Supreme Court refuses case challenging full price disclosure for airlines

The US Supreme Court on Monday turned aside an appeal filed by Spirit Airlines alleging that a new rule requiring air carriers to disclose the full price of a ticket – including taxes and fees – violates the free speech rights of the company.

The justices rejected the case, Spirit Airlines v. Department of Transportation (12-656), without comment.

The action lets stand a federal appeals court decision upholding the 2010 rule and a related regulation that requires air carriers to allow travelers to cancel a reservation within 24 hours without charge when booking travel a week or more before the departure date.

US Solicitor General Donald Verrilli had urged the court to reject the airline’s petition. “The decision of the court below is correct and does not conflict with any decision of this court or any other court of appeals,” he wrote in his brief. “Further review is not warranted.”

Spirit Airlines argued that the airline industry has been deregulated since 1978, allowing individual companies to set their own fares, routes, schedules, and marketing practices.

The Department of Transportation retained authority to regulate deceptive and unfair practices. But Spirit said the new rules seek to reassert government authority over the industry by dictating the content of advertising.

“Such a government effort to micro-manage how speakers communicate the burdens of taxation would raise serious First Amendment concerns in any industry, but they are doubly problematic in an industry Congress specifically chose to deregulate,” former Solicitor General Paul Clement wrote in his brief on behalf of Spirit Airlines.

“This regulation is an unconstitutional limitation on speech critical of the government, as it restricts carriers’ ability to convey truthful information about the significant tax burden on air travel,” he said.

Prior to the new rule, Spirit advertised its base fare and only later in the reservation process disclosed what the full fare would be when taxes and fees are added. Some consumers complained that the practice was similar to a “bait and switch” tactic.

Mr. Clement said Spirit primarily serves price-conscious travelers and sought to demonstrate for their customers which portion of the fare was within the airline’s control and which portion is required by government.

“The Total Price Rule hamstrings [Spirit] from clearly communicating this information to consumers at the very moment they are most receptive to [Spirit’s] message – namely, just before that tax burden is imposed upon the consumer,” Clement wrote.

“DOT has asserted that the Rule is necessary to prevent deception or confusion,” Clement said. “But it strains credulity to suggest that consumers are somehow deceived by advertisements of pre-tax prices, given that this is standard operating procedure in virtually every other US industry.”

Verrilli said the Total Price Rule imposes little or no burden on the airlines’ ability to communicate truthful information to consumers.

He noted that in one example presented in court, Spirit advertised a $14 base fare to draw the attention of would-be travelers. The total cost of travel however was $41.69, he said.

“The Department concluded that such advertisements caused consumer confusion by making it difficult to discern the total price of air transportation,” Verrilli said.

The federal appeals court concluded that the Total Price Rule was aimed at providing accurate information to consumers, not restricting it.

“Nothing in the rule prohibits the airlines from separately alerting the public to the taxes imposed on air transportation,” the court said.

“The Total Price Rule is just one example of the government’s effort to re-regulate the industry through the back door by relying on its narrow consumer protection authority to prohibit deception as justification for broader rules regarding carriers’ pricing practices,” Clement said in his brief.

He said the Total Price Rule and 24-hour Refund Rule had nothing to do with consumer deception, and were “little more than an attempt to impose mandatory ‘best practices’ on a highly competitive industry.”

“DOT has attempted to reclaim the authority to regulate not only the type of tickets airlines may offer, but how they communicate their prices to customers,” he said. “Neither the First Amendment nor the Deregulation Act permits this micro-management.”