Unfair or Deceptive Fees Trade Regulation Rule Commission Matter No. R207011, 67413-67424 [2022-24326]
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JS4.2840
Functional Test
The variable-pitch propeller system
must be subjected to the applicable
functional tests of this section. The
same propeller system used in the
endurance test of JS4.2839 must be used
in the functional tests and must be
driven by a representative engine on a
test stand or on the aircraft. The
propeller must complete these tests
without evidence of failure or
malfunction. This test may be combined
with the endurance test for
accumulation of cycles.
(a) Governing and reversible-pitch
propellers. Thirteen-hundred complete
cycles must be made across the range of
forward pitch and rotational speed. In
addition, 200 complete cycles of control
must be made from lowest normal pitch
to maximum reverse pitch. During each
cycle, the propeller must run for 30
seconds at the maximum power and
rotational speed selected by the
applicant for maximum reverse pitch.
(b) Feathering propellers. Fifty cycles
of feather and unfeather operation must
be made.
(c) An analysis based on tests of
propellers of similar design may be used
in place of the tests of this section.
Sec. 35.41
Overspeed and Overtorque
(a) through (b) [Applicable to JAS4–1]
Sec. 35.42 Components of the
Propeller Control System
A33.4 Airworthiness Limitations Section
(a) [Applicable to JAS4–1]
(b) [Not applicable to JAS4–1]
Appendix A2—Instructions for
Continued Airworthiness (Propellers)
AJS4.2801 General
(a) This appendix specifies requirements
for the preparation of Instructions for
Continued Airworthiness for the propellers
as required by JS4.1529.
(b) The Instructions for Continued
Airworthiness for the propeller must include
the Instructions for Continued Airworthiness
for all propeller parts.
(c) The applicant must submit to the FAA
a program to show how changes to the
Instructions for Continued Airworthiness
made by the applicant or by the
manufacturers of propeller parts will be
distributed, if applicable.
A35.2 Format
(a) through (b) [Applicable to JAS4–1]
A35.3 Content
(a) through (b) [Applicable to JAS4–1]
A35.4 Airworthiness Limitations Section
[Applicable to JAS4–1]
Issued in Washington, DC, on October 31,
2022.
Daniel J. Elgas,
Acting Deputy Director, Policy and Innovation
Division, Aircraft Certification Service.
[FR Doc. 2022–23962 Filed 11–7–22; 8:45 am]
BILLING CODE 4910–13–P
[Applicable to JAS4–1]
Sec. 35.43 Propeller Hydraulic
Components
FEDERAL TRADE COMMISSION
(a) through (b) [Applicable to JAS4–1]
Appendix A to Part 23—Instructions for
Continued Airworthiness
A23.1 through A23.3(g) and A23.4
[Applicable to JAS4–1]
A23.3(h) [Not applicable to JAS4–1]
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A33.3 Content
(a) and (b) [Applicable to JAS4–1]
(c) [Not applicable to JAS4–1]
16 CFR Part 464
Unfair or Deceptive Fees Trade
Regulation Rule Commission Matter
No. R207011
Federal Trade Commission
Advance notice of proposed
rulemaking; request for public
comment.
AGENCY:
Appendix A1—Instructions for
Continued Airworthiness (Electric
Engine)
ACTION:
AJS4.2701 General
(a) This appendix specifies requirements
for the preparation of Instructions for
Continued Airworthiness for the engines as
required by JS4.1529.
(b) The Instructions for Continued
Airworthiness for the engine must include
the Instructions for Continued Airworthiness
for all engine parts.
(c) The applicant must submit to the FAA
a program to show how the applicant’s
changes to the Instructions for Continued
Airworthiness will be distributed, if
applicable.
SUMMARY:
A33.2 Format
(a) through (b) [Applicable to JAS4–1]
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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
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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 https://
www.regulations.gov. 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
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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
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
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
1 Nat’l Econ. Council, The Competition Initiative
and Hidden Fees 7–15 (2016) (‘‘Competition
Initiative’’), https://obamawhitehouse.archives.gov/
sites/whitehouse.gov/files/documents/
hiddenfeesreport_12282016.pdf.
2 See Consumer Reports, WTFee Survey: 2018
Nationally Representative Multi-Mode Survey, at 7
(Jan. 3, 2019),
https://advocacy.consumerreports.org/wp-content/
uploads/2019/09/2018-WTFee-Survey-Report-_Public-Report-1.pdf.
3 See id. at 4.
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/theremay-be-an-end-in-sight-for-controversial--andoften-invisible--resort-fees/2016/06/16/101f6074317e-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), https://www.usnews.com/
education/best-colleges/paying-for-college/
slideshows/10-surprising-college-fees-you-mayhave-to-pay.
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), https://www.wsj.com/articles/waitertheres-a-fee-in-my-soup-11654139870.
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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, roomsharing, car rentals, and cruises.
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 priceobscuring 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 allin pricing, all members of the live event
7 Mary W. Sullivan, Fed. Trade Comm’n,
Economic Analysis of Hotel Resort Fees 37 (2017),
https://www.ftc.gov/system/files/documents/
reports/economic-analysis-hotel-resort-fees/
p115503_hotel_resort_fees_economic_issues_
paper.pdf.
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 LastSecond Fees (Feb. 9, 2021), https://
newsroom.haas.berkeley.edu/research/buyerbeware-massive-experiment-shows-why-ticketsellers-hit-you-with-hidden-fees-drip-pricing/
(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), https://www.washingtonpost.com/news/
grade-point/wp/2016/06/22/tuition-at-publiccolleges-has-soared-in-the-last-decade-but-studentfees-have-risen-faster/ (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).
9 Fed. Trade Comm’n, ‘‘That’s the Ticket’’
Workshop: Staff Perspective, 4 (May 2020).
10 Id.
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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.
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
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).
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.
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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
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
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
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).
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), https://www.federalregister.gov/documents/
2022/02/02/2022-02071/request-for-informationregarding-fees-imposed-by-providers-of-consumerfinancial-products-or.
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), https://www.governor.ny.gov/news/governorhochul-signs-legislation-targeting-unfair-ticketingpractices-live-event-industry; see also Anne Steele,
New York to Ban Hidden Fees in Live-Event
Ticketing, Wall St. J. (June 7, 2022), https://
www.wsj.com/articles/new-york-to-ban-hidden-feesin-live-event-ticketing-11654606800.
23 Council Directive 98/6, art. 2 and 4, 1998 O.J.
(L 80) 27 (EC), https://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=uriserv%3AOJ.L_
.1998.080.01.0027.01.ENG&toc=OJ%3AL%3A1998
%3A080%3ATOC.
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.
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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’’
Tex. May 4, 2016) (placing charges on consumers’
bills without authorization); Compl. at 3, FTC v. TMobile 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. Inc21.com 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), https://
www.federalregister.gov/documents/2022/07/13/
2022-14214/motor-vehicle-dealers-trade-regulationrule. 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
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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
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
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),
https://www.ftc.gov/news-events/news/pressreleases/2012/11/ftc-warns-hotel-operators-pricequotes-exclude-resort-fees-other-mandatorysurcharges-may-be.
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).
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).
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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).
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
37 See
15 U.S.C. 45(m)(1)(A).
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
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38 See,
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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)
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-ACar, 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., Inc21.com, 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), https://
www.ftc.gov/sites/default/files/documents/public_
statements/prepared-statement-federal-tradecommission-prepaid-calling-cards/
p074406prepaidcc_0.pdf (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), https://www.ftc.gov/sites/
default/files/attachments/press-releases/ftc-warnshotel-operators-price-quotes-exclude-resort-feesother-mandatory-surcharges-may-be/
121128hoteloperatorsletter.pdf (announcing
investigations into whether certain hotel operators
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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
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, consumerperception studies, and consumer
complaints.
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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
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’’).
46 See Inst. for Policy Integrity, Pet. for
Rulemaking Concerning Drip Pricing 1 (2021),
https://policyintegrity.org/documents/Petition_for_
Rulemaking_Concerning_Drip_Pricing.pdf (‘‘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), https://
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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 drippricing rulemaking, while the rest
supported granting the petition.
The petition argues that, by initially
withholding crucial pricing information,
sellers manipulate market pressures to
consumers’ detriment.50 Consumers
then cannot effectively comparisonshop 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
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
www.federalregister.gov/documents/2021/12/27/
2021-27435/petition-for-rulemaking-by-institute-forpolicy-integrity.
49 See Policy Integrity Pet. Rulemaking Dkt.
(‘‘Browse All Comments’’ tab), https://
www.regulations.gov/docket/FTC-2021-0074/
comments.
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.
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).
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67417
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 debtnegotiation 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
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
56 See Fed. Trade Comm’n, FTC Enforcement
Policy Statement on Deceptively Formatted
Advertisements 8 & n.29 (2015) (collecting such
cases), https://www.ftc.gov/system/files/documents/
public_statements/896923/151222deceptive
enforcement.pdf.
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), https://www.ftc.gov/
news-events/events-calendar/2012/05/economicsdrip-pricing.
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), https://www.ftc.gov/
news-events/news/press-releases/2012/11/ftcwarns-hotel-operators-price-quotes-exclude-resortfees-other-mandatory-surcharges-may-be.
62 14 CFR 399.84(a).
63 See Compl. at 1, D.C. v. Marriott International,
Inc. (D.C. Super. Ct. July 9, 2019), https://
oag.dc.gov/sites/default/files/2019-07/MarriottComplaint.pdf.
64 See Am. Compl. at 4, Nebraska v. Hilton
Dopco., Inc., No. CI 19–2366 (Lancaster Cty. Neb.,
July 24, 2019), https://hotellaw.jmbm.com/files/
2019/07/Nebraska-v-Hilton-resort-fee-complaint-724-19.pdf.
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), https://
www.sfcityattorney.org/2019/09/19/herrera-suesjustfly-and-flighthub-over-hidden-fees-and-otherpredatory-scams/.
66 Ltr. to Chairman Simons from Congressmen
Pallone and Pascrell (June 20, 2018), https://
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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
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
Policy Integrity proposes the
following rulemaking language:
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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
pascrell.house.gov/sites/pascrell.house.gov/files/ftc
%20letter%20on%20ticket%20sales_072018.pdf.
67 See Pet. at 7.
68 See id. at 10–24.
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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services, must be conspicuously disclosed in
the advertisement or solicitation.73
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
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
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
at 5.
Policy Integrity Pet. Rulemaking Dkt.
(‘‘Browse All Comments’’ tab), https://
www.regulations.gov/docket/FTC-2021-0074/
comments.
75 Cmt. of Policy Integrity on Pet. at 1 (Jan. 25,
2022), https://www.regulations.gov/comment/FTC2021-0074-0003.
76 Id.
77 Id. at 2 (quoting study).
78 Id.
79 Id.
80 Id.
81 Id. at 3.
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
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, nontransparent 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
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
73 Id.
82 Id.
74 See
83 Id.
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84 Id.
85 See Cmt. of Nat’l Ass’n of Ticket Brokers on
Pet. 1 (Jan. 26, 2022), https://www.regulations.gov/
comment/FTC-2021-0074-0024.
86 Id.
87 Id.
88 See id.
89 Cmt. of Nat’l Consumers League on Pet. 1 (Jan.
26, 2022), https://www.regulations.gov/comment/
FTC-2021-0074-0019.
90 See id.
91 Id. at 2.
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comment notes that, while drip pricing
is particularly prevalent in the liveevent, hotel, and airline industries,
other industries use drip pricing as
well.92
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
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
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
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
100 Id.
at 4.
of Consumer Reports on Pet. 1 (Jan. 26,
2022), https://www.regulations.gov/comment/FTC2021-0074-0023.
102 Id. at 2.
103 See Cmt. of TickPick, LLC on Pet. 1 (Jan. 26,
2022), https://www.regulations.gov/comment/FTC2021-0074-0026.
104 See Cmt. of TicketNetwork on Pet. 1 (Jan. 26,
2022), https://www.regulations.gov/comment/FTC2021-0074-0027.
105 Id.
106 Cmt. of TickPick at 1.
107 Id. at 1–2.
108 Id. at 2.
101 Cmt.
92 See
id. at 3.
of U.S. Public Interest Research Grp.
Educ. Fund on Pet. (Jan. 26, 2022), https://
www.regulations.gov/comment/FTC-2021-00740022.
94 Id.
95 See id.
96 See Cmt. of Travelers United, Inc. on Pet. (Jan.
26, 2022), https://www.regulations.gov/comment/
FTC-2021-0074-0021.
97 Id. at 2.
98 See id. at 2–3.
99 Id. at 3.
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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
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 straightforward 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
109 Id.
110 Cmt. of Colleen Welch on Pet. (Jan. 26, 2022),
https://www.regulations.gov/comment/FTC-20210074-0010.
111 Cmt. of Anonymous on Pet. (Jan. 26, 2022),
https://www.regulations.gov/comment/FTC-20210074-0016.
112 Cmt. of Amy Lebetsamer on Pet. (Jan. 26,
2022), https://www.regulations.gov/comment/FTC2021-0074-0008.
113 See Cmt. of Anonymous on Pet. (Jan. 26,
2022), https://www.regulations.gov/comment/FTC2021-0074-0025.
114 See Cmt. of Daniel Melling on Pet. (Jan. 26,
2022), https://www.regulations.gov/comment/FTC2021-0074-0011 (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.’’).
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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
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.
The Commission finds Policy
Integrity’s petition and the public
comments submitted in response to it
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116 Cmt.
of Janice Hough on Pet. (Jan. 26, 2022),
https://www.regulations.gov/comment/FTC-20210074-0012.
117 Cmt. of Scott Ogawa on Pet. (Jan. 26, 2022),
https://www.regulations.gov/comment/FTC-20210074-0020.
118 See generally Policy Integrity Pet. Rulemaking
Dkt. (‘‘Browse All Comments’’ tab), https://
www.regulations.gov/docket/FTC-2021-0074/
comments.
119 Cmt. of Ray Stevens on CFPB Request for Info.
Regarding Fees Imposed by Providers of Consumer
Fin. Prods. or Servs. (Feb. 17, 2022), https://
www.regulations.gov/comment/CFPB-2022-00030790.
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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.
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
120 See Fed. Trade Comm’n, Public Participation
in the Rulemaking Process, https://www.ftc.gov/
enforcement/rulemaking/public-participationrulemaking-process. 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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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
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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 governmentimposed 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
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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 https://
www.regulations.gov.
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 https://www.regulations.gov
website. To ensure the Commission
considers your online comment, please
follow the instructions on the webbased 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
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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 https://
www.regulations.gov—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
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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
https://www.ftc.gov/siteinformation/
privacypolicy.
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.
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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 widgetcertification 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
1 See Consumer Reports, WTFee Survey: 2018
Nationally Representative Multi-Mode Survey 7
(2019), https://advocacy.consumerreports.org/wpcontent/uploads/2019/09/2018-WTFee-SurveyReport-_-Public-Report-1.pdf.
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$2 billion per year.2 In higher education
and hospitality, fees are increasing
faster than tuition or posted room rates.3
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, insurancerelated 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
2 Nat’l Econ. Council, The Competition Initiative
and Hidden Fees 7–15 (2016), https://
obamawhitehouse.archives.gov/sites/
whitehouse.gov/files/documents/hiddenfeesreport_
12282016.pdf.
3 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/theremay-be-an-end-in-sight-for-controversial-and-ofteninvisible-resort-fees/2016/06/16/101f6074-317e11e6-8758-d58e76e11b12_story.html; Farran Powell
& Emma Kerr, 11 Surprising College Fees You May
Have to Pay, U.S. News & World Report (Feb. 12,
2020), https://www.usnews.com/education/bestcolleges/paying-for-college/slideshows/10surprising-college-fees-you-may-have-to-pay.
4 Press Release, Fed. Trade Comm’n, FTC Opens
Rulemaking Petition Process, Promoting Public
Participation and Accountability (Sept. 15, 2021),
https://www.ftc.gov/news-events/news/pressreleases/2021/09/ftc-opens-rulemaking-petitionprocess-promoting-public-participationaccountability.
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procedural change was to make the
rulemaking process more open and
democratic, and I’m glad that we have
been able to follow through.
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.
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,
1 Nat’l Econ. Council, The Competition Initiative
and Hidden Fees 8 (2016), https://
obamawhitehouse.archives.gov/sites/
whitehouse.gov/files/documents/hiddenfeesreport_
12282016.pdf.
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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.
There are kernels of utility in the
ANPR that I had hoped to explore with
my fellow Commissioners and staff. I
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), https://
whitehouse.gov/briefing-room/speeches-remarks/
2022/09/26/remarks-by-president-biden-at-thethird-meeting-of-the-white-house-competitioncouncil/.
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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
• 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, roomsharing, 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 ecommerce, 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
• 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?
• 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
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.
3 142 S. Ct. 2587 (June 20, 2022).
PO 00000
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Sfmt 4702
67423
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?
• 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?
• 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?
• 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
• 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?
• 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?
• 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?
• The FTC enforces several laws and
rules that govern when and how pricing
information should be conveyed to
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Federal Register / Vol. 87, No. 215 / Tuesday, November 8, 2022 / Proposed Rules
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 marketingspecific rules? Do we need a rule that
covers all transactions? If industryspecific rules have not prevented harm
from pricing practices, how would
additional rules bring about greater
compliance?
• 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?
lotter on DSK11XQN23PROD with PROPOSALS1
Basis for the Rule
• 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?
• 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
• 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?
• 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
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incremental costs? What percentage of
incremental costs can a business recover
before it becomes a ‘‘junk fee’’?
• 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?
• 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?
• 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?
• The ANPR asserts that ‘‘junk fees
. . . facilitate inflation.’’ What evidence
points to a connection between fees and
inflation?
Impact on Competition
• To what extent does competition
discipline suboptimal pricing practices?
• Would a government requirement
for all-in pricing facilitate coordination
among regulated companies in the same
industry?
• 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
• 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?
PO 00000
Frm 00028
Fmt 4702
Sfmt 4702
Æ Are there existing or emerging
threats to consumers and competition
we are not pursuing because resources
are focused on rules instead of cases?
Æ 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
FEDERAL TRADE COMMISSION
16 CFR Part 465
Trade Regulation Rule on the Use of
Reviews and Endorsements
Federal Trade Commission.
ACTION: Advance notice of proposed
rulemaking; request for public
comment.
AGENCY:
The Federal Trade
Commission (the ‘‘Commission’’)
proposes to commence a rulemaking
proceeding to address certain deceptive
or unfair uses of reviews and
endorsements. The Commission is
soliciting written comment, data, and
arguments concerning the need for such
a rulemaking to prevent unfair or
deceptive marketing utilizing reviews
and endorsements. In addition, the
Commission solicits comment on how
the Commission can ensure the broadest
participation by affected interests in the
rulemaking process.
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 ‘‘Reviews and
Endorsements ANPR, P214504’’ on your
comment, and file your comment online
at https://www.regulations.gov. 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:
Michael Ostheimer (202–326–2699),
mostheimer@ftc.gov, or Michael Atleson
(202–326–2962), matleson@ftc.gov,
Division of Advertising Practices,
Bureau of Consumer Protection, Federal
Trade Commission, Room CC–10603,
600 Pennsylvania Avenue NW,
Washington, DC 20580.
SUPPLEMENTARY INFORMATION:
SUMMARY:
E:\FR\FM\08NOP1.SGM
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]]>Agencies
[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 [www.gpo.gov]
[FR Doc No: 2022-24326]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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
https://www.regulations.gov. 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\
---------------------------------------------------------------------------
\1\ Nat'l Econ. Council, The Competition Initiative and Hidden
Fees 7-15 (2016) (``Competition Initiative''), https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf.
\2\ See Consumer Reports, WTFee Survey: 2018 Nationally
Representative Multi-Mode Survey, at 7 (Jan. 3, 2019), https://advocacy.consumerreports.org/wp-content/uploads/2019/09/2018-WTFee-Survey-Report-_-Public-Report-1.pdf.
\3\ See id. at 4.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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), https://www.usnews.com/education/best-colleges/paying-for-college/slideshows/10-surprising-college-fees-you-may-have-to-pay.
\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), https://www.wsj.com/articles/waiter-theres-a-fee-in-my-soup-11654139870.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\7\ Mary W. Sullivan, Fed. Trade Comm'n, Economic Analysis of
Hotel Resort Fees 37 (2017), https://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf.
\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), https://newsroom.haas.berkeley.edu/research/buyer-beware-massive-experiment-shows-why-ticket-sellers-hit-you-with-hidden-fees-drip-pricing/ (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), 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/ (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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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
[[Page 67415]]
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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), https://www.federalregister.gov/documents/2022/02/02/2022-02071/request-for-information-regarding-fees-imposed-by-providers-of-consumer-financial-products-or.
\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), https://www.governor.ny.gov/news/governor-hochul-signs-legislation-targeting-unfair-ticketing-practices-live-event-industry; see also Anne Steele, New York to Ban Hidden Fees in
Live-Event Ticketing, Wall St. J. (June 7, 2022), https://www.wsj.com/articles/new-york-to-ban-hidden-fees-in-live-event-ticketing-11654606800.
\23\ Council Directive 98/6, art. 2 and 4, 1998 O.J. (L 80) 27
(EC), 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.
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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.
Inc21.com 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), https://www.federalregister.gov/documents/2022/07/13/2022-14214/motor-vehicle-dealers-trade-regulation-rule. 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), 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.
\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., Inc21.com, 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), https://www.ftc.gov/sites/default/files/documents/public_statements/prepared-statement-federal-trade-commission-prepaid-calling-cards/p074406prepaidcc_0.pdf (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),
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
(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), https://policyintegrity.org/documents/Petition_for_Rulemaking_Concerning_Drip_Pricing.pdf
(``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), https://www.federalregister.gov/documents/2021/12/27/2021-27435/petition-for-rulemaking-by-institute-for-policy-integrity.
\49\ See Policy Integrity Pet. Rulemaking Dkt. (``Browse All
Comments'' tab), https://www.regulations.gov/docket/FTC-2021-0074/comments.
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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), https://www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf.
\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), https://www.ftc.gov/news-events/events-calendar/2012/05/economics-drip-pricing.
\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), 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.
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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), https://oag.dc.gov/sites/default/files/2019-07/Marriott-Complaint.pdf.
\64\ See Am. Compl. at 4, Nebraska v. Hilton Dopco., Inc., No.
CI 19-2366 (Lancaster Cty. Neb., July 24, 2019), https://hotellaw.jmbm.com/files/2019/07/Nebraska-v-Hilton-resort-fee-complaint-7-24-19.pdf.
\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), https://www.sfcityattorney.org/2019/09/19/herrera-sues-justfly-and-flighthub-over-hidden-fees-and-other-predatory-scams/.
\66\ Ltr. to Chairman Simons from Congressmen Pallone and
Pascrell (June 20, 2018), https://pascrell.house.gov/sites/pascrell.house.gov/files/ftc%20letter%20on%20ticket%20sales_072018.pdf.
\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), https://www.regulations.gov/docket/FTC-2021-0074/comments.
\75\ Cmt. of Policy Integrity on Pet. at 1 (Jan. 25, 2022),
https://www.regulations.gov/comment/FTC-2021-0074-0003.
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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), https://www.regulations.gov/comment/FTC-2021-0074-0024.
\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),
https://www.regulations.gov/comment/FTC-2021-0074-0019.
\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), https://www.regulations.gov/comment/FTC-2021-0074-0022.
\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),
https://www.regulations.gov/comment/FTC-2021-0074-0021.
\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),
https://www.regulations.gov/comment/FTC-2021-0074-0023.
\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),
https://www.regulations.gov/comment/FTC-2021-0074-0026.
\104\ See Cmt. of TicketNetwork on Pet. 1 (Jan. 26, 2022),
https://www.regulations.gov/comment/FTC-2021-0074-0027.
\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), https://www.regulations.gov/comment/FTC-2021-0074-0010.
\111\ Cmt. of Anonymous on Pet. (Jan.
