New FTC junk fees rule prohibits deceptive pricing

There’s not a lot of harmony in Washington, D.C., these days, but one issue managed to garner bipartisan support. The FTC’s new Junk Fees Rule prohibits bait-and-switch pricing and other tactics that hide total prices and bury junk fees in the live-event ticketing and short-term lodging industries.

The FTC says that consumers searching for hotels or vacation rentals or seats at a show or sporting event will no longer be surprised by “resort,” “convenience,” or “service” fees that are added to the advertised price. The Chair of the FTC said, “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 afford.”

The rule was passed after the agency received over 70,000 comments about how hidden and misleading fees affected personal spending and competition. It estimates the rule will save consumers over 50 million hours per year in wasted time searching for total prices, which it equates to more than $11 billion in time savings over the next ten years.

The rule doesn’t prohibit any fees, but says businesses should know that:

• Businesses selling live-event tickets and short-term lodging are covered. The final rule will apply to all businesses – including corporations, partnerships, associations, or any other entity or individual – offering, displaying, or advertising live-event tickets and short-term lodging. Tickets to concerts, sporting events, musicals, or other performing arts shows are all covered. And when it comes to short-term lodging, many kinds of temporary stays are covered. They include stays offered through platforms like Airbnb or VRBO, a few nights at a hotel, motel, or inn, or a week at a beach vacation rental. Although the rule doesn’t limit the definition of short-term lodging to a particular length of stay, the Commission has clarified that it does not cover long-term rental housing.
• Hidden fees are prohibited. The rule will require covered businesses to disclose the total prices upfront. That means ads must include the maximum total of all mandatory fees or charges people will have to pay, with limited exceptions.
• Misleading fees are prohibited. You can’t lie about the fees you charge. Tell the truth when it comes to fee-related information that matters, like what’s being charged and why, how much people will pay, and whether fees are refundable.
• Certain fees can be disclosed later in the transaction. Unless you say prices displayed are the final amount people will pay, you can omit certain charges you may not know up front. Examples of charges that you can disclose later include taxes, shipping, and fees for optional goods or services selected by the consumer as part of the same transaction. But, if you exclude these fees from your display prices, you still have to tell people about the fees, and be truthful about information like their nature, purpose, and amount, before you ask people to make a final payment.
• Business-to-business transactions are covered too. The final rule will protect all transactions for live-event tickets and short-term lodging, including where businesses are the consumers.

The original draft of the bill would have covered a wider array of businesses beyond live-event ticketing and short-term lodging, but other laws still prohibit them from deceiving consumers about fees and pricing.