The Federal Trade Commission (FTC) has introduced new rules to combat hidden “junk fees” in the hospitality and entertainment industries, sparking debate about consumer protection and business practices.
At a Glance
- FTC announces bipartisan rule banning hidden junk fees for tickets and lodging
- Rule requires upfront disclosure of total prices, including mandatory fees
- Expected to save consumers $11 billion over the next decade
- Rule will become effective 120 days after publication in Federal Register
- Civil penalties for violations can reach $51,000 per day per violation
FTC Takes Aim at Deceptive Pricing Practices
In a move aimed at enhancing transparency in consumer transactions, the Federal Trade Commission has announced a bipartisan Junk Fees Rule. This regulation targets bait-and-switch pricing tactics in the live-event ticketing and short-term lodging industries, sectors that have long been criticized for surprising consumers with additional costs at checkout.
The new rule mandates that businesses present the total price, including all mandatory fees, more prominently than other pricing information. This approach doesn’t outlaw specific fees but ensures consumers have a clear understanding of the full cost from the outset. The FTC estimates this change will save consumers up to 53 million hours annually in comparison shopping, translating to approximately $11 billion in savings over the next decade.
Consumer Protection vs. Business Concerns
FTC Chair Lina M. Khan emphasized the importance of this rule in protecting consumers from unexpected expenses. She further urged state and federal policymakers to build on this initiative with legislation targeting unfair and deceptive junk fees across the economy.
“People deserve to know up-front what they’re being asked to pay—without worrying that they’ll later be saddled with mysterious fees that they haven’t budgeted for and can’t avoid,” said FTC Chair Lina M. Khan.
“The FTC’s rule will put an end to junk fees around live event tickets, hotels, and vacation rentals, saving Americans billions of dollars and millions of hours in wasted time. I urge enforcers to continue cracking down on these unlawful fees and encourage state and federal policymakers to build on this success with legislation that bans unfair and deceptive junk fees across the economy.”
However, the rule has not been without its critics. Commissioner Andrew Ferguson dissented in the 4-1 Commission vote, expressing concerns about the timing of the rule’s adoption. This dissent highlights the ongoing debate between consumer protection advocates and those who worry about potential unintended consequences for businesses.
Implementation and Enforcement
The Junk Fees Rule is set to take effect 120 days after its publication in the Federal Register. This gives affected businesses a window to adjust their pricing displays and internal systems to comply with the new regulations. The FTC has made it clear that it will enforce the rule through civil court actions, with the ability to refer serious cases to the Department of Justice.
Violations of the rule can result in substantial penalties, with civil fines potentially reaching $51,000 per day for each infraction.
CFC applauds @FTC , and particularly FTC Chair @linakhanFTC , for finalizing their Junk Fees Rule, which will provide consumers across the country additional transparent pricing information when they search for tickets or hotel rooms or vacation rentals. #ProtectConsumers https://t.co/m055HPiCLV
— Consumer Federation of California (@consumercal) December 17, 2024
It’s worth noting that some companies, particularly in California, have already adopted transparent fee practices due to existing state laws. This suggests that the transition may be smoother for businesses in certain regions, while others may face a steeper learning curve in adapting to the new federal standards.
