DECEPTIVE AIRLINE PRICING is coming

[NotUrsula]

Please provide any evidence you have that this change will promote fraud ...

No one is saying it will *promote* fraud. We are saying (accurately) that it simply *is* fraud, as defined by state statute in quite a number of states. If it is not possible to purchase an advertised product or service for the advertised price + tax, then the advertisement constitutes a bait & switch, and bait & switch is specifically prohibited under fraud statutes. Missouri, for example, specifically defines it as a misdemeanor theft: http://www.moga.mo.gov/statutes/C500-599/5700000170.HTM

Missouri Revised Statutes, Chapter 570, Stealing and Related Offenses
Section 570.170 (August 28, 2005)

Bait advertising.
570.170. 1. A person commits the crime of bait advertising if he advertises in any manner the sale of property or services with the purpose not to sell or provide the property or services:
(1) At the price which he offered them; or
(2) In a quantity sufficient to meet the reasonably expected public demand, unless the quantity is specifically stated in the advertisement; or
(3) At all.
2. Bait advertising is a class A misdemeanor.

 

[Tigger_Magic]

No one is saying it will *promote* fraud. We are saying (accurately) that it simply *is* fraud, as defined by state statute in quite a number of states. If it is not possible to purchase an advertised product or service for the advertised price + tax, then the advertisement constitutes a bait & switch, and bait & switch is specifically prohibited under fraud statutes. Missouri, for example, specifically defines it as a misdemeanor theft: http://www.moga.mo.gov/statutes/C500-599/5700000170.HTM

Missouri Revised Statutes, Chapter 570, Stealing and Related Offenses
Section 570.170 (August 28, 2005)

Bait advertising.
570.170. 1. A person commits the crime of bait advertising if he advertises in any manner the sale of property or services with the purpose not to sell or provide the property or services:
(1) At the price which he offered them; or
(2) In a quantity sufficient to meet the reasonably expected public demand, unless the quantity is specifically stated in the advertisement; or
(3) At all.
2. Bait advertising is a class A misdemeanor.

Once again, please provide any example -- not your opinion -- of any airline perpetrating a fraud. I'm not a lawyer (but I love to play one on the DIS), but I haven't heard of any litigation involving any airline alleging that they are committing a fraud. If you are so certain of this, maybe you should instigate a preemptive lawsuit.

 

[Pedler]

It serves the free market economy by allowing the business to sell the goods and/or services it has available at a price they wish to sell at. If they exercise good judgment and planning, they should be able to make a profit and continue in business. The general public benefits because some good and/or service was available at that price and someone made that purchase. Supply and demand have worked themselves out just as they always do. Capitalism rules!

That doesn't explain how advertising pricing that consumers can not buy a good or service at helps the free market. It just explains why business's shouldn't have thier prices regulated. Could you explain how advertising pricing that consumers can't buy the product at helps a free market. I can see how it benefits a business but how does it benefit the consumer? FYI A free market exists to provide the best methods of providing goods and services to consumers, not providing profits to a business. In a theoretically pure free market, lots of buyers and sellers, no barriers to entry for buyers and sellers and perfect information business profit is at a minimum.

Also just for your information Capitalism is a system where the means of production and distribution are privately owned. Having controls on a free market with regards to maintaining the characteristics of a free market does not determine if an economy is Capitalism. In reality most capitalist would rather not have two of the key tenets of a free market. They would not want to have a large number of sellers / producers of competing products (i.e. lots of competition) and they would not consumers to have "perfect information regarding thier offerings". (i.e. they don't want consumers to easily be able to compare the features of a product and service and the price). My point is having a true free market has nothing to do with Capitialism and in many cases capitialists really don't want a true free market.

As an aside you should know that in general I am for less regulation and all for capitialism. I just feel that the whole system works better under a true free market.

 

[Tigger_Magic]

That doesn't explain how advertising pricing that consumers can not buy a good or service at helps the free market. It just explains why business's shouldn't have thier prices regulated. Could you explain how advertising pricing that consumers can't buy the product at helps a free market. I can see how it benefits a business but how does it benefit the consumer?

JMO advertising is not designed to benefit anyone except the business doing the advertising. Ads are designed to attract attention and interest hopefully to lead to sales of goods and services. I wholeheartedly agree that advertising should be honest. If an airline has only 1 seat to sell at $39 and someone else gets that deal, they benefit and I don't. Big deal. I wasn't fast enough. Doesn't mean I can't purchase a similar seat for $49 or $59 or even $299. Again -- supply and demand at work. As long as the ad was honest, I have no problem with it. (I don't think the airline should be forced to disclose how many seats are available at a set fare, just that they must have at least one seat available at that fare when the ad is released.)

(BTW, thanks for the mini-lesson on economics. I am not an economist, but I love to play one on the DIS.)

(Yeah, it's an old, worn out joke and yeah I need to work on some new material. Maybe I'll get a 2nd wind later today.)

 

[Pedler]

JMO advertising is not designed to benefit anyone except the business doing the advertising. Ads are designed to attract attention and interest hopefully to lead to sales of goods and services. I wholeheartedly agree that advertising should be honest. If an airline has only 1 seat to sell at $39 and someone else gets that deal, they benefit and I don't. Big deal. I wasn't fast enough. Doesn't mean I can't purchase a similar seat for $49 or $59 or even $299. Again -- supply and demand at work. As long as the ad was honest, I have no problem with it. (I don't think the airline should be forced to disclose how many seats are available at a set fare, just that they must have at least one seat available at that fare when the ad is released.)

(BTW, thanks for the mini-lesson on economics. I am not an economist, but I love to play one on the DIS.)

(Yeah, it's an old, worn out joke and yeah I need to work on some new material. Maybe I'll get a 2nd wind later today.)

Then I think we agree that as long as someone somewhere is able to at that point in time but at that price then its OK. If no one could ever buy at that price then the ad could be considered deceptive.

BTW here is a link to a settlment of a lawsuit along the same lines. As a promo a company was offering free airfare based on certain purchases. It turns out that they jacked up the rates of the hotel cost to cover the airfare so in reality the airfare wasn't free. I have seen similar articles regarding this type of activity and it is almost always illegal. Enjoy the reading.

www.gilardi.com/pdf/cti2not.pdf

 

[NotUrsula]

I haven't heard of any litigation involving any airline alleging that they are committing a fraud.

Sigh. Under the current rules the advertisement must state the number of seats available at the advertised price, or state that the number of seats at that price is severely limited and that rainchecks will not be issued. They do this now, therefore there has heretofore been no standing for anyone to sue.
As it now stands, they are NOT advertising fares that are not available at all, but if the rules change, they will be -- IF they choose to state a price. I believe that what you will see is that in states where the statute is worded that way they will simply not state prices in broadcast or print ads at all, OR they will choose to just suck it up and pay the fines as part of the cost of doing business (which is more likely, IMO.) Personally, I think the fine is insufficient for enforcing the law. Repeat offenses should result in suspension or revocation of the business license.

FWIW, I'm thinking that if airlines start using this advertising practice, it won't be long before Eliot Spitzer notices in a way that they won't appreciate.

 

[Tigger_Magic]

Then I think we agree that as long as someone somewhere is able to at that point in time but at that price then its OK. If no one could ever buy at that price then the ad could be considered deceptive.

Yup. Just to add, I don't see how this proposed change would alter this in any way. Airlines that choose to engage in such practices (advertising a price that is unavailable at any time) would do so now or in the future at their own peril.

 

[Tigger_Magic]

Sigh. Under the current rules the advertisement must state the number of seats available at the advertised price, or state that the number of seats at that price is severely limited and that rainchecks will not be issued. They do this now, therefore there has heretofore been no standing for anyone to sue.

So, currently there is no FRAUD or DECEPTIVE PRICING of airline tickets occurring. Just to demonstrate my stranglehold on the obvious.

As it now stands, they are NOT advertising fares that are not available at all, but if the rules change, they will be -- IF they choose to state a price. I believe that what you will see is that in states where the statute is worded that way they will simply not state prices in broadcast or print ads at all, OR they will choose to just suck it up and pay the fines as part of the cost of doing business (which is more likely, IMO.) Personally, I think the fine is insufficient for enforcing the law. Repeat offenses should result in suspension or revocation of the business license.

Again, just to demonstrate my stranglehold... you have NO EVIDENCE to support your contention that FRAUD WILL OCCUR; you have only your "belief" that this is what will happen. Sort of hard to prove anything without any evidence.

As stated previously, airlines that fail to practice honest advertising do so at their own peril. Unless an airline has some sort of "death wish", I doubt they would engage in fraud or deceptive practices; to do so invites the general public to make other choices of airlines to patronize leaving the offender with short flight to bankruptcy. I doubt that's a choice any airline would want to risk. They are well aware of the competitive environment. I don't believe there is a need for additional federal regulation of this. YMMV

 

[Lewisc]

http://www.nytimes.com/2006/02/25/b...&partner=rssuserland&emc=rss&pagewanted=print

Actually the airlines are lobbying to change the rules to permit incomplete pricing which is by definition deceptive. I think it's a big reach to think they are lobbying to change the rules but have no intention of using the new rules.

Robert W. Kneisley, associate general counsel at Southwest, said: "I'd hate to think we're aspiring to be just as good as car-rental outfits. They're maddening."

Southwest is worried, for instance, that a competitor would advertise a $10 base fare with a $100 fuel surcharge. "If the industry as a whole engages in mass deception, who knows what we would have to do to be competitive,"

A British Air quote of $159 from NY to London became $425 when you try to book it.

So, currently there is no FRAUD or DECEPTIVE PRICING of airline tickets occurring. Just to demonstrate my stranglehold on the obvious. Again, just to demonstrate my stranglehold... you have NO EVIDENCE to support your contention that FRAUD WILL OCCUR; you have only your "belief" that this is what will happen. Sort of hard to prove anything without any evidence.

 

[NotUrsula]

I think it's a big reach to think they are lobbying to change the rules but have no intention of using the new rules.

Yep. An awful lot of money (that they claim they don't have, mind you) spent if there isn't any point. I believe that the key here is the fines. The DOT issues their operating certificates, so the airlines can't risk crossing that agency. They can and will risk crossing the various states Attorneys General, if all those states have to punish them with are misdemeanor fines. Chump change overhead.

IMO, the publicity of just lobbying for it is poisonous, but evidently lots of legacy carriers are too bullheaded to see that.

 

[Tigger_Magic]

http://www.nytimes.com/2006/02/25/b...&partner=rssuserland&emc=rss&pagewanted=print

Actually the airlines are lobbying to change the rules to permit incomplete pricing which is by definition deceptive. I think it's a big reach to think they are lobbying to change the rules but have no intention of using the new rules.

Robert W. Kneisley, associate general counsel at Southwest, said: "I'd hate to think we're aspiring to be just as good as car-rental outfits. They're maddening."

Southwest is worried, for instance, that a competitor would advertise a $10 base fare with a $100 fuel surcharge. "If the industry as a whole engages in mass deception, who knows what we would have to do to be competitive,"

A British Air quote of $159 from NY to London became $425 when you try to book it.

Again, only opinion and belief with no factual evidence. It becomes more and more obvious who is truly behind all the bluster about this. Heaven forbid that SW actually have to face -- GASP! -- competition.

 

[TDC Nala]

I don't get who is going to be confused. If I am purchasing an airline ticket and the window before you click "charge my card" pops up and says I'm paying a $100 surcharge for labor and fuel, I will say "You've GOT to be kidding" and start searching other airlines.

I can see it causing disappointment for those who will find out they can't afford that "great fare" after all, but not confusion or deception.

 

[Pedler]

Again, only opinion and belief with no factual evidence. It becomes more and more obvious who is truly behind all the bluster about this. Heaven forbid that SW actually have to face -- GASP! -- competition.

Actually its the legacy airlines that said they need to be creative with pricing to be competitive with Southwest. They lose when consumers can easily compare pricing head to head. In the New York Times article Lewis referenced they essentially said that they can not compete with Southwest if they have to go head to head on advertised price.

 

[Pedler]

I don't get who is going to be confused. If I am purchasing an airline ticket and the window before you click "charge my card" pops up and says I'm paying a $100 surcharge for labor and fuel, I will say "You've GOT to be kidding" and start searching other airlines.

I can see it causing disappointment for those who will find out they can't afford that "great fare" after all, but not confusion or deception.

The problem is that the consumer may not know that the fee is unique to that airline. It would be easy to confuse a consumer by just the terms used for the surcharge. As it stands now the fare advertised does not include government mandated fees. Just like adds for other consumer goods doesn't include sales tax. Consumers expect that when they check out the sales tax / government mandated fees will be the same from store to store. (Assuming the same tax jurisdiction.)

What could happen is that a consumer could get to the check out and the airline could lump the "we need more profit" fee in with other fees. Or they could call it something that would make it sound like a government mandated fee. The consumer could then assume, incorrectly, that all the airlines had this add on fee as is the case now. Thus while they may be disappointed at check out they may also say well it was still less than all the other advertised rates and they all charge the same fees. That is the point of confusion. If the airlines were to let consumers know that these fees are unique to them, and I doubt very much they would do that, then they could mitigate the confusion.

As for the deception. A quick definition: Deception is providing intentionally misleading information to others. As the goal by the airlines is to qoute a price that is not what the consumer will pay the airline (The part that excludes government mandated fees) and the goal is to advertise prices that will cause the consumer to think thier rates are lower than other airlines when in reality they may not be I think this fales into the text book case of deception. It is intentional and misleading.

 

[Pedler]

I don't get who is going to be confused. If I am purchasing an airline ticket and the window before you click "charge my card" pops up and says I'm paying a $100 surcharge for labor and fuel, I will say "You've GOT to be kidding" and start searching other airlines.

I can see it causing disappointment for those who will find out they can't afford that "great fare" after all, but not confusion or deception.

Currently the taxes / fees to fly from upstate NY to Orlando on Jet Blue are:

Federal Tax, Segment Tax, Security Fee, Passenger Facility Charge.

If they were to add into that bundle something like Terminal Fuel Maintenance Charge how would a consumer that doesn't fly very often know that it wasn't a normal charge that all the airlines charge? And if they were to bundle it into a single line item like the taxes and fees mentioned about it wouldn't even be itemized without clicking on it to see further.

You may be inclined to say that if the consumer can't figure it out then thats thier problem and the deserve what they get. If you believe that then you should also be against the existing truth in advertising laws, truth in lending and any other laws that protect consumers from predatory business practices. Keep in mind I am all for capitialism. I just want to make sure it adheres to free market principles. The legacy airlines have essentially said that they can't compete in a free market. If thats the case then its time for them to go and have other competitors replace them.

 

[Pedler]

If its ok to advertise a price for an airline ticket that you can't pay without fees then it should be OK for an electronics store to advertise a price for a TV that doesn't include hidden fees. Why not. When you drive to the store and get the TV and check out you will be told of the fees and can decide not to purchase it. All it cost you was the time to drive to the store and wait in the check out line. If its OK to do it for airline tickets it should be ok for anything. It doesn't hurt the consumer if they can back out of the transaction does it?

I could see a whole cottage industry in marketing trying to determine what the max fees is that they could charge without having customers storm out of the store. They could start at maybe $10 and then work thier way up.

BTW I think that is how the airlines will start. I don't see them being bold enough to have something as large as a $100 fee. Just adding another $10-20 per seat would be a good start.