Hotwire in Hot Water Over Ads

Online airfare site Hotwire will have to pay a fee and rethink its advertising campaign, following an inquiry by the U.S. Department of Transportation over its accuracy.

The San Francisco-based site will have to pay a fine of $25,000 for its seven-month-old radio advertising campaign that violated the DOT’s rules for promoting air fares, according to the federal agency. A second $25,000 payment could be waived if the company adheres to the ruling.

Under U.S. legal codes, prices for air fares quoted by travel agents must include the entire price to be paid by the customer and accurately represent times of departure and points served — or be considered an unfair or deceptive practice.

The campaign, which had been designed by New York-based DiMassimo Brand Advertising, interviewed random consumers and asked them to compare Hotwire’s prices against those of deals directly from carriers or from rival sites — such as Priceline .

But the spots didn’t indicate when or from where the fares were being offered, which ran afoul of DOT rules on disclosure.

“By omitting a full description of the markets in which its advertised fares were available … Hotwire created the false impression that the fares it advertised were available in the cities in which its advertisements were broadcast when that, in fact, was not the case,” U.S. DOT Deputy General Counsel Rosalind Knapp wrote in the ruling. “We also see nothing inherently unlawful in advertising fares, as Hotwire has, that consumers have received in the recent past but which may not be currently available, so long as the advertisements clearly indicate that fact. However, the [DOT] believes that the disclosure in the Hotwire advertisements was inadequate. ”

Hotwire said it is moving to comply with the ruling by modifying its advertising to now include origin city and booking dates.

“Hotwire is committed to providing consumers a clear and complete picture of the Hotwire service, and we are therefore cooperating fully with the DOT’s ruling,” the company said in a statement. The firm also added that it had originally omitted the origin city and booking date from its ads to “avoid misleading customers into thinking that the fares stated were guaranteed to be available.”

“The purpose of the ads was to illustrate the type of savings possible for flexible travelers who use Hotwire,” the firm said in the statement.

The DOT also investigated, and dismissed, claims by Frontier Airlines and American Trans Air that Hotwire’s ads were defamatory or unfairly derogatory toward the carriers and represented unfair and deceptive means of competition but dismissed the allegations.

Those claims originated from the ads’ interviews, during which an announcer said that Hotwire delivered deals worthy of “no-name” carriers with “big-name” airlines that “you know and trust.” The DOT said the ad copy did not refer specifically to Frontier or ATA, nor did it suggest that they were either “no-name” carriers or untrustworthy.

The settlement is the second time that Hotwire’s campaign has come under scrutiny. Late last month, the Better Business Bureau’s National Advertising Division, which monitors BBB members’ compliance with ethical advertising practices, recommended that Hotwire modify its banner advertising after a complaint by Norwalk, Conn.-based Priceline.

The ads in question claimed that Hotwire offered “better deals” than competition — a statement that the NAD recommended Hotwire clarify to refer to qualities other than the lowest fare, which wasn’t always the case. The industry association also recommended that Hotwire “discontinue use of an illustration that inaccurately depicts Priceline’s bidding model and refrain from using unsupported, disparaging language when referring to Priceline’s business practices.”

Hotwire said it had taken the recommendations into consideration and modified some of its ads accordingly.

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