The Department of Transportation is opening a rulemaking proceeding to, among other things, require airlines and ticket agents to include ancillary fees (for, e.g., checked bags, seat assignments) in any fare comparison. More troubling is its expansion of "ticket agent" to "apply to all entities that hold out airfare, schedule, and availability information to consumers," including meta-search engines such as Google Flights and KAYAK. But most troubling is the Department's summary of its preliminary regulatory analysis, reproduced in full below:
The quantifiable costs of this rulemaking exceed the quantifiable benefits. However, when unquantified costs and benefits are taken into account, we anticipate that the benefits of this rulemaking would justify the costs. It was not possible to measure the benefits of the proposals in this rulemaking, except for the benefits for provision 2. For example, there are a number of unquantified benefits for the proposals such as improved on time performance for newly reporting carriers and code-share flights of reporting carriers, improved customer goodwill towards ticket agents, and greater competition and lower overall prices for ancillary services and products. There are also some unquantified costs such as increased management costs to improve carrier performance, increased staff time to address consumer complaints, and decreased carrier flexibility to customize services, though we believe these costs would be minimal. If the value of the unquantified benefits, per passenger, is any amount greater than one cent and the unquantified costs are minimal as anticipated, then the entire rule is expected to be net beneficial. (Emphasis added.)
That is a bold statement. DOT admits its proposal fails benefit-cost analysis, but argues that "unquantifiable benefits," such as "improved customer goodwill toward ticket agents," will almost certainly result in a positive net benefits finding. Why? Who knows and who cares? Some bureaucrat says so.
Unfortunately, this is par for the course over at the Obama-era Department of Transportation. Unbeknownst to many on Capitol Hill, DOT has in recent years been quietly expanding its authority to police unfair and deceptive practices (UDP) in the airline industry (49 U.S.C. § 41712), what it calls its Aviation Consumer Protection Authority, to include virtually any activity any person might claim to be "unfair" at any time. In essence, the Department is expanding its UDP authority to cover any intervention it wants. So much for the rule of law. Previous examples of UDP authority expansion by the Obama administration include:
- The Total-Price Rule (14 C.F.R. Part 399.84(a)), which denies carriers their First Amendment rights while limiting dissemination to consumers of information related to government taxes and fees;
- The 24-Hour Hold/Refund Rule (14 C.F.R. Part 259.5(b)(4)), which effectively outlaws true nonrefundable ticketing; and
- The Tarmac Delay Rule (14 C.F.R. Part 259.4(b)(1)), which numerous studies from the American Aviation Institute, Government Accountability Office, and Econometrica, Inc. (actually commissioned by the Department) have found to have increased flight cancellations.
In addition, DOT is currently considering outlawing cellular voice communications under its UDP authority, which I have harshly criticized in comments to the Department.
In its thirst for power, DOT is not only harming consumers and airlines in the name of "consumer protection," it is thumbing its nose at the principles of the 1978 Airline Deregulation Act and at over three decades of economic liberalization. In addition to being asleep at the switch, Congress set the stage for this worrisome abuse of UDP power by failing to correct a key statutory deficiency.
After recognizing the harm done by overzealous UDP enforcement, Congress passed the Federal Trade Commission Act Amendments of 1994 that modified the UDP section to explicitly exempt conduct that generates harm to someone that is “reasonably avoidable by consumers” or is “outweighed by countervailing benefits to consumers or to competition" (15 U.S.C. § 45(n)). The Dodd-Frank so-called "financial reform" law also included these exemptions (12 U.S.C. §§ 5531(c)(1)(A)–(B)). At the very least, Congress should do the same to the Department of Transportation.
The latest power grab from the DOT indicates they care little about consumer welfare, industry competition, and sound economic policy. In order to foster a healthy, competitive, and pro-consumer aviation sector, Congress must rein in the Department of Transportation's abuse of its unfair and deceptive practices authority. The very future of the aviation sector is at stake.