DOT INCREASES REACH AND FINES CATHAY PACIFIC FOR ADVERTISING VIOLATIONS
November 6, 2014
On October 17, 2014, the United States Department of Transportation (DOT) fined Cathay Pacific Airways Limited (Cathay Pacific) $260,000 for violating the Department’s full-fare advertising rule, 14 C.F.R. 399.84(a), and the statutory prohibition against unfair and deceptive practices, 49 U.S.C. § 41712.
Pursuant to 14 C.F.R. 399.84(a), carriers must ensure that advertised prices for passenger air transportation include all government-imposed fees and taxes and all mandatory airline and ticket-agent imposed fees. The applicable regulation applies to advertisements on carrier websites that are “marketed to U.S. consumers”. In determining whether a website is marketed to U.S. consumers, DOT analyzes each site on a case-by-case basis and considers several factors, including: (1) whether fares are marketed in U.S. dollars; (2) whether the language on the site is English; and (3) whether the seller has an option on its website that differentiates sites or pages designed for U.S. or other consumers.
Following a consumer complaint, the Department’s Enforcement Office found that Cathay Pacific advertised, on its U.S. customer-facing website, certain fares for travel beginning outside the United States that did not include mandatory taxes and fees. DOT determined that this practice constituted a violation of the full-fare advertising rule.
In mitigation, Cathay Pacific highlighted several relevant factors, including that its website did display the full fare to be paid for all travel originating in the United States. For fares originating outside the United States, it reasonably believed that those fares were not marketed to U.S. consumers because people who purchase fares for travel originating in a foreign country are generally located in that country. Cathay Pacific explained that it did not consider people who used the U.S. website to book transportation originating and/or terminating outside the United States to be “U.S. consumers” for purposes of complying with the full fare advertising rule. Cathay Pacific also highlighted the fact that its U.S. website displayed fares originating outside the United States in the currency of the country in which the fare originated, not U.S. dollars, and that its website and the servers used to operate its website are located in Hong Kong.
This fine represents somewhat of a departure from DOT enforcement history for two reasons. First, it is much higher than similar fines that have been levied against foreign carriers (in the past, violations of the full-fare advertising rule by foreign carriers have led to fines, for the most part, in the $50,000 – $80,000 range). Second, it is an example of DOT’s arguably extraterritorial application of its regulations in the sense that the Department fined Cathay Pacific for selling airfare originating, and in some cases, terminating, in foreign jurisdictions.