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01 April 2020
One of the most significant roles of the US Department of Transportation (DOT) is to protect airline consumers from unfair and deceptive practices and unfair methods of competition by air carriers and ticket agents. This authority is found in Section 41,712 of the Transportation Code (49 USC § 41712) and forms the statutory basis for some of the DOT's most broad-reaching and controversial regulations and enforcement actions.
Yet, surprisingly, the key statutory terms 'unfair' and 'deceptive' are not defined in the statute and the DOT has never attempted to define them, until now. Instead, the terms have been used liberally and even aggressively to impose regulations on air carriers and ticket agents that, in the opinion of many, run contrary to the pro-market mandate of the Airline Deregulation Act 1978.
However, on 21 February 2020 DOT Secretary Elaine Chao announced that the DOT is, for the first time, proposing definitions of these terms and other procedural protections designed to prevent their abuse. This move was in response to increasing pressure from airlines to bring the DOT's regulatory discretion in line with congressional intent. The notice of proposed rulemaking was published in the Federal Register on 28 February 2020 (85 Fed Reg 11881, et seq).
In recent years, the DOT has used these statutory criteria to promulgate rules that, among other things:
The DOT has also taken numerous enforcement actions against individual carriers for acts that were inadvertent and lacked any display of harm to the public on the basis that it deemed the actions unfair or deceptive. Airlines have been increasingly concerned by what appears to be the DOT's unfettered discretion in expanding the meanings of these terms beyond what the statute contemplates.
In response to the DOT's October 2017 initiative to re-examine the entire aviation regulatory structure as part of the Trump administration's regulatory overhaul, Airlines for America – the trade association of large US airlines – submitted comments that challenged the DOT to adhere more closely to Congress's directive to place "maximum reliance on competitive market forces and on actual and potential competition" in regulating aviation for the benefit of the public. Airlines for America noted that the unfair and deceptive standard originated in the Federal Trade Commission Act amendments of 1938, which, as interpreted by the Federal Trade Commission (FTC) and amended over the years by Congress, have a more specific meaning than the DOT has applied.
The DOT's proposed rule would largely follow the FTC's standards, including specific definitions of 'unfairness' and 'deception':
Significantly, the DOT's proposal adds a provision holding that "proof of intent is not necessary to establish unfairness or deception". Therefore, acts that are entirely inadvertent on a carrier's part may still be penalised under the consumer protection rules.
The DOT has also proposed to adopt a more liberal procedural approach to rulemaking when dealing with regulations based on the unfair or deceptive standard. The DOT would allow for parties to petition the general counsel for a formal rulemaking hearing, even on proposed rules that would not rise to the level of 'high impact' or 'economically significant'. A hearing would be required if a petitioner demonstrates that material issues are in dispute and that the ordinary public comment process is unlikely to provide an adequate basis for a fully informed judgment.
The DOT has not proposed to scale back existing consumer protection regulations and will no doubt continue to pursue violations of those rules. However, the current proposal gives reason to believe that the DOT may be more circumspect in the future in proscribing and penalising air carrier behaviour that threatens only insubstantial or purely theoretical harm to consumers. It is expected that airlines and airline trade groups will support the proposal, while consumer groups may be more sceptical.
For further information on this topic please contact Mark W Atwood at Cozen O'Connor by telephone (+1 202 912 4800) or email (firstname.lastname@example.org). The Cozen O'Connor website can be accessed at www.cozen.com.
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