contract-law consumer-protection
Is airline ticket overbooking fraud?
<p>What protects airlines (if anything) from fraud charges when they sell same ticket to multiple people for a single flight?</p>

<p>Why <em>might</em> 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?</p>

<p>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 <a href="https://www.united.com/web/en-US/content/contract-of-carriage.aspx#sec5" rel="nofollow noreferrer">United Carriage Contract</a> specifically says, rule 5G:</p>

<blockquote>
  <p>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.</p>
</blockquote>

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

<p>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.</p>

<p>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.</p>

<ol>
<li>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. </li>
</ol>

<p>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.</p>

<p>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.</p>

<ol start="2">
<li><p>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.</p></li>
<li><p>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).</p></li>
</ol>

<p>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.</p>

<p>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.</p>

<ol start="4">
<li><p>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.</p></li>
<li><p>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.</p></li>
</ol>

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

<blockquote>
  <p>wrongful or criminal deception intended to result in financial or personal gain</p>
</blockquote>

<p>The problem here is that an airline has created a <em>conditional</em> 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 <em>physically given anything</em> - 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.</p>

<p>Is that fraud? <strong>No.</strong> Because the airline in that situation:</p>

<ul>
<li>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.</li>
<li>Has not benefited financially from the situation. In fact, in pretty much <em>all</em> cases they actually <em>lose</em> 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.</li>
</ul>

<p>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 <em>really</em> 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.</p>

<p>Commercial air transportation is heavily regulated by the U.S. Code.  <a href="https://www.law.cornell.edu/cfr/text/14/part-250" rel="nofollow noreferrer">14 CFR Part 250</a> explicitly allows (and regulates) the practice of overselling flights.  <a href="https://www.law.cornell.edu/cfr/text/14/250.11" rel="nofollow noreferrer">For example</a>:</p>

<blockquote>
  <h3>§ 250.11 Public disclosure of deliberate overbooking and boarding procedures.</h3>
  
  <p>(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:</p>
  
  <blockquote>
    <p><strong>Notice - Overbooking of Flights</strong></p>
    
    <p>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.</p>
  </blockquote>
  
  <p>(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.</p>
  
  <p>(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.</p>
</blockquote>

<p>Airline overbooking isn't fraud because <em>the purchaser of the ticket agreed to it when entering into a contract with the airline.</em>  For example, <a href="https://www.united.com/web/en-US/content/contract-of-carriage.aspx" rel="nofollow noreferrer">United's contract of carriage</a> says, in Rule 5(G):</p>

<blockquote>
  <p>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.</p>
</blockquote>

<p>Rule 25, in turn, is the rule governing "Denied Boarding Compensation."</p>
