BILL REQ. #:  H-4245.1 

Read first time 01/16/08.   Referred to Committee on Commerce & Labor.

     AN ACT Relating to requirements for airlines participating in the secondary market for points, miles, or other similar credits earned in frequent flier programs; and adding a new chapter to Title 19 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature finds that:
     (1) In recent years, frequent flier programs have become a popular marketing tool used not only to attract airline customers and generate customer loyalty, but also to generate significant revenue for airlines;
     (2) As frequent flier programs have grown in popularity, a secondary market for points, miles, or other similar credits earned by participating in frequent flier programs has also grown;
     (3) This secondary market for points, miles, or other similar credits is independent from the original frequent flier loyalty programs and is not related to airline rates, routes, and services;
     (4) Airlines have contributed to the growth of this secondary market by creating a business out of selling points, miles, or other similar credits to outside companies, such as credit card companies, that in turn use the points, miles, or other similar credits to attract their own customers;
     (5) As the secondary market for points, miles, or other similar credits has grown, however, airlines have increasingly attempted to unreasonably restrict, restrain, limit, or control the secondary market by prohibiting frequent flier program members from also participating in the secondary market;
     (6) When unreasonable restrictions, restraints, limitations, or controls are placed on the secondary market for points, miles, or other similar credits, consumers in the state of Washington who participate in frequent flier programs are harmed; and
     (7) Regulation of the secondary market for points, miles, or other similar credits earned through participation in frequent flier programs is necessary to ensure that consumers in the state of Washington can freely participate in the secondary market.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Frequent flier program" means a program in which a consumer receives points, miles, or other similar credits in exchange for travel on a certain airline.
     (2) "Secondary market" means the market in which the sale, barter, or exchange of points, miles, or other similar credits occurs between an airline and someone other than a frequent flier member or between a frequent flier member and someone other than the airline sponsoring the frequent flier program.

NEW SECTION.  Sec. 3   (1) If an airline chooses to claim to own points, miles, or other similar credits sold, bartered, or exchanged on the secondary market, the airline shall comply with the requirements of subsections (2) and (3) of this section.
     (2) The airline shall include a warning in the first twenty-five percent of the first page of any communication from the airline, including the airline's web site or newsletters, stating that the points, miles, or other similar credits that are sold, bartered, or exchanged on the secondary market are the property of the airline and that the airline may terminate a frequent flier program at any time and reserves the right to seize the points, miles, or other similar credits without notice or compensation. The warning shall be in red font of not less than eighteen point and displayed on a background of distinctly contrasting color.
     (3)(a) If the airline terminates its frequent flier program, the airline shall compensate holders two and one-half cents for each point, mile, or other similar credit of the airline's frequent flier program sold, bartered, or exchanged on the secondary market.
     (b) The airline shall establish and maintain a separate reserve fund adequate to compensate holders of points, miles, or other similar credits of the airline's frequent flier program that were sold, bartered, or exchanged on the secondary market if the airline terminates its frequent flier program.
     (c) The amount of the separate reserve fund shall be not less than two and one-half cents per point, mile, or other similar credit of the airline's frequent flier program that was sold, bartered, or exchanged on the secondary market.
     (d) If the airline terminates the frequent flier program, the general assets of the airline shall be liable to consumers who bought, bartered, or exchanged the airline's points, miles, or other similar credits on the secondary market to the extent that the separate reserve fund is inadequate to compensate consumers.

NEW SECTION.  Sec. 4   If an airline violates section 3 of this act, an individual may bring a civil action for damages as a result of the violation. If the individual prevails, the individual shall be allowed reasonable attorneys' fees and costs.

NEW SECTION.  Sec. 5   Sections 1 through 4 of this act constitute a new chapter in Title 19 RCW.