FTC Cracks Down on Junk Fees: What You Need to Know About the New Ban

The Federal Trade Commission (FTC) has announced a groundbreaking new rule aimed at eliminating hidden fees and deceptive pricing practices in the live-event ticketing and short-term lodging industries. This bipartisan decision, known as the Junk Fees Rule, is set to revolutionize how businesses present pricing information to consumers, ensuring transparency and fairness in these sectors.

Key Points of the Junk Fees Rule

Under the new Junk Fees Rule, businesses are required to display the total price, including all mandatory fees, upfront whenever they advertise or show prices for tickets or lodging. The total price on display must be the most prominent figure in advertisements, ensuring that consumers can easily see the full cost at a glance. The goal is to prevent “bait-and-switch” tactics that lure consumers in by a low base price, only for them to discover additional charges later on that significantly increase the final cost.

The rule also addresses situations where certain fees might not be included. If businesses choose to exclude some fees, such as taxes or optional services, from the advertised price, they must clearly explain these additional costs before the consumer completes their payment. This includes providing details about the nature, purpose, and amount of any excluded fees.

The FTC's decision to implement this rule followed extensive public input, with over 72,000 total comments received regarding the impact of hidden fees on consumer spending and competition. The final rule reflects a commitment to protecting consumers from unfair practices while allowing businesses some flexibility in their pricing strategies.

The Impact on Consumers and Businesses

The FTC estimates that this new regulation could save consumers a substantial amount of time, around 53 million hours a year, by reducing the effort needed to search for and calculate total costs. This time savings is projected to be equivalent to more than $11 billion over the next decade, highlighting the significant impact this rule is expected to have on consumer experiences and decision-making in these industries.

The rule aims to level the playing field for honest businesses by eliminating unfair competition from those who use deceptive pricing tactics. It doesn’t forbid any specific types or amounts of fees, nor does it ban any particular pricing strategies. Instead, it focuses on ensuring that consumers receive truthful and transparent pricing information upfront.

Implementation and Scope of the Junk Fees Rule

The Junk Fees Rule will take effect 120 days after its publication in the Federal Register. This means that businesses in the live-event ticketing and short-term lodging industries will have approximately four months to adjust their pricing practices and ensure compliance with the new regulations. It’s worth noting that while it specifically targets these two industries, the FTC has stated that it will continue to pursue deceptive pricing practices in other industries through case-by-case enforcement.

While the rule has been finalized by the FTC, there are still some potential hurdles it may face. For instance, the new Congress could potentially invalidate the rule through the Congressional Review Act. Additionally, as with many new regulations, there's a possibility of legal challenges that could affect its implementation timeline.

Current Chair of the FTC, Lina M. Khan, emphasized the importance of this rule in the FTC press release, stating, “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.”

Khan’s tenure as FTC Chair is expected to come to an end in January 2025 when President-elect Donald Trump takes office. Khan's official term as commissioner ended in September 2024, but she stayed on under President Biden. President-elect Trump recently announced he has selected Andrew Ferguson, a current Republican FTC commissioner, to succeed Khan as the next FTC Chair.

Ferguson, who previously clerked for a Supreme Court Justice and advised Senate Republican Leader Mitch McConnell, was appointed to the FTC by President Biden in 2023 and confirmed by the Senate in March 2024. Trump praised Ferguson's "established history of opposing Big Tech censorship and safeguarding Freedom of Speech" in his announcement.

In addition to Ferguson's appointment, Trump has nominated Mark Meador, a partner at a specialized antitrust law firm and former advisor to a senator, to serve as a Republican commissioner on the FTC. These appointments signal a potential shift in the FTC's approach to antitrust enforcement and regulation of big tech companies, with Ferguson pledging to end what he calls Big Tech's "vendetta against competition.”

While the rule has been finalized by the FTC, there are still some potential hurdles it may face. For instance, the new Congress could potentially invalidate the rule through the Congressional Review Act. Additionally, as with many new regulations, there's a possibility of legal challenges that could affect its implementation timeline.