability and blackout dates, and must contain a prominent disclosure in proximity to the fare listing of roundtrip purchase conditions. See, e.g., Orders 93-3-24, 96-4-47, and 2004-5-9.

  10. Advertising: Pre-Licensing Sales (14 CFR 201.5) Restricts certain marketing activities of applicants for new or amended certificate or commuter air carrier authority (See, e.g., Order 2008-4-32): • Applicants shall not advertise, list schedules, or accept reservations for the operations covered in their applications before their applications have been approved. • Applicants shall not accept payment or issue tickets for the operations covered by their applications before the authority granted in their approved applications has become effective or DOT issues a notice authorizing such sales. • Applicants that have received DOT approval for their proposed operations shall not advertise or publish schedules before they also possess effective “safety” authority from the Federal Aviation Administration, unless such advertising or schedule prominently states: “ This service is subject to receipt of government operating authority.”

  11. Disclosure: Codeshare(14 CFR Part 257)Change of Gauge (14 CFR Part 258) • On codeshare flights to, from, or within the United States, or long-term wet leases, the identity of the airline actually providing the transportation, including its corporate name, must be disclosed. See 14 CFR Part 257. Notice must be provided as follows: • By an asterisk or other identifying mark in the written and electronic schedule information that airlines provide to the public, to the Official Airline Guide and comparable publications, and to computer reservations systems (14 CFR 257.5(a)); • Orally by any airline or ticket agent before booking transportation in any direct oral communication in the United States with a prospective consumer and in any telephone calls placed from the United States (14 CFR 257.5(b)); • In writing on an itinerary or in separate written notice accompanying the passenger’s ticket or, if time does not allow for advance notification or in the case of e-tickets, no later than the time that the passenger checks in at the airport for the first flight in an itinerary involving a code-share service or a long-term wet-lease service (14 CFR 257.5(c)); and • In printed advertisements and radio and television broadcasts made in the United States (14 CFR 257.5(d)). • When an airline offers change-of-gauge service, or service that requires a change of aircraft en route but has only a single flight number, to, from, or within the United States, the en-route change of aircraft must be disclosed. See 14 CFR Part 258. Notice must be provided as follows: • In the written and electronic schedule information that airlines provide to the public, to the Official Airline Guide and comparable publications, and to computer reservations systems ( 14 CFR 258.5(a)); • Orally by any airline or ticket agent doing business in the United States before booking transportation in any direct oral communication with a consumer in the United States (14 CFR 258.5(b)); and • In writing, using language specified in the rule, at the time of sale or, if no ticket is issued, no later than the time when the passenger checks in at the airport for the first flight in an itinerary that includes a change-of-gauge service (14 CFR 258.5(c)).

  12. Advertising: Unrealistic Scheduling(14 CFR 399.81(a)On-time Performance Ads(14 CFR 399.81(b))On-time Performance Disclosure(14 CFR 234.11) • Pursuant to section 399.81(a), airlines may not publish schedules that they cannot reasonably expect to achieve (e.g., schedules listing chronically late flights). • Significant and routine failures to meet published flight arrival times has resulted in enforcement action against several large airlines. • The routine cancellation of flights for economic reasons is prohibited. See Order 92-7-13. • Pursuant to section 399.81(b), ads making on-time performance claims must state: • The basis of the on‑time performance calculation; • The time period involved; • The pairs of points or percentage of system operations involved; and • Whether the on-time performance figures presented represent all scheduled flights or only those that operated. • Pursuant to 14 CFR Part 234, the largest U.S. carriers (currently 18) are required to report their on-time performance to DOT and include information on the on-time performance of their flights in computer reservation systems. Each month DOT publishes the carriers' reported data. • In view of the widespread availability of the reported on-time performance information, DOT permits the carriers subject to Part 234 some flexibility in publishing on-time performance comparison ads provided that the ads: • Are accurate; • Are based on (and state they are based on) flight arrival data published by DOT; • State the time periods covered by the on-time performance claims (e.g. April 2007); and • Accurately identify the carriers or types of carriers (e.g. " seven largest") used in any comparisons. See, e.g., Order 93-3-24. • During the course of reservations or ticketing discussions or transactions, or inquiries about flights, airlines must disclose, upon reasonable request, the on-time performance of their domestic flights.

  13. Refunds (14 CFR Part 374) When a refund is due: • Airlines must forward a credit to the credit card company within seven days after receiving a complete ticket refund application. See 14 CFR Part 374 and Regulation Z: section 226.12 (e)(1) of the Federal Reserve Board. • Refunds for cash and check sales of tickets must be made within 20 days of the carrier receiving a complete refund application. See, e.g., Order 2006-7-7, Order 2001-12-25.

  14. Oversales(14 CFR Part 250) • Part 250 permits airlines to sell more tickets for a flight than there are seats on the aircraft, which allows carriers to account for "no –shows.“ In exchange, the rule mandates compensation and other protection for ticketed passengers denied boarding. • Airlines must first seek volunteers willing to give up their reservation in exchange for compensation of the airline’s choosing. • To be eligible for involuntary denied boarding compensation - • The passenger must hold a confirmed reservation; • The passenger must meet the carrier's check-in deadline; • The flight involved must be departing from a point in the U.S.; • The flight must be with an aircraft having 30 or more seats; and • The passenger must be bumped from the planned flight and not be rerouted to arrive at his or her ultimate destination within one hour of the passenger's original planned arrival time. • The amount of denied boarding compensation (DBC) to which a passenger is entitled is based on the cost of the ticket, the length of the delay and whether the flight is domestic or international. • Where the delay is 1 to 2 hours (4 hours on an international flight), the DBC is 100% of the passenger’s one-way fare up to a $400 maximum. • Where the delay is over 2 hours (4 hours on an international flight) , the DBC is 200% of the passenger’s one-way fare up to a $800 maximum. • Involuntary DBC must be paid on the carrier’s initiative by cash or check within 24 hours unless the passenger agrees to accept another form of compensation (e.g., a free ticket for a future flight.) • DBC is not required if the airline substitutes aircraft for safety or operational reasons. • Passengers can decline DBC and sue carriers for damages.

  15. Baggage Liability • Domestic Flights. Pursuant to 14 CFR Part 254, on flights with aircraft having seating for more than 60 passengers and any other domestic flight on the same ticket, airlines may not limit their liability for baggage damage, loss, or delay of delivery to less than $3,300 per passenger. In addition, pursuant to 14 CFR 382.43, the liability limit for disabled traveler assistive devices is the original purchase price of the device. • International flights. Pursuant to the Montreal Convention, the liability limit for most international flights is 1,000 Special Drawing Rights (SDR). The SDR fluctuates daily; the current value may be found at www.imf.org. Recently, one SDR has equaled US$1.60. The 1000 SDR limit applies to assistive devices.

  16. Notices to Passengers • Certain DOT rules require that passengers be provided certain notices about their rights on or with tickets and via airport signs. • Ticket notices are required on the following subjects. (A DOT policy statement recognizing on e-tickets allows notices usually provided with tickets to be provided to air travelers using e-tickets by e-mail, fax or before boarding at the airport. (62 FR 19473; April 22, 1997)): • Oversales. See 14 CFR 250.11. • Domestic Baggage Liability. See 14 CFR 254.5. • International Baggage Liability. See 14 CFR 221.106. • Incorporated Contract Terms. See 14 CFR 253.3 and 221.107. • Fare Increases and Penalties - Domestic. See 14 CFR 253.7. • Fare Increases - International. See 14 CFR 221.107. • Death/Injury Liability Limits - International. See 14 CFR 221.105. • Airport signs are required for Oversales, International Baggage Liability, Availability of International Tariffs and Death/Injury Liability Limits. • Other international ticket notice and signage provisions are contained in 14 CFR Part 221, Subpart K.

  17. Contract of Carriage(14 CFR Part 253) • Part 253 permits carriers to incorporate the passenger/airline contract (i.e. the contract of carriage) by reference into the airline ticket but mandates procedures for disclosing those terms. • The contract of carriage must be available for inspection at the airline's airport and city ticket offices and free copies must be mailed upon a request to the airline's headquarters. • Every ticket must disclose in general terms - • That there are contract terms incorporated by reference; • That those terms constitute a contract; • How to inspect and obtain copies of the contract; • The liability limits for injury and lost or damaged baggage; • Claim restrictions including deadlines; • Rights of carrier to change contract terms; • Rules on reconfirmation and check-in times; and • Carrier rights on flight delays and rerouting. • Carriers must provide direct notice on tickets in order to enforce any contract term that- • Restricts ticket refund ability; • Imposes monetary penalties; or • Permits the carrier to raise a price. • The contract of carriage can serve as the basis for a passenger lawsuit if its terms are breached.

  18. Penalties Penalties/Remedies • Warning letter; may be accompanied by letter of agreement to take corrective action • Order tocease and desist from similar conduct in the future • Civil Penalties • 49 U.S.C. 46301 • For non-small businesses, up to $25,000 per day per violation of permit authority, cabotage, and civil rights and consumer protection statutes and regulations (raised in 2003 from $1,100 by Vision 100) • “Small business concerns” and individuals are liable for penalties of up to $1,100, $2,500, or $10,000 per day per violation of permit authority, cabotage, and civil rights and consumer protection statutes and regulations, depending on the nature of the violation • Other Penalties • Suspension or revocation of economic authority of an air carrier • Permanent or temporary ban of individual from involvement in air transportation • Criminal penalties under 49 U.S.C. 46316 for knowing and willful violations with referral generally made to the DOT Inspector General

  19. Assessed Civil Penalties(2000 – May 2008)

  20. Assessed Civil Penalties 1996-May 2008 YearAggregate Penalty*Suspended Penalty**Total Orders 1996 $1,287,000 $460,500 32 1997 $730,000 $290,000 22 1998 $336,000 $145,500 14 1999 $336,000 $219,000 14 2000 $265,000 $37,500 9 2001 $444,000 $206,000 20 2002 $2,172,000 $806,000 22 2003 $8,108,000 $521,500 32 2004 $5,627,500 $774,500 38 2005 $3,987,500 $842,250 28 2006 $2,236,500 $796,250 28 • $1,433,000 $726,500 29 May 2008 $475,000 $237,500 9 * Includes amounts that carriers were required to expend for civil rights training ** Includes suspended and ultimately forgiven civil penalties but not offsets where carriers expended sums that are included in aggregate civil penalty amounts to provide benefits to consumers above and beyond what was required by statute or DOT regulations.

  21. Requests for Information • Consumers • U.S. Congress • Private attorneys • News media • Academics • Foreign governments

  22. Public Education & Outreach • “Air Travel Consumer Report” • Other consumer publications • Web site • News media relations

  23. Air Travel Consumer Report Monthly publication with statistics on: • Mishandled baggage • Delayed and canceled flights • Oversales • Consumer complaints • Security complaints • Loss, injury or death of pets

  24. Other Available Consumer Publications • Fly-Rights • Tell It To The Judge • New Horizons: Information for the Air Traveler with a Disability • Plane Talk fact sheet series • When Kids Fly Alone

  25. News Media Relations • “Consumer Alert” news releases • Interviews • Customized complaint data and complaint examples

  26. Monitoring Airline Service Quality Consumer-reported: ■ Passenger complaints – may refer violations to Legal Division Carrier-reported: ■ Reports on oversales, mishandled baggage, on-time performance ■ Required traffic and financial data (T-100, O&D Survey) Other government agency-reported: ■ FAA operations data (e.g.,causes of flight delays) Methodology: ■ Use data to assist in reviewing specific complaints ■ Use data to identify industry trends

  27. Web site: www.airconsumer.ost.dot.gov Content: • Consumer publications • How to file a complaint (incl. web form) • ‘Industry Letters’ (guidance for airlines) • Fact sheets (bankruptcies, strikes) • Links to safety and security information Format: • Handicap accessible • Spanish version

  28. AEP CONTACT INFORMATION For licensing information: •http://ostpxweb.dot.gov/aviation/index.html For enforcement information: • AEP main office: 202-366-9342 • Website: http://air.consumer.ost.dot.gov; click on “Rules and Guidelines” for guidance documents For consumer information: • Online complaint form: http://air.consumer.ost.dot.gov; click on “Filing a complaint” • Voicemail consumer complaint line: 202-366-2220 •Disability Hotline: 1-800-778-4838 (voice) 1-800-455-9880 (TTY)

  29. Questions?

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