AIRLINES GRANTED TEMPORARY HOLD ON DOT’S ANCILLARY FEE RULE; POTENTIAL CHALLENGE TO AUTOMATIC REFUND RULE COMING NEXT
August 1, 2024
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On July 29, 2024, Judge Duncan of the Fifth Circuit Court of Appeals granted a temporary hold on the Department of Transportation’s (“the Department” or “DOT”) “Enhancing Transparency of Airline Ancillary Service Fees” rule “ancillary fees rule”). DOT issued the Rule, which requires covered entities to disclose ancillary service fees and policies, in April. Various airlines and airline associations asked DOT to stay the ancillary fees rule while they sought review, but DOT declined to do so. The airlines and airline associations then challenged the ancillary fees rule in the Fifth Circuit Court of Appeals, arguing that it: “(1) exceeds DOT’s authority; (2) is arbitrary and capricious; and (3) wrongly bypassed notice and comment.” Judge Duncan granted the stay and ordered expedited review of the ancillary fees rule.
The Judge reasoned that the petitioners made a “strong showing that the Rule exceeds DOT’s authority.” The Judge agreed that the ancillary fees rule “prescribes” conduct, rather than prohibiting it, which he said goes beyond DOT’s statutory authority. The Judge also found that petitioners submitted enough evidence showing that, absent a stay of the ancillary fees rule, they would suffer significant, irreparable harm because they would “have to expend significant resources reengineering their websites to comply with the Rule,” among other things. Finally, the Judge stated that there was “no public interest in the perpetuation of unlawful agency action.” The ancillary fees rule is on hold until the entire Fifth Circuit reviews it.
Similarly, airlines and airline associations asked DOT for more time to comply with the Automatic Refund Rule issued in April. DOT declined their request, setting the stage for potential legal challenges to the Automatic Refund Rule. Unknown at this time is the effect that the overturing of the Chevron Deference via the Supreme Court decision, Loper Bright Enterprises v. Raimondo may have on these challenges. For more information regarding Loper Bright and another significant Supreme Court decision limiting regulatory agency authority (SEC v. Jarkesy), please see articles further below.
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