1

What protects airlines (if anything) from fraud charges when they sell same ticket to multiple people for a single flight?

Why might this be fraud? In most consumer transactions (the norm), if I sold what is perceived to be an exclusive right multiple times, I would assume a fraud had taken place (because everyone who did not receive that right has been deceived). Is an airline ticket transaction different from normal consumer transaction that makes this not fraud?

  • Airline tickets (its in the title and question per the guidelines). While I understand there's particular laws that apply in different domains, generally I would expect that selling again what I've sold to one person to second, is fraud. Typically, when something is sold you give up the right to sell it again. My question is: if its not fraud, how is this activity different to similar kinds of activity that is fraud. – user48956 Apr 11 '17 at 17:59
  • Thank you. Actually, my assumption is that this case is not fraud and somehow differs normal consumer transactions. How its different is really what I'd like to understand. – user48956 Apr 11 '17 at 18:33
  • 1
    It's not an exclusive right, so the entire question is immediately a false premise. – Nij Apr 11 '17 at 19:08
  • Obligatory Seinfeld: youtu.be/1EvZeIAe_8w – JonathanReez Apr 12 '17 at 17:53
  • That's a Hyundai advert. No Seinfeld. – user48956 Apr 12 '17 at 17:56
6

As a general rule, airlines to have a contract that permits them to overbook flights and when more passengers show up than they have seats for, to bump some passengers subject to some rather elaborate protocols and compensation schemes.

This doesn't, however, end the inquiry. There are several ways that there could be fraud or other liability not arising out of a contract with a customer, even though overbooking itself might not constitute fraud.

  1. If the promotional materials of the airline misstate or conceal when there is a duty to disclose, the fact that a "reserved seat" has a technical meaning under their contract of carriage that does not carry its ordinary meaning, this could still be fraud. The fact that a contract provides otherwise does not necessarily preclude a fraud suit if the company misrepresents or misleads customers and prospective customers about the the contract actually says, or about the likelihood of a passenger actually getting bumped.

Note that the airline can be liable for misstatements made by its employees, that contradict its contract and overstate the customers rights, even if those statements were not actually authorized by the company. A statement made with "apparent authority" is binding.

The dollar amounts are small enough, however, that this is difficult to enforce outside of a class action lawsuit, and I suspect that there is a term in the contract of carriage that may make it difficult or impossible to pursue that remedy in the ordinary case against the airline. The contract may set a forum for suits against the airline even if the suits don't arise out of the contract itself, unless there is an anti-waiver provision in an applicable law that is not pre-empted by federal law, or the suit is brought by a federal agency.

  1. It is also fraudulent to enter into a contract with a present intent at the time that the contract is entered into not to abide by its terms. If, as in this case, the airline doesn't just hold its customers to its contract of carriage, but actually routinely violates its contract of carriage by not following the procedures and providing the compensation called for by the contract, and knows that it will continue to do so, then the airline is not just providing a contractual remedy that is not a breach of contract, but is engaged in fraud.

  2. There are a variety of consumer protection laws that prohibit certain kinds of practices and representations. Overbooking is not one of them. Overbooking is regulated (by laws that in all likelihood pre-empt state and local laws), but often conduct prohibited by consumer protection laws (often called "deceptive trade practices") is broader than actions that are prohibited by common law fraud doctrines and often dispense with many elements of a fraud claim (e.g. causation and proof of damages if statutory damages are claimed instead).

For example, many states make it a deceptive trade practice to advertise a good for sale at a particular price, when there aren't enough units for sale at that price to meet consumer demand, without offering rain checks for people who try to buy the good offered for sale which the seller has predictably run out of at the time of the sale.

It is not at all obvious that some of the more general deceptive trade practice laws are preempted by federal regulation of the airline industry in the same way that practices that are comprehensively regulated at the federal level, and particular to the airline industry would be preempted by federal law. In the same vein, federal law does not generally preempt ordinary contract and property law as applied to airlines.

  1. Even if the airline fulfills the letter of its contract terms, if it exercises its discretionary rights in performing the contract in a manner that is not consistent with the mutual intent of the parties to the contract at the outset, it has violated the covenant of good faith and fair dealing, which is a different kind of breach of contract. This isn't fraud, but these abuses of discretion in the performance of the contract can be actionable.

  2. Finally, large publicly held businesses routinely get into lawsuits with all sorts of people, public and private, and in the course of that litigation, routinely enter into settlements. In particular, settlements of class action lawsuits and settlements of lawsuits and investigations brought by government regulators, routinely contain consent decrees or other forward looking injunctive relief governing how the company will conduct its business that goes above and beyond what the applicable laws and regulations require. A violation of such a settlement term may also be actionable, although usually for breach of a settlement contract or contempt of court, rather than for fraud.

|improve this answer|||||
6

Airlines do not sell the same ticket to multiple people: each person gets their own ticket (you can verify that by looking at the ticket number, which is unique). They do sell more tickets than can be accommodated by particular airplane. In so doing, no material false claim is made. Consumers may have wrong ideas about what buying a ticket means, but airlines are not obscuring anything. The United Carriage Contract specifically says, rule 5G:

All of UA’s flights are subject to overbooking which could result in UA’s inability to provide previously confirmed reserved space for a given flight or for the class of service reserved. In that event, UA’s obligation to the Passenger is governed by Rule 25.

You can pretty much Google "contract of carriage ___" filling in the desired airline, to find the applicable clause.

|improve this answer|||||
  • Re: "airlines are not obscuring anything". Well... isn't it the norm that when I make a "reservation" for a hotel, or a stadium, or anything else, this is an exclusive reservation. Is it made clear to consumers that this is not an a exclusive reservation? – user48956 Apr 11 '17 at 19:37
  • 6
    Yes, they do say that the reservation is subject to cancellation and they point you to information on remedies. It doesn't matter what the norm is for a "reservation", and anyhow everybody knows (or should know) that people get bumped. – user6726 Apr 11 '17 at 19:45
  • Whilst accepting all that you say, it would not be a bad thing for there to be a law prohibiting the removal of a validly seated passenger against their will. I actually find it difficult to believe, in the UA case, that the airline staff had made much effort to find four people prepared to accept $1,000 to leave the flight. If they had, why didn't they start offering $2,000 per seat? – WS2 Apr 14 '17 at 17:50
  • Because they weren't authorised to offer $2000, is the clear reason. They needed seats empty and to leave on time, when you don't have long enough to haggle, you make the seat empty now. – Nij Apr 15 '17 at 23:54
  • Whether or not such a law would be a good thing is basically a political question. The point here is that the practice is not fraud. That doesn't mean that it was good or even legal, it just means that it isn't fraud. – user6726 Apr 15 '17 at 23:58
3

Here's a very basic definition of fraud from Merriam Webster, although the actual definitions in law are much more specific and vary between jurisdictions:

wrongful or criminal deception intended to result in financial or personal gain

The problem here is that an airline has created a conditional contract with you, similar to how when you accept a job, your starting work there is generally conditional on not doing terrible things before your start date. In exchange for your money, they will grant you a seat on their plane so long as nothing else comes up and those seats are still available. But at the time you purchase your ticket, you have not actually been physically given anything - all you're doing is putting down a deposit in hopes that you'll be granted that seat. They can legally decide to cancel that contract at any point before it is executed (e.g. the plane takes off and you are transported to the destination) and simply refund the deposit.

Is that fraud? No. Because the airline in that situation:

  • Has not deceived you in any way. They didn't "trick" you into not being able to provide that seat to you. It may have been poor planning on their part, but that's about all that it qualifies as.
  • Has not benefited financially from the situation. In fact, in pretty much all cases they actually lose money from the situation, because they have to refund your ticket cost and/or provide you additional compensation for the inconvenience they've just caused you.

While overbooking is a generally crappy thing that some airlines still do and is an incredible inconvenience to some people who might get bumped off a flight and really need to be on it, it does not constitute fraud in any sense of the word. If you don't like the potential of overbooking, choose an airline that doesn't. There are airlines out there that, when the plane is full, use a "standby" system whereby you pay a cheaper price, but they also make it clear that you will only be given a seat if other people who purchased actual tickets don't show up to claim their seat. That, of course, does not account for situations where other serious problems arise and the seat does become unavailable at a later time after you purchased your ticket.

|improve this answer|||||
  • Can you point to an airline that doesn't overbook? – user48956 Apr 11 '17 at 19:28
  • So -- to summarize, this type of transaction differs from say, exclusive transfer of goods (it would be a crime to resell someone else's property), because you're purchasing a reservation? – user48956 Apr 11 '17 at 19:34
  • 1
    @user48956 overbooking isn't fraud because it is explicitly covered in the contract of carriage. See, for (not-so-random) example, United's. – phoog Apr 11 '17 at 19:52
  • 3
    @animuson: I agree that overbooking is not fraud. However, I'm pretty sure that airlines DO benefit financially (in the aggregate) from over-booking, otherwise they wouldn't overbook. – James Apr 12 '17 at 12:55
  • 1
    @animuson - It's not assigning seats that determines if an airline overbooks. United, for example, will assign seats to anyone who purchases a ticket until a threshold determined by their algorithms is crossed. At that point assigned seats will only be available to frequent fliers at a particular status level. As far as I can tell, the next threshold is no assigned seats until the passenger gets to the check-in counter and finally no assigned seats until arriving at the gate. In those situations where you can't get a seat until arriving at the gate you can pretty much bet the flight's oversold – Dave D Apr 14 '17 at 2:20
2

Commercial air transportation is heavily regulated by the U.S. Code. 14 CFR Part 250 explicitly allows (and regulates) the practice of overselling flights. For example:

§ 250.11 Public disclosure of deliberate overbooking and boarding procedures.

(a) Every carrier shall cause to be displayed continuously in a conspicuous public place at each desk, station and position in the United States which is in the charge of a person employed exclusively by it, or by it jointly with another person, or by any agent employed by such air carrier or foreign air carrier to sell tickets to passengers, a sign located so as to be clearly visible and clearly readable to the traveling public, which shall have printed thereon the following statement in boldface type at least one-fourth of an inch high:

Notice - Overbooking of Flights

Airline flights may be overbooked, and there is a slight chance that a seat will not be available on a flight for which a person has a confirmed reservation. If the flight is overbooked, no one will be denied a seat until airline personnel first ask for volunteers willing to give up their reservation in exchange for compensation of the airline's choosing. If there are not enough volunteers, the airline will deny boarding to other persons in accordance with its particular boarding priority. With few exceptions, including failure to comply with the carrier's check-in deadline (carrier shall insert either “of _ minutes prior to each flight segment” or “(which are available upon request from the air carrier)” here), persons denied boarding involuntarily are entitled to compensation. The complete rules for the payment of compensation and each airline's boarding priorities are available at all airport ticket counters and boarding locations. Some airlines do not apply these consumer protections to travel from some foreign countries, although other consumer protections may be available. Check with your airline or your travel agent.

(b) Every carrier shall include with each ticket sold in the United States the notices set forth in paragraph (a) of this section, printed in at least 12-point type. The notice may be printed on a separate piece of paper, on the ticket stock, or on the ticket envelope. The last two sentences of the notice shall be printed in a type face contrasting with that of the rest of the notice.

(c) It shall be the responsibility of each carrier to ensure that travel agents authorized to sell air transportation for that carrier comply with the notice provisions of paragraphs (a) and (b) of this section.

|improve this answer|||||
0

Airline overbooking isn't fraud because the purchaser of the ticket agreed to it when entering into a contract with the airline. For example, United's contract of carriage says, in Rule 5(G):

G. All of UA’s flights are subject to overbooking which could result in UA’s inability to provide previously confirmed reserved space for a given flight or for the class of service reserved. In that event, UA’s obligation to the Passenger is governed by Rule 25.

Rule 25, in turn, is the rule governing "Denied Boarding Compensation."

|improve this answer|||||
  • 1
    This is just blatantly wrong. Fraud can still occur when contracts are involved, and just because a contract says that a company can do something doesn't necessarily mean that it isn't fraudulent. While the contract can be useful in determining whether fraud occurred, it is not ever a sole identifier. Courts have been filled with cases over time where contracts have been thrown out for being unenforceable. The inclusion of that in the contract is a customer service issue - it has nothing to do with protecting them from fraud. – animuson Apr 11 '17 at 19:57
  • 1
    @animuson it's only wrong if there's some reason to think that the agreement is invalid. If the airline said somewhere else that they won't overbook the flight, or won't bump a given passenger who is later bumped, then sure, that could be fraudulent. But that doesn't generally happen. The usual state of affairs is that people don't read the contract of carriage before buying the ticket, so they think they've been wronged when actually they just didn't do their homework. – phoog Apr 11 '17 at 20:01
  • 1
    @animuson Your own answer points out that fraud is deception: the presence of this clause in the contract shows that overbooking is not a deceptive practice. – phoog Apr 11 '17 at 20:02
  • 1
    It's not at all baffling. You're trying to claim something isn't fraud based on something else that is not responsible for determining whether or not something is fraud. That's just wrong. I'm not saying contracts don't have legal effects - they do. They just have absolutely no bearing on whether fraud is committed, and tying the two together makes no sense. – animuson Apr 11 '17 at 20:26
  • 3
    @animuson: At the risk of further fanning the flames - a contract does have a bearing on whether something is fraud, because a fraud by definition requires deception. If some rule / condition / fact is mentioned in the contract, you can (usually) no longer claim to have been deceived about that aspect. – sleske Apr 11 '17 at 22:09

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.