Reforming the Department of Transportation’s aviation consumer protection authority
Photo 78309183 © Jakub Gojda |


Reforming the Department of Transportation’s aviation consumer protection authority

DOT increasingly uses its authority to protect consumers from unfair practices to chip away at airline deregulation.

In 1978, Congress passed the Airline Deregulation Act and President Jimmy Carter signed it into law, laying the basis for a greatly expanded, more competitive, and lower-priced airline industry. In recent years, the U.S. Department of Transportation (DOT) has increasingly used its authority to protect consumers from unfair or deceptive practices to chip away at airline deregulation.

The transportation department’s rulemakings on airfare advertising, ticket refundability, and tarmac delays during the Obama administration have been cited by critics as examples of a backdoor re-regulatory trend at DOT. The Trump administration attempted to bring the aviation consumer protection authority in line with similar federal authorities wielded by the Federal Trade Commission and Consumer Financial Protection Bureau, but the Biden administration has reversed course. Under President Joe Biden, the Department of Transportation has reinitiated a regulatory agenda based on an expansive reading of its statutory powers. It is increasingly clear that successful reform must come from Congress.

What is now known as the aviation consumer protection authority, the term that the Department of Transportation uses for its statutory authority to police unfair or deceptive practices in the aviation industry (49 U.SC. § 41712), long predates the department itself. The authority was created as Section 411 of the Civil Aeronautics Act of 1938 and modeled on the “unfair or deceptive acts or practices” language included months before in the Federal Trade Commission Act of 1938, which covered most other commercial contexts. The authority was soon transferred to the new Civil Aeronautics Board (CAB) in 1940, which was created by merging the Civil Aeronautics Authority and the Air Safety Board. In 1952, Congress expanded Section 411 to cover not only air transportation itself but the sale of air transportation. For the next three decades, the enforcement against unfair or deceptive practices in the airline and ticket agent businesses by the Civil Aeronautics Board remained the same.

When Congress passed the Airline Deregulation Act in 1978, it eliminated most economic regulation in the aviation sector and wound down the CAB. When the Civil Aeronautics Board was terminated in 1985, Section 411 authority was transferred to the Department of Transportation’s Office of the Secretary. In 1994, Congress reorganized the Title 49 Transportation Code, and Section 411 was recodified as Section 41712. 

While reorganizing the Transportation Code, Congress was also working to modernize authorities held by the Federal Trade Commission (FTC). The FTC Act amendments of 1994, among other things, codified longstanding internal FTC policy in dealing with claims of unfair or deceptive acts or practices that were synthesized for Congress in the FTC’s December 1980 Policy Statement on Unfairness. In a nutshell, the FTC’s approach, as affirmed by Congress, requires that specific elements be met to prove unfairness allegations, one of which necessitates careful benefit/cost analysis.

Specifically, three standards of proof of the Federal Trade Commission’s broad statutory prohibition on unfair business practices were added at 15 U.S.C. § 45(n) by the FTC Act amendments. For conduct to qualify as legally unfair, it must be (1) “likely to cause substantial injury to consumers,” (2) not “reasonably avoidable by consumers themselves,” and (3) “not outweighed by countervailing benefits to consumers or to competition.”

It is worth noting that these reforms were made at a time when Democrats controlled both chambers of Congress and the White House, and they earned bipartisan support. Similar language was included in the Dodd-Frank Act of 2010, covering the enforcement responsibilities of the Consumer Financial Protection Bureau (12 U.S.C. § 5531(c)), also when the federal government was fully controlled by Democrats. 

While bipartisan recognition of the problem of ill-defined “unfairness” exists in virtually every other federal consumer protection context, Congress has not moved to reform DOT’s similar Section 41712 aviation consumer protection authority. This failure to act has enabled regulators in recent years to engage in a variety of re-regulatory activities, from new restrictions on airfare advertising (14 C.F.R. § 399.84(a)) to outlawing true nonrefundable ticketing (14 C.F.R. § 259.5(b)(4)) to an inflexible tarmac delay rule (14 C.F.R. § 259.4) suspected of increasing flight cancellations. Each of these regulations has been criticized as perversely harming consumers, but without the FTC-style standards of proof, the scales have been tipped in favor of the regulators.

Despite congressional inaction, there has been some official interest in modernizing DOT’s Section 41712 powers. At the International Air Transport Association (IATA) Legal Symposium in New York in February 2020, then-Transportation Secretary Elaine Chao announced that the Department of Transportation would propose a rule to update policies and procedures for its aviation consumer protection authority. The final rule on defining unfair or deceptive practices was published in December 2020.

DOT’s rule added Federal Trade Commission-style standards of proof to Section 41712 enforcement and rulemaking while also codifying internal agency procedures for allowing alleged violators to present evidence defending themselves against possible enforcement or rulemaking activity derived from DOT’s aviation consumer protection authority. While this would have improved airline and ticket agents’ defensive positions, it also would have required bureaucrats to clearly explain themselves along the way and give consumers better insight into how decisions that affect them are made. In this way, the time-tested FTC-style standards of proof in unfairness claims are best understood as promoting regulatory quality and consistency in enforcement.

Unfortunately, the Biden administration quickly moved to reverse these reforms. In his July 2021 Executive Order 14036, President Biden ordered the Department of Transportation to amend the new Federal Trade Commission-style definitions of “unfair” and “deceptive” for Section 41712. In August 2022, DOT published a guidance document suggesting it will again take an expansive view of how its Section 41712 powers are defined and limited. This will likely open the door for future discretionary rulemaking guided more by political whims than careful empirical analysis.

The good news is Congress can take the lead and bring the Department of Transportation’s aviation consumer protection authority into alignment with other federal consumer protection authorities. At a minimum, it should adopt the FTC-style unfairness definition in Section 41712. This can be accomplished by adding a new subsection (d) at 49 U.S.C. § 41712 to read:

(d) Unfairness defined; standard of proof

The Secretary shall have no authority under this section to declare unlawful a practice or method of competition on the grounds that such practice or method of competition is unfair unless the practice or method of competition causes or is likely to cause the substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.

As Congress debates Federal Aviation Administration reauthorization over the coming year, it should consider reforming the Department of Transportation’s aviation consumer protection authority to align with other federal consumer protection statutes. Doing so would help ensure regulatory quality and consistent enforcement at the department, which would benefit all parties involved.