The Federal Trade Commission on Tuesday announced a final Rule on Unfair or Deceptive Fees, or “Junk Fees Rule,” that targets “bait-and-switch pricing” for short-term lodging and live-ticket events.
The rule requires up-front disclosure of total prices including fees, so that consumers booking hotels or vacation rentals are not surprised by “resort,” “service” or “convenience” fees at checkout. The rule targets pricing practices that “harm consumers and undercut honest businesses,” per the FTC’s announcement.
The Junk Fees Rule will mandate that pricing information is presented in a “timely, transparent, and truthful way to consumers” of short-term lodging and live-event tickets, two industries the FTC has studied in particular.
The FTC estimates that the new rule will save American consumers up to 53 million hours per year spent searching for the total price of lodging and events — equivalent to more than $11 billion over the next decade.
“People deserve to know up-front what they’re being asked to pay — without worrying that they’ll later be saddled with mysterious fees that they haven’t budgeted for and can’t avoid,” said FTC Chair Lina Khan in a statement.
The Junk Fees Rule does not ban any particular type of fee. Rather, it requires businesses to advertise their pricing inclusive of all mandatory fees up front, even in ads or offers. It also requires businesses to display the total price more prominently than “most other pricing information,” meaning that the most prominent price in an ad should be the “all-in total price.”
Businesses must also disclose the “nature, purpose, identity, and amount of those fees” before consumers consent to pay.
Though the Junk Fees Rule targets short-term lodging and live-event ticketing specifically, the FTC pledged to use its authority “to continue to rigorously pursue bait-and-switch pricing tactics, such as drip pricing and misleading fees, in other industries through case-by-case enforcement.”
The final rule will become effective in April, 120 days after its publication in the Federal Register.
In her statement, Khan said she urges “enforcers to continue cracking down on these unlawful fees and encourage state and federal policymakers to build on this success with legislation that bans unfair and deceptive junk fees across the economy.”
Many enforcers already are. California implemented the nation’s strongest anti-“junk fee” legislation in July. And legislation targeting hidden fees has been introduced in both the House of Representatives and the Senate. The American Hotel & Lodging Association has supported both pieces of legislation.
