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DOT Air Fare Ad Rule May Snag Small Agencies, Independent Agents- August 07, 2012

Small travel agencies beware: When you advertise an airline fare that does not include all mandatory taxes and fees in the total amount, you could end up paying a fine of up to $27,500 per infraction. Under the U.S. Department of Transportation’s new price advertising rule, which took effect on Jan. 26, carriers and ticket agents must show the total price, including all government taxes and fees, in every advertised fare, but not ancillary charges for baggage or special assigned seating.

Since that time the Department of Transportation (DOT) has fined airlines, online travel agencies, tour operators and large travel agencies for violating the rule. For example, Travelocity was fined $180,000, Philippine Airlines was fined $80,000, Trip Advisor was fined $80,000 and Pacific for Less (a ticket agent) was fined $20,000.

For now, the DOT has mostly been targeting fairly large players in the market. But any business that violates the rule is liable, which is a big concern for Alexander Anolik, a San Francisco-based travel industry attorney. Anolik said he is representing two agents -- one home-based agent who works at her kitchen table and another who had advertised a fare in a church bulletin -- who have received notices from the DOT charging them with violating the rule.

“We are not aware of an ad in a church bulletin starting an investigation on price advertising,” said DOT spokesman Bill Mosley. “However, if an agent or airline deceptively advertised an airfare or air tour price in a church bulletin, neighborhood newsletter or other limited-circulation media, it would violate our rules. Depending on the degree of harm and the nature of the deception, we might issue only a warning or a small penalty.”

Normally, the DOT polices the industry for rule violations by regularly reviewing websites, Twitter feeds, and other widely distributed means of advertising, according to Mosley. The department also takes complaints from people who see ads that they feel are misleading. The DOT does not keep a count of how many letters it has sent to companies regarding violations, Mosley said.

“The DOT told me they're going give a little time for people to adjust to it,” Anolik said. “But they came out like gangbusters. These are small agencies. The moral of the unfortunate story is that the DOT will go after small and large agencies if they see any unbundled fares."

The DOT has no jurisdiction over non-U.S. carriers that don't touch the U.S., according to Anolik. “If a carrier touches in and out of the U.S., it can be fined,” he said. “But if it's strictly an EU flight within Europe, the law doesn't apply.”

Anolik said he is representing a number of travel agents who have received letters from the DOT. These are not just warning letters. In the first couple of months, the DOT "did their best to talk to agents,” Anolik said. “Now, they're hitting them with five- to six-figure violations, and it's up to me to negotiate them down. Independent agents must realize that, if they get product from their host agency, and it is unbundled, they are held responsible, and the host agency is held responsible. It goes up the line."

Mosley acknowledged that the maximum fine per infraction is $27,500, “if no compromise of penalty can be reached.” That kind of fine could put a small travel agency or independent contractor out of business. However, the actual penalty depends on factors such as how long the ad ran and any fine can be negotiated downward, which is where travel industry attorneys like Anolik come in.

According to Mosley, in order to comply with the DOT’S new rule agents must check to ensure a fare includes all mandatory taxes and fees before advertising that fare to their clients. The proper way to advertise a fare is to include the entire price, which is the base fare plus taxes and fees. The important thing to remember is that the bundled fare should be the first fare that customers see. Potentially, both the agent and the airline advertising the fare could be fined.

In addition, if a small agency or independent agent were to forward or distribute a flyer or ad provided by a wholesaler or airline that violated the price advertising rule, that agency or agent could potentially be subject to penalties, according to Mosley. “We review ad copy and website mockups regularly from airlines and agents who want to make sure they are in compliance, so if agents have questions they might first show the ads to the DOT,” he said. “Trade associations and agents’ attorneys also regularly send in ads for our review.”

Mosley said travel agents should contact the DOT’s Aviation Enforcement office to submit a fare advertisement by mailing the U.S. Department of Transportation, Office of Aviation Enforcement and Proceedings, C-70, 1200 New Jersey Ave. SE, Washington, D.C. 20590. Agents also can reach a DOT attorney at 202-366-9342 if they need a quicker response on a fare question.

Mimi Kmet
Travel Pulse