Why consumers still need the Department of Transportation's consumer protection: CFR 399.88

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This is why consumers still need the Department of Transportation’s consumer protection CFR 399.88: Mistake Fares.

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What is the CFR 399.88?

Below I have included the whole directive so that you can see it for yourself, what is included and what is not. In layman’s terms here is what the Department of Transportation has said:

If you buy a ticket, the airline cannot come back to you and state that they made a mistake and the ticket will now cost more than what you have paid. They also cannot cancel your ticket and void the order to avoid increasing the costs when you go to re-book it.

§ 399.88 Prohibition on post-purchase price increase.

(a) It is an unfair and deceptive practice within the meaning of 49 U.S.C. 41712 for any seller of scheduled air transportation within, to or from the United States, or of a tour (i.e., a combination of air transportation and ground or cruise accommodations), or tour component (e.g., a hotel stay) that includes scheduled air transportation within, to or from the United States, to increase the price of that air transportation, tour or tour component to a consumer, including but not limited to an increase in the price of the seat, an increase in the price for the carriage of passenger baggage, or an increase in an applicable fuel surcharge, after the air transportation has been purchased by the consumer, except in the case of an increase in a government-imposed tax or fee. A purchase is deemed to have occurred when the full amount agreed upon has been paid by the consumer.

(b) A seller of scheduled air transportation within, to or from the United States or a tour (i.e., a combination of air transportation and ground or cruise accommodations), or tour component (e.g., a hotel stay) that includes scheduled air transportation within, to or from the United States, must notify a consumer of the potential for a post-purchase price increase due to an increase in a government-imposed tax or fee and must obtain the consumer’s written consent to the potential for such an increase prior to purchase of the scheduled air transportation, tour or tour component that includes scheduled air transportation. Imposition of any such increase without providing the consumer the appropriate notice and without obtaining his or her written consent of the potential increase constitutes an unfair and deceptive practice within the meaning of 49 U.S.C. 41712.

This does not allow customers to receive compensation if they find a mistake fare, it just forces them to honor the ticket regardless of whether or not it was the result of human error. At a minimum, the rule allows customers to cancel within 24 hours, airlines should be given the same opportunity if they catch the error within 24 hours of filing.

Airlines are much happier to give full refunds on these flight deals that are too good to be true, even if the airline prices flights in a similar fashion during a “sale” period.

Why is this important?

This directive protects passengers against airlines or even travel agencies for behaving badly. Delta is one airline that I could see, without this protection in place. It does not seem out of character for them right now, to go back and add a fee that effectively prices someone out of a great deal. In defense of Delta, last year there were mistake fares that were allowing US domestic travel for as little as $5 roundtrip and Delta did honor those fares. United, however, has had several ambiguous instances and has found a way to slide out of each of them. American Airlines, on Tuesday, March 17th had (an assumed mistake) fares for $20 in business class from Washington DC to Beijing. The problem is that with fuel and airline surcharges, though it seems like an obvious mistake on the airline, maybe it is not. Take a look at the breakdown for one of those tickets:

While the fare amount is only $72, the carrier-imposed fees are $658 and they are distinctly different from taxes. Taxes, everyone pays regardless of carrier, these sorts of fees though are direct lines of revenue to the airline. For most situations and most consumers, this distinction is meaningless. The ticket will cost $817 in this case whether that is listed as “base fare” or carrier-imposed fees makes no difference to the purchaser. This fare is understood to be a mistake fare or an error fare. Here is one that is absolutely not a mistake found by Ric Gerardo of Loaylty Traveler:

That’s a $2 base fare with $518 in carrier-imposed surcharges. We have seen these types of fares all over the place to fight off Norwegian Air Shuttle which is trying to break into the long haul Ultra Low-Cost Carrier market. Wow Air was selling legitimate $99 flight prices each way from Boston or Washington DC to London or Iceland.

The spirit of the rule is to ask, “Could a consumer have thought this was a legitimate fare and bought in good faith?” and if the answer is yes, then the fare should stand (subject to meeting the other requirements of the directive). This is one reason why United was able to get out of their recent mistake fare, there was no way that $80 fares in first class (less than the taxes would be alone) from London to the United States could have been assumed to be a legitimate fare.

But where then is the line? Is $200 reasonable? I would say it is given that there are now two carriers willing to fly you across the Atlantic for that amount. Would a distance twice as far (say to China for example) be reasonable? Sure. Using the above fare from Washington DC to Shanghai, even more so is it reasonable at $817 for that flight? Absolutely – a great deal yes, but it’s not $80 right?

Is CFR 399.88 under threat?

It is. The Department of Transportation has stated that because of the proliferation of blogs and bad actors (I am responsible for one of those but not both) people are knowingly buying tickets that were clearly mistakes and that is not the intention of the rule. I can understand their point. When the United fare was around, I like many others, purchased many tickets that I did not need, some of which I only intended to fly one-way. I was taking advantage of the situation. In the end it did no harm to either myself nor to United, but (just like if you have ever seen me on TV) I was a bad actor and not what the consumer protection was intended to correct.

Why do we still need it?

The more mistake fares that are catastrophic for the airlines, the more likely this rule will get seriously overhauled. People make mistakes, and they should not be severely punished if it was a genuine mistake. The problem is that pricing has gotten so tricky, and some fares so competitive that one can’t always know the difference between a good deal and a mistake. Airlines, and more importantly tour operators could put out an overly attractive offer, receive more demand than they can deal with and then retract the offer (bait and switch) as a “mistake”.

Here are some examples of flights that could confuse customers:

Spirit offers $9 fares to destinations regularly
Jet Smarter offers private jets for positioning flights as cheap as free for members and as little as $52 for non-members
RyanAir offers flights for as little as $10.60 for distances of up to 1,000 miles
American Airlines, United Airlines, Delta Airlines, and Air Canada regularly compete on Chinese routes at $500 fares
Wow Air from the east coast of the US to Europe for $200 round trip
Norwegian Air Shuttle offers just over $200 to/from Sweden and Denmark to the US

Which of those are mistakes? None of them.

The opacity of the generation of a fare is part of the problem. The other is bad actors on the business side. There have been instances of companies selling vouchers for “Caribbean Vacations” that are less complete or accurate than a consumer should reasonably expect. Airlines have the potential to change fees once someone has booked, etc. The consumer needs an advocate, and the DoT through CFR 399.88 is that voice.

However, I sense that the DoT will soon give the airlines a little greater protection too. They may have over-compensated in favor of the consumer, and I am okay with some changes. It should be a fair deal for both parties. Remember that if you book the wrong date and do not change outside of the 24-hour window, you are stuck. Even when a consumer makes a mistake (and not the airline) they can be stuck with the consequences. If it’s fair to stick the consumer with the consequences, it’s fair to stick the businesses with the same liability for errors.

It is my hope that when the alteration of the rule is made there will be some correction for the airline, hopefully, the pendulum doesn’t swing too far in the other direction.

What do you think? Should the DoT enforce CFR 399.88?