Spirit Airlines, Inc. v. United States Department of Transportation

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 7, 2012 Decided July 24, 2012
No. 11-1219
SPIRIT AIRLINES, INC., ET AL.,
PETITIONER
SOUTHWEST AIRLINES CO.,
INTERVENOR
v.
UNITED STATES DEPARTMENT OF TRANSPORTATION,
RESPONDENT
AMERICAN SOCIETY OF TRAVEL AGENTS, INC.,
INTERVENOR
Consolidated with 11-1222
On Petitions for Review of Final Rules
of the U.S. Department of Transportation
David M. Kirstein argued the cause for petitioners. With
him on the brief was Joanne W. Young.
M. Roy Goldberg and Robert W. Kneisley were on the
briefs for intervenor Southwest Airlines Co. in support of
petitioners.
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Bert W. Rein and Roger H. Miksad were on the brief for
amicus curiae International Air Transport Association in
support of petitioners and intervenor.
Andrew B. Steinberg and Jeffrey S. DeVore were on the
brief for amicus curiae Air Transport Association of America,
Inc. in support of petitioners. Robert P. Silverberg entered an
appearance.
Daniel Tenny, Attorney, U.S. Department of Justice,
argued the cause for respondent. With him on the brief were
Tony West, Assistant Attorney General, Michael S. Raab,
Attorney, Paul M. Geier, Assistant General Counsel for
Litigation, U.S. Department of Transportation, Timothy H.
Goodman, Senior Trial Attorney, and Blane Workie, Deputy
Assistant General Counsel for Aviation Enforcement and
Proceedings.
Dale C. Andrews was on the brief for amicus curiae
Interactive Travel Services Association in support of
respondent.
Before: HENDERSON and TATEL, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge TATEL.
Opinion concurring in part and dissenting in part filed by
Senior Circuit Judge RANDOLPH.
TATEL, Circuit Judge: Pursuant to its authority to regulate
“unfair and deceptive” practices in the airline industry, the
Department of Transportation issued a final rule entitled
“Enhancing Airline Passenger Protections.” 76 Fed. Reg.
23,110 (Apr. 25, 2011). Spirit Airlines and others challenge
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three of the rule’s provisions—the requirement that the most
prominent figure displayed on print advertisements and
websites be the total price, inclusive of taxes (as arbitrary and
capricious and a violation of the First Amendment); the
requirement that airlines allow consumers who purchase their
tickets more than a week in advance the option of canceling
their reservations without penalty for twenty-four hours
following purchase (as arbitrary and capricious); and the
prohibition against increasing the price of air transportation
and baggage fees after consumers purchase their tickets (as
procedurally defective and otherwise arbitrary and
capricious). For the reasons set forth in this opinion, we deny
the petitions for review.
I.
Prior to 1978, the federal government regulated the fares
airlines could charge and the routes they could fly, and had
authority to take administrative action against certain
deceptive trade practices. Federal Aviation Act of 1958, Pub.
L. No. 85-726, §§ 403–404, 411, 1002, 72 Stat. 731, 758–60,
769, 788–91. That changed in 1978 when Congress passed the
Airline Deregulation Act, Pub. L. No. 95-504, 92 Stat. 1705,
which, among other things, eliminated the government’s
ability to set airfares on the theory that “maximum reliance on
competitive market forces would best further efficiency,
innovation, and low prices as well as variety and quality of air
transportation services,” Morales v. Trans World Airlines,
Inc., 504 U.S. 374, 378 (1992) (alteration, omission, and
internal quotation marks omitted). Notwithstanding these
changes, the government, through the Department of
Transportation (DOT), retained authority to prohibit “unfair
or deceptive practice[s] . . . in air transportation or the sale of
air transportation.” 49 U.S.C. § 41712(a).
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Pursuant to that authority, DOT issued a final rule
entitled “Enhancing Airline Passenger Protections.” See 76
Fed. Reg. 23,110. Three of its provisions are at issue in this
case.
The first relates to the advertising of airfares. Since 1984,
DOT has required that any advertised price for air
transportation disclose the “entire price to be paid by the
customer to the air carrier.” 49 Fed. Reg. 49,440, 49,440
(Dec. 20, 1984) (codified as amended at 14 C.F.R
§ 399.84(a)). Prior to the rulemaking at issue here, DOT
allowed airlines to advertise the pre-tax price of tickets
provided that the advertisement clearly disclosed the amount
of the tax. See 75 Fed. Reg. 32,318, 32,327 (June 8, 2010)
(explaining DOT enforcement policy regarding the 1984
rule). For example, airlines could advertise a “$167 base fare
+ $39 taxes and fees” even though consumers would have to
add these two numbers to arrive at the total, final price they
would have to pay—$206. DOT reaffirmed this policy in
2006. See 71 Fed. Reg. 55,398, 55,401 (Sept. 22, 2006)
(withdrawing Notice of Proposed Rulemaking and retaining
status quo). But in the challenged rule, DOT, citing consumer
confusion, revised its policy to require airlines to state the
total, final price—$206. See 76 Fed. Reg. at 23,166
(amending 14 C.F.R § 399.84(a)). Under this so-called
“Airfare Advertising Rule,” airlines remain free to provide an
itemized breakdown (displaying to the customer the amount
of the base fare, taxes, and other charges), but they may not
display such price components “prominently” or “in the same
or larger size as the total price.” Id. In subsequent guidance,
DOT explained that airlines may not list price components “in
a more prominent place on a webpage or in a print
advertisement than the advertised total fare.” Office of
Aviation Enforcement & Proceedings, Dep’t of Transp.,
Answers to Frequently Asked Questions 22 (Oct. 19, 2011),
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available at http://airconsumer.ost.dot.gov/rules/EAPP_2_
FAQ_10-19-2011.pdf. In other words, to ensure that
consumers will clearly understand what final price they will
have to pay, the total cost must be the most prominent figure.
DOT describes this as a change in “enforcement policy.” See
75 Fed. Reg. at 32,327 (discussing the proposed change).
DOT issued the second challenged provision, the
“Refund Rule,” in the context of a broader effort to curb
deception and unfairness in the airline industry. Relying on
customer feedback and Office of Inspector General reports,
72 Fed. Reg. 65,233, 65,236 (Nov. 20, 2007), DOT found that
many airlines failed either to provide consumers with clear
customer service plans or to adhere to whatever plans they did
provide. Accordingly, DOT ordered U.S. carriers to adopt
customer service plans that address a list of topics, including
whether the airline “[a]llow[s] reservations to be held without
payment or cancelled without penalty for a defined amount of
time.” 74 Fed. Reg. 68,983, 69,003 (Dec. 30, 2009)
(amending 14 C.F.R. § 259.5(b)(4)). But in a later
rulemaking, the one at issue here, DOT found this insufficient
and that further steps were necessary to “ensure that . . . plans
are specific and enforceable.” 75 Fed. Reg. at 32,323. It found
that some airlines had adopted “vague[]” policies that made it
“difficult for a consumer to know” what exactly to expect. Id.
For example, Allegiant Air’s plan told customers that they
could “cancel their reservations up to 24 hours before the
scheduled time of departure, but fail[ed] to mention that there
are significant fees associated with cancellation.” Letter from
Susan Kurland, Assistant Sec’y for Aviation & Int’l Affairs,
Dep’t of Transp., to Joanne W. Young & David M. Kirstein,
Counsel for Petitioners 6 (July 20, 2011) (denying stay of the
rule and explaining DOT’s findings). Responding to such
shortcomings, DOT proposed “establishing minimum
standards for the plans,” which would “result in consumers
6
being better informed and protected,” 75 Fed. Reg. at
32,323—the idea being that anything less than the guarantees
contained in the rule constitutes an unfair practice or has an
unacceptably high risk of deceiving customers. One such
requirement, the Refund Rule, directs airlines to allow
passengers to cancel reservations without penalty for twenty-
four hours “if the reservation is made one week or more prior
to a flight’s departure.” 76 Fed. Reg. at 23,165 (amending 14
C.F.R. § 259.5(b)(4)).
Finally, the “Post-Purchase Price Rule” prohibits airlines
from “increas[ing] . . . the price of the seat,” the “price for the
carriage of passenger baggage,” or the “applicable fuel
surcharge, after the air transportation has been purchased by
the consumer, except in the case of an increase in a
government-imposed tax or fee.” Id. at 23,167 (amending 14
C.F.R. § 399.88(a)). DOT has now advised us that “it will
undertake another rulemaking process to assess the
appropriateness of applying the rule to ancillary charges other
than baggage charges that traditionally have been included in
the price of air transportation” and that “[u]ntil the conclusion
of that rulemaking, the agency will only enforce the rule as
applied to charges the consumer has already paid, to any
charges for carry-on baggage and first and second checked
bags, and to mandatory charges like fuel surcharges.” DOT
Br. 9.
Spirit Airlines and Allegiant Air (collectively Spirit)
claim that all three rules are arbitrary and capricious and that
the Airfare Advertising Rule violates the First Amendment
rights of airlines to engage in commercial and political
speech. Intervening on behalf of petitioners, Southwest
Airlines challenges only the Airfare Advertising Rule.
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II.
Beginning with their challenge to the Airfare Advertising
Rule, the airlines argue that there is nothing inherently
deceptive about listing taxes separately and that DOT lacked
substantial evidence for concluding that doing so is deceptive
in practice. By the airlines’ count, only six commenters
suggested that existing airline displays were confusing or
misleading, and just two of those pointed to the exclusion of
taxes from base fares as the source of their confusion. The
airlines also emphasize that in 2010 (the year of the
rulemaking), there were only 77 complaints about advertising,
as compared, for example, to 3,336 about flight-related
problems. Spirit Br. 27 (citing Office of Aviation
Enforcement & Proceedings, Dep’t of Transp., Air Travel
Consumer Report 42 (Feb. 2011)). Thus, they argue, DOT
acted arbitrarily and capriciously when it relied on such scant
evidence, particularly given (1) the general norm in the U.S.
economy of listing prices exclusive of taxes, (2) DOT
precedent rejecting consumer comments about feeling
deceived as insufficient to demonstrate deception, and (3) the
fact that in 2006, DOT reaffirmed its policy of allowing base-
fare advertising (i.e., not requiring airlines to integrate taxes
into their advertised fare), even though roughly 500
commenters urged it to depart from that policy, see 71 Fed.
Reg. at 55,399, 55,401.
We are unpersuaded. For one thing, DOT left unaltered
the rule’s key language (though it did add language allowing
airlines to state charges, fees, and taxes separately while
prohibiting them from doing so “prominently” or “in the same
or larger size as the total price,” 14 C.F.R. § 399.84). Since
1984, DOT has required any advertised price for air
transportation to state the “entire price to be paid by the
customer to the air carrier.” 49 Fed. Reg. at 49,440 (codified
as amended at 14 C.F.R § 399.84(a)). Because neither Spirit
8
nor Southwest challenges the original rule, the only question
before us is whether DOT acted arbitrarily and capriciously
when it decided to enforce that rule by requiring that airlines
actually add the taxes to the base fare and disclose the total
price. In considering this question, “we give substantial
deference to an agency’s interpretation of its own regulations,
according the agency’s interpretation thereof controlling
weight unless it be plainly erroneous or inconsistent with the
regulation.” St. Luke’s Hosp. v. Sebelius, 611 F.3d 900, 904
(D.C. Cir. 2010) (internal quotation marks omitted). Not only
have the airlines offered us no basis for questioning DOT’s
interpretation of its rule, but they give short shrift to the
record as a whole. In addition to the comments mentioned by
the airlines, DOT relied on the following evidence: (1)
comments from the original 1984 rulemaking, (2) roughly 500
comments from the 2006 hearing explaining how consumers
were being confused by advertisements that itemized price
components rather than display a single, total price, and (3)
feedback from its “Regulation Room,” an online forum DOT
employs to solicit comments. Spirit contests the relevance of
the Regulation Room, claiming that DOT framed the issue to
elicit comments helpful to its end. But we need not consider
the Regulation Room comments because the other two
categories of evidence sufficiently support the intuitive
conclusion that customers are likely to be deceived by price
quotes significantly lower than the actual cost of travel. See
Kornman v. SEC, 592 F.3d 173, 184 (D.C. Cir. 2010)
(“Substantial evidence . . . means such relevant evidence as a
reasonable mind might accept as adequate to support a
conclusion.” (internal quotation marks omitted)).
The airlines also challenge DOT’s prohibition on
disclosing government taxes and fees “prominently,” arguing
that “DOT provides no explanation [for] why the prominent
disclosure of taxes and fees would be confusing to
9
consumers,” and that DOT acted arbitrarily and capriciously
by “requir[ing] airlines to prominently and conspicuously
disclose airline-imposed fees but . . . bury[ing] in fine print
the taxes and fees that the government itself imposes on air
transportation.” Southwest Br. 28–29. DOT responds that it
“reasonably declined to allow the airlines to state, with equal
prominence, the breakdown of that figure as between base
fare, airline-imposed fees, and government taxes and fees.”
DOT Br. 27. In addition, it clarifies that its prohibition on
prominently stating taxes “ ‘means that the break-out of per-
person charges cannot be in a more prominent place on a web
page or in a print advertisement than the total advertised
fare.’ ” Id. at 28 (quoting Office of Aviation Enforcement &
Proceedings, Dep’t of Transp., Answers to Frequently Asked
Questions 22).
DOT has the better argument. Contrary to the airlines’
repeated suggestions, nothing in the Airfare Advertising Rule
requires airlines to hide the taxes—or, as Spirit’s website puts
it, the “Government’s Cut.” It just requires that the total, final
price be the most prominently listed figure, relying on the
reasonable theory that this prevents airlines from confusing
consumers about the total cost of their travel. This limited
imposition hardly amounts to an arbitrary exercise of DOT’s
statutory authority to prevent “unfair or deceptive
practice[s],” 49 U.S.C. § 41712(a). See Petal Gas Storage,
LLC v. FERC, 496 F.3d 695, 703 (D.C. Cir. 2007) (under the
arbitrary and capricious standard of review, an agency “is not
required to choose the best solution, only a reasonable one”).
Next, the airlines contend that the Airfare Advertising
Rule violates the First Amendment. The parties dispute which
standard of review governs: strict scrutiny, applied to laws
burdening political speech, FEC v. Wis. Right to Life, Inc.,
551 U.S. 449, 464 (2007); intermediate scrutiny, as defined in
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Central Hudson and applied to laws regulating commercial
speech, Cent. Hudson Gas & Elec. Corp. v. Pub. Serv.
Comm’n of N.Y., 447 U.S. 557 (1980); or reasonableness
review, as defined in Zauderer and applied to laws requiring
“purely factual” disclosures “reasonably related to the State’s
interest in preventing deception of consumers,” Zauderer v.
Office of Disciplinary Counsel of the Supreme Court of Ohio,
471 U.S. 626, 651 (1985).
The airlines argue that strict scrutiny applies because they
have “a First Amendment right to engage in political speech
that informs [their] customer base of the huge tax burden that
the federal government imposes on air travel.” Southwest Br.
29; see also Spirit Br. 36–37. For support, they point to
Consolidated Edison Co. v. Public Service Commission of
New York, 447 U.S. 530 (1980), where the Supreme Court
invalidated a rule prohibiting utilities from including pro-
nuclear energy statements in their invoice envelopes. In doing
so, the Court treated the ban as a restriction on political
speech, meaning that it had to be “a precisely drawn means of
serving a compelling state interest,” id. at 540. According to
the airlines, because they wish to inform their customers
about the large and burdensome taxes imposed on airfare, the
Airfare Advertising Rule must also be subject to strict
scrutiny. We disagree.
The speech at issue here—the advertising of prices—is
quintessentially commercial insofar as it seeks to “do[] no
more than propose a commercial transaction,” Va. State Bd. of
Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S.
748, 762 (1976) (internal quotation marks omitted).
According to the airlines, their speech does more than propose
a transaction, as it also makes a political point. See also
Dissenting Op. at 4 n.2. But where speech “cannot be
characterized merely as proposals to engage in commercial
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transactions,” it is nonetheless commercial in certain
circumstances, for instance when it is an “advertisement[],”
“refer[s] to a specific product,” and the speaker “has an
economic motivation” for it. Bolger v. Youngs Drug Prods.
Corp., 463 U.S. 60, 66–67 (1983). “The combination of all
these characteristics”—undoubtedly present in this case—
suffices to classify the speech as “commercial speech” under
Bolger. See id. at 67 (emphasis omitted). As the Court
explained there, “advertising which links a product to a
current public debate is not thereby entitled to the
constitutional protection afforded noncommercial speech.” Id.
at 68 (internal quotation marks omitted). “A company has the
full panoply of protections available to its direct comments on
public issues, so there is no reason for providing similar
constitutional protection when such statements are made in
the context of commercial transactions. Advertisers should
not be permitted to immunize false or misleading product
information from government regulation simply by including
references to public issues.” Id. (footnote and citation
omitted).
This leaves either the Central Hudson or Zauderer
frameworks, and we think the latter applies. The Central
Hudson cases have at least two features not fully present here.
As the Court recently explained, where, as in this case, laws
are “directed at misleading commercial speech,” and where
they “impose a disclosure requirement rather than an
affirmative limitation on speech,” Zauderer, not Central
Hudson, applies, Milavetz, Gallop & Milavetz, P.A. v. United
States, 130 S. Ct. 1324, 1339 (2010)—i.e., “an advertiser’s
rights are adequately protected as long as disclosure
requirements are reasonably related to the State’s interest in
preventing deception of consumers.” Zauderer, 471 U.S. at
651. In Central Hudson itself, an electric utility challenged
the constitutionality of a state regulation banning promotional
12
advertising by the utility. 447 U.S. at 558. The Court
explained that because “[t]he First Amendment’s concern for
commercial speech is based on the informational function of
advertising, . . . there can be no constitutional objection to the
suppression of commercial messages that do not accurately
inform the public about lawful activity. The government may
ban forms of communication more likely to deceive the public
than to inform it.” Id. at 563. But “[i]f the communication is
neither misleading nor related to unlawful activity”—as was
the advertising the state had banned in that case—the
government “must assert a substantial interest to be achieved
by restrictions on commercial speech.” Id. at 564. Likewise,
in In re R.M.J., 455 U.S. 191 (1982), the Court applied
intermediate scrutiny to ethics rules that “prohibited attorneys
from advertising their practice areas in terms other than those
prescribed by the State Supreme Court and from announcing
the courts in which they were admitted to practice.” Milavetz,
130 S. Ct. at 1340 (citing In re R.M.J., 455 U.S. at 197–98).
As the Court held there, and as it has since explained, there
was no reason—in common sense or in experience—to
suggest the prohibited “advertisements were themselves likely
to mislead consumers.” Id. (citing In re R.M.J., 455 U.S. at
205). In addition, the rule in In re R.M.J. completely
prohibited a category of speech (advertising practice areas in
non-prescribed terms).
By contrast, in Zauderer the Court faced a rule that,
instead of prohibiting speech, simply required a clarifying
disclosure. Specifically, the rule required attorneys
advertising contingency-fee services “to disclose in their
advertisements that a losing client might still be responsible
for certain litigation fees and costs.” Id. at 1339 (describing
Zauderer, 471 U.S. 626). The Court concluded that “an
attorney’s constitutionally protected interest in not providing
the required factual information is ‘minimal.’ ” Id. (quoting
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Zauderer, 471 U.S. at 651). In doing so, the Court demanded
no evidence that the advertisements would be misleading
because, as it explained, “the possibility of deception” in that
case was “self-evident.” Zauderer, 471 U.S. at 652–53
(emphasis added). And in Milavetz, the Court applied the
Zauderer standard to uphold a law requiring debt relief
agencies to “ ‘clearly and conspicuously disclose in any
advertisement of bankruptcy assistance services . . . that the
services or benefits are with respect to bankruptcy relief’ ”
and to include the following, “ ‘or a substantially similar
statement’ ”: “ ‘We are a debt relief agency. We help people
file for bankruptcy relief under the Bankruptcy Code.’ ”
Milavetz, 130 S. Ct. at 1330 (quoting 11 U.S.C. § 528(a)(3),
(4)). Citing Zauderer, the Court explained that the
government had no need to produce “evidence that [the]
advertisements are misleading” because, based on experience
and common sense, the “likelihood of deception” in that case
was “hardly a speculative one.” Id. at 1340 (internal quotation
marks omitted).
As in the Zauderer cases and unlike in the Central
Hudson cases, the Airfare Advertising Rule targets misleading
speech and does not constitute what the case law defines as an
affirmative limitation on speech. To begin with, the
government, as in Milavetz, had no need to produce additional
“evidence that [the] advertisements are misleading” because
the “likelihood of deception” here is “hardly . . . speculative,”
id. (internal quotation marks omitted). Based on common
sense and over three decades of experience and complaints,
DOT concluded that it was deceitful and misleading when the
most prominent price listed by an airline is anything other
than the total, final price of air travel. Disclosure
requirements, moreover, are not the kind of limitations that
the Court refers to when invoking the Central Hudson
standard of review. To be sure, the airlines claim that the rule
14
here imposes an affirmative limitation on speech because it
requires them to post the total, final price in the most
prominent manner, thus prohibiting them from posting other
numbers as prominently or more prominently than the total,
final price. But by mentioning affirmative limitations on
speech, the Court was referring to rules that prohibit certain
kinds of speech—like the one in In re R.M.J., which flatly
“prohibited attorneys from advertising their practice areas in
terms other than those prescribed by the State Supreme Court
and from announcing the courts in which they were admitted
to practice.” Milavetz, 130 S. Ct. at 1340 (citing In re R.M.J.,
455 U.S. at 197–98); see also Thompson v. W. States Med.
Ctr., 535 U.S. 357, 360, 368 (2002) (applying intermediate
scrutiny to a law prohibiting providers of “compounded
drugs” from advertising or promoting particular drugs);
Central Hudson, 447 U.S. 557 (intermediate scrutiny for a
law prohibiting promotional advertising by electric utilities);
Virginia State Bd., 425 U.S. at 773 (rejecting state statute that
“completely suppress[ed] the dissemination of concededly
truthful information about entirely lawful activity”). By
contrast, the Airfare Advertising Rule does not prohibit
airlines from saying anything; it just requires them to disclose
the total, final price and to make it the most prominent figure
in their advertisements. Though limiting the manner in which
airlines may advertise information, this neither prohibits nor
significantly burdens airlines’ ability to provide that
information.
And indeed they do. For example, Spirit’s website
prominently displays “Our Price”—broken down into “Base
Fare + Fuel”—and then adds, with a plus sign,
“Government’s Cut,” which is displayed clearly and
separately, and then finally provides, in slightly larger font,
the “Total Price.” See Appendix A (a screenshot of a sample
flight advertised on Spirit’s website). The website also
15
separately states, underlined and in bold, the “government tax
rate” for each flight price quote, so that consumers know the
tax burden in both absolute and relative terms. Moreover, a
bright orange link (in the form of a question mark) appears
next to each of those price components—i.e., “Base Fare,”
“Fuel,” and “Government’s Cut”—and if one clicks that link,
the site provides a further breakdown of what makes up the
cost of airfare. For example, the base fare on domestic flights
generally includes the cost of “Flight,” a “Passenger Usage
Fee,” and what Spirit labels a fee for the “Unintended
Consequences of DOT Regulations.” See generally Spirit,
www.spirit.com (last search conducted on June 6, 2012); see
also Oral Arg. Rec. 32:37–33:05 (government attorney
acknowledging that Spirit’s current website is compliant with
the new enforcement policy). All of this demonstrates what
the rule’s text already tells us: the rule is aimed at providing
accurate information, not restricting it. Nothing in the rule
prohibits the airlines from separately alerting the public to the
taxes imposed on air transportation, much as the utility in
Consolidated Edison, 447 U.S. 530, advised its customers of
its support for nuclear energy. The airlines can even call
attention to taxes and fees in their advertisements; what they
cannot do is call attention to them by making them more
prominent than the total, final price the customer must pay.
Having determined that the Zauderer standard applies,
we have no doubt that DOT’s final rule, which requires the
total, final price to be the most prominently listed figure, is
“ ‘reasonably related to the [government’s] interest in
preventing deception of consumers.’ ” Milavetz, 130 S. Ct. at
1340 (quoting Zauderer, 471 U.S. at 651). The rule aims to
prevent consumer confusion about the total price they have to
pay, and it goes without saying that requiring the total price to
be the most prominent number is reasonably related to that
interest.
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The dissent disagrees, arguing that the rule fails under the
Central Hudson test. To reach that conclusion, the dissent
says that the rule bans airlines “from displaying taxes and fees
prominently.” Dissenting Op. at 3 (internal quotation marks
omitted). But DOT interprets the rule to mean only that the
“ ‘break-out of per-person charges cannot be in a more
prominent place on a web page or in a print advertisement
than the total advertised fare,’ ” such as “ ‘at the top of the
page, ahead of the total price,’ ” or with “ ‘special
highlighting that sets it apart and makes it more prominent
than the total price,’ ” DOT Br. 28–29 (quoting Office of
Aviation Enforcement & Proceedings, Dep’t of Transp.,
Answers to Frequently Asked Questions 22). We owe
“substantial deference” to the government’s interpretation of
its own rule, “according [it] controlling weight unless it be
plainly erroneous or inconsistent with the regulation,” see St.
Luke’s Hosp., 611 F.3d at 904 (internal quotation marks
omitted). Confirming this interpretation, government counsel
stated at oral argument that Spirit’s website, which displays
taxes and fees vividly, see Appendix A, is fully compliant
with the rule. See Oral Arg. Rec. 32:37–33:05.
So interpreted, the rule satisfies even the Central Hudson
test. That test requires that we ask three questions. First, is the
asserted government interest substantial? Central Hudson,
447 U.S. at 566. This is easy. The Supreme Court has already
held that “[f]or purposes of [the Central Hudson] test, there is
no question that [the government’s] interest in ensuring the
accuracy of commercial information in the marketplace is
substantial,” Edenfield v. Fane, 507 U.S. 761, 769 (1993).
The second and third inquiries are related: “whether the
regulation directly advances the governmental interest
asserted,” Central Hudson, 447 U.S. at 566, and “whether the
fit between the government’s ends and the means chosen to
accomplish those ends ‘is not necessarily perfect, but
17
reasonable,’ ” Pearson v. Shalala, 164 F.3d 650, 656 (D.C.
Cir. 1999) (quoting Bd. of Trs. of the State Univ. of N.Y. v.
Fox, 492 U.S. 469, 480 (1989)). These too are easy. The
government interest—ensuring the accuracy of commercial
information in the marketplace—is clearly and directly
advanced by a regulation requiring that the total, final price be
the most prominent. Moreover, such a regulation appears
reasonably tailored to accomplish that end. Unlike in other
cases—where the government expressly prohibits certain
kinds of speech on the premise that consumers need
government to protect them from accurate information, see
Bates v. State Bar of Ariz., 433 U.S. 350, 375 (1977) (“[W]e
view as dubious any justification that is based on the benefits
of public ignorance.”); cf. 44 Liquormart, Inc. v. Rhode
Island, 517 U.S. 484, 503 (1996) (opinion of Stevens, J.)
(“The First Amendment directs us to be especially skeptical
of regulations [of truthful, nonmisleading information] that
seek to keep people in the dark for what the government
perceives to be their own good.”)—the rule simply regulates
the manner of disclosure. It imposes no burden on speech
other than requiring airlines to disclose the total price
consumers will have to pay. This the First Amendment plainly
permits.
III.
Next, we address Spirit’s challenge to the Refund Rule,
which allows consumers to cancel reservations without
penalty for twenty-four hours provided that they made those
reservations more than a week in advance of the flight. Spirit
argues that the rule violates the Airline Deregulation Act,
which prohibits regulation of fares. It also argues that “DOT
did not make a finding or even discuss the possibility that
charging a cancellation penalty is deceptive” or unfair. Spirit
Br. 49–50. Finally, Spirit points out that cancellation penalties
allow airlines to ensure that their planes are full. Without
18
cancellation penalties, consumers could book several seats to
cover their contingencies, cancel, and get full refunds, leaving
the airlines with insufficient time to rebook.
Again, we are unpersuaded. For one thing, the rule has
nothing to do with airfares. Instead, it regulates cancellation
policies on the basis of a finding that existing practices were
deceptive and unfair—a regulation plainly allowed under 49
U.S.C. § 41712 so long as it “was reasonable and . . .
supported by substantial evidence in the record,” Nat’l Ass’n
of State Util. Consumer Advocates v. FCC, 372 F.3d 454, 461
(D.C. Cir. 2004). It was. DOT’s finding of deception and
unfairness in the context of an ongoing effort to reduce
unfairness in the industry rests on over a decade’s worth of
recorded experience. DOT found that airlines were routinely
misleading consumers with vague customer service policies.
One manifestation of that unfairness, DOT found, was that
consumers were led to expect, based on widespread
advertising and general practices, that they may cancel
reservations without penalty for twenty-four hours only to
have that expectation thwarted by airlines with vague policies
that often departed from this practice. Viewing this as unfair
and deceptive, DOT now requires airlines to meet a basic set
of customer service guarantees—guarantees that it crafted
after canvassing industry norms and gauging consumer
expectations. Finally, DOT took account of Spirit’s concern
about ensuring that its planes are full: it amended the
proposed rule to apply only if seats are purchased more than a
week in advance, thus allowing airlines at least that much
time to rebook.
In sum, Spirit gives us no reason to believe that the
Refund Rule—developed as part of a systematic effort aimed
at preventing unfair and deceptive practices—is arbitrary or
capricious. See Petal Gas Storage, 496 F.3d at 703 (agencies
19
“[are] not required to choose the best solution, only a
reasonable one”).
IV.
This brings us, finally, to the Price Rule, which prohibits
airlines from increasing the price of air transportation after
consumers purchase their tickets. Because of some dispute as
to whether the rule applies to ancillary charges, such as in-
flight refreshments, DOT has informed us that it “will
undertake a new notice-and-comment procedure before
enforcing the post-purchase price increase provision to any
ancillary service other than the carriage of carry-on baggage
and the first and second checked bag.” DOT Br. 51. Taking
DOT at its word, we agree that the only issue before us is
whether DOT appropriately prohibited airlines from raising
the price of airline tickets, carry-on luggage, or the first two
checked bags after customers buy their tickets.
According to Spirit, the Price Rule is procedurally
unlawful because the final rule was not “a logical outgrowth
of its notice” of proposed rulemaking. See CSX Transp., Inc.
v. Surface Transp. Bd., 584 F.3d 1076, 1079 (D.C. Cir. 2009)
(internal quotation marks omitted). In the Notice of Proposed
Rulemaking, DOT explained it was considering prohibiting
airlines “from raising the price after the consumer completes
the purchase.” 75 Fed. Reg. at 32,330. Given this, Spirit tells
us that it “reasonably believed the proposal would prohibit the
collection of additional amounts for a ticket after the
passenger purchased a ticket, or for an optional service such
as a checked bag or seat selection after the passenger paid for
the optional service.” Spirit Br. 53. Until the final rule was
promulgated, it had no idea “that DOT also intended to
prohibit price increases for optional services, which a
passenger can select after he buys a ticket, before the
passenger purchases them.” Id. at 53–54. Thus, DOT failed to
20
give adequate “notice of the scope and general thrust of the
proposed rule.” Id. at 56. (internal quotation marks omitted).
This argument is ridiculous. As the government points
out, the proposed rule deemed it an unfair and deceptive
practice for a “seller of scheduled air transportation . . . to
increase the price of that air transportation to a consumer,
including but not limited to increase in the price of the seat,
increase in the price for the carriage of passenger baggage,
or increase in an applicable fuel surcharge, after the air
transportation has been purchased by the consumer.” 75 Fed.
Reg. at 32,341 (emphasis added). The final rule adopted the
same operative language with the following amendments: (1)
adding “except in the case of an increase in a government-
imposed tax or fee,” and (2) specifying that a “purchase is
deemed to have occurred when the full amount agreed upon
has been paid by the consumer.” 76 Fed. Reg. at 23,167
(amending 14 C.F.R. § 399.88(a)).
Spirit next argues that the Refund Rule is arbitrary and
capricious. According to Spirit, DOT based the rule on its
concern that “some air tour operators (who were also subject
to the notice requirements) . . . were burying consumer
notices about the possibility of price increases in their
conditions of carriage.” Spirit Br. 57. But, Spirit argues, this
has no relationship to raising the price of an optional service
before a consumer purchases it—especially given that “under
the status quo, airlines are prohibited from increasing prices
without first giving consumers notice prices could go up.” Id.
at 58. In addition, Spirit points out, “a passenger can protect
himself against future price increases by purchasing optional
services at the same time as (or as soon as possible after) he
purchases his ticket.” Id. at 59. But DOT saw this as a classic
bait and switch. It found that when consumers purchase
airline tickets, they assume that the price they pay for extra
21
bags at the airport will be the price advertised when they
bought their ticket. Thus, DOT concluded, increasing the
price of these very commonly purchased and practically
necessary services (like the ability to carry bags onto the
flight) amounts to an unfair practice. Under the APA, we ask
only whether DOT’s conclusion “was reasonable and . . .
supported by substantial evidence in the record.” Nat’l Ass’n
of State Util. Consumer Advocates, 372 F.3d at 461. It was.
V.
For the foregoing reasons, the petitions for review are
denied.
So ordered.
22
APPENDIX A
23
RANDOLPH, Senior Circuit Judge, concurring in part and
dissenting in part: Speech about government, especially speech
critical of government, is at the core of “the freedom of speech.”
The First Amendment thus protects speech complaining about
taxes. One of the Department of Transportation’s new rules
restricts such speech. The new rule dictates how airlines and
others selling air transportation may convey information
criticizing the taxes and fees exacted from their customers. The
government is thus attempting to restrict speech critical of the
government. The majority opinion upholds the rule. I think the
rule violates the First Amendment.
The Department’s rule regulates airfare advertising. I
join the majority in its decision sustaining the rule’s requirement
that such advertisements must state the total price of airfare. 14
C.F.R. § 399.84(a). My problem is with the following portion
of the rule: “Although charges included within the single total
price listed (e.g., government taxes) may be stated separately or
through links or ‘pop ups’ on websites that display the total
price, such charges may not be false or misleading, may not be
displayed prominently, may not be presented in the same or
larger size as the total price, and must provide cost information
on a per passenger basis that accurately reflects the costs of the
item covered by the charge.” Id.The rule does not define “not . . . prominently.” In the
past, the Department used “prominently” to describe text that
was “clear” and “large enough to alert a reader to the [subject].”
Trans World Airlines, Inc., Dep’t of Transp., Order 95-7-46
(July 28, 1995). The preamble to the advertising rule reflects
that definition. It explains that sellers of air transportation may
display taxes and government-imposed fees “on the same page”
as an advertised fare if the taxes and fees appear “in fine print.”
The preamble goes on to say that taxes and fees must “be
presented in significantly smaller type” than the total price.
Enhancing Airline Passenger Protections, 76 Fed. Reg. 23,110,
23,143 (Apr. 25, 2011). A guidance document issued to explain
2
the regulation states: “‘Prominent’ under this rule means that the
break-out of per-person charges cannot be in a more prominent
place . . . than the advertised total fare.” Office of Aviation
Enforcement and Proceedings, Dep’t of Transp., Answers to
Frequently Asked Questions 22 (Oct. 19, 2011). The document
adds that taxes and fees “cannot be at the top of the page, ahead
of the total price. The total price should be in larger font. The
[taxes] should not have special highlighting that sets [them]
apart and makes [them] more prominent than the total price
(e.g., bold font, underlined, or italicized).” Id.The majority quibbles about how much smaller the
typeface of taxes and fees must be in comparison to the typeface
of the total price.1 This is a classic red herring, an attempt to
1
The majority accuses me of not accepting the government’s
interpretation of its rule because I state that the rule requires taxes and
fees to be displayed in “fine print” or a “significantly smaller” font
size than the total price. Maj. Op. at 15-16. “Fine print” and
“significantly smaller” are not my words. They are the Transportation
Department’s interpretation of what its rule requires. See 76 Fed. Reg.
at 23,143. The guidance document the majority invokes does not
suggest otherwise; that document interprets only the word
“prominently,” retains the requirement that the total price be listed in
“larger font,” and says nothing about how much smaller taxes and fees
must be in comparison. Office of Aviation Enforcement and
Proceedings, Dep’t of Transp., Answers to Frequently Asked
Questions 22.
The majority strains to support its ruling by reaching outside
the record, in violation of the Administrative Procedure Act. See
Camp v. Pitts, 411 U.S. 138, 142-43 (1973). It examines Spirit’s
current website and proclaims that although taxes and fees are not
displayed in fine print, Spirit is not violating the rule. Maj. Op. at 15-
16. And how exactly does the majority know this? Because the
Department of Justice attorney supposedly said so during oral
3
divert attention from what is really at stake here. No matter how
hard the majority tries, it cannot disguise the fact that the
government has forbidden airlines from displaying taxes and
fees “prominently”; that it has made it illegal for airlines to put
these government charges in the same or larger typeface than
that of the total price; that the government has ordered airlines
not to place government taxes and fees above the total price and
not to show these items in bold or italics or with underlining.
The airlines say they are engaging in political speech
rather than commercial speech when they inform customers, and
potential customers, of the amount of the total airfare
attributable to government taxes and fees. For this reason they
believe they are entitled to the full protection of the First
Amendment. Their speech about taxes and fees will be in
advertisements, and the airlines, of course, have an economic
incentive for educating the public about these charges: if
discourse regarding these charges results in the government
lessening the financial burden it imposes, airfares would become
more affordable and people would fly more often. These
circumstances – advertising and economic incentive – do not
necessarily disqualify the airlines’ speech from being treated as
political speech. In one of the leading First Amendment cases,
New York Times Co. v. Sullivan, 376 U.S. 254 (1964), the Court
held that an advertisement placed in a newspaper to raise money
was political speech the First Amendment protected. See also
Consol. Edison Co. v. Pub. Serv. Comm’n, 447 U.S. 530 (1980).
argument. But the Justice Department attorney said no such thing.
How could he? There is no indication that the attorney had ever seen
Spirit’s website (it was Judge Tatel who brought it up during Spirit’s
argument). And at no point did the attorney say anything about how
much smaller the type size of taxes and fees must be in comparison to
the total price, which is the subject the Transportation Department
discussed in the passages I quoted.
4
The majority opinion nevertheless holds that anything
the airlines say in their advertisements regarding taxes and fees
falls within the category of commercial speech, and is therefore
subject to less than full constitutional protection. Maj. Op. at
10-11. No Supreme Court decision has ever dealt with the sort
of regulation we have here. That is, none of the commercial
speech cases – including Bolger v. Youngs Drug Products Corp.,
463 U.S. 60 (1983),2 on which the majority relies – involved the
government’s attempt to control and to muffle speakers who are
critical of the government. As the Sixth Circuit wrote in an
analogous situation, a law “looks like a ban on core political
speech” if it restricts companies from “announcing who bears
political responsibility for a new tax . . . in the forum most likely
to capture voters’ attention” – here, in an advertisement.
Bellsouth Telecomms., Inc. v. Farris, 542 F.3d 499, 504-05 (6th
Cir. 2008). Because the law in Bellsouth was unconstitutional
even if it regulated commercial speech, the Sixth Circuit found
it unnecessary decide how the speech in that case should be
classified. Id. The same is true here, and I am therefore content
to assume arguendo that we have before us a law restricting
commercial speech.
For commercial speech the current test, despite
criticism,3 is still Central Hudson Gas & Electric Corp. v.
2
Bolger defined commercial speech as “speech which does ‘no
more than propose a commercial transaction.’” 463 U.S. at 66(quoting Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council,
Inc., 425 U.S. 748, 762 (1976)). The airlines want to do more than
“merely” propose that the customer purchase airfare: the airlines want
to criticize the government by revealing prominently the full extent of
the costs government imposes on their customers’ air travel.
3
See, e.g., Thompson v. W. States Med. Ctr., 535 U.S. 357,
377 (2002) (Thomas, J., concurring); 44 Liquormart, Inc. v. Rhode
Island, 517 U.S. 484, 501-04 (1996) (opinion of Stevens, J., joined by
5
Public Service Commission, 447 U.S. 557 (1980): restrictions on
commercial speech are permissible if the government
demonstrates (1) that it has a substantial interest in the
restriction; (2) the regulation directly advances that interest; and
(3) the regulation is not more extensive than necessary. Id. at
566. False, deceptive, or misleading advertisements can be
banned altogether. Ibanez v. Fla. Dep’t of Bus. & Prof’l
Regulation, 512 U.S. 136, 142 (1994).
What then are the government’s interests here? The
government’s brief offers two: the “interest in ensuring that
consumers are accurately informed of the cost of air travel”; and
the interest in preventing consumers from being “confuse[d] . .
. as to the actual price” of airfare.
With respect to the first – ensuring accurate information
– the Transportation Department in the rulemaking never
mentioned this in connection with the taxes and fees restrictions.
And for good reason. The accuracy of the amount of fees and
taxes listed in an advertisement does not depend on font size,
positioning, prominence, or anything else regulated by the
advertising rule.4 And of course there is no evidence – how
could there be? – that smaller typeface for taxes and fees, or
anything else the rule requires for these charges, leads to more
accurate airline advertising.
Kennedy and Ginsburg, JJ.); id. at 517 (Scalia, J., concurring in part
and concurring in judgment).
4
The only evidence in the record indicates that consumers
“feel” misled when the total price is not disclosed or is hidden in
footnotes and hyperlinks. See 76 Fed. Reg. at 23,142-43; Enhancing
Airline Passenger Protections, 75 Fed. Reg. 32,318, 32,327-28
(proposed June 8, 2010); Price Advertising, 71 Fed. Reg. 55,398,
55,401-02 (Sept. 22, 2006). But the part of the rule addressing this
topic is not the subject of my dissent.
6
The second interest – preventing confusion – was the
only justification mentioned in the rulemaking.5 But neither the
Department in its rulemaking nor the government in its brief
explains why disclosure of taxes in the same or larger font size
as the total price, or at the top of a page rather than at the
bottom, or in bold typeface rather than regular typeface, would
confuse anyone. And neither the Department in its rulemaking
nor the government in its brief cites any sort of evidentiary
support for such a notion. The majority’s opinion cites nothing
either. These omissions should have resulted in a holding that
this aspect of the advertising rule is unconstitutional.6
5
The entirety of the Transportation Department’s explanation
is the following non sequitur: Disclosure of taxes and fees “must
accurately reflect the actual costs to the carrier of the service or matter
covered, be displayed on a per passenger basis, and be displayed in a
manner that otherwise does not deceive consumers. Consequently, the
rule requires that any such listing not be displayed prominently and be
presented in significantly smaller type than the listing of the total price
to ensure that consumers are not confused about the total price they
must pay.” 76 Fed. Reg. at 23,143.
6
A further consideration is worth mentioning. Airlines, like
most businesses, market their products through a variety of mediums.
The preamble identifies social networking websites like Facebook and
Twitter as popular ways to sell and advertise airfares. 76 Fed. Reg. at
23,143. The Notice of Proposed Rulemaking points to the common
practice of marketing via text message. 75 Fed. Reg. at 32,327. In
addition to being popular means for advertising, Facebook, Twitter,
and text messages have this additional characteristic in common: only
one font size currently is possible. The user can input text and
numbers, but can do nothing more with regard to style or size before
his message is distributed.
This leaves airlines three options when advertising on many
platforms: (1) disclose taxes and violate the regulation; (2) suppress
7
In commercial speech cases, the government’s burden is
to demonstrate that its speech restriction “directly” advances the
interest it identifies. Central Hudson, 447 U.S. at 566. To this
end, the Supreme Court has required an evidentiary showing that
the regulation advances the government’s interest to a material
extent. See, e.g., Greater New Orleans Broad. Ass’n, Inc. v.
United States, 527 U.S. 173, 188 (1999); 44 Liquormart, 517
U.S. at 505 (plurality); Rubin v. Coors Brewing Co., 514 U.S.
476, 486-90 (1995); Ibanez, 512 U.S. at 142-43; Edenfield v.
Fane, 507 U.S. 761, 770 (1993); cf. Bose Corp. v. Consumers
Union of United States, Inc., 466 U.S. 485, 499 (1984).7
Government “speculation” or “conjecture” will not suffice.
Ibanez, 512 U.S. at 143 (quoting Edenfield, 507 U.S. at 770).
tax information and comply with the rule; or (3) cease marketing on
the platform altogether. The government addressed this problem at
oral argument by explaining that it was “not aware of the [mediums]
where you only have a choice of one font, but if [airlines] have a
particular problem with the rule as applied in some situation like that
. . . they can make that point with the agency.” Oral Arg. Rec. at
33:31-46. If I understand the point, the onus is on the airlines to
justify same-size disclosures whenever fine print is not an option, and
it is the agency’s prerogative to exempt truthful disclosures from the
rule’s reach. This is completely backwards; supplication and
administrative clemency have no place in the First Amendment. “If
the First Amendment means anything, it means that regulating speech
must be a last – not first – resort.” Thompson, 535 U.S. at 373.
7
In Milavetz, Gallop & Milavetz, P.A. v. United States, 130
S. Ct. 1324, 1340 (2010), a commercial speech case dealing with the
constitutionality of a federal statute, the Court accepted as evidence
material in the congressional record and stated that it was self-evident
that the advertisements at issue were misleading. Milavetz has no
bearing on the relevant portion of the tax and fee rule. The opinion
dealt with the requirement of disclosure. Id. at 1339; Maj. Op. at 12-
13. The issue I am addressing deals with suppression of speech.
8
Yet the government has presented not a shred of
evidence to support its tax and fee rule, and it has offered no
reasoning to explain why a significant number of consumers
would be confused without the rule. The lack of evidence is
particularly telling. It is not because the Transportation
Department was without experience with a system in which
taxes were stated in large type. For more than a quarter of a
century before the current advertising rule, the Department
required airlines not to bury the amount of taxes in fine print,
but to state the amount of taxes “clearly” and prominently, in a
typesize at least as large as “the price of the trip.” Request of the
Air Transp. Ass’n of Am. for an Exemption, Dep’t of Transp.,
Order 85-12-68 (Dec. 24, 1985). Yet there is no history, no
example, of anyone reading the airlines’ advertisements and
coming away with the belief that the taxes and fees amounted to
the total price of the airfare. The idea that the new rule is now
needed to prevent such confusion is, to put it mildly, absolutely
absurd. Taxes and fees for air travel are steep, but – the record
shows – they still make up only twenty percent of the total cost
of a ticket. Given the fact that the total airfare and the total
taxes and fees included therein would be labeled as such, only
a fool would confuse or misunderstand the two, regardless of
how prominently the taxes and fees were displayed in
comparison to the total charge. People get bills all the time that
breakout the components of the total amount due. (Many list the
total amount due at the bottom of the page – not at the top as the
Department’s rule requires.) Maybe someone somewhere at
some time would be confused. But one of the abiding principles
of the commercial speech cases is that the government may not
restrict speech on the basis that someone somewhere may
misread a particular advertisement.8
8
The Supreme Court has rejected the proposition “that the public
is not sophisticated enough to realize the limitations of advertising,
and that the public is better kept in ignorance than trusted with correct
9
I therefore dissent from the majority opinion to the
extent that it upholds the rule prohibiting sellers of air
transportation from prominently displaying government taxes
and fees. I join the balance of the majority’s opinion.
but incomplete information.” Bates v. State Bar of Ariz., 433 U.S.
350, 374-75 (1977).
Even if commercial speech “may be potentially misleading to
some consumers, that potential does not satisfy the [government’s]
heavy burden of justifying a categorical prohibition against the
dissemination of accurate factual information to the [wider] public.”
Peel v. Attorney Registration & Disciplinary Comm’n, 496 U.S. 91,
109 (1990).