September 22, 2014

Transparency of Airline Ancillary Fees and Other Consumer Protection Issues

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The Department of Transportation (DOT) proposes, among other things, to expand the definition of ticket agent to include entities that display airline schedules and fares on their websites and apply DOT consumer protection rules to them, to require all such websites to disclose the fees associated with a specific set of services early in the flight search process, and to prohibit certain types of biasing in schedule and fare displays. The proposed rule requires sellers of travel to offer information and disclosures in a uniform manner.

We disagree with this approach for the following reasons:

First, the DOT is proposing to intervene in a market without presenting credible evidence of a problem that needs government intervention. The DOT has not successfully made the case that airline ticket buyers need the information required by the proposed rule for every trip they consider.

Second, there is ample evidence that airlines, travel agents, and information services companies are already acting to help consumers in their travel choices. A growing number of websites make travel easier by providing relevant information to potential travelers. The trend in the market—exemplified by websites such as kayak.com—suggests that, even without this rule, travelers increasingly receive the information they care about. We provide several examples of this trend in this comment.

Third, several elements of this proposed rule would lead to unintended consequences. By specifying what information travelers must see whenever presented airline schedules, the proposed rule risks stifling innovation that’s already underway and has the potential to do far more to improve consumer understanding. The proposal could hinder websites’ ability to present a customized set of relevant information to consumers by requiring disclosure of a uniform, specific set of fees to all consumers by all websites. Meanwhile, by requiring consumers to wade through information that’s not customized or relevant to their specific situation, the rule carries the risk of reducing rather than improving understanding.

It is primarily because of these unintended consequences that we recommend that the DOT consider the following changes to its proposal:

1. The DOT should limit the websites subject to the proposed rule to only airline-owned and -operated travel sites. This would help avoid the unintended consequence of limiting the ability of third-party information aggregation and organization services—such as Google—to customize the information display based upon user preferences.

2. The proposal should not attempt to limit travel agencies’ ability to improve service for consumers by requiring that information or search results be sorted in a predetermined (“unbiased”) manner. Websites have incentives to compete to develop the “best” algorithm for attracting customers to make purchases on their websites, and restricting that competition to only certain predetermined algorithms will likely reduce an important element of competition between travel websites.

3. The DOT should consider leaving the disclosure requirements established in 14 CFR 399.85— the section that requires a simple “baggage fees may apply” statement—unchanged. This approach would impose a minimum amount of disruption on innovation in the airfare distribution market while alerting travelers to be aware of possible baggage fees.

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