The Federal Trade Commission’s historic proposed rule banning noncompete agreements, which the Commission issued last week, restores a crucial tool of the agency: the use of its Section 5 authority to prohibit unfair methods of competition. By writing rules under Section 5, the FTC can engage in blanket bans of such conduct, rather than case-by-case enforcement actions that take too much time and provide only after-the-fact relief rather than an up-front, certain deterrent. Anti-monopoly reformers have deeply wanted the FTC to engage in Section 5 rulemaking, not just in noncompetes but a host of areas. There will be a legal fight, but as FTC director of policy planning Elizabeth Wilkins said to PBS, “Congress gave us this authority, and I think actually we feel fairly obligated to make sure that if we have this authority to prevent unfair methods of competition like this … that we should do so.”
It just so happens that the Department of Transportation (DOT) has the exact same authority. But critics have charged that the DOT has not sufficiently used this authority under Transportation Secretary Pete Buttigieg, even as the airline industry has engaged in what could easily be characterized as a massive unfair and deceptive practice in the scheduling and cancellation of flights.
The authorities accorded to the DOT include Section 41712(a), which covers “unfair and deceptive practices” and “unfair methods of competition.” As the DOT explained in a guidance posted at the Federal Register in August, “Section 41712 was modeled on Section 5 of the Federal Trade Commission (FTC) Act.” That is where DOT derives the definitions of “unfair,” “deceptive,” and “practice.”
The guidance states, “Congress granted the Department the exclusive authority to prohibit unfair or deceptive practices of air carriers and foreign air carriers.” In other words, with respect to airlines, DOT authority supersedes that of the FTC, while being modeled on the same definitions and permitted activities.
As the guidance also repeatedly notes, the DOT has used this authority in the past. For example, the tarmac delay rule, which states that passengers cannot be stranded on tarmacs for more than three hours, was written under this Section 5–like authority. There’s no dispute that DOT can write aviation consumer protection rules, and investigate and punish airlines for specific unfair or deceptive practices, including unfair methods of competition. It’s explicitly in this statute.
So if the FTC is restarting its rulemaking authority and specifically prohibiting unfair practices, then DOT has precisely the same authority to do so. And if that’s the case, it has the opportunity to prevent the flood of unfairness and deception from the major airlines.
The meltdown of mass cancellations at Southwest Airlines over the holidays is the foremost example in the public mind, but similar instances occurred all last year, which has been characterized as the worst ever for customer service in U.S. aviation history. There were over 121,000 flights canceled in the first six months of the year, and that obviously doesn’t count other cancellations throughout the summer, or the 15,000 Southwest flights postponed in December.
Democratic officials as well as Republican attorneys general have repeatedly asked Buttigieg to take action to reduce cancellations.
Here’s the argument for why those cancellations represent a deceptive practice and deserve agency enforcement: As my colleague Bob Kuttner has explained, the airlines received a $54 billion bailout at the beginning of the pandemic, specifically to maintain crew levels. Instead, they ended up giving pilots incentives to take early retirements, getting their pay off the books and violating the spirit of the bailout. When travel resumed in 2022, the major carriers were left without enough pilots to handle the flights they were…
Read More: The FTC Banned an Unfair Practice. The Department of Transportation Can, Too.