The opinion
Case: 24-60231 Document: 173-1 Page: 1 Date Filed: 01/28/2025
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
____________ FILED
January 28, 2025
No. 24-60231 Lyle W. Cayce
____________ Clerk
Airlines for America; Alaska Airlines, Incorporated;
American Airlines, Incorporated; Delta Air Lines,
Incorporated; Hawaiian Airlines, Incorporated;
Jetblue Airways Corporation; United Airlines,
Incorporated; National Air Carrier Association;
International Air Transport Association,
Petitioners,
versus
Department of Transportation,
Respondent,
consolidated with
_____________
No. 24-60373
_____________
Spirit Airlines, Incorporated,
Petitioner,
versus
United States Department of Transportation,
Respondent.
Case: 24-60231 Document: 173-1 Page: 2 Date Filed: 01/28/2025
______________________________
Petitions for Review from an order of the
Department of Transportation
Agency No. 89 Fed. Reg. 34620
______________________________
Before Southwick, Haynes, and Douglas, Circuit Judges.
Haynes, Circuit Judge:
In 2024, the Department of Transportation (“DOT”) issued a final
rule under 49 U.S.C. § 41712(a) requiring airlines to disclose certain fees
upfront when potential customers search for itineraries. See Enhancing
Transparency of Airline Ancillary Service Fees [hereinafter “Rule”], 89
Fed. Reg. 34620 (Apr. 30, 2024). Two groups of airlines now challenge the
Rule as unauthorized by Congress and unlawful under the Administrative
Procedure Act (“APA”).
We hold that DOT has authority to make rules under § 41712(a).
However, we ultimately REMAND this particular Rule, as DOT failed to
fully comply with the requirements of the APA.
I. Background
A. Legislative Background
Under the Federal Aviation Act of 1958, the Civil Aeronautics Board
regulated the interstate airline industry. Nw., Inc. v. Ginsberg, 572 U.S. 273,
279–80 (2014). “Pursuant to this authority, the Board closely regulated air
carriers, controlling, among other things, routes, rates, and services.” Id. at
280. The Board also had authority “to take administrative action against
certain deceptive trade practices.” Morales v. Trans World Airlines, Inc., 504
U.S. 374, 378 (1992). Specifically, Congress empowered the Board to
“investigate and determine whether any air carrier . . . has been or is engaged
in unfair or deceptive practices or unfair methods of competition” and to
“order such air carrier . . . to cease and desist from such practices or
2
Case: 24-60231 Document: 173-1 Page: 3 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
methods” upon finding after “notice and hearing” that the air carrier was
engaged in the same. Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 296 n.7
(1976) (quoting § 411 of the Federal Aviation Act, 72 Stat. 769 (formerly
codified at 49 U.S.C. § 1381 (1976))).
“In 1978, however, Congress enacted the [Airline Deregulation Act
(the “Deregulation Act”)], which sought to promote ‘efficiency, innovation,
and low prices’ in the airline industry through ‘maximum reliance on
competitive market forces and on actual and potential competition.’”
Ginsberg, 572 U.S. at 280 (quoting 49 U.S.C. § 40101(a)(6), (12)(A)). The
Deregulation Act “provided that [the Civil Aeronautics Board] would be
dismantled in 1985.” Statland v. Am. Airlines, Inc., 998 F.2d 539, 540 (7th
Cir. 1993). It also “eliminated the government’s ability to set airfares.”
Spirit Airlines, Inc. v. DOT, 687 F.3d 403, 408 (D.C. Cir. 2012). But the
Deregulation Act did not abolish the federal government’s power to
investigate and prohibit unfair or deceptive practices in air transportation;
instead, Congress transferred the power to the DOT. Ginsberg, 572 U.S. at
288–89; Morales, 504 U.S. at 378–79; Spirit Airlines, 687 F.3d at 408;
Statland, 998 F.2d at 541. Such power is now codified in 49 U.S.C. § 41712,
whose relevant language echoes § 411 of the Federal Aviation Act of 1958:
On the initiative of the Secretary of Transportation or the
complaint of an air carrier . . . or ticket agent, and if the
Secretary considers it is in the public interest, the Secretary
may investigate and decide whether an air carrier . . . has been or is
engaged in an unfair or deceptive practice or an unfair method of
competition in air transportation or the sale of air transportation.
If the Secretary, after notice and an opportunity for a hearing,
finds that an air carrier . . . is engaged in an unfair or deceptive
practice or unfair method of competition, the Secretary shall
order the air carrier . . . to stop the practice or method.
49 U.S.C. § 41712(a) (emphasis added).
3
Case: 24-60231 Document: 173-1 Page: 4 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
B. Administrative Background
Before it was dismantled pursuant to the Deregulation Act, the Civil
Aeronautics Board issued rules pursuant to § 41712’s predecessor, § 411 of
the Federal Aviation Act. United Air Lines v. Civ. Aeronautics Bd., 766 F.2d
1107, 1111 (7th Cir. 1985) (“The Board has been issuing rules based on section
411 since 1960.”). Such rules included provisions relating to overbooking,
notice of passenger contract terms, and liability for lost luggage. Id.
DOT has likewise issued regulations pursuant to § 41712 for decades.
For example, in 1999, DOT promulgated a rule requiring carriers, when
selling service under a single flight number but requiring a change of aircraft,
to provide passengers written notice that they “must change aircraft en route
even though [the] ticket may show only one flight number.” 14 C.F.R.
§ 258.5(c); see id. § 258.4 (stating that the holding out of such service “is
prohibited as an unfair or deceptive practice or an unfair method of
competition within the meaning of [§ 41712] unless . . . carriers and ticket
agents follow the requirements of this part”).
Further, effective January 2012, sellers of air transportation became
required to notify consumers “of the potential for a price increase that could
take place prior to the time that the full amount agreed upon has been paid
by the consumer,” including but not limited to increases in baggage prices or
fuel surcharges. 14 C.F.R. § 399.89. More recently, DOT issued a rule
requiring carriers to “provide a passenger on a [domestic] flight experiencing
a tarmac delay at a U.S. airport the opportunity to deplane before the tarmac
delay exceeds three hours in duration,” subject to certain exceptions.
14 C.F.R. § 259.4(c)(1); see id. § 259.4(h) (stating that a carrier’s “failure to
comply . . . will be considered to be an unfair and deceptive practice within
the meaning of” § 41712); Tarmac Delay Rule, 86 Fed. Reg. 23260, 23270–
71 (May 3, 2021) (publishing the rule).
4
Case: 24-60231 Document: 173-1 Page: 5 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
C. Procedural History
In 2022, DOT proposed a new rule that would require airlines to
disclose—upfront—the prices of certain ancillary fees, such as those for
checking a bag or canceling a flight, during the online booking process. See
Enhancing Transparency of Airline Ancillary Service Fees [hereinafter
“Notice of Proposed Rulemaking,” or “NPRM”], 87 Fed. Reg. 63718 (Oct.
20, 2022). The proposed rule aimed to increase transparency and thus allow
consumers “to determine the true cost of travel and to adequately compare
airline pricing.” Id. at 63721. Indeed, the Deregulation Act was issued for
the purpose of saving money. DOT also proposed amending 14 C.F.R.
§ 399.85 to provide that the failure to disclose these fees “on the first page
displayed when a consumer conducts a search for air transportation when
fare and schedule information is shown” is “an unfair and deceptive
practice” within the meaning of § 41712. Id. at 63736–38.
1. The 2022 regulatory impact analysis
After the Office of Management and Budget determined that the
proposed rule required an assessment of potential costs and benefits, 1 DOT
prepared a regulatory impact analysis (the “2022 RIA”). See Doc. No.
DOT-OST-2022-0109-0002, 2 https://perma.cc/F9E8-HFL9; see also
NPRM, 87 Fed. Reg. at 63732 (summarizing 2022 RIA). In a section titled
“Need for regulation,” the 2022 RIA said the “main premise underlying the
proposed rule” was that “a market failure may exist because airline
consumers may have inadequate information about ancillary fees before
_____________________
1
See Exec. Ord. No. 12866, Regulatory Planning and Review, 58 Fed. Reg. 51735
(Sept. 30, 1993), § 6(a)(3)(B)(ii), (C) (requiring, where applicable, assessment of potential
costs and benefits of regulatory action).
2
Unless otherwise specified, all citations to the administrative record will be to the
rulemaking docket labeled DOT-OST-2022-0109, available at Regulations.gov.
5
Case: 24-60231 Document: 173-1 Page: 6 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
buying tickets.” 2022 RIA at 1. It acknowledged that although consumers
“can sometimes acquire [the] information on their own,” they are more
likely to do so “when search costs are low.” Id. at 5; see also id. (“When
consumers can easily acquire the information . . . , they can eliminate the
[information] asymmetry through their own actions, albeit with the cost of
additional time and effort.”).
The 2022 RIA further said it was “not possible at this time” to
“quantitatively evaluat[e] the effects of the rule” due to “a lack of data and
other significant uncertainties,” and thus it was “not possible to quantify
whether the proposed rule would yield benefits that exceed costs.” Id. at i–
ii. But DOT concluded that the proposed rule “would yield societal benefits
if it leads to reduced deadweight loss . . . or reduced search costs,” and it
calculated a “hypothetical example range” of societal benefits “using
methods from earlier rulemakings.” NPRM, 87 Fed. Reg. at 63732. 3
For example, assuming that “1% of passengers compared prices
[including ancillary fees] before the proposed rule” and that “those
passengers save 2 minutes of searching after the rule,” DOT calculated that
$4.9 million in annual search cost savings would result, or $0.73 in time
savings per passenger. 2022 RIA at 21. 4 DOT acknowledged, however, that
its numbers were highly speculative: it “d[id] not have information to
estimate the number of passengers who already compare fares with ancillary
fees included or the amount of time they would save due to the proposed
_____________________
3
DOT defines “deadweight loss” as “the reduction of excess consumption of air
travel” that “occurs because consumers who are unaware of ancillary service fees behave
as if the price for air travel is lower than it is.” Rule, 89 Fed. Reg. at 34668.
4
This calculation “assume[d] that passengers search for fares on their own time
without compensation and estimate[d] the value of this time using the median post-tax
wage for United States workers, which was $22.00 per hour in 2021.” 2022 RIA at 21.
6
Case: 24-60231 Document: 173-1 Page: 7 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
rule,” so it cautioned that its “discussion of potential time savings benefits
[was] only illustrative.” Id.
2. Public comments
DOT sought comments regarding the costs of implementing the
proposed rule and regarding “the key uncertainties for quantifying or
monetizing the economic effects of the proposed rule.” NPRM, 87 Fed.
Reg. at 63732. Commenters, including the trade association Airlines for
America (“A4A”), questioned the proposed rule’s benefits.
A4A argued that the proposed disclosure requirements would do
more harm than good by “consum[ing] scarce screen real estate.”
Comments of Airlines for America at 38 (Jan. 23, 2023) [hereinafter A4A
Comments], Doc. No. 90, https://perma.cc/T7LV-8DWB. A4A’s
comments included a regulatory impact assessment prepared for A4A by
Campbell-Hill Aviation Group, LLC. See generally Attach. B [hereinafter
Campbell-Hill Survey], A4A Comments. The Campbell-Hill Survey
estimated that the proposed disclosure rule would result in net benefits of
negative $33.7 billion and “will do much more harm than good.” Campbell-
Hill Survey at 6. For example, the survey argued that only 20 percent of all
passengers pay for a first checked bag, making the proposed disclosure rule
“only relevant to one of every five passengers.” Id. at 10.
For its part, Frontier Airlines contended that the proposed rule
“would make it impossible . . . to offer consumers the benefit of unbundled
service options and ultra-low fares.” Presentation of Frontier Airlines (Mar.
30, 2023) at 12, Doc. No. 728, https://perma.cc/FY8C-PW7H. 5 The public
comment period closed on April 6, 2023. Rule, 89 Fed. Reg. at 34625.
_____________________
5
As described by petitioners Frontier Airlines and Spirit Airlines, an “unbundled”
fare model offers customers “a base fare for air transportation” and the option to “select
7
Case: 24-60231 Document: 173-1 Page: 8 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
3. The 2024 RIA
DOT promulgated the final Rule a year later on April 30, 2024. In
doing so, it published a new Regulatory Impact Analysis (the “2024 RIA”) 6
supporting the Rule’s benefits for consumers. See Rule, 89 Fed. Reg. at
34669 (stating that the 2024 RIA was “developed in support of this final
rule” and contained “modifi[cations] in response to public comments and
further consideration by the Department”).
The 2024 RIA noted that in light of new data, DOT had reevaluated
the benefits of the Rule for consumers with respect to time savings. See 2024
RIA at 16. It cited a study by Nicholas Rupp, dated December 15, 2023, that
concluded that the “amount of time needed to determine airfares inclusive
of checked bag fees” was longer on airline sites compared to online travel
sites like Travelocity or Expedia “due to the increase[d] effort needed to find
information on baggage fees during airfare search.” Id. DOT “use[d]
Rupp’s finding” to raise its estimate of consumer time savings that would
result from the Rule. Id. The 2024 RIA also responded to A4A’s estimate
that only 20 percent of consumers pay to check bags,7 noting that “baggage
fee information is not necessarily irrelevant for consumers who do not pay to
check bags” and citing the Rupp study’s finding that “46 percent of student
participants consider baggage fee information when they search for airfare.”
Id. “Thus,” DOT concluded, “while we estimate time savings benefits
using 20 percent, this is only for illustrative purposes. We view 46 percent
[from the Rupp study] and 61 percent [from a 2023 A4A survey in which 61
_____________________
as needed or desired . . . ancillary services such as the ability to change or cancel flights,
select specific seats, or take a checked bag.”
6
See Doc. No. 753, https://perma.cc/SG5T-EF53.
7
Of course, knowing one has to pay to check a bag may cause far fewer people to
check a bag.
8
Case: 24-60231 Document: 173-1 Page: 9 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
percent of respondents said they wanted checked bag fees reported in initial
airfare displays] as more plausible proxies for the percentage of consumers
who find information on ancillary fees relevant to their search for airfare and
use those as primary estimates.” Id. at 16–18.
Overall, the 2024 RIA estimated that the Rule would provide net
benefits ranging from $30.3 million to $254 million annually, with a 53
percent probability “of net benefits being positive.” Id. at i. This 53 percent
probability was based on “plausible assumptions about the percentage of
consumers who consider ancillary fees when they purchase airfare.” Rule,
89 Fed. Reg. at 34668. The $30.3 million and $254 million figures were the
result of two calculations, the lower of which used the Rupp study to estimate
that 46 percent of consumers consider ancillary fees when searching for
airfare. 2024 RIA at 24 (cost-benefit table). Both estimates accounted for
approximately $5.5 million reduction in deadweight loss. Id.
The bulk of the assumed benefits in both estimates was attributable to
a “[r]eduction in search time for consumers interested in ancillary service
fees when they search for airline tickets.” Id. DOT acknowledged that its
cost-benefit analysis was “highly sensitive to the percentage of consumers
who consider ancillary fee information relevant to their airfare purchase
decision.” Id. DOT also estimated that the Rule would result in a transfer
of $543 million annually from airlines to consumers—an amount that
represents what consumers currently overpay in fees. Id. at i–ii; see also Rule,
89 Fed. Reg. at 34622, 34668 (summarizing 2024 RIA).
4. The final Rule
The final Rule provides that airlines must make clear and conspicuous
disclosures regarding the costs of “critical ancillary services,” defined as
“(1) transporting a first checked bag, second checked bag, and carry-on bag;
and (2) changing or canceling a reservation.” Id. at 34621. These disclosures
must occur at “the first point at which a fare is quoted for a particular flight
9
Case: 24-60231 Document: 173-1 Page: 10 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
itinerary.” Id. at 34649. They also may not occur via a hyperlink because
“displaying fees in that manner would disrupt the consumer’s search.” Id.
at 34650.
Otherwise, the Rule allows for flexibility. Various display choices
remain available; website platforms can disclose the fees “through a pop-up,
in expandable text, or by other means.” Id. (emphasis added). Further,
airlines and ticket agents may “enabl[e] consumers to opt out of receiving fee
information for a first checked bag, a second checked bag, or a carry-on bag
during the search process,” so long as the consumer “affirmatively indicates
that no one in their booking party plans to travel with a first checked bag, a
second checked bag, or a carry-on bag.” Id. at 34657. In other words, the
regulated entities retain some discretion as to how they implement the
disclosure requirements.
5. Litigation
On May 10, 2024, A4A and a group of airlines (together “Airline
Petitioners”) petitioned for review in this court and moved for a stay of the
Rule pending the outcome of their petition. We have jurisdiction over the
petition pursuant to 49 U.S.C. § 46110. See U.S. Air Tour Ass’n v. FAA, 298
F.3d 997, 1012 (D.C. Cir. 2002). A panel of our court granted the requested
stay on July 29, 2024. See Airlines for Am. v. DOT, 110 F.4th 672, 674 (5th
Cir. 2024). 8
Meanwhile, on June 28, 2024, Spirit Airlines filed a similar petition in
the Eleventh Circuit. Since the A4A petition was filed first, the Spirit
petition was transferred to this court. See 28 U.S.C. § 2112(a)(5). After
_____________________
8
This opinion is meaningful and helpful although it has some differences in what
we say and address here. While we very carefully consider such rulings, a merits panel is
not bound by the motions panel in the same case. Voting for Am., Inc. v. Steen, 732 F.3d
382, 386 (5th Cir. 2013).
10
Case: 24-60231 Document: 173-1 Page: 11 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
Frontier Airlines intervened in Spirit’s case in support of Spirit, we
consolidated the A4A and Spirit petitions. We will refer to Spirit and
Frontier together as “SF Petitioners” and we list both groups together as
simply “Petitioners.”
II. Discussion
Petitioners’ challenges to the Rule fall into three categories. First,
they argue that DOT does not have statutory authority under 49 U.S.C.
§ 41712 to issue the Rule. We review questions of statutory interpretation de
novo. United States v. Lauderdale County, 914 F.3d 960, 964 (5th Cir. 2019).
Second, Petitioners contend that the Rule violates the APA. Under
the APA, we must “hold unlawful and set aside agency action” that is
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with law”; “contrary to constitutional right, power, privilege, or immunity”;
“in excess of statutory jurisdiction, authority, or limitations, or short of
statutory right”; or “without observance of procedure required by law.” 5
U.S.C. § 706(2)(A)–(D).
Third, SF Petitioners argue that the Rule violates the First
Amendment. Because we ultimately remand the Rule under the APA for
further consideration, we decline for now to reach the First Amendment
question.
A. Rulemaking Authority
Petitioners argue that DOT exceeded its statutory authority in issuing
the Rule because 49 U.S.C. § 41712 merely provides adjudicatory authority
to the agency—not prescriptive rulemaking authority. Airline Petitioners
focus on the statute’s use of the word “stop,” § 41712(a), stressing that
“stop means stop, not prescribe” and that the “prohibitory power in
§ 41712(a)” is conditioned “on DOT’s making individualized findings”
11
Case: 24-60231 Document: 173-1 Page: 12 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
through case-by-case adjudication. Further, Airline Petitioners contend that
even if § 41712(a)’s text can otherwise be read to support DOT’s authority
to issue the Rule, the major questions and nondelegation doctrines prohibit
it.
We conclude that DOT has the power to make rules under § 41712
and that this power is not inconsistent with the major questions or
nondelegation doctrines. But because we hold below that the Rule at issue
here must be remanded under the APA, we need not determine whether this
Rule is fully authorized by § 41712.
1. Forfeiture
At the threshold, DOT argues that Petitioners conceded the agency’s
rulemaking authority during the notice-and-comment process and thus
forfeited their statutory challenge, citing our decision in BCCA Appeal
Group. v. EPA, 355 F.3d 817, 828 (5th Cir. 2003) (“Generally, in considering
a petition for review from a final agency order, this court will not consider
questions of law which were neither presented to nor passed on by the
agency.”). 9 In reply, Petitioners argue that City of Seabrook v. EPA, 659 F.2d
1349, 1360 (5th Cir. Unit A Oct. 1981), controls and that they are allowed to
raise legal challenges not made before the agency in the first instance.
For two reasons, we agree with Petitioners. First, Seabrook was the
first case in this court addressing whether a litigant who challenges agency
action on grounds not raised during notice and comment has forfeited the
_____________________
9
DOT specifically cites comments by A4A, Spirit, and Frontier. See A4A
Comments at 3–4 (“Regulations that empower consumers to make intelligent choices in a
competitive marketplace are consistent with airline deregulation.”); Comments of Spirit
Airlines, Inc. (Jan. 23, 2023), at 6, Doc. No. 92, https://perma.cc/9D7V-2229 (“Current
Regulations Encourage Innovation[.]”); Comments of Frontier Airlines (Jan. 23, 2023) at
5, Doc. No. 84, https://perma.cc/YQU8-L57H (“The 2011 regulations have worked well
. . . .”).
12
Case: 24-60231 Document: 173-1 Page: 13 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
challenge in court. The Seabrook panel determined that “courts should not
generally hold a petitioner estopped from objecting to an agency rule because
his specific objection was not made during the ‘notice and comment’
period.” Id. So, to the extent that BCCA contradicts it, we follow Seabrook
under the rule of orderliness. See Burge v. Par. of St. Tammany, 187 F.3d 452,
466 (5th Cir. 1999) (“It is a firm rule of this circuit that in the absence of an
intervening contrary or superseding decision by this court sitting en banc or
by the United States Supreme Court, a panel cannot overrule a prior panel’s
decision.”).
Second, our precedent suggests that forfeiture is most apt when a
petitioner raises an arbitrary and capricious challenge before the courts and
makes arguments not developed during underlying rulemaking proceedings.
Compare, e.g., BCCA Appeal Grp., 355 F.3d at 829 n.10 (arbitrary and
capricious challenge forfeited), and Tex. Oil & Gas Ass’n v. EPA, 161 F.3d
923, 933 n.7 (5th Cir. 1998) (arbitrary and capricious challenge forfeited),
with Am. Forest & Paper Ass’n v. EPA, 137 F.3d 291, 295, 297 (5th Cir. 1998)
(statutory authority challenge not forfeited). Here, DOT argues that
Petitioners forfeited their challenge to its rulemaking authority under
§ 41712—a matter of statutory interpretation we determine de novo, with no
deference owed to the agency. See Loper Bright Enters. v. Raimondo, 603 U.S.
369, 412–13 (2024). DOT’s interpretation of § 41712(a) merely holds
persuasive value, at best. See id. at 2262 (reaffirming Skidmore v. Swift & Co.,
323 U.S. 134, 140 (1944)). Thus, in line with the dichotomy that BCCA–
Seabrook suggests, it would run afoul of the judicial function to abstain from
deciding this purely legal matter simply because the agency has yet to weigh
in. We thus reject DOT’s forfeiture argument and proceed to the merits of
Petitioners’ statutory challenge.
13
Case: 24-60231 Document: 173-1 Page: 14 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
2. Statutory interpretation
Airline Petitioners and SF Petitioners both argue that DOT lacks
power to promulgate regulations like the Rule at issue here. Airline
Petitioners focus mostly on the text of § 41712. SF Petitioners mostly make
policy arguments grounded on the Deregulation Act. We address both
arguments below.
a. Statutory text and framework
Airline Petitioners’ argument centers on their contention that § 41712
grants DOT only adjudicative authority, not prescriptive authority. They do
not cite any case in which a court held that an agency with conceded
adjudicatory power similar to the power granted in § 41712 nevertheless did
not have rulemaking power. Instead, they focus on § 41712’s use of the word
“stop.” 49 U.S.C. § 41712(a) (stating that after notice and hearing, DOT
may order an air carrier to “stop” unfair or deceptive practices). Airline
Petitioners read the “stop” provision to “condition[] the prohibitory power
in § 41712(a) on DOT’s making individualized findings” and to “limit[] the
reach of the prohibitory power to the particular airline under investigation.”
In response, DOT argues that this argument is foreclosed, both by the plain
text of the statutory framework and by Supreme Court precedent.
We agree with DOT that the agency has authority to issue some
prescriptive rules under § 41712, specifically in the context of needing to stop
the problems that the rule is addressing. Our conclusion is based primarily
on the plain text of the statutory framework. For example, 49 U.S.C.
§ 40113(a) grants the Secretary authority to “take action” he “considers
necessary to carry out” Part A (“Air Commerce and Safety”) of Subtitle VII
(“Aviation Programs”), which contains § 41712, “including . . . prescribing
regulations” (emphasis added).
14
Case: 24-60231 Document: 173-1 Page: 15 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
Another section of Part A, § 46301, expressly discusses rules issued
under § 41712. That section sets forth civil penalties for violating “a
regulation prescribed” under Chapter 417 (“Operations of Carriers”) of
Title 49, which includes § 41712. Id. § 46301(a)(1)(A)–(B). The maximum
penalty is generally $75,000, or $1,100 if the violator is an individual or small
business concern. Id. § 46301(a)(1). The penalty provision exempts five
sections of Chapter 417, but not § 41712. Id. § 46301(a)(1)(A). Further,
§ 46301 singles out § 41712, raising the maximum penalty to $2,500 for
individuals or small business concerns that violate “section 41712 (including
a regulation prescribed or order issued under such section).” Id.
§ 46301(a)(5)(D) (emphasis added).
We are not persuaded by Airline Petitioners’ argument that other
Title 49 provisions’ express use of the word “prescribe” forecloses the
possibility that Congress authorized prescriptive rulemaking under § 41712,
which does not use that term. All of Airline Petitioners’ examples of
Congress expressly using the word “prescribe” come in the context of
mandatory directives to engage in rulemaking. For example, 49 U.S.C.
§ 40103 provides that the Administrator of the Federal Aviation
Administration “shall prescribe air traffic regulations.” Id. § 40103(b)(2)
(emphasis added). But Airline Petitioners do not quote the word “shall”;
they characterize the provision as merely “authoriz[ing],” rather than
requiring, the Administrator to prescribe such regulations.
Airline Petitioners also elide the word “shall” in § 44903. That
section directs the Administrator of the Transportation Security
Administration (1) to prescribe regulations to protect passengers and
property against criminal violence and aircraft piracy and (2) to prescribe
requirements for screening or inspection of individuals and property before
entry into a secured area of an airport. 49 U.S.C. § 44903(b) (“The
Administrator shall prescribe regulations to protect passengers and property
15
Case: 24-60231 Document: 173-1 Page: 16 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
. . . against an act of criminal violence or aircraft piracy.” (emphasis added));
id. § 44903(h)(4)(B) (stating that the Administrator “shall prescribe specific
requirements for . . . screening and inspection” (emphasis added)). Again,
Airline Petitioners characterize this provision as merely authorizing, rather
than requiring, such regulations.
This distinction between mere authorization and affirmative
command undermines Airline Petitioners’ argument. Once the distinction
becomes clear, it makes perfect sense that § 41712 would not expressly
mention prescriptive regulation because (1) it, unlike §§ 40103 and 44903,
does not require the Secretary to issue prescriptive regulations and (2) the
Secretary already has discretionary rulemaking authority under § 40113. See
49 U.S.C. § 40113(a) (providing that the Secretary “may” prescribe
necessary regulations (emphasis added)); Me. Cmty. Health Options v. United
States, 590 U.S. 296, 310 (2020) (“Unlike the word ‘may,’ which implies
discretion, the word ‘shall’ usually connotes a requirement.” (quotation
omitted)). 10
Supreme Court precedent bolsters our conclusion. In American
Hospital Ass’n v. NLRB, 499 U.S. 606, 608 (1991), the Court heard a
challenge to an NLRB rule pertaining to bargaining units in the hospital
industry. The rule provides that the NLRB will generally recognize only
eight bargaining units for employees of acute-care hospitals: registered
_____________________
10
The other aviation provisions Airline Petitioners cite also use the word “shall.”
See FAA Reauthorization Act of 2018, div. B, tit. IV, subtit. A, § 421, 132 Stat. 3186, 3337
(“[T]he Secretary of Transportation shall promulgate regulations that require each
covered air carrier to promptly provide a refund . . . .” (emphasis added)); FAA Extension,
Safety, and Security Act of 2016, tit. II, subtit. C, § 2305, 130 Stat. 615, 640 (“[T]he
Secretary of Transportation shall issue final regulations to require an air carrier or foreign
air carrier to promptly provide to a passenger an automated refund . . . .” (emphasis
added)).
16
Case: 24-60231 Document: 173-1 Page: 17 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
nurses, physicians, other professionals, technical employees, skilled
maintenance employees, clerical employees, guards, and other
nonprofessional employees. 29 C.F.R. § 103.30(a). The NLRB
promulgated the rule pursuant to § 6 of the National Labor Relations Act
(“NLRA”), which allows the NLRB to make, pursuant to the APA, “rules
and regulations as may be necessary to carry out the provisions” of the
NLRA. 29 U.S.C. § 156. In turn, § 9(b) of the NLRA directs the NLRB to
“decide in each case whether . . . the unit appropriate for the purposes of
collective bargaining shall be the employer unit, craft unit, plant unit, or
subdivision thereof.” 29 U.S.C. § 159(b). In American Hospital Ass’n, the
challenger argued that because § 9(b) of the NLRA requires the NLRB to
make bargaining unit determinations “in each case,” the NLRB cannot
“us[e] general rules to define bargaining units.” 499 U.S. at 608.
In a unanimous opinion, the Supreme Court upheld the NLRB rule.
Id. at 609. First, the Court concluded that the general NLRB rulemaking
authority set forth in § 6 of the NLRA “was unquestionably sufficient to
authorize the rule at issue in this case unless limited by some other provision
in the Act.” Id. at 609–10. This general grant of NLRB authority is
analogous to Title 49’s general grant to the Secretary of Transportation of
rulemaking authority. See 49 U.S.C. § 40113(a).
The Court then rejected the challenger’s argument that NLRA
§ 9(b)’s “in each case” language limits the grant of general authority in § 6.
Am. Hosp. Ass’n, 499 U.S. at 610. Observing that the requirement that the
NLRB “exercise its discretion in every disputed case cannot fairly or
logically be read to command the Board to exercise standardless discretion in
each case,” the Court held that “even if a statutory scheme requires
individualized determinations, the decisionmaker has the authority to rely on
rulemaking to resolve certain issues of general applicability unless Congress
clearly expresses an intent to withhold that authority.” Id. at 612 (emphasis
17
Case: 24-60231 Document: 173-1 Page: 18 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
added); see also Lopez v. Davis, 531 U.S. 230, 244 (2001) (reaffirming
American Hospital Ass’n and stating that even if statute required
individualized determinations, federal agency was not “required continually
to revisit issues that may be established fairly and efficiently in a single
rulemaking proceeding” (internal quotation marks and citation omitted)).
We think the Supreme Court’s interpretation of NLRA § 9 is equally
applicable to 49 U.S.C. § 41712. In other words, even though § 41712
“requires individualized determinations,” DOT “has the authority to rely
on rulemaking to resolve certain issues of general applicability” under that
provision, as Airline Petitioners point to no statute in which Congress has
“clearly expresse[d] an intent to withhold that authority.” Am. Hosp. Ass’n,
499 U.S. at 612.
Airline Petitioners’ attempt to distinguish American Hospital Ass’n is
not persuasive. Airline Petitioners say American Hospital Ass’n “didn’t
concern legislative rules” and instead concerned an NLRB “policy
statement telling regulated parties how it would exercise its enforcement
discretion in future adjudications.” But that is not true. The provision
challenged in American Hospital Ass’n is the same type of provision
challenged here: a final rule issued pursuant to the APA. Compare Rule, 89
Fed. Reg. at 34620, with Collective-Bargaining Units in the Health Care
Industry, 54 Fed. Reg. 16,336, 16,336, 16,347 (Apr. 21, 1989) (publishing
“Final rule” at issue in American Hospital Ass’n pursuant to 5 U.S.C. § 553).
Further, Airline Petitioners make a distinction that is largely without
a difference. They do not explain how, as a practical matter, a rule issued
under the APA is different than a “statement telling regulated parties how
[an agency] w[ill] exercise its enforcement discretion in future
adjudications.” Assuming the Rule is otherwise lawful in stopping the
deceptive or unfair acts of the airline, Airline Petitioners will not
automatically be subject to civil penalties upon its effective date. If the Rule
18
Case: 24-60231 Document: 173-1 Page: 19 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
were to take effect and the Secretary suspects that an air carrier is violating
it, the Secretary would have discretion to (in other words, he “may”)
“investigate and decide” whether the carrier is in fact doing so, and the
carrier would be entitled to “notice and an opportunity for a hearing” before
being subject to any “order . . . to stop” or to any other penalty. 49 U.S.C.
§ 41712(a). Like many typical legislative or prescriptive enactments,
administrative rules often provide regulated parties fair notice concerning the
conduct the government will consider unlawful in future adjudications—
here, such notice concerns the conduct DOT will consider an unfair or
deceptive practice. See 49 U.S.C. § 41712(a) (allowing Secretary to prohibit
“unfair or deceptive practice[s]”); Rule, 89 Fed. Reg. at 34675–77 (revising
14 C.F.R. § 399.85 to provide that DOT “considers the failure to provide and
adhere to the disclosures required by this section to be an unfair and
deceptive practice within the meaning of” § 41712). As the Supreme Court
said of the NLRB rule in American Hospital Ass’n, “[T]he Board must still
apply the rule ‘in each case.’” 499 U.S. at 613. So too here.
In short, Supreme Court precedent and the plain text of the statutory
framework containing § 41712 show that DOT has authority to issue rules
under that provision to stop unfair or deceptive practices. We next consider
whether that authority conflicts with the Deregulation Act.
b. History of airline deregulation
Petitioners’ Deregulation Act argument centers on that law’s repeal
of the Federal Aviation Act’s rate-filing requirements. Prior to the
Deregulation Act, air carriers were required to file with the Civil Aeronautics
Board “tariffs showing all rates, fares, and charges for air transportation” and
to keep the tariffs “open to public inspection.” Federal Aviation Act of 1958,
tit. IV, § 403(a), 72 Stat. 731, 758. SF Petitioners contend that the abolition
of this requirement precludes DOT from issuing the Rule because it “re-
19
Case: 24-60231 Document: 173-1 Page: 20 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
introduc[es] specifically how, when, and where airlines publish rates for
specific air transportation services.”
But, importantly, the Rule is a disclosure requirement, not a rate-filing
requirement. Under the Rule, air carriers do not have to file rates or tariffs
with any government agency; they have to disclose certain fees to consumers
“whenever fare and schedule information is provided for flights to, within,
and from the United States.” Rule, 89 Fed. Reg. at 34620. Further, as
explained above, the Deregulation Act did not abolish the federal
government’s authority to prohibit unfair or deceptive practices or unfair
methods of competition in the airline industry. Compare 49 U.S.C.
§ 41712(a), with Federal Aviation Act of 1958, tit. IV, § 411, 72 Stat. 731, 769.
Indeed, the federal government has been issuing rules, including disclosure
rules, based on § 41712 and its predecessor “since 1960.” United Air Lines,
766 F.2d at 1111; see, e.g., Notice of Terms of Contract of Carriage, 47 Fed.
Reg. 52128, 52130, 52135 (Nov. 19, 1982) (codified as amended at 14 C.F.R.
§ 253.7) (promulgating rule pursuant to § 411 of the Federal Aviation Act
stating that a “passenger shall not be bound by any terms restricting refunds
. . . , imposing monetary penalties . . . , or permitting the carrier to raise the
price, unless the passenger receives conspicuous written notice . . . on or with
the ticket.”); Statements of General Policy, 49 Fed. Reg. 49440, 49440 (Dec.
20, 1984) (codified as amended at 14 C.F.R. § 399.84) (promulgating rule
pursuant to § 411 of the Federal Aviation Act stating that any advertising by
an air carrier is an “unfair or deceptive practice” unless “the price stated is
the entire price to be paid by the customer”). Accordingly, we reject
20
Case: 24-60231 Document: 173-1 Page: 21 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
Petitioners’ argument that the Deregulation Act precludes DOT from
issuing the Rule. 11
We thus hold as a general matter that DOT has authority to issue
rules under § 41712 as long as such rules are consistent with the statutory
language and specifically addressing unfair or deceptive practices being
conducted by airlines. Given our decision below to remand the particular
Rule at issue here, however, we need not go further and evaluate at this
juncture whether any specific requirement of the Rule, as currently written,
goes beyond DOT’s authority to promulgate regulations implementing
§ 41712’s text. For example, Airline Petitioners take issue with an aspect of
the Rule requiring that, if an airline offers a consumer a seat selection for a
fee, the airline make a specific three-sentence disclosure written into the
Rule. See Rule, 89 Fed. Reg. at 34645 (requiring the following disclosure
under certain circumstances: “A seat is included in your fare. You are not
required to purchase a seat assignment to travel. If you decide to purchase a
ticket and do not select a seat prior to purchase, a seat will be provided to you
without additional charge when you travel.”). We decline for now to reach
the question whether this requirement regarding seat-assignment disclosure
impermissibly goes beyond mere implementation of § 41712 and bleeds too
far into prescription of particular fair practices, perhaps at the expense of
other fair practices. 12
_____________________
11
In United Air Lines, the Seventh Circuit read the history of deregulation similarly
and likewise held that the rulemaking authority at issue here survived the abolition of the
Civil Aeronautics Board. See 766 F.2d at 1110–12.
12
But cf. Murphy v. NCAA, 584 U.S. 453, 474–75 (2018) (acknowledging that that
the distinction between prescription and prohibition is “empty”); Rochester Tel. Co. v.
United States, 307 U.S. 125, 143 (1939) (likewise stating that the distinction “serves no
useful purpose”).
21
Case: 24-60231 Document: 173-1 Page: 22 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
3. Major questions doctrine
Our conclusion is not inconsistent with the major questions doctrine.
Airline Petitioners argue that the question of DOT’s rulemaking authority is
of such “vast economic and political significance” that this panel should
hesitate before concluding it exists here. West Virginia v. EPA, 597 U.S. 697,
716 (2022) (quotation omitted). We disagree.
The few cases in which the Supreme Court has applied the major
questions doctrine instruct lower courts to hesitate before accepting a
“colorable textual basis” for agency authority when confronted with
structural, separation-of-powers concerns. West Virginia, 597 U.S. at 722.
These worries are at their peak when an agency claims power to regulate
conduct far beyond the “history and the breadth of the authority” that it has
traditionally asserted. See FDA v. Brown & Williamson Tobacco Corp., 529
U.S. 120, 160 (2000).
Those concerns are not present in this case. At bottom, DOT has
argued that § 41712(a) authorizes APA rulemaking. This interpretation is
hardly novel; DOT has long promulgated rules targeting unfair or deceptive
practices in the airline industry, and it has long claimed the authority to do
so. See, e.g., United Air Lines, 766 F.2d at 1111 (“The Board has been issuing
rules based on section 411 [the statutory predecessor] since 1960.”).
Further, Airline Petitioners concede that § 41712 prohibits airlines from
engaging in unfair or deceptive practices and allows DOT to bring
adjudicative proceedings to enforce that prohibition. A conclusion that
DOT can enforce the same provision via rulemaking is not so
groundbreaking as to be barred by the major questions doctrine. See Brown
& Williamson, 529 U.S. at 160.
The major questions doctrine is not a talisman to be invoked by
concerned litigants whenever they are beholden to new administrative
22
Case: 24-60231 Document: 173-1 Page: 23 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
requirements. Petitioners concede that they already disclose ancillary fees,
through hyperlinks on their websites. Requiring that these disclosures
merely move to a more prominent position on the websites is not a vastly
significant economic or political issue like student loan forgiveness, see Biden
v. Nebraska, 143 S. Ct. 2355, 2374 (2023); vaccine mandates, see Nat’l Fed’n
of Indep. Bus. v. OSHA, 595 U.S. 109, 122 (2022) (Gorsuch, J., concurring);
or healthcare tax credits worth billions of dollars, see King v. Burwell, 576 U.S.
473, 485–86 (2015). In sum, concluding that DOT can issue rules under
§ 41712 does not work a “radical or fundamental change,” MCI Telecomms.
Corp. v. AT&T, 512 U.S. 218, 229 (1994), to the statute’s concededly valid
requirement that airlines refrain from engaging in “unfair or deceptive
practice[s]” or else risk adjudication by DOT, 49 U.S.C. § 41712(a).
4. Nondelegation doctrine
Finally, we reject Airline Petitioners’ argument that if § 41712 permits
rulemaking, such power would violate the nondelegation doctrine. In other
words, according to Airline Petitioners, if Congress has authorized
prescriptive authority under § 41712, then DOT is impermissibly exercising
legislative power. See Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 472
(2001).
The Supreme Court has held that there are two ways a delegation of
authority to an agency can violate the nondelegation doctrine: (1) Congress
failed to provide an “intelligible principle” by which the agency can exercise
its authority; or (2) the power granted to the agency is vast beyond measure,
akin to the ability to “regulate the entire economy on the basis of no more
precise a standard than stimulating the economy by assuring fair
competition.” Whitman, 531 U.S. at 474 (internal quotation marks and
citation omitted). Under this governing standard, the Supreme Court has
approved statutes that delegate extremely broad authority to agencies. See,
23
Case: 24-60231 Document: 173-1 Page: 24 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
e.g., Gundy v. United States, 588 U.S. 128, 145–48 (2019) (plurality opinion);
Mistretta v. United States, 488 U.S. 361, 372 (1989) (“Congress simply cannot
do its job absent an ability to delegate power under broad general
directives.”).
Here, the governing statutory scheme provides an intelligible standard
to DOT akin to one we recently upheld against a nondelegation challenge.
In Mayfield v. DOL, 117 F.4th 611, 621 (5th Cir. 2024), we held that the
statutory directive in the Fair Labor Standards Act (“FLSA”) to “eliminate
substandard labor conditions that are detrimental to the health, efficiency,
and general wellbeing of workers” was sufficient to guide the Department of
Labor when it issued the “Minimum Salary Rule,” which raised the
minimum income that workers must receive before they are exempt from
FLSA protections. Because the FLSA’s text provided “some guidance” to
DOL, there failed to be a nondelegation concern. Id. Here, too, DOT has
received guidance from Congress: it can only issue those rules that are
“appropriate” and “necessary” to carrying out the substantive provisions of
Part A. 49 U.S.C. § 40113(a). The substantive provision at issue here,
§ 41712, puts further limitations on DOT’s rulemaking power, allowing only
rules designed to stop “unfair or deceptive practice[s] or unfair method[s] of
competition.” Id. § 41712(a). This certainly meets the standard of an
intelligible principle. See Gundy, 588 U.S. at 146 (plurality opinion)
(describing standard as “not demanding”). Further, DOT’s authority to
issue rules preventing unfair and deceptive practices in airline commerce is
not akin to “regulat[ing] the entire economy.” Whitman, 531 U.S. at 474.
For these reasons, we hold that Congress’s delegation of rulemaking
24
Case: 24-60231 Document: 173-1 Page: 25 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
authority to DOT under § 41712 comports with the many other instances of
delegation that have been upheld. 13
B. APA Compliance
The APA instructs courts to set aside agency action found to be
“without observance of procedure required by law.” 5 U.S.C. § 706(2)(D).
Such procedure requires a notice of proposed rulemaking to include “either
the terms or substance of the proposed rule or a description of the subjects
and issues involved” and directs the issuing agency to “give interested
persons an opportunity to participate . . . through submission of written data,
views, or arguments.” Id. § 553(b)(3), (c). Agencies have a duty “to identify
and make available . . . data that it has employed in reaching the decisions to
propose particular rules.” Solite Corp. v. EPA, 952 F.2d 473, 484 (D.C. Cir.
_____________________
13
Airline Petitioners also contend that DOT exceeded its statutory authority
because the practices it seeks to regulate are not “unfair” or “deceptive” under § 41712.
We agree with DOT that the APA’s arbitrary-and-capricious standard applies to this
argument. Airline Petitioners cite Loper Bright and Garland v. Cargill, 602 U.S. 406
(2024), but those cases involved disputes about the meaning of statutory language. See
Loper Bright, 603 U.S. at 380–84; Cargill, 602 U.S. at 412. Here, by contrast, Airline
Petitioners do not challenge DOT’s definitions of the relevant statutory terms “unfair”
and “deceptive”; in fact, Airline Petitioners adopt DOT’s definitions as their own.
Moreover, the definitions necessarily implicate DOT’s predictive judgment, see 89 Fed.
Reg. at 34627 (defining an unfair practice as one that “causes or is likely to cause substantial
injury . . .” and a deceptive practice as one that “is likely to mislead a consumer . . .”
(emphases added)), and DOT exercised its predictive judgment in issuing the rule, see, e.g.,
id. at 34634 (predicting that absent the Rule, “consumers of air transportation may have
difficulty understanding the actual and potential costs of accessing the air transportation
between different carriers” (emphasis added)). When a determination involves an
agency’s “predictive judgment,” the arbitrary-and-capricious standard applies. FCC v.
Prometheus Radio Project, 592 U.S. 414, 422–23 (2021); cf. Loper Bright, 603 U.S. at 380–84
(presenting yes-or-no question whether agency could impose data collection costs—a
question that could be answered in the present without predictive judgment); Cargill, 602
U.S. at 417–21 (similar). We need not reach the merits of this arbitrary-and-capricious
challenge in light of our decision to remand.
25
Case: 24-60231 Document: 173-1 Page: 26 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
1991) (per curiam) (quotation omitted). Thus, “[a]n agency commits serious
procedural error when it fails to reveal portions of the technical basis for a
proposed rule in time to allow for meaningful commentary.” Id. (quotation
omitted). If an agency promulgates a rule based on “completely new and
different data” that “supplant[s]” or “replace[s] its original data,” the
agency may need to “afford interested parties an opportunity to challenge
the underlying factual data relied upon.” Chem. Mfrs. Ass’n v. EPA, 870
F.2d 177, 200–02 (5th Cir.), clarified on reh’g, 885 F.2d 253 (5th Cir. 1989);
see also Tex. Ass’n of Mfrs. v. U.S. Consumer Prod. Safety Comm’n, 989 F.3d
368, 381–83 (5th Cir. 2021) (remanding rule to relevant agency because
agency had changed the primary justification for the rule based on new data).
“At the same time . . . an agency may use supplementary data,
unavailable during the notice and comment period, that expands on and
confirms information contained in the proposed rulemaking and addresses
alleged deficiencies in the pre-existing data, so long as no prejudice is
shown.” Solite Corp., 952 F.2d at 484 (alterations adopted) (internal
quotation marks and citation omitted); see also 5 U.S.C. § 706 (“[D]ue
account shall be taken of the rule of prejudicial error.”); Chamber of Com. v.
SEC, 85 F.4th 760, 779 (5th Cir. 2023) (stating that challenged rule survives
review if error “clearly had no bearing on the procedure used or the
substance of the decision reached” (quotation omitted)).
Airline Petitioners argue that DOT justified the Rule using cost-
benefit data—specifically data from the Rupp study—that was not available
during the notice-and-comment period. They contend that this data is
central to the Rule rather than merely supplementary.
We agree. DOT’s reliance on new data here resembles the SEC’s
reliance on materials outside the rulemaking record in Chamber of Commerce
v. SEC, 443 F.3d 890 (D.C. Cir. 2006). There, the D.C. Circuit had
26
Case: 24-60231 Document: 173-1 Page: 27 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
remanded an SEC rule to the agency because the SEC had not satisfied its
obligation under the Investment Company Act of 1940 to determine the
economic implications of the rule. Id. at 894. 14 On remand, the SEC had
declined to reopen the rulemaking record for further comment, concluding
that the D.C. Circuit’s concerns could be addressed by information in the
existing record and publicly available information outside the record.
Chamber of Com., 443 F.3d at 895. When the case returned to the D.C.
Circuit, the court held that the SEC violated the APA by relying on extra-
record material that “did not merely supplement the rulemaking record” but
rather “suppl[ied] the basic assumptions used by the Commission to
establish the range of costs that [regulated parties] are likely to bear in
complying with the [rule].” Id. at 901–02. When doing so, the D.C. Circuit
clarified that an agency must generally provide an opportunity for comment
on “data critical to support a rule” even if the extra-record data is meant to
cure a deficiency in the existing record. Id. at 903. A request the SEC had
made in its notice of proposed rulemaking for comments and empirical data
on costs “did not place interested parties on notice that, in the absence of
receiving reliable cost data during the comment period, the Commission
would base its cost estimates on . . . extra-record survey data.” Id. at 904.
In this case, like the SEC in Chamber of Commerce, DOT relied on
“extra-record material critical to its cost[-benefit] estimates”—here, the
_____________________
14
See also 15 U.S.C. § 80a-2(c) (relevant section of Investment Company Act
requiring SEC to “consider . . . whether [a] [rulemaking] action will promote efficiency,
competition, and capital formation”); cf. NPRM, 87 Fed. Reg. at 63732 (stating that under
executive order, assessment of potential benefits and costs of instant Rule was required);
49 U.S.C. § 40101(a)(6), (12)(A) (stating that under Deregulation Act, Secretary of
Transportation shall consider “efficiency, innovation, and low prices” and “maximum
reliance on competitive market forces and on actual and potential competition” to be in the
public interest); 49 U.S.C. § 41712(a) (allowing Secretary to investigate unfair or deceptive
practices if “it is in the public interest”).
27
Case: 24-60231 Document: 173-1 Page: 28 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
Rupp study—“without affording an opportunity for comment.” Id. at 908.
The study “did not merely supplement the rulemaking record”; rather, it
“suppl[ied] the basic assumption[]” used by DOT to arrive at the low end
of its range of the estimated net benefits to be delivered by the Rule. Id. at
901–02; see 2024 RIA at 16–18, 24. DOT’s estimate of net benefits—
somewhere between $30 million and $254 million annually, see Rule, 89 Fed.
Reg. at 34668—is somewhat imprecise, to put it mildly. Where the low end
of the range was based on a study outside the administrative record and where
the probability that the Rule would produce net societal benefits was
calculated as merely 53 percent, see Rule, 89 Fed. Reg. at 34668, DOT should
have allowed Petitioners the opportunity to comment on the study. Indeed,
DOT acknowledged in the 2024 RIA that its cost-benefit methodology is
“highly sensitive to the percentage of consumers who consider ancillary fee
information relevant to their airfare purchase decision,” and one of DOT’s
two inputs for that percentage (46 percent) came from the Rupp study—at
the expense of the lower 20 percent figure provided by A4A. 2024 RIA at
24; see id. at 16–18. DOT has therefore “fail[ed] to reveal” a “portion[] of
the technical basis for a proposed rule in time to allow for meaningful
commentary.” Solite Corp., 952 F.2d at 484 (quotation omitted).
DOT argues that the Rupp study “merely elaborate[d] on the
Department’s point in the proposed rule that the new disclosure
requirements would benefit consumers,” but DOT mischaracterizes its
earlier position. In fact, DOT expressly acknowledged at the NPRM stage
that it was “not possible to quantify whether the proposed rule would yield
benefits that exceed costs,” 2022 RIA at ii, and that the rule would only
“yield societal benefits if it leads to reduced deadweight loss . . . or reduced
search costs,” NPRM, 87 Fed. Reg. at 63732. It was only after the public
comment period closed that DOT, using the Rupp study, justified its
conclusion that hundreds of millions of dollars in annualized benefits would
28
Case: 24-60231 Document: 173-1 Page: 29 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
result from reduced search costs. 2024 RIA at 24; see id. at 16–18 (taking 46
percent scenario from Rupp study).
DOT cites Chemical Manufacturers Ass’n v. EPA, in which a number
of companies challenged pollution regulations. 870 F.2d at 184. There, the
EPA had announced its intent to prepare an economic-impact study relying
on an “industry-wide” database containing Dun & Bradstreet data covering
the years 1976–81. Id. at 201. After industry members commented that the
database was outdated and “did not have adequate data for plants whose sales
exceeded $10 million annually,” the EPA announced in the preamble to the
final rules that it had relied on newer Dun & Bradstreet data that the EPA
did not reveal. Id. The new data was “edited in the same manner” as the
older data and was used “to increase the size of the entire data base, to
increase the number of plants in the ‘greater than $10 million sales’ category
. . . , and to update the data base to cover the period from 1981 to 1986.” Id.
The EPA “also relied on data that had earlier been obtained from other
sources,” and it “did not supplant its economic-impact study, or replace its
original data with completely new and different data, but, in response to
industry criticisms, updated and expanded one of several data sources.” Id.
at 202. We thus concluded that the EPA’s use of the updated and expanded
Dun & Bradstreet data “did not require further notice and comment.” Id.
Here, DOT did not merely “update[]” or “expand[] one of several
data sources.” Id. Instead, the agency issued a cost-benefit analysis based in
large part on a study outside the administrative record. Unlike the updated
Dun & Bradstreet data in Chemical Manufacturers, the Rupp study here had
no antecedent in the underlying rulemaking proceedings. See id. at 201
(stating that new data was “edited in the same manner” as the older data and
was used to merely update preexisting database). Nor was the Rupp study an
“industry-wide” document. Id. at 201. Instead, it was based on the
29
Case: 24-60231 Document: 173-1 Page: 30 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
preferences of students; yet DOT used it to calculate cost-benefit estimates
with respect to all airline customers. See 2024 RIA at 16–18, 24. 15
Nor may DOT rely solely on its solicitation of comments regarding
quantifying costs and benefits or on the fact that at the time of the NPRM,
the agency could not say whether its proposal would produce net societal
benefits. An agency cannot “generally . . . rely, without affording comment,
on data critical to support a rule solely because the existing record contains a
deficiency that extra-record data might cure.” Chamber of Com., 443 F.3d at
903.
DOT contends that Petitioners were not prejudiced by its failure to
afford public comment on the Rupp study, see 5 U.S.C. § 706 (stating that
“due account shall be taken of the rule of prejudicial error”), but we cannot
agree under the circumstances presented here. As Airline Petitioners say,
DOT’s 53 percent probability of net societal benefits amounted to a “coin
flip.” Given those odds, and given DOT’s acknowledgement that it pulled
from the Rupp study a number to which its cost-benefit methodology was
“highly sensitive,” 2024 RIA at 24, we question whether DOT would have
issued the same Rule had Petitioners been given the chance to challenge the
Rupp data. See Chamber of Com., 443 F.3d at 904 (stating that failure to
comply with notice and comment “cannot be considered harmless if there is
any uncertainty at all as to the effect of that failure” (quotation omitted)).
We therefore remand the Rule to DOT so it can afford Petitioners an
opportunity to comment on the new data. Vacatur is often the appropriate
remedy for unlawful agency action. See Braidwood Mgmt., Inc. v. Becerra, 104
_____________________
15
At this juncture, we express no opinion on the merits of DOT’s decision to
extrapolate its conclusion from the Rupp study. We hold only that DOT should have given
Petitioners an opportunity to comment on the study.
30
Case: 24-60231 Document: 173-1 Page: 31 Date Filed: 01/28/2025
No. 24-60231
c/w No. 24-60373
F.4th 930, 952 (5th Cir. 2024), cert. granted, No. 24-316, __ S. Ct. __, 2025
WL 65913 (U.S. Jan. 10, 2025). 16 But it is not always required. See, e.g., Tex.
Ass’n of Mfrs., 989 F.3d at 389-90. Because we are leaving the stay of the Rule
in place, we see no need to vacate it at this time. 17
III. Conclusion
For the above reasons, we REMAND the Rule to DOT. The
current Rule shall remain stayed until the matters required above are met.
_____________________
16
It is important that, on remand, both sides consider what makes sense in this
context and allows for passengers to be clearly aware of the extra costs (such as checked
bags) but not unable to clearly consider the dates and times of their travels.
17
Since we remand to the agency, we need not reach Petitioners’ remaining
arguments under the APA’s arbitrary-and-capricious standard.
31