Spirit Airlines Ordered to Amend Fare Advertising

WASHINGTON (CN) - A divided D.C. Circuit ordered Spirit Airlines to stop advertising "the government's cut"-- taxes and fees on air travel -- more prominently than its base airfare, while also rejected Spirit's challenge to a DOT rule establishing new guidelines for when a passenger can cancel or change a booking.

Spirit Airlines took the U.S. Department of Transportation to court over rules designed to enhance airline passenger protection.

Specifically, the airline objected to three of the rules' provisions: the requirement that the most prominent figure displayed in advertisements and on websites be the total price including taxes, allowing passengers to cancel their ticket purchases within 24 hours without a penalty, and a prohibition on raising baggage and other fees after tickets are purchased.

Spirit called the DOT's rules "arbitrary and capricious," "procedurally defective" and "a violation of the First Amendment."

But writing for a three-judge panel of the D.C. Circuit, Judge David Tatel wrote that Spirit's arguments against the airfare advertising rule fell short in proving arbitrary and capricious behavior.

"Contrary to the airlines' repeated suggestions, nothing in the Airfare Advertising Rule requires airlines to hide the taxes -- or, as Spirit's website puts it, the 'Government's Cut,'" Tatel wrote. "It just requires that the total, final price be the most prominently listed figure, relying on the reasonable theory that this prevents airlines from confusing consumers about the total cost of their travel."

The panel also rejected Spirit's argument that it has "a First Amendment right to engage in political speech that informs [its] customer base of the huge tax burden that the federal government imposes on air travel," citing intervenor Southwest Airlines' brief.

"According to the airlines, their speech does more than propose a transaction, as it also makes a political point... But where speech 'cannot be characterized merely as proposals to engage in commercial transactions,' it is nonetheless commercial in certain circumstances, for instance when it is an 'advertisement,' 'refer[s] to a specific product,' and the speaker 'has an economic motivation' for it," Tatel wrote, citing Bolger v. Young Drugs Prods. Corp.

"As the court explained there, 'advertising which links a product to a current public debate is not thereby entitled to the constitutional protection afforded noncommercial speech,'" Tatel added.

Tatel noted that the Airfare Advertising Rule does not prohibit airlines from saying anything -- it requires them to disclose the total, final price and to make it the most prominent figure in their advertisements -- and prevents customer confusion.

Spirit also failed to persuade the court that rules giving customers who book at least 14 days in advance a day to cancel or change their bookings violate airline deregulation laws and force airlines to fly half-full planes.

"For one thing, the rule has nothing to do with airfares. Instead, it regulates cancellation policies on the basis of a finding that existing practices were deceptive and unfair -- a regulation plainly allowed under [U.S. law]," Tatel wrote. "In sum, Spirit gives us no reason to believe that the Refund Rule -- developed as part of a systematic effort aimed at preventing unfair and deceptive practices -- is arbitrary or capricious."

The Department of Transportation agreed to review the third portion of the rule which prohibits airlines from raising fees after tickets are purchased, though Spirit argued that it had no idea the agency intended to prohibit price increases for optional services and that it failed to give adequate notice of the "scope and general thrust of the proposed rule."

"This argument is ridiculous. As the government points out, the proposed rule deemed it an unfair and deceptive practice for a 'seller of scheduled air transportation... to increase the price of that air transportation to a consumer, including but not limited to increase in the price of the seat, increase in the price for the carriage of passenger baggage, or increase in an applicable fuel surcharge, after the air transportation has been purchased by the consumer,'" Tatel wrote, quoting the regulation.

Spirit's arguments that a customer can protect himself higher charges -- on checked baggage, for instance -- by purchasing the optional services at time of booking didn't fly with the Department of Transportation.

"DOT saw this as a classic bait and switch. It found that when consumers purchase airline tickets, they assume that the price they pay for extra bags at the airport will be the price advertised when they bought their ticket. Thus, DOT concluded, increasing the price of these very commonly purchased and practically necessary services (like the ability to carry bags onto the flight) amounts to an unfair practice," Tatel concluded, denying Spirit's petition for review of the agency's rules.

While he agreed in part with Tatel's opinion, Senior Circuit Judge A. Raymond Randolph took exception over federal rules requiring certain font sizes for total ticket price.

"The majority quibbles about how much smaller the typeface of taxes and fees must be in comparison to the typeface of the total price. This is a classic red herring, an attempt to divert attention from what is really at stake here," Randolph wrote in the court's dissenting opinion.

"No matter how hard the majority tries, it cannot disguise the fact that the government has forbidden airlines from displaying taxes and fees 'prominently;' that it has made it illegal for airlines to put these government charges in the same or larger typeface than that of the total price; that the government has ordered airlines not to place government taxes and fees above the total price and not to show these items in bold or italics or with underlining."

"[The airlines'] speech about taxes and fees will be in advertisements, and the airlines, of course, have an economic incentive for educating the public about these charges: if discourse regarding these charges results in the government lessening the financial burden it imposes, airfares would become more affordable and people would fly more often. These circumstances - advertising and economic incentive - do not necessarily disqualify the airlines' speech from being treated as political speech," Randolph added.

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