Warnings of an impending regulatory focus on hidden and junk fees materialized following President Joe Biden’s call to Congress during his 2023 State of the Union address to eliminate them. On December 17, the Federal Trade Commission (FTC) announced its final rule, Trade Regulation rule on Unfair or Deceptive Fees (Junk Fees Rule), which bans junk fees associated with live-event ticket and short-term lodging (hotels and vacation rentals). By focusing exclusively on the live-event ticket and short-term lodging sectors, the rule is notably narrower in scope than the originally proposed rule from October 2023, which targeted junk and hidden fees across all industries nationwide.
What Are Junk Fees?
Junk fees — such as processing fees, convenience charges, and recoupment — often remain unseen by consumers due to their lack of transparency. Businesses tend to advertise an initially low price, only to reveal additional fees throughout the purchasing process. This practice, known as bait advertising, can mislead consumers about the true cost of a product or service and hinder their ability to compare prices accurately, as the total price is typically disclosed only at the end of the transaction.
New Rule Requirements
The Junk Fees Rule imposes disclosure requirements for live-event ticket and short-term lodging businesses. First, when “offering, displaying, or advertising” any good or service, businesses must disclose the total price clearly and conspicuously, ensuring it is more prominent than any other pricing information. This requirement to ensure the total price is clear, conspicuous, and more prominent than any other pricing information differs from some state laws banning junk fee practices, such as California’s SB 478, which took effect on July 1. Under the FTC’s rule, the total price excludes government charges (e.g., sales tax), shipping charges, and fees or charges related to optional items or services.
Second, before a consumer consents to pay for any good or service, businesses must clearly and conspicuously disclose the nature and amount of any fee or charges excluded from the total price; the good or service the excluded fee applies to; and the final amount of payment for the transaction, disclosed as prominently, or more prominently, than the total price.
The rule further specifies that it is an unfair and deceptive practice for businesses to misrepresent any fee or charge, including the nature, purpose, amount or refundability. This aligns with existing unfair and deceptive trade practice (UDAP) regulations at both federal and state levels.
Implications for Impacted Businesses
This rule should prompt businesses to adopt best practices to ensure compliance. The FTC released a blog post discussing the rule’s impact on covered businesses in these industries. To comply, businesses must determine which portions of their product and service offerings are in fact mandatory and need to be included in the advertised price.
