Germany: Appellate Court Rules On Promotion Of Air Fares And Price Transparency

Last Updated: 2 October 2008
Article by Ulrich Steppler and Christian Kusulis

Air passengers expect to be allowed to check in a reasonable amount of luggage without being charged an additional fee, irrespective of the price of their ticket. A recent decision confirms that where a flight is advertised at a certain price "including taxes and fees", but an additional tariff will be levied for each item of hold baggage, the airline must make specific reference to these additional costs in its advertisements.(1)

Facts

The applicant in these interim proceedings was an industry association that is dedicated to fighting unfair competition. The respondent provides air transport services and had advertised flights in a newspaper and online at prices "starting from ...". The headline in the newspaper advertisement read: "On the road at sensational prices." Underneath, several destinations were listed in a chart together with the relevant prices. Above this chart was stated: "Single flights starting from ..." and at the bottom of the column was further noted: "Including taxes and fees." Online, the respondent advertised a single flight from Friedrichshafen to Pisa or Dublin at prices "starting from €25.59 including taxes and fees".

According to its conditions of carriage, the respondent charged for the carriage of hold baggage at a rate of €4.50 per item for online bookings from September 1 2006, or €7 if paid at the airport. This charge was levied separately for outbound and inbound flights. The fees applied to a total luggage weight of 20 kilograms (kg) per person; where this figure was exceeded, a fee of €8 for each additional kilogram was charged.

Proceedings

The applicant objected to the advertisements as misleading and asserted a right to forbearance. In an ex parte injunction issued on September 26 2006 the Hamburg Regional Court enjoined the respondent from mentioning flight prices in advertisements without indicating that a fee was charged for each piece of hold baggage. In a ruling issued on December 20 2006 the court confirmed the injunction.

The respondent appealed against the judgment, while the applicant requested that it be maintained insofar as it related to advertisements actually placed by the respondent. The applicant prevailed.

Decision

The appellate court ruled that the applicant's motion requesting a cease and desist order – as clarified in the appeal proceeding – was founded on the basis of Sections 5, 8 and 3 of the Act against Unfair Competition. The court stressed that the average consumer would not expect an additional fee to apply to each item of hold baggage where the prices advertised had been stated as inclusive of taxes and fees. In such cases the average consumer would assume that - at least for 'normal' luggage - no further costs would be incurred.

In particular, when prices are advertised as "starting from" a certain price, the marketplace would recognize that some flights were being offered for a higher, unspecified price. At the same time, the average consumer would understand that the price advertised applied to a particular part of the offer. According to the court, in this particular case the marketplace would understand the respondent's advertisement for flights "starting from..." to indicate that the price of a particular flight would depend on the place of departure/destination (not mentioned in the advertisement) and/or the booking date. In other words, the specific price quoted would be available only in the best cases. However, the average consumer would not expect that in addition to the "starting from ..." price, a fee for hold baggage would be charged. The statement "including taxes and fees" rather pointed in the opposite direction, supporting an assumption that no further fees would be incurred.

In the Senate's view, there were insufficient grounds to support a conclusion that in the case of cheap flights, the marketplace is aware that passengers will always have to pay extra for hold baggage. Therefore, the court concluded that regardless of the price paid for the flight, passengers do not view a normal amount of hold baggage as an 'extra' for which an additional fee must be paid.

Comment

When advertising flight prices, statutory requirements and the criteria developed in legal practice must be observed.

The airline must advertise the final price to end consumers. The price stated must include all price components. Net prices "plus value added tax" or "plus airport landing fee", for example - in other words, prices that do not indicate the full total that will be charged - would violate Section 1(1) of the Ordinance on the Quotation of Prices.

If no reference is made to airport landing or other fees, the advertisement and the violation of the Ordinance on the Quotation of Prices at the same time constitute a violation of the Act against Unfair Competition. As a consequence, in such cases a competitor may generally assert a right to forbearance.

In the case of internet bookings, the courts are less strict. Within the online context, the consumer need not necessarily be informed of the final price at the first stage of the booking process, if the final price can be calculated only as the process progresses and the consumer is informed of that fact.

Finally, if insufficient numbers of tickets are available at the cheapest price advertised, the advertisement will also be misleading under Section 5(5) of the Act on Unfair Competition.

In this case the court rightly ruled that the average consumer does not expect to be charged for each single item of luggage that he or she wishes to check in. A free baggage allowance of between 15kg and 20kg is still considered the market standard, irrespective of the price of the ticket. If an airline wishes to deviate from the market standard, it may do so, but in that case it must make clear in its advertisements that it will charge for hold baggage.

However, the market standard assumed by the appellate court may yet change - and perhaps sooner rather than later. Certain airlines already charge for all hold baggage and this number will surely increase. The rise in jet fuel prices is affecting not only pricing, but also marketing and distribution.

In the meantime, the EU Regulation on Common Rules for the Operation of Air Services in the Community has been adopted at the second reading. The regulation states that:

"Air fares published in any form, including on the Internet, which are addressed directly or indirectly to the travelling public shall include all applicable taxes, non-avoidable charges, surcharges and fees known at the time of publication."

Therefore, market standards may change, but the airlines must still make clear what the final price is.

Endnotes

(1) Hanseatic Appellate Court, judgment of September 20 2007 (File 3 U 30/07).

(Ulrich Steppler and Christian Kusulis)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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