In an era of unprecedented pressure on the travel industry in
general, and travel agents in particular, a U.S. Department of
Transportation proposal to regulate service fee disclosures is
being met with irritation by at least one industry
“They ought not be meddling in the question of how travel agents
disclose their fees,” said Paul Ruden, senior vice president for
legal and industry affairs at the American Society of Travel
Agents. “There are a lot bigger and more important issues out there
Misplaced priorities aren’t ASTA’s only objection.
“Portions of what they propose to do are tantamount to rate
regulation, which is beyond their legal power,” said Ruden.
The final price of a tour or airline ticket traditionally
includes the service fee. “They’ve had that rule in place for
decades,” he said, referring to the DOT. “All that rule says is,
‘If you’re going to disclose the price, you must disclose the whole
Now however, the DOT is proposing that the fee and the final
price, including the fee, be listed separately in advertising or
It also says the fee listing would be considered “an unfair and
deceptive practice” if it is ad valorem, or expressed as a
percentage of the base price; if the fee exceeds $20 or 10 percent
of the base price, whichever is greater; and if the fee is not
placed prominently near the base price.
A DOT spokesman, Bill Mosley, said the proposal would extend the
current rules for online travel sales “to all price advertising,
Internet or not.
“After looking at Orbitz and other online sellers of travel, DOT
came to the conclusion that this approach could benefit consumers
responding to ads in any kind of medium,” he said.
Why the inclusion of a “$20 or 10 percent” limit in the
“That ensures that carriers aren’t declaring a certain
percentage of the pricea large percentageto be a service fee in
order to make the basic fare look smaller,” he said.
Mosley said the proposal would not represent rate regulation.
“It just regulates how much they can separate out and call it a
service fee,” he said. “The final and full price is still the full
But Ruden countered: “When they say that you can’t have a rate
that’s based on a percentage of the price, if that’s not rate
regulation I don’t know what is.”
He also added, “The only way a service fee could be used to make
the fare seem lower is if they don’t disclose the fee. This is a
very intense, competitive marketplace. Who is going to get away
without ultimately disclosing what their charge is?
“One way or another, the client is going to get told that.”
One early advocate of service fees says the DOT’s proposal is
rooted in a “fundamental confusion” about the travel agent
Robert Joselyn, now president of Joselyn Tepper Associates in
Scottsdale, Ariz., said agents sell other people’s products, such
as airline seats, tours and cruises, and they sell their own
product of service and expertise.
The DOT is making a mistake in “lumping this all together and
saying, ‘What you are doing with service fees is that you are
misrepresenting the price of the airline product that’s being
sold,’ ” the travel consultant said.
“The agency fee has nothing to do with the airline product being
sold. It has everything to do with the service the agency provides
as a separate product.”
DOT Service Fee Proposal
“In any advertising or solicitation by an agent of an air
carrier, or indirect air carrier, the agent must separately list
its service fees, if any for the price of the air transportation
tour, or tour component, provided that any offer to sell specific
air transportation, tour, or tour component services must also
state the entire price to be paid by the customer to the agent or
such air transportation, tour or tour component, including any
service fee charged by the agent, and providing further that such
separate listing of the service fee would be considered an unfair
and deceptive practice if the service is ad valorem in nature, if
the fee exceeds the greater of $20 or 10 percent of the price for
the air transportation, tour or tour component, and if the amount
of the fee is not prominently disclosed near the advertised fare or