Airline Mischaracterization of Fuel Surcharges: Cathay Pacific

Misrepresentation of Fuel Surcharges in Airline Price Advertising - Benjamin Edelman and Xiaoxiao Wu

Fuel surcharges are imposed by air carriers of their own volition, not required by any government, regulator, airline, or similar authority. However, Cathay Pacific mischaracterized these surcharges as "tax" when customers make bookings using Cathay Pacific's online around-the-world booking tool, rtw.oneworld.com. These amounts can be substantial – regularly more than $1000 on a single ticket, and we believe in some instances more than $2000.

We have quoted a variety of around-the-world tickets using this tool. For example, on January 20, 2013, Edelman quoted a coach ticket ORD-HKG-NRT-HKG-SIN-LHR-ARN-LHR-DXB-LHR-JFK-YVR with the first four segments on CX. Taxes were quoted at $1,327.44 USD. See first screenshot below. Clicking the "Proceed" button yielded the lengthy itinerary and fare quote shown in the second screenshot below, reiterating the $1,327.44 quote of "Taxes." There, the word "Taxes" appeared as a hyperlink. Clicking this link yielded the itemization in the third screenshot. The top two lines of that itemization report "Multiple Surcharges" of $242.50 and "Surcharge" of $798 -- labels potentially alerting a consumer that these are not actually "taxes" (despite prior statements), but then the bottom "total" line reiterates the (false) claim that are all in fact "taxes".

Cathay Pacific falsely claims the trip price includes 'Taxes' of $1327.44 In this second stage of the purchase proces, Cathay Pacific again falsely claims the trip price includes Cathay Pacific itemizes the supposed 'taxes', which turn out to include two large carrier-imposed surcharges.  The top two listings are described as 'surcharge' (which some consumers might recognize as distinct from a bona fide tax), but the final 'total' line reaffirms (falsely) that these are in fact 'taxes'

As best we can tell there are no actual government taxes totaling the $1,327.44 "tax" charged on this itinerary. Rather, we believe the majority of the $1,327.44 "tax" – specifically, the $242.50 and $798 later characterized as "surcharge" – are actually carrier-imposed surcharges. Thus, 78.3% of the $1,327.44 "tax" is not actually tax but rather carrier-imposed surcharge unlawfully disguised as "tax".

Crucially, the initial disclosures (as shown in the first and second screenshots) mischaracterize the amounts at issue as "taxes", not "taxes and surcharges" or the like. Moreover, every user using this booking tool must see the first two screens; in contrast, the information in the third is shown only if users specifically click the "Taxes" hyperlink to view details. Thus, even though the third describes the surcharges within a page entitled "taxes and surcharges information" (potentialy admitting that some of the charge are not taxes), most users are unlikely to see this screen. Moreover, the "and surcharges" label appears only in HTML title, not in page text – insufficiently prominent to cure the false statements made previously. Indeed, at the same time that the "taxes and surcharges" label appears at the top of the page (indicating that some of the listed charges are "surcharges" rather than taxes), the wording "TaxBreakdownPopUp" appears immediately below (in the popup's URL bar) (indicating that everything in the listing is a "tax"). Finally, even on the most favorable view, the statements in the third screenshot still fall short of applicable DOT rules: Note the absence of the crucial words "carrier-imposed" as well as the failure to include statements substantiating the surcharge amounts ("On average our passengers paid…" or similar). These omissions are in sharp contrast to the requirements of the DOT's Additional Guidance on Airfare/Air Tour Price Advertisements.

 

Edelman's Complaint to the Department of Transportation

Edelman complaint to DOT - February 4, 2013 - re Cathay Pacific Edelman's February 4, 2013 complaint to the Department of Transportation directs their attention to this matter and makes the following request to DOT:

I ask that the Department of Transportation:

(1) Exercise its authority under 49 USC 41712 to open an investigation of Cathay Pacific for having engaged in, and continuing to engage in, the unfair or deceptive practices described above;

(2) Order Cathay Pacific to refund to ticket purchasers all monies represented to ticket purchasers as "taxes" or government-imposed fees, but not actually remitted to governments;

(3) Impose appropriate civil penalties on Cathay Pacific;

(4) Refer this matter to appropriate US and foreign tax collection agencies for investigation of possible tax fraud or other violations of tax law in non-payment to governments of monies collected as "taxes" or government-imposed fees; and

(5) Issue any guidance or revised regulations needed to clarify to other airlines and ticket agents, and to preclude any future claim of ambiguity, that these practices are unfair and deceptive in violation of 49 USC 41712.

Regulations.gov has docketed Edelman's complaint. Anyone wishing to comment may do so via that link.

Regulations.go has also docketed the Answer of Cathay Pacific.

On August 23, 2013, the DOT entered a consent order, affirming that Cathay Pacific is responsible for the display of its fares, finding that the displays at issue were in violation of 14 CFR 399.84, and ordering Cathay Pacific to cease and desist from the practices identified on this page. The DOT did not order that Cathay pay any monetary penalties, nor did DOT order Cathay to provide refunds to passengers who were charged "tax" that did not actually exist.