Proposed Rule2022-24326
Unfair or Deceptive Fees Trade Regulation Rule Commission Matter No. R207011
Primary source
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Published
November 8, 2022
Issuing agencies
Federal Trade Commission
Abstract
The Federal Trade Commission ("Commission") proposes to commence a rulemaking proceeding to address certain deceptive or unfair acts or practices relating to fees. The Commission is soliciting written comment, data, and argument concerning the need for such a rulemaking to prevent persons, entities, and organizations from imposing such fees on consumers.
Full Text
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[Federal Register Volume 87, Number 215 (Tuesday, November 8, 2022)]
[Proposed Rules]
[Pages 67413-67424]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-24326]
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FEDERAL TRADE COMMISSION
16 CFR Part 464
Unfair or Deceptive Fees Trade Regulation Rule Commission Matter
No. R207011
AGENCY: Federal Trade Commission
ACTION: Advance notice of proposed rulemaking; request for public
comment.
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SUMMARY: The Federal Trade Commission (``Commission'') proposes to
commence a rulemaking proceeding to address certain deceptive or unfair
acts or practices relating to fees. The Commission is soliciting
written comment, data, and argument concerning the need for such a
rulemaking to prevent persons, entities, and organizations from
imposing such fees on consumers.
DATES: Comments must be received on or before January 9, 2023.
ADDRESSES: Interested parties may file a comment online or on paper by
following the instructions in the Comment Submissions part of the
SUPPLEMENTARY INFORMATION section below. Write ``Unfair or Deceptive
Fees ANPR, R207011'' on your comment and file your comment online at
<a href="https://www.regulations.gov">https://www.regulations.gov</a>. If you prefer to file your comment on
paper, mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite
CC-5610 (Annex B), Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Austin King, Associate General Counsel
for Rulemaking, phone: 202-326-3166.
SUPPLEMENTARY INFORMATION:
I. General Background Information
The Federal Trade Commission publishes this advance notice of
proposed rulemaking (``ANPR'') pursuant to Section 18 of the Federal
Trade Commission Act (``FTC Act''), 15 U.S.C. 57a, the provisions of
part 1, subpart B, of the Commission's Rules of Practice, 16 CFR 1.7-
1.20, and 5 U.S.C. 553. This authority permits the Commission to
promulgate, modify, and 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).
II. Objectives the Commission Seeks To Achieve and Possible Regulatory
Alternatives
A. Background
American consumers, workers, and small businesses today are swamped
with junk fees that frustrate consumers, erode trust, impair comparison
shopping, and facilitate inflation. For this ANPR, the term ``junk
fees'' refers to unfair or deceptive fees that are charged for goods or
services that have little or no added value to the consumer, including
goods or services that consumers would reasonably assume to be included
within the overall advertised price; the term also encompasses ``hidden
fees,'' which are fees for goods or services that are deceptive or
unfair, including because they are disclosed only at a later stage in
the consumer's purchasing process or not at all, whether or not the
fees are described as corresponding to goods or services that have
independent value to the consumer. These terms may overlap--a junk fee
can be a hidden fee, but not all junk fees are hidden fees.
Frequently, these unfair or deceptive fees are bundled as
``ancillary products'' in conjunction with loans, auto financing, or
some other complicated or
[[Page 67414]]
expensive transaction, ending up on the final bill without the
consumer's awareness or express and informed consent. Junk fees are
especially likely to cause consumer harm when they arise ``without real
notice, unconnected to any additional service, in an industry where
advertising is essential.'' \1\ Junk fees manifest in markets ranging
from auto financing to international calling cards and payday loans. A
2019 poll conducted by Consumer Reports found eighty-two percent of
those surveyed had spent money on hidden fees in the previous year.\2\
The respondents cited telecommunications and live entertainment as
sources of hidden fees more than any other industries.\3\
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\1\ Nat'l Econ. Council, The Competition Initiative and Hidden
Fees 7-15 (2016) (``Competition Initiative''), <a href="https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf">https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf</a>.
\2\ See Consumer Reports, WTFee Survey: 2018 Nationally
Representative Multi-Mode Survey, at 7 (Jan. 3, 2019), <a href="https://advocacy.consumerreports.org/wp-content/uploads/2019/09/2018-WTFee-Survey-Report-_-Public-Report-1.pdf">https://advocacy.consumerreports.org/wp-content/uploads/2019/09/2018-WTFee-Survey-Report-_-Public-Report-1.pdf</a>.
\3\ See id. at 4.
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Junk fees not only are widespread but also are growing. In various
industries, fees are increasing at higher rates than the base prices of
the goods or services to which they are added. For example, in higher
education and hospitality,\4\ fees are increasing faster than tuition
or posted room rates. After first emerging in the late 1990s, hotel
``resort fees'' accounted for $2 billion, or one-sixth of total hotel
revenue, by 2015.\5\ With rising prices, fees are becoming more
prevalent, allowing some businesses to raise effective prices without
appearing to do so.\6\
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\4\ See Christopher Elliott, There may be an end in sight for
controversial--and often invisible--resort fees, Wash. Post (June
16, 2016), https://www.washingtonpost.com/lifestyle/travel/there-
may-be-an-end-in-sight-for-controversial_and-often-invisible_
resort-fees/2016/06/16/101f6074-317e-11e6-8758-
d58e76e11b12_story.html; Farran Powell & Emma Kerr, 11 Surprising
College Fees You May Have to Pay, U.S. News & World Report (Feb. 12,
2020), <a href="https://www.usnews.com/education/best-colleges/paying-for-college/slideshows/10-surprising-college-fees-you-may-have-to-pay">https://www.usnews.com/education/best-colleges/paying-for-college/slideshows/10-surprising-college-fees-you-may-have-to-pay</a>.
\5\ Competition Initiative at 7.
\6\ See, e.g., J.J. McOrvey, Restaurants add new fees to your
check to counter inflation, Wall St. J. (June 2, 2022), <a href="https://www.wsj.com/articles/waiter-theres-a-fee-in-my-soup-11654139870">https://www.wsj.com/articles/waiter-theres-a-fee-in-my-soup-11654139870</a>.
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Junk fees impose substantial economic harms on consumers and impede
the dissemination of important market information. A Commission
analysis of hotel ``resort fees'' that were mandatory and undisclosed
in the posted room rates concluded such fees ``artificially increas[e]
the search costs and the cognitive costs'' for consumers carrying out
the transaction.\7\ Junk fees force consumers either to accept a higher
actual price for a service or product after beginning the transaction
or to spend more time searching for lower actual prices elsewhere.
Consumers faced with such fees pay upward of twenty percent more than
when the actual price was disclosed upfront.\8\ These fee practices can
be found throughout the economy but appear to be particularly
widespread in markets for travel such as hotels, room-sharing, car
rentals, and cruises.
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\7\ Mary W. Sullivan, Fed. Trade Comm'n, Economic Analysis of
Hotel Resort Fees 37 (2017), <a href="https://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf">https://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf</a>.
\8\ See Tom Blake et al., Price Salience and Product Choice 16,
40 Marketing Science 619 (2021) (finding that consumers paid 19.5%
more when the actual price was not disclosed upfront); Morgan Foy,
University of California-Berkley, Haas School of Business, Buyer
Beware: Massive Experiment Shows Why Ticket Sellers Hit You With
Last-Second Fees (Feb. 9, 2021), <a href="https://newsroom.haas.berkeley.edu/research/buyer-beware-massive-experiment-shows-why-ticket-sellers-hit-you-with-hidden-fees-drip-pricing/">https://newsroom.haas.berkeley.edu/research/buyer-beware-massive-experiment-shows-why-ticket-sellers-hit-you-with-hidden-fees-drip-pricing/</a> (concluding that consumer
expenditure on tickets increased 21% when true price not disclosed
initially); Danielle Douglas-Gabriel, Tuition at public colleges has
soared in the past decade, but student fees have risen faster, Wash.
Post (June 22, 2016), <a href="https://www.washingtonpost.com/news/grade-point/wp/2016/06/22/tuition-at-public-colleges-has-soared-in-the-last-decade-but-student-fees-have-risen-faster/">https://www.washingtonpost.com/news/grade-point/wp/2016/06/22/tuition-at-public-colleges-has-soared-in-the-last-decade-but-student-fees-have-risen-faster/</a> (noting that
mandatory fees imposed by colleges for campus facilities, library
services, and information technology increased the median four-year
tuition at public university by twenty percent).
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Tickets for live events appear to be another market with widespread
junk fees. A Commission workshop focused on the event-tickets market
found such fees result in significant market misallocations. Because in
a price-obscuring transaction consumers initiate purchasing decisions
without knowing the actual cost, ``[t]ickets will not necessarily go to
the consumers who value them the most.'' \9\ The workshop also
highlighted the inability of market participants to correct this course
without intervention: After a market leader took unilateral action to
phase out hidden fees, the platform ``lost significant market share and
abandoned the policy after a year because consumers perceived the
platform's advertised prices to be higher than its competitors'
displayed prices.'' \10\ The president of another significant market
actor testified before a Congressional subcommittee that, ``for any
single [company] to avoid being disproportionately harmed by using all-
in pricing, all members of the live event ticket industry must be
legally required to list all prices and fees up-front.'' \11\ At the
Commission workshop, ``each participating ticket seller that [did] not
[ ] provide upfront all-in pricing [ ] favored requiring all-in pricing
through federal legislation or rulemaking.'' \12\ A market
characterized by both consumers and merchants calling for clearer
pricing suggests further Commission action may be justified.
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\9\ Fed. Trade Comm'n, ``That's the Ticket'' Workshop: Staff
Perspective, 4 (May 2020).
\10\ Id.
\11\ ``In the Dark: Lack of Transparency in the Live Event
Ticketing Industry'': Hearing Before the Oversight and
Investigations Subcomm. of the H. Comm. on Energy and Commerce,
116th Cong., 6 (Feb. 26, 2020) (Questions for the Record Responses,
Amy Howe, President and Chief Operating Officer, Ticketmaster, North
America).
\12\ Fed. Trade Comm'n, Staff Perspective at 4 (emphases added).
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Many measures to tackle junk fees have already been considered or
implemented by Congress, federal agencies, states, and peer countries.
The Full Fare Advertising Rule issued by the U.S. Department of
Transportation states any ``advertising or solicitation'' that ``states
a price'' constitutes an ``unfair or deceptive practice . . . unless
the price stated is the entire price to be paid.'' \13\ The
Telemarketing Sales Rule defines as a deceptive act or practice the
misrepresentation of, and failure to, ``disclose truthfully, in a clear
and conspicuous manner,'' the ``total costs to purchase, receive, or
use, . . . any goods or services that are the subject of [a] sales
offer.'' \14\ The Commission's Funeral Rule provides it is an unfair or
deceptive act or practice ``to fail to furnish accurate price
information . . . for each of the specific funeral goods and funeral
services.'' \15\ The Restore Online Shoppers' Confidence Act requires
post-transaction third-party sellers online to clearly and
conspicuously disclose the cost of a good or service and obtain
``express informed consent for the charge'' from the consumer.\16\
Congress enacted the Ocean Shipping Reform Act of 2022, which grants
the Federal Maritime Commission greater authority to investigate, make
determinations of reasonableness about, and order refunds for, fees
charged by common ocean carriers.\17\ The Commission's Negative Option
Rule, which regulates ``a common form of marketing where the
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absence of affirmative consumer action constitutes assent to be charged
for goods or services,'' also reflects the importance of disclosure and
consent in transactions.\18\
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\13\ 14 CFR 399.84(a).
\14\ 16 CFR 310.3(a)(1)-(2). See also 16 CFR 310.4(a)(7) (``In
any telemarketing transaction, the seller or telemarketer must
obtain the express informed consent of the customer or donor to be
charged for the goods or services or charitable contribution and to
be charged using the identified account.'').
\15\ 16 CFR 453.2(a).
\16\ 15 U.S.C. 8402(a)(1)-(2).
\17\ See Ocean Shipping Reform Act of 2022, Public Law 117-146.
\18\ Rule Concerning the Use of Prenotification Negative Option
Plans, 84 FR 52393 (Oct. 2, 2019). See also 16 CFR 425; Compl. at
20-21, FTC v. Age of Learning, Inc., No. 2:20-cv-07996 (C.D. Cal.
filed Sept. 1, 2020) (billing consumers without their authorization
and making cancellation difficult, resulting in unwanted additional
charges); Am. Compl. at 17-20, FTC v. Triangle Media Corp., No.
3:18-cv-01388 (S.D. Cal. filed Dec. 11, 2018) (advertising online
``free'' trials of skincare and supplements before enrolling
consumers in expensive subscriptions without consent).
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The Consumer Financial Protection Bureau (``CFPB'') requested
public comment on fees levied on consumer financial products or
services.\19\ The CFPB expressed concern such fees carry the risk that
``companies are not just shifting costs to consumers'' but also
``taking advantage of a captive relationship with the consumer to drive
excess profits.'' \20\ Connecticut has passed a law requiring that
``any advertisement for an in-state event [ ] conspicuously disclose
the total price for each ticket and what portion . . . represents a
service charge.'' \21\ New York State recently adopted a similar
law.\22\ The European Union implemented a directive in 1998 requiring
the ``selling price,'' defined as the ``final price of a unit of the
product,'' must be ``unambiguous, easily identifiable, and clearly
legible.'' \23\
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\19\ Consumer Fin. Prot. Bureau, Request for Info. Regarding
Fees Imposed by Providers of Consumer Fin. Prods. or Servs., 71 FR
5801, 5801 (Feb. 2, 2022), <a href="https://www.federalregister.gov/documents/2022/02/02/2022-02071/request-for-information-regarding-fees-imposed-by-providers-of-consumer-financial-products-or">https://www.federalregister.gov/documents/2022/02/02/2022-02071/request-for-information-regarding-fees-imposed-by-providers-of-consumer-financial-products-or</a>.
\20\ Id. at 5802.
\21\ Conn. Gen. Stat. 53-289a.
\22\ See Press Release, Gov. Kathy Hochul, Governor Hochul Signs
Legislation Targeting Unfair Ticketing Practices in Live Event
Industry (June 30, 2022), <a href="https://www.governor.ny.gov/news/governor-hochul-signs-legislation-targeting-unfair-ticketing-practices-live-event-industry">https://www.governor.ny.gov/news/governor-hochul-signs-legislation-targeting-unfair-ticketing-practices-live-event-industry</a>; see also Anne Steele, New York to Ban Hidden Fees in
Live-Event Ticketing, Wall St. J. (June 7, 2022), <a href="https://www.wsj.com/articles/new-york-to-ban-hidden-fees-in-live-event-ticketing-11654606800">https://www.wsj.com/articles/new-york-to-ban-hidden-fees-in-live-event-ticketing-11654606800</a>.
\23\ Council Directive 98/6, art. 2 and 4, 1998 O.J. (L 80) 27
(EC), <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.L_.1998.080.01.0027.01.ENG&toc=OJ%3AL%3A1998%3A080%3ATOC">https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.L_.1998.080.01.0027.01.ENG&toc=OJ%3AL%3A1998%3A080%3ATOC</a>.
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Based on the Commission's substantial work in this area, the
Commission's initial view is junk fees appear to be prevalent in many
sectors of the American economy. The Commission's actions to address
such fees encompass ``mobile cramming'' charges,\24\ connection and
maintenance fees on prepaid phone cards,\25\ account fees,\26\ fees
that diminish the amount a borrower receives from a loan,\27\
miscellaneous fees levied on fuel cards,\28\ auto dealer fees,\29\
undisclosed fees for funeral services,\30\ hotel ``resort'' fees,\31\
hidden fees for academic publishing,\32\ poorly disclosed ancillary
insurance products,\33\ membership programs,\34\ and discounts for
food, travel, long-distance calls, and merchandise.\35\
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\24\ ``Mobile cramming'' fees refer to charges on mobile phones
that the consumers did not order or authorize. See, e.g., Stipulated
Order at 2, FTC v. Hold Billing Servs., Ltd., No. 98-cv-00629 (W.D.
Tex. May 4, 2016) (placing charges on consumers' bills without
authorization); Compl. at 3, FTC v. T-Mobile USA, Inc., No. 14-cv-
967 (W.D. Wash. filed July 1, 2014); Compl. at 3, FTC v. AT&T
Mobility, LLC, No. 14-cv-3227 (N.D. Ga. Oct. 8, 2014); FTC v.
<a href="http://Inc21.com">Inc21.com</a> Corp., 745 F. Supp. 2d 975, 982 (N.D. Cal. 2010) (ninety-
seven percent of customers had not agreed to purchase the products
for which defendant billed them); Stipulated Order at 8, FTC v.
Websource Media, LLC, No. H-06-1980 (S.D. Tex. July 17, 2007)
(restraining defendants from charging purchasers without express
informed consent); Compl. at 8, FTC v. Nationwide Connections, Inc.,
No. 06-80180 (S.D. Fla. filed Feb. 27, 2006) (charging consumers for
long distance calls that were either unauthorized or never made);
Stipulated Judgment and Order, FTC v. Mercury Mktg. of Del., Inc.,
No. 00-cv-3281, 2004 WL 2677177, *1 (E.D. Pa. Nov. 22, 2004)
(``Defendants [ ] engaged in a telemarketing scheme designed to
mislead unsuspecting small businesses into receiving its
introductory internet package and without consent of the businesses
to bill and collect monthly charges'').
\25\ See, e.g., Compl. at 2, FTC v. Millennium Telecard, Inc.,
No. 2:11-cv-02479 (D.N.J. filed May 2, 2011) (``failing to disclose
or disclose adequately fees that have the effect of reducing the
number of calling minutes available to consumers using Defendants'
prepaid calling cards'').
\26\ See, e.g., Compl. at 6, FTC v. NetSpend Corp., No. 1:16-cv-
04203 (N.D. Ga. filed Apr. 11, 2017) (charging account maintenance
and inactivity fees on blocked or inaccessible accounts).
\27\ See, e.g., Compl. at 13, FTC v. Lead Express, Inc., No.
2:20-cv-00840 (D. Nev. filed May 11, 2020) (payday loan company
continually withdrew finance charges from consumers' bank accounts
without decreasing outstanding principal, resulting in significantly
greater costs than represented by Defendants); First Am. Compl. at
3, FTC v. LendingClub Corp., No. 3:18-cv-02454 (N.D. Cal. filed Oct.
22, 2018) (promising ``no hidden fees'' but delivering loans
significantly lower than expected due to hidden fees deducted from
consumers' loan proceeds).
\28\ See, e.g., Compl. at 14-16, FTC v. FleetCor Techs., Inc.,
No. 1:19-cv-05727 (N.D. Ga. filed Dec. 10, 2019) (charging hundreds
of millions of dollars of unexpected fees after selling charge cards
for transportation costs to businesses through promises of savings
and no fees).
\29\ See generally Fed. Trade Comm'n, Notice of Proposed
Rulemaking: Motor Vehicle Dealers Trade Regulation Rule, 78 FR
42012, 42023 & n.113 (July 23, 2022) (describing rationale for
requiring upfront pricing and exploring Commission's history of work
to combat unfair or deceptive fees), <a href="https://www.federalregister.gov/documents/2022/07/13/2022-14214/motor-vehicle-dealers-trade-regulation-rule">https://www.federalregister.gov/documents/2022/07/13/2022-14214/motor-vehicle-dealers-trade-regulation-rule</a>. See also, e.g., Compl. at 3,
FTC v. Liberty Chevrolet, Inc., No. 20-cv-3945 (S.D.N.Y. filed May
21, 2020) (automobile dealer charged consumers for fees relating to
``certification,'' ``shop,'' and ``reconditioning,'' and levied
documentation fees that greatly exceeded statutory limits); Compl.
at 7-8, FTC v. N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D.
Ill. filed Mar. 31, 2022) (auto dealer charged consumers additional
fees falsely claimed to be not optional after failing to disclose
such fees in advertising or to consumers who called ahead to confirm
low advertised prices).
\30\ See, e.g., Compl. at 11-14, United States v. Funeral &
Cremation Grp. of N. Am. LLC, No. 0:22-cv-60779 (S.D. Fla. filed
Apr. 22, 2022) (advertising low prices for cremation services and
then charging additional undisclosed fees for filing, death
certificates, and county permits).
\31\ See, e.g., 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), <a href="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">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</a>.
\32\ See, e.g., Compl. at 12-14, FTC v. OMICS Grp. Inc., No.
2:16-cv-02022 (D. Nev. filed Aug. 25, 2016) (academic publisher
charged authors hefty publication fees that were previously
undisclosed).
\33\ One defendant ``induce[d] borrowers unknowingly to purchase
optional credit insurance products'' and imposed various obstacles
to removing such charges if a consumer asked for the removal of the
optional products. Press Release, Fed. Trade Comm'n, Citigroup
Settles FTC Charges Against the Associates Record-Setting $215
Million for Subprime Lending Victims (Sept. 19, 2002); see Compl. at
12-13, FTC v. Citigroup Inc., No. 010-cv-0606 (N.D. Ga. filed Mar.
6, 2001). See also, e.g., Compl. at 11, FTC v. Stewart Fin. Co.
Holdings, Inc., No. 1:03-cv-2648 (N.D. Ga. Filed Sept. 4, 2003)
(``in quoting the monthly amount, [Defendant] employees do not even
mention the existence of [ ] ancillary products, much less that the
consumer has the option to decline them'').
\34\ See, e.g., Stewart Fin. Co. Holdings, Inc., No. 1:03-cv-
2648; Compl. at 21, FTC v. Simple Health Plans LLC, No. 0:18-cv-
62593 (S.D. Fla. filed Oct. 29, 2018) (advertising comprehensive
health insurance plans while actually enrolling consumers in limited
benefit plans and medical discount memberships).
\35\ See, e.g., Compl. at 5-7, FTC v. Direct Benefits Grp., LLC,
No. 6:11-cv-01186 (M.D. Fla. filed July 18, 2011) (enrolling
consumers without consent in a discount program for gas, groceries,
restaurants, and more).
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Certain unlawful fee practices may be covered by existing rules and
statutes. The Commission lacks authority, however, to seek redress for
consumers or penalties against violators for everyday junk fees that
fall outside those specific prohibitions. Indeed, although the
Commission has brought many cases that challenge junk fees and hidden
fees under Section 5 of the FTC Act, 15 U.S.C. 45, and other statutes,
its current remedial authority is limited. The U.S. Supreme Court
recently held equitable monetary relief, including consumer redress, is
unavailable under Section 13(b) of the FTC Act.\36\ Consumer redress
under Section 19(b), 15 U.S.C. 57b(b), is limited and
[[Page 67416]]
challenging to obtain without a rule violation. The Commission believes
a rule addressing certain types of unfair or deceptive acts or
practices involving junk fees could help reduce the level of unlawful
activity in this area, serving as a deterrent against these practices
because such a trade regulation rule would allow for civil penalties to
be sought against violators.\37\ It also would enable the Commission
more readily to obtain redress and damages for consumers through
Section 19(b) of the FTC Act, 15 U.S.C. 57b(b).
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\36\ See AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1352
(2021). See generally Fed. Trade Comm'n, Notice of Proposed
Rulemaking: Trade Regulation Rule on Impersonation of Government and
Businesses, 87 FR 62741 (Oct. 17, 2022) (describing in greater
detail the Commission's perspective that promulgating new rules can
be worth the cost because of the benefit in providing consumer
redress when lawbreakers violate not only Section 5 of the FTC Act
but also a specific rule promulgated under Section 18 or treated as
such).
\37\ See 15 U.S.C. 45(m)(1)(A).
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B. Objectives and Regulatory Alternatives
The Commission requests input on whether and how it should use its
authority under Section 18 of the FTC Act, 15 U.S.C. 57a, to address
deceptive or unfair acts or practices involving junk fees and hidden
fees. Specifically, the Commission proposes addressing the following
practices, which have been the subject of Commission investigations,
enforcement actions, workshops, research, and consumer education, among
other activities: (a) misrepresenting or failing to disclose clearly
and conspicuously, on any advertisement or in any marketing, the total
cost of any good or service for sale; \38\ (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;
\39\ (c) misrepresenting or failing to disclose clearly and
conspicuously whether fees, interest, charges, products, or services
are optional or required; \40\ (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; \41\ (e) misrepresenting that a
consumer owes payments for any product or service the consumer did not
agree to purchase; \42\ (f) billing or charging consumers for fees,
interest, goods, services, or programs without express and informed
consent; \43\ (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; \44\ and (h)
[[Page 67417]]
misrepresenting or failing to disclose clearly and conspicuously on an
advertisement or in marketing the nature or purpose of any fees,
interest, charges, or other costs.\45\
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\38\ See, e.g., Compl. at 16, FTC v. Funeral & Cremation Grp. of
N. Am. (``Defendants represent[ed] that the prices they quote for
cremation packages include all or substantially all the fees and
costs that they will charge consumers for their goods and
services''); Order at 31, OMICS Grp. (Mar. 29, 2019) (permanently
enjoining defendant from ``soliciting from a consumer or publishing
articles, manuscripts, or other works solicited from a consumer,
without disclosing Clearly and Conspicuously [ ] all costs to the
consumer''); Stipulation to Enter Order at 5, Lead Express (Jan. 27,
2021) (permanently enjoining defendant from misrepresenting ``[a]ny
fact material to Consumers concerning any product or service, such
as the total costs''); Stipulated Order at 7, Simple Health Plans
(Feb. 4, 2021) (permanently enjoining defendants from
misrepresenting ``[a]ny other fact material to consumers concerning
any good or service, such as [ ] the total costs'').
\39\ See, e.g., Stipulated Final Order at 10-11, Millennium
Telecard, Inc. (Jan. 26, 2012) (permanently enjoining defendants
from failing to clearly and conspicuously disclose all material
limitations including ``[t]he existence and amount of all fees or
charges of any type, including, but not limited to, maintenance
fees, weekly fees, monthly fees, connection fees, hang-up fees,
pagyphone fees, cell phone fees, access number fees, and when and
under what circumstances such fees or charges will apply when using
[the product]''); Stipulated Order at 5-6, LendingClub (July 14,
2021) (permanently enjoining defendant from misrepresenting ``[t]he
existence of amount of any fees or charges'' and ``the dollar amount
of any prepaid, up-front, or origination fee''); Compl. at 3, In re
Value Rent-A-Car, Inc., FTC Dkt. No. C-3420 (Mar. 29, 1993)
(Defendants ``stated prices [of] rental vehicles without disclosing:
(A) the existence and amount of a mandatory airport surcharge or fee
that is imposed on consumers who travel from certain airport
locations to one of respondent's rental stations in one of
respondent's shuttle vehicles; and (B) the existence and amount of
an under 25 years of age driver charge''); Decision and Order at 3-
4, In re Budget Rent-A-Car Systems, Inc., FTC Dkt. No. C-4212 (Jan.
2, 2008) (Defendant ordered to ``disclose clearly and conspicuously,
at the time of the rental transaction, A. any fuel-related charges,
fees, or costs, including any fuel-related charges, fees, or costs
which a renter who drives the vehicle less than any specified amount
may incur; B. any requirements related to [such charges]; C. the
manner, if any, in which a renter can avoid such fuel-related
charges, fees, or costs, or related requirements''); Compl. at 3,
FTC v. First Am. Payment Sys., No. 22-cv-00654 (N.D. Tex. filed July
29, 2022) (alleging that defendants ``failed to disclose, clearly
and conspicuously, key terms of their agreements, including the . .
. early termination fee'').
\40\ See, e.g., Stipulated Order for Permanent Injunction at 9,
N. Am. Auto. Servs. (Mar. 31, 2022) (permanently restraining
defendants from misrepresenting ``whether charges, products, or
services are optional or required''); Stipulated Order at 45,
Liberty Chevrolet (May 22, 2020) (permanently enjoining defendants
from misrepresenting ``whether charges, products, or services are
optional or required'' and ``whether sales tax charges are in
amounts required by state and local law''); Stipulated Final
Judgment and Order at 14, Stewart Fin. Co. Holdings, Inc. (Nov. 9,
2005) (permanently enjoining defendants from failing to disclose
clearly and conspicuously ``all material terms of any Direct Deposit
program including but not limited to the costs, requirements,
mandatory or optional nature''); Compl. at 19, Citigroup Inc.
(charging defendants with failing to disclose ``that the purchase of
credit insurance was optional and not required to obtain [a]
loan'').
\41\ See, e.g., Stipulated Final Order at 6-7, FTC v.
Alternatel, Inc., No. 08-21433-cv (S.D. Fla. Apr. 1, 2009)
(permanently restraining defendants from misrepresenting ``all
Material Limitations, including . . . That the number of Talk
Minutes is only available on a single call, to the extent Talk
Minutes are advertised; [ ] The existence and amount of all fees or
charges of any type . . . and when and under what circumstances such
fees or charges will apply when using a Prepaid Calling Card; [ ]
Any limit on the period of time during which [ ] (1) the number of
advertised Talk Minutes is available [ ] or (2) the advertised per
minute rates are available''); Press Release, Fed. Trade Comm'n, FTC
Order Against Four Car Rental Firms Halts Deceptive Practices (Aug.
21, 1973) (announcing order that compels defendants to ``clearly
disclose in advertising and rental agreements all charges and
conditions imposed for rental of cars''); Stipulated Judgment and
Order at 2-3, Mercury Mktg. of Del. (permanently restraining
defendants from failing to clearly disclose material terms of the
transactions, including ``the intended method of billing [and]
Defendants' policies concerning cancellations or refunds'');
Stipulated Order at 5, NetSpend Corp. (Apr. 10, 2017) (permanently
enjoining defendant from misrepresenting: ``A. Any fact regarding
the length of time or conditions necessary before (1) [the product]
will be ready to use, or (2) consumers will have access to funds; B.
Any fact regarding the length of time or conditions necessary to
gain approval to use [the product], including that consumers are
guaranteed approval; [and] C. Any fact regarding the protections
consumers have in the event of account errors, including the terms
under which Defendant will provide provisional credits.'').
\42\ See, e.g., <a href="http://Inc21.com">Inc21.com</a>, 745 F. Supp. 2d at 1001 (order on
cross-motions for summary judgment, holding as deceptive the
``representation that consumers owed defendants monthly payments for
products that they had never agreed to purchase''); Stipulated Order
at 9, Nationwide Connections (restraining defendants from
misrepresenting that a consumer ``is obligated to pay any
Telecommunications Charge that has not been Expressly Authorized'');
Stipulated Order at 7-8, Websource Media (restraining defendants
from misrepresenting that ``an authorized purchaser is obligated to
pay any charge for which the authorized purchaser has not given
express informed consent'').
\43\ See, e.g., Compl. at 63, FTC v. Benefytt Techs., No. 22-cv-
01794 (M.D. Fla. filed Aug. 8, 2022) (``Defendants have charged
consumers for products or services for which consumers have not
provided express, informed consent.''); Stipulated Order at 10, Hold
Billing Servs. (``Defendants shall not, directly or through an
intermediary, place charges for any products or services on any bill
to consumers unless the consumer has expressly authorized such
charge''); Compl. at 52, FleetCor (``Defendants have billed
consumers for fees, interest, and finance charges, and programs for
which consumers have not provided express, informed consent'');
Final Judgment and Order at 4-6, Direct Benefits Grp. (Aug. 12,
2013) (permanently enjoining defendants from ``[c]harging or
attempting to charge any consumer unless the consumer has provided
express informed consent to be charged'').
\44\ See, e.g., Prepared Statement of the Fed. Trade Comm'n,
``Prepaid Calling Cards'' Before Subcommittee on Commerce, Trade and
Consumer Protection of the House Committee on Energy and Commerce,
110th Congr., (Sept. 16, 2008), <a href="https://www.ftc.gov/sites/default/files/documents/public_statements/prepared-statement-federal-trade-commission-prepaid-calling-cards/p074406prepaidcc_0.pdf">https://www.ftc.gov/sites/default/files/documents/public_statements/prepared-statement-federal-trade-commission-prepaid-calling-cards/p074406prepaidcc_0.pdf</a> (describing
enforcement actions against prepaid calling card distributors for
failing to disclose prepaid calling cards' connection and
maintenance fees); Warning Ltr., Fed. Trade Comm'n (Nov. 28, 2012),
<a href="https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-warns-hotel-operators-price-quotes-exclude-resort-fees-other-mandatory-surcharges-may-be/121128hoteloperatorsletter.pdf">https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-warns-hotel-operators-price-quotes-exclude-resort-fees-other-mandatory-surcharges-may-be/121128hoteloperatorsletter.pdf</a>
(announcing investigations into whether certain hotel operators
mispresented hotel room prices to consumers by failing to disclose
mandatory ``resort'' fees); Compl. at 13, Funeral & Cremation Grp.
of N. Am. (``Defendants charge consumers additional fees Defendants
have not previously disclosed for goods and services such as death
certificates, death certificate filing fees, county permits, heavy
duty vinyl pouches, or alternative containers.''); Compl. at 7,
Liberty Chevrolet, (falsely telling consumers they must pay ``dealer
prep,'' ``air money,'' ``reconditioning,'' and ``documentation''
fees as part of auto sale).
\45\ See, e.g., Compl. at 2-4, In re Value Rent-A-Car (failing
to disclose airport surcharge fees); Compl. at 13, Funeral &
Cremation Grp. of N. Am. (failing to disclose funeral-related fees
for filing, permits, death certificates); 16 CFR 453.2(a) (requiring
funeral providers to ``furnish accurate price information disclosing
the cost to the purchaser of each of the specific funeral goods and
funeral services used in connection with the disposition of deceased
human bodies'').
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The Commission seeks comment on, among other things, the prevalence
of each of the above practices, the costs and benefits of a rule that
would require upfront inclusion of any mandatory fees whenever
consumers are quoted a price for a good or service and other potential
rule requirements to curtail unfair or deceptive fees, and alternative
or additional action to such a rulemaking, such as the publication of
additional consumer and business education materials and hosting of
public workshops. In their replies, commenters should provide any
available evidence and data that support their position, such as
empirical data, consumer-perception studies, and consumer complaints.
C. Public Comments on a Related Petition and Request for Comment
On December 27, 2021, the Federal Trade Commission published a
petition for rulemaking submitted by the Institute for Policy Integrity
(``Policy Integrity'').\46\ The petition asks the Commission to
promulgate rules to address the practice it identifies as ``drip
pricing.'' Drip pricing is defined by the petition as ``the practice of
advertising only part of a product's price upfront and revealing
additional charges later as consumers go through the buying process.''
\47\ The petition itself addressed only some of the issues explored in
this ANPR. The comment period for the petition closed on January 26,
2022.\48\ The petition received 25 comments from individual consumers,
trade associations, and industry leaders.\49\ Of these comments
received, only one comment, by a ticket-broker corporation, urged
caution as to drip-pricing rulemaking, while the rest supported
granting the petition.
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\46\ See Inst. for Policy Integrity, Pet. for Rulemaking
Concerning Drip Pricing 1 (2021), <a href="https://policyintegrity.org/documents/Petition_for_Rulemaking_Concerning_Drip_Pricing.pdf">https://policyintegrity.org/documents/Petition_for_Rulemaking_Concerning_Drip_Pricing.pdf</a>
(``Policy Integrity Pet.'').
\47\ Pet. at 1 (quoting Mary Sullivan, supra n.7).
\48\ See Fed. Trade Comm'n, Notice of Pet., 87 FR 73207 (Dec.
27, 2021), <a href="https://www.federalregister.gov/documents/2021/12/27/2021-27435/petition-for-rulemaking-by-institute-for-policy-integrity">https://www.federalregister.gov/documents/2021/12/27/2021-27435/petition-for-rulemaking-by-institute-for-policy-integrity</a>.
\49\ See Policy Integrity Pet. Rulemaking Dkt. (``Browse All
Comments'' tab), <a href="https://www.regulations.gov/docket/FTC-2021-0074/comments">https://www.regulations.gov/docket/FTC-2021-0074/comments</a>.
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The petition argues that, by initially withholding crucial pricing
information, sellers manipulate market pressures to consumers'
detriment.\50\ Consumers then cannot effectively comparison-shop to
find the best value or must devote an undue amount of time to making
cost-appropriate decisions. According to the National Economic Council,
these skewed market dynamics may cause consumers to ``systematically .
. . pay more for goods and services.'' \51\ Policy Integrity recommends
the Commission require sellers to provide prominent indication of the
entire price imposed by a seller, including all mandatory fees and
service charges (but excluding optional add-on features and taxes
imposed by government).\52\ The petition identifies Commission
authority to impose such a rule as stemming from the Commission's
Section 5 mandate to protect consumers and competition by preventing
unfair, deceptive, and anticompetitive practices.\53\ By
misrepresenting a product's true cost, drip pricing, according to the
petition, deceives consumers acting reasonably under the circumstances,
unfairly imposes injury not reasonably avoidable and not outweighed by
countervailing benefits, and disadvantages parties who disclose entire
prices upfront, which makes it an unfair method of competition.\54\
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\50\ Pet. at 1.
\51\ Competition Initiative at 9.
\52\ See Pet. at 2.
\53\ See 15 U.S.C. 45(a)(2) (``The Commission is hereby
empowered and directed to prevent persons, partnerships, or
corporations . . . from using unfair methods of competition in or
affecting commerce and unfair or deceptive acts or practices in or
affecting commerce'').
\54\ See Pet. at 3, 10, 16.
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Policy Integrity notes the Commission's long record of related
enforcement actions, such as: preventing door-to-door encyclopedia
salespersons from initially posing as advertising researchers; \55\
enforcing the Telemarketing Sales Rule against parties
mischaracterizing the commercial nature of their calls; \56\
prohibiting a rental car company from using the misleading name
``Dollar-a-Day'' to lure customers; \57\ and disciplining a debt-
negotiation company for its false pledge to settle all client accounts
for 40-60% of the debt owed.\58\ Specific to drip pricing, Policy
Integrity points to Commission actions including: the convening of a
2012 conference \59\ and the 2019 workshop on tickets, a 2012 warning
to hotel operators of potential Section 5 violations through their
reservation websites,\60\ and a broader declaration by then-Chair Jon
Leibowitz that drip-pricing practices do ``a huge disservice to
American consumers.'' \61\
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\55\ See Encyc. Britannica, Inc., 87 F.T.C. 421, 495-97, 531
(1976), aff'd, 605 F.2d 964 (7th Cir. 1979), as modified, 100 F.T.C.
500 (1982).
\56\ See Fed. Trade Comm'n, FTC Enforcement Policy Statement on
Deceptively Formatted Advertisements 8 & n.29 (2015) (collecting
such cases), <a href="https://www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf">https://www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf</a>.
\57\ See Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962, 964
(9th Cir. 1975).
\58\ See FTC v. Connelly, No. 06-cv-701, 2006 WL 6267337, at
*11-12 (C.D. Cal. Dec. 20, 2006).
\59\ See Fed. Trade Comm'n, The Economics of Drip Pricing (May
21, 2012), <a href="https://www.ftc.gov/news-events/events-calendar/2012/05/economics-drip-pricing">https://www.ftc.gov/news-events/events-calendar/2012/05/economics-drip-pricing</a>.
\60\ See Warning Ltr., supra n.44.
\61\ 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), <a href="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">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</a>.
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The petition identifies the Department of Transportation's 2011
Full Fare Advertising Rule as a useful regulatory precedent for
requiring clear indication of ``the entire price to be paid.'' \62\ It
also highlights that the District of Columbia \63\ and Nebraska \64\
have filed parallel suits against Marriott and Hilton, respectively,
while the City and County of San Francisco filed suits against the
operators of online travel sites JustFly and FlightHub.\65\
Congressional leaders recently called on the Commission to act against
deceptive and unfair practices related to hidden fees in the event-
ticket-sales industry.\66\
[[Page 67418]]
Policy Integrity argues such piecemeal policies limited to particular
sectors or regions cannot substitute for comprehensive nationwide
regulation.\67\ Policy Integrity's petition outlines the legal bases
for determining an act or practice is deceptive, unfair, or an unfair
method of competition, concluding that drip pricing falls under each of
these categories.\68\
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\62\ 14 CFR 399.84(a).
\63\ See Compl. at 1, D.C. v. Marriott International, Inc. (D.C.
Super. Ct. July 9, 2019), <a href="https://oag.dc.gov/sites/default/files/2019-07/Marriott-Complaint.pdf">https://oag.dc.gov/sites/default/files/2019-07/Marriott-Complaint.pdf</a>.
\64\ See Am. Compl. at 4, Nebraska v. Hilton Dopco., Inc., No.
CI 19-2366 (Lancaster Cty. Neb., July 24, 2019), <a href="https://hotellaw.jmbm.com/files/2019/07/Nebraska-v-Hilton-resort-fee-complaint-7-24-19.pdf">https://hotellaw.jmbm.com/files/2019/07/Nebraska-v-Hilton-resort-fee-complaint-7-24-19.pdf</a>.
\65\ See Press Release, City Att'y of S.F., Herrera Sues JustFly
and FlightHub Over Hidden Fees and Other Predatory Scams (Sept. 19,
2019), <a href="https://www.sfcityattorney.org/2019/09/19/herrera-sues-justfly-and-flighthub-over-hidden-fees-and-other-predatory-scams/">https://www.sfcityattorney.org/2019/09/19/herrera-sues-justfly-and-flighthub-over-hidden-fees-and-other-predatory-scams/</a>.
\66\ Ltr. to Chairman Simons from Congressmen Pallone and
Pascrell (June 20, 2018), <a href="https://pascrell.house.gov/sites/pascrell.house.gov/files/ftc%20letter%20on%20ticket%20sales_072018.pdf">https://pascrell.house.gov/sites/pascrell.house.gov/files/ftc%20letter%20on%20ticket%20sales_072018.pdf</a>.
\67\ See Pet. at 7.
\68\ See id. at 10-24.
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The petition also explores at length what benefit-cost analyses may
be required to promulgate the rule the petition proposes.\69\ While the
Commission, as an independent regulatory agency, is not subject to
Executive Order 12866, it faces a similar obligation to assess the
economic effect of its rulemaking under Section 22 of the FTC Act, 15
U.S.C. 57b-3. Policy Integrity cites as primary benefits of drip-
pricing regulation the corresponding decrease in consumer search time
and a decrease in overpriced transactions.\70\ Policy Integrity
considers the primary cost of drip-pricing regulation to come through
private-sector compliance in the form of substantial modification of
solicitation schemes and online ticket portals, with possible secondary
costs from administrative and enforcement efforts.\71\ Policy Integrity
stresses that, because redistributed costs between buyers and sellers
are ``monetary payments from one group to another, that do not affect
total resources available to society,'' these are neither ``costs'' nor
``benefits'' in the strict economic sense.\72\
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\69\ See generally id. at 25-31.
\70\ See id. at 28-29.
\71\ See id. at 27-28.
\72\ See id. at 30-31.
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Policy Integrity proposes the following rulemaking language:
It is an unfair or deceptive act or practice and unfair method
of competition to advertise or solicit the sale of a product or
service without prominently disclosing the entire price to be paid
by the customer inclusive of all unavoidable fees and service
charges (excluding government taxes). Although unavoidable fees and
charges included within the single total price disclosed may also be
stated separately from the total price, such statement of fees and
charges may not be false or misleading and may not be presented more
prominently or in the same or larger size as the total price. In
addition, all other fees or service charges that might foreseeably
be assessed in connection with the sale of the product or service,
including additional fees for optional services, must be
conspicuously disclosed in the advertisement or solicitation.\73\
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\73\ Id. at 5.
Comments to Policy Integrity's petition largely supported its
effort, with 24 in support and one urging caution.\74\ Policy Integrity
itself comments on its own petition, focusing on findings from two
recent studies: ``These studies find that, absent regulation, online
platforms have strong incentives to hide fees and that drip pricing
lowers consumers' perceived price fairness.'' \75\
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\74\ See Policy Integrity Pet. Rulemaking Dkt. (``Browse All
Comments'' tab), <a href="https://www.regulations.gov/docket/FTC-2021-0074/comments">https://www.regulations.gov/docket/FTC-2021-0074/comments</a>.
\75\ Cmt. of Policy Integrity on Pet. at 1 (Jan. 25, 2022),
<a href="https://www.regulations.gov/comment/FTC-2021-0074-0003">https://www.regulations.gov/comment/FTC-2021-0074-0003</a>.
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The first study, ``Deceptive Features on Platforms,'' analyzed
``incentives of online platforms to hide additional'' mandatory fees,
such as service charges, from the market.\76\ Platforms have the
capability either to hide the mandatory fees or to disclose them
transparently to consumers upfront, and the study found, even though
the platforms will not themselves receive the hidden fees or
commissions, a platform still has ``stronger incentives'' to hide the
fees than sellers do themselves.\77\ This is because platforms that
hide these additional fees for all sellers make ``overall product
prices seem lower'' and ``are more likely to attract more buyers.''
\78\ Even as sophisticated buyers might avoid these platforms,
unsuspecting buyers will still use such platform and raise their
revenues. There is a ``spillover effect on obscuring platform fees: a
platform can shroud seller fees to increase the number of buyers, and
that increase in turn incentives platforms to hide their own fees.''
\79\ The study concludes that policies such as the Policy Integrity
petition's upfront pricing model is ``likely, in aggregate, to increase
consumer surplus.'' \80\
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\76\ Id.
\77\ Id. at 2 (quoting study).
\78\ Id.
\79\ Id.
\80\ Id.
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The second study, ``Many a Little Makes a Mickle: Why Do Consumers
Negatively React to Sequential Price Disclosure?,'' used ``eye-tracking
data'' to analyze consumer reaction to the ``timing of price
disclosures and the number of sequentially presented surcharges.'' \81\
The study found sequential final price disclosures both increased ``a
consumer's perceived price complexity'' and ``decreased their perceived
transparency of a firm's pricing.'' \82\ Consumers, as a result, find
sequential pricing is less fair but upfront disclosure of the final
price is ``more transparent'' and fair.\83\ The study concluded drip
pricing injures consumers because it increases ``the amount of effort
they must exert to understand the total price and to compare prices
between products and sellers.'' \84\
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\81\ Id. at 3.
\82\ Id.
\83\ Id.
\84\ Id.
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The Commission received three comments from industry participants
and four from consumer organizations on Policy Integrity's petition.
Notably, the National Association of Ticket Brokers urges caution in
its comment.\85\ As a general matter, ``NATB supports fair and
transparent live event ticket sales and has supported a requirement of
`all-in pricing' which would be the outcome of a prohibition on drip
pricing.'' \86\ NATB warns, however, as it did in the 2019 Commission
workshop on online ticket sales, a rule will be effective only if (1)
it were required of every ticket seller and (2) there were ``rigorous
and expeditious enforcement.'' \87\ The NATB comment also mentions a
variety of other issues facing the ticket industry, including
transferability, ticket holdbacks when tickets go on sale, cancellation
of season tickets, locking tickets in a single platform, deceptive
websites, non-transparent fees, bots, and others. The comment letter
agrees reform in the ticket market is needed, suggests the Commission
take action under its existing authority, and states new federal
legislation is needed to provide broader authority to the
Commission.\88\
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\85\ See Cmt. of Nat'l Ass'n of Ticket Brokers on Pet. 1 (Jan.
26, 2022), <a href="https://www.regulations.gov/comment/FTC-2021-0074-0024">https://www.regulations.gov/comment/FTC-2021-0074-0024</a>.
\86\ Id.
\87\ Id.
\88\ See id.
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On the other hand, the National Consumers League ``strongly
supports the petition'' to promulgate rules governing drip pricing.\89\
NCL notes its history of fighting drip pricing in live event ticketing,
hotel accommodations, and airline tickets, having joined the Sports
Fans Coalition to ask the Commission to prohibit drip pricing for live
event ticketing in 2018.\90\ The comment argues that, following the
Live Nation-Ticketmaster merger in 2010, the ``unfair and deceptive
practices have gone largely unchecked.'' \91\ The
[[Page 67419]]
comment notes that, while drip pricing is particularly prevalent in the
live-event, hotel, and airline industries, other industries use drip
pricing as well.\92\
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\89\ Cmt. of Nat'l Consumers League on Pet. 1 (Jan. 26, 2022),
<a href="https://www.regulations.gov/comment/FTC-2021-0074-0019">https://www.regulations.gov/comment/FTC-2021-0074-0019</a>.
\90\ See id.
\91\ Id. at 2.
\92\ See id. at 3.
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The U.S. Public Interest Research Group and Education Fund notes in
its comment ``[t]here are no circumstances where a reasonable person
could think it's OK to reveal only part of the cost of a product or
service'' and ``[t]ransparency is a moral obligation.'' \93\ The
comment advocates that promulgation of a rule would ensure other
industries would be required to disclose all mandatory fees, like the
``full-fare advertising rule.'' \94\ The comment also notes the CFPB is
exploring a similar effort to reduce junk fees charged by banks and
other financial institutions. The comment points out a new rule would
not control how much businesses charge for their goods and services; it
would instead require them to disclose all those charges to the
consumer at the outset of a purchase.\95\
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\93\ Cmt. of U.S. Public Interest Research Grp. Educ. Fund on
Pet. (Jan. 26, 2022), <a href="https://www.regulations.gov/comment/FTC-2021-0074-0022">https://www.regulations.gov/comment/FTC-2021-0074-0022</a>.
\94\ Id.
\95\ See id.
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Travelers United notes it has been very active on the issue of drip
pricing for over a decade.\96\ The comment emphasizes the Commission
has extensively studied the issue of drip pricing and published reports
in the past decade. The comment notes ``[e]very action has determined
that drip pricing is harmful to consumers, and it undermines market
competition.'' \97\ The comment also discusses Travelers United's
extensive work with the Department of Transportation to create the Full
Fare Advertising Rule, which requires airlines to disclose all
mandatory taxes and fees in its advertising of ticket prices.\98\ After
its passage, several airlines unsuccessfully sued the DOT to overturn
the rule. The comment advocates that the Commission must work to close
this loophole that ``allows hotel drip pricing even when accommodations
are sold together with regulated airfares.'' \99\ Travelers United also
discussed its advocacy work with NAAG which resulted in lawsuits by
state attorneys general against Marriot and Hilton. The comment notes
``American consumers are facing an assault of deceptive fees'' and
``[w]orse yet, the growth of drip pricing harms not only consumers but
also sellers who attempt to be honest and decline participation in the
practice.'' \100\
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\96\ See Cmt. of Travelers United, Inc. on Pet. (Jan. 26, 2022),
<a href="https://www.regulations.gov/comment/FTC-2021-0074-0021">https://www.regulations.gov/comment/FTC-2021-0074-0021</a>.
\97\ Id. at 2.
\98\ See id. at 2-3.
\99\ Id. at 3.
\100\ Id. at 4.
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Consumer Reports likewise has opposed drip pricing for years,
describing the practice as ``a particularly pernicious form of `bait
and switch,' made even more potent with the growing use of the internet
for consumer transactions.'' \101\ Consumer Reports states the
Department of Transportation's Full Fare Advertising Rule is a ready
model and a good start, ``although Consumer Reports to improve
transparency for non-mandatory but common ancillary fees, such as for
seat assignments and baggage.'' \102\
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\101\ Cmt. of Consumer Reports on Pet. 1 (Jan. 26, 2022),
<a href="https://www.regulations.gov/comment/FTC-2021-0074-0023">https://www.regulations.gov/comment/FTC-2021-0074-0023</a>.
\102\ Id. at 2.
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Two online ticket sellers, TickPick \103\ and TicketNetwork,\104\
voice their strong support for the petition and note their websites
feature straightforward models that do not hide fees from consumers.
Both companies stress that, without Commission intervention, companies
that adopt more-straightforward pricing models will continue to play on
an uneven playing field. TicketNetwork notes, according to a survey it
conducted, ``most major ticket marketplaces allow for this all-in model
after comments from FTC Commissioner Rebecca Kelly Slaughter . . .
indicated support for a move away from drip pricing.'' \105\ TickPick
states it was the first in the industry to offer a ``no-fee''
marketplace and it has saved consumers more than $50 million by not
charging service fees.\106\ TickPick expresses that the ``base price of
a ticket'' and the ``service'' or ``convenience fees'' are often
``contrived by primary and/or secondary ticket sellers to increase
consumer demand.'' \107\ TickPick supports elimination of drip pricing
but recommends the proposed language from the petition be modified to
``ensure companies are fully apprised of what is required for
compliance.'' \108\ Specifically, the comment suggests two key
principles to guide the Commission: (1) the all-in prices should be
``prominently disclosed to the consumer on the ticketing platform, as
well as in any advertising'' before any component prices are broken
out; and (2) ``all-in'' prices should not include taxes or any optional
fees that the customer may or may not decide to purchase, and the terms
``optional fees,'' ``service charges,'' and ``mandatory'' or
``unavoidable fees'' must be carefully defined.\109\
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\103\ See Cmt. of TickPick, LLC on Pet. 1 (Jan. 26, 2022),
<a href="https://www.regulations.gov/comment/FTC-2021-0074-0026">https://www.regulations.gov/comment/FTC-2021-0074-0026</a>.
\104\ See Cmt. of TicketNetwork on Pet. 1 (Jan. 26, 2022),
<a href="https://www.regulations.gov/comment/FTC-2021-0074-0027">https://www.regulations.gov/comment/FTC-2021-0074-0027</a>.
\105\ Id.
\106\ Cmt. of TickPick at 1.
\107\ Id. at 1-2.
\108\ Id. at 2.
\109\ Id.
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Seventeen individual consumers offer comment in support of Policy
Integrity's petition. The consumers' comments evince a general sense of
frustration with drip pricing, and several directly plea for the
Commission to act. As Colleen Welch puts it, ``There are few things
more irritating when shopping than to have the final price be way more
than expected due to mandatory fees.'' \110\ An anonymous commenter
underscores the hardship these fees cause: ``As someone making minimum
wage, it's impossible to budget and attend these events when prices sky
rocket with hidden fees.'' \111\ Many comments reflect that consumers
are generally upset when they feel as if the price is a surprise. Amy
Lebetsamer states, ``My purchase should be straight-forward and I
should know exactly what I'm paying for.'' \112\ One commenter
describes receiving an unwelcome surprise when a Boston hotel slid a
piece of paper under her door the night before check-out with a $50
``resort fee'' that had not been previously disclosed.\113\ Another
commenter, Daniel Melling, expresses his dismay after seeing L.A.
Lakers basketball tickets advertised as $42.00, he clicked to the
checkout page and saw service fees totaling $13.95.\114\ Mr. Melling
states, ``Drip pricing wastes time as I have to take extra steps in
online purchases to reach the checkout window before the vendor
provides me with a final price.'' \115\ Many consumers note the lack of
transparency among
[[Page 67420]]
ticket sellers is unfair because consumers are at an information
disadvantage. One commenter, Janice Hough, is a travel agent who spent
``HOURS'' trying to figure out the total price of a trip because of the
various additional fees.\116\ Commenter Scott Ogawa notes that, if the
Commission promulgates a rule banning drip pricing, the rule may become
``self-enforcing'' because consumers will be irritated by violations of
new norms and look to alternative choices.\117\ Other individual
consumers' comments express their dismay at the practice of drip
pricing and urge the Commission to take action to prevent it.\118\
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\110\ Cmt. of Colleen Welch on Pet. (Jan. 26, 2022), <a href="https://www.regulations.gov/comment/FTC-2021-0074-0010">https://www.regulations.gov/comment/FTC-2021-0074-0010</a>.
\111\ Cmt. of Anonymous on Pet. (Jan. 26, 2022), <a href="https://www.regulations.gov/comment/FTC-2021-0074-0016">https://www.regulations.gov/comment/FTC-2021-0074-0016</a>.
\112\ Cmt. of Amy Lebetsamer on Pet. (Jan. 26, 2022), <a href="https://www.regulations.gov/comment/FTC-2021-0074-0008">https://www.regulations.gov/comment/FTC-2021-0074-0008</a>.
\113\ See Cmt. of Anonymous on Pet. (Jan. 26, 2022), <a href="https://www.regulations.gov/comment/FTC-2021-0074-0025">https://www.regulations.gov/comment/FTC-2021-0074-0025</a>.
\114\ See Cmt. of Daniel Melling on Pet. (Jan. 26, 2022),
<a href="https://www.regulations.gov/comment/FTC-2021-0074-0011">https://www.regulations.gov/comment/FTC-2021-0074-0011</a> (attaching
screenshots).
\115\ Id. See also id. (``With more consumers relying on e-
commerce and online purchases of goods and services, now is an
important time for FTC to initiate this rulemaking process and
provide consumers with the fair and transparent pricing they
deserve.'').
\116\ Cmt. of Janice Hough on Pet. (Jan. 26, 2022), <a href="https://www.regulations.gov/comment/FTC-2021-0074-0012">https://www.regulations.gov/comment/FTC-2021-0074-0012</a>.
\117\ Cmt. of Scott Ogawa on Pet. (Jan. 26, 2022), <a href="https://www.regulations.gov/comment/FTC-2021-0074-0020">https://www.regulations.gov/comment/FTC-2021-0074-0020</a>.
\118\ See generally Policy Integrity Pet. Rulemaking Dkt.
(``Browse All Comments'' tab), <a href="https://www.regulations.gov/docket/FTC-2021-0074/comments">https://www.regulations.gov/docket/FTC-2021-0074/comments</a>.
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The comments received by the CFPB in response to its request for
comments on fees imposed by providers of consumer financial products
and services express the same frustrations and concerns, albeit in
greater volume: The CFPB received 50,007 comments, which suggests drip
pricing may be ripe for action. Many commenters submitted comments
relaying their frustration with encountering hidden fees when seeking
to purchase live event tickets, hotel, and travel accommodations. A
graduate student, Ray Stevens, related his frustrations with travel-
related companies that hide additional fees, writing, ``I don't object
to paying fair prices for goods and services, but in order to be
responsible for myself and my family, I want to know what I will be
charged up front when I do business with, and feel that what I am
paying is the actual price of the purchase . . . .'' \119\ Tens of
thousands of other comments offer a similar perspective. This parallel
inquiry at the CFPB further reinforces the importance of the rulemaking
proceeding initiated by the Commission with this ANPR. The CFPB does
not have authority to address drip pricing beyond its jurisdiction of
consumer financial products and services, but the Commission can go
further and address unfair or deceptive fee practices in interstate
commerce.
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\119\ Cmt. of Ray Stevens on CFPB Request for Info. Regarding
Fees Imposed by Providers of Consumer Fin. Prods. or Servs. (Feb.
17, 2022), <a href="https://www.regulations.gov/comment/CFPB-2022-0003-0790">https://www.regulations.gov/comment/CFPB-2022-0003-0790</a>.
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The Commission finds Policy Integrity's petition and the public
comments submitted in response to it persuasive. Accordingly, the
Commission, through its publication of this ANPR and a corresponding
Order, grants Policy Integrity's petition for rulemaking.
D. The Rulemaking Process
The Commission seeks the broadest participation by the affected
interests in the rulemaking. The Commission encourages all interested
parties to submit written comments. The Commission also expects
affected interests to assist the Commission in analyzing various
options and in drafting any proposed rule. After reviewing comments
submitted in response to this ANPR, the Commission may proceed with
further steps outlined in Section 18 of the FTC Act and Part 1, Subpart
B, of the Commission's Rules of Practice.
III. Request for Comments
Members of the public are invited to comment on any issues or
concerns they believe are relevant to the Commission's consideration of
the proposed rulemaking. In addition to the issues raised above, the
Commission solicits public comment on the specific questions identified
below. These questions are designed to assist the public and should not
be construed as a limitation on the issues on which public comment may
be submitted. For all questions, the Commission seeks commenters'
views, arguments, experiences, and the qualitative and quantitative
data that support or inform their answers.\120\ The Commission requests
that factual data upon which the comments are based be submitted with
the comments.
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\120\ See Fed. Trade Comm'n, Public Participation in the
Rulemaking Process, <a href="https://www.ftc.gov/enforcement/rulemaking/public-participation-rulemaking-process">https://www.ftc.gov/enforcement/rulemaking/public-participation-rulemaking-process</a>. Commenters who filed
comments on other rulemaking dockets that address related issues,
such as the notice of proposed rulemaking concerning a Motor Vehicle
Dealers Trade Regulation Rule or the Regulatory Review of the
Funeral Rule, are welcome to re-file those comments, or update them
as commenters think appropriate, on this rulemaking docket. The
Commission's analysis of public comments in considering whether to
proceed to a notice of proposed rulemaking on Unfair or Deceptive
Fees will be based only on comments filed on this docket in response
to this ANPR and not on any other rulemaking dockets.
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Questions
1. How widespread is the practice of misrepresenting or failing to
disclose on any advertisement or marketing the total cost for a good or
service for sale? To what extent are total costs misrepresented during
the advertising or marketing of a good or service? Provide all
available data and evidence that supports your answer, such as
empirical data, consumer-perception studies, and consumer complaints.
2. How widespread is the practice of misrepresenting or failing to
disclose on any advertisement or marketing the existence of any fees,
interest, charges, or costs that cannot be reasonably avoided or are
mandatory? To what extent are those mandatory fees misrepresented
during the advertising or marketing of a good or service?
3. How widespread is the practice of misrepresenting or failing to
disclose clearly and conspicuously on an advertisement or in marketing
whether fees, interest, charges, products, or services are optional or
required? To what extent is the optional or required nature of a fee,
interest, charge, product, or service misrepresented during the
advertising or marketing of a good or service? To what extent are such
optional or required fees, interest, charges, products, or services
related to the product or service that is the primary purpose of the
transaction?
4. How widespread is the practice of misrepresenting or failing to
disclose clearly and conspicuously on an advertisement or in marketing
any material restriction, limitation, or condition 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? To what extent are those material
restrictions, limitations, or conditions misrepresented during the
advertising or marketing of the good or service?
5. How widespread is the practice of misrepresenting that a
consumer owes payment for any product or service the consumer did not
agree to purchase? To what extent are such claims made expressly in
written text or oral communications and to what extent are they made
indirectly?
6. How widespread is the practice of billing or charging consumers
for fees, interest, goods, services, or programs without the consumer's
express and informed agreement? To what extent are third parties
engaging in such practices, including add-ons and upsells to which
consumers did not agree?
7. How widespread is the practice of charging consumers for fees,
interest, goods, services, or programs that have little or no added
value to the consumer? Are there specific industries or market sectors
in which this practice occurs more often? How, if at all, should the
value of fees be defined or determined?
8. How widespread is the practice of charging fees for goods or
services that
[[Page 67421]]
consumers would reasonably assume to be included within the overall
advertised price? Are there specific industries or market sectors in
which this practice occurs more often? Please share any evidence of
consumer perception, such as copy tests or surveys.
9. How widespread is the practice of misrepresenting or failing to
disclose clearly and conspicuously on an advertisement or in marketing
the nature or purpose of any fee, interest, charge, or other costs? To
what extent are such claims made expressly and to what extent are they
made indirectly?
10. How widespread is the practice of misrepresenting that a fee or
charge is a mandatory fee, charge, or tax imposed by a government
entity? To what extent are such claims made expressly and to what
extent are they made indirectly?
11. How widespread is the practice of misrepresenting or failing to
disclose clearly and conspicuously fees or charges for terminating
services or contracts? To what extent are those fees misrepresented
expressly or indirectly during the marketing of a good or service?
12. For any practices discussed in Questions 1 through 11, above,
does the practice cause consumer injury? If so, what type of consumer
injury does it cause?
13. For each of the practices described in Questions 1 through 11,
above, are there circumstances in which such practices would not be
deceptive or unfair? If so, what are those circumstances, and could and
should the Commission exclude such circumstances from the scope of any
rulemaking? Why or why not?
14. Is there a need for new regulatory provisions to prevent the
practices described in Questions 1 through 11, above? If yes, why? If
no, why not?
15. How should a rule addressing the practices described in
Questions 1 through 11, above, be crafted to maximize the benefits to
consumers and to minimize the costs to legitimate businesses?
16. Should a rule addressing the practices described in Questions 1
through 11, above, require businesses to disclose in all advertising
one price that encompasses all mandatory component parts, otherwise
known as ``all-in pricing''? Why or why not? Should any such rule also
require that the advertised price include government-imposed taxes or
fees? Why or why not?
17. Should a rule addressing the practices described in Questions 1
through 11, above, forbid misrepresentations as to the nature,
optionality, value, price, recurrence, or other material features of
any fees? Why or why not?
18. Should a rule addressing the practices described in Questions 1
through 11, above, including any rule requiring disclosure of all-in
pricing, apply to all industries? Would such a rule be better if it
expressly applied only to certain industries? Are there any industries
for which such a rule should not apply? Why or why not?
19. How would a rule addressing the practices described in
Questions 1 through 11, above, intersect with existing industry
practices, norms, rules, laws, or regulations? Are there any existing
laws or regulations that would affect or interfere with the
implementation of a rule addressing the practices described in
Questions 1 through 11, above?
20. Should the Commission consider publishing additional consumer
and business education materials or hosting public workshops to reduce
consumer harm associated with the practices described in Questions 1
through 11, above? If so, what should such education materials include,
and how should the Commission communicate that information to consumers
and businesses?
21. Are there other commercial acts or practices involving junk
fees or hidden fees that are deceptive or unfair that should be
addressed in the proposed rulemaking? If so, describe the practices.
How widespread are the practices? Please answer Questions 12 through
20, above, with respect to these practices.
IV. Comment Submissions
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before January 9, 2023.
Write ``Unfair or Deceptive Fees ANPR, R207011'' on your comment. Your
comment--including your name and your state--will be placed on the
public record of this proceeding, including, to the extent practicable,
on the website <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Because of the public health protections and the agency's
heightened security screening, postal mail addressed to the Commission
will be subject to delay. We strongly encourage you to submit your
comments online through the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website. To
ensure the Commission considers your online comment, please follow the
instructions on the web-based form.
If you file your comment on paper, write ``Unfair or Deceptive Fees
ANPR, R207011'' on your comment and on the envelope, and mail your
comment to the following address: Federal Trade Commission, Office of
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex B),
Washington, DC 20580.
Because your comment will be placed on the public record, you are
solely responsible for making sure your comment does not include any
sensitive or confidential information. In particular, your comment
should not contain sensitive personal information, such as your or
anyone else's Social Security number; date of birth; driver's license
number or other state identification number or foreign country
equivalent; passport number; financial account number; or credit or
debit card number. You are also solely responsible for making sure your
comment does not include any sensitive health information, such as
medical records or other individually identifiable health information.
In addition, your comment should not include any ``[t]rade secret or
any commercial or financial information which . . . is privileged or
confidential''--as provided in Section 6(f) of the FTC Act, 15 U.S.C.
46(f), and Commission Rule 4.10(a)(2), 16 CFR 4.10(a)(2)--including in
particular competitively sensitive information such as costs, sales
statistics, inventories, formulas, patterns, devices, manufacturing
processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with Commission Rule 4.9(c), 16 CFR
4.9(c). In particular, the written request for confidential treatment
that accompanies the comment must include the factual and legal basis
for the request and must identify the specific portions of the comment
to be withheld from the public record. See Commission Rule 4.9(c). Your
comment will be kept confidential only if the General Counsel grants
your request in accordance with the law and the public interest. Once
your comment has been posted publicly at <a href="https://www.regulations.gov">https://www.regulations.gov</a>--
as legally required by Commission Rule 4.9(b), 16 CFR 4.9(b)--we cannot
redact or remove your comment, unless you submit a confidentiality
request that meets the requirements for such treatment under Commission
Rule 4.9(c), and the General Counsel grants that request.
Visit the Commission's website to read this document and the news
release describing it. The FTC Act and other laws the Commission
administers permit the collection of public comments to consider and
use in this proceeding as appropriate. The Commission will consider all
timely
[[Page 67422]]
and responsive public comments it receives on or before January 9,
2023. For information on the Commission's privacy policy, including
routine uses permitted by the Privacy Act, see <a href="https://www.ftc.gov/siteinformation/privacypolicy">https://www.ftc.gov/siteinformation/privacypolicy</a>.
By direction of the Commission, Commissioner Wilson dissenting.
April J. Tabor,
Secretary.
Note: the following statements will not appear in the Code of
Federal Regulations.
Statement of Chair Lina M. Khan
Today we are considering the publication of an advance notice of
proposed rulemaking to address the problem of junk fees. ``Junk fees''
are extra charges associated with unnecessary or worthless services.
Companies often fail to disclose these fees up front. Earlier this
week, the Commission announced a quintessential junk fee case.
According to the complaint, Passport Auto advertised a price for cars
that were certified, reconditioned, and inspected. But when people went
to buy a car, they were hit with charges for certification,
reconditioning, and inspection.
These types of extra or redundant fees can mislead consumers or
prevent them from knowing the true cost of a purchase until they've
already invested substantial time and energy. At that point, they may
feel like it's too late to walk away. Junk fees also prevent consumers
from making accurate price comparisons, which means they end up
spending more than they expected or wanted to.
These fees don't only harm consumers--they can also force honest
businesses to compete on an unfair playing field. A company selling a
widget for 25 dollars might lose sales to a company selling a
comparable widget for 20 dollars, plus a six-dollar widget-
certification fee tacked on at the end.
Junk fees have come to feel like an inevitable fact of life.
Consumer Reports found that eighty-two percent of those surveyed had
spent money on hidden fees in the previous year. In reality, there's
nothing inevitable about this.\1\ These fees are a surprisingly recent
phenomenon. So-called ``resort fees'' at hotels, for example, first
emerged in the late 1990s. By 2015, they accounted for one-sixth of
total hotel revenue. That's $2 billion per year.\2\ In higher education
and hospitality, fees are increasing faster than tuition or posted room
rates.\3\
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\1\ See Consumer Reports, WTFee Survey: 2018 Nationally
Representative Multi-Mode Survey 7 (2019), <a href="https://advocacy.consumerreports.org/wp-content/uploads/2019/09/2018-WTFee-Survey-Report-_-Public-Report-1.pdf">https://advocacy.consumerreports.org/wp-content/uploads/2019/09/2018-WTFee-Survey-Report-_-Public-Report-1.pdf</a>.
\2\ Nat'l Econ. Council, The Competition Initiative and Hidden
Fees 7-15 (2016), <a href="https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf">https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf</a>.
\3\ See Christopher Elliott, There May Be an End in Sight for
Controversial--And Often Invisible--Resort Fees, Wash. Post (June
16, 2016), <a href="https://www.washingtonpost.com/lifestyle/travel/there-may-be-an-end-in-sight-for-controversial-and-often-invisible-resort-fees/2016/06/16/101f6074-317e-11e6-8758-d58e76e11b12_story.html">https://www.washingtonpost.com/lifestyle/travel/there-may-be-an-end-in-sight-for-controversial-and-often-invisible-resort-fees/2016/06/16/101f6074-317e-11e6-8758-d58e76e11b12_story.html</a>;
Farran Powell & Emma Kerr, 11 Surprising College Fees You May Have
to Pay, U.S. News & World Report (Feb. 12, 2020), <a href="https://www.usnews.com/education/best-colleges/paying-for-college/slideshows/10-surprising-college-fees-you-may-have-to-pay">https://www.usnews.com/education/best-colleges/paying-for-college/slideshows/10-surprising-college-fees-you-may-have-to-pay</a>.
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The Commission has a long track record of taking action against
junk fees, and that deep experience would inform any potential
rulemaking we undertake here. The FTC has regulated junk fees in
sector-specific contexts, including telemarketing and funeral homes. It
has also brought many enforcement cases, including against junk fees on
prepaid phone cards, loan servicing, insurance-related products, and
more. Merchants are free to set prices for services rendered. But when
they add arbitrary, opaque fees that seem calibrated to squeeze more
money out of customers--sometimes without their knowledge, or once it
feels too late to back out--consumer protection laws can kick in.
Unfortunately, in areas where there is no specific rule or sector-
specific law, the Commission lacks authority to seek penalties against
violators or readily get financial compensation for victims. A forward-
looking rule classifying certain junk fees as unfair or deceptive could
give us that authority, allowing us to make wronged consumers whole and
to seek penalties from lawbreakers. That, in turn, would help create a
powerful deterrent against imposing junk fees. If we move forward with
considering a rulemaking, we will carefully review public comments when
deciding whether and how to craft a rule that would protect consumers
from these potentially unfair or deceptive practices.
In fact, the public has already played a key role. Last fall, the
Commission voted to make it easier for the public to submit petitions
to the FTC.\4\ One petition that came in concerned ``drip pricing,'' a
business practice companies can use to try and hide junk fees. That
petition helped spur the action we're announcing today. The goal of our
procedural change was to make the rulemaking process more open and
democratic, and I'm glad that we have been able to follow through.
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\4\ Press Release, Fed. Trade Comm'n, FTC Opens Rulemaking
Petition Process, Promoting Public Participation and Accountability
(Sept. 15, 2021), <a href="https://www.ftc.gov/news-events/news/press-releases/2021/09/ftc-opens-rulemaking-petition-process-promoting-public-participation-accountability">https://www.ftc.gov/news-events/news/press-releases/2021/09/ftc-opens-rulemaking-petition-process-promoting-public-participation-accountability</a>.
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I also want to extend my gratitude to staff for their hard work on
this effort. I strongly support moving forward with this ANPR and
beginning this process.
Statement of Commissioner Rebecca Kelly Slaughter
I'm sure that to the public some of the work we do at the
Commission can seem obscure--only affecting a part of the market they
don't really participate in. This matter is emphatically the opposite.
There is probably no greater and universal frustration in modern
American life than seeing an advertised price for a product or service
and then getting to the cashier or online payment page and seeing that
price balloon to what can feel like twice as much.
Unfair and deceptive pricing practices aren't just annoying, they
can prey on people's sunk costs in a transaction to squeeze even more
money out of them at the last minute--effectively raising prices
without appearing to do so. Empirical research on hidden fees and drip
pricing have suggested that these fees ``cause, or even trick, people
into buying things they would not otherwise.'' \1\ In a time when many
folks need to make hard choices about what to spend money on this kind
of deception is even more unconscionable.
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\1\ Nat'l Econ. Council, The Competition Initiative and Hidden
Fees 8 (2016), <a href="http://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf">http://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf</a>.
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These practices undermine effective competition as well. As I
mentioned during our vote for the Earnings Claims ANPR: Markets cannot
function effectively without honest and transparent pricing. A market
without transparent price signals can encourage deception and rent-
seeking incentivizing creative ways to extract wealth instead of
providing the goods and services people value.
The FTC has done great work in combating some of these practices.
We've addressed mobile cramming charges, phone card charges, and fees
in discount programs for goods and travel. We've also deployed our
existing rules to combat hidden fees in telemarking scams, funerals,
and to prevent companies from billing consumers without authorization.
But, as in other areas where we have opened a rulemaking inquiry, case-
by-case enforcement has not effectively deterred these practices. Our
inquiry into the prevalence and harms of practices like junk-fees,
drip-pricing, resort fees,
[[Page 67423]]
service fees, and others is as necessary as it is timely.
I want to thank BCP's Division of Advertising Practices and the
Office of the General Counsel for their partnership and hard work in
developing this ANPR. I look forward to hearing more from the public on
this matter.
Dissenting Statement of Commissioner Christine S. Wilson
Today the Commission votes to issue an advance notice of proposed
rulemaking to address how prices are conveyed to consumers. Before
discussing the substance of the ANPR, two procedural issues merit
attention. First, the ANPR is based on the submission of a petition for
rulemaking submitted by the Institute for Policy Integrity. I encourage
consumer and industry groups to monitor the FTC's rulemaking docket and
take seriously the public petitions that get published there--
yesterday's petition may very well become today's ANPR.
Second, I was given less than three weeks to consider a rulemaking
effort that, if adopted, could impact billions or even trillions of
dollars in commerce, as well as millions of consumers and companies. I
posed dozens of questions, many of which went unanswered. Today's
proposal could launch rules that regulate the way prices are conveyed
to consumers across nearly every sector of the economy. I understand
that President Biden referenced so-called ``junk fees'' in remarks to
the White House Competition Council on September 26, just three weeks
ago.\1\ Chair Khan sits on that Council. And I recognize that some of
these fees may be inadequately disclosed. But manufactured deadlines
based on our monthly open commission meeting schedule to demonstrate
that the Commission is in lockstep with the Biden Administration should
not override our obligation to exercise our significant authority in
sober and thoughtful ways. If FTC leadership truly believes that this
proposal will result in a rule, then it is irresponsible to shortchange
the Commission on the time required to perform our due diligence.
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\1\ Remarks by President Biden at the Third Meeting of the White
House Competition Council (referencing many industries that do not
fall within the FTC's jurisdiction) (Sept. 26, 2022), <a href="https://whitehouse.gov/briefing-room/speeches-remarks/2022/09/26/remarks-by-president-biden-at-the-third-meeting-of-the-white-house-competition-council/">https://whitehouse.gov/briefing-room/speeches-remarks/2022/09/26/remarks-by-president-biden-at-the-third-meeting-of-the-white-house-competition-council/</a>.
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There are kernels of utility in the ANPR that I had hoped to
explore with my fellow Commissioners and staff. I agree with ensuring
that consumers (1) have access to sufficient information to make
informed decisions and (2) are not charged for products or services
they did not agree to purchase. I would have looked more favorably on a
rulemaking effort narrowly focused on those issues, particularly where
we have an enforcement track record. But the version of the ANPR we
discuss today is sweeping in its breadth; may duplicate, or contradict,
existing laws and rules; is untethered from a solid foundation of FTC
enforcement; relies on flawed assumptions and vague definitions;
ignores impacts on competition; and diverts scarce agency resources
from important law enforcement efforts. For these reasons, I cannot
support the issuance of this ANPR.
Given my concerns, I would like to highlight issues on which
stakeholder input would be constructive.
Breadth
<bullet> The ANPR explicitly mentions pricing practices in a wide
array of industries, including auto financing, phone cards, fuel cards,
payday lending, telecommunications, live entertainment, travel
(including airlines, hotels, room-sharing, car rentals, and cruises),
higher education, financial products and services, telemarketing,
funeral services, publishing, insurance, and membership programs. Some
of these sectors fall outside the FTC's jurisdiction. Of course, it is
likely that a future rule will cover other industries not explicitly
discussed in the ANPR, including e-commerce, retail, food services,
healthcare, administration and business support, repair services,
dating services, apartment rentals, commercial leasing, warehousing,
logistics assistance, and professional and technical services. What
other markets or industries could be covered by an omnibus pricing
disclosure rule?\2\
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\2\ Trade associations and consumer groups should take a close
look at this ANPR to determine whether their members' practices
could be impacted by any future rule.
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<bullet> The GDP of the United States in 2021 totaled roughly $23
trillion dollars. What percentage of the goods and services for sale in
the United States would be covered by the ANPR?
<bullet> Given the potential scope of this rule, it appears likely
to be exercising a claim of authority that concerns an issue of ``vast
economic and political significance'' and thereby could implicate the
Major Questions Doctrine discussed in the recent Supreme Court
decision, West Virginia v. EPA.\3\ What precedent would support the
perspective that Congress has clearly empowered the FTC to promulgate a
rule that would regulate pricing disclosures for the breadth of good
and services identified in the ANPR?
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\3\ 142 S. Ct. 2587 (June 20, 2022).
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<bullet> Do pricing practices and fee disclosures vary across
industries and markets? How would a rule requiring that marketing
materials explain the purpose of any fees, interest, charges, or other
costs work with the FTC's approach to clear and conspicuous disclosures
across advertising mediums (e.g., mobile screens or television ads)?
Should the FTC mandate that marketing materials aimed at sophisticated
business consumers include the same breadth and depth of fee
disclosures as marketing materials targeting an individual consumer?
<bullet> Do consumer expectations about pricing practices and fee
disclosures for repair services differ from those for healthcare?
Across what sectors do consumers have homogenous expectations around
pricing and fee disclosures?
<bullet> Are the harms from inadequately disclosed fees or
illegitimate fees the same in all sectors? Do all industries lend
themselves to a uniform pricing regime?
Rule Duplication
<bullet> The ANPR appears to overlap with several existing
regulations related to advertising and disclosures enforced by the FTC
and/or other expert agencies. How would industry and markets determine
which rule controls should conflicts arise?
<bullet> How does this ANPR relate to the proposed Motor Vehicle
Dealers Trade Regulation Rule, approved by the Commission on June 23,
2022, which focuses on pricing practices and fee disclosures in the
automobile industry?
<bullet> The Truth in Lending Act (``TILA'') and Regulation Z
outline complex credit disclosure requirements for open and closed-end
credit, including advertisement terms that trigger disclosures about
fees, interest, charges, or other costs. This ANPR considers imposing
more stringent requirements by requiring disclosure of all fees,
interest, and charges regardless of whether the advertisement contains
trigger terms. Are there prevalent unfair or deceptive practices that
would support the FTC's adoption of more stringent advertising
requirements on the marketing of consumer products, e.g., an Xbox, than
the federal government imposes on the marketing of a home loan or
credit card?
<bullet> The FTC enforces several laws and rules that govern when
and how pricing information should be conveyed to
[[Page 67424]]
consumers, including the Telemarketing Sales Rule (``TSR''), the
Funeral Rule, the Restore Online Shoppers' Confidence Act (``ROSCA''),
and the Rule Concerning the Use of Prenotification Negative Option
Plans (``Negative Option Rule''). Is there evidence that we have been
unable to address specific types of deceptive and unfair pricing
practices, for example in the marketing of negative option
transactions, with these marketing-specific rules? Do we need a rule
that covers all transactions? If industry-specific rules have not
prevented harm from pricing practices, how would additional rules bring
about greater compliance?
<bullet> The Funeral Rule's goals are to lower barriers to price
competition in the funeral goods and services market and to facilitate
informed consumer choice. One way the Funeral Rule helps achieve these
goals is to require funeral providers to ``unbundle'' the goods and
services they sell and instead to offer them on an itemized basis. But
this ANPR takes the opposite approach by favoring up-front, all-in
pricing. How might this ANPR impact price transparency and competition?
Basis for the Rule
<bullet> Section 18 rules must be based on ``prevalent'' deceptive
or unfair practices. Notably, this ANPR references several potentially
deceptive and unfair fees that have been the subject of FTC workshops,
business guidance, and even investigations, but not enforcement
actions. Can the FTC meet the requisite showing of prevalence without
any underlying FTC enforcement?
<bullet> What evidence, beyond law enforcement, can be used to
demonstrate prevalence? Can a showing of prevalence be satisfied by a
workshop or roundtable? News articles?
Flawed Assumptions and Vague Definitions
<bullet> The ANPR defines the term ``junk fees'' to include ``fees
for goods or services that are deceptive or unfair . . . whether or not
the fees are described as corresponding to goods or services that have
independent value to the consumer.'' How should the Commission
determine whether fees correspond to goods and services that consumers
value? What percentage of consumers should be the threshold? A majority
of consumers? A significant minority?
<bullet> Do fees sometimes viewed as unnecessary by consumers
reflect attempts by businesses to recover incremental costs? Is it
reasonable for businesses to impose fees to recover incremental costs?
What percentage of incremental costs can a business recover before it
becomes a ``junk fee''?
<bullet> The ANPR defines ``junk fees'' to include ``goods or
services that consumers would reasonably assume to be included within
the overall advertised price.'' What evidence does the FTC need to
demonstrate consumer expectations about what services, products, or
fees are covered by a published price? Should the FTC be required to
demonstrate quantitative or qualitative measures of consumer
expectations?
<bullet> The ANPR defines ``hidden fees'' as fees that ``are
deceptive or unfair, including because they are disclosed only at a
later stage in the consumer's purchasing process or not at all.'' At
what point in a transaction should fees be disclosed to consumers? Is
disclosing a fee before a consumer makes a purchase too late? Should
disclosures occur at the same point in a transaction regardless of the
industry or market? Why or why not?
<bullet> The ANPR indicates that the Commission is exploring the
``costs and benefits of a rule that would require upfront inclusion of
any mandatory fees whenever consumers are quoted a price for a good or
service.'' How would this proposal work for dynamic fees, like shipping
and handling, that are based on consumer input?
<bullet> The ANPR asserts that ``junk fees . . . facilitate
inflation.'' What evidence points to a connection between fees and
inflation?
Impact on Competition
<bullet> To what extent does competition discipline suboptimal
pricing practices?
<bullet> Would a government requirement for all-in pricing
facilitate coordination among regulated companies in the same industry?
<bullet> Could a potential rule incentivize all-in pricing and the
bundling of products and services, which would then require consumers
to pay for goods and services they may not want or need?
Opportunity Costs
<bullet> In 2022, including proposals that I anticipate will be
voted out during the open Commission meeting, the FTC has initiated the
rulemaking process for a total of six new rules. These massive
regulatory undertakings require substantial FTC resources. To what
extent does our current rulemaking agenda divert resources from our
primary law enforcement mandate? Are there other risks associated with
our apparent attempt to become a powerful legislature?
[cir] Are there existing or emerging threats to consumers and
competition we are not pursuing because resources are focused on rules
instead of cases?
[cir] Will the credibility of the FTC be tarnished if we pursue
broad rulemaking efforts without qualitative and quantitative evidence
of consumer injury?
[FR Doc. 2022-24326 Filed 11-7-22; 8:45 am]
BILLING CODE 6750-01-P
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</html>Indexed from Federal Register on November 8, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.