Trade Regulation Rule on Unfair or Deceptive Fees

Federal RegisterNov 9, 2023

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FEDERAL TRADE COMMISSION

16 CFR Part 464

Trade Regulation Rule on Unfair or Deceptive Fees

AGENCY:

Federal Trade Commission.

ACTION:

Notice of proposed rulemaking; request for public comment.

SUMMARY:

The Federal Trade Commission commences a rulemaking to promulgate a trade regulation rule entitled “Rule on Unfair or Deceptive Fees,” which would prohibit unfair or deceptive practices relating to fees for goods or services, specifically, misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees. The Commission finds these unfair or deceptive practices relating to fees to be prevalent based on prior enforcement, the comments it received in response to an advance notice of proposed rulemaking, and other information discussed in this proposal. The Commission now solicits written comment, data, and arguments concerning the utility and scope of the trade regulation rule proposed in this notice of proposed rulemaking to prevent the identified unfair or deceptive practices.

DATES:

Comments must be received on or before January 8, 2024.

ADDRESSES:

Interested parties may file a comment online or on paper by following the instructions in the Comment Submissions part of the

SUPPLEMENTARY INFORMATION

section in this preamble. Write “Unfair or Deceptive Fees NPRM, R207011” on your comment and file your comment online at

https://www.regulations.gov.

If you prefer to file your comment on paper, mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex J), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Janice Kopec or Stacy Cammarano, Division of Advertising Practices, Bureau of Consumer Protection, Federal Trade Commission, 202-326-2550 (Kopec), 202-326-3308 (Cammarano),

jkopec@ftc.gov, scammarano@ftc.gov.

SUPPLEMENTARY INFORMATION:

The Federal Trade Commission (“FTC” or “Commission”) invites interested parties to submit data, views, and arguments on the proposed Rule on Unfair or Deceptive Fees and, specifically, on the questions set forth in Section X of this notice of proposed rulemaking (“NPRM”). The comment period will remain open until January 8, 2024.

To the extent practicable, all comments will be available on the public record and posted at the docket for this rulemaking on

https://www.regulations.gov.

The Commission will provide an opportunity for an informal hearing if an interested person requests to present their position orally.

See

15 U.S.C. 57a(c). Any person interested in making a presentation at an informal hearing must submit a comment requesting to make an oral submission, and the request must identify the person's interests in the proceeding and indicate whether there are any disputed issues of material fact that need to be resolved during the hearing.

See

16 CFR 1.11(e). The comment should also include a statement explaining why an informal hearing is warranted and a summary of any anticipated testimony. If the Commission schedules an informal hearing, either on its own initiative or in response to request by an interested party, a separate notice will issue.

See id.

at 1.12(a).

The Commission elects not to provide a separate, second comment period for rebuttal comments.

See

16 CFR 1.11(e) (“The Commission may in its discretion provide for a separate rebuttal period following the comment period.”).

I. Background

The Commission published, on November 8, 2022, an Advance notice of proposed rulemaking (“ANPR”) under the authority of Section 18 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. 57a(b)(2); the provisions of Part 1, Subpart B, of the Commission's Rules of Practice, 16 CFR 1.7 through 1.20; and 5 U.S.C. 553.

This authority permits the Commission to promulgate, modify, or repeal trade regulation rules that define with specificity acts or practices that are unfair or deceptive in or affecting commerce within the meaning of Section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).

Fed. Trade Comm'n, ANPR: Unfair or Deceptive Fees Trade Regulation Rule Commission Matter No. R207011, 87 FR 67413 (Nov. 8, 2022),

https://www.federalregister.gov/documents/2022/11/08/2022-24326/unfair-or-deceptive-fees-trade-regulation-rule-commission-matter-no-r207011

https://www.regulations.gov/document/FTC-2022-0069-0001.

The ANPR described the Commission's history of taking law enforcement action against, and educating consumers about, unfair or deceptive practices relating to fees, and it asked a series of questions to inform the Commission about whether such practices are prevalent and, if so, whether and how to proceed with a NPRM.

The Commission took comments for 60 days, extended the comment period,

and received over 12,000 comments, which it has thoroughly considered.

Id.

88 FR 4796 (Jan. 25, 2023).

Based on the substance of these comments, as well as the Commission's history of enforcement and other information discussed in this preamble, the Commission has reason to believe that unfair or deceptive practices relating to fees are prevalent

and that proceeding with this rulemaking is in the public interest. After discussing the comments and explaining its considerations in developing the proposed rule, the Commission poses specific questions for comment and provides the text of its proposed rule.

See

15 U.S.C. 57a(b)(3) (“The Commission shall issue a notice of proposed rulemaking pursuant to paragraph (1)(A) only where it has reason to believe that the unfair or deceptive acts or practices which are the subject of the proposed rulemaking are prevalent.”).

II. Summary of Comments to the ANPR

The Commission received over 12,000 comments in response to the ANPR. Publicly posted comments are available on this rulemaking's docket at

https://www.regulations.gov/docket/FTC-2022-0069/comments.

The majority of comments expressly supported government action or described negative experiences relating to fees that suggested support for such action. The comments generally supported a rulemaking to improve pricing transparency—including requiring advertised prices to include mandatory fees—and to prohibit misrepresentations about the nature, purpose, or amount of fees. The Commission has carefully considered the views expressed in the comments, and proposes the rule described in Section XIV.

For Docket ID FTC-2022-0069,

Regulations.gov

lists the “Number of Comments Posted to this Docket” as 6,166 out of a total “Number of Comments Received” of 12,046. As noted in the responses to Frequently Asked Questions at

Regulations.gov

, “Not every comment is made publicly available to read. Comment counts that refer to ‘comments posted’ reflect the number of comments that an agency has posted to

Regulations.gov

to be publicly viewable. Agencies may choose to redact or withhold certain submissions (or portions thereof) such as those containing private or proprietary information, inappropriate language, or duplicate/near duplicate examples of a mass-mail campaign. Therefore, the number of comments posted may be lower than the comments received.” In connection with this docket, over 5,700 comments were a part of a single mass-mail campaign, which is represented in the posted comments by comment FTC-2022-0069-5989.

As discussed in this preamble, the comments raised concerns about widespread deceptive practices in

connection with fees. In particular, they raised concerns that sellers do not advertise the total amount consumers will have to pay and disclose fees only after consumers are well into purchasing transactions, harming both consumers and businesses. They also stated sellers misrepresent or do not adequately disclose the nature or purpose of fees, leaving consumers wondering what they are paying for or believing fees are arbitrary, and they are getting nothing for the fees charged.

The comments also stated in large numbers that the amounts of fees charged are often excessive, increasing prices by large percentages and making purchases unaffordable, particularly, in the live-event ticketing industry. The rule proposed by the FTC does not limit the amount that businesses may charge for goods or services.

Commenters provided examples of these practices related to a wide array of goods and services, such as hotels, short-term lodging, ticket sales, rental housing, financial services, auto sales, internet service providers, and other market sectors. Many commenters addressed multiple sectors in a single comment. In this section, we discuss comments from individual commenters and other stakeholders, including consumer, policy, and industry groups, about these widespread practices. The breadth and number of comments strongly support a rule to tackle the harm caused to consumers and businesses from these practices across various industries, by requiring all-in pricing and other measures to prevent false and misleading representations about fees.

A. Overview of Prevalent Unfair or Deceptive Fee Practices Identified in Comments

1. Comments on Bait-and-Switch Tactics: Misrepresenting Total Costs by Omitting Mandatory Fees From Advertised Prices

Commenters stated businesses routinely engage in deceptive bait-and-switch pricing tactics by advertising prices that fail to include mandatory fees and that end up misrepresenting total prices because fees imposed later increase total prices significantly.

In many comments, mandatory add-on fees omitted from an initial offer were not disclosed until checkout,

and some comments raised concerns about advertisements that omitted key terms that required consumers to pay more to fully use the good or service.

They stated fees can inflate advertised prices by amounts that are large percentages of the base prices of goods or services.

Commenters described this bait-and-switch practice as misrepresenting the total costs consumers must pay and as false advertising that is deceptive and unfair to consumers, and asked the FTC to take action.

FTC-2022-0069-1046 (“Consumers should not have to guess what their total outlay for a purchase will be . . . . Not revealing the true cost of something is deceptive and anti-competitive (How can you comparison-shop if you don't know the price?)”); FTC-2022-0069-1481 (“the price advertised is significantly less then [sic] the final price once convenience fees and other hidden fees with vague justifications are added to the cost”); FTC-2022-0069-2582 (“These fees serve to mask the true price of any service.”); FTC-2022-0069-3420 (delayed disclosures “artificially lower prices”); FTC-2022-0069-3498 (“[O]nline businesses . . . advertise a low cost to attract attention, then add on a fee at checkout that eliminates any benefit from the initial advertised price.”); FTC-2022-0069-4064 (“In a time when information is readily available to hide it when it comes to costs is nefarious.”); FTC-2022-0069-4120 (“If the fees are not optional, they need to be included in the initial price; otherwise, it's false advertising[.]”); FTC-2022-0069-4724 (“It has gotten to the point that fees mis-represent [sic] the true cost of the product or service until after the purchase.”); FTC-2022-0069-6104 (“Advertising low prices and tacking on various fees is nothing more than bait and switch.”).

FTC-2022-0069-0040 (describing additional mandatory fees disclosed at the checkout page in a live-event ticket purchase); FTC-2022-0069-0103 (describing additional mandatory fees disclosed at the hotel checkout); FTC-2022-0069-0120 (same); FTC-2022-0069-0116 (describing additional mandatory fees disclosed at the rental car checkout); FTC-2022-0069-0842 (describing late-disclosed fees in a variety of industries); FTC-2022-0069-1437 (describing late-disclosed fees in delivery applications and vacation rentals).

FTC-2022-0069-1622 (describing subscription models to use features that are already part of a product); FTC-2022-0069-1915 (same); FTC-2022-0069-5913 (“We need to ban having subscription services attached to vehicle features, requiring you to pay monthly fees for items already installed in the vehicle.”); FTC-2022-0069-1638 (complaining of a video subscription service with undisclosed limitations on the shows included and requiring additional payments); FTC-2022-0069-5434 (describing recurring fees for rental apartments disclosed after the lease application was submitted); FTC-2022-0069-5419 (describing a gym membership with a late-disclosed policy of add-on fees, including extra charges to access classes); FTC-2022-0069-5353 (describing a security camera that requires additional purchases to use).

FTC-2022-0069-0048 (“I've seen situations where the resort fee can be 2-3 times the `room rate.' ”); FTC-2022-0069-1862 (“Norwegian Cruise Line recently increased their service charge to $20 per person per day. That's $560 for a week-long cruise for a family of four and accounts for 17% of the total cost of a cruise. It's clear that cruise lines have been increasing these fees to pay their workers more without increasing the base fare they advertise.”); FTC-2022-0069-2154 (“Often times these fees are a considerable percentage of the advertised price, and there is no obvious rationale for how they quantify these massive and varying amounts.”); FTC-2022-0069-3434 (“[C]ompanies should not be allowed to advertise one price and then tack on enough fees to almost double the cost to consumers.”); FTC-2022-0069-5892 (“a `Processing fee' of $299.11, which is more than the total quoted price for a year's supply of contact lenses, is added to the order, increasing the total purchase price from $271.92 to $579.98. This clearly shows how these deceptive junk fees more than double the advertised price of a year's supply of contact lenses.”).

FTC-2022-0069-3415 (“false advertising at best”); FTC-2022-0069-0111 (“a way to falsely advertise a lower price”); FTC-2022-0069-3435 (“Advertising one price when you know there is more to it, or more that you as a business will have to pay, is deceptive and unfair to the consumer[.]”); FTC-2022-0069-6167 (“Please put a STOP to this deceptive, dishonest practice”).

2. Comments on Misrepresenting the Nature and Purpose of Fees

Commenters stated consumers often do not know what fees are for because businesses routinely do not clearly or conspicuously disclose the nature or purpose of fees, including the identity of the goods or services for which the fees are charged.

Commenters explained that businesses employ vague names like convenience fees, economic impact fees, or improvement fees that do not adequately disclose to consumers what they are paying for.

Commenters also noted prices are sometimes advertised as “free,” but are not in fact free when fees are added.

FTC-2022-0069-0489 (“it is unclear what purpose they serve”); FTC-2022-0069-0493 (“fee system” is “clouded in secrecy”); FTC-2022-0069-0603 (“what are they for?”); FTC-2022-0069-1301 (“These fees are terrible, they're an added cost with no apparent purpose or meaning.”); FTC-2022-0069-1748 (“Besides ticketing sites, utilities have service fees, banks have statement fees, retail stores may have convenience fees, ride sharing apps have service fees, food delivery apps have service fees, and many other business types have fees that the consumer is expected to pay for without clarity to their purpose.”); FTC-2022-0069-1794 (“[h]aving a name for a fee [that] doesn't really describe what it does or why I have to pay it”); FTC-2022-0069-2187 (“[I]t seems too easy for companies across the spectrum to both `hide' fees from the consumer in the initial pricing, but then also avoid explain [sic] to the purchaser what those fees are actually for.”); FTC-2022-0069-2189 (“it's often unclear what these fees are for”); FTC-2022-0069-2346 (“A reasonable person can't fathom what these `fees' are for and most times these fees are not explicit in their purpose.”); FTC-2022-0069-3784 (“Not only are the fees added later, their [sic] is no insight as to what these fees are.”); FTC-2022-0069-2566 (“it has never been clear what they are actually for”); FTC-2022-0069-3148 (“Fees are going up and up and it's never clear what, exactly, they're being charged for.”); FTC-2022-0069-3686 (“organizations do not make the knowledge of what the fees are used for public, or at least accessible/obvious”); FTC-2022-0069-4067 (“It would be better also if an explanation of the fees and what their purpose is was present.”).

FTC-2022-0069-1477 (“some secret convenience fee pushing the actual cost up”); FTC-2022-0069-1612 (“The fees are vague and there's not [sic] reason for them to not be included in the advertised price, unless the company is utilizing a marketing strategy with the intention of deceiving the customer.”); FTC-2022-0069-1947 (“Why are companies allowed to charge an abstract `convenience fee' with no further explanation of what the fee is for?”); FTC-2022-0069-3766 (“restaurant . . . deceptively adds a 20% `equity fee' to every bill instead of fairly displaying a price”); FTC-2022-0069-3880 (commenter wrote about a fluctuating “Economic Impact Fee”); FTC-2022-0069-4405 (“From hotels to online delivery companies to service providers, it seems that nearly all companies are tackling [sic] on additional costs without explaining why they are necessary to provide the service.”).

FTC-2022-0069-1676 (“Turbo tax. Waiting until I've done all of my paperwork to tell me that I need to upgrade my package to file.”); FTC-2022-0069-2986 (“the cruise line included room service at no charge,” but “they added a $9,95 [sic] plus 18% gratuity charge to all room service services”); FTC-2022-0069-0688 (“During on-line Christmas shopping, one company offered `Free Shipping' as a promotion. At checkout, even though there was a $0 charge for `Shipping', I was charged $2.99 for `Shipping Service Fees'. How is this considered FREE shipping?”).

Commenters stated that, even when businesses purport to disclose the nature or purpose of fees, the disclosures may not be truthful. Commenters described fees as arbitrary and not bearing any reasonable relationship to the costs of goods or services provided.

Commenters stated fees provided them with little or no value, were not for goods or services they received, and were merely revenue sources for businesses.

FTC-2022-0069-2433 (“These fees are not representative of any actual cost of processing an electronic payment or other transaction and without regulation any price can be set arbitrarily resulting in extra cost to the consumer for no reason at all.”); FTC-2022-0069-2558 (“whatever fees they decide to make up”); FTC-2022-0069-3492 (Consumers are under the impression that “fees do not cover any actual costs”).

FTC-2022-0069-0605 (“just an unfair profit markup, there is not benefit or service for the ticket transaction”); FTC-2022-0069-0443 (“Pure income generation scams”); FTC-2022-0069-3664 (“fee is used merely to generate profit rather than cover a cost”).

B. The Comments Show the Identified Deceptive Practices Are Widespread

The FTC received comments regarding a wide range of industries from individual commenters and consumer, policy, and industry groups. Individual commenters frequently raised concerns about these practices in connection with more than one industry in a single comment, with some describing the existence of mandatory, hidden, or misrepresented fees across the economy.

Although many individual commenters wrote about online purchases, they also noted that stores with physical locations also engage in advertising prices that do not include mandatory fees, and only later disclose fees using names that do not clearly inform consumers of the nature or purpose of fees.

Individual commenters noted that businesses also face undisclosed fees for which the nature or purpose is not clear.

FTC-2022-0069-0450 (“As a consumer, I despise being duped with advertised pricing only to be alarmingly surprised at checkout that there are ancillary fees, convenience charges, special handling charges, resort fees, extended warranty charges, restocking fees, waste disposal fees, entry fees, exit fees, toll charges, health mandate fees, CRV fees, upgrade fees, downgrade fees, overweight baggage fees, extra baggage fees, additional BBQ sauce fees, monthly service fees if your balance falls below $xxx, overdraft fees, mystery gasoline tax for winter blends and/or summer blends, to-go bag and container fees, delivery fees, etc.”); FTC-2022-0069-0688 (“These fees in various forms, are appearing everywhere: through entertainment ticket sales, hotels and resorts, banks, credit card companies, car dealerships, on-line retail companies, etc.”); FTC-2022-0069-1634 (“Unduly forcing frivolous and intentionally vague monetary fees on anything, whether necessary (utility payments, rent, phone bills, etc.) or recreational (concerts, hotels, short-term rental properties, etc.) is unethical); FTC-2022-0069-1940 (“This is everything from Ticketmaster, ticket processing fees, doordash/food delivery, convenience fees, bank fees, landlords charging admin fees, restaurants charging a service surcharge, and many more. These hidden fees that are not upfront greatly affect consumers and do not give them the proper knowledge of the true cost upfront.”); FTC-2022-0069-3323 (“Hidden fees just feel way too common nowadays. Credit cards, software, subscriptions, travel, and the vast majority of other industries are making it too difficult for consumers to find the right business to work with.”); FTC-2022-0069-3374 (“Lately most companies are using hidden fees to falsely advertise low prices. Delivery companies, Ticketmaster, telecommunications companies, car dealerships, airbnb, rentals, hotels, credit card companies, banks, convenience fees for payment types, airlines, and others.”); FTC-2022-0069-3932 (“Consumers across so many industries are increasingly subject to fees that are not conveyed at the time of the purchase . . . surprise service fees in hospitality, surprise interest fees in financial services, surprise charges in healthcare that even insurance providers cannot explain”); FTC-2022-0069-5743 (“The FTC needs to regulate the transparency of prices for EVERYTHING, online and in person.”).

FTC-2022-0069-0427 (Pottery shop “receipt said C19 surcharge. What? I had to look it up. Never heard of it before now. . . . There was no signage about this extra surcharge. The sales clerk didn't say there would be extra fees.”); FTC-2022-0069-2242 (Grocery “store charges a .5% `improvement fee' that no employee can give me a straight answer as to why it exists.”); FTC-2022-0069-5616 (“there are some areas that have a `Public improvement fee.' These are nice areas that I have no issue shopping at, but why do I not know what the fee is or where it is applied? These fees and taxes should be included in the listing price. Stores have price guns, so I know they can set the price on each item in the store.”).

For example, individual commenters noted that merchant account payment processors charged previously undisclosed fees for no clear purpose.

See, e.g.,

FTC-2022-0069-1922 (“without warning or justification, we have been charged $149 for an `annual compliance fee' and $169 for an `annual member fee.' I assure you that these fees were not part of our original contract.”); FTC-2022-0069-6159 (“These, often bogus, fees go by many names and in some cases there are `duplicate' fees for the same purpose only under different names on the same monthly statements.”).

Consumer groups—the Consumer Federation of America, Consumer Reports, Truth in Advertising, UnidosUS, and the Institute for Policy Integrity—expressed support for rulemaking.

Although the U.S. Chamber of Commerce and the Association of National Advertisers

(“ANA”) argued the FTC has not presented evidence that unfair or deceptive practices related to fees are prevalent, and opposed rulemaking,

consumer groups raised concerns shared by individual commenters and provided information about existing regulations and legislation,

enforcement actions,

and studies and surveys,

demonstrating (along with other evidence described in this NPRM) that it is a prevalent practice for businesses to advertise prices that fail to disclose mandatory fees.

FTC-2022-0069-6077 (The Institute for Policy Integrity at New York University School of Law (“Policy Integrity”) submitted a comment in support of rulemaking); FTC-2022-0069-6095 (The Consumer Federation of America (“CFA”) submitted comments from 42 national and State consumer advocates, supporting FTC rulemaking); FTC-2022-0069-6042 (Truth in Advertising, Inc. (“

TINA.org

”) supports FTC rulemaking); FTC-2022-0069-6099 (Consumer Reports (“CR”) supports FTC rulemaking relating to junk fees, and joins the comment of CFA); FTC-2022-0069-6113 (UnidosUS, the nation's largest Hispanic civil rights and advocacy organization, submitted a comment in support of rulemaking, and endorsing the comment of the CFA.).

FTC-2022-0069-6047 (The U.S. Chamber of Commerce (“the Chamber”) did not support rulemaking, argued that fees rulemaking should be based on whether practices are unfair or deceptive under Section 5 of the FTC, not on a lack of remedies, such as monetary relief after AMG, and recommended that the FTC withdraw from rulemaking); FTC-2022-0069-6093 (ANA also did not support rulemaking.).

Consumer groups noted that the Consumer Financial Protection Bureau, the Department of Transportation, and the Federal Communications Commission are tackling junk fees through regulation, and that the States are also tackling deceptive junk fees through legislation.

See, e.g.,

FTC-2022-0069-6095 (CFA discussed efforts by other Federal agencies (

e.g.,

CFPB, DOT, FCC) and New York legislation related to junk fees.).

FTC-2022-0069-6095 (CFA cited enforcement actions that addressed deceptive practices relating to junk fees); FTC-2022-0069-6042 (

TINA.org

has tracked and published information about class-action lawsuits related to fees in various industries in its Class Action Tracker); FTC-2022-0069-6113 (UnidosUS cited enforcement actions regarding auto-dealer fees and subprime installment lending fees as evidence of problematic fees and unfair or deceptive practices.).

FTC-2022-0069-6099 (CR discussed its

WTFee?! Survey, 2018 Nationally-Representative Multi-Mode Survey

of hidden fees in multiple sectors of the economy and the prevalence of unfair or deceptive fees practices in specific “priority economic sectors,” including telecommunications, travel, banking and financial services, automotive sales and services, utilities, retail sales and e-commerce, and live entertainment and sporting events.); FTC-2022-0069-6095 (CFA noted that the Washington Attorney General's Hidden Fee Survey showed that consumers experienced unexpected fees in a wide range of industries.); FTC-2022-0069-6113 (UnidosUS cited surveys or studies by UnidosUS, the Financial Health Network, and the Center for Responsible Lending that documented the impact of fees related to financial services products.).

FTC-2022-0069-6095 (CFA provided information relating to the prevalence of unfair or deceptive practices relating to junk fees); FTC-2022-0069-6042 (

TINA.org

stated its “work tracking and exposing junk and hidden fees makes clear that it is a pervasive problem that causes real financial harm to consumers”); FTC-2022-0069-6113 (UnidosUS endorsed the comment by the Consumer Federation of America in connection with that comment's discussion of evidence of how junk fees in connection with financial products and transactions, such as overdraft, auto-buying fees, mortgage delinquency-related fees, education tuition and loan fees, and installment loan fees, disproportionally harm low-income consumers, consumers of color, and those who are limited English proficient.).

The information presented by consumer groups shows that false advertising of total prices occurs across industries. Consumer Reports' 2018 WTFee?! Survey “found that at least 85% of Americans have experienced a hidden or unexpected fee for a service in the previous two years, and 96% found them highly annoying” and that “[n]early two-thirds of those surveyed by [Consumer Reports] said they were paying more now in surprise charges than they did five years ago.”

Truth in Advertising noted that hidden fees are a prevalent problem related to internet apps, automobile rentals, communications companies, event ticket sellers, carpet cleaners, auto dealers, dietary supplement sellers, restaurants, airlines, moving companies, credit unions and banks, payday lenders, gyms, hotel and travel companies, outlet stores, sports betting, and online auctions.

Some of the market sectors about which the FTC received comments are discussed in this section of the preamble.

FTC-2022-0069-6099 (CR submitted its

WTFee?! Survey,

a related 2019 article,

Protect Yourself from Hidden Fees,

and “consumer stories collected by CR in January 2023” detailing many personal experiences with hidden fees). Another survey was published after the close of the comment period showed that a significant percentage of consumers encountered unexpected or hidden fees across a variety of industries, including telecommunications, utilities, auto loans and purchases, financial services, college tuition, hotels, rental cars, and live entertainment. Consumer Reports,

American Experiences Survey: A Nationally Representative Multi-Mode Survey

(April 2023), available at

https://article.images.consumerreports.org/image/upload/v1682544745/prod/content/dam/surveys/April_2023_AES_Toplines.pdf.

FTC-2022-0069-6042 (

TINA.org

In addition to these market sectors, the FTC also received comments about many other market sectors, such as healthcare, subscriptions, electronic payment services, and utilities, and from other industry groups. For example, one industry commenter reported that remittance fees are often hidden in artificially inflated exchange rates and that the nature of these fees is not disclosed to consumers who do not have an adequate opportunity to comparison shop among different methods to transfer money. FTC-2022-0069-2523 (Wise supported rulemaking and recommended that any rule address pricing practices in cross-border payments (remittances)). Another industry commenter stated chain Fixed-Base Operators (“FBOs”), which are businesses or organizations which provide commercial aeronautical services, “might disclose pricing for their services only after an aircraft has arrived at the Chain FBO or, even more troubling, after rendering the services[,]” and therefore supported enhancing pricing transparency by requiring chain FBOs, to disclose pricing for their services before aircrafts arrive at airports. FTC-2022-0069-2615 (The Aircraft Owners and Pilots Association (“AOPA”) also stated some chain FBOs may also charge fees that “often offer little or no added value or discernable benefit[.]”).

1. Hotel and Short-Term Lodging Fees

Individual commenters stated hotels, online travel agencies (“OTAs”), and vacation rental providers often do not include fees, such as hotel resort fees and vacation rental fees such as cleaning fees, in advertised nightly rates, artificially lowering the true cost of hotel rooms and rentals vis-a-vis competitors.

Other comments stated fees may be misrepresented, for example, fees charged as vacation rental cleaning fees when hosts require renters to clean accommodations.

Consumer Reports commented that hotels and OTAs have continued to charge hidden resort fees after the FTC issued warning letters in 2012.

FTC-2022-0069-0084 (“[Y]ou have hotels around the country that are now adding in destination fees, resort fees, etc. Not only are these fees hidden, they also add these fees to `free' night stays.”); FTC-2022-0069-2350 (“Vacation accommodation platforms are becoming increasingly misleading with the listed price on the initial search nearly doubling by the time you reach checkout for fees that, by explanation, dont [sic] seem to differ from what you are already paying for; `destination fee' and `property service fee'. This practice seems to be common with most booking sites but I specifically use

Booking.com

so I will keep my complaint specific to their hidden fees. . . . [O]nce I reach checkout, the price has been increased by 78% to $853.10. This makes it impossible to search by cost on this site because these final hidden fees differ between accommodations and are not clearly explained why they exist in the first place. . . . I have called and discussed this with

Booking.com

and lodged a formal complaint but their response was that they have no control over this. I believe all of these fees should be listed up front as the final price when conducting a search comparing cost.”); FTC-2022-0069-3459 (“Lodging: Both hotels (including travel agencies) and short term private lodging (like AirBnB) falsely advertise low `nightly rates' to appear better on upfront/initial comparison screens than alternatives. However, once you select them the fees can be 2x what the base rate is. This is blatant misrepresentation; they know the total cost and are hiding it.”); FTC-2022-0069-3469 (“Hotel `Resort Fees' = When comparing prices online, calling, etc—If a hotel subtracts a fraction of the true cost and hides it in the back end (fees), it suddenly looks a lot more affordable in reservations searches.”); FTC-2022-0069-3484 (“Hotel hidden fees are insidious. They allow hotels to `compete' with seemingly low rates, then use fees to increase the actual amount paid after you've already booked. . . . This results in significant increase in consumer burden to avoid fees or eat the additional cost, and stifles competition and innovation.”).

FTC-2022-0069-1759 (commenter complained about “mandatory charges that are not initially disclosed in listed pricing, cleaning fees for vacation home rentals after mandatory cleaning by the renter”); FTC-2022-0069-2131 (“Cleaning Fees for Airbnb; these fees significantly increase the price of the room, and it often involves hosts essentially charging guests to clean the room they stayed in.”); FTC-2022-0069-3470 (“Homes often ask you to clean before you go but then add several hundred dollars in cleaning fees.”).

FTC-2022-0069-6099 (CR).

Comments from the lodging industry generally argued further regulation is not necessary because resort fees provide value to consumers

and the

industry already engages in pricing transparency.

However, these comments do not dispute that resort fee disclosures routinely occur after base room rates are advertised.

Some industry members cautioned that requiring all-in pricing may have unintended consequences,

and recommended that, if the FTC decides to proceed with a rulemaking, any rule apply across the board, online and offline, to all short-term lodging providers to provide a level playing field.

FTC-2022-0069-6037 (American Hotel and Lodging Association (“AHLA”) stated resort fees at hotel properties provide guests with value that includes various goods and services); FTC-2022-0069-6057 (American Gaming Association (“AGA”) contended that resort fees provide value to consumers). The AHLA stated some of the data

about resort fees that the FTC provided in the ANPR were incorrect. AHLA stated “only 6% of hotels nationwide charge a mandatory resort/destination/amenity fee, at an average of $26 per night[,]” and that “80% of hotel-goers are willing to pay additional fees if doing so will provide access to certain amenities or better service.” FTC-2022-0069-6037.

FTC-2022-0069-6037 (AHLA stated “[t]he hotel industry embraces a competitive business model that is driven by transparency and customer satisfaction” and that hotels “disclose resort and amenity fees at or before the time of booking.”); FTC-2022-0069-6111 (Travel Technology Association (Travel Tech) stated its members “publish, disclose and share . . . rates, terms, and fees” provided to them by accommodation suppliers and other travel service providers “in a clear and conspicuous manner . . . prior to consumers completing their bookings.”); FTC-2022-0069-6057 (AGA stated businesses properly disclose “how much and what the resort fee pays for”).

FTC-2022-0069-6057 (AGA stated the disclosures occur after the base room rate is advertised (

i.e.,

“typically no more than one screen following the base room rate, and at least one web page before consumers commit to the room and before any payment is required or made.”).

FTC-2022-0069-6057 (AGA stated companies may roll resort fees into base room rates and not itemize fees to the detriment of consumers' ability to review amenities and services on offer and compare them with competitors and to the detriment of businesses' ability to distinguish themselves from competitors, for example, through loyalty programs that waive resort fees, a practice that the comment claimed would be difficult if itemized pricing were eliminated or limited).

FTC-2022-0069-6037 (AHLA urged that any rule requirements proposed by the FTC apply to all industry participants, including “the short-term rental market, metasearch sites, and online travel agencies (`OTAs')”); FTC-2022-0069-6111 (Travel Tech recommends that any regulation adopted by the FTC “apply to any entity that supplies or advertises travel pricing information to consumers, including, for example, travel provider direct sites, metasearch, and both online and offline advertisements.”).

2. Live-Event Ticket Fees

In connection with tickets for live entertainment, individual commenters noted that it is nearly impossible to obtain tickets at advertised prices because ticket sellers inflate these prices with fees.

Consumer Reports noted that hidden fees can increase the price of tickets by as much as 30% to 40%.

Individual commenters questioned the meaning of fees that are vaguely identified, such as “convenience” fees,

and the stated purposes of ticket fees. For example, individual commenters questioned whether processing fees really pay for ticket processing and whether delivery fees really pay for delivery expenses.

The comments opined that fees appear to be arbitrary.

FTC-2022-0069-0448 (“My wife and I regularly attend metal and punk concerts, and sometimes we cannot justify attending a show we thought we were going to attend because, rather than pay the amount we expected to pay, we are sometimes looking at $50 or more of additional costs and fees.”); FTC-2022-0069-0530 (“They wait until a buyer has waited in queues for long, stressful delays and spring substantial (nonsense) fees on them last minute knowing they are more likely to pay them than if they had been upfront with the cost of the purchase to begin with.”); FTC-2022-0069-1323 (“I personally am always very frustrated when I go to buy so something, like a concert ticket, and try to get the advertised price. It has never, in my entire life, been as simple as handing over $100 for a $100 ticket. It always ends up costing much more, whether through a fee to hand them the money, soem [sic] contrived surcharge, or simply outright undisclosed and wholly newly made up miscellaneous charges.”); FTC-2022-0069-2086 (“Time and time again, as a consumer I and many I know have been discouraged from purchasing things we like or going to events we wanted to, simply because the amount we had allocated based on the cost was not enough in the end due to hidden fees.”); FTC-2022-0069-2144 (“I also feel that it is deception to say a ticket is price X. Then when all the fees collapse on top of you that the total price is now $80-$100 more than price X PER ticket.”); FTC-2022-0069-2154 (“It is incredibly deceptive that a company can advertise a particular price for a ticket but then stack substantial fees at the end of the check-out process onto the consumer. Often times these fees are a considerable percentage of the advertised price, and there is no obvious rationale for how they quantify these massive and varying amounts.”); FTC-2022-0069-3128 (“A face value ticket can have fees that nearly equal the original price, making the end consumer cost nearly double the advertised price. This is unfair and deceptive practice.”); FTC-2022-0069-3595 (“It is uncommon to find tickets at advertised prices as [sic] Ticketmaster”); FTC-2022-0069-5435 (“Ticketmaster, StubHub, & other ticket retailers: These companies abuse the fact that there's limited competition in their industry, and tack on predatory fees during check out that can double or triple the originally advertised price of the ticket.”); FTC-2022-0069-5886 (“It is very disheartening to be told that the price of a ticket is one thing and then be met by service fees, convenience fees, and additional unknown fees that bring the price up to almost 2 times what the original price was listed at.”); FTC-2022-0069-5971 (“Ticketmaster routinely and repeatedly pulls a bait-and-switch with ticket pricing—and the size of their final price inflations are egregious, reaching 50%.”).

FTC-2022-0069-6099 (CR).

FTC-2022-0069-0226 (“The `convenience' fees and processing fees charged by Ticketmaster and others, are not only inconvenient but excessive and provide no benefit.”); FTC-2022-0069-2281 (“These fees are often labeled as `convenience fees', however they serve no real purpose and the consumer is often left with no other option.”).

FTC-2022-0069-0603 (“How much money does it take for a computer to process a ticket order?”); FTC-2022-0069-2123 (“Ticketmaster is not printing physical tickets, yet charges a significant delivery fee”); FTC-2022-0069-2665 (“ `order processing fee' . . . . fine. Whatever. Even though this is an automated software system that requires no additional time or effort for a human to process”); FTC-2022-0069-3500 (“ensure the scam of `processing fees' is ended, because its [sic] all digital, there are no fees on their end”); FTC-2022-0069-3592 (“there is no reason for it to cost more to process a more expensive ticket”).

FTC-2022-0069-1972 (“Something has to be done to protect consumers from runaway ticket prices and these unbelievable fees with no discernable or knowable purpose.”); FTC-2022-0069-2970 (“fees were added with no detail of why or for what purpose”); FTC-2022-0069-3571 (“fees often feel completely arbitrary . . . . the fees vary wildly depending on what show I'm purchasing tickets for”); FTC-2022-0069-0489 (“Although the fees are disclosed, it is unclear what purpose they serve.”).

One ticket seller argued that State and Federal laws prohibiting unfair or deceptive trade practices already adequately address any problems with unfair or deceptive fees,

but most comments received from ticket sellers or entities representing them,

and from entities representing the interests of musicians, artists, managers, agents;

independent venues, promoters, festivals;

and audience groups;

expressed concerns about deceptive practices and supported a rulemaking with some conditions. Some of these comments noted that ticket sellers routinely do not disclose the total cost of tickets in advertising,

and that the

nature and purpose of fees is not always clear.

The comments emphasized that ticket fees raise competition issues separate from the deceptive advertising practices and recommended that the FTC address alleged anticompetitive practices that result in fees consumers consider excessive.

FTC-2022-0069-3347 (AXS opposed all-in pricing, arguing that it would be less transparent to consumers, and recommended that any rule require sellers to disclose to consumers whether the ticket is being sold “from the artist/venue's official ticket seller, at the face price set by the artist or venue, or, alternatively, from a ticket broker or resale marketplace where ticket prices are set by the reseller.”).

The following ticket sellers support rulemaking: FTC-2022-0069-6089 (National Association of Ticket Brokers (“NATB”); FTC-2022-0069-6078 (TickPick, LLC); FTC-2022-0069-6079 (StubHub). AXS Group LLC does not support a rulemaking. FTC-2022-0069-3347.

FTC-2022-0069-6162 (Recording Academy recommends that any rule include strong protections for artists); FTC-2022-0069-6048 (Future of Music Coalition (“FMC”)); FTC-2022-0069-6041 (National Independent Talent Organization (“NITO”)).

FTC-2022-0069-6046 (National Independent Venue Association); FTC-2022-0069-0501 (Annual International Ballet Festival of Miami and Cuban Classical Ballet of Miami).

FTC-2022-0069-6110 (Sports Fans Coalition described harm to consumers from drip pricing); FTC-2022-0069-2581 (Dunsmoor Law, P.C.).

FTC-2022-0069-6162 (The Recording Academy believes that the majority of concerts listed for sale in the United States do not disclose the total cost or mandatory fees in advertising, but that some sellers advertise a base cost “plus fees”); FTC-2022-0069-6048 (FMC noted that “pervasive problems currently exist where ticketing fees are not disclosed”); FTC-2022-0069-6078 (TickPick stated other jurisdictions have taken action against drip-pricing, including Canada which enacted a law providing that “the making of a representation of a price that is not attainable due to fixed obligatory charges or fees constitutes a false or misleading representation, unless the obligatory charges or fees” are imposed by the Canadian federal government or a provincial government (

e.g.,

taxes).”).

FTC-2022-0069-6048 (FMC stated it “can be challenging to distinguish between a fee that can reasonably be connected to an actual expense, and what is just tacked on to the ticket base price to provide a venue or ticketing company with an additional revenue stream.”)

FTC-2022-0069-6065 (The Break Up Ticketmaster Coalition argued that Ticketmaster's market dominance, including in secondary markets, has resulted in excessive fees that consumers cannot reasonably avoid.); FTC-2022-0069-6162 (The Recording Academy recommended strong enforcement and improved regulation of the secondary ticket market, including requiring disclosure by resellers that tickets are resale tickets and that fees do not go to artists); FTC-2022-0069-6041 (NITO raised concerns that ticket fees are excessive, often as a result of the secondary market, and asked the FTC to take all measures within its authority to stop the growth of ticket fees for live events); FTC-2022-0069-6048 (FMC noted that it is a part of the Break Up Ticketmaster coalition and that it also broadly shares the concerns expressed in the comments by NITO and the Recording Academy, relating to problems stemming from secondary ticketing companies, and the importance of considering cultural diversity and community health, including the music community); FTC-2022-0069-0501 (Annual International Ballet Festival of Miami and Cuban Classical Ballet of Miami commented that Ticketmaster adds “exorbitant fees . . . in some cases more than 20%” to its ticket prices, resulting in many people not being able to afford tickets, “particularly those with children or elderly” and reducing ticket sales and profits); FTC-2022-0069-6110 (SFC noted a lack of competition among ticket sellers and problematic behavior in the secondary ticket marketplace, including transferability restrictions, disclosures of holdbacks, speculative ticket disclosures, and the use of bots, and recommended that the FTC conduct a 6(b) study of Ticketmaster/Live Nation's business conduct, and that the FTC support Federal and State legislation to address harm to consumers in ticket sales); FTC-2022-0069-2581 (Dunsmoor Law stated Ticketmaster's practices are harmful to artists and consumers, including dynamic pricing which “makes it nearly impossible to comparison shop,” and recommended that the FTC consider limiting fees and addressing Ticketmaster's monopolistic behavior.); FTC-2022-0069-6046 (NIVA stated apart from practices related to fees, secondary markets use predatory and deceptive practices in connection with ticket resales); FTC-2022-0069-6089 (NATB described the practice of holding back tickets or “slow ticketing” to be a deceptive marketing tactic that distorts the market and urged the FTC to require disclosures of how many tickets are available for sale, but argued that the transferability of tickets should be protected in any rulemaking.); FTC-2022-0069-6079 (StubHub expressed concerns regarding the lack of competition in the live events industry, and requested that the FTC investigate anticompetitive and anti-consumer behaviors in the industry brought about by the merger of Live Nation and Ticketmaster.).

Although entities in the ticketing sector argued that ticket fees are not “junk” fees, but provide value to consumers

and are already adequately disclosed,

a ticket seller in the secondary market, TickPick, disagreed. TickPick stated other members of the secondary market, including all of TickPick's larger peers, have gained a competitive advantage by omitting mandatory fees from the total cost of tickets in advertising and luring consumers with deceptively low prices only to impose substantial back-end fees, sometimes after customers provide payment information.

TickPick also noted that ticket sellers misrepresent the nature or purpose of their mandatory fees when fees do not provide anything of value to consumers and are used only to generate additional profit.

FTC-2022-0069-6046 (NIVA stated many fees add value, such as facilities fees charged by independent venues and promoters to pay for overhead costs such as staffing, rent, insurance, heating and cooling, repairs and maintenance, and property taxes, but notes that there are differences between facilities fees charged by independent venues and promoters and fees charged on secondary resale exchanges that do not support venues); FTC-2022-0069-6089 (NATB recommended that any rule differentiate between types of ticket fees, arguing that fees imposed by secondary ticket brokers account for a valuable service, while fees imposed by the original ticket sellers may not); FTC-2022-0069-6079 (StubHub objected to the characterization of fees it charges as “junk” or “hidden” fees because its service fees enable it to provide valuable services to StubHub users and partners); FTC-2022-0069-3347 (AXS argues that its fees provide value to consumers).

FTC-2022-0069-6079 (StubHub stated its fees are transparent and fully disclosed before it collects payment information and before consumers complete transactions); FTC-2022-0069-3347 (AXS argued that its fees are adequately disclosed).

FTC-2022-0069-6078 (TickPick).

Id.

Comments related to ticket sales supported greater pricing transparency with most supporting all-in pricing that specifies the full final cost to consumers including mandatory, but not optional, fees.

Most comments from ticket sellers supported all-in pricing if the requirement would apply to all ticket sellers to establish a level playing field.

They argued that, without a level playing field, businesses that display all-in pricing would be at a competitive disadvantage.

Many of these comments recommended that itemization of fees should also be required so consumers see a breakdown of the fees charged,

but one comment argued that itemization of fees harms consumers.

Some of these comments recommended an industry-neutral rule while others did not express an opinion.

The comments also noted the importance of FTC guidance and enforcement action relating to fees.

FTC-2022-0069-6110 (Sports Fans Coalition); FTC-2022-0069-6041 (NITO): FTC-2022-0069-6046 (NIVA); FTC-2022-0069-6089 (NATB); FTC-2022-0069-6078 (TickPick); FTC-2022-0069-2581-A2 (Dunsmoor Law recommended that the FTC “evaluate all possible legal outcomes from the disclosing of fees.”); FTC-2022-0069-6078 (TickPick supported model rule language proposed by the Institute for Policy Integrity with minor modifications, and proposed definitions for “all-in price,” “unavoidable fee or charge,” and “avoidable fee or charge.”); FTC-2022-0069-6048 (FMC described music royalty fees that are a part of a subscription music service as an example of unavoidable or mandatory fees); FTC-2022-0069-6079 (StubHub supported Policy Integrity's recommendation to exclude fees for optional add-on purchases that are fully disclosed to consumers prior to payment).

FTC-2022-0069-6089 (NATB commented that it will only be effective if applicable to all ticket sellers); FTC-2022-0069-6078 (TickPick); FTC-2022-0069-6079 (StubHub).

FTC-2022-0069-6078 (TickPick stated its all-in pricing has not caused competitors to engage in the practice, that a competitor temporarily adopted all-in pricing but abandoned the practice after losing market share, and that regulatory intervention is necessary to establish an even playing field); FTC-2022-0069-6079 (StubHub stated that in 2014 it voluntarily began displaying all-in pricing to buyers, but this practice put StubHub at a disadvantage in comparison to competitors who did not display all-in pricing, causing StubHub to discontinue the practice).

FTC-2022-0069-6162 (The Recording Academy recommended that any rule require the disclosure of the face value of tickets to avoid consumer misperception that artists are responsible for any increase in total cost that results from the rule); FTC-2022-0069-6048 (FMC recommended requiring full fee itemization so consumers can still see the base price so artists are not blamed for fees and can identify increases in fees); FTC-2022-0069-6041 (NITO's support for rulemaking is conditioned on requiring that ticket fees are clearly separated and itemized from the face value of the ticket); FTC-2022-0069-6046 (NIVA recommends requiring itemization of the face value of tickets and all fees so that consumers know what they are paying for); FTC-2022-0069-3347 (AXS recommended, if the FTC determines that a new rule is necessary, that instead of all-in pricing, the FTC require sellers to disclose all components of the ticket price).

FTC-2022-0069-6078 (TickPick opposed itemization of fees and recommends that the all-in price be the only price a consumer sees in all advertising and marketing materials; itemization of fees is not helpful to consumers because the fees are contrived and only serve to mislead consumers and inhibit competition).

FTC-2022-0069-6079 (StubHub supported an industry-neutral rule establishing price transparency across market sectors. StubHub supported a Federal solution, consistent enforcement of a rule with sufficient specificity to avoid varying interpretations.); FTC-2022-0069-6078 (TickPick reserved judgment on whether the rule should be industry-neutral or specific to the ticketing industry).

FTC-2022-0069-6078 (TickPick recommended that the FTC create a procedure to provide staff interpretations and guidance regarding what constitutes an unavoidable fee); FTC-2022-0069-6048 (FMC recommended that the FTC take enforcement action in connection with live-event ticketing, and other instances of problematic fee practices); FTC-2022-0069-6089 (NATB commented that a rule will only be effective if the FTC undertakes rigorous enforcement).

3. Fees Related to Restaurants and Prepared Food and Grocery Delivery Apps

Individual commenters submitted many observations about restaurants and prepared food and grocery delivery services. They noted that restaurants routinely add fees to bills that were not

previously disclosed, using various names (

e.g.,

“service fee,” “hospitality fee,” “kitchen fee,” “equity fee,” “economic impact fee,” “temporary inflation fee”) that do not clearly or conspicuously identify their nature or purpose.

Commenters expressed particular concern about the true purpose of restaurant “service” charges, which they expected would go entirely to wait staff.

As these comments imply, while a restaurant's management may not keep tips received by its employees for any purposes,

no such prohibition exists for service fees imposed by a restaurant.

In connection with food delivery, individual commenters similarly stated delivery apps charge fees that are not reflected in advertised food prices,

and that the nature or purpose of these fees is not always clear or is misrepresented, for example, when fees identified as delivery fees do not go to delivery personnel.

The Consumer Federation of America noted that prepared food and grocery delivery apps have been the subject of law enforcement actions challenging misrepresentations relating to fees.

FTC-2022-0069-3423 (“I don't know what the “HOSPITALITY FE” [sic] is for, but it doesn't appear anywhere on the menu of this restaurant we attended.”); FTC-2022-0069-3459 (restaurants “started adding a ‘kitchen fee’ in the small foot notes of the menu. Why not just include this in the cost of the food. Otherwise all menu items can be misrepresented as very low and high fees added in the foot notes.”); FTC-2022-0069-3766 (restaurant “deceptively adds a 20% ‘equity fee’ to every bill instead of fairly displaying a price.”); FTC-2022-0069-3880 (restaurant “started putting an undisclosed ‘Economic Impact Fee’ on their bills”); FTC-2022-0069-3885 (“local businesses have been tacking on ‘service fees’ when ringing up at the register. This is most noticeable at restaurants, for dine-in, takeout, and delivery. The fees are not disclosed on the menu or anywhere at the physical establishments or on their websites before placing an order.”); FTC-2022-0069-4428 (“I would like to add that lately, I've seen the restaurant industry adding-on junk fees to post-meal restaurant bills named ‘temporary inflation fee’ or similar which are not disclaimed prior to eating. It's difficult to un-eat a meal if you disagree with these fees.”); FTC-2022-0069-5999 (“And restaurants that charge a surcharge fee for various things at the final bill which ate [sic] not disclosed on the menu or stated by the wait staff or posted at the door!”).

FTC-2022-0069-0244 (“Another, more recent, development has been the addition of a ‘service charge’ on a restaurant check, calculated as a percent of the check total. Is this in place of a tip? Who receives it?”); FTC-2022-0069-1988 (“I visited a bar that had a sign which stated ‘we add on a 20% service fee to all transactions which goes directly to the staff as a tip.’ Then, on the payment screen, I was prompted AGAIN to tip for 15%, 20%, or 25% by the software.”); FTC-2022-0069-2131 (“Service Charges at restaurants. I am fine with these when 100% of the charge goes to the waiter, but it's not always clear and I've heard that many restaurants hold it for themselves.”).

29 CFR 531.52(b).

See

29 CFR 531.52(a) (distinguishing tips—which are entirely at the discretion of the customer—from the payment of a charge made for service).

FTC-2022-0069-2089 (“Many food delivery services, are deceptive in their pricing. . . . They are advertising a price much lower than it truly is”); FTC-2022-0069-2997 (“these companies add multiple different fees and charges to the final bill that are not seen until check-out”); FTC-2022-0069-4617 (“Doordash, Ubereats, Postmates, and every other food delivery app uses hidden fees to somehow make a $10 order double in price through several different fees that have no explanation as to what they are and there is no transparency on how much they will be when the customer is building their order.”).

FTC-2022-0069-0581 (“Delivery app services similarly charge fees which are not clearly related to a service or function of the business”); FTC-2022-0069-1545 (“it isn't plainly clear that the fees are non refundable even when the company fails to properly provide the service they are charging you a fee to perform”); FTC-2022-0069-1672 (“why am I being charged a delivery fee for my food, when the fee doesn't go to the driver?”); FTC-2022-0069-2190 (“Charges extra fees without explanation. How are there 2 delivery fees?”); FTC-2022-0069-2316 (“The delivery fee I pay to the national pizza chain that doesn't go to the delivery person, instead I still have to tip the delivery driver because the fee doesn't go to him/her”); FTC-2022-0069-4400 (“I have to pay unexplained additional fees for delivery services that don't seem to have a good explanation when there is already a base fee and travel fee.”).

FTC-2022-0069-6095 (CFA).

4. Transportation Fees

Individual commenters made similar observations about transportation-related goods and services. They noted that airlines fail to include mandatory fees in advertised prices and misrepresent fees.

They also described advertising for car rentals

and car sales

that misrepresented total costs to consumers by delaying the disclosure of mandatory fees that inflated amounts consumers had to pay. The Consumer Federation of America noted that rental car companies impose fees that are not always clearly disclosed up front,

and that “[d]ishonest auto dealers have an established history of failing to clearly disclose mandatory fees in their advertised prices.” It noted that numerous State attorneys general have taken related enforcement action.

FTC-2022-0069-0084 (“Airlines, if they are offering a ‘free’ flight, should ONLY charge you the fees charged by governments or airports. They shouldn't be taking on junk fees, fuel surcharges, etc.”); FTC-2022-0069-1676 (“Airline fees for bags, seats etc. Its [sic] not transparent until you get to the last page. Last minute fees for changes.”); FTC-2022-0069-3724 (“Airlines obscure the true price of tickets until the very end of the purchase process wasting customer's time in a cynical effort to leverage sunk cost biases so we just buy the misleading ticket price because we've spent the last 30 minutes filling in every detail.”); FTC-2022-0069-2055 (“I recently paid a ‘plane usage’ fee on plane ticket, purchased directly from the airline's website. This fee implies there's a possible travel option I could have booked that didn't involve flying, which is deceptive.”).

FTC-2022-0069-0013 (“I recently reserved a rental car with a ‘total’ of $856. When I got to the final booking page, the total was $600 more. ‘Total’ should mean exactly that, all-in, no further charges.”); FTC-2022-0069-3459 (“Renting either a car or a moving van; they advertise $10/day. After all the fees which are standard and they are already aware of (nothing dependent on your choices) the actual cost is $40/day.”); FTC-2022-0069-3785 “(For my rental car, I got charged a tourism commission fee, county bus license fee, customer facility charge, airport tram fee, vehicle license recovery fee, and concession recovery fee in addition to the base rate. Prices jump up to 30% higher when fee after fee is added”.).

FTC-2022-0069-0688 (“It wasn't until we sat down to fill out the contract, that we were informed of an additional mandatory fee of $3,000 for a clear-coat finish.”); FTC-2022-0069-5435 (auto dealers “tack on a number of fees during the contract process such as ‘dealer fees’ and `transportation fees' that were not included in price discussions”).

FTC-2022-0069-6095 (CFA).

Id.

Industry comments related to auto sales, including ancillary goods and services, did not support a rulemaking.

These comments stated that the definition of junk fees is too vague,

and questioned whether fees that are not mandatory because they relate to voluntary ancillary products offered as part of auto sales transactions (

e.g.,

voluntary protection products) would be covered by the ANPR definition of “junk” fees.

The comments stated that fees for ancillary

goods and services provide value to consumers.

FTC-2022-0069 6043 (The National Automobile Dealers Association (NADA) stated rulemaking is not necessary, and recommended advertising guidance and business education); FTC-2022-0069-6106 (American Property Casualty Insurance Association (APCIA) stated fees rulemaking would impact several industries and business activities, and suggested that the FTC engage in more stakeholder engagement and analysis of the marketplace before moving forward); FTC-2022-0069-6058 (The Service Contract Industry Council (SCIC), the Motor Vehicle Protection Products Association (MVPPA), and the Guaranteed Asset Protection Alliance (GAPA)); FTC-2022-0069-5983 (The Motorcycle Industry Council (MIC), the Specialty Vehicle Institute of America (SVIA), and the Recreational Off-Highway Vehicle Association (ROHVA)); FTC-2022-0069-0124 (The National Association of Mutual Insurance Companies (NAMIC) objected that the ANPR created a false impression that junk fees are a problem in the property casualty insurance market, including automobile insurance, and argued that the FTC may not have the jurisdiction to regulate fees in insurance). All of these commenters, except NAMIC, referenced comments they previously submitted in connection with the Motor Vehicle Dealers Trade Regulation Rule matter.

FTC-2022-0069-6043 (NADA stated the scope of the ANPR requires clarification regarding the definition of “junk” fees, and proposed defining a “junk” fee as one that “is mandatory and yet provides no additional benefit of any kind beyond that included in the advertised price of the specific good or service and does not have any other business justifications.”); FTC-2022-0069-6058 (SCIC, MVPPA, and GAPA argued that the definition of junk fees is too vague to provide any notice as to what the FTC may seek to regulate.).

FTC-2022-0069-6106 (APCIA expressed concern that the definition of “junk fees” in the ANPR could unintentionally include products such as voluntary protection products (

i.e.,

VPPs) that have proven to be beneficial to consumers and are sold in a transparent manner); FTC-2022-0069-6058 (SCIC, MVPPA, and GAPA argued that fees for VPPs in auto sales do not meet the definition of junk fees.)

FTC-2022-0069-6106 (APCIA stated VPPs that motor vehicle dealers make available at the time of auto sales provide valuable services and benefits to consumers); FTC-2022-0069-6058 (SCIC, MVPPA, and GAPA argued that VPPs provide value to consumers by facilitating the filing of product claims and providing financial security).

See also

FTC-2022-0069-6113 (UnidosUS endorsing the comment of the CFA).

8. Financial Services Fees

Individual commenters argued that fees charged in connection with bank accounts, credit cards, and other financial products are excessive and not adequately disclosed.

104

Consumer Reports noted that “[a]ccording to the 2018 Consumer Reports national survey, 37% of consumers said they had received a hidden fee for personal banking in the previous two years, while 36% had received a hidden fee for credit cards and 24% for investment services.”

105

Consumer groups noted that financial services fees are particularly burdensome to vulnerable, low-income, Black, and Latino consumers.

106

104

FTC-2022-0069-0450 (“monthly service fees if your balance falls below $xxx, overdraft fees”); FTC-2022-0069-0488 (“Then there are the account fees, service fees, and atm fees at banks, which are ridiculous considering they loan out your money and pay a half a percent interest to you.”); FTC-2022-0069-0550 (“Junk fees manifest in markets ranging from auto financing to international calling cards and payday loans.”); FTC-2022-0069-1676 (“Banks charging overdraft fees and then when you link a credit card to cover the overdraft, the credit card charges you a fee. This can be for every single overdraft! Ridiculous!”); FTC-2022-0069-1974 (“I also am charged $12 anytime my savings account goes below 1500 dollars by chase bank.”); FTC-2022-0069-2131 (“ ‘Convenience’ fees for paying bills online. A literal scam. It's more convenient for businesses to take electronic payments.”); FTC-2022-0069-5995 (“Fees to pay with a credit card when the fee wasn't posted or disclosed anywhere. Usually at least 3 to 5% of the total transaction and that would include taxes. It's insane. Prices not posted. Fees added. Consumers are being robbed at will.”); FTC-2022-0069-2262 (“Convenience fees in general are outrageous. It's 2023, credit cards and online payments aren't novel, they're the norm. Cable/internet companies do it (xfinity/Comcast and Cox). Cell phone companies do it, Verizon. It's outrageous.”); FTC-2022-0069-2312 (“Fees should also be collected in one place and easy to read. Some places like banks list fees but they're usually not collected in one place. You have to go looking for them. This feels a little hidden and anti-consumer.”); FTC-2022-0069-2729 (“When I opened a bank account at a small local bank they charged a monthly fee for even opening a savings account. They claimed this fee for `maintenance' of the account.”); FTC-2022-0069-3052 (“My employer opened an HSA account for me at First Financial Bank. I started receiving statements in the mail that they took a monthly $3 paper statement fee out of my account, which I had not consented to. When I went online to change it to email statements, the first thing they made me do is accept an agreement saying that I acknowledge the validity of paper statement fees.”); FTC-2022-0069-3675 (“You know how sometimes you get those visa style gift cards that work as debit cards with the pre-loaded amounts? Some of those companies will charge you a monthly fee on those types of cards that isn't mentioned literally anywhere and that you won't know about until you go to check the balance and find out that they've literally been robbing you of your own money.”); FTC-2022-0069-3681 (“Some examples of companies that include hidden fees at significant cost to the consumer include: . . . USBank/Wells Fargo/BoA/WaFD Bank—Monthly maintenance fees/overdraft fees (These also disproportionately impact the poor).”); FTC-2022-0069-3932 (“Consumers across so many industries are increasingly subject to fees that are not conveyed at the time of the purchase . . . surprise service fees in hospitality, surprise interest fees in financial services, surprise charges in healthcare that even insurance providers cannot explain and are unwilling to pay themselves. Consumers should simply not be required to pay fees that were not agreed to and understood in advance.”); FTC-2022-0069-5652 (“Banks disclose their fees for `overdraft protection' or `insufficient funds fees' buried in a massive packet of information and on their websites. Meanwhile advertisements excitedly talk about interest rates or joining bonuses. Most banking customers find out about these fees when they are the most vulnerable: low on funds. They then have to pay nearly $30 for being poor.”); FTC-2022-0069-5896 (“Fees should be disclosed. Misleading ads that lure consumers in. Hidden disclosures that change to benefit financial is [sic] institutes and further burden consumers should be disclosed in larger print, and announced more than advertisements.”);

105

FTC-2022-0069-6099 (CR also noted that, in March 2022, it asked its member to share experiences regarding junk financial fees, and collected over 1,800 comments identifying hidden financial fees, including overdraft and insufficient fund fees, account maintenance fees, late fees, dormancy and inactivity fees, check cashing fees, fees for minimum purchase transactions, fees for paper statements, and fees to pay bills).

106

FTC-2022-0069-6095 (CFA noted that fees represent a disproportionately high cost to low-income consumers and may destabilize household budgets and “ultimately push consumers out of mainstream financial products and into fringe financial services and predatory financial products.”); FTC-2022-0069-6113 (UnidosUS referenced a comment it submitted to the Consumer Financial Products Bureau, highlighting ways that junk fees in the financial system disproportionately impact Latinos and lower-income people.)

Some comments from the consumer financial services

industry supported a rulemaking to create a more transparent financial services sector and to address bad actors who mislead consumers about fees.

107

Other comments opposed a rulemaking.

108

107

FTC-2022-0069-6044 (The American Fintech Council (“AFC”) acknowledged and supported the FTC's jurisdiction over the issues raised in the ANPR and supported regulation that will create a fairer and more transparent financial services ecosystem to provide for sustainable access to credit and to foster responsible practices and fair lending in consumer financial markets); FTC-2022-0069-2623 (The American Land Title Association (“ALTA”) supported the FTC rulemaking to address bad actors who mislead consumers about fees). Some commenters framed their comments within the context of previous comments they submitted in connection with Motor Vehicle Trade Regulation Rule—Rulemaking, No. P204800. See FTC-2022-0069-6045 (The Credit Union National Association (“CUNA”) submitted a comment that referred to and incorporated its comment to Motor Vehicle Trade Regulation Rule—Rulemaking, No. P204800, in which it stated it supports “the FTC's effort to develop a rule that addresses bad actors in the auto dealer market”); FTC-2022-0069-6114 (The Consumer Credit Industry Association (“CCIA”) similarly referred the FTC to its comments submitted in response to the Motor Vehicle Dealers Trade Regulation Proposed Rule).

108

FTC-2022-0069-6090 (The American Financial Services Association (“AFSA”) opposed rulemaking and argued that the unfair or deceptive practices on which the FTC sought comment in the ANPR are not widespread in the consumer financial services market.).

Industry comments recommended that the FTC clearly define or clarify the meaning of “junk fees,”

109

and objected that fees in the consumer financial sector are for legitimate services that add value to consumers

110

and are already adequately regulated by State and Federal laws.

111

For example, AFSA argued that there is already sufficient regulation of fees in the financial services sector, including through the Truth in Lending Act (“TILA”), the Real Estate Settlement Procedures Act (“RESPA”), the Truth in Savings Act (“TISA”), and the Consumer Financial Protection Act of 2010 (“CFPA”)).

112

Comments also stated competitive pressures within the industry tend to reduce fees.

113

109

FTC-2022-0069-2623 (ALTA recommended that the FTC clearly define what “junk” fees are because the definition in the ANPRM is too broad); FTC-2022-0069-6114 (CCIA suggested that there is no objective standard for identifying junk fees for goods or services that have little or no added value to consumers); FTC-2022-0069-6045 (CUNA strongly urged the Commission to further clarify the definition of the term “junk fee.”).

110

FTC-2022-0069-2623 (ALTA noted that title insurance and settlement services fees commonly charged in real estate transactions are for legitimate services); FTC-2022-0069-6090 (AFSA argued that junk fees are misnamed because they provide value to consumers who are in the best position to determine whether fees add value to them through their purchasing decisions, and that such fees compensate financial services providers, including when they are placed in a worse position as a result of subsequent consumer action); FTC-2022-0069-6114 (CCIA commented that ancillary products offered in conjunction with auto financing loans provide value to consumers by protecting auto financing loans and consumer credit); FTC-2022-0069-6040 (Online Lenders Alliance (“OLA”) argued that three types of fees, mandatory fees, misconduct fees, and enhancement fees, have been mislabeled as junk fees by the Consumer Financial Protection Bureau); FTC-2022-0069-6045 (CUNA argued that describing fees as “junk fees” does a disservice to responsible actors like credit unions and their partners that charge well-disclosed fees to recoup costs and encourage positive behavior.).

111

FTC-2022-0069-2623 (ALTA noted that title insurance and settlement services fees are highly regulated to provide protection for consumers and ensure that fees are adequately disclosed); FTC-2022-0069-6045 (CUNA); FTC-2022-0069-6114 (CCIA commented that Federal and State regulations adequately protect consumers by ensuring that their purchase of ancillary products is voluntary and express); FTC-2022-0069-6040 (OLA noted that the financial services sector is already heavily regulated and numerous types of fee disclosures are already required.).

112

FTC-2022-0069-6090 (AFSA).

113

FTC-2022-0069-6044 (AFC).

The comments stated fees in the consumer financial services market cannot be equated with fees charged in other markets, such as live event or resort fees.

114

They stated there may be

legitimate reasons for disclosing fees other than at the beginning of sales transactions.

115

The comments noted that regulating fees in the consumer financial services sector could have negative consequences such as limiting services and raising prices.

116

The comments stated the FTC should coordinate with other agencies to harmonize rules.

117

114

FTC-2022-0069-6045 (CUNA stated fees in the heavily regulated consumer financial services market cannot be equated with opaque fees for live-event tickets or hotel resorts); FTC-2022-0069-6040 (OLA criticized oft-cited studies on fees, particularly, “The Impact of Price Frames on Consumer Decision Making Experimental Evidence” and “The Competition Initiative And

Hidden Fees,” arguing that they are not applicable to fees in the financial services industry.).

115

FTC-2022-0069-6114 (CCIA objected that fees are not hidden or deceptive if they are offered to consumers at different steps of the sales process because disclosing fees later in the process may be necessitated by the fact that consumers must first be approved for loans); FTC-2022-0069-6045 (CUNA noted that late fees are disclosed on fee schedules and only levied if payments are not rendered by their due dates.); FTC-2022-0069-6090 (AFSA argued that the FTC should not seek comments about how widespread certain unfair or deceptive practice are but should instead identify such widespread problems on its own.).

116

FTC-2022-0069-6090 (AFSA claimed that limiting fees in the financial services sector would cool competition, raise prices, and harm consumers who do not use services but may be required to pay fees that are built into overall costs.); FTC-2022-0069-6045 (CUNA urged the FTC to avoid adopting regulatory changes that will negatively impact the ability of credit unions or their system partners from serving members.).

117

FTC-2022-0069-6044 (AFC noted that the CFPB has jurisdiction over several topics addressed in the ANPR, as reflected in the CFPB's “Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services,” and recommended that the FTC coordinate with the CFPB and other relevant agencies to ensure that any rule fit within the FTC's jurisdictional authority and is not duplicative or contradictory of CFPB rules.).

9. Correctional Services Fees

Consumer and policy groups also commented on a number of unfair or deceptive practices regarding fees imposed on incarcerated people and supported rulemaking.

118

These comments stated that incarcerated people are a captive audience who are forced to pay excessive fees by monopolistic or oligopolistic service providers in connection with private correctional services.

119

Commenters stated these fees are often deceptive because service providers fail to comply with Federal disclosure requirements, omit fee information, and present pricing information in confusing ways that are likely to mislead consumers, for example, by bundling services that make identifying fees difficult.

120

Commenters also stated these fees are often unfair because they cause substantial harm to incarcerated people who are the least able to afford them, cannot reasonably be avoided because the consumers are captive to private companies with exclusive contracts, provide little or no added value to consumers, and do not benefit competition.

121

118

FTC-2022-0069-6088 (National Consumer Law Center submitted a comment on behalf of a group of civil rights, consumer rights, faith-based, criminal justice, and reentry organizations supporting rulemaking.); FTC-2022-0069-6082 (Fines and Fees Justice Center (“FFJC”), “a national center for advocacy, policy, information, and collaboration on effective solutions to the unjust and harmful imposition and enforcement of fine and fees in the criminal legal system,” submitted a comment in support of rulemaking, and noted that the CFPB and FCC are considering fees imposed on incarcerated persons.).

119

FTC-2022-0069-6088 (NCLC noted that these services include money-transfer services, release cards, and various technology services, including technologies incarcerated people use to communicate with loved ones, such as electronic messaging services.); FTC-2022-0069-6082 (FFJC noted that these correctional services include money transfers, release cards, and technology services, such as phone calls, emails, tablets, and music and e-book subscriptions, and that providers often charge fees far in excess of the cost of the services to the companies providing them.).

120

FTC-2022-0069-6088 (NCLC); FTC-2022-0069-6082 (FFJC).

121

Id.

C. Comment Recommendations

Many commenters argued that the prevalence of hidden fees cannot be effectively addressed by tools currently available to the FTC without a rulemaking.

122

The Consumer Federation of America argued that a rulemaking is necessary to address “the root cause of the `junk fee' problem—rampant deceptive advertising and impaired competition.”

123

122

FTC-2022-0069-6095 (CFA noted that AMG prevents the FTC from seeking monetary relief under Section 13(b) of the FTC Act, and that consumer contracts requiring arbitration would not deter misconduct or provide appropriate remedies for unfair and deceptive junk fee conduct.); FTC-2022-0069-6042 (TINA.org stated the prevalence of junk and hidden fees cannot be effectively addressed by tools currently available to the FTC, particularly in the wake of the AMG decision, and that a junk fees rule would be in the public's best interest.).

123

FTC-2022-0069-6095 (CFA noted that advertising deceptively low prices then tacking on mandatory fees harms honest businesses and consumers, and disproportionately impacts vulnerable consumers, limited English-speaking consumers, and consumers with disabilities.).

124

FTC-2022-0069-0032 (“I agree with the proposed rule and requiring all unavoidable fees, including taxes, be included in the published price.”); FTC-2022-0069-0117 (“I wholeheartedly support the FTC's proposal to force companies to show ALL mandatory fees and charges in the initial price search or quote.”); FTC-2022-0069-0457 (“Forcing all fees to appear in any advertised price would be a help. Prohibition of those fees would be even better”); FTC-2022-0069-1087 (“Except with respect to taxes and voluntary add-ons which exceed normal expectations, no one should be able to legally charge more than the price they advertise.”); FTC-2022-0069-2144 (“Not just for ticket master but for all companies. Put the real price up front and don't hide behind other fees you earmark 2/3rds of the way down the page.”); FTC-2022-0069-2178 (“All fees and charges should always be clear and upfront in the price. Nothing should be hidden. It is deceptive to state otherwise.”); FTC-2022-0069-3017 (“[T]he rule should require all-in pricing, because that is the simplest and most honest way to disclose the actual cost to the consumer.”); FTC-2022-0069-3083 (“MAKE ALL BUSINESSES SHOW THE REAL TRUE PRICE (TAX INCLUDED) ON THE LABEL AT EVERY STORE AND BUSINESS IN THE UNITED STATES.”); FTC-2022-0069-3423 (“I urge the FTC to act to bring these business practices in line with the customary way business has been conducted in our society in stores for a very long time by banning the practice and requiring listed and/or advertised prices to include all costs, beginning with the first time the price is presented to customers.”); FTC-2022-0069-3459 (“ Please move towards upfront pricing, for all taxes, service charges and other charges that are standard should be included in the first price you see.”); FTC-2022-0069-3469 (“The only way, in my opinion, to solve this problem is to implement a rule/law where the ONLY additional charges allowed for an invoice or service is GOVERNMENT fees and taxes. . . . There would be no additional costs incurred by a business/service to change to this rule, just a change forcing them to advertise the TRUE COST for using their service or business.”); FTC-2022-0069-3659 (“Please have merchants show the actual final cost of a product or service as opposed to providing a sale price and then adding additional charges.”); FTC-2022-0069-3708 (“Companies should be required to show the TOTAL price, including all applicable fees, on any advertisements or listings on their website.”); FTC-2022-0069-3746 (“The total cost of an e-commerce purchase should be required to be displayed alongside the listing for the item.”); FTC-2022-0069-3859 (“Corporations should be mandated to advertise full-prices including fees.”); FTC-2022-0069-4151 (“Every company in every scenario possible should be forced to advertise only the true combined total cost.”); FTC-2022-0069-4176 (“Please step up and make retailera [sic] at all levels advertise the real true cost of their goods and services so consumers can make reasonable choices without being lured or baited and switched.”); FTC-2022-0069-4252 (“Everyday, I am lured into a transaction, told I am going to pay one price, only to have it raised by a large percentage at checkout due to fees that are non-negotiable or part of processing. If these are standard fees, they need to be added to the price of the item, service etc. These are a bait and switch tactic that I don't know how became legal.”); FTC-2022-0069-4253 (“What's the point of a price if that's not the price? Advertised price should be the finial [sic] price. Nothing more nothing less.”); FTC-2022-0069-4255 (“Fees should be transparent and included in advertised prices. This should go for everything from airbnb rentals, to airfare, to concert tickets, to retail, to grocery stores. The price you see advertised should be the price you pay.”); FTC-2022-0069-5144 (“All business should be legally required to post the all-in or `total' price of goods, including taxes and fees. Many other countries practice this, promoting transparency and allowing the consumer to shop with clear pricing.”); FTC-2022-0069-5332 (“[T]he advertised/shown price should be the price.”); FTC-2022-0069-5517 (“We need price transparency for the services we buy. I advocate for requiring all services to be forced to advertise and display FINAL prices, after all fees.”); FTC-2022-0069-5692 (“Taxes and fees should be included in the listed price every time. This is for every service and every good everywhere in the country. This should be for every label, advertisement, coupon, and other reasonable statement of price.”).

The comments broadly supported FTC action to address the identified deceptive practices by requiring price transparency. Many individual commenters,

124

consumer groups,

125

and industry members

126

recommended an industry-neutral rule requiring the disclosure of all-in pricing that includes all mandatory fees.

125

FTC-2022-0069-6095 (CFA supports an industry-neutral rule requiring disclosure of all-in pricing, including all fees that are unavoidable or mandatory, at the beginning of transactions to allow

consumers to comparison shop and foster competition); FTC-2022-0069-6099 (CR recommended, as an alternative to prohibiting fees, requiring the clear, upfront disclosure of fees, stated consumers “would greatly benefit from a comprehensive national rule to ban hidden and surprise junk fees and improve the transparency and comparability of any truly optional add-on services,” and advocated for a “strong economy-wide initiative” to create “marketplace standards and ethical norms . . . in all or most economic sectors”); FTC-2022-0069-6113 (UnidosUS endorsed the recommendation of the CFA for a rule that requires “all-in” pricing for goods and services at the beginning of purchase transactions, and that the rule identify prohibited unfair and deceptive conduct relating to junk and hidden fees).

126

See

Section II.B.

Many individual commenters and consumer groups, concerned with the cumulative impact of fees, also recommended that the FTC prohibit or limit fees, such as fees that are of little to no value to consumers,

127

or require that fees bear a reasonable relationship to the cost of the services provided.

128

Some consumer groups recommended that the rule incorporate a reasonable consumer standard and that the FTC develop model fee disclosures.

129

127

FTC-2022-0069-6095 (CFA recommended that fees that provide little or no value to consumers or which consumers reasonably believe would be included in advertised prices should be prohibited); FTC-2022-0069-6099 (CR commented that junk fees that add little or no value or would reasonably be included in the base price of goods or services should be reduced or banned).

128

FTC-2022-0069-6099 (CR recommended, as an alternative to prohibiting fees, that fees “bear a reasonable and proportionate relationship to the underlying costs of providing the particular service for which they are charged.”).

129

FTC-2022-0069-6095 (CFA recommended that the FTC develop model fee disclosures); FTC-2022-0069-6113 (UnidosUS recommended that a rule require disclosures that take into account consumers' language proficiency, include model fees disclosures, and incorporate a reasonable consumer standard).

The U.S. Chamber of Commerce and the Association of National Advertisers argued that Congress has not authorized comprehensive unfair or deceptive fees rulemaking, and that the ANPR is too broad to comply with rulemaking procedures.

130

They acknowledged that existing FTC rules include disclosure requirements related to pricing, citing the Telemarketing Sales Rule, the Restore Online Shoppers' Confidence Act, and the Funeral Rule, but objected that the FTC has not shown that existing rules are insufficient to protect consumers or explained how a proposed rule would work with other rules.

131

They also objected to an economy-wide rule because it would overlap with industry-specific rules and recommended that the FTC narrowly tailor rulemaking to specific industries engaging in unfair or deceptive practices.

132

ANA recommended alternatives to rulemaking, such as industry-specific workshops, consumer and business education, and individual enforcement actions.

133

130

FTC-2022-0069-6047 (The Chamber stated the proposed rulemaking implicates the Major Questions Doctrine, Congress has not clearly authorized comprehensive unfair and deceptive fees rulemaking, and the proposed rulemaking does not meet the requirements of the FTC Act and would constitute unauthorized competition rulemaking to the extent it relates to concerns about monopoly and anticompetitive behavior. The Chamber also stated the FTC has not shown practices related to fees are unfair because requiring extensive fee disclosures upfront would harm businesses without countervailing benefits to consumers.).

131

FTC-2022-0069-6047 (The Chamber stated the FTC has not explained how existing rules are “insufficient from a deterrence or consumer-protection standpoint.”); FTC-2022-0069-6093 (ANA stated the ANPR fails to discuss how the proposed rulemaking will apply when it overlaps with existing regulations related to advertising and disclosures.). The Commission addresses and seeks comment on other rules with disclosure requirements related to pricing information in Sections IX.C and X.

132

FTC-2022-0069-6047 (The Chamber stated an economy-wide rule would likely overlap with existing sectoral rules); FTC-2022-0069-6093 (ANA urged the FTC to identify specific industries engaging in unfair or deceptive practices and narrowly tailor rulemaking to those industries.).

133

FTC-2022-0069-6093 (ANA).

Other commenters disagreed. For example, Policy Integrity argued that the FTC has clear congressional authority to tackle deceptive or unfair practices through rulemaking, and that doing so would not supersede that authority.

134

Policy Integrity pointed out that FTC rulemaking relating to all-in pricing would be in keeping with other FTC rules that relate to unfair or deceptive fee disclosure practices, such as the Unavailability Rule or Raincheck Rule, the Funeral Rule, the Negative Option Rule, the Mail, internet, or Telephone Order Merchandise Rule, and the Cooling-Off Rule.

135

Policy Integrity pointed out that these FTC rules “imposed disclosure requirements targeting unfair and deceptive fee-disclosure practices that apply to a vast number of entities across numerous industries, similar to its present effort to regulate junk fees and hidden fees.”

136

134

FTC-2022-0069-6077 (Policy Integrity argued that the FTC has clear congressional authorization in the FTC Act to tackle deceptive practices related to fees under Section 5(a) and unfair practices under Section 5(n), and that regulating junk fees, hidden fees, and related practices would not implicate the Major Questions Doctrine because FTC regulatory and enforcement antecedents demonstrate that FTC action in this area would not be “unheralded” and would not represent a “transformative” change in the FTC's authority, under

West Virginia

EPA.

135

FTC-2022-0069-6077 (Policy Integrity argued that FTC rulemaking related to all-in pricing would not be “unheralded” under

West Virginia

EPA

given prior rulemaking related to pricing disclosures.).

136

FTC-2022-0069-6077 (Policy Integrity).

III. Prevalence of Unfair and Deceptive Fee Practices

This proposed rule addresses prevalent fee practices that are unlawful under Section 5 of the FTC Act, 15 U.S.C. 45, because they are unfair or deceptive to consumers. The Commission has identified two practices that, for the reasons described herein, are unfair or deceptive practices under Section 5 of the FTC Act: (1) practices that misrepresent the total costs by omitting mandatory fees from advertised prices, and (2) practices that misrepresent the nature and purpose of fees or charges. The comments received in response to the ANPR and the Commission's history of enforcement actions and other complementary work, discussed in Section III.C, demonstrate the prevalence of these practices.

137

The Commission can support a finding that practices are prevalent by showing that it has issued cease and desist orders or by providing information that indicates a widespread pattern of unfair or deceptive acts or practices. 15 U.S.C. 57a(b)(3).

As shown in the comments received, advertising misrepresentations and unlawful practices related to pricing and added fees are chronic problems confronting consumers. These problems are prolific and occur across industries affecting a large majority of the population.

138

The FTC uses its authority under Section 5 to stop deceptive or unfair acts or practices. A representation, omission, or practice is deceptive if it is likely to mislead consumers acting reasonably under the circumstances and is material to consumers—that is, it would likely affect the consumer's conduct or decisions with regard to a product or service.

139

False and misleading statements are unlawful regardless of an intent to deceive.

140

Some deception cases involve omission of material information, the disclosure of which is necessary to prevent the claim, practice, or sale from being misleading.

141

A practice is considered unfair under Section 5 if: (1) it causes, or is likely to

cause, substantial injury; (2) the injury is not reasonably avoidable by consumers; and, (3) the injury is not outweighed by benefits to consumers or competition.

142

138

FTC-2022-0069-6095 (describing a survey in which 85% of respondents encountered fees that were not initially disclosed and listing a range of industries in which the fees occurred);

supra

Section II.B.

139

See

Fed. Trade Comm'n,

FTC Policy Statement on Deception,

103 F.T.C. 174, 175 (1984) (appended to

In re Cliffdale Assocs., Inc.,

103 F.T.C. 110, 183 (1984)), (hereinafter “Deception Policy Statement”),

https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.

140

In re Sears, Roebuck & Co.,

95 F.T.C. 406, 517 n. 9 (1980) (citing

Regina Corp.

FTC,

322 F.2d 765, 768 (3d Cir. 1963)).

141

Id.

at 175 & 175 n. 4, 176-77.

142

15 U.S.C. 45(n).

A. Bait-and-Switch Tactics: Misrepresenting Total Costs by Omitting Mandatory Fees From Advertised Prices

The comment record supports a finding that bait-and-switch pricing practices are prevalent. Specifically, commenters identified pricing structures that do not disclose the total price for goods or services, but instead advertise a lower cost to consumers that is ultimately inflated by mandatory charges.

143

These pricing structures take a variety of forms, including pure misrepresentations through initial advertisements displaying a lower price, advertisements that inadequately disclose mandatory add-on charges,

144

tactics that disclose mandatory add-on charges late in the purchasing process, and sales that omit material terms such as requiring an additional purchase to make full use of the good or service.

145

All of these practices render the quoted price misleading because they lead consumers to believe that the cost for the good or service is lower than it actually is—put another way, the advertised good or service is not actually attainable for the quoted price.

143

See

discussion,

supra

Section II.A.1.

144

This practice would include advertisements where additional charges are not disclosed clearly and conspicuously—for example, they appear only in fine print—and advertisements that partition the total cost into various components without displaying the total price most prominently.

145

See

discussion,

supra

Section II.A.1. & nn. 9-10.

Pricing structures that do not initially disclose the total cost of a good or service are deceptive even if the total cost is disclosed at some point during the transaction. It has long been the FTC's position that misleading door openers are deceptive.

146

Further, numerous courts have recognized that it is a violation of the FTC Act if a consumer's first contact is induced through deception, even if the truth is clarified prior to purchase.

147

Thus, when the initial contact with a consumer shows a lower or partial price without disclosing the total cost, it violates the FTC Act even if the total cost is later disclosed.

146

Fed. Trade Comm'n,

Enforcement Policy Statement on Deceptively Formatted Advertisements

at 7 (2015),

https://www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf

(hereinafter “

Policy Statement on Deceptive Ad Formats

”) (describing the FTC's enforcement actions against misleading door openers since at least 1976).