Congress Should Conduct Hearings, Amend Bill In Several Ways To Protect Consumers
Business Travel Coalition (BTC) today responded with deep concern that the U.S. House Transportation & Infrastructure Committee (T&I) has scheduled a markup of the airline industry-promoted H.R. 4156, or the Transparent Airfares Act of 2014 (http://btcnews.co/1nkp6UX) at 11:00am on Wednesday, April 9 without hearings or a process that would otherwise secure the formal views of aviation industry stakeholders and consumer groups.
This draft bill would effectively reverse a 2012 U.S. Department of Transportation (DOT) advertising rule and undermine a critically important consumer protection. (See March 2014 BTC analysis at http://btcnews.co/1eapcOG.) There is a certain irony that some airlines, having vigorously fought price transparency, especially by withholding ancillary fee information (e.g., for checked baggage) from travel agencies, now seek to champion consumer protections through H.R. 4156.
This bill would undermine DOT consumer protections by retreating to a print advertising practice that would allow lower base ticket prices to be highlighted first and foremost while by permitting total ticket prices to be disclosed in an opaque manner. The most pernicious consumer consequences of H.R. 4156 are with regard to Internet advertising. Airlines would be free to conspicuously display lower base ticket prices on initial screens and then disclose higher total ticket prices, including government taxes and fees, on other parts of their websites through a "link or pop up...that displays the information in a manner that is easily ‘accessible and viewable’ by the consumer." This represents an open invitation for deceptive marketing practices.
The full committee markup should be delayed so that members can benefit from full debate and consideration of the anti-consumer consequences of this proposed legislation. Indeed, greater airline industry pricing transparency is welcomed and with additional time and a hearing this bill could be amended to truly strengthen consumer safeguards in commercial aviation while eliminating any adverse effects flowing from the bill as currently written.
H.R. 4156 could be strengthened and consumers better protected if the following amendments were considered and included:
1 - a requirement that the base airfare, government taxes and fees and the total airfare be prominently displayed on an initial website screen or in a print advertisement as well as all airline fees and fuel and other surcharges that consumers must commit to pay to complete an online transaction;
2 – an excise tax on baggage fees to fund a robust DOT hotline for consumer complaints to respond to growing concerns about customer experiences as highlighted in this week’s Wichita State University and Embry-Riddle Aeronautical University report (http://btcnews.co/1oHWr0b) that establishes that the rate of lost, stolen or delayed checked bags rose 5 percent in 2013 over 2012, despite consumers paying supra premium prices for those services;
3 - a requirement that airline ancillary services and associated fees be made available to consumers for comparison shopping and purchase at all points-of-sale where airlines choose to sell their base airfares;
4 - a repeal of a narrow section of the federal preemption clause of the Airline Deregulation Act of 1978 that addresses unfair and deceptive airline marketing practices to provide consumers with legal redress under state consumer protection laws made more urgent by the implication of last week’s Supreme Court’s ruling in the Ginsburg case (http://btcnews.co/1jWlk3N) that DOT is not just the last bastion of consumer protection in air transport, but unfortunately the ONLY one; and
5 - an increase in the Passenger Facility Charge cap to $9 per flight segment with increased revenue earmarked for a DOT-administered passenger-compensation fund for industry practices adverse to consumer interests such as for denied boarding.
“With airline industry consolidation to just a few controlling major network carriers the new reality, it is imperative that consumer protections be modernized as the recent Supreme Court ruling underscores. H.R. 4156 weakens DOT’s enforcement capability instead of strengthening it. Airlines have recently unsuccessfully fought DOT’s consumer-protection authority hammer and tongs in federal court and in the court of public opinion. They have now moved their ill-considered fight to Congress with entirely misleading information and arguments,” said BTC chairman Kevin Mitchell. “Consumer-focused members of T&I should insist on full debate on H.R. 4156 and an exploration of newer concepts of consumer protections in air transport being adopted around the world as fewer airlines seek to collectively decide on market rules(1),” added Mitchell.
(1) “It's easier to make collectively rational decisions when there are fewer participants,” said Matt Moulis, who oversees $801 million worth of airline and other transportation stocks at Fidelity. He holds large positions in Delta, American and Spirit Airlines, Inc. 3-19-14 The Wall Street Journal