Ask the lawyers: Miles and Mileage Programs
 

Currently, the International Bar Association`s annual conference takes place in Singapore. Among other things, we have panel on legal issues surrounding loyalty programs, with experts from the US, UK, Canada, and two EU countries. The session will be on Wednesday morning. If you have questions, please post them here, and I will try to have them answered - and post the answers, of course. Obviously, no legal advice is being offered for indivdual cases, and we must reserve all liability.

Wow, that should be of great interest to many of us. Will that session be transcribed? If not, I hope you will take copious notes and share them with us.

I imagine there are a huge number of questions people might want to ask. I would like to know if the FFPs (hotel and other "loyalty programs" too?) are the quintessential application of Murphy's Golden Rule, that is "he who holds the gold makes the rules"? They make up the rules in the beginning, then change them whenever they please, perhaps with just a brief pause to consider whether what they are doing is so outrageous (rarely, if ever, do they really "enhance" their programs) that it will produce massive disaffection, and we are told, probably correctly, that our choice is to like it or lump it. Is there any alternative to like it or lump it, or is it the case that they could role them up tomorrow if they chose to do so and we would be SOL, so to speak?

I suppose another question might relate to the non-transferrability of most miles/points, and attempts to quash and punish those who would try to get around the rules about such. Again, they can strip one of their miles/points without proving wrongdoing?

Can't think of any legal questions at the moment, but I do have to comment that myself and I am sure lots of other FTers would find the prospect of going to a conference of the International Bar Association to be very interesting. :D

The buying and selling of miles is a almost always a violation of program rules. Given that, does this market nonetheless provide a fair market value for miles?

The OP said the panel, not surprisingly, would concern itself with "legal issues surrounding loyalty programs." I don't see how your question relates to a "legal issue." Furthermore, what defines "fair market value" for what amounts to black market or gray market goods?

When a parking garage says on its tickets and on signs everywhere that they are not responsible for anything that might happen to your car, that does not mean that they can escape all legal liability for whatever might happen when the car is left with them. For example, a drunk employee of theirs smashes another car into yours, the garage is going to pay no matter that they sought to disclaim such responsibility. So another question - how legally effective are the loyalty programs various disclaimers, the ones that say they can do whatever they care to and you will have no legal recourse against them?

Can miles ever be the property of an employer?
 

One question that always seems to be a bit hairy is the recourse of employees who travel for work, when the employer deems that miles earned from company travel are property of the company to use on company travel.

My employer does not do this (though if anyone found out how far my miles got me, I'm sure they'd give it some thought!), and although it does not seem to be the norm, it would not appear to be uncommon, either. The normal form seems to be that a company forces employees to submit their FF#'s and from that point on withdraws from the employee's account with or without consent. Furthermore, the employee is not allowed to withdraw from the account himself.

The question is, then, can your employer legitimately do this, and if so, what terms should apply? It seems that if the company has employees set up a separate account, this could hold up, but the idea that my double miles from a trip to Singapore that I paid for should fund company travel seems....offensive.

There are a lot more questions that I imagine come up: what happens to the account when an employee leaves? Is this even legitimate under the T&C of most programs, since the account is under the name of the individual with no reference to the company?

When DL switched from Frequent Flyer Program to Skymiles program they sent flyers and placed full page ads in several National (and I assume local) newspapers stating that OLD FREQUENT FLYER mile would never expire AS LONG AS DELTA HAS A FREQUENT FLYER PROGRAM and that, as long as flyer remained a Medallion Member, the Old Miles would be redeemed at the old Frequent Flyer rate.

Last year, when Frequent Flyer Miles were folded into, and mixed with, Skymiles, that all ended.

The old redemption schedule is gone and miles expire if no activity.

Randy Petersen has all documentation and, in fact, did an Inside Flyer article complaining about this action by DL.

Question, by sending mailers and placing ad stating that the miles would never expire and that they are redeemable at old rates, did DL make a legal contract with Members of the Frequent Flyer Program? And, is there any action that can be taken to reverse this move?

My question relates to tax law. The fair market value of miles is important in a variety of tax situations.

That's an interesting one, as have been the ones before it. Other than when one wins a huge number of miles and the airline imputes a value so great to the miles that the tax bill makes it not worth it to accept the prize, in what situations do taxes come up? I thought that frequent flyer miles rarely had any tax implications to them.

When you have miles awarded as a result of travel for work, it could conceivably be seen as an extra form of compensation...IF the miles had any kind of market value associated with them.

Mistake Fares
 

It's been discussed here, but would be great to get the panels opinions on honoring these fares. Related are verbiage mistakes on websites: example on hotel offered 30% off lowest internet rate, but they really meant 30% off the regular rate. Is there any recourse for such errors?

I have wondered whether or not some type of class action could be taken against the airlines.

Most notably for me the QFF program.

We are induced to enter the program based on promises of not so free travel and those here in Australia pay a fee for the privilege. It is a contract. We choose credit cards that promise reward points and generally pay a fee for the privilege of accruing points to a particular ff program ie ANZ Qantas card and others and the interest rate is usually higher when the card has a reward program.

The law of contract deals with the aspect of harsh and unconcsionable conduct as well as the TPA secs 51AA and 51AC. These problems generally arise from one party having a superior bargaining position which the law trys to balance by protecting the little guy.

Now the rules that I find harsh are:

Limit of 100000 points transferable
If you die so do your points
Only one transfer per year
Only to a restricted class can you transfer

What about those poor infrequent fliers who never accrue enough to do anything reasonable and the points just languish until they extinguish.

I bet there is a big bonus for QF wher people die or points expire

These programs are very profitable to the airlines and QF in particular.

4,000,000 QFFers giving $1 certainly creates a handsome fighting fund.

I am interested in the contract to offer free flights in return for travelling on said airline. That there must be a fair amount of free awards seats offered.

a senarioo in question.. Emirates have a huge push to join their program with promise of award seats.
I am a top tier member and they could not find one first class seat on any flight out of Australia for the whole year of 2008 including seats to be released.
I would like to know what constitutes false advertising in these circumstances. I have been redeeming FF points on most carriers for 20 years and can always get a flight at some stage during the year -not with Emirates.

as they are based in a middle eastern country are they untouchable?
or

as they have an office in Australia is Australian office responsible
( as they keep referring to Dubai as the bad guy)
so if we join a FF program on the net where is the contract deemed as consumated?(cyberspace/head office or Australian office)

Well, I won't say it is inconceivable, but the odds are hugely against it, at least in the United States.

It's not only conceivable, it's been a reality in several countries and it may still be the case that tax officials have a legal right to levy taxes on the market value of non-cash compensation and perks including on frequent flyer miles and tickets acquired from work for personal use. The US is not the place I would worry about this, but there are places in Europe and Asia where this certainly was something to consider when domiciling the loyalty program accounts. ;)