The Defining Unfair or Deceptive Practices Rule: A New Beginning?
The UDP Rule commits DOT to providing thorough cost-benefit justifications for new aviation consumer protection rulemaking and for investigations. This is a welcome departure from rules based on mere suspicions of consumer harm, or from cost-benefit analyses that leaned too heavily on unquantifiable benefits. The rule also formalizes certain due process protections—such as affirming a respondent’s opportunity to be heard during the informal investigation stage—though the rule falls short of its potential to clearly explain what factors DOT relies on in exercising prosecutorial discretion or mitigation of proposed penalties. Nevertheless, the rule’s procedural reforms are a welcome development for regulated entities that often struggle to understand the priorities and reasoning of the Department when it seeks to assert its authority to restrain unfair or deceptive practices.
Though these reforms were finalized under the Trump Administration, they are not partisan or anticonsumer. Rather, they strike a fair balance between the Department’s need for flexibility in addressing novel problems and regulated entities’ need for advance notice and clarity about the law, and the new Administration would be wise to retain them. The necessity for such reforms was recently suggested in a report by the Government Accountability Office (GAO), further highlighting the nonpartisan nature of the issue.
The Biden DOT would also be wise to bring the same willingness to carefully study and revise existing regulations to its work as was brought by the previous Administration. An excellent example of revising rules in light of experience, and thoughtful balancing of stakeholder interests, is the recent final revision to DOT’s service animal regulations. These rules fixed the emotional service animal loophole that was much abused by unscrupulous passengers; this not only provided airlines with greater certainty but also was supported by the disability community that relies on the integrity of the service animal rules to ensure equity in air transportation. The regulations were also rationalized by aligning DOT’s standards with those applied by the Department of Justice (DOJ) in airports for greater consistency across the consumer journey. The Biden DOT should remain on the lookout for other such win-win fixes to regulations.
Regulatory Reform Placed a New Focus on Cost-Benefit Analysis and Articulating Consumer Harm
The Trump Administration’s regulatory reform agenda was the subject of numerous articles and is well-known. In part responding to aggressive new consumer regulation of airlines during the Obama Administration and even more aggressive enforcement activity that in turn led to calls for an overhaul of DOT’s approach to rulemaking and enforcement, including more careful attention to cost-benefit analyses and more fulsome articulation of consumer harms, the Trump DOT conducted extensive regulatory reform.
For its aviation consumer protection rules, the Trump DOT finalized reforms on both procedural and substantive fronts. On procedure, DOT’s so-called Rule on Rules directed the Department to follow best practices in administrative law, restating procedures for rulemaking, setting forth a workflow for supervision of nonbinding guidance documents, and clarifying procedural requirements in administrative enforcement proceedings. On substance, DOT’s UDP Rule took an important step by committing the Department to applying the time-tested standards of Federal Trade Commission (FTC or Commission) jurisprudence when exercising the Department’s rulemaking and enforcement discretion to prohibit “unfair or deceptive practices” pursuant to 49 U.S.C. § 41712 (section 41712). Together, these rules bind the Department to thorough consideration and input from the public and industry before issuing new consumer protections, and commit the agency to responsibly using nonbinding guidance to further explain the meaning of its rules.
Following the FTC’s 1980 Policy Statement on Unfairness, the UDP Rule defines unfair as “[a] practice . . . if it causes or is likely to cause substantial injury, which is not reasonably avoidable, and the harm is not outweighed by benefits to consumers or competition.” Following the FTC’s 1983 Policy Statement on Deception, DOT’s rule defines deceptive as “[a] practice . . . if it is likely to mislead a consumer, acting reasonably under the circumstances, with respect to a material matter. A matter is material if it is likely to have affected the consumer’s conduct or decision with respect to a product or service.” In the final rules, the Department declined many industry suggestions, including adoption of an intent to deceive as an element of deception, and defined key terms including practice, substantial harm, likely to mislead, reasonably avoidable, and acting reasonably under the circumstances. The Department suggested that it had already been applying these standards in the same fashion as the FTC despite the standards not being codified in regulation.
Informal Hearings Should Bolster Clarity and Due Process in Informal Investigations
The UDP Rule also includes two procedural requirements that complement the Rule on Rules.
The first allows for an evidentiary hearing when formulating “low-cost discretionary aviation consumer protection rules where scientific, technical, economic, or other factual issues are genuinely in dispute.” During the comment period of a proposed regulation, an interested party may petition DOT for a hearing on the record to determine disputed factual issues, provided the party can successfully argue to DOT’s general counsel that “the ordinary public comment process is unlikely to provide an adequate examination of the issues to permit a fully informed judgment [by DOT].” As a safeguard, the general counsel may decline a petition if such a hearing would not contribute to fact-finding or would cause undue delay in the rulemaking. Despite a degree of additional formality, DOT expects that such hearings could help focus the engagement of stakeholders and thus bring new efficiency to the public input process on rules where they will be an option.
The second procedural reform is to provide a clear overview of DOT’s informal investigation process and a clear commitment to due process within such an investigation. Though generally familiar to airline lawyers, the particulars of the Department’s enforcement process are traditionally quite opaque, especially for informal enforcement proceedings, and could be even less apparent to other members of the public. Going forward, during informal investigations, a respondent must be afforded notice and an opportunity to present mitigating evidence regarding potential consumer harms. For any negotiated settlement and consent order issued at the close of an investigation, if a preexisting rule did not prohibit the practice at issue, the Department must spell out, with reference to the UDP standards, why something constitutes an unfair or deceptive practice. The Department may only launch a formal proceeding to investigate a matter if there are “reasonable grounds” to believe a practice is unfair or deceptive and “if efforts to settle the matter [informally] have failed.”
FTC Experts Provide Differing Views on the Notice of Proposed Rulemaking
The UDP Rule rulemaking docket was graced by deep policy debate between current and former FTC regulators over the FTC’s history of consumer rulemaking and enforcement. Airline industry and consumer groups also filed thorough comments. The sitting Democratic FTC commissioners, Rohit Chopra and Rebecca Kelly Slaughter, opposed DOT’s proposal, while J. Howard Beales III, former director of the FTC Bureau of Consumer Protection, and Timothy J. Muris, former chairman of the Commission, filed a joint comment in support.
Commissioner Chopra decried what he expected would be the practical effect for consumers of adopting the FTC’s substantive standard for finding unfair or deceptive practices, arguing that adoption of the standard would sharply curtail the types of problems that DOT could successfully address using section 41712. Commissioner Slaughter seconded these comments and elaborated on DOT’s proposal to allow fact-finding hearings during certain rulemakings. She asserted that FTC experience shows how hearings on disputed issues of fact like those contemplated by DOT have tended to slow down rulemaking significantly, requiring increased investments of time and energy by the government and stakeholders.
In opposition to the sitting commissioners and in favor of DOT’s proposal, Beales and Muris cited the history leading up to the FTC’s adoption of its policy statements on unfairness and deception. In the 1960s and 1970s, the FTC aggressively issued consumer protection rules “relying on a broad reading of the unfairness criteria with little or no empirical basis . . . . [P]roposals could be based entirely on personal values, without regard to the costs they might impose on consumers . . . [and these proposals] relied heavily, if not exclusively, on public policy” for justification. Until the FTC’s policy statements and eventual congressional action firmed up the statutory definitions, the agency tended to exercise “unbridled discretion” in pronouncing commercial practices to be illegal, which could waste stakeholder resources without bringing real benefits to consumers. Beales and Muris argued that reforms like the Policy Statement on Unfairness did not diminish the FTC’s consumer protection powers but instead caused the quality of the Commission’s reasoning to improve. Beales and Muris disagreed with the assertions of Commissioners Chopra and Slaughter that the FTC’s UDP standards were ill-suited to aviation consumer protection, and disagreed that additional hearing procedures in rulemakings would lead to undue burdens and delays.
The finalization of DOT’s UDP Rule recognizes that consumer protection in the airline industry had reached an inflection point like that of the FTC in the late 1970s—that is, there was a need to transition from a period of extensive, ill-supported, and at times seemingly arbitrary regulation and enforcement to more carefully reasoned, objective rulemaking and enforcement. Despite stating at the outset that its UDP proposal would merely codify existing statutory interpretations and enforcement procedures (aside from new hearings available under part 399.79(c)), the Department admitted that “more can be done to better inform the public and regulated entities how the Department determines what constitutes an unfair and deceptive practice when issuing discretionary aviation consumer protection rulemakings . . . and when issuing enforcement orders . . . where there has not been a regulation that already specifies required or prohibited conduct.” Put another way, DOT admitted that the UDP Rule serves to “enhance the justifications for actions taken under the Department’s statutory authority,” consistent with the principle of the Rule on Rules “to provide greater transparency to regulated entities when conducting enforcement actions and adjudications.” These passages suggest that the UDP Rule was truly intended to make Department activity more concrete, transparent, and accountable.
DOT Enforcement of the UDP Standard Must Be Transparent and Consistent
A recently released study from GAO suggests that such an increase in rigor would be welcome, particularly in the domain of DOT enforcement. Reviewing enforcement practices in response to a mandate from Congress in the 2018 FAA Reauthorization Act, GAO observed a lack of transparency in current DOT practice.
For example, no process currently exists to give regulated entities or the traveling public insight into the facts underlying warning letters or investigations that are closed but do not result in consent orders. Occasionally, fact-specific guidance of this sort will emerge in the negative, as when third-party petitions for rulemaking are denied and the Department is obliged to state reasons on the record for not taking certain actions. More information about warning letters and subjects of investigations closed without issuance of consent orders would be a valuable source of guidance on DOT’s reasoning and application of the rules to different fact patterns. This in turn would allow for the industry and the public to better understand the standards that DOT seeks to establish.
Furthermore, the GAO report documented the vagaries arising from DOT’s strong preference for informal consent order settlements of alleged violations of consumer protection rules, given the flexibility this mechanism provides to DOT in pursuing its goals. The Department, GAO wrote,
considers a variety of factors—such as the frequency and extent of consumer harm—when determining whether to pursue enforcement actions. However, [DOT] officials said that the determination is ultimately based on a review of all of the factors of each case and no two cases have the same factors or are exactly comparable. As a result, the decision to pursue enforcement actions cannot be reduced to an exact science, according to the officials.
Later, GAO observed that “OACP officials told us they consider a variety of factors when making enforcement decisions, including the extent of consumer harm. However, these factors are not published anywhere and stakeholders we spoke with were not otherwise aware of them.” An enforcement policy handbook now under development might one day illuminate how DOT thinks about the balance of factors and priorities in enforcement, but such a document has no firm time frame for delivery. This last area is one in which the UDP Rule falls short of its full potential for transparency. An additional subsection of 14 C.F.R. § 399.79 would be a logical place to lay out what factors DOT considers in the exercise of its prosecutorial discretion or in mitigation of proposed penalties during investigations.
While the real-world meanings of unfair and deceptive can hardly be “an exact science” in a predictive sense, it is wise to provide more clarity to the public than merely suggesting that a variety of factors are considered in the exercise of enforcement discretion and that no two cases are alike. As the FTC experience detailed by Beales and Muris suggests, a black box of unbridled discretion in consumer protection can easily lead to agency action that is overdriven by the particular persuasions of regulators. Such a risk may be particularly acute when political passions are strong and a new Administration seeks to chart a new course. The standards adopted should allow DOT to investigate and stop egregiously unfair or deceptive practices when they arise, but helpfully keep a clear focus on consumer welfare and predictability for an industry that already competes vigorously on the quality and timeliness of its service. Especially with the unforeseen circumstances of the global pandemic, and the continuing possibility of health issues and political pressures arising faster than rulemaking can keep up with, a principled, transparent, and predictable consumer harm approach in enforcement is more important than ever.
Traveling by Air with Service Animals: Common Sense Prevails Regarding Emotional Support Animals
The Air Carrier Access Act (ACAA) prohibits discrimination on the basis of disability in air travel and generally applies to both U.S. and foreign air carriers that operate flights to/from and within the United States. However, Congress left it to DOT to implement this mandate, leaving the Department free to craft its own regulatory and enforcement structure. DOT promulgated its first ACAA-related regulations (14 C.F.R. part 382) in 1990, which have been subject to a number of revision and expansions. A key area of part 382 relates to service animals, which was expanded to include emotional support animals (ESAs) and psychiatric service animals (PSAs) in 2008.
When ESAs Went Rogue
With the inclusion of ESAs and PSAs, airlines—particularly U.S. certificated air carriers—were forced to accommodate an ever-increasing number of different animal species, which in many cases had none of the formal training typically expected of traditional service animals.
After years of documented abuse by passengers, Delta Airlines took action after a passenger was bitten in the face and hospitalized by an emotional support dog on one of Delta’s flights. At the time, Delta was accommodating nearly 700 animals on its flights per day, and increasingly saw issues with the behavior of ESAs that were typically not seen with trained traditional service animals. To address its safety and operational concerns, Delta changed its policies to require all service and support animal users to provide proof of an animal’s health and vaccinations; and for ESAs and PSAs, to provide a letter signed by a doctor or licensed mental health worker and sign a special form attesting that their support animal would behave on the flight.
Delta took further action at the end of 2018, refusing to accommodate any service or support animal under four months old and refusing to carry ESAs on any flights longer than eight hours. Many of the other major airlines followed Delta’s lead. At the time, it was not clear whether these changes fully complied with the requirements of part 382.
Even so, the industry changes did little to limit abuse by passengers who sought to qualify their pets as ESAs, and many issues continued. As a result, airlines, disability rights advocacy groups for traditional service animals, and passengers alike continued to complain, asking DOT to take action to resolve the issues with ESAs.
Pursuant to a mandate in the 2018 FAA Reauthorization Act, DOT issued a notice of proposed rulemaking (NPRM), Traveling by Air with Service Animals, on February 5, 2020, setting forth nearly all of the same changes that made their way into the final rule. DOT received approximately 15,000 comments on the NPRM, and while most were from individual commenters, disability rights advocacy organizations, airlines, airports, transportation worker associations, animal health and training organizations, and other special-interest groups also weighed in. As noted in the final rule, which became effective January 11, 2021, the two biggest concerns of those in support of the change were the incidents of misbehavior and the misrepresentation of pets as service animals. On the other hand, about half of disability rights organizations that commented requested that DOT keep an ESA classification, potentially with more stringent qualification requirements. After considering all stakeholder views, DOT determined that revision to the regulations was warranted in order to provide a clearer service animal definition and to reduce incidents of misbehavior and fraud.
The final rule changes were prompted by a number of specific factors, but importantly, the following: (i) an increasing number of complaints to DOT and the airlines regarding service animals, (ii) DOT’s definition of service animal being inconsistent with DOJ’s definition of service animal, (iii) an increasing number of requests to transport unusual species of animals, (iv) individuals fraudulently representing pets as service animals, and (v) increasing reports of misbehavior by ESAs.
Airlines Are No Longer Required to Transport ESAs
The final rule addresses a litany of issues, but the two most significant changes involve a more specific definition of what qualifies as a service animal and the elimination of the requirement that airlines recognize ESAs.
Service animal is now defined as “a dog, regardless of breed or type that is individually trained to do work or perform tasks for the benefit of a qualified individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability.” Airlines are not required to transport other species of animal (e.g., miniature horses, capuchin monkeys, etc.), although they are free to do so pursuant to established airline policies. As support for this change, DOT relied significantly on the desire to bring its own definition of service animal in line with DOJ’s definition of this term under the Americans with Disabilities Act (ADA). As DOT noted in the NPRM, this change was supported by airlines and 10 different disability rights organizations that wished to “stop the proliferation of a patchwork of service animal access requirements in airlines’ service animal policies.” The Open Doors Organization and the Association of Late-Deafened Adults also supported these changes, specifically citing the fraudulent representations of pets as service animals and the anger from such misrepresentations being directed at individuals with disabilities.
Importantly for travelers and airlines alike, ESAs no longer qualify as service animals under part 382 and may instead be treated as pets, subjecting them to pet fees and/or carriage in the cargo compartment. But DOT reiterated that PSAs must still be treated as service animals; DOT further provided that PSA users can no longer be required to provide a letter from a licensed mental health professional detailing the passenger’s need for the animal, nor will they be required to check in one hour before the check-in time for other passengers.
The rule also permits airlines to limit the number of service animals traveling with a single passenger with a disability to two service animals and gives airlines additional discretion in limiting where a service animal must be contained in the aircraft, by mandating that a service animal must either fit within its handler’s foot space on the aircraft or be placed on the passenger’s lap. Airlines may also require that passengers harness, leash, or tether their service animal at all times in the airport and on the aircraft.
To further simplify the process for airlines, DOT developed two new standard forms for service animal users: (i) a “Service Animal Air Transportation Form,” attesting and certifying to a service animal’s training, good behavior, and health; and (ii) for flight segments of eight hours or more, a “Relief Form,” attesting that the service animal has the ability not to relieve itself on a long flight or to do so in a sanitary manner. Airlines can require individuals traveling with a service animal to provide the DOT service animal form(s) up to 48 hours in advance of the date of travel if the passenger’s reservation was made prior to that time.
Looking Ahead
Overall, the new service animal regulations should be a welcome change for airlines and the traveling public alike. With a clear definition of service animal and no requirement to recognize ESAs, airlines now have clarity as to the accommodations that must be provided to passengers and the situations in which airlines can restrict or place conditions on travel. Further, by aligning the DOT definition of service animal with the DOJ/ADA definition, there are no longer different accommodations required for service animals in airports depending on the aircraft.
To the extent that concerns remain about excluding legitimate PSA users, DOT’s new rule further strengthens protections for PSAs. PSAs are now protected to the same degree traditional service animals are, meaning that users no longer need to follow additional carrier requirements, such as providing documentation from a licensed mental health professional up to 48 hours in advance of travel. Any individual who needs a service animal to serve a psychiatric function will still be allowed to do so. PSA users will similarly be limited to dogs, but to the extent these individuals need assistance, it remains available to them. While some commenters were also concerned about potential fraudulent PSA abuses, DOT intends to continue monitoring this and seek additional comments from airlines and disability rights advocates about how to best conduct monitoring.
Additionally, we should see an end to (or dramatic reduction of) the abuse by passengers simply seeking to escape airline pet fees and the corollary development of the fraudulent ESA certification industry. Over the last few years, numerous websites have promoted their ability to certify ESAs via the payment of a small fee, in the range of $30 to $90. In the best of cases, these online ESA certification services required individuals to interact with a presumably licensed mental health professional and show some need for an ESA, though just about any claim of anxiety or stress during flying could qualify. In the worst of cases, individuals simply paid the fee and printed an ESA certificate. These new rule changes therefore balance the legitimate needs of PSA users against the need to combat this fraud.
With regard to the new forms, each individual airline previously had developed and was allowed to use its own forms, which potentially led to confusion for service animal users on what information and documentation would be required for each specific airline. As all airlines will now be required to use the DOT-approved forms, service animal users now have a clear idea of what is required to travel with their service animal regardless of which airline is flown.
Conclusion
The Service Animal Rule, like the UDP Rule, demonstrates the best in consumer protection rulemaking—careful balancing of the interests of both consumers and regulated entities and a commitment to clear explanations of applicable standards. Both of these rules should serve as models for DOT aviation consumer protection activity going forward.
