We recently reported that the U.S. Department of Transportation (“DOT”) issued a new rule prescribing the timing and manner in which air carriers must disclose certain ancillary fees (“the Rule”), which include fees for transporting baggage and changing or cancelling a reservation as well as all other ancillary services.1 The stated purpose of the Rule is to promote transparency and protect consumers from “surprise” fees. The Rule was set to take effect on April 30, 2025.
Several air carriers and trade groups filed a petition challenging the Rule in the U.S. Court of Appeals for the Fifth Circuit. While the petition awaits formal consideration by the Fifth Circuit, the Court has issued a stay of enforcement of the Rule on the ground that the Rule likely exceeds the DOT’s authority and the air carriers will sustain irreparable harm absent a stay of enforcement.2
The Fifth Circuit explained that the DOT’s statutory authority allows it only to (1) “investigate and decide” whether an air carrier has engaged in “an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation” and, if so, (2) “order the air carrier . . . to stop the practice or method.”3 The Court held that the plain language of the Statute limits the DOT’s role to adjudication, yet the Rule “essentially enacts a code of online disclosure practices” – rulemaking that is not authorized by the Statute.4 The Court rejected the argument that other statutes authorize the DOT to engage in rulemaking, reasoning that any rulemaking must be necessary to further only those provisions which the agency is tasked with carrying out; here, the DOT’s authority under the Statute is limited to stopping certain practices, but the Rule “does not just prohibit – it prescribes.”5
The Court also determined that the carriers would suffer irreparable harm without a stay because they would need to expend significant resources engineering their websites to comply with the Rule.6
In issuing the stay, the Fifth Circuit did not conclusively establish that the DOT exceeded its statutory authority in issuing the Rule, only that such a finding is likely when the petition is formally considered. But in finding that the DOT likely exceeded its authority, the Fifth Circuit rejected the DOT’s argument that the DOT has a long history of promulgating regulations to prevent unfair and deceptive trade practices; the Court reasoned that an agency’s custom and practice is insufficient to justify rulemaking not authorized by statute.7 This is particularly noteworthy in light of the recent U.S. Supreme Court decision holding that courts should question whether an agency has acted within its statutory authority and should no longer defer to an agency’s interpretation of a statute, a practice that had commonly been known as “Chevron deference.”8 If the Fifth Circuit ultimately concludes that the DOT did, in fact, exceed its statutory authority when issuing the Rule, courts may revisit the legality of other regulations purportedly issued to prevent unfair and deceptive trade practices and that are not strictly related to adjudication.
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1 Enhancing Transparency of Airline Ancillary Service Fees, 89 Fed. Reg. 34620 (Apr. 30, 2024) (to be codified at 14 C.F.R. pts. 259, 399).
2 Airlines for America v. Dep’t of Transp., — F.4th —, No. 24-60231, 2024 WL 3580314 (5th Cir. July 29, 2024).
3 Id. at *1 (quoting 49 U.S.C. § 41712(a) (“the Statute”)).
4 Id. at *2.
5 Id. (interpreting 49 U.S.C. § 40113(a)).
6 Id. at *3.
7 Examples of issues that have been the subject of DOT rulemaking under Section 41712, and which that have been the subject of previous Client Bulletins, are fare disclosure, denied boarding compensation, and tarmac delay contingency plans.
8 Loper Bright Enters. V. Raimondo, 144 S.Ct. 2244 (2024) (overturning Chevron U.S.A. Inc. v. Nat’l Resources Defense Council, Inc., 467 U.S. 837 (1984)).