Airlines Lose Bid to Block Ban on 'Deceptive' Airfare Advertising

By JOAN LOWY

WASHINGTON -- The government can require airlines to show consumers a total ticket price that includes taxes and fees in print and online ads, the U.S. Court of Appeals said Tuesday, rejecting an industry challenge to a series of consumer protection regulations.

The Department of Transportation, which issued the regulations last year, has the authority to regulate "unfair and deceptive" airline industry practices, the three-member panel said in its ruling.

The ruling also covers two other regulations: A requirement that airlines allow consumers who purchase tickets more than a week in advance the option of canceling their reservations without penalty within 24 hours after purchase, and a ban on airlines increasing the price of tickets or baggage fees after tickets have been bought.

The rules had been challenged by Spirit and Southwest airlines, with the support of two major airline industry trade associations.

Prior to the new regulations, airlines could advertise a base airfare and separately disclose taxes and fees, which consumers would have to add together to arrive at a total price. Under the new regulations, airlines can still breakdown the price of a ticket to show taxes and fees, but the total price must be displayed in the largest type size and be the most prominent price in the ad or on the web page.

The airlines argued that there was nothing deceptive about listing taxes separately, which they said is the general norm in the U.S. economy.

But Judge David Tatel, who was appointed by President Bill Clinton, wrote in the decision that there's nothing in the regulations that would force airlines to hide the taxes. As an example, he pointed to Spirit's website, which listed taxes under the heading: "The government's cut."

Judge Raymond Randolph agreed the transportation department has the authority to require the ads display a total ticket price, but wrote in a dissent that he disagreed with the portion of the regulation that requires a larger typeface be used for the total price than for taxes and fees. He said the regulation restricts the airlines' political speech. Randolph and the third judge on the panel, Karen Henderson, were appointed by President George H.W. Bush.

Officials for Southwest (LUV) and Spirit (SAVE) said the two airlines are already complying with the regulations.

"While we're disappointed in the court's decision, it really doesn't further impact us," said Brad Hawkins, a Southwest spokesman.

Misty Pinion, a Spirit spokeswoman, warned: "American consumers are going to pay more for air travel and have less choice, as the [transportation department] continues to pile costly new rules onto an already over-regulated and over-taxed industry."

Kevin Mitchell, chairman of the Business Travelers Coalition, which represents corporate travel managers, said the decision is "really good news for consumers" since it reaffirms the Transportation Department's authority to regulate the airline industry.

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"Were it not for the Transportation Department, [airline] consumers would have no protections whatsoever -- it would be consumer protection no man's land," Mitchell said.

Under President Barack Obama the department has issued a series of consumer regulations aimed at protecting airline passengers, including placing a three-hour limit on the length of time airlines can keep passengers waiting on airport tarmacs before giving them the option of leaving the plane. Another wave of regulations, scheduled for November, is expected to address whether airlines should be required to provide the global distribution systems used by travel agents with all their ticket price and fee information.