U.S. Department of Transportation Proposes Modernizing its Aviation Consumer Protection Authority

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Yesterday, U.S. Secretary of Transportation Elaine Chao announced a new proposed rule that would “align its definitions of unfairness and deception with the principles set forth by the Federal Trade Commission,” which “is intended to provide regulated entities and other interested parties greater clarity and certainty about the Department’s interpretation of unfair or deceptive practices in the context of aviation consumer protection rulemaking and enforcement actions.”

This is great news for consumers and their aviation service providers. In recent years, the Department of Transportation’s (DOT) legacy unfair and deceptive practices authority (49 U.S.C. § 41712), which it calls its “aviation consumer protection authority,” has been abused by regulators. As I noted back in 2014, this abuse sometimes veered into the absurd:

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.

That assessment was in regard to a 2014 proposal to, among other things, define websites that list but do not sell flights as ticket agents. It was a particularly ridiculous example of the Department’s abuse of its authority, but is far from the only one. DOT also wielded this authority to make it harder for consumers to know about government taxes and fees imposed on their air travel, outlaw nonrefundable ticketing and thereby putting pressure on carriers to raise prices, and impose a heavy-handed tarmac delay rule that incentivizes carriers to cancel more flights.

Each of these actions harmed consumers, but were supposedly done for their benefit under the Department’s aviation consumer protection authority. Most troubling, it appeared there was a concerted effort by the then-leadership of DOT to chip away at the extremely successful reforms brought about by the Airline Deregulation Act of 1978.

The core problem was that DOT had not modernized this authority to bring it into alignment with similar authorities held by the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB). In 1994 with the FTC Act amendments (15 U.S.C. § 45(n)) and 2010 with the Dodd-Frank Act (12 U.S.C. §§ 5531(c)(1)(A)–(B)), large bipartisan majorities in Congress supported including two exemptions from the general unfair and deceptive practices authorities: 1) the alleged harm is “reasonably avoidable by consumers,” and 2) the alleged harm is “outweighed by countervailing benefits to consumers or to competition.”

Both of these reforms, which cover most consumer protection contexts, were signed into law by Democratic presidents while Democrats held majorities in both chambers of Congress, so there has long been bipartisan recognition of this problem in nearly every context other than aviation consumer protection.

The notice of proposed rulemaking from DOT proposes two core regulatory changes to how it will wield its aviation consumer protection authority:

  1. Define the nebulous terms “unfair” and “deceptive,” while requiring the same FTC/CFPB requirements that the conduct at issue must not be reasonably avoidable by consumers and/or not outweighed by benefits to consumers or competition.
  2. Allow regulated entities to present evidence that their practices do not violate the prohibition on unfair and deceptive practices prior to DOT engaging in rulemaking or enforcement related to the conduct in question.

This should be seen by all as a long overdue win for good, competent government, but of course some don’t see it that way. In an interview with Politico, John Breyault of the National Consumers League laments the proposed rule, saying, “You’re just putting more barriers in the way of the DOT exercising its authority here.”

Indeed, that is the point. No agency, DOT or other, should have virtually unbounded, nebulous authority to do whatever it wants. Too often, consumerist groups like Breyault’s conflate harming producers with protecting consumers. Too often, the mindless rubberstamping of regulations these self-styled consumer advocates cheer on perversely harms consumers by reducing their choices and increasing the prices they face. That’s not real consumer protection; it’s the substitution of consumer protection for a simplistic, evidence-free political ideology.

Fortunately, the present leadership of the Department of Transportation seems more interested in actually protecting consumers than in promoting the failed ideas of consumerist special interest groups, and for that Secretary Chao and the Department deserve praise.