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Airlines Rejected by Top Court on Price Advertising Rules

Spirit Airlines Inc. and other airlines are arguing that the Transportation Department is trying to block companies
Spirit Airlines Inc. and other airlines are arguing that the Transportation Department is trying to block companies "from drawing clear and conspicuous attention to truthful information about the significant tax burden on airline tickets, at a time when the administration is pushing to raise those taxes even higher." Photographer: Sam Hodgson/Bloomberg

April 1 (Bloomberg) -- The U.S. Supreme Court turned away an airline-industry challenge to federal requirements that carriers display the total cost of a ticket more prominently than the pretax price on web pages and in advertisements.

The justices today left intact Transportation Department rules that were put in place last year to reduce consumer confusion about ticket charges. Airlines said the rules violate speech rights by preventing companies from emphasizing the impact of fees and taxes.

The department is trying to block companies “from drawing clear and conspicuous attention to truthful information about the significant tax burden on airline tickets, at a time when the administration is pushing to raise those taxes even higher,” Spirit Airlines Inc., Southwest Airlines Co. and Allegiant Air LLC argued in court papers.

The Supreme Court under Chief Justice John Roberts has backed corporate speech rights in other contexts, striking down restrictions on violent video games, pharmaceutical marketing and political spending.

The court also let stand a Transportation Department requirement that airlines either allow penalty-free cancellation of reservations for 24 hours or let customers hold seats for a day without payment. The airlines said the rules amount to re-regulation of the industry.

A federal appeals court upheld the rules last year, calling them a legitimate use of the department’s power to regulate deceptive and unfair industry trade practices. President Barack Obama’s administration urged the justices not to hear the appeal.

Consumer Protection

“The airline advertising rule is a quintessential consumer-protection regulation,” U.S. Solicitor General Donald Verrilli argued in court papers. “The government’s substantial interest in ensuring that consumers receive accurate information about air fares is clearly and directly advanced by a regulation requiring that the total, final price be the most prominent.”

The Obama administration said in 2010 that it planned to start enforcing a longstanding requirement that airlines advertise only the total cost of a ticket. Under the Transportation Department’s current policy, airlines that list taxes and fees separately must use a smaller type size and can’t put those costs at the top of the page.

The case is Spirit v. United States Department of Transportation, 12-656.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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