Hi;
This is interesting.

I have a real, and recent, example (economic damages) that happened to my daughter. It exemplifies, I think, why the consumer transparency issue and apparent authority is important. Our daughter, Erin, spent the fall semester in Italy. Because she was not sure what date she actually wanted to return, she was delighted to find, under a link on the Lufthansa site, a "student special" for fares that included one free flight change. The link took her to another website that had "Lufthansa" on the banner of the site, and was in the same exact colors and type of layout as the Lufthansa site. She made her reservations there.

When Erin went to change the date of the return flight, she called Lufthansa, who said: We won't make the change for you, any change made by us will incur a (significant) charge. You have to go back to the website  where you purchased the ticket because that website is not Lufthansa, it is a travel agent. The operator stated; "We have had a lot of problems with those tickets so we were told not to deal with them." The student site had no contact information except an email address. Sending them a message was useless; the only answer was that the change was not possible. You can imagine the frustration;  Erin tried to send an email for each possible change and then had to wait days for a (negative) response.

Then,  a complication arose --- the volcano erupted. We paid to get her home, but wonder now about submitting a complaint to not only Lufthansa but also the FTC for a deceptive business practice. We purchased the ticket from (we thought) Lufthansa relying on their reputation, yet were misled.

On another topic, I am looking forwarding to welcoming you all to Richmond in August! If I can be of any assistance, please let me know!

Best regards,
Janine


Janine S. Hiller
Professor of Business Law
Virginia Tech
Blacksburg, Va. 24061
540-231-7346

On 5/26/10 11:29 AM, "Terence Lau" <[log in to unmask]> wrote:

What I meant to say, perhaps inartfully, is that there is a layer of
consumer deception here.  Deception is too strong of a word.  What
Continental is doing is not unusual, but I think it might be unfair.
Continental decides when to schedule the flight, what route the flight will
fly, how much to charge for the ticket, issues the ticket, collects the
money, awards frequent flyer miles, uses Continental airport facilities
like lounges, and allows Colgan to use the Continental brand and logo on
the plane, seats covers, napkins and peanuts.  Colgan, a company I would
guess a tiny minority of Continental customers have ever heard of, owns and
operates the plane and the crew -- that's it.  I do think that is different
than a typical insurance contract.  This isn't just a typical trademark
licensing agreement either, like someone trying to sue Jeep for a Jeep
stroller malfunctioning.  Continental's presence on the Colgan product is
overwhelming.

I think a more typical analogy would be if Toyota decided to shift all
their warranty responsibilities to one of those third-party warranty
providers that's always trying to sell extended warranties, and allowed
that third party to call themselves Toyota Express and use the Toyota logo.
If a customer faced a problem with getting a dealer to honor a warranty
claim, and contacted Toyota, Toyota could just wash their hands clean and
tell the customer to contact the warranty provider.  Isn't that at least
deceptive?



Regarding "It's an interesting sleight of hand created by contract, isn't
it?", what's unusual or unfair about this? How does this differ from
typical agent indemnification of principal (which doesn't even require
contract) or a typical insurance contract? Continental is liable to the
full extent, but will be indemnified to the extent that the indemnifier is
liable or solvent; beyond that Continental can be made to pay; and
Continental pays the price in terms of loss of reputation. Except for a
lack of consumer transparency at the outset, what's the problem?

Murray Levin

Murray S. Levin
Professor
University of Kansas
School of Business
[log in to unmask]
785-864-7506
913-262-2688