The U.S. Department of Transportation decision, issued Friday, was taken in response to formal complaintsby American Trans Air and Frontier Airlines earlier this year.
The complaints centered around certain Hotwire radio commercials which offered examples of low airline fares to certain destination cities, but failed to mention where the flights originated or when the fares would be available. The DOT found that in some cases, fares were not available in certain cities where they were advertised.
"The department found that these were deceptive ads," said Bill Mosely, a DOT spokesman. In addition to the fine, the DOT ordered the company to cease running the ads in question.
Hotwire has been cooperating with the DOT and has already addressed concerns raised in the complaint, the company said in a statement.
"The purpose of the ads was to illustrate the type of savings possible for flexible travelers who use Hotwire," the company said. "To add clarity to the ads, Hotwire has added origin city and booking date to its current advertising, and will continue to include that information in future advertising messages."
Hotwire representatives were not immediately available for comment.
The decision marks the second time in recent weeks that Hotwire has come under fire for its advertising practices. Last month, the National Advertising Division (NAD) of the Council of Better Business Bureaus, following up on a complaint filed by rival Priceline.com, recommended that Hotwire drop or modify claims in its advertising that it offers "better deals" and the "lowest price guaranteed." NAD found that if "better deals" meant "lower prices," Hotwire had no evidence to support its claims.
An NAD representative did not return calls seeking comment. Hotwire said in a separate statement that the NAD had asked it to "slightly modify" its advertisements in a way that "does not materially change (the advertisements') overall message."
Often used for last-minute airline fares, Hotwire offers inexpensive airline tickets, yet assigns customers to an airline only after they book a ticket. The company competes directly with Priceline.com.
The DOT required Hotwire to pay half of the $50,000 fine within 15 days, adding that the other half would be forgiven if Hotwire complied with the order to cease running the ads in question.
"If it fails to do so (after that year), the entire unpaid balance of the penalty shall become due and payable immediately, and Hotwire may be subject to further enforcement action," the DOT said in a statement.
Separately, the DOT dismissed complaints by airlines ATA and Frontier that Hotwire's ads were "unlawfully derogatory." In the ads, Hotwire compared the fares it provided on major carriers with those available from lesser-known carriers, such ATA and Frontier. ATA and Frontier and argued that Hotwire's characterization of their services was false and illegal.
Regardless, an ATA representative praised the ruling on the deceptive advertising claim.
"We are pleased with the (department's) decision and that our complaint has been rectified," said ATA spokeswoman Angela Thomas.
Frontier airlines representatives did not return calls seeking comment.
The enforcement action against Hotwire was the third such action the DOT has taken this year concerning deceptive advertising. The department oversees advertising claims related to airline transportation.