Trade Regulation Rule on Unfair or Deceptive Fees

Federal RegisterJan 10, 2025

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FEDERAL TRADE COMMISSION

16 CFR Part 464

RIN 3084-AB77

Trade Regulation Rule on Unfair or Deceptive Fees

AGENCY:

Federal Trade Commission.

ACTION:

Final rule.

SUMMARY:

The Federal Trade Commission (“FTC” or “Commission”) is issuing a final trade regulation rule entitled “Rule on Unfair or Deceptive Fees” (“rule” or “final rule”) and Statement of Basis and Purpose addressing certain unfair or deceptive practices involving fees or charges for live-event tickets and short-term lodging: bait-and-switch pricing that hides the total price by omitting mandatory fees and charges from advertised prices; and misrepresenting the nature, purpose, amount, and refundability of fees or charges. The final rule specifies that it is an unfair and deceptive practice for businesses to offer, display, or advertise any price of live-event tickets or short-term lodging without clearly, conspicuously and prominently disclosing the total price. The rule also requires businesses to clearly and conspicuously make certain disclosures before a consumer consents to pay. The rule further specifies that it is an unfair and deceptive practice for businesses to misrepresent any fee or charge in any offer, display, or advertisement for live-event tickets or short-term lodging.

DATES:

This rule is effective May 12, 2025.

ADDRESSES:

Copies of this document are available on the Commission's website,

www.ftc.gov

FOR FURTHER INFORMATION CONTACT:

Janice Kopec or Annette Soberats, Division of Advertising Practices, Bureau of Consumer Protection, Federal Trade Commission, 202-326-2550 (Kopec), 202-326-2921 (Soberats),

jkopec@ftc.gov, asoberats@ftc.gov

SUPPLEMENTARY INFORMATION:

Statement of Basis and Purpose

Table of Contents

I. Background

A. Advance Notice of Proposed Rulemaking

B. Notice of Proposed Rulemaking

C. Informal Public Hearing

II. The Legal Standard for Promulgating the Rule

A. Prevalence of Acts or Practices Addressed by the Rule

B. Manner and Context in Which the Acts or Practices Are Deceptive or Unfair

C. The Economic Effect of the Rule

III. Section-by-Section Analysis

A. § 464.1: Definitions

1. Ancillary Good or Service

2. Business

3. Clear(ly) and Conspicuous(ly)

4. Covered Good or Service

5. Government Charges

6. Pricing Information

7. Shipping Charges

8. Total Price

(a) Mandatory Fees

(b) Maximum Total

(d) Exclusions From Total Price

(e) Intersection With IRS Requirements

B. § 464.2 Hidden Fees Prohibited

1. § 464.2(a)

(a) Contingent Fees

(b) Ticket Service Fees

(d) Dynamic Pricing and National Advertising

(e) Rebates, Bundled Pricing, and Other Discounts: Compliance When Promotional Pricing Models Have Different Fees

(f) Online Marketplaces

2. § 464.2(b)

3. § 464.2(c)

C. § 464.3 Misleading Fees Prohibited

D. § 464.4 Relation to State Laws

E. § 464.5 Severability

IV. Challenges to the FTC's Legal Authority To Promulgate the Rule

A. Major Questions Doctrine

1. The Rule Does Not Address a Major Question

(a) The Commission Has a Long History of Addressing Unfair or Deceptive Acts or Practices Related to Pricing Information

(b) Commenters' Claims About the Scope of the Acts or Practices Covered by the Rule Are Inapplicable or Overstated

2. Congress Provided the Commission With a Clear Grant of Authority To Promulgate This Rule

B. Non-Delegation Doctrine

C. First Amendment

1. Comments

2. Legal Standard

3. The Rule's Disclosure Requirements Are Constitutional Under Zauderer

4. The Rule Does Not Prohibit Truthful Speech

5. The Rule's Treatment of Credit Card Fees and Government Charges Does Not Violate the First Amendment

D. Commission Structure

E. Administrative Procedure Act

V. Final Regulatory Analysis Under Section 22 of the FTC Act

A. Concise Statement of the Need for, and Objectives of, the Final Rule

B. Alternatives to the Final Rule the Commission Considered, Reasons for the Commission's Determination That the Final Rule Will Attain Its Objectives in a Manner Consistent With Applicable Law, and the Reasons the Particular Alternative Was Chosen

C. The NPRM's Preliminary Regulatory Analysis

D. Significant Issues Raised by Comments, the Commission's Assessment and Response, and Any Changes Made as a Result

1. Comments on Costs

(a) Public Comments: Estimated Costs Are Too Low

(b) Public Comments: Unquantified Costs to Firms

(d) Public Comments: Unquantified Costs to Third Parties

(e) Public Comments: Costs From Incorporating Contingent Fees Into Total Price

2. Comments on Benefits

(a) Public Comments: Benefits Are Too High

(b) Public Comments: Unquantified Benefits

3. Comments on the Economy-Wide Break-Even Analysis

(a) Public Comments: Break-Even Analysis Has Incorrect Assumptions or Contains Errors

(b) Public Comments: Break-Even Analysis Is Not Enough To Justify an Economy-Wide Rule

E. Economic Regulatory Analysis of the Final Rule's Costs and Benefits

1. Economic Rationale for the Final Rule

(a) Shrouded Pricing as a Cause of Market Failure

(b) Shrouded Pricing as a Source of Biased Expectations

2. Economic Effects of the Final Rule

(a) General Benefits of the Final Rule

i. Reductions in Search Costs

ii. Reductions in Deadweight Loss

(b) Welfare Transfers

3. Quantified Welfare Effects

(a) Quantified Compliance Costs

(b) Break-Even Analysis

i. Sensitivity Analysis: Assume Higher Wage Rates

i. Live-Event Ticketing: Estimated Benefits of the Final Rule

(a) Consumer Time Savings When Shopping for Live-Event Tickets

(b) Additional Unquantified Benefits: Reductions in Deadweight Loss and Abandoned Transactions

ii. Live-Event Ticketing: Estimated Costs of the Final Rule

iii. Live-Event Ticketing: Net Benefits

iv. Live-Event Ticketing: Uncertainties

(d) Quantified Benefits and Costs: Short-Term Lodging Industry

i. Short-Term Lodging: Estimated Benefits of the Final Rule

(a) Search Statistics

(b) U.S. Hotels and Home Shares

(d) All Hotels and Home Shares

(e) Additional Unquantified Benefits: Reductions In Deadweight Loss and Abandoned Transactions

ii. Short-Term Lodging: Estimated Costs of the Final Rule

(a) Panel A: U.S. Hotels and Home Share Hosts

(b) Panel B: Foreign Hotels and Home Share Hosts

iii. Short-Term Lodging: Net Benefits

iv. Short-Term Lodging: Uncertainties

4. Economic Evaluation of Alternatives

5. Summary of Results

6. Appendix A: Model of Market Distortion Caused by Drip Pricing

7. Appendix B: Short-Term Lodging Industry Minutes per Listing Calculations

(a) Low-End Estimate of Minutes per Listing Calculation

(b) High-End Estimate of Minutes per Listing Calculation

VI. Paperwork Reduction Act

A. Disclosures Related to Final § 464.2(a) Through (c)

1. Number of Respondents

2. Estimated One-Time Hour Burden

3. Estimated One-Time Labor Costs

4. Estimated One-Time Non-Labor Costs

5. Projected Labor Costs Likely Overestimated

B. Prohibited Misrepresentations Under Final § 464.3

VII. Regulatory Flexibility Act—Final Regulatory Flexibility Analysis

A. Statement of the Need for, and Objectives of, the Rule

B. Significant Issues Raised by Comments, the Commission's Assessment and Response, and Any Changes Made as a Result

C. Comment by the Small Business Administration, Office of Advocacy, the Commission's Assessment and Response, and Any Changes Made as a Result

D. Description and Estimate of the Number of Small Entities To Which the Rule Will Apply

E. Description of the Projected Reporting, Recordkeeping, and Other Compliance Requirements

F. Discussion of Significant Alternatives the Commission Considered That Would Accomplish the Stated Objectives of the Final Rule and That Would Minimize Any Significant Economic Impact of the Final Rule on Small Entities

VIII. Congressional Review Act

I. Background

When shopping for a good or service, consumers want to know: how much? It is a bedrock principle of FTC law that price is material to a consumer's decision about whether to purchase a good or service. Consumers look for prices to comparison shop and to weigh what a good or service might be worth. Most consumers also rely on price to answer critical budgeting questions such as: Can I afford this hotel or short-term rental for my upcoming vacation? Can I afford these concert tickets? Unfortunately, consumers face widespread and growing unfair and deceptive fee practices that make it much harder to find out: how much will this cost?

There is nothing new about businesses using bait-and-switch tactics to reel in and deceive consumers. The Commission has a long history of bringing enforcement actions against these unfair and deceptive practices. Quoting a misleading, artificially low price and then adding in mandatory fees and other charges throughout the buying process—a practice known today as drip pricing—is a quintessential example of bait-and-switch pricing and is a practice that falls squarely within the scope of the Commission's long history of work to protect consumers. While today this practice goes by a different name, the playbook has not changed: lure in consumers with a low price, then hit them with a higher price after they have invested in the transaction and sunk time and effort into trying to buy a good or service for an illusory price. Behavioral and economic research explains that piecemeal numbers and explanations cannot cure the deception or mitigate the harms to consumers when businesses employ these pricing tactics. Often consumers finish the transaction without an accurate understanding of the total price of goods or services.

In recent years, bait-and-switch pricing has garnered widespread public attention. Consumers have cried foul when they discovered the cost of their hotel stays were significantly higher than expected due to a mandatory, hidden “resort fee,” typically charged for services that consumers expected to be a part of staying in a hotel. Consumers have also complained when they tried to purchase tickets to a live event, only to find out that the quoted ticket price almost doubled by the time they reached the final checkout page. Consumers have confronted a host of mysterious, mandatory, “convenience,” “processing,” or “service” charges that are either non-descript or otherwise misleading. These practices are frustrating for consumers when they shop for travel and entertainment especially because these purchases can be significant expenditures. This rulemaking record is replete with individual stories of consumers inundated by bait-and-switch pricing and misleading fees and charges.

For example, an individual commenter lamented the pervasiveness of bait-and-switch pricing tactics across everyday purchases:

Like almost every American consumer, I have had to pay these “junk fees” in various circumstances. I consider myself reasonably well informed, yet have been surprised by them, because they keep [c]ropping up in unexpected places. Like many, I've experienced them in hotels, with car rentals and telecom providers. In these instances, the consumer has no real recourse, as the bargaining power is wholly unequal. However, these fees are now impacting every aspect of commerce. “Convenience” fees have impacted me with food service. “Facility” fees charges at fitness facilities. Credit card fees in excess of the actual interchange fees being charged at restaurants. It's endless, ubiquitous and makes it extremely difficult for consumers to make informed decisions.

FTC-2023-0064-0886 (Individual Commenter).

As another individual commenter aptly put it, “It's one thing to be on guard when walking down a dark alley, but being on guard every time you want to take a vacation, go to a concert, fly home to see a sick loved one—that's just not fair.”

FTC-2023-0064-1576 (Individual Commenter).

It is no surprise that, once bait-and-switch pricing tactics are used by some businesses to obscure the cost of a good or service, they tend to spread. Businesses that want to compete on the true price of their offering are undercut by businesses that use hidden or misleading fees to display an artificially low price. As studies confirm, in such instances, consumers cannot shop for price effectively. This forces businesses into a race to the bottom and results in more and more businesses using hidden and misleading fees to remain competitive. When these types of fees are eventually revealed, consumers are left frustrated with a new and unexpected higher price and misleading fees and charges that prevent them from having a real understanding of what they are getting in return for these additional fees.

The Rule on Unfair or Deceptive Fees addresses these problems directly in the live-event ticketing industry and the short-term lodging industry, which includes temporary sleeping accommodations at a hotel, motel, inn, short-term rental, vacation rental, or other place of lodging. These two industries have engaged in bait-and-switch pricing tactics for years. The rule ensures that when businesses advertise a price for live-event tickets or short-term lodging, it is the total price, and when they explain a fee or charge, the description is truthful. In simple terms: tell consumers the real price and do not lie about the fees or charges. The final rule does this by addressing two specific and prevalent unfair and deceptive practices: (1) bait-and-switch pricing that hides the total price of live-event tickets and short-term lodging by omitting mandatory fees and charges from advertised prices, including through drip pricing, and (2) misrepresenting the nature, purpose, amount, and refundability of fees or charges. The rule has two main

components. First, the final rule requires businesses that offer a price for live-event tickets or short-term lodging to disclose the total price, inclusive of most mandatory charges, and to make sure that the total price is disclosed more prominently than other pricing information, except the final amount of payment. Second, the final rule prohibits misrepresentations about fees or charges in any offer, display, or advertisement for live-event tickets and short-term lodging.

The final rule is tailored to target these specific unfair and deceptive pricing practices, while preserving flexibility for live-event ticket and short-term lodging businesses. The rule does not prohibit any one type of fee, nor does it prohibit specific pricing practices such as itemization of fees or dynamic pricing. The rule does not require that all fees be included when offering a price—just mandatory ones. The rule gives businesses discretion to list optional fees selected by the consumer and government and shipping charges separately. The discretion to set prices remains squarely with businesses; the rule simply requires that they tell consumers the truth about prices for live-event tickets and short-term lodging.

A. Advance Notice of Proposed Rulemaking

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”)

to address certain unfair or deceptive acts or practices involving fees. 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 help inform the Commission about whether such practices are prevalent and, if so, whether and how to proceed with a notice of proposed rulemaking (“NPRM”). The Commission was particularly interested in the following practices that it identified as the subjects of investigations, enforcement actions, workshops, research, and consumer education: (a) misrepresenting or failing to disclose clearly and conspicuously, on any advertisement or in any marketing, the total price of any good or service for sale; (b) misrepresenting or failing to disclose clearly and conspicuously, on any advertisement or in any marketing, the existence of any fees, interest, charges, or other costs that are not reasonably avoidable for any good or service; (c) misrepresenting or failing to disclose clearly and conspicuously whether fees, interest, charges, products, or services are optional or required; (d) misrepresenting or failing to disclose clearly and conspicuously any material restriction, limitation, or condition concerning any good or service that may result in a mandatory charge in addition to the cost of the good or service or that may diminish the consumer's use of the good or service, including the amount the consumer receives; (e) misrepresenting that a consumer owes payments for any product or service the consumer did not agree to purchase; (f) billing or charging consumers for fees, interest, goods, services, or programs without express and informed consent; (g) billing or charging consumers for fees, interest, goods, services, or programs that have little or no added value to the consumer or that consumers would reasonably assume to be included within the overall advertised price; and (h) misrepresenting or failing to disclose clearly and conspicuously, on any advertisement or in any marketing, the nature or purpose of any fees, interest, charges, or other costs.

Advance notice of proposed rulemaking; request for public comment: Unfair or Deceptive Fees Trade Regulation Rule Commission Matter No. R207011, 87 FR 67413 (Nov. 8, 2022). The ANPR and other documents pertaining to this rulemaking are available on the FTC web page, Rulemaking: Unfair or Deceptive Fees,

https://www.ftc.gov/legal-library/browse/rules/rulemaking-unfair-or-deceptive-fees

15 U.S.C. 57a(b)(2). Section 18 authorizes 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).

The Commission specifically sought public comment on the prevalence of such practices and the costs and benefits of a rule that would require upfront inclusion of mandatory fees whenever consumers are quoted a price, including by asking a series of questions to solicit data and commentary. The Commission took comments for sixty days, extended the comment period by an additional thirty days,

and carefully considered the more than 12,000 comments received.

Notice; extension of public comment period: Unfair or Deceptive Fees Trade Regulation Rule, 88 FR 4796 (Jan. 25, 2023).

Publicly posted comments are available to view through

Regulations.gov

under Docket ID FTC-2022-0069 at

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

B. Notice of Proposed Rulemaking

Based on the substance of the comments received in response to the ANPR, as well as the Commission's history of enforcement and other information, on November 9, 2023, the Commission published an NPRM, which proposed an industry-neutral rule that would prohibit misrepresenting the total price of goods or services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees.

The NPRM described the comments received in response to the ANPR and examined the Commission's prior enforcement actions and other responses concerning unfair and deceptive fees. In the NPRM, the Commission stated that it has reason to believe that certain unfair or deceptive acts or practices involving fees are prevalent, specifically: (1) misrepresenting the total price of goods and services by omitting mandatory fees from advertised prices and (2) misrepresenting the nature and purpose of fees. After discussing the comments and explaining its considerations in developing a proposed rule, the Commission also posed specific questions for comment and provided explanation of the proposed rule text. Finally, the NPRM set out the Commission's proposed regulatory text.

The Commission took public comments for sixty days, and extended the comment period for an additional thirty days.

Notice of proposed rulemaking; request for public comment: Trade Regulation Rule on Unfair or Deceptive Fees, 88 FR 77420 (Nov. 9, 2023). In accordance with section 18(b)(2)(C) of the FTC Act, 15 U.S.C. 57a(b)(2)(C), on October 10, 2023, the Commission sent notices to the House Committee on Energy and Commerce and the Senate Committee on Commerce, Science and Transportation seeking comment concerning the utility and scope of the trade regulation rule proposed in the NPRM and including the full text of the NPRM.

NPRM, 88 FR 77483.

Notice of proposed rulemaking; extension of public comment period: Trade Regulation Rule on Unfair or Deceptive Fees, 89 FR 38 (Jan. 2, 2024).

In response to the NPRM, the Commission received over 60,800 comments from stakeholders representing a wide range of viewpoints and industries.

These stakeholders

included numerous individual consumers and consumer groups who described examples and experiences with the unfair and deceptive fee practices identified by the Commission. Commenters also included a range of business owners, trade associations, and other industry groups; academics; and government officials and agencies from all levels of government. While some commenters raised concerns and recommended specific modifications to, or exemptions from, the Commission's proposal, the overwhelming majority of commenters strongly supported the Commission's proposed rule.

Publicly available comments are available to view through

Regulations.gov

under Docket ID FTC-2023-0064 at

https://www.regulations.gov/document/FTC-2023-0064-0001/comment

. As noted on

Regulations.gov

, not every comment is made publicly available. For example, “[a]gencies may redact or withhold certain Comment Submissions . . . , such as those containing . . . duplicate/near duplicate examples of a mass-mail campaign. Therefore, the total in the Number of Comments Posted Box may be lower than the total in the Comments Received Box.”

See https://www.regulations.gov/faq

, Frequently Asked Questions, General FAQs, Find Dockets, Documents, and Comments FAQs, answer to

How are Comments counted and posted to Regulations.gov?.

In this rulemaking,

Regulations.gov

identified ten mass-mail campaigns as part of the total number of comments received

of over 60,800. One mass-mail campaign alone accounted for close to 48,200 comments, and all mass-mail campaigns combined accounted for more than 57,400 comments. Because comments within each mass-mail campaign are highly similar, only representative comments of each mass-mail campaign are publicly posted on

Regulations.gov

. In addition to representative mass-mail comments, the more than 3,300 comments that

Regulations.gov

did not identify as belonging to a mass-mail campaign are publicly posted. The Commission received and considered all filed comments, including all mass-mail comments.

The proposed rule received widespread support in comments from Federal,

State, and local

elected officials; State Attorneys General;

Federal,

State, and local

government agencies; public policy and consumer advocates,

including housing advocates

and advocates for the incarcerated or formerly incarcerated;

university public policy advocates and clinics;

academics;

legal services providers;

and industry members from a broad range of market sectors, including online merchants,

live-event ticketing,

and hotels and other short-term lodging.

These commenters supporting the rule confirmed the prevalence of hidden and misrepresented fees throughout the economy, across large and small industries subject to the Commission's jurisdiction, ranging, for example, from travel, live events, restaurants, delivery, rental housing, and correctional services to carpet cleaning, dietary supplements, moving companies, and gyms. These commenters supported the rule for its benefits to both consumers and honest businesses.

See, e.g.,

FTC-2023-0064-3135 (U.S. Senate, Sen. Robert P. Casey, Jr.); FTC-2023-0064-3271 (U.S. Senate, Sen. Amy Klobuchar); FTC-2023-0064-2858 (U.S. House of Representatives, Rep. Maxwell Alejandro Frost, Rep. Jimmy Gomez, Rep. Barbara Lee, Rep. Rashida Tlaib, Rep. Kevin Mullin, Rep. Dwight Evans, Rep. Judy Chu, Rep. Greg Casar, Rep. Dan Goldman, Rep. Salud Carbajal).

See, e.g.,

FTC-2023-0064-1411 (Arizona House of Representatives, Rep. Analise Ortiz); FTC-2023-0064-2938 (Colorado House of Representatives, Rep. Naquetta Ricks); FTC-2023-0064-2926 (Florida House of Representatives, Rep. Rita Harris); FTC-2023-0064-3081 (Florida House of Representatives, Rep. Anna V. Eskamani); FTC-2023-0064-3103 (Florida House of Representatives, Rep. Angela Nixon); FTC-2023-0064-3117 (Maryland House of Delegates, Del. Julie Palakovich Carr); FTC-2023-0064-2341 (Massachusetts House of Representatives, Rep. Lindsay Sabadosa); FTC-2023-0064-3072 (Michigan Senate and House of Representatives, Sen. Darrin Camilleri, Sen. Mary Cavanagh, and Rep. Betsy Coffia); FTC-2023-0064-3079 (Montana State Senate, Senate Democratic Caucus, Sen. Pat Flowers, Sen. Susan Webber, Sen. Andrea Olsen, Sen. Edie McClafferty, Sen. Jen Gross, Sen. Janet Ellis, Sen. Shane Morigeau, Sen. Ellie Boldman, Sen. Ryan Lynch, Sen. Christopher Pope, Sen. Mike Fox, Sen. Denise Hayman, Sen. Willis Curdy, and Sen. Mary Ann Dunwell); FTC-2023-0064-3184 (New York Senate, Sen. Michael Gianaris); FTC-2023-0064-3123 (Syracuse, New York, City Auditor Alexander Marion); FTC-2023-0064-3149 (North Carolina House of Representatives, Rep. Julie von Haefen); FTC-2023-0064-3237 (North Carolina House of Representatives, Rep. Pricey Harrison).

See, e.g.,

FTC-2023-0064-3150 (Attorney General of the State of California); FTC-2023-0064-3215 (Attorneys General of the States of North Carolina and Pennsylvania, along with Attorneys General of the States or Territories of Arizona, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maine, Michigan, Minnesota, New Jersey, New York, Oklahoma, Oregon, Vermont, Washington, and Wisconsin).

See, e.g.,

FTC-2023-0064-3134 (U.S. Department of Transportation, Federal Motor Carrier Safety Administration); FTC-2023-0064-3187 (U.S. Department of Justice, Antitrust Division).

See, e.g.,

FTC-2023-0064-1519 (New York City Department of Consumer and Worker Protection); FTC-2023-0064-2883 (District of Columbia, Office of the People's Counsel); FTC-2023-0064-3196 (South Carolina Department of Consumer Affairs).

See, e.g.,

FTC-2023-0064-1028 (Complex Trauma Project); FTC-2023-0064-2885 (AARP); FTC-2023-0064-3104 (Truth in Advertising, Inc.); FTC-2023-0064-3160 (Consumer Federation of America on behalf of itself and 51 other national and State consumer advocacy groups, authored by American Economic Liberties Project, Consumer Action, Consumer Federation of America, National Association of Consumer Advocates, National Consumer Law Center, National Consumers League, U.S. Public Interest Research Group); FTC-2023-0064-3162 (BBB National Programs, Inc.); FTC-2023-0064-3191 (Community Catalyst and 32 other organizations focused on health care and consumer protection issues); FTC-2023-0064-3205 (Consumer Reports); FTC-2023-0064-3216 (Demand Progress Education Fund); FTC-2023-0064-3218 (National Consumer Law Center); FTC-2023-0064-3242 (William E. Morris Institute for Justice); FTC-2023-0064-3246 (Coalition for App Fairness); FTC-2023-0064-3248 (DC Jobs With Justice on behalf of Fair Price, Fair Wage Coalition); FTC-2023-0064-3259 (National Women's Law Center); FTC-2023-0064-3270 (Consumer Federation of America, National Consumer Law Center, and National Association of Consumer Advocates); FTC-2023-0064-3290 (U.S. Public Interest Research Group Education Fund); FTC-2023-0064-3302 (Public Citizen).

See, e.g.,

FTC-2023-0064-1431 (McPherson Housing Coalition); FTC-2023-0064-2851 (Housing Action Illinois); FTC-2023-0064-3102 (Corporation for Supportive Housing); FTC-2023-0064-3235 (National Housing Law Project).

See, e.g.,

FTC-2023-0064-2915 (Voice of the Experienced); FTC-2023-0064-2696 (Safe Return Project); FTC-2023-0064-3253 (Fortune Society); FTC-2023-0064-3260 (Formerly Incarcerated, Convicted People & Families Movement, in collaboration with the Partnership for Just Housing); FTC-2023-0064-3283 (National Consumer Law Center, Prison Policy Initiative, and advocate Stephen Raher).

See, e.g.,

FTC-2023-0064-1939 (Tzedek DC, David A. Clarke School of Law, University of the District of Columbia); FTC-2023-0064-2888 (Housing Policy Clinic, University of Texas School of Law); FTC-2023-0064-3146 (Institute for Policy Integrity, New York University School of Law); FTC-2023-0064-3255 (Carrie Floyd, Clinical Teaching Fellow, Veterans Legal Clinic, and Mira Edmonds, Clinical Assistant Professor of Law, Civil-Criminal Litigation Clinic, University of Michigan Law School); FTC-2023-0064-3275 (Berkeley Center for Consumer Law & Economic Justice, University of California, Berkeley School of Law, and Consumer Law Advocates, Scholars & Students Network); FTC-2023-0064-3268 (Housing & Eviction Defense Clinic, University of Connecticut School of Law).

See, e.g.,

FTC-2023-0064-1294 (James J. Angel, Ph.D., CFP, CFA, Professor, Georgetown University, McDonough School of Business); FTC-2023-0064-1467 (Richard J. Peltz-Steele, Chancellor Professor, University of Massachusetts Law School).

See, e.g.,

FTC-2023-0064-2862 (Legal Aid Foundation of Los Angeles); FTC-2023-0064-2892 (Community Legal Services of Philadelphia); FTC-2023-0064-2920 (Colorado Poverty Law Project); FTC-2023-0064-3090 (Atlanta Legal Aid Society, Inc.); FTC-2023-0064-3225 (CED Law); FTC-2023-0064-3278 (Southeast Louisiana Legal Services).

See, e.g.,

FTC-2023-0064-2840 (Indie Sellers Guild); FTC-2023-0064-2901 (E-Merchants Trade Council, Inc.).

See, e.g.,

FTC-2023-0064-2856 (National Football League); FTC-2023-0064-3108 (Christian L. Castle, Esq.; Mala Sharma, President, Georgia Music Partners; and Dr. David C. Lowery, founder of musical groups Cracker and Camper Van Beethoven, and a lecturer at the University of Georgia Terry College of Business); FTC-2023-0064-3122 (Vivid Seats); FTC-2023-0064-3195 (League of American Orchestras on behalf of itself and Association of Performing Arts Professionals, Carnegie Hall, Dance/USA, Folk Alliance International, Future of Music Coalition, National Performance Network, OPERA America, PAVA—Performing Arts Venues Alliance, Performing Arts Alliance, and Theatre Communications Group); FTC-2023-0064-3212 (TickPick, LLC); FTC-2023-0064-3230 (Future of Music Coalition); FTC-2023-0064-3250 (National Independent Talent Organization); FTC-2023-0064-3266 (StubHub, Inc.); FTC-2023-0064-3292 (National Association of Theatre Owners); FTC-2023-0064-3304 (Recording Academy); FTC-2023-0064-3306 (Live Nation Entertainment and its subsidiary Ticketmaster North America); FTC-2023-0064-3105 (Charleston Symphony); FTC-2023-0064-3241 (National Association of Ticket Brokers).

See, e.g.,

FTC-2023-0064-3077 (Far Horizons Travel); FTC-2023-0064-3094 (American Hotel & Lodging Association); FTC-2023-0064-3106 (American Society of Travel Advisors, Inc.); FTC-2023-0064-3204 (Expedia Group); FTC-2023-0064-3244 (Vacation Rental Management Association).

Individual consumers overwhelmingly supported the rule. Out of 60,853 total comments received, a mass mailing of close to 48,186 consumer commenters stated that they supported “the FTC's efforts to protect American consumers and crack down on unscrupulous businesses that tack on junk fees at the end of the purchasing process,” and urged the Commission “to pass this rule to not only save consumers tens of billions of dollars each year, but to level the playing field for honest businesses who are transparent about their costs and

fees.”

Other mass mailings contained similar comments in support. In a mass mailing of about 344 comments, consumer commenters made near-identical statements to the aforementioned mass mailing and added: “Junk fees are monies a business tacks on at the end of the purchasing process instead of being transparent about the full price upfront. These fees are common when people are purchasing airline and concert tickets, booking hotel rooms, paying utility bills, and renting apartments.”

A mass mailing submitted by about 315 consumer commenters stated, “I support cracking down on hidden junk fees that cost Americans billions of dollars each year.”

A mass mailing by about nineteen consumer commenters stated, “For too long, individuals have been subjected to misleading practices, such as the omission of mandatory fees from advertised prices and misrepresentation of the nature and purpose of fees. These practices not only erode trust but also hinder informed decision-making by consumers.”

A mass mailing by about thirteen consumer commenters simply urged: “Stop junk fees!”

Additional comments from individual consumers also supported the rule.

See, e.g.,

FTC-2023-0064-0962, FTC-2023-0064-1186, FTC-2023-0064-1219, FTC-2023-0064-1230, FTC-2023-0064-1826, FTC-2023-0064-1827, FTC-2023-0064-1933, FTC-2023-0064-1946.

See, e.g.,

FTC-2023-0064-2290.

See, e.g.,

FTC-2023-0064-3156.

See, e.g.,

FTC-2023-0064-2962.

See, e.g.,

FTC-2023-0064-2964.

Other commenters opposed the rule, sought exemptions from the rule, or expressed concern about the rule's definitions or application to specific pricing scenarios. They included a Federal government agency;

national business groups and public policy advocates,

including tax groups and advisors;

academics;

representatives from auto dealers and service providers;

app-based delivery platforms;

financial and real estate settlement services;

franchised businesses;

representatives of housing providers,

including apartment associations

and a housing advertising platform;

hospitality groups, including hotel

and restaurant associations;

funeral and cemetery providers;

gaming associations;

telecommunications providers;

live-event venues;

a law firm;

providers of communications services to incarcerated people;

and other sectors.

The commenters argued that the FTC failed to establish the prevalence of the defined unfair and deceptive practices and failed to conduct an adequate cost-benefit analysis, and that the proposed rule would interfere with established pricing models, could not be applied to all pricing scenarios, would overlap with other laws and regulations, or would exceed the FTC's rulemaking authority or jurisdiction.

U.S. Small Bus. Admin., Office of Advocacy, Re: Trade Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001,

https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.

See, e.g.,

FTC-2023-0064-2367 (Small Business Majority); FTC-2023-0064-2887 (Progressive Policy Institute); FTC-2023-0064-2919 (National Automatic Merchandising Association); FTC-2023-0064-3028 (Competitive Enterprise Institute); FTC-2023-0064-3016 (National Federation of Independent Business, Inc.); FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3128 (Merchants Payments Coalition); FTC-2023-0064-3137 (Chamber of Progress); FTC-2023-0064-3140 (Merchant Advisory Group); FTC-2023-0064-3145 (Association of National Advertisers, Inc.); FTC-2023-0064-3147 (American Land Title Association); FTC-2023-0064-3173 (Center for Individual Freedom); FTC-2023-0064-3186 (National LGBT Chamber of Commerce and National Asian/Pacific Islander American Chamber of Commerce & Entrepreneurship); FTC-2023-0064-3208 (FreedomWorks); FTC-2023-0064-3267 (National Retail Federation).

See, e.g.,

FTC-2023-0064-3100 (Civitas Advisors, Inc.); FTC-2023-0064-3126 (Tax Foundation); FTC-2023-0064-3258 (National Taxpayers Union Foundation).

See, e.g.,

FTC-2023-0064-2891 (Mary Sullivan, George Washington University, Regulatory Studies Center); FTC-2023-0064-3264 (Mark J. Perry, Ph.D., Professor Emeritus of Economics at University of Michigan-Flint and Senior Fellow Emeritus at the American Enterprise Institute).

See, e.g.,

FTC-2023-0064-3121 (National Independent Automobile Dealers Association); FTC-2023-0064-3189 (National Automobile Dealers Association); FTC-2023-0064-3206 (Motor Vehicle Protection Products Association, Guaranteed Asset Protection Alliance, and Service Contract Industry Council); FTC-2023-0064-3276 (Automotive Service Association).

See, e.g.,

FTC-2023-0064-3263 (Flex Association); FTC-2023-0064-3202 (TechNet).

See, e.g.,

FTC-2023-0064-1425 (Iowa Bankers Association); FTC-2023-0064-1941 (Independent Bankers Association of Texas); FTC-2023-0064-2574 (BattleLine LLC via Investor Protection Initiative); FTC-2023-0064-2893 (America's Credit Unions); FTC-2023-0064-3119 (Money Services Business Association, Inc.); FTC-2023-0064-3138 (Independent Community Bankers of America); FTC-2023-0064-3139 (American Bankers Association and Consumer Bankers Association); FTC-2023-0064-3142 (American Escrow Association); FTC-2023-0064-3144 (Mortgage Bankers Association); FTC-2023-0064-3168 (American Financial Services Association); FTC-2023-0064-3182 (Massachusetts Bankers Association).

See, e.g.,

FTC-2023-0064-3141 (Coalition of Franchisee Associations); FTC-2023-0064-3211 (American Association of Franchisees & Dealers); FTC-2023-0064-3294 (International Franchise Association).

See, e.g.,

FTC-2023-0064-3066 (Norhart, Inc.); FTC-2023-0064-3115 (National Association of Residential Property Managers); FTC-2023-0064-3116 (Manufactured Housing Institute); FTC-2023-0064-3133 (National Multifamily Housing Council and National Apartment Association); FTC-2023-0064-3152 (Building Owners & Managers Association, Council for Affordable & Rural Housing, Housing Advisory Group, Institute of Real Estate Management, Manufactured Housing Institute, National Apartment Association, National Association of Home Builders, National Association of Residential Property Managers, National Leased Housing Association, National Multifamily Housing Council, and Real Estate Roundtable).

See, e.g.,

FTC-2023-0064-2981 (Apartment & Office Building Association of Metropolitan Washington); FTC-2023-0064-3042 (Nevada State Apartment Association); FTC-2023-0064-3044 (San Angelo Apartment Association); FTC-2023-0064-3045 (Chicagoland Apartment Association); FTC-2023-0064-3089 (Apartment Association of Northeast Wisconsin and Fox Valley Apartment Association); FTC-2023-0064-3111 (Houston Apartment Association); FTC-2023-0064-3172 (New Jersey Apartment Association); FTC-2023-0064-3296 (Bay Area Apartment Association); FTC-2023-0064-3311 (Greater Cincinnati Northern Kentucky Apartment Association); FTC-2023-0064-3312 (Tulsa Apartment Association); FTC-2023-0064-3313 (Property Management Association of Michigan).

FTC-2023-0064-3289 (Zillow Group).

See, e.g.,

FTC-2023-0064-3262 (Skyscanner); FTC-2023-0064-3293 (Travel Technology Association).

See, e.g.,

FTC-2023-0064-2918 (Elite Catering + Event Professionals); FTC-2023-0064-3078 (Washington Hospitality Association); FTC-2023-0064-3080 (UNITE HERE); FTC-2023-0064-3101 (High Road Restaurants); FTC-2023-0064-3180 (Independent Restaurant Coalition); FTC-2023-0064-3197 (American Beverage Licensees); FTC-2023-0064-3203 (American Pizza Community); FTC-2023-0064-3219 (Georgia Restaurant Association); FTC-2023-0064-3300 (National Restaurant Association).

See, e.g.,

FTC-2023-0064-3065 (Carriage Services, Inc.); FTC-2023-0064-3130 (International Cemetery, Cremation & Funeral Association); FTC-2023-0064-3210 (Service Corporation International).

See, e.g.,

FTC-2023-0064-2886 (American Gaming Association); FTC-2023-0064-3120 (Arizona Indian Gaming Association).

See, e.g.,

FTC-2023-0064-3261 (National Association of Broadcasters); FTC-2023-0064-2884 (NTCA—The Rural Broadband Association); FTC-2023-0064-3143 (ACA Connects—America's Communications Association); FTC-2023-0064-3233 (NCTA—The internet & Television Association); FTC-2023-0064-3234 (CTIA—The Wireless Association); FTC-2023-0064-3295 (USTelecom—The Broadband Association).

See, e.g.,

FTC-2023-0064-3033 (The Rebel Lounge, Lucky Man Concerts LLC, PHX Fest, RelentlessBeats LLC).

FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).

See, e.g.,

FTC-2023-0064-3236 (NCIC Inmate Communications); FTC-2023-0064-3284 (Global Tel*link Corporation d/b/a ViaPath Technologies).

See, e.g.,

FTC-2023-0064-2906 (National Association of College & University Business Officers, American Council on Education); FTC-2023-0064-3217 (Bowling Proprietors' Association of America); FTC-2023-0064-3249 (Marine Retailers Association of the Americas); FTC-2023-0064-3251 (National RV Dealers Association); FTC-2023-0064-3269 (IHRSA—The Health & Fitness Association). Towing & Recovery Association of America, Inc. submitted a late comment, which the Commission considered in its discretion and makes available at

https://www.ftc.gov/system/files/ftc_gov/pdf/R207011TRAAComment.pdf.

Members of the restaurant industry voiced opposition to the proposal. A mass mailing from about 4,650

restaurant owners criticized the rule as a one-size-fits-all approach that would be unworkable for the restaurant industry. In addition, members of the rental housing industry also submitted comments in opposition to the proposed rule. A mass mailing from about 3,781 members of the rental housing industry stated that it is virtually impossible to predict and disclose in advertisements total prices that include all mandatory fees that residents could incur during lease terms. The Commission does not address the specific issues raised by these industries and others that fall outside the scope of this final rule.

See, e.g.,

FTC-2023-0064-2953, FTC-2023-0064-2961, FTC-2023-0064-2972; FTC-2023-0064-2971.

C. Informal Public Hearing

On March 27, 2024, the Commission published an initial notice of informal hearing, which also served as the final notice of informal hearing (“Informal Hearing Notice”).

The Informal Hearing Notice was published in accordance with section 18(b)(1) of the FTC Act, 15 U.S.C. 57a(b)(1), which requires the Commission to provide an opportunity for an informal hearing in section 18 rulemaking proceedings. The Informal Hearing Notice identified eight commenters to the NPRM that requested an informal hearing in accordance with the requirements of 16 CFR 1.11(e), as well as nine additional commenters that requested the opportunity to make an oral presentation if the Commission was to hold an informal hearing at others' requests. A number of commenters, including several who requested an informal hearing, proposed potential disputed issues of material fact for the Commission's consideration.

The Commission reviewed these potential issues and concluded in its Informal Hearing Notice that there were no disputed issues of material fact to resolve at the hearing.

Initial notice of informal hearing; final notice of informal hearing; list of Hearing Participants; requests for submissions from Hearing Participants: Trade Regulation Rule on Unfair or Deceptive Fees, 89 FR 21216 (Mar. 27, 2024).

See, e.g.,

FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3143 (ACA Connects); FTC-2023-0064-3139 (American Bankers Association and Consumer Bankers Association); FTC-2023-0064-3294 (International Franchise Association); FTC-2023-0064-3233 (NCTA—The internet & Television Association).

On April 24, 2024, the Commission conducted an informal public hearing. In the Informal Hearing Notice, which was formally approved by vote of the Commission, the Commission's Chief Presiding Officer, the Chair, designated the Honorable Jay L. Himes, an Administrative Law Judge for the Federal Trade Commission, to serve as the presiding officer of the informal hearing. Seventeen interested parties were identified in the Informal Hearing Notice,

and six of them made documentary submissions in support of their hearing testimony.

Fifteen interested parties made presentations,

and two did not appear at the hearing.

The majority of interested parties that appeared spoke in support of the proposed rule. However, several voiced opposition to the rule, explained perceived problems with the proposed rule text, or argued that the Commission incorrectly concluded that there were no disputed issues of material fact raised in response to the NPRM.

The interested parties were: ACA Connects—America's Communication Association; American Bankers Association and Consumer Bankers Association; U.S. Chamber of Commerce; NCTA—The internet & Television Association; International Franchise Association; BattleLine LLC; IHRSA—The Global Health & Fitness Association; National Taxpayers Union Foundation; Consumer Federation of America, representing a coalition of 52 national and state consumer advocacy groups; Consumer Federation of America with National Consumer Law Center and National Association of Consumer Advocates; Community Catalyst, representing a coalition of 33 health and consumer protection advocacy groups; National Housing Law Project, representing a coalition of 39 housing justice advocacy organizations; National Consumer Law Center, Prison Policy Initiative, and Stephen Raher; Formerly Incarcerated, Convicted People & Families Movement; Truth in Advertising, Inc.; National Consumer Law Center; and Fair Price, Fair Wage Coalition.

The interested parties that made documentary submissions in connection with the informal hearing were: National Taxpayers Union Foundation; Community Catalyst; National Housing Law Project; Consumer Federation of America; U.S. Chamber of Commerce; and NCTA—The internet & Television Association. Each of the documentary submissions is posted in the Informal Hearing Documents folder available at

https://www.ftc.gov/legal-library/browse/rules/rulemaking-unfair-or-deceptive-fees.

Transcript, Informal Hearing on Proposed Trade Regulation Rule on Unfair or Deceptive Fees (Apr. 24, 2024),

https://www.ftc.gov/system/files/ftc_gov/pdf/transcript-deceptive-fees.pdf.

American Bankers Association and Consumer Bankers Association and the U.S. Chamber of Commerce did not appear at the Informal Hearing despite being given the opportunity to do so.

II. The Legal Standard for Promulgating the Rule

The Commission is promulgating 16 CFR part 464 (“final rule” or “rule”) pursuant to section 18 of the FTC Act, 15 U.S.C. 57a, which authorizes the Commission to promulgate, modify, and repeal trade regulation rules that define with specificity acts or practices in or affecting commerce that are unfair or deceptive within the meaning of section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).

Whenever the Commission promulgates a rule under section 18(a)(1)(B), the rule must include a Statement of Basis and Purpose (“SBP”) that addresses: (1) the prevalence of the acts or practices addressed by the rule; (2) the manner and context in which the acts or practices are unfair or deceptive; and (3) the economic effect of the rule, taking into account the effect on small businesses and consumers.

The Commission summarizes in this section its findings regarding each of these requirements.

See

15 U.S.C. 57a(a)(1)(B).

15 U.S.C. 57a(b)(3). In addition, section 22(b)(2) of the FTC Act, 15 U.S.C. 57b-3(b)(2), requires the Commission to prepare a final regulatory analysis, which it discusses in section V.

Substantial evidence exists supporting the prevalence of bait-and-switch pricing and misleading fees and charges economy-wide as well as in the live-event ticketing and short-term lodging industries. As documented by the rulemaking record, the Commission's work on these pricing issues for over a decade, and the complementary actions of the Commission's local, State, and international counterparts, these specific practices are widespread across the economy and are harmful to consumers and honest businesses. Nevertheless, the Commission has decided, in its discretion, to focus this final rule on the industries in which the Commission first evaluated drip pricing—live-event ticketing and short-term lodging—and have a long history of harming consumers and honest competitors.

The Commission notes that the harms of bait-and-switch pricing and the misrepresentation of fees and charges are particularly pronounced in industries such as these, in which most transactions occur online. Consumers trying to comparison shop across multiple websites, or even on the same website, when deciding what tickets to purchase or where to travel are unable to do so effectively because some businesses hide the true total price and instead force consumers to go to different sites and click through multiple web pages for each offer to learn the true total price.

Consumer harm is also pronounced in these industries because the offered goods and services are often identical (as is the case with live-event tickets), or nearly identical (as is the case with competing short-term lodging offers in a particular destination and for a particular star rating), and the most salient feature is the total price, which is shrouded from consumers. Indeed, for some consumers, hotel rooms are interchangeable so long as the location, star rating, and reviews are similar

across offers, and what matters most is the total price.

In the future, the Commission may address these unfair and deceptive practices across industries as discussed in the NPRM. For now, however, the Commission will address unfair and deceptive pricing practices in other industries using its existing section 5 authority.

A. Prevalence of Acts or Practices Addressed by the Rule

As discussed herein, and in the NPRM, the Commission finds that unfair or deceptive pricing practices involving bait-and-switch pricing and misleading fees or charges are prevalent throughout the economy and affect, or have the potential to affect, virtually every purchasing transaction a consumer undertakes, including decisions about basic goods or services; where to live, dine, stay, or travel; and what events to attend. Specifically, the Commission finds that the following unfair or deceptive practices relating to fees are prevalent generally throughout the economy and specifically in the live-event ticketing and short-term lodging industries: (1) bait-and-switch pricing practices that hide the total price of goods or services by omitting mandatory fees and charges from advertised prices, including through drip pricing, and (2) misrepresenting the nature, purpose, amount, and refundability of fees or charges.

Section 18 of the FTC Act instructs that the Commission may determine that unfair or deceptive acts or practices are prevalent if: “it has issued cease and desist orders regarding such acts or practices” or “any other information available to the Commission indicates a widespread pattern of unfair or deceptive acts or practices.”

In support of its preliminary finding that these practices are prevalent, the NPRM cited enforcement evidence, including prior work by the Commission, complementary actions by State Attorneys General, private lawsuits, and international actions to address unfair or deceptive pricing practices, as well as comments received in response to the ANPR.

The NPRM also described legislative and regulatory action taken by multiple States to address unfair or deceptive fees.

15 U.S.C. 57a(b)(3).

NPRM, 88 FR 77435;

see also

Complaint ¶¶ 24-25, 29, 40-42,

FTC

T Mobility LLC,

No. 3:14-cv-04785 (N.D. Cal. Oct. 28, 2014) (alleging defendant did not adequately disclose the limitations of defendant's data plan offerings and subsequently charged high cancellation fees for consumers who chose to end their contracts); Complaint ¶¶ 1, 26, 39-40,

FTC

Millennium Telecard, Inc.,

No. 2:11-cv-02479 (D.N.J. May 2, 2011) (alleging defendants deceptively marketed prepaid credit calling cards by failing to adequately disclose fees that substantially limited the number of minutes consumers had purchased); Complaint ¶ 15,

FTC

CompuCredit Corp.,

No. 1:08-cv-01976 (N.D. Ga. June 10, 2008) (alleging in part that defendants misrepresented the credit limits on various credit cards and failed to disclose fees charged upfront).

See, e.g.,

Complaint ¶¶ 4-5, 106-14, 118-23,

Invitation Homes, Inc.,

No. 24-cv-04280 (alleging that defendant, among other deceptive and unfair practices, misled consumers about fees by using confusing and buried language); Complaint ¶¶ 39-46,

Vonage Holdings Corp.,

No. 3:22-cv-6435; Complaint ¶¶ 61-63,

FTC

Benefytt Techs., Inc.,

No. 8:22-cv-1794 (M.D. Fla. Aug. 8, 2022) (alleging in part that defendants bundled and charged fees for unwanted products with sham health insurance plans); Complaint ¶¶ 17-20,

FTC

Passport Auto Grp., Inc.,

No. 8:22-cv-02670 (D. Md. Oct. 18, 2022) (alleging in part that defendants advertised vehicle prices that did not include redundant fees ranging from hundreds to thousands of dollars for inspection, reconditioning, preparation, and certification); Complaint ¶¶ 3, 33, 41,

FTC

N. Am. Auto. Serv., Inc.

(

“Napleton Auto”

), No. 1:22-cv-01690 (E.D. Ill. Mar. 31, 2022) (alleging defendants charged consumers for additional products and services without their consent and misrepresented the fees as mandatory, resulting in artificially low advertised prices); Complaint ¶¶ 50-51,

Amazon.com, Inc.

(“

Amazon Flex”

), No. C-4746 (FTC June 9, 2021) (alleging respondents falsely represented that 100% of tips would go to the driver in addition to the pay respondents offered drivers); Complaint ¶¶ 37-39,

FTC

Lead Express, Inc.,

No. 2:20-cv-00840 (D. Nev. May 11, 2020) (alleging in part that defendants did not clearly and conspicuously disclose material information related to the total amount of payments related to loans and also withdrew significantly more than the stated total cost of the loan from consumers' accounts); Complaint ¶¶ 9-10,

FTC

FleetCor Techs, Inc.,

No. 1:19-cv-05727, 2019 WL 13081514 (N.D. Ga. Dec. 20, 2019) (alleging defendants charged consumers arbitrary and unexpected fees related to pre-paid fuel cards without consumers' consent); Complaint ¶¶ 4, 30-32, 36-37,

FTC

BCO Consulting Servs., Inc.,

No. 8:23-cv-00699 (C.D. Cal. Apr. 24, 2023) (alleging defendants enticed consumers with false promises to alleviate student loan debt despite not applying any payments to the student loan balances and collecting illegal advance fees without providing any services); Complaint ¶¶ 31-36,

FTC

OMICS Grp. Inc.,

No. 2:16-cv-02022 (D. Nev. Aug. 25, 2016) (alleging in part defendants misrepresented the publishing process of academic papers and only disclosed large publishing fees after notifying consumers that their papers had been approved for publication); Complaint ¶¶ 12, 23-25,

FTC

Lending Club Corp.,

No. 3:18-cv-02454 (N.D. Cal. Apr. 25, 2018) (alleging defendant charged consumers an upfront fee based on a percentage of the loan requested that was not clearly and conspicuously disclosed; this hidden fee caused loans received to be substantially smaller than advertised); Complaint ¶ 37,

FTC

T-Mobile USA, Inc.,

No. 2:14-cv-00967 (W.D. Wash. July 1, 2014) (alleging defendant added unauthorized third-party charges to the telephone bills of consumers); Amended Complaint ¶¶ 21-22,

FTC

Websource Media, LLC,

No. 4:06-cv-01980 (S.D. Tex. June 21, 2006) (alleging defendants placed charges on consumer telephone bills despite representations that there would be no charges or

obligations);

FTC

Mercury Mktg. of Del., Inc.,

No. 00-cv-3281, 2004 WL 2677177, *1 (E.D. Pa. Nov. 22, 2004) (finding defendants billed consumers without their consent after misleading consumers about introductory internet packages); Complaint ¶¶ 25-27,

FTC

Stewart Fin. Co.,

No. 1:03-cv-02648 (N.D. Ga. Sept. 4, 2003) (alleging in part that defendants package undisclosed add-on products with consumer loans and in some cases describe those add-on products as mandatory); Complaint ¶¶ 19-21, 24,

FTC

Hold Billing Serv., Ltd.,

No. SA-98-CA-0629-FB (W.D. Tex. July 16, 1998) (alleging defendants had previously added third-party charges to consumers' phone bills without permission by using sweepstakes entry forms as contracts to authorize charges); Complaint ¶¶ 18, 33, 56-58,

FTC

Lake,

No. 8:15-cv-00585-CJC-JPR (C.D. Cal. Apr. 14, 2015) (alleging defendants misrepresented that trial loan payments or reinstatement fee payments would be held in escrow and refunded to the consumer if the loan modification was not approved);

FTC

Hope for Car Owners, LLC,

No. 2:12-CV-778-GEB-EFB, 2013 WL 322895, at *3-4 (E.D. Cal. Jan. 24, 2013) (finding that the FTC sufficiently stated a claim for misrepresentation of the refundability of vehicle loan modification fees and entering default judgment); Amended Complaint ¶¶ 38-39, 58-60,

FTC

U.S. Mortg. Funding, Inc.,

No. 9:11-cv-80155-JIC (S.D. Fla. July 26, 2011) (alleging defendants misrepresented that an upfront loan modification fee was refundable);

FTC

Nat'l Bus. Consultants, Inc.,

781 F. Supp. 1136, 1143 (E.D. La. 1991) (finding that “defendants' misrepresentations regarding the ease with which the `performance deposit' could be refunded composed a large part of the various and sundry misrepresentations”).

Compare

15 U.S.C. 45(m) (excluding consent orders from the type of cease and desist orders that could support an action for civil penalties under 15 U.S.C. 45(m)(1)(B))

and

108 Stat. 1691 (1994) (amending 15 U.S.C. 45(m) to add “other than a consent order” after the term “cease and desist order”)

with

15 U.S.C. 57a(b)(3) (stating that the Commission may make a determination of prevalence if “it has issued cease and desist orders regarding such acts or practices or any other information available to the Commission indicat[ing] a widespread pattern of unfair or deceptive acts or practices”). Even if consent orders and the investigations that lead up to them are not “cease and desist orders,” in making a determination of prevalence, the Commission can still rely upon them as “other information.”

In addition to the Commission's enforcement actions, for more than a decade, the Commission has engaged with the public and issued guidance to industry on issues related to bait-and-switch tactics, including drip pricing, and the misrepresentation of fees or charges. The Commission first engaged with the public on the concept of drip pricing in 2012 by convening a conference, titled “The Economics of Drip Pricing,” to bring together economists and marketing academics to “examine the theoretical motivation for drip pricing and its impact on consumers, empirical studies, and policy issues pertaining to drip pricing.”

Several psychological theories were discussed at this conference, and these theories explain why consumers cannot reasonably avoid making errors when the total price is not revealed upfront.

Following the workshop, Commission staff sent warning letters to hotels and online travel agents that were not adequately disclosing resort fees or including those fees in the total price.

These hotels and online travel agents were employing drip pricing tactics as well as another bait-and-switch pricing tactic, partitioned pricing, to inadequately disclose resort fees and hide the total price of a hotel stay. Partitioned pricing consists of dividing a price into multiple components without ever disclosing the total and leaving consumers to figure out the true total price on their own. Hotels, for example, might separately list the room rate and “resort fee” but never add them up and quote an all-inclusive total price. In 2017, the Commission's Bureau of Economics published a report that reviewed the existing literature on drip pricing and partitioned pricing and examined the costs and benefits of disclosing hotel resort fees.

The report found that “[u]nless the total price is disclosed up front, separating resort fees from the room rate is unlikely to result in benefits that offset the likely harm to consumers.”

Specifically,

Fed. Trade Comm'n,

The Economics of Drip Pricing

(May 21, 2012),

https://www.ftc.gov/news-events/events/2012/05/economics-drip-pricing.

See, e.g.,

Fed. Trade Comm'n,

The Economics of Drip Pricing: Conference Transcript

76-111 (May 21, 2012),

https://www.ftc.gov/sites/default/files/documents/public_events/economics-drip-pricing/transcript.pdf.

Press Release, Fed. Trade Comm'n,

FTC Warns Hotel Operators that Price Quotes that Exclude “Resort Fees” and Other Mandatory Surcharges May Be Deceptive

(Nov. 28, 2012),

https://www.ftc.gov/news-events/news/press-releases/2012/11/ftc-warns-hotel-operators-price-quotes-exclude-resort-fees-other-mandatory-surcharges-may-be.

Mary Sullivan, Fed. Trade Comm'n,

Economic Analysis of Hotel Resort Fees

4 (2017),

https://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf.

Id.

separating mandatory resort fees from posted room rates without first disclosing the total price is likely to harm consumers by increasing the search costs and cognitive costs of finding and choosing hotel accommodations. Forcing consumers to click through additional web pages to see a hotel's resort fee increases the cost of learning the hotel's price. Separating the room rate from the resort fee increases the cognitive costs of remembering the hotel's price. When it becomes more costly to search and evaluate an additional hotel, a consumer's choice is either to incur higher total search and cognitive costs or to make an incomplete, less informed decision that may result in a more costly room, or both.

Id.

The report observed that hotels could eliminate these costs to consumers by including the resort fee in the advertised price; bundling the same resort services with the room and charging the same total price; listing the components of the total price separately, as long as the total price is the most prominently disclosed price; or changing to unbundled, optional resort services which would not be included in the advertised price.

Finally, the report did not find “any benefits to consumers from separately-disclosed mandatory resort fees that could not be achieved by first listing the total price and then disclosing the resort fee.”

Id.

In 2019, the Commission hosted a workshop and issued a staff perspective report that examined pricing and fees in the live-event tickets market.

The report observed,

Fed. Trade Comm'n, “

That's the Ticket” Workshop: Staff Perspective

4 (May 2020),

https://www.ftc.gov/system/files/documents/reports/thats-ticket-workshop-staff-perspective/staffperspective_tickets_final-508.pdf.

On most primary and resale platforms, the ticket price a consumer first sees is not what the consumer will pay. Mandatory fees, such as `venue' and `ticket processing' fees, bulk up the price-often by as much as thirty percent . . . . The late disclosure of fees increases search costs for consumers and makes it harder to comparison shop.

Id.

The report remarked that “[a]ll of the workshop panelists who discussed the fees issue, including each participating ticket seller that does not currently provide upfront all-in pricing, favored requiring all-in pricing through federal legislation or rulemaking.”

Id.

The Commission's finding of prevalence is further supported by the complementary enforcement actions brought by its law enforcement partners, most of which have resulted in orders prohibiting bait-and-switch pricing and misrepresenting fees and charges in the short-term lodging, live-event ticketing, delivery services, rental cars, travel, and tax filing preparation services

industries.

Indeed, a group of State Attorneys General wrote in support of a finding of prevalence of these practices across industries, including event ticket sellers, and hotels and other short-term lodging providers.

They have attempted to address some, but not all, of these fees in their own States.

The State Attorneys General cited a number of cases across industries demonstrating that bait-and-switch pricing and misleading fees are “a chronic, prolific problem confronting many consumers across numerous sectors of the economy.”

Further, they agreed with the Commission's assertion that “charges that misrepresent their nature and purpose are unfair and deceptive because they mislead consumers and make it more difficult for truthful businesses to compete on price.”

The Commission takes note of legislative and regulatory efforts in Minnesota, California, Pennsylvania, New York, Massachusetts, and North Carolina to combat hidden and misleading fees

which further support its finding of prevalence.

See, e.g.,

Complaint ¶ 3,

Rhode Island

UPP Global, LLC,

No. PC-2024-04453 (R.I. Super. Ct. Aug. 13, 2024) (alleging in part that defendant charges a fee as a tax, fails to disclose prices until after consumers have elected to use defendant's service, and advertises hourly prices and then requires consumers to pay for multiple hours at a minimum); Complaint ¶¶ 3-4,

District of Columbia

StubHub, Inc.,

No. 2024-CAB-004794 (D.C. Super. Ct. July 31, 2024) (alleging defendant uses drip pricing and entices consumers to shop for tickets by displaying artificially low prices and revealing mandatory fees later in the checkout process which defendant also misrepresents the purpose of); Consent Decree ¶¶ 10-24,

Arizona

Cox Enterprises, Inc.,

No. CV-2023-019752 (Ariz. Sup. Ct. Jan. 2, 2024) (alleging defendants failed to disclose additional fees to consumers who purchased services through long-term contracts based on “price-lock” guarantee); Assurance of Voluntary Compliance ¶ 2,

Texas

Marriott Int'l, Inc.,

No. 2023-CI09717 (Tex. Dist. Ct. May 16, 2023) (alleging defendant misrepresented various fees, including resort fees, and did not include all mandatory fees in the advertised room rate in violation of the Texas Deceptive Trade Practices Act); Plaintiff's Original Pet. ¶ 1,

Texas

Hyatt Hotels Corp.,

No. C2023-0884D (TX. Dist. Ct. May 15, 2023) (alleging defendant did not include mandatory fees in advertised room rates in violation of the Texas Deceptive Trade Practices Act); Consent Order ¶ 20,

District of Columbia

Grubhub Holdings, Inc.,

No. 2022 CA 001199 B (D.C. Super. Ct. Jan. 4, 2023) (alleging in part that defendants misrepresented menu prices to consumers and deceptively advertised that consumers could “order online for free”); Assurance of Voluntary Compliance ¶ 4,

Commonwealth

Omni Hotels Mgmt.,

GD-23-013056 (Pa. Commw. Ct. Nov. 9, 2023) (alleging defendants failed to advertise room prices including mandatory fees, misleading consumers); Assurance of Voluntary Compliance ¶ 2,

Commonwealth

Choice Hotels Intl., Inc.,

GD-23-011023 (Pa. Commw. Ct. Sept. 21, 2023) (alleging defendants failed to advertise room prices including mandatory fees misleading consumers); Assurance of Voluntary Compliance ¶¶ 1-5,

Commonwealth

RYADD, Inc.,

No. 2022-07262 (Pa. Commw. Ct. Sept. 8, 2022) (alleging defendants failed to advertise ticket prices including service fees and failed to clearly disclose an itemization of the total cost); Complaint ¶ 1,

Commonwealth

Mariner Finance, LLC,

No. 2:22-cv-03235-MAK (E.D. Pa. Sept. 6, 2022) (alleging defendant charged consumers for hidden add-on products without consumer knowledge and in some cases after explicit rejection); Consent Order ¶ 6,

District of Columbia

Maplebear, Inc.,

No. 2020 CA 003777B (D.C. Super. Ct. Aug. 19, 2022) (prohibiting defendant from misrepresenting the nature and purpose of fees applied to consumers' orders); Assurance of Voluntary Compliance ¶ 2,

Commonwealth

Marriott Int'l, Inc.,

No. GD-21-014016 (Pa. Ct. C.P. Nov. 16, 2021) (alleging defendant misrepresented its room rates by failing to include items such as mandatory fees in its pricing); Consent Order ¶ 3.1-3.18,

Drivo LLC,

N.J. Div. Consumer Aff. (Sept. 16, 2020) (prohibiting unfair and deceptive practices relating to damage fees and third party reservation fees for rental vehicles); Press Release, Off. Minn. Att'y Gen.,

Attorney General Ellison Obtains Relief for More than 30,000 Comcast/Xfinity Customers

(Jan. 15, 2020) (alleging in part that defendants misrepresented prices for their services and added services without consumer consent),

https://www.ag.state.mn.us/Office/Communications/2020/01/15_ComcastXfinity.asp

; Press Release, Off. Minn. Att'y Gen.,

Attorney General Ellison Obtains Nearly $9 Million Settlement with CenturyLink for Overcharging Minnesota Customers

(Jan. 8, 2020) (alleging defendant misrepresented the price of its services and used a complex pricing scheme to mislead consumers),

https://www.ag.state.mn.us/Office/Communications/2020/01/08_CenturyLinkSettlement.asp.

; Assurance of Voluntary Compliance ¶¶ 1-12,

Commonwealth

Event Ticket Sales, LLC,

No. 201101873 (Pa. Commw. Ct. Nov. 19, 2020) (alleging defendants failed to advertise ticket prices including service fees and failed to clearly disclose an itemization of the total cost); Assurance of Voluntary Compliance ¶ 7,

CenturyLink, Inc.,

No. 19-CV-56401 (Or. Cir. Ct., 2019) (alleging defendants charged undisclosed fees and failing to disclose all mandatory fees and charges); Agreed Final J. ¶ 8,

Texas

Guided Tourist, LLC,

No. D-1-GN-19-001618 (Tex. Dist. Ct. Mar. 26, 2019) (enjoining defendant from advertising ticket prices other than the total ticket price, including all mandatory fees); Settlement Agreement ¶ 8(b)-(c),

Florida

Dollar Thrifty Auto. Grp., Inc.,

No. 16-2018-cv-005938 (Fla. Cir. Ct., Jan. 14, 2019) (alleging in part that defendant misrepresented optional charges as mandatory and did not sufficiently disclose toll-related fees). Additionally, Intuit recently entered a multistate settlement of allegations that it misrepresented its tax filing products would come at no cost. Assurance of Voluntary Compliance,

Commonwealth

Intuit Inc.,

No. 220500324 (Pa. Ct. C.P. May 4, 2022).

FTC-2023-0064-3215 (Attorneys General of the States of North Carolina and Pennsylvania, along with Attorneys General of the States or Territories of Arizona, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maine, Michigan, Minnesota, New Jersey, New York, Oklahoma, Oregon, Vermont, Washington, and Wisconsin). The Attorneys General also pointed to prevalence of these practices in residential leasing, payday lending, internet applications, online shopping, automobile rentals, carpet cleaners, dietary supplement sellers, moving companies, gyms, travel companies, outlet stores, and online auctions.

Id.

(The Attorneys General highlighted actions each has taken in their own states to address financial services fees, hotel fees, live-event ticket fees, rental housing fees, auto rental fees, and telecommunication fees.)

Id.

N.Y. Arts & Cult. Aff. Law sec. 25.01-25.33 (McKinney 2023) (Effective Jun. 30, 2022) (requiring that the sellers and resellers of live-event tickets disclose the total cost of a ticket, upfront, and clearly and conspicuously disclose the amount of the price that is made up of fees and other charges); An Act Ensuring Transparent Ticket Pricing, H. 259, 193rd Gen. Court (Mass. 2023) (proposed legislation requiring in part that the sellers and resellers of live-event tickets disclose the total cost inclusive of all ancillary fees that must be paid and the portion of the ticket price that represents a service charge or any other fee or surcharge); H.B. 714 (2023-2024 Session) (N.C. 2023) (proposed legislation that requires, among other things, that providers of short-term lodging and live-event ticketing clearly display the total price of goods and services inclusive of mandatory fees a consumer would incur during a transaction);

see also

2023 Minn. H.B. 3438 (Enacted May 20, 2024) (stating that it is a deceptive trade practice for a business to not include all mandatory fees or surcharges when advertising, displaying or offering a price for goods or services); Cal. S.B. 478 (2023-2024 Regular Session) (Enacted Oct. 7, 2023) (amending the California Consumer Legal Remedies Act to state that it is unlawful to advertise, display, or offer a price for a good or service that does not include all mandatory fees or charges other than taxes or fees imposed by a government on the transaction); Cal. S.B. 1524 (2023-2024 Regular Session) (clarifying and amending S.B. 478 to include that additional fees such as service charges for food services businesses including bars and restaurants could appear separately so long as they were displayed on the menu); H.B. 636 (2023-2024) (Pa. 2023) (Engrossed Oct. 19, 2023) (proposed legislation amending the Pennsylvania Unfair Trade Practices and Consumer Protection Law to require the disclosure of all mandatory fees and charges included in the advertised and displayed price of any good or service); Conn. Gen. Stat. sec. 53-289a (2023) (requiring conspicuous disclosure in the advertisement of total price of live-event tickets including service charges); Conn. Gen. Stat. sec. 53-289a (2023) (requiring conspicuous disclosure in the advertisement of total price of live-event tickets including service charges); SB 329 (2024 Reg. Sess.) (Md.) (requiring all-in pricing throughout the purchase process of a live-event ticket); SB 329 (2024 Reg. Sess.) (Md.) (requiring all-in pricing throughout the purchase process of a live-event ticket); 1510 Mass. Reg. 5 (Dec. 8, 2023) (Proposed Regulations 940 C.M.R. 38.00: Unfair and Deceptive Fees) (proposed regulation stating that it is an unfair and deceptive practice to misrepresent or fail to disclose at the time of initial presentation of the price of any product the total price of that product inclusive of all fees, interest, charges, or other expenses necessary or required in order to complete the transaction).

Comments submitted by Federal and State elected officials echoing the widespread practice of misleading consumers about total prices and fees or charges further strengthen the Commission's prevalence finding. For example, U.S. Senator Amy Klobuchar stated that she held a hearing focusing on the lack of transparency in the live-event ticketing industry as well as a hearing on fees in the rental housing market that prevent renters from having meaningful opportunities to compare prices.

U.S. Senator Robert Casey discussed a report released on January 24, 2024, “Additional Charges May Apply: How Big Corporations Use

Hidden Fees to Nickel, Dime, and Deceive American Families,” tracking the variety of junk fees facing Pennsylvania families, including in the short-term lodging industry.

A group of Congressional representatives raised concerns regarding misleading fees and a lack of price transparency in the rental housing market.

Concerns over unfair and deceptive pricing were also raised by a variety of State legislators and officials.

There has also been significant bipartisan interest in passing legislation targeting fees in the live-event ticketing and short-term lodging industries.

FTC-2023-0064-3271 (U.S. Senate, Sen. Amy Klobuchar).

FTC-2023-0064-3135 (U.S. Senate, Sen. Robert P. Casey, Jr. noted that his report “details how corporations use hidden fees to deceive consumers and increase corporate profits, which leaves families paying more than they should and puts honest businesses at a disadvantage.”) The report is available at

https://www.casey.senate.gov/imo/media/doc/greedflation_junk_fees3.pdf

FTC-2023-0064-2858 (U.S. House of Representatives, Rep. Maxwell Alejandro Frost, Rep. Jimmy Gomez, Rep. Barbara Lee, Rep. Rashida Tlaib, Rep. Kevin Mullin, Rep. Dwight Evans, Rep. Judy Chu, Rep. Greg Casar, Rep. Dan Goldman, and Rep. Salud Carbajal stated that the rule would help eliminate some of the barriers to those seeking rental housing as renters “often face ambiguous or misleading fees” and “bring much needed transparency to the rental housing market.”).

FTC-2023-0064-2341 (Massachusetts House of Representatives, Rep. Lindsay Sabadosa); FTC-2023-0064-1411 (Arizona House of Representatives, Rep. Analise Ortiz); FTC-2023-0064-3072 (Michigan Senate and House of Representatives, Sen. Darrin Camilleri, Sen. Mary Cavanagh, and Rep. Betsy Coffia); FTC-2023-0064-3079 (Montana State Senate, Senate Democratic Caucus, Sen. Pat Flowers, Sen. Susan Webber, Sen. Andrea Olsen, Sen. Edie McClafferty, Sen. Jen Gross, Sen. Janet Ellis, Sen. Shane Morigeau, Sen. Ellie Boldman, Sen. Ryan Lynch, Sen. Christopher Pope, Sen. Mike Fox, Sen. Denise Hayman, Sen. Willis Curdy, and Sen. Mary Ann Dunwell); FTC-2023-0064-3103 (Florida House of Representatives, Rep. Angela Nixon); FTC-2023-0064-3123 (Syracuse, New York, City Auditor Alexander Marion); FTC-2023-0064-3117 (Maryland House of Delegates, Del. Julie Palakovich Carr); FTC-2023-0064-3149 (North Carolina House of Representatives, Rep. Julie von Haefen); FTC-2023-0064-3237 (North Carolina House of Representatives, Rep. Pricey Harrison).

See, e.g.,

Transparency In Charges for Key Events Ticketing Act (“TICKET Act”), H.R. 3950, sec. 2, 118th Cong. (as engrossed in the House, May 15, 2024) (among other provisions, requiring ticket sellers, including secondary markets and exchanges, to clearly and conspicuously disclose the total ticket price for an event in any advertisement and each time the ticket is displayed in the purchasing process, and to provide an itemized list of the base ticket price and each fee or charge prior to completion of the purchase; violations of the TICKET Act would be treated as violation of a rule defining an unfair or deceptive act or practice under section 18(a)(1)(B) of the FTC Act); No Hidden Fees on Extra Expenses for Stays Act of 2023 (“No Hidden FEES Act of 2023”), H.R. 6543, sec. 2(a), 118th Cong. (as engrossed in the House, June 11, 2024) (among other provisions, prohibiting providers of short-term lodging, including providers of a website or other centralized platform that advertises or otherwise offers the price of a reservation for short-term lodging, from advertising, displaying, marketing, or otherwise offering for sale, including through a direct offering, third-party distribution, or metasearch referral, a price of a reservation that does not include each mandatory fee; violations of sec. 2(a) would be treated as violation of a rule defining an unfair or deceptive act or practice under section 18(a)(1)(B) of the FTC Act).

The Commission also takes notice of the work of its international counterparts, as well as private lawsuits in the United States concerning unfair and deceptive fee practices. Regulatory actions in Canada, Australia, the European Union, and the United Kingdom with respect to such conduct include paragraph 74.01(1.1) of the Canadian Competition Act,

the Australian Competition and Consumer Protection Act of 2010,

EU Directive 2005/29/EC of the European Parliament and of the Council,

and the UK Digital Markets, Competition and Consumers Act 2024.

In addition, private lawsuits filed against businesses in the live-event ticketing, short-term lodging, banking, and delivery service industries challenging these practices lend further support to the Commission's prevalence determination.

Competition Act, R.S.C., 1985, c. C-34, ¶ 74.01(1.1) (Can.) (providing with respect to “drip pricing” 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”),

https://laws.justice.gc.ca/eng/acts/C-34/FullText.html

Competition and Consumer Act 2010, Vol. 4, Sched. 2, Ch. 3, P. 3-1, Sec. 48, Ch. 4, P. 4-1, Sec. 166 (Austl.) (prohibiting “mak[ing] a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods or services unless the person also specifies, in a prominent way and as a single figure, the single price for the goods or services”),

https://www.legislation.gov.au/C2004A00109/latest/text

Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market, art. 7, 2005 O.J. (L 149) (providing that it is a misleading commercial practice to engage in “bait advertising” or offering products at a specified price if not able to provide the products at that price for a period and in quantities reasonable with regard to the product, the scale of advertising of the product and the price offered),

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32005L0029; see also

Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, art. 5 and art. 6, 2011 O.J. (L 304),

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32011L0083&qid=1726109600968

. Additionally, a 1998 Directive required that the selling price should be indicated for all products referred to in the Article, which means a price that is the final price for a unit of the product including VAT and all other taxes.

See

Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers, 1998 O.J. (L 80),

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A31998L0006&qid=1726109951386

Digital Markets, Competition and Consumers Act 2024, c. 13, sec. 230 (providing that an invitation to purchase omits material information if it omits the total price of the product or, if the nature of the product prevents all or a part of the total price from reasonably being calculated in advance, how the price (or that part of it) will be calculated),

https://www.legislation.gov.uk/ukpga/2024/13/section/230

. Reports preceding this legislation included: UK Department for Business & Trade,

Estimating the Prevalence and Impact of Online Drip Pricing

(2023),

https://assets.publishing.service.gov.uk/media/64f1ebd7a78c5f000dc6f448/estimating-the-prevalence-and-impact-of-online-drip-pricing.pdf

; and UK Department for Business & Trade,

Government response to consultation on “Smarter Regulation: Consultation on Improving Price Transparency and Product Information for Consumers”

(2023),

https://www.gov.uk/government/consultations/smarter-regulation-improving-price-transparency-and-product-information-for-consumers/outcome/government-response-to-consultation-on-smarter-regulation-improving-consumer-price-transparency-and-product-information-for-consumers#introduction

See, e.g.,

Class Action Complaint ¶¶ 2-3,

Abdelsayed

Marriot Int'l, Inc.,

No. 3:21-cv-00402-JLS-AHG (S.D. Cal. Mar. 5, 2021) (alleging defendant misled consumers into believing that hotel rooms were cheaper that they actually were by engaging in drip pricing that baited consumers with lower prices and adding charges, such as resort fees, amenity fees, and destination fees, throughout the vending process); Complaint ¶¶ 1, 3-5,

Travelers United

MGM Resorts Int'l, Inc.,

No. 2021-CA-00477-B (D.C. Super. Ct. Feb. 18, 2021) (alleging defendant misled consumers into believing hotel rooms were cheaper that they actually were by using drip pricing that hid resort fees from advertised daily room rates); Class Action Complaint ¶¶ 18, 31, 43, 69-71,

Lee

Ticketmaster LLC,

No. 3:18-cv-05987-VC (N.D. Cal. Sept. 28, 2018) (alleging, in part, that defendants were unjustly enriched through service charges added to resale tickets); Second Amended Class Action Complaint ¶¶ 1-2,

Wang

StubHub, Inc.,

No. CGC-18564120 (Cal. Super. Ct. Feb. 25, 2019) (alleging defendant intentionally hid additional fees in order to advertise artificially low-ticket prices); Class Action Complaint ¶¶ 1-3, 33-34,

Holl

United Parcel Service, Inc.,

No. 4:16-cv-05856-HSG (N.D. Cal., Oct. 11, 2016) (alleging defendant created a bait and switch by falsely advertising low published rates that were later inflated); (Truth in Advertising, Inc., submitted information about its tracking of class action cases related to unfair and deceptive fees, including cases involving event ticket sellers charging and misrepresenting the purpose of “junk fees” and hotels advertising a low base rate for rooms and then charging consumers more than the advertised rate by imposing additional fees.);

see also

Second Amended Class Action Complaint ¶¶ 5-7,

Hecox

DoorDash, Inc.,

No. 1:23-cv-01006-JRR (D. Md. Sept. 5, 2023) (alleging in part that defendant employed deceptively named fees misleading consumers to believe the fees were for delivery personnel or for government imposed fees); Class Action Complaint ¶¶ 7-16,

Ramirez

Bank of Am., N.A.,

No. 4:22-cv-00859-YGR (N.D. Cal., Feb. 10, 2022) (alleging misrepresentations about the refundability of fees); Class Action Complaint ¶¶ 27, 36, 46-51,

Cross

Point and Pay LLC,

No. 6:16-cv-01182 (M.D. Fla., June 29, 2016) (alleging defendant made representations about its services and fees that contained false, misleading, and deceptive and unfair statements and omissions about fees for online payment processing services); Class Action Complaint ¶¶ 1-2, 9-12,

DeSimone

LOOK Brands, LLC,

No. 23-cv-11144 (S.D.N.Y. Dec. 22, 2023) (alleging defendant failed to disclose the total cost of movie ticket prices, inclusive of all fees, in violation of New York state law); Class Action Complaint ¶¶ 1-2, 9-15,

Jones

Regal Cinemas, Inc.,

No. 23-CV-11145 (S.D.N.Y. Dec. 22, 2023) (alleging defendant failed to disclose total cost of movie ticket prices, inclusive of all fees, in violation of New York state law);

see also

FTC-2022-0069-6042 (ANPR).

The Commission takes notice of additional indications of prevalence identified in response to the NPRM. Commenters to the NPRM noted that unfair or deceptive pricing practices exist economy-wide.

For instance, Consumer Reports conducted a nationally representative survey and found that many consumers experienced unexpected fees in a variety of industries and that more than two-thirds of Americans report paying more in hidden fees now than they did five years ago.

Similarly, Consumer Federation of American submitted an extensive compilation of stories from consumers about their experiences with junk fees that recounted hidden and misleading fees being applied across a wide range of industries.

Truth in Advertising, Inc. provided a sampling of consumer complaints it had received over the years and noted the pervasiveness of hidden and misleading fees in multiple industries, including event ticket sales, hotel and travel companies, short-term lodging, internet apps, automobile rentals, communication services, carpet cleaning, auto/truck sales, dietary supplement orders, food services, airlines, moving services, credit unions and banks, payday lending services, gym memberships, outlet stores, sports betting, and online auctions.

Public Citizen commented about “the widespread use of the deceptive practice of charging undisclosed fees by major industries . . . including communication carriers, air carriers, ticket sales, auto dealers, credit card companies, cable giants, and property owners,” as well as “event ticketing, hotels, funeral homes,” and other industries.

Additionally, AARP pointed to a myriad of confusing fees charged by assisted living facilities.

Commenters also noted that instances of unfair and deceptive fees or charges have increased over time.

See, e.g.,

FTC-2023-0064-3216 (Demand Progress Education Fund noted that consumers face surprise or “bogus” fees across industries, including rental housing, cell phone service, utilities, and ticketing, and cited a Consumer Reports study finding that 85% of Americans have dealt with fees of this nature.).

FTC-2023-0064-3205 (Consumer Reports noted the prevalence of unexpected fees in live entertainment or sporting events, hotels, telecommunication services, gas or electric utilities, air travel, credit cards, auto loans and purchases, and personal banking services.).

FTC-2023-0064-3160 (Consumer Federation of America submitted the compilation as Appendix B to its comment.).

FTC-2023-0064-3104 (Truth in Advertising, Inc.).

FTC-2023-0064-3302 (Public Citizen).

FTC-2023-0064-2885 (AARP argued these fees are not well understood by potential residents and that renters are charged “many superfluous fees, including application fees, credit check fees, pet fees, excessive late fees, utility-related fees, mail sorting fees, inspection fees, convenience fees, common area fees, guest fees, trash fees, notice fees, security deposit fees, check cashing fees, cleaning or repair fees, and other mandatory fees for services that a renter does not need or want.”).

See, e.g.,

FTC-2023-0064-3290 (U.S. Public Interest Research Group Education Fund commented that consumers have faced more unfair and deceptive fees as consumers “have become accustomed to online transactions.”); FTC-2023-0064-3090 (Atlanta Legal Aid Society, Inc. noted the ubiquity of unfair and deceptive fees and that these types of fees in the rental housing context have been steadily rising for years.).

Commenters also raised concerns about the prevalence of hidden fees in specific industries such as live-event ticketing and short-term lodging. The American Society of Travel Advisors, Travel Technology Association, and a travel agent observed that, despite increased scrutiny over hotel resort fees, there remains little uniformity in pricing practices, and bait-and-switch pricing remains an issue.

Multiple commenters raised continued concerns over hidden fee pricing practices in the live-event ticketing market. TickPick, LLC observed the “widespread” deceptive practice of bait-and-switch pricing rampant in this industry. Chamber of Progress noted that deceptive and unfair fees are “rampant in some industries and pose clear threats to consumers,” including “hotel stays, live sports or concert tickets, and airline tickets.” Future of Music Coalition commented that they have worked to “deal[ ] with the scourge of junk fees in various parts of the economy,” including live touring. The Charleston Symphony affirmed that “requiring sellers to disclose the total price clearly and conspicuously[ ] addresses a pressing issue in the nonprofit performing arts sector.”

FTC-2023-0064-3106 (American Society of Travel Advisors stated that resort fees are disclosed in a highly inconsistent manner, even between hotels doing business under the same brand name.); FTC-2023-0064-3293 (Travel Technology Association commented that hotels have been known to surprise guests at check-in with these fees and “guests have no reasonable recourse but to pay them.”); FTC-2023-0064-3077 (Far Horizons Travel, by its owner, a travel agent of almost 40 years, called hotel fees “out of control” and stated: “I am appalled by these fees and how much they have risen over the years. . . . They say it's for extra amenities but that is not always the case and more often not the case at all.”).

FTC-2023-0064-3212 (TickPick, LLC); FTC-2023-0064-3137 (Chamber of Progress); FTC-2023-0064-3230 (Future of Music Coalition); FTC-2023-0064-3105 (Charleston Symphony).

Despite the overwhelming evidence supporting the prevalence of bait-and-switch pricing and misleading fee practices economy-wide, a minority of commenters argued that the Commission has failed to meet its burden of establishing prevalence. Some commenters contended that the Commission's evidence focuses on a small number of problematic industries and does not demonstrate prevalence in every single industry across the economy.

100

Some commenters similarly contended that the proposed rule was an attempt to impose a “one-size-fits-all” solution on distinct industries, not all of which are engaging in unfair or deceptive practices, and thus the proposed rule is overbroad and not supported by the requisite evidence of prevalence.

101

100

FTC-2023-0064-3143 (ACA Connects—America's Communication Association argued that the NPRM contained no meaningful discussion of prevalence of unfair or deceptive pricing disclosures with respect to communication services.); FTC-2023-0064-3186 (National LGBT Chamber of Commerce and the National Asian/Pacific Islander American Chamber of Commerce & Entrepreneurship argued that “prepared food and grocery delivery applications . . . have demonstrated transparency and accessibility, providing clear explanations about fees.”); FTC-2023-0064-3292 (National Association of Theatre Owners argued that the NPRM failed to demonstrate prevalence with respect to the theatre industry, identifying only fifty comments received in response to the ANPR that reference movie theatre convenience fees.); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP argued that the Commission has failed to reliably demonstrate the prevalence of unfair or deceptive fees across any industry or sector.); FTC-2023-0064-3233 (NCTA—The Internet & Television Association argued that the only mention of telecommunication fees is anecdotal, and the Commission has failed to show prevalence with respect to any NCTA member.); FTC-2023-0064-3263 (Flex Association stated that “[t]he Commission has not pointed to evidence of any prevalent consumer harm that justifies imposing new pricing and disclosure rules on app-based delivery platforms.”); FTC-2023-0064-3130 (International Cemetery, Cremation & Funeral Association argued that over the last several reviews of the Funeral Rule the Commission has not found evidence of widespread consumer abuse among cemeteries or third-party suppliers.).

101

FTC-2023-0064-3258 (National Taxpayers Union Foundation); FTC-2023-0064-3173 (Center for Individual Freedom argued that the Commission was overly reliant on lodging, ticketing, and restaurants in justifying an economy-wide rule.); FTC-2023-0064-3251 (National RV Dealers Association argued the proposed rule “is an overextension from this drip pricing concern, and not only strays from the FTC's traditional areas of concern but also risks impeding the normal business operations and innovation across a multitude of sectors.”).

First, the Commission disagrees that it must find that the unfair or deceptive act or practice is widespread within every individual context or industry to issue a rule targeting a specific practice across industries. To begin with, the Commission's prevalence findings need only have “some basis or evidence” to show “the practice the FTC rule seeks to regulate does indeed occur.”

102

While many trade regulation rules promulgated under section 18 focus on a particular industry, as discussed in

section IV.A.1, others apply to specific practices across industries regardless of product or service, such as the Cooling-Off Period for Door-to-Door Sales Rule (the “Cooling-Off Rule”), the Rule on the Preservation of Consumers' Claims and Defenses (the “Holder Rule”), the Rule on Retail Food Store Advertising and Marketing Practices (the “Unavailability Rule”), the mail, Internet, or Telephone Order Merchandise Rule (the “Mail Order Rule”), the Rule on the Use of Prenotification Negative Option Plans (the “Negative Option Rule”), the Rule on Impersonation of Government and Businesses (the “Impersonator Rule”), and the Rule on the Use of Consumer Reviews and Testimonials.

103

While the Commission agrees that minimal evidence of a practice would be insufficient to meet the prevalence standard, section 18 did not require the Commission to find for its economy-wide rulemakings that every industry engaged in sales made at a consumer's home or at certain other locations (Cooling-Off Rule), used credit contracts (Holder Rule), offered products at an advertised price when they did not have the advertised products in stock (Unavailability Rule), or had a robust mail, internet or telephone order business (Mail Order Rule); or that every industry used negative options (Negative Option Rule), had an issue with impersonating government agencies or businesses (Impersonator Rule), or used and abused reviews (Rule on the Use of Consumer Reviews and Testimonials). Imposing such a standard would artificially limit the Commission's rulemaking authority under section 18 in a way that does not align with the Commission's mandate or the text of the statute, which focuses on acts or practices generally and never mentions the need to define markets or industries. As explained herein and in the NPRM, the information evidencing prevalence of bait-and-switch pricing and misleading fees more than meets section 18's standard for prevalence for the economy generally, and for the live-event ticketing and short-term lodging industries, specifically, by demonstrating that the practices are widespread and, further, that such practices are occurring across a wide range of industries.

102

Pa. Funeral Dirs. Ass'n.

FTC,

41 F.3d 81, 87 (3d Cir. 1994).

103

16 CFR part 429; 16 CFR part 433; 16 CFR part 424; 16 CFR part 435; 16 CFR part 425; 16 CFR part 461; 16 CFR part 465.

Second, the Commission notes that, even when commenters challenged the application of the rule to specific pricing scenarios or to their own industries, they also appeared to concede that advertising a base price to which mandatory fees are added later is a frequent practice even in their own industries. While some commenters raised genuine challenges or questions about the application of the rule, others attempted to conflate such genuine challenges with their desire to continue to use drip or partition pricing.

As discussed in section III.B.1, commenters from some ticket sellers did not contest that their advertised prices failed to include all mandatory fees and to provide the total price of goods or services. Instead, they attempted to explain why they engaged in those practices.

Finally, some commenters from industries other than live-event ticketing and short-term lodging argued that the Commission's NPRM failed to establish prevalence because of the following reasons: the cited cases focused on inapplicable fact patterns or resulted in settlement; the cited conferences called for additional research rather than regulatory strategy, or were narrow in scope as to the industries covered; and the resort fee warning letters failed to result in enforcement action.

104

Commenters such as the U.S. Chamber of Commerce argued that the enforcement record should rely only on cease-and-desist orders or “extensive empirical research.”

105

Other commenters also raised concerns about a lack of empirical research.

106

These commenters overlook section 18's clear instruction that the Commission's prevalence determination can be based on “any other information available to the Commission” that indicates a widespread pattern, which the Commission thoroughly laid out in the NPRM and expands upon herein.

104

FTC-2023-0064-3127 (U.S. Chamber of Commerce argued the NPRM failed to cite any cases holding that late in time fee disclosures are unfair or deceptive and the settlements described by the Commission only raised the failure of companies to disclose certain applicable fees prior to purchase or at all.).

105

Id.

106

FTC-2023-0064-3152 (Building Owners & Managers Association et al. commented that the proposed rule “lacks any reasonable factual underpinning as applied to the rental housing industry because it is not based on any statistical data relevant to the industry,” but is “based solely upon anecdotal, conclusory, and non-representative justification.”); FTC-2023-0064-3172 (New Jersey Apartment Association stated that the NPRM lacked “statistical basis” for claims that unfair and deceptive fees were an issue in the rental housing context and that the Commission relied on anecdotal evidence.).

In sum, the Commission's enforcement history, workshops, and reports, together with the record of this rulemaking and the enforcement cases brought by the Commission's local, State, and international enforcement counterparts fully support a finding that bait-and-switch pricing that hides the total price of goods or services and misrepresenting the nature, purpose, amount, and refundability of fees or charges are prevalent across the economy, including in the live-event ticketing and short-term lodging industries.

107

Despite the evidence that these specific practices are prevalent economy wide, the Commission will first focus its rulemaking authority on combatting these practices in the live-event ticketing and short-term lodging industries, the two industries in which the Commission first began evaluating drip pricing more than a decade ago and for which there is a long history of consumer harm.

107

See, e.g., supra

notes 66, 67, 72, 75, 80, 85, 90 (detailing the Commission's enforcement history, workshops, and reports, class action lawsuits, state and local enforcement and regulations, and other efforts to curb unfair or deceptive pricing practices in the live-event ticket and short-term lodging industries). The Commission also received thousands of comments from individual consumers detailing bait-and-switch pricing and deceptive fees in the live-event ticket and short-term lodging industries in response to the ANPR and the NPRM.

See, e.g.,

FTC-2023-0064-0820 (Individual Commenter stated “I was just considering buying some event tickets on Vivid Seats and was shocked to see that they add a full 33% in bogus fees.”); FTC-2023-0064-0058 (Individual Commenter stated: “The worst offenders are ticket sellers/resellers, who advertise baseline ticket prices in their search engines and then include some unknown amount of fees when it's time to pay.”); FTC-2023-0064-0102 (Individual Commenter stated: “I recently went to a MLB game and the fees were $21 for a $75 ticket or greater than 20%. I went to a concert and the tickets were $55 but the fees brought the price to over $100. On both cases, the fees were not disclosed until the payment screen.”); FTC-2023-0064-0145 (Individual Commenter described purchasing tickets to a musical: “Nearly 20% of the total cost was for fees that were not disclosed until I was at the payment step ($119 ticket + $4.55 order processing fee + $4.00 facility charge + $20.50 service fee). I don't understand what any of those fees are actually for.”); FTC-2023-0064-0040 (Individual Commenter described hotel resort fees as “egregious and opaque” and stated they learned of an additional $50 per night resort fee upon check-in: “I asked what the purpose of the fee was and was told by the staff person, `I'm not really sure.' ”); FTC-2023-0064-1462 (Individual Commenter stated: “Recently I found an “affordable” hotel in a city and booked a 4 night stay, but was not informed until after I checked in that parking cost extra each day . . . . which made the hotel no longer affordable for me”); FTC-2023-0064-0977 (Individual Commenter described spending hours trying to book a hotel to face “mandatory hotel fees for a pool, a gym and 24 hour security totalled $50/night”); FTC-2023-0064-0152 (Individual Commenter stated that fees through services including Airbnb and VRBO are “often vague and undefined” and described fees including a “host fee,” “booking fee,” “safety fee,” and “resort fee”).

B. Manner and Context in Which the Acts or Practices Are Deceptive or Unfair

The final rule curbs certain unfair or deceptive pricing practices by requiring

truthfulness and transparency in pricing for live-event ticketing and short-term lodging. Truthful, timely, and transparent pricing, including the nature, purpose, and amount of any fees or charges imposed, is critical for consumers—and also for honest businesses. The legal underpinning of the rule, or the manner and context in which the acts or practices defined by the rule are unfair or deceptive, is not complex. By identifying and targeting pricing tactics that hide the true price of live-event tickets and short-term lodging from consumers, the rule's central provisions prohibit conduct that is inherently deceptive or unfair, including: (1) offering prices that do not include all mandatory fees or charges and (2) misrepresenting the nature, purpose, amount, and refundability of fees or charges, and the identity of the good or service for which the fees or charges are imposed. Thus, the final rule will allow American consumers to make better-informed purchasing decisions when purchasing live-event tickets or deciding where to stay on a short-term basis and level the playing field for honest businesses in these industries that truthfully, timely, and transparently disclose their pricing information.

A representation, omission, or practice is deceptive under section 5 of the FTC Act 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 good or service.

108

Price is a material term.

109

It is a deceptive practice to misrepresent the price of a good or service,

110

including through a deceptive first contact.

111

Through its false savings cases, the Commission repeatedly found that it was deceptive under section 5 to present an inflated list price or comparison price, from which consumers were misled to believe that the business offered a lower-than-normal price.

112

The inverse—luring consumers to a good or service with a false low price—is also deceptive.

113

For example, in

In re Filderman Corp.,

64 F.T.C. 427 (1964), the Commission found that the defendant violated section 5 both when it displayed misleading list prices and when it later imposed mandatory service charges on top of the advertised price.

114

Once a consumer has been lured in by deception, including about the cost of the good or service, it is well established that a later disclosure cannot cure that deception.

115

Thus, bait-and-switch pricing, where the initial contact with a consumer shows a lower or partial price without including mandatory fees, violates the FTC Act even if the total price is later disclosed.

108

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, 174 (1984) (hereinafter

“Deception Policy Statement”), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-103/ftc_volume_decision_103_january_-_june_1984pages_103-203.pdf.

109

Deception Policy Statement,

103 F.T.C. at 182-83 (listing claims or omissions involving cost among those that are presumptively material);

see also

FTC-2023-0064-3247 (Private Law Clinic at Yale Law School).

118

Sullivan,

supra

note 67, at 4; FTC-2023-0064-3271 (U.S. Senate, Sen. Amy Klobuchar).

119

Sullivan,

supra

note 67, at 22-24; Vicki G. Morowitz et al.,

Divide and Prosper: Consumers' Reactions to Partitioned Prices,

35 J. Mktg. Rsch. 453 (1998) (subjects exposed to partitioned prices recalled significantly lower total product costs than subjects exposed to combined prices).

In addition, consumers who wish to compare prices incur additional search costs to make direct comparisons of goods or services when the full price is not disclosed upfront.

120

For example, in an online transaction to book a hotel room, consumers cannot simply view the first price displayed on each website, but instead need to navigate to subsequent pages or even enter all their payment information and reach the checkout page for each website to determine the true total price of their hotel stay.

121

The same is true on live-event ticketing websites. As TickPick, LLC noted, “[m]ajor ticketing marketplaces often require consumers to enter their credit card or other payment information prior to disclosing mandatory fees. On these marketplaces, the full purchase price is only disclosed after payment information is collected.”

122

Under such circumstances, consumers waste time and effort pursuing an offer that is not actually available at the promised price. Such search costs that result from unfair or deceptive practices are legally cognizable injuries under the FTC Act.

123

120

Sullivan,

supra

note 67, at 4; Fed. Trade Comm'n,

“That's the Ticket” Workshop: Staff Perspective

4 (May 2020),

https://www.ftc.gov/system/files/documents/reports/thats-ticket-workshop-staff-perspective/staffperspective_tickets_final-508.pdf;

see also

Han Hong et al.,

Using Price Distributions to Estimate Search Costs,

37 RAND J. Econ. 257 (2006) (describing methods of estimating search costs).

121

NPRM, 88 FR 77433 n.170.

122

FTC-2023-0064-3212 (TickPick, LLC) (“[On] StubHub's website, for example, a consumer can be required to click 12 times after being shown the first price before being shown the total price they will pay.”)

123

See, e.g.,

Decision & Order at 3-4,

In re LCA-Vision,

No. C-4789 (FTC Mar. 13, 2023) (settling allegations that deceptive advertising caused consumers to “waste[ ] 90 minutes to two hours of their time” responding to a deceptive promotion, Complaint ¶ 35, and prohibiting misrepresentations of price and requiring disclosure of price or discount qualification requirements),

https://www.ftc.gov/system/files/ftc_gov/pdf/1923157-lca-vision-consent-package.pdf;

Decision & Order at 2-3,

In re Credit Karma, LLC,

No. C-4781 (FTC, Jan. 19, 2023) (settling allegations that deceptive advertising caused consumers to waste significant time in applying for “pre-approved” offers that were denied, Complaint ¶ 13, and requiring Credit Karma to pay $3 million in monetary relief),

https://www.ftc.gov/system/files/ftc_gov/pdf/2023138-credit-karma-combined-final-consent-without-signatures.pdf;

FTC

Amazon.com, Inc.,

No. C14-1038-JCC, 2016 U.S. Dist. LEXIS 55569, at *17 (W.D. Wash., Apr. 26, 2016) (finding consumer injury included “time spent pursuing those refunds”);

FTC

Neovi, Inc.,

598 F. Supp. 2d 1104, 1115 (S.D. Cal. 2008) (finding “no genuine issue of material fact that consumers suffered substantial injury” based on “considerable amount of time” spent by consumers);

FTC

Accusearch, Inc.,

No. 06-cv-105-D, 2007 U.S. Dist. LEXIS 74905, at *22-23 (D. Wyo., Sept. 28, 2007) (granting summary judgment in favor of FTC based in part on finding of consumer injury for “lost time and productivity”).

Misrepresented fees also cause or are likely to cause substantial injury—they harm consumers as well as businesses that do not engage in these practices. For example, as discussed in section III.C, a hotel might charge a resort fee when only typical and ordinary accommodations and amenities are offered, an environmental fee that serves no environmental purpose, or a fee misrepresented as a government charge. As TickPick, LLC put it, misrepresented fees trick consumers into paying more and ultimately inhibit competition by providing an unfair advantage to businesses that misrepresent their fees.

124

Likewise, when businesses misrepresent fees, consumers are unable to make informed choices about the value of the fee or charge, or the good or service it represents, because their understanding of the fee or charge is predicated on false, vague, or otherwise misleading information. As such, consumers are unable to understand what they have purchased, or to which charges they have consented.

125

124

FTC-2023-0064-3212 (TickPick, LLC).

125

Id.

Consumers cannot reasonably avoid these harms. As explained in the NPRM, studies suggest that cognitive bias may prevent consumers from reasonably avoiding injury caused by unfair and deceptive pricing practices.

126

Several behavioral studies explain why consumers cannot reasonably avoid making errors when the true price is not displayed upfront. Behavioral research shows that consumers who first learn of a lower price do not properly adjust their calculations when additional fees are added, thereby underestimating the total price.

127

It also shows that consumers attach value to things they perceive to be theirs and, once consumers begin the purchase process, their perception shifts so that stopping the transaction feels like a loss.

128

The research shows that consumers who already have invested in an endeavor, such as by taking time to make selections on a travel or live-event ticket website, continue that endeavor even if they would pay less if they began again elsewhere.

129

Lastly, consumers necessarily incur search costs when mandatory fees are obscured because it takes them longer to discover the full price within a single transaction and to comparison shop across transactions.

130

Notably, it is unlikely that the market can correct for these injuries because once the practice of displaying incomplete initial prices takes hold, honest businesses will struggle to compete. For example, as noted in the NPRM, one market participant in the live-event ticketing industry, StubHub, unilaterally adopted all-in pricing in 2014 but soon reverted back to its original model after it lost significant market share when customers

incorrectly perceived StubHub's prices to be higher.

131

126

NPRM, 88 FR 77434 (discussing various cognitive biases that contribute to the unavoidability of consumer injury, including the anchoring theory, the endowment theory, and the sunken cost fallacy).

127

Inst. for Policy Integrity,

Pet. for Rulemaking Concerning Drip Pricing

18 (2021),

https://policyintegrity.org/documents/Petition_for_Rulemaking_Concerning_Drip_Pricing.pdf

128

Steffen Huck et al.,

The Impact of Price Frames on Consumer Decision Making: Experimental Evidence

(2015).

129

David A. Friedman,

Regulating Drip Pricing,

31 Stan. L. & Pol'y Rev. 51, 55 n.13 (2020).

130

See

NPRM, 88 FR 77447 (discussing reductions in search costs from the proposed rule).

131

See

NPRM, 88 FR 77434 (quoting Fed. Trade Comm'n, “

That's the Ticket” Workshop: Staff Perspective

4 (May 2020),

https://www.ftc.gov/system/files/documents/reports/thats-ticket-workshop-staff-perspective/staffperspective_tickets_final-508.pdf

.).

See also, e.g., https://www.contactlensking.com/faq.aspx

(describing a contact lens company's decrease in traffic and total orders when it displayed a total price while competitors implemented “processing” fees).

The consumer injury caused by these bait-and-switch pricing practices is not outweighed by any benefits to consumers or competition. Consumers receive no benefit from businesses that use drip pricing, partitioned pricing, or misleading price presentation while they obscure the total price. To the extent that consumers could benefit from itemized information about price components, such itemization can be done in conjunction with clear total price information. Consumers receive no benefit from businesses partitioning or breaking up mandatory price components while they obscuring the total price.

Likewise, as discussed in section V.E, there is no benefit to competition, as honest businesses that disclose all-inclusive total prices lose market share to businesses that do not. Bait-and-switch pricing and misleading fees undermine the ability of honest businesses to compete on price and therefore diminish the competitive pressure in a market that pushes prices downward. As a result, these practices lead to higher prices than would be supported in a competitive marketplace. The Antitrust Division of the U.S. Department of Justice noted that “companies that impose mandatory hidden fees” have “an unfair advantage over honest brokers” and interfere with consumers' ability to “choose between competitors based on the important considerations of price and what, exactly, the consumer is purchasing.”

132

Some commenters, including those from the live-event ticketing and short-term lodging industries, noted that bait-and-switch pricing not only confuses consumers, but harms honest businesses that offer truthful, timely, and transparent pricing because their prices initially may seem higher than competitors that use bait-and-switch pricing and misleading fees. For example, TickPick, LLC commended the Commission for proposing to curb the widespread practice of bait-and-switch pricing and observed that “the proposed rule would significantly benefit consumers and competition in the live-event ticketing industry.”

133

The American Society of Travel Advisors argued that, in addition to consumer harm, “the imposition of undisclosed fees also unfairly places honest retailers—those that do disclose the full, all-in price upfront—at a competitive disadvantage relative to those that do not.”

134

132

FTC-2023-0064-3187 (U.S. Department of Justice, Antitrust Division, observed that “[w]hen consumers lack choice and information, and are saddled with mandatory hidden fees, the benefits of the competitive process break down.”);

see also

FTC-2023-0064-3106 (American Society of Travel Advisors); FTC-2023-0064-3184 (New York State Sen. Michael Gianaris); FTC-2023-0064-1294 (James J. Angel, Ph.D., CFP, CFA, Professor, Georgetown University, McDonough School of Business).

133

FTC-2023-0064-3212 (TickPick, LLC).

134

FTC-2023-0064-3106 (American Society of Travel Advisors).

A minority of commenters stated that hidden and misleading fees do not harm consumers. For instance, the Competitive Enterprise Institute argued that consumers' search costs do not increase when advertisements lack a single total price, as the consumer is better informed after watching the advertisement despite the omission.

135

FTC-2023-0064-3028 (Competitive Enterprise Institute argued that consumers already bear a search cost merely by looking for a product, and that any advertisement that includes some, but not all, pricing information, benefits the searching consumer if the information is accurate and non-deceptive.).

While the commenter conceded that consumers may benefit more if a total price is disclosed, the commenter argued that any harm could be easily avoidable by consumers calculating the total themselves.

136

Some commenters also argued that these types of fees often benefit consumers and are openly disclosed.

137

Indeed, the American Gaming Association stated that resort fees enhance a consumer's stay, distinguish resorts from more standard lodging offerings, are openly disclosed to consumers, and often appear several times throughout the search and purchasing process. As the Commission already noted, drip and partitioned pricing and other bait-and-switch pricing harm consumers for numerous reasons, including because consumers underestimate the total price of a good or service, overconsume, overpay, and waste time. The U.S. Chamber of Commerce argued that there are pro-consumer and pro-competitive justifications for this type of pricing, including allowing for dynamic pricing strategies and preventing consumers from paying for services that they do not use.

138

The rule, however, does not prohibit the use of dynamic pricing strategies, itemization, or offering optional goods or services for consumers to select; it simply prohibits offering a price that is not inclusive of all mandatory fees and charges, as well as prohibiting misrepresented fees and charges.

136

Id.

137

FTC-2023-0064-2886.

138

FTC-2023-0064-3127 (U.S. Chamber of Commerce noted that, among these pricing practices, dynamic pricing strategies provide these benefits to consumers and this was ignored in the conclusions of the NPRM.).

As stated herein, the Commission and courts have previously recognized that price is a material term

139

and that it is a violation of section 5 of the FTC Act to misrepresent the price of a good or service.

140

Commenters emphasized the materiality of price to consumers.

141

The commenters who argue that bait-and-switch pricing does not harm consumers ignore the large body of literature demonstrating that drip pricing and partitioned pricing have a negative impact on consumers and competition. The economic analysis in Section V provides additional discussion regarding the economic harms from bait-and-switch pricing tactics, including drip pricing and partitioned pricing in the live-event and short-term lodging industries.

139

Deception Policy Statement,

103 F.T.C. at 182-183, 183 n.55 (listing claims or omissions involving cost among those that are presumptively material);

see also

NPRM, 88 FR 77438 (discussing impact of

AMG Cap. Mgmt.

). When the Commission has reason to believe that the rule has been violated, the Commission can commence a Federal court action to ask a Federal judge to determine liability and, if proven, require violators to provide redress.

See

15 U.S.C. 57b(a)(1), (b). Without the rule, the path to court-ordered redress is longer. The Commission must first conduct an administrative proceeding to determine whether the respondent engaged in unfair or deceptive acts or practices in violation of section 5(a) of the FTC Act. If the Commission finds that the respondent did so, the Commission issues a cease-and-desist order, which might not become final until after the resolution of any resulting appeal to a Federal court of appeals. Then, to obtain redress, the Commission must initiate a second action in Federal district court, in which it must prove that the violator engaged in objectively fraudulent or dishonest conduct in order to obtain court-ordered redress.

See

15 U.S.C. 57b(a)(2), (b).

As an additional benefit, the rule will enable the Commission to seek civil penalties against violators. The FTC Act generally does not allow the Commission to obtain civil penalties against those who engage in unfair or deceptive acts or practice in violation of section 5(a) of the FTC Act. Section 5(m)(1)(A) of the FTC Act does, however, authorize the Commission to seek civil penalties in court for violations of trade regulation rules, such as the final rule here.

147

The ability to obtain civil penalties provides two benefits. First, court-ordered civil penalties give the Commission the ability to ensure that violators do not retain the profits they earn by engaging in the unfair or deceptive pricing practices prohibited by the rule. Second, the potential for civil penalties will deter violations and provide a strong incentive for businesses providing live-event tickets and short-term lodging to provide truthful and transparent pricing information in compliance with the rule, which will have consumer welfare benefits and will benefit honest competition.

148

147

See

section 5(m)(1)(A) of the FTC Act, 15 U.S.C. 45(m)(1)(A) (providing that those who violate a trade regulation rule “with actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is unfair or deceptive and is prohibited by such rule” are liable for civil penalties for each violation). In addition, any entity or person who violates such a rule (irrespective of the state of knowledge) is liable for any injury caused to consumers by the rule violation. The Commission may pursue such recovery in a suit under section 19(a)(1) of the FTC Act, 15 U.S.C. 57b(a)(1).

148

NPRM, 88 FR 77447-48.

When promulgating a final rule, the Commission must prepare a final regulatory analysis, which is contained in section V. The final regulatory analysis contains an estimated cost-benefit analysis of the final rule, as well as a more in-depth discussion of the comments the Commission received in response to the NPRM. In addition, the Commission's final regulatory flexibility analysis, which is contained in section VII, discusses the final rule's economic impact on small entities.

III. Section-by-Section Analysis

The Commission has carefully considered the rulemaking's extensive comment record. It has weighed considerations raised by individual consumers, businesses (including small businesses), industry advocates, consumer advocates, labor representatives, academics, and other law enforcement bodies. After considering these comments, the Commission finalizes this rule to address a subset of the specific unfair and deceptive practices identified in the NPRM. The rule will help ensure that consumers shopping for live-event tickets and short-term lodging see advertised prices that include all mandatory fees, can obtain such goods or services at those prices, and know what they are paying for. The rule promotes honest and transparent pricing for consumers and a level playing field for businesses.

Numerous public comments in support of and in opposition to the rule included discussions of the definitions and substantive provisions of the proposed rule, and made various recommendations. The Commission considered comments pointing out confusion about specific phrases in the proposed rule, particularly phrases that commenters found vague or overbroad. The Commission also took notice of comments that suggested some entities or transactions would be subject to overlapping Federal regulations regarding pricing disclosures that could result in confusion to consumers or businesses. In addition, the Commission appreciated comments from industry that identified potential gaps in how the proposed rule would interact with certain types of pricing practices.

The Commission makes a number of changes to the final rule. Notably, the Commission narrows the application of the final rule to offers, displays, or advertisements of a covered good or service—

i.e.,

live-event tickets or short-term lodging. The Commission recognizes that many comments to the proposed rule focused on the application of the rule to specific industries or pricing scenarios. As a result of the Commission's decision to limit this final rule to live-event ticketing and short-term lodging, the

Commission need not respond to each of these comments at this time.

In addition, wherever possible, the Commission works to reduce burden on, and maintain pricing flexibility for, businesses. Finally, the Commission provides guidance and explanation to respond to specific questions and hypotheticals posed by commenters to help give additional clarity to businesses. The following discussion provides a section-by-section analysis of the NPRM's proposed provisions and the provisions adopted in the final rule, as well as a discussion of the comments received and the Commission's responses.

A. § 464.1 Definitions

Proposed § 464.1 contained definitions for the following terms: “ancillary good or service”; “business”; “clear(ly) and conspicuous(ly)”; “government charges”; “pricing information”; “shipping charges”; and “total price.” The Commission received various comments with respect to these definitions, including particular industries' requests for exemption from the definition of “business” and other suggestions. Section 464.1 of the final rule adopts these definitions, in some instances with minor modifications for clarification, and adds a definition for “covered good or service.” In the definition-by-definition analysis, the Commission discusses each definition proposed in the NPRM, any changes to the definition's text, the added definition, and other comments relevant to the definitions section that are not otherwise addressed in the discussion of the final rule's substantive provisions.

1. Ancillary Good or Service

Proposed § 464.1(a) in the NPRM defined “ancillary good or service” as “any additional good(s) or service(s) offered to a consumer as part of the same transaction.” This definition was relevant to the definition of “total price,” in proposed § 464.1(g), which specified that any mandatory fees or charges for such goods or services would be included in total price. Commenters proposed modifications to the definition of “ancillary good or service” but, following review of those comments and as discussed in this section, the Commission declines to adopt the suggested modifications. Final § 464.1 adopts the definition of “ancillary good or service” without modification.

Several commenters recommended that the Commission modify the definition of “ancillary good or service” to state that fees charged by a third party must be included in total price if those fees are part of the same transaction.

149

As stated in the NPRM, if a business advertises a price for a good or service that requires an ancillary good or service provided by another entity, the charge for the mandatory ancillary good or service must be included in total price. Additionally, the NPRM made clear that the definition includes goods and services (whether from the seller or third parties) offered as part of the same transaction, because it included examples of mandatory ancillary goods or services that may be offered by third-party providers but are part of the same transaction, such as a payment processing fee for an online transaction. Accordingly, the Commission does not believe that it is necessary to modify the definition of “ancillary good or service” to clarify that fees charged by a third party must be included in total price if those fees are part of the same transaction.

149

FTC-2023-0064-3191 (Community Catalyst et al.); FTC-2023-0064-3283 (National Consumer Law Center, Prison Policy Initiative, and advocate Stephen Raher).

Several commenters also suggested that the Commission add language referring to a reasonable consumer in the definition of “ancillary good or service,” to clarify that only goods or services that a “reasonable consumer” would expect to be included must be included in total price.

150

The Commission does not believe that adding “reasonable consumer” to the definition of “ancillary good or service” is necessary, as the reasonable consumer standard is implicit in the rule text. Under longstanding precedent, the Commission examines conduct from the perspective of a consumer acting reasonably under the circumstances.

151

If a representation or practice affects or is directed primarily to a particular group, the Commission examines reasonableness from the perspective of an ordinary member of that group.

152

Accordingly, the Commission does not believe it is necessary to modify the definition of “ancillary good or service” to refer to a reasonable consumer.

150

FTC-2023-0064-3268 (Housing & Eviction Defense Clinic, University of Connecticut School of Law, commented “the definition of an `Ancillary Good or Service' should be amended to include all fees that are not reasonably avoidable and all fees or charges for goods or services that a reasonable consumer would expect to be included with the purchase.”); FTC-2023-0064-3275 (Berkeley Center for Consumer Law & Economic Justice et al. recommended the definition of “Ancillary Good or Service” be revised “to mean `any optional, additional good(s) or service(s), offered to a consumer as part of the same transaction, that a reasonable consumer would not expect to be included with the purchase of the advertised good or service.”); FTC-2023-0064-3160 (Consumer Federation of America et al. proposed the definition of “Ancillary Good or Service” be modified to “any optional, additional good(s) or service(s), offered to a consumer as part of the same transaction, that a reasonable consumer would not expect to be included with the purchase of the advertised good or service.”).

151

Deception Policy Statement,

103 F.T.C. at 175, 177-82;