Advisory Committee for Aviation Consumer 

Protection:

Customized Offers

Airlines for America

December 16, 2013

Presenter: Dana Rosenfeld, Partner

Kelley Drye & Warren LLP.

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Overview

 Federal Consumer Protection Framework

 FTC Deception and Unfairness Standards

 FTC Approach to Pricing and Consumer Protection

 Examples

 Customized Offers Can Provide a Pro-Consumer Approach

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Federal Consumer Protection Framework

 Dept. of Transportation Regulations on Advertising and Pricing

 Express prohibition of unfair and deceptive practices of ticket 

agents and restrictions on price advertising

 Federal Trade Commission Act

 Section 5 prohibits “unfair or deceptive acts or practices”

 Express exemption for commercial air carriers

 FTC approach to consumer protection issues is instructive

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Federal Consumer Protection Framework 2

 FTC Deception Standard

 Representation or omission

 About a material fact (“likely to affect a consumer’s conduct 

regarding a product or service”)

 Likely to mislead a consumer acting reasonably under the 

circumstances

 FTC Unfairness Standard

 Act or practice that causes substantial injury to consumers

 Which consumers cannot reasonably avoid

 Not offset by benefits to consumers or competition

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FTC Approach to Pricing and Consumer 

Protection

 Nothing inherently unfair or deceptive about offering, marketing, and 

packaging customized products and services

 FTC generally favors procompetitive efforts in a free and competitive 

open market

 “Competition has been an effective organizing principle for the United 

States economy since the founding of the Republic. For more than a 

century, the promotion of competition has underpinned the federal 

and state statutes that apply to most sectors of the economy.” –FTC 

Staff, Comment to the Delaware Public Service Commission (2013)

 “The Federal Trade Commission is committed to the principle that 

people are best served by the effective operation of a free and 

competitive open market.” –Chairman Engman, FTC, Oversight of Civil 

Aeronautics Board Practices and Procedures: Hearing Before the Subcomm. On Admin. Practices and 

Procedure of the S. Comm. On the Judiciary, 94th Cong. (1975)

 If conducted in a fair, transparent, and truthful manner, customized offers 

can be provided in a manner consistent with tenets of consumer 

protection and increase benefits to consumers

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FTC Policy Applied to Example Markets

 Exchange of consumer information to provide more relevant and 

targeted content or discounts is a common practice deemed 

consistent with consumer protection values and consumer choice

 Energy Industry

 Taxicab Deregulation

 Loyalty/Membership Programs

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Energy Industry

 FTC staff comments on creation of competitive market for electric 

supply service (e.g., smart meters) to Delaware Public Service 

Commission

 Focus on dynamic pricing to benefit customers through lower costs, 

increased innovation, and expanded variety of services

 “Dynamic pricing for any end use is more efficient and pro-consumer 

than uniform flat-rate pricing, and regulators should take steps 

needed to ensure that dynamic pricing prevails in electricity markets”

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Taxicab Deregulation

 FTC staff has provided comments on deregulation of taxicabs to 

numerous cities including New York, Seattle, San Francisco, 

Cambridge, MA, DC, and Alaska and Colorado state legislatures

 FTC staff comments to Montgomery County Council (MD) regarding 

deregulation of taxicabs

 “With open entry and unregulated fares, radio-dispatched taxicab 

services would have an incentive to offer various fare and quality 

combinations responsive to different groups of customers”

 “A major benefit of deregulation is the ease with which a competitive 

market can make the continual adjustments needed to 

accommodate market changes over time”

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Loyalty/Membership Programs

 Allows consumers to provide certain information from and about 

themselves, including product purchase information, in exchange for 

reduced prices on certain products and services

 Have been subject to challenges based on specific application of the 

programs (e.g., alleged discrimination of protected classes of 

individuals (e.g., race, gender) or deception for false or misleading 

advertising), but no wholesale determination that loyalty programs 

reduce protections for consumers

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In re Upromise, Inc. (Settlement with FTC 2012)

 Membership program that allowed members to purchase products 

and services from partner merchants and receive cash rebates

 Included a software toolbar that would highlight partner merchants in 

members’ search results and present “personalized offers” based on 

members’ online activity (including data submitted to third party 

sites)

 FTC alleged that Upromise’s

 Failure to adequately disclose how the toolbar would collect and 

use information, and failure to provide data safeguards 

consistent with representations, was deceptive

 Failure to employ reasonable and appropriate measures to 

protect consumer information was unfair

 While specific practices were challenged, the membership program 

as a whole was not alleged to be inherently unfair or deceptive

10
Pro-Consumer Approach

 Customized offers are pro-consumer when managed consistent with 

the legal principles noted above

 A program that can provide consumers with more relevant airfare 

pricing and services options—based on their information and 

interests—in a manner that is truthful, fair, and transparent would be 

consistent with consumer protection concepts and goals

“Firms engage in a variety of business practices that create efficiencies 

and thereby enhance their abilities and incentives to compete. 

These efficiencies can result in lower prices, improved quality, better 

services, new products, and other benefits that enhance consumer 

welfare.” –Commissioner Wright (FTC), Proposed Policy Statement Regarding 

Unfair Methods of Competition Under Section 5 of the FTC Act (2013)

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Questions?

Dana B. Rosenfeld

PARTNER

Advertising & Marketing

Privacy & Information Security 

(202) 342-8588

drosenfeld@kelleydrye.com 

Connect with Kelley Drye

Website: www.KelleyDrye.com 

Blog: www.AdLawAccess.com

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