Price Advertising, 73960-73966 [05-23841]

Agencies

• Office of the Secretary
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 70, Number 239 (Wednesday, December 14, 2005)]
[Proposed Rules]
[Pages 73960-73966]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-23841]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 399

Docket No. OST-2005-23194
RIN 2105-AD56


Price Advertising

AGENCY: Office of the Secretary (OST), U.S. Department of 
Transportation (DOT).

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: The Department is considering amending its rule on price 
advertising, and it is seeking comment on several options. Under the 
existing rule, the Department considers any advertisement that states a 
price for air transportation that is not the total price the consumer 
will pay to be unfair or deceptive in violation of the statute under 
which this provision was adopted in 1984. Although it has not amended 
the codified rule, in practice the Department has long allowed an 
exception to it for certain taxes, fees, and other charges that are 
imposed by a government entity. As a matter of prosecutorial 
discretion, the Department does not take enforcement action against any 
advertisement that omits these charges from the quoted fare, provided 
that the charges are collected on a per-passenger basis and are not ad 
valorem in nature, and provided further that the advertisement clearly 
indicates the existence and amount of these charges so that consumers 
can easily calculate the total fare. The Department has consistently 
prohibited sellers of air transportation from breaking out other cost 
elements, such as fuel surcharges, from the advertised fare. Although 
the Department has denied a recent request to allow separate listing of 
the fuel surcharges that carriers are adopting in response to soaring 
fuel costs, the Department has also decided that the time is ripe after 
21 years of marketing innovations for a reexamination of the fare-
advertising rule and its long-time enforcement policy. Therefore, the 
Department is asking interested persons to comment on four alternative 
options: Maintain the current practice either with or without codifying 
all of its elements in the rule; end the exception for government-
imposed charges and enforce the rule as written; revise the rule to 
eliminate most or all requirements for airfare advertisements but to 
require that consumers be apprised of the total purchase price before 
the purchase is made; or eliminate the full-fare advertising rule in 
its entirety.

DATES: Comments must be received by February 13, 2006. The Department 
will consider late-filed comments to the extent practicable.

ADDRESSES: You may submit comments [identified by DOT DMS Docket Number 
OST-2005-23194] by any of the following methods:
     Web Site: https://dms.dot.gov. Follow the instructions for 
submitting comments on the DOT electronic docket site.
     Fax: 1-202-493-2251.
     Mail: Docket Management Facility, U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, 
Washington, DC 20590-001.
     Hand Delivery: Room PL-401 on the plaza level of the 
Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
     Federal eRulemaking Portal: Go to https://
www.regulations.gov. Follow the online instructions for submitting 
comments.
    Instructions: All submissions must include the agency name and 
docket number or Regulatory Identification Number (RIN) for this 
rulemaking. Note that all comments received will be posted without 
change to https://dms.dot.gov, including any personal information 
provided. Please see the Privacy Act heading under Regulatory Notices.
    Docket: For access to the docket to read background documents or 
comments received, go to https://dms.dot.gov at any time or to Room PL-
401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., 
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Betsy L. Wolf, Senior Trial Attorney, 
Office of the Assistant General Counsel for Aviation Enforcement and 
Proceedings, U.S. Department of Transportation, 400 Seventh St., SW., 
Room 4116, Washington, DC 20590, tel: (202) 366-9342, fax: (202) 366-
7152, e-mail: Betsy.Wolf@DOT.GOV.

SUPPLEMENTARY INFORMATION:

Background

    The Department of Transportation requires generally that in 
advertisements of air transportation, the price advertised must be the 
full price that the consumer will pay. Our Statements of General 
Policy, codified in 14 CFR part 399, include a rule on price 
advertising adopted by our predecessor agency, the Civil Aeronautics 
Board, in December of 1984. The rule states that the Department 
considers any advertisement of passenger air transportation, a tour, or 
a tour component that states a price that is not the entire price the 
consumer must pay to be an unfair or deceptive practice. Our rules 
governing public charters, codified in 14 CFR part 380, contain an 
analogous requirement for charter air transportation.
    Both rules were adopted pursuant to 49 U.S.C. section 41712 
(formerly section 411 of the Federal Aviation Act), which empowers the 
Department to prohibit unfair and deceptive practices and unfair 
methods of competition in air transportation and its sale. 
Specifically, this provision provides among other things that the 
Department may investigate and decide whether an air carrier, foreign 
air carrier, or ticket agent is or has been engaging in an unfair or 
deceptive practice or an unfair method of competition in air 
transportation or its sale and that if, after notice and an opportunity 
for a hearing, the Department finds in the affirmative, it may order 
the offending party to stop the conduct at issue. Violations of 
regulations adopted pursuant to section 41712 are also violations of 
the statute itself and may incur civil penalties, see 49 U.S.C. 
46301(a)(7).

[[Page 73961]]

    Air transportation is unlike other industries in that we have the 
sole authority to regulate airlines' fare advertisements by prohibiting 
practices that are unfair or deceptive. (Two other Federal agencies 
enforce provisions relating to airline fare advertising, but these 
regulations do not bear on unfair or deceptive practices. First, under 
Department of Homeland Security regulations, carriers must specifically 
identify the Transportation Security Administration's $2.50 security 
service fee as the ``September 11th Security Fee'' in fare 
advertisements, 49 CFR 1510.7.
    Second, the Internal Revenue Service enforces a tax-code provision 
that imposes restrictions on the display of taxes in fare 
advertisements, 26 U.S.C. 7275.) Congress modeled section 41712 on 
section 5 of the Federal Trade Commission (FTC) Act, 15 U.S.C.A. 
section 45, but by its own terms, that statute cannot be enforced 
against ``air carriers and foreign air carriers,'' 15 U.S.C. section 
45(a)(2). The States are preempted from regulating in this area (49 
U.S.C. 41713, see Morales v. Trans World Airlines, 504 U.S. 374, 112 
S.Ct. 2031, 119 L.Ed.2d 157 (1992)). Thus, unlike advertising in other 
industries, where either the States or the FTC, or both, can take 
action against abusive practices, if we do not exercise our authority, 
consumers and competitors have no governmental recourse against 
advertising that is unfair or deceptive. We do not believe, moreover, 
that 49 U.S.C. section 41712 gives rise to a private right of action, 
see Love v. Delta Air Lines, 310 F.3d 1347 (11th Cir. 2002), Boswell v. 
Skywest Airlines, Inc., 361 F.3d 1263 (10th Cir. 2004); see also 
Alexander v. Sandoval 532 U.S. 275, 286, 121 S.Ct. 1511, 149 L.Ed.2d 
517 (2001).
    For many years, as a matter of enforcement policy, we have allowed 
limited exceptions to the general rule that fare advertisements must 
state the entire price of the advertised air transportation or tour. 
Specifically, as a matter of prosecutorial discretion, the Department 
does not take enforcement action against any advertisement that omits 
government-imposed fees, taxes, and other charges from the quoted fare, 
provided that such charges are collected on a per-passenger basis and 
are not ad valorem in nature, and provided also that the advertisement 
shows the existence and amount of these charges clearly so that 
consumers can readily determine the total fare. See, e.g., Notice of 
the Assistant General Counsel for Aviation Enforcement and Proceedings, 
``Prohibition on Deceptive Practices in the Marketing of Airfare[s] to 
the Public Using the Internet,'' https://airconsumer.ost.dot.gov/rules/
20010118.htm (January 18, 2001); Order 2001-12-1 (December 3, 2001); 
Order 88-8-2 (August 2, 1988). We originally allowed the separate 
listing of charges that are approved by a government in addition to 
those that are government-imposed, but recently the Enforcement Office 
eliminated the exception for the former, reasoning as follows:

    The ``government approved'' surcharges [that we allowed to be 
listed separately] were limited to security surcharges approved in 
the mid-1980's [sic] that affected foreign air transportation only 
and were approved by both the foreign government involved and the 
U.S. government. Recently, tariff regulation, owing to expanded 
open-skies agreements and other factors, has been revised to the 
extent that there is no longer a consistent practice of joint 
approvals of surcharges, in many instances resulting in the filing 
of tariffs that may include surcharges that are approved by only one 
government. In addition, the desire of carriers to pass on the 
higher costs of certain expenses discretely, such as insurance and 
fuel, has led to such expenses being filed separately from the 
`base' fare in tariffs, a situation that the Department cannot 
effectively monitor. [footnote omitted] In view of these 
developments, the Enforcement Office will no longer allow the 
separate listing of ``government-approved'' surcharges in fare 
advertising.

    Notice of the Assistant General Counsel for Aviation Enforcement 
and Proceedings, ``Disclosure of Higher Prices for Airfares Purchased 
over the Telephone via Airline Telephone Reservation Centers or at 
Airline Ticket Counters, and Surcharges That May Be Listed Separately 
in Fare Advertisements,'' https://airconsumer.ost.dot.gov/rules/
index.htm (November 5, 2004).
    The history of our enforcement policy begins at the end of 1984, 
when the Civil Aeronautics Board adopted Sec.  399.84 to address the 
widespread practice of advertising attractive fares and featuring 
``add-on'' costs much less prominently. The Board found that this 
practice misled and deceived consumers and made price comparison 
difficult. See Civil Aeronautics Board, 14 CFR part 380 [Special 
Regulations; Amendment No. 18 to Part 380; Docket 41184; Regulation 
SPR-195], Public Charters, Final Rule, 49 FR 49438-49440 (December 20, 
1984), and 14 CFR part 399 [Policy Statements; Amendment No. 88 to Part 
399; Docket 41184-PS-113], Statements of General Policy, Final Rule, 49 
FR 49440 (December 20, 1984). Barely one year later, after this 
Department succeeded to the CAB's jurisdiction in this area, we granted 
an industry-wide exemption from Sec.  399.84 and Sec.  380.30 to allow 
exclusion of the U.S. international departure tax from the advertised 
price, provided that the amount of this tax was clearly stated 
elsewhere in the advertisement. To reach this result, we balanced the 
air carriers' asserted need for greater flexibility in advertising 
against the traveling public's need to know all charges they must pay 
for air services. Order 85-12-68 (December 24, 1985). We later 
broadened this exemption to include other per-passenger government fees 
by Order 88-3-25 (March 10, 1988), once again taking both the needs of 
the carriers and the imperative that consumers know the total cost of 
air transportation services into account. We clarified this amendment 
by Order 88-8-2 (August 2, 1988), where we recognized that consumers 
can benefit from knowing what portion of their fare is passed on to 
government entities and what portion retained by the carrier, as long 
as they can easily determine what the total fare will be. Although the 
U.S. Court of Appeals struck down the latter two decisions on 
procedural grounds in Alaska v. Skinner, 868 F2d. 441 (D.C. Cir. 1989), 
our Enforcement Office has continued to base its discretionary 
enforcement policy on their substance.
    Recently, with fuel costs both rising significantly in the past 
year and surging in the wake of Hurricane Katrina, the Air Transport 
Association of America (ATA) informally requested relief from Sec.  
399.84 to allow its air-carrier members to list fuel surcharges 
separately in the manner of government-imposed charges. Our Enforcement 
Office has consistently taken the position, however, that while nothing 
in Sec.  41712 or Sec.  399.84 precludes carriers from stating in 
advertisements that fares include a fuel surcharge and specifying the 
amount, fuel surcharges must be included in the advertised fare in 
order to avoid confusing or deceiving consumers. See, e.g., Notice of 
the Assistant General Counsel for Aviation Enforcement and Proceedings, 
``Prohibition on Deceptive Practices in the Marketing of Airfare to the 
Public Using the Internet,'' https://airconsumer.ost.dot.gov/rules/
20010118.htm (January 18, 2001). (All of the Enforcement Office's 
notices and industry letters may be found at https://
airconsumer.ost.dot.gov/rules/guidance.htm.) Although the Secretary has 
denied ATA's fuel surcharge request, with the passage of over twenty 
years since the adoption of Sec.  399.84, and with the extensive and 
intensive changes in both marketing and consumer sophistication that 
the

[[Page 73962]]

revolution in electronic communications has fostered, we have decided 
that the time has come to reconsider our full-fare advertising rule in 
light of current conditions.
    We are therefore proposing four alternative approaches to the 
regulation of airline price advertising and inviting interested persons 
to comment on these proposals and reasonable alternatives. The first 
option is to leave current enforcement policy unchanged, either with or 
without codifying it explicitly in Sec.  399.84. The second option is 
to enforce the rule as written by ending the exceptions we have long 
allowed for government-imposed fees, taxes, and charges. Thus, any 
price advertised for air transportation would have to be the total fare 
that the consumer would pay. The third option is to amend the policy 
statement so as to do away with most of our existing requirements for 
fare advertising and mostly rely on the language of 49 U.S.C. 41712. We 
are proposing two alternative approaches for the third option: one, a 
rule that requires only that the total price of any air transportation 
be disclosed to the consumer before any purchase is transacted, and 
two, a rule that requires both this and also that any fare 
advertisement set forth all elements of the fare so that consumers can 
add them together to determine the total price. This latter option is 
consistent with the general approach to advertising taken by the FTC--
namely, that an advertisement is deceptive if it contains a 
representation or omission that is likely to mislead consumers acting 
reasonably in the circumstances and is material to the consumer's 
decision to buy the advertised product or service, see FTC Policy 
Statement on Deception (October 14, 1983), https://www.ftc.gov/bcp/
policystmt/ad-decept.htm. Under either approach of this third option, 
while we would no longer routinely take enforcement action against 
advertisers that list fuel surcharges and other cost elements not 
imposed by governments separately from the fare, we would retain the 
power under section 41712 to take enforcement action whenever 
advertisements constitute unfair or deceptive practices or unfair 
methods of competition. The fourth option is to eliminate the full fare 
advertising rule in its entirety, leaving any fare advertising 
enforcement action to be undertaken solely under section 41712.
    We invite interested persons to comment on all four proposals. In 
addition, we invite comments on whether we should amend Sec.  380.30, 
our rule on price advertising in charter solicitation materials, in 
light of developments over the past two decades and, if so, how. We can 
issue a Notice of Proposed Rulemaking to amend Sec.  380.30 if the 
comments so warrant. The comments we receive on our proposals for Sec.  
399.84 should help us determine which of them now strikes the most 
appropriate balance between the public interest in preventing consumer 
deception and the public interest in allowing the market to function 
efficiently.

Price-Advertising Proposals

Option I: Amend Sec.  399.84 To Codify the Enforcement Office's Long-
Standing Policy or Leave Sec.  399.84 as Written but Continue the 
Enforcement Policy

    This proposal would maintain current enforcement practice and 
Department case precedent regarding full-fare advertising. One approach 
would be to amend the rule to incorporate all elements of this 
practice. Our advertising enforcement precedents under 49 U.S.C. 
section 41712 that relate only tangentially to full-fare advertising--
e.g., the requirement that a reasonable number of seats be available at 
advertised prices and disclosure requirements for ``percentage off'' 
advertisements and for when seats at an advertised fare are limited 
and/or not available on all flights--would not be incorporated in the 
amended 14 CFR 399.84. In addition, the amended rule would not 
incorporate our policy of allowing Internet travel agents to list their 
service fees separately from advertised airfares under certain limited 
conditions (see Notice of the Assistant General Counsel for Aviation 
Enforcement and Proceedings, ``Revised Enforcement Policy on Deceptive 
Practices Regarding Service Fees Charged by Travel Agents in the 
Marketing and Sale of Airfares to the Public via the Internet,'' http:/
/airconsumer.ost.dot.gov/rules/20011219.htm (December 19, 2001) and 
Order 2001-12-7 (December 7, 2001)), because this exception is very 
narrow and we are not aware of its being used. Thus, the following 
exceptions and clarifications would be added to the existing text of 
the rule:
     Government-imposed taxes and fees that the carrier 
collects on a per-passenger basis may be excluded from the advertised 
fare, provided that they are not ad valorem in nature, and provided 
that the advertisement shows the existence and amount of these charges 
clearly so that consumers can easily determine the total fare. An 
indication of the existence of the taxes and fees listed separately 
must be situated close to the advertised fare, and the information 
provided must be easily readable.
     In advertisements where multiple destinations are listed 
and not all entail the same government-imposed charges, the 
advertisement may state a maximum fee, a fee for each destination, or a 
range of fees. Also, the word ``approximately'' or a range of amounts 
may be used to account for minor currency-exchange fluctuations.
     Advertising ``two-for-one'' fares is deceptive if the fare 
that must be purchased to take advantage of the promotion is higher 
than the carrier's other fares in the same market, unless this fact is 
prominently and clearly disclosed.
     Advertisements of each-way fares that are available only 
when bought for round-trip travel must disclose the round-trip purchase 
requirement clearly and conspicuously--i.e., the disclosure must be 
prominent and proximate to the advertised fares. A banner or pop-up 
internet advertisement of an each-way fare that is only available with 
a round-trip purchase must disclose this fact in the advertisement 
itself.
     In internet fare advertisements, including not only web 
sites but also banner, pop-up, and e-mail advertisements, the per-
person government charges that may be listed separately may be noted by 
a prominent hyperlink, proximate to the listed fare, that takes the 
viewer to a display showing the nature and amount of these charges.
     In advertisements of ``free'' air transportation in 
conjunction with the purchase of one or more other tickets, 
restrictions, fees, and other conditions that apply to the ``free'' 
transportation must be noted prominently and proximate to the offer, at 
a minimum through an asterisk or other symbol directing the reader's 
attention to the information elsewhere in the advertisement. The 
information must be presented in easily readable print. This 
requirement applies to advertisements in all media: the internet, 
billboards, television, radio, and print media.
     Advertisements of fares that are higher if purchased by 
telephone or in person than over the Internet must prominently disclose 
that the stated fares are only available over the Internet. The 
advertisements must also disclose that tickets cost more than the 
advertised price if purchased by telephone or in person, and they may 
disclose the price increment. If the advertisements state a price 
differential, they may not characterize this amount as a ``service 
fee.''
     In any billboard advertisement that breaks out taxes and 
fees, a sum of the

[[Page 73963]]

taxes and fees must be legible to drivers passing the billboard at the 
posted speed limit.
     In television advertisements, the sum of any taxes and 
fees that are broken out must be disclosed. It may be presented on 
screen in a readable manner or disclosed audially.
     Radio advertisements must include the sum of any taxes and 
fees that are broken out.
    We invite comments on whether any of the Department's other 
enforcement policies on fare advertising should be included in the 
expanded rule.
    This first approach would codify the Enforcement Office's long-
standing practice. The Enforcement Office has acted aggressively to 
ensure that airlines and travel agents comply with 14 CFR 399.84 and 
the refinements set forth above. It has, for example, issued numerous 
formal and informal warnings in response to advertisements that did not 
comply with the Department's advertising requirements. Also, as a 
result of the Enforcement Office's investigations, the Department has 
issued 86 cease-and-desist orders concerning violations of 14 CFR 
399.84, as enforced, and has assessed a total of $2.26 million in civil 
penalties in these orders.
    We can identify a number of advantages in continuing this practice 
and codifying it. First, it enables consumers to determine the maximum 
fare being advertised with ease: they need only add the broken-out 
charges to the advertised fare. Second, breaking out government-imposed 
taxes and fees lets consumers know for the most part how much of their 
fares go to government entities and how much to the carrier. (Our 
enforcement policy prohibits separate listing of the 7.5 percent 
Federal excise tax or any other ad valorem tax due to the potential for 
consumer confusion.) Third, our practice ensures that consumers are 
protected from hidden surcharges, many of which are entirely under the 
seller's control. Fourth, while we recognize that the internet affords 
consumers an unprecedented level of highly detailed information on 
prices for air transportation, we also recognize both that not all 
consumers have access to the internet and that those who do not tend to 
travel less frequently and be less familiar with airline pricing 
practices than those who do. We are concerned that either allowing 
advertisements with additional per-person or ad valorem ``add-ons'' or 
allowing advertisements that do not include all elements of the fare 
could increase the risk of consumers not being able to determine the 
actual fares or of their buying tickets at higher prices than 
necessary. Fifth, our disclosure requirements promote competition in 
air transportation, both by facilitating price comparison by consumers 
and in another respect. We are concerned, for example, that a carrier 
that has succeeded in hedging its fuel costs might be deprived of the 
competitive advantage its lower costs should confer if its higher-cost 
competitors list fuel surcharges separately and thus advertise fares 
that appear to match or undercut those of their lower-cost rival. 
Sixth, sellers might prefer the greater certainty of a detailed 
codified rule to the lesser certainty of a discretionary enforcement 
policy that currently allows exemptions to the rule but could easily be 
changed. Seventh, as noted above, unlike price advertising in other 
industries, the States and the FTC are barred from regulating airline 
advertising. Curtailment of our traditional role would thus create a 
vacuum of regulation.
    We can also identify disadvantages in continuing and codifying our 
long-standing practice. First, the fast pace of change in the marketing 
of air transportation due to evolving technologies has made it 
increasingly difficult for us to keep our price-advertising 
requirements current. Codification of all elements of our policy will 
make future refinements even more difficult and time-consuming. Second, 
even under the current practice, some sellers advertise a full price 
while others exclude taxes. This variation makes it more difficult for 
consumers to compare prices. Third, we are aware that many sellers of 
air transportation believe our requirements to be unnecessary or unduly 
restrictive or burdensome, especially given the plethora of price 
information available on the internet and the ease of using that source 
to find and compare airfares. These sellers take the position that 
relaxing or eliminating our full-fare advertising requirements will 
clear the way for better marketing innovations and increases in 
efficiency that may in turn mean lower prices for consumers. Fourth, 
our advertising requirements are not consistent with requirements 
applicable to other industries, as is discussed below in connection 
with the third option.
    An alternate approach to maintaining our long-standing enforcement 
practice would be to do so without change to the language of Sec.  
399.84. Since enforcement is by nature discretionary, this alternate 
approach has the advantage of retaining our flexibility to make further 
refinements to our enforcement policy without the delays associated 
with rulemaking. Some might argue that this approach has a 
corresponding disadvantage in that codifying all elements of our 
enforcement policy in the CFR will make the policy as a whole more 
accessible to sellers and consumers of air transportation. Given, 
however, both that (1) sellers and lawyers practicing in this area are 
already familiar with the policy and the relevant case precedent and 
that (2) all of this information is readily available on-line at http:/
/airconsumer.ost.dot.gov/rules/guidance.htm, as noted above, this 
disadvantage may be marginal at best.
    We invite commenters to address both whether and to what extent 
consumers continue to need the level of protection that our disclosure 
requirements afford them and how these requirements affect competition 
in air transportation.

Option II: Change the Long-Standing Enforcement Policy To Discontinue 
Exceptions to the Strict Terms of Sec.  399.84

    This proposal would change current practice by requiring that all 
advertised fares include all price components. No longer could 
government-imposed per-passenger charges be broken out and listed 
separately. While we recognize that crafting an advertisement or 
display that includes all government-imposed charges in the listed 
fares may not be possible given that the applicability of some charges 
varies with the routing chosen, we would consider an advertisement to 
be in compliance with Sec.  399.84 if it either set forth a range of 
prices for each city-pair--i.e., the minimum and maximum--or used the 
word ``from'' along with the minimum price. This approach would have 
the virtue of simplicity, and it would ensure uniformity of fare 
advertisements and thus facilitate price comparison by consumers to the 
greatest extent. Nevertheless, unless sellers were to continue to list 
government-imposed charges separately despite being required to include 
these charges in the advertised fare, which we deem unlikely, this 
approach would deprive passengers of potentially useful information 
concerning the composition of airfares. It would also deprive sellers 
of flexibility that they have long enjoyed. Some Internet sellers of 
air transportation might incur minimal costs for reprogramming their 
displays to include government charges, but not all of them would: many 
already display total fares. We invite commenters to address the 
advantages and disadvantages of this approach.

[[Page 73964]]

Option III: Amend Sec.  399.84 Either (1) To Require Simply That the 
Total Price of Air Transportation Be Disclosed Before the Consumer 
Makes the Purchase or (2) To Require This and Also That Price 
Advertisements Set Forth All Elements of the Fare So That Consumers Can 
Add Them Together To Determine the Total Price

    This proposal would reverse over twenty years of enforcement 
practice and eliminate virtually all of our traditional full-fare 
advertising requirements. In their place we would adopt either (1) a 
rule requiring that in any sale of air transportation the seller must 
inform the consumer of the total price before the purchase is 
transacted or (2) a rule requiring both this and that fare 
advertisements contain all information necessary to enable consumers to 
calculate total fares. Advertisements could not feature airline-imposed 
security charges under either approach, because the Department of 
Homeland Security prohibits airlines from collecting surcharges for 
their own security costs, see 49 CFR 1510.9(d).
    A rule requiring simply that sellers inform consumers of the total 
price before the purchase is made has a number of advantages. First, it 
would allow the entire content of fare advertisements to be determined 
by the competitive marketplace. The FTC, which has authority to 
prohibit unfair and deceptive practices and unfair methods of 
competition in other industries, does not have any express price 
regulations comparable to our full-fare advertising requirements. Car-
rental companies, for example, are thus under no Federal obligation to 
inform consumers in advertisements of the total price they will have to 
pay, but we have nevertheless observed a trend among Web sites to give 
total prices for rental cars when giving quotes for dates the consumer 
has entered. Another feature of Internet commerce in other industries 
is that consumers who compare base prices among various Web sites can 
see that some sites show low base prices but actually charge higher 
total prices when shipping costs are included. This transparency can 
result in competition over shipping rates as well as base prices, all 
to consumers' benefit. When sellers have this level of flexibility, 
consumers must take greater care in comparing prices before hitting the 
``buy'' button, but as long as consumers know the total price of air 
travel before they commit themselves to buying it, this approach would 
merely align the purchase of air transportation with the experience of 
purchasing most other goods and services on line. Second, this approach 
would eliminate the difficulties that we face in keeping our 
enforcement policy current in an era of constant technological flux. 
Third, if consumers and competitors alike no longer need the level of 
protection that our requirements have provided, then this approach 
would clear the way for innovations that could benefit either or both. 
The Internet now gives those consumers who use it a vast amount of 
information about prices for air transportation and makes comparing 
prices fast and easy. (According to the U.S. Department of Commerce, as 
of October of 2003, 54.6 percent of U.S. households had Internet 
connections [See A Nation Online: Entering the Broadband Age, U.S. 
Department of Commerce, Economics and Statistics Administration, 
National Telecommunications and Information Administration, September 
2004]. Also, with the proliferation of computers in public libraries, 
even those who do not own computers or have internet connections at 
home can gain access to the Internet.) Moreover, on-line consumers can 
now take advantage of so-called ``meta'' search sites (e.g., 
sidestep.com and kayak.com) that gather price information by 
``scraping'' other Web sites and display a greater variation in prices 
than can be found elsewhere. Southwest, Delta, AirTran, and Jet Blue 
are now making 59 percent, 28 percent, 65 percent, and nearly 100 
percent of their sales, respectively, through their own Web sites 
(Airline Business, June 2005 and November 2004), and consumers also buy 
air transportation through on-line travel agencies such as Expedia, 
Orbitz, Priceline, and Travelocity. Fourth, this approach would not 
preclude us from taking action under section 41712 against advertisers 
that engage in unfair or deceptive practices or unfair methods of 
competition. Advertising practices long held to be deceptive, such as 
``bait and switch,'' for example, would still be subject to enforcement 
action. The FTC has regulations for bait advertising (16 CFR part 238), 
deceptive pricing (16 CFR part 233), and use of the word ``free'' and 
similar representations (16 CFR part 251) as well as policy statements 
on deception (https://www.ftc.gov/bcp/policystmt/ad-decept.htm) and 
unfairness (https://www.ftc.gov/bcp/policystmt/ad-unfair.htm). We 
anticipate that we would look to precedent under these regulations and 
under 15 U.S.C.A. 45 for guidance in determining whether advertisements 
that comply with the amended Sec.  399.84 may nevertheless be unfair or 
deceptive within the meaning of section 41712.
    This approach also has disadvantages. First, we are concerned that 
if we eliminate all requirements except that the consumer be told the 
total price before the purchase is transacted, some sellers of air 
transportation will begin publishing print advertisements that 
highlight absurdly low fares but disclose none of the taxes, fees, or 
surcharges that apply. Not all consumers have easy access to the 
Internet (In October of 2003, according to the Department of Commerce, 
45.4 percent of U.S. households did not have Internet connections. [See 
A Nation Online: Entering the Broadband Age, supra]), and many still 
rely on print advertisements. These consumers would have to make 
telephone calls to learn the total price and might well be subject to 
long waits for a live agent. Moreover, some might view such 
advertisements as examples of ``bait and switch.'' We invite commenters 
to address the likelihood of this type of advertising and whether and 
to what extent it would harm consumers. We specifically invite those 
sellers that already display or otherwise advertise total fares to 
comment on whether and how they would change their practices if we 
adopt this option. Second, we recognize that the positive trends we 
have observed in car-rental advertisements on the Internet may reflect 
government initiatives taken at the State level. As noted above, the 
States are preempted from regulating airline advertising practices. We 
encourage commenters to address the extent to which a simple 
requirement that airlines inform customers of the total fare before 
selling the ticket might leave consumers uniquely vulnerable. Unlike 
consumers in other industries, consumers of air transportation would 
not be able to appeal for protection to the States, a circumstance that 
many believe justifies Department requirements that go beyond FTC 
requirements for advertising in other industries. Third, enforcement 
action against abusive advertising practices is likely to be 
considerably more costly and time-consuming for all parties than it is 
now. Fare advertising is commercial speech, which, the Supreme Court 
has held, enjoys certain protections under the First Amendment. See 
Central Hudson Gas & Electric Corp. v. Public Service Commission of New 
York, 447 U.S. 557 (1980), 100 S.Ct. 2343. The Court said in that case 
that ``the government may ban forms of communication more likely to 
deceive the public than to inform it'' (citation omitted). Id, at 563.

[[Page 73965]]

Thus, in reviewing an advertisement for compliance with Sec.  41712, we 
must consider both the advertisement itself and its effect on an 
ordinary consumer to determine if it is unfair or deceptive. Country 
Tweeds, Inc. v. FTC, 326 F.2d 144, 148 (2nd Cir. 1964), Order 86-8-4. 
``The important criterion is the net impression which the advertisement 
is likely to make upon the general populace, Eastern Air Lines, Inc. v. 
National Airlines Enforcement Proceeding, 33 CAB 436, 464 (1969), 
quoting Charles of the Ritz Dist. Corp. v. FTC, 143 F.2d 676, 679 (2nd 
Cir. 1944). The ``likelihood of deception or the capacity to deceive'' 
has been held to be the standard for judging whether an advertisement 
is deceptive in violation of the law. Montgomery Ward and Co. v. FTC, 
379 F.2d 666, 670 (7th Cir. 1967), CAB Order 82-7-107. Under these 
formulations of the government's burden, enforcement of section 41712 
against fare advertising would be more cumbersome without Sec.  399.84 
as it is currently construed, both because there would be more elements 
of proof and because issues would have to be decided on a case-by-case 
basis.
    The first concern stated above will not arise if we amend Sec.  
399.84 to require that fare advertisements set forth all elements of 
the fare so that consumers can add them together to determine the total 
price. Under this approach, sellers could exclude any fees and 
surcharges from the advertised fares, but the advertisement would still 
have to disclose all excluded price elements as well as their amounts. 
This approach would most closely approximate the policy followed by the 
FTC, as noted above. It would still leave sellers free, however, to 
advertise absurdly low fares in bold, large print and relegate large 
carrier-imposed surcharges to the fine print, a practice some might 
deem unfair and misleading.
    We invite commenters to address each approach of this third option 
and to point out any other advantages or drawbacks that they perceive. 
Among other things, commenters may want to address the following: (1) 
The implications for both consumers and competition of there being no 
requirement that sellers use a consistent approach to advertising 
fares--i.e., the same base fare with the same cost elements broken 
out--across all media--i.e., Web sites, print advertisements, and 
broadcast advertisements, and (2) whether carriers are likely to break 
out booking or service fees from the base fare in order to make their 
offerings appear as attractive as those of travel agents, many of which 
now charge such fees, and if so, whether this will harm consumers.

Option IV: Remove Sec.  399.84

    The advantages and disadvantages of removing Sec.  399.84 are 
similar to those of the first approach under Option III above, except 
that without an explicit rule requiring sellers to inform consumers of 
the total price of their transportation before purchases are 
consummated, consumers would have less regulatory protection. We invite 
interested persons to comment on whether an express disclosure 
requirement is necessary in light of (1) the potential for enforcement 
action under section 41712 against sellers that engage in practices 
that deceive or confuse consumers and (2) consumers' ability to bring 
contract actions against sellers that charge them prices to which they 
have not agreed. We invite comments on any other advantages or 
disadvantages of this option.

Charter Air Transportation

    As noted above, Sec.  399.84 has a counterpart in our charter 
regulations, Sec.  380.30. While we are not proposing any specific 
changes to the latter rule here, we do invite interested persons to 
comment on whether and how current conditions may warrant its revision 
as well. We can issue a Notice of Proposed Rulemaking to revise the 
rule if appropriate.

Regulatory Notices

Privacy Act

    Anyone is able to search the electronic form of all comments 
received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.) You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (Volume 65, Number 70, Pages 19477-78) or you may visit 
https://dms.dot.gov.

Executive Order 12866 (Regulatory Planning and Review) and DOT 
Regulatory Policies and Procedures

    The Department has determined that any of several of the options 
proposed for amending the existing rule, if adopted as a final rule, 
would be a significant regulatory action under Executive Order 12866 
and under the Department's Regulatory Policies and Procedures. None of 
the proposed rules would require the disclosure of any information in 
addition to what is required under application of the existing rule, 
and the Department expects that adoption of any of the proposed rules 
will not significantly affect the regulatory burdens or benefits 
associated with the current rule. Therefore, this proposal is expected 
to have a minimal economic effect, and further regulatory evaluation is 
not necessary.

Executive Order 13132 (Federalism)

    This NPRM has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132 (``Federalism''). The 
Department has determined that this proposal would not have a 
substantial direct effect on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, that it 
would not impose substantial direct compliance costs on State and local 
governments, and that it would not preempt State law. Therefore, the 
consultation and funding requirements of Executive Order 13132 do not 
apply.

Executive Order 13084

    This NPRM has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13084 (``Consultation and 
Coordination with Indian Tribal Governments''). Because any of the 
proposed amendments, if adopted, would not significantly or uniquely 
affect the Indian tribal communities and would not impose substantial 
direct compliance costs, the funding and consultation requirements of 
the Executive Order do not apply.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires an 
agency to review regulations to assess their impact on small entities 
unless the agency determines that a rule is not expected to have a 
significant economic impact on a substantial number of small entities. 
I hereby certify that any of these proposed amendments, if adopted, 
would not have a significant economic impact on a substantial number of 
small entities. None of the proposed amendments would increase the 
regulatory burden on air carriers and ticket agents substantially. The 
Department seeks comment on whether there are small entity impacts that 
should be considered.

Paperwork Reduction Act

    None of the proposed amendments contains information collection 
requirements that require approval by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 2507 et seq.)

[[Page 73966]]

Unfunded Mandates Reform Act

    The Department has determined that the requirements of Title II of 
the Unfunded Mandates Reform Act of 1995 do not apply to this 
rulemaking.

    Dated: Issued this Day of December 5, 2005, at Washington, DC, 
Under Authority Delegated by 49 CFR 1.56a.
Michael W. Reynolds,
Acting Assistant Secretary for Aviation and International Affairs.

List of Subjects in 14 CFR Part 399

    Administrative practice and procedure, Air carriers, Air rates and 
fares, Air taxis, Consumer protection, Small businesses.

    For the reasons set forth in the preamble, the Department proposes 
to amend 14 CFR part 399 as follows:

PART 399--STATEMENTS OF GENERAL POLICY

    1. The authority citation for part 399 continues to read as 
follows: 49 U.S.C. 40101 et seq.

Subpart G--Policies Relating to Enforcement

Option I

    2. Section 399.84 would be revised to read as follows:


Sec.  399.84  Price Advertising.

    (a) Total Price Requirement. (1) Except as specified in paragraph 
(a)(2) of this section, the Department considers any advertising or 
solicitation by an air carrier, a foreign air carrier, or a ticket 
agent for passenger air transportation, a tour (i.e., a combination of 
air transportation and ground accommodations), or a tour component 
(i.e., a hotel stay) that states a price for such air transportation, 
tour, or tour component to be an unfair or deceptive practice, unless 
the price stated is the entire price to be paid by the customer to the 
air carrier, foreign air carrier, or ticket agent, for such air 
transportation, tour, or tour component.
    (2) Government-imposed taxes and fees that the carrier collects on 
a per-person basis may be excluded from the advertised airfare, 
provided that they are not ad valorem in nature, and provided that the 
advertising or solicitation shows the existence and amount of these 
charges clearly so that consumers can easily determine the entire price 
to be paid. An indication of the existence of the taxes and fees listed 
separately must be situated close to the advertised fare, and the 
information provided must be easily readable.
    (i) If an advertisement lists multiple destinations that do not all 
entail the same government-imposed taxes and fees, the advertisement 
may state a maximum sum of these charges, a sum for each destination, 
or a range of sums. Also, the word ``approximately'' or a range of sums 
may be used to account for minor currency-exchange fluctuations.
    (ii) In Internet fare advertisements, including not only Web sites 
but also banner, pop-up, and e-mail advertisements, the per-person 
government taxes and fees that may be listed separately may be noted by 
a prominent hyperlink, proximate to the listed fare, that takes the 
viewer to a display showing the nature and amount of these charges.
    (iii) In any billboard advertisement that breaks out taxes and 
fees, a sum of these charges must be legible to drivers passing the 
billboard at the posted speed limit.
    (iv) In television advertisements, the sum of any taxes and fees 
that are broken out must be disclosed. It must either be presented on 
screen so that it can be read (i.e., in sufficiently large print and 
for a sufficient amount of time) or be disclosed audially.
    (v) Radio advertisements must include the sum of any taxes and fees 
that are broken out.
    (b) Advertising ``two-for-one'' fares is an unfair or deceptive 
practice if the fare that must be purchased to take advantage of the 
promotion is higher than the carrier's other fares in the same market, 
unless this fact is prominently and clearly disclosed.
    (c) Advertising ``each-way'' fares that are available only when 
bought for round-trip travel is an unfair or deceptive practice unless 
the round-trip purchase requirement is disclosed clearly and 
conspicuously. Specifically, the disclosure must be prominent and 
proximate to the advertised fares. A banner or pop-up Internet 
advertisement of an ``each-way'' fare that is only available with a 
round-trip purchase must disclose this fact in the advertisement 
itself.
    (d) Advertising ``free'' air transportation in conjunction with the 
purchase of one or more other tickets is an unfair or deceptive 
practice unless restrictions, fees, and other conditions that apply to 
the ``free'' transportation are disclosed prominently and proximate to 
the offer, at a minimum through an asterisk or other symbol directing 
the reader's attention to the information elsewhere in the 
advertisement. The information must be presented in easily readable 
print or audially. This requirement applies to advertisements in all 
media: the Internet, billboards, television, radio, and print media.
    (e) Advertising fares that are higher if purchased through one or 
more media (e.g., by telephone or in person) than through another 
(e.g., over the Internet) is an unfair or deceptive practice unless the 
advertisement prominently discloses that the stated fares are only 
available through the one medium and that tickets cost more than the 
advertised price if purchased through other media. The advertisement 
may state a price differential but may not characterize this amount as 
a ``service fee.''

Option II

    3. Section 399.84 would be revised to read as follows:


Sec.  399.84  Price disclosure.

    The Department considers the sale of air transportation to be an 
unfair or deceptive practice unless the total price of the 
transportation is disclosed to the consumer before the consumer makes 
the purchase.

Option III

    4. Section 399.84 would be revised to read as follows:


Sec.  399.84  Price disclosure and price advertising.

    (a) The Department considers the sale of air transportation to be 
an unfair or deceptive practice unless the total price of the 
transportation is disclosed to the consumer before the consumer makes 
the purchase.
    (b) The Department considers any advertising by an air carrier, 
foreign air carrier, or ticket agent that states a price for air 
transportation to be an unfair or deceptive practice unless the 
advertisement sets forth all price components for such air 
transportation so that the consumer can determine the entire price to 
be paid.

Option IV

    5. Section 399.84 would be removed.

[FR Doc. 05-23841 Filed 12-13-05; 8:45 am]
BILLING CODE 4910-62-P