Airlines and Opting Ethics

Here’s a post with my co-author and colleague at Yale Law School, Jonathan Macey. Jon is the author of the just-published book Corporate Governance: Promises Kept, Promises Broken.

Airlines and Opting Ethics
By Ian Ayres and Jonathan Macey

Some airlines and travel sites are trying to goose their revenues by running a new opt-out insurance scam. As Tribune Media Services reports:

When Angela Gross buys a ticket through Frontier Airlines’ web site, it tacks on an extra $10.95 for travel insurance. How did it manage to do that? By having a [pre-]checked box on the booking screen that she had to opt out of. Now Frontier is balking at a refund.

If you’re not paying close attention while finishing your ticket-purchase transaction on the web, you may well be on the hook for an extra insurance fee.

Pre-checked boxes committing people to receive stuff unless they affirmatively opt out have been around for years. But until recently, failure to opt out just means that you are likely to receive spam because you have agreed to have your contact information shared with other vendors. Like most others, we have been caught asleep in the past only to find ourselves deluged with hordes of subsequent emails containing unwanted “special offers.” What’s new about the latest wave of opt outs is that very prominent retailers are brazenly adding services that will increase the upfront price of their services unless the customer affirmatively opts out.

We learned about these shenanigans first hand. About a month ago, Ian was checking in at an airline kiosk and was almost tricked into paying $75 for a coach seat with a little extra legroom.

The kiosk touch screen was designed with the standard “continue” button in the lower left-hand corner of the screen. But after hitting several “continues,” Ian landed on a screen with a button already set in the “accept” position. It took Ian a moment to figure out that he was about to agree to pay a $75 seating upgrade fee and then some additional time to find the by-no-means-obvious button on the screen that he had to click to avoid the upgrade — and the fee — and continue with his check in.

The upgrade at the kiosk did not involve a pre-checked box. But by putting the “accept” button in the lower left-hand place — where users had become accustomed to clicking, having just clicked there several times — the airline (diabolically) created an ingenious sort of positional opt out. To avoid the fee, the customer has to stop doing what she’d been doing and physically move her hand to another part of the screen.

Jon was the near-victim of the more explicit opt-out scam that involved more serious money. Shortly after reading about Angela Gross’s experience with Frontier Airlines, Jon happened to be using to buy five airline tickets from New York to Paris for himself and his family. After buying the tickets and after logging out of Orbitz, Jon received an email from an insurance company purporting to thank him for buying … you guessed it … trip insurance!

By not noticing that Orbitz had used a pre-checked box, Jon had “agreed” (by failing to disagree) to a whopping $156.90 trip insurance addition to his airline ticket price, taxes, and airport fees. The fun really started for Jon when he went into fast forward to set the matter right. It turns out that even though customers can go back and electronically cancel the airline tickets that Orbitz sells, customers cannot cancel the insurance that Orbitz sells through the website where it was brought. In fact, the insurance could not be canceled through Orbitz at all, but only by contacting the insurance vendor Access America directly by phone.

When Jon reached the insurance company, he learned that the insurance was only refundable if the policy is canceled within 10 days of “purchasing” the policy (i.e. after most people received their credit card statements for the purchased tickets, and after many customers had already gone on their trips, thereby “using” the insurance!). In order to cancel, Jon was required to listen to a pre-recorded message informing him of nothing (other than that the company was trying to raise the transaction costs associated with canceling their insurance).

When Jon complained to Orbitz, the company sent him the following response:


It’s refreshing to receive a form letter that says “I understand … you are not happy.” But the message misrepresented how Orbitz’s website actually functions. The OrbitzTLC team’s message asserted that travel insurance was added to Jon’s reservation because he manually checked the box “Yes, Add Airline Ticket Protector for USD …” In other words, Orbitz erroneously claimed that its program required a customer to opt in to it. In fact, the program required Jon to affirmatively opt out of the program in order to avoid “buying” the insurance.

To make sure, we went back on and found that, consistent with Jon’s recollection, the travel insurance option, unlike numerous other options on the website is pre-checked, comme ça:


In some ways, all’s well that ends well. Access America did finally refund Jon’s money. And a very nice and knowledgeable Orbitz employee told Jon that the travel insurance is only opt out for foreign flights and tourist packages.

But the episode raises troubling issues:

What’s to stop retailers from pre-checking a $300 or $3,000 charge for trip insurance, or pre-checking a life-insurance policy in case the plane crashes?

What does the trip insurance actually give you that you don’t already have? The Access America policy is incredibly narrow in scope — basically only covering you if you get ill or die because of an unexpected event (no pre-existing conditions). We’re betting that many airlines would give you a refund under such circumstances, even without buying the insurance. Other insurance companies do offer insurance that includes coverage for pre-existing conditions.

What happens to people who don’t learn of the coverage until after the 10-day cancellation period has run? (Jon was told that Orbitz might work with the vendor to persuade it to cancel the insurance protection under certain conditions, but that: 1) the decision to cancel and refund was up to the insurance company, not Orbitz; and 2) if the trip was completed no refund would be allowed.

How many needless cancellation hoops (making six rather than one call, listening to a 20-minute message, submitting an affidavit) can be imposed as preconditions to cancellation?

We’re particularly concerned that Orbitz sent Jon an email that inaccurately described this program as an opt-in rather than as an opt-out program. We assume that this misrepresentation by Orbitz was inadvertent and will be corrected. Jon was told by the Orbitz representative who called him that the earlier Orbitz email was incorrect and that the issue had been passed along to “management.”

But the 800-pound gorilla in the room is the opt-out scam that began this entire travail. In their recent best-selling book Nudge, Cass Sunstein and Richard Thaler show that default setting can be a powerful force for the social good. But default setting can also be a powerful force for mischief if controlled by those with ill intent.

We wonder whether the fact that opt outs were only recently introduced in the travel industry — and only after Nudge was published — is merely coincidental. Perhaps the insights in the book provided valuable, if unscrupulous, tips to the marketers who help design websites for the travel agency.

As lawyers and economists, we would have predicted that reputational sanctions would have kept Orbitz from engaging in these sorts of shenanigans. Experience, however, is proving us wrong.

Particularly troubling is the fact that Orbitz must know what it is doing, because it sometimes uses opt-in marketing strategies, and it sometimes uses opt-out marketing strategies. It seems to us that there must be a reason for this.

If other retailers follow suit, this might be a place where a light legal intervention is called for. We, of course, would allow consumers to buy trip insurance or any other add-on service they really want. But it might be wise to require that any add-on services that add to the advertised price be offered solely on an opt-in basis.


I think that this is a disturbing trend which should be curbed by legislation as soon as possible. It does not just occur with travel insurance either. My fiancee recently ordered some flowers on a popular website*, and discovered a few months later that she was being charged $15 per month on her credit card for some "service" which she had apparently registered for while ordering the flowers. I can only assume that this was an opt-in scam as she does not remember ever signing up for it. The fact that this was a monthly charge and not single use is even more insidious, as I know that many people do not routinely check their credit card statements for accuracy (even though they should), and could well continue paying for this mistake for months.

*I won't say which flower website, but it is one of the top google search results.


This is very prevalent with European low budget airlines. Ryanair for instance opt you in for travel insurance. They also attempt to opt you in to various other schemes such as airport check in (?8), taking a bag (?5), priority boarding (?5) and additionally charge ludicrous fees for using credit OR debit cards to book (generally ?5 per flight, each way - only VISA Electron cards escape this charge.)

The difference between noticing and de-selecting these options and using a VISA Electron card can be fairly hefty. I recently booked for 5 of us to go to mainland Europe and the price difference was around ?240 on flights which cost ?190.


I find opt-out selections in many of the products I buy online. It's hard to remember all, but I'm sure I bought a computer from Dell and had to opt out of a number of options and add-ons that I had absolutely no use for, or could get on my own for a fraction of the price (legally).


Frontier Airlines and Orbitz are both in the business of making money. If they need to manipulate people -- using "opt out" tricks such as those described here -- then so be it.

Ethics is rarely a consideration for companies like this because ethics do not make them money. Perhaps they already tried selling these add-ons using "opt in" methods, but didn't make enough sales, so they resorted to the "opt out" trick. Being ethical didn't bring in enough sales, so they resort to unethical manipulation.

That's how the business world works.

Of course, this sort of thinking is based on the presumption of an adversarial relationship between business and customer. A business that treats its (potential or actual) customers as "targets" to be manipulated is not really sending them a very good message, is it? It almost defies logic to do business by treating customers in such a way.

Yet businesses do it all the time. And we, as consumers, settle for it, all the time.



Simple answer, vote with your feet. Pick a provider that doesn't resort to those shenanigans - although I live in Denver, Frontier has become my airline of last resort for some of the very reasons you mention - I get the impression they're far more interested in picking my pocket than in providing me service. Orbitz doesn't get my business for the same reasons.

"Opt-Out" fees are a very short-sighted policy and one likely to backfire. It doesn't take burning customers too many times until you're faced with the unhappy prospect of winning a new batch, generally at 10-20 times the cost of retaining those you have. And I don't care how politely the customer service agent explains to me it was my mistake by not unchecking the box, I still feel burned when something like this happens. If you have enough of a customer base that a customer lost over a $10 fee on a $200 plane ticket is not a problem, fine, the company should just realize it will most likely take them $100 to get that customer back.



I'm not sure that the Dell situation and this situation are comparable. Computers (like cars and other similar items) is a configurable item. Just like a car on the lot might have things you don't care about or need (like a coat of wax and scotchgaurd labeled as a "protection package" at several hundred dollars), it's pretty well understood that Dell has multiple upgrade and downgrades. The website is pretty good about being explicit on each component about where in the upgrade curve you are- and the least expensive option is always at the top of the list. The cost of each option is quite clear as well.

I think the tricky part here is you are being told "buy this flight for this much money". Then, in the purchasing stage is slips in a little additional note that you're going to buy something else for x amount of money, which doesn't make the change in the price obvious until you're at the final price, which you're used to being higher due to travel taxes that no one ever really knows the amount of ahead of time.



This is why Southwest Airlines has a dedicated customer in myself. I fly SWA over 100 time per year, not because I enjoy flying cattle class (I am 6'8"), but because SWA has convinced me that they view me as a long-term client, not a mobile ATM to be fiscally assaulted at every opportunity. I cring when I have to fly other airlines.

The biggest issues to me? 1) While SWA charges more for a refundable ticket, they do not try to rake you over the coals when you purchase a last minute ticket and 2) SWA fares are pretty consistent based on mileage flow, not number of competing airlines to your destination.

Marc Resnick

Although this is a particularly troubling example because of the high costs involved, it is not new.

In my field of usability engineering, we are often faced with similar design decisions. On the side of pure customer-friendliness, these would never be defaulted to accept. The design guideline is to default to the least risky option.

On the side of pure short term cash flow (i.e. businesses without a clue), it is always defaulted to the option that yields the highest margin to the company.

In the past decade, most companies have realized that long term customer loyalty trumps any benefits that this short term cash flow might provide and have stopped this practice. The only exceptions are low risk items that won't alienate too many people by too much.

I am very disappointed that companies with the size and reputation of Orbitz and Frontier have not yet learned this lesson.


I don't see an ethical dilemma here. Every one of the customers mentioned was presented with a choice, and it sounds like a clear choice in each case. The fact that the box is opt-out instead of opt-in is an annoyance, but as a consumer it is your obligation to read before you buy. This is not a case of fine print or unreadable lawyer-ese that could be mis-construed, these were check boxes that asked a simple question. It's no fun to mistakenly sign up for something like this (and most of us probably have at some point in our lives), but calling it an ethical issue ignores the responsibility I have as an adult to take the presonal responsibility for my own actions.


That was one evil nudge!


To avoid future outrage, I would suggest the following:

(1) Accept that Orbitz is in the business of making money. If they can make money by selling you stupid cr*p that you didn't want, they will. Incidentally, since when does a desire to make money constitute "ill intent" to an economist?

(2) Read what you agree to. You would have clearly seen the checkbox if you had bothered to skim over the page. Though I'd recommend reading the entire thing, here is a rule of thumb: checkbox=choice; if you don't make a choice, one will be made for you; as noted above, you should assume that the choice made for you will be the one that makes Orbitz more money.

I can't share your outrage at this practice. You might not like my recommendation above - your time might be more valuable than mine or you may otherwise have less patience for reading through agreements. To be honest, I would prefer that you continue not to read the not-so-fine print allowing you to opt out; you are subsidizing the purchases of those who do.

Other related points:
-Orbitz does not have unlimited discretion in this matter - if it were truly onerous to opt out, I am quite confident consumers would switch travel sites.
-"Light legal intervention" is practically an oxymoron.


Lance wiggs

Like the free flowers from Hari Krishnas we learn and subsequently avoid this technique. Hopefully we learn without paying
It's a one shot deal, and companies that try it are very shortsighted.


I think the more disturbing issue here is that Orbitz probably either owns a substantial share of the insurance company or gets a hefty percentage of the "insurance" money. It's not like this is a service that Orbitz added for the good of the consumer. Disturbing trend....

Kevin H

Ha, Ian, in neuroscience and psychology, that airline kiosk trick would be called a go-no-go task. And who says neuroeconomics isn't worth anything. Looks like it's worth at least 75$


The real test (and possibly a neat economics experiment) here is whether we'd stand for the same shenanigans at a physical cash register: What if, at the grocery store, the clerk stuffed something in your bag as you walked up to the register?

Soon no one would shop there -- customers would "vote with their feet." I'd probably even drive to a store farther away to avoid such sales tactics, and I suspect that others would, too. So, given that it's easier to take your business elsewhere on the Web than in the physical world, shouldn't we expect that online businesses will feel an "opt out" backlash faster and deeper than a brick-and-mortar business who tried something similar?

I'd love to see someone design and conduct an experiment to find out!


"we would have predicted that reputational sanctions would have kept Orbitz from engaging in these sorts of shenanigans"

I'm not surprised at all, I think Orbitz has learned after several other well-publicized incidents like this that most of their customers really don't even hear about these things.

And I wonder how many other customers didn't even notice the fee? (They got their credit card statement, the first two digits of the charge were about what they remembered, so they didn't look more closely.)


Orbitz is awful

Two years ago, I was purchasing a ticket to have a round-trip ticket to fly through orbitz. Two days before the flight, I checked the web site to confirm, and the flight was gone!

Of course, my credit card had been charged. I spent 8 hours on Christmas Eve on the phone with people in the Philippines, and even then, when I arrived at the airport on the day of my flight, I still wasn't in the system.

What did orbitz offer me? A non-transferable $100 off of my next orbitz purchase, good for 6 months.

Needless to say, I didn't end up using that coupon.


Thanks. Let's keep outing these greedy jerks on a national platform.


Got burned by this once and have voted with my feet. Orbitz and its opt-out scammers can rot in Hades as far as I'm concerned.



If being ethical has no correlation to business or capitalism it is not liekly to a be long term philosphy in a world where information asymmetry is decreasing.

I didn't even have to go through this experience to learn about it.