Class Actions That Changed the Way We Travel

It’s no secret that Americans love to travel. In 2013, we spent nearly $900 billion on travel-related expenses. Still, we’ve come to know and expect healthy competition in this booming industry, which is made evident by dozens of companies purporting to offer the “cheapest flights” or “best hotels” for our money.

But what happens when these companies pretend to compete and artificially inflate prices, only to make additional profits across the board at our expense? That’s where antitrust class actions come into play. In 1890, Congress passed the Sherman Antitrust Act, which was designed to ensure that our country retained a free market economy. Under the Act, companies were free to compete for business without private or governmental restraints and, in turn, consumers could purchase better products and services for lower prices.

While the Sherman Act still serves as the basis for our modern antitrust laws, some companies continue to run afoul of the law by conspiring to fix their prices or taking part in other anticompetitive practices with their “competitors” – all in the interest of profits. Fortunately, class action lawsuits allow people the chance to come together and fight back against large corporations when the law is being broken.

Much to the public’s benefit, class actions have been filed in multiple areas of the travel industry. These suits have not only provided compensation to consumers, but also serve as examples for other companies, thereby reaffirming our nation’s laws and protecting our rights for the future. So, have you benefitted from a class action lawsuit involving the way we travel? Read on to find out.

CA Rental Car Companies Conspired to Pass Government Fees onto Customers, Lawsuit Alleged

In 2006, legislators in California agreed to a state law provision that would allow rental car companies to “unbundle” two fees – one that funded the California Travel and Tourism Commission’s budget and another that paid airports for the use of their facilities – from their overall rental prices. This meant that the fees could be charged in addition to their base rental prices and passed onto customers at the company’s discretion.

The provision was originally designed to work as a tool for competition if, say, Hertz wanted to win over customers by advertising that it would not charge the fees; however, customers became suspicious when the provision went into effect and many major car rental companies decided to charge drivers separately for the fees. In a class action lawsuit against Hertz, Avis, Enterprise, Vanguard and others, it was alleged that the rental car companies all conspired to charge the fees separately, leaving customers with no choice but to pay the additional costs.

Several years into litigation, the companies agreed to settle the claims and gave free rental car vouchers to millions of affected drivers. More importantly, though, the agreement prohibited the companies from colluding on pricing decisions in the future. Now, rental car companies in California must disclose, on a separate line, the specific fees customers will be charged and what those fees go toward.In addition, the settlement prevents car rental companies from tacking on government fees without first removing them from their base rental prices.

Shames et al. v. Hertz Corporation et al., case number 3:07-cv-02174, in the U.S. District Court for the Southern District of California

Price-Fixing: International and Trans-Pacific Airlines Faced Lawsuits over Fuel, Airfare Fees

If an airline told you that it was increasing its fares simply because it was following in the footsteps of its competition – would you believe it? During the last decade, consumers have targeted dozens of major airlines for allegedly trying to “keep up with the competition” when less-than-honorable behavior was suspected.

For instance, consumers filed a class action lawsuit against several trans-Pacific airlines alleging that they “conspired and colluded” to increase fuel surcharges on their flights, which effectively raised and fixed airfare prices. According to the suit, the airlines staggered their fuel fee increases to appear as if the increases were not premeditated, but that one company was just following another’s lead. A similar suit, filed against British Airways and Virgin Atlantic Airways, alleged that the airlines set an anticompetitive environment for consumers because they allegedly conspired to fix the prices of their international flights.

Both cases ultimately settled for $22 and $200 million, respectively, with the airlines agreeing that they would no longer conspire over airfare and fuel fees in the future. Not to mention, the settlements served as multi-million dollar messages for other airlines considering the same illegal practices.

In re: International Air Transportation Surcharge Antitrust Litigation, MDL no. 1793, in the U.S. District Court for the Northern District of California

In re: Transpacific Passenger Air Transportation Antitrust Litigation, MDL no. 1913 in the U.S. District Court for the Northern District of California

Lawsuit Alleged Hidden Currency Conversion Fees Were Pure Profit for Credit Card Companies, Banks

More than 90 percent of credit card companies in the United States charge currency conversion fees on purchases made in foreign countries. The credit card industry introduced these fees in the 1980s, allegedly as part of an industry-wide conspiracy to generate new revenue off the backs of customers who travel overseas. When the banks first started charging currency conversion fees, the amount of the fee and the rate at which it was calculated was not disclosed to the credit card holder. Rather, if a person made a purchase while traveling, the person’s monthly credit card statement would show the amount of the transaction in dollars, with no mention of the exchange rate used to convert the foreign currency or the fee charged by the bank for allegedly performing this service.

To help remedy this injustice, consumers filed a class action lawsuit against several credit card companies alleging that they all violated federal antitrust law by agreeing to charge similar currency conversion fees. The class action claimed credit card companies and banks made millions from fees that were completely unnecessary and more or less made up out of thin air to make money for the banking industry.

While the major credit card companies and their issuing banks typically compete for business when setting prices for interest rates, annual fees and other charges, the lawsuit alleged that these companies purposely inflated, fixed and concealed these fees, preventing competition and ultimately leaving consumers no choice but to accept the charges. In addition, the class action alleged that the currency conversion fees bore no relationship to the actual costs involved in processing overseas transactions. While a $10 purchase would only cost $0.10 to “convert,” a $10,000 purchase would cost $100, which is much more than any such conversion would cost. In addition, the plaintiffs claimed that the conversion fees weren’t needed for every transaction, because the companies had customers in other countries who would also make foreign purchases, which would essentially cancel out the cost of most conversion fees.

In 2009, the companies agreed to settle these lawsuits and pay more than $330 million to customers who allegedly overpaid for foreign transaction fees. The settlement also prohibited the companies from contracting and conspiring to set foreign transaction fees at an equal rate in the future. Today, both Visa and MasterCard are required to disclose the amount of these fees on customers’ account statements, separate from the total foreign transaction charge. Furthermore, any changes made to first-tier currency conversion fees must be fully disclosed to consumers.

In re: Currency Conversion Fee Antitrust Litigation, MDL no. 1409 in the U.S. District Court in the Southern District of New York

Whether traveling for business or leisure, the effects of these class action lawsuits can be felt. Did we miss any important cases that changed the way you travel? Tell us about it in the comments.

If you liked this piece, you may also enjoy our previous entry in this series, “Class Actions that Changed the Way We Eat.”

Resources

Shames et al. v. Hertz Corporation et al., case number 3:07-cv-02174, in the U.S. District Court for the Southern District of California – Legal Brief Filed By Plaintiffs Explaining Benefits of the Settlement Agreement

In re: International Air Transportation Surcharge Antitrust Litigation, MDL no. 1793, in the U.S. District Court for the Northern District of California – Transfer Order

In re: Transpacific Passenger Air Transportation Antitrust Litigation, MDL no. 1913 in the U.S. District Court for the Northern District of California – Second Amended Complaint

In re: Currency Conversion Fee Antitrust Litigation, MDL no. 1409 in the U.S. District Court in the Southern District of New York – Settlement Agreement