Order 2011

- 2

- 14

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Tr ansportation

O n the Twenty

- Eighth day of February

, 20 1 1

Docket OST

- 201 1

- 0003

Served February 28 , 2011

CONSENT ORDER

This consent order concerns violations of 49 U.S.C. § 41712

, which prohibits unfair and deceptive trade practice s and unfair method s of competition , by American Airlines, Inc.

, (American) for failure to disclose the amount of fees and us e restricti ons on travel vouchers

offered and provided as denied boarding compensation (DBC) to passengers who volunteered to give up their seats in oversales situations

. This consent order directs

American to cease and desist from such further viola tions and assesses American a compromise civil penalty of $ 9 0 ,000

.

Applicable Law

As an air carrier, American must fully disclose fees and significant use restrictions in connection with offers and solicitations for passenger air transportation, including those made with respect to compensation to volunteers in oversales situation s . We consider

instances in which notice of fees or significant terms of an offer are withheld, obscured, or

disclosed only after the customer has accepted to be an unfair and deceptive practice and unfair method of competition in viola tion of 49 U.S.C. § 41712.

Facts and Conclusion s

An investigation by t he Office of Aviation Enforcement and Proceedings ( Enforcement

Office ) found that for a number of years American offered travel vouchers as compensation

to passenger s who volunteered to give up their seats in oversales situation s without adequate disclosure of applicable fees and significant use restrictions. During this period

, a ticketing fee w as added to the cost of each ticket purchased through American’s telephone

reservation s li ne or at American airport ticketing location s , including tickets purchased

when using travel voucher s provided as voluntary DBC

. American ceased adding ticketing

fee s for tickets purchased through the reservation s line when using such vouchers about

four years ago , but continued add ing a $30.00 ticketing fee to the cost of each ticket American Airlines, Inc.

Violations of 49 U.S.C. § 417122

purchased with such voucher s at American airport ticketing location s until late 2010

. At

all times relevant to this matter

, travel vouchers provided as voluntary DBC could not be

redeemed on American’s Internet web site. Thus

, until American eliminated the ticketing fee for tickets purchased through its telephone reservation s line, the vouchers could not be redeemed without incurring a ticketing fee

, and until late 2010, the vouchers could not be redeemed at airport ticketing locations without incurring a fee

. Although a notice appear ed on the voucher stating that a “ticketing fee may apply,” no fee amount was stated and no information was given as to when the fee applie d

. Thus, fee amounts and certain other

restrictions were not disclosed at the time of the voucher offer s
, resulting in passenger s accepting these voucher s as voluntary DBC at what was less than the bargained

- for

amount.

The Enforcement Office also found that American’s internal reference document on

oversales volunteer solicitations g ave no instruction to agents on disclosing certain significant limitations on redeeming vouchers. There w e re no guidelines , for example, to inform p assengers that vouchers c ould not be used for ticket purchases online or that

voucher s applied to tickets purchased by telephone had to be mailed in for processing 12

- 21 days before the departure date. P assenger complaints reviewed by the Enforcement

O ffice indicated that passengers generally learned about fees and certain redemption restrictions only after trying to purchase tickets with the vouchers. It appears , for example,

that passengers first learned of restrictions on the use of vouchers (e.g., the 12

- 21 day

p rocessing time) and the amount of the ticketing fee when they contact ed A merican ’s telephone reservation s agents to redeem the vouchers

. Our findings further indicate that

reservation s agents did not always accurately disclose policies and procedures conc erning

the use of vouchers , resulting in significant inconvenience and expense to some consumers

.

Mitigation

In mitigation, American believes th at applying the general prohibition against unfair and deceptive practices found in 49 U.S.C. 41712 to this matter in the absence of specific regulations or guidance on these issues is inherent ly subjectiv e

. American contends that

t his case is therefore distinguishable from enforcement cases where carriers have violated an explicit regulation or guidance.

American also believes that any consumer problems associated with voucher distribution in

oversale s situations were minimal. The carrier maintains th at since April 2007, passengers who received travel vouchers in return for giving up a seat could realize the full value of the voucher unless they chose to redeem at an airport. American points out that it

eliminated the airport ticketing fee two months before the Enforcement Office first

contacted Ame rican on this matter. American state s that it issues approximately 250 of the

s ubject travel vouchers per day . The carrier further state s that the number of complaint s it

received from its “ top tier ” customers about issues associated with the redemption of travel

vouchers was very small . American believe s this to be an indicator that the number of

similar complaints from its non

- top tier customer s , if discern i ble

, would also be minor in magnitude.3

American underscores its excellent record of compliance with the Department ’s consumer regulations and guidance

. D espite periodic audits of both American and American Eagle for compliance with the Department's consumer protection rules

, no enforcement order s have arisen from th ese audit s , or in any other context

, since 2003

. W ith respect to denied boarding compensation

, American notes that it consistently ranks favorably in the Depart ment's monthly air travel consumer reports

.

Decision

The Enforcement Office has carefully considered all of the information available to it, including the cooperation of American and the changes in procedures it has implemented

, but continues to believe that en forcement action is warranted

. I n order to avoid litigation,

the Enforcement Office and American have reached a settlement of this matter. Without admitting or denying the violations described above, American agree s to the issuance of

this order to cease and desist from future violation s of 49 U.S.C. § 41712

. American further agrees to the assessment of $ 90 ,000 in compromise of potential civil penalties

otherwise assessable against it

.

T his compromise assessment is appropriate in view of the nature and extent of the violations in que stion, serves the public interest , and establishes a strong deterrent to future

similar unlawful practices by American and other air carriers

.

This order is issued under the authority contained in 49 CFR 1.57a and 14 CFR 385.15.

ACCORDINGLY,

1. Based on the above discussion, we approve this settlement and the provisions of the

order as being in the public interest.

2

. We find that American Airlines

, Inc.

, violated 49 U.S.C. § 41 7 1 2 by failing to fully and accurately disclose the amount of fees and significant use restrictions applicable to

travel vouchers offered and provided to passengers as compensation for voluntary denied boarding at the time the offer s w ere made

.

3

. We order American Airlines

, Inc.

, and all other entities owned and controlled by or under common ownership with American Airlines

, Inc.

, and its successors and assignees to

cease and desist from such further violations of 49 U.S.C. § 41712

.

4

. We assess American Airline s, Inc.

, a compromise civil penalty of $ 90 ,000 in lieu of civil penalties that might otherwise be assessed for the violations described in orde ring paragraph 2

, above

. Of this total assessed penalty, $ 4 5,000 shall be due and payable within thirty days of the issuance of this order. The remaining $ 4 5,000 shall become due and payable if American Airlines, Inc., violates this order's cease and desist provisions within one year following the date of issuance of this order or fails to comply with the payment provi sions of this order, in which case the entire unpaid portion of the $ 9 0,000 assessed penalty shall become due and payable immediately.4

5

. We order American Airlines

, Inc.

, to pay the penalty by wire transfer through the

Federa l Reserve Communications System commonly known as "Fed Wire," in accordance

with paragraph 4 above to the account of the U.S. Treasury as described in the attached

instructions

. Failure to pay the penalty as ordered shall subject American Airlines

, Inc.

, to the assessment of interest, penalty, and collection charges under the Debt Collection Act and to possible additional enforcement action for failure to comply with this order.

This order will become a final order of the Department 10 days after its se rvice date unless a timely petition for review is filed or the Department takes review on its own initiative.

BY:

ROSALIND A. KNAPP Deputy General Counsel (SEAL)

An electronic version of this document is available at www.regulations.gov

.