They say the road to hell is paved with good intentions. In American Airline’s case, it’s constructed with greed, but the result may end up the same, and that might be good news for travelers.
The Supreme Court recently refused to lift a temporary injunction which prohibits the company Frequent Flier Depot from buying and selling frequent flier points. AA had sued to stop the practice, claiming that its AAdvantage program was a contract, and as such, precludes individuals from selling their points to brokers and others.
Among other things, American is alleging tortious interference with contract, tortious interference with prospective relations, fraud and misappropriation. I’m reminded of parents who quarrel over the custody rights of their children and somehow destroy all the goodwill they’ve built up in the process. Not to mention the fact that all such future interactions will be subject to the possible oversight of the court.
The Supreme Court’s refusal to act throws the case back to the lower courts where it will proceed. At issue is whether or not Frequent Flier Depot (FFD) can purchase points from consumers and use them to buy tickets they sell back to customers who don’t want to deal directly with American Airlines. FFD says buying a ticker through them is cheaper than purchasing it from the airline. Of course, the airlines think that is a crime.
It’s a shame that AA thinks that way, and in doing so, they fail to take the long view. If they opened up their minds, they would see that ticket brokers can be a good thing — they help ensure seats are filled, the tickets they offer have been paid for in the form of the loyalty points travelers earned through higher priced tickets, and if AA loses a little on the deal, so what? They discount tickets all the time.
This is a prime example of someone having a tantrum because of a perceived loss of control which may cost them in the end because they could lose more control. On the surface, this litigation would seem to restrict consumer options if it follows through to a legal conclusion that sustains the airline’s view and results in less choice in terms of where and how to buy tickets. But, in legal circles, one must be careful of the precedents one sets.
Every passenger who’s ever been bumped, delayed, held on the tarmac or had their luggage lost, knows the strict line the airlines draw at enforcing the “Contract of Carriage.” Ditto for those that seek refunds for a missed flight – the airline cites its purchase rules with steely resolve to avoid reimbursements. Notoriously cheap and infamously strict in dealing with such disputes, the consumer has long felt at a disadvantage.
Yet, when it comes to frequent flier programs, which are often touted more as some sort of social club or affinity program, airlines tend to slack off a bit. Sites such as Consumer Traveler are often mushy battlegrounds when issues arise dealing with those spam-like e-mails that covertly inform the recipient that they have 30 days to use all 10 years worth of accumulated miles or else. Changes in program features are handled with the diplomacy of a parent that instructs the child about rules with the standard, “because I said so.”
At the crux of the matter is the legal definition of a contact. Legally, a contract is “based on mutuality of obligation and thus is enforceable.” The brokers argue (and so would many consumers) that by its rather unilateral nature, which allows American to change the terms of the program with or without notice and to terminate the program with six months notice (i.e., those notorious e-mails) the agreement with American on frequent flier miles is not a legally binding contract. Right now that would be because American holds all of the power – it can change virtually any part of the program with little, or even no, notice (and without any resulting compensation). If American prevails in its argument in this case, it might be much to its future detriment, for with the definition of these types of programs as a legally binding contract, airlines will potentially be held to a much higher standard in terms of rescinding and changing the terms.
So, in light of the airlines rather imperious history with regard to the implementation of these programs, and their ‘take it or leave it’ attitude on changes, it’s a curious and not entirely harmful development that American Airlines is rocketing the somewhat unsteady guidance system directing frequent flier programs into the rarified air reserved for those objects that defy the gravity of a legal challenge.
If American Airlines is successful in putting Frequent Flier Depot out of business, they may have exchanged that brief victory for a future pitted with lawyers and litigation every time a frequent flier decides their ‘contract ‘with the airlines precludes its present conduct.
The case is Frequent Flyer Depot v. American Airlines, 09-815.
