MilesBuzz! - Who this miles belong? My right to resale MY miles.

When, I buy a box of cereal with 100 miles, does it belong to me the purchaser, Kellogs or AMR?
I paid for the cereal and the box, I may dispose it in any way I found, so can I save 250 certs in sell a free ticket from this promotion?

When I rent a car, I PAY additional fees to earn FF miles, then the miles should belong to me, being kept by the Airline.

The same is applicable in any other example, but flying miles (AIR MILES).

So, then what right has an airline to confiscate, because of selling awards?

If the airline is safekeeping the miles, and the airline misuses my miles, then the company should be liable for missusing private property, what do you think?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mlibers:
So, then what right has an airline to confiscate, because of selling awards?
</font>

When you joined the FF program, you agreed to play by their rules. That's pretty much it, sorry.

sorry, but the very operating system you are using now, probably Microsoft windows 98/me/xp. you do not really own that copy of OS, the OS goes with the computer. so you can not remove it and install it in another computer.

in this day and age, you don't really own any thing. Corporation owns everything, if you read their fine prints.

You own the box of cereal. You can do anything you want with it.

If you clip the coupon, you own the piece of cardboard. You can do anything you want with that.

Once you turn that piece of cardboard into miles, you don't own a thing. The airline keeps a balance under your name on its books, but that doesn't make the miles in that balance your "property" in any meaningful (or legal) sense. Only the airline can do anything with this balance - such as issue awards. What they do with it on your behalf is subject to rules you agreed to when you joined the program (and which they can modify).

Many, if not most, people will agree with you that it's unfair. However, you were told the rules up front and had the option of not joining the program. If you chose to join anyway, you can complain about the rules and campaign to change them, but accusing the airline of misusing "your" property is a bit strong. You never had any property there to begin with. And, if you do something in violation of the rules you agreed to (such as selling awards) the airline has every right to take the action it told you it would take (such as cancelling your account and voiding all "your" miles).

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Efrem:
You own the box of cereal. You can do anything you want with it.

If you clip the coupon, you own the piece of cardboard. You can do anything you want with that.

Once you turn that piece of cardboard into miles, you don't own a thing. The airline keeps a balance under your name on its books, but that doesn't make the miles in that balance your "property" in any meaningful (or legal) sense. Only the airline can do anything with this balance - such as issue awards. What they do with it on your behalf is subject to rules you agreed to when you joined the program (and which they can modify).

Many, if not most, people will agree with you that it's unfair. However, you were told the rules up front and had the option of not joining the program. If you chose to join anyway, you can complain about the rules and campaign to change them, but accusing the airline of misusing "your" property is a bit strong. You never had any property there to begin with. And, if you do something in violation of the rules you agreed to (such as selling awards) the airline has every right to take the action it told you it would take (such as cancelling your account and voiding all "your" miles).</font>

According to the NY Consumer Board, I own the miles, when Alamo failed to credit miles after several car rentals, and I brought up the issue, the state consumer affairs, understood that the miles are my property, because in the rental agreement shows that I paid for it.

No seas cabeza dura... http://www.flyertalk.com/forum/rolleyes.gif

Its against the program rules... why is that so hard to understand? If you are so adamant about the issue, take the airlines to court - and please let keep us updated on the proceedings.

You own the miles. There's currently a class action going on to prevent airlines from monopolizing the marketplace and assessing arbitrary penalties. I believe it will win.

http://www.insideflyer.com/articles/printable/o2.php?key=59

QL

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Gaucho100K:
No seas cabeza dura... http://www.flyertalk.com/forum/rolleyes.gif

Its against the program rules... why is that so hard to understand? If you are so adamant about the issue, take the airlines to court - and please let keep us updated on the proceedings.</font>

Actually, I have a case open against UA with the office of Lisa, Attorney General of IL, to which they have asked me for supporting doc. with my claim that miles are mine, "Valid ones" include the fee paid to the car rental co., the Nextel promotion, and M+ Visa, that the bank stated that I paid a membership fee to pay for the miles.

If you buy a donut, you don't own the center--the baker kept it.

If you buy a time share, you don't own the other 51 weeks.

If you rent an apt., you have to move out after 12 mos unless you re-up.

An airline can give you a limited right--something that is not transferable. I have no problem with that. I do have a problem with an airline making claims that you can redeem 25,000 miles for a ticket and not telling you that its often next to impossible.

mlibers: As far as I know, selling cereal boxes is legal. If you want to sell 250 cereal boxes on eBay, that should be perfectly legal and none of AA, Kellogg's, your local grocer, or the people who recycle and manufacture cardboard should care. No gray area whatsoever here - unless the state you live in passes Anti-Cereal-Box-Trafficking laws.

Once the coupons have been mailed in to convert to FF miles, you enter the gray area. You are playing by their rules now, and legal precedent weighs in their favor - so far.

I hope these class-action suits win. I don't ever expect there to be a wide-open exchange floor for the buying and selling of FF miles, but some legal definition around what can and cannot be done with miles would help. Heck, a crisp legal definition for what an FF mile is to begin with would be a start.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mlibers:
When, I buy a box of cereal with 100 miles, does it belong to me the purchaser, Kellogs or AMR?
I paid for the cereal and the box, I may dispose it in any way I found, so can I save 250 certs in sell a free ticket from this promotion?</font>

Theoretically, you should be able to sell the certificates without repercussion from AA, because you're not selling miles - you're selling pieces of cardboard that are worthless until they're sent in for redemption.

At the point where they are redeemed, they then become worth something (because AA/Kellogg's has assigned this value), and thereby subject to AA terms and conditions.

Mike

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">There's currently a class action going on to prevent airlines from monopolizing the marketplace and assessing arbitrary penalties. I believe it will win.</font>I am not so sanguine, as much as I would like the plaintiffs to prevail. I have read that portion of the complaint printed in InsideFlyer. On what basis do judge the complaint to be meritorious?

Viewing the allegations as dispassionately as possible, using the same techniques I used as a federal district court law clerk in 1991-92 (albeit without a written memo!) it is my objective opinion that this lawsuit will not prevail.

Of course, time will tell.

Hey, this is America. Let's all sue every airline. **** the silly rules that I agreed to. Maybe if enough of us sue, the airlines will get rid of these crazy programs with all the fine print. Who needs award tickets anyway. Just charge them all and then declare bankruptcy!

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by LemonThrower:
An airline can give you a limited right--something that is not transferable. I have no problem with that. I do have a problem with an airline making claims that you can redeem 25,000 miles for a ticket and not telling you that its often next to impossible.</font>

I agree. what I hate the most is airlines changing their redeemption rules. isn't that breaching of the contract?

when I bought my miles, I agreed to the award redemption in the member agreement. I DID NOT agree to the new higher award redeemption. and please don't give me that crap about they have the right to change the rules.

What will you do if airlines decide you must do a back flip + 50,000 miles + no redeemption on holidays (oops!! they are already doing that). Hey!!! they are allowed to do that in the contract.

When I won one million AA miles in a contest, I had to pay taxes on the prize value of $20,000. The government obviously thinks I own them.

Quite rare an "item" that you legally own but cannot legally sell.

I know that AA monitors the ebay travel board very closely, but I ran around 100 auctions for Kellogg's certs in 2001 without hearing from AA. I assume that what I was doing was completly legal.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by bellwilliam:
sorry, but the very operating system you are using now, probably Microsoft windows 98/me/xp. you do not really own that copy of OS, the OS goes with the computer. so you can not remove it and install it in another computer.

.</font>

Actually, you do own the OS. You can technically format your Hard Drive and sell the old computer. Buy a new computer without an OS and install your operating system on the new one.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by davistev:
Actually, you do own the OS. You can technically format your Hard Drive and sell the old computer. Buy a new computer without an OS and install your operating system on the new one.
</font>

That doesn't mean you own it. It means you have the right, under your license from Microsoft, to install it on one computer. The license allows you to change that computer from time to time. That's all you're doing here. If you really owned it, your rights would be broader.

Regarding the argument in previous threads that "I paid for it so I must own it:" there are lots of things we pay for that we don't own. Rental is one obvious example. We have the right to use whatever we rent, subject to the terms of the rental agreement, but that right is limited by what we agreed to when we rented it, and we can't sell it. (I'm not saying that we rent airline miles; just using renting as an example of paying for something but not owning it.)

I hope I'm not straying too far off topic here, Mike's post about paying taxes for the right to use 1 million FF miles along with these software posts got me thinking...

When I bought my last PC, it came with a free software package that included a copy of Windows, Office, and some other junk. I did not consider that income (and didn't report it as such). I considered it part of the normal smoke and mirrors that companies use to sell a PC. (i.e., They could sell me a $500 PC and charge me $200 for software, but instead they sold me a $699.99 PC with FREE software that they convince you is worth a couple hundred bucks.) To me, this is analagous to FF miles when earned the normal way: the airline could sell you a $100 ticket with no miles, but they don't: they sell you a $200 ticket and give you a bunch of miles and convince you that they are worth $100.

An airline giving away a pile of miles (as in Mike's case) is different because the company is inviting you to use the product completely for free. This is more analagous to your local health club giving out free memberships or the new Chipotle franchise dropping free burrito coupons in your office lobby. You get free product without a requirement that you ever become a paying customer. (Certainly that's the hope, just like AA certainly hopes that Mike will want to become a 2MM flyer.)

Point is, we all are gifted things all the time by companies with no strings attached. In fact, just about every FT'er here has been gifted free FF miles with no flight or purchase - most of us get some sort of FREE miles on a regular basis.

I have never claimed anything like this as income. Has anyone else?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by pinniped:

[first part of post snipped to save space]

I have never claimed anything like this as income. Has anyone else?</font>

In the U.S., frequent flyer miles are explicitly not considered taxable income. There is no reason to declare them even under a strict interpretation of the law. That may change in the future, like any other tax regulation, but the IRS and Congress have looked at this several times and have decided officially not to tax them at this time.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by davistev:
Actually, you do own the OS. You can technically format your Hard Drive and sell the old computer. Buy a new computer without an OS and install your operating system on the new one.

</font>

I am a Microsoft Gold Member distributor. with OEM (when the OS comes with PC), the license is PERMANANTLY attached to that PC only, you may NOT format the drive and install in another PC. of course you can technically changed one part at a time until you have a new box, but legally you may NOT install in any other computer.

If you have a retail OS, you may transfer ONE time only to another PC.

Power of Bill Gates. hey!! this is what happened when you agree to EULA agreement when you start your PC the first time. This is about the same as you agreeing to ff member agreement. but at least Bill Gates don't change the agreement later (as airlines does when they change redemption rates), saying you now need to pay Microsoft extra $10 to keep on using the computer.

If airlines are allowed to change their redeemption after I purchased my miles, then I should be allowed to sell my miles.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Efrem:
In the U.S., frequent flyer miles are explicitly not considered taxable income. &lt;snip&gt; </font>


Weellll, that's not quite correct.

What the IRS said, is that for the moment, they do not consider you as having received income when you receive frequent flyer miles in conjunction with a flight (or hotel stay or car rental, probably) paid for by your employer provided you are not redeeming them for cash or cash equivalents.

If you "sell" those miles somehow, they reserve the right to tax you on the money you got as being additional "income".

Similarly, if you win the miles in a lottery, you're going to have to pay taxes on them. So it's only some miles that "are not considered taxable income".

(And, of course, the miles you received for travel you paid for -- and don't take a tax deduction on -- are not considered to be income you; at best, they are a rebate or refund of part of your purchase price.)

At least, that's how I understand the rule.

Like it or not, you may "own" the miles to the extent of using them according to program rules, but when you agree to be a part of the program, you also agree to the rules of the program's administrator, the airline. Should you violate those rules, you lose, simple. People and lawyers who waste tons of tax and corporate dollars fighting something that is stated that clearly should be the ones to pay for all the lawsuits since they are wasting everyone's time and money. If you do not like the rules, call the airline and cancel your account, you have that right, take advantage of it so the rest of us who are not interested in violating the rules have more award availability.

The above "law of the jungle" (or "they can do anything they want to you because you agreed to it when you joined") position is indeed the one taken by the Airlines themselves.

However, before concluding that they can indeed do anything they want because you agreed to it, you might want to read up on such things as "contracts of adhesion" (contracts not fairly bargained, but rather where the party with the superior bargaining position refuses to bargain, saying in essence “That’s the way it’s going to be, take it or leave it, and oh by the way we have the right to change the terms any time we want to.”) and general rules of consumer protection. These rules have evolved since the days of the robber barons to ensure that they couldn’t exploit their position to the detriment of the individual consumers.

When the frequent flyer programs were simply patronage-rewarding programs by airlines, that gave miles (or points) for flying their airlines which could be redeemed only for flights on their airlines, the Government was willing to cut them quite a bit of slack by exempting them from enforcement of many of the state consumer protection laws. That’s one of the reasons why the older cases came out in favor of the airlines – the courts didn’t say what the airlines were doing was “right”, but rather that the courts had been denied jurisdiction by the Congress from hearing such cases.

Where that sort of Congressional protection does not exist, however, the courts have not been so quiescent. Recently non-airlines have attempted to claim that the “miles” were not property, or did not have “value” and thus the loss of the miles need not be recompensed, but (as I understand it at least) those claims have fallen on deaf ears. Right now, arguably it is only the Congressional preclusion of jurisdiction for courts to hear these cases that is saving the airlines from similar rulings.

Congress extended this shield from judicial scrutiny to the airlines based on the idea that the frequent flyer programs were simply part of running the airline. Back in the 1980s that was, for the most part, true. The question is whether it is still true?

When airlines have spun off their frequent flyer programs into separate companies, and are selling miles to be given other than for patronizing the airlines (what does buying pudding or cereal, or using telephones have to do with air travel?), some commentators suggest that the protections granted by Congress for running an airline really don’t apply to this separate company and its separate program.

If the bar to jurisdiction ever falls, and typical state consumer protection legislation is ever applied to the “frequent flyer” programs, things may very well change.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by pinniped:
mlibers: As far as I know, selling cereal boxes is legal. If you want to sell 250 cereal boxes on eBay, that should be perfectly legal and none of AA, Kellogg's, your local grocer, or the people who recycle and manufacture cardboard should care. No gray area whatsoever here - unless the state you live in passes Anti-Cereal-Box-Trafficking laws.

Once the coupons have been mailed in to convert to FF miles, you enter the gray area. You are playing by their rules now, and legal precedent weighs in their favor - so far.

I hope these class-action suits win. I don't ever expect there to be a wide-open exchange floor for the buying and selling of FF miles, but some legal definition around what can and cannot be done with miles would help. Heck, a crisp legal definition for what an FF mile is to begin with would be a start.</font>
A crisp legal definition of what a FF mile is worth would also help. I am entering the Kellogg 25K promotion every day and shutter to think about the taxes I'll have to pay should I be the lucky winner. http://www.flyertalk.com/forum/smile.gif

I have a question. If FF miles aren't taxable, then what taxes was the guy who won 1MM paying? Is there some kind of excise or something owing?

Also, in the case of the MS EULA. I don't believe this has ever been tested in a court of law. It really is unenforceable. Joe6pack hasn't really read those dozens of pages of text. He just ticked the box and clicked on continue.

Perhaps this is also the case with the FF programs? Have their T&C been tested in a court of law? Or are the forthcoming case actions the first time?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">If the [federal preemption] bar to jurisdiction ever falls, and typical state consumer protection legislation is ever applied to the “frequent flyer” programs, things may very well change.</font>I personally think this is a more fruitful avenue of approach than the antitrust theory being pursued in the S.D.N.Y. or even the "contract of adhesion" angle, since it would take very egregious facts for the forfeiture to be unconscionable. I seem to recall from law school that consumer protection statutes tend to be more hospitable to plaintiffs than contract law, though I admit to not having studied either in more than a decade.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by PW1P:
I have a question. If FF miles aren't taxable, then what taxes was the guy who won 1MM paying? &lt;snip&gt;</font>

As I explained in my first posting on this thread (posted 04-19-2003 03:57 AM), the statement that FF miles are not taxable is overly broad. In some cases they are. The text of the IRS statement is found embedded in this thread (http://www.flyertalk.com/forum/Forum1/HTML/006485.html). As you can see, the statement is strictly limited to <font face="Verdana, Arial, Helvetica, sans-serif" size="2">taxability of frequent flyer miles or other promotional items that are received as the result of business travel and used for personal purposes.</font>

In the case of a person who won them in a contest, the value of the prize (the miles) is taxable under Federal (and some state) income tax law, just as though he had won a house or a car.

The problem then is valuing the miles for tax purposes. There are threads on this subject here in "Buzz"; if you do a "search" on "tax" you can probably find lots.

The rights given by the airlines to themselves in these contracts of adhesions are so outrageous that I would consider them unconscionable, particularly that they get to sell miles but we don't and they get to forfeit all your miles at their whim.

QL

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Schutzee:
Hey, this is America. Let's all sue every airline. **** the silly rules that I agreed to. Maybe if enough of us sue, the airlines will get rid of these crazy programs with all the fine print. Who needs award tickets anyway. Just charge them all and then declare bankruptcy! </font>

No, they'll discontinue their programs, and leave us with nothing.

I look at it like stock. As long as a company is in business, I have something of value that changes all of the time. However, if the company closes the business, I have nothing.


------------------
Bob
<font face="Verdana, Arial, Helvetica, sans-serif" size="2"> You only live once -- but if you work it right, once is enough.

Joe E. Lewis
</font>

Someone mentioned that they know AA monitors Ebay closely. What is that statement based on? I'm curious. Has anyone been busted for buying/selling miles on Ebay? Or do you know anyone that has had their account terminated or miles confiscated? Just curious.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by fsumike:
When I won one million AA miles in a contest, I had to pay taxes on the prize value of $20,000. The government obviously thinks I own them.

Quite rare an "item" that you legally own but cannot legally sell.</font>

I hope you know that for tax purposes you are allowed to discount the prize value claimed by the merchant/manufacturer to the common retail price. What that would be in this case, I have no idea, but something like this would probably work:

1 million miles gets you 40 trips at the now-standard 25k/trip rate, including Saturday night stay restrictions, etc. If similar tix can be purchased for $300 each then you can claim to have only received $12000 of value instead of $20000. Of course there are better ways to get creative here. You could base your calculation on 50k miles/award netting $6000 in value. You could cite the current low airfares and claim $250 is a fair price per ticket.

Some info can be found here (http://www.promolaw.com/Virtual%20Library/tax_issues.asp).


[This message has been edited by xyzzy (edited 04-23-2003).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by saint:
Someone mentioned that they know AA monitors Ebay closely. What is that statement based on? I'm curious. Has anyone been busted for buying/selling miles on Ebay? Or do you know anyone that has had their account terminated or miles confiscated? Just curious.</font>

I think you need to read this thread (http://www.flyertalk.com/forum/Forum1/HTML/008571.html).

[This message has been edited by xyzzy (edited 04-23-2003).]