BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. COMMENTS OF DEUTSCHE LUFTHANSA AG

Transcription

1 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. In the matter of: Notice of Proposed Rulemaking Transparency of Airline Ancillary Fees and Other Consumer Protection Issues Docket OST COMMENTS OF DEUTSCHE LUFTHANSA AG Communications with respect to this document should be sent to: Arthur J. Molins Natalie Hartman Trapasso The Lufthansa Group Deutsche Lufthansa AG General Counsel, the Americas Director, Public Affairs, the Americas 1640 Hempstead Turnpike 1120 G Street, NW, Suite 747 East Meadow, New York Washington, DC arthur.molins@dlh.de natalie.hartman@dlh.de September 29, 2014

2 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. In the matter of: Notice of Proposed Rulemaking Transparency of Airline Ancillary Fees and Other Consumer Protection Issues Docket OST COMMENTS OF DEUTSCHE LUFTHANSA AG Deutsche Lufthansa AG ( Lufthansa ) respectfully submits these comments in response to the U.S. Department of Transportation s Notice of Proposed Rulemaking on Transparency of Airline Ancillary Fees and Other Consumer Protection Issues 79 Federal Register and published in the Federal Register on May 23, 2014 (the NPRM ). Lufthansa supports and is in agreement with the comments submitted by the International Air Transport Association ( IATA ) on this matter. It is evident that the market is already addressing the issues raised by DOT and any intervention by the Department will likely have a negative impact on consumers. Lufthansa believes that the proposed rules are inconsistent with a deregulated environment and urges the Department to either withdraw this rule or, in the alternative, enter into collaborative consultations with the international aviation industry organizations and the airline community in developing balanced solutions that may be required in enhancing passenger protections that are efficient, cost effective and compliant with international law. Additionally, Lufthansa submits the following comments on various other matters raised in the NPRM: 1

3 DOT Should Address Mistaken Fares by Issuing a Rule That Alleviates Air Carriers Strict Liability for Such Fares DOT is considering a revision to its post-purchase price regulations to address the issue of mistaken fares. 79 Fed. Reg. at Under 14 C.F.R. Section , sellers of air transportation are prohibited from increasing the price of an airline ticket to a consumer who has purchased and paid for the ticket in full. DOT has previously indicated that this rule applies even when the fare is a mistake. 79 Fed. Reg. at In some cases, DOT effectively has required air carriers to honor mistaken fares (regardless of the economic cost to the carrier) or potentially face substantial civil penalties. 1 As the Department recognizes in the NPRM, however, requiring air carriers and other sellers of air transportation to honor these mistaken fares is problematic in a number of ways. DOT cites its well-founded concerns that mistaken fares are increasingly being posted on frequentflyer community blogs and travel-deal sites, resulting in individuals purposely targeting and purchasing these fares in bad faith with full knowledge that the fares are an inadvertent mistake. Furthermore, these mistaken fares are not offered to consumers as part of some unfair and deceptive bait-and-switch by sellers of air travel, but rather are instances of human or technological error that result in fares being offered that do not even come close to covering an air carrier s cost in providing the air transportation at issue. Also, many of the mistaken fares are published by third parties without the air carrier s knowledge. Forcing air carriers to honor implausibly low fares that were published by mistake can result in serious 1 For example, British Airways sold tickets from the U.S. to India for $40 (excluding taxes and fees). Although British Airways almost immediately realized its error and removed the mistaken fare within minutes from its own website, it remained on the websites of on-line travel agents for nearly two hours, resulting in bookings by approximately 2,200 passengers. The fare, which DOT recognized as erroneous, was nearly 20 times lower than the lowest U.S.-India fare being offered by British Airways prior to the mistake. Press Release, U.S. Dep t of Transp., Department Ensures British Airways Offers Reimbursements Following Erroneous Fare Offer, DOT (Nov. 30, 2009). Although the carrier cancelled the bookings of all passengers who purchased the erroneous fare and offered each of them a $300 voucher, following a DOT investigation, it agreed to reimburse passengers for expenses, including fees for cancelling flights, hotels, rental cars or other ground arrangements, and additional costs incurred in rebooking flights, resulting from consumers having relied on the erroneous fare. 2

4 financial consequences for air carriers, whose profit margins as an industry have always been historically narrow. Allowing an air carrier to refund or rebook a mistaken fare at the correct fare level versus forcing a carrier to honor a mistaken fare can mean the difference between an air carrier making a profit on a particular flight, which enables it to continue in the business of providing much-needed air transportation services to consumers, stimulate local economies, and pay its employees; or operating at a substantial loss, thereby threatening to harm its business and potentially its employees and the communities it serves. DOT s statutory authority, 49 U.S.C. section 41712, is modeled on section 5 of the Federal Trade Commission Act. The FTC has recognized that there is no federal statute requiring sellers in other industries to honor erroneous pricing unless it is misleading or deceptive. In addition, most state laws allow a seller to correct an inadvertent pricing error. 2 Thus, absent any federal or state law prohibiting them from doing so, companies in other industries are able to protect themselves by contract from the consequences of mistaken prices. In addition, other modes of transportation, such as cruise lines and passenger railways, are allowed to rely on their ticket contracts with customers and general principles of contract law to require passengers who book mistaken fares to pay the difference in order to access the purchased transportation. These mistaken fare contract provisions, coupled with general principles of contract law, protect members of the cruise and rail transportation industries against the sale of erroneously priced tickets. By virtue of these protections, members of these industries are effectively shielded from unscrupulous parties who become aware of the mistake and attempt to take unfair advantage of the company by disseminating the error on blogs and the Internet. Lufthansa urges DOT, consistent with the well-established unilateral mistake doctrine, to permit air carriers to void contracts when (1) the mistake makes enforcement of the contract unconscionable; or (2) the other party had reason to know of the mistake. 3 2 See Restatement Second of Law, Contracts, 153 (allowing a contract to be voided based on a unilateral mistake regarding a core element of the contract where the mistake has a material effect such that enforcement of the contract would be unconscionable or the other party reasonably would know of the mistake). 3 As noted above, this principle is applied across other industries and by other aviation regulatory authorities, including the Canadian Transport Agency, which recently issued a decision on this topic stating that since those who purchased the mistaken tickets knew or should have known the fare was 3

5 DOT Should Exempt Airline Websites/Displays from its Proposed Rule Prohibiting Undisclosed Biasing of Displays of Multiple Carriers Fares and Schedules The Department proposes to prohibit any undisclosed bias by airlines and ticket agents in any Internet displays of multiple carriers fares, schedules, rules or availability that are made publicly available directly to consumers or that are directed toward travel agents. As an alternative, DOT has proposed that carriers and ticket agents would be allowed to provide biased displays as long as they provide consumers and travel agents with prominent and specific disclosure of such bias. 79 Fed. Reg. at The proposed rule would apply to all electronic airline information systems displaying multiple carriers fare and schedule information, including airlines own websites and direct connections between a ticket agent and the internal reservations systems of an individual airline if the direct connection provides fares, schedules, rules, or availability of more than one airline, unless all of the listed airlines are under the same ownership or the individual airline s direct connection only provides information on flights operated under its own code. 79 Fed. Reg. at For the reasons set forth below, Lufthansa urges the Department to exclude from this proposed rule airline and airline-alliance websites, as well as direct connections between ticket agents and airlines internal reservations systems. Lufthansa, like other network airlines that participate in codesharing and alliance relationships with other airlines, displays the fares and schedule information of those airline partners (in addition to Lufthansa s own flights/schedules) on its website. The proposed rule, as applicable to airline websites (such as Lufthansa s) and direct connections between ticket agents and airlines internal reservations systems, is unnecessary. Consumers and ticket agents intuitively understand that an airline biases its website and internal reservations systems to prioritize and promote its own services and those of its codeshare and alliance partner airlines. Consumers and ticket agents instinctively know that they will not be able to access fares and schedules of other airlines that compete against or are not aligned with the airline whose website (and, in the case of ticket agents, internal reservations systems) they access. DOT has recognized that such bias does not raise any concerns or require regulation. In the 2004 CRS Final Rule, DOT concluded that anti-biasing rules were not a mistake, there was no meeting of the minds and therefore no valid contract. CTA Decision No C-A-2014, May 9, 2014; CTA Decision No. 202-C-A-2014, May 27,

6 needed to regulate airline websites: Consumers assume that an airline website will favor the airline s own services and not present an impartial display of all airline services. Any airline offering a website will seek to promote its own services and those of any allied airlines. Computer Reservations System (CRS) Regulations, Final Rule, 69 Fed. Reg. 976, 1020 (Jan. 7, 2004). If the Department decides to finalize its undisclosed biasing prohibition, it should clarify that the anti-biasing prohibition does not apply to airline or airline-alliance websites, including those that display the fares and schedules of multiple carriers (i.e., codeshare and alliance partner airlines). Such exclusion should also apply to airline-alliance websites (e.g., the Star Alliance) that display the fares and schedules of alliance member airlines. Consumers understand that these alliance websites only display fare and schedule information for alliance member airlines and not those associated with other airline alliances and their member airlines or non-aligned airlines. Furthermore, airlines should not be required to provide prominent and specific disclosure of the already-assumed bias on their websites. Requiring the addition of bias disclosures on airline websites would not provide any information that consumers do not already know, but would clutter webpage displays and could actually confuse consumers. There may be a case to apply the proposed rule to websites and distribution channels that purport (or may be presumed) to be neutral, such as GDS, on-line travel agent, and meta-search engine displays of multiple carriers fare and schedule information. Indeed, DOT cites as the reason for its undisclosed biasing prohibition complaints it received that certain ticket agents, including GDSs, biased their displays to disadvantage certain airlines by prioritizing the listing of favored carriers fare and schedule information without providing notice or disclosure to consumers about such bias. DOT also justifies the proposed antibiasing rule based on concerns that GDSs and other ticket agents could sell bias to airlines or bias displays toward carriers that pay higher segment fee compensation to GDSs, and that such bias could be difficult to detect. 79 Fed. Reg. at None of these concerns applies to airline websites or direct connections between ticket agents and the internal reservations systems of individual airlines. Indeed, the Department cites no instances in which consumers have complained that they were harmed by biasing of airline websites or ticket agents have complained of harm due to biasing of information obtained from airline internal reservations systems. In the absence of such complaints or concerns, there is no 5

7 justification for applying the proposed undisclosed biasing prohibition to airline websites or information obtained by ticket agents from airline internal reservations systems. Finally, DOT also proposes to require airlines to provide unbiased displays or disclose biases in their displays provided for corporate travel unless a corporation agrees by contract to biases in the display used by its employees for business travel. 79 Fed. Reg. at As the Department recently acknowledged, airline business travel programs involve business enterprises that choose to accept the program s terms and conditions on a contractual basis and such fare offerings are not available to the general public. DOT stated that it does not enforce the full-fare advertising rule in connection with private corporate booking tools because they are not available to the general public, they involve private contractual arrangements, and the contracting parties are deemed to have notice and have accepted the carrier s terms and conditions. Third Party Complaint of Benjamin Edelman v. British Airways PLC, Order , Sept. 5, 2014 (Docket DOT-OST ). Similarly, there is no need for DOT to implement and apply anti-biasing rules for corporate travel arrangements that are contractually entered into by sophisticated entities that are well aware that the fares and schedules offered through their business travel programs are limited to certain airlines and do not provide the full range of available fares and schedules offered by other airlines that do not participate in a particular program. In sum, neither individual consumers nor corporate travel purchasers require disclosure of the self-evident fact that airline websites and corporate travel programs are intended to promote the services of the airline and its codeshare/alliance partners and do not purport to offer one-stop shopping for all of the service options that may be available in the marketplace. Therefore, in the absence of any evidence of actual or potential harm, Lufthansa respectfully requests that the Department confirm its existing policy and exclude airlines websites, corporate travel programs, and direct connections from the scope of its proposed rule prohibiting undisclosed biasing. 6

8 Respectfully submitted, Deutsche Lufthansa AG Arthur J. Molins Natalie Hartman Trapasso General Counsel, the Americas Director, Public Affairs, the Americas 1640 Hempstead Turnpike 1120 G Street, NW, Suite 747 East Meadow, New York Washington, DC September 29,