Junk fees on the way out? FTC proposes an end to unpopular business practice

The Federal Trade Commission (FTC) just widened its crackdown of so-called junk fees that mislead the buying public. A proposed rule would prohibit businesses from adding “hidden and bogus fees that can harm consumers and undercut honest businesses.”

The FTC estimates “fees can cost consumers tens of billions of dollars per year in unexpected costs.” Consumer advocate groups pushed the FTC to regulate fees typically hidden in the “fine print” by outlets like car and truck dealers, hotels and live entertainment companies like Live Nation and Ticketmaster.

Opponents of the rule say consumers who might otherwise qualify for discounts on listed prices may lose out on good deals. Savvy shoppers who take time to read the “fine print” are arguably the one group that won’t like the changes required by the FTC proposal, not to mention trial lawyers (hat tip to Matthew Stoller’s Substack “BIG”).

However: The FTC sought input on a junk fee ban last year and received 12,000 comments in response. Most of the comments were supportive, says FTC chair Lina Khan. “By hiding the total price, these junk fees make it harder for consumers to shop for the best product or service and punish businesses who are honest up-front.”

‘Just tell us what the actual price is!’

The FTC is calling for a ban on two kinds of junk fees that it says “consistently confuse and trick consumers”:

• hidden fees that may be omitted or left out of advertising prices, or are mandatory but not revealed until time of sale (aka surprise fees), and
• bogus fees in which “the nature or purpose of the fees” aren’t clear, and whether they’re refundable.

Businesses that include fees in product or service deals may want to look to companies like Verizon which changed its practices a few years back. The telecommunications giant now includes all fees and taxes in rates down to the penny after customers complained for years about price confusion.

The FTC’s proposed rule would apply to a broad range of businesses, such as “live-event ticket sales, hotels and short-term lodging, auto rentals and sales, internet apps and internet service providers.” The only excluded sector is motor vehicle dealers which will need to comply with an FTC rule proposed in July 2022.