Trade Regulation Rule on Unfair or Deceptive Fees, 2066-2167 [2024-30293]
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Federal Register / Vol. 90, No. 6 / Friday, January 10, 2025 / Rules and Regulations
FEDERAL TRADE COMMISSION
16 CFR Part 464
RIN 3084–AB77
Trade Regulation Rule on Unfair or
Deceptive Fees
Federal Trade Commission.
Final rule.
AGENCY:
ACTION:
The Federal Trade
Commission (‘‘FTC’’ or ‘‘Commission’’)
is issuing a final trade regulation rule
entitled ‘‘Rule on Unfair or Deceptive
Fees’’ (‘‘rule’’ or ‘‘final rule’’) and
Statement of Basis and Purpose
addressing certain unfair or deceptive
practices involving fees or charges for
live-event tickets and short-term
lodging: bait-and-switch pricing that
hides the total price by omitting
mandatory fees and charges from
advertised prices; and misrepresenting
the nature, purpose, amount, and
refundability of fees or charges. The
final rule specifies that it is an unfair
and deceptive practice for businesses to
offer, display, or advertise any price of
live-event tickets or short-term lodging
without clearly, conspicuously and
prominently disclosing the total price.
The rule also requires businesses to
clearly and conspicuously make certain
disclosures before a consumer consents
to pay. The rule further specifies that it
is an unfair and deceptive practice for
businesses to misrepresent any fee or
charge in any offer, display, or
advertisement for live-event tickets or
short-term lodging.
DATES: This rule is effective May 12,
2025.
ADDRESSES: Copies of this document are
available on the Commission’s website,
www.ftc.gov.
FOR FURTHER INFORMATION CONTACT:
Janice Kopec or Annette Soberats,
Division of Advertising Practices,
Bureau of Consumer Protection, Federal
Trade Commission, 202–326–2550
(Kopec), 202–326–2921 (Soberats),
jkopec@ftc.gov, asoberats@ftc.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Statement of Basis and Purpose
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Table of Contents
I. Background
A. Advance Notice of Proposed
Rulemaking
B. Notice of Proposed Rulemaking
C. Informal Public Hearing
II. The Legal Standard for Promulgating the
Rule
A. Prevalence of Acts or Practices
Addressed by the Rule
B. Manner and Context in Which the Acts
or Practices Are Deceptive or Unfair
C. The Economic Effect of the Rule
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III. Section-by-Section Analysis
A. § 464.1: Definitions
1. Ancillary Good or Service
2. Business
3. Clear(ly) and Conspicuous(ly)
4. Covered Good or Service
5. Government Charges
6. Pricing Information
7. Shipping Charges
8. Total Price
(a) Mandatory Fees
(b) Maximum Total
(c) Itemization
(d) Exclusions From Total Price
(e) Intersection With IRS Requirements
B. § 464.2 Hidden Fees Prohibited
1. § 464.2(a)
(a) Contingent Fees
(b) Ticket Service Fees
(c) Credit Card and Other Payment
Processing Surcharges
(d) Dynamic Pricing and National
Advertising
(e) Rebates, Bundled Pricing, and Other
Discounts: Compliance When
Promotional Pricing Models Have
Different Fees
(f) Online Marketplaces
2. § 464.2(b)
3. § 464.2(c)
C. § 464.3 Misleading Fees Prohibited
D. § 464.4 Relation to State Laws
E. § 464.5 Severability
IV. Challenges to the FTC’s Legal Authority
To Promulgate the Rule
A. Major Questions Doctrine
1. The Rule Does Not Address a Major
Question
(a) The Commission Has a Long History of
Addressing Unfair or Deceptive Acts or
Practices Related to Pricing Information
(b) Commenters’ Claims About the Scope
of the Acts or Practices Covered by the
Rule Are Inapplicable or Overstated
2. Congress Provided the Commission With
a Clear Grant of Authority To Promulgate
This Rule
B. Non-Delegation Doctrine
C. First Amendment
1. Comments
2. Legal Standard
3. The Rule’s Disclosure Requirements Are
Constitutional Under Zauderer
4. The Rule Does Not Prohibit Truthful
Speech
5. The Rule’s Treatment of Credit Card
Fees and Government Charges Does Not
Violate the First Amendment
D. Commission Structure
E. Administrative Procedure Act
V. Final Regulatory Analysis Under Section
22 of the FTC Act
A. Concise Statement of the Need for, and
Objectives of, the Final Rule
B. Alternatives to the Final Rule the
Commission Considered, Reasons for the
Commission’s Determination That the
Final Rule Will Attain Its Objectives in
a Manner Consistent With Applicable
Law, and the Reasons the Particular
Alternative Was Chosen
C. The NPRM’s Preliminary Regulatory
Analysis
D. Significant Issues Raised by Comments,
the Commission’s Assessment and
Response, and Any Changes Made as a
Result
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1. Comments on Costs
(a) Public Comments: Estimated Costs Are
Too Low
(b) Public Comments: Unquantified Costs
to Firms
(c) Public Comments: Unquantified Costs
to Consumers
(d) Public Comments: Unquantified Costs
to Third Parties
(e) Public Comments: Costs From
Incorporating Contingent Fees Into Total
Price
2. Comments on Benefits
(a) Public Comments: Benefits Are Too
High
(b) Public Comments: Unquantified
Benefits
3. Comments on the Economy-Wide BreakEven Analysis
(a) Public Comments: Break-Even Analysis
Has Incorrect Assumptions or Contains
Errors
(b) Public Comments: Break-Even Analysis
Is Not Enough To Justify an EconomyWide Rule
(c) Public Comments: Break-Even Analysis
Is Satisfactory
E. Economic Regulatory Analysis of the
Final Rule’s Costs and Benefits
1. Economic Rationale for the Final Rule
(a) Shrouded Pricing as a Cause of Market
Failure
(b) Shrouded Pricing as a Source of Biased
Expectations
2. Economic Effects of the Final Rule
(a) General Benefits of the Final Rule
i. Reductions in Search Costs
ii. Reductions in Deadweight Loss
(b) Welfare Transfers
(c) General Costs of the Final Rule
3. Quantified Welfare Effects
(a) Quantified Compliance Costs
(b) Break-Even Analysis
i. Sensitivity Analysis: Assume Higher
Wage Rates
(c) Quantified Benefits and Costs: LiveEvent Ticketing Industry
i. Live-Event Ticketing: Estimated Benefits
of the Final Rule
(a) Consumer Time Savings When
Shopping for Live-Event Tickets
(b) Additional Unquantified Benefits:
Reductions in Deadweight Loss and
Abandoned Transactions
ii. Live-Event Ticketing: Estimated Costs of
the Final Rule
iii. Live-Event Ticketing: Net Benefits
iv. Live-Event Ticketing: Uncertainties
(d) Quantified Benefits and Costs: ShortTerm Lodging Industry
i. Short-Term Lodging: Estimated Benefits
of the Final Rule
(a) Search Statistics
(b) U.S. Hotels and Home Shares
(c) Foreign Hotels and Home Shares With
U.S.-Facing websites
(d) All Hotels and Home Shares
(e) Additional Unquantified Benefits:
Reductions In Deadweight Loss and
Abandoned Transactions
ii. Short-Term Lodging: Estimated Costs of
the Final Rule
(a) Panel A: U.S. Hotels and Home Share
Hosts
(b) Panel B: Foreign Hotels and Home
Share Hosts
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(c) Panel C: All Hotels and Home Share
Hosts (US + Foreign)
iii. Short-Term Lodging: Net Benefits
iv. Short-Term Lodging: Uncertainties
4. Economic Evaluation of Alternatives
5. Summary of Results
6. Appendix A: Model of Market Distortion
Caused by Drip Pricing
7. Appendix B: Short-Term Lodging
Industry Minutes per Listing
Calculations
(a) Low-End Estimate of Minutes per
Listing Calculation
(b) High-End Estimate of Minutes per
Listing Calculation
VI. Paperwork Reduction Act
A. Disclosures Related to Final § 464.2(a)
Through (c)
1. Number of Respondents
2. Estimated One-Time Hour Burden
3. Estimated One-Time Labor Costs
4. Estimated One-Time Non-Labor Costs
5. Projected Labor Costs Likely
Overestimated
B. Prohibited Misrepresentations Under
Final § 464.3
VII. Regulatory Flexibility Act—Final
Regulatory Flexibility Analysis
A. Statement of the Need for, and
Objectives of, the Rule
B. Significant Issues Raised by Comments,
the Commission’s Assessment and
Response, and Any Changes Made as a
Result
C. Comment by the Small Business
Administration, Office of Advocacy, the
Commission’s Assessment and Response,
and Any Changes Made as a Result
D. Description and Estimate of the Number
of Small Entities To Which the Rule Will
Apply
E. Description of the Projected Reporting,
Recordkeeping, and Other Compliance
Requirements
F. Discussion of Significant Alternatives
the Commission Considered That Would
Accomplish the Stated Objectives of the
Final Rule and That Would Minimize
Any Significant Economic Impact of the
Final Rule on Small Entities
VIII. Congressional Review Act
I. Background
When shopping for a good or service,
consumers want to know: how much? It
is a bedrock principle of FTC law that
price is material to a consumer’s
decision about whether to purchase a
good or service. Consumers look for
prices to comparison shop and to weigh
what a good or service might be worth.
Most consumers also rely on price to
answer critical budgeting questions
such as: Can I afford this hotel or shortterm rental for my upcoming vacation?
Can I afford these concert tickets?
Unfortunately, consumers face
widespread and growing unfair and
deceptive fee practices that make it
much harder to find out: how much will
this cost?
There is nothing new about
businesses using bait-and-switch tactics
to reel in and deceive consumers. The
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Commission has a long history of
bringing enforcement actions against
these unfair and deceptive practices.
Quoting a misleading, artificially low
price and then adding in mandatory fees
and other charges throughout the buying
process—a practice known today as drip
pricing—is a quintessential example of
bait-and-switch pricing and is a practice
that falls squarely within the scope of
the Commission’s long history of work
to protect consumers. While today this
practice goes by a different name, the
playbook has not changed: lure in
consumers with a low price, then hit
them with a higher price after they have
invested in the transaction and sunk
time and effort into trying to buy a good
or service for an illusory price.
Behavioral and economic research
explains that piecemeal numbers and
explanations cannot cure the deception
or mitigate the harms to consumers
when businesses employ these pricing
tactics. Often consumers finish the
transaction without an accurate
understanding of the total price of goods
or services.
In recent years, bait-and-switch
pricing has garnered widespread public
attention. Consumers have cried foul
when they discovered the cost of their
hotel stays were significantly higher
than expected due to a mandatory,
hidden ‘‘resort fee,’’ typically charged
for services that consumers expected to
be a part of staying in a hotel.
Consumers have also complained when
they tried to purchase tickets to a live
event, only to find out that the quoted
ticket price almost doubled by the time
they reached the final checkout page.
Consumers have confronted a host of
mysterious, mandatory, ‘‘convenience,’’
‘‘processing,’’ or ‘‘service’’ charges that
are either non-descript or otherwise
misleading. These practices are
frustrating for consumers when they
shop for travel and entertainment
especially because these purchases can
be significant expenditures. This
rulemaking record is replete with
individual stories of consumers
inundated by bait-and-switch pricing
and misleading fees and charges.
For example, an individual
commenter lamented the pervasiveness
of bait-and-switch pricing tactics across
everyday purchases:
Like almost every American consumer, I
have had to pay these ‘‘junk fees’’ in various
circumstances. I consider myself reasonably
well informed, yet have been surprised by
them, because they keep [c]ropping up in
unexpected places. Like many, I’ve
experienced them in hotels, with car rentals
and telecom providers. In these instances, the
consumer has no real recourse, as the
bargaining power is wholly unequal.
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However, these fees are now impacting every
aspect of commerce. ‘‘Convenience’’ fees
have impacted me with food service.
‘‘Facility’’ fees charges at fitness facilities.
Credit card fees in excess of the actual
interchange fees being charged at restaurants.
It’s endless, ubiquitous and makes it
extremely difficult for consumers to make
informed decisions.1
As another individual commenter
aptly put it, ‘‘It’s one thing to be on
guard when walking down a dark alley,
but being on guard every time you want
to take a vacation, go to a concert, fly
home to see a sick loved one—that’s just
not fair.’’ 2
It is no surprise that, once bait-andswitch pricing tactics are used by some
businesses to obscure the cost of a good
or service, they tend to spread.
Businesses that want to compete on the
true price of their offering are undercut
by businesses that use hidden or
misleading fees to display an artificially
low price. As studies confirm, in such
instances, consumers cannot shop for
price effectively. This forces businesses
into a race to the bottom and results in
more and more businesses using hidden
and misleading fees to remain
competitive. When these types of fees
are eventually revealed, consumers are
left frustrated with a new and
unexpected higher price and misleading
fees and charges that prevent them from
having a real understanding of what
they are getting in return for these
additional fees.
The Rule on Unfair or Deceptive Fees
addresses these problems directly in the
live-event ticketing industry and the
short-term lodging industry, which
includes temporary sleeping
accommodations at a hotel, motel, inn,
short-term rental, vacation rental, or
other place of lodging. These two
industries have engaged in bait-andswitch pricing tactics for years. The rule
ensures that when businesses advertise
a price for live-event tickets or shortterm lodging, it is the total price, and
when they explain a fee or charge, the
description is truthful. In simple terms:
tell consumers the real price and do not
lie about the fees or charges. The final
rule does this by addressing two specific
and prevalent unfair and deceptive
practices: (1) bait-and-switch pricing
that hides the total price of live-event
tickets and short-term lodging by
omitting mandatory fees and charges
from advertised prices, including
through drip pricing, and (2)
misrepresenting the nature, purpose,
amount, and refundability of fees or
charges. The rule has two main
1 FTC–2023–0064–0886
2 FTC–2023–0064–1576
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(Individual Commenter).
(Individual Commenter).
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components. First, the final rule
requires businesses that offer a price for
live-event tickets or short-term lodging
to disclose the total price, inclusive of
most mandatory charges, and to make
sure that the total price is disclosed
more prominently than other pricing
information, except the final amount of
payment. Second, the final rule
prohibits misrepresentations about fees
or charges in any offer, display, or
advertisement for live-event tickets and
short-term lodging.
The final rule is tailored to target
these specific unfair and deceptive
pricing practices, while preserving
flexibility for live-event ticket and shortterm lodging businesses. The rule does
not prohibit any one type of fee, nor
does it prohibit specific pricing
practices such as itemization of fees or
dynamic pricing. The rule does not
require that all fees be included when
offering a price—just mandatory ones.
The rule gives businesses discretion to
list optional fees selected by the
consumer and government and shipping
charges separately. The discretion to set
prices remains squarely with
businesses; the rule simply requires that
they tell consumers the truth about
prices for live-event tickets and shortterm lodging.
A. Advance Notice of Proposed
Rulemaking
The Commission published, on
November 8, 2022, an advance notice of
proposed rulemaking (‘‘ANPR’’) 3 under
the authority of section 18 of the Federal
Trade Commission Act (‘‘FTC Act’’) 4 to
address certain unfair or deceptive acts
or practices involving fees. The ANPR
described the Commission’s history of
taking law enforcement action against,
and educating consumers about, unfair
or deceptive practices relating to fees,
and it asked a series of questions to help
inform the Commission about whether
such practices are prevalent and, if so,
whether and how to proceed with a
notice of proposed rulemaking
(‘‘NPRM’’). The Commission was
particularly interested in the following
practices that it identified as the
subjects of investigations, enforcement
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3 Advance
notice of proposed rulemaking; request
for public comment: Unfair or Deceptive Fees Trade
Regulation Rule Commission Matter No. R207011,
87 FR 67413 (Nov. 8, 2022). The ANPR and other
documents pertaining to this rulemaking are
available on the FTC web page, Rulemaking: Unfair
or Deceptive Fees, https://www.ftc.gov/legal-library/
browse/rules/rulemaking-unfair-or-deceptive-fees.
4 15 U.S.C. 57a(b)(2). Section 18 authorizes the
Commission to promulgate, modify, or 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).
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actions, workshops, research, and
consumer education: (a)
misrepresenting or failing to disclose
clearly and conspicuously, on any
advertisement or in any marketing, the
total price of any good or service for
sale; (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; (c) misrepresenting or failing to
disclose clearly and conspicuously
whether fees, interest, charges,
products, or services are optional or
required; (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; (e) misrepresenting that a
consumer owes payments for any
product or service the consumer did not
agree to purchase; (f) billing or charging
consumers for fees, interest, goods,
services, or programs without express
and informed consent; (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; and (h)
misrepresenting or failing to disclose
clearly and conspicuously, on any
advertisement or in any marketing, the
nature or purpose of any fees, interest,
charges, or other costs.
The Commission specifically sought
public comment on the prevalence of
such practices and the costs and
benefits of a rule that would require
upfront inclusion of mandatory fees
whenever consumers are quoted a price,
including by asking a series of questions
to solicit data and commentary. The
Commission took comments for sixty
days, extended the comment period by
an additional thirty days,5 and carefully
considered the more than 12,000
comments received.6
B. Notice of Proposed Rulemaking
Based on the substance of the
comments received in response to the
ANPR, as well as the Commission’s
history of enforcement and other
5 Notice; extension of public comment period:
Unfair or Deceptive Fees Trade Regulation Rule, 88
FR 4796 (Jan. 25, 2023).
6 Publicly posted comments are available to view
through Regulations.gov under Docket ID FTC–
2022–0069 at https://www.regulations.gov/docket/
FTC-2022-0069/comments.
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information, on November 9, 2023, the
Commission published an NPRM,
which proposed an industry-neutral
rule that would prohibit
misrepresenting the total price of goods
or services by omitting mandatory fees
from advertised prices and
misrepresenting the nature and purpose
of fees.7 The NPRM described the
comments received in response to the
ANPR and examined the Commission’s
prior enforcement actions and other
responses concerning unfair and
deceptive fees. In the NPRM, the
Commission stated that it has reason to
believe that certain unfair or deceptive
acts or practices involving fees are
prevalent, specifically: (1)
misrepresenting the total price of goods
and services by omitting mandatory fees
from advertised prices and (2)
misrepresenting the nature and purpose
of fees. After discussing the comments
and explaining its considerations in
developing a proposed rule, the
Commission also posed specific
questions for comment and provided
explanation of the proposed rule text.
Finally, the NPRM set out the
Commission’s proposed regulatory text.8
The Commission took public comments
for sixty days, and extended the
comment period for an additional thirty
days.9
In response to the NPRM, the
Commission received over 60,800
comments from stakeholders
representing a wide range of viewpoints
and industries.10 These stakeholders
7 Notice of proposed rulemaking; request for
public comment: Trade Regulation Rule on Unfair
or Deceptive Fees, 88 FR 77420 (Nov. 9, 2023). In
accordance with section 18(b)(2)(C) of the FTC Act,
15 U.S.C. 57a(b)(2)(C), on October 10, 2023, the
Commission sent notices to the House Committee
on Energy and Commerce and the Senate
Committee on Commerce, Science and
Transportation seeking comment concerning the
utility and scope of the trade regulation rule
proposed in the NPRM and including the full text
of the NPRM.
8 NPRM, 88 FR 77483.
9 Notice of proposed rulemaking; extension of
public comment period: Trade Regulation Rule on
Unfair or Deceptive Fees, 89 FR 38 (Jan. 2, 2024).
10 Publicly available comments are available to
view through Regulations.gov under Docket ID
FTC–2023–0064 at https://www.regulations.gov/
document/FTC-2023-0064-0001/comment. As noted
on Regulations.gov, not every comment is made
publicly available. For example, ‘‘[a]gencies may
redact or withhold certain Comment Submissions
. . . , such as those containing . . . duplicate/near
duplicate examples of a mass-mail campaign.
Therefore, the total in the Number of Comments
Posted Box may be lower than the total in the
Comments Received Box.’’ See https://
www.regulations.gov/faq, Frequently Asked
Questions, General FAQs, Find Dockets,
Documents, and Comments FAQs, answer to How
are Comments counted and posted to
Regulations.gov?. In this rulemaking,
Regulations.gov identified ten mass-mail campaigns
as part of the total number of comments received
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included numerous individual
consumers and consumer groups who
described examples and experiences
with the unfair and deceptive fee
practices identified by the Commission.
Commenters also included a range of
business owners, trade associations, and
other industry groups; academics; and
government officials and agencies from
all levels of government. While some
commenters raised concerns and
recommended specific modifications to,
or exemptions from, the Commission’s
proposal, the overwhelming majority of
commenters strongly supported the
Commission’s proposed rule.
The proposed rule received
widespread support in comments from
Federal,11 State, and local 12 elected
officials; State Attorneys General; 13
of over 60,800. One mass-mail campaign alone
accounted for close to 48,200 comments, and all
mass-mail campaigns combined accounted for more
than 57,400 comments. Because comments within
each mass-mail campaign are highly similar, only
representative comments of each mass-mail
campaign are publicly posted on Regulations.gov.
In addition to representative mass-mail comments,
the more than 3,300 comments that Regulations.gov
did not identify as belonging to a mass-mail
campaign are publicly posted. The Commission
received and considered all filed comments,
including all mass-mail comments.
11 See, e.g., FTC–2023–0064–3135 (U.S. Senate,
Sen. Robert P. Casey, Jr.); FTC–2023–0064–3271
(U.S. Senate, Sen. Amy Klobuchar); FTC–2023–
0064–2858 (U.S. House of Representatives, Rep.
Maxwell Alejandro Frost, Rep. Jimmy Gomez, Rep.
Barbara Lee, Rep. Rashida Tlaib, Rep. Kevin Mullin,
Rep. Dwight Evans, Rep. Judy Chu, Rep. Greg Casar,
Rep. Dan Goldman, Rep. Salud Carbajal).
12 See, e.g., FTC–2023–0064–1411 (Arizona
House of Representatives, Rep. Analise Ortiz); FTC–
2023–0064–2938 (Colorado House of
Representatives, Rep. Naquetta Ricks); FTC–2023–
0064–2926 (Florida House of Representatives, Rep.
Rita Harris); FTC–2023–0064–3081 (Florida House
of Representatives, Rep. Anna V. Eskamani); FTC–
2023–0064–3103 (Florida House of Representatives,
Rep. Angela Nixon); FTC–2023–0064–3117
(Maryland House of Delegates, Del. Julie Palakovich
Carr); FTC–2023–0064–2341 (Massachusetts House
of Representatives, Rep. Lindsay Sabadosa); FTC–
2023–0064–3072 (Michigan Senate and House of
Representatives, Sen. Darrin Camilleri, Sen. Mary
Cavanagh, and Rep. Betsy Coffia); FTC–2023–0064–
3079 (Montana State Senate, Senate Democratic
Caucus, Sen. Pat Flowers, Sen. Susan Webber, Sen.
Andrea Olsen, Sen. Edie McClafferty, Sen. Jen
Gross, Sen. Janet Ellis, Sen. Shane Morigeau, Sen.
Ellie Boldman, Sen. Ryan Lynch, Sen. Christopher
Pope, Sen. Mike Fox, Sen. Denise Hayman, Sen.
Willis Curdy, and Sen. Mary Ann Dunwell); FTC–
2023–0064–3184 (New York Senate, Sen. Michael
Gianaris); FTC–2023–0064–3123 (Syracuse, New
York, City Auditor Alexander Marion); FTC–2023–
0064–3149 (North Carolina House of
Representatives, Rep. Julie von Haefen); FTC–2023–
0064–3237 (North Carolina House of
Representatives, Rep. Pricey Harrison).
13 See, e.g., FTC–2023–0064–3150 (Attorney
General of the State of California); FTC–2023–0064–
3215 (Attorneys General of the States of North
Carolina and Pennsylvania, along with Attorneys
General of the States or Territories of Arizona,
Colorado, Connecticut, Delaware, District of
Columbia, Hawaii, Illinois, Maine, Michigan,
Minnesota, New Jersey, New York, Oklahoma,
Oregon, Vermont, Washington, and Wisconsin).
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Federal,14 State, and local 15 government
agencies; public policy and consumer
advocates,16 including housing
advocates 17 and advocates for the
incarcerated or formerly incarcerated; 18
university public policy advocates and
clinics; 19 academics; 20 legal services
14 See, e.g., FTC–2023–0064–3134 (U.S.
Department of Transportation, Federal Motor
Carrier Safety Administration); FTC–2023–0064–
3187 (U.S. Department of Justice, Antitrust
Division).
15 See, e.g., FTC–2023–0064–1519 (New York City
Department of Consumer and Worker Protection);
FTC–2023–0064–2883 (District of Columbia, Office
of the People’s Counsel); FTC–2023–0064–3196
(South Carolina Department of Consumer Affairs).
16 See, e.g., FTC–2023–0064–1028 (Complex
Trauma Project); FTC–2023–0064–2885 (AARP);
FTC–2023–0064–3104 (Truth in Advertising, Inc.);
FTC–2023–0064–3160 (Consumer Federation of
America on behalf of itself and 51 other national
and State consumer advocacy groups, authored by
American Economic Liberties Project, Consumer
Action, Consumer Federation of America, National
Association of Consumer Advocates, National
Consumer Law Center, National Consumers League,
U.S. Public Interest Research Group); FTC–2023–
0064–3162 (BBB National Programs, Inc.); FTC–
2023–0064–3191 (Community Catalyst and 32 other
organizations focused on health care and consumer
protection issues); FTC–2023–0064–3205
(Consumer Reports); FTC–2023–0064–3216
(Demand Progress Education Fund); FTC–2023–
0064–3218 (National Consumer Law Center); FTC–
2023–0064–3242 (William E. Morris Institute for
Justice); FTC–2023–0064–3246 (Coalition for App
Fairness); FTC–2023–0064–3248 (DC Jobs With
Justice on behalf of Fair Price, Fair Wage Coalition);
FTC–2023–0064–3259 (National Women’s Law
Center); FTC–2023–0064–3270 (Consumer
Federation of America, National Consumer Law
Center, and National Association of Consumer
Advocates); FTC–2023–0064–3290 (U.S. Public
Interest Research Group Education Fund); FTC–
2023–0064–3302 (Public Citizen).
17 See, e.g., FTC–2023–0064–1431 (McPherson
Housing Coalition); FTC–2023–0064–2851 (Housing
Action Illinois); FTC–2023–0064–3102 (Corporation
for Supportive Housing); FTC–2023–0064–3235
(National Housing Law Project).
18 See, e.g., FTC–2023–0064–2915 (Voice of the
Experienced); FTC–2023–0064–2696 (Safe Return
Project); FTC–2023–0064–3253 (Fortune Society);
FTC–2023–0064–3260 (Formerly Incarcerated,
Convicted People & Families Movement, in
collaboration with the Partnership for Just
Housing); FTC–2023–0064–3283 (National
Consumer Law Center, Prison Policy Initiative, and
advocate Stephen Raher).
19 See, e.g., FTC–2023–0064–1939 (Tzedek DC,
David A. Clarke School of Law, University of the
District of Columbia); FTC–2023–0064–2888
(Housing Policy Clinic, University of Texas School
of Law); FTC–2023–0064–3146 (Institute for Policy
Integrity, New York University School of Law);
FTC–2023–0064–3255 (Carrie Floyd, Clinical
Teaching Fellow, Veterans Legal Clinic, and Mira
Edmonds, Clinical Assistant Professor of Law, CivilCriminal Litigation Clinic, University of Michigan
Law School); FTC–2023–0064–3275 (Berkeley
Center for Consumer Law & Economic Justice,
University of California, Berkeley School of Law,
and Consumer Law Advocates, Scholars & Students
Network); FTC–2023–0064–3268 (Housing &
Eviction Defense Clinic, University of Connecticut
School of Law).
20 See, e.g., FTC–2023–0064–1294 (James J.
Angel, Ph.D., CFP, CFA, Professor, Georgetown
University, McDonough School of Business); FTC–
2023–0064–1467 (Richard J. Peltz-Steele,
Chancellor Professor, University of Massachusetts
Law School).
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providers; 21 and industry members
from a broad range of market sectors,
including online merchants,22 liveevent ticketing,23 and hotels and other
short-term lodging.24 These commenters
supporting the rule confirmed the
prevalence of hidden and
misrepresented fees throughout the
economy, across large and small
industries subject to the Commission’s
jurisdiction, ranging, for example, from
travel, live events, restaurants, delivery,
rental housing, and correctional services
to carpet cleaning, dietary supplements,
moving companies, and gyms. These
commenters supported the rule for its
benefits to both consumers and honest
businesses.
Individual consumers
overwhelmingly supported the rule. Out
of 60,853 total comments received, a
mass mailing of close to 48,186
consumer commenters stated that they
supported ‘‘the FTC’s efforts to protect
American consumers and crack down
on unscrupulous businesses that tack on
junk fees at the end of the purchasing
process,’’ and urged the Commission ‘‘to
pass this rule to not only save
consumers tens of billions of dollars
each year, but to level the playing field
for honest businesses who are
transparent about their costs and
21 See, e.g., FTC–2023–0064–2862 (Legal Aid
Foundation of Los Angeles); FTC–2023–0064–2892
(Community Legal Services of Philadelphia); FTC–
2023–0064–2920 (Colorado Poverty Law Project);
FTC–2023–0064–3090 (Atlanta Legal Aid Society,
Inc.); FTC–2023–0064–3225 (CED Law); FTC–2023–
0064–3278 (Southeast Louisiana Legal Services).
22 See, e.g., FTC–2023–0064–2840 (Indie Sellers
Guild); FTC–2023–0064–2901 (E-Merchants Trade
Council, Inc.).
23 See, e.g., FTC–2023–0064–2856 (National
Football League); FTC–2023–0064–3108 (Christian
L. Castle, Esq.; Mala Sharma, President, Georgia
Music Partners; and Dr. David C. Lowery, founder
of musical groups Cracker and Camper Van
Beethoven, and a lecturer at the University of
Georgia Terry College of Business); FTC–2023–
0064–3122 (Vivid Seats); FTC–2023–0064–3195
(League of American Orchestras on behalf of itself
and Association of Performing Arts Professionals,
Carnegie Hall, Dance/USA, Folk Alliance
International, Future of Music Coalition, National
Performance Network, OPERA America, PAVA—
Performing Arts Venues Alliance, Performing Arts
Alliance, and Theatre Communications Group);
FTC–2023–0064–3212 (TickPick, LLC); FTC–2023–
0064–3230 (Future of Music Coalition); FTC–2023–
0064–3250 (National Independent Talent
Organization); FTC–2023–0064–3266 (StubHub,
Inc.); FTC–2023–0064–3292 (National Association
of Theatre Owners); FTC–2023–0064–3304
(Recording Academy); FTC–2023–0064–3306 (Live
Nation Entertainment and its subsidiary
Ticketmaster North America); FTC–2023–0064–
3105 (Charleston Symphony); FTC–2023–0064–
3241 (National Association of Ticket Brokers).
24 See, e.g., FTC–2023–0064–3077 (Far Horizons
Travel); FTC–2023–0064–3094 (American Hotel &
Lodging Association); FTC–2023–0064–3106
(American Society of Travel Advisors, Inc.); FTC–
2023–0064–3204 (Expedia Group); FTC–2023–
0064–3244 (Vacation Rental Management
Association).
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fees.’’ 25 Other mass mailings contained
similar comments in support. In a mass
mailing of about 344 comments,
consumer commenters made nearidentical statements to the
aforementioned mass mailing and
added: ‘‘Junk fees are monies a business
tacks on at the end of the purchasing
process instead of being transparent
about the full price upfront. These fees
are common when people are
purchasing airline and concert tickets,
booking hotel rooms, paying utility
bills, and renting apartments.’’ 26 A mass
mailing submitted by about 315
consumer commenters stated, ‘‘I support
cracking down on hidden junk fees that
cost Americans billions of dollars each
year.’’ 27 A mass mailing by about
nineteen consumer commenters stated,
‘‘For too long, individuals have been
subjected to misleading practices, such
as the omission of mandatory fees from
advertised prices and misrepresentation
of the nature and purpose of fees. These
practices not only erode trust but also
hinder informed decision-making by
consumers.’’ 28 A mass mailing by about
thirteen consumer commenters simply
urged: ‘‘Stop junk fees!’’ 29 Additional
comments from individual consumers
also supported the rule.
Other commenters opposed the rule,
sought exemptions from the rule, or
expressed concern about the rule’s
definitions or application to specific
pricing scenarios. They included a
Federal government agency; 30 national
business groups and public policy
advocates,31 including tax groups and
25 See, e.g., FTC–2023–0064–0962, FTC–2023–
0064–1186, FTC–2023–0064–1219, FTC–2023–
0064–1230, FTC–2023–0064–1826, FTC–2023–
0064–1827, FTC–2023–0064–1933, FTC–2023–
0064–1946.
26 See, e.g., FTC–2023–0064–2290.
27 See, e.g., FTC–2023–0064–3156.
28 See, e.g., FTC–2023–0064–2962.
29 See, e.g., FTC–2023–0064–2964.
30 U.S. Small Bus. Admin., Office of Advocacy,
Re: Trade Regulation Rule on Unfair or Deceptive
Fees FTC–2023–0064–0001, https://
advocacy.sba.gov/wp-content/uploads/2024/03/
Comment-Letter-Trade-Regulation-Rule-on-Unfairor-Deceptive-Fees.pdf.
31 See, e.g., FTC–2023–0064–2367 (Small
Business Majority); FTC–2023–0064–2887
(Progressive Policy Institute); FTC–2023–0064–2919
(National Automatic Merchandising Association);
FTC–2023–0064–3028 (Competitive Enterprise
Institute); FTC–2023–0064–3016 (National
Federation of Independent Business, Inc.); FTC–
2023–0064–3127 (U.S. Chamber of Commerce);
FTC–2023–0064–3128 (Merchants Payments
Coalition); FTC–2023–0064–3137 (Chamber of
Progress); FTC–2023–0064–3140 (Merchant
Advisory Group); FTC–2023–0064–3145
(Association of National Advertisers, Inc.); FTC–
2023–0064–3147 (American Land Title
Association); FTC–2023–0064–3173 (Center for
Individual Freedom); FTC–2023–0064–3186
(National LGBT Chamber of Commerce and
National Asian/Pacific Islander American Chamber
of Commerce & Entrepreneurship); FTC–2023–
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advisors; 32 academics; 33
representatives from auto dealers and
service providers; 34 app-based delivery
platforms; 35 financial and real estate
settlement services; 36 franchised
businesses; 37 representatives of housing
providers,38 including apartment
associations 39 and a housing
0064–3208 (FreedomWorks); FTC–2023–0064–3267
(National Retail Federation).
32 See, e.g., FTC–2023–0064–3100 (Civitas
Advisors, Inc.); FTC–2023–0064–3126 (Tax
Foundation); FTC–2023–0064–3258 (National
Taxpayers Union Foundation).
33 See, e.g., FTC–2023–0064–2891 (Mary
Sullivan, George Washington University, Regulatory
Studies Center); FTC–2023–0064–3264 (Mark J.
Perry, Ph.D., Professor Emeritus of Economics at
University of Michigan-Flint and Senior Fellow
Emeritus at the American Enterprise Institute).
34 See, e.g., FTC–2023–0064–3121 (National
Independent Automobile Dealers Association);
FTC–2023–0064–3189 (National Automobile
Dealers Association); FTC–2023–0064–3206 (Motor
Vehicle Protection Products Association,
Guaranteed Asset Protection Alliance, and Service
Contract Industry Council); FTC–2023–0064–3276
(Automotive Service Association).
35 See, e.g., FTC–2023–0064–3263 (Flex
Association); FTC–2023–0064–3202 (TechNet).
36 See, e.g., FTC–2023–0064–1425 (Iowa Bankers
Association); FTC–2023–0064–1941 (Independent
Bankers Association of Texas); FTC–2023–0064–
2574 (BattleLine LLC via Investor Protection
Initiative); FTC–2023–0064–2893 (America’s Credit
Unions); FTC–2023–0064–3119 (Money Services
Business Association, Inc.); FTC–2023–0064–3138
(Independent Community Bankers of America);
FTC–2023–0064–3139 (American Bankers
Association and Consumer Bankers Association);
FTC–2023–0064–3142 (American Escrow
Association); FTC–2023–0064–3144 (Mortgage
Bankers Association); FTC–2023–0064–3168
(American Financial Services Association); FTC–
2023–0064–3182 (Massachusetts Bankers
Association).
37 See, e.g., FTC–2023–0064–3141 (Coalition of
Franchisee Associations); FTC–2023–0064–3211
(American Association of Franchisees & Dealers);
FTC–2023–0064–3294 (International Franchise
Association).
38 See, e.g., FTC–2023–0064–3066 (Norhart, Inc.);
FTC–2023–0064–3115 (National Association of
Residential Property Managers); FTC–2023–0064–
3116 (Manufactured Housing Institute); FTC–2023–
0064–3133 (National Multifamily Housing Council
and National Apartment Association); FTC–2023–
0064–3152 (Building Owners & Managers
Association, Council for Affordable & Rural
Housing, Housing Advisory Group, Institute of Real
Estate Management, Manufactured Housing
Institute, National Apartment Association, National
Association of Home Builders, National Association
of Residential Property Managers, National Leased
Housing Association, National Multifamily Housing
Council, and Real Estate Roundtable).
39 See, e.g., FTC–2023–0064–2981 (Apartment &
Office Building Association of Metropolitan
Washington); FTC–2023–0064–3042 (Nevada State
Apartment Association); FTC–2023–0064–3044
(San Angelo Apartment Association); FTC–2023–
0064–3045 (Chicagoland Apartment Association);
FTC–2023–0064–3089 (Apartment Association of
Northeast Wisconsin and Fox Valley Apartment
Association); FTC–2023–0064–3111 (Houston
Apartment Association); FTC–2023–0064–3172
(New Jersey Apartment Association); FTC–2023–
0064–3296 (Bay Area Apartment Association);
FTC–2023–0064–3311 (Greater Cincinnati Northern
Kentucky Apartment Association); FTC–2023–
0064–3312 (Tulsa Apartment Association); FTC–
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advertising platform; 40 hospitality
groups, including hotel 41 and restaurant
associations; 42 funeral and cemetery
providers; 43 gaming associations; 44
telecommunications providers; 45 liveevent venues; 46 a law firm; 47 providers
of communications services to
incarcerated people; 48 and other
sectors.49 The commenters argued that
the FTC failed to establish the
prevalence of the defined unfair and
deceptive practices and failed to
conduct an adequate cost-benefit
analysis, and that the proposed rule
would interfere with established pricing
models, could not be applied to all
pricing scenarios, would overlap with
other laws and regulations, or would
exceed the FTC’s rulemaking authority
or jurisdiction.
Members of the restaurant industry
voiced opposition to the proposal. A
mass mailing from about 4,650
2023–0064–3313 (Property Management
Association of Michigan).
40 FTC–2023–0064–3289 (Zillow Group).
41 See, e.g., FTC–2023–0064–3262 (Skyscanner);
FTC–2023–0064–3293 (Travel Technology
Association).
42 See, e.g., FTC–2023–0064–2918 (Elite Catering
+ Event Professionals); FTC–2023–0064–3078
(Washington Hospitality Association); FTC–2023–
0064–3080 (UNITE HERE); FTC–2023–0064–3101
(High Road Restaurants); FTC–2023–0064–3180
(Independent Restaurant Coalition); FTC–2023–
0064–3197 (American Beverage Licensees); FTC–
2023–0064–3203 (American Pizza Community);
FTC–2023–0064–3219 (Georgia Restaurant
Association); FTC–2023–0064–3300 (National
Restaurant Association).
43 See, e.g., FTC–2023–0064–3065 (Carriage
Services, Inc.); FTC–2023–0064–3130 (International
Cemetery, Cremation & Funeral Association); FTC–
2023–0064–3210 (Service Corporation
International).
44 See, e.g., FTC–2023–0064–2886 (American
Gaming Association); FTC–2023–0064–3120
(Arizona Indian Gaming Association).
45 See, e.g., FTC–2023–0064–3261 (National
Association of Broadcasters); FTC–2023–0064–2884
(NTCA—The Rural Broadband Association); FTC–
2023–0064–3143 (ACA Connects—America’s
Communications Association); FTC–2023–0064–
3233 (NCTA—The internet & Television
Association); FTC–2023–0064–3234 (CTIA—The
Wireless Association); FTC–2023–0064–3295
(USTelecom—The Broadband Association).
46 See, e.g., FTC–2023–0064–3033 (The Rebel
Lounge, Lucky Man Concerts LLC, PHX Fest,
RelentlessBeats LLC).
47 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
48 See, e.g., FTC–2023–0064–3236 (NCIC Inmate
Communications); FTC–2023–0064–3284 (Global
Tel*link Corporation d/b/a ViaPath Technologies).
49 See, e.g., FTC–2023–0064–2906 (National
Association of College & University Business
Officers, American Council on Education); FTC–
2023–0064–3217 (Bowling Proprietors’ Association
of America); FTC–2023–0064–3249 (Marine
Retailers Association of the Americas); FTC–2023–
0064–3251 (National RV Dealers Association); FTC–
2023–0064–3269 (IHRSA—The Health & Fitness
Association). Towing & Recovery Association of
America, Inc. submitted a late comment, which the
Commission considered in its discretion and makes
available at https://www.ftc.gov/system/files/ftc_
gov/pdf/R207011TRAAComment.pdf.
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restaurant owners criticized the rule as
a one-size-fits-all approach that would
be unworkable for the restaurant
industry. In addition, members of the
rental housing industry also submitted
comments in opposition to the proposed
rule. A mass mailing from about 3,781
members of the rental housing industry
stated that it is virtually impossible to
predict and disclose in advertisements
total prices that include all mandatory
fees that residents could incur during
lease terms. The Commission does not
address the specific issues raised by
these industries and others that fall
outside the scope of this final rule.50
C. Informal Public Hearing
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On March 27, 2024, the Commission
published an initial notice of informal
hearing, which also served as the final
notice of informal hearing (‘‘Informal
Hearing Notice’’).51 The Informal
Hearing Notice was published in
accordance with section 18(b)(1) of the
FTC Act, 15 U.S.C. 57a(b)(1), which
requires the Commission to provide an
opportunity for an informal hearing in
section 18 rulemaking proceedings. The
Informal Hearing Notice identified eight
commenters to the NPRM that requested
an informal hearing in accordance with
the requirements of 16 CFR 1.11(e), as
well as nine additional commenters that
requested the opportunity to make an
oral presentation if the Commission was
to hold an informal hearing at others’
requests. A number of commenters,
including several who requested an
informal hearing, proposed potential
disputed issues of material fact for the
Commission’s consideration.52 The
Commission reviewed these potential
issues and concluded in its Informal
Hearing Notice that there were no
disputed issues of material fact to
resolve at the hearing.
On April 24, 2024, the Commission
conducted an informal public hearing.
In the Informal Hearing Notice, which
was formally approved by vote of the
Commission, the Commission’s Chief
Presiding Officer, the Chair, designated
the Honorable Jay L. Himes, an
Administrative Law Judge for the
50 See, e.g., FTC–2023–0064–2953, FTC–2023–
0064–2961, FTC–2023–0064–2972; FTC–2023–
0064–2971.
51 Initial notice of informal hearing; final notice
of informal hearing; list of Hearing Participants;
requests for submissions from Hearing Participants:
Trade Regulation Rule on Unfair or Deceptive Fees,
89 FR 21216 (Mar. 27, 2024).
52 See, e.g., FTC–2023–0064–3127 (U.S. Chamber
of Commerce); FTC–2023–0064–3143 (ACA
Connects); FTC–2023–0064–3139 (American
Bankers Association and Consumer Bankers
Association); FTC–2023–0064–3294 (International
Franchise Association); FTC–2023–0064–3233
(NCTA—The internet & Television Association).
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Federal Trade Commission, to serve as
the presiding officer of the informal
hearing. Seventeen interested parties
were identified in the Informal Hearing
Notice,53 and six of them made
documentary submissions in support of
their hearing testimony.54 Fifteen
interested parties made presentations,55
and two did not appear at the hearing.56
The majority of interested parties that
appeared spoke in support of the
proposed rule. However, several voiced
opposition to the rule, explained
perceived problems with the proposed
rule text, or argued that the Commission
incorrectly concluded that there were
no disputed issues of material fact
raised in response to the NPRM.
II. The Legal Standard for Promulgating
the Rule
The Commission is promulgating 16
CFR part 464 (‘‘final rule’’ or ‘‘rule’’)
pursuant to section 18 of the FTC Act,
15 U.S.C. 57a, which authorizes the
Commission to promulgate, modify, and
repeal trade regulation rules that define
with specificity acts or practices in or
affecting commerce that are unfair or
deceptive within the meaning of section
5(a)(1) of the FTC Act, 15 U.S.C.
45(a)(1).57 Whenever the Commission
promulgates a rule under section
18(a)(1)(B), the rule must include a
53 The interested parties were: ACA Connects—
America’s Communication Association; American
Bankers Association and Consumer Bankers
Association; U.S. Chamber of Commerce; NCTA—
The internet & Television Association; International
Franchise Association; BattleLine LLC; IHRSA—
The Global Health & Fitness Association; National
Taxpayers Union Foundation; Consumer Federation
of America, representing a coalition of 52 national
and state consumer advocacy groups; Consumer
Federation of America with National Consumer
Law Center and National Association of Consumer
Advocates; Community Catalyst, representing a
coalition of 33 health and consumer protection
advocacy groups; National Housing Law Project,
representing a coalition of 39 housing justice
advocacy organizations; National Consumer Law
Center, Prison Policy Initiative, and Stephen Raher;
Formerly Incarcerated, Convicted People & Families
Movement; Truth in Advertising, Inc.; National
Consumer Law Center; and Fair Price, Fair Wage
Coalition.
54 The interested parties that made documentary
submissions in connection with the informal
hearing were: National Taxpayers Union
Foundation; Community Catalyst; National Housing
Law Project; Consumer Federation of America; U.S.
Chamber of Commerce; and NCTA—The internet &
Television Association. Each of the documentary
submissions is posted in the Informal Hearing
Documents folder available at https://www.ftc.gov/
legal-library/browse/rules/rulemaking-unfair-ordeceptive-fees.
55 Transcript, Informal Hearing on Proposed
Trade Regulation Rule on Unfair or Deceptive Fees
(Apr. 24, 2024), https://www.ftc.gov/system/files/
ftc_gov/pdf/transcript-deceptive-fees.pdf.
56 American Bankers Association and Consumer
Bankers Association and the U.S. Chamber of
Commerce did not appear at the Informal Hearing
despite being given the opportunity to do so.
57 See 15 U.S.C. 57a(a)(1)(B).
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Statement of Basis and Purpose (‘‘SBP’’)
that addresses: (1) the prevalence of the
acts or practices addressed by the rule;
(2) the manner and context in which the
acts or practices are unfair or deceptive;
and (3) the economic effect of the rule,
taking into account the effect on small
businesses and consumers.58 The
Commission summarizes in this section
its findings regarding each of these
requirements.
Substantial evidence exists
supporting the prevalence of bait-andswitch pricing and misleading fees and
charges economy-wide as well as in the
live-event ticketing and short-term
lodging industries. As documented by
the rulemaking record, the
Commission’s work on these pricing
issues for over a decade, and the
complementary actions of the
Commission’s local, State, and
international counterparts, these
specific practices are widespread across
the economy and are harmful to
consumers and honest businesses.
Nevertheless, the Commission has
decided, in its discretion, to focus this
final rule on the industries in which the
Commission first evaluated drip
pricing—live-event ticketing and shortterm lodging—and have a long history
of harming consumers and honest
competitors.
The Commission notes that the harms
of bait-and-switch pricing and the
misrepresentation of fees and charges
are particularly pronounced in
industries such as these, in which most
transactions occur online. Consumers
trying to comparison shop across
multiple websites, or even on the same
website, when deciding what tickets to
purchase or where to travel are unable
to do so effectively because some
businesses hide the true total price and
instead force consumers to go to
different sites and click through
multiple web pages for each offer to
learn the true total price.
Consumer harm is also pronounced in
these industries because the offered
goods and services are often identical
(as is the case with live-event tickets),
or nearly identical (as is the case with
competing short-term lodging offers in a
particular destination and for a
particular star rating), and the most
salient feature is the total price, which
is shrouded from consumers. Indeed, for
some consumers, hotel rooms are
interchangeable so long as the location,
star rating, and reviews are similar
58 15 U.S.C. 57a(b)(3). In addition, section 22(b)(2)
of the FTC Act, 15 U.S.C. 57b–3(b)(2), requires the
Commission to prepare a final regulatory analysis,
which it discusses in section V.
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across offers, and what matters most is
the total price.
In the future, the Commission may
address these unfair and deceptive
practices across industries as discussed
in the NPRM. For now, however, the
Commission will address unfair and
deceptive pricing practices in other
industries using its existing section 5
authority.
A. Prevalence of Acts or Practices
Addressed by the Rule
As discussed herein, and in the
NPRM, the Commission finds that
unfair or deceptive pricing practices
involving bait-and-switch pricing and
misleading fees or charges are prevalent
throughout the economy and affect, or
have the potential to affect, virtually
every purchasing transaction a
consumer undertakes, including
decisions about basic goods or services;
where to live, dine, stay, or travel; and
what events to attend. Specifically, the
Commission finds that the following
unfair or deceptive practices relating to
fees are prevalent generally throughout
the economy and specifically in the
live-event ticketing and short-term
lodging industries: (1) bait-and-switch
pricing practices that hide the total
price of goods or services by omitting
mandatory fees and charges from
advertised prices, including through
drip pricing, and (2) misrepresenting the
nature, purpose, amount, and
refundability of fees or charges.
Section 18 of the FTC Act instructs
that the Commission may determine
that unfair or deceptive acts or practices
are prevalent if: ‘‘it has issued cease and
desist orders regarding such acts or
practices’’ or ‘‘any other information
available to the Commission indicates a
widespread pattern of unfair or
deceptive acts or practices.’’ 59 In
support of its preliminary finding that
these practices are prevalent, the NPRM
cited enforcement evidence, including
prior work by the Commission,
complementary actions by State
Attorneys General, private lawsuits, and
international actions to address unfair
or deceptive pricing practices, as well as
comments received in response to the
ANPR.60 The NPRM also described
59 15
U.S.C. 57a(b)(3).
88 FR 77435; see also, e.g., FTC–2022–
0069–6099 (ANPR) (Consumer Reports discussed its
WTFee?! Survey, 2018 Nationally-Representative
Multi-Mode Survey of hidden fees in multiple
sectors of the economy and the prevalence of unfair
or deceptive fees practices.); FTC–2022–0069–6095
(ANPR) (Consumer Federation of America noted
that the Washington Attorney General’s Hidden Fee
Survey showed that consumers experienced
unexpected fees in a wide range of industries.);
FTC–2022–0069–6113 (ANPR) (UnidosUS cited
surveys or studies by itself, the Financial Health
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legislative and regulatory action taken
by multiple States to address unfair or
deceptive fees.
To support its prevalence
determination herein as to the economy
generally, and as to the live-event
ticketing and short-term lodging
industries specifically, the Commission
reiterates that it has a long history of
enforcement actions, as well as a
plethora of other information, indicating
a widespread pattern of bait-and-switch
pricing practices, including drip pricing
and misleading fees or charges. In
addition, the Commission’s prevalence
determination is further supported by
the Commission’s workshops and
warning letters relating to bait-andswitch pricing and misleading fees or
charges; the behavioral and economic
research documenting consumer harm
from these practices; and consumer
surveys and reports. The Commission
also relies on the great majority of the
more than 60,800 comments filed in
response to the NPRM—one of the
largest number of comments filed in any
Commission rulemaking to date—
including comments by consumers,
consumer groups, academics,
businesses, and government officials
highlighting the prevalence of these
unfair and deceptive practices and
urging the Commission to promulgate a
final rule to combat them.
As explained in the NPRM, the
Commission has a long history of
enforcement actions targeting unfair and
deceptive bait-and-switch pricing tactics
concerning hidden fees 61 and
Network, and the Center for Responsible Lending
that documented the impact of fees related to
financial services products.).
61 See, e.g., Complaint ¶¶ 4–5, 106–14, FTC v.
Invitation Homes, Inc., No. 24–cv–04280 (N.D. Ga.
Sept. 24, 2024) (alleging that defendant, among
other deceptive and unfair practices, deceptively
advertised monthly home rental prices that omitted
and used confusing and buried language about
mandatory fees); Complaint ¶¶ 39–46, FTC v.
Vonage Holdings Corp., No. 3:22–cv–6435 (D.N.J.
Nov. 3, 2022) (alleging in part that defendant
charged undisclosed large cancellation fees);
Complaint ¶¶ 42–44, 50, United States v. Funeral
Cremation Grp. of N. Am., LLC (‘‘Legacy Cremation
Servs.’’), No. 0:22–cv–60779 (S.D. Fla. Apr. 22,
2022) (alleging defendants advertised artificially
low prices for cremation services which ultimately
included undisclosed additional charges and, in
some cases where consumers contested these
charges, defendants refused to return remains);
Complaint ¶ 9, FTC v. Liberty Chevrolet, Inc.
(‘‘Bronx Honda’’), No. 1:20–cv–03945 (S.D.N.Y.
May 21, 2020) (alleging defendants advertised low
sales prices but later told consumers they were
required to pay additional charges including
certification charges); Complaint ¶ 13, FTC v.
NetSpend Corp., No. 1:16–cv–04203 (N.D. Ga. Apr.
11, 2017) (alleging in part that defendant charged
maintenance and usage fees to consumers who were
unable to use all, or even a portion of, the funds
of their prepaid debit cards); see also Complaint
¶¶ 24–25, 29, 40–42, FTC v. AT&T Mobility LLC,
No. 3:14–cv–04785 (N.D. Cal. Oct. 28, 2014)
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misrepresentations regarding the nature
and purpose of fees.62 The takeaway
(alleging defendant did not adequately disclose the
limitations of defendant’s data plan offerings and
subsequently charged high cancellation fees for
consumers who chose to end their contracts);
Complaint ¶¶ 1, 26, 39–40, FTC v. Millennium
Telecard, Inc., No. 2:11–cv–02479 (D.N.J. May 2,
2011) (alleging defendants deceptively marketed
prepaid credit calling cards by failing to adequately
disclose fees that substantially limited the number
of minutes consumers had purchased); Complaint
¶ 15, FTC v. CompuCredit Corp., No. 1:08–cv–
01976 (N.D. Ga. June 10, 2008) (alleging in part that
defendants misrepresented the credit limits on
various credit cards and failed to disclose fees
charged upfront).
62 See, e.g., Complaint ¶¶ 4–5, 106–14, 118–23,
Invitation Homes, Inc., No. 24–cv–04280 (alleging
that defendant, among other deceptive and unfair
practices, misled consumers about fees by using
confusing and buried language); Complaint ¶¶ 39–
46, Vonage Holdings Corp., No. 3:22–cv–6435;
Complaint ¶¶ 61–63, FTC v. Benefytt Techs., Inc.,
No. 8:22–cv–1794 (M.D. Fla. Aug. 8, 2022) (alleging
in part that defendants bundled and charged fees
for unwanted products with sham health insurance
plans); Complaint ¶¶ 17–20, FTC v. Passport Auto
Grp., Inc., No. 8:22–cv–02670 (D. Md. Oct. 18, 2022)
(alleging in part that defendants advertised vehicle
prices that did not include redundant fees ranging
from hundreds to thousands of dollars for
inspection, reconditioning, preparation, and
certification); Complaint ¶¶ 3, 33, 41, FTC v. N. Am.
Auto. Serv., Inc. (‘‘Napleton Auto’’), No. 1:22–cv–
01690 (E.D. Ill. Mar. 31, 2022) (alleging defendants
charged consumers for additional products and
services without their consent and misrepresented
the fees as mandatory, resulting in artificially low
advertised prices); Complaint ¶¶ 50–51,
Amazon.com, Inc. (‘‘Amazon Flex’’), No. C–4746
(FTC June 9, 2021) (alleging respondents falsely
represented that 100% of tips would go to the
driver in addition to the pay respondents offered
drivers); Complaint ¶¶ 37–39, FTC v. Lead Express,
Inc., No. 2:20–cv–00840 (D. Nev. May 11, 2020)
(alleging in part that defendants did not clearly and
conspicuously disclose material information related
to the total amount of payments related to loans and
also withdrew significantly more than the stated
total cost of the loan from consumers’ accounts);
Complaint ¶¶ 9–10, FTC v. FleetCor Techs, Inc., No.
1:19–cv–05727, 2019 WL 13081514 (N.D. Ga. Dec.
20, 2019) (alleging defendants charged consumers
arbitrary and unexpected fees related to pre-paid
fuel cards without consumers’ consent); Complaint
¶¶ 4, 30–32, 36–37, FTC v. BCO Consulting Servs.,
Inc., No. 8:23–cv–00699 (C.D. Cal. Apr. 24, 2023)
(alleging defendants enticed consumers with false
promises to alleviate student loan debt despite not
applying any payments to the student loan balances
and collecting illegal advance fees without
providing any services); Complaint ¶¶ 31–36, FTC
v. OMICS Grp. Inc., No. 2:16–cv–02022 (D. Nev.
Aug. 25, 2016) (alleging in part defendants
misrepresented the publishing process of academic
papers and only disclosed large publishing fees
after notifying consumers that their papers had been
approved for publication); Complaint ¶¶ 12, 23–25,
FTC v. Lending Club Corp., No. 3:18–cv–02454
(N.D. Cal. Apr. 25, 2018) (alleging defendant
charged consumers an upfront fee based on a
percentage of the loan requested that was not
clearly and conspicuously disclosed; this hidden
fee caused loans received to be substantially smaller
than advertised); Complaint ¶ 37, FTC v. T-Mobile
USA, Inc., No. 2:14–cv–00967 (W.D. Wash. July 1,
2014) (alleging defendant added unauthorized
third-party charges to the telephone bills of
consumers); Amended Complaint ¶¶ 21–22, FTC v.
Websource Media, LLC, No. 4:06–cv–01980 (S.D.
Tex. June 21, 2006) (alleging defendants placed
charges on consumer telephone bills despite
representations that there would be no charges or
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from this enforcement history is clear—
businesses cannot hide or misrepresent
the true cost of a good or service or
mislead consumers about the nature,
purpose, amount, or refundability of
fees or charges. Some commenters
suggested consent orders are not ceaseand-desist orders that the Commission
can rely upon to support a finding of
prevalence, but that is incorrect. The
FTC Act makes clear when it intends to
exclude consent orders from the ambit
of ‘‘cease and desist orders,’’ and does
not do so in section 18.63
In addition to the Commission’s
enforcement actions, for more than a
decade, the Commission has engaged
with the public and issued guidance to
industry on issues related to bait-andswitch tactics, including drip pricing,
and the misrepresentation of fees or
charges. The Commission first engaged
with the public on the concept of drip
pricing in 2012 by convening a
obligations); FTC v. Mercury Mktg. of Del., Inc., No.
00–cv–3281, 2004 WL 2677177, *1 (E.D. Pa. Nov.
22, 2004) (finding defendants billed consumers
without their consent after misleading consumers
about introductory internet packages); Complaint
¶¶ 25–27, FTC v. Stewart Fin. Co., No. 1:03–cv–
02648 (N.D. Ga. Sept. 4, 2003) (alleging in part that
defendants package undisclosed add-on products
with consumer loans and in some cases describe
those add-on products as mandatory); Complaint
¶¶ 19–21, 24, FTC v. Hold Billing Serv., Ltd., No.
SA–98–CA–0629–FB (W.D. Tex. July 16, 1998)
(alleging defendants had previously added thirdparty charges to consumers’ phone bills without
permission by using sweepstakes entry forms as
contracts to authorize charges); Complaint ¶¶ 18,
33, 56–58, FTC v. Lake, No. 8:15–cv–00585–CJC–
JPR (C.D. Cal. Apr. 14, 2015) (alleging defendants
misrepresented that trial loan payments or
reinstatement fee payments would be held in
escrow and refunded to the consumer if the loan
modification was not approved); FTC v. Hope for
Car Owners, LLC, No. 2:12–CV–778–GEB–EFB,
2013 WL 322895, at *3–4 (E.D. Cal. Jan. 24, 2013)
(finding that the FTC sufficiently stated a claim for
misrepresentation of the refundability of vehicle
loan modification fees and entering default
judgment); Amended Complaint ¶¶ 38–39, 58–60,
FTC v. U.S. Mortg. Funding, Inc., No. 9:11–cv–
80155–JIC (S.D. Fla. July 26, 2011) (alleging
defendants misrepresented that an upfront loan
modification fee was refundable); FTC v. Nat’l Bus.
Consultants, Inc., 781 F. Supp. 1136, 1143 (E.D. La.
1991) (finding that ‘‘defendants’ misrepresentations
regarding the ease with which the ‘performance
deposit’ could be refunded composed a large part
of the various and sundry misrepresentations’’).
63 Compare 15 U.S.C. 45(m) (excluding consent
orders from the type of cease and desist orders that
could support an action for civil penalties under 15
U.S.C. 45(m)(1)(B)) and 108 Stat. 1691 (1994)
(amending 15 U.S.C. 45(m) to add ‘‘other than a
consent order’’ after the term ‘‘cease and desist
order’’) with 15 U.S.C. 57a(b)(3) (stating that the
Commission may make a determination of
prevalence if ‘‘it has issued cease and desist orders
regarding such acts or practices or any other
information available to the Commission
indicat[ing] a widespread pattern of unfair or
deceptive acts or practices’’). Even if consent orders
and the investigations that lead up to them are not
‘‘cease and desist orders,’’ in making a
determination of prevalence, the Commission can
still rely upon them as ‘‘other information.’’
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conference, titled ‘‘The Economics of
Drip Pricing,’’ to bring together
economists and marketing academics to
‘‘examine the theoretical motivation for
drip pricing and its impact on
consumers, empirical studies, and
policy issues pertaining to drip
pricing.’’ 64 Several psychological
theories were discussed at this
conference, and these theories explain
why consumers cannot reasonably avoid
making errors when the total price is not
revealed upfront.65 Following the
workshop, Commission staff sent
warning letters to hotels and online
travel agents that were not adequately
disclosing resort fees or including those
fees in the total price.66 These hotels
and online travel agents were employing
drip pricing tactics as well as another
bait-and-switch pricing tactic,
partitioned pricing, to inadequately
disclose resort fees and hide the total
price of a hotel stay. Partitioned pricing
consists of dividing a price into
multiple components without ever
disclosing the total and leaving
consumers to figure out the true total
price on their own. Hotels, for example,
might separately list the room rate and
‘‘resort fee’’ but never add them up and
quote an all-inclusive total price. In
2017, the Commission’s Bureau of
Economics published a report that
reviewed the existing literature on drip
pricing and partitioned pricing and
examined the costs and benefits of
disclosing hotel resort fees.67 The report
found that ‘‘[u]nless the total price is
disclosed up front, separating resort fees
from the room rate is unlikely to result
in benefits that offset the likely harm to
consumers.’’ 68 Specifically,
separating mandatory resort fees from posted
room rates without first disclosing the total
price is likely to harm consumers by
increasing the search costs and cognitive
costs of finding and choosing hotel
accommodations. Forcing consumers to click
through additional web pages to see a hotel’s
resort fee increases the cost of learning the
64 Fed. Trade Comm’n, The Economics of Drip
Pricing (May 21, 2012), https://www.ftc.gov/newsevents/events/2012/05/economics-drip-pricing.
65 See, e.g., Fed. Trade Comm’n, The Economics
of Drip Pricing: Conference Transcript 76–111 (May
21, 2012), https://www.ftc.gov/sites/default/files/
documents/public_events/economics-drip-pricing/
transcript.pdf.
66 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-excluderesort-fees-other-mandatory-surcharges-may-be.
67 Mary Sullivan, Fed. Trade Comm’n, Economic
Analysis of Hotel Resort Fees 4 (2017), https://
www.ftc.gov/system/files/documents/reports/
economic-analysis-hotel-resort-fees/p115503_hotel_
resort_fees_economic_issues_paper.pdf.
68 Id.
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2073
hotel’s price. Separating the room rate from
the resort fee increases the cognitive costs of
remembering the hotel’s price. When it
becomes more costly to search and evaluate
an additional hotel, a consumer’s choice is
either to incur higher total search and
cognitive costs or to make an incomplete, less
informed decision that may result in a more
costly room, or both.69
The report observed that hotels could
eliminate these costs to consumers by
including the resort fee in the advertised
price; bundling the same resort services
with the room and charging the same
total price; listing the components of the
total price separately, as long as the total
price is the most prominently disclosed
price; or changing to unbundled,
optional resort services which would
not be included in the advertised
price.70 Finally, the report did not find
‘‘any benefits to consumers from
separately-disclosed mandatory resort
fees that could not be achieved by first
listing the total price and then
disclosing the resort fee.’’ 71
In 2019, the Commission hosted a
workshop and issued a staff perspective
report that examined pricing and fees in
the live-event tickets market.72 The
report observed,
On most primary and resale
platforms, the ticket price a consumer
first sees is not what the consumer will
pay. Mandatory fees, such as ‘venue’
and ‘ticket processing’ fees, bulk up the
price–often by as much as thirty percent
. . . . The late disclosure of fees
increases search costs for consumers
and makes it harder to comparison
shop.73
The report remarked that ‘‘[a]ll of the
workshop panelists who discussed the
fees issue, including each participating
ticket seller that does not currently
provide upfront all-in pricing, favored
requiring all-in pricing through federal
legislation or rulemaking.’’ 74
The Commission’s finding of
prevalence is further supported by the
complementary enforcement actions
brought by its law enforcement partners,
most of which have resulted in orders
prohibiting bait-and-switch pricing and
misrepresenting fees and charges in the
short-term lodging, live-event ticketing,
delivery services, rental cars, travel, and
tax filing preparation services
69 Id.
70 Id.
71 Id.
72 Fed. Trade Comm’n, ‘‘That’s the Ticket’’
Workshop: Staff Perspective 4 (May 2020), https://
www.ftc.gov/system/files/documents/reports/thatsticket-workshop-staff-perspective/staffperspective_
tickets_final-508.pdf.
73 Id.
74 Id.
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industries.75 Indeed, a group of State
75 See, e.g., Complaint ¶ 3, Rhode Island v. UPP
Global, LLC, No. PC–2024–04453 (R.I. Super. Ct.
Aug. 13, 2024) (alleging in part that defendant
charges a fee as a tax, fails to disclose prices until
after consumers have elected to use defendant’s
service, and advertises hourly prices and then
requires consumers to pay for multiple hours at a
minimum); Complaint ¶¶ 3–4, District of Columbia
v. StubHub, Inc., No. 2024–CAB–004794 (D.C.
Super. Ct. July 31, 2024) (alleging defendant uses
drip pricing and entices consumers to shop for
tickets by displaying artificially low prices and
revealing mandatory fees later in the checkout
process which defendant also misrepresents the
purpose of); Consent Decree ¶¶ 10–24, Arizona v.
Cox Enterprises, Inc., No. CV–2023–019752 (Ariz.
Sup. Ct. Jan. 2, 2024) (alleging defendants failed to
disclose additional fees to consumers who
purchased services through long-term contracts
based on ‘‘price-lock’’ guarantee); Assurance of
Voluntary Compliance ¶ 2, Texas v. Marriott Int’l,
Inc., No. 2023–CI09717 (Tex. Dist. Ct. May 16,
2023) (alleging defendant misrepresented various
fees, including resort fees, and did not include all
mandatory fees in the advertised room rate in
violation of the Texas Deceptive Trade Practices
Act); Plaintiff’s Original Pet. ¶ 1, Texas v. Hyatt
Hotels Corp., No. C2023–0884D (TX. Dist. Ct. May
15, 2023) (alleging defendant did not include
mandatory fees in advertised room rates in violation
of the Texas Deceptive Trade Practices Act);
Consent Order ¶ 20, District of Columbia v.
Grubhub Holdings, Inc., No. 2022 CA 001199 B
(D.C. Super. Ct. Jan. 4, 2023) (alleging in part that
defendants misrepresented menu prices to
consumers and deceptively advertised that
consumers could ‘‘order online for free’’);
Assurance of Voluntary Compliance ¶ 4,
Commonwealth v. Omni Hotels Mgmt., GD–23–
013056 (Pa. Commw. Ct. Nov. 9, 2023) (alleging
defendants failed to advertise room prices including
mandatory fees, misleading consumers); Assurance
of Voluntary Compliance ¶ 2, Commonwealth v.
Choice Hotels Intl., Inc., GD–23–011023 (Pa.
Commw. Ct. Sept. 21, 2023) (alleging defendants
failed to advertise room prices including mandatory
fees misleading consumers); Assurance of
Voluntary Compliance ¶¶ 1–5, Commonwealth v.
RYADD, Inc., No. 2022–07262 (Pa. Commw. Ct.
Sept. 8, 2022) (alleging defendants failed to
advertise ticket prices including service fees and
failed to clearly disclose an itemization of the total
cost); Complaint ¶ 1, Commonwealth v. Mariner
Finance, LLC, No. 2:22–cv–03235–MAK (E.D. Pa.
Sept. 6, 2022) (alleging defendant charged
consumers for hidden add-on products without
consumer knowledge and in some cases after
explicit rejection); Consent Order ¶ 6, District of
Columbia v. Maplebear, Inc., No. 2020 CA 003777B
(D.C. Super. Ct. Aug. 19, 2022) (prohibiting
defendant from misrepresenting the nature and
purpose of fees applied to consumers’ orders);
Assurance of Voluntary Compliance ¶ 2,
Commonwealth v. Marriott Int’l, Inc., No. GD–21–
014016 (Pa. Ct. C.P. Nov. 16, 2021) (alleging
defendant misrepresented its room rates by failing
to include items such as mandatory fees in its
pricing); Consent Order ¶ 3.1–3.18, Drivo LLC, N.J.
Div. Consumer Aff. (Sept. 16, 2020) (prohibiting
unfair and deceptive practices relating to damage
fees and third party reservation fees for rental
vehicles); Press Release, Off. Minn. Att’y Gen.,
Attorney General Ellison Obtains Relief for More
than 30,000 Comcast/Xfinity Customers (Jan. 15,
2020) (alleging in part that defendants
misrepresented prices for their services and added
services without consumer consent), https://
www.ag.state.mn.us/Office/Communications/2020/
01/15_ComcastXfinity.asp; Press Release, Off.
Minn. Att’y Gen., Attorney General Ellison Obtains
Nearly $9 Million Settlement with CenturyLink for
Overcharging Minnesota Customers (Jan. 8, 2020)
(alleging defendant misrepresented the price of its
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Attorneys General wrote in support of a
finding of prevalence of these practices
across industries, including event ticket
sellers, and hotels and other short-term
lodging providers.76 They have
attempted to address some, but not all,
of these fees in their own States.77 The
State Attorneys General cited a number
of cases across industries demonstrating
that bait-and-switch pricing and
misleading fees are ‘‘a chronic, prolific
problem confronting many consumers
across numerous sectors of the
economy.’’ 78 Further, they agreed with
the Commission’s assertion that
‘‘charges that misrepresent their nature
and purpose are unfair and deceptive
because they mislead consumers and
make it more difficult for truthful
businesses to compete on price.’’ 79 The
Commission takes note of legislative
and regulatory efforts in Minnesota,
California, Pennsylvania, New York,
Massachusetts, and North Carolina to
combat hidden and misleading fees 80
services and used a complex pricing scheme to
mislead consumers), https://www.ag.state.mn.us/
Office/Communications/2020/01/08_
CenturyLinkSettlement.asp.; Assurance of
Voluntary Compliance ¶¶ 1–12, Commonwealth v.
Event Ticket Sales, LLC, No. 201101873 (Pa.
Commw. Ct. Nov. 19, 2020) (alleging defendants
failed to advertise ticket prices including service
fees and failed to clearly disclose an itemization of
the total cost); Assurance of Voluntary Compliance
¶ 7, CenturyLink, Inc., No. 19–CV–56401 (Or. Cir.
Ct., 2019) (alleging defendants charged undisclosed
fees and failing to disclose all mandatory fees and
charges); Agreed Final J. ¶ 8, Texas v. Guided
Tourist, LLC, No. D–1–GN–19–001618 (Tex. Dist.
Ct. Mar. 26, 2019) (enjoining defendant from
advertising ticket prices other than the total ticket
price, including all mandatory fees); Settlement
Agreement ¶ 8(b)–(c), Florida v. Dollar Thrifty Auto.
Grp., Inc., No. 16–2018–cv–005938 (Fla. Cir. Ct.,
Jan. 14, 2019) (alleging in part that defendant
misrepresented optional charges as mandatory and
did not sufficiently disclose toll-related fees).
Additionally, Intuit recently entered a multistate
settlement of allegations that it misrepresented its
tax filing products would come at no cost.
Assurance of Voluntary Compliance,
Commonwealth v. Intuit Inc., No. 220500324 (Pa.
Ct. C.P. May 4, 2022).
76 FTC–2023–0064–3215 (Attorneys General of
the States of North Carolina and Pennsylvania,
along with Attorneys General of the States or
Territories of Arizona, Colorado, Connecticut,
Delaware, District of Columbia, Hawaii, Illinois,
Maine, Michigan, Minnesota, New Jersey, New
York, Oklahoma, Oregon, Vermont, Washington,
and Wisconsin). The Attorneys General also
pointed to prevalence of these practices in
residential leasing, payday lending, internet
applications, online shopping, automobile rentals,
carpet cleaners, dietary supplement sellers, moving
companies, gyms, travel companies, outlet stores,
and online auctions.
77 Id. (The Attorneys General highlighted actions
each has taken in their own states to address
financial services fees, hotel fees, live-event ticket
fees, rental housing fees, auto rental fees, and
telecommunication fees.)
78 Id.
79 Id.
80 N.Y. Arts & Cult. Aff. Law sec. 25.01–25.33
(McKinney 2023) (Effective Jun. 30, 2022) (requiring
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which further support its finding of
prevalence.
Comments submitted by Federal and
State elected officials echoing the
widespread practice of misleading
consumers about total prices and fees or
charges further strengthen the
Commission’s prevalence finding. For
example, U.S. Senator Amy Klobuchar
stated that she held a hearing focusing
on the lack of transparency in the liveevent ticketing industry as well as a
hearing on fees in the rental housing
market that prevent renters from having
meaningful opportunities to compare
prices.81 U.S. Senator Robert Casey
discussed a report released on January
24, 2024, ‘‘Additional Charges May
Apply: How Big Corporations Use
that the sellers and resellers of live-event tickets
disclose the total cost of a ticket, upfront, and
clearly and conspicuously disclose the amount of
the price that is made up of fees and other charges);
An Act Ensuring Transparent Ticket Pricing, H.
259, 193rd Gen. Court (Mass. 2023) (proposed
legislation requiring in part that the sellers and
resellers of live-event tickets disclose the total cost
inclusive of all ancillary fees that must be paid and
the portion of the ticket price that represents a
service charge or any other fee or surcharge); H.B.
714 (2023–2024 Session) (N.C. 2023) (proposed
legislation that requires, among other things, that
providers of short-term lodging and live-event
ticketing clearly display the total price of goods and
services inclusive of mandatory fees a consumer
would incur during a transaction); see also 2023
Minn. H.B. 3438 (Enacted May 20, 2024) (stating
that it is a deceptive trade practice for a business
to not include all mandatory fees or surcharges
when advertising, displaying or offering a price for
goods or services); Cal. S.B. 478 (2023–2024 Regular
Session) (Enacted Oct. 7, 2023) (amending the
California Consumer Legal Remedies Act to state
that it is unlawful to advertise, display, or offer a
price for a good or service that does not include all
mandatory fees or charges other than taxes or fees
imposed by a government on the transaction); Cal.
S.B. 1524 (2023–2024 Regular Session) (clarifying
and amending S.B. 478 to include that additional
fees such as service charges for food services
businesses including bars and restaurants could
appear separately so long as they were displayed on
the menu); H.B. 636 (2023–2024) (Pa. 2023)
(Engrossed Oct. 19, 2023) (proposed legislation
amending the Pennsylvania Unfair Trade Practices
and Consumer Protection Law to require the
disclosure of all mandatory fees and charges
included in the advertised and displayed price of
any good or service); Conn. Gen. Stat. sec. 53–289a
(2023) (requiring conspicuous disclosure in the
advertisement of total price of live-event tickets
including service charges); Conn. Gen. Stat. sec. 53–
289a (2023) (requiring conspicuous disclosure in
the advertisement of total price of live-event tickets
including service charges); SB 329 (2024 Reg. Sess.)
(Md.) (requiring all-in pricing throughout the
purchase process of a live-event ticket); SB 329
(2024 Reg. Sess.) (Md.) (requiring all-in pricing
throughout the purchase process of a live-event
ticket); 1510 Mass. Reg. 5 (Dec. 8, 2023) (Proposed
Regulations 940 C.M.R. 38.00: Unfair and Deceptive
Fees) (proposed regulation stating that it is an
unfair and deceptive practice to misrepresent or fail
to disclose at the time of initial presentation of the
price of any product the total price of that product
inclusive of all fees, interest, charges, or other
expenses necessary or required in order to complete
the transaction).
81 FTC–2023–0064–3271 (U.S. Senate, Sen. Amy
Klobuchar).
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Hidden Fees to Nickel, Dime, and
Deceive American Families,’’ tracking
the variety of junk fees facing
Pennsylvania families, including in the
short-term lodging industry.82 A group
of Congressional representatives raised
concerns regarding misleading fees and
a lack of price transparency in the rental
housing market.83 Concerns over unfair
and deceptive pricing were also raised
by a variety of State legislators and
officials.84 There has also been
significant bipartisan interest in passing
legislation targeting fees in the liveevent ticketing and short-term lodging
industries.85
The Commission also takes notice of
the work of its international
counterparts, as well as private lawsuits
in the United States concerning unfair
and deceptive fee practices. Regulatory
actions in Canada, Australia, the
European Union, and the United
Kingdom with respect to such conduct
include paragraph 74.01(1.1) of the
Canadian Competition Act,86 the
Australian Competition and Consumer
Protection Act of 2010,87 EU Directive
2005/29/EC of the European Parliament
and of the Council,88 and the UK Digital
Markets, Competition and Consumers
Act 2024.89 In addition, private lawsuits
82 FTC–2023–0064–3135 (U.S. Senate, Sen.
Robert P. Casey, Jr. noted that his report ‘‘details
how corporations use hidden fees to deceive
consumers and increase corporate profits, which
leaves families paying more than they should and
puts honest businesses at a disadvantage.’’) The
report is available at https://www.casey.senate.gov/
imo/media/doc/greedflation_junk_fees3.pdf.
83 FTC–2023–0064–2858 (U.S. House of
Representatives, Rep. Maxwell Alejandro Frost,
Rep. Jimmy Gomez, Rep. Barbara Lee, Rep. Rashida
Tlaib, Rep. Kevin Mullin, Rep. Dwight Evans, Rep.
Judy Chu, Rep. Greg Casar, Rep. Dan Goldman, and
Rep. Salud Carbajal stated that the rule would help
eliminate some of the barriers to those seeking
rental housing as renters ‘‘often face ambiguous or
misleading fees’’ and ‘‘bring much needed
transparency to the rental housing market.’’).
84 FTC–2023–0064–2341 (Massachusetts House of
Representatives, Rep. Lindsay Sabadosa); FTC–
2023–0064–1411 (Arizona House of
Representatives, Rep. Analise Ortiz); FTC–2023–
0064–3072 (Michigan Senate and House of
Representatives, Sen. Darrin Camilleri, Sen. Mary
Cavanagh, and Rep. Betsy Coffia); FTC–2023–0064–
3079 (Montana State Senate, Senate Democratic
Caucus, Sen. Pat Flowers, Sen. Susan Webber, Sen.
Andrea Olsen, Sen. Edie McClafferty, Sen. Jen
Gross, Sen. Janet Ellis, Sen. Shane Morigeau, Sen.
Ellie Boldman, Sen. Ryan Lynch, Sen. Christopher
Pope, Sen. Mike Fox, Sen. Denise Hayman, Sen.
Willis Curdy, and Sen. Mary Ann Dunwell); FTC–
2023–0064–3103 (Florida House of Representatives,
Rep. Angela Nixon); FTC–2023–0064–3123
(Syracuse, New York, City Auditor Alexander
Marion); FTC–2023–0064–3117 (Maryland House of
Delegates, Del. Julie Palakovich Carr); FTC–2023–
0064–3149 (North Carolina House of
Representatives, Rep. Julie von Haefen); FTC–2023–
0064–3237 (North Carolina House of
Representatives, Rep. Pricey Harrison).
85 See, e.g., Transparency In Charges for Key
Events Ticketing Act (‘‘TICKET Act’’), H.R. 3950,
sec. 2, 118th Cong. (as engrossed in the House, May
15, 2024) (among other provisions, requiring ticket
sellers, including secondary markets and
exchanges, to clearly and conspicuously disclose
the total ticket price for an event in any
advertisement and each time the ticket is displayed
in the purchasing process, and to provide an
itemized list of the base ticket price and each fee
or charge prior to completion of the purchase;
violations of the TICKET Act would be treated as
violation of a rule defining an unfair or deceptive
act or practice under section 18(a)(1)(B) of the FTC
Act); No Hidden Fees on Extra Expenses for Stays
Act of 2023 (‘‘No Hidden FEES Act of 2023’’), H.R.
6543, sec. 2(a), 118th Cong. (as engrossed in the
House, June 11, 2024) (among other provisions,
prohibiting providers of short-term lodging,
including providers of a website or other
centralized platform that advertises or otherwise
offers the price of a reservation for short-term
lodging, from advertising, displaying, marketing, or
otherwise offering for sale, including through a
direct offering, third-party distribution, or
metasearch referral, a price of a reservation that
does not include each mandatory fee; violations of
sec. 2(a) would be treated as violation of a rule
defining an unfair or deceptive act or practice under
section 18(a)(1)(B) of the FTC Act).
86 Competition Act, R.S.C., 1985, c. C–34,
¶ 74.01(1.1) (Can.) (providing with respect to ‘‘drip
pricing’’ that ‘‘the making of a representation of a
price that is not attainable due to fixed obligatory
charges or fees constitutes a false or misleading
representation’’), https://laws.justice.gc.ca/eng/acts/
C-34/FullText.html.
87 Competition and Consumer Act 2010, Vol. 4,
Sched. 2, Ch. 3, P. 3–1, Sec. 48, Ch. 4, P. 4–1, Sec.
166 (Austl.) (prohibiting ‘‘mak[ing] a representation
with respect to an amount that, if paid, would
constitute a part of the consideration for the supply
of the goods or services unless the person also
specifies, in a prominent way and as a single figure,
the single price for the goods or services’’), https://
www.legislation.gov.au/C2004A00109/latest/text.
88 Directive 2005/29/EC of the European
Parliament and of the Council of 11 May 2005
concerning unfair business-to-consumer
commercial practices in the internal market, art. 7,
2005 O.J. (L 149) (providing that it is a misleading
commercial practice to engage in ‘‘bait advertising’’
or offering products at a specified price if not able
to provide the products at that price for a period
and in quantities reasonable with regard to the
product, the scale of advertising of the product and
the price offered), https://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=celex%3A32005L0029; see
also Directive 2011/83/EU of the European
Parliament and of the Council of 25 October 2011
on consumer rights, art. 5 and art. 6, 2011 O.J. (L
304), https://eur-lex.europa.eu/legal-content/EN/
TXT/?uri=CELEX%3A32011L0083&
qid=1726109600968. Additionally, a 1998 Directive
required that the selling price should be indicated
for all products referred to in the Article, which
means a price that is the final price for a unit of
the product including VAT and all other taxes. See
Directive 98/6/EC of the European Parliament and
of the Council of 16 February 1998 on consumer
protection in the indication of the prices of
products offered to consumers, 1998 O.J. (L 80),
https://eur-lex.europa.eu/legal-content/EN/TXT/
?uri=CELEX%3A31998L0006&qid=1726109951386.
89 Digital Markets, Competition and Consumers
Act 2024, c. 13, sec. 230 (providing that an
invitation to purchase omits material information if
it omits the total price of the product or, if the
nature of the product prevents all or a part of the
total price from reasonably being calculated in
advance, how the price (or that part of it) will be
calculated), https://www.legislation.gov.uk/ukpga/
2024/13/section/230. Reports preceding this
legislation included: UK Department for Business &
Trade, Estimating the Prevalence and Impact of
Online Drip Pricing (2023), https://assets.
publishing.service.gov.uk/media/64f1ebd7a78c5
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filed against businesses in the live-event
ticketing, short-term lodging, banking,
and delivery service industries
challenging these practices lend further
support to the Commission’s prevalence
determination.90
f000dc6f448/estimating-the-prevalence-and-impactof-online-drip-pricing.pdf; and UK Department for
Business & Trade, Government response to
consultation on ‘‘Smarter Regulation: Consultation
on Improving Price Transparency and Product
Information for Consumers’’ (2023), https://
www.gov.uk/government/consultations/smarterregulation-improving-price-transparency-andproduct-information-for-consumers/outcome/
government-response-to-consultation-on-smarterregulation-improving-consumer-price-transparencyand-product-information-forconsumers#introduction.
90 See, e.g., Class Action Complaint ¶¶ 2–3,
Abdelsayed v. Marriot Int’l, Inc., No. 3:21–cv–
00402–JLS–AHG (S.D. Cal. Mar. 5, 2021) (alleging
defendant misled consumers into believing that
hotel rooms were cheaper that they actually were
by engaging in drip pricing that baited consumers
with lower prices and adding charges, such as
resort fees, amenity fees, and destination fees,
throughout the vending process); Complaint ¶¶ 1,
3–5, Travelers United v. MGM Resorts Int’l, Inc., No.
2021–CA–00477–B (D.C. Super. Ct. Feb. 18, 2021)
(alleging defendant misled consumers into
believing hotel rooms were cheaper that they
actually were by using drip pricing that hid resort
fees from advertised daily room rates); Class Action
Complaint ¶¶ 18, 31, 43, 69–71, Lee v. Ticketmaster
LLC, No. 3:18–cv–05987–VC (N.D. Cal. Sept. 28,
2018) (alleging, in part, that defendants were
unjustly enriched through service charges added to
resale tickets); Second Amended Class Action
Complaint ¶¶ 1–2, Wang v. StubHub, Inc., No.
CGC–18564120 (Cal. Super. Ct. Feb. 25, 2019)
(alleging defendant intentionally hid additional fees
in order to advertise artificially low-ticket prices);
Class Action Complaint ¶¶ 1–3, 33–34, Holl v.
United Parcel Service, Inc., No. 4:16–cv–05856–
HSG (N.D. Cal., Oct. 11, 2016) (alleging defendant
created a bait and switch by falsely advertising low
published rates that were later inflated); (Truth in
Advertising, Inc., submitted information about its
tracking of class action cases related to unfair and
deceptive fees, including cases involving event
ticket sellers charging and misrepresenting the
purpose of ‘‘junk fees’’ and hotels advertising a low
base rate for rooms and then charging consumers
more than the advertised rate by imposing
additional fees.); see also Second Amended Class
Action Complaint ¶¶ 5–7, Hecox v. DoorDash, Inc.,
No. 1:23–cv–01006–JRR (D. Md. Sept. 5, 2023)
(alleging in part that defendant employed
deceptively named fees misleading consumers to
believe the fees were for delivery personnel or for
government imposed fees); Class Action Complaint
¶¶ 7–16, Ramirez v. Bank of Am., N.A., No. 4:22–
cv–00859–YGR (N.D. Cal., Feb. 10, 2022) (alleging
misrepresentations about the refundability of fees);
Class Action Complaint ¶¶ 27, 36, 46–51, Cross v.
Point and Pay LLC, No. 6:16–cv–01182 (M.D. Fla.,
June 29, 2016) (alleging defendant made
representations about its services and fees that
contained false, misleading, and deceptive and
unfair statements and omissions about fees for
online payment processing services); Class Action
Complaint ¶¶ 1–2, 9–12, DeSimone v. LOOK
Brands, LLC, No. 23–cv–11144 (S.D.N.Y. Dec. 22,
2023) (alleging defendant failed to disclose the total
cost of movie ticket prices, inclusive of all fees, in
violation of New York state law); Class Action
Complaint ¶¶ 1–2, 9–15, Jones v. Regal Cinemas,
Inc., No. 23–CV–11145 (S.D.N.Y. Dec. 22, 2023)
(alleging defendant failed to disclose total cost of
movie ticket prices, inclusive of all fees, in
violation of New York state law); see also FTC–
2022–0069–6042 (ANPR).
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The Commission takes notice of
additional indications of prevalence
identified in response to the NPRM.
Commenters to the NPRM noted that
unfair or deceptive pricing practices
exist economy-wide.91 For instance,
Consumer Reports conducted a
nationally representative survey and
found that many consumers
experienced unexpected fees in a
variety of industries and that more than
two-thirds of Americans report paying
more in hidden fees now than they did
five years ago.92 Similarly, Consumer
Federation of American submitted an
extensive compilation of stories from
consumers about their experiences with
junk fees that recounted hidden and
misleading fees being applied across a
wide range of industries.93 Truth in
Advertising, Inc. provided a sampling of
consumer complaints it had received
over the years and noted the
pervasiveness of hidden and misleading
fees in multiple industries, including
event ticket sales, hotel and travel
companies, short-term lodging, internet
apps, automobile rentals,
communication services, carpet
cleaning, auto/truck sales, dietary
supplement orders, food services,
airlines, moving services, credit unions
and banks, payday lending services,
gym memberships, outlet stores, sports
betting, and online auctions.94 Public
Citizen commented about ‘‘the
widespread use of the deceptive
practice of charging undisclosed fees by
major industries . . . including
communication carriers, air carriers,
ticket sales, auto dealers, credit card
companies, cable giants, and property
owners,’’ as well as ‘‘event ticketing,
hotels, funeral homes,’’ and other
industries.95 Additionally, AARP
pointed to a myriad of confusing fees
charged by assisted living facilities.96
91 See, e.g., FTC–2023–0064–3216 (Demand
Progress Education Fund noted that consumers face
surprise or ‘‘bogus’’ fees across industries,
including rental housing, cell phone service,
utilities, and ticketing, and cited a Consumer
Reports study finding that 85% of Americans have
dealt with fees of this nature.).
92 FTC–2023–0064–3205 (Consumer Reports
noted the prevalence of unexpected fees in live
entertainment or sporting events, hotels,
telecommunication services, gas or electric utilities,
air travel, credit cards, auto loans and purchases,
and personal banking services.).
93 FTC–2023–0064–3160 (Consumer Federation of
America submitted the compilation as Appendix B
to its comment.).
94 FTC–2023–0064–3104 (Truth in Advertising,
Inc.).
95 FTC–2023–0064–3302 (Public Citizen).
96 FTC–2023–0064–2885 (AARP argued these fees
are not well understood by potential residents and
that renters are charged ‘‘many superfluous fees,
including application fees, credit check fees, pet
fees, excessive late fees, utility-related fees, mail
sorting fees, inspection fees, convenience fees,
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Commenters also noted that instances of
unfair and deceptive fees or charges
have increased over time.97
Commenters also raised concerns
about the prevalence of hidden fees in
specific industries such as live-event
ticketing and short-term lodging. The
American Society of Travel Advisors,
Travel Technology Association, and a
travel agent observed that, despite
increased scrutiny over hotel resort fees,
there remains little uniformity in
pricing practices, and bait-and-switch
pricing remains an issue.98 Multiple
commenters raised continued concerns
over hidden fee pricing practices in the
live-event ticketing market. TickPick,
LLC observed the ‘‘widespread’’
deceptive practice of bait-and-switch
pricing rampant in this industry.
Chamber of Progress noted that
deceptive and unfair fees are ‘‘rampant
in some industries and pose clear
threats to consumers,’’ including ‘‘hotel
stays, live sports or concert tickets, and
airline tickets.’’ Future of Music
Coalition commented that they have
worked to ‘‘deal[ ] with the scourge of
junk fees in various parts of the
economy,’’ including live touring. The
Charleston Symphony affirmed that
‘‘requiring sellers to disclose the total
price clearly and conspicuously[ ]
addresses a pressing issue in the
nonprofit performing arts sector.’’ 99
Despite the overwhelming evidence
supporting the prevalence of bait-andswitch pricing and misleading fee
practices economy-wide, a minority of
commenters argued that the
Commission has failed to meet its
burden of establishing prevalence. Some
common area fees, guest fees, trash fees, notice fees,
security deposit fees, check cashing fees, cleaning
or repair fees, and other mandatory fees for services
that a renter does not need or want.’’).
97 See, e.g., FTC–2023–0064–3290 (U.S. Public
Interest Research Group Education Fund
commented that consumers have faced more unfair
and deceptive fees as consumers ‘‘have become
accustomed to online transactions.’’); FTC–2023–
0064–3090 (Atlanta Legal Aid Society, Inc. noted
the ubiquity of unfair and deceptive fees and that
these types of fees in the rental housing context
have been steadily rising for years.).
98 FTC–2023–0064–3106 (American Society of
Travel Advisors stated that resort fees are disclosed
in a highly inconsistent manner, even between
hotels doing business under the same brand name.);
FTC–2023–0064–3293 (Travel Technology
Association commented that hotels have been
known to surprise guests at check-in with these fees
and ‘‘guests have no reasonable recourse but to pay
them.’’); FTC–2023–0064–3077 (Far Horizons
Travel, by its owner, a travel agent of almost 40
years, called hotel fees ‘‘out of control’’ and stated:
‘‘I am appalled by these fees and how much they
have risen over the years. . . . They say it’s for
extra amenities but that is not always the case and
more often not the case at all.’’).
99 FTC–2023–0064–3212 (TickPick, LLC); FTC–
2023–0064–3137 (Chamber of Progress); FTC–2023–
0064–3230 (Future of Music Coalition); FTC–2023–
0064–3105 (Charleston Symphony).
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commenters contended that the
Commission’s evidence focuses on a
small number of problematic industries
and does not demonstrate prevalence in
every single industry across the
economy.100 Some commenters
similarly contended that the proposed
rule was an attempt to impose a ‘‘onesize-fits-all’’ solution on distinct
industries, not all of which are engaging
in unfair or deceptive practices, and
thus the proposed rule is overbroad and
not supported by the requisite evidence
of prevalence.101
First, the Commission disagrees that it
must find that the unfair or deceptive
act or practice is widespread within
every individual context or industry to
issue a rule targeting a specific practice
across industries. To begin with, the
Commission’s prevalence findings need
only have ‘‘some basis or evidence’’ to
show ‘‘the practice the FTC rule seeks
to regulate does indeed occur.’’ 102
While many trade regulation rules
promulgated under section 18 focus on
a particular industry, as discussed in
100 FTC–2023–0064–3143 (ACA Connects—
America’s Communication Association argued that
the NPRM contained no meaningful discussion of
prevalence of unfair or deceptive pricing
disclosures with respect to communication
services.); FTC–2023–0064–3186 (National LGBT
Chamber of Commerce and the National Asian/
Pacific Islander American Chamber of Commerce &
Entrepreneurship argued that ‘‘prepared food and
grocery delivery applications . . . have
demonstrated transparency and accessibility,
providing clear explanations about fees.’’); FTC–
2023–0064–3292 (National Association of Theatre
Owners argued that the NPRM failed to demonstrate
prevalence with respect to the theatre industry,
identifying only fifty comments received in
response to the ANPR that reference movie theatre
convenience fees.); FTC–2023–0064–3238 (Gibson,
Dunn & Crutcher LLP argued that the Commission
has failed to reliably demonstrate the prevalence of
unfair or deceptive fees across any industry or
sector.); FTC–2023–0064–3233 (NCTA—The
Internet & Television Association argued that the
only mention of telecommunication fees is
anecdotal, and the Commission has failed to show
prevalence with respect to any NCTA member.);
FTC–2023–0064–3263 (Flex Association stated that
‘‘[t]he Commission has not pointed to evidence of
any prevalent consumer harm that justifies
imposing new pricing and disclosure rules on appbased delivery platforms.’’); FTC–2023–0064–3130
(International Cemetery, Cremation & Funeral
Association argued that over the last several
reviews of the Funeral Rule the Commission has not
found evidence of widespread consumer abuse
among cemeteries or third-party suppliers.).
101 FTC–2023–0064–3258 (National Taxpayers
Union Foundation); FTC–2023–0064–3173 (Center
for Individual Freedom argued that the Commission
was overly reliant on lodging, ticketing, and
restaurants in justifying an economy-wide rule.);
FTC–2023–0064–3251 (National RV Dealers
Association argued the proposed rule ‘‘is an
overextension from this drip pricing concern, and
not only strays from the FTC’s traditional areas of
concern but also risks impeding the normal
business operations and innovation across a
multitude of sectors.’’).
102 Pa. Funeral Dirs. Ass’n. v. FTC, 41 F.3d 81, 87
(3d Cir. 1994).
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section IV.A.1, others apply to specific
practices across industries regardless of
product or service, such as the CoolingOff Period for Door-to-Door Sales Rule
(the ‘‘Cooling-Off Rule’’), the Rule on
the Preservation of Consumers’ Claims
and Defenses (the ‘‘Holder Rule’’), the
Rule on Retail Food Store Advertising
and Marketing Practices (the
‘‘Unavailability Rule’’), the mail,
Internet, or Telephone Order
Merchandise Rule (the ‘‘Mail Order
Rule’’), the Rule on the Use of
Prenotification Negative Option Plans
(the ‘‘Negative Option Rule’’), the Rule
on Impersonation of Government and
Businesses (the ‘‘Impersonator Rule’’),
and the Rule on the Use of Consumer
Reviews and Testimonials.103 While the
Commission agrees that minimal
evidence of a practice would be
insufficient to meet the prevalence
standard, section 18 did not require the
Commission to find for its economywide rulemakings that every industry
engaged in sales made at a consumer’s
home or at certain other locations
(Cooling-Off Rule), used credit contracts
(Holder Rule), offered products at an
advertised price when they did not have
the advertised products in stock
(Unavailability Rule), or had a robust
mail, internet or telephone order
business (Mail Order Rule); or that every
industry used negative options
(Negative Option Rule), had an issue
with impersonating government
agencies or businesses (Impersonator
Rule), or used and abused reviews (Rule
on the Use of Consumer Reviews and
Testimonials). Imposing such a standard
would artificially limit the
Commission’s rulemaking authority
under section 18 in a way that does not
align with the Commission’s mandate or
the text of the statute, which focuses on
acts or practices generally and never
mentions the need to define markets or
industries. As explained herein and in
the NPRM, the information evidencing
prevalence of bait-and-switch pricing
and misleading fees more than meets
section 18’s standard for prevalence for
the economy generally, and for the liveevent ticketing and short-term lodging
industries, specifically, by
demonstrating that the practices are
widespread and, further, that such
practices are occurring across a wide
range of industries.
Second, the Commission notes that,
even when commenters challenged the
application of the rule to specific
pricing scenarios or to their own
industries, they also appeared to
103 16 CFR part 429; 16 CFR part 433; 16 CFR part
424; 16 CFR part 435; 16 CFR part 425; 16 CFR part
461; 16 CFR part 465.
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concede that advertising a base price to
which mandatory fees are added later is
a frequent practice even in their own
industries. While some commenters
raised genuine challenges or questions
about the application of the rule, others
attempted to conflate such genuine
challenges with their desire to continue
to use drip or partition pricing.
As discussed in section III.B.1,
commenters from some ticket sellers did
not contest that their advertised prices
failed to include all mandatory fees and
to provide the total price of goods or
services. Instead, they attempted to
explain why they engaged in those
practices.
Finally, some commenters from
industries other than live-event
ticketing and short-term lodging argued
that the Commission’s NPRM failed to
establish prevalence because of the
following reasons: the cited cases
focused on inapplicable fact patterns or
resulted in settlement; the cited
conferences called for additional
research rather than regulatory strategy,
or were narrow in scope as to the
industries covered; and the resort fee
warning letters failed to result in
enforcement action.104 Commenters
such as the U.S. Chamber of Commerce
argued that the enforcement record
should rely only on cease-and-desist
orders or ‘‘extensive empirical
research.’’ 105 Other commenters also
raised concerns about a lack of
empirical research.106 These
commenters overlook section 18’s clear
instruction that the Commission’s
prevalence determination can be based
on ‘‘any other information available to
the Commission’’ that indicates a
widespread pattern, which the
Commission thoroughly laid out in the
NPRM and expands upon herein.
In sum, the Commission’s
enforcement history, workshops, and
reports, together with the record of this
rulemaking and the enforcement cases
brought by the Commission’s local,
104 FTC–2023–0064–3127 (U.S. Chamber of
Commerce argued the NPRM failed to cite any cases
holding that late in time fee disclosures are unfair
or deceptive and the settlements described by the
Commission only raised the failure of companies to
disclose certain applicable fees prior to purchase or
at all.).
105 Id.
106 FTC–2023–0064–3152 (Building Owners &
Managers Association et al. commented that the
proposed rule ‘‘lacks any reasonable factual
underpinning as applied to the rental housing
industry because it is not based on any statistical
data relevant to the industry,’’ but is ‘‘based solely
upon anecdotal, conclusory, and non-representative
justification.’’); FTC–2023–0064–3172 (New Jersey
Apartment Association stated that the NPRM lacked
‘‘statistical basis’’ for claims that unfair and
deceptive fees were an issue in the rental housing
context and that the Commission relied on
anecdotal evidence.).
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State, and international enforcement
counterparts fully support a finding that
bait-and-switch pricing that hides the
total price of goods or services and
misrepresenting the nature, purpose,
amount, and refundability of fees or
charges are prevalent across the
economy, including in the live-event
ticketing and short-term lodging
industries.107 Despite the evidence that
these specific practices are prevalent
economy wide, the Commission will
first focus its rulemaking authority on
combatting these practices in the liveevent ticketing and short-term lodging
industries, the two industries in which
the Commission first began evaluating
drip pricing more than a decade ago and
for which there is a long history of
consumer harm.
B. Manner and Context in Which the
Acts or Practices Are Deceptive or
Unfair
The final rule curbs certain unfair or
deceptive pricing practices by requiring
107 See, e.g., supra notes 66, 67, 72, 75, 80, 85,
90 (detailing the Commission’s enforcement history,
workshops, and reports, class action lawsuits, state
and local enforcement and regulations, and other
efforts to curb unfair or deceptive pricing practices
in the live-event ticket and short-term lodging
industries). The Commission also received
thousands of comments from individual consumers
detailing bait-and-switch pricing and deceptive fees
in the live-event ticket and short-term lodging
industries in response to the ANPR and the NPRM.
See, e.g., FTC–2023–0064–0820 (Individual
Commenter stated ‘‘I was just considering buying
some event tickets on Vivid Seats and was shocked
to see that they add a full 33% in bogus fees.’’);
FTC–2023–0064–0058 (Individual Commenter
stated: ‘‘The worst offenders are ticket sellers/
resellers, who advertise baseline ticket prices in
their search engines and then include some
unknown amount of fees when it’s time to pay.’’);
FTC–2023–0064–0102 (Individual Commenter
stated: ‘‘I recently went to a MLB game and the fees
were $21 for a $75 ticket or greater than 20%. I went
to a concert and the tickets were $55 but the fees
brought the price to over $100. On both cases, the
fees were not disclosed until the payment screen.’’);
FTC–2023–0064–0145 (Individual Commenter
described purchasing tickets to a musical: ‘‘Nearly
20% of the total cost was for fees that were not
disclosed until I was at the payment step ($119
ticket + $4.55 order processing fee + $4.00 facility
charge + $20.50 service fee). I don’t understand
what any of those fees are actually for.’’); FTC–
2023–0064–0040 (Individual Commenter described
hotel resort fees as ‘‘egregious and opaque’’ and
stated they learned of an additional $50 per night
resort fee upon check-in: ‘‘I asked what the purpose
of the fee was and was told by the staff person, ‘I’m
not really sure.’ ’’); FTC–2023–0064–1462
(Individual Commenter stated: ‘‘Recently I found an
‘‘affordable’’ hotel in a city and booked a 4 night
stay, but was not informed until after I checked in
that parking cost extra each day . . . . which made
the hotel no longer affordable for me’’); FTC–2023–
0064–0977 (Individual Commenter described
spending hours trying to book a hotel to face
‘‘mandatory hotel fees for a pool, a gym and 24 hour
security totalled $50/night’’); FTC–2023–0064–0152
(Individual Commenter stated that fees through
services including Airbnb and VRBO are ‘‘often
vague and undefined’’ and described fees including
a ‘‘host fee,’’ ‘‘booking fee,’’ ‘‘safety fee,’’ and
‘‘resort fee’’).
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truthfulness and transparency in pricing
for live-event ticketing and short-term
lodging. Truthful, timely, and
transparent pricing, including the
nature, purpose, and amount of any fees
or charges imposed, is critical for
consumers—and also for honest
businesses. The legal underpinning of
the rule, or the manner and context in
which the acts or practices defined by
the rule are unfair or deceptive, is not
complex. By identifying and targeting
pricing tactics that hide the true price of
live-event tickets and short-term lodging
from consumers, the rule’s central
provisions prohibit conduct that is
inherently deceptive or unfair,
including: (1) offering prices that do not
include all mandatory fees or charges
and (2) misrepresenting the nature,
purpose, amount, and refundability of
fees or charges, and the identity of the
good or service for which the fees or
charges are imposed. Thus, the final
rule will allow American consumers to
make better-informed purchasing
decisions when purchasing live-event
tickets or deciding where to stay on a
short-term basis and level the playing
field for honest businesses in these
industries that truthfully, timely, and
transparently disclose their pricing
information.
A representation, omission, or
practice is deceptive under section 5 of
the FTC Act if it is likely to mislead
consumers acting reasonably under the
circumstances and is material to
consumers—that is, it would likely
affect the consumer’s conduct or
decisions with regard to a good or
service.108 Price is a material term.109 It
is a deceptive practice to misrepresent
the price of a good or service,110
108 See Fed. Trade Comm’n, FTC Policy Statement
on Deception, 103 F.T.C. 174, 175 (1984) (appended
to In re Cliffdale Assocs., Inc., 103 F.T.C. 110, 174
(1984) (hereinafter ‘‘Deception Policy Statement’’),
https://www.ftc.gov/sites/default/files/documents/
commission_decision_volumes/volume-103/ftc_
volume_decision_103_january_-_june_1984pages_
103-203.pdf.
109 Deception Policy Statement, 103 F.T.C. at
182–83 (listing claims or omissions involving cost
among those that are presumptively material); see
also, e.g., FTC v. FleetCor Techs., Inc., 620 F. Supp.
3d 1268, 1303–04, 1311 (N.D. Ga. 2022) (finding
that representations about discounts and
transaction fees were material).
110 Deception Policy Statement, 103 F.T.C. at 175
(listing ‘‘misleading price claims’’ among those
claims that the FTC has found to be deceptive); see
also, e.g., In re Resort Car Rental Sys., Inc., 83
F.T.C. 234, 281–82, 300 (1973), https://www.ftc.gov/
system/files/ftc_gov/pdf/Resort%20Car%20
Rental%20System%2C%20Inc.%2083%20FTC
%20234%20%281973%29.pdf (finding that using
the name ‘‘Dollar-A-Day’’ misrepresented the price
of car rentals in violation of section 5 of the FTC
Act where a rental could not be attained for one
dollar per day due to mileage, insurance, and other
mandatory charges), aff’d sub. nom. Resort Car
Rental Sys., Inc. v. FTC, 518 F.2d 962, 964 (9th Cir.
1975).
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including through a deceptive first
contact.111 Through its false savings
cases, the Commission repeatedly found
that it was deceptive under section 5 to
present an inflated list price or
comparison price, from which
consumers were misled to believe that
the business offered a lower-thannormal price.112 The inverse—luring
consumers to a good or service with a
false low price—is also deceptive.113
For example, in In re Filderman Corp.,
64 F.T.C. 427 (1964), the Commission
found that the defendant violated
section 5 both when it displayed
misleading list prices and when it later
111 See, e.g., Opinion of the Commission at 37–
40, 47–50, In re Intuit Inc., No. 9408 (FTC Jan. 22,
2024), https://www.ftc.gov/system/files/ftc_gov/pdf/
d09408_commission_opinion_redacted_public.pdf
(finding that under the legal doctrine known as the
first-contact or deceptive door-opener rule,
respondent’s first contact with consumers was
deceptive because its advertising falsely claimed
that consumers can file their taxes for free with
TurboTax and that later disclosures did not cure the
deception); Complaint ¶¶ 12, 46–49, In re LCAVision, No. C–4789 (FTC Mar. 13, 2023) (alleging
respondent’s advertisements misrepresented the
price of surgery and failed to disclose eligibility
limitations for a promotional price); Complaint
¶¶ 8–10, In re Progressive Chevrolet Company, No.
C–4578 (FTC Jun. 16, 2016) (alleging that
respondents represented that consumers could lease
vehicles at advertised down payment and monthly
payment amounts, and deceptively failed to
disclose a material condition that meant few
consumers would qualify for the advertised terms);
Resort Car Rental Sys., 518 F.2d at 964 (upholding
the Commission’s order finding that the name
‘‘Dollar-A-Day’’ was deceptive when charges adding
up to more than one dollar per day were disclosed
later).
112 E.g., In re Giant Food, Inc., 61 F.T.C. 326, 341–
42, 361 (1962), https://www.ftc.gov/sites/default/
files/documents/commission_decision_volumes/
volume-61/ftcd-vol61july-december1962pages306404.pdf (finding that comparative-price advertising
of household goods and appliances created false,
misleading, and deceptive impressions that induced
consumers to make purchases based on mistaken
beliefs); In re George’s Radio & Television Co., 60
F.T.C. 179, 193–94, 196 (1962), https://www.ftc.gov/
sites/default/files/documents/commission_
decision_volumes/volume-60/ftcd-vol60januaryjune1962pages107-211.pdf (collecting cases and
finding that advertisements including
manufacturer’s suggested list prices that were
higher than the customary retail prices were
deceptive).
113 See, e.g., In re Filderman Corp., 64 F.T.C. 427,
442–43, 461 (1964), https://www.ftc.gov/sites/
default/files/documents/commission_decision_
volumes/volume-64/ftcd-vol64january-march
1964pages409-511.pdf (finding, among other things,
that respondents unlawfully advertised prices that
were later inflated with mandatory service charges);
In re Resort Car Rental Sys., 83 F.T.C. at 281–82,
300; Opinion of the Commission at 37–40, 47–50,
In re Intuit Inc., No. 9408 (finding that respondent’s
advertising that falsely claimed that consumers can
file their taxes for free with TurboTax was
deceptive); Complaint ¶¶ 12, 46–49, In re LCAVision, No. C–4789 (alleging respondent’s
advertisements misrepresented the price of surgery
and failed to disclose eligibility limitations for a
promotional price). See also cases cited supra note
61 (collecting FTC enforcement actions alleging that
bait-and-switch pricing tactics concerning hidden
fees violated section 5).
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imposed mandatory service charges on
top of the advertised price.114 Once a
consumer has been lured in by
deception, including about the cost of
the good or service, it is well established
that a later disclosure cannot cure that
deception.115 Thus, bait-and-switch
pricing, where the initial contact with a
consumer shows a lower or partial price
without including mandatory fees,
violates the FTC Act even if the total
price is later disclosed.
A practice is considered unfair under
section 5 if: (1) it causes, or is likely to
cause, substantial injury; (2) the injury
is not reasonably avoidable by
consumers; and (3) the injury is not
outweighed by benefits to consumers or
competition.116 Pricing that is not
truthful or transparent causes or is
likely to cause substantial injury; such
injury is not reasonably avoidable by
consumers or outweighed by benefits to
consumers or competition.
Drip pricing and other bait-andswitch tactics that hide the true price
cause substantial injury, as the
Commission discusses in detail in
section V.E, by leading consumers to
buy more goods or services, pay more
for those goods or services, and incur
higher search costs than they otherwise
would have if they had been presented
with the true price upfront. Studies
have shown that consumers spend more
money on the same goods when faced
with drip pricing, i.e., when they are not
shown the total price upfront, but
instead are shown a base price, with
mandatory fees or charges added later
114 In re Filderman Corp., 64 F.T.C. at 461
(ordering respondents to stop ‘‘[r]epresenting,
directly or by implication: That any amount is the
price of merchandise when an additional amount is
required to be paid before the merchandise will be
sold.’’)
115 Fed. Trade Comm’n, Enforcement Policy
Statement on Deceptively Formatted
Advertisements 7 n.25 (2015), https://www.ftc.gov/
system/files/documents/public_statements/896923/
151222deceptiveenforcement.pdf; see also Opinion
of the Commission at 28–30, In re Intuit Inc., No.
9408, https://www.ftc.gov/system/files/ftc_gov/pdf/
d09408_commission_opinion_redacted_public.pdf
(finding that disclosures on Intuit’s websites were
‘‘inadequate to cure a misimpression for Intuit’s
ads,’’ which used ‘‘false claims to engage consumers
and induce them to further interact with the
company’’); Resort Car Rental Sys, 518 F.2d at 964
(‘‘The Federal Trade [Commission] Act is violated
if it induces first contact through deception, even
if the buyer later becomes fully informed before
entering the contract.’’) (bracketed text added);
Exposition Press, Inc. v. FTC, 295 F.2d 869 (2d Cir.
1961) (‘‘The law is violated if the first contact is
secured by deception, even though the true facts are
made known to the buyer before he enters into the
contract of purchase.’’ (citations omitted)); FTC v.
City W. Advantage, Inc., No. 2:08–cv–00609–BES–
GWF, 2008 WL 2844696, at *3 (D. Nev., 123 July
22, 2008) (finding defendant likely employed
‘‘deceptive door openers . . . to induce consumers
to stay on the line’’).
116 15 U.S.C. 45(n).
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throughout the buying process.117
Where mandatory fees or charges are
disclosed at the same time as, but
separately from, the base price,
consumers are still harmed. The
practice of dividing the price into
multiple components without disclosing
the total, generally referred to as
partitioned pricing, distorts consumer
choice.118 Consumers confronted with
partitioned pricing, on average,
underestimate the total price of the good
or service, likely because they use
mental shortcuts to estimate price that
do not fully account for each
component.119
In addition, consumers who wish to
compare prices incur additional search
costs to make direct comparisons of
goods or services when the full price is
not disclosed upfront.120 For example,
in an online transaction to book a hotel
room, consumers cannot simply view
the first price displayed on each
website, but instead need to navigate to
subsequent pages or even enter all their
payment information and reach the
checkout page for each website to
determine the true total price of their
hotel stay.121 The same is true on live117 Alexander Rasch et al., Drip Pricing and its
Regulation: Experimental Evidence, 176 J. Econ.
Behav. & Org. 353 (2020) (‘‘[E]xperimental evidence
suggests that consumers indeed strongly and
systematically underestimate the total price under
drip pricing, and that they make mistakes when
searching’’); Shelle Santana et al., Consumer
Reactions to Drip Pricing, 39 Mktg. Sci. 188 (2020)
(‘‘Across six studies, we find that drip pricing
(versus nondrip pricing) increases the likelihood
that consumers will both initially and ultimately
select a lower base price option, even though the
surcharges for optional add-ons cause this base
price to balloon—making the lower base fare option
more expensive than the alternative’’); Tom Blake
et al., Price Salience and Product Choice, 40 Mktg.
Sci. 619 (2021); Steffen Huck et al., The Impact of
Price Frames on Consumer Decision Making:
Experimental Evidence (2015); Meghan R. Busse &
Jorge M. Silva-Risso, ‘‘One Discriminatory Rent’’ or
‘‘Double Jeopardy’’: Multi-component Negotiation
for New Car Purchases, 100 a.m. Econ. Rev. 470
(2010); Raj Chetty et al., Salience and Taxation:
Theory and Evidence, 99 a.m. Econ. Rev. 1145
(2009) (‘‘[C]ommodity taxes that are included in
posted prices reduce demand significantly more
than taxes that are not included in posted prices.’’);
see also FTC–2023–0064–3247 (Private Law Clinic
at Yale Law School).
118 Sullivan, supra note 67, at 4; FTC–2023–0064–
3271 (U.S. Senate, Sen. Amy Klobuchar).
119 Sullivan, supra note 67, at 22–24; Vicki G.
Morowitz et al., Divide and Prosper: Consumers’
Reactions to Partitioned Prices, 35 J. Mktg. Rsch.
453 (1998) (subjects exposed to partitioned prices
recalled significantly lower total product costs than
subjects exposed to combined prices).
120 Sullivan, supra note 67, at 4; Fed. Trade
Comm’n, ‘‘That’s the Ticket’’ Workshop: Staff
Perspective 4 (May 2020), https://www.ftc.gov/
system/files/documents/reports/thats-ticketworkshop-staff-perspective/staffperspective_tickets_
final-508.pdf; see also Han Hong et al., Using Price
Distributions to Estimate Search Costs, 37 RAND J.
Econ. 257 (2006) (describing methods of estimating
search costs).
121 NPRM, 88 FR 77433 n.170.
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event ticketing websites. As TickPick,
LLC noted, ‘‘[m]ajor ticketing
marketplaces often require consumers to
enter their credit card or other payment
information prior to disclosing
mandatory fees. On these marketplaces,
the full purchase price is only disclosed
after payment information is
collected.’’ 122 Under such
circumstances, consumers waste time
and effort pursuing an offer that is not
actually available at the promised price.
Such search costs that result from unfair
or deceptive practices are legally
cognizable injuries under the FTC
Act.123
Misrepresented fees also cause or are
likely to cause substantial injury—they
harm consumers as well as businesses
that do not engage in these practices.
For example, as discussed in section
III.C, a hotel might charge a resort fee
when only typical and ordinary
accommodations and amenities are
offered, an environmental fee that serves
no environmental purpose, or a fee
misrepresented as a government charge.
As TickPick, LLC put it, misrepresented
fees trick consumers into paying more
and ultimately inhibit competition by
providing an unfair advantage to
businesses that misrepresent their
fees.124 Likewise, when businesses
misrepresent fees, consumers are unable
to make informed choices about the
value of the fee or charge, or the good
or service it represents, because their
122 FTC–2023–0064–3212 (TickPick, LLC) (‘‘[On]
StubHub’s website, for example, a consumer can be
required to click 12 times after being shown the first
price before being shown the total price they will
pay.’’)
123 See, e.g., Decision & Order at 3–4, In re LCAVision, No. C–4789 (FTC Mar. 13, 2023) (settling
allegations that deceptive advertising caused
consumers to ‘‘waste[ ] 90 minutes to two hours of
their time’’ responding to a deceptive promotion,
Complaint ¶ 35, and prohibiting misrepresentations
of price and requiring disclosure of price or
discount qualification requirements), https://
www.ftc.gov/system/files/ftc_gov/pdf/1923157-lcavision-consent-package.pdf; Decision & Order at 2–
3, In re Credit Karma, LLC, No. C–4781 (FTC, Jan.
19, 2023) (settling allegations that deceptive
advertising caused consumers to waste significant
time in applying for ‘‘pre-approved’’ offers that
were denied, Complaint ¶ 13, and requiring Credit
Karma to pay $3 million in monetary relief), https://
www.ftc.gov/system/files/ftc_gov/pdf/2023138credit-karma-combined-final-consent-withoutsignatures.pdf; FTC v. Amazon.com, Inc., No. C14–
1038–JCC, 2016 U.S. Dist. LEXIS 55569, at *17
(W.D. Wash., Apr. 26, 2016) (finding consumer
injury included ‘‘time spent pursuing those
refunds’’); FTC v. Neovi, Inc., 598 F. Supp. 2d 1104,
1115 (S.D. Cal. 2008) (finding ‘‘no genuine issue of
material fact that consumers suffered substantial
injury’’ based on ‘‘considerable amount of time’’
spent by consumers); FTC v. Accusearch, Inc., No.
06–cv–105–D, 2007 U.S. Dist. LEXIS 74905, at *22–
23 (D. Wyo., Sept. 28, 2007) (granting summary
judgment in favor of FTC based in part on finding
of consumer injury for ‘‘lost time and
productivity’’).
124 FTC–2023–0064–3212 (TickPick, LLC).
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2079
understanding of the fee or charge is
predicated on false, vague, or otherwise
misleading information. As such,
consumers are unable to understand
what they have purchased, or to which
charges they have consented.125
Consumers cannot reasonably avoid
these harms. As explained in the NPRM,
studies suggest that cognitive bias may
prevent consumers from reasonably
avoiding injury caused by unfair and
deceptive pricing practices.126 Several
behavioral studies explain why
consumers cannot reasonably avoid
making errors when the true price is not
displayed upfront. Behavioral research
shows that consumers who first learn of
a lower price do not properly adjust
their calculations when additional fees
are added, thereby underestimating the
total price.127 It also shows that
consumers attach value to things they
perceive to be theirs and, once
consumers begin the purchase process,
their perception shifts so that stopping
the transaction feels like a loss.128 The
research shows that consumers who
already have invested in an endeavor,
such as by taking time to make
selections on a travel or live-event ticket
website, continue that endeavor even if
they would pay less if they began again
elsewhere.129 Lastly, consumers
necessarily incur search costs when
mandatory fees are obscured because it
takes them longer to discover the full
price within a single transaction and to
comparison shop across transactions.130
Notably, it is unlikely that the market
can correct for these injuries because
once the practice of displaying
incomplete initial prices takes hold,
honest businesses will struggle to
compete. For example, as noted in the
NPRM, one market participant in the
live-event ticketing industry, StubHub,
unilaterally adopted all-in pricing in
2014 but soon reverted back to its
original model after it lost significant
market share when customers
125 Id.
126 NPRM, 88 FR 77434 (discussing various
cognitive biases that contribute to the
unavoidability of consumer injury, including the
anchoring theory, the endowment theory, and the
sunken cost fallacy).
127 Inst. for Policy Integrity, Pet. for Rulemaking
Concerning Drip Pricing 18 (2021), https://policy
integrity.org/documents/Petition_for_Rulemaking_
Concerning_Drip_Pricing.pdf.
128 Steffen Huck et al., The Impact of Price
Frames on Consumer Decision Making:
Experimental Evidence (2015).
129 David A. Friedman, Regulating Drip Pricing,
31 Stan. L. & Pol’y Rev. 51, 55 n.13 (2020).
130 See NPRM, 88 FR 77447 (discussing
reductions in search costs from the proposed rule).
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incorrectly perceived StubHub’s prices
to be higher.131
The consumer injury caused by these
bait-and-switch pricing practices is not
outweighed by any benefits to
consumers or competition. Consumers
receive no benefit from businesses that
use drip pricing, partitioned pricing, or
misleading price presentation while
they obscure the total price. To the
extent that consumers could benefit
from itemized information about price
components, such itemization can be
done in conjunction with clear total
price information. Consumers receive
no benefit from businesses partitioning
or breaking up mandatory price
components while they obscuring the
total price.
Likewise, as discussed in section V.E,
there is no benefit to competition, as
honest businesses that disclose allinclusive total prices lose market share
to businesses that do not. Bait-andswitch pricing and misleading fees
undermine the ability of honest
businesses to compete on price and
therefore diminish the competitive
pressure in a market that pushes prices
downward. As a result, these practices
lead to higher prices than would be
supported in a competitive marketplace.
The Antitrust Division of the U.S.
Department of Justice noted that
‘‘companies that impose mandatory
hidden fees’’ have ‘‘an unfair advantage
over honest brokers’’ and interfere with
consumers’ ability to ‘‘choose between
competitors based on the important
considerations of price and what,
exactly, the consumer is
purchasing.’’ 132 Some commenters,
including those from the live-event
ticketing and short-term lodging
industries, noted that bait-and-switch
pricing not only confuses consumers,
but harms honest businesses that offer
truthful, timely, and transparent pricing
because their prices initially may seem
higher than competitors that use baitand-switch pricing and misleading fees.
131 See NPRM, 88 FR 77434 (quoting Fed. Trade
Comm’n, ‘‘That’s the Ticket’’ Workshop: Staff
Perspective 4 (May 2020), https://www.ftc.gov/
system/files/documents/reports/thats-ticketworkshop-staff-perspective/staffperspective_tickets_
final-508.pdf.). See also, e.g., https://www.contact
lensking.com/faq.aspx (describing a contact lens
company’s decrease in traffic and total orders when
it displayed a total price while competitors
implemented ‘‘processing’’ fees).
132 FTC–2023–0064–3187 (U.S. Department of
Justice, Antitrust Division, observed that ‘‘[w]hen
consumers lack choice and information, and are
saddled with mandatory hidden fees, the benefits
of the competitive process break down.’’); see also
FTC–2023–0064–3106 (American Society of Travel
Advisors); FTC–2023–0064–3184 (New York State
Sen. Michael Gianaris); FTC–2023–0064–1294
(James J. Angel, Ph.D., CFP, CFA, Professor,
Georgetown University, McDonough School of
Business).
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For example, TickPick, LLC
commended the Commission for
proposing to curb the widespread
practice of bait-and-switch pricing and
observed that ‘‘the proposed rule would
significantly benefit consumers and
competition in the live-event ticketing
industry.’’ 133 The American Society of
Travel Advisors argued that, in addition
to consumer harm, ‘‘the imposition of
undisclosed fees also unfairly places
honest retailers—those that do disclose
the full, all-in price upfront—at a
competitive disadvantage relative to
those that do not.’’ 134
A minority of commenters stated that
hidden and misleading fees do not harm
consumers. For instance, the
Competitive Enterprise Institute argued
that consumers’ search costs do not
increase when advertisements lack a
single total price, as the consumer is
better informed after watching the
advertisement despite the omission.135
While the commenter conceded that
consumers may benefit more if a total
price is disclosed, the commenter
argued that any harm could be easily
avoidable by consumers calculating the
total themselves.136 Some commenters
also argued that these types of fees often
benefit consumers and are openly
disclosed.137 Indeed, the American
Gaming Association stated that resort
fees enhance a consumer’s stay,
distinguish resorts from more standard
lodging offerings, are openly disclosed
to consumers, and often appear several
times throughout the search and
purchasing process. As the Commission
already noted, drip and partitioned
pricing and other bait-and-switch
pricing harm consumers for numerous
reasons, including because consumers
underestimate the total price of a good
or service, overconsume, overpay, and
waste time. The U.S. Chamber of
Commerce argued that there are proconsumer and pro-competitive
justifications for this type of pricing,
including allowing for dynamic pricing
strategies and preventing consumers
from paying for services that they do not
use.138 The rule, however, does not
133 FTC–2023–0064–3212
134 FTC–2023–0064–3106
(TickPick, LLC).
(American Society of
Travel Advisors).
135 FTC–2023–0064–3028 (Competitive Enterprise
Institute argued that consumers already bear a
search cost merely by looking for a product, and
that any advertisement that includes some, but not
all, pricing information, benefits the searching
consumer if the information is accurate and nondeceptive.).
136 Id.
137 FTC–2023–0064–2886.
138 FTC–2023–0064–3127 (U.S. Chamber of
Commerce noted that, among these pricing
practices, dynamic pricing strategies provide these
benefits to consumers and this was ignored in the
conclusions of the NPRM.).
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prohibit the use of dynamic pricing
strategies, itemization, or offering
optional goods or services for
consumers to select; it simply prohibits
offering a price that is not inclusive of
all mandatory fees and charges, as well
as prohibiting misrepresented fees and
charges.
As stated herein, the Commission and
courts have previously recognized that
price is a material term 139 and that it is
a violation of section 5 of the FTC Act
to misrepresent the price of a good or
service.140 Commenters emphasized the
materiality of price to consumers.141
The commenters who argue that baitand-switch pricing does not harm
consumers ignore the large body of
literature demonstrating that drip
pricing and partitioned pricing have a
negative impact on consumers and
competition. The economic analysis in
Section V provides additional
discussion regarding the economic
harms from bait-and-switch pricing
tactics, including drip pricing and
partitioned pricing in the live-event and
short-term lodging industries.
C. The Economic Effect of the Rule
As part of the rulemaking proceeding,
the Commission solicited public
comment and data (both qualitative and
quantitative) on the economic impact of
the proposed rule and its costs and
benefits. In issuing this final rule, the
Commission has carefully considered
the comments received and the costs
and benefits of each provision, taking
into account the effects on small
businesses and consumers, as discussed
in more detail in sections V and VII.
The record demonstrates that the most
significant anticipated benefits of the
final rule are promoting transparent
pricing, facilitating comparison
shopping for consumers, and leveling
139 Deception Policy Statement, 103 F.T.C. at
182–183, 183 n.55 (listing claims or omissions
involving cost among those that are presumptively
material); see also, e.g., FleetCor Techs., Inc., 620
F. Supp. 3d at 1303–04, 1311 (finding that
representations about discounts and transaction
fees were material); FTC v. Windward Marketing,
Inc., No. 1:96–CV–615F, 1997 WL–33642380, at *10
(N.D. Ga., Sept. 30, 1997) (‘‘[A]ny representations
concerning the price of a product or service are
presumptively material’’).
140 Deception Policy Statement, 103 F.T.C. at 175
(listing ‘‘misleading price claims’’ among those
claims that the FTC has found to be deceptive); see
also, e.g., Resort Car Rental Sys., 518 F.2d at 964
(upholding the Commission’s order finding that
using the name ‘‘Dollar-A-Day’’ misrepresented the
price of car rentals in violation of section 5 of the
FTC Act).
141 See, e.g., FTC–2023–0064–3162 (BBB National
Programs Inc. stated that BBB National Advertising
Division ‘‘precedent is clear that the advertised
price for a product or service is among one of the
most material terms to a consumer’s purchasing
decision.’’).
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the playing field for businesses in the
live-event ticketing and short-term
lodging industries. By prohibiting drip
pricing, the final rule also will promote
social trust, which is a necessary
component of successful market
interactions.142 Most participants in a
market transaction do not have prior
experience with one another and
consumers must rely on some degree of
trust that the business will provide the
good or service in question, at the stated
price and quality level. Without social
trust, it would be costlier for both
consumers and businesses to acquire all
the necessary information to participate
in the market. While there has been less
research on the relationship between
social trust and previous market
interactions, there is some evidence that
bad market experiences can reduce
social trust.143 Thus, prohibiting these
types of deceptive and unfair practices
will promote social trust, which can be
a measure of a well-functioning
market.144
Another beneficial consequence
would be the expansion of the remedies
available for violations of the final rule,
including the ability to more effectively
obtain monetary relief for consumers
who have been deceived about the true
total price of live-event tickets or shortterm lodging. This is particularly critical
given the U.S. Supreme Court’s decision
in AMG Capital Mgmt., LLC v. FTC, 593
U.S. 67 (2021), which held that
equitable monetary relief, including
consumer redress, is not available under
section 13(b) of the FTC Act.145 Under
the final rule, the Commission will now
be able to seek court-ordered consumer
redress in one Federal district court
action brought under section 19(a)(1),
rather than the longer, less efficient,
two-step process for obtaining redress
142 The relationship between social trust and
market outcomes is well established. See, e.g., Paul
J. Zak & Stephen Knack, Trust and growth. 111
Econ. J., 470 (Mar. 2001), https://doi.org/10.1111/
1468-0297.00609; Philip Keefer & Stephen Knack,
Does Social Capital Have an Economic Payoff? A
Cross-Country Investigation, 112 Q.J. Econ. 4 (Nov.
1997), https://doi.org/10.1162/003355300555475.
Social trust is particularly necessary for
participation in financial markets. See Jesse Bricker
& Geng Li, Fed. Reserve Bd., Credit Scores, Social
Trust, and Stock Market Participation, Finance and
Economics Discussion Series 2017–008r1, https://
doi.org/10.17016/FEDS.2017.008r1; Luigi Guiso,
Paola Sapienza, & Luigi Zingales, Trust the Stock
Market, 63 J. Fin. (Dec. 2008), https://www.jstor.org/
stable/20487944?seq=1.
143 Ginny Seung Choi & Virgil Henry Storr,
Market interactions, trust and reciprocity, 15 PLOS
One 5 (May 7, 2020), https://doi.org/10.1371/
journal.pone.0232704.
144 Joshua Kleinfeld & Hadar Dancig-Rosenberg,
Social Trust in Criminal Justice: A Metric, 98 Notre
Dame L. Rev. 815 (2022), https://
scholarship.law.nd.edu/ndlr/vol98/iss2/6.
145 AMG Cap. Mgmt., 593 U.S. at 82.
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under section 19(a)(2).146 By allowing
the Commission to secure redress more
efficiently, this rule will also allow the
Commission to conserve its limited
enforcement resources for other mission
priorities.
As an additional benefit, the rule will
enable the Commission to seek civil
penalties against violators. The FTC Act
generally does not allow the
Commission to obtain civil penalties
against those who engage in unfair or
deceptive acts or practice in violation of
section 5(a) of the FTC Act. Section
5(m)(1)(A) of the FTC Act does,
however, authorize the Commission to
seek civil penalties in court for
violations of trade regulation rules, such
as the final rule here.147 The ability to
obtain civil penalties provides two
benefits. First, court-ordered civil
penalties give the Commission the
ability to ensure that violators do not
retain the profits they earn by engaging
in the unfair or deceptive pricing
practices prohibited by the rule. Second,
the potential for civil penalties will
deter violations and provide a strong
incentive for businesses providing liveevent tickets and short-term lodging to
provide truthful and transparent pricing
information in compliance with the
rule, which will have consumer welfare
benefits and will benefit honest
competition.148
When promulgating a final rule, the
Commission must prepare a final
regulatory analysis, which is contained
in section V. The final regulatory
146 See 15 U.S.C. 57b(a)(1) and (2); see also
NPRM, 88 FR 77438 (discussing impact of AMG
Cap. Mgmt.). When the Commission has reason to
believe that the rule has been violated, the
Commission can commence a Federal court action
to ask a Federal judge to determine liability and, if
proven, require violators to provide redress. See 15
U.S.C. 57b(a)(1), (b). Without the rule, the path to
court-ordered redress is longer. The Commission
must first conduct an administrative proceeding to
determine whether the respondent engaged in
unfair or deceptive acts or practices in violation of
section 5(a) of the FTC Act. If the Commission finds
that the respondent did so, the Commission issues
a cease-and-desist order, which might not become
final until after the resolution of any resulting
appeal to a Federal court of appeals. Then, to obtain
redress, the Commission must initiate a second
action in Federal district court, in which it must
prove that the violator engaged in objectively
fraudulent or dishonest conduct in order to obtain
court-ordered redress. See 15 U.S.C. 57b(a)(2), (b).
147 See section 5(m)(1)(A) of the FTC Act, 15
U.S.C. 45(m)(1)(A) (providing that those who
violate a trade regulation rule ‘‘with actual
knowledge or knowledge fairly implied on the basis
of objective circumstances that such act is unfair or
deceptive and is prohibited by such rule’’ are liable
for civil penalties for each violation). In addition,
any entity or person who violates such a rule
(irrespective of the state of knowledge) is liable for
any injury caused to consumers by the rule
violation. The Commission may pursue such
recovery in a suit under section 19(a)(1) of the FTC
Act, 15 U.S.C. 57b(a)(1).
148 NPRM, 88 FR 77447–48.
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analysis contains an estimated costbenefit analysis of the final rule, as well
as a more in-depth discussion of the
comments the Commission received in
response to the NPRM. In addition, the
Commission’s final regulatory flexibility
analysis, which is contained in section
VII, discusses the final rule’s economic
impact on small entities.
III. Section-by-Section Analysis
The Commission has carefully
considered the rulemaking’s extensive
comment record. It has weighed
considerations raised by individual
consumers, businesses (including small
businesses), industry advocates,
consumer advocates, labor
representatives, academics, and other
law enforcement bodies. After
considering these comments, the
Commission finalizes this rule to
address a subset of the specific unfair
and deceptive practices identified in the
NPRM. The rule will help ensure that
consumers shopping for live-event
tickets and short-term lodging see
advertised prices that include all
mandatory fees, can obtain such goods
or services at those prices, and know
what they are paying for. The rule
promotes honest and transparent pricing
for consumers and a level playing field
for businesses.
Numerous public comments in
support of and in opposition to the rule
included discussions of the definitions
and substantive provisions of the
proposed rule, and made various
recommendations. The Commission
considered comments pointing out
confusion about specific phrases in the
proposed rule, particularly phrases that
commenters found vague or overbroad.
The Commission also took notice of
comments that suggested some entities
or transactions would be subject to
overlapping Federal regulations
regarding pricing disclosures that could
result in confusion to consumers or
businesses. In addition, the Commission
appreciated comments from industry
that identified potential gaps in how the
proposed rule would interact with
certain types of pricing practices.
The Commission makes a number of
changes to the final rule. Notably, the
Commission narrows the application of
the final rule to offers, displays, or
advertisements of a covered good or
service—i.e., live-event tickets or shortterm lodging. The Commission
recognizes that many comments to the
proposed rule focused on the
application of the rule to specific
industries or pricing scenarios. As a
result of the Commission’s decision to
limit this final rule to live-event
ticketing and short-term lodging, the
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Commission need not respond to each
of these comments at this time.
In addition, wherever possible, the
Commission works to reduce burden on,
and maintain pricing flexibility for,
businesses. Finally, the Commission
provides guidance and explanation to
respond to specific questions and
hypotheticals posed by commenters to
help give additional clarity to
businesses. The following discussion
provides a section-by-section analysis of
the NPRM’s proposed provisions and
the provisions adopted in the final rule,
as well as a discussion of the comments
received and the Commission’s
responses.
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A. § 464.1 Definitions
Proposed § 464.1 contained
definitions for the following terms:
‘‘ancillary good or service’’; ‘‘business’’;
‘‘clear(ly) and conspicuous(ly)’’;
‘‘government charges’’; ‘‘pricing
information’’; ‘‘shipping charges’’; and
‘‘total price.’’ The Commission received
various comments with respect to these
definitions, including particular
industries’ requests for exemption from
the definition of ‘‘business’’ and other
suggestions. Section 464.1 of the final
rule adopts these definitions, in some
instances with minor modifications for
clarification, and adds a definition for
‘‘covered good or service.’’ In the
definition-by-definition analysis, the
Commission discusses each definition
proposed in the NPRM, any changes to
the definition’s text, the added
definition, and other comments relevant
to the definitions section that are not
otherwise addressed in the discussion of
the final rule’s substantive provisions.
1. Ancillary Good or Service
Proposed § 464.1(a) in the NPRM
defined ‘‘ancillary good or service’’ as
‘‘any additional good(s) or service(s)
offered to a consumer as part of the
same transaction.’’ This definition was
relevant to the definition of ‘‘total
price,’’ in proposed § 464.1(g), which
specified that any mandatory fees or
charges for such goods or services
would be included in total price.
Commenters proposed modifications to
the definition of ‘‘ancillary good or
service’’ but, following review of those
comments and as discussed in this
section, the Commission declines to
adopt the suggested modifications. Final
§ 464.1 adopts the definition of
‘‘ancillary good or service’’ without
modification.
Several commenters recommended
that the Commission modify the
definition of ‘‘ancillary good or service’’
to state that fees charged by a third party
must be included in total price if those
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fees are part of the same transaction.149
As stated in the NPRM, if a business
advertises a price for a good or service
that requires an ancillary good or
service provided by another entity, the
charge for the mandatory ancillary good
or service must be included in total
price. Additionally, the NPRM made
clear that the definition includes goods
and services (whether from the seller or
third parties) offered as part of the same
transaction, because it included
examples of mandatory ancillary goods
or services that may be offered by thirdparty providers but are part of the same
transaction, such as a payment
processing fee for an online transaction.
Accordingly, the Commission does not
believe that it is necessary to modify the
definition of ‘‘ancillary good or service’’
to clarify that fees charged by a third
party must be included in total price if
those fees are part of the same
transaction.
Several commenters also suggested
that the Commission add language
referring to a reasonable consumer in
the definition of ‘‘ancillary good or
service,’’ to clarify that only goods or
services that a ‘‘reasonable consumer’’
would expect to be included must be
included in total price.150 The
Commission does not believe that
adding ‘‘reasonable consumer’’ to the
definition of ‘‘ancillary good or service’’
is necessary, as the reasonable consumer
standard is implicit in the rule text.
Under longstanding precedent, the
Commission examines conduct from the
perspective of a consumer acting
reasonably under the circumstances.151
149 FTC–2023–0064–3191 (Community Catalyst et
al.); FTC–2023–0064–3283 (National Consumer Law
Center, Prison Policy Initiative, and advocate
Stephen Raher).
150 FTC–2023–0064–3268 (Housing & Eviction
Defense Clinic, University of Connecticut School of
Law, commented ‘‘the definition of an ‘Ancillary
Good or Service’ should be amended to include all
fees that are not reasonably avoidable and all fees
or charges for goods or services that a reasonable
consumer would expect to be included with the
purchase.’’); FTC–2023–0064–3275 (Berkeley
Center for Consumer Law & Economic Justice et al.
recommended the definition of ‘‘Ancillary Good or
Service’’ be revised ‘‘to mean ‘any optional,
additional good(s) or service(s), offered to a
consumer as part of the same transaction, that a
reasonable consumer would not expect to be
included with the purchase of the advertised good
or service.’’); FTC–2023–0064–3160 (Consumer
Federation of America et al. proposed the definition
of ‘‘Ancillary Good or Service’’ be modified to ‘‘any
optional, additional good(s) or service(s), offered to
a consumer as part of the same transaction, that a
reasonable consumer would not expect to be
included with the purchase of the advertised good
or service.’’).
151 Deception Policy Statement, 103 F.T.C. at 175,
177–82; see also FTC v. Cantkier, 767 F. Supp. 2d
147, 151–52 (D.D.C. 2011) (applying deception
standard set forth in the Deception Policy
Statement); POM Wonderful, LLC v. FTC, 777 F.3d
478, 490, 500 (D.C. Cir. 2015) (applying deception
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If a representation or practice affects or
is directed primarily to a particular
group, the Commission examines
reasonableness from the perspective of
an ordinary member of that group.152
Accordingly, the Commission does not
believe it is necessary to modify the
definition of ‘‘ancillary good or service’’
to refer to a reasonable consumer.
One commenter argued, in the context
of online movie ticket purchases, that
online convenience fees are reasonably
avoidable because consumers can
purchase tickets in-person at a theater
without incurring the fees.153 Although
a movie ticket is not a covered good or
service, similar convenience fees are
common in the live-event ticketing
industry. The Commission disagrees
with the commenter that online
convenience fees are reasonably
avoidable: If a consumer must pay a
service or other fee in order to purchase
tickets online (i.e., as part of the same
transaction), then such a fee must be
included in total price when it appears
online. In addition, using vague fee
descriptions, such as an unspecified
‘‘convenience’’ fee, may violate
§§ 464.2(c) and 464.3 by failing to
disclose clearly and conspicuously, and
by misrepresenting, the nature or
purpose of fees or the identity of the
good or service for which fees or charges
are imposed.
Another commenter argued that the
definition of ‘‘ancillary good or service’’
should ‘‘not turn on whether the good
or service is ‘offered’ to a consumer but
whether it is ‘required to be purchased’
by the consumer.’’ 154 The commenter
proposed that the Commission
standard set forth in the Deception Policy Statement
and upholding administrative law judge
determination that ‘‘ ‘a significant minority’ of
‘reasonable’ consumers ‘would interpret [the ad] to
be claiming that drinking eight ounces of POM Juice
daily prevents or reduces the risk of heart
disease.’ ’’); FTC v. World Travel Vacation Brokers,
Inc., 861 F.2d 1020, 1029 (7th Cir. 1988) (upholding
lower court’s determination that ‘‘ ‘the $29 airfare
promotion constituted the type of misrepresentation
upon which a reasonably prudent person would
rely’ ’’); Fed. Trade Comm’n, FTC Policy Statement
on Unfairness (appended to In re Int’l Harvester Co.,
104 F.T.C. 949, 1070, 1073 (1984), (hereinafter
‘‘Unfairness Policy Statement’’), https://
www.ftc.gov/sites/default/files/documents/
commission_decision_volumes/volume-104/ftc_
volume_decision_104__july_-_december_
1984pages949_-_1088.pdf (‘‘To justify a finding of
unfairness the [consumer] injury must . . . be an
injury that consumers themselves could not
reasonably have avoided.’’).
152 Deception Policy Statement, 103 F.T.C. at 175,
179 (‘‘For instance, if a company markets a cure to
the terminally ill, the practice will be evaluated
from the perspective of how it affects the ordinary
member of that group.’’).
153 FTC–2023–0064–3292 (National Association
of Theatre Owners).
154 FTC–2023–0064–3206 (Motor Vehicle
Protection Products Association et al.).
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incorporate the word ‘‘mandatory’’ into
the definition of ‘‘ancillary good or
service.’’ The Commission disagrees
with this proposed modification. As
discussed in the NPRM, an ancillary
good or service may be mandatory or
optional. Whether the cost of the
ancillary good or service must be
incorporated into total price turns on
whether the good or service is
mandatory, which depends on the facts
of a transaction.155 For example, if a
hotel offers a consumer the option to
purchase or decline a trip protection
plan with a room reservation, the plan
would be an optional ancillary good or
service because the consumer has the
option to decline the trip insurance.
Conversely, a hotel may require all
guests to purchase a daily breakfast
voucher. In this case, the hotel guest
cannot avoid being charged for the
voucher, and it is a mandatory ancillary
good or service. If a business charges
payment processing fees that the
consumer cannot reasonably avoid, such
fees would be for a mandatory ancillary
good or service.
It is also possible that a good or
service may be mandatory in one
transaction but optional in another.156
For example, if a hotel allows a guest to
purchase amenities such as bottled
water or pool towels for an additional
fee but permits each guest to supply
their own water or pool towels, such
amenities would be optional ancillary
goods or services. If, however, the hotel
requires all patrons to use the hotelprovided amenities for a fee, then the
amenities would be mandatory ancillary
goods or services. Because ancillary
goods or services may be either
mandatory or optional, the Commission
declines to add the word ‘‘mandatory’’
into the definition of ‘‘ancillary good or
service.’’
Some commenters also asked the
Commission for additional guidance as
to when a good or service might be
considered ancillary, particularly if a
good or service includes variable
155 See
infra section III.A.8.a.
Commission notes that several
commenters misinterpreted the definition of
‘‘Ancillary Good or Service’’ as necessarily being
optional. See, e.g., FTC–2023–0064–3145
(Association of National Advertisers, Inc. stated that
‘‘Ancillary fees, by definition, are not ‘mandatory’
and should not be characterized as ‘mandatory’ fees
subject to the proposed disclosure requirements.’’);
FTC–2023–0064–1425 (Iowa Bankers Association
stated, ‘‘While the definition of Total Price includes
‘mandatory’ Ancillary Goods or Services, the actual
definition [of Ancillary Good or Service] seems to
speak to the discretionary aspect of this term.’’).
The Commission reiterates that the rule text is clear:
Ancillary Goods or Services may be mandatory or
optional, depending on the facts of a particular
transaction.
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156 The
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costs.157 The Commission addresses
pricing scenarios, including those
pertaining to contingent or variable fees,
in section III.B.1.a. Another commenter
stated that the use of the word ancillary
was unclear, because it ‘‘implies a
relationship between a primary object
and the ancillary object’’ and does not
include guidance concerning the
primary object.158 The Commission
cannot identify in every possible
situation which good or service would
be the ‘‘primary object’’ versus an
ancillary good or service because such
a determination is fact-specific and will
depend on the goods or services offered
by individual businesses.
For the foregoing reasons, and based
on its review of the comments received,
the Commission adopts the definition of
‘‘ancillary good or service’’ set forth in
the NPRM. As discussed in section
III.A.8, to address comments and clarify
the rule, the Commission modifies the
definition of total price to further clarify
that under final § 464.2(a), Businesses
may exclude from total price fees or
charges for any optional ancillary good
or service.
2. Business
Proposed § 464.1(b) defined
‘‘business’’ as ‘‘an individual,
corporation, partnership, association, or
any other entity that offers goods or
services, including, but not limited to,
online, in mobile applications, and in
physical locations.’’ As part of the
NPRM, the Commission also proposed a
carve-out for certain motor vehicle
dealers required to comply with the
Combating Auto Retail Scams Trade
Regulation Rule (‘‘CARS Rule’’),159 and
for the carve-out to become effective
upon the CARS Rule’s effective date.
The CARS Rule provides for certain
pricing disclosure requirements and
prohibits misrepresentations. Final
§ 464.1 adopts the first sentence of the
proposed definition of ‘‘business,’’ but
removes the carve-out for motor
vehicles required to comply with the
CARS Rule because of the final rule’s
narrowed scope.
In the NPRM, the Commission sought
input as to whether it should modify the
proposed definition of ‘‘business’’ to
exclude certain businesses, or whether
it should add a definition of ‘‘covered
business’’ to narrow the businesses
subject to the rule. The NPRM also
included several questions concerning
how to define ‘‘covered business’’ in the
157 FTC–2023–0064–3172 (New Jersey Apartment
Association); FTC–2023–0064–3296 (Bay Area
Apartment Association).
158 FTC–2023–0064–3206 (Motor Vehicle
Protection Products Association et al.).
159 16 CFR part 463.
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event the Commission opted to adopt
such a definition. The Commission
received broad support for an industryneutral rule from individual
commenters, consumer groups, and
industry organizations. Commenters
cited the prevalence of hidden and
deceptive fees across a variety of
industries and argued that broad
exemptions would create an uneven
economic playing field and confuse
consumers by creating unpredictability
across industries.160 Conversely, the
Commission received numerous
comments asking that it narrow the rule
to specific industries, including, for
example, live-event ticketing and shortterm lodging. Several commenters also
urged the Commission to exempt certain
industries, arguing that the rule would
pose challenges for those industries or
that those industries are already subject
to existing regulations.
Following its review of the comments,
the Commission narrows application of
the final rule to covered goods or
services, those involving live-event
tickets or short-term lodging. While the
comments demonstrated that bait-andswitch pricing and misleading fees and
charges inflict harms on consumers
across the economy, the rulemaking
record reveals longstanding concerns
with these unfair and deceptive
practices within the live-event ticketing
and short-term lodging industries in
particular. The final rule addresses
these industries first. The Commission
addresses the definition of ‘‘covered
good or service’’ in section III.A.4.
The Commission received comments
requesting modifications to various
definitions, including the definition of
‘‘business,’’ or wholesale exemptions
from the proposed rule’s coverage
related to issues in particular industries,
including auto dealers and service
providers,161 app-based delivery
platforms,162 financial services
160 See, e.g., FTC–2023–0064–2887 (Progressive
Policy Institute); FTC–2023–0064–3160 (Consumer
Federation of America et al.); FTC–2023–0064–3275
(Berkeley Center for Consumer Law & Economic
Justice et al.).
161 E.g., FTC–2023–0064–3276 (Automotive
Service Association); FTC–2023–0064–3206 (Motor
Vehicle Protection Products Association et al.);
FTC–2023–0064–3189 (National Automobile
Dealers Association); FTC–2023–0064–3121
(National Independent Automobile Dealers
Association).
162 E.g., FTC–2023–0064–3263 (Flex Association);
FTC–2023–0064–3202 (TechNet); FTC–2023–0064–
3238 (Gibson, Dunn & Crutcher LLP).
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providers,163 franchised businesses,164
funeral service providers,165 rental
housing,166 restaurants and other food
and beverage service providers,167
telecommunications providers,168
vending machine retailers,169 movie
theaters,170 health and fitness
centers,171 higher education
institutions,172 recreational vehicles and
marine crafts,173 and towing
companies.174 The Commission’s
163 E.g., FTC–2023–0064–3139 (American
Bankers Association and Consumer Bankers
Association); FTC–2023–0064–2893 (America’s
Credit Unions); FTC–2023–0064–3168 (American
Financial Services Association); FTC–2023–0064–
3147 (American Land Title Association); FTC–
2023–0064–1425 (Iowa Bankers Association); FTC–
2023–0064–1941 (Independent Bankers Association
of Texas); FTC–2023–0064–3182 (Massachusetts
Bankers Association); FTC–2023–0064–3119
(Money Services Business Association, Inc.); FTC–
2023–0064–3144 (Mortgage Bankers Association);
FTC–2023–0064–3127 (U.S. Chamber of
Commerce).
164 E.g., FTC–2023–0064–3294 (International
Franchise Association); FTC–2023–0064–3141
(Coalition of Franchisee Associations); FTC–2023–
0064–3211 (American Association of Franchisees &
Dealers).
165 E.g., FTC–2023–0064–3210 (Service
Corporation International); FTC–2023–0064–3065
(Carriage Services, Inc.); FTC–2023–0064–3130
(International Cemetery, Cremation & Funeral
Association).
166 E.g., FTC–2023–0064–3152 (Building Owners
& Managers Association et al.); FTC–2023–0064–
3116 (Manufactured Housing Institute); FTC–2023–
0064–3133 (National Multifamily Housing Council
and National Apartment Association); FTC–2023–
0064–3172 (New Jersey Apartment Association);
FTC–2023–0064–3289 (Zillow Group). As
explained in section III.A.4, the Commission does
not intend to cover rental housing providers in its
definition of ‘‘Covered Good or Service’’ at this
time.
167 E.g., FTC–2023–0064–0264 (Individual
Commenter); FTC–2023–0064–2953 (Individual
Commenter); FTC–2023–0064–2124 (Individual
Commenter); FTC–2023–0064–3022 (Individual
Commenter); FTC–2023–0064–3021 (Individual
Commenter); FTC–2023–0064–3300 (National
Restaurant Association); FTC–2023–0064–3219
(Georgia Restaurant Association); FTC–2023–0064–
3180 (Independent Restaurant Coalition); FTC–
2023–0064–3078 (Washington Hospitality
Association); FTC–2023–0064–3080 (UNITE HERE);
FTC–2023–0064–2918 (Elite Catering + Event
Professionals).
168 E.g., FTC–2023–0064–3234 (CTIA—The
Wireless Association); FTC–2023–0064–3295
(USTelecom—The Broadband Association); FTC–
2023–0064–2884 (NTCA—The Rural Broadband
Association); FTC–2023–0064–3143 (ACA
Connects).
169 E.g., FTC–2023–0064–2919 (National
Automatic Merchandising Association).
170 E.g., FTC–2023–0064–3292 (National
Association of Theatre Owners).
171 E.g., FTC–2023–0064–3269 (IHRSA—The
Health & Fitness Association).
172 E.g., FTC–2023–0064–2906 (National
Association of College & University Business
Officers et al.).
173 E.g., FTC–2023–0064–3249 (Marine Retailers
Association of the Americas); FTC–2023–0064–
3251 (National RV Dealers Association).
174 Towing & Recovery Association of America,
Inc. submitted a late comment, which the
Commission considered in its discretion and makes
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decision to narrow the final rule to
covered goods or services renders these
requests inapplicable, and as such, the
Commission does not address them at
this time.
The Commission received comments
from various third-party travel service
providers, including online travel
agencies and travel advisors, arguing
that third-party travel intermediaries
and advisors are situated differently
from underlying travel service providers
and may be subject to existing
Department of Transportation (‘‘DOT’’)
regulations. Online travel agencies and
travel advisors routinely offer, display,
or advertise prices of covered goods or
services to consumers, including
businesses, which is conduct covered by
the final rule. One industry group
representing travel advisors argued that
travel advisors do not set the price of
underlying travel products and rely on
the sellers of such products to provide
accurate pricing information.175 The
commenter requested that the
Commission include a ‘‘safe harbor
mechanism’’ to protect travel advisors
who may rely on inaccurate pricing
information provided by sellers. The
Commission declines to exclude travel
advisors from the rule or to provide
them with a safe harbor. The
Commission addresses in section
III.B.1.f requests for immunity for thirdparty intermediaries.
The Commission also received
comments from online travel agencies
seeking an exemption from the rule for
airfare or bundled products that include
airfare, arguing that the FTC Act does
not confer jurisdiction over airlines and,
further, that DOT’s Full Fare
Advertising Rule requires certain
pricing disclosures for airfare.176 As
noted in the NPRM, the Commission’s
enforcement of its rule is subject to all
existing limitations of the law and the
Commission cannot bring a complaint to
enforce its rule if doing so would exceed
the Commission’s jurisdiction or
constitutional limitations. The
Commission declines to exempt online
travel agencies from the rule. However,
the Commission notes that, where there
is overlap between this rule and the
DOT’s Full Fare Advertising Rule on the
treatment of government charges (i.e., in
the context of bundled travel packages,
such as for airfare and hotels, the Full
Fare Advertising Rule requires the
inclusion of government taxes and fees
available at https://www.ftc.gov/system/files/ftc_
gov/pdf/R207011TRAAComment.pdf.
175 FTC–2023–0064–3106 (American Society of
Travel Advisors).
176 See, e.g., FTC–2023–0064–3293 (Travel
Technology Association); FTC–2023–0064–3262
(Skyscanner).
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in the total price), complying with both
rules is feasible. While this rule permits
businesses to exclude government
charges from total price, it does not
require them to do so.
The Commission received a comment
from a gaming association seeking an
exemption for Federally recognized
Indian Tribes and Tribal entities as
governments that act for the benefit of
their tribal citizens.177 The commenter
asserted that the Commission does not
generally exercise regulatory authority
over such entities. The comment
focused on Tribal government casinos
and explained that Tribal casino
revenues are used for essential Tribal
government services and community
development, including education,
healthcare services, housing, and
infrastructure development.178
The Commission recognizes that some
Tribal Government casinos and other
businesses may operate as hotels or liveevent venues, or may otherwise offer
goods or services that fit within the
definition of covered good or service.
Nevertheless, the Commission declines
to exempt Federally recognized Indian
Tribes and Tribal entities from coverage
under the final rule. The FTC Act is a
law of general applicability that applies
to such entities, as well as individual
members thereof.179 The Commission
recognizes that, in some instances, these
entities may be organized in such a way
that they are outside FTC jurisdiction,
but whether a given Tribe or Tribal
business is a corporation within the
scope of the FTC Act is a fact-dependent
inquiry.180 The Commission is not
aware of any evidence to suggest that
the final rule would disproportionately
impact such entities or that it would
have any impact on their ability to
continue to use revenues for
government services or community
development.
The Commission received a comment
seeking an exemption for all franchised
businesses. The commenter raised
concerns that franchised businesses may
lose out on the benefit of national
177 FTC–2023–0064–3120 (Arizona Indian
Gaming Association).
178 Id.
179 See Fed. Power Comm’n v. Tuscarora Indian
Nation, 362 U.S. 99, 116–17 (1960) (examining case
law supporting the conclusion that ‘‘a general
statute in terms applying to all persons includes
Indians and their property interests’’); FTC v. AMG
Servs., Inc., No. 2:12–CV–00536–GMN, 2013 WL
7870795, at * 16–21 (D. Nev. July 16, 2013), R. &
R. adopted, 2014 WL 910302 (D. Nev. Mar. 7, 2014)
(discussing the FTC Act’s applicability to Federally
recognized Tribes and Tribal businesses).
180 See, e.g., AMG Servs., 2013 WL 7870795, at
* 22–23 (holding there was a genuine dispute of
material fact barring summary judgment on
question of whether Tribal chartered corporations
were for-profit corporations under the FTC Act).
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advertising campaigns, asserting that
‘‘[u]nder the Proposed Rule, national
marketing campaigns are only workable
if all franchised businesses in a
franchise system adhere to the same
pricing regime (including pass-through
fees), regardless of the economic
demands of the market in which they
operate.’’ 181 The commenter also raised
concerns particular to restaurant
franchises.182
The Commission declines to exclude
franchised businesses from the final
rule. As the commenter notes,
franchised businesses include hotels,
restaurants, and fitness centers, among
other businesses. The Commission’s
addition of the ‘‘covered good or
service’’ definition narrows the rule’s
application to businesses that make
available live-event tickets or short-term
lodging and moots the commenter’s
concerns regarding restaurants or other
franchises. Further, the final rule
applies equally to franchised and nonfranchised businesses, including hotels.
The commenter has not provided any
evidence to suggest that the rule will
disproportionately impact franchised
businesses. As to the commenter’s
contention that application of the rule
will negatively impact franchised
businesses’ ability to benefit from
national advertising campaigns, the
Commission addresses commenters’
questions and concerns about national
advertising campaigns in section
III.B.1.d.
The commenter also urged the
Commission to exclude from the rule
sellers of franchises (‘‘franchisors’’)
subject to the FTC’s Disclosure
Requirements and Prohibitions
Concerning Franchising Rule
(‘‘Franchise Rule’’), arguing that the
rule’s total price requirement would
undermine the Franchise Rule’s
requirement to itemize specific fees.183
Two commenters representing
franchised businesses (‘‘franchisees’’),
however, urged the Commission to
address ‘‘the types of fees that are
charged to franchisees by franchisors,’’
which are not subject to the Franchise
Rule.184
The Franchise Rule, 16 CFR part 436,
requires franchisors, in connection with
the offer or sale of a franchise, to
provide prospective franchisees with
specific information about the fees and
charges necessary to begin operation of
the franchised business, including the
181 FTC–2023–0064–3294 (International
Franchise Association).
182 Id.
183 Id.
184 FTC–2023–0064–3141 (Coalition of
Franchisee Associations); FTC–2023–0064–3211
(American Association of Franchisees & Dealers).
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estimated initial investment, expected
fees, and other expenses.185 Because the
final rule is limited to prices for covered
goods or services and ancillary goods or
services offered as part of the same
transaction, it would not apply to an
offer or sale of a franchise, including a
hotel franchise. However, the
Commission reiterates that franchised
businesses must comply with the final
rule in its entirety when selling covered
goods or services.
One industry group recommended
that the definition of ‘‘business’’ be
limited to ‘‘an individual, corporation,
partnership, association, or any other
entity that offers goods or services to
consumers,’’ with the purpose of
exempting business-to-business
transactions from the scope of the final
rule.186 Another industry group
similarly requested that the Commission
exempt business-to-business
transactions from the scope of the final
rule.187 As set forth in section III.B.1.f,
the Commission believes that
application of the rule to business-tobusiness transactions is appropriate and
necessary to provide the Commission
with the tools necessary to seek redress
from businesses that violate the law.
The final rule covers both business-toconsumer transactions and business-tobusiness transactions, so no
modification to the definition of
‘‘business’’ is required.
3. Clear(ly) and Conspicuous(ly)
Proposed § 464.1(c) in the NPRM
defined ‘‘clear(ly) and conspicuous(ly),’’
consistent with longstanding FTC
practice, as ‘‘a required disclosure that
is difficult to miss (i.e., easily
noticeable) and easily understandable,’’
and listed proposed specifications for
‘‘visual disclosure[s],’’ ‘‘audible
disclosure[s],’’ and ‘‘any communication
using an interactive electronic
medium.’’ Among other specifications,
the definition explained that the
disclosure ‘‘must be made through the
same means through which the
communication is presented.’’ The
proposed definition also provided that
disclosures ‘‘must use diction and
syntax understandable to ordinary
consumers and must appear in each
language in which the representation
that requires disclosure appears’’ and
‘‘must not be contradicted or mitigated
185 16 CFR 436.5; see also Fed. Trade Comm’n,
Staff Guidance on the Unlawfulness of Undisclosed
Fees Imposed on Franchisees (July 2024), https://
www.ftc.gov/system/files?file=ftc_gov/pdf/
Franchise-Staff-Guidance.pdf.
186 FTC–2023–0064–3189 (National Automobile
Dealers Association).
187 FTC–2023–0064–3294 (International
Franchise Association).
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2085
by, or inconsistent with, anything else
in the communication.’’ The proposed
definition further made clear that for
‘‘representations or sales practice[s]’’
targeting specific audiences, ‘‘such as
children, older adults, or the terminally
ill, ‘ordinary consumers’ includes
reasonable members of that group.’’ The
Commission finalizes the definition of
‘‘clear(ly) and conspicuous(ly)’’
proposed in § 464.1(c) with minor
clarifications to harmonize the language
and terminology used in this provision
with the terminology used in recent
rulemakings and agency guidance.
Specifically, proposed § 464.1(c)
provided that a required disclosure
must be ‘‘difficult to miss (i.e., easily
noticeable).’’ Final § 464.1 reverses the
order of the phrases ‘‘easily noticeable’’
and ‘‘difficult to miss,’’ and, thus,
provides that a required disclosure must
be ‘‘easily noticeable (i.e., difficult to
miss).’’ Additionally, in final § 464.1,
the Commission adds language to clarify
that required disclosures must be
‘‘easily understandable by ordinary
consumers.’’ In final § 464.1, the
Commission deletes reference to
‘‘reasonable’’ members of a specifically
targeted group. Each of these
modifications is to comport with the
Commission’s recently finalized Trade
Regulation Rule on the Use of Consumer
Reviews and Testimonials and the
Negative Option Rule, as well as the
Commission’s Endorsement Guides.188
Moreover, as noted in section II.B., the
Commission examines conduct from the
perspective of a consumer acting
reasonably under the circumstances,
and if a representation or practice
affects or is directed primarily to a
particular group, the Commission
examines reasonableness from the
perspective of an ordinary member of
that group.189 In final § 464.1, the
Commission also includes ‘‘mobile
188 See Promulgation of Trade Regulation Rule
and Statement of Basis and Purpose: Rule
Concerning Recurring Subscriptions and Other
Negative Option Programs, 89 FR 90476 (Nov. 15,
2024), https://www.federalregister.gov/documents/
2024/11/15/2024-25534/negative-option-rule
(amending 16 CFR 425.4); 16 CFR part 465;
Promulgation of Trade Regulation Rule and
Statement of Basis and Purpose: Rule on the Use of
Consumer Reviews and Testimonials, 89 FR 68034
(Oct. 22, 2024), https://www.federalregister.gov/
documents/2024/08/22/2024-18519/traderegulation-rule-on-the-use-of-consumer-reviewsand-testimonials; Guides Concerning Use of
Endorsements and Testimonials in Advertising, 16
CFR 255.0(f). The Commission notes that it declines
to adopt every modification adopted in the finalized
Rule on the Use of Consumer Reviews and
Testimonials, based on the goals of each rule and
the comment record.
189 See Deception Policy Statement, 103 F.T.C. at
175, 177–82; Unfairness Policy Statement, 104
F.T.C. at 1073; and other sources cited supra notes
151–52.
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Federal Register / Vol. 90, No. 6 / Friday, January 10, 2025 / Rules and Regulations
applications’’ within the definition of
‘‘clear(ly) and conspicuous(ly).’’ This
addition clarifies that ‘‘mobile
applications’’ constitute interactive
media devices under item (4) of the
definition. The Commission does not
believe that these modifications
substantively alter the definition of
‘‘clear(ly) and conspicuous(ly).’’
The Commission declines to adopt
several modifications to the definition
of ‘‘clear(ly) and conspicuous(ly)’’
proposed by a consumer group. First,
the commenter suggested that the
Commission add ‘‘limited English
proficient consumers’’ to the list of
specific audience-types that a
representation or sales practices may
target in proposed § 464.1(c)(8) to make
clear that disclosures are
understandable for both English and
limited-English speakers.190 The
Commission does not believe such a
modification is necessary. While the
definition includes examples of specific
audiences who may be targeted by
particular sales practices or
representations, the use of ‘‘such as’’ is
intended to make clear these are
examples, rather than an exhaustive list
of categories of consumers who may be
targeted. The Commission further notes
that final § 464.1 requires that the
disclosures ‘‘must appear in each
language in which the representation
that requires the disclosure appears.’’
The commenter also suggested that
the Commission add language to require
that disclosures on interactive electronic
media ‘‘be capable of being printed and
saved in an easily readable format.’’ 191
The Commission does not believe such
a modification is necessary. The
definition considers the various types of
media through which consumers and
businesses transact and, for all types of
media, the definition requires the
disclosures to be ‘‘easily noticeable (i.e.,
difficult to miss).’’ Thus, the
Commission believes that the definition
provides businesses with flexibility to
continue transacting effectively and
efficiently through different media,
while ensuring sufficient consumer
understanding of required disclosures.
The commenter further proposed that
the rule clarify that disclosures must be
concise to discourage businesses from
‘‘listing hundreds of optional fees,
identifying fees that would not be
applicable to the consumer, providing a
description that uses complex jargon,
[or is] unnecessarily lengthy.’’ 192 The
definition already addresses these
190 FTC–2023–0064–3160
(Consumer Federation
of America et al.).
191 Id.
192 Id.
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concerns by setting forth what ‘‘clear(ly)
and conspicuous(ly)’’ means: using
simple terms that provide sufficient
information about how businesses can
formulate disclosures that are easily
understandable and noticeable to
consumers. The definition provides that
disclosures ‘‘must stand out from any
accompanying text or other visual
elements’’ to be ‘‘easily noticed, read,
and understood.’’
An automobile industry group urged
the Commission to remove ‘‘required
disclosure’’ from the definition of
‘‘clear(ly) and conspicuous(ly),’’ arguing
that ‘‘the NPRM is silent on what those
required disclosures actually are.’’ 193
The Commission disagrees and notes
that the final rule modifies § 464.2(a)
through (c) to provide greater clarity
concerning what needs to be disclosed,
including total price and other
information related to fees or charges
that were excluded from total price, and
the nature, timing, and prominence of
those disclosures. Those modifications
are discussed in detail in section III.B.
One commenter on behalf of members
in the financial services industry
asserted that the definition of ‘‘clear(ly)
and conspicuous(ly)’’ may conflict with
requirements of certain financial
services regulations, which do not
generally require a certain text size or
placement, but do require that certain
disclosures be made with ‘‘equal
prominence and in close proximity to
certain trigger terms.’’ 194 The
Commission does not believe that
financial services regulations are
implicated by the final rule’s more
narrow application to covered goods or
services. Nonetheless, the Commission
notes that the definition does not
require a particular text size or
placement; the definition states that
‘‘clear(ly) and conspicuous(ly)’’ requires
a visual disclosure to ‘‘stand out from
any accompanying text or other visual
elements so that it is easily noticed,
read, and understood.’’
A commenter on behalf of marketing
and advertising businesses criticized the
proposed definition of ‘‘clear(ly) and
conspicuous(ly)’’ as imposing
‘‘prescriptive visual and audio
disclosure[s] . . . that may not cleanly
map onto all advertising mediums’’ and
argued that a business’s compliance
obligations may not be clear if the
business relies on advertising mediums
not mentioned in the definition.195 The
commenter urged the Commission to
193 FTC–2023–0064–3206 (Motor Vehicle
Protection Products Association et al.).
194 FTC–2023–0064–1425 (Iowa Bankers
Association).
195 FTC–2023–0064–3145 (Association of
National Advertisers, Inc.).
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allow for sufficient flexibility ‘‘to better
accommodate current and future
advertising mediums that may not allow
for the contemplated disclosures,’’ in
particular to make it easier for small
businesses to comply with the rule.196
The commenter did not provide any
examples of advertising media that
would make it difficult to comply with
the rule and did not suggest alternative
language. Similarly, a commenter
representing app-based delivery
platforms noted the limited space for
disclosures on delivery platforms and
asserted that the rule lacked clarity as to
how such platforms should comply.197
The Commission believes that the
definition of ‘‘clear(ly) and
conspicuous(ly)’’ provides basic,
common-sense, and flexible principles
to address current and future
advertising media. For example, the
definition requires that visual
disclosures be in a size and font that
consumers will easily notice and not be
obscured by other text and that audible
disclosures be at a volume, speed, and
cadence that consumers will easily
understand. In keeping with
longstanding Commission interpretation
and guidance, the definition does not
mandate specific fonts, text-size, or
volume, or otherwise impose a one-sizefits-all approach. Instead, it provides
substantial flexibility to businesses in
meeting the rule’s disclosure
requirements so long as consumers take
away an accurate understanding of the
disclosure. The Commission has
published multiple resources to assist
businesses in ensuring that disclosures
are clear and conspicuous, including a
guide specifically geared toward digital
and mobile advertising.198
4. Covered Good or Service
In the NPRM, the Commission
solicited comment on whether it should
narrow the businesses covered by the
rule to particular industries or to
covered businesses, and if so, how to
define covered businesses.199 The final
rule includes a definition for ‘‘covered
good or service’’ to include: (1) Liveevent tickets; or (2) Short-term lodging,
including temporary sleeping
accommodations at a hotel, motel, inn,
short-term rental, vacation rental or
other place of lodging. Under § 464.2(a),
196 Id.
197 FTC–2023–0064–3263
(Flex Association).
Fed. Trade Comm’n, Bureau of Consumer
Protection Business Guidance, .com Disclosures:
How to Make Effective Disclosures in Digital
Advertising 7, 18 (Mar. 2013), https://www.ftc.gov/
system/files/documents/plain-language/bus41-dotcom-disclosures-information-about-onlineadvertising.pdf.
199 NPRM, 88 FR 77481, Question 14.
198 See
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the final rule requires businesses that
offer, display, or advertise any price of
a covered good or service to clearly and
conspicuously disclose the total price.
In addition, § 464.3 of the final rule
prohibits businesses that offer, display,
or advertise a covered good or service
from misrepresenting any fees or
charges.
The Commission received comments
encouraging it to adopt an industryneutral rule and urging it not to limit
the rule’s application to particular
industries, as well as comments
conversely urging it to limit the rule to
live-event ticketing and short-term
lodging industries. One advocacy group
argued that narrowing application of the
final rule to a subset of industries would
‘‘create an unlevel playing field’’ and
alter competitive incentives.200 Other
commenters argued that hidden or
deceptive fees are present across
industries and often impact vulnerable
populations.201 Several commenters did
not specifically address the
Commission’s question regarding
whether to add a definition of ‘‘covered
business’’ or how to define ‘‘covered
business,’’ but instead submitted
comments highlighting unfair and
deceptive pricing practices in certain
industries, and encouraging the
Commission to adopt a final rule
applicable to those industries. Those
included comments concerning the
motor vehicle industry; 202 delivery
applications; 203 the financial services
200 FTC–2023–0064–2887 (Progressive Policy
Institute).
201 FTC–2023–0064–1519 (NYC Consumer and
Worker Protection argued that ‘‘[c]onsumers
deserve every business to be transparent and fair
about prices.’’); FTC–2023–0064 (Berkeley Law
stated that ‘‘[r]estricting the Rule to particular
industries would exclude some of the most critical
sectors that low-income people especially rely on,’’
including ‘‘the rental housing market, tax
preparation services, payday lenders, and gift card
merchants’’); FTC–2023–0064–3282 (NCLC
highlighted hidden or deceptive fees in ‘‘businesses
that offer credit, lease, or savings products’’)
202 See, e.g., FTC–2023–0064–3160 (Consumer
Federation of America et al.); FTC–2023–0064–3270
(Consumer Federation of America, National
Consumer Law Center, National Association of
Consumer Advocates); see also FTC–2023–0064–
2853 (Performance Auto Inc., an individual car
dealership, supported application of the rule to car
dealers.).
203 See, e.g., FTC–2023–0064–1939 (Tzedek DC).
204 See, e.g., FTC–2023–0064–3160 (Consumer
Federation of America et al.); FTC–2023–0064–3275
(Berkeley Center for Consumer Law & Economic
Justice et al.); see also FTC–2023–0064–0199 (‘‘I
don’t understand why I have to pay to have my
credit card bill mailed to me . . . .’’); FTC–2023–
0064–0258 (‘‘I checked our account and discovered
that they had charged $10.00 for maintenance
fees.’’); FTC–2023–0064–0418 (‘‘Even credit unions
are charging insane fees it is bleeding us dry if we
are broke already why are we getting hit with fees
for being poor’’); FTC–2023–0064–0396 (‘‘My son is
on SSI, and his bank charges him fees when his
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industry; 204 the restaurant industry; 205
the movie theater industry; 206 tax
account goes below $100! . . . How does this make
sense? Banks should not have fees like this. It [is]
penalizing the poorest people!’’); FTC–2023–0064–
0425 (‘‘What bothers me is that my bank charges me
$35 for every overdraft!! I find that excessive! It’s
a lot of money, especially when you don’t have
enough in the first place. It’s like being punished
for being poor.’’); FTC–2023–0064–0762 (‘‘We have
and continue to pay unnecessary costs for services
especially personal loans and credit card debt. This
makes payments for these loans much more of a
hardship than the initial being in need of the card
or loans was in the first place.’’).
205 See, e.g., FTC–2023–0064–3248 (DC Jobs With
Justice on behalf of Fair Price, Fair Wage Coalition
encouraged the Commission to maintain an
industry-neutral rule applicable to the restaurant
industry); FTC–2023–0064–2885 (AARP
commented that many consumers ‘‘feel deceived
when faced with an unexpected mandatory charge,’’
such as ‘‘service fees,’’ ‘‘living wage fees,’’ or
‘‘kitchen fees,’’ and ‘‘would prefer these costs be
incorporated into the price of food so that they
better understand restaurants’ costs upfront.’’);
FTC–2023–0064–0103 (Individual Commenter
stated: ‘‘[R]estaurants are adding surcharges [for]
providing health insurance, or to make sure that
kitchen crew receives a tip. But these are existing
operating costs that can and should be factored into
the price. . . . On at least a couple occasions, the
add-on fee wasn’t even disclosed until the check.’’);
FTC–2023–0064–0119 (Individual Commenter
stated: ‘‘Fees of approximately 5–20% are often
added to restaurant bills. . . . They are often
written in small font in inconspicuous places on the
menu or past blank space on websites. It’s often
unclear where these additional fees are going and
should be simply incorporated into the menu
prices.’’); FTC–2023–0064–0120 (Individual
Commenter stated: ‘‘Now restaurants are adding
service fees instead of increasing food price. I want
to buy goods and services, I want to know the full
price, with all the extra fees and taxes before, not
after selecting a goods or service.’’); FTC–2023–
0064–0152) (Individual Commenter stated:
‘‘Tipping since covid is crazy now too—and now
these add on fees appear to be creeping into
restaurants. A local pizza restaurant added a 20%
‘gratuity fee’ on the bill—this was not a tip but an
additional charge for ‘business costs’ and does not
go to employees.’’); FTC–2023–0064–0065
(Individual Commenter stated: ‘‘A number of
restaurants here in Chicago are now adding
surcharges that are only disclosed after you get the
check, or they are disclosed in small print on the
menu, which effectively makes the prices displayed
on the menu deceptive.’’); FTC–2023–0064–0052
(Individual Commenter stated: ‘‘Small businesses,
particularly restaurants, have grown their use of the
type of non-transparent pricing practices that this
rule aims to address . . ., such as the inclusion in
bills of various fees that cannot be avoided (and that
therefore should be part of the total price)’’).
206 See, e.g., FTC–2026–0064–1303 (Individual
Commenter stated: ‘‘Just last night I tried to buy
movie tickets (from the movie theater’s own app no
less!) but the fees added 25% more to the cost of
the ticket! Ten dollars in fees on an app that the
big movie chain runs on its own!’’); FTC–2023–
0064–1469 (Individual Commenter stated: ‘‘I’m sick
of paying for ‘convenience fees’ when purchasing
tickets online (to live events and even the local
movie theater), even though there is no other way
to purchase them.’’); see also FTC–2023–0064–3104
(Truth in Advertising, Inc.) (highlighting class
action lawsuits alleging failure to disclose the total
cost of movie ticket prices, inclusive of fees, in
violation of New York State law).
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preparation services; 207 and the health
care industry.208
Several commenters specifically
urged the Commission to ensure that the
rental housing industry would be
subject to the final rule, including in
any definition of ‘‘covered business,’’ to
mitigate unfair or deceptive fees
imposed on renters.209 The Commission
also received numerous comments from
individual consumers, consumer and
policy organizations, elected officials,
legal service providers, and housing
advocates highlighting unfair and
deceptive fees in the rental housing
industry.210 Conversely, advocates from
207 See, e.g., FTC–2023–0064–3275 (Berkeley
Center for Consumer Law & Economic Justice et al.).
208 See, e.g., FTC–2023–0064–3191 (Community
Catalyst et al.).
209 FTC–2023–0064–2888 (Housing Policy Clinic,
University of Texas School of Law stated, ‘‘it is
essential for the rule to cover the rental housing
industry in order to mitigate the harmful impacts
of unfair and deceptive fees on renters.’’); FTC–
2023–0064–2858 (U.S. House of Representatives,
Rep. Maxwell Alejandro Frost, Rep. Jimmy Gomez,
Rep. Barbara Lee, Rep. Rashida Tlaib, Rep. Kevin
Mullin, Rep. Dwight Evans, Rep. Judy Chu, Rep.
Greg Casar, Rep. Dan Goldman, and Rep. Salud
Carbajal encouraged an industry-neutral rule but
urged the Commission at minimum to include liveevent ticketing, short-term lodging, and the rental
housing industries in the final rule.); FTC–2023–
0064–3275 (Berkeley Center for Consumer Law &
Economic Justice et al. commented that:
‘‘Exempting landlords from the Rule as other
commenters have proposed would deprive the
Commission of a critical tool to challenge purveyors
of junk fees charged in connection with a basic
necessity of life, one that is disproportionately
relevant to low-income consumers.’’).
210 See, e.g., FTC–2023–0064–3218 (National
Consumer Law Center collected consumer
comments highlighting: ‘‘a ‘technology fee’
addendum that adds 1% fee of total rent on top of
rental cost’’; ‘‘an extra $255 in mandatory fees, for
services I don’t even want’’; and ‘‘water, sewer, and
garbage fees would be charged over and above the
base rent we agreed to . . . [that] could add as
much as $250 extra per month to our rent.’’); FTC–
2023–0064–3271 (U.S. Senator Amy Klobuchar
commented discussing a hearing conducted
concerning rental housing competition and noting
that: ‘‘[R]enters are often hit with numerous junk
fees that are only disclosed to them when signing
a lease—frequently after the renter has already
given notice to end a prior lease. . . . As a result,
renters struggle to meaningfully compare the cost of
various housing options.’’); FTC–2023–0064–2888
(Housing Policy Clinic, University of Texas School
of Law commented: ‘‘This lack of transparency robs
tenants of their opportunity to fairly participate in
comparison shopping in the rental housing market
and can seriously disrupt their financial well-being
and housing stability.’’); FTC–2023–0064–3218
(National Consumer Law Center commented: ‘‘With
respect to the rental housing market, the proposed
rule would benefit consumers and competition. By
requiring disclosure of the actual cost of an
apartment, the rule would help renters to
comparison shop and enable them to find housing
that fits their budget.’’); FTC–2023–0064–3225 (CED
Law described undisclosed fees experienced by its
clients and stated: ‘‘Up front disclosure of all
mandatory fees and accurate representation of all
fees charged would go a long way towards ensuring
low income renters like those we represent in
Colorado understand what their monthly housing
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the rental housing industry urged the
Commission to exempt rental housing
providers from any definition of
‘‘covered business.’’ 211 A rental housing
advertising platform urged the
Commission to adopt a definition of
‘‘covered business’’ that excludes thirdparty advertising platforms, arguing that
third-party platforms do not direct
pricing and ‘‘are not best positioned to
meet the requirements of the proposed
rule.’’ 212
On the other hand, the Commission
also received comments in support of a
narrow definition of ‘‘covered business’’
limited to the live-event ticketing and
short-term lodging industries, including
from members of those industries.213
The U.S. Chamber of Commerce
recommended limiting the definition of
covered businesses to ‘‘the live-event
ticketing and/or short-term lodging
industries,’’ arguing that unique aspects
of these markets, including a robust
secondary market for live-event tickets
and pressures on third-party lodging
intermediaries ‘‘to advertise the lowest
price to consumers to optimize search
outcomes,’’ have shaped FTC research
on all-in pricing and appropriate
remedies.214 One academic commenter
expenses will be before being locked into a lease
agreement.’’); FTC–2023–0064–0146 (Individual
Commenter stated they pay fees including for trash,
electricity, and ‘‘some other junk fees’’ and argued
that rental providers ‘‘should be forced to disclose
all fees before lease signing and never be able to add
fees after the lease has been signed.’’); FTC–2023–
0064–0157 (Individual Commenter highlighted
mandatory added fees and charges not disclosed in
listed rental prices and stated: ‘‘Landlords should
not be allowed to force tenants into paying these
fees with no opt out or if the fees are allowed, then
the landlord must add that to the total monthly rent
in advertisements so prospective tenants have an
accurate scope of what the real monthly costs are.’’);
FTC–2023–0064–0229 (Individual Commenter
described an apartment company with fees:
‘‘[I]ncluding a $20 mos. fee for package delivery. It’s
a mandatory add-on. Many people do not get
packages. Including myself.’’); FTC–2023–0064–
0923 (Individual Commenter stated their rental
‘‘requires a number of fixed, non-negotiable
mandatory fees. . . . In my opinion, these fees
allow the company to advertise a lower monthly
rental rate, intentionally making it difficult for a
prospective tenant to comparison shop and
compare rents from different organizations.’’).
211 See, e.g., FTC–2023–0064–3172 (New Jersey
Apartment Association supported the rule’s
inclusion of a definition of Covered Business and
asked that rental housing providers be excluded
from the scope of Covered Business); see also FTC–
2023–0064–3133 (National Multifamily Housing
Council and National Apartment Association).
212 FTC–2023–0064–3289 (Zillow Group).
213 See, e.g., FTC–2023–0064–3127 (U.S. Chamber
of Commerce); FTC–2023–0064–2891 (Mary
Sullivan, George Washington University, Regulatory
Studies Center); FTC–2023–0064–3233 (NCTA—
The internet & Television Association); see also
FTC–2023–0064–3300 (National Restaurant
Association urged the Commission to exclude small
restaurants from a definition of ‘‘Covered
Business’’).
214 FTC–2023–0064–3127 (U.S. Chamber of
Commerce).
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likewise recommended a definition of
‘‘covered business’’ limited to live-event
ticketing and short-term lodging, stating
that these industries have been subject
to extensive research showing ‘‘their use
of across-the-board drip pricing to be
harmful.’’ 215
Commenters from the live-event
ticketing industry supported a rule
applicable to their industry,
emphasizing that a total price
requirement will aid consumers and
businesses alike if applied across the
entire industry.216 For example,
TickPick, a secondary ticket
marketplace, commented that it already
provides consumers with all-in pricing
and supports ‘‘eliminating drip pricing
from the live-event ticketing industry,’’
arguing that ‘‘widespread use of hidden
and/or misleading fees harms
consumers and market competition.’’ 217
StubHub similarly commented that it
‘‘strongly supports efforts to increase
215 FTC–2023–0064–2891 (Mary Sullivan, George
Washington University, Regulatory Studies Center
also stated that a rule focused on the short-term
lodging and live-event ticketing industries would
‘‘increase the chance of [the rule’s] success’’ and
provide well-defined limits for those Covered
Businesses.)
216 See, e.g., FTC–2023–0064–3212 (TickPick,
LLC stated that it ‘‘supports the Commission using
its authority under Section 18 of the FTC Act to
address unfair and deceptive acts or practices
involving hidden and misleading fees.’’); FTC–
2023–0064–3266 (StubHub, Inc. commented that it
‘‘strongly supports efforts to increase price
transparency for consumers nationwide with the
federal adoption of all-in pricing.’’); FTC–2023–
0064–3105 (Charleston Symphony commented:
‘‘[R]equiring sellers to disclose the total price
clearly and conspicuously[ ] addresses a pressing
issue. . . . Predatory practices in the secondary
ticket sales market pose a significant threat to
artists, venues, audiences, and the future of
nonprofit arts organizations, impacting the integrity
of the ticket-buying process and eroding audience
confidence.’’); FTC–2023–0064–3122 (Vivid Seats
stated that it ‘‘supports additional consumer
disclosures, including all-in pricing,’’ but the rule
should ‘‘apply equally across all parts of the liveevents ticketing industry,’’ so consumers can
compare prices and businesses that display total
prices will not be at a competitive disadvantage.);
FTC–2023–0064–3241 (National Association of
Ticket Brokers submitted a comment supporting allin pricing, but noting that it would only work if ‘‘(i)
it was required of every ticket seller and (ii) there
was rigorous and expeditious enforcement.’’); FTC–
2023–0064–3306 (Live Nation Entertainment and its
subsidiary Ticketmaster North America commented
that they ‘‘support[ ] a definition of all-in pricing
that requires the first price for a live-event ticket
shown to consumers to be the price ultimately
charged at checkout (exclusive of state and local
taxes and optional add-ons).’’); see also FTC–2023–
0064–3264 (Mark J. Perry, Ph.D., Professor Emeritus
of Economics at University of Michigan-Flint and
Senior Fellow Emeritus at the American Enterprise
Institute, ‘‘urge[d] the FTC to ensure that any rule
requiring all-in pricing in live events apply equally
to all market participants.’’). The Commission
addresses other comments and factual scenarios
raised by commenters concerning live-event
ticketing, including those concerning ticket service
fees, in section III.B.1.b.
217 FTC–2023–0064–3212 (TickPick, LLC).
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price transparency for consumers
nationwide with the federal adoption of
all-in pricing’’ in the live-event ticketing
industry. According to StubHub, in
2014, it decided to display the all-in
price to consumers in the hopes of
encouraging the remainder of the
industry to follow suit; however, it ‘‘had
no choice but to revert to its former
pricing display,’’ which used dripped
fees, because other platforms continued
to rely on drip pricing, making
StubHub’s all-in prices appear higher
than other platforms.218 Live Nation and
its subsidiary, Ticketmaster North
America, likewise expressed concern
that, absent a nationwide rulemaking to
implement all-in pricing, ‘‘the current
market realities present barriers to
implementing all-in pricing,’’ because
adopting all-in pricing ‘‘absent a
mandate creates a first-mover
disadvantage.’’ 219 Live Nation stated
that the rule would ‘‘increase pricing
transparency for fans and support
competition in the ticketing
industry.’’ 220
The Commission also received
support from the representatives of the
short-term lodging industry for the
rule’s application to that industry. The
American Society of Travel Advisors
commented that ‘‘the rule as proposed
would greatly benefit consumers of
hotel and other short-term lodging
services’’ and applauded the proposed
rule’s prohibition on misleading fees.221
The American Hotel & Lodging
Association also expressed support for
implementation of clear total price
requirements and encouraged the
Commission to ‘‘ensure that any final
rule it promulgates . . . apply broadly
to all industry participants,’’ including
intermediaries such as online travel
agencies, short-term rental platforms,
and metasearch sites.222 The American
Gaming Association, a trade group
representing the casino industry,
contended that fees are adequately
disclosed and provide value to
consumers, but stated that, if applied to
the lodging industry, the rule should be
applied ‘‘equitably across the
industry. . . . including search engines,
online travel agencies, and other thirdparty vendors.’’ 223
218 FTC–2023–0064–3212
219 FTC–2023–0064–3306
(StubHub).
(Live Nation
Entertainment).
220 Id.
221 FTC–2023–0064–3106 (American Society of
Travel Advisors).
222 FTC–2023–0064–3094 (American Hotel &
Lodging Association).
223 FTC–2023–0064–2886 (American Gaming
Association). As discussed in section II, bait-andswitch pricing, including drip pricing, harms
consumers even when charges are subsequently
disclosed.
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As described in section II, the
Commission has determined, in its
discretion, to focus this final rule on the
live-event ticketing and short-term
lodging industries. The Commission
recognizes that substantial evidence
exists to support a finding of the
prevalence of bait-and-switch pricing
and misleading fees throughout the
economy; nevertheless, the Commission
elects to use its rulemaking authority
incrementally by first combatting these
unfair and deceptive practices in the
two industries in which the
Commission first began evaluating drip
pricing and that have a history of baitand-switch pricing tactics and
misleading fees. Indeed, commenters
representing the live-event ticket and
short-term lodging industries recognized
the need for the Commission’s
rulemaking and generally supported the
rule’s application to those industries.
As described in this section, the
Commission received comments
supporting a definition of ‘‘covered
business’’ that is limited to the liveevent ticketing and short-term lodging
industries.224 The Commission also
received comments emphasizing the
need for a level playing field among
businesses and allowing consumers to
comparison shop.225 For reasons
described herein, the final rule applies
to a defined set of covered goods or
services, rather than to covered
businesses. Because some businesses in
the live-event ticketing and short-term
lodging industries provide goods or
services outside of those industries, a
narrowing of the businesses covered by
the rule rather than a narrowing of the
goods or services covered by the rule,
might unintentionally create an uneven
playing field. As a result, the
Commission instead narrows the rule to
the defined covered goods and services
of live-event tickets and short-term
lodging. The Commission notes that the
rule also applies to ancillary goods or
services, defined as additional goods or
services offered to consumers as part of
the same transaction.
The NPRM also solicited comment as
to how to define businesses that offer
either live-event ticketing or short-term
lodging, if the final rule were narrowed
224 See, e.g., FTC–2023–0064–3212 (TickPick,
LLC); FTC–2023–0064–3106 (American Society of
Travel Advisors).
225 See, e.g., FTC–2023–0064–2886 (American
Gaming Association); FTC–2023–0064–3106
(American Society of Travel Advisors); FTC–2023–
0064–3266 (StubHub, Inc.); FTC–2023–0064–3264
(Mark J. Perry, Ph.D., Professor Emeritus of
Economics at University of Michigan-Flint and
Senior Fellow Emeritus at the American Enterprise
Institute); FTC–2023–0064–3162 (BBB National
Programs, Inc.); FTC–2023–0064–1000 (Individual
Commenter).
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to covered businesses.226 A third-party
ticketing marketplace commented that it
‘‘supports inclusion of the live-event
ticketing industry as a ‘covered
business’ and is comfortable with the
proposed definition of ‘businesses in the
live-event ticketing industry . . . .’ ’’ 227
The final rule’s inclusion of live-event
tickets in the definition of ‘‘covered
good or service’’ is consistent with the
proposed definition of covered business
in the NPRM.
With respect to the proposed
definition of the short-term lodging
industry, the American Hotel & Lodging
Association commented that the
Commission should define short-term
lodging as: ‘‘a hotel, motel, inn, shortterm rental, or other place of lodging
that advertises at a price that is a
nightly, hourly, or weekly rate.’’ 228 One
commenter representing the rental
housing industry expressed concern that
the proposed definition of short-term
lodging ‘‘could mean different things to
different people, and that could be
(mis)applied to rental housing
industry,’’ including, for example,
where an apartment community
provides temporary corporate housing
subject to the same leasing agreements
as longer-term tenants or where a
resident extends a lease agreement for a
few weeks or months.229 Conversely,
another commenter representing the
rental housing industry explained that
for rental housing, ‘‘the landlord-tenant
relationship involves an ongoing
contractual relationship, typically at
least a year-long commitment.’’ 230
The final rule incorporates portions of
the American Hotel & Lodging
Association’s suggested definition of
short-term lodging and the Commission
modifies the rule text proposed in the
NPRM to refer to hotels, motels, inns,
short-term rentals, vacation rentals, or
other places of lodging. The
Commission declines to limit the
definition of short-term lodging based
on the advertised payment period or
length of stay. In some instances, shortterm lodging may include home shares
and vacation rentals, such as through
226 NPRM, 88 FR 77481, Question 14(a)(i)
(proposing to define Businesses in the live-event
ticketing as ‘‘any Business that makes live-event
ticketing available, directly or indirectly, to the
general public’’); Question 14(a)(ii) (proposing to
define Business in the short-term lodging industry
as ‘‘any Business that makes temporary sleeping
accommodations available, directly or indirectly, to
the general public’’).
227 FTC–2023–0064–3212 (TickPick, LLC).
228 FTC–2023–0064–3094 (American Hotel &
Lodging Association).
229 FTC–2023–0064–3296 (Bay Area Apartment
Association).
230 FTC–2023–0064–3133 (National Multifamily
Housing Council and National Apartment
Association).
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2089
platforms like Airbnb or VRBO, that
offer short-term rental accommodations
for durations as long as several months.
The Commission clarifies that, with the
addition of a definition for ‘‘covered
good or service,’’ it does not intend to
cover rental housing providers at this
time. When a rental housing provider
offers a short-term extension on a lease,
the extension typically would not be
considered short-term lodging under the
rule. Similarly, an apartment
community that offers temporary
corporate housing subject to the same
conditions as its long-term leases
typically would not be considered shortterm lodging under the rule. On the
other hand, a hotel that offers
discounted extended stays typically
would be considered short-term lodging
under the rule. Whether any particular
good or service is short-term lodging
within the rule’s definition of ‘‘covered
good or service’’ will depend on the
specific factual circumstances. In
addition, the Commission may provide
additional business guidance to address
nuanced pricing scenarios that may
arise.
5. Government Charges
Proposed § 464.1(d) in the NPRM
defined ‘‘government charges’’ as ‘‘all
fees or charges imposed on consumers
by a Federal, State, or local government
agency, unit, or department,’’ and
specified that government charges did
not encompass fees or charges that the
government imposes on a business and
that a business chooses to pass on to
consumers. The proposed rule
permitted businesses to exclude
government charges from total price.
The Commission received comments
supporting and critiquing the proposed
rule’s treatment of government charges.
Final § 464.1 adopts this provision with
minor modifications to add ‘‘Tribal’’
fees and charges and to clarify that the
definition of ‘‘government charges’’
includes ‘‘the fees or charges imposed
on the transaction by a Federal, State,
Tribal, or local government agency, unit,
or department.’’
One consumer group supported the
NPRM’s exclusion of fees or charges that
businesses choose to pass onto
consumers from the definition of
‘‘government charges’’ (thus requiring
their inclusion in total price), and
expressed concern that businesses may
inflate such fees to pad profits, rather
than accurately reflect amounts paid in
fees or charges to the government.231
Two academic commenters similarly
supported the distinction between fees
231 FTC–2023–0064–3290 (U.S. Public Interest
Research Group Education Fund).
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or charges imposed on consumers and
those that a business chooses to pass
onto consumers, stating that the latter
should be incorporated into total price
to avoid creating a loophole that would
undermine the rule.232
On the other hand, the Commission
received several comments expressing
concern over the NPRM’s definition of
‘‘government charges’’ as including only
those charges ‘‘imposed on consumers.’’
Two commenters argued that the
proposed definition failed to consider
nuances in tax law across States and
localities. They pointed out, for
example, that several State laws
formally impose sales tax on businesses,
rather than on consumers.233 Under the
proposed definition, sales tax in those
States would need to be included in
total price, while sales tax in other
States could be excluded from total
price. These and other commenters also
noted that many States prohibit the
inclusion of sales tax in total price,
which would result in direct conflict
between the proposed rule and State
laws that formally impose sales tax on
businesses.234 Relatedly, one tax policy
organization noted variation in how
State laws treat hotel occupancy taxes,
with most State laws defining hotel
occupancy taxes as imposed on the
hotel operator and just six States
defining hotel occupancy taxes as
imposed on the consumer. Under the
proposed definition of ‘‘government
charges,’’ the commenter stated, hotel
operators in all but six States would be
232 FTC–2023–0064–1467 (Richard J. Peltz-Steele,
Chancellor Professor, University of Massachusetts
Law School); FTC–2023–0064–1294 (James J. Angel,
Ph.D., CFP, CFA, Professor, Georgetown University,
McDonough School of Business).
233 FTC–2023–0064–3126 (Tax Foundation stated:
‘‘In several states, at least including Alabama,
Arizona, Hawaii, and New Mexico, and possibly
California, the state sales tax would not meet the
Rule’s definition of a government charge, since its
legal incidence (per statute, regulation, or court
determination) is on the seller.’’); FTC–2023–0064–
3258 (National Taxpayers Union Foundation
commented: ‘‘Arizona, California, Hawaii, and New
Mexico structure their sales taxes as taxes on the
business, as measured by its gross receipts.’’).
234 See, e.g., FTC–2023–0064–3127 (U.S. Chamber
of Commerce); FTC–2023–0064–3258 (National
Taxpayers Union Foundation stated, ‘‘[n]early all
states with sales tax prohibit retailers from
including sales taxes, including taxes collected
from both suppliers and consumers, in the sales
price,’’ and cited to states including Alabama,
Florida, Georgia, Indiana, Maryland, Massachusetts,
Oklahoma, Pennsylvania, and others.); FTC–2023–
0064–3126 (Tax Foundation stated, ‘‘many states
prohibit sales tax-inclusive pricing,’’ highlighting
Alabama as a State in which the legal incidence of
sales tax on the seller may ‘‘obligate a vendor, per
the proposed Rule, to list the sales tax-inclusive
price if selling to an Alabama resident—which not
only presupposes advance knowledge of the
consumer’s location, but forces the vendor to
disregard Alabama’s requirement that the list price
not include sales tax.’’).
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required to include occupancy taxes in
total price.235 As such, these
commenters argued that the proposed
definition is unworkable and noted that
businesses will spend considerable time
and resources in understanding the legal
incidence of Federal, State, and local
taxes.236
Industry groups also urged the
Commission to modify the definition of
‘‘government charges’’ to include
charges and fees that the government
expressly permits, and sometimes
requires, businesses to pass through to
consumers.237 One commenter noted
that businesses may be required to
‘‘unfairly absorb’’ the cost of these
government charges.238 Commenters
also expressed concern that
incorporating pass-through taxes that
consumers understand and have come
to expect into total price would obscure
government fees, resulting in less
pricing transparency, because
consumers will not understand that the
additional costs stem from the
imposition of government fees.239
Relatedly, two industry groups argued
that consumers should be made aware
through transparent pricing that
additional costs stem from government
taxes and fees, rather than requiring
businesses to include them in total
price.240
After considering the comments, the
Commission modifies the definition of
‘‘government charges’’ from those fees
or charges ‘‘imposed on consumers’’ to
those ‘‘imposed on the transaction.’’ As
such, it eliminates the potential
distinction between fees and charges for
the transaction a government imposes
directly on consumers and those
imposed on businesses. Businesses may
not exclude from total price fees and
charges that are wholly distinct from the
relevant transaction, such as a
proportional share of a business’s
income or property taxes, because they
would not be government charges that
were ‘‘imposed on the transaction by a
Federal, State, Tribal, or local
235 FTC–2023–0064–3258 (National Taxpayers
Union Foundation).
236 Id.
237 See, e.g., FTC–2023–0064–3100 (Civitas
Advisors, Inc.); FTC–2023–0064–3217 (Bowling
Proprietors’ Association of America); FTC–2023–
0064–3127 (U.S. Chamber of Commerce); FTC–
2023–0064–3233 (NCTA—The internet & Television
Association).
238 FTC–2023–0064–3234 (CTIA—The Wireless
Association).
239 See, e.g., id.; FTC–2023–0064–3217 (Bowling
Proprietors’ Association of America); FTC–2023–
0064–3295 (USTelecom—The Broadband
Association).
240 FTC–2023–0064–3233 (NCTA—The internet &
Television Association); FTC–2023–0064–3127
(U.S. Chamber of Commerce).
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government agency, unit, or
department.’’
An online travel agency submitted a
comment identifying concerns about a
potential conflict between the definition
of ‘‘government charges’’ and DOT’s
Full Fare Advertising Rule, 14 CFR
399.84, which requires tax-inclusive
pricing for certain travel products,
including airline tickets and bundled
vacation packages (e.g., airline tickets
and hotel stays purchased together).241
Specifically, the commenter asserted
that the final rule should require that
hotels and short-term lodging providers
incorporate government charges into
total price because, otherwise,
consumers shopping for bundled
vacation packages—which are subject to
the Full Fare Advertising Rule—could
see different prices from consumers who
shop separately for flights and lodging.
The commenter also argued that the rule
should require that taxes and
government-imposed fees be included
in advertised lodging prices, consistent
with DOT’s Full Fare Advertising Rule.
The Commission declines to require
only short-term lodging providers, as
opposed to live-event ticket sellers and
other businesses covered by the rule, to
incorporate government charges into
total price. However, the Commission
notes that while the final rule provides
that businesses ‘‘may’’ exclude
government charges from total price,
nothing in the rule prevents businesses
from advertising prices inclusive of
those charges, as required by DOT’s Full
Fare Advertising Rule.
Finally, an industry group
representing certain Federally
recognized Arizona Indian Tribes that
operate gaming entities urged the
Commission to include fees or charges
imposed on consumers by ‘‘tribal’’
agencies, units, or departments in the
definition of ‘‘government charges,’’ to
recognize taxes or fees that Tribes might
impose.242 The Commission agrees and
adds the word ‘‘Tribal’’ to the definition
of ‘‘government charges’’ to clarify that
businesses may exclude from total price
fees or charges imposed on a transaction
by a Tribal government.
The Commission notes that the
modifications in the final rule to the
definition of ‘‘government charges’’
represent a narrowing of the final rule.
businesses must still make the
disclosures required by § 464.2(c) in
connection with government charges
and are prohibited by § 464.3 from
misrepresenting the nature, purpose,
241 FTC–2023–0064–3204
242 FTC–2023–0064–3120
Gaming Association).
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7. Shipping Charges
Proposed § 464.1(f) in the NPRM
defined ‘‘shipping charges’’ as ‘‘the fees
or charges that reasonably reflect the
amount a business incurs to send
physical goods to a consumer through
the mail, including private mail
services.’’ The NPRM made clear that
businesses are not permitted to
artificially inflate the cost of shipping,
and, instead, shipping charges must
reasonably reflect the cost incurred to
send goods to consumers. Final § 464.1
adopts the proposed definition of
‘‘shipping charges,’’ with a minor
modification to clarify that shipping
charges incurred through private mail
and shipping services such as FedEx
and UPS, or by freight, fall within the
definition.
One trade association raised
numerous concerns about the proposed
definition of ‘‘shipping charges.’’ First,
the commenter argued that the proposed
definition fails to consider the
unpredictability of shipping fees, noting
that precise costs are difficult for
retailers to determine because shipping
costs are frequently based on quotes or
estimates subject to change based on the
carrier.244 The commenter noted that
businesses may face challenges using
certain shipping methods, including
consolidating shipment of multiple
orders or using rail service for partial
shipment, which it argued can be
particularly difficult to predict. Second,
the commenter asked that the
Commission modify the definition of
‘‘shipping charges’’ to explicitly permit
the use of flat rate shipping, explaining
that many businesses have existing
agreements with major freight carriers to
provide flat rate shipping. For example,
the commenter asked whether the use of
flat rate shipping charges would be
considered unlawful if the business
shipped a small, lightweight item for
which the actual shipping costs are less
than the flat rate to ship. Finally, the
commenter argued that the use of the
phrase ‘‘reasonably reflect’’ in the
definition is ambiguous and asked that
the Commission clarify whether the
definition includes a scienter
requirement. Two commenters also
asserted that the rule would ‘‘force’’
businesses to disclose proprietary
shipping calculations in a threat to free
market competition.245
The Commission’s use of the phrase
‘‘reasonably reflect’’ is intended to allow
for flexibility in determining shipping
costs. The Commission recognizes that
precise shipping costs may not be
knowable until the end of a transaction,
and, for that reason, the final rule
permits businesses to exclude shipping
charges from total price. The rule does
not require that the cost of shipping
reflect an exact certainty. Moreover, the
rule does not require businesses to
disclose proprietary information
pertaining to relationships with freight
or shipping providers because the rule
does not require that shipping charges
be excluded from total price; instead,
the rule permits businesses to exclude
shipping charges from total price if they
choose. The final rule does not prohibit
businesses from incorporating the cost
of shipping into total price and thereby
providing shipping to consumers at no
additional charge. Nor does the final
rule prohibit the use of flat rate shipping
or shipping costs based on national
averages. Instead, the language is
243 FTC–2023–0064–1425 (Iowa Bankers
Association argued that the definition of ‘‘Pricing
Information’’ is inappropriate for ‘‘standard bank
products’’ and products earning interest).
244 FTC–2023–0064–3267 (National Retail
Federation).
245 Id.; FTC–2023–0064–2901 (E-Merchants Trade
Council).
amount, or refundability of government
charges.
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6. Pricing Information
Proposed § 464.1(e) in the NPRM
defined ‘‘pricing information’’ as ‘‘any
information relating to any amount a
consumer may pay.’’ The final rule
references pricing information in one
provision: § 464.2(b). As discussed in
section III.B.2, final § 464.2(b) is limited
to covered goods or services and
requires that, in any offer, display, or
advertisement that represents any price
of a covered good or service, a business
disclose the total price more
prominently than any other pricing
information. However, where the final
amount of payment for the transaction
is displayed, the final amount of
payment must be disclosed more
prominently than, or as prominently as,
the total price.
A commenter from the financial
services industry asserted that the
proposed definition of ‘‘pricing
information’’ would be inappropriate for
‘‘standard bank products, such as
checking, savings, CDs, consumer loans,
etc.’’ and failed to address the treatment
of interest rates for products and
services governed by existing financial
regulations.243 The commenter’s
concerns about the definition of
‘‘pricing information’’ are inapplicable
because the final rule, including
§ 464.2(b), is limited to covered goods or
services. Accordingly, the final rule
adopts the proposed definition of
‘‘pricing information’’ at § 464.1 without
modification.
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intended to prevent businesses from
inappropriately excluding from total
price costs unrelated to shipping.
One live-event ticket platform
supported the proposed rule’s exclusion
of certain shipping costs from total
price, noting that the cost to ship
physical tickets may vary based on
factors determined later in the
transaction, such as the location of the
buyer.246 The commenter also noted
that a variety of delivery and shipping
methods may be available to consumers
purchasing live-event tickets, some of
which may be mandatory and therefore
included in total price.247 The
Commission emphasizes that certain
fees do not fall within the definition of
‘‘shipping charges,’’ including online
‘‘convenience’’ or other fees charged, for
example, by online ticket agencies to
electronically ‘‘deliver’’ tickets or other
processing fees associated with certain
online purchases. The Commission
further notes that an online convenience
or other fee for electronic delivery of a
ticket should be included in total price
if a consumer cannot obtain the ticket as
part of the same transaction (i.e., online)
without incurring a fee. While the
Commission received comments raising
concerns about incorporating the cost of
delivery, as opposed to shipping, into
total price,248 the Commission is not
aware of any evidence that such
concerns would apply to sales of liveevent tickets or short-term lodging.
Finally, the Commission also received
a range of comments regarding handling
costs. Some commenters urged the
Commission to amend the definition of
‘‘shipping charges’’ to clarify that
internal handling costs do not constitute
shipping costs and therefore must be
included in total price.249 The
comments related to handling costs
involving goods or services covered by
the broader proposed rule in the
NPRM.250 While the Commission has
not received any evidence that the
246 FTC–2023–0064–3266
(StubHub, Inc.).
247 Id.
248 See, e.g., FTC–2023–0064–3263 (Flex
Association); FTC–2023–0064–3137 (Chamber of
Progress); FTC–2023–0064–3186 (National LGBT
Chamber of Commerce and National Asian/Pacific
Islander American Chamber of Commerce &
Entrepreneurship); FTC–2023–0064–3238 (Gibson,
Dunn & Crutcher LLP); FTC–2023–0064–3267
(National Retail Federation).
249 See, e.g., FTC–2023–0064–3146 (Institute for
Policy Integrity, New York University School of
Law); FTC–2023–0064–1294 (James J. Angel, Ph.D.,
CFP, CFA, Professor, Georgetown University,
McDonough School of Business).
250 FTC–2023–0064–3146 (Institute for Policy
Integrity, New York University School of Law);
FTC–2023–0064–1294 (James J. Angel, Ph.D., CFP,
CFA, Professor, Georgetown University,
McDonough School of Business); FTC–2023–0064–
3267 (National Retail Federation).
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concerns raised in these comments
would impact covered goods or services,
the Commission clarifies that internal
handling costs must be included in total
price. The Commission does not believe
that a modification to the ‘‘shipping
charges’’ definition is necessary,
however, because the definition
specifically states that shipping charges
include only those costs that reasonably
reflect the cost to ‘‘send physical goods’’
to consumers. The Commission does not
believe that handling charges, like the
cost to store goods or labor costs
associated with preparing items for
shipment, reflect the costs to ‘‘send
physical goods’’ to consumers.
Accordingly, handling charges are not
shipping charges and must be included
in total price.
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8. Total Price
Proposed § 464.1(g) in the NPRM
defined ‘‘total price’’ as ‘‘the maximum
total of all fees or charges a consumer
must pay for a good or service and any
mandatory ancillary good or service,
except that shipping charges and
government charges may be excluded.’’
Although some commenters stated that
the proposed definition was not flexible
enough to account for all pricing
models, the Commission believes the
modified definition of ‘‘total price’’ is
narrowly tailored to protect consumers
by addressing the identified unfair and
deceptive practice of hiding costs by
omitting mandatory fees from advertised
prices for covered goods or services.
Consumers must be able to purchase
and use goods or services at the
advertised total price.
Final § 464.1 differs from the
proposed definition of ‘‘total price’’ 251
to the extent the definitions of
‘‘government charges’’ and ‘‘shipping
charges,’’ as discussed in section III at
A.5 and A.7, are modified. In addition,
the Commission clarifies in final § 464.1
that businesses also may exclude from
total price any fees or charges for
optional ancillary goods or services.
Further, the Commission notes herein
that the rule does not directly address
concerns that fees imposed in
connection with covered goods or
services are ‘‘excessive’’; the rule does
not cap, ban, or prohibit the charging of
any fees, but requires certain disclosures
and prohibits misrepresentations to
prevent unfair or deceptive pricing
practices.
251 Although one commenter expressed concern
that businesses would use different terms for Total
Price, and thereby create confusion, the rule does
not mandate that Businesses use the term Total
Price. See FTC–2023–0064–3290 (U.S. Public
Interest Research Group Education Fund).
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As detailed herein, the Commission
declines to accept commenters’
recommendations to define
‘‘mandatory,’’ to exclude ancillary goods
or services from the ‘‘total price’’
definition, to modify the ‘‘maximum
total’’ requirement, or to require the
inclusion of shipping charges and
government charges in total price.
However, the Commission clarifies in
final § 464.2(c) that businesses must
disclose the final amount of payment for
the transaction before a consumer
consents to pay.
(a) Mandatory Fees
Commenters noted that the rule does
not define ‘‘mandatory,’’ and expressed
concern about identifying mandatory
fees to be included in total price.252
Some commenters recommended that
the Commission clarify the distinction
between ‘‘core’’ goods and services and
ancillary goods or services,253 provide
guidance as to which ancillary goods or
services are mandatory,254 and modify
the ‘‘total price’’ definition to exclude
the reference to mandatory ancillary
goods or services.255
The Commission has considered these
comments and declines to accept these
proposed modifications to the definition
of ‘‘total price.’’ The definition of ‘‘total
price’’ specifies that it includes the cost
of the goods and services being offered
and any mandatory ancillary goods or
services, subject to certain exceptions.
The Commission retains in the
definition of ‘‘total price’’ fees and
charges for ‘‘any mandatory ancillary
good or service’’ as necessary to protect
consumers from the identified unfair
and deceptive practice of hidden fees.
The Commission also declines to
modify the rule to add a definition of
‘‘mandatory fees.’’ The Commission
cannot identify in advance a definitive
list of mandatory fees because whether
a particular fee will be mandatory or
optional will depend on the specific
facts of an individual business
transaction, as described in section
III.A.1.
Ancillary goods or services can be
either optional or mandatory depending
252 See, e.g., FTC–2023–0064–3133 (National
Multifamily Housing Council and National
Apartment Association); FTC–2023–0064–3134
(U.S. Department of Transportation, Federal Motor
Carrier Safety Administration); FTC–2023–0064–
3145 (Association of National Advertisers, Inc.).
253 See, e.g., FTC–2023–0064–2888 (Housing
Policy Clinic, University of Texas School of Law).
254 See, e.g., FTC–2023–0064–3267 (National
Retail Federation).
255 See, e.g., FTC–2023–0064–3160 (Consumer
Federation of America et al.); FTC–2023–0064–3258
(National Taxpayers Union Foundation); FTC–
2023–0064–3275 (Berkeley Center for Consumer
Law & Economic Justice et al.).
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on whether businesses require
consumers to purchase them or if they
are necessary to make the principal
goods or services fit for their intended
purpose. If businesses offer ancillary
goods or services and require consumers
to purchase them to complete
transactions for or to use the covered
goods or services being offered, the
ancillary goods or services are
mandatory and their cost must be
included in total price.
In the NPRM, the Commission sought
comment on whether it was clear that
the reference in the definition of ‘‘total
price’’ to ‘‘all fees or charges a consumer
must pay for a good or service and any
mandatory ancillary good or service’’
includes (1) all fees or charges that are
not reasonably avoidable and (2) all fees
or charges for goods or services that a
reasonable consumer would expect to be
included with the purchase.256
Commenters disagreed on whether the
rule text is clear that ‘‘total price’’
includes unavoidable fees and fees
based on consumer expectations, and
recommended clarifying the definition
of ‘‘total price’’ in this regard or adding
a definition of mandatory fees.257 Other
commenters argued that the two types of
fees described are themselves vague and
unclear.258
Businesses should consider, in the
context of their specific business
practices, the Commission’s guidance
that mandatory fees include charges that
consumers cannot reasonably avoid and
charges for goods or services that a
reasonable consumer would expect to be
included with the purchase because
they are necessary to make primary
goods or services fit for their intended
purpose. The Commission reiterates the
guidance about total price that it
provided in the NPRM: It is well
established that it is deceptive to offer
goods or services that are not fit for the
purpose for which they are sold. By
offering goods or services, businesses
impliedly represent that the goods or
services are fit for their intended
purpose; reasonable consumers would
expect that, when they purchase a good
or service, they will be able to use it for
256 NPRM,
88 FR 77482, Question 19.
e.g., FTC–2023–0064–3134 (U.S.
Department of Transportation, Federal Motor
Carrier Safety Administration); FTC–2023–0064–
3160 (Consumer Federation of America et al.); FTC–
2023–0064–3196 (South Carolina Department of
Consumer Affairs); FTC–2023–0064–3248 (DC Jobs
With Justice on behalf of Fair Price, Fair Wage
Coalition); FTC–2023–0064–3146 (Institute for
Policy Integrity, New York University School of
Law).
258 See, e.g., FTC–2023–0064–3233 (NCTA—The
internet & Television Association); FTC–2023–
0064–3172 (New Jersey Apartment Association).
257 See,
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that purpose.259 It is therefore deceptive
to advertise a total price for a primary
good or service that does not include
fees for additional purchases that are
necessary to render the primary good or
service fit for its intended purpose.
Further, businesses cannot treat
additional purchases that are necessary
to render covered goods or services fit
for their intended purpose as optional
and exclude the costs of these
additional purchases from total price.
For example, businesses cannot treat
credit card surcharges or processing fees
as optional and exclude them from total
price if they do not provide consumers
with other payment options. The rule
does not require, as some commenters
suggested, the inclusion of fees for truly
optional ancillary goods or services in
total price.260 Nonetheless, such fees
and their nature, purpose, and amount
still must be clearly and conspicuously
disclosed before the consumer consents
to pay and cannot be misrepresented.
Commenters expressed the concern
that businesses could misrepresent
mandatory fees as optional, for example,
by including them by default in bills,
requiring consumers to opt out from
them, or using other deceptive practices,
and recommended that the Commission
include safeguards in the rule to prevent
these practices.261 The Commission
determines that the rule adequately
protects consumers from the posited
scenarios without modification.
businesses cannot characterize fees as
optional and exclude them from total
price when businesses require
consumers to purchase the good or
service for which the fees are charged
and employ practices, such as default
billing or opt-out provisions, that
effectively take away consumers’ ability
to consent to the fees. For example, a
previously undisclosed resort fee that a
hotel discloses at check-in is not an
optional fee if the hotel will charge the
fee unless the guest challenges the fee.
Final § 464.3 prohibits misrepresenting
259 NPRM,
88 FR 77432.
e.g., FTC–2023–0064–2891 (Mary
Sullivan, George Washington University, Regulatory
Studies Center, noted that ‘‘purely optional’’
subscription services, such ‘‘optional features that
are installed in automobiles, like satellite radio’’ are
‘‘not deceptive and unfair’’ but are instead efficient.
She further contended that the proposed rule lacks
specificity as to these types of ‘‘purely optional’’
services.)
261 See, e.g., FTC–2023–0064–3275 (Berkeley
Center for Consumer Law & Economic Justice et al.);
FTC–2023–0064–3160 (Consumer Federation of
America et al.); FTC–2023–0064–3248 (DC Jobs
With Justice on behalf of Fair Price, Fair Wage
Coalition); FTC–2023–0064–0915 (Individual
Commenter noted that businesses may misrepresent
optional fees as mandatory and ‘‘[t]he consumer
may not realize they are optional when receiving a
bill and may not realize they can be removed.’’).
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260 See,
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the nature, purpose, amount, and
refundability of fees, including
misrepresenting mandatory fees as
optional fees from which consumers
must opt out.262
Whether fees for ancillary goods or
services must be included in total price
will depend on the specific factual
circumstances. The inclusion of the
defined term ‘‘ancillary good or service’’
in the definition of ‘‘total price’’ clarifies
that total price includes ‘‘additional
good(s) or service(s) offered to a
consumer as part of the same
transaction.’’ Businesses cannot exclude
mandatory fees from total price simply
by characterizing them as not part of the
same transaction if, in fact, they are.
(b) Maximum Total
The rule provides that ‘‘total price’’ is
the ‘‘maximum total’’ of all mandatory
fees except identified permissible
exclusions. Some commenters objected
to defining ‘‘total price’’ as the
maximum total, arguing that it could
discourage advertising discounted rates
or misrepresent actual costs and
interfere with comparison shopping.263
Other commenters suggested that the
reference to maximum total would
require businesses that enter into
continuous service contracts with
consumers (e.g., subscriptions) to
include in total price all mandatory fees
that might arise over the duration of a
contract, which they argued would be
difficult to determine at the time the
rule requires a total price disclosure.264
Some commenters argued that
continuous service contracts that reflect
negotiated transactions do not raise
‘‘bait and switch’’ concerns and that
total price is adequately disclosed in
such contracts.265
The Commission has considered
comments relating to the ‘‘maximum
total’’ requirement and retains that
language in the definition of ‘‘total
price.’’ The Commission determines that
such language is necessary to protect
262 See
discussion infra section III.C and note 349.
e.g., FTC–2023–0064–3293 (Travel
Technology Association); FTC–2023–0064–3233
(NCTA—The internet & Television Association).
264 See, e.g., FTC–2023–0064–3116
(Manufactured Housing Institute); FTC–2023–0064–
3172 (New Jersey Apartment Association); FTC–
2023–0064–3121 (National Independent
Automobile Dealers Association); FTC–2023–0064–
1425 (Iowa Bankers Association).
265 See, e.g., FTC–2023–0064–3289 (Zillow Group
stated that ‘‘rental housing market fees are distinct
from fees in other economic sectors’’ because they
are not charged in ‘‘click-to-purchase’’ transactions,
but involve an ‘‘interactive process’’ over a ‘‘much
longer period of time’’ and involved ‘‘written
agreements that include all relevant binding terms
and conditions, including the total price.’’); FTC–
2023–0064–3269 (IHRSA—The Health & Fitness
Association).
263 See,
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consumers from advertised total prices
that are deceptively lower than what
businesses actually charge. As the
Commission noted in the NPRM, ‘‘[t]he
use of the phrase ‘maximum total’
would allow businesses to apply
discounts and rebates after disclosing
total price.’’ 266 Since all businesses are
subject to the maximum total
requirement for covered goods or
services, the resulting level playing field
would allow for comparison shopping.
The Commission does not agree that
disclosures in contracts or agreements
adequately protect consumers from
deceptive advertising that omits
mandatory fees.
Commenters questioned how
businesses should handle conditions or
limitations on advertised prices.267
Businesses must comply with the rule
and other disclosure requirements,
including those related to material
conditions or limitations.268 Businesses
that advertise prices that are not
attainable by consumers because the
prices are conditioned on undisclosed
material conditions, restrictions, or
limitations may fail to disclose and
misrepresent total price.
(c) Itemization
The rule neither requires, nor
prohibits, the itemization of mandatory
fees that must be included in total price.
The Commission notes that final
§ 464.2(c) requires disclosure of the
nature, purpose, and amount of fees or
charges imposed on the transaction that
have been excluded from total price but
declines to modify the regulatory text
proposed in the NPRM to otherwise
require or prohibit the itemization of
fees.
Some commenters recommended that
the rule not require itemization.269
Other commenters stated that including
mandatory fees in total price would
obscure the nature and purpose of the
fees and provide less information to
consumers,270 while others
266 NPRM,
88 FR 77439.
e.g., FTC–2023–0064–3162 (BBB National
Programs, Inc. commented that the definition of
‘‘Total Price’’ does not specifically address ‘‘how
advertisers should disclose material limitations to
obtaining an advertised price.’’); FTC–2023–0064–
1294 (James J. Angel, Ph.D., CFP, CFA, Professor,
Georgetown University, McDonough School of
Business, commented that ‘‘[i]f there are any
restrictions, they must be as clear and conspicuous
as the price.’’).
268 See, e.g., supra note 111.
269 See, e.g., FTC–2023–0064–3293 (Travel
Technology Association ‘‘recommends that any
final rule refrain from imposing an obligation to
itemize mandatory fees.’’).
270 See, e.g., FTC–2023–0064–3173 (Center for
Individual Freedom); FTC–2023–0064–3137
(Chamber of Progress); FTC–2023–0064–3208
267 See,
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recommended that the rule require
itemization to provide more information
to consumers and to protect other
transaction participants by disclosing
where mandatory fees go.271 Other
commenters recommended that the rule
prohibit itemization because fees could
be arbitrary or invented by businesses
and itemizing them could misrepresent
their nature and purpose.272
The Commission has considered the
comments and declines to require or
prohibit the itemization of mandatory
fees, except as provided by § 464.2(c).
Section 464.2 of the rule permits, but
does not require, itemization of the
components of total price, and therefore
allows businesses to break out
transaction inputs, consistent with laws
that require itemization. When
businesses choose to itemize mandatory
fees that are a part of total price or
itemize fees pursuant to § 464.2(c), total
price must be displayed more
prominently than itemized fees. Further,
§ 464.3 prohibits misrepresenting
itemized fees.
any specific conflict with the final rule.
Instead, the commenter asked about the
rule’s intersection with the IRS’s
Substantiation and Disclosure
Requirements. Based on the
Commission’s review, the IRS
Substantiation and Disclosure
Requirements pertain to substantiation
requirements for donors who contribute
to charitable organizations or causes,
and disclosure requirements for
charitable organizations that provide
goods or services to donors for certain
contributions. The Commission’s rule
has no bearing on, and does not change
or impact, any of these IRS
requirements. The commenter also
stated that ‘‘the concept of
‘refundability’’’ is ‘‘not common in
charitable giving.’’ As set forth in
section III.B.3, the Commission
eliminates the requirement that
businesses affirmatively disclose the
refundability of each fee or charge
imposed; however, § 464.3 still
prohibits businesses from
misrepresenting a fee’s refundability.
(d) Exclusions From Total Price
The definition of ‘‘total price’’ in final
§ 464.1 is modified from the proposed
definition to the extent that the
definitions of ‘‘government charges’’
and ‘‘shipping charges’’ are modified, as
discussed in section III at A.5 and A.7.
Finally, the definition of ‘‘total price’’
clarifies that businesses may exclude
fees or charges for optional ancillary
goods or services.
B. § 464.2 Hidden Fees Prohibited
Proposed § 464.2(a) and (b) in the
NPRM provided, respectively, that it
would be a violation of the rule for a
business to ‘‘offer, display, or advertise
an amount a consumer may pay without
clearly and conspicuously disclosing
total price’’ and that ‘‘[i]n any such
offer, display, or advertisement that
contains an amount a consumer may
pay, a business must display total price
more prominently than any other
pricing information.’’ As discussed
herein, final § 464.2 makes certain
modifications to proposed § 464.2(a)
and (b) and consolidates all provisions
related to disclosures by relocating
proposed § 464.3(b), with certain
modifications, to final § 464.2(c).
As discussed in section III.B.1 and
III.B.2, to address commenter concerns
that ‘‘an amount a consumer may pay’’
is vague and overbroad, the Commission
modifies final § 464.2(a) and (b) as
compared to the NPRM proposals to
focus their required disclosures on
offers, displays, or advertisements that
include ‘‘any price of a covered good or
service.’’ Final § 464.2(b) also clarifies
that, in any offer, display, or
advertisement that represents any price
of a covered good or service, total price
must be more prominent than other
pricing information, except if the final
amount of payment for a transaction is
displayed, the final amount of payment
must be more prominent than, or as
prominent as, total price.
As discussed in section III.B.3, the
Commission also consolidates all
provisions related to required
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(e) Intersection With IRS Requirements
One commenter sought clarification
as to the intersection of the total price
requirements with Internal Revenue
Service (‘‘IRS’’) requirements regarding
charitable gifts.273 The commenter
specifically highlighted a scenario in
which charitable contributions are made
concurrent with ticket sales. The
Commission is not aware of—and
indeed, the commenter did not cite to—
(FreedomWorks); FTC–2023–0064–3263 (Flex
Association); FTC–2023–0064–3258 (National
Taxpayers Union Foundation).
271 See, e.g., FTC–2023–0064–3304 (Recording
Academy stated: ‘‘Price itemization is the only way
to ensure pricing is transparent and that all parties
involved in setting the ticket’s total price are held
accountable for what they charge.’’); FTC–2023–
0064–3230 (Future of Music Coalition); FTC–2023–
0064–3250 (National Independent Talent
Organization); FTC–2023–0064–3283 (National
Consumer Law Center, Prison Policy Initiative, and
advocate Stephen Raher stated that itemization is
necessary to clarify opaque charges in the context
of consumer correctional services.); FTC–2023–
0064–3290 (U.S. Public Interest Research Group
Education Fund).
272 See, e.g., FTC–2023–0064–3212 (TickPick,
LLC).
273 FTC–2023–0064–3195 (League of American
Orchestras et al.).
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disclosures under § 464.2 of the rule
and, therefore, codifies proposed
§ 464.3(b) with certain modifications at
final § 464.2(c). Proposed § 464.3(b)
specified that businesses must disclose
clearly and conspicuously, and before
the consumer consents to pay, the
nature and purpose of any amount a
consumer may pay that is excluded
from total price. The Commission
clarifies that, in line with the narrower
scope of the rule, the trigger requiring
disclosures in final § 464.2(c) is ‘‘before
the consumer consents to pay for any
covered good or service.’’ As with final
§ 464.2(a) and (b), final § 464.2(c) also
eliminates the reference to ‘‘any amount
a consumer may pay’’ to narrow the
focus of the disclosures required by
§ 464.2(c)(1) to ‘‘any fee or charge
imposed on the transaction that has
been excluded from total price.’’
Final § 464.2(c) also differs from the
NPRM proposal in that it explicitly
requires disclosure of the amount,
nature, and purpose of any fees or
charges imposed on the transaction that
have been excluded from total price and
the identity of the good or service for
which the fees or charge is imposed, as
well as the final amount of payment for
the transaction. Importantly, to preserve
choice and control for businesses,
§ 464.2(c)’s disclosures with respect to
government charges and shipping
charges are only required if a business
elects to permissibly exclude such
charges from total price. Similarly,
§ 464.2(c)’s disclosures with respect to
fees for optional ancillary goods or
services are only required if the
consumer has elected to purchase such
goods or services as part of the same
transaction and the business has
excluded their fees from total price.
Nothing in the final rule requires a
business to disclose commercially
sensitive information regarding the
components of its total price.
The Commission discusses herein
changes to the text of the proposed
provisions and addresses substantive
comments about these provisions,
including how § 464.2 would apply to
specific pricing scenarios discussed in
the comment record.
1. § 464.2(a)
Proposed § 464.2(a) in the NPRM
provided that it would be a violation of
the rule for a business to ‘‘offer, display,
or advertise an amount a consumer may
pay without clearly and conspicuously
disclosing total price,’’ which was
defined in proposed § 464.1(g) as ‘‘the
maximum total of all fees or charges a
consumer must pay for a good or service
and any mandatory ancillary good or
service, except that shipping charges
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and government charges may be
excluded.’’ In final § 464.2(a), the
Commission changes the reference to
‘‘an amount a consumer may pay’’ to the
more limited ‘‘any price of a covered
good or service.’’ Final § 464.2(a) also
further clarifies that businesses may
exclude from total price fees or charges
for any optional ancillary good or
service. The Commission makes these
modifications to address NPRM
comments and to clarify the rule. The
comments relating to the exclusion from
total price of charges for any optional
ancillary good or service, and the
Commission’s reasons for allowing these
exclusions, are discussed in section III
at A.1 and A.8.
Commenters argued that the reference
to ‘‘an amount a consumer may pay’’ in
proposed § 464.2(a) and in other
sections (i.e., proposed §§ 464.2(b) and
464.3(b)) was overbroad and that the
Commission failed to consider its
application to various pricing
scenarios.274 In response to these
comments, the Commission finalizes
§ 464.2(a) with modification to limit the
total price disclosure requirement from
each time businesses ‘‘offer, display, or
advertise an amount a consumer may
pay’’ to only when they ‘‘offer, display,
or advertise any price of a covered good
or service.’’ The Commission also
provides guidance regarding the
application of § 464.2(a) to various types
of fees and pricing scenarios, including:
contingent fees; ticket service fees;
credit card surcharges; dynamic pricing
and national advertising; rebates,
bundled pricing, and discounts; and
online marketplaces in section III.B.1.a
through f.
(a) Contingent Fees
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Under certain circumstances
discussed herein, total price can
exclude certain fees that businesses
cannot calculate in advance because
they necessarily are contingent on
consumer behavior or choice; unknown,
external factors; or pricing models that
include variable fees. The Commission
notes that whether certain contingent
fees cannot be calculated and are truly
unknown at the time the rule requires
disclosures may depend on the specific
factual circumstances. The Commission
is not persuaded by the comments to
274 See, e.g., FTC–2023–0064–3206 (Motor
Vehicle Protection Products Association et al.
commented that proposed § 464.3, in referring to
any amount a consumer may pay, goes ‘‘far broader
than ‘fees’’’ and ‘‘the use of the verb ‘may’ suggests
that even offers of goods or services—or, frankly,
even goods or services that ‘may be’ available but
not actually offered—impermissibly and
imprudently stretches this section.’’).
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change the rule as it applies to
contingent fees.
Certain commenters remarked that, in
some instances, businesses cannot quote
an all-inclusive price due to unknown
fees arising from consumer behavior and
choices during and after the purchasing
process; unknown, external factors; or
pricing models that have variable rates
such as hourly rates or rates based on
guest count and consumption. Indeed,
some commenters argued that the
Commission’s failure to recognize the
existence of variable marketplace fees is
a significant oversight of the proposed
rule.275 Other commenters observed that
concerns about variable marketplace
fees are overblown and stated that the
Commission should prohibit charging
such fees if the full amount of such fees
cannot be calculated in the upfront
price.276
275 See, e.g., FTC–2023–0064–3127 (U.S. Chamber
of Commerce stated that variable fees should be
excluded from Total Price because: fees that ‘‘vary
based on volume, transaction type, and region’’
cannot be assessed until consumers take some
action; requiring their inclusion in Total Price
‘‘could less efficiently spread costs, undermine
consumer choice, and eliminate price competition
on certain cost inputs’’; and ‘‘[t]he NPRM also
provides no reason to think that variable or
dynamic pricing is necessarily deceptive or unfair
across all industries and sectors of the economy.’’);
FTC–2023–0064–3137 (Chamber of Progress
expressed concern about the rule’s impact on
variable pricing models, including delivery
platforms, where ‘‘the prices for delivery or other
services increase as the size of the order increases,’’
which it asserts is ‘‘a more efficient way of
distributing costs than flat rates’’ and asserted it is
not clear how such platforms would comply with
the rule ‘‘without creating confusion for customers
or misrepresenting prices.’’); FTC–2023–0064–3173
(Center for Individual Freedom argued that:
‘‘Acknowledging the distinct roles and objectives of
both flat and variable fees in different industries is
crucial, and the proposed rule’s failure to recognize
the benefits of variable pricing structures, which
allow fees to scale based on the nature of the items
or services purchased, is a significant oversight.’’);
FTC–2023–0064–3258 (National Taxpayers Union
Foundation stated that under the rule, ‘‘it will be
nearly impossible for businesses using variable
prices to display the Total Price at all times,
because businesses are unable to predict
consumer’s choices.’’); FTC–2023–0064–3202
(TechNet urged the Commission to exclude from
Total Price ‘‘fees that are variable or unknowable,’’
such as in e-commerce marketplaces, or the rule
‘‘would complicate the communication of pricing in
situations where the ‘total price cannot practically
be determined’ in advance.’’); FTC–2023–0064–
3263 (Flex Association commented that app-based
delivery platforms could be ‘‘forced to change the
way they price entirely—moving from variable . . .
to static fees . . . that would not benefit
consumers’’); FTC–2023–0064–3238 (Gibson, Dunn
& Crutcher LLP commented that the proposed rule
failed to consider reliance on dynamic pricing that
depends on consumer choices throughout the
buying process).
276 See, e.g., FTC–2023–0064–3134 (U.S.
Department of Transportation, Federal Motor
Carrier Safety Administration recommended that
the rule prohibit ‘‘charging variable mandatory
ancillary fees if the full amount of such variable
fees cannot be calculated in the upfront price.’’);
FTC–2023–0064–3275 (Berkeley Center for
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2095
The Commission finds that, to the
extent that certain fees are contingent on
later conduct or choices by a consumer
after purchase (e.g., pet fees, fees for late
payments, fees for property damage at a
rental accommodation, or smoking in a
non-smoking hotel room), these fees are
not mandatory for purposes of the
transaction, and as such, do not need to
be included in total price.277 The
Commission notes that fees that are
unavoidable by the consumer,
regardless of conduct or choices, are not
contingent. Ultimately, if a business
cannot ascertain whether certain fees or
charges apply until after concluding a
purchase or transaction, the business
need not include such fees or charges in
total price. Whether mandatory fees are
truly unknown due to reasons beyond a
business’s control will depend on
specific factual circumstances.
Businesses should include in total
price other fees that may vary
depending on a consumer’s choices
during the purchase process or
transaction as soon as consumers
provide the business with the
information needed to determine the
applicability or amount of those fees.
Indeed, some commenters discussed
different scenarios in which total price
depends on a consumer’s choices while
buying a good or service, such as season
and flexible ticket packages for the
arts.278 According to some commenters,
consumers expect fees arising from their
personal choices and customizations to
be disclosed only after providing
additional information to, or negotiating
with, sellers. Businesses can include in
their advertisements ‘‘starting at’’ or
base prices to deal with situations in
which ultimate price may depend on a
consumer’s selection of various
ticketing and lodging options, but only
if consumers can in fact obtain the
Consumer Law & Economic Justice et al. asserted
that concerns ‘‘that it is impossible to accurately
estimate all fees in advance of providing a complex
service’’ or fees dependent on consumer choice, are
‘‘easily resolvable with minimal effort and
creativity on the part of vendors.’’).
277 See, e.g., FTC–2023–0064–3233 (NCTA—The
internet & Television Association commented that
the definition of ‘‘Total Price’’ is ambiguous as ‘‘it
does not clearly address fees that are contingent on
later actions by particular consumers . . . such as
for unreturned equipment or late payment of the
consumer’s bill’’ and encouraged the Commission
to ‘‘resolve the ambiguity by, among other things,
making clear in the rule itself that contingent or
avoidable fees are to be excluded from the Total
Price.’’).
278 See, e.g., FTC–2023–0064–3195 (League of
American Orchestras et al. requested the
Commission’s ‘‘consideration for season-based and
flexible ticket packages in which multiple and
variable options are available to ticket-buyers, and
the total price will vary based on selection.’’).
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advertised ticket or lodging for the
‘‘starting at’’ or base price.279
Businesses still must clearly and
conspicuously disclose the nature,
purpose, and amount of such fees or
charges and the identity of the good or
service for which they are imposed, and
the final amount of payment, before a
consumer consents to pay or, if the
applicability of a fee or charge is
contingent on later conduct or choices
by a consumer after purchase, as soon
as such circumstances arise. Businesses
also must not mispresent those or other
fees or charges, including total price.
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(b) Ticket Service Fees
Businesses operating in the live-event
ticketing industry, including venues,
ticket sellers, and ticket resellers,
historically have imposed on consumers
a host of charges in addition to the
ticket’s face value that are dripped in
throughout the purchasing process. One
of the rule’s principal purposes is to
give consumers upfront knowledge of
the true cost of a good or service,
including mandatory charges, without
being forced to navigate through a timeintensive search and transaction. A
broad swath of industry members
supported a nationwide total price
requirement for ticket pricing,280
279 In some instances, advertising prices as a base
or starting price can be deceptive, depending on the
relevant limiting or qualifying criteria. In such
instances, the material terms, conditions and
obligations upon which receipt and retention of the
base or starting price are contingent should be set
forth clearly and conspicuously at the outset of the
offer so as to leave no reasonable probability that
the terms of the offer might be misunderstood.
280 See, e.g., FTC–2023–0064–3266 (StubHub, Inc.
submitted a comment supporting nationwide all-in
pricing and including Total Price in every
advertisement to consumers and throughout the
transaction.); FTC–2023–0064–3105 (Charleston
Symphony commented: ‘‘[R]equiring sellers to
disclose the total price clearly and conspicuously[ ]
addresses a pressing issue. . . . Predatory practices
in the secondary ticket sales market pose a
significant threat to artists, venues, audiences, and
the future of nonprofit arts organizations, impacting
the integrity of the ticket-buying process and
eroding audience confidence.’’); FTC–2023–0064–
3122 (Vivid Seats stated that it ‘‘supports additional
consumer disclosures, including all-in pricing,’’ but
the rule should ‘‘apply equally across all parts of
the live-events ticketing industry,’’ so consumers
can compare prices and businesses that display
total prices will not be at a competitive
disadvantage.); FTC–2023–0064–3241 (National
Association of Ticket Brokers submitted a comment
supporting all-in pricing, but noting that it would
only work if ‘‘(i) it was required of every ticket
seller and (ii) there was rigorous and expeditious
enforcement.’’); FTC–2023–0064–3306 (Live Nation
Entertainment and its subsidiary Ticketmaster
North America commented that they ‘‘support[ ] a
definition of all-in pricing that requires the first
price for a live-event ticket shown to consumers to
be the price ultimately charged at checkout
(exclusive of state and local taxes and optional addons).’’); see also FTC–2023–0064–3264 (Mark J.
Perry, Ph.D., Professor Emeritus of Economics at
University of Michigan-Flint and Senior Fellow
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although some industry commenters
expressed concerns with certain aspects
of the rule. The Commission addresses
commenters’ concerns herein.
Some industry members emphasized
that the added fees are their primary
source of revenue, since they typically
do not share in the revenue from the
ticket’s face value.281 Industry members
and an academic commenter also stated
that certain added fees pay for valuable
services such as delivery and the
convenience of selecting a seat from
home.282 An industry member
emphasized, however, that although
consumers do expect additional fees,
businesses nonetheless should clearly
disclose a ticket’s true, all-in price (i.e.,
total price).283 Another industry
member commented that unless an
added fee is truly optional, it should be
Emeritus at the American Enterprise Institute,
‘‘urge[d] the FTC to ensure that any rule requiring
all-in pricing in live events apply equally to all
market participants.’’); FTC–2023–0064–2856
(National Football League stated that if the liveevent ticket industry is included in the rule’s
coverage, the Commission must ‘‘include all sellers
of live-event tickets to prevent inconsistencies in its
application.’’).
281 See, e.g., FTC–2023–0064–3122 (Vivid Seats
commented that service fees ‘‘are the TRM’s [ticket
resale marketplace’s] sole source of revenue and
provide the capital necessary to operate the TRM.’’);
FTC–2023–0064–3306 (Live Nation Entertainment
and its subsidiary Ticketmaster North America
commented that a ticket service charge
‘‘compensates the venue for hosting the event and
the ticketing company for distributing tickets and
related services—important since venues and
ticketing companies typically do not share in
revenues attributable to a ticket’s face value.’’).
282 See, e.g., FTC–2023–0064–3122 (Vivid Seats
commented that delivery fees cover costs associated
with delivering a ticket.); FTC–2023–0064–3306
(Live Nation Entertainment and its subsidiary
Ticketmaster North America); FTC–2023–0064–
3292 (National Association of Theatre Owners
commented: ‘‘These fees allow moviegoers to
purchase tickets and select their seats from home,
and this service requires ongoing support and
management, entailing operational costs that are
offset by convenience fees. At the same time
customers can avoid the convenience fee altogether
by purchasing directly at the box office.’’) FTC–
2023–0064–3264 (Mark J. Perry, Ph.D., Professor
Emeritus of Economics at University of MichiganFlint and Senior Fellow Emeritus at the American
Enterprise Institute, commented that ticket resale
marketplaces offer numerous valuable services to
ticket sellers and buyers that a single seller or buyer
could not access otherwise, including access to
buyers or tickets, inventory management, seller and
customer support, secure financial transactions, and
guarantees.’’).
283 FTC–2023–0064–3306 (Live Nation
Entertainment and its subsidiary Ticketmaster
North America commented: ‘‘Because the practice
of adding these charges to the ticket’s face value has
been so longstanding, consumers have come to
expect service fees when purchasing a ticket to a
live entertainment event—but it is impossible for
consumers to anticipate the amount of applicable
fees because those rates are set by hundreds of
different venues and can vary accordingly.’’ The
commenter continued, ‘‘Consumers therefore need
clear disclosures about the true price of a ticket,
including the elements that constitute the all-in
price.’’).
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included in total price.284 The
Commission reiterates that businesses
are not prohibited from charging fees;
instead § 464.2(a) requires the
disclosure of total price, including fees
for mandatory ancillary goods or
services, when a price for a good or
service is displayed, while § 464.2(c)
requires disclosures about fees being
imposed on the transaction that have
been permissibly excluded from total
price, including for optional ancillary
goods or services, before a consumer
consents to pay for a covered good or
service. The Commission further
reiterates that, in an online transaction,
fees such as for payment processing,
electronic ticket ‘‘delivery,’’
‘‘convenience,’’ or similar add-on
ticketing fees are mandatory and must
be included in total price if a consumer
cannot obtain the covered good or
service as part of the same transaction
(e.g., online) without incurring the fee.
Final § 464.3 also prohibits businesses
from misrepresenting the nature or
purpose, or the identity of the good or
service for which fees are imposed.
Some industry members expressed
concern that the rule would prohibit
itemization of fees in addition to total
price, while others argued that it should
prohibit such itemization.285 The
Commission clarifies that, so long as
total price is displayed clearly and
conspicuously, and more prominently
than any itemized fees, the rule does not
prohibit businesses from itemizing the
284 FTC–2023–0064–3266 (StubHub, Inc.
supported the exclusion of ‘‘fees for optional addon features selected at the discretion of the
consumer.’’ As an example, the commenter stated,
‘‘[I]n some instances, consumers may not have a
choice on delivery method. In those cases, delivery
fees are mandatory and should be included in the
[Total Price] because the consumer has no
discretion to choose. In other instances, consumers
have multiple delivery options at different price
points.’’).
285 See, e.g., FTC–2023–0064–3230 (Future of
Music Coalition commented that ‘‘adopting all in
pricing without itemization [of the base ticket price
or face value and of fee amounts] would be a gift
to . . . predatory resellers.’’); FTC–2023–0064–3250
(National Independent Talent Organization stressed
‘‘the need for an itemized breakdown of ticket fees’’
and called for ‘‘fees to be clearly itemized
throughout the purchasing process.’’); FTC–2023–
0064–3304 (Recording Academy commented: ‘‘Price
itemization is the only way to effectively regulate
transparent pricing in a manner that truly informs
the consumer about how their dollar is being spent
. . . . Additionally, price itemization is the only
way to effectively hold third party fees and charges
in check.’’). But see FTC–2023–0064–3212
(TickPick, LLC commented that the rule ‘‘must
prohibit the itemization of fees and charges that
make up the Total Price (other than breaking out
government taxes and shipping fees) in order to
prevent harm from hidden and/or misleading fees.’’
The commenter stated concerns that such fees were
‘‘arbitrary’’ and ‘‘any secondary ticketing
marketplace that itemizes mandatory fees and
charges is arguably misrepresenting the ‘nature and
purpose of any amount a consumer may pay.’ ’’).
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charges imposed on a transaction.
However, any such itemization must not
misrepresent the nature, purpose,
amount, or refundability of the itemized
fees, including the identity of the goods
or services for which they are being
charged.
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(c) Credit Card and Other Payment
Processing Surcharges
The rule requires businesses to
include credit card surcharges or
processing fees in total price only if they
choose to make payment by credit card
mandatory. If, on the other hand, credit
card use is optional because consumers
can use multiple payment options, those
fees do not need to be included in total
price. If the consumer chooses to use a
credit card, businesses must clearly and
conspicuously disclose the nature,
purpose, and amount of any credit card
surcharge before the consumer consents
to pay. Some commenters expressed
concern about the rule’s application to
credit card fees but, as discussed herein,
the Commission was not persuaded by
the comments to change the proposed
rule as it applies to such fees.
Many commenters expressed concern
that the rule would require total price to
include credit card processing fees or
prohibit businesses from passing
through such fees to consumers. This
was of particular concern to small
businesses.286 Numerous industry
members also commented that requiring
such fees to be part of total price would
reduce price transparency and penalize
customers who want or need to pay
with cash.287
Various commenters suggested that if
businesses properly disclose credit card
processing charges and provide
alternate payment methods, both
consumers and businesses would
benefit.288 Commenters noted that,
when appropriately disclosed,
consumers can avoid such fees by
286 See, e.g., FTC–2023–0064–3217 (Bowling
Proprietors’ Association of America); FTC–2023–
0064–2755 (Caffe! Caffe!); FTC–2023–0064–3114
(Shine Beer Sanctuary); FTC–2023–0064–1456
(MED Murphy St. Enterprise); see also, e.g., FTC–
2023–0064–2953; FTC–2023–0064–2972 (Over
4,600 comments submitted through a National
Restaurant Association mass mailing campaign
misinterpreted the rule as ‘‘eliminating the use of
fees and surcharges.’’).
287 See, e.g., FTC–2023–0064–3300 (National
Restaurant Association); FTC–2023–0064–3128
(Merchants Payments Coalition); FTC–2023–0064–
3219 (Georgia Restaurant Association); FTC–2023–
0064–3180 (Independent Restaurant Coalition).
288 See, e.g., FTC–2023–0064–3180 (Independent
Restaurant Coalition commented: ‘‘Clearly and
prominently displaying any fees promotes
transparency and fairness as well as allowing
restaurants to meet the needs of their workers and
customers.’’); FTC–2023–0064–2891 (Mary
Sullivan, George Washington University, Regulatory
Studies Center).
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choosing another form of payment.289
An academic commenter suggested that
prominent disclosure of a credit card
surcharge in advance, so consumers can
avoid it, would benefit consumers and
reduce business costs more than
requiring such charges to be included in
total price.290 A tenant advocacy legal
clinic that generally supported requiring
credit card processing charges to be
included in total price, suggested that
such charges might be reasonably
avoidable if disclosed in advance to let
consumers use a different payment
method.291 Another academic
commenter recommended that the
Commission clarify that, while credit
card surcharges need not be included in
total price, a business can only pass
through the actual amount of the charge
and must clearly and conspicuously
disclose any markup it imposes.292
The Commission notes that the rule
does not prohibit a business from
charging or passing through credit card
fees if otherwise allowed by law. The
rule does not affect State laws that
prohibit credit card surcharges. Whether
credit card charges must be included in
total price, however, depends on
whether a business makes such fees
mandatory, for example, by not
providing any other payment option for
the transaction. For example, if a
consumer is purchasing a ticket online,
there must be another online payment
option that does not require a fee, not
merely an option to go in person to the
box office to purchase the ticket with
cash for no additional fee.
In other words, if there is no other
payment option for an offered
transaction, or if every payment option
requires a fee or charge, such fees are
mandatory and must be included in
total price.293 But, if a business offers
289 See, e.g., FTC–2023–0064–3128 (Merchants
Payments Coalition); FTC–2023–0064–3140
(Merchant Advisory Group stated: ‘‘When
appropriately disclosed, consumers can typically
avoid these fees by simply choosing lower-cost
forms of payment, and this could help keep prices
down for consumers overall.’’); FTC–2023–0064–
3300 (National Restaurant Association commented:
‘‘When a credit card surcharge is properly disclosed
via in-store signage, on the menu, and on the
receipt, customers have a clear understanding that
the fee is a product of the card companies, not the
restaurant.’’).
290 FTC–2023–0064–2891 (Mary Sullivan, George
Washington University, Regulatory Studies Center).
291 FTC–2023–0064–3268 (Housing & Eviction
Defense Clinic, University of Connecticut School of
Law).
292 FTC–2023–0064–1294 (James J. Angel, Ph.D.,
CFP, CFA, Professor, Georgetown University,
McDonough School of Business).
293 This approach is consistent with the
Telemarketing Sales Rule, which requires sellers
and telemarketers to disclose, in a clear and
conspicuous manner, the total cost of a good or
service, which would include any applicable credit
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consumers multiple viable payment
options for the offered transaction, so
that paying with a credit card is
optional, then credit card fees need not
be included in total price. The same is
true for debit card surcharges and other
payment processing fees.
A business that provides at least one
viable method to pay for the offered
transaction without a fee, chooses to
pass through payment processing fees to
consumers, and excludes such fees from
total price would have to clearly and
conspicuously disclose the nature,
purpose, and amount of the processing
fees before a consumer consents to pay.
In addition, nothing in the rule
prohibits businesses that accept
multiple viable forms of payment from
advertising two prices, one that includes
credit card or other payment processing
fees and one that does not. It is the
Commission’s understanding that some
businesses already do this, and such a
strategy is consistent with the rule.
In addition, under final § 464.3, a
business that offers, displays, or
advertises a covered good or service
cannot misrepresent the nature,
purpose, amount, or refundability of
credit card or other fees. Since the rule
does not prohibit itemization, a business
may choose to also itemize mandatory
credit card fees so long as they are
included in total price and total price is
displayed more prominently. The
voluntary itemization of mandatory
credit card fees addresses commenters’
concerns that consumers will not
understand the different costs affecting
businesses.
(d) Dynamic Pricing and National
Advertising
Some commenters expressed concern
that the total price requirements will
interfere with dynamic pricing strategies
where total price is not fixed but
changes based on supply, demand, or
other factors.294 The rule does not bar
card or other payment processing charges, before a
consumer consents to pay for that good or service.
16 CFR 310.3(a)(1)(i) and (a)(2)(i).
294 See, e.g., FTC–2023–0064–3195 (League of
American Orchestras et al. observed: ‘‘It would be
harmful to paint all dynamic pricing strategies as
‘unfair.’ Nonprofit performing arts organizations
often use variable pricing strategies to both
maximize the earned revenue that supports the
nonprofit performing arts workforce, as well as to
offer reduced or free-of-charge ticketing options for
community-based partners.’’); FTC–2023–0064–
3230 (Future of Music Coalition stated that dynamic
pricing ‘‘can certainly be used in ways that frustrate
consumers’’ but ‘‘can also solve practical
problems.’’ It is ‘‘often used by nonprofit arts
presenters in non-problematic ways.’’ The
commenter noted, however, that ‘‘disclosure of
specific dynamic pricing strategies and tools,
whether manual or algorithmic[,] will only help
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businesses from engaging in dynamic
pricing, but adjusted prices must
include all known mandatory fees and
the advertised good or service must be
actually available to consumers at the
quoted price. The Commission’s review
of the comments did not identify any
persuasive reason to change the rule as
it applies to dynamic pricing.
A few commenters noted that the rule
could interfere with businesses’ ability
to engage in national advertising or to
advertise to a broad audience because
mandatory fees may vary by location, as
is often the case with franchisee costs
and delivery costs.295 One commenter
argued that the rule would require
either impractical and challenging geotargeted advertising or advertising a
‘‘maximum total price’’ to any potential
consumer in the businesses’ footprint,
which would overstate the price that
most consumers need to pay and defeat
comparison shopping.296 The
commenter also noted that
‘‘[a]lternatively, companies might
respond to the proposed rule by
omitting pricing from advertising
altogether, an option that would defeat
the [Commission’s] goal of ensuring
consumers have access to accurate and
predatory resellers make purchasing decisions and
maximize their extraction of value.’’).
295 See, e.g., FTC–2023–0064–3127 (U.S. Chamber
of Commerce commented that the Total Price
requirements ‘‘may eliminate the opportunity for
national advertising campaigns’’ because
‘‘[m]andatory fees [such as regional sports fees] may
vary by location or tie to specific franchisee costs.’’
The commenter recommended that the FTC
‘‘consider revising the definition of ‘Total Price’ to
exclude all charges that vary based on geographic
region.’’); FTC–2023–0064–3294 (International
Franchise Association commented: ‘‘Under the
Proposed Rule, national marketing campaigns are
only workable if all franchised businesses in a
franchise system adhere to the same pricing regime
(including pass-through fees), regardless of the
economic demands of the markets in which they
operate.’’); FTC–2023–0064–3300 (National
Restaurant Association commented: ‘‘Like
‘Shipping Charges,’ delivery fees should be
excluded from the ‘Total Price’ requirement since
local or national advertising may feature the cost of
the food item but cannot reasonably predict how
regional market conditions will alter the price of
delivery.’’).
296 See, e.g., FTC–2023–0064–3233 (NCTA—The
Internet & Television Association stated that the
rule would interfere with ‘‘efforts to advertise
pricing nationwide or to a broad audience’’ and
would require impractical and technically
challenging geo-targeted advertising. The
commenter further stated that businesses may be
incentivized to ‘‘‘‘advertis[e] a Total Price for a
particular service option that overstates the price
that most consumers would actually end up paying
at their service location (i.e., the Total Price would
be the maximum price that any potential customer
in the provider’s footprint would have to pay for
the service),’’ which would ‘‘confuse consumers
and undermine the type of comparison-shopping
the FTC is aiming to facilitate. Bundled pricing
would be even more challenging to calculate and
represent in advertising, given that each bundled
service could have multiple different applicable
taxes or surcharges.’’).
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reliable cost information as they shop
for services.’’297
The Commission determines that
shipping charges may be excluded from
total price. As to other charges that may
vary by time or location, businesses can
comply with the rule by advertising a
maximum total price either by region or
nationwide. The Commission
understands that many businesses
already engage in regional or geotargeted advertising that enables
flexibility for pricing by time and
locality. Since the rule applies to all
businesses offering covered goods or
services, it levels the playing field and
preserves comparison-shopping even
when advertised prices are maximum
totals.
(e) Rebates, Bundled Pricing, and Other
Discounts: Compliance When
Promotional Pricing Models Have
Different Fees
Promotional pricing models, such as
two-for-one deals, bulk or bundled
pricing, unbundled or a la carte pricing,
rebates, or other discounts, can change
the price a consumer ultimately may
pay. Section 464.2(a)’s total price
disclosure requirement applies whether
a consumer is purchasing a single
covered good or service, multiple
covered goods or services, or covered
goods or services combined with
ancillary goods or services, as well as
when a discount or other promotion
affects the final amount of payment. If
a consumer applies a discount or
otherwise qualifies for a promotional
price, the business can update the total
price displayed. The Commission
provides clarification herein to address
commenter concerns about the rule as it
applies to promotional pricing models.
Some commenters expressed concern
that the rule’s total price requirement
would prohibit or discourage businesses
from offering promotional prices to
consumers.298 Two industry groups
commented that the potential difficulty
of incorporating promotions into total
price might discourage businesses from
offering them.299 A competition policy
297 Id.
298 See, e.g., FTC–2023–0064–2919 (National
Automatic Merchandising Association) (expressing
concern that the rule would ban offering cash
discounts); see also, FTC–2023–0064–3217
(Bowling Proprietors’ Association of America)
(stating that requiring businesses to consolidate
‘‘diverse pricing models into a single displayed
price could lead to significant consumer confusion
and dissatisfaction.’’).
299 FTC–2023–0064–3263 (Flex Association
commented that some fees cannot be calculated at
the start of a transaction, including for discounts
and special offers: ‘‘For example, a ‘two-for-one’
offer cannot be activated until two eligible items are
added to a shopping cart.’’); FTC–2023–0064–3137
(Chamber of Progress commented that sellers may
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group agreed and suggested
modifications might be ‘‘necessary to
ensure that the proposed rules do not
interfere with such pricing models.’’ 300
The Antitrust Division of the U.S.
Department of Justice commented that
‘‘[c]ompetition between companies that
offer bundled and unbundled pricing for
core products and value-added features
can play an important role in preserving
consumer choice . . . and unbundled
pricing can empower consumers who
prefer to pay only for what they
value.’’ 301 The Antitrust Division
further commented that the proposed
rule ‘‘does not affect companies’ ability
to offer consumers a choice whether to
buy unbundled features that do not
impose mandatory fees.’’ 302 However, it
asserted that ‘‘[w]hen companies use
unbundled offerings to disguise
mandatory fees, they undermine the
value to competition of that unbundled
option.’’ 303
The rule does not prohibit businesses
from using bundled, discount, or similar
pricing models if, when the business
advertises any price of a covered good
or service, it discloses the total price the
consumer must pay for the good or
service. The rule also does not require
businesses to incorporate different
pricing models into a single price;
rather, under the rule, businesses
advertising any price of a covered good
or service must only display the
maximum total price. For example, a
hotel can display a regular total price
and a loyalty program member total
price. Businesses also can display total
price under a promotional pricing
model, such as a bundled price or a
promotion advertising, ‘‘stay three
nights, get one night free,’’ when and to
the extent that model applies. The
Commission notes that offering,
displaying, or advertising a general [x]%
or $[y] discount, without displaying the
price of a covered good or service, does
not require the disclosure of total price
under the rule.
abandon discounts on bundles of goods or bulk
orders, because ‘‘the total price of each good could
vary depending on the other items in the customer’s
cart.’’).
300 FTC–2023–0064–2887 (Progressive Policy
Institute commented, ‘‘the proposed disclosure
requirements may interfere with the use of different
pricing models that provide value to consumers and
are the basis upon which some firms compete,’’
such as unbundled pricing models when ‘‘the total
price may not be known until the consumer
completes the purchase process,’’ and therefore, a
‘‘requirement to display prices before the purchase
. . . may mislead consumers and distort
competition.’’).
301 FTC–2023–0064–3187 (U.S. Department of
Justice, Antitrust Division).
302 Id.
303 Id.
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(f) Online Marketplaces
The rule covers sellers and online
marketplace platforms or other
intermediaries in the same manner as
other businesses that offer covered
goods or services. Various commenters,
however, highlighted the challenges
some businesses may face in
implementing the rule if it is applied
equally to all online marketplace
stakeholders. The Commission’s review
of the comments, as discussed herein,
did not identify any persuasive reason
to change the rule as it applies to online
marketplaces for covered goods or
services.
Some commenters stated that certain
businesses offering, displaying, or
advertising goods and services in an
online marketplace often must rely on
other entities for accurate information
about pricing and expressed concern
about liability under the rule if they
receive inaccurate pricing information.
This concern arose both from
intermediaries that display prices
provided by sellers and from sellers
who offer their goods or services
through an intermediary. Intermediaries
are concerned about facing liability if
they post prices that are inaccurate
because the seller of the good or service
did not provide complete and accurate
pricing information. Commenters also
expressed concern about liability when
sellers list their good or service for sale
on a platform but are not in control of
how the platform displays information
about pricing.304
Travel Technology Association
(‘‘Travel Tech’’), for instance, observed
the complex and multi-layered
information flow from travel service
providers, such as hotels, motels, inns,
vacation rentals, and other short-term
lodging providers, to different types of
intermediaries which operate either as
business-to-business, consumer-facing,
or both, and include online travel
agents, metasearch engines, global
distribution systems, travel management
companies, short-term rental platforms,
‘‘brick-and-mortar’’ or offline travel
agents, tour operators, and
304 See, e.g., FTC–2023–0064–3258 (National
Taxpayers Union Foundation stated that Total Price
may be difficult or impossible to implement with
third-party marketplaces because ‘‘while the
platform may control the display of prices, it is
sellers and not the platform that sets [sic] the
prices.’’); FTC–2023–0064–3293 (Travel Technology
Association stated that intermediaries may be
‘‘similarly situated to consumers in that they are
also dependent on Travel Service Providers such as
hotels to provide accurate, complete, and timely
information before booking.’’); FTC–2023–0064–
3262 (Skyscanner Ltd. highlighted ‘‘the numerous
and complex ways in which metasearch sites
receive pricing information directly from hotels and
other short-term lodging providers’’).
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wholesalers.305 Travel Tech explained
that travel service providers determine
the rates, terms, and mandatory fees,
including resort fees, applicable to their
travel services, and that only travel
service providers know whether the
nature and purpose of any fee they
impose is accurate.306 Travel Tech
members, which consist of the
aforementioned intermediaries, use the
information provided to them directly
from travel service providers, or
indirectly through other intermediaries,
to aggregate, sort, and display offers on
their sites and applications, and
consumers in turn use this information
to compare offers and make informed
choices.307 Travel Tech and one of its
members, Skyscanner, a metasearch
engine, suggested that the rule should
immunize intermediaries from liability
if travel service providers or other
upstream distributors ‘‘fail to provide
accurate, complete, and timely pricing
information and such downstream
[i]ntermediaries have made reasonable
efforts to receive such information.’’ 308
Both commenters further requested that
the Commission make clear that travel
service providers would be engaging in
an unfair or deceptive practice if they
provide inaccurate, incomplete, or
untimely pricing information to
intermediaries or seek remuneration
from intermediaries for information
necessary for them to comply with any
final rule.309 Finally, Travel Tech
further requested that the Commission
clarify that the rule applies to any
business that supplies or advertises
pricing to consumers so all are held to
the same standard.310
The American Hotel & Lodging
Association, a national association
representing all segments of the U.S.
lodging industry, including hotel
owners, beds & breakfasts, State hotel
associations, and industry suppliers,
also stressed that a final rule must apply
broadly to all industry participants,
including online travel agencies, shortterm rental platforms, and metasearch
sites.311 The commenter noted that the
industry broadly is moving to
implement the clear publishing of total
price (including all mandatory, nongovernment fees) for lodging, so that
305 FTC–2023–0064–3293 (Travel Technology
Association).
306 Id.
307 Id.
308 FTC–2023–0064–3293 (Travel Technology
Association); FTC–2023–0064–3262 (Skyscanner
Limited).
309 Id.
310 FTC–2023–0064–3293 (Travel Technology
Association).
311 FTC–2023–0064–3094 (American Hotel &
Lodging Association).
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consumers can more easily navigate the
myriad of choices they have when it
comes to places to stay.312
The Commission declines to adopt
blanket immunity from the rule for
intermediaries that depend on providers
of live-event tickets and short-term
lodging for accurate pricing information.
The Commission, clarifies, however,
that the final rule applies to business-tobusiness (‘‘B2B’’) transactions as well as
business-to-consumer transactions.
Businesses such as travel service
providers that sell or advertise through
intermediaries must provide such
entities with accurate pricing
information (including about total price,
as well as mandatory and optional fees).
Platforms and other intermediaries that
offer, display, or advertise covered
goods or services and ancillary goods or
services or allow third party sellers to
do so must disclose the total price of the
goods and services, including all
mandatory and optional fees and, if
applicable, provide third-party sellers
with all necessary information to
calculate the total price. The rule’s
coverage of B2B transactions in this
manner protects not only individual
consumers from hidden and misleading
fees, but also businesses.
The Commission also notes that at
least one commenter, the International
Franchise Association, argued that the
rule should exempt B2B transactions,
without providing any compelling
justification for why bait-and-switch
pricing, including drip pricing, and the
misrepresentation of fees and charges
should be allowed in transactions
involving businesses.313 This
commenter noted that, for example,
‘‘[f]ranchised hotels advertise large
event spaces for consumers’ weddings
and business conventions’’ and the rule
‘‘could be applied against these
businesses if they fail to display total
price even though no consumer is ever
misled or deceived.’’ 314 The prohibition
in section 5 of the FTC Act against
unfair or deceptive acts or practices
does not include any limitation on the
‘‘consumers’’ who can be injured.
Relying on this authority, the
Commission has long interpreted the
FTC Act to apply to cases where the
harmed consumers are businesses,
particularly small- and medium-sized
businesses.315
312 Id.
313 FTC–2023–0064–3294 (International
Franchise Association).
314 Id.
315 See, e.g., Complaint ¶¶ 1–7, 13–87, FTC v.
Arise Virtual Solutions, Inc., No. 24–cv–61152 (S.D.
Fla. July 2, 2024), https://www.ftc.gov/system/files/
ftc_gov/pdf/arise_complaint.pdf (alleging
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The Commission clarifies that it does
not intend to treat intermediaries as the
publisher or speaker of information
about pricing or as controlling the
manner of its display where the
intermediary is not responsible, in
whole or in part, for such content or
display.316 However, if intermediaries
are responsible, in whole or in part, for
offering, displaying, or advertising any
price, including any portion thereof, of
a covered good or service, then within
the scope of that responsibility, they
must give sellers the information
necessary to calculate total price and,
when uniquely situated to do so, such
intermediaries must ensure that they
display total price. For example, if an
intermediary charges a fee for access to
its platform and the seller passes the fee
through to consumers, the intermediary
defendants made misleading and unsubstantiated
earnings claims in selling its Arise business
opportunity to gig worker consumers seeking to
work from home in customer service and failed to
provide the disclosures required by the Business
Opportunity Rule); Complaint ¶¶ 7–51, In re
Amazon.com, Inc., 171 F.T.C. 860, 861–71 (2021),
https://www.ftc.gov/system/files/ftc_gov/pdf/
DV171.pdf (alleging defendants deceptively
claimed they would give their Amazon Flex drivers
100% of consumer tips when in fact they withheld
nearly a third of the tips from their drivers);
Complaint ¶¶ 13–65, FTC v. First American
Payment Systems, LLC, No. 4:22–cv–00654 (E.D. TX
July 29, 2022), https://www.ftc.gov/system/files/ftc_
gov/pdf/Complaint%20%28file%20stamped%29_
0.pdf (alleging defendants made false claims about
their payment processing services, including about
total monthly fees, savings opportunities, and the
ease of cancelling automatically-renewing accounts,
to small business consumers such as restaurants,
nail salons, or small retail businesses); Complaint
¶¶ 12–50, FTC v. Yellowstone Capital LLC, No.
1:20–cv–06023 (S.D.N.Y. Aug. 3, 2020), https://
www.ftc.gov/system/files/documents/cases/
1823202yellowstonecomplaint.pdf (alleging
defendants engaged in a pattern of deceptive and
unfair conduct involving their ‘‘merchant cash
advances’’ to small business consumers and made
excess, unauthorized withdrawals from consumers’
accounts after consumers already repaid the full
amount they owed); Complaint ¶¶ 9–104, FTC v.
Fleetcor Technologies, Inc., No. 1:19–cv–05727–
ELR (N.D. Ga. December 20, 2019), https://
www.ftc.gov/system/files/documents/cases/fleetcor_
complaint_with_exhibits_002.pdf (alleging
defendants marketed fuel cards to business
consumers that operate vehicle fleets, including
many small businesses and made false claims about
the fuel card’s savings, fraud controls, and lack of
set-up, transaction, and membership fees, instead
charging these businesses hundreds of millions of
dollars in unexpected fees); see also Fed. Trade
Comm’n, Policy Statement on Enforcement Related
to Gig Work (2022), https://www.ftc.gov/system/
files/ftc_gov/pdf/Matter%20No.%20P227600
%20Gig%20Policy%20Statement.pdf (noting that
protecting gig workers ‘‘from unfair, deceptive, and
anticompetitive practices is a priority,’’ and the FTC
‘‘will use its full authority to do so’’).
316 See, e.g., FTC–2023–0064–3202 (TechNet
stated: ‘‘The FTC’s proposed rule also poses
significant harm to online marketplaces by
potentially creating liability for platforms that
merely display pricing advertised by others. As
publishers, such platforms are likely protected from
such responsibility by Section 230 of the
Communications Decency Act of 1996.’’).
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must provide the seller with accurate
information about the fee’s amount so
the seller can accurately calculate total
price, or otherwise ensure that the total
price is displayed. Travel service
providers and other sellers, by the same
token, must provide intermediaries with
accurate price information.
Whether an intermediary, seller, or
other business is responsible for
offering, displaying, or advertising a
price of a covered good or service, may
be a fact- and law-specific
determination in which the Commission
can consider issues of participation in,
and control of, unfair or deceptive
practices, as well as contractual
obligations between sellers and
platforms and other intermediaries, and
the applicability of other Federal laws.
The Commission will consider issuing
and updating business guidance to
address particular or nuanced scenarios,
as it has done as a complement to other
rulemakings.317
2. § 464.2(b)
Proposed § 464.2(b) in the NPRM
required businesses to display total
price more prominently than any other
pricing information in any offer,
display, or advertisement that contains
an amount a consumer may pay.
Following review of the comments, the
Commission finalizes § 464.2(b) with
three modifications. First, as already
discussed in this section, the
Commission limits the requirements of
§ 464.2, including § 464.2(b), to covered
goods or services. Second, as discussed
in section III.B.1, the Commission
narrows the disclosure trigger in
§ 464.2(a) and (b) to ‘‘an offer, display,
or advertisement that represents any
price of a covered good or service.’’
Third, as discussed herein, final
§ 464.2(b) clarifies the prominence
requirement with respect to the final
amount of payment for a transaction.
Final § 464.2(b) thus provides that, in
any offer, display, or advertisement that
represents any price of a covered good
or service, a business must disclose the
total price more prominently than any
other pricing information. However,
where the final amount of payment for
317 See, e.g., Fed. Trade Comm’n, Bureau of
Consumer Protection Business Guidance, FTC
Safeguards Rule: What Your Business Needs to
Know (May 2022), https://www.ftc.gov/businessguidance/resources/ftc-safeguards-rule-what-yourbusiness-needs-know; Fed. Trade Comm’n, Bureau
of Consumer Protection Business Guidance, FAQs:
Complying with the Contact Lens Rule (June 2020),
https://www.ftc.gov/business-guidance/resources/
faqs-complying-contact-lens-rule; Fed. Trade
Comm’n, Bureau of Consumer Protection Business
Guidance, Complying with the Funeral Rule (Aug.
2012), https://www.ftc.gov/business-guidance/
resources/complying-funeral-rule.
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the transaction is displayed, the final
amount of payment must be disclosed
more prominently than, or as
prominently as, the total price.
Various commenters voiced support
for proposed § 464.2(b)’s requirement
that total price must be displayed more
prominently than other pricing
information.318 Certain commenters
stated that the prominence requirement
will prevent consumer confusion as to
the true price of a good or service.319
Some commenters suggested
strengthening the prominence
requirement or adding guidance about
it.320 Other commenters also suggested
clarifying that the phrase ‘‘an amount a
consumer may pay’’ refers only to truly
mandatory ancillary goods or
services.321 On the other hand, some
318 See, e.g., FTC–2023–0064–3266 (StubHub, Inc.
agreed with the FTC’s proposal to require Total
Price in every offer, display, or advertisement
presented to consumers and that Total Price must
be consistently displayed throughout the
transaction); FTC–2023–0064–3306 (Live Nation
Entertainment and its subsidiary Ticketmaster
North America supported ‘‘requir[ing] the first price
for a live-event ticket shown to consumers to be the
price ultimately charged at checkout (exclusive of
state and local taxes and optional add-ons). This
price should be clearly displayed on the initial
landing page and easily discernible.’’ The
commenter proposed adding the phrase, ‘‘from the
first instance a consumer sees a price for a good or
service’’ to the end of proposed § 464.2(a) and
moving the phrase, ‘‘as soon as pricing information
is provided to the consumer’’ before ‘‘more
prominently than any other Pricing Information’’ in
proposed § 464.2(b).); FTC–2023–0064–3290 (U.S.
Public Interest Research Group Education Fund
commented: ‘‘[T]he Total Price should be provided
first and with the most prominence. Businesses
must not be allowed to confuse consumers with a
barrage of numbers.’’); FTC–2023–0064–1939
(Tzedek DC).
319 See, e.g., FTC–2023–0064–3290 (U.S. Public
Interest Research Group Education Fund); FTC–
2023–0064–1939 (Tzedek DC commented that
proposed § 464.2(b) ‘‘will prevent companies from
hiding the real cost of goods and services in fine
print or making the total cost difficult to find.’’).
320 See, e.g., FTC–2023–0064–3196 (South
Carolina Department of Consumer Affairs
commented: ‘‘Guidance on how the business can
simultaneously comply with the ‘Clearly and
Conspicuously’ requirement and the prominence
requirement may help with business
comprehension and compliance.’’ The commenter
suggested adding ‘‘a definition addressing the
different mediums by which the offer, display or
advertisement may be relayed to a consumer
(visual, audio, print, online)’’ and providing
‘‘examples of compliance with the requirement of
prominent display’’ such as ‘‘in a visual disclosure
presentation of the Total Price in bolded typeface
at least two points larger than any other Pricing
Information or 14-point font, whichever is larger,
satisfies the prominence requirement.’’).
321 See, e.g., FTC–2023–0064–3275 (Berkeley
Center for Consumer Law & Economic Justice et al.
suggested modifying proposed § 464.2(b) to include:
‘‘[A] Business must not automatically include
Ancillary Goods or Services in the Total Price or
automatically select Ancillary Goods or Services for
purchase on behalf of the consumer.’’); FTC–2023–
0064–3160 (Consumer Federation of America et al.
made a similar suggestion and stated it would
‘‘ensure that ‘must pay’ is interpreted to include
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industry commenters stated that the
prominence requirement may have
unintended consequences that could
harm consumers, such as consumers not
noticing an offered discount or a
business deciding not to provide any
pricing information.322 As noted in
section III.B.1.e, nothing in the rule
prohibits a business from adjusting total
price to account for any applied
discounts or other promotional pricing
and, given strong market incentives, the
Commission disagrees with comments
that the rule’s prohibitions against
hidden and misleading fees will deter
businesses from advertising prices.323
Final § 464.2(b) also clarifies how the
prominence requirement applies to the
final amount of payment for a
transaction. The Commission recognizes
that the final amount of payment, now
an explicitly required disclosure under
final § 464.2(c), may differ from total
price due to various factors, such as the
exclusion from total price of certain fees
or charges, including for any optional
ancillary good or service, or the
application of promotional pricing
models. The Commission determines
that both total price and the final
amount of payment are material to
consumers. The Commission therefore
clarifies that, when the final amount of
payment is displayed, it must be
any fee or charge that is included by default and
that the consumer must pay unless they take
affirmative action to opt-out or avoid it.’’ The
commenter proposed adding guidance that: ‘‘A
consumer must pay a fee or charge if the fee or
charge is not reasonably avoidable or if the
consumer must pay the fee or charge unless they
take affirmative action to avoid it. An ancillary good
or service is mandatory if a reasonable consumer
would expect the good or service to be included
with the purchase.’’).
322 See, e.g., FTC–2023–0064–3293 (Travel
Technology Association commented that if Total
Price is ‘‘clearly and conspicuously’’ displayed, a
prominence requirement is unnecessary and
‘‘discounts would have to be less prominent than
the Total Price, potentially leading to a consumer
missing out on a deal that may have saved them
money or led to a more enjoyable vacation.’’ The
commenter suggested that the rule be more flexible
‘‘so that Intermediaries can use their expertise to
relay the most appropriate information to
consumers.’’); FTC–2023–0064–3296 (Bay Area
Apartment Association commented that the
prominence requirement could have a ‘‘chilling
effect on the content of commercial speech,’’ with
some rental housing providers choosing ‘‘not to
include pricing information in their advertisements,
and instead invite prospective residents to learn
about pricing on their website or to call their
leasing office,’’ thereby ‘‘undermining a key
objective (better consumer awareness of the price of
goods and service[s]) the rule is intended to
accomplish.’’).
323 See also Bates v. State Bar of Ariz., 433 U.S.
350, 383–84 (1977) (‘‘Since the advertiser knows his
product and has a commercial interest in its
dissemination, we have little worry that regulation
to assure truthfulness will discourage protected
speech.’’) (citing Va. State Bd. of Pharm. v. Va.
Citizens Consumer Council, Inc., 425 U.S. 748, 771–
772, 771 n. 24 (1976)).
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displayed as prominently as, or more
prominently than, total price. The
modification avoids a potential
unintended consequence of the rule,
which may have been read to require
total price to obscure the final amount
of payment.
The Commission determines that,
with these modifications, § 464.2(b)’s
prominence requirement is clear,
understandable, and unambiguous.
3. § 464.2(c)
In final § 464.2, the Commission
consolidates all proposed disclosure
requirements; therefore, proposed
§ 464.3(b) is codified at final § 464.2(c).
Proposed § 464.3(b) would have
required businesses to disclose clearly
and conspicuously, before the consumer
consents to pay, the nature and purpose
of any amount a consumer may pay that
is excluded from total price, including
the fee’s refundability and the identity
of the good or service for which the fee
is charged. Final § 464.2(c) largely
adopts the disclosure requirements of
proposed § 464.3(b), with certain
modifications. Specifically, final
§ 464.2(c) requires businesses to
disclose clearly and conspicuously,
before the consumer consents to pay for
any covered good or service: The nature,
purpose, and amount of any fee or
charge imposed on the transaction that
has been excluded from total price and
the identity of the good or service for
which the fee or charge is imposed, but
not the fee’s refundability; and the final
amount of payment for the transaction.
The Commission makes these
modifications, as discussed herein, in
response to the comments and to
address related concerns. One
commenter recommended that the
Commission provide greater specificity
about which fees excluded from total
price must be disclosed under this
provision, and require the itemized
disclosure of such fees.324 Some
commenters argued that the provision
was vague and overbroad, and that its
application to ‘‘any amount a consumer
may pay’’ would make complying with
the provision impracticable and result
in excessive disclosures that would
confuse consumers into believing that
all disclosed fees apply to them when
they might not.325 One commenter
324 FTC–2023–0064–3283 (National Consumer
Law Center, Prison Policy Initiative, and advocate
Stephen Raher).
325 See, e.g., FTC–2023–0064–3094 (American
Hotel & Lodging Association asserted: ‘‘The
language of the proposed rule is vague, overbroad,
and not sufficiently specific to provide notice of
what types of fees businesses are required to
display . . . . Businesses could reasonably differ in
their approaches to disclosing the ‘nature and
purpose’ or ‘identity’ of such fees.’’); FTC–2023–
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recommended that the rule allow the
required disclosures to be made at the
time goods or services are selected.326
Commenters argued that requiring
businesses to explain how fees will be
used is not reasonable and may require
the disclosure of confidential,
proprietary, or commercially sensitive
information, such as the business
rationale for imposing fees and the
specific uses to which businesses put
fees.327 Other commenters
recommended that the rule require the
disclosure of the optional nature of
optional fees 328 and regulate opt-in and
opt-out procedures for fees.329
The Commission modifies the NPRM
proposal so that final § 464.2(c) requires
businesses to disclose separately the
amount, as well as the nature and
purpose, of each fee or charge imposed
on the transaction for the covered good
or service that is excluded from total
price, and the final amount of payment,
before the consumer consents to pay.
The Commission determines that these
modifications are necessary for price
transparency and to protect consumers
who would reasonably expect to know
the nature, purpose, and amount of fees
they will have to pay, as well as the
0064–3133 (National Multifamily Housing Council
and National Apartment Association commented
that disclosing the nature and purpose of fees is
‘‘impracticable’’ and requiring rental housing
providers to furnish prospective tenants ‘‘with any
fee or charge excluded from the total price that the
customer may (or may not) have to pay at some
point during the lease practically means housing
providers will need to disclose all possible fees.’’);
FTC–2023–0064–3263 (Flex Association asserted
that the ‘‘requirement to disclose the ‘nature and
purpose’ of a fee is vague’’ and ‘‘provide[s] no
material benefit to consumers.’’); see also, FTC–
2023–0064–2981 (Apartment & Office Building
Association of Metropolitan Washington); FTC–
2023–0064–3042 (Nevada State Apartment
Association); FTC–2023–0064–3044 (San Angelo
Apartment Association); FTC–2023–0064–3045
(Chicagoland Apartment Association); FTC–2023–
0064–3111 (Houston Apartment Association); FTC–
2023–0064–3116 (Manufactured Housing Institute);
FTC–2023–0064–3233 (NCTA—The internet &
Television Association); FTC–2023–0064–3296 (Bay
Area Apartment Association); FTC–2023–0064–
3311 (Greater Cincinnati Northern Kentucky
Apartment Association).
326 FTC–2023–0064–3094 (American Hotel &
Lodging Association).
327 See, e.g., FTC–2023–0064–1425 (Iowa Bankers
Association); FTC–2023–0064–3263 (Flex
Association asserted that ‘‘[i]t appears that the
Commission seeks to require disclosure of the
business rationale for imposing a fee and the
specific uses to which proceeds of a given fee will
go,’’ which would require businesses to ‘‘divulge
commercially sensitive information that could
seriously alter competition in a given
marketplace.’’).
328 See, e.g., FTC–2023–0064–2888 (Housing
Policy Clinic, University of Texas School of Law).
329 See, e.g., Id.; FTC–2023–0064–2883 (District of
Columbia, Office of the People’s Counsel); FTC–
2023–0064–3146 (Institute for Policy Integrity, New
York University School of Law).
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final amount of payment, before they
consent to pay.
To provide clarification and address
commenter concerns about potential
overbreadth and vagueness, the
Commission narrows the NPRM
proposal so that final § 464.2(c) requires
the disclosures in connection with ‘‘any
fee or charge imposed on the transaction
that has been excluded from total price’’
instead of ‘‘any amount a consumer may
pay.’’ The provision therefore requires
the disclosure, before the consumer
consents to pay, of the nature, purpose,
and amount of government charges,
shipping charges, and any other fee or
charge, such as for optional ancillary
goods or services, that permissibly were
excluded from total price but are being
imposed on the transaction.
Final § 464.2(c) also explicitly
requires disclosure of ‘‘the final amount
of payment for the transaction,’’ as that
amount may differ from total price due
to, for example, the application of
promotional pricing or the addition of
any fees or charges permissibly
excluded from total price, including for
any optional ancillary goods or services.
Where the final amount of payment is
displayed, as discussed in section
III.B.2, final § 464.2(b) requires it to be
at least as prominent as, or more
prominent than, total price.
In most instances, the disclosure
about the nature, purpose, and amount
of the excluded charge or fee will be
minimal. For example, using the
defined term ‘‘shipping charges’’ is
likely to convey the nature and purpose
of such charges. For government
charges, a phrase like ‘‘sales tax’’ or
‘‘hotel occupancy tax’’ would convey
the nature and purpose of an imposed
sales tax or hotel occupancy tax.
Similarly, in most instances, simply
identifying the ancillary good or service
for which a charge applies, such as
‘‘valet parking,’’ will sufficiently convey
the nature and purpose of the charge.
Some commenters observed that the
timing of ‘‘before the consumer consents
to pay’’ is unclear. One commenter
cautioned that the language of the rule
may open the door to the types of baitand-switch pricing that the total price
disclosure requirement is meant to
prevent.330 Other commenters
recommended that the Commission
clarify the meaning of the phrase
‘‘before the consumer consents to pay’’
and the timing of the required
disclosures, for example, by specifying
330 FTC–2023–0064–3160 (Consumer Federation
of America et al.).
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that it means before businesses obtain
consumers’ billing information.331
The Commission clarifies that,
although when a consumer consents to
pay may depend on the facts and
circumstances surrounding the
transaction, § 464.2(c) requires
businesses to clearly and conspicuously
disclose the nature, purpose, and
amount of any fees or charges imposed
on the transaction that have been
excluded from total price and the
identity of the good or service for which
the fee or charge is imposed, as well as
the final amount of payment for the
transaction, before consumers are
required to pay cash or provide their
payment information. The Commission
notes that a default setting that
automatically opts-in consumers to pay
for goods or services does not constitute
consent to pay nor does it satisfy
§ 464.2(c)’s disclosure requirements.
As part of final § 464.2(c), the
Commission does not adopt the NPRM’s
proposed requirement to affirmatively
disclose each fee’s refundability. The
Commission determines that requiring
clear and conspicuous disclosure of
each fee’s refundability may be
impractical for businesses and
confusing to consumers due to extensive
qualifications or other requirements for
refunds. Such extensive, itemized
disclosures may impede the
Commission’s goal of ensuring
consumers receive clear and accurate
pricing information. However, the
Commission finalizes § 464.3’s
prohibition on misrepresenting a fee’s
refundability.
C. § 464.3 Misleading Fees Prohibited
Both practices that the Commission
identified in the NPRM as unfair or
deceptive involve misleading practices:
(1) bait-and-switch pricing that hides
the total price of goods or services by
omitting mandatory fees from advertised
prices, including through drip pricing,
and (2) misrepresenting the nature,
purpose, amount, and refundability of
fees or charges. Proposed § 464.3(a)
would have prohibited any business
from misrepresenting the nature and
purpose of any amount a consumer may
pay, including the refundability of such
fees and the identity of any good or
service for which fees are charged.332
331 See, e.g., FTC–2023–0064–3160 (Consumer
Federation of America et al.); FTC–2023–0064–3146
(Institute for Policy Integrity, New York University
School of Law); FTC–2023–0064–3283 (National
Consumer Law Center, Prison Policy Initiative, and
advocate Stephen Raher); FTC–2023–0064–3191
(Community Catalyst et al.).
332 As noted supra section III.B, the Commission
redesignates proposed § 464.3(b) as final § 464.2(c)
to consolidate all provisions related to disclosures
in final § 464.2.
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The Commission finalizes proposed
§ 464.3(a) in § 464.3 with some
modifications. Specifically, final § 464.3
prohibits any business, in any offer,
display, or advertisement for a covered
good or service, from misrepresenting
any fee or charge, including its nature,
purpose, amount or refundability, and
the identity of the good or service for
which it is imposed. The Commission
adds the phrase ‘‘covered goods or
services’’ to reflect the narrower scope
of the final rule. The Commission also
adds ‘‘amount’’ to ‘‘nature’’ and
‘‘purpose,’’ and clarifies that the
prohibited misrepresentations concern
‘‘any fee or charge’’ instead of ‘‘any
amount a consumer may pay.’’ This
modified provision makes plain that, in
connection with covered goods or
services, businesses cannot
misrepresent the nature, purpose,
amount, or refundability of any fee or
charge, including government charges,
shipping charges, any fees or charges for
optional ancillary goods or services, or
any mandatory fees or charges. In
making these modifications, the
Commission has considered
recommendations and alternatives
suggested in NPRM comments,
discussed herein.
The Commission noted in the NPRM
that it had received comments in
response to the ANPR stating that sellers
often misrepresent the nature or
purpose of fees, leaving consumers
wondering what they are paying for,
believing fees are arbitrary, or
concerned that they are getting nothing
for the fees charged. The Commission
received similar comments in response
to the NPRM.
The Attorneys General of nineteen
States and the District of Columbia
commented that fee misrepresentations
‘‘mislead consumers and make it more
difficult for truthful businesses to
compete on price.’’ 333 Commenters
supported prohibiting fee
misrepresentations because truthful
information benefits both consumers
and businesses.334 A commenter
333 FTC–2023–0064–3215 (Attorneys General of
the States of North Carolina and Pennsylvania,
along with Attorneys General of the States or
Territories of Arizona, Colorado, Connecticut,
Delaware, District of Columbia, Hawaii, Illinois,
Maine, Michigan, Minnesota, New Jersey, New
York, Oklahoma, Oregon, Vermont, Washington,
and Wisconsin stated: ‘‘[C]harges that misrepresent
their nature and purpose are unfair and deceptive
because they mislead consumers and make it more
difficult for truthful businesses to compete on
price.’’ The Attorneys General asserted that ‘‘this
provision is another straightforward, commonsense
approach that should not significantly burden
businesses.’’).
334 See, e.g., FTC–2023–0064–3275 (Berkeley
Center for Consumer Law & Economic Justice et al.
asserted: ‘‘Prohibiting misrepresentation of the
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recommended that the Commission
clarify that the provision includes
misrepresentations about fees included
in total price and fees excluded from
total price.335
Commenters stated that businesses
misrepresent fees by using language that
is vague and not understandable to
consumers,336 and provided examples
of various types of misrepresentations
about the nature and purpose of fees,
such as ‘‘service’’ fees that may not go
to service employees, ‘‘environmental’’
fees that may not have an environmental
purpose, ‘‘resort’’ fees for ordinary
accommodations or amenities,337 and
fees misrepresented as government
charges.338 Commenters also stated that
identity and nature of fees further serves the
Commission’s mandate to promote fair business
practices and competition.’’); FTC–2023–0064–2892
(Community Legal Services of Philadelphia stated
that the rule’s ‘‘prohibition on misrepresentation
regarding the nature and cost of fees would also be
extremely beneficial for low-income renters, who
often face inflated fees that can contribute to
housing insecurity.’’); FTC–2023–0064–3268
(Housing and Eviction Defense Clinic, University of
Connecticut School of Law stated: ‘‘Prohibiting
misleading fees will not only properly inform the
tenants of the charges but also hold the landlords
accountable for their fees.’’).
335 FTC–2023–0064–3283 (National Consumer
Law Center, Prison Policy Initiative, and advocate
Stephen Raher stated that § 464.3(a) should make
clear that it prohibits misrepresentations regarding
any amount included in Total Price as well as any
other fee or charge the consumer may pay,
including ‘‘Shipping Charges, Government Charges,
fines, penalties, optional charges, voluntary
gratuities, and invitations to tip,’’ and proposed
adding specific text to that effect.).
336 See, e.g., FTC–2023–0064–3268 (Housing &
Eviction Defense Clinic, University of Connecticut
School of Law stated that rental fees may be ‘‘for
something the landlord/property manager cannot
explain.’’); FTC–2023–0064–3283 (National
Consumer Law Center, Prison Policy Initiative, and
advocate Stephen Raher stated the rule should
clarify that descriptions of fees which are not
understandable to reasonable consumers
misrepresent their nature and purpose.); FTC–
2023–0064–3275 (Berkeley Center for Consumer
Law & Economic Justice et al. cited research
showing that ‘‘many businesses characterize their
hidden and unexpected fees using vague or
anodyne language that fails to succinctly explain to
the consumer exactly what the fee is for.’’).
337 See, e.g., FTC–2023–0064–1939 (Tzedek DC
expressed support for the misleading fees provision
because it ‘‘will prevent companies from making
misleading claims about a fee, in example, a
company charging a ‘staff service fee’ that does not
go to employees.’’); FTC–2023–0064–3106
(American Society of Travel Advisors noted:
‘‘While admittedly there is no universally accepted
industry definition of what constitutes a ‘resort,’
hotels offering only typical or ordinary
accommodations and/or amenities but nevertheless
characteriz[ing] their fees as such misrepresent the
nature of the property being booked.’’); FTC–2023–
0064–3275 (Berkeley Center for Consumer Law &
Economic Justice et al. identified ‘‘environmental
fees’’ as one example of fees that may ‘‘serve[ ] no
apparent environmental sustainability or
conservation purpose.’’).
338 See, e.g., FTC–2023–0064–3275 (Berkeley
Center for Consumer Law & Economic Justice et al.
stated that ‘‘environmental’’ fees ‘‘are likely
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businesses may misrepresent the
mandatory or optional nature of fees, or
their amount, and recommended that
the Commission clarify that prohibiting
misrepresentations about the nature and
purpose of fees includes
misrepresentations about their
mandatory or optional nature.339
Another commenter argued that
businesses can misrepresent fees when
they itemize mandatory fees that are
arbitrary and are not for identified goods
or services, and recommended that the
Commission clarify that businesses
must have adequate substantiation for
itemized fees.340 Commenters also
argued that businesses misrepresent fees
when they do not provide the goods or
services for which fees are charged or
provide nothing of value,341 and when
designed to trick consumers into thinking that the
added cost is either a government-imposed tax to
protect the environment, or a salutary contribution
to somehow ‘offset’ any negative environmental
impact caused by the good or service’’ when they
may be ‘‘charged simply to boost a business’s
profits.’’); FTC–2023–0064–3106 (American Society
of Travel Advisors noted that ‘‘use of terms such as
‘destination fee’ . . . will inevitably mislead many
consumers into mistakenly believing that it
represents a tax or government surcharge that must
be collected from the consumer and passed on to
a local jurisdiction.’’).
339 See, e.g., FTC–2023–0064–3275 (Berkeley
Center for Consumer Law & Economic Justice et al.
argued that the rule could be strengthened by
clarifying that the misleading fees provision applies
to mandatory and optional fees.); FTC–2023–0064–
3160 (Consumer Federation of America et al. stated
that the FTC should make clear that the misleading
fees provision applies to mandatory and optional
fees.).
340 FTC–2023–0064–3212 (TickPick, LLC argued:
‘‘Due to the arbitrary nature of the components that
make up the Total Price of a ticket, any secondary
ticketing marketplace that itemizes mandatory fees
and charges is arguably misrepresenting the ‘nature
and purpose of any amount a consumer may pay.’ ’’
The commenter proposed that the Commission
‘‘define any breakdown of the amounts that a
consumer may pay as a representation that requires
adequate substantiation.’’).
341 See, e.g., FTC–2023–0064–3102 (Corporation
for Supportive Housing noted that landlords and
property managers may collect ‘‘fees for services
that were not performed (e.g., running a background
check, credit check), [and] charg[e] fees in excess
of the actual amount to perform the service/run the
check to generate profit.’’); FTC–2023–0064–3278
(Southeast Louisiana Legal Services noted that lowincome renters face unfair and deceptive fees
during residential leases that are ‘‘frequently for
services not rendered.’’ The commenter further
noted: ‘‘Without any restrictions on hidden or
misleading fees, landlords are free to use rental
applications as an independent source of profit for
which there may be no real service provided.’’);
FTC–2023–0064–1431 (McPherson Housing
Coalition stated that rental housing applicants who
pay application fees and do not get approved lose
their money.); FTC–2023–0064–2862 (Legal Aid
Foundation of Los Angeles gave as examples of
misleading fees a repairs fee when the landlord is
legally obligated to provide the repairs and a
parking fee when the tenant does not have or park
a car.); FTC–2023–0064–2920 (Colorado Poverty
Law Clinic stated, ‘‘we often see fees added for
services that the tenant does not receive, or that are
basic services that should only reasonably be
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fees fail to reflect the cost of the goods
or services provided.342
The American Hotel & Lodging
Association and other commenters
described the misleading fees provision
as unnecessary given the Commission’s
existing authority under section 5 of the
FTC Act to police misleading fees.343 It
is true that section 5, which prohibits
unfair or deceptive practices, has long
been used to protect against
misrepresentations regarding material
terms of a transaction, including price.
False claims about fees or charges, as
well as those claims that lack a
reasonable basis, are inherently likely to
mislead. However, the Commission
disagrees with commenters’ contentions
that the rule’s prohibitions on
misrepresentations are unnecessary
given the existing section 5 authority.
As explained in section V, the final rule
is necessary to: (1) ensure all businesses
offering covered goods or services are
held to the same standard so that
consumers can effectively comparison
shop; (2) level the playing field for these
businesses so that they can compete
based on truthful pricing information;
and (3) increase deterrence by allowing
courts to impose civil penalties and
enabling the Commission to more
readily obtain redress and damages for
consumers through section 19(b) of the
FTC Act. As it has become increasingly
common for businesses offering covered
goods or services to charge or itemize
discrete fees over the course of a
transaction, a specific prohibition on
pricing misrepresentations is necessary
to ensure consumers receive truthful
information about the charges and fees
they incur, and businesses are able to
compete based on truthful
information.344
included in the tenant’s monthly rent,’’ such as for
common area maintenance or utilities.); FTC–2023–
0064–3242 (William E. Morris Institute for Justice
expressed concern that ‘‘housing providers and
landlords are charging junk fees untethered to any
real cost or business expense . . . or to any value
or benefit delivered to rental housing applicants.’’).
342 See, e.g., FTC–2023–0064–3106 (American
Society of Travel Advisors noted that ‘‘even where
use of the term ‘resort’ to describe the property may
be warranted, often the amount of the fee collected
appears arbitrary and bears no relationship to the
value of the services purportedly being provided.’’);
FTC–2023–0064–3278 (Southeast Louisiana Legal
Services commented that rental housing providers
charge misleading fees when ‘‘they do not appear
to correspond to the cost of service provided’’ or are
vaguely identified, such as an ‘‘administrative fee’’
that causes ‘‘confusion for tenants who believe it to
be a security deposit.’’); FTC–2023–0064–3253
(Fortune Society commented that ‘‘application fees
often do not reflect the actual costs of submitting
a rental application.’’).
343 See, e.g., FTC–2023–0064–3094 (American
Hotel & Lodging Association).
344 Given the prevalence of the defined unfair or
deceptive practices regarding the misrepresentation
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Other commenters described the
misrepresentations provision as vague
and overbroad.345 The Commission
carefully considered comments that
suggested the language proposed in the
NPRM prohibiting misrepresentations
lacked specificity and was vague or
overbroad, particularly the phrase ‘‘any
amount a consumer may pay.’’ In final
§ 464.3, the Commission modifies the
NPRM proposal to replace ‘‘any amount
a consumer may pay’’ with a reference
to ‘‘any fee or charge.’’ In the NPRM, the
Commission stated that ‘‘[o]ther
characteristics included in the nature
and purpose of a charge, such as the
amount of the charge and whether it is
refundable, are also material.’’ 346 To
elaborate on this point in the final rule
text, the Commission specifies that the
‘‘amount’’ of any fee or charge cannot be
misrepresented. Taken together, these
modifications provide clarity to
businesses that they cannot
misrepresent the nature, purpose,
amount, or refundability of any fee or
charge excluded from total price,
including government charges, shipping
charges, any fees or charges for optional
ancillary goods or services, or any other
itemized or totaled fee or charge,
including total price and the final
amount of payment.
Final § 464.3 prohibits
misrepresentations about material
pricing terms of a transaction. The
nature, purpose, amount, and
refundability of fees or charges and the
identity of the good or service for which
they are imposed are material
characteristics that affect the value to
consumers of the covered goods or
services being offered and businesses’
ability to compete on price. As the
Commission noted in the NPRM,
whether a consumer is required to pay
a charge, the amount of the charge, and
what goods or services they will receive
in exchange for the charge, is
necessarily material information that
affects a consumer’s choice about
whether to consent to a charge.347 Other
of total costs and the nature and purpose of fees,
the Commission finds that it is necessary to require
both affirmative disclosures and a prohibition of
misrepresentations, instead of limiting the rule to
prohibiting misrepresentations. See supra Parts II.A
and II.B.
345 See, e.g., FTC–2023–0064–3094 (American
Hotel & Lodging Association); FTC–2023–0064–
3206 (Motor Vehicle Protection Products
Association et al.).
346 NPRM, 88 FR 77434.
347 NPRM, 88 FR 77432; Deception Policy
Statement, 103 F.T.C. 110, 175, 182–183, 183 n.55
(listing, respectively, ‘‘misleading price claims’’
among those that the FTC has found to be
deceptive, and claims or omissions involving cost
among those that are presumptively material); see
also FTC v. FleetCor Techs, Inc., 620 F. Supp. 3d
1268, 1303–04 (N.D. Ga. 2022) (finding that
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characteristics included in the nature,
purpose, and amount of a charge, such
as whether it is refundable, are also
material.
Under final § 464.3, businesses cannot
misrepresent the nature, purpose,
amount, or refundability of fees or
charges and the identity of the goods or
services for which they are imposed.348
For example, it would be a
misrepresentation to characterize fees as
mandatory when they are optional, or to
characterize fees as optional when they
are mandatory or consumers are
automatically opted-in to pay them.349
Representations that fees are for
identified goods or services when those
goods or services are not provided
would also be a misrepresentation.
Further, although the rule does not
govern how businesses set their prices,
if a business represents that it is
charging a fee for a specific good or
service, but the amount of the fee does
not reflect the cost of that good or
service, that may be evidence that the
business has misrepresented the nature
or purpose of the fee.
Misrepresentations can result from
failing to disclose material conditions or
limitations relating to fees and charges,
for example, material conditions or
limitations that would affect consumers’
ability to purchase covered goods or
services at advertised prices.350
representations about transaction fees and
discounts were material).
348 As the Commission noted in the NPRM, if a
delivery application includes an invitation to tip a
delivery driver without disclosing that a portion of
the tip is allocated to offset the delivery driver’s
base wages or benefits, it would violate § 464.3 in
addition to other laws or regulations relating to the
distribution of tips. See Complaint ¶¶ 50–51, In re
Amazon.com, Inc. (‘‘Amazon Flex’’), No. C–4746
(FTC June 9, 2021) (alleging respondents falsely
represented that 100% of tips would go to the
driver in addition to the pay respondents offered
drivers).
349 See discussion of optional and mandatory fees
supra Parts III.A.1 and III.A.8.a; see also, e.g., Fed.
Trade Comm’n, Bringing Dark Patterns to Light:
Staff Report 9, 15, 15 n.122, 22 (stating ‘‘companies
must not mislead consumers to believe that fees are
mandatory when they are not’’ and describing the
use of pre-selected checkboxes as a dark pattern
that tricks consumers into buying unwanted goods
and services) (Sept. 2022), https://www.ftc.gov/
system/files/ftc_gov/pdf/P214800%20Dark%
20Patterns%20Report%209.14.2022%20%20FINAL.pdf; Stipulated Order for Permanent
Injunction, Monetary Judgment, and Other Relief as
to Defendants Rhinelander Auto Grp. LLC, et al.,
FTC v. Rhinelander Auto Ctr., Inc., No. 3:23–cv–
00737–wmc (W.D. Wis. Nov. 6, 2023) (settling
allegations that defendants misrepresented that
consumers were required to purchase add-on
products to purchase, lease, or finance a vehicle
and, among other provisions, enjoining defendants
from misrepresenting whether charges, products, or
services are optional or required), https://
www.ftc.gov/system/files/ftc_gov/pdf/18ConsentJudgmentEnteredastoRAGRMGand
Towne.pdf.
350 See, e.g., cases cited supra note 111.
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Describing a good or service as fully
refundable without disclosing material
limitations on refundability (e.g.,
refunds are only accepted for a specified
amount of time) would also be
misleading.
The American Hotel & Lodging
Association expressed the concern that
businesses may use inconsistent
descriptions of similar fees and confuse
consumers in disclosing the nature and
purpose of fees or the identity of the
goods or services for which fees are
imposed.351 Using vague language or fee
descriptions (e.g., unspecified service or
convenience fees) that do not accurately
inform consumers of the nature or
purpose of fees or charges or the
identity of the good or service for which
the fee or charge is imposed
misrepresents those fees. In addition, it
would be misleading if a business
conflates fees so that consumers are
unable to determine their nature,
purpose, or the identity of the goods or
services for which the fees are charged.
Whether fee descriptions are adequate
to avoid misrepresenting their nature,
purpose, or the identity of goods or
services for which they are charged will
be case specific and may depend on the
context.
Another commenter argued that the
rule would unfairly hold online travel
agencies and other intermediaries liable
for fee misrepresentations when only
travel service providers can know
whether representations about the
nature and purpose of fees are
accurate.352 As discussed in section
III.B.1.f, complying with the rule would
require businesses that sell or advertise
covered goods or services through
platforms to provide the platforms with
accurate pricing information.
Contractual relationships and the rule’s
application to B2B transactions should
ensure that businesses that rely on other
parties for pricing information receive
accurate pricing information.
One commenter argued that charging
consumers for ‘‘speculative tickets’’ in
the live-event sector is deceptive
because it is tantamount to ‘‘charging
consumers for something that doesn’t
exist,’’ and suggested the rule should
‘‘prohibit sellers or resellers from
charging the consumer for buying
something the seller doesn’t own, or
that does not even exist.’’ 353 The
351 FTC–2023–0064–3094 (American Hotel &
Lodging Association).
352 FTC–2023–0064–3293 (Travel Technology
Association).
353 FTC–2023–0064–3108 (Christian L. Castle,
Esq.; Mala Sharma, President, Georgia Music
Partners; and Dr. David C. Lowery, founder of
musical groups Cracker and Camper Van
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Commission notes that the final rule
does not directly address the sale of
speculative tickets. However, a business
that represents that tickets are in fact
available when they are not may violate
§§ 464.2(c) and 464.3 by failing to
disclose clearly and conspicuously, and
by misrepresenting, the identity of the
good or service for which fees or charges
are imposed.
Commenters opposed the
misrepresentation provision in the
context of negotiated contracts because
negotiations arguably allow consumers
to seek clarification about fees.354 The
Commission, however, has not
identified any justification for excluding
contracts from the misleading fees
provision. Truthful fee disclosures in
contract negotiations are material to
consumers. One commenter
recommended providing a safe harbor
from the misleading fees provision if
businesses clearly and conspicuously
disclose fees and make either no
statement or an accurate statement
about the nature and purpose of fees.355
The Commission declines to grant a safe
harbor from the misleading fees
provision when businesses make
affirmative disclosures. Whether
disclosures are adequate, clear and
conspicuous, and not misleading are
issues that may depend on the specific
facts and circumstances of the
transaction.
The NPRM identified and sought
comment on the proposed rule’s
intersection with existing Federal rules
and regulations containing prohibitions
on misrepresentations: the Business
Opportunity Rule,356 the Mortgage Acts
and Practices Advertising Rule
(Regulation N),357 the Mortgage
Assistance Relief Services Rule
(Regulation O),358 the amendments to
Beethoven, and a lecturer at the University of
Georgia Terry College of Business).
354 See, e.g., FTC–2023–0064–2918 (Elite Catering
+ Event Professionals opposed the
misrepresentations provision for private food
services contracts because ‘‘[t]hroughout the
contracting process, there are ample opportunities
for the customer to seek clarification or negotiate
the applicability of the price and fees.’’).
355 FTC–2023–0064–3016 (National Federation of
Independent Business proposed modifying the rule
as follows: ‘‘(a) . . . [I]t is an unfair and deceptive
practice . . . for a Business to: (i) misrepresent the
total cost of a good or service by omitting a
mandatory fee from the advertised price of the good
or service; or (ii) misrepresent the nature and
purpose of such a mandatory fee.’’ The commenter
also proposed exempting any business from that
requirement if it discloses the fee clearly and
conspicuously ‘‘before a consumer becomes
obligated to pay the fee’’ and ‘‘either makes no
statement about the nature and purpose of the fee
or makes an accurate statement of the nature and
purpose of the fee.’’).
356 16 CFR part 437.
357 12 CFR part 1014.
358 12 CFR part 1015.
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the Negative Option Rule,359 and the
Telemarketing Sales Rule.360 The
Commission did not receive substantive
comments about overlap or conflict with
these rules.361 The Commission is not
aware of any evidence that there is a
conflict between these rules and the
final rule. The Commission believes it is
possible for businesses to comply with
each of them, as applicable.
D. § 464.4
Relation to State laws
Proposed § 464.4 addressed
preemption and the proposed rule’s
relation to State statutes, regulations,
orders, or interpretations, including
State common law (hereinafter ‘‘State
law’’). Proposed § 464.4(a) provided that
the rule would not supersede or
otherwise affect any State law unless the
State law is inconsistent with the rule,
and then only to the extent of the
inconsistency. Proposed § 464.4(b)
specified that a State law providing
consumers with greater protections than
the rule does not, solely for that reason,
make the State law inconsistent with the
rule. When a State law offers greater (or,
in some circumstances, even lesser)
protection than the rule, if businesses
can comply with both, they are not
inconsistent. Thus, as commenters
noted, the rule would establish a
regulatory floor rather than a ceiling.362
After reviewing the comments, the
Commission adopts the provision as
proposed in the NPRM.
The Commission finds it has the
authority to promulgate regulations that
preempt inconsistent State laws under
section 5 of the FTC Act. Even without
an express preemption provision,
Federal statutes and regulations
preempt conflicting State laws. Under
the Supreme Court’s conflict
preemption doctrine, a Federal statute
or regulation impliedly preempts State
law when it is impossible for the
regulated parties to comply with both
the Federal and the State law, or when
a State law is an obstacle to achieving
the full purposes and objectives of the
359 Promulgation of Trade Regulation Rule and
Statement of Basis and Purpose: Rule Concerning
Recurring Subscriptions and Other Negative Option
Programs, 89 FR 90476 (Nov. 15, 2024), https://
www.federalregister.gov/documents/2024/11/15/
2024-25534/negative-option-rule.
360 16 CFR part 310.
361 In addition, the added definition of ‘‘Covered
Goods or Services’’ removes any potential overlap
between the final rule and Regulations N and O.
362 See, e.g., FTC–2023–0064–3150 (Attorney
General of the State of California ‘‘appreciate[d] that
the FTC’s rule respects the states’ role in protecting
consumers from deceptive price advertising, and
the rule’s clear intent to create a federal floor, rather
than a ceiling, for consumer protection.’’); FTC–
2023–0064–3212 (TickPick, LLC).
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Federal law.363 ‘‘Federal regulations
have no less pre-emptive effect than
[F]ederal statutes.’’ 364 Accordingly, the
rule preempts a State law only to the
extent it is inconsistent with the rule
and compliance with both is impossible,
or it is an obstacle to achieving the full
purposes and objectives of the rule. To
provide a clear explanation of the
Commission’s intent and the rule’s
scope of preemption, the rule includes
an express preemption provision at
§ 464.4.365
Numerous commenters supported
proposed § 464.4(b)’s targeted approach
of preempting only inconsistent parts of
State laws.366 Some commenters,
363 See, e.g., Cong. Rsch. Serv., R45825, Federal
Preemption: A Legal Primer 23 (2023), https://
crsreports.congress.gov/product/pdf/R/R45825/3.
364 Fid. Fed. Sav. & Loan Ass’n v. de la Cuesta,
458 U.S. 141, 153 (1982).
365 Many FTC regulations, including regulations
promulgated under section 18 of the FTC Act,
include provisions addressing State laws and
preemption. See, e.g., Funeral Rule, 16 CFR 453.9
(exempting from preemption State laws that
‘‘afford[ ] an overall level of protection [that] is as
great as, or greater than, the protection afforded by’’
the FTC’s Rule); Rule Concerning Cooling Off
Period for Sales Made at Homes or at Certain Other
Locations, 16 CFR 429.2(b) (exempting laws and
ordinances that provide ‘‘a right to cancel a doorto-door sale that is substantially the same or greater
than that provided in this part’’); Business
Opportunity Rule, 16 CFR 437.9(b) (‘‘The FTC does
not intend to preempt the business opportunity
sales practices laws of any state or local
government, except to the extent of any conflict
with this part. A law is not in conflict with this
Rule if it affords prospective purchasers equal or
greater protection . . . .’’); Mail, Internet, or
Telephone Order Merchandise Rule, 16 CFR
435.3(b) (‘‘This part does supersede those
provisions of any State law, municipal ordinance,
or other local regulation which are inconsistent
with this part to the extent that those provisions do
not provide a buyer with rights which are equal to
or greater than those rights granted a buyer by this
part.’’); Franchise Rule, 16 CFR 436.10(b) (‘‘The
FTC does not intend to preempt the franchise
practices laws of any state or local government,
except to the extent of any inconsistency with part
436. A law is not inconsistent with part 436 if it
affords prospective franchisees equal or greater
protection . . . .’’); Labeling and Advertising of
Home Insulation, 16 CFR 460.24(b) (preemption of
‘‘State and local laws and regulations that are
inconsistent with, or frustrate the purposes of, this
regulation’’).
366 See, e.g., FTC–2023–0064–3150 (Attorney
General of the State of California commented that
consumer protection is also a state concern, so, ‘‘it
is appropriate, then, that the rule does not preempt
a state law unless the rule and the state law conflict
and then only to the extent of the inconsistency.’’);
FTC–2023–0064–3215 (Attorneys General of the
States of North Carolina and Pennsylvania, along
with Attorneys General of the States or Territories
of Arizona, Colorado, Connecticut, Delaware,
District of Columbia, Hawaii, Illinois, Maine,
Michigan, Minnesota, New Jersey, New York,
Oklahoma, Oregon, Vermont, Washington, and
Wisconsin, supported the rule’s preemption
provision because it ‘‘recognizes and preserves the
interest that individual states have in combatting
unfair or deceptive acts or practices committed in
our respective jurisdictions.’’); FTC–2023–0064–
3275 (Berkeley Center for Consumer Law and
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however, stated that the rule should
completely preempt all State laws to
provide greater consistency and clarity
and to lower compliance costs,367
particularly when State laws provide
greater protections.368 However, if a
business subject to both the rule and a
State law that imposes greater
protections does not want to use
different practices for that State versus
the rest of the country, it can choose to
comply with both by using a single set
of practices consistent with the greater
protections afforded under the
applicable State law. Nothing in the rule
prohibits businesses from giving
consumers greater protections than the
rule requires. Another commenter
expressed concern that some State laws
create loopholes that allow businesses
to mischaracterize fees as government
charges that they then can exclude from
total price.369 The Commission
discusses issues related to the rule’s
treatment of government charges in
section III.A.5 and notes here that final
§ 464.3 would prohibit misrepresenting
that a fee is a Government Charge, or
otherwise misrepresenting the nature,
purpose, amount, or refundability of any
fee or charge.
Other commenters suggested that the
Commission provide compliance
guidance that addresses when State law
differs from the rule and identify which
State laws are not preempted.370 Some
commenters suggested that existing
State and local industry regulations can
make the rule unnecessary, duplicative,
and confusing due to conflicting
requirements.371 The Commission
Economic Justice et al. commented that the rule is
‘‘an invaluable complement to state and private
actions to challenge hidden and deceptive pricing
practices.’’); FTC–2023–0064–3293 (Travel
Technology Association); FTC–2023–0064–3262
(Skyscanner); FTC–2023–0064–3266 (StubHub,
Inc.); FTC–2023–0064–3212 (TickPick, LLC); FTC–
2023–0064–3267 (National Retail Federation).
367 See, e.g., FTC–2023–0064–2886 (American
Gaming Association); FTC–2023–0064–3094
(American Hotel & Lodging Association); FTC–
2023–0064–3122 (Vivid Seats); FTC–2023–0064–
3204 (Expedia Group); FTC–2023–0064–3137
(Chamber of Progress); FTC–2023–0064–3127 (U.S.
Chamber of Commerce); FTC–2023–0064–3233
(NCTA—The Internet & Television Association);
FTC–2023–0064–3238 (Gibson, Dunn & Crutcher
LLP); FTC–2023–0064–2856 (National Football
League).
368 See, e.g., FTC–2023–0064–3127 (U.S. Chamber
of Commerce); FTC–2023–0064–3238 (Gibson,
Dunn & Crutcher LLP).
369 FTC–2023–0064–3137 (Chamber of Progress).
370 See, e.g., FTC–2023–0064–3244 (Vacation
Rental Management Association); FTC–2023–0064–
3206 (Motor Vehicle Protection Products
Association et al.); FTC–2023–0064–3143 (ACA
Connects—America’s Communications
Association).
371 See, e.g., FTC–2023–0064–3152 (Building
Owners & Managers Association et al.); FTC–2023–
0064–3133 (National Multifamily Housing Council
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reiterates that a State law is preempted
only to the extent it conflicts with the
rule’s requirements and complying with
both is impossible, or it is an obstacle
to achieving the full purposes and
objectives of the rule. A State law can
provide greater protections and, solely
for that reason, will not be inconsistent
with the rule; a business can comply
with both. A business also can comply
with both when the State law provides
lesser protections, although businesses
still would have to comply with the
greater protections of the rule. Only if a
State law provides conflicting
requirements, and a business cannot
comply with both, or it is an obstacle to
achieving the full purposes and
objectives of the rule, will the State law
be preempted, and then only to the
extent of that conflict or obstacle.
Moreover, preemption furthers a
primary goal of the final rule, discussed
in section V.A: to provide a uniform,
minimum standard for pricing
disclosures for covered goods or
services that is easy for businesses and
consumers to understand. The
Commission also determines, as
discussed in section V.B, that declining
to issue this final rule and continuing to
rely solely on State laws and piecemeal
adjudication would be less effective.
The Commission believes the final
rule’s establishment of nationwide
minimum standard will functionally
reduce many variations among State
laws,372 because businesses will have to
conform their practices to meet the
rule’s standards for covered goods or
services to the extent those standards
exceed or directly conflict with State
law requirements. Moreover, to the
extent State law is not inconsistent with
the final rule, additional State authority
and resources will only serve to further
protect consumers and competition. To
that end, the Commission will continue
to work with its State law enforcement
and the National Apartment Association); FTC–
2023–0064–3115 (National Association of
Residential Property Managers); FTC–2023–0064–
3116 (Manufactured Housing Institute); FTC–2023–
0064–3172 (New Jersey Apartment Association);
FTC–2023–0064–3289 (Zillow Group).
372 The Commission has made similar findings in
previous regulations. See, e.g., Final rule: NonCompete Clause Rule, 89 FR 38342, 38453–54 (May
7, 2024) (finding that the Non-Complete Clause
Rule sets a Federal floor that will reduce the
variations in a patchwork of State regulations);
Promulgation of Trade Regulation Rule and
Statement of Its Basis and Purpose: Cooling-Off
Period for Door-to-Door Sales, 37 FR 22934, 22958
(Oct. 26, 1972) (finding that, when State laws ‘‘give
the consumer greater benefit and protection . . .,
there seems to be no reason to deprive the affected
consumers of these additional benefits,’’ but when
State laws do not, ‘‘the rule would supply the
needed protection or be construed to supersede the
weak statute to the extent necessary to give the
consumer the desired protection.’’).
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partners in battling unfair and deceptive
pricing disclosure practices.373 For the
reasons stated herein, the Commission
adopts § 464.4 as proposed.
E. § 464.5
Severability
The Commission includes a
severability clause at final § 464.5,
which provides that, if any provision of
the final rule is held to be invalid or
unenforceable either by its terms, or as
applied to any person, industry, or
circumstance, or stayed pending further
agency action, the provision shall be
construed to continue to give the
maximum effect to the provision
permitted by law. It further provides
that any such invalidity shall not affect
the application of the provision to other
persons, industries, or circumstances, or
the validity or application of other
provisions. Final § 464.5 also states that,
if any provision or application of the
final rule is held to be invalid or
unenforceable, the provision or
application shall be severable from the
final rule and shall not affect the
remainder thereof. This provision
confirms the Commission’s intent, as
discussed herein, that the final rule be
given the maximum effect permitted by
law even if a reviewing court stays or
invalidates any provision, any
component of any provision, or any
application of the rule, in whole or in
part, to any person, industry, or
circumstance.
In issuing this final rule, as discussed
in section II.A and II.B, the Commission
finds bait-and-switch pricing tactics and
misleading fee practices to be unfair and
deceptive because they deceive
consumers about the true cost of goods
and services, prevent price comparison,
and harm competitors that do accurately
disclose true cost. The Commission also
finds such practices to be widespread
and to affect many types of consumer
purchasing transactions, particularly
with respect to covered goods or
services. The Commission adopts this
rule to comprehensively address the
practices and to provide a consistent,
administrable standard with respect to
covered goods or services. The
Commission finds in section V.E that,
for covered goods or services, the
benefits of the rule exceed its costs.
At the same time, the Commission
finds that each of the provisions,
373 See, e.g., Final Trade Regulation Rule: Trade
Regulation Rule; Funeral Industry Practices, 47 FR
42260, 42287 (Sept. 24, 1982) (codified at 16 CFR
part 453) (noting the purpose of the rule’s provision
addressing relation of the rule to State law is ‘‘to
encourage federal-state cooperation by permitting
appropriate state agencies to enforce their own state
laws that are equal to or more stringent than the
trade regulation rule’’).
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components of the provisions, and
applications of the final rule operate
independently, and that the evidence
and findings supporting each stand
independent of one another. The
Commission finds that realizing the
benefits of the rule does not require the
joint adoption or operation of each
provision. In addition, while the
Commission believes applying the same
restrictions to all pricing representations
would provide even greater overall
benefits, as explained in Parts II.B and
V.B, the Commission finds the benefits
of the final rule exceed the costs as to
covered goods or services, both overall
and with respect to each substantive
provision of the rule. For covered goods
or services, as discussed in section V.E,
ample data show the rule would have
positive quantified net benefits,
including by reducing search costs, as
well as unquantified reductions in
deadweight loss and consumer
frustration. Similarly, consumers would
benefit from the misleading fees
prohibition even if the requirement to
disclose total price were stayed or
invalidated. The benefits would also
justify the costs if the total price
provision were further limited to either
just the live-event ticketing or just the
short-term lodging industry.
Based on the available data, the
Commission concludes that, even if the
rule were more limited in scope or if it
applied to a more limited set of
transactions, such as to a single industry
or to particular circumstances, it would
still achieve some of the Commission’s
objectives and the benefits of the rule
would still exceed the costs. Although
a more limited scope or application
would change the magnitude of the
overall benefit of the final rule, it would
not undermine the valid and measurable
benefit of, and justification for, the
remaining provisions or applications of
the final rule. Thus, were a court to stay
or invalidate any provision, any
component of any provision, or any
application of the rule, the Commission
intends the remainder of the rule to
remain in force.
As described in section V.B, the
Commission considered alternatives to
the final rule that would have applied
the rule to other transactions or
industries or expanded it to all goods
and services within the Commission’s
jurisdiction. The Commission finds that
each such alternative would be an
appropriate exercise of the
Commission’s authority under sections
5 and 18 of the FTC Act as stand-alone
regulations because disclosure of total
price in any type of transaction or
industry—whether or not the same is
required in other transactions or
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industries—mitigates the harms caused
by the unfair or deceptive pricing tactics
in those transactions or industries to
which the rule does apply. At the same
time, as discussed in parts I and II.A,
the Commission finds bait-and-switch
pricing tactics and misleading fee
practices are widespread and potentially
growing. As a result, the Commission
may later find that a rule of expanded
or even general applicability, to the
extent of its jurisdiction, would be
appropriate and would result in benefits
to consumers and competition that are
greater in magnitude than a rule with
more limited applicability. However,
such findings do not invalidate this
final rule’s quantifiable positive
benefits, in whole or in part.
Accordingly, the Commission
considers and intends each of the
provisions adopted in the final rule to
be severable, within each provision,
from other provisions in Part 464, and
as applied to different persons,
industries, or circumstances. In the
event of a stay or invalidation of any
provision, any component of any
provision, or of any provision as it
applies to certain persons, conduct, or
industry, the Commission’s intent is to
otherwise preserve and enforce the final
rule to the fullest possible extent.
Therefore, if a reviewing court were to
stay or invalidate a particular
application of the final rule, or a
provision thereof, as to certain persons,
industries, or circumstances, other
businesses that remain covered by the
rule should be required to comply with
the applicable provisions of the final
rule that remain in effect.
IV. Challenges to the FTC’s Legal
Authority To Promulgate the Rule
As explained in the NPRM and
section II, this rule is consistent with
decades of FTC adjudications and
enforcement actions addressing the
standards governing unfair or deceptive
pricing practices.374 The Commission
374 See, e.g., In re Filderman Corp., 64 F.T.C. 427,
442–43, 461 (1964), https://www.ftc.gov/sites/
default/files/documents/commission_decision_
volumes/volume-64/ftcd-vol64januarymarch1964pages409-511.pdf; In re Resort Car
Rental Sys., Inc., 83 F.T.C. 234, 281–82, 300 (1973),
https://www.ftc.gov/system/files/ftc_gov/pdf/Resort
%20Car%20Rental%20System%2C%20Inc.
%2083%20FTC%20234%20%281973%29.pdf,
aff’d sub. nom. Resort Car Rental Sys., Inc. v. FTC,
518 F.2d 962, 964 (9th Cir. 1975); Opinion of the
Commission at 28–30, 47–50, In re Intuit Inc., No.
9408 (FTC Jan. 22, 2024), https://www.ftc.gov/
system/files/ftc_gov/pdf/d09408_commission_
opinion_redacted_public.pdf; In re George’s Radio
& Television Co., 60 F.T.C. 179, 193–94 (1962),
https://www.ftc.gov/sites/default/files/documents/
commission_decision_volumes/volume-60/ftcdvol60january-june1962pages107-211.pdf (collecting
cases involving false savings claims); cases cited
supra notes 61–62 (collecting FTC enforcement
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issues this rule to prevent prevalent
unfair or deceptive acts or practices and
to promote compliance in a manner that
accounts for and balances the needs of
consumers and regulated entities. The
rule falls squarely within the
Commission’s legal authority, is based
on substantial evidence in the
rulemaking record, and clearly defines
specific unfair and deceptive practices
regarding fees or charges.
The Commission received comments
supporting, discussing, or questioning
its authority to promulgate the final
rule. Commenters supporting the
Commission’s authority noted the rule
falls squarely within the Commission’s
mandate to prevent unfair and deceptive
acts and practices through rulemaking
under sections 5 and 18 of the FTC
Act.375 Commenters questioning the
Commission’s rulemaking authority
typically advanced one of three
arguments. First, some commenters
argued that requiring disclosures related
to pricing is a major question that
Congress has not given the Commission
authority to address.376 Second, some
commenters argued that if the rule was
in fact consistent with the Commission’s
authority under sections 5 and 18 of the
FTC Act, Congress had impermissibly
delegated this authority to the
Commission.377 Third, some
commenters argued that the disclosures
required by the rule violate the First
Amendment.378 In addition to these
arguments, one commenter asserted that
the rule is invalid because the
actions alleging, respectively, that bait-and-switch
pricing tactics concerning hidden fees and
misrepresentations regarding the nature and
purpose of fees violated section 5); NPRM, 88 FR
77435–37 (section III.C (‘‘Law Enforcement Actions
and Other Responses’’)). See also supra note 115
(collecting cases holding that later disclosures
cannot cure deceptive door openers).
375 See, e.g., FTC–2023–0064–2883 (District of
Columbia, Office of the People’s Counsel); FTC–
2023–0064–3104 (Truth in Advertising, Inc.); see
also FTC–2022–0069–6077 (ANPR) (Institute for
Policy Integrity, New York University School of
Law).
376 FTC–2023–0064–3127 (U.S. Chamber of
Commerce); FTC–2023–0064–3133 (National
Multifamily Housing Council and National
Apartment Association); FTC–2023–0064–3152
(Building Owners & Managers Association et al.);
FTC–2023–0064–3202 (TechNet); FTC–2023–0064–
3238 (Gibson, Dunn & Crutcher LLP); FTC–2023–
0064–3251 (National RV Dealers Association); FTC–
2023–0064–3263 (Flex Association); FTC–2023–
0064–3294 (International Franchise Association).
377 FTC–2023–0064–3233 (NCTA—The internet &
Television Association); FTC–2023–0064–3238
(Gibson, Dunn & Crutcher LLP); FTC–2023–0064–
3294 (International Franchise Association).
378 FTC–2023–0064–3016 (National Federation of
Independent Business, Inc.); FTC–2023–0064–3028
(Competitive Enterprise Institute); FTC–2023–0064–
3233 (NCTA—The internet & Television
Association); FTC–2023–0064–3238 (Gibson, Dunn
& Crutcher LLP); FTC–2023–0064–3267 (National
Retail Federation).
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Commission is unconstitutionally
structured.379 Finally, some commenters
asserted the Commission has not
complied with the Administrative
Procedure Act (‘‘APA’’).380
Most of the commenters challenging
the Commission’s authority represent
businesses that offer goods or services
other than covered goods or services.
Thus, the concerns raised by these
commenters may not be relevant to the
narrowed scope of the final rule.
Further, the NPRM’s industry-neutral
approach was central to nearly all of the
critiques of the rule that raised
questions regarding the Commission’s
authority to promulgate the rule; while
the Commission disagrees with such
critiques, they are not applicable to this
final rule, which focuses on two
industries, live-event tickets and shortterm lodging. Notably, the vast majority
of comments from businesses offering
live-event tickets and short-term lodging
and their direct representatives did not
raise challenges to the Commission’s
authority to promulgate the rule.381
Nevertheless, the Commission has
considered the comments challenging
its authority and explains in this section
why it disagrees with those.
A. Major Questions Doctrine
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Some commenters invoked the major
questions doctrine to argue that the
Commission lacks authority to adopt the
rule. Commenters argued the rule raises
a major question because addressing
consumer fees and pricing across
industries is of vast political and
economic significance.382 Some
379 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
380 See, e.g., id.; FTC–2023–0064–3133 (National
Multifamily Housing Council and National
Apartment Association); FTC–2023–0064–3152
(Building Owners & Managers Association et al.);
FTC–2023–0064–3263 (Flex Association); FTC–
2023–0064–3294 (International Franchise
Association).
381 The International Franchise Association,
which represents franchised businesses offering
short-term lodging, raised challenges to the
Commission’s authority to promulgate the rule.
IFA’s comment, however, primarily focused on the
NPRM’s industry-neutral scope and its implications
for franchised businesses that do not offer Covered
Goods or Services. Regarding the short-term lodging
industry specifically, IFA’s comment challenged
certain aspects of the Commission’s estimate of
compliance costs, which are addressed in section V.
See FTC–2023–0064–3294 (International Franchise
Association).
382 See, e.g., FTC–2023–0064–3263 (Flex
Association); FTC–2023–0064–3127 (U.S. Chamber
of Commerce); FTC–2023–0064–3152 (Building
Owners & Managers Association et al.); FTC–2023–
0064–3202 (TechNet); FTC–2023–0064–3133
(National Multifamily Housing Council and
National Apartment Association); FTC–2023–0064–
3238 (Gibson, Dunn & Crutcher LLP). While
commenters suggested that the rule would have
‘‘political and economic significance,’’ no
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commenters also argued that the rule is
broader than the agency’s prior rules,
based on the assertion that the rule
regulates pricing.383 Commenters
concluded that Congress has not
authorized the Commission to
promulgate the rule.384
The major questions doctrine, as the
Supreme Court recently explained in
West Virginia v. EPA, 597 U.S. 697
(2022), applies to ‘‘ ‘extraordinary cases’
. . . in which the ‘history and the
breadth of the authority that [the
agency] has asserted,’ and the ‘economic
and political significance’ of that
assertion, provide a ‘reason to hesitate
before concluding that Congress’ meant
to confer such authority.’’ 385 When an
agency claims a ‘‘ ‘transformative
expansion in [its] regulatory
authority,’ ’’ it ‘‘must point to ‘clear
congressional authorization’ for the
power it claims.’’ 386
Having considered the factors that the
Supreme Court has used to identify
major questions, the Commission, as
discussed herein, concludes that the
final rule does not implicate the major
questions doctrine. The FTC does not
claim a transformative change in its
rulemaking authority. The final rule
comports with the history and breadth
of prior rules that the FTC has
promulgated pursuant to its existing
rulemaking authority, which Congress
conferred to allow the Commission to
address prevalent unfair or deceptive
practices. Even if the major questions
doctrine did apply, the Commission
concludes that Congress provided clear
authorization for the Commission to
promulgate this rule.
1. The Rule Does Not Address a Major
Question
(a) The Commission Has a Long History
of Addressing Unfair or Deceptive Acts
or Practices Related to Pricing
Information
Identifying unfair or deceptive acts or
practices related to the disclosure of the
price and purpose of goods and services
is at the core of the Commission’s
commenters pointed to any specific political
significance.
383 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP); FTC–2023–0064–3127 (U.S.
Chamber of Commerce).
384 FTC–2023–0064–3127 (U.S. Chamber of
Commerce); FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP); FTC–2023–0064–3152 (Building
Owners & Managers Association et al.); FTC–2023–
0064–3202 (TechNet); FTC–2023–0064–3133
(National Multifamily Housing Council and
National Apartment Association).
385 West Virginia v. EPA, 597 U.S. at 721 (quoting
FDA v. Brown & Williamson Tobacco Corp., 529
U.S. 120, 159–60 (2000)).
386 Id. at 723–24 (quoting Util. Air Regulatory
Group v. EPA, 573 U.S. 302, 324 (2014).
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mandate under section 5.387 The
Commission has the authority to
address these unfair or deceptive acts or
practices both through case-by-case
enforcement, either administratively or
in Federal court, or through rulemaking
if the unfair or deceptive practices are
prevalent as established by the
rulemaking record. The Commission
may choose case-by-case adjudication or
rulemaking at its discretion.388
The Commission’s authority to
promulgate rules to define with
specificity unfair or deceptive acts or
practices under section 18 of the FTC
Act, 15 U.S.C. 57a, is not extraordinary
and is undisputed, resting on firm
historical footing.389 Indeed, when
consumers have faced bait-and-switch
tactics in the past, including being
unable to get accurate material
information about what they must pay
and what they will receive in return, the
Commission has repeatedly issued rules
that define unfair or deceptive acts or
practices related to the disclosure of that
material information.390 For example,
387 See generally supra section II.B; NPRM, 88 FR
77432, 77434.
388 Cf. NLRB v. Bell Aerospace Co., 416 U.S. 267,
294 (1974) (holding that ‘‘the Board is not
precluded from announcing new principles in an
adjudicative proceeding,’’ that ‘‘the choice between
rulemaking and adjudication lies in the first
instance within the Board’s discretion,’’ and that
the agency’s choice between adjudication and
rulemaking was ‘‘entitled to great weight’’); SEC v.
Chenery Corp., 332 U.S. 194, 203 (1947) (‘‘[T]he
choice made between proceeding by general rule or
by individual, ad hoc litigation is one that lies
primarily in the informed discretion of the
administrative agency.’’).
389 Congress added section 18, 15 U.S.C. 57a, to
the FTC Act in 1975, and that section provides the
process the Commission must follow to promulgate
rules defining unfair or deceptive acts or practices.
See Magnuson-Moss Warranty—Federal Trade
Commission Improvement Act, Public Law 93–637,
sec. 202, § 18, 88 Stat. 2183, 2193 (1975)
(hereinafter ‘‘Magnuson-Moss Warranty Act’’); see
also Am. Fin. Servs. Ass’n v. FTC, 767 F.2d 957,
967 (D.C. Cir. 1985) (summarizing the historical
backdrop to the Commission’s authority to prevent
unfair or deceptive acts or practices including the
adoption of the Magnuson-Moss Warranty Act,
which codified section 18 of the FTC Act and
confirmed the Commission’s authority to
promulgate rules defining acts or practices that are
unfair or deceptive).
390 See, e.g., Franchise Rule, 16 CFR 436.2(a),
436.5(e) and (f) (defining as an unfair or deceptive
act or practice to fail to provide prospective
franchisees with the franchisor’s disclosure
document, which includes, among other things,
disclosure of ‘‘initial fees’’—i.e., ‘‘all fees and
payments, or commitments to pay . . . whether
payable in lump sum or installments’’ and of ‘‘all
other fees that the franchisee must pay to the
franchisor or its affiliates’’); Business Opportunity
Rule, 16 CFR 437.4(d) (defining as an unfair or
deceptive act or practice to ‘‘[f]ail to notify any
prospective purchaser in writing of any material
changes affecting the relevance or reliability of the
information contained in an earnings claim
statement before the prospective purchaser . . .
makes a payment’’); Business Opportunity Rule, 16
CFR 437.6(h) (defining as an unfair or deceptive act
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the Commission initiated the
rulemaking resulting in the Rule on
Retail Food Store Advertising and
Marketing Practices (the ‘‘Unavailability
Rule’’), 16 CFR part 424, based in part
on findings in a Commission report that
items priced at or below the advertised
price were frequently unavailable and
that in ‘‘a very substantial majority of
the instances of the deviations, the
prices marked on the items were higher
than the advertised price.’’ 391
As discussed in parts I and II, there
is nothing new about businesses using
bait-and-switch tactics to reel in and
deceive consumers, just as there is
nothing new about the Commission
exercising its authority to limit such
tactics and the harms they cause.392
This rule is tailored to address practices
squarely within the scope of the
Commission’s core work to protect
consumers: bait-and-switch pricing
tactics, including drip pricing, and
misrepresentations regarding a material
term. As described in section II.A and
II.B, the Commission adopts this rule
now because bait-and-switch tactics,
including drip pricing, and
misrepresentations as to the nature and
purpose of fees and charges are
prevalent and continue to harm
consumers. This is precisely what
section 18 of the FTC Act envisions and
is consistent with the Commission’s
exercise of the same authority in the
past.
or practice to ‘‘[m]ispresent the cost . . . of the
business opportunity or the goods or services
offered to a prospective purchaser’’); Funeral Rule,
16 CFR 453.2(a) and (b) (defining as an unfair or
deceptive act or practice to ‘‘fail to furnish accurate
price information disclosing the cost to the
purchaser for each of the specific funeral goods and
funeral services used in connection with the
disposition of deceased human bodies’’ and
requiring funeral providers to provide specific price
lists in writing).
391 Statement of Basis and Purpose: Retail Food
Store Advertising and Marketing Practices, 36 FR
8777, 8777–78 (May 13, 1971) (citing a Bureau of
Economics staff report titled ‘‘Economic Report on
Food Chain Selling Practices in the District of
Columbia and San Francisco’’). Similarly, when the
Commission later amended the Unavailability Rule,
it again stressed that food retailers must not engage
in bait and switch advertising—where the seller
advertises an unavailable good at a low price to get
the consumer in the door—or deception regarding
availability of advertised goods. Final amendments
to trade regulation rule: Amendment to Trade
Regulation Rule Concerning Retail Food Store
Advertising and Marketing Practices, 54 FR 35456,
35462–63 (Aug. 28, 1989).
392 E.g., In re Filderman Corp., 64 F.T.C. 427,
442–43, 461 (1964); Resort Car Rental Sys., 83
F.T.C. at 281–82, 300 (1973); Complaint ¶¶ 12, 46–
49, In re LCA-Vision, No. C–4789 (FTC Mar. 13,
2023); Opinion of the Commission at 37–40, 47–50,
In re Intuit Inc., No. 9408 (FTC Jan. 22, 2024). See
generally supra section I.A.–I.C (discussing the
comment and hearing record in response to the
ANPR and NPRM); section II.A (discussing the
prevalence of the practices that the rule addresses).
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(b) Commenters’ Claims About the
Scope of the Acts or Practices Covered
by the Rule Are Inapplicable or
Overstated
Commenters suggested that the major
questions doctrine is implicated simply
because the rule proposed by the NPRM
was industry-neutral.393 The
Commission disagrees. Congress
authorized the Commission to prevent
unfair or deceptive practices in or
affecting commerce across the economy
while specifying a limited number of
industries, activities, or entities that are
exempt.394 These comments are
inapposite, however, because the final
rule is limited to covered goods or
services: live-event ticketing and shortterm lodging.
Commenters also contended that the
rule implicates a major question because
it regulates pricing practices broadly or
supposedly will have effects on a wide
array of pricing strategies.395 The
Commission disagrees. The rule focuses
on hidden mandatory fees or charges
that obscure the total price of a covered
good or service and misrepresentations
about the nature, purpose, amount, and
refundability of fees or charges. The rule
has no effect on many pricing practices
and strategies, including a business’s
fundamental decision about what price
to charge consumers for its goods or
services.396 Nor does the rule affect a
business’s ability to use dynamic
pricing, to offer or use sales, discounts,
rebates, or special offers, or to truthfully
itemize fees and costs so long as the
business accurately describes the total
price upfront.397 With respect to
393 See, e.g., FTC–2023–0064–3263 (Flex
Association); FTC–2023–0064–3127 (U.S. Chamber
of Commerce); FTC–2023–0064–3152 (Building
Owners & Managers Association et al.); FTC–2023–
0064–3202 (TechNet); FTC–2023–0064–3133
(National Multifamily Housing Council and
National Apartment Association).
394 15 U.S.C. 45.
395 Commenters did not argue or provide
substantive support for any argument that a major
question was raised by proposed § 464.3(a), which
would have prohibited any Business from
misrepresenting the nature and purpose of any
amount a consumer may pay, including its
refundability and the identity of any good or service
for which it is charged. The Commission is
finalizing § 464.3 more narrowly to prohibit any
Business, in any offer, display, or advertisement for
a Covered Good or Service, from misrepresenting
any fee or charge, including its nature, purpose,
amount, or refundability, and the identity of the
good or service for which it is imposed.
396 See supra section I (‘‘The discretion to set
prices remains squarely with businesses; the rule
simply requires that they tell consumers the truth
about those prices.’’).
397 See supra section III.A.8.c (‘‘The rule neither
requires, nor prohibits, the itemization of
mandatory fees that must be included in Total
Price.’’); section III.B.1.d–e (responding to
comments about dynamic pricing, rebates, bundled
pricing, and other discounts).
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mandatory fees, the rule does not
prevent businesses from continuing to
charge such fees as a pricing strategy,
itemizing them in addition to stating the
total price, or from providing nonmisleading information about those fees.
Indeed, a number of commenters have
misunderstood the rule to act as a
prohibition or limitation on itemization;
as explained in section III, truthful
itemization is not prohibited.
In sum, the rule does not address a
major question because it focuses on
traditional types of unfair or deceptive
acts or practices that have long been the
subject of Commission rulemaking and
enforcement activity and targets only
those acts or practices.
2. Congress Provided the Commission
With a Clear Grant of Authority To
Promulgate This Rule
Even if the final rule did present a
major question, the FTC Act provides
clear authorization for the rule. In cases
involving major questions, courts expect
Congress to ‘‘speak clearly’’ if it wishes
to assign the disputed power.398 In the
FTC Act, Congress vested the
Commission with enforcement powers
and the authority to promulgate rules to
carry out the Commission’s mandate to
prevent unfair or deceptive acts or
practices.399 Rather than trying to define
all unfair or deceptive acts and
practices, Congress empowered the
Commission to respond to changing
market conditions and to identify
conduct that is unfair or deceptive.400
When the Commission was created by
the FTC Act in 1914, the Act prohibited
‘‘unfair methods of competition’’ in
398 West Virginia v. EPA, 597 U.S. at 716, 723
(quoting Util. Air, 573 U.S. at 324).
399 15 U.S.C. 45, 57a.
400 See S. Rep. No. 75–221, at 2 (1937) (report on
Amendments to the Federal Trade Commission Act
(S.1077), explaining Congress’s reasoning in
granting the Commission authority in 1914 to
define specific unfair methods of competition, and
then applying the same reasoning to the proposed
grant of authority to prohibit unfair or deceptive
acts or practices: ‘‘The committee gave careful
consideration to the question as to whether it would
attempt to define the many and variable unfair
practices . . . or whether it would by a general
declaration . . . condemn[ ] unfair practices,
leav[ing] it to the Commission to determine what
practices were unfair.’’ The Committee ‘‘concluded
that the latter course would be the better, for the
reason . . . that there were too many unfair
practices to define, and after writing 20 of them into
the law it would be quite possible to invent
others.’’); see also H.R. Rep. No. 93–1606, at H
12060 (1974) (Conf. Rep.) (report on Consumer
Product Warranty and Federal Trade Commission
Improvement Act, stating: ‘‘[section 18] is an
important power by which the Commission can
fairly and efficiently pursue its important statutory
mission.’’ Further, ‘‘[b]ecause the prohibitions of
section 5 of the Act are quite broad, trade regulation
rules are needed to define with specificity conduct
that violates the statute and to establish
requirements to prevent unlawful conduct.’’).
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section 5 and granted the Commission
authority to promulgate rules to
effectuate the Act’s provisions in section
6(g), including the prohibition on unfair
methods of competition.401 The Act did
not expressly prohibit deception. While
deception could qualify as an unfair
method of competition, courts required
the Commission to show harm to
competition or rivals in each instance;
harm to consumers alone was
insufficient to meet the standard.402 In
response, Congress amended the FTC
Act in 1938 to include a prohibition, not
just against unfair methods of
competition, but against unfair or
deceptive acts or practices as well.403
Congress affirmed the Commission’s
authority to issue rules like the one here
through amendments to the FTC Act in
1975 and 1980. First, in the MagnusonMoss Warranty Act of 1975, Congress
added section 18 of the FTC Act, 15
U.S.C. 57a, confirming the
Commission’s authority to issue rules
that ‘‘define with specificity acts or
practices which are unfair or deceptive
acts or practices,’’ and requiring the
Commission to follow specific
procedures for promulgating rules.404
Among the substantially completed
rules at the time were the Rule on the
Preservation of Consumers’ Claims and
Defenses 405 and the Mail Order Rule,406
which proposed to define as an unfair
or deceptive act—and upon
promulgation did so define—certain
conduct that the rulemaking record
showed was causing harm across
various industries. As Congress added
procedural requirements to the
Commission’s rulemaking authority
through section 18, Congress did not
limit these existing cross-industry rules
targeting unfair or deceptive acts or
practices, but instead created an
exception under which the Commission
401 Federal Trade Commission Act, Public Law
63–203, secs. 5, 6(g), 38 Stat. 717, 719, 722 (1914).
402 FTC v. Raladam Co., 283 U.S. 643, 647–49
(1931) (‘‘The paramount aim of the [FTC] act is the
protection of the public from the evils likely to
result from the destruction of competition or the
restriction of it in a substantial degree. . . . Unfair
trade methods are not per se unfair methods of
competition.’’).
403 Federal Trade Commission Act Amendments
of 1938 (Wheeler-Lea Act), Public Law 75–447, sec.
3, sec. 5, 52 Stat. 111, 111 (1938).
404 Magnuson-Moss Warranty—Federal Trade
Commission Improvement Act, Public Law 93–637,
sec. 202, sec. 18, 88 Stat. 2183, 2193 (1975)
(codified at 15 U.S.C. 57a).
405 Promulgation of Trade Regulation Rule and
Statement of Basis and Purpose: Preservation of
Consumers’ Claims and Defenses (Holder Rule), 40
FR 53506 (Nov. 18, 1975).
406 Promulgation of Trade Regulation Rule and
Statement of Basis and Purpose: Mail Order
Merchandise, 40 FR 51582 (Nov. 5, 1975).
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could finalize them without following
section 18’s procedural requirements.407
Congress again confirmed the
Commission’s authority to promulgate
rules defining unfair and deceptive acts
or practices in 1980 when it enacted
section 22 of the FTC Act, 15 U.S.C.
57b–3(b), as part of the Federal Trade
Commission Improvements Act of
1980.408 Section 22 imposes certain
additional procedural requirements the
Commission must follow when it
promulgates any ‘‘rule,’’ including rules
promulgated under section 18. Section
22(b) contemplates the FTC’s authority
to promulgate rules that are substantive
and economically significant by
requiring, for example, that the
Commission conduct a cost-benefit
analysis.409 In addition, section 22(a)
imposes the same requirements on
amendments to existing rules if they
may ‘‘have an annual effect on the
national economy of $100,000,000 or
more,’’ ‘‘cause a substantial change in
the cost or price of goods or services,’’
or ‘‘have a significant impact upon’’
persons and consumers.410 Thus,
Congress explicitly authorized the
Commission to issue rules and
amendments that address major
economic questions, so long as the
rulemaking complies with section 22.
The Commission has exercised its
authority to promulgate numerous rules
and rule amendments defining unfair or
deceptive acts or practices pursuant to
sections 18 and 22.411 Central to many
of these rules is a rulemaking record
establishing that businesses
misrepresent or fail to disclose certain
material terms in a transaction,
including information related to price,
and that these practices are unfair or
deceptive.412 Unlike in West Virginia v.
407 Magnuson-Moss Warranty—Federal Trade
Commission Improvement Act, Public Law 93–637,
sec. 202, sec. 18(c)(1), 88 Stat. 2183, 2198 (1975)
(Specifically, section 18(c)(1) provided that ‘‘[a]ny
proposed rule under section 6(g)’’ with certain
components that were ‘‘substantially completed
before’’ section 18’s enactment ‘‘may be
promulgated in the same manner and with the same
validity as such rule could have been promulgated
had this section not been enacted.’’).
408 Federal Trade Commission Improvements Act
of 1980, Public Law 96–252, sec. 15, sec. 22, 94
Stat. 374, 388 (1980) (codified at 15 U.S.C. 57b–3).
409 15 U.S.C. 57b–3(b).
581 15 U.S.C. 57b–3(a).
411 See, e.g., Franchise Rule, 16 CFR part 436;
Business Opportunity Rule, 16 CFR part 437;
Funeral Rule, 16 CFR part 453; Negative Option
Rule, 16 CFR part 425; Cooling Off Rule, 16 CFR
part 429; see also discussion supra section IV.1.a.
412 See, e.g., 16 CFR 437.6(d), (h), (i) (The
Business Opportunity Rule provides that it is an
‘‘unfair or deceptive act or practice’’ to
misrepresent, among other information, ‘‘the
amount of sales, or gross or net income or profits
a prospective purchaser may earn’’; ‘‘the cost, or the
performance, efficacy, nature, or central
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EPA, courts have upheld Commission
rules similar to the one here—that
prohibit misrepresentations, define
unfair or deceptive conduct, and require
specific disclosures to avoid
deception—against a myriad of legal
challenges.413
In sum, this is a far cry from a
situation where Congress
‘‘conspicuously and repeatedly’’
declined to grant the agency the claimed
power.414 Quite the opposite—Congress
has conspicuously and repeatedly
confirmed that promulgating a rule like
this final rule is precisely how Congress
expects the Commission to use its
rulemaking authority. For these reasons,
even if the final rule involves a major
question, Congress has clearly delegated
to the Commission the authority to
address that question.
B. Non-Delegation Doctrine
One commenter contended that the
Commission’s issuance of the rule
violates the non-delegation doctrine.415
The commenter argued that, given the
rule’s breadth, section 5 lacks an
intelligible principle if it authorizes the
Commission to promulgate the rule. The
commenter asserted that the rule
regulates pricing economy-wide and
that Congress has not made ‘‘the
necessary fundamental policy-decision’’
underlying the rule. The commenter
characteristics of the business opportunity or the
goods or services offered’’; or ‘‘any material aspect
of any assistance offered to a prospective
purchaser’’); 16 CFR 436.9(a) and (c) (The Franchise
Rule provides that it is an ‘‘unfair or deceptive act
or practice’’ to ‘‘[m]ake any claim or representation
. . . that contradicts’’ the required disclosures,
which include certain pricing information and fees,
or to ‘‘[d]isseminate any financial performance
representations to prospective franchisees unless
the franchisor has a reasonable basis and written
substantiation for the representation[.]’’).
413 See, e.g., Harry & Bryant Co. v. FTC, 726 F.2d
993, 999–1001 (4th Cir. 1984) (holding that
petitioners challenging Funeral Rule were not
denied procedural due process, and that the rule
was within the Commission’s statutory authority
and supported by substantial evidence); Am. Fin.
Servs. Ass’n v. FTC, 767 F.2d 957, 983–88, 991 (D.C.
Cir. 1985) (holding that the FTC did not exceed its
authority when promulgating the Trade Regulation
Rule on Credit Practices under sections 5 and 18 of
the FTC Act, and that the rule was supported by
substantial evidence and not arbitrary, capricious,
or an abuse of discretion); Consumers Union of
U.S., Inc. v. FTC, 801 F.2d 417, 422, 426 (D.C. Cir.
1986) (denying petition for review of FTC Used Car
Rule and holding that Commission’s decision to
omit a proposed disclosure requirement from the
rule had evidentiary support under both the FTC’s
substantial evidence test and the APA’s arbitrary
and capricious test, which are one and the same as
to the requisite degree of evidence); Pa. Funeral
Dirs. Ass’n v. FTC, 41 F.3d 81, 92 (3d Cir. 1994)
(denying petition for review of Funeral Rule and
finding that Commission decision to regulate casket
handling fees was not arbitrary or capricious and
was supported by substantial evidence).
414 West Virginia v. EPA, 597 U.S. at 724.
415 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
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also asserted that the Commission’s
authority to promulgate the rule is an
unconstitutional delegation under a
‘‘history and tradition test,’’ citing to a
dissenting opinion in Gundy v. United
States, 588 U.S. 128 (2019).416 The
Commission disagrees. The Commission
notes that this commenter’s argument
that the proposed rule violated the nondelegation doctrine was predicated on
its assertion that the proposed rule
regulated ‘‘the disclosing and collecting
[of] consumer fees for all
businesses.’’ 417 Since the focus of the
final rule is narrowed to covered goods
or services, the comment may not be
relevant to the final rule. Nevertheless,
the Commission addresses the
arguments herein.
‘‘Only twice in this country’s history
has the Court found a delegation
excessive, in each case because
‘Congress had failed to articulate any
policy or standard’ to confine
discretion.’’ 418 Article I of the
Constitution vests the Federal
government’s legislative powers in
Congress, and Congress may not
delegate those powers to an executive
agency absent an intelligible principle
to guide the exercise of discretion.419
The ‘‘intelligible principle’’ standard is
‘‘not demanding.’’ 420 This is because of
the practical understanding that ‘‘ ‘in
our increasingly complex society,
replete with ever changing and more
technical problems,’ . . . ‘Congress
simply cannot do its job absent an
ability to delegate power under broad
general directives.’ ’’ 421 For that reason,
the Supreme Court has repeatedly held
that ‘‘a statutory delegation is
constitutional as long as Congress ‘lay[s]
down by legislative act an intelligible
principle to which the person or body
authorized to [exercise the delegated
authority] is directed to conform.’ ’’ 422
As described throughout section IV.A,
Congress, the Commission, and the
courts have long understood the
Commission’s mandate to prevent both
unfair and deceptive acts or practices as
providing intelligible principles to
guide the exercise of the Commission’s
discretion. In A.L.A. Schechter Poultry
Corp. v. United States, 295 U.S. 495
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416 Id.
(citing Gundy, 588 U.S. at 159 (Gorsuch, J.,
dissenting, joined by Roberts, C.J. and Thomas, J.)).
417 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
418 Gundy, 588 U.S. at 130 (plurality op.) (quoting
Mistretta v. United States, 488 U.S. 361, 373 n.3
(1989)).
419 U.S. Const. art. I, sec. 1; see also, e.g.,
Mistretta, 488 U.S. at 372.
420 Gundy, 588 U.S. at 146.
421 Id. at 135 (quoting Mistretta, 488 U.S. at 372).
422 Id. (quoting J.W. Hampton, Jr., & Co. v. United
States, 276 U.S. 394, 409 (1928)) (brackets in
original).
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(1935), the Court observed that conduct
that fell within the ambit of section 5 of
the FTC Act was ‘‘to be determined in
particular instances, upon evidence, in
the light of particular competitive
conditions and of what is found to be a
specific and substantial public
interest.’’ 423 The Court ultimately
concluded that Congress properly
delegated authority to the FTC under
the FTC Act based, among other things,
on the subject matter and procedural
requirements Congress placed on the
Commission—which involves ‘‘notice
and hearing,’’ ‘‘appropriate findings of
fact supported by adequate evidence,’’
and ‘‘judicial review.’’ 424
FTC rulemaking under section 18
features similar procedural safeguards to
FTC adjudication and thus comports
with the nondelegation doctrine for the
same reasons. For example, section 18’s
rulemaking process requires the
Commission to: (1) notify Congress; (2)
publish multiple public notices of the
proposed rulemaking; (3) provide all
interested persons the opportunity to
‘‘submi[t] . . . written data, views, or
arguments’’; (4) consider all
submissions; (5) provide the
opportunity for an informal hearing; (6)
determine, based on all available
information, that the unfair or deceptive
acts or practices are prevalent; and (7)
determine, based on the rulemaking
record, that the final rule is appropriate.
In addition, once the rule is finalized, it
is subject to judicial review in a court
of appeals.425 The rulemaking process
thus ‘‘may actually be fairer to regulated
parties than total reliance on case-bycase adjudication’’ because the process
allows all interested parties the
opportunity to weigh in by submitting
data, views, and arguments and by
participating in a hearing.426 In this
rulemaking, interested parties had
numerous opportunities to be heard by
423 A.L.A. Schechter, 295 U.S. at 532–33. In so
holding, the Supreme Court in A.L.A. Schechter
referred to cases in which both unfair and deceptive
practices were determined to be unfair methods of
competition. 295 U.S. at 532–33 (citing FTC v. R.F.
Keppel, 291 U.S. 304 (1934) and FTC v. Algoma
Lumber Co., 291 U.S. 67 (1934)). Congress later
clarified in the Wheeler-Lea Act of 1938 that unfair
and deceptive practices are unlawful under the FTC
Act independent of any effect they may have on
competition. 52 Stat. 111. Accordingly, the A.L.A.
Schechter Court’s conclusion that Congress’s grant
of authority to the Commission is guided by
intelligible principles applies equally to the
Commission’s authority to identify unfair or
deceptive acts or practices and to the Commission’s
authority to identify unfair methods of competition.
424 A.L.A. Schechter, 295 U.S. at 533–36.
425 15 U.S.C. 57a(b)(1)–(2). Section 18 requires
both an advance notice of proposed rulemaking and
a notice of proposed rulemaking to engage with and
solicit comment from interested parties.
426 Nat’l Petroleum Refiners Ass’n v. FTC, 482
F.2d 672, 681–83 (D.C. Cir. 1973).
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2111
the Commission, including through
ninety-day public comment periods on
both an advance notice of proposed
rulemaking and a notice of proposed
rulemaking, as well as an informal
hearing. These procedures helped to
ensure that the Commission properly
applied its statutory mandate when
adopting the rule to prevent prevalent
unfair and deceptive practices
concerning hidden and misleading fees.
Like the FTC’s Act’s procedural
requirements, the subject matter
requirements that apply to the FTC’s
statutory authority are well established.
With respect to unfairness, Congress
articulated in section 5(n) of the FTC
Act the factors the Commission must
apply.427 For deception, virtually all
courts have adopted the three-part test
put forward by the Commission in its
Deception Policy Statement: (1) there is
a representation, omission, or practice
that (2) is likely to mislead consumers
acting reasonably under the
circumstances, and (3) the
representation, omission, or practice is
material.428 For decades, courts have
reviewed and upheld the Commission’s
application of unfairness and deception
authority in enforcement actions and
rules. Moreover, the Supreme Court has
recognized the ability of regulators,
courts, and regulated entities to
distinguish deceptive from
nondeceptive claims or advertisements
under section 5 of the FTC Act.429 In
sum, the subject matter requirements of
the FTC Act’s statutory authority as to
unfair and deceptive practices are well
settled.
Finally, the Supreme Court has not
adopted the commenter’s suggested
‘‘history and tradition test’’ as the
applicable standard for determining
whether congressional delegation of
authority is constitutional. The
intelligible principle test is binding
precedent on that question, and the final
rule complies with the intelligible
principle test.
C. First Amendment
Some commenters argued that § 464.2
impermissibly prohibits and compels
speech in violation of the First
427 15
U.S.C. 45(n).
Trade Comm’n, FTC Policy Statement on
Deception, 103 F.T.C. 174, 175 (1984) (sent by letter
to Congress on October 14, 1983 and appended to
In re Cliffdale Assocs., Inc., 103 F.T.C. 110, 174
(1984) (hereinafter ‘‘Deception Policy Statement’’),
https://www.ftc.gov/system/files/ftc_gov/pdf/
Cliffdale-Assocs-103-FTC-110.pdf.
429 FTC v. Colgate-Palmolive Co., 380 U.S. 374,
387 (1965); Zauderer v. Office of Disciplinary
Counsel, 471 U.S. 626, 645–46 (1985).
428 Fed.
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Amendment.430 The Commission
disagrees. The rule addresses unfair and
deceptive conduct and does not
otherwise affect businesses’ ability to
express truthful and accurate price
information.
1. Comments
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Some commenters argued the rule’s
disclosure requirements compel speech
in violation of the First Amendment.
Some commenters also contended that
§ 464.2 would prohibit businesses from
advertising aspects or parts of truthful
and accurate price information. They
argued that conditioning the ability to
provide some truthful information—
such as a partial price without including
certain fees—on total price being
disclosed violates the First
Amendment.431 Commenters asserted
that consumers are not injured where a
business presents a price that omits fees
or fails to add up the fees for the
consumer. They argued that this type of
price information is useful and truthful
even if it is only partial. A commenter
argued that how the price of goods and
services is displayed is a message under
the First Amendment and the rule’s
requirement that total price be
displayed clearly and conspicuously is
unconstitutional compelled speech.432
One academic commenter supported the
rule and argued it does not
unconstitutionally compel speech
because it only requires disclosure of
factual, non-controversial information,
without which the prices disclosed or
advertised would be misleading.433
Some commenters argued the
requirement to disclose total price
clearly and conspicuously should be
subject to strict scrutiny,434 while others
argued it should be reviewed under a
430 See, e.g., FTC–2023–0064–3028 (Competitive
Enterprise Institute); FTC–2023–0064–3238
(Gibson, Dunn & Crutcher LLP); FTC–2023–0064–
3233 (NCTA—The internet and Television
Association); FTC–2023–0064–3016 (National
Federation of Independent Business). In opposing
§ 464.2, the commenters did not argue that § 464.3,
which simply prohibits misrepresentations related
to prices and fees, implicates the First Amendment.
431 E.g., FTC–2023–0064–3028 (Competitive
Enterprise Institute provided examples of pricing
information it argued was not unfair or deceptive
that involve drip pricing with disclaimers,
contingent pricing, and partition pricing.) The
Commission addresses in section III.B.1 when and
to what extent the rule covers these types of
information and also explains why the omission of
Total Price is unfair and deceptive in those
circumstances.
432 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
433 FTC–2023–0064–3275 (Berkeley Law Center
for Consumer Law & Economic Justice et al.).
434 FTC–2023–0064–3028 (Competitive Enterprise
Institute); FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
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heightened scrutiny standard 435 or
intermediate scrutiny.436 One
commenter argued that the rule is a
content-based regulation subject to strict
scrutiny because, where a business
presents any type of price information,
it is required to display total price and
in a particular way—i.e., clearly,
conspicuously, and prominently.437 The
commenter argued that the Commission
failed to demonstrate the rule directly
advances any compelling government
interest. Another commenter argued that
price information is commercial speech
subject to intermediate scrutiny and that
the rule fails to meet the standard
because, even if some price displays
without total price are deceptive, not all
such displays are deceptive.438
Some commenters asserted that the
rule’s application to credit card
surcharges and government charges
violated the First Amendment. An
industry commenter interpreted the rule
to require all credit card surcharges to
be included in total price. The
commenter argued that this amounts to
a ban on presenting credit card
surcharges to consumers, which is
regulation of commercial speech that
violates merchants’ First Amendment
rights. The commenter cited to several
State laws banning credit card
surcharges or fees, but allowing cash
discounts, that were struck down by
Federal courts of appeals.439 Two
commenters argued that the rule’s
allowance for government charges to be
excluded from total price—while other
fees or charges cannot be excluded—
amounts to content-based regulation of
speech that provides preferential
treatment to the government.440 One
commenter argued that the rule would
allow businesses to conceal government
charges and shows favoritism for
government speech to assist it in raising
tax revenues; the commenter proposed
the alternative of marginally raising the
tax rate.441 The commenter also argued
435 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
436 FTC–2023–0064–3016 (National Federation of
Independent Business).
437 FTC–2023–0064–3028 (Competitive Enterprise
Institute).
438 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
439 FTC–2023–0064–3128 (Merchants Payments
Coalition).
440 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP); FTC–2023–0064–3233 (NCTA—The
Internet & Television Association).
441 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP ‘‘assume[d]’’ that in allowing
government charges to be excluded from Total
Price, the Commission aims to ‘‘rais[e] tax
revenues’’ because the Commission believes
‘‘disclosing a tax upfront will lead to fewer people
making purchases, resulting in a decline in
revenue’’). The commenter did not address the fact
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that the rule is underinclusive because
total price does not include government
charges, arguing that consumers suffer
the same harm of being surprised by
government fees as with nongovernment charges required to be
included in total price. Finally, other
commenters recommended that the
Commission adopt a rule that only
prohibits deceptive conduct without
requiring specific affirmative
disclosures.442
2. Legal Standard
The Commission finds that
businesses’ First Amendment rights are
adequately protected because § 464.2’s
compelled disclosures are in a
commercial context and meet the
longstanding legal standards governing
commercial speech. Courts apply one of
two standards in the context of
commercial speech. In Cent. Hudson
Gas & Electric Corp. v. Pub. Serv.
Comm’n of N.Y., 447 U.S. 557, 563–64
(1980), the Supreme Court established
the analytical framework for
determining the constitutionality of a
regulation of commercial speech that is
not misleading and does not involve
illegal activity. Under that framework,
described as intermediate scrutiny, the
regulation must: (1) serve a substantial
governmental interest; (2) directly
advance this interest; and (3) not be
more extensive than necessary to serve
the government’s interests.443 The third
prong does not require the government
to adopt the least restrictive means.
Instead, it simply calls for a ‘‘ ‘fit’
between the legislature’s ends and the
means chosen to accomplish those ends
. . . a fit that is not necessarily perfect,
but reasonable.’’ 444
The Supreme Court’s ‘‘precedents
have applied a lower level of scrutiny to
laws that compel disclosures in certain
contexts,’’ such as in commercial
speech, as set forth in Zauderer v. Office
of Disciplinary Counsel, 471 U.S. 626
(1985).445 Contrary to commenters’
that the Commission does not have authority over
taxation, or whether the commenter’s proposed
alternative of raising marginal tax rates would fulfill
the Commission’s goal in this rulemaking of
preventing unfair or deceptive conduct related to
mandatory fees and charges. The Commission finds
that marginally raising the tax rate is not a viable
alternative because the Commission does not have
taxing authority and raising the tax rate would not
achieve the Commission’s stated goal of preventing
unfair or deceptive conduct.
442 FTC–2023–0064–3016 (National Federation of
Independent Business); FTC–2023–0064–3028
(Competitive Enterprise Institute).
443 Cent. Hudson Gas & Elec. Corp., 447 U.S. at
564.
444 Bd. of Trs. of State Univ. of N.Y. v. Fox, 492
U.S. 469, 480 (1989) (internal citations omitted).
445 Zauderer, 471 U.S. at 650–53; Nat’l Inst. of
Family & Life Advocates v. Becerra (‘‘NIFLA’’), 585
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assertions, compelled speech in the
commercial context is neither
unequivocally prohibited nor subject to
strict scrutiny under the First
Amendment. Rather, the First
Amendment permits required
disclosures that are: (1) factual and
uncontroversial; (2) reasonably related
to the government’s interest—here,
preventing unfair and deceptive
commercial practices that harm
consumers; and (3) not ‘‘unjustified or
unduly burdensome.’’ 446 The final
rule’s disclosure requirements satisfy
these parameters.
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3. The Rule’s Disclosure Requirements
Are Constitutional Under Zauderer
Section 464.2 applies to speech that
is, at its core, commercial—the
disclosure and advertising of the price
for goods and services.447 It requires
U.S. 755, 768 (2018); see also Milavetz, Gallop &
Milavetz P.A. v. United States, 559 U.S. 229, 249–
50 (2010) (applying ‘‘the less exacting scrutiny
described in Zauderer’’ and upholding a
requirement that advertisements include a
disclosure ‘‘intended to combat the problem of
inherently misleading commercial
advertisements’’).
446 Zauderer, 471 U.S. at 653; see also Am. Meat
Inst. v. USDA, 760 F.3d 18, 22–23 (D.C. Cir. 2014)
(en banc) (holding Zauderer applies to compelled
commercial speech in service of government
interests in addition to preventing and correcting
deception); CTIA—The Wireless Ass’n v. City of
Berkeley, 928 F.3d 832, 844 (9th Cir. 2019) (holding
Zauderer applies to compelled commercial health
and safety disclosures if they further a substantial
government interest) (citing Central Hudson Gas &
Elec. Corp., 447 U.S. at 564; NIFLA, 585 U.S. at 768,
775)); Pharm. Care Mgmt. Ass’n v. Rowe, 429 F.3d
294, 310, 310 n.8 (1st Cir. 2005) (clarifying that the
application of Zauderer is not limited to cases in
which the compelled disclosure prevents deception
and upholding compelled commercial disclosures
based on government interests in preventing
deception and ‘‘increasing public access to
prescription drugs’’); Nat’l Elec. Mfrs. Ass’n v.
Sorrell, 272 F.3d 104, 116 (2d Cir. 2001) (applying
Zauderer to compelled commercial disclosure even
though it ‘‘was not intended to prevent ‘consumer
confusion or deception’ per se, . . . but rather to
better inform consumers about the products they
purchase’’) (internal citation and quotation marks
omitted) (citing Zauderer, 471 U.S. at 651).
447 See Expressions Hair Design v. Schneiderman,
581 U.S. 37, 48 (2017) (reviewing State law
regulating disclosure of differentiation of prices for
credit card versus other types of payment and
remanding for determination of whether the statute
‘‘is a valid commercial speech’’ regulation); City of
Cincinnati v. Discovery Network, Inc., 507 U.S. 410,
422 (1993) (‘‘Most of the appellee’s mailings
consisted primarily of price and quantity
information, and thus fell within the core notion of
commercial speech—speech which does ‘no more
than propose a commercial transaction.’’’) (cleaned
up) (citing Bolger v. Young’s Prods. Corp., 463 U.S.
60, 66 (1983)); see generally Cent. Hudson Gas &
Elec. Corp., 447 U.S. at 561 (referring to commercial
speech as ‘‘expression related solely to the
economic interests of the speaker and its
audience’’); Va. State Bd. of Pharmacy v. Va.
Citizens Consumer Council, Inc., 425 U.S. 748, 762
(1976) (commercial speech includes speech that
does ‘‘no more than propose a commercial
transaction’’ (internal citations omitted)); see also
Bates v. State Bar of Ariz., 433 U.S. 350, 383 (1977)
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precisely the type of disclosure the
Supreme Court has confirmed is
constitutional under Zauderer.448 In
Zauderer, the Supreme Court
considered a challenge to governmentcompelled commercial speech in an
advertisement by an attorney. The
advertisement stated that certain types
of cases were handled on a contingent
fee basis for which the client owed no
legal fees if the lawsuit was
unsuccessful. The State required such
advertisements to disclose that clients
may be liable for litigation costs even if
their lawsuit is unsuccessful. The
attorney argued such a requirement was
compelled speech in violation of the
First Amendment. The Supreme Court
disagreed. Noting that the disclosure
applied to commercial advertising, the
Court held that an advertiser’s
‘‘constitutionally protected interest in
not providing any particular factual
information in his advertising is
minimal.’’ 449 The Court concluded,
‘‘The State’s position that it is deceptive
to employ advertising that refers to
contingent-fee arrangements without
mentioning the client’s liability for costs
is reasonable enough to support a
requirement that information regarding
the client’s liability for costs be
disclosed.’’ 450 The Court also noted that
attorneys were not prevented from
conveying information to the public—
they were merely required ‘‘to provide
somewhat more information than they
might otherwise be inclined to present
. . . in order to dissipate the possibility
of consumer confusion or
deception.’’ 451
Section 464.2 satisfies all prongs of
Zauderer. First, § 464.2 only requires
businesses to disclose factual and
noncontroversial pricing information,
by incorporating known mandatory fees
or charges into total price, with
exceptions, and by disclosing certain
other customary pricing information
before a consumer consents to pay. As
described in section II.B, the purpose of
the rule is to ensure that consumers
know the total amount they will have to
(‘‘the advertiser knows his product and has a
commercial interest in its dissemination’’; ‘‘any
concern that strict requirements for truthfulness
will undesirably inhibit spontaneity seems
inapplicable because commercial speech generally
is calculated. Indeed, the public and private
benefits from commercial speech derive from
confidence in its accuracy and reliability.’’).
448 Zauderer, 471 U.S. at 651–53; see also NIFLA,
585 U.S. at 768–69 (restating the Zauderer standard,
noting that ‘‘purely factual and uncontroversial
information about the terms under which . . .
services will be available . . . should be upheld
unless they are unjustified or unduly burdensome’’
(internal citations omitted)).
449 Zauderer, 471 U.S. at 651.
450 Id. at 653.
451 Id. at 650–51 (internal quotation omitted).
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pay because this information is material
to consumer decision making.
Second, parts II.B and III lay out in
detail how the rule is reasonably related
to—and, in fact, directly advances—the
government’s interest in preventing
unfairness and deception in the
marketplace. Preventing unfair and
deceptive conduct is the Commission’s
mandate under sections 5 and 18 of the
FTC Act.452 And based on voluminous
comments from the public as well as
significant empirical evidence, the
Commission finds that consumers
seeking to purchase covered goods or
services are likely to be deceived and
harmed if the required disclosures are
not made.
Finally, § 464.2 is neither unduly
burdensome nor unjustified. The
Commission set forth the justification
for the required disclosures in parts II
and III, including the harms to
consumers and to competition from drip
or partitioned pricing. Further, the rule
does not impose an undue burden;
businesses offering covered goods or
services are simply required ‘‘to provide
somewhat more information than they
might otherwise be inclined to
present.’’ 453 The rule merely requires
clear and conspicuous display of total
price if other pricing information is
displayed, and requires certain pricing
and informational disclosures before the
consumer consents to pay. As described
in detail in section III, the final rule
permits businesses to exclude from total
price certain mandatory fees or charges
that industry commenters stated would
be impractical or burdensome for
inclusion in total price.
The Commission disagrees with a
commenter who seemed to argue that
because the rule imposes disclosure
requirements as to ‘‘how’’ total price is
displayed, the rule ‘‘offends the First
Amendment’’ by compelling speech.454
In so arguing, the commenter cited to
303 Creative, LLC v. Elenis, 600 U.S. 570
(2023). The Supreme Court in 303
Creative considered an as-applied
challenge to the Colorado AntiDiscrimination Act (‘‘CAD’’) by a sole
proprietor who designed individualized
websites the Court concluded ‘‘qualify
as pure speech,’’ with each website
being an ‘‘original, customized
creation.’’ 455 While the Court in that
case held that the CAD violated the First
Amendment as applied to the plaintiff,
the rule here is distinguishable from the
facts of 303 Creative. First, both price
452 15
U.S.C. 45, 57a.
471 U.S. at 650.
454 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
455 303 Creative, 600 U.S. at 587–88.
453 Zauderer,
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and how price is displayed (here, how
total price is displayed) relate solely to
proposing a commercial transaction and
to the economic interests of the speaker
and its audience.456 Second, the Court
based its decision in 303 Creative on the
unique nature of the plaintiff’s work,
noting the plaintiff ‘‘does not seek to
sell an ordinary commercial good.’’ 457
In comparison, the rule merely requires
the display of the total price of a
covered good or service—live-event
tickets and short-term lodging—which
is core commercial speech.
Therefore, the Commission finds that
the disclosure requirements are
consistent with the compelled speech
analysis under Zauderer. Clear,
conspicuous, and prominent disclosure
of total price in advertisements,
displays, or offers, and the disclosure of
complete pricing information of covered
goods or services before the consumer
consents to pay, directly advance the
Commission’s interest in preventing
deception and harm. The rule’s
requirements enable consumers to
receive the information they need to
make informed purchasing decisions
about live-event tickets and short-term
lodging based on complete and truthful
information.
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4. The Rule Does Not Prohibit Truthful
Speech
Commenters asserted that the rule
amounts to a prohibition on the display
of truthful price information in violation
of the First Amendment because the
rule prohibits certain information (like
partial prices without mandatory fees)
from being displayed without
displaying total price. Commenters also
asserted that, because the rule prohibits
certain displays of price, like parts of
prices without fees, it should be
evaluated under Central Hudson. The
Commission disagrees. First, the
commenters ‘‘overlook[ ] material
differences between disclosure
requirements and outright prohibitions
on speech.’’ 458 The rule does not
prevent businesses from conveying
information to the public and, in
particular, it does not prohibit the
disclosure of the components of total
price. Businesses remain free to
describe, disclose, or convey price, fee,
and charge information.459 Put
456 See cases cited supra note 447 (defining
commercial speech).
457 303 Creative, 600 U.S. at 593–94.
458 Zauderer, 471 U.S. at 650.
459 Of course, Businesses offering, displaying, or
advertising a Covered Good or Service cannot
misrepresent the nature, purpose, amount, or
refundability of any fee or charge under § 464.3; this
requirement is consistent with the First
Amendment. See Ibanez v. Fla. Dep’t of Bus. &
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differently, the rule permits any truthful
pricing claims an advertiser wants to
make; what it forbids is half-truths that
omit total price.
Section 464.2 does require a business
that displays certain pricing information
about covered goods or services to also
provide factual and non-controversial
information in the form of total price.
Although total price may be ‘‘somewhat
more information than they might be
otherwise inclined to present,’’ such a
requirement is allowed by Zauderer.460
With the rule’s requirement that total
price be clear, conspicuous, and
prominent, the Commission balances
industry commenters’ stated desire to
display other price information with its
finding that total price is a necessary
piece of price information for
consumers if any other price
information is displayed.461
Because the rule does not restrict
truthful speech, and because the
conduct the rule addresses (advertising
prices without mandatory fees) is
deceptive, the Commission need not
apply the Central Hudson factors.
Nevertheless, the rule would meet them.
Under Central Hudson, the regulation
must serve a substantial governmental
interest, must directly advance that
interest, and must not be more extensive
than necessary to serve the
government’s interest.462 As outlined in
parts II and III, the rule serves the
substantial governmental interest of
providing material price information to
consumers purchasing live-event tickets
and short-term lodging to allow them to
make accurate price comparisons and
informed purchasing decisions, and to
allow businesses to compete on price in
a level playing field. And consistent
with the third prong of Central Hudson,
the rule is no more extensive than
necessary to serve the government’s
interests in preventing unfairness,
deception, and harm, as the rule simply
requires clear, conspicuous, and
prominent display of total price. Central
Hudson acknowledges that the
government can regulate the format of
Prof’l. Regul., 512 U.S. 136, 142 (1994) (‘‘false,
deceptive, or misleading commercial speech may be
banned’’ (citations omitted)). Commenters did not
argue § 464.3 violates the First Amendment.
460 Zauderer, 471 U.S. at 650.
461 Indeed, the Zauderer Court noted that
‘‘because disclosure requirements trench much
more narrowly on an advertiser’s interests than do
flat prohibitions on speech, ‘warning[s] or
disclaimer[s] might be appropriately required . . .
in order to dissipate the possibility of consumer
confusion or deception.’ ’’ Id. at 651 (citation
omitted).
462 Cent. Hudson Gas & Elec. Corp., 447 U.S. at
566.
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advertising, including by requiring a
disclosure.463
The Commission also disagrees with
commenters arguing the rule violates is
overinclusive and would prohibit some
displays of partial price that are not
deceptive or unfair without the display
of total price. Again, because truthful
itemization of price components is not
prohibited by the rule, commenters’
contention that the rule is a prohibition
on speech misses the mark. The
Commission finds, however, that the
display of the price of a good or service
without disclosing total price clearly,
conspicuously, and prominently is
unfair and deceptive and harms
consumers and honest competitors.
Because the third prong of Central
Hudson does not require the
government to use the least restrictive
means necessary to advance its interest,
the rule would be constitutional even if
it prohibited displaying partial price in
instances that, in isolation, may not be
unfair or deceptive. The same is true
under Zauderer, where the Court held
that the State’s ‘‘assumption that
substantial numbers of potential clients
would be . . . misled’’ about the
possibility that they would be
responsible for litigation costs—in
contrast to proving that all potential
clients would be misled—was sufficient
to meet the standard.464
The Commission addresses in section
III commenters who argued that it
should adopt alternative policies, such
as prohibiting misrepresentations and
allowing businesses to disclose amounts
or fees as they wish. As relevant here,
commenters argued that the
Commission should adopt those
alternatives because they would not
violate the First Amendment. The
Commission finds that the rule,
including § 464.2, does not violate the
First Amendment. Given the
Commission’s finding that failure to
disclose total price is unfair and
deceptive, the rule’s affirmative
disclosure requirements are needed to
achieve the Commission’s goal of
preventing this unfair and deceptive
conduct.
463 See id. at 570–71 (‘‘To further its policy of
conservation, the Commission could attempt to
restrict the format and content of Central Hudson’s
advertising. It might, for example, require that the
advertisements include information about the
relative efficiency and expense of the offered
service, both under current conditions and for the
foreseeable future.’’).
464 Zauderer, 471 U.S. at 652–53.
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5. The Rule’s Treatment of Credit Card
Fees and Government Charges Does Not
Violate the First Amendment
The rule does not violate the First
Amendment in its treatment of credit
card fees and government charges. First,
as noted in section III.B.1.c, the rule
does not prohibit a business from
charging or passing through credit card
fees if otherwise allowed by law. The
rule also does not affect State laws that
prohibit credit card surcharges. Whether
credit card charges must be included in
total price depends on whether a
business makes such fees mandatory. If
a business offers consumers multiple
viable payment methods for the offered
transaction, so that paying with a credit
card is optional, then credit card fees
are not for a ‘‘mandatory ancillary good
or service’’ under the rule and need not
be included in total price. In addition,
where credit card fees are mandatory,
the rule does not prohibit businesses
from itemizing them as long as they are
also included in total price.
Accordingly, there is no merit to
commenters’ concerns that consumers
will not understand the impact of costs
affecting businesses, since businesses
can itemize those costs under the rule.
The Commission also disagrees with
commenters’ argument that § 464.2
violates the First Amendment as a
content-based regulation because it does
not require businesses to include
government charges in total price. One
commenter, who argued the point in
detail, relied on Barr v. American Ass’n
of Political Consultants, Inc., 591 U.S.
610 (2020), in which the Supreme Court
held that an exclusion for collectors of
government debt from the Telephone
Consumer Protection Act (‘‘TCPA’’),
which generally prohibits robocalls,
violated the First Amendment. A
majority agreed that the exclusion for
collectors of government debt was
severable—the prohibition on robocalls
was upheld.
The exclusion provision in the TCPA
addressed in Barr is distinguishable
from the final rule in several ways. At
the outset, the rule does not favor
government charges unequivocally.
While the rule allows businesses to
exclude government charges from total
price, it does not require businesses to
do so. Businesses have a choice—they
may include government charges in
total price. Second, the commenter
makes specific and erroneous
assumptions about the Commission’s
reasoning for excluding government
charges from total price, such as that the
Commission’s interest in adopting the
rule includes favoring taxes and
increasing tax revenue. Tax revenues
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have no bearing on the Commission’s
decision to adopt this rule. As noted in
section III.A.5, consumers have come to
understand and expect sales tax to be
added at the end of a purchase, and
there are other Federal, State, and local
laws that have specific requirements
about disclosing taxes and other
government charges. In addition, in
many online transactions, businesses
are unable to fully calculate certain
components of government charges
until a consumer provides their location
information. Thus, the Commission has
good reason to allow businesses to
exclude government charges from total
price if they choose.465
D. Commission Structure
One commenter argued the
Commission is unconstitutionally
structured because the Commissioners
are shielded from removal and asserts
that Humphrey’s Executor v. United
States, 295 U.S. 602 (1935), either no
longer applies or was wrongly decided
by the Supreme Court.466 The same
commenter asserted that the
Commission’s administrative law judges
are unconstitutionally appointed by the
Commission Chair and are
unconstitutionally shielded from
removal.467 The Commission disagrees.
In Humphrey’s Executor, the Supreme
Court addressed the crux of the
commenter’s first argument and
concluded that the Commission’s
structure is constitutional. In that case,
President Roosevelt sought to remove a
Commissioner without cause. The Court
held that the FTC Act authorized
removal of Commissioners only on the
grounds specified in the statute
(‘‘inefficiency, neglect of duty, or
malfeasance in office’’) and that this
limitation on the President’s removal
power was constitutional given the
‘‘character of the [C]ommission and the
legislative history which accompanied
and preceded the passage of the act.’’ 468
The commenter’s arguments that
Humphrey’s Executor is no longer
applicable are unavailing. The Supreme
Court’s decision is not rendered any less
binding because Congress has refined
the Commission’s authorities during the
course of its more than 100-year
465 The Commission modifies the definition of
‘‘Government Charges’’ from those fees or charges
‘‘imposed on consumers’’ to those ‘‘imposed on the
transaction’’ to limit the potential distinction
between fees and charges imposed directly on
consumers and those imposed on Businesses. See
supra section III.A.5.
466 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
467 Id.
468 Humphrey’s Executor, 295 U.S. at 624–32.
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tenure.469 The key policy rationale
underlying Humphrey’s Executor
remains valid today. The
Commissioners collectively act as an
adjudicatory body, and the for-cause
removal standard ensures that they are
free from ‘‘suspicion of partisan
direction’’ or ‘‘political domination or
control.’’ 470 Congress has similarly
provided for-cause removal standards
for the members of many other nonArticle III tribunals composed of
multiple members who perform
adjudicatory functions as an expert
body within a specific area of the
law.471
Next, the commenter incorrectly
asserted that administrative law judges
are appointed by the Chair and are
unconstitutionally shielded from
removal. The commenter argued that
under Free Enter. Fund v. Pub. Co.
Accounting Oversight Bd., 561 U.S. 477
(2010), administrative law judges must
be appointed by the full Commission
and that the appointment process for
administrative law judges at the FTC is
unconstitutional because administrative
law judges are appointed by the
Commission Chair alone.472 The
commenter is mistaken. The
Commission voted in December 2023 to
approve the appointment of
Administrative Law Judge Jay L.
Himes.473 The Chief Presiding Officer—
here, the Chair pursuant to 16 CFR 0.8—
then selected Judge Himes to be the
presiding officer for this rulemaking,
and Judge Himes was properly
designated as the presiding officer in the
Commission’s notice of informal
hearing.474
In response to the commenter’s
contention that the removal protections
for the Commission’s administrative law
judges are unconstitutional, the
Commission notes that the Supreme
Court has recognized in recent decisions
that Congress may constitutionally
469 See FTC v. Am. Nat’l Cellular, Inc., 810 F.2d
1511, 1513–14 (9th Cir. 1987) (enactment of section
13(b) of the FTC Act did not render Humphrey’s
Executor inapposite).
470 Humphrey’s Executor, 295 U.S. at 625.
471 See Collins v. Yellen, 594 U.S. 220, 250 n.18
(2021); Wiener v. United States, 357 U.S. 349, 353
(1958).
472 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
473 Press Release, Fed. Trade Comm’n, FTC
Announces Appointment of Jay L. Himes as New
Administrative Law Judge (Mar. 12, 2024), https://
www.ftc.gov/news-events/news/press-releases/2024/
03/ftc-announces-appointment-jay-l-himes-newadministrative-law-judge.
474 Initial notice of informal hearing; final notice
of informal hearing; list of Hearing Participants;
requests for submissions from Hearing Participants:
Trade Regulation Rule on Unfair or Deceptive Fees,
89 FR 21216 (Mar. 27, 2024); see also 16 CFR 0.8,
1.13.
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restrict the President’s at-will removal
power with regard to inferior officers.475
In Collins v. Yellen, 594 U.S. 220 (2021),
for example, the Court declined to
‘‘revisit . . . prior decisions allowing
certain limitations on the President’s
removal power,’’ 476 which include the
‘‘good cause’’ protections for inferior
officers ‘‘with limited duties and no
policymaking or administrative
authority’’ described by the Court in
Seila Law LLC v. CFPB, 591 U.S. 197
(2020).477 In Free Enter. Fund, the Court
held removal protections for Public
Company Accounting Oversight Board
members unconstitutional and
contrasted the duties of those members
with the lesser duties of administrative
law judges: ‘‘[U]nlike members of the
[Public Company Accounting Oversight]
Board,’’ administrative law judges (1)
‘‘perform adjudicative rather than
enforcement or policy making
functions,’’ or (2) ‘‘possess purely
recommendatory powers.’’ 478 The
FTC’s administrative law judges fit
squarely within both of those
descriptions.
Even if the appointment procedures
and removal protections of
administrative law judges were
unconstitutional because of their role as
inferior officers under Article II, the
constitutionality of the rule would not
be in question because presiding officers
under section 18 are not ‘‘officers’’
under Article II. Notably, while the
presiding officer in the Informal Hearing
for this rulemaking happened to be an
administrative law judge, neither
section 18(c)(1)(B) nor the Commission’s
rules implementing that provision
require an administrative law judge to
preside over section 18 informal
hearings.479
Instead, the presiding officer is a
specific, temporary designation made
under section 18(c) and its
implementing rules, 16 CFR 1.11
through 1.13. The Supreme Court’s
framework for distinguishing between
officers and employees asks whether an
individual ‘‘exercise[s] significant
authority pursuant to the laws of the
United States’’ and occupies a position
that is ‘‘continu[ous] and
permanent.’’ 480 For presiding officers,
475 See, e.g., Decker Coal Co. v. Pehringer, 8 F.4th
1123, 1133–36 (9th Cir. 2021) (holding that
administrative law judge removal protections are
constitutional).
476 Collins, 594 U.S. at 250–51 (discussing Seila
Law LLC v. CFPB, 591 U.S. 197 (2020)).
477 Seila Law, 591 U.S. at 217–18.
478 Free Enter. Fund, 561 U.S. at 507 n.10.
479 15 U.S.C. 57a(c)(1)(B); 16 CFR 1.13.
480 Lucia v. SEC, 585 U.S. 237, 245 (2018) (in the
‘‘Court’s basic framework for distinguishing
between officers and employees[,] . . . an
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neither is true. As relevant here, the role
of the presiding officer in section 18
rulemakings—assisting in the collection
of necessary information for the
rulemaking to proceed, ensuring
hearings proceed methodically, and
maintaining the rulemaking record 481—
is not policymaking; that role is
reserved for the Commission.482
Moreover, an administrative law judge,
whether or not he or she is serving as
a presiding officer, cannot initiate a
rulemaking, decide its subject, decide
whether a rule should issue, or establish
its content. The Commission performs
all of these functions.483
As an initial matter, the Commission
determines whether an informal hearing
will be conducted; presiding officers do
not have discretion over whether the
hearing will occur. The presiding officer
simply ‘‘presides over the rulemaking
proceedings’’ and, when appropriate,
makes a ‘‘recommended decision based
upon the findings and conclusions of
such officer.’’ 484 The presiding officer’s
powers in the conduct of the hearing are
also limited. For example, the officer
may not extend the time allotted for the
informal hearing beyond a certain
period ‘‘unless the Commission, upon a
showing of good cause, extends the
number of days for the hearing.’’ 485 The
commenter is correct that the presiding
officer is initially chosen by the ‘‘chief
presiding officer,’’ who is the Chair of
the FTC under 16 CFR 0.8. However, the
formal assignment of that presiding
officer to a particular hearing is in the
initial notice of informal hearing, which
is issued by vote of the Commission.
Although the presiding officer reports to
the chief presiding officer, again, the
powers of the two together amount to no
more than conducting the informal
hearing and making a recommended
decision based on the presiding officer’s
findings to the Commission.486 All
substantive decisions are made by the
Commission. These are temporary
assignments that begin and end with the
informal hearing process.
Accordingly, neither the
Commission’s structure nor the role of
the presiding officer in section 18
violates the Constitution.
individual must occupy a ‘continuing’ position
established by law to qualify as an officer . . . [and]
‘exercise[ ] significant authority pursuant to the
laws of the United States’ ’’ (citations omitted)).
481 15 U.S.C. 57a; 16 CFR 0.14.
482 16 CFR 1.13.
483 16 CFR 1.9, 16 CFR 1.13(i), 16 CFR 1.14, 16
CFR 1.25, 16 CFR 1.26(d).
484 15 U.S.C. 57a(c).
485 16 CFR 1.13(a)(2)(ii).
486 16 CFR 1.13.
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E. Administrative Procedure Act
Several commenters asserted the
Commission has not complied with the
APA.487 The Commission disagrees. The
Commission complies with the APA’s
requirements, including by explaining
the rule’s relationship to the unfair and
deceptive conduct the Commission
seeks to prevent and by responding to
all significant comments.488 As
explained herein, the Commission also
complies with the additional
requirements of sections 18 and 22 of
the FTC Act.
Commenters claimed that the rule is
arbitrary and capricious because it is not
based on sufficient facts or data, and
lacks a rational connection between the
facts and the regulatory choices.489
These commenters argued that the
factual record does not support the
Commission’s decision to promulgate an
industry-neutral rule or to apply the
rule to particular industries.490 One
commenter criticized various
substantive aspects of the rule including
its breadth, consideration of
alternatives, and costs.491 The
commenter also argued that the rule is
duplicative and could lead to regulatory
confusion.492
The Commission has carefully
reviewed and considered the comments
and information it received in this
rulemaking. As a preliminary matter,
the NPRM engaged in extensive
discussion concerning the comments
received in response to the ANPR and
followed up with additional questions
and requests for empirical data and
proposed rule text. Likewise, the
analysis contained throughout this SBP,
particularly Parts III–VII, similarly
487 FTC–2023–0064–3133 (National Multifamily
Housing Council and National Apartment
Association); FTC–2023–0064–3152 (Building
Owners & Managers Association et al.); FTC–2023–
0064–3238 (Gibson, Dunn & Crutcher LLP); FTC–
2023–0064–3263 (Flex Association); FTC–2023–
0064–3294 (International Franchise Association).
488 Motor Vehicle Mfrs. Ass’n v. State Farm Mut.
Auto Ins., 463 U.S. 29, 43 (1983) (holding that an
agency must articulate a satisfactory explanation for
its action including a ‘‘rational connection between
the facts found and the choices made.’’ (citing
Burlington Truck Lines, Inc. v. United States, 371
U.S. 156, 168 (1962))).
489 See, e.g., FTC–2023–0064–3294 (International
Franchise Association); FTC–2023–0064–3133
(National Multifamily Housing Council and
National Apartment Association); FTC–2023–0064–
3152 (Building Owners & Managers Association et
al.); FTC–2023–0064–3263 (Flex Association).
490 See, e.g., FTC–2023–0064–3294 (International
Franchise Association); FTC–2023–0064–3133
(National Multifamily Housing Council and
National Apartment Association); FTC–2023–0064–
3152 (Building Owners & Managers Association et
al.); FTC–2023–0064–3263 (Flex Association).
491 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
492 Id.
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engages with and considers the
additional significant comments and
information received in response to the
NPRM. Commenters raising questions
regarding APA compliance primarily
critiqued the industry-neutral nature of
the proposal advanced in the NPRM.
The Commission disagrees with these
critiques. The Commission, however,
has determined to limit this final rule to
covered goods or services and need not
address arguments regarding the
application of the rule to a wide range
of industries at this time. Further, both
the NPRM and this SBP explain in
detail the factual record and its
relationship to the provisions finalized
in the rule. While empirical data is not
required, the Commission in section V
presents an analysis for the final rule,
identifying benefits, such as reductions
in consumer search cost time and
deadweight loss, and quantifying
compliance costs. Finally, in section
V.E.2.d, the Commission finds that the
rule’s benefits to the public will exceed
its costs.
V. Final Regulatory Analysis Under
Section 22 of the FTC Act
Under section 22 of the FTC Act,
when the Commission promulgates any
final rule as a ‘‘rule’’ as defined in
section 22(a)(1), it must include a ‘‘final
regulatory analysis.’’ 15 U.S.C. 57b–
3(b)(2). The final regulatory analysis
must contain: (1) a concise statement of
the need for, and objectives of, the final
rule; (2) a description of any alternatives
to the final rule that were considered by
the Commission; (3) an explanation of
the reasons for the Commission’s
determination that the final rule will
attain its objectives in a manner
consistent with applicable law and the
reasons the particular alternative was
chosen; (4) an analysis of the projected
benefits, any adverse economic effects,
and any other effects of the final rule;
and (5) a summary of any significant
issues raised by the comments
submitted during the public comment
period in response to the Preliminary
Regulatory Analysis, and the
Commission’s assessment of such
issues. 15 U.S.C. 57b–3(b)(2)(A) through
(E). The Commission analyzes each of
these components in the following final
regulatory analysis.
The Commission has the authority to
promulgate this rule under section 18 of
the FTC Act, 15 U.S.C. 57a, which
authorizes the Commission to
promulgate, modify, and repeal trade
regulation rules that define with
specificity acts or practices in or
affecting commerce that are unfair or
deceptive within the meaning of section
5(a)(1) of the FTC Act, 15 U.S.C.
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45(a)(1). In explaining the need for, and
objectives of, the rule, the Commission
observes that a clear rule is the best way
to accomplish its goals of: (1) ensuring
that consumers receive truthful, timely,
and transparent information about price
to permit them to comparison shop
effectively and (2) leveling the playing
field for honest competitors. In addition,
a clear rule would deter the defined
unfair or deceptive pricing practices by
enabling the Commission to more
readily obtain monetary relief and civil
penalties. The Commission carefully
considered several alternatives to the
rule, including terminating the
rulemaking and pursuing a broader,
industry-neutral alternative. The
Commission determined that the
alternative of terminating the
rulemaking would not accomplish these
objectives. As explained in section II,
the Commission finds that bait-andswitch pricing and misleading fees and
charges are prevalent economy-wide,
but chooses to begin by tackling these
practices in the live-event ticketing and
short-term lodging industries, where the
Commission first began evaluating drip
pricing more than a decade ago and
which have a long history of harming
consumers and businesses. The final
rule will attain its objectives of
promoting truthful, timely, and
transparent pricing, comparison
shopping, and fair competition in the
live-event ticketing and short-term
lodging industries in a manner
consistent with applicable law. The
Commission will rely on its existing
section 5 authority in pursuing case-bycase enforcement actions against
businesses in other industries that
engage in the specific unfair and
deceptive pricing practices that are the
subject of the industry-specific coverage
in this rule.
The Commission’s final regulatory
analysis indicates that adoption of the
rule will result in benefits to the public
that exceed the costs. As described
further herein, the rule will not only
result in significant benefits to
consumers but also improve the
competitive environment in the liveevent ticketing and short-term lodging
industries, particularly for small,
independent, or new firms. One such
benefit is that the final rule will reduce
deadweight loss. ‘‘Deadweight loss’’ is a
term used to describe the loss of
efficiency or economic welfare, a cost to
society, that occurs when resources are
not used as efficiently as possible. At a
competitive equilibrium, in which the
marginal benefit for consumers equals
the marginal cost for firms, there is no
deadweight loss. When firms, including
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those in the live-event ticketing and
short-term lodging industries, engage in
bait-and-switch tactics, consumers
purchase more goods and services than
they would otherwise because they do
not understand the full price. In other
words, in such cases, consumers
overconsume beyond the quantity
necessary for competitive equilibrium.
This overconsumption is a deadweight
loss because, if they had full
information, consumers would shift
their spending toward more beneficial
and efficient spending patterns that
reflect their true preferences.
Deadweight loss is discussed more fully
in section V.E.2.a.ii.
The rule provides a net benefit to
society if its benefits exceed its costs.
The Commission quantifies the
incremental benefits for the live-event
ticketing and short-term lodging
industries and shows that the rule’s
benefits exceed the costs in these
industries.
The Commission reviewed the
comments relating to its Preliminary
Regulatory Analysis, some of which
challenged the Commission’s estimation
of the rule’s potential costs and benefits.
In response to these comments, the
Commission herein clarifies its analysis
and adds a sensitivity analysis to the
baseline estimation. The Commission
concludes that these comments do not
affect the Commission’s finding that the
potential benefits of the rule exceed the
potential costs.
A. Concise Statement of the Need for,
and Objectives of, the Final Rule
The Commission believes the final
rule is needed to ensure that consumers
receive truthful, timely, and transparent
information about the total price of
goods or services, including the nature,
purpose, and amount of any fees or
charges imposed on the transaction, so
that they can effectively comparison
shop and budget their spending dollars
when deciding what live-event tickets to
purchase or where to stay when
traveling. Although bait-and-switch
pricing and misleading fees are already
unlawful unfair or deceptive acts or
practices under section 5 of the FTC
Act, the Commission concludes that a
clear rule is the best way to accomplish
its goal of preventing the rule’s defined,
specific unfair and deceptive pricing
practices in the live-event ticketing and
short-term lodging industries while
fostering a level playing field for honest
competitors to be able to compete
truthfully and fairly based on price. In
addition, the final rule aims to increase
deterrence of the defined unfair or
deceptive pricing practices in these
industries by enabling the Commission
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to more readily obtain redress for injury
to consumers through section 19(a)(1) of
the FTC Act, 15 U.S.C. 57b(a)(1), and by
allowing courts to impose civil penalties
where appropriate. The Commission
believes that the rule will accomplish
these goals without significantly
burdening businesses and will provide
significant benefits to consumers and
honest competitors.
The record of this rulemaking is
replete with comments from consumers,
consumer groups, industry members,
academics, and policy organizations, as
well as officials and agencies across all
levels of government, emphasizing the
importance of consumers’ ability to
effectively comparison shop and
businesses’ ability to honestly compete
against each other based on price.
Regardless of industry, consumers want
to comparison shop when deciding
where to purchase their goods or
services from among various competing
offers. In many instances, consumers
have found it increasingly difficult, if
not impossible, to effectively
comparison shop because businesses
fail to provide the total price when they
display a purported amount a consumer
will pay for a good or service.
Consumers are also misled as to the
nature, purpose, amount, and
refundability of fees and charges, and
are unable to make informed choices
about the value of the fee or charge, or
the good or service it represents,
because their understanding of the fee
or charge is predicated on deceptive
omissions or false or misleading
information. As a result, consumers are
harmed because they consume more
goods or services, pay more for a good
or service, and incur higher search costs
than they otherwise would have if they
had been presented with the total price
upfront and truthful, timely, and
transparent information regarding fees
and charges. Businesses that honestly
present the total price of a good or
service and accurately disclose the
nature, purpose, and amount of fees and
charges are at a competitive
disadvantage to those that mislead
consumers by presenting purportedly
lower prices and inaccurate information
about fees and charges. As explained in
section II, the record, as well as the
Commission’s law enforcement actions,
outreach, and other engagement with
businesses and consumers, support a
finding that these practices pervade the
economy across industries.
Fundamentally, the rule will help
consumers make informed decisions
when comparison shopping and level
the playing field for honest businesses
in the live-event ticketing and short-
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term lodging industries, two industries
that have a long history of bait-andswitch pricing and misrepresentations
regarding fees and charges.
In addition, the final rule is necessary
to allow the Commission to recover
redress more efficiently in cases where
there is quantifiable consumer harm
resulting from bait-and-switch pricing
and misleading fees and charges. The
final rule will also deter live-event
ticketing and short-term lodging
businesses from engaging in these
practices by allowing for the imposition
of monetary relief in the form of
consumer redress and civil penalties.
In 2021, the Supreme Court in AMG
Capital Mgmt., LLC v. FTC, 593 U.S. 67,
82 (2021), held that section 13(b) of the
FTC Act 493 did not authorize the
Commission to seek, or a court to order,
equitable monetary relief for consumers
such as restitution or disgorgement. The
AMG ruling has made it significantly
more difficult for the Commission to
return money to injured consumers,
particularly in cases that do not involve
rule violations.494
Since AMG, the primary means for the
Commission to return money
unlawfully taken from consumers has
been through section 19 of the FTC Act,
15 U.S.C. 57b, which provides two
paths for consumer redress. One path,
under section 19(a)(2), typically requires
the Commission to first conduct an
administrative proceeding to determine
whether the respondent violated the
FTC Act; if the Commission finds that
the respondent did so, the Commission
can issue a cease-and-desist order,
which might not become final until after
the resolution of any appeals. To obtain
monetary relief, the Commission then
must initiate a separate action in
Federal court under section 19 and, in
that action, the Commission must prove
that the violator in the administrative
action engaged in objectively fraudulent
or dishonest conduct.495
The more efficient path to monetary
relief is under section 19(a)(1), which
allows the Commission to recover
redress in a single Federal court action
for violations of a Commission rule
relating to unfair or deceptive acts or
practices.496 Under the rule, the
493 15
U.S.C. 53(b).
NPRM, 88 FR 77436–38, nn.122, 211, 232
(discussing AMG).
495 See 15 U.S.C. 57b(a)(2) (‘‘If the Commission
satisfies the court that the act or practice to which
the cease and desist order relates is one which a
reasonable man would have known under the
circumstances was dishonest or fraudulent, the
court may grant relief under subsection (b) of this
section.’’).
496 Certain statutes, such as the Restore Online
Shoppers’ Confidence Act, 15 U.S.C. 8401 through
8405, include provisions that treat violations of the
494 See
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Commission will now be able to use the
section 19(a)(1) pathway to obtain
redress for losses attributable to the
specific unfair or deceptive practices the
rule defines and prohibits.
In addition, the final rule will allow
courts to impose civil penalties under
section 5(m)(1)(A) of the FTC Act, 15
U.S.C. 45(m)(1)(A). Civil penalties will
provide the deterrence necessary to
incentivize compliance with the law,
even in cases when it is difficult to
quantify consumer harm.
Overall, the rule’s prohibition of baitand-switch pricing tactics, including
drip pricing, and misleading fees in the
live-event ticketing and short-term
lodging industries expands the
Commission’s enforcement toolkit and
allows it to deliver on its consumer
protection mission by stopping and
deterring harmful conduct in these
industries and making consumers whole
when they have been harmed. The
unfair or deceptive acts or practices
involving bait-and-switch pricing and
misleading fees encompassed by this
final rule are prevalent and harmful to
consumers and honest competitors.
Thus, the unlocking of additional
remedies through this rulemaking—
particularly, the ability to obtain redress
for consumers injured by misconduct
and civil penalties against violators,
where appropriate—will allow the
Commission to more effectively police
and deter unfair or deceptive pricing
practices in these industries.
B. Alternatives to the Final Rule the
Commission Considered, Reasons for
the Commission’s Determination That
the Final Rule Will Attain Its Objectives
in a Manner Consistent With Applicable
Law, and the Reasons the Particular
Alternative Was Chosen
In analyzing the potential costs and
benefits of the proposed rule, the
Commission considered several
alternatives, including terminating the
rulemaking and a broader rule
alternative. As the Commission
observed in the NPRM, one potential
alternative is to terminate the
rulemaking and rely instead on the
Commission’s existing tools to combat
unfair or deceptive practices relating to
pricing, such as consumer education
and enforcement actions brought under
sections 5 and 19(a)(2) of the FTC Act.
However, terminating the rulemaking
would deprive consumers of live-event
tickets and short-term lodging of
quantifiable time savings, and
unquantifiable benefits including
reduced frustration, less consumer
statute as a violation of a rule for purposes of
section 19(a)(1). See, e.g., 15 U.S.C. 8404(a).
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stress, and improved economic
efficiency through a reduction of
deadweight loss, as outlined in section
V. Implementation of the rule also
strengthens the Commission’s
enforcement program against unfair or
deceptive pricing practices in the liveevent ticketing and short-term lodging
industries.
As noted in the NPRM, given the
strong indicators that bait-and-switch
pricing, including drip pricing, and
misleading fees and charges are
prevalent and worsening across
industries, the Commission considered
adopting a final rule that would have
applied to all industries nationwide.
The Commission declines to adopt such
an industry-neutral rule at this time and
instead chooses, in its discretion, to use
its rulemaking authority incrementally.
The Commission’s rule first targets the
two industries where the Commission
first began evaluating drip pricing more
than a decade ago and where consumer
harm has been longstanding and
continues to be pronounced. As noted
in section II, most transactions in the
live-event ticketing and short-term
lodging industries occur online, where
bait-and-switch pricing and misleading
fees and charges have the highest
potential to thwart the rule’s stated
objectives, namely price transparency
and timeliness, as well as comparison
shopping. In addition, consumers are
often presented with identical offers (as
is the case with live-event ticketing) or
near-identical offers (as is the case with
short-term lodging), and as such, price
is the most salient feature for consumers
in these transactions.
The NPRM also discussed, and the
Commission also considered, a small
business exemption. Small businesses,
which may have smaller profit margins,
may be disproportionately affected by
initial compliance costs associated with
§ 464.2’s disclosure requirements. On
the other hand, a rule exempting small
businesses would fail to accomplish the
rule’s core objectives of transparency in
pricing and facilitating comparison
shopping because consumers would
continue to be subject to a mix of
pricing disclosures in the live-event
ticketing and short-term lodging
industries that could include bait-andswitch pricing and misleading fees. As
one commenter noted, ‘‘Small
businesses will benefit from the rule
because it eliminates the deceptive
practices that keep consumers from
being able to comparison shop.’’ 497 The
commenter also stated that a small
business ‘‘exception will undermine the
ability of consumers to make purchasing
497 FTC–2023–0064–3302
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decisions based on transparent and
honest information.’’ 498 A small
business exemption could also reduce
consumer benefits arising from
increased price transparency across
markets and lower consumer confidence
regarding whether the rule applies to
specific purchases.
Excluding small businesses could also
harm honest competition because such
an exemption might impose more
uncertainty and compliance costs for
businesses to determine whether the
rule applies to them. In addition, as
noted in section III, some industry
commenters favored a rule that applied
equally to all industry members, to
facilitate comparison shopping and
avoid the creation of competitive
advantages.
Some commenters, as noted in section
III, expressed frustration with fees or
charges they described as ‘‘excessive’’ or
‘‘worthless.’’ As discussed in the NPRM,
an alternative to the final rule could be
to explicitly prohibit excessive or
worthless fees or charges in the liveevent ticketing and short-term lodging
industries. This alternative may benefit
consumers who pay excessive amounts
for goods or services in these industries
or for fees or charges that provide them
little to no value, allowing them instead
to save their money or spend it
elsewhere.
The Commission declines to adopt an
alternative rule prohibiting worthless or
excessive fees or charges, because doing
so may raise additional questions for
these industries and for the Commission
regarding how to assess the value of fees
or charges. In addition, the final rule
may already accomplish some of the
benefits of such an alternative. For
example, the final rule requires total
price to include all mandatory fees or
charges (with limited exceptions for
government charges and shipping
charges). Transparency and competition
on price could then disincentivize liveevent ticketing and short-term lodging
businesses from incorporating such fees
into their pricing schemes altogether. In
addition, consumer confusion related to
the purpose or value of fees or charges
would be addressed by the final rule’s
requirement to disclose the nature,
purpose, and amount of any fees or
charges lawfully excluded from total
price, as well as the prohibition against
misrepresenting any fees or charges.
In sum, the rule accomplishes the
Commission’s objectives in the areas of
live-event ticketing and short-term
lodging consistent with applicable law,
while providing the Commission
additional time to consider further
498 Id.
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2119
action. As explained in section V.E, the
Commission believes the rule’s benefits
exceed the costs of the rule. Notably, the
Commission believes, as detailed in
Parts II, III, and V, that the rule also will
result in additional tangible benefits
from consumers’ ability to accurately
comparison shop for live-event tickets
and short-term lodging. Therefore, the
Commission finds in this final
regulatory analysis that adoption of the
rule will result in benefits to the public
that exceed the costs.
C. The NPRM’s Preliminary Regulatory
Analysis
In the Economic Analysis of Costs and
Benefits of the Proposed Rule in section
VII.C of the NPRM (hereafter,
‘‘Preliminary Regulatory Analysis’’), the
Commission described the anticipated
effects of the proposed rule and
quantified the expected benefits and
costs to the extent possible. For each
benefit or cost quantified, the analysis
identified the data sources relied upon
and, where relevant, the quantitative
assumptions made. The Preliminary
Regulatory Analysis measured the
benefits and costs of the proposed rule
against a baseline in which the
Commission did not promulgate a rule
addressing the unfair or deceptive
practices of presenting incomplete or
inaccurate pricing information that
obscures total price and misrepresenting
the nature and purpose of fees. Several
of the benefits and costs were
quantifiable for specific industries, but
the Commission found that benefits at
the economy-wide level were not
quantifiable. The Preliminary
Regulatory Analysis discussed the bases
for uncertainty in the estimates.
In the Preliminary Regulatory
Analysis, the Commission performed a
break-even analysis under various
assumptions to determine the required
benefits necessary to justify the
estimated costs. Under the assumptions
of high-end compliance costs and a 7%
discount rate, the Commission found
that if the average benefit to consumers
from the proposed rule exceeded $6.65
per year over ten years, then the
proposed rule’s benefits would exceed
its quantified economy-wide
compliance costs. The expected benefit
could be a result of reduced consumer
search time, of increased consumer
surplus from more efficient purchasing
decisions, or a combination of the two.
The Commission found in the
Preliminary Regulatory Analysis that if
the proposed rule resulted in savings
from reduced search time that exceeded
15.82 minutes per consumer per year
over ten years, then the benefits from
reduced search time alone would
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exceed quantified compliance costs
under the assumption of high-end costs
and a 7% discount rate.
D. Significant Issues Raised by
Comments, the Commission’s
Assessment and Response, and Any
Changes Made as a Result
In this section, the Commission
summarizes its assessment of, and
response to, the major concerns,
comments, and suggestions raised by
commenters about the Preliminary
Regulatory Analysis. The Commission
received comments about the
Preliminary Regulatory Analysis from
industry groups, law firms, consumer
advocacy groups, think tanks,
consumers, and business owners.
Section V.D.1 addresses comments
about the Commission’s cost estimates,
section V.D.2 addresses comments about
the Commission’s the benefits estimates,
and section V.D.3 addresses comments
specific to the economy-wide breakeven analysis.
1. Comments on Costs
In section V.D.1.a through d, the
Commission addresses four major
comments regarding the NPRM’s cost
estimates: (a) the estimated costs are too
low; (b) there are unquantified costs to
firms; (c) there are unquantified costs to
consumers; and (d) there are
unquantified costs to third parties.
Section V.D.1.e addresses commenter
concerns about costs that may stem from
applying the rule to variable, dynamic,
or contingent fees.
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(a) Public Comments: Estimated Costs
Are Too Low
Commenters from members and
representatives of the live-event
ticketing and short-term lodging
industries, among others, argued that
estimated costs in the NPRM were too
low because the analysis
underestimated the number of attorney,
data scientist, and web developer hours
needed to comply with the proposed
rule.499 These commenters contended
that some businesses will require more
time than the assumed average estimates
of labor hours used in the Preliminary
Regulatory Analysis. The Commission
acknowledges the possibility that some
businesses will incur a greater number
of hours to comply with the final rule,
499 FTC–2023–0064–2856 (National Football
League); FTC–2023–0064–3127 (U.S. Chamber of
Commerce); FTC–2023–0064–3238 (Gibson, Dunn,
& Crutcher LLP); FTC–2023–0064–3122 (Vivid
Seats); FTC–2023–0064–3094 (American Hotel &
Lodging Association); FTC–2023–0064–3292
(National Association of Theatre Owners); FTC–
2023–0064–3293 (Travel Technology Association);
FTC–2023–0064–3294 (International Franchise
Association).
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but notes that this is consistent with the
Preliminary Regulatory Analysis
because the employee hour estimates
used represent averages. These
estimates capture the fact that some
businesses will require more time than
the average and some will require less.
The Commission received additional
comments with similar concerns about
the Commission’s compliance hours
estimates as they apply to other specific
industries such as movie theater
ticketing, delivery apps, restaurants,
bowling, and cable and broadband,
which are no longer subject to the final
rule.500 However, the Commission’s
argument that the compliance hours
represent averages holds more broadly.
Two commenters in the live-event
ticketing industry provided alternative
estimates of average employee hours
necessary to comply with the rule. Vivid
Seats stated that, from its experience
implementing upfront pricing as a ticket
seller in three states, the Commission
underestimated the employee hours
needed for live-event ticket sellers by at
least a factor of five.501 Conversely,
another live-event ticket seller,
TickPick, commented that, for the most
part, live-event ticketing companies
would incur an immaterial cost to
implement all-in pricing because ‘‘the
technology already exists within
ticketing platforms to eliminate drip
pricing and would simply need to be
applied to events in the U.S.’’ 502 Again,
the Commission notes that the estimated
employee hours reflect an average and,
as these commenters stated, it is
possible that firms like Vivid Seats may
require more hours, while others, like
TickPick, may require fewer.
The National Restaurant Association
stated that it would take restaurants at
least twenty hours a year to reoptimize
menu prices because the Commission’s
estimates did not account for supply
chain issues that may change prices or
consider that some restaurants may offer
seasonal menus.503 The Preliminary
Regulatory Analysis omitted these costs
because they are not a result of the rule;
restaurants will face supply chain
fluctuations and seasonal changes to
their menus regardless of the rule.504
500 FTC–2023–0064–3263 (Flex Association);
FTC–2023–0064–3300 (National Restaurant
Association); FTC–2023–0064–3217 (Bowling
Proprietors’ Association of America); FTC–2023–
0064–3233 (NCTA—The internet & Television
Association).
501 FTC–2023–0064–3122 (Vivid Seats).
502 FTC–2023–0064–3212 (TickPick, LLC).
503 FTC–2023–0064–3300 (National Restaurant
Association).
504 See, e.g., id. (National Restaurant Association
commented that there are ‘‘common supply chain
issues that may cause certain food items to increase
or decrease in price’’ and ‘‘thousands of restaurants
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However, this is no longer a concern in
the final rule, which does not apply to
restaurants.
The Office of Advocacy of the United
States Small Business Administration
(‘‘SBA Office of Advocacy’’) argued that
costs estimated in the Preliminary
Regulatory Analysis are too low because
data scientist and web developer hours
should be ongoing costs, rather than
one-time costs.505 It argued that ‘‘the
FTC should assume a percentage of
firms that in the previous year were in
compliance will not be the following
year.’’ The Commission does not believe
that these ongoing costs are attributable
to the rule. Once firms have adjusted to
the rule, making sure new pricing
strategies comply with the rule is
considered a part of the normal course
of business, as is ensuring compliance
with other existing laws and
regulations.
Some commenters identified
purported costs that were either already
captured in the economic analysis or
would not be affected by the rule. The
U.S. Chamber of Commerce and SBA
Office of Advocacy argued that the
Preliminary Regulatory Analysis did not
account for the time needed to train staff
to provide new upfront prices to
customers for in-person, online, and
phone sales.506 The Commission
believes training time, to the extent that
it exists, is already captured in the
assumed range of data scientist and web
developer hours, which the Commission
has noted serves as a proxy for any ruleassociated costs from adjusting pricing
strategies and displaying prices to
consumers. Another commenter argued
that businesses would need to ‘‘hire
graphic designers to make
advertisements look appealing and web
designers or software engineers to
rebuild entire websites.’’ 507 In addition,
it argued that the Preliminary
Regulatory Analysis did not account for
. . . offer varying seasonal menus with completely
different offerings’’); FTC–2023–0064–2992
(Individual Commenter who owns a restaurant
commented that complying with the rule would not
be complex for restaurants because ‘‘[t]hey reprice
and change dishes frequently’’); FTC–2023–0064–
3219 (Georgia Restaurant Association also referred
to ‘‘rising food costs [and] supply chain
disruptions’’); FTC–2023–0064–3180 (Independent
Restaurant Coalition commented about ‘‘increasing
food costs’’); FTC–2023–0064–3078 (Washington
Hospitality Association referred to supply chain
issues, inflation, and other rising costs).
505 U.S. Small Bus. Admin., Office of Advocacy,
Re: Trade Regulation Rule on Unfair or Deceptive
Fees FTC–2023–0064–0001, https://
advocacy.sba.gov/wp-content/uploads/2024/03/
Comment-Letter-Trade-Regulation-Rule-on-Unfairor-Deceptive-Fees.pdf.
506 See, e.g., id.; FTC–2023–0064–3127 (U.S.
Chamber of Commerce).
507 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
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costs needed to replace physical ads,
subway ads, and billboards and
speculated that would take ‘‘thousands
of hours.’’ The final rule has no bearing
on a firm’s decision to engage graphic
designers to ensure its advertisements
are ‘‘appealing,’’ and the Commission
does not believe—and commenters have
failed to cite evidence demonstrating—
that the need to update prices will
require rebuilding entire websites.
Moreover, as discussed in more detail in
section V.E.3.a, the estimated range of
web developer time is a proxy for any
costs associated with changing price
displays to comply with the rule.
Two commenters argued that the
Preliminary Regulatory Analysis
underestimated costs because the wage
rates for attorneys and data scientists
were too low and were not the same as,
for example, attorneys fees.508 One
commenter stated that the estimated
wages did not account for overhead
costs or reflect the higher costs of hiring
outside counsel and data scientists and
suggested using $306 in attorney wages
and $59 in data scientist wages to reflect
these higher costs.509 In response to
these suggestions, the Commission
conducted a sensitivity analysis that
multiplied wage rates by two to reflect
overhead and hiring costs for the shortterm lodging and live-event ticket
industries. The results of the sensitivity
analysis are provided in section
V.E.3.b.i and do not impact the
Commission’s assessment that the
benefits exceed the costs. The
Commission received two additional
comments with similar concerns about
the Commission’s wage estimates as
they apply to the restaurant industry
and the innovation economy, which are
no longer subject to the final rule.510
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(b) Public Comments: Unquantified
Costs to Firms
The NPRM noted that there are
unquantified costs of the rule, primarily
in the form of unintended consequences
to consumers as they adjust to upfront
pricing. In addition, commenters
identified additional types of
unquantified costs to firms.
An academic commenter argued that
there may be unintended consequences
to firms from partial compliance.511 The
508 Id.; U.S. Small Bus. Admin., Office of
Advocacy, Re: Trade Regulation Rule on Unfair or
Deceptive Fees FTC–2023–0064–0001, https://
advocacy.sba.gov/wp-content/uploads/2024/03/
Comment-Letter-Trade-Regulation-Rule-on-Unfairor-Deceptive-Fees.pdf.
509 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
510 FTC–2023–0064–3300 (National Restaurant
Association); FTC–2023–0064–3202 (TechNet).
511 FTC–2023–0064–2891 (Mary Sullivan, George
Washington University, Regulatory Studies Center).
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commenter stated that no firm would
want to be the first in its market to
comply, and the resulting ‘‘partial or
uneven compliance would cause
compliant firms to lose business to firms
that ignored the rule. Implementing
coordinated compliance for the entire
economy would be difficult with the
[Commission’s] limited resources.’’ The
Commission believes that the partial
compliance described by this
commenter is the current status quo in
the absence of a rule. Currently, some
firms impose drip pricing, and these
firms may have a competitive advantage
over those that do not impose drip
pricing. Under the rule, the Commission
expects all firms in the short-term
lodging and live-event ticket industries
to provide total price, which is an
improvement relative to the status quo.
If, as the commenter argues, some
degree of partial compliance remains,
the potential competitive advantage
from non-compliance would be similar
to the status quo, with the additional
risk to non-compliant firms of law
enforcement actions with potential
exposure to consumer redress and
penalties. In other words, even with
some degree of partial compliance after
the final rule, such an equilibrium
would still result in more benefits for
consumers than a world without the
final rule. The commenter’s concern
that implementing coordinated
compliance for the whole economy may
be difficult is mitigated in the final rule,
which only applies to two industries. In
addition, while the Commission may
have limited enforcement resources, it
expects consumer behavior regarding
fees to adjust over time due to the final
rule. Once upfront pricing becomes the
new norm, consumers will expect to see
total prices displayed upfront and will
be more likely to punish firms that
ignore the rule by taking their business
elsewhere. Therefore, any partial
compliance is likely to be temporary.
Nine commenters stated the NPRM’s
assertion that the rule will provide a
harmonized legal framework for all
States is incorrect because, as discussed
in section III, the rule only preempts
State laws if they are inconsistent with
the rule.512 Commenters noted that an
512 FTC–2023–0064–2856 (National Football
League); FTC–2023–0064–2887 (Progressive Policy
Institute); FTC–2023–0064–3122 (Vivid Seats);
FTC–2023–0064–3127 (U.S. Chamber of
Commerce); FTC–2023–0064–3133 (National
Multifamily Housing Council and National
Apartment Association); FTC–2023–0064–3143
(ACA Connects—America’s Communications
Association); FTC–2023–0064–3233 (NCTA—The
internet & Television Association); FTC–2023–
0064–3238 (Gibson, Dunn & Crutcher LLP); FTC–
2023–0064–3258 (National Taxpayers Union
Foundation).
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2121
added layer of regulation is an
additional cost for businesses as they
determine whether they are compliant
with the various rules to which they are
subject. The Commission updates the
final regulatory analysis to reflect this
concern as it applies to covered goods
or services, but notes that the cost was
already captured by the assumption that
all firms within the live-event ticketing
and short-term lodging industries will
spend on average one hour to determine
whether the rule applies to them.
One commenter asserted that ‘‘[t]he
Commission erroneously disclaims the
possibility of losses to producer
surplus.’’ 513 The commenter argued that
the Commission’s statement that
consumer surplus is reduced due to
consumer search costs under drip
pricing ignores the countervailing
increase of producer surplus. The
commenter further contended that the
Preliminary Regulatory Analysis omits
that, under drip pricing, consumers
purchase more expensive products,
which amounts, in part, to a transfer of
surplus from consumers to sellers. The
Commission acknowledges the transfer
of surplus due to higher prices.
However, the commenter incorrectly
assumes that the movement of surplus
from consumers to producers will be a
one-to-one transfer and presupposes
that there will be no increase in
consumer search time or deadweight
loss. As is discussed in section V.E.2.a.i,
the increased, unnecessary consumer
search time due to drip pricing results
in a net cost to society—no one benefits
from the additional hours consumers
collectively spend searching for price
information and then being surprised
with a higher final amount at the time
of purchase. In addition, as is discussed
in section V.E.2.a.ii, inefficient
overconsumption under drip pricing
generates a deadweight loss.
Inefficiently high spending under drip
pricing thus results in a cost to society
in the form of higher search costs and
a deadweight loss in addition to a
transfer of surplus from consumers to
sellers in the form of higher seller
revenue. Overall, this results in a net
loss to society.
Lastly, some commenters representing
the communications services industry
noted that there are unquantified costs
to cable, broadband, and wireless
providers due to similar upfront pricing
requirements from the FCC.514 The
513 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
514 FTC–2023–0064–2884 (NTCA—The Rural
Broadband Association); FTC–2023–0064–3143
(ACA Connects—America’s Communications
Association); FTC–2023–0064–3233 (NCTA—The
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Commission’s decision to narrow the
final rule to covered goods or services
renders these comments inapplicable.
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(c) Public Comments: Unquantified
Costs to Consumers
The NPRM noted that there may be
unquantified costs of the rule in the
form of consumer confusion as
consumers adjust to upfront pricing.
Commenters argued there were several
additional unquantified costs to
consumers. One commenter suggested
that consumers would experience
higher search time if companies limit or
eliminate price advertising to avoid the
regulatory risk of providing an
inaccurate total price.515 The
Commission reiterates that the rule does
not require firms to eliminate price
advertising; rather the rule requires
covered firms to present total price to
consumers whenever businesses offer,
display, or advertise any price of a
covered good or service. The
Commission believes that unnecessarily
high consumer search time and
anticompetitive effects resulting from
different pricing strategies are already a
problem absent the rule, where firms
advertise a mix of dripped prices,
upfront prices, and no prices. The
commenter did not provide evidence for
why, under the rule, some firms are, or
would be, unable to advertise total price
or why it would result in higher search
time and a less competitive equilibrium
than the status quo. The Commission
received two additional comments with
similar concerns as they apply to the
telecommunications and rental housing
industries, which are no longer subject
to the final rule.516
Two commenters also suggested there
might be potentially higher consumer
search time if businesses unbundle
previously bundled options in an effort
to reduce the advertised price in
response to the rule, stating that hotels,
for example, may make amenities such
as wi-fi, gym access, and parking payper-use.517 The Commission
acknowledges that some businesses may
unbundle previously bundled options
but reiterates that the rule prohibits
businesses from treating features as
optional if they are necessary to render
the good or service fit for its intended
use. The Commission also notes that
internet & Television Association); FTC–2023–
0064–3234 (CTIA—The Wireless Association).
515 FTC–2023–0064–3127 (U.S. Chamber of
Commerce).
516 FTC–2023–0064–3143 (ACA Connects—
America’s Communication Association; FTC–2023–
0064–3296 (Bay Area Apartment Association).
517 FTC–2023–0064–3127 (U.S. Chamber of
Commerce); FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
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consumers are likely to punish firms
that unbundle features that they expect
to be included in total price by taking
their business elsewhere. A commenter
also speculated that there may be an
increase in deadweight loss if
businesses set inefficiently high prices
as they reoptimize prices or seek to cut
costs by reducing the quality of goods
and services.518 The Commission
believes this is unlikely. Under the rule,
there will be competitive pressure to
adjust both price and product quality to
more efficient levels when firms must
present total price. As discussed in
section V.E.1.b, drip pricing sometimes
leads consumers to underestimate the
total price of a good or service. The
result is that consumers start
transactions not understanding that the
final amount of payment will be higher
than what they are willing or able to
pay. For example, consumers may book
premium seats to a concert believing
they could afford the purchase, only to
realize afterward that the total price was
understated. Had they understood the
final amount of payment, they would
have selected seats at a lower price
point or skipped the concert altogether.
The final rule will help ensure that
consumers’ preferences, both in terms of
cost and quality, can be realized.
One industry group argued that
because intermediary travel websites
rely on short-term lodging firms for
accurate price information, the
proposed rule may incentivize these
firms to charge intermediaries a
premium for accurate pricing
information, ‘‘knowing that the
intermediaries face significant
regulatory risk without access to such
information.’’ 519 The commenter
suggested that these additional costs
could be passed onto consumers
without adding any value. As explained
in section III, the Commission reiterates
that the rule requires businesses that
sell or advertise through intermediaries
to provide the intermediaries with
accurate pricing information (including
about mandatory and optional fees). The
rule’s coverage of business-to-business
transactions protects consumers when
they purchase goods or services, the
sellers that do business with
intermediaries, and the intermediaries
themselves. The Commission further
notes that hotels are already free to
charge travel websites and
intermediaries money in exchange for
pricing information, yet they do not
because these travel websites and
518 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
519 FTC–2023–0064–3293 (Travel Technology
Association).
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intermediaries allow the hotels to reach
more consumers. In addition, under the
status quo, intermediaries already
contend with different fee practices
across short-term lodging firms and are
required to ensure they consistently
disclose pricing information to
consumers; the final rule should obviate
the need for intermediaries to deal with
inconsistent fee practices moving
forward. Therefore, the final rule should
not change any incentives relative to the
status quo, and it is unlikely that hotels
will change their behavior in this
respect as a result of the rule.
A commenter disagreed with the
Commission’s statement that consumer
confusion will be a temporary cost as
prices adjust.520 The commenter also
argued that consumers may inefficiently
under-consume when confronted with
higher upfront prices. The Commission
believes that consumers who may
inefficiently under-consume due to the
rule because they are anticipating
hidden fees are the same consumers
who are accurately accounting for
hidden fees and efficiently consuming
under the status quo. The percentage of
consumers who expect and anticipate
hidden fees is likely to be very small
because, as discussed in the NPRM,
empirical and theoretical models
consistently show that consumers
strongly and systematically
underestimate the full price they will
pay when faced with drip pricing, and
they pay more than they otherwise
would in a transparent marketplace.521
Therefore, if these consumers are savvy
enough to adjust their expectations and
accurately account for hidden fees
under the status quo, then it is likely
that they will quickly adjust their
expectations after the final rule becomes
effective and any under-consumption
will be temporary.
The commenter also misinterpreted
the results of a study conducted in the
live-event ticketing market, Blake et al.
(2021) (the ‘‘Blake Study’’), in an effort
to support the claim that seeing total
price will deter consumers from making
efficient and economically desirable
purchases.522 The Blake Study found
520 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
521 Tom Blake et al., Price Salience and Product
Choice, 40 Mktg. Sci. 619 (2021), https://doi.org/
10.1287/mksc.2020.1261; Michael R. Baye et al.,
Search Costs, Hassle Costs, and Drip Pricing:
Equilibria with Rational Consumers and Firms
(Nash-Equilibrium.com Working Paper, 2019),
https://nash-equilibrium.com/PDFs/Drip.pdf;
Alexander Rasch et al., Drip Pricing and its
Regulation: Experimental Evidence, 176 J. Econ.
Behav. & Org. 353 (2020), https://doi.org/10.1016/
j.jebo.2020.04.007.
522 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP, discussing Blake, supra note 521).
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that providing an upfront total price
reduces both the quantity and quality of
purchases relative to the inefficiently
high levels of quantity and quality
purchased under dripped prices. In
other words, when consumers do not
have truthful, timely, and transparent
information about the final price, they
purchase goods of higher quality and
make more purchases than they would
if they had full information. The
commenter incorrectly implied that this
reduction amounts to inefficient
underconsumption when, in fact, it
represents a return to an efficient level
and quality of consumption compared
to drip pricing. The authors explicitly
concluded: ‘‘Our empirical results
support our hypotheses: price
obfuscation distorts both quality and
quantity decisions.’’ 523
Five industry groups identified what
they incorrectly labeled as three
additional types of unquantified costs
for consumers. The ‘‘costs’’ identified
actually are either transfers from
consumers to producers (resulting in no
net loss for society) or reflect
misunderstandings of the rule. These
commenters claimed that prices would
increase as businesses pass compliance
costs onto consumers,524 that
prohibiting businesses from displaying
partitioned pricing would decrease
transparency for consumers,525 and that
forcing businesses to display all
optional fees upfront would overload
and confuse consumers with often
irrelevant information.526 None of these
are true costs resulting from the final
rule. First, increased prices that result
from the sellers’ increased compliance
costs are a transfer of consumer surplus
to producer surplus and do not result in
a cost to society. Second, the rule does
not prohibit itemization. As long as total
price is clear and conspicuous and most
prominent, businesses are free to
display the components of total price if
they so choose. Finally, the rule does
not require businesses to display all
optional fees upfront. Rather, businesses
must disclose clearly and
conspicuously, before the consumer
consents to pay, the nature, purpose,
and amount of any fee or charge
imposed on the transaction that been
excluded from total price.
523 Blake,
supra note 521.
524 FTC–2023–0064–3238
(Gibson, Dunn &
Crutcher LLP); FTC–2023–0064–3033 (The Rebel
Lounge et al.).
525 FTC–2023–0064–3028 (Competitive Enterprise
Institute); FTC–2023–0064–3208 (FreedomWorks).
526 FTC–2023–0064–3127 (U.S. Chamber of
Commerce).
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One policy organization commented
on the study 527 cited in the NPRM that
shows partitioned pricing decreases
consumers’ ability to accurately recall
total costs and increases their
demand.528 The commenter argued that
the conclusion cited in the NPRM does
not follow from the study because
participants who recalled a lower price
could have known the total cost but
misunderstood the question to be asking
for the base price excluding the fees.
This interpretation is incorrect because
there was no ambiguity in the study
question at issue; it explicitly asked for
the total cost inclusive of all fees.
cases where price is determined through
customization, total price may not be
known until after consumers have
finalized their selection of options. The
Commission addresses contingent fees
in section III.
(d) Public Comments: Unquantified
Costs to Third Parties
One commenter argued that, as
consumer expectations adjust to upfront
prices, inefficiently low spending may
affect other businesses in the supply
chain such as manufacturers, packagers,
shippers, and warehouses.529 The
commenter also argued that lower
spending may affect live-event venues
and ticket resellers due to decreased
sales in food, drinks, and merchandise.
In addition, the commenter claimed that
lower spending will lead to lower sales
tax revenue for State and local
governments, causing them to borrow
more money at high interest rates, raise
taxes, or eliminate services. As
discussed in detail in section V.E.2.c,
the Commission believes that any
inefficient underconsumption due to
consumer confusion is likely to be
temporary, as are any resulting costs to
third parties.
One commenter argued that benefits
are too high because the Preliminary
Regulatory Analysis overestimated
consumer search costs that result from
drip pricing.531 It argued that consumers
benefit from seeing an advertisement
with dripped fees compared to their
position before seeing any
advertisement. The Commission
believes this is not the correct
comparison to make when determining
whether consumer search time will
change as a result of the rule; a more apt
comparison considers consumer benefit
when faced with total price versus drip
pricing. The Commission expects that
the rule will decrease consumer search
time, because consumers will spend less
time searching for total price under the
rule’s framework versus a dripped
pricing framework.
A commenter argued that the rule’s
estimated benefits are too high because
the value-of-time estimate of $24.40 is
too high.532 The $24.40 figure is
calculated by taking 82% of the 2022
mean hourly wage from the Bureau of
Labor Statistics. A meta-analysis of
eleven studies conducted between
2004–2015 finds that the value of time
as a percentage of mean wage is about
82% in the United States.533 In
addition, previous studies indicate that,
over time, people’s time has become
more valuable as a fraction of what they
earn.534 So, it is possible that the
current percentage in 2024 may actually
be higher than 82%. The final regulatory
analysis in section V.E updates the
value of time using the same method but
(e) Public Comments: Costs From
Incorporating Contingent Fees Into Total
Price
Several commenters, including
industry groups, policy organizations,
and an academic, expressed concern
that it would be difficult for firms to
display total price in cases where total
price is unknown because it depends on
consumer conduct or choices.530 In
527 Vicki G. Morwitz et al., Divide and Prosper:
Consumers’ Reactions to Partitioned Prices, 35 J.
Mktg. Rsch. 453 (1998), https://doi.org/10.1177/
002224379803500404.
528 FTC–2023–0064–3028 (Competitive Enterprise
Institute).
529 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
530 See, e.g., id.; FTC–2023–0064–3140 (Merchant
Advisory Group); FTC–2023–0064–3180
(Independent Restaurant Coalition); FTC–2023–
0064–3300 (National Restaurant Association); FTC–
2023–0064–3202 (TechNet); FTC–2023–0064–3127
(U.S. Chamber of Commerce); FTC–2023–0064–
3173 (Center for Individual Freedom); FTC–2023–
0064–3258 (National Taxpayers Union Foundation);
FTC–2023–0064–2891 (Mary Sullivan, George
Washington University, Regulatory Studies Center);
FTC–2023–0064–3293 (Travel Technology
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2. Comments on Benefits
Section V.D.2.a addresses the concern
of some commenters that the NPRM’s
benefit calculations are too high, and
section V.D.2.b outlines several
unquantified benefits identified by
commenters.
(a) Public Comments: Benefits Are Too
High
Association); FTC–2023–0064–3133 (National
Multifamily Housing Council and National
Apartment Association); FTC–2023–0064–3296
(Bay Area Apartment Association).
531 FTC–2023–0064–3028 (Competitive Enterprise
Institute).
532 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
533 Daniel S. Hamermesh, What’s to Know About
Time Use?, 30 J. Econ. Surv. 198 (2016), https://
doi.org/10.1111/joes.12107.
534 Id.
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with the more recent 2023 mean hourly
wage.
The commenter further asserted that it
would be more accurate to calculate the
value of time as a percentage of the
median hourly wage instead of the mean
hourly wage, stating that ‘‘the mean
wage is driven by a few outliers.’’ 535
Relying on the median hourly wage,
however, would be incorrect and
reflects a misunderstanding of how the
value of time is calculated. The value of
time initially was calculated as an
absolute dollar amount per hour in the
studies reviewed by the Hamermesh
(2016) paper, and then expressed as a
percentage of the mean hourly wage at
that time. That percentage can be
applied to the current mean hourly
wage to calculate an updated value of
time. If the Commission expressed the
value of time as a percentage of the
median wage, this would not be a ‘‘more
accurate’’ calculation of the value of
time as the commenter suggests, but
simply a different way of expressing the
same value of time estimated by
Hamermesh (2016).
The commenter also argued that the
Commission’s valuation of time estimate
is inaccurate because some consumers
may have lower valuations of time, such
as consumers who earn no wages or
lower wages, and consumers who
‘‘enjoy shopping’’ and may not believe
they incur costs from searching.536
These concerns are consistent with the
Commission’s estimated value of time,
which captures an average of a
representative group of American
consumers across eleven studies; some
individuals will have lower valuations
of time, and some will have higher.
Furthermore, the Commission
distinguishes between efficient and
inefficient searching by consumers.
Consumers, based on their preferences,
may find some amount of search, or
comparison shopping, to be beneficial to
their consumption choices. A consumer
will naturally choose an efficient level
of search such that the marginal benefit
of discovering an additional different
price or comparable good equals the
marginal cost of the time and effort to
perform the additional search. The
Commission recognizes the purpose of
this efficient level of search and does
not count it as a harm. When consumers
face drip pricing, they must spend
additional time and effort to acquire full
pricing information allowing them to
535 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
536 Id.
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properly comparison shop. This
additional time and effort results in an
inefficient level of search that harms
consumers with no countervailing
benefit. In the Commission’s final
regulatory analysis, the estimate of cost
savings through reduced search time is
based on the estimated difference
between consumer search time under
drip pricing and consumer search time
under upfront pricing; that is, the
estimate is based solely on the estimate
of the inefficient level of search.
Finally, another commenter argued
that benefits are too high in the shortterm lodging calculation because the
Preliminary Regulatory Analysis
estimated the reduction in listings
viewed as a result of the proposed rule
using data from a study done in the liveevent ticketing market.537 However, the
Commission’s base number of listings
viewed under the status quo was taken
from studies conducted in the shortterm lodging industry. The live-event
ticketing study provided a scaling factor
that the Commission used to estimate a
percentage reduction in listings viewed
in response to the rule. The commenter
neither demonstrated why the
Commission’s method overestimated the
reduction in listings viewed nor
provided the Commission with
additional data.
(b) Public Comments: Unquantified
Benefits
The NPRM identified the rule’s
unquantified benefits, primarily a
reduction in deadweight loss as
consumers make more efficient
purchasing decisions. Several comments
from consumer and worker protection
groups identified additional
unquantified benefits of the rule to lowincome households,538 incarcerated
people and their families,539 and to
restaurant workers.540 Although these
comments no longer apply to the final
rule, the Commission acknowledges that
the broader rule was likely to positively
impact some vulnerable populations
like those discussed in the comments
and may have had second-order effects
on housing security and the labor
market.
One commenter also recommended
that the Commission further explain or
537 FTC–2023–0064–3127 (U.S. Chamber of
Commerce).
538 FTC–2023–0064–2883 (District of Columbia,
Office of the People’s Counsel).
539 FTC–2023–0064–3283 (National Consumer
Law Center, Prison Policy Initiative, and advocate
Stephen Raher).
540 FTC–2023–0064–3248 (DC Jobs With Justice
on behalf of Fair Price, Fair Wage Coalition).
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quantify why the rule would result in
enforcement resource savings as stated
in the NPRM.541 The Commission does
not quantify the net effect of the rule on
enforcement resources due to a lack of
data, but discusses in detail the rule’s
enforcement benefits in section V.A.
Based on its experience, the
Commission finds that the resources it
needs to expend under the two-step
pathway pursuant to section 19(a)(2) are
typically greater because the
Commission needs to initiate two
separate proceedings.
3. Comments on the Economy-Wide
Break-Even Analysis
In this section, the Commission
addresses comments specific to the
economy-wide break-even analysis of
the Preliminary Regulatory Analysis.
Section V.D.3.a addresses comments
that argued the Commission’s breakeven analysis contained incorrect
assumptions or errors; section V.D.3.b
addresses comments that claimed a
break-even analysis is not enough to
justify an economy-wide rule; and
section V.D.3.c addresses a comment
that argued the break-even analysis is
satisfactory and recommended further
analysis to strengthen it.
(a) Public Comments: Break-Even
Analysis Has Incorrect Assumptions or
Contains Errors
Three commenters argued that the
Commission’s assumption that 90% of
firms are already in compliance with the
proposed rule was inaccurate.542 This
comment does not apply to the final
rule, which no longer contains an
economy-wide analysis. However, the
Commission reaffirms its break-even
calculation in the Preliminary
Regulatory Analysis, and acknowledges
uncertainty regarding the number of
firms in the economy that currently
employ unfair or deceptive fees or
charges and that would need to incur
additional costs to comply with the rule.
To address the uncertainty, the
Preliminary Regulatory Analysis
provided both the break-even benefits
required if 90% of firms in the economy
are already compliant with the rule, as
well as the break-even benefits required
if 50% of the firms were already
compliant with the rule.
541 FTC–2023–0064–3146 (Institute for Policy
Integrity, New York University School of Law).
542 FTC–2023–0064–3233 (NCTA—The Internet &
Television Association); FTC–2023–0064–3238
(Gibson, Dunn & Crutcher LLP); FTC–2023–0064–
3294 (International Franchise Association).
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One commenter also argued that the
$6.65 average annual per-consumer
benefit number in the Preliminary
Regulatory Analysis is too low because
the Commission calculated the
necessary break-even benefit level by
dividing estimated costs by all U.S.
adults, rather than only consumers who
make live-event ticket and short-term
lodging purchases.543 The Commission
emphasizes that the $6.65 figure from
the Preliminary Regulatory Analysis is
an average per-person benefit. In the
same way that the estimated attorney
hours assumes that some small
businesses will not hire an attorney to
ensure compliance, the benefit per
consumer figure reflects the fact that
some adults will not encounter dripped
fees. The Commission does not dispute
that some consumers will see much
higher benefits than others. The same
argument applies to the final rule,
where the Commission recalculates the
average annual per-consumer breakeven benefit level using only the costs
from covered goods or services.
Finally, the same commenter
contended that both the one-time and
annual costs for the high-end estimates
in table 2 of the Preliminary Regulatory
Analysis were calculated incorrectly.544
This comment no longer applies to the
final rule, which does not contain an
economy-wide break-even analysis.
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(b) Public Comments: Break-Even
Analysis Is Not Enough To Justify an
Economy-Wide Rule
Some commenters disagreed that the
rule should apply to the whole economy
when the Preliminary Regulatory
Analysis quantifies a net benefit for two
industries and relies on a break-even
analysis for the remainder of the
economy.545 Other commenters
similarly stated that the Preliminary
Regulatory Analysis should include an
industry-by-industry cost-benefit
analysis.546 The final rule is limited to
543 FTC–2023–0064–3238 (Gibson, Dunn &
Crutcher LLP).
544 Id.
545 See, e.g., id.; FTC–2023–0064–3127 (U.S.
Chamber of Commerce); FTC–2023–0064–2891
(Mary Sullivan, George Washington University,
Regulatory Studies Center); FTC–2023–0064–3173
(Center for Individual Freedom); FTC–2023–0064–
3208 (FreedomWorks); FTC–2023–0064–3143 (ACA
Connects—America’s Communications
Association); FTC–2023–0064–3258 (National
Taxpayers Union Foundation).
546 See, e.g., FTC–2023–0064–3133 (National
Multifamily Housing Council and National
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only covered goods or services, which
are offered by the live-event ticketing
and short-term lodging industries.
The Commission emphasizes that a
break-even analysis is encouraged by
OMB Circular A–4 when there are
unquantifiable costs or benefits, and
affirms that its break-even analysis in
the Preliminary Regulatory Analysis is
consistent with OMB guidance.547 In the
final regulatory analysis, the
Commission identifies some of the
unquantified benefits to the rule and
provides a similar break-even analysis
for the live-event ticketing and shortterm lodging industries. The
Commission also provides benefit-cost
analyses demonstrating that the
quantified benefits exceed the
quantified costs.
(c) Public Comments: Break-Even
Analysis Is Satisfactory
Conversely, another commenter noted
that the Commission’s break-even
analysis is satisfactory and suggested
the Commission provide further
analysis to support the conclusion that
time savings resulting from the rule are
likely to exceed the break-even
threshold.548 Although this comment no
longer applies to the final rule, which
focuses on addressing hidden and
misleading fees in the live-event
ticketing and short-term lodging
industries, the Commission
acknowledges that there is economic
support for a broader rule.
E. Economic Regulatory Analysis of the
Final Rule’s Costs and Benefits
The Commission has narrowed the
application of the final rule to a limited
set of covered goods or services, which
comprise live-event ticketing and shortterm lodging. This in turn necessitates
revisions to the Preliminary Regulatory
Analysis. The final regulatory analysis
no longer includes the economy-wide
break-even analysis. The Commission
provides the per-consumer break-even
benefit levels for the live-event ticketing
and short-term lodging industries, as
Apartment Association); FTC–2023–0064–3143
(ACA Connects—America’s Communications
Association); FTC–2023–0064–3258 (National
Taxpayers Union Foundation); FTC–2023–0064–
3197 (American Beverage Licensees).
547 Office of Mgmt. & Budget, Circular A–4 (Sep.
17, 2003) (hereinafter, OMB Circular A–4), https://
obamawhitehouse.archives.gov/omb/circulars_
a004_a-4/.
548 FTC–2023–0064–3146 (Institute for Policy
Integrity, New York University School of Law).
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well as quantified benefits and costs for
these industries. After incorporating
these revisions and updating numbers
based on recent data releases, the
Commission confirms in the final
regulatory analysis that the benefits of
the rule exceed the costs. Specifically,
the Commission estimates that the
quantified benefits of the rule will
exceed its quantified costs, and the
Commission believes that the total
benefits of the rule (quantified and
unquantified) will outweigh its total
costs (quantified and unquantified).
The Commission discusses in the
final regulatory analysis the projected
impact of the rule’s prohibition on
offering, displaying, or advertising any
price of a covered good or service
without clearly and conspicuously
disclosing total price, as well as the
rule’s prohibition on misrepresentations
regarding any fee or charge, including
the nature, purpose, amount, or
refundability of any fee or charge, and
the identity of the good or service for
which the fee or charge is imposed. The
Commission’s analysis also assesses the
impact of the rule’s required disclosures
of the nature, purpose, and amount of
any fee or charge imposed on the
transaction that has been lawfully
excluded from total price, the identity of
the good or service for which the fee or
charge is imposed, and the final amount
of payment. When possible, the
Commission quantifies the benefits and
costs and notes where some potential
benefits and costs are unquantified. If a
benefit or cost is quantified, the sources
of the data relied upon are indicated. If
an assumption is needed, the
Commission makes clear which
quantities are being assumed.
The Commission uses ten years for
the time period of analysis because the
Commission’s trade regulation rules are
subject to review every ten years. Tables
1 and 2 summarize the main findings of
the final regulatory analysis. Table 1
presents the potential costs, benefits,
and resulting net benefits for the liveevent ticketing and short-term lodging
industries. Quantified benefits in these
industries derive from time savings
consumers would experience due to
greater price transparency, leading to
more efficient shopping processes.
Quantified costs derive from the costs
firms would incur to comply with the
rule.
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potential adjustment costs or consumer
confusion as expectations adjust under
the rule.
For both quantified benefits and costs,
the final regulatory analysis provides a
range representing the set of
assumptions that result in a ‘‘low-end’’
or ‘‘high-end’’ estimate. These estimates
are calculated as present values over a
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The quantified net benefits for the
live-event ticketing and short-term
lodging industries are positive. There
are also unquantified benefits, which
may arise from a reduction in
deadweight loss as consumers
experience greater price transparency
and make fewer mistake purchases.
Unquantified costs may stem from
ten-year period. Benefits and costs are
more valuable to society the sooner they
occur. A discount rate (3% or 7%) is
used to adjust estimated benefits and
costs for differences in timing; a higher
discount rate is associated with a greater
value for benefits and costs in the
present.549
BILLING CODE 6750–01–P
549 We use 3% and 7% for the discount rate,
consistent with Office of Management and Budget’s
guidance. OMB Circular A–4, supra note 547.
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As discussed in more detail in section
V.E.3, the Commission only quantifies
benefits from reductions in consumer
search costs. However, the Commission
notes there are likely additional
consumer benefits in the form of
reduced deadweight loss. Since the
Commission is unable to quantify all of
the final rule’s potential benefits, the
final regulatory analysis instead
calculates the minimum value for the
1. Economic Rationale for the Final Rule
The final rule addresses the economic
problem of incomplete and insufficient
price information by businesses that
shroud the full price from the consumer
during parts of the purchasing process,
which harms both consumers and
honest competitors. Not including
mandatory fees in the full price when
consumers start the purchasing process
for a good or service may result in a
market failure. Firms may shroud the
full price to the consumer through the
practice of ‘‘drip pricing,’’ which is ‘‘a
pricing technique in which firms
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average consumer that the final rule
would need to generate in order for its
benefits to outweigh its quantified costs.
Table 2 presents low-end and high-end
estimates of the total quantified costs
and the necessary ‘‘break-even benefit’’
per consumer. Under the high-end cost
assumptions with a 7% discount rate,
the Commission’s analysis finds that
each consumer would need to
experience a benefit of $0.33 per year
over ten years for the rule’s benefits to
exceed its quantified compliance costs.
Under the low-end cost assumptions
with a 3% discount rate, that perconsumer amount is $0.08 per year over
ten years. As noted, the Commission
believes that the necessary break-even
benefit per consumer is likely between
$0.08 and $0.33 per year over ten years,
depending on which set of assumptions
is used.
advertise only part of a product’s price
and reveal other charges later as the
customer goes through the buying
process.’’ 550 Discovering the lowest full
price prior to a final purchase by going
through the checkout process with
multiple firms is inefficient and
involves additional consumer search
costs. In some cases, taking the time to
search for the full price from one firm
may result in the consumer losing the
opportunity to purchase the product
from another firm. Drip pricing and the
resulting imposition of additional
search costs make it more difficult for
consumers to compare prices across
platforms, which may soften price
competition in the market.551
550 Howard A. Shelanski et al., Economics at the
FTC: Drug and PBM Mergers and Drip Pricing, 41
Rev. Indus. Org. 303 (2012), https://doi.org/
10.1007/s11151-012-9360-x.
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551 White House, How Junk Fees Distort
Competition (Mar. 21, 2023), https://
www.whitehouse.gov/cea/written-materials/2023/
03/21/how-junk-fees-distort-competition/; Brian
Deese et al., White House, The President’s Initiative
on Junk Fees and Related Pricing Practice (Oct. 26,
2022), https://www.whitehouse.gov/briefing-room/
blog/2022/10/26/the-presidents-initiative-on-junkfees-and-related-pricing-practices/; Glenn Ellison, A
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A market failure may also occur when
firms shroud full price through nonaggregated partitioned pricing, in which
all of the components of the full price
(base price, fees, etc.) are presented to
consumers without the full price
itself.552 Non-aggregated partitioned
pricing, like drip pricing, imposes costs
on consumers by requiring them to
spend additional time to calculate the
full price for themselves. Consumers
tend to underestimate the full price
when faced with partitioned pricing,
and this underestimation leads to an
increase in demand. The increased
demand from erroneous price
calculations, in turn, leads to inefficient
overconsumption by consumers.
(a) Shrouded Pricing as a Cause of
Market Failure
A well-functioning market depends,
in part, on consumers having accurate
information regarding the price, and
other attributes, of the goods or services
being offered. Firms that engage in drip
pricing or employ partitioned pricing
create a friction in the operation of the
market by imposing costs on consumers
to acquire price information. Several
economic harms may arise from this
friction. First, holding consumer choices
and prices fixed, the added search cost
to acquire price information harms
consumers with no countervailing
benefit to firms. Second, because
shrouded prices make comparison
shopping more difficult, consumers
might make suboptimal consumption
decisions. In fact, consumers may find
it too costly to search for full and
accurate price information for some or
all goods or services under
consideration. The lack of full price
information may lead consumer demand
to become less sensitive, i.e., less
elastic, to changes in price, and
consumers will accept higher (qualityadjusted) prices than they would if they
were fully informed with clear and
upfront pricing. This, in turn, leads to
a third effect: since shrouded prices
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Model of Add-On Pricing, 120 Q.J. Econ. 585 (2005),
https://www.jstor.org/stable/25098747.
552 Morwitz, supra note 527.
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make it harder for consumers to
compare prices, some firms may gain
market power that allows them to raise
prices or decrease quality.553 Firms may
further distort the market outcome by
changing the products they offer to
consumers relative to a market where
prices are transparent.
The Commission discusses further the
first of these effects, the added search
costs incurred by consumers to acquire
complete price information, in section
V.E.2.a.i and quantifies these costs in
the live-event ticketing and short-term
lodging industries in section V.E.3.c and
V.E.3.d. The Commission discusses the
welfare impact of the second of these
effects, the distortion of consumers’
decisions due to lack of full
information, in this section. The third
effect, firms increasing their market
power in response to increases in search
costs, would exacerbate any welfare
losses caused by the distortion of
consumers’ decisions due to the lack of
full price information. However, the
Commission lacks the data to quantify
or distinguish their effects on
deadweight loss.
The distortion of consumers’
decisions due to the lack of full price
information, the second effect discussed
in the previous paragraph, can be
illustrated through a simple model of
supply and demand. For simplicity of
exposition, the analysis assumes that
there are many firms, each selling a
homogeneous product (i.e., good or
service). The analysis further assumes
that firms can adjust their prices and
pricing strategies, but that the quality of
the product is fixed.554
A useful starting point is to consider
the baseline market outcome where
consumers are fully informed; that is,
consumers know the full price upfront
(either because firms state the full price
upfront or because consumers can fully
and correctly predict any add-on
553 Baye,
supra note 521.
assumptions are made for exposition
purposes to abstract from the issues of market
power in pricing and strategic interactions between
firms. The general ideas from this simple
framework extend to differentiated products and
strategic interactions between a smaller number of
firms.
554 These
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prices). Since all firms sell the same
product, competition will lead all firms
to set equal prices at marginal cost.
Figure 1 illustrates the baseline market
outcome. The curve Dupfront represents
consumers’ demand when they are fully
informed. The supply curve S
represents the marginal cost to firms of
producing a given quantity of the
product. The intersection of Dupfront with
S, denoted by point A, at quantity
Qupfront and price Pupfront, represents the
outcome. The analysis will refer to this
as the ‘‘fully informed outcome.’’ At
point A, the marginal benefit to
consumers from consuming one
additional unit is equal to the marginal
cost to firms from the production of one
more unit of the product.
As long as there are no externalities
(i.e., impacts on third parties beyond the
consumers and firms under
consideration) from the consumption of
the product, this outcome is efficient;
that is, point A represents the
consumption level of the product that
provides the greatest benefit to society.
The benefit to society is measured by
the sum of the benefit to consumers,
called consumer surplus, and the
benefit to firms, called producer surplus
or profit. Consumer surplus is the net
benefit consumers experience from
consuming the product after accounting
for their expenditure on the product.
Consumer surplus is given by the
difference between the area of trapezoid
ACFG, the value to consumers from
consuming Qupfront units of the product,
and the area of rectangle ABFG, the total
expenditure on the product (Pupfront *
Qupfront); thus, consumer surplus is given
by the area of triangle ABC. Producer
surplus is the net benefit to firms from
selling the product after accounting for
their costs to provide the product.
Producer surplus is given by the
difference between rectangle ABFG, the
total revenue from the product, and the
area of trapezoid AEFG, the cost to firms
from producing Qupfront units of the
product; thus, producer surplus is given
by the area of triangle ABE. The net
benefit to society is then given by the
area of triangle ACE.
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As previously discussed, shrouded
pricing makes it more difficult for
consumers to ascertain the full price of
the product. In the case of drip pricing,
consumers will see the base price before
seeing additional mandatory price
components such as convenience fees.
Consumers may or may not be unaware
of the additional fees at the time they
make a purchase decision. If consumers
are fully aware of the additional fees, or
anticipate them correctly, the outcome
remains point A, which is efficient.
However, there is evidence that
consumers respond differently to a
change in the base price offered upfront
than to changes in the fees disclosed
separately from the base price.
Specifically, economic studies provide
evidence that consumers react less to
price changes through fees than they do
to price changes through the base
price.555 That is, consumer demand is
less elastic to the fee component of the
full price than it is to the base price.
One possible rationale for this
phenomenon is that consumers are fully
aware of base prices but are not, or only
partially, aware of fees.
The Commission analyzes the impact
drip pricing has on market outcomes in
the previous framework in two stages.
The analysis starts by examining the
case where consumers are completely
unaware of the additional fees, namely,
they assume that the base price offered
upfront is the full price. The analysis
then examines the case where
consumers are aware that a fee might be
added later but do not correctly estimate
the size of this fee. Note that this case
may arise under a variety of
circumstances. For example, all
consumers could be partially aware of
the fees, some consumers could be fully
aware of the fees while others are totally
unaware, or there could be a mixture of
consumers exhibiting different degrees
of awareness.
In the first stage of the analysis,
Pbase,unaware denotes the base prices firms
offer upfront, and Ptotal,unaware denotes
the full price firms charge, which is
equal to the base price plus t, the sum
of mandatory per unit fees not included
in the base price: Ptotal,unaware =
Pbase,unaware + t.556 Consumers determine
their consumption according to
Pbase,unaware, unaware that they are
actually going to pay Ptotal,unaware. This
difference between the price consumers
believe they are paying and the price
firms are actually charging leads to an
expansion in consumer demand relative
to demand when consumers are fully
informed. Specifically, as illustrated by
Figure 2, the firms’ deception causes an
upward shift in demand equal to the
price difference, t, from Dupfront to
Dunaware. The intersection of Dunaware
with S, illustrated by point J, at quantity
Qunaware and price Ptotal,unaware,represents
the outcome when consumers are
unaware of the fee and only observe the
base price.557
555 Blake, supra note 521; Raj Chetty et al.,
Salience and Taxation: Theory and Evidence, 99
Am. Econ. Rev. 1145 (2009), https://doi.org/
10.1257/aer.99.4.1145.
556 For simplicity of exposition, the analysis
assumes that all firms follow the same shrouding
strategy and set the same t.
557 This shift is entirely analogous to the shift that
would occur from a government subsidy. When a
subsidy is provided, the price consumers pay is
lower than the price charged by firms.
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Consumer surplus is now equal to the
area of triangle CHI minus the area of
triangle IJK. Relative to the fully
informed outcome, consumer surplus
decreases by the area of trapezoid ABHI,
the decrease in consumer surplus due to
the price increase, and the area of
triangle IJK, the decrease in consumer
surplus due to the deceptive pricing
strategy. Producer surplus is now equal
to the area of triangle EHJ. It increases,
relative to the fully informed outcome,
by the area of trapezoid ABHJ. This
trapezoid illustrates the transfer of
surplus from consumers to firms due to
the deceptive practice of shrouded
pricing. The net effect on society is now
the area of triangle ACE minus the area
of triangle AJK. Relative to the fully
informed outcome, the benefit to society
decreases by the area of triangle AJK (the
combined change in consumer and
producer surplus). This decrease in
social surplus is the harm, also referred
to as deadweight loss, caused by the full
shrouding of the fee.
The analysis now turns to the case
where consumers are aware of the
possibility of additional fees but do not
fully anticipate their magnitude. As
previously discussed, academic research
suggests that this might be the case.558
This reduced salience would increase
quantity demanded and incur a
deadweight loss compared to the fully
informed outcome (illustrated in Figure
1), although both the increase in
558 Blake,
supra note 521; Chetty, supra note 555.
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quantity demanded and the deadweight
loss would be smaller than in the case
where consumers were fully unaware of
the fees (illustrated in Figure 2).
Essentially, the aggregate demand curve
will lie somewhere between the upfront
demand curve in Figure 1 and the fully
shrouded demand in Figure 2. This
aggregate demand can come from (the
same) partial awareness by all
consumers or a mixture of different
degrees of awareness by different
consumers. A technical appendix in
section V.E.6 provides a more detailed
model of the impact of consumers’
partial awareness.
In summary, the shrouding of prices
distorts the market outcome by leading
consumers to consume more than they
would if they were fully aware of the
full price. The overconsumption by
consumers leads to a social cost in the
form of deadweight loss because the
resources used to produce the product
would have been put to better use if
consumer demand had not been
distorted in this manner. The
deadweight loss from the inefficient
consumption level is one component of
the welfare loss generated by drip
pricing, in addition to the increase in
consumer search costs and the possible
shift in pricing and product offerings
due to increased market power.
Collectively, these effects represent a
market failure.
Shrouded pricing likely cannot be
mitigated by competitive forces alone
once it has become pervasive in a
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market. Although consumers would
prefer upfront full prices, it is unlikely
that an individual firm in a market with
shrouded prices could increase its
market share by providing its full price
upfront. Under the expectation of
shrouded prices, consumers may
inadvertently interpret such a firm’s
upfront full price as a higher base price,
with fees added separately, leading the
firm to lose, rather than gain, business.
The distortion of consumer expectations
caused by shrouded pricing thus
prevents a shift to upfront pricing
through competition.
In many markets, goods and services
are differentiated, with higher quality
items selling at higher prices. In such
markets, drip pricing may lead to
outcomes characterized by inefficiently
high qualities in addition to the
inefficiently high quantities previously
discussed.559 Consumers may respond
to fully disclosed prices in these
markets by purchasing goods or services
of lower, more efficient quality in
addition to purchasing lower, more
efficient quantities of goods or services.
(b) Shrouded Pricing as a Source of
Biased Expectations
As explained in section V.E.1.a, firms
have incentives to distort consumer
demand toward an inefficient
equilibrium. This inefficiency may also
559 This phenomenon has been observed, for
example, in the live-event ticketing industry. See
Blake, supra note 521.
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arise in a behavioral context.560 By
shrouding full prices through drip or
partitioned pricing, a firm may bias its
consumers’ price expectations. For
example, consumers may respond to
dripped prices by anchoring their
beliefs on the base price and, thus,
systematically underestimate the price
of the good or service.561 This
underestimation, whether by all
consumers, or a subset of consumers,
leads to a similarly inefficient
equilibrium in which the good or
service is overconsumed and society
suffers a deadweight loss.
Several studies show how consumer
behavior changes because of drip
pricing. One study found that when
optional surcharges are dripped,
individuals are more likely to select a
more expensive option (after including
surcharges) than what they would have
chosen under upfront pricing.562 Even
when the participants became aware of
the additional fees, they were reluctant
to restart the purchase process because
they perceived high search costs from
doing so and inaccurately assumed that
all firms charge the same fees. A
different economics experiment found
that consumers encountering drip
pricing are more likely to make
purchasing mistakes if they are
uncertain about the extent of the drip
pricing.563
Another prominent study looked at
how consumers respond to the salience
of sales tax on goods, which affects the
full price of a product.564 In this study,
when the grocery store displayed the
full price of each item on shelves as part
of a field experiment, people purchased
fewer goods relative to the control
scenario in which sales tax was added
at checkout, despite knowing that the
final price being charged had not
changed. In 2014, StubHub conducted
an experiment in which some
consumers were presented with upfront
prices inclusive of fees while other
consumers were presented a base price
upfront with fees hidden until checkout.
This experiment revealed that
presenting consumers with full prices
upfront reduced both the quantity and
quality of tickets purchased relative to
560 David Laibson, Harvard U., Drip Pricing: A
Behavioral Economics Perspective, Address at the
FTC (May 21, 2012), https://www.ftc.gov/sites/
default/files/documents/public_events/economicsdrip-pricing/dlaibson.pdf.
561 Morwitz, supra note 527.
562 Shelle Santana et al., Consumer Reactions to
Drip Pricing, 39 Mktg. Sci. 188 (2020), https://
doi.org/10.1287/mksc.2019.1207.
563 Rasch, supra note 521.
564 Chetty, supra note 555.
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presenting consumers with dripped
prices.565
2. Economic Effects of the Final Rule
The model of incomplete price
information, described in section
V.E.1.a, provides a framework for
assessing the potential costs, benefits,
and transfers associated with the final
rule in the live-event ticketing and
short-term lodging industries. The rule
will result in positive net benefits if it
allows consumers to learn total price
more easily, improves consumer
comprehension of fees and charges as
they relate to total price, facilitates
comparison shopping, reduces search
costs, or otherwise allows consumers to
make choices that increase net welfare.
The Commission believes the rule will
accomplish these goals in the live-event
ticketing and short-term lodging
industries.
The Commission finds in section
V.E.1 that consumer demand in the liveevent ticketing and short-term lodging
industries is distorted by incomplete
price information—in simple terms,
consumers respond to lower base prices
even if fees are revealed or added up
later in a transaction. Thus, if a seller in
these industries uses hidden fees, that
seller may acquire a larger market share
by advertising lower initial prices than
other sellers not using hidden fees.
Absent the rule, competitive forces will
drive other firms in these industries to
also use hidden fees, as has become
evident as noted in section II.B. If firms
do not use hidden fees, they may have
to accept a lower market share, even
though their full prices to consumers are
similar to (or lower than) their
competitors. Thus, the Commission
finds that with the final rule, firms that
currently do not use drip pricing will no
longer face the competitive pressure to
employ hidden fees and may experience
higher revenue if consumers can more
easily compare prices across firms. The
Commission also finds that the rule will
generate costs as firms that currently
employ hidden or misleading fees adjust
how they convey prices to consumers.
Overall, the Commission expects the
rule will increase economic efficiency
through improved consumer price
calculations, resulting in reduced
deadweight loss and reduced consumer
search time that exceeds the costs to
firms of providing more transparent
pricing. It may also facilitate price
comparison by consumers, increase
competition among sellers, and put
downward pressure on prices. Due to a
lack of data, it is difficult to fully
quantify all the potential effects of the
565 See
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final rule. Where there may be impacts
that the Commission is unable to
quantify, it provides a qualitative
description.
(a) General Benefits of the Final Rule
Consumers will benefit from the rule
in several ways. In addition to
reductions in search costs and
deadweight loss, which are described in
greater detail herein, the Commission
expects there to be unquantified benefits
for consumers from the rule, including
reduced frustration and consumer stress
associated with surprise fees that distort
the purchasing process.
i. Reductions in Search Costs
Consumers will save time searching
for the total price of live-event tickets
and short-term lodging as a result of the
rule. In a well-functioning market,
consumers find it beneficial to
comparison shop for low prices. When
mandatory fees are obscured or
misrepresented, however, consumers
learn the full price at the end of the
process and may need to re-assess
whether they wish to purchase at a
higher price than originally expected or
to look for other options. Consumers
incur longer search times to discover
full prices and make informed
purchasing decisions. The final rule will
eliminate the need for additional,
inefficient amounts of time to determine
total price from sellers that do not
already provide total price upfront. The
Commission quantifies the reduction in
search costs in the live-event ticketing
and short-term lodging industries.
ii. Reductions in Deadweight Loss
As discussed in section V.E.1.a,
incomplete pricing information may
distort consumer demand. This
distortion will lead to an inefficient
market equilibrium and generate
deadweight loss, which results from
consumers purchasing higher quantities
of the good or service than they would
if fully informed. Under the final rule,
consumers will learn total price upfront.
Thus, the rule will likely mitigate
distorted consumer demand and prevent
welfare-reducing transactions.
Resources supporting overconsumption
will become available for better societal
use, and the deadweight loss will be
reduced or eliminated.
The disclosure of total price may also
reduce mistake purchases with respect
to product quality. Drip pricing can lead
consumers to purchase goods of
inefficient quality; the final rule will
allow consumers to choose more
efficient levels of quality. The
Commission does not quantify the
reduction in deadweight loss but finds
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that it is a positive benefit to the final
rule.
(b) Welfare Transfers
The Commission expects that prices
in the live-event ticketing and shortterm lodging industries will adjust in
response to the transparency facilitated
by the rule. These price adjustments
transfer welfare from one side of the
market to the other; consumer welfare
will increase, and producer profits will
decrease by the same amount. Typically,
transfers of welfare from one set of
people in the economy to another are
documented in a regulatory analysis,
but do not change net social welfare.566
Consequently, while it is likely that the
rule will result in transfers of welfare,
the Commission does not attempt to
estimate these transfers.
(c) General Costs of the Final Rule
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Firms in the live-event ticketing and
short-term lodging industries will likely
do a basic regulatory review to
determine how the rule applies to
them.567 Firms that are not already in
compliance with the rule may incur
additional costs to re-optimize the price
of goods and services. These firms may
also incur costs to adjust how they
display pricing information to disclose
total price whenever the price of a good
or service is displayed. For example,
firms may need to update websites or
reprint advertisements to comply with
the rule.
In addition, the Commission notes
that there may be other indirect shortterm costs that the Commission cannot
quantify. For instance, consumers who
are used to an existing pricing structure
that separately discloses mandatory fees
at the end of the purchase process may
mistakenly make inefficient purchases
while adjusting to the new regime of
upfront total price. Specifically,
consumers accustomed to dripped liveevent ticketing fees may initially underconsume when shopping for tickets
with upfront total price. The societal
cost of such inefficiencies would be
temporary and decrease as consumers
566 See OMB Circular A–4, supra note 547
(‘‘Transfer payments are monetary payments from
one group to another that do not affect total
resources available to society. A regulation that
restricts the supply of a good, causing its price to
rise, produces a transfer from buyers to sellers.’’
Even though a ‘‘net reduction in the total surplus
(consumer plus producer) is a real cost to society,
[ ] the transfer from buyers to sellers resulting from
a higher price is not a real cost since the net
reduction automatically accounts for the transfer
from buyers to sellers.’’).
567 This basic regulatory review also captures the
time it takes for firms to determine how a
nationwide rule interacts with any state-level
regulations to which they are already subject.
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adjust to the truthful, timely, and
transparent pricing required by the rule.
While the rule allows businesses to
exclude shipping charges from total
price until the point at which a
consumer may consent to pay, the rule
requires any internal handling costs that
were previously disclosed at the end of
the purchase process to be incorporated
in total price. Since shipping and
handling charges are sometimes
combined, businesses may have to
change how they account for handling
costs and how they advertise shipping
and handling costs to comply with this
provision.
3. Quantified Welfare Effects
This section quantifies the potential
benefits and costs of the final rule for
the live-event ticketing industry and the
short-term lodging industry. The
Commission provides quantitative
estimates where possible for these
industries, and it describes benefits and
costs that can only be assessed
qualitatively. The Commission estimates
that the quantified benefits will exceed
the quantified costs, and the
Commission believes that the total
benefits (quantified and unquantified)
will outweigh the total costs (quantified
and unquantified) of the rule.
(a) Quantified Compliance Costs
The Commission quantifies the
compliance costs for both industries
utilizing assumptions about the number
of hours required to determine and, if
necessary, come into compliance with
the final rule. The Commission expects
that, in response to the final rule, firms
will initially determine whether and
how the rule applies to their current
pricing and fee disclosure practices. The
Commission assumes firms with current
practices that align with the final rule
will incur, at most, one hour of lawyer
time to confirm compliance. This hour
of lawyer time is a proxy for the average
amount of time firms will need to
determine whether the final rule applies
to them. For example, some firms may
not employ an attorney at all but may
instead have a staff member review the
rule.
The Commission does not have data
on the exact costs noncompliant firms
will incur to comply with the final rule.
Some firms already may have developed
tools to comply with the rule because
they operate in jurisdictions, such as
California, with existing similar all-in
pricing requirements. Coming into
compliance with the rule should be
relatively easy for these firms. For other
firms, complying with the final rule may
require additional time and costs. To
capture both the variation and
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2133
uncertainty of costs across the two
industries, the analysis includes a series
of low- and high-end assumptions about
the number of hours required to comply
with the rule.568 For example, the
Commission’s analysis assumes that
firms not presently compliant will
employ a low end of five hours and a
high end of ten hours of lawyer time to
determine necessary steps to comply
with the rule. While some firms may
forgo legal advice, this range of lawyer
time serves as a proxy for any costs
associated with understanding and
preparing to comply with the rule.
The final rule’s requirement to
display total price may lead to shifts in
consumer demand and, consequently,
market equilibria. In response, firms
transitioning away from drip pricing
may need to determine new optimal
prices. The Commission’s analysis
assumes that these price reoptimizations will require firms to incur
a one-time, upfront cost of data scientist
time to perform this work. The analysis
assumes firms not presently compliant
will employ a low-end of forty hours
and a high-end of eighty hours of data
scientist time. Similar to the use of
lawyer hours in estimating compliance
costs, this range of data scientist time
serves as a proxy for any costs
associated with adjusting pricing
strategies in response to the rule.569
The Commission expects that the drip
pricing employed by firms not presently
compliant with the rule is, in many
cases, manifested in online sales. In
such cases, firms also will need to
adjust advertised prices as well as
purchase processes for online sales, and
the analysis assumes these adjustments
require firms to incur a one-time,
upfront cost of web developer time. The
analysis assumes firms not presently
compliant will employ a low end of
forty hours and a high end of eighty
hours of web developer time to become
568 The Commission requested additional
information on potential compliance hours in the
NPRM, but it did not receive consistent data.
Therefore, the Commission uses the same set of
assumptions on hours as used in the NPRM but
notes that the live-event ticketing and short-term
lodging industries are likely to have already
established systems necessary to comply with the
final rule due to operating in jurisdictions with
similar regulations.
569 It is possible that presently compliant firms
would also need to reoptimize prices in response
to shifts in market equilibria. That is, the shift in
an industry’s equilibrium resulting from the rule
could be significant enough that all firms in the
industry, compliant or not, would need to adjust
prices. Firms regularly reoptimize prices in
response to market shifts, but it is possible that this
price adjustment would require already compliant
firms to incur additional costs. The Commission
solicited, but did not receive, the data necessary to
quantify this potential cost to firms.
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compliant with the final rule.570 Once
firms are compliant with the rule, any
future changes to pricing displays or
purchasing systems are not a direct
consequence of the rule. Since the rule
will not take effect for four months,
some of these pricing display and
advertising updates may come at no
additional cost to certain firms. Many
firms regularly update their pricing
displays and advertisements. Any firms
that would, in their normal course of
business, update their displays and
advertising during the four month
window prior to the rule taking effect
would not incur the additional one-time
cost of updating their displays and
advertisements in response to the rule.
Because the Commission lacks data on
these business practices, the
Commission conservatively assumes
that all firms not presently compliant
with the rule will incur these costs. As
such, the Commission’s analysis likely
represents an overestimate of
compliance costs.
It may be the case that once the firm
incurs the one-time transition costs,
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570 The U.S. Department of Transportation also
uses an assumption of 80 hours of time to
reprogram flight quotation websites for the
Enhancing Airline Passenger Protections II rule.
U.S. Dep’t Transp., Preliminary Regulatory
Analysis: Enhancing Airline Passenger Protections
II (May 24, 2010), https://www.regulations.gov/
document/DOT-OST-2010-0140-0003 (‘‘Consumer
Rule II’’).
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there are no additional costs. For a lowend estimate of costs, the Commission’s
analysis assumes annual costs are $0
because there are zero additional hours
of labor. However, it may be the case
that, as firms transition into compliance
with the final rule, firms need to
reevaluate their pricing policies to
ensure continued compliance by
employing additional lawyer time on an
annual basis. Available data do not
allow the Commission to estimate the
exact annual compliance costs firms
may incur as various industries adapt to
the final rule. For the high-end cost
estimate, the Commission’s analysis
assumes firms require an average of ten
hours of lawyer time for annual
compliance checks. The Commission
recognizes some firms may not utilize
lawyer time but may delegate
compliance to non-attorney employees
and still incur annual compliance costs.
Data on non-lawyer compliance costs
are not available, and these potential
annual compliance costs are proxied
with lawyer time with the implicit
assumption that non-attorney employee
hourly wages are lower than lawyer
wages.
Table 3 presents the total compliance
costs as the sum of the industry-specific
compliance costs described in more
detail in section V.E.3.c and V.E.3.d.
The cost of employee time is monetized
using wages obtained from the Bureau
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of Labor Statistics’ May 2023 National
Occupational Employment and Wage
Estimates for the live-event ticketing
industry.571 For the short-term lodging
industry, the analysis uses industryspecific wages associated with the North
American Industry Classification
System (‘‘NAICS’’) codes.
571 U.S. Bureau Lab. Stat., Occupational
Employment and Wage Statistics, May 2023
National Occupational Employment and Wage
Estimates United States (May 2023), https://
www.bls.gov/oes/current/oes_nat.htm (‘‘OEWS
National’’); U.S. Bureau Lab. Stat., Occupational
Employment and Wage Statistics, Occupational
Employment and Wages, May 2023: 15–2051 Data
Scientists (May 2023), https://www.bls.gov/oes/
current/oes152051.htm (‘‘OEWS Data Scientists’’)
(providing the hourly wages for data scientists);
U.S. Bureau Lab. Stat., Occupational Employment
and Wage Statistics, Occupational Employment and
Wages, May 20231: 15–1254 Web Developers (May
2023), https://www.bls.gov/oes/current/
oes151254.htm (‘‘OEWS Web Developers’’)
(providing the hourly wages for web developers);
U.S. Bureau Lab. Stat., Occupational Employment
and Wage Statistics, Occupational Employment and
Wages, May 2023: 23–1011 Lawyers (May 2023),
https://www.bls.gov/oes/current/oes231011.htm
(‘‘OEWS Lawyers’’) (providing the hourly wages for
lawyers). This assumption is valid if hours spent in
compliance activities would otherwise be spent in
other productive work-related activities, the social
value of which is summarized by the employee’s
wage. To the extent that these activities can be
accomplished using time during which employees
would otherwise be idle in the absence of a rule,
our estimates will overstate the welfare costs of the
final rule.
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one-time compliance check, and firms
not presently in compliance, which
incur both one-time and recurring costs.
Compliance costs for the short-term
lodging industry are further
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disaggregated into costs for U.S. hotels
and U.S. home share hosts. Costs to
foreign hotels and home share hosts are
discussed in section V.E.3.d.ii.
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Table 4 presents the ten-year per-firm
annualized compliance costs for the
live-event ticketing and short-term
lodging industries, separated by firms
already in compliance, which incur a
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(b) Break-Even Analysis
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To have a positive net benefit, the
final rule’s benefits must outweigh its
costs. The Commission calculates the
break-even benefit per consumer based
on the quantified costs presented in
section V.E.3.b.572 That is, the
Commission determines the minimum
value the final rule would need to
generate for the average consumer for its
total benefits to outweigh its quantified
costs. The rule’s benefits may include
reduced search costs, reduced
deadweight loss, and reduced
psychological distress or frustration
from surprise fees. For this analysis, the
Commission considers costs in
annualized terms—the average
discounted cost of compliance per year
over 10 years.573 As such, the analysis
expresses the break-even benefit as an
572 In
section V.E.3.c and V.E.3.d, the
Commission quantifies the final rule’s net social
benefits for the live-event ticketing and short-term
lodging industries.
573 For purposes of discounting and annualizing
costs, the analysis assumes that firms incur onetime costs immediately, at the beginning of year 1,
and potential costs of annual compliance checks at
the end of each year.
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average benefit per consumer per year
over ten years.574
From Table 3, under the assumption
that firms and consumers discount
future years at 3%, the Commission’s
analysis estimates that the final rule
may result in costs as high as $644
million over 10 years. Assuming instead
a discount rate of 7% for future years,
the analysis estimates that the final rule
may result in costs as high as $603
million over ten years. To determine the
break-even benefit, the Commission’s
analysis begins with the total present
value of total costs and calculates the
annualized total costs across both
industries.575 Next, the Commission
calculates what the break-even benefit
would be per consumer, according to
the following formula:
Per Consumer Annualized Benefits ≥
(Annualized Quantified
Compliance Costs/Population)
574 Benefits to consumers, such as reductions in
search costs, will accrue continually over time. For
simplicity, the break-even analysis assumes that
annualized benefits accrue all at once at the end of
each year. As such, the break-even analysis may
overestimate the benefits required to outweigh
costs.
575 While total costs are higher with a smaller
discount rate, annualized costs are higher with a
larger discount rate due to higher upfront costs and
lower recurring costs.
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Table 5 presents the results of this
break-even analysis. According to the
2020 Census, there are 258,343,281
adults living in the United States. Thus,
the analysis divides the estimates of
annualized costs by the number of U.S.
adults to find the average consumer
benefit per year for 10 years required to
exceed quantified compliance costs. For
example, if the final rule results in an
average benefit to consumers that
exceeds $0.33 per year over ten years,
then the final rule’s benefits exceed its
quantified compliance costs under the
high-end assumption and an assumed
7% discount rate.
Table 5 also provides the break-even
benefit per consumer in terms of
minutes saved as a result of the final
rule. According to the Bureau of Labor
Statistics’ Occupational Employment
Statistics, the average hourly wage of
U.S. workers in 2023 was $31.48, and
recent research suggests that individuals
living in the U.S. value their non-work
time at 82% of average hourly earnings.
Thus, the value of non-work time for the
average U.S. worker would be $25.81
per hour.576 If the analysis divides the
576 See OEWS National, supra note 571
(providing the mean hourly wage); Hamermesh,
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2137
break-even dollar benefit per consumer,
using the high-end assumptions and a
discount rate of 7% ($0.33), by the value
of saved search time ($25.81/hour) and
converts to minutes, the break-even
saved search time per consumer is 0.77
minutes. That is, if the final rule results
in savings from reduced search time that
exceed 0.77 minutes per consumer per
year over ten years, then the benefits
solely from reduced search time will
exceed quantified compliance costs.577
Although the Commission
acknowledges that benefits of the final
rule may vary across consumers, as
some consumers may be more likely
than others to consume live-event
tickets and/or short-term lodging, the
Commission finds it highly likely that
consumers would experience average
search time savings of this amount.
There are a few important caveats to
this break-even analysis. This analysis
may overestimate the number of
noncompliant firms in the live-event
ticketing and short-term lodging
industries. In that case, this assumption
leads to an overestimate of both costs
and necessary break-even benefits. On
the other hand, there may be more firms
not already in compliance with the final
rule, in which case this assumption
results in an underestimate of both costs
and break-even benefits.
The Commission cannot forecast all
potential consequences and costs. This
break-even analysis does not account for
any unquantified benefits or costs due
to unintended consequences. However,
if the benefits from reduced deadweight
loss caused by consumers’ incomplete
price information, reduced search time,
and beneficial unintended
consequences outweigh the costs from
compliance and harmful unintended
consequences, then the rule results in
positive net social benefits. The
Commission believes benefits will
exceed the costs.
i. Sensitivity Analysis: Assume Higher
Wage Rates
The Commission received comments
regarding the wage rates used in the cost
estimation. To address these comments,
this section provides the break-even
analysis described in section V.E.3.b
using rates that are double the average
wage rate obtained from the Bureau of
Labor Statistics May 2023 National
Occupational Employment and Wage
Estimates.578 Specifically, the wage
rates used for this analysis are $169.68
for lawyer time to review compliance,
$114.46 for data scientist time to reoptimize pricing, and $91.90 for web
developer time. Using these higher wage
rates, the break-even benefit required to
exceed quantified compliance costs is
provided in Table 6.579
supra note 533 (providing the value of consumer
time).
577 Assuming a 3% discount rate and the highend assumptions, the break-even time saved per
consumer per year would be 0.68 minutes.
578 See sources cited supra note 571, including
OEWS National (providing the mean hourly wage);
OEWS Data Scientists (providing the hourly wages
for data scientists); OEWS Web Developers
(providing the hourly wages for web developers);
and OEWS Lawyers (providing the hourly wages for
lawyers).
579 Wages are doubled in this sensitivity analysis,
but the break-even benefit per consumer does not
exactly double because not all costs depend on
wages. One component of the cost calculation in the
short-term lodging industry is the cost to home
share hosts of re-optimizing prices. This cost is
evaluated using an estimate of hosts’ hourly value
of time rather than wages, which is not doubled.
Therefore, the break-even benefits per consumer
presented in Table 6 are slightly less than double
those in Table 5.
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The break-even analysis under the
assumption of doubled wages implies
that if the final rule results in an average
benefit to consumers that exceeds $0.59
per year over ten years, then the final
rule’s benefits exceed its quantified
compliance costs under the high-end
assumption and an assumed 7%
discount rate. In terms of minutes saved
per consumer, the high-end cost
assumptions with doubled wages and a
7% discount rate imply that if the final
rule results in savings from reduced
search time that exceed 1.36 minutes
per consumer per year over ten years,
then the benefits solely from reduced
search time will exceed quantified
compliance costs.
(c) Quantified Benefits and Costs: LiveEvent Ticketing Industry
This section analyzes the final rule’s
quantified benefits and costs in the liveevent ticketing industry. Quantified
benefits are limited to the expected
reductions in search costs to consumers.
Since there is an additional,
unquantified benefit of reduced
deadweight loss, which is discussed
conceptually in section V.E.2.a.ii, the
net benefit estimated in the following
analysis is conservative. The
Commission finds that the quantified
benefits and costs indicate that the rule
will have a positive net benefit, even
without accounting for the unquantified
benefit of reducing deadweight loss.
Consumers in the live-event ticketing
industry are often surprised by
mandatory fees at the end of the
purchase process.580 In 2022, online
580 E.g., White House, How Junk Fees Distort
Competition, supra note 551.
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event ticket sales were reported to be
$8.1 billion.581 Live events include
concerts (30.3%), sporting events (33%),
and dance, opera, and theater
productions (12.4%).582 For many
consumers, there are no close
substitutes for the specific product that
they wish to purchase: a ticket to attend
a live event. Thus, when consumers are
presented with surprise mandatory fees,
the consumer either pays the full price
including the fees, spends time
searching for a new option such as a
different seat or a different seller, or
forgoes the purchase entirely.
The live-event ticketing industry is
unique relative to other industries
because there is a large and robust
secondary market. A given ticket to an
event may be sold in the primary
market, and then resold multiple times
in the secondary market. It is difficult to
fully quantify how many live-event
ticket purchases are made in the U.S.,
how many involve mandatory fees, and
the typical amount of the fee. Many liveevent ticket sellers appear to include
some kind of fee, although the size and
type of the fees vary across sellers.583 In
581 Michal Dalal, Online Event Ticket Sales in the
US, IBIS World (May 2023) (‘‘Ticket Sales Industry
Report’’).
582 Id.
583 Numerous commenters from the live-event
ticketing industry recognized the pervasiveness of
various ticketing fees. See, e.g., FTC–2023–0064–
3212 (TickPick, LLC observed the ‘‘widespread’’
deceptive practice of bait-and-switch pricing); FTC–
2023–0064–3230 (Future of Music Coalition
commented that they have worked to ‘‘deal[ ] with
the scourge of junk fees in various parts of the
economy,’’ including live touring); FTC–2023–
0064–3105 (Charleston Symphony affirmed that
‘‘requiring sellers to disclose the total price clearly
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a non-generalizable sample, the GAO
found live-event ticketing fees in
primary and secondary ticket markets
averaged 27% and 31% of the ticket’s
price, respectively.584
Following White House and
Congressional calls for disclosure of
hidden fees, and after the ANPR was
announced, some ticket sellers pledged
to show all-in prices when the
consumer begins the purchase
process.585 However, absent the final
rule, market forces would likely return
to the equilibrium of hidden mandatory
fees. In fact, the National Association of
Ticket Brokers and StubHub, Inc.
submitted comments to the ANPR in
support of a rule requiring all-in pricing,
but commented that such a rule would
only be effective if applied to all ticket
sellers and rigorously enforced.586 As
discussed in section III.B.1.b, the
and conspicuously[ ] addresses a pressing issue in
the nonprofit performing arts sector’’).
584 U.S. Gov’t Accountability Office, Event Ticket
Sales: Market Characteristics and Consumer
Protection Issues, (Apr. 12, 2018), (‘‘GAO Report’’),
https://www.gao.gov/products/gao-18-347.
585 See, e.g., White House, President Biden
Recognizes Actions by Private Sector Ticketing and
Travel Companies to Eliminate Hidden Junk Fees
and Provide Millions of Customers with
Transparent Pricing (Jun. 15, 2023) https://
www.whitehouse.gov/briefing-room/statementsreleases/2023/06/15/president-biden-recognizesactions-by-private-sector-ticketing-and-travelcompanies-to-eliminate-hidden-junk-fees-andprovide-millions-of-customers-with-transparentpricing/. Some ticket sellers, such as TickPick, LLC,
have never used hidden fees; S. Comm. on
Commerce, Sci., & Transp., TICKET Act, https://
www.commerce.senate.gov/services/files/
071401A3-D280-414C-AEDB-A9B57F276067.
586 FTC–2022–0069–6089 (ANPR) (National
Association of Ticket Brokers); FTC–2022–0069–
6079 (ANPR) (StubHub, Inc.).
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Commission received similar comments
in response to the NPRM emphasizing
that the benefit of the rule requires
industry-wide coverage so that no single
seller is allowed to charge surprise fees
at the end of the transaction. If any
seller utilizes hidden fees, they may
capture a larger market share by
advertising lower initial prices. Absent
a Federal rule applying to all sellers,
competitive forces might drive ticket
sellers to return to the use of hidden
fees. Thus, the Commission’s analysis
quantifies benefits and costs relative to
the baseline equilibrium where sellers
do not disclose total price upfront.
In this final live-event ticketing net
benefit analysis, the Commission
updates firm counts, wage rates, any
inflation-adjusted values, value of time,
and 10–K live-event ticket revenue
information to reflect the most recent
available data. The Commission was
unable to update any numbers from
IBISWorld Reports.
i. Live-Event Ticketing: Estimated
Benefits of the Final Rule
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(a) Consumer Time Savings When
Shopping for Live-Event Tickets
The final rule requires disclosure of
total price inclusive of all fees or
charges that a consumer must pay in
order to use the good or service for its
intended purpose. Required disclosure
of total price and prohibitions on
misrepresentations save consumers time
when shopping for a live-event ticket by
requiring the provision of salient,
material information upfront and
eliminating time spent pursuing ticket
offers priced above the amount the
consumer is willing to spend, also
known as the consumer’s reservation
price.
The Commission’s analysis assumes
that, as a result of the rule, the total time
spent by a consumer conducting the
transaction will decrease, because some
consumers will reduce the number of
ticket listings they view prior to making
a ticket purchase. For example, the
Blake Study examined an experiment on
StubHub where fees were presented
upfront to some consumers and at the
end of the purchase to others.587 The
experiment found that the percentage of
consumers who only view one listing is
74% when fees are presented at the end
of the transaction versus 83% when fees
are presented upfront. Using the
distribution of listings viewed by
consumers as reported in the Blake
Study, the analysis calculates that the
reduction in the average number of
587 Blake,
supra note 521.
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listings a consumer views when fees are
displayed upfront is 0.1525 listings.
To calculate the reduction in
consumer search time resulting from
upfront pricing, the Commission
requires information on the length of
time a consumer spends viewing a
single listing. The Commission is not
aware of any data available on this.
However, many ticket sellers utilize a
‘‘countdown clock’’ where the selected
tickets in the consumer’s shopping cart
expire and are returned to the
marketplace. During this countdown
clock, a consumer who was unhappy
with the revealed total price could
search for another ticket without losing
the original ticket. The Commission
uses this range of countdown clock time
as a proxy for a low-end and high-end
estimate of the time spent viewing a
listing. These countdown clocks range
from five to ten minutes per ticket
transaction.588 Multiplying the assumed
length of a ticket transaction of five or
ten minutes by the estimated reduction
in viewed listings from the Blake Study
results in a search time savings of
0.7625 to 1.525 minutes per consumer
transaction.589
Next, the Commission’s analysis
estimates the number of consumer
purchases of live-event tickets. Live
Nation (which owns Ticketmaster)
reported selling over 329 million feebearing tickets in the primary and
secondary markets using the
Ticketmaster system in its 2023 10–K
SEC filing.590 However, this figure
combines North American and
international ticket sales. Live Nation
also reported that slightly more than
two-thirds of concert events were in
North America, so the analysis applies
that proportion to the total combined
ticket sales and assumes that
Ticketmaster sold more than 221
million tickets in North America. To
estimate the number of tickets sold
solely in the U.S., the analysis then also
adjusts the number of tickets by the
share of North American GDP
588 Ticketmaster states that the amount of time it
imposes varies by event but references a fiveminute purchasing period. FAQ’s: Why does
Ticketmaster enforce a time limit when making
purchases online?, Ticketmaster.com.au, https://
www.ticketmaster.com.au/h/faq.html. Based on a
small, non-representative sample of ticket purchase
attempts, StubHub appears to generally offer ten
minutes to complete a ticket purchase.
589 See also Consumer Rule II, supra note 570, at
39. The Preliminary Regulatory Impact Analysis for
Consumer Rule II assumed airfare consumers would
save five minutes of search and estimation time if
all websites provided full-fare information upfront.
590 Live Nation Entm’t Inc., Annual Report (Form
10–K) (Feb. 22, 2024) (‘‘Live Nation 10–K’’), https://
investors.livenationentertainment.com/sec-filings/
annual-reports/content/0001335258-24-000017/
0001335258-24-000017.pdf.
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2139
attributable to the U.S. (0.87 in 2023),
which results in an estimated 192
million tickets sold in the primary and
secondary markets by Ticketmaster in
the U.S.591
To find the total number of tickets
sold in the U.S. by all live-event ticket
sellers, the Commission’s analysis
extrapolates from Ticketmaster’s ticket
sales using its market share. However,
Ticketmaster’s market share is
uncertain. In 2010, the Department of
Justice found that Ticketmaster had
maintained a market share of more than
80% for the previous fifteen years.592 If
the Commission’s analysis assumes that
Ticketmaster still has an 80% share of
the live-event ticket market (which
includes both primary and secondary
ticket markets), it can estimate the total
number of tickets sold in the U.S. by
dividing Ticketmaster’s ticket sales in
the U.S. by 80%. This provides a lowend estimate of the number of tickets
sold in the U.S. of 240 million tickets.
However, Ticketmaster did not begin
selling in the secondary market until
after it merged with Live Nation. Based
on publicly available information, the
Commission is uncertain of
Ticketmaster’s market share in the
secondary market for tickets.593 If
Ticketmaster does not have 80% of the
ticket market (both primary and
secondary), the number of tickets sold
in the U.S. would exceed the low-end
estimate of 240 million tickets. To
generate a high-end estimate of the total
number of tickets sold in the U.S., the
Commission’s analysis uses the reported
revenue for the full online ticket sales
industry provided by the private
research firm IBISWorld and calculates
Ticketmaster’s revenue share of the
industry. IBISWorld reports the online
ticket sales industry, including both
primary ticket sellers and ticket
591 U.S. GDP in 2023 was estimated to be $27.36
trillion and GDP for North America was estimated
to be $31.4 trillion. IMF DataMapper United States
Datasets, IMF.org, https://www.imf.org/external/
datamapper/profile/USA; IMF DataMapper North
America Datasets, IMF.org, https://www.imf.org/
external/datamapper/profile/NMQ. The
Commission’s analysis adjusts North American
tickets (221 million) by 87% to estimate the number
of tickets sold in the United States, resulting in 192
million.
592 See Christine A. Varney, Assistant Attorney
General, Antitrust Division, U.S. Dep’t of Justice,
Remarks at the South by Southwest Conference:
The TicketMaster/Live Nation Merger Review and
Consent Decree in Perspective (Mar. 18, 2010),
https://www.justice.gov/atr/speech/ticket
masterlive-nation-merger-review-and-consentdecree-perspective.
593 The Live Nation 10–K, supra note 590, does
not separate out tickets sold by Ticketmaster in the
primary versus secondary markets. Ticketmaster
now sells tickets on the secondary market, which
includes several other sellers such as StubHub, Inc.,
Vivid Seats, TickPick, LLC, Ace Ticket, Alliance
Tickets, Coast to Coast Tickets, and others.
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resellers, earned $12.5 billion in
revenue in 2023.594 The Live Nation 10–
K reported ticketing revenue of $3
billion in 2023, which suggests that
Ticketmaster has a 24% revenue share
of the online ticketing industry.595 The
Commission’s analysis extrapolates a
high-end estimate of the total number of
tickets sold in the U.S. by dividing
Ticketmaster ticket sales in the U.S. by
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594 See https://www.ibisworld.com/industrystatistics/market-size/online-event-ticket-salesunited-states/.
595 Assuming Ticketmaster’s market share is
equivalent to its revenue share (of the primary and
secondary markets) also assumes that the average
price of a ticket sold by Ticketmaster is the same
as (or lower than) the average price of a ticket sold
by the rest of the industry. If, however, the average
price of a ticket sold by Ticketmaster is higher than
average prices in the rest of the industry, then
Ticketmaster’s revenue share is higher than its
ticket share, and the extrapolation understates the
total number of tickets sold in the U.S.
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24%, which results in an estimate of
801 million live-event tickets sold in the
U.S.
Lastly, the reduction in search time of
0.7625 to 1.525 minutes is per consumer
purchase, not per ticket purchase. The
Commission’s analysis assumes that the
average consumer purchase is between
1.5 and 3 tickets.596 Thus, the total
number of tickets sold is divided by 1.5
or 3 to arrive at an estimated range for
596 The Commission does not currently have
information on the average number of tickets
purchased in a transaction. However, there is
reason to believe the average would be greater than
one because most venues limit the number of
tickets that can be purchased in a given transaction,
suggesting that there is consumer demand for
purchases of more than a single ticket. The limit is
dependent on the event. Ticketmaster, Why is there
a ticket limit?, https://help.ticketmaster.com/hc/enus/articles/9781245025937-Why-is-there-a-ticketlimit.
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the number of consumer purchases. The
analysis estimates the range of live
event consumer purchases in the U.S. to
be 80 million on the low end and 534
million on the high end.
When multiplied by the number of
transactions per year, the reduction in
minutes spent viewing ticket listings
will generate a total time savings of 1.02
million to 13.6 million hours per year.
Using the value of non-work time for the
average U.S. worker of $25.81 per hour,
the Commission’s analysis estimates
that the total benefit from time savings
for completed transactions is roughly
$26.3 million to $350.6 million per year,
depending on how conservative its
assumptions are. Table 7 presents the
expected benefits of time savings over
the next ten years in present value.
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consumers are better able to find the
tickets that match their desired quantity
and quality (seat type or location).599
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(b) Additional Unquantified Benefits:
Reductions in Deadweight Loss and
Abandoned Transactions
597 Live
Due to the incomplete price
information problem described in
section V.E.1, the final rule requiring
ticket sellers to show total price of
tickets upfront will likely result in a
reduction of deadweight loss. Recent
research suggests that when consumers
know total prices for tickets upfront,
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Nation 10–K, supra note 590.
National, supra note 571; Hamermesh,
supra note 533.
599 Blake, supra note 521. Live-event tickets are
an example of a differentiated product; there are
higher quality tickets (e.g., better views, more
comfortable seats, cover from the elements) that are
associated with higher price tiers. Blake et al. find
that consumers who face drip pricing purchase
more expensive, higher quality tickets than they
would if provided with upfront pricing.
598 OEWS
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2141
The analysis does not quantify the
reduction in deadweight loss, but such
a reduction is a positive benefit of the
rule.
Another unquantified benefit to the
final rule is a potential decrease in
abandoned transactions. For example, in
some cases, once the additional
information impacting full price is
revealed, consumers may fully abandon
the transaction (i.e., not purchase any
ticket). Although the Commission
solicited comment in the NPRM on the
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frequency of, and the reasons for,
abandoned transactions in the live-event
ticket market to help quantify this
benefit, it did not receive this data and
cannot determine the quantity of such
abandoned transactions and the amount
of time spent pursuing them. As a
result, this benefit is unquantified.
ii. Live-Event Ticketing: Estimated Costs
of the Final Rule
This section describes the potential
costs of the final rule’s provisions and
provides quantitative estimates where
possible. For live-event ticketing, the
cost of employee time is again
monetized using wages obtained from
the Bureau of Labor Statistics’ May 2023
National Occupational Employment and
Wage Estimates.600 Because live-event
ticketing is not associated with a
specific NAICS code, the Commission
uses wages at the national level rather
than the industry-specific wages that are
used to calculate costs for the short-term
lodging industry.
The costs to sellers from the rule
include a review of whether the rule
applies, and, if the firm is not currently
compliant with the rule, one-time costs
to comply with the rule, as well as
recurring annual costs to review and
ensure ongoing compliance. The
Commission’s analysis presents two cost
scenarios corresponding to different
assumptions of how many hours are
required to comply with the rule and
how many firms would be affected by
the rule. The analysis presents these as
low-end and high-end cost scenarios.
To estimate costs for the entire liveevent ticket-selling industry, the
Commission’s analysis calculates the
cost per seller and multiplies that by the
number of sellers in the industry. There
is some uncertainty about the number of
live-event ticket sellers that would be
affected by the rule because, while the
600 OEWS
National, supra note 571.
code 561599 ‘‘comprises
establishments (except travel agencies, tour
operators, and convention and visitors bureaus)
primarily engaged in providing travel arrangement
and reservation services.’’ U.S. Census Bureau,
North American Industry Classification System,
561599 All Other Travel Arrangement and
Reservation Services (2022), https://
www.census.gov/naics/?input=561599&year=
2022&details=561599.
602 U.S. Census Bureau, 2021 SUSB Annual
Datasets by Establishment Industry (Dec. 2023),
https://www.census.gov/data/datasets/2021/econ/
susb/2021-susb.html.
603 Id.
604 Note that some live-event ticket sellers may be
organized as non-profit entities and thus could fall
outside of the Commission’s jurisdiction. The
Commission did not find data on the proportion of
ticket sellers that are non-profits and thus uses the
full number of firms. If a non-trivial number of
ticket sellers are outside the jurisdiction of the
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601 NAICS
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NAICS classification system does not
define a classification solely for ticket
sellers, two different NAICS codes
might include ticket sellers. The GAO
Report used the NAICS code 561599,
which is ‘‘All Other Travel Arrangement
and Reservation Services.’’ 601 This
NAICS category includes 1,442 firms;
some live-event ticket sellers, such as
Tickets.com and Vivid Seats, use this
classification.602 Other live-event ticket
sellers, such as Ticketmaster and
StubHub, however, are classified as
NAICS code 7113, which is ‘‘Promoters
of Performing Arts, Sports, and Similar
Events,’’ and includes 7,998 firms.603 As
a high-end estimate of the number of
live-event ticket sellers, the
Commission’s analysis uses the sum of
the firms within these two NAICS code
and assumes there are 9,440 firms
potentially impacted by the final
rule.604
The 9,440 figure is potentially overinclusive, as many firms within NAICS
code 561599 and 7113 do not directly
sell tickets or charge mandatory fees,
and thus would not be impacted by the
final rule. The private research firm
IBISWorld estimated that the number of
firms in the online live-event ticket
selling industry was 3,326.605 The
Commission’s analysis uses the 3,326
figure as a low-end estimate of the
number of firms.
Next, the Commission’s analysis
estimates the number of hours a firm
would spend complying with the rule.
As with assumptions regarding the
number of firms, the following
estimation utilizes low-end and highend values for the number of hours
necessary for compliance. Because
many ticket sellers operate in other
countries that currently have
requirements similar to the final rule
(Canada, Australia, the United
Kingdom, and the European Union
member states), ticket sellers already
may have incorporated any changes
required by the final rule to their
operating practices. The websites
already may be programmed; the
lawyers already may be prepared to
advise on compliance with the rule; and
the data scientists already may have
determined the optimal pricing strategy.
Thus, sellers would have relatively low
costs to transition to all-in pricing in the
U.S.606
In this low-end cost scenario, because
live-event ticket sellers already are
prepared to advertise total prices to
consumers, the one-time, upfront cost of
determining optimal prices and
updating the purchase systems in terms
of the number of required hours is
negligible. The Commission’s analysis
assumes five hours of lawyer time to
determine if the rule applies, forty hours
of data scientist time to re-optimize
pricing strategy, and forty hours of web
developer time to edit and reprogram
the website to display upfront prices.
For the low-end cost scenario, the
analysis also assumes there are no
annual costs after the firm has incurred
the one-time transition costs.
In the high-end cost scenario, the
Commission’s analysis assumes that
ticket sellers have not laid the
groundwork to comply with the rule.
The high-end cost scenario assumes
sellers require twice the number of
hours to determine optimal prices, reprogram the website to include total
price, and review and confirm
compliance. Thus, the one-time costs
include 10 hours of lawyer time, 80
hours of data scientist time, and eighty
hours of web developer time. For the
high-end cost estimate, the analysis
assumes there are recurring annual costs
of ten hours of lawyer time per year to
review and confirm compliance.607
Commission and not subject to the provisions of the
rule, then the total costs to ticket sellers is
overestimated.
605 Ticket Sales Industry Report, supra note 581.
606 FTC–2023–0064–3212 (TickPick, LLC
commented: ‘‘For the most part, ticketing
marketplaces would incur an immaterial cost to
implement all-in pricing. Internationally, major
ticket marketplaces are already required to comply
with true all-in pricing in Canada and the United
Kingdom. The technology to display tickets
inclusive of fees in the form of a toggle is a widely
available functionality. Put differently, the
technology already exists within ticketing platforms
to eliminate drip pricing and would simply need to
be applied to events in the U.S.’’).
607 FTC–2023–0064–3122 (Vivid Seats
commented: ‘‘We believe that the FTC is
underestimating the amount of employee time
required by at least a factor of five.’’). The
Commission notes that other commenters stated the
transition to upfront pricing for ticket sellers would
be as simple as a toggle switch and that most ticket
sellers already have the capability to provide Total
Price due to existing regulations in other countries.
See, e.g., FTC–2023–0064–3212 (TickPick, LLC);
FTC–2023–0064–0132 (Individual Commenter who
purchased tickets from GameStop and StubHub
noted that ‘‘on all of these sites the fees are not
explained until the final page unless you go find the
toggle to include fees as you are looking for
tickets’’); FTC–2023–0064–3207 (Consumer Reports
noted a consumer who commented: ‘‘While I
appreciate that TM [Ticketmaster] now has the
option to view all your fees up front as part of the
price if you toggle that option, its totally insane that
fees can be 25% of the cost at LEAST.’’); FTC–
2022–0069–6162 (ANPR) (Recording Academy
noted that ‘‘StubHub allows the consumer to toggle
‘Show prices with estimated fees’ filter during the
ticket search’’). The Commission did not receive
any definitive data on the number of hours this
change would take and thus retains the low-end
and high-end hours estimates presented in the
NPRM.
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iii. Live-Event Ticketing: Net Benefits
2143
In Table 9, the Commission’s analysis
presents net benefits using the
quantified benefits and costs discussed
in section V.E.3.c.i and V.E.3.c.ii. To
calculate the low-end of the range for
net benefits, the analysis subtracts the
total quantified costs using the high-end
cost assumptions from the total
quantified benefits using the low-end
benefit assumptions. For the high-end of
the range for net benefits, the analysis
subtracts the low-end estimate of total
quantified costs from the high-end
estimate of total quantified benefits.
608 U.S. Census Bureau, 2021 SUSB Annual
Datasets by Establishment Industry, supra note 602.
Hourly wages are from the Bureau of Labor
Statistics. See sources cited supra note 571,
including OEWS Data Scientists (providing the
hourly wages for data scientists); OEWS Web
Developers (providing the hourly wages for web
developers); and OEWS Lawyers (providing the
hourly wages for lawyers).
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Using various assumptions, the
quantified benefits and costs imply that
the rule will have a positive net benefit,
even without accounting for the
additional benefit of reducing
deadweight loss.
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iv. Live-Event Ticketing: Uncertainties
The Commission’s ability to precisely
estimate benefits and costs is limited
due to uncertainties in key parameters.
The quantified benefits and costs for the
live-event ticketing industry rely on a
set of assumptions, based on the best
available public information. When the
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data are unclear, the analysis relies on
assumptions that generate a range of
low-end and high-end estimates. In
Table 10, the analysis summarizes those
key assumptions and their effect on the
resulting estimate of quantified benefits
and costs.
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(d) Quantified Benefits and Costs: ShortTerm Lodging Industry
Businesses in the short-term lodging
industry, which include both traditional
hotels 609 as well as home share options
like Airbnb and VRBO, often charge a
variety of mandatory add-on fees. These
fees are typically either disclosed
upfront but separately from the base
price (a practice known as partitioned
pricing), or revealed just before
payment, after the consumer has clicked
through multiple pages of a listing (a
practice known as drip pricing).
Sometimes, these fees are not disclosed
at all or are disclosed only when a
consumer checks out at the conclusion
of their stay. These fees may include
mandatory surcharges referred to by
hotels as ‘‘resort fees,’’ ‘‘amenity fees,’’
or ‘‘destination fees.’’ Hotels often
justify charging these fees as necessary
to cover the costs of amenities that are
not reflected in the base rate, such as
Wi-Fi, pool and gym access, towels,
parking, or shuttle services. Home share
websites like Airbnb and VRBO may
include mandatory fees such as
‘‘cleaning fees,’’ ‘‘service fees,’’ or ‘‘host
fees.’’ These fees are mandatory and do
not depend on the consumer’s use of the
amenities or services.
Consumer behavior studies have
shown that both partitioned pricing and
drip pricing cause consumers to
underestimate the full price of the
product, even when all components of
the price are disclosed upfront.610 As a
result, disclosing mandatory surcharges
separately from the room rate without
more prominently disclosing total price
is likely to harm consumers by
increasing search costs and reducing
consumer surplus.611 These fees may
reduce consumer surplus if consumers
respond by booking a room that is more
expensive than the room they would
have chosen under upfront total pricing.
Partitioned pricing and drip pricing may
also increase search costs if consumers
spend more time looking at additional
listings in search of a cheaper hotel.
One industry group states that 6% of
U.S. hotels charge mandatory fees,
which amounts to over $2.5 billion paid
in resort fees annually by U.S.
consumers.612 This number
609 Throughout this section, we use ‘‘hotel’’ as an
umbrella term for hotels, motels, inns, short-term
rentals, vacation rentals, traditional bed and
breakfasts, hostels, and other places of lodging.
610 Shelanski, supra note 550.
611 Mary Sullivan, Fed. Trade Comm’n, Economic
Analysis of Hotel Resort Fees 4 (2017), https://
www.ftc.gov/system/files/documents/reports/
economic-analysis-hotel-resort-fees/p115503_hotel_
resort_fees_economic_issues_paper.pdf.
612 FTC–2023–0064–3094 (American Hotel &
Lodging Association); Bjorn Hanson, U.S. Lodging
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underestimates how much U.S.
consumers pay in mandatory fees
because it does not include fees from
finding accommodations on the home
share market through websites like
Airbnb and VRBO, or fees incurred from
booking at foreign hotels with U.S.facing websites. Resort fees in the U.S.
average 3.9% of the per-night cost of a
room, and can exceed 20% of the pernight cost, especially at lower cost
hotels.613
This section analyzes the final rule’s
quantified benefits and costs in the
short-term lodging industry. Quantified
benefits are limited to the expected
reductions in search costs to consumers.
Since there is an additional,
unquantified benefit of reduced
deadweight loss, which is discussed
conceptually in section V.E.2.a.ii, the
net benefit estimated in the following
analysis is conservative. The
Commission finds that the quantified
benefits and costs indicate that the rule
will have a positive net benefit, even
without accounting for the unquantified
benefit of reducing deadweight loss.614
i. Short-Term Lodging: Estimated
Benefits of the Final Rule
As a result of the final rule, the
Commission expects that the time
consumers spend searching for shortterm lodging will decrease because
prices will be easier to compare within
and across websites. Some consumers
will reduce the number of short-term
lodging listings they view prior to
booking or spend less time
understanding and assessing the full
price.615 In its analysis, the Commission
Industry Fees and Surcharges Forecast to Increase
to a New Record Level in 2018—$2.93 Billion, and
Another Record Anticipated for 2019—the Newest
Emerging Category is ‘‘Resort Fees’’ for Urban
Luxury and Full Service Hotels (Aug. 27, 2018),
https://bjornhansonhospitality.com/fees-%26surcharges.
613 Sally French & Sam Kemmis, How to Avoid
Hotel Resort Fees (and Which Brands Are the
Worst), NerdWallet (updated Aug. 1, 2024, 11:53
a.m. PDT), https://www.nerdwallet.com/article/
travel/hotel-resort-fees.
614 In this final short-term lodging net benefit
analysis, the Commission updates firm counts,
wage rates, any inflation-adjusted values, value of
time, and 10–K hotel revenue information to reflect
the most recent available data. The Commission
was unable to update any numbers from IBISWorld
Reports.
615 The drip pricing literature suggests that,
because time to view one listing is lower under
upfront pricing, a subset of consumers may view
more listings rather than fewer because the cost of
viewing an additional listing has decreased.
Sullivan, supra note 611. It is unclear how this
affects total search time. If the higher number of
listings viewed is offset by the lower time it takes
to view each listing, the total search time will be
lower under upfront pricing for this subset of
consumers. If total time increases, it can be
classified as ‘‘good’’ search time for this subset of
consumers because it results in consumers
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makes the conservative and simpler
assumption that the time spent viewing
a listing remains the same, and that
consumers reduce the number of listings
they view. Table 11 quantifies the
benefits of such time savings and
provides low- and high-end estimates to
account for uncertainty in the available
statistics.
The Commission’s analysis focuses on
the benefits that accrue to consumers
who book rooms from within the United
States on any U.S.-facing website, which
can include bookings at both domestic
and foreign short-term lodgings. Shortterm lodgings include both traditional
hotels as well as rooms booked through
home share websites like Airbnb and
VRBO. In this section, the Commission
outlines how it calculates the benefits
listed in Table 11 as well as the
assumptions made. The table reports a
set of basic search statistics used in the
calculation, the savings per year for
consumers who book at U.S. short-term
lodgings, the savings per year for
consumers who book at foreign shortterm lodgings with U.S.-facing websites,
and the combined total savings for all
U.S. consumers per year.
Although not all short-term lodgings
charge resort fees, the lack of a unified
standard of upfront pricing across
listings makes comparing prices
difficult and time consuming for
consumers. Even a single short-term
lodging website can vary in whether
listings have hidden fees. Different hotel
brands belonging to the same larger
hotel company may impose hidden fees
for listings in some cities but not in
others. Some listings may note whether
resort fees are included in the base
price, but in very fine print under the
listed price. Some listings may not say
anything, requiring consumers to click
through the listing to learn whether
there are hidden fees at the end of the
booking process. Given that a minimum
of 6% of hotels 616 impose drip or
partitioned pricing, and the average
hotel shopper visits seventeen travel
websites before booking,617 consumers
purchasing their preferred hotel room.
Alternatively, another group of consumers could
view fewer listings because upfront prices allow
consumers to compare rooms more easily and select
their preferred hotel room more quickly. Blake,
supra note 521. The total search time for these
consumers will decrease. The Commission’s
analysis focuses on the latter group of consumers
because the change in their search time represents
a decrease in ‘‘bad’’ or unnecessary searches caused
by drip pricing.
616 FTC–2023–0064–3094 (American Hotel &
Lodging Association).
617 Chris Anderson & Saram Han, The Billboard
Effect: Still Alive and Well, 17 Cornell Hosp. Rpt.
1 (2017), https://hdl.handle.net/1813/70982. The
Commission calculates the average number of
websites visited by summing the average number of
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are likely to encounter at least one
website that imposes dripped or
partitioned pricing in their search for a
hotel. Even if consumers complete their
whole search and booking process
without visiting any websites that
impose hidden resort fees, the fact that
there could be hidden fees creates
uncertainty and may cause consumers
to click through more listings than they
otherwise would have to learn if the
initial price is truly the final price.
Therefore, the Commission quantifies
the benefits for all U.S. consumers who
book a room in a given year, regardless
of whether they interacted with a
website that imposed dripped or
partitioned pricing.
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(a) Search Statistics
The Commission uses two different
studies to calculate low- and high-end
estimates for the average number of
minutes it takes to view one listing. On
the low end, the analysis uses statistics
on Airbnb user search behavior
collected by Fradkin (2017) to calculate
that consumers spend 9.48 minutes to
view one listing.618 On the high end, the
analysis uses a hotel search cost model
developed by Chen and Yao (2016) to
calculate the average search cost per
listing.619 Using this average search
cost, the Commission estimates that
consumers spend 14.18 minutes
viewing one listing. Appendix B in
section V.E.7 contains calculation
details for both estimates. Using the
estimates from each study as low- and
high-end estimates ensures that the
analysis captures user search behavior
when shopping on home share websites
like Airbnb and when shopping for a
traditional hotel.
To estimate the reduction in average
listings viewed due to dripped or
partitioned pricing, the Commission’s
analysis uses results on the average
reduction in listings viewed under
upfront pricing from an experiment in
the live-event ticket industry.620 That
study found that the average reduction
in listings viewed under upfront pricing
was 10.6% of the mean listings viewed
under drip pricing. For the low-end
estimate, the analysis applies the same
OTAs, Hotel Sites, TripAdvisor, and Other Meta
websites visited sixty days prior to reserving a
room.
618 Andrey Fradkin, Search, Matching, and the
Role of Digital Marketplace Design in Enabling
Trade: Evidence from Airbnb (MIT Initiative on the
Digit. Econ., Working Paper, 2017), https://
ide.mit.edu/wp-content/uploads/2017/07/Search
MatchingEfficiency.pdf.
619 Yuxin Chen & Song Yao, Sequential Search
with Refinement: Model and Application with
Click-Stream Data, 63 Mgmt. Sci. 4345 (2016),
https://doi.org/10.1287/mnsc.2016.2557.
620 Blake, supra note 521.
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proportion to the mean listings viewed
by Airbnb users in Fradkin (2017) (2.367
listings, proxied by number of contacts)
and finds a reduction of 0.25 listings.
On the high end, the Commission
applies this to the mean listings viewed
by hotel searchers in Chen and Yao
(2016), 2.3 listings, and finds a
reduction of 0.24 listings.621
Multiplying these numbers by the
minutes to view one listing results in
2.39 to 3.47 minutes saved per
transaction. These are likely
conservative estimates, given that they
assume consumers only view one
website before booking a room. As
previously stated, one study suggested
that consumers visit an average of
seventeen websites before booking.622
The average reduction in listings viewed
may also underestimate benefits from
eliminating dripped and partitioned
pricing because it is more difficult to
adapt to the wide variability of fees in
the short-term lodging industry than it
is in the live-event ticketing industry,
where listings have the same percentage
fee. Short-term lodgings have different
fees, and the number of lodgings with
such fees will vary across markets.
Finally, as is described in detail in
section V.E.3.b, the Commission’s
analysis uses $25.81 as the value of one
hour work time.
(b) U.S. Hotels and Home Shares
Next, the Commission calculates the
total savings per year for U.S.
consumers who book at U.S. short-term
lodgings, which includes both U.S.
621 Although the Commission is basing its
estimate about reduction in listings on data that
comes from the ticketing industry, this method
results in the most conservative reduction of
viewed listings compared to other methods. The
most relevant study from the hotel search cost
literature estimates that improvements in hotel
rankings (which may be loosely comparable to
removing drip pricing) reduces search costs by
$11.50. See Raluca M. Ursu, The Power of Rankings:
Quantifying the Effect of Rankings on Online
Consumer Search and Purchase Decisions, 37 Mktg.
Sci. 530 (2018), https://doi.org/10.1287/
mksc.2017.1072. Given the Commission’s estimates
of the time to view one listing (between 9.48 and
14.18 minutes), this suggests an average reduction
of between 2.95 and 1.95 listings viewed, which is
implausible given that various papers find the
average number of listings viewed at baseline to be
between 2 and 3. Thus, while some papers find
substantially higher search costs than the
Commission’s method, these findings reinforce that,
if anything, the benefits estimates presented here
are likely conservative.
622 See Anderson & Han, supra note 800. It is
unclear whether the relationship between websites
viewed and time saved is linear, as consumers may
save less time on the fifteenth website they view
than they do on the first. As such, it is difficult to
extrapolate from the Commission’s estimates to the
total time saved for consumers who view multiple
websites. Therefore, to remain conservative in its
estimate of benefits, the Commission’s analysis
assumes that consumers visit only one website.
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hotels and home shares. The
Commission’s analysis finds the total
number of nights booked in the U.S. in
2022 by dividing the total revenue the
U.S. short-term lodgings industry
earned from rooms by the average daily
rate (‘‘ADR’’).623 The ADR is the average
revenue per room-night booked in the
U.S. The total number of nights booked
in the U.S. in 2022 that would
potentially be affected by this rule is
about 1.29 billion.
Dividing the total number of nights
booked by the average number of nights
per booking gives 715 million total
bookings.624 About 91.8%, or 657
million, of these bookings are made by
U.S. consumers.625 Finally, the
Commission calculates the total savings
for U.S. consumers per year by
multiplying the number of bookings
made by U.S. consumers by the minutes
saved per transaction and the value of
time for consumers. This results in total
savings ranging from about $674 million
to $980.3 million.
(c) Foreign Hotels and Home Shares
with U.S.-Facing websites
To estimate the number of foreign
short-term lodging bookings made by
U.S. consumers, the Commission uses
the fact that 96% of all trips taken by
U.S. consumers are domestic.626
Multiplying the number of bookings
made by U.S. consumers by ((1¥0.96)/
0.96)) gives 27.4 million foreign
bookings. The total savings for this
category ranges from about $28.1 to
$40.8 million.
(d) All Hotels and Home Shares
Together, U.S. and foreign bookings
amount to about 683.9 million bookings
per year. This corresponds to between
27.2 and 39.6 million hours saved by
U.S. consumers per year, and between
623 Revenue equals about $192.23 billion. Alexia
Moreno Zambrano, Hotels & Motels in the US,
IBISWorld (Jan. 2023) (‘‘Hotels & Motels Industry
Report’’); Thi Le, Bed & Breakfast & Hostel
Accommodations in the US, IBISWorld (Jan. 2023)
(‘‘Bed & Breakfast Industry Report’’). The ADR is
about $149. STR: U.S. hotel ADR and RevPAR
reached record highs in 2022, STR (Jan. 20, 2023),
https://str.com/press-release/str-us-hotel-adr-andrevpar-reached-record-highs-2022.
624 Consumers book on average 1.8 nights per
booking. Jordan Hollander, 75+ Hospitality
Statistics You Should Know (2024), Hotel Tech
Report (updated July 9, 2024), https://hoteltech
report.com/news/hospitality-statistics.
625 How much do U.S. hotels depend on
international guest stays?, CBRE Econometric
Advisors’ Blog (Oct. 10, 2017), https://www.cbreea.com/public-home/deconstructing-cre/2017/10/
10/how-much-do-u.s.-hotels-depend-oninternational-guest-stays.
626 Adrian, U.S. Travel & Tourism Statistics 2020–
2021, Tourism Academy Blog (Sep. 15, 2021
12:39:18 p.m.), https://blog.tourismacademy.org/ustourism-travel-statistics-2020–2021.
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$702.1 million and $1.02 billion total
savings per year. Table 11 presents the
expected benefits of time savings over
the next ten years in present value.
BILLING CODE 6750–01–C
627 OEWS National, supra note 571; Hamermesh,
supra note 533.
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(e) Additional Unquantified Benefits:
Reductions in Deadweight Loss and
Abandoned Transactions
As is discussed in section V.E.2.a.ii,
the final rule requiring short-term
lodgings to display total price of rooms
will likely result in a reduction of
deadweight loss. When consumers are
not provided total price at the beginning
of the booking process, sellers likely are
able to charge higher prices than under
the final rule. The rule’s total price
requirement may provide consumers
with more complete pricing information
so that they can make informed
decisions about short-term lodging
reservations, thus reducing deadweight
loss. The Commission does not quantify
the reduction in deadweight loss but
acknowledges that it is a positive benefit
to the final rule.
In some cases, once total price is
provided, consumers may fully abandon
the transaction (i.e., not book any room).
Since lodging cost is only a part of
overall trip cost, abandoning a
transaction may be less likely for shortterm lodging than other industries. In
that case, the unquantified benefit is
likely to be small. The Commission
solicited comment in the NPRM on the
frequency of, and reasons for,
abandoned transactions in the shortterm lodging industry to help quantify
this benefit, but did not receive
adequate information in response, so
this benefit remains unquantified.
ii. Short-Term Lodging: Estimated Costs
of the Final Rule
The Commission herein describes the
final rule’s potential costs to the shortterm lodging industry and, where
possible, provides quantitative estimates
of those costs. The costs to hotels from
the final rule include a review of
whether the rule applies and, in cases
of noncompliance with the final rule,
one-time costs to come into compliance
and recurring annual costs to ensure
ongoing compliance. The cost of
employee time is monetized using
wages obtained from the Bureau of
Labor Statistics’ National IndustrySpecific Occupational Employment and
Wage Estimates.629 The Commission
uses wages specific to the Traveler
Accommodation industry (associated
with NAICS code 721100). This
industry includes traditional hotels and
motels, casino hotels, bed and breakfast
inns, hostels, and home share
629 U.S. Bureau Lab. Stat., Occupational
Employment and Wage Statistics, May 2023
National Industry-Specific Occupational
Employment and Wage Estimates: NAICS 721100—
Traveler Accommodation (May 2023), https://
www.bls.gov/oes/current/naics4_721100.htm
(‘‘OEWS Traveler Accommodation’’).
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platforms.630 The Commission also
quantifies the cost to individual home
share hosts in the form of a one-time
cost to adjust prices on home share
listings.
Table 12 outlines the estimated costs
of the final rule. Panel A shows the
costs for U.S. hotels and home share
hosts; Panel B shows the costs for
foreign hotels and home share hosts
who post listings on U.S.-facing
websites; 631 and Panel C shows the total
combined costs for both groups.
(a) Panel A: U.S. Hotels and Home Share
Hosts
There are 49,216 U.S. hotels
associated with the ‘‘Traveler
Accommodation’’ NAICS code. Of these
firms, 6% impose resort fees, bringing
the high-end number of U.S. firms
affected to 2,953. The low-end number
of firms affected is 2,948 after removing
Marriott International, Inc., Omni Hotels
Management Corporation, Choice Hotels
International, Inc., Hilton Worldwide
Inc., and Hyatt Hotels Corporation to
account for the possibility that these
hotels will eliminate dripped and
partitioned pricing from their websites
regardless of this rule to comply with
any existing or forthcoming settlements
with various State Attorneys General.632
630 NAICS code 721100 does not capture
intermediary travel websites, which display pricing
information and offer booking options for various
short-term lodging firms. Because these
intermediaries constantly update pricing
information obtained directly from short-term
lodging firms (see, e.g., FTC–2023–0064–3293,
Travel Technology Association), and do not need to
reoptimize prices or drastically change displays
themselves, the Commission believes that
intermediary firms will not face additional
compliance costs from the rule.
631 The Commission’s analysis includes costs to
foreign hotels with U.S.-facing websites because
complying with the rule may cause them to pass
through some costs to U.S. hotel shoppers. The
Commission is unable to quantify what percentage
of costs will be passed through; to be conservative,
the analysis includes all costs to foreign hotels and
home share hosts.
632 In 2021, Marriott agreed to a settlement with
the Commonwealth of Pennsylvania, Office of the
Attorney General, in which Marriott agreed to
include mandatory resort fees in the base rate of its
hotel rooms on the first page of the booking process.
Assurance of Voluntary Compliance,
Commonwealth v. Marriott Int’l, Inc., No. GD–21–
014016 (Pa. Ct. C.P. Nov. 16, 2021). In 2023 and
2024, Marriott entered into similar settlements with
the Offices of the Attorney General in both the State
of Nebraska and the State of Texas. Assurance of
Voluntary Compliance, Texas v. Marriott Int’l, Inc.,
No. 2023–CI09717 (Tex. Dist. Ct. May 16, 2023);
Order Approving Assurance of Voluntary
Compliance, Nebraska v. Marriott Int’l, Inc., No. CI
23–3860 (Neb. Dist. Ct. Jan. 18, 2024). In 2023,
Omni and Choice Hotels both agreed to similar
multi-state settlements with the Offices of the
Attorney General in the State of Colorado, the
Commonwealth of Pennsylvania, and the State of
Nebraska. See, e.g., Assurance of Discontinuance, In
re Choice Hotels Int’l Inc. Resort Fees (Colo. Sept.
21, 2023); Assurance of Discontinuance, In re Omni
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2149
Next, the Commission’s analysis
estimates the number of hours a U.S.
hotel would spend complying with the
final rule. The analysis assumes all
hotels that do not impose dripped or
partitioned pricing will spend one hour
of lawyer time determining if the final
rule requires any changes to their
advertising. Hotels that are not presently
compliant with the rule will incur
additional costs to come into
compliance. In the low-end estimate,
the analysis assumes that, because many
hotels have websites facing other
countries that already have similar
requirements to the final rule (e.g.,
Canada, Australia, and the European
Union member states), hotels already
may have the experience and
infrastructure required to incorporate
the necessary changes to their operating
practices. In this scenario, hotels have
relatively low costs to transition to allin pricing for their U.S.-facing websites.
The analysis assumes five hours of
lawyer time to determine how the final
rule applies to the firm, forty hours of
data scientist time to re-optimize the
pricing strategy, and forty hours of web
developer time to edit the website to
display total prices and make other
requisite disclosures.
In addition to hotels, the final rule
also would affect individuals who
participate in the home share market by
listing their properties for short-term
rentals on websites like Airbnb and
VRBO. The Commission’s analysis
estimates the total number of home
share hosts in the U.S. by starting with
the number of Airbnb hosts in the U.S.
who post home share listings (not
including larger bed and breakfast or
hostel establishments) and extrapolating
to the full U.S. market using Airbnb’s
Hotels Mgmt. Corp. Resort Fees (Colo. Nov 9, 2023);
Assurance of Voluntary Compliance,
Commonwealth v. Omni Hotels Mgmt., GD–23–
013056 (Pa. Commw. Ct. Nov. 9, 2023); Assurance
of Voluntary Compliance, Commonwealth v. Choice
Hotels Intl., Inc., GD–23–011023 (Pa. Commw. Ct.
Sept. 21, 2023); Order Approving Assurance of
Voluntary Compliance, Nebraska v. Choice Hotels
Int’l, Inc., No. CI 23–3269 (Neb. Dist. Ct. Sept. 27,
2023); Order Approving Assurance of Voluntary
Compliance, Nebraska v. Omni Hotels Mgmt. Corp.,
No. CI 23–3641 (Neb. Dist. Ct. Oct. 27, 2023).
Choice Hotels agreed to an additional settlement
with the Oregon Department of Justice. Assurance
of Voluntary Compliance, In re Choice Hotels, Int’l,
Inc., No. 23–CV–39128 (Or. Cir. Ct. Sept. 21, 2023).
In 2024, Hilton Hotels agreed to a settlement with
the State of Nebraska, Office of the Attorney
General. Final Consent Judgment, Nebraska v.
Hilton Dopco, Inc., No. CI 19–2366 (Neb. Dist. Ct.
Jan. 29, 2024). Finally, Hyatt Hotels faces an
ongoing lawsuit filed in 2023 by the State of Texas,
Office of the Attorney General, which seeks to
require Hyatt to display full prices in the initial
advertised price of any hotel room. Plaintiff’s
Original Pet., Texas v. Hyatt Hotels Corp., No.
C2023–0884D (Tex. Dist. Ct. May 15, 2023).
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U.S. market share.633 On the low-end,
the analysis assumes that each host will
take one hour to reprice each listing.
Hosts have, on average, 1.18 listings,
resulting in 1.18 hours of time per
host.634 The value of time comes from
the same source as in Table 11.
In the high-end cost scenario, the
Commission’s analysis assumes that
hotels have not laid the groundwork for
upfront pricing. The analysis assumes
under this scenario that hotels require
twice the number of hours to determine
optimal prices, re-program the website
to include total price, and review and
confirm compliance. Thus, the one-time
costs for hotels include ten hours of
lawyer time, eighty hours of data
scientist time, and eighty hours of web
developer time. The analysis further
assumes home share hosts spend three
hours repricing each listing, resulting in
3.5 hours per host.
In addition to the one-time costs, the
Commission’s analysis also assumes
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633 See Clark Shultz, Airbnb increases market
share in latest read from M Science, Seeking Alpha
(June 6, 2022 1:32 p.m. ET), https://seeking
alpha.com/news/3846023-airbnb-increases-marketshare-in-latest-read-from-m-science (providing
Airbnb’s market share); Thibault Masson, Airbnb
Host Data: Who are Airbnb hosts? Why are
individual hosts more important than professional
ones?, Rental Scale-Up (updated Dec. 19, 2020),
https://www.rentalscaleup.com/airbnb-host-datawho-are-airbnb-hosts-why-are-individual-hostsmore-important-than-professional-ones/ (providing
the statistics used to estimate the number of Airbnb
home share hosts in the U.S.). The estimated total
number of home share hosts in the U.S. is 675,603,
which is calculated as 504,000/.746, where 504,000
is the number of Airbnb home share hosts in the
U.S. and .746 is Airbnb’s U.S. market share. The
number of Airbnb home share hosts is calculated
as 560,000 * .9 = 504,000, where 560,000 is the
number of Airbnb hosts in the U.S., and 90% of
these hosts are individual hosts (people who rent
individual rooms or entire primary homes rather
than traditional bed and breakfasts or hostels;
traditional bed and breakfasts or hostels are already
captured in the hotel firms defined by Traveler
Accommodation NAICS code 721100).
634 The average number of listings per host is
calculated from the total number of U.S. listings
and the total number of U.S. hosts. Steve Deane,
2022 Airbnb Statistics: Usage, Demographics, and
Revenue Growth, Stratos Jet Charters, Inc. Blog (Jan.
4, 2022), https://www.stratosjets.com/blog/airbnbstatistics/ [https://web.archive.org/web/
20220219093345/https://www.stratosjets.com/blog/
airbnb-statistics/] (providing the total number of
U.S. listings); Masson, supra note 633 (providing
the total number of U.S. hosts).
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hotels incur annual costs of between
zero to ten hours of lawyer time per year
to review and confirm compliance with
the final rule.635 The total costs, which
include both the one-time fixed cost and
the annual costs for the next ten years
in present value, range from $35.9
million to $107.8 million using a 7%
discount rate, and from $35.9 million to
$112 million using a 3% discount rate.
The Commission also finds that the per
firm annualized cost to U.S. hotels that
are not presently compliant with the
rule ranges from $527 to $2,011 using a
7% discount rate, and from $434 to
$1,825 using a 3% discount rate. Home
share hosts in the U.S. incur an average
one-time cost between $30.42 to $91.27.
All ranges of lawyer, data scientist,
web developer, and home share host
time used in the analysis serve as
proxies for any costs associated with
reviewing and ensuring compliance,
adjusting pricing strategies, ensuring
consumers are presented with total
price, and re-evaluating home share
listings, respectively, in response to the
final rule.
(b) Panel B: Foreign Hotels and Home
Share Hosts
The Commission acknowledges that
non-U.S. firms and home share hosts
with U.S.-facing websites may bear
compliance costs from the final rule that
may be passed on to consumers.
Therefore, the Commission estimates
these costs using the best available data.
Estimating costs for foreign hotels and
home share hosts using the same
method in Panel A would be difficult
because there are no reliable estimates
for the number of foreign hotels and
home share hosts or for the relevant
international wage rate for lawyers, data
scientists, and web developers. The
Commission’s analysis instead estimates
foreign costs by extrapolating from the
estimated U.S. costs in Panel A. Since
the U.S. hotel industry’s global market
635 Since home share hosts are not operating
large, sophisticated firms and will likely not spend
additional time ensuring compliance beyond year
one, the analysis assumes home share hosts do not
incur annual costs due to the rule.
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share is about 14.5%,636 the one-time
and annual costs for foreign hotels each
can be calculated by multiplying the
one-time and annual costs for U.S.
hotels by (1¥0.145)/0.145. This method
captures the cost of all foreign hotels,
including ones that will not be subject
to the final rule because they do not
have U.S.-facing advertising. Therefore,
the costs to foreign hotels may be
overestimated.
The Commission’s analysis uses the
percentage of Airbnb’s U.S. revenue
(43%) 637 as a proxy for the U.S. home
share market’s global market share.
Using this proxy, the analysis estimates
the one-time cost for foreign home share
hosts to be equal to the total one-time
cost for U.S. home share hosts
multiplied by (1¥0.43)/0.43. The total
one-time and annual foreign hotel and
home-share costs for the next ten years
in present value range from $117.4
million to $352.8 million using a 7%
discount rate, and from $117.4 million
to $377.9 million using a 3% discount
rate. The Commission is unable to
provide the per firm annualized cost for
foreign hotels and non-U.S. home share
hosts because the number of foreign
hotels and home share hosts is not
known.
(c) Panel C: All Hotels and Home Share
Hosts (US + Foreign)
The total cost for all affected hotels
and home share hosts over ten years in
present value is estimated to be from
$153.3 million to $460.6 million using
a 7% discount rate and from $153.3
million to $489.9 million using a 3%
discount rate.
BILLING CODE 6750–01–P
636 The U.S. hotel industry’s global market share
in 2022 is calculated by adding the revenues
reported in the IBISWorld Reports for ‘‘Hotels and
Motels in the US,’’ ‘‘Casino Hotels in the US,’’ and
‘‘Bed and Breakfast and Hostel Accommodations in
the US,’’ and dividing it by the global revenue
found in IBISWorld Global Hotels & Resorts
Industry Report. Hotels & Motels Industry Report,
supra note 623; Bed & Breakfast Industry Report,
supra note 623; Demetrios Berdousis, Casino Hotels
in the US, IBISWorld (Jan. 2023).
637 Airbnb, Inc., Annual Report (Form 10–K) (Feb.
16, 2024) (‘‘Airbnb 10–K’’), https://investors.airbnb.
com/financials/sec-filings/sec-filings-details/
default.aspx?FilingId=17283799.
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iii. Short-Term Lodging: Net Benefits
Table 13 presents the net benefits of
the final rule in the short-term lodging
638 U.S.
Census Bureau, 2021 SUSB Annual
Datasets by Establishment Industry, supra note 602.
639 FTC–2023–0064–3094 (American Hotel &
Lodging Association).
640 OEWS Traveler Accommodation, supra note
629.
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industry using the quantified benefits
and costs discussed in section V.E.3.d.i
and V.E.3.d.ii. To calculate the low-end
of the range for net benefits, the
641 See OEWS National, supra note 571
(providing the mean hourly wage); Hamermesh,
supra note 533 (providing the value of time).
642 See infra section V.E.3.d.ii.b (describing the
calculations).
643 Airbnb 10–K, supra note 637.
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Commission’s analysis subtracts the
total costs using the high-end cost
assumptions from the total benefits
using the low-end benefit assumptions.
For the high-end of the range for net
benefits, the analysis subtracts the total
costs using the low-end cost
assumptions from the total benefits
using the high-end benefit assumptions.
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accounting for the unquantified benefit
of reducing deadweight loss.
iv. Short-Term Lodging: Uncertainties
of assumptions based on the best
available public information. When the
data are unclear, the analysis uses sets
of assumptions that would generate a
range of low- and high-end estimates.
Table 14 summarizes the key
assumptions and how they may affect
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The Commission’s ability to precisely
estimate benefits and costs is limited
due to uncertainties in key parameters.
The quantified benefits and costs for the
short-term lodging industry rely on a set
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the resulting estimate of quantified
benefits and costs. When possible, the
analysis underestimates benefits and
overestimates costs in order to
conservatively estimate net benefits.
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The quantified benefits and costs
imply that the final rule will have a
positive net benefit, even without
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4. Economic Evaluation of Alternatives
As an alternative to the rule, the
Commission considered not pursuing
rulemaking and instead relying on its
existing tools of enforcement actions
and consumer education. This approach
is equivalent to a no-action baseline and
would result in no incremental benefits
or costs. The prevalence of drip pricing
and hidden mandatory fees would
persist.
The Commission also alternatively
considered, as discussed in the
Preliminary Regulatory Analysis,
promulgating an industry-neutral
version of the rule. The Commission
was unable to quantify economy-wide
benefits and provided a break-even
analysis using quantified compliance
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costs for the entire economy.644 The
economy-wide break-even analysis
implied there would be positive net
benefits to the rule if the benefit per
consumer was at least $6.65 per
consumer per year over a ten-year
period assuming a 7% discount rate or
at least $5.95 assuming a 3% discount
rate. The Commission estimated that per
firm annualized costs for an economywide rule would be between $691 and
$2,010 assuming a 7% discount rate and
between $569 and $1,803 assuming a
3% discount rate.
644 The break-even analysis provided in the
Preliminary Regulatory Analysis utilized the same
set of assumptions regarding the high-end and lowend numbers of hours required for firms to comply
with the proposed economy-wide rule. The
preliminary break-even analysis also made a set of
assumptions about what proportion of the economy
currently complied with the provisions of the
proposed rule.
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The Commission sets forth additional
alternatives to the final rule that it
considered in section V.B but does not
have sufficient data to prepare a
quantitative analysis of those
alternatives.
5. Summary of Results
The Commission’s final regulatory
analysis catalogs and, where possible,
quantifies the incremental benefits and
costs of the final rule for the live-event
ticketing and short-term lodging
industries. The Commission estimates
that the quantified benefits of the rule
will exceed its quantified costs, and the
Commission believes that the total
benefits of the rule (quantified and
unquantified) will outweigh the total
costs (quantified and unquantified). The
Commission estimates that the benefits
of the final rule over the next ten years
accruing solely from reduced consumer
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search costs in the live-event ticketing
industry range from $184 million to
$2.46 billion under an assumed 7%
discount rate, and $224 million to $2.99
billion using an assumed 3% discount
rate. The Commission estimates
compliance costs for live-event ticketing
firms over the ten-year period to be
between $15 million and $142 million
using a 7% discount rate, and between
$15 million and $154 million using a
3% discount rate.
For the short-term lodging industry,
the Commission estimates ten-year
benefits to consumers from reduced
search costs to range from $4.93 billion
to $7.17 billion using a 7% discount
rate, and between $5.99 billion and
$8.71 billion using a 3% discount rate.
The Commission estimates compliance
costs for short-term lodging firms for the
ten-year period to be between $153
million and $461 million using a 7%
discount rate and between $153 million
and $490 million using a 3% discount
rate.
The Commission also provides a
break-even analysis using quantified
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compliance costs that are aggregated for
the live-event ticketing and short-term
lodging industries. The break-even
analysis demonstrates that there are
positive net benefits to the rule if the
benefit per consumer is at least $0.33
per consumer per year over a ten-year
period using a 7% discount rate. The
break-even analysis does not account for
costs from unintended consequences of
the rule or the potential benefits from
reducing deadweight loss by providing
consumers with full information.
6. Appendix A: Model of Market
Distortion Caused by Drip Pricing
Measuring the deadweight loss, the
surplus transfer from consumers to
firms, and the shift in quantity
demanded requires a quantification of
consumers’ aggregate level of awareness.
Academic research provides a model
that relates consumers’ partial
awareness to the resulting shift in
aggregate demand.645 Specifically, the
model assumes, based on empirical
evidence, the elasticity of demand with
645 Chetty,
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respect to the fee equals the elasticity of
demand with respect to the base price
scaled by a factor of q, where 0 < q <
1. This factor, q, serves as a measure of
consumers’ awareness of the fee. When
consumers are fully aware of the fee, q
= 1; when consumers are completely
unaware, q = 0. As a working example,
if demand is given by the equation
Q(Pbase,t) = a + bPbase + ct, where a, b,
and c are constants, the previous
assumption implies that c = qb. At q =
1, shrouding the fee has no effect, and
the demand function simplifies to
Q(Ptotal, t) = a + bPtotal. At q = 0,
shrouding the fee leaves consumers
completely unaware of it, and demand
is solely a function of the base price:
Q(Pbase, t) = a + bPbase. Assuming 0 < q
< 1, instead, one may note that, for any
given change in the base price and the
corresponding change to the quantity
demanded, a larger change in the fee
would be needed to effect the same
change in quantity, reflecting
consumers’ partial awareness of, and
decreased sensitivity to, the fee.
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Figure 4 illustrates how consumers’
partial awareness of fees impacts the
effect of shrouded pricing on consumer
and producer surplus. The intersection
of Dpartial with S, illustrated by point R,
at quantity Qpartial and price Ptotal,partial,
represents the outcome when
consumers are partially aware of the fee.
In this figure, Dfee,Pbase,partial (not shown)
would go through point U (equivalent to
point A in Figure 3) and point R
(equivalent to point B in Figure 3). For
comparison, in the case of complete
unawareness (q = 0), Dfee,Pbase,unaware (not
shown) would go vertically through
point K (equivalent to point A in Figure
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3) and point J (equivalent to point B in
Figure 3). As illustrated in Figure 4, the
more consumers are aware of the fee,
i.e., the larger the q, the smaller the
market clearing full price and, hence,
the base price, must be. As an additional
example, when consumers are fully
aware of the fee (q = 1), the market
clearing full price under shrouded
pricing equals the market clearing price
under upfront pricing, Pupfront, and the
base price, Pbase,aware (not shown), is
lower than Pbase,partial.
Consumer surplus is now equal to the
area of triangle CMN minus the area of
triangle NRT. Producer surplus is now
equal to the area of triangle EMR. The
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deceptive shrouding of the price leads
to a transfer of surplus from consumers
to firms equal to the area of trapezoid
ABMR as well as an additional decrease
in consumer surplus not captured by
firms, the deadweight loss, equal to the
area of triangle ART. The surplus
transfer from consumers to firms and
the deadweight loss are both smaller in
this case of partial awareness relative to
the case where consumers are
completely unaware of the fee. That is,
the harm caused by the firms’ deception
is mitigated by the extent to which
consumers are aware of and account for
the fee.
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(a) Low-End Estimate of Minutes per
Listing Calculation
The Commission’s analysis uses the
Airbnb user search statistics reported in
Fradkin (2017) 646 to obtain a low-end
time estimate to view one listing after
clicking on it. The paper provides data
on a random sample of users who
searched for short-term rentals on
Airbnb in a large U.S. city. It reports
search behavior separately for all
searchers and for searchers who
contacted the host, either to inquire
about a listing or to book it. The analysis
uses those numbers to calculate search
behavior for the group of searchers who
did not send a contact. The relevant
statistics for these three groups are
summarized in Table B.1.
‘‘Average unique listings seen’’
includes all listings users see on a
search result page, including listings
users do not click on. ‘‘Average time
spent browsing’’ includes entering
search parameters, scrolling through
results, and viewing listings after
clicking on them. ‘‘Average number of
contacts’’ is the average number of times
searchers contacted a host for a listing.
Since contacting the host requires users
to click on the listing, the analysis uses
this as a proxy for number of clickedon listings.
23.253/57.61 = .40 minutes per
listing.
From the third column, we calculate:
Time to view each listing without clicks
= Average time spent browsing/
Average unique listings seen =
Because the average time spent
browsing for the group in column (2) is
inclusive of the amount of time spent
sending contacts, not just viewing
listings that were not contacted, we use
the preceding value calculated from the
group in column (3) to estimate the
646 Andrey Fradkin, Search, Matching, and the
Role of Digital Marketplace Design in Enabling
Trade: Evidence from Airbnb, (MIT Initiative on the
Digit. Econ., Working Paper, 2017), https://
ide.mit.edu/wp-content/uploads/2017/07/Search
MatchingEfficiency.pdf.
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7. Appendix B: Short-Term Lodging
Industry Minutes per Listing
Calculations
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following that applies to searchers in
column 2:
Time spent viewing listings without
clicks = Time to view each listing
without clicks * Average unique
listings seen = .40 * 87.812 = 35.44
minutes
and
Average total time viewing listings after
clicking = Average time spent
browsing¥Time spent viewing
listings without clicks =
57.874¥35.44 = 22.43 minutes.
Finally, we calculate time to view one
listing:
Time per listing = Average total time
viewing listings after clicking/
Average number of contacts =
22.43/2.367 = 9.48 minutes per
listing.647
(b) High-End Estimate of Minutes per
Listing Calculation
The Commission’s analysis uses the
hotel search cost model developed by
Chen and Yao (2016) 648 to calculate a
high-end estimate of minutes to view
one listing. The paper uses data from
consumer search behavior when
booking hotels in four major
international cities on an anonymous
major U.S. online travel website.
A search is defined as a listing clickthrough, and the search cost for a listing
is specified as:
Cij = Ci (TimeConstrainti, Slotj) = exp(gi0
+ gi1TimeConstrainti + gi2Slotj) =
exp(3.07 ¥ .05 * TimeConstrainti +
.01 * Slotj)
where TimeConstrainti is the number of
days between consumer i’s search and
her check-in. Slotj is the slot position of
the j-th search. The exponential operator
ensures that the costs are positive. The
gammas are mean levels of cost
coefficients.
Using this formula, the analysis can
find that the mean search cost per
listing when 30 days in advance (the
sample average) is exp(3.07 ¥ (.05*30))
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647 The
numerator of ‘‘Time per listing’’ is an
underestimate because ‘‘Time spent browsing
without clicks’’ may capture some time spent
viewing clicked-on listings that did not result in a
contact. The denominator of ‘‘Time per listing’’ is
also an underestimate because the number of
listings clicked on is proxied using the number of
listings users inquire about or book. Users may click
on more listings than just the ones they want to
inquire about or book. The two values are related.
If the true denominator is higher than estimated,
then the true numerator also will be higher. Higher
listing clicks beyond those that resulted in a contact
means more time spent viewing clicked-on listings
that did not result in a contact. The ratio should
remain about the same.
648 Yuxin Chen & Song Yao, Sequential Search
with Refinement: Model and Application with
Click-Stream Data, 63 Mgmt. Sci. 4345 (2016),
https://doi.org/10.1287/mnsc.2016.2557.
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= $4.81 per listing. The inflation
adjusted value is $6.10.
The resulting total search cost is then
$6.10 per listing * 2.3 searches on
average = $14.04. This total cost can be
conceptualized as the number of
minutes of viewing listings multiplied
by the consumer’s value of time. Using
$25.81 per hour as the value of time, the
time spent viewing listings is ($14.04/
$25.81 per hour) * 60 minutes per hour
= 32.62 minutes.
The minutes to view one listing is
then calculated as 32.62 minutes/2.3
searches = 14.18 minutes per listing.
VI. Paperwork Reduction Act
The Paperwork Reduction Act
(‘‘PRA’’), 44 U.S.C. 3501–3520, requires
Federal agencies to seek and obtain
OMB approval before collecting
information directed to ten or more
persons. The term ‘‘collection of
information,’’ as used in the PRA,
includes any requirement or request for
persons to obtain, maintain, retain,
report, or publicly disclose
information.649 The PRA analysis
requires an estimate of the burden
associated with a collection of
information.650
Upon publication of the NPRM, the
Commission submitted an associated
clearance request with a Supporting
Statement to OMB for review under the
PRA. In response, OMB filed a comment
on December 11, 2023 (OMB Control
No. 3084–0176), requesting that the
Commission resubmit the clearance
request upon the finalization of the
proposed rule.651 Accordingly,
simultaneously with the publication of
this final rule, the Commission is
resubmitting its clearance request and a
Supplemental Supporting Statement to
OMB for review under the PRA. For the
reasons discussed below, the
Commission has made adjustments to
its initial burden analysis. The
Commission’s updated burden analysis
follows.
A. Disclosures Related to Final
§ 464.2(a) Through (c)
Final § 464.2(a) through (c) provide
clarity as to how businesses should
disclose total price, optional exclusions
from total price, and the final amount of
payment. This information is readily
available to businesses, and many
businesses already disclose this
information in the course of their
649 44
U.S.C. 3502(3); 5 CFR 1320.3(c).
CFR 1320.8(a)(4).
651 See Office of Info. and Regul. Aff., Office of
Mgmt. and Budget, OMB Control Number History
for OMB Control Number 3084–0176, https://
www.reginfo.gov/public/do/PRAOMB
History?ombControlNumber=3084-0176#.
650 5
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regular business activities. However, the
Commission is aware that in some
instances the requirements in final
§ 464.2(a) through (c) may require some
businesses to display readily available
information more clearly. OMB
guidance is unclear regarding whether,
and to what extent, requiring displays of
information to be clearer amounts to a
collection of information. The
Commission is of the view that the
rule’s requirements regarding disclosure
of total price, exclusions from total price
and the final amount of payment are
unlikely to qualify as collections of
information. Nevertheless, the
Commission includes this analysis out
of an abundance of caution and not
because it concedes that such standard
pricing disclosures constitute
collections of information.
Final § 464.2(a) provides it is an
unfair and deceptive practice for a
business to offer, display, or advertise
any price of a covered good or service
without clearly and conspicuously
disclosing total price, which is defined
in final § 464.1 to permit the exclusion
of government charges, shipping
charges, and fees or charges for any
optional ancillary good or service.
While businesses may exclude these
charges from total price in offers,
displays, and advertisements, final
§ 464.2(c) provides that, before a
consumer consents to pay for any
covered good or service, a business must
disclose clearly and conspicuously: The
nature, purpose, and amount of any fee
or charge imposed on the transaction
that has been excluded from total price
and the identity of the good or service
for which the fee or charge is imposed;
and the final amount of payment for the
transaction. Final § 464.2(b) relatedly
provides that in any offer, display, or
advertisement that represents any price
of a covered good or service, total price
must be disclosed more prominently
than any other pricing information;
however, where the final amount of
payment for the transaction is
displayed, it must be more prominent
than, or as prominent as, total price. As
discussed in section III, the Commission
is not finalizing the proposed
affirmative refundability disclosure
requirement.
As part of the NPRM, the Commission
assumed that, except for the proposed
affirmative refundability disclosure
requirement, the Commission’s proposal
was limited to disclosure activities that
businesses already perform in the
course of their regular business
activities. However, following its review
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of the comments,652 the Commission
determines that, although many
businesses already make the disclosures
required by final § 464.2(a) through (c)
in the usual course of their regular
business activities, it is possible that
some businesses in the live-event
ticketing and short-term lodging
industries may nonetheless incur
incremental labor costs in ensuring that
their disclosure activities are fully
aligned with the requirements that are
set forth in final § 464.2(a) through (c).
As a result, out of an abundance of
caution, the Commission updates its
burden analysis in recognition of these
comments. As described in section
VI.A.5, however, the estimated costs
may be overestimated.
the Commission assumes sixty hours of
web developer time will be necessary to
adjust advertised prices and purchase
processes to comply with final § 464.2’s
disclosure requirements.653 Once firms
adjust advertised prices and purchase
process displays to be compliant with
the final rule, any future changes to
pricing displays or purchasing systems
are part of the regular course of business
and are not a direct consequence of the
rule. The Commission finds that any
ongoing additional costs associated with
these activities are de minimis. Thus,
the Commission estimates the total web
developer hours to adjust price displays
and purchase processes is 743,580 hours
(12,393 firms × 60 web developer hours
per firm).
1. Number of Respondents
The Commission estimates that there
are 12,393 entities that may incur
additional incremental labor costs to
refine their disclosure activities so that
they are fully compliant with final
§ 464.2. This estimate of 12,393 entities
takes the high-end estimate of the
number of firms in the United States in
the live-event ticketing industry (9,440
firms) and the number of firms in the
United States in the short-term lodging
industry (2,953) that will incur
additional compliance costs related to
disclosure activities.
3. Estimated One-Time Labor Costs
The estimated one-time labor cost that
live-event ticketing and short-term
lodging firms may incur to comply with
final § 464.2’s disclosure requirements
is $32,990,931. This total is calculated
by summing the labor costs for the liveevent ticketing and short-term lodging
industries. The labor cost for the liveevent ticketing industry is calculated by
applying the hourly wage for web
developer time in the live-event
ticketing industry of $45.95 to the
estimate of 60 hours of web developer
time multiplied by the number of U.S.
firms in the live-event ticketing industry
that incur additional compliance costs
($45.95/hour × 60 hours per firm × 9,440
firms) resulting in $26,026,080.654 The
labor cost for the short-term lodging
industry is calculated by applying the
hourly wage for web developer time in
the short-term lodging industry of
$39.31 to the estimate of sixty hours of
web developer time multiplied by the
number of U.S. firms in the short-term
lodging industry that incur additional
compliance costs ($39.31/hour × 60
hours per firm × 2,953 firms) resulting
in $6,964,851.655 The total for the two
industries is $32,990,931 ($26,026,080 +
$6,964,851).
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2. Estimated One-Time Hour Burden
In section V.E.3, the Commission
estimates the cost of adjusting the
presentation of advertised prices and
the purchase process for online sales.
The final regulatory analysis in section
V assumes live-event ticketing and
short-term lodging firms not presently
compliant with the final rule will
employ a low end of forty hours and a
high end of eighty hours of web
developer time to become compliant
with the final rule. For purposes of this
PRA analysis, the Commission uses the
midpoint of the range of web developer
hours presented in section V.E.3; that is,
652 See, e.g., FTC–2023–0064–3238 (Gibson, Dunn
& Crutcher LLP argued that businesses would need
to hire, among other professionals, web designers or
software engineers ‘‘to rebuild entire websites.’’ In
addition, it argued that the Preliminary Regulatory
Analysis did not account for costs needed to replace
physical ads, subway ads, and billboards and
speculated that would take ‘‘thousands of hours.’’);
FTC–2023–0064–2856 (National Football League
called on the Commission to reexamine the
estimated compliance costs because it did not
adequately take into account ‘‘the additional legal,
developer, and data personnel time that would be
required from live-event industry participants—and
especially industry participants dealing in large
volumes of live-event ticket sales in complying with
a final rule.’’); FTC–2023–0064–3122 (Vivid Seats
commented: ‘‘We believe that the FTC is
underestimating the amount of employee time
required by at least a factor of five.’’).
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4. Estimated One-Time Non-Labor Costs
The capital and start-up costs
associated with the final rule’s
653 Brick-and-mortar firms that do not currently
comply with the rule would update the price
presentation and purchase process by printing new
price displays, revising advertising campaigns,
adding required disclosures, and potentially
updating websites. The Commission uses web
developer hours as a proxy for any costs associated
with updating the price presentation and purchase
process to become compliant with the final rule.
654 The estimated mean hourly wages for a web
developer are $45.95. OEWS Web Developers, supra
note 571.
655 The estimated mean hourly wages for a web
developer are $39.31 in the short-term lodging
industry. OEWS Web Developers, supra note 571.
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2161
disclosure are de minimis. Any
disclosure capital costs involved with
the final rule, such as equipment and
office supplies, would be costs borne by
businesses in the normal course of
business.
5. Projected Labor Costs Likely
Overestimated
In preparing its burden estimate for
compliance with final § 464.2(a) through
(c), the Commission considered
comments noting that some businesses
may incur incremental labor costs to
come into compliance with the rule,
though commenters did not submit
specific data for the Commission to
evaluate this contention. As a result, the
Commission’s updated burden
calculation relies in part on cost
assumptions from its final regulatory
analysis in section V. Applying these
cost assumptions as one-time fixed costs
in this burden analysis likely generates
an overestimate of incremental labor
costs for a number of reasons. First, the
number of respondents that will have to
make changes to their price displays
and offers is likely to be significantly
inflated. Since the Commission
announced its NPRM, California’s
Honest Pricing Law, SB 478, which was
amended by SB 1524, went into effect,
making it illegal for businesses to
advertise or list prices that do not
include all mandatory fees or charges
other than certain government taxes and
shipping costs. As such, many national
firms doing business in California,
including live-event ticketing and shortterm lodging firms, will already have
incurred costs to develop the
capabilities to comply with the
Commission’s rule even if they are
currently only fully deploying such
capabilities in California. Similar
legislative and regulatory efforts have
been enacted in New York,
Massachusetts, North Carolina,
Minnesota, Tennessee, Connecticut,
Maryland, and Colorado.656 Second, to
the extent that live-event ticketing and
short-term lodging firms opt to present
all-inclusive total prices that obviate the
need for the disclosures set forth in final
§ 464.2(b) through (c), such firms will
require less web developer time to
656 See, e.g., N.Y. Arts & Cult. Aff. Law sec. 25.01–
25.33 (McKinney 2023) (Effective Jun. 30, 2022); An
Act Ensuring Transparent Ticket Pricing, H. 259,
193rd Gen. Court (Mass. 2023); S. 607 (2023–2024
Session) (N.C. 2023) (Enacted July 9, 2024); 2023
Minn. H.B. 3438 (Enacted May 20, 2024) (Minn.);
H.B. 1231 (113th G.A.) (Tenn.) (Enacted May 24,
2023); Conn. Gen. Stat. § 53–289a (2023); S.B. 329
(2024 Reg. Sess.) (Md.); S.B. 329 (2024 Reg. Sess.)
(Md.) (Enacted May, 9, 2024); H.B. 23–1378 (2024
Reg. Sess.) (Colo.) (Enacted June 5, 2024).
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comply, and the Commission is likely
overestimating total labor hours.
B. Prohibited Misrepresentations Under
Final § 464.3
Final § 464.3, which the Commission
proposed in similar form as § 464.3(a),
sets forth that in any offer, display, or
advertisement for a covered good or
service, it is an unfair and deceptive
practice for a business to misrepresent
any fee or charge, including its nature,
purpose, amount, or refundability, and
the identity of the good or service for
which the fee or charge is imposed.
Consistent with the NPRM’s discussion
of proposed § 464.3(a), the Commission
notes that final § 464.3 does not impose
any information collection requirement
for the purpose of the PRA. Rather than
imposing any affirmative disclosure,
reporting, or recordkeeping
obligations,657 final § 464.3 merely
prohibits businesses from making
certain misrepresentations that are
already prohibited under section 5 of
the FTC Act. As noted in the NPRM, any
additional costs that might be associated
with these prohibitions are de
minimis.658
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VII. Regulatory Flexibility Act—Final
Regulatory Flexibility Analysis
The Regulatory Flexibility Act
(‘‘RFA’’), as amended by the Small
Business Regulatory Enforcement
Fairness Act of 1996, requires an agency
to provide an Initial Regulatory
Flexibility Analysis (‘‘IRFA’’) and Final
Regulatory Flexibility Analysis
(‘‘FRFA’’) of any final rule subject to
notice-and-comment requirements,
unless the agency head certifies that the
regulatory action will not have a
significant economic impact on a
substantial number of small entities.659
In developing the final rule, the
Commission carefully considered
whether the rule would have a
significant impact on a substantial
number of small entities. The
Commission continues to believe that
the final rule’s impact will not be
substantial for most small entities and,
in many cases, will likely positively
impact small businesses by enabling
them to compete fairly in the
marketplace with larger players.
However, the Commission cannot fully
quantify the impact the final rule will
have on such entities. Therefore, in the
interest of thoroughness and an
abundance of caution, the Commission
657 See 5 CFR 1320.3(c) (definition of the term
‘‘collection of information’’).
658 See NPRM, 88 FR 77478.
659 5 U.S.C. 603–605.
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has prepared the following FRFA for
this final rule.
In the NPRM, the Commission
provided an IRFA and solicited
comments on the burden on any small
entities that would be covered.660 The
Commission received comments in
response to the IRFA.661 The
Commission received comments from
two industry groups requesting that the
Commission conduct a Small Business
Regulatory Impact Analysis to analyze
the impact of small businesses in
particular industries.662 The
Commission also received comments
from small business owners and
industry groups in support of the rule
and its impact on small businesses, as
well as from commenters concerned
about potential costs to small
businesses. Consistent with the
requirements of the FRFA, the
Commission has considered the
comments received, and the final rule’s
impact on small entities, including
alternatives to the final rule.
The Commission thoroughly
considered the feedback it received from
the SBA Office of Advocacy, the Small
Business Majority, and other
commenters in developing the final
rule. The Commission modifies the
proposed rule in response, in part, to
such feedback. The Commission will
continue to engage with small business
stakeholders to facilitate
implementation of, and compliance
with, the final rule and other guidance
as necessary to assist small entities in
complying with the rule.
Based on the Commission’s expertise,
and after careful review and
consideration of the entire rulemaking
record—including the more than 60,800
comments the Commission received in
response to the NPRM, empirical
research on how bait-and-switch pricing
tactics, including drip pricing and
partitioned pricing, harm consumers
and honest competitors, and the
Commission’s Final Regulatory Analysis
in section V—the Commission adopts
660 NPRM,
88 FR 77479–80.
e.g., FTC–2023–0064–3251 (National RV
Dealers Association); FTC–2023–0064–2367 (Small
Business Majority). The Small Business
Administration, Office of Advocacy raised similar
criticisms of the proposed rule. See U.S. Small Bus.
Admin., Office of Advocacy, Re: Trade Regulation
Rule on Unfair or Deceptive Fees FTC–2023–0064–
0001, https://advocacy.sba.gov/wp-content/
uploads/2024/03/Comment-Letter-TradeRegulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
The Commission addresses that comment infra
section VII.C.
662 FTC–2023–0064–3269 (IHRSA—The Health &
Fitness Association); FTC–2023–0064–3294
(International Franchise Association). The
Commission notes that the final rule is limited to
Covered Good or Services, which does not include
the health and fitness industry.
661 See,
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this final rule focused on covered goods
or services with certain additional
revisions to reduce compliance burdens
on small businesses and other entities.
To begin with, because this final rule is
limited to covered goods or services,
many industries that have significant
small business participants are no
longer covered. Second, the
Commission adopts an extended
compliance date—120 days—to ensure
that small businesses have adequate
time to come into compliance with the
rule’s requirements.663 Third, as
discussed in section III, in response to
feedback from commenters representing
the interests of small businesses, the
Commission clarifies in this SBP that
businesses may exclude from total price
pass-through credit card or other
payment processing fees if they give
consumers a viable payment alternative
without a fee (e.g., cash is accepted). In
addition, as discussed in section III, the
final rule adopts definitions of
government charges to increase
flexibility for businesses, including
small businesses.
A. Statement of the Need for, and
Objectives of, the Rule
The Commission describes the need
for, and objectives of, the rule in section
V.A. The legal basis for the rule is
section 18 of the FTC Act, 15 U.S.C. 57a,
which authorizes the Commission to
promulgate, modify, and repeal trade
regulation rules that define with
specificity acts or practices in or
affecting commerce that are unfair or
deceptive within the meaning of section
5(a)(1) of the FTC Act, 15 U.S.C.
45(a)(1).
B. Significant Issues Raised by
Comments, the Commission’s
Assessment and Response, and Any
Changes Made as a Result
Commenters, including the Small
Business Majority, argued that the IRFA
failed to appropriately assess the impact
of the proposed rule on small
businesses.664 The NPRM assumed that
of the total estimated firms in the
United States (6,140,612),665 only a
663 A 120-day compliance date after publication
in the Federal Register complies with the
requirements of the Congressional Review Act that
a ‘‘major rule’’ may not take effect fewer than sixty
days after the rule is published in the Federal
Register. 5 U.S.C. 801(a)(1)(3).
664 FTC–2023–0064–3251 (National RV Dealers
Association); FTC–2023–0064–2367 (Small
Business Majority).
665 The number of firms used in the NPRM was
provided by the United States Census Bureau’s
Statistics of United States Businesses. U.S. Census
Bureau, 2020 SUSB Annual Datasets by
Establishment Industry (Mar. 2023), https://
www.census.gov/data/datasets/2020/econ/susb/
2020-susb.html.
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small fraction (818,178 or about 13%)
would incur additional costs beyond the
initial one-hour compliance review to
comply fully with the proposed rule.
Commenters, including the Small
Business Majority, argued that the IRFA
failed to appropriately assess the impact
of the proposed rule on small
businesses.666 For the purpose of the
IRFA, the Commission concluded that
the proposed rule would not have a
significant economic impact on a
substantial number of small entities and
solicited comment on its analysis,
including the submission of supporting
or contradictory empirical data. The
Commission did not receive any data or
other evidence to suggest that the
number of firms incurring additional
costs should be higher. The Commission
anticipates that modifications made in
the final rule will reduce the number of
businesses that are likely to incur
additional costs.
These commenters further asserted
the rule’s proposed economic analysis
underestimated the cost of attorneys’
fees and ongoing costs to comply with
the rule.667 The Commission addresses
comments and concerns related to its
economic analysis in section V,
including estimates for attorneys’ fees
and ongoing compliance costs.
The same commenters also noted that
the Commission’s IRFA failed to
appropriately consider alternatives to
the proposed rule for small
businesses.668 The Commission
disagrees. The NPRM stated that the
Commission had considered
alternatives, including: (1) a rule that
would exempt small businesses from
the proposed rule; (2) a rule that would
apply to online-only businesses; (3)
alternatives that would otherwise
narrow the scope of the proposed rule,
including limiting application of the
rule to Covered Businesses as defined in
the NPRM; or (4) terminating the
rulemaking entirely. Consistent with the
NPRM, the Commission declines to
exempt small businesses, including
those that offer live-event ticketing and
short-term lodging, from the rule to
avoid creating uncertainty across
businesses as to whether the rule
applies to them, to avoid creating unfair
competitive advantages for those
businesses that engage in bait-andswitch pricing and misrepresent fees,
666 FTC–2023–0064–3251 (National RV Dealers
Association); FTC–2023–0064–2367 (Small
Business Majority).
667 FTC–2023–0064–3251 (National RV Dealers
Association); FTC–2023–0064–2367 (Small
Business Majority).
668 FTC–2023–0064–3251 (National RV Dealers
Association); FTC–2023–0064–2367 (Small
Business Majority).
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and to ensure maximum consumer
benefits from increased price
transparency. The NPRM also invited
comment on questions and concerns
related to small businesses, including
the estimated number of small
businesses and the impact on those
businesses, as well as alternatives to the
rule for small businesses. The
Commission’s FRFA includes further
discussion of the alternatives
considered in section V.B.
The Small Business Majority noted
that many small businesses lack access
to legal staff and ‘‘run the risk of
occupying a substantial amount of time
to understand how exactly they need to
adjust their pricing models to comply
with the new rule.’’ 669 As a result, the
Small Business Majority encouraged the
Commission to provide guidance to
small businesses, including through
outreach, education, and compliance
guidance, as well as working directly
with small businesses, to help small
businesses comply with the final
rule.670 The Commission highlights and
discusses herein that, in response to the
comments, the final rule both narrows
the NPRM proposal as well as clarifies
it in certain respects, thereby decreasing
the burden on small businesses. The
SBP also discusses various pricing
scenarios raised by commenters, and the
Commission believes that such
discussion will aid businesses,
including small businesses, in
complying with the final rule. Finally,
the Commission routinely provides
guidance and conducts outreach to
businesses on complying with the FTC
Act and regulations that it enforces and,
as required by law, the Commission will
publish a small entity compliance guide
to assist small businesses in complying
with the rule.
The Commission received numerous
comments from industry groups and
individual small business owners,
including comments highlighting the
benefits of the proposed rule on small
businesses, as well as comments
identifying certain concerns about
application of the proposed rule to
small businesses. The Commission
addresses many of these comments in
other parts of the SBP, including section
III, and accordingly incorporates that
analysis into its FRFA, and addresses
the remainder of these comments
herein.
669 FTC–2023–0064–2367 (Small Business
Majority).
670 Id.; see also U.S. Small Bus. Admin., Office of
Advocacy, Re: Trade Regulation Rule on Unfair or
Deceptive Fees FTC–2023–0064–0001, https://
advocacy.sba.gov/wp-content/uploads/2024/03/
Comment-Letter-Trade-Regulation-Rule-on-Unfairor-Deceptive-Fees.pdf.
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Some commenters argued that fees
help small businesses offset rising costs
and staff salaries and benefits,
especially for small businesses
operating on thin margins.671 One
industry group argued that the rule
might place small businesses at a
competitive disadvantage compared to
larger businesses.672 As discussed in
Parts III and V, the Commission narrows
the scope of the rule to address concerns
affecting small businesses by, for
example, modifying the definition of
government charges and addressing
factual scenarios and questions
concerning application of the rule to
small businesses, including related to
credit card surcharges and contingent
fees. In making these clarifications and
modifications, the Commission narrows
the total price requirement for, and
thereby reduces the compliance burden
on businesses, including small
businesses, offering covered goods or
services. As discussed in section VII.C,
the Commission is also adopting an
extended 120-day compliance date to
allow more time for businesses,
including small businesses, to assess
and come into compliance with the final
rule.
Conversely, other commenters noted
that bait-and-switch practices and
misleading fees harm small businesses,
and that the rule will help small
businesses.673 One State representative
asserted that the final rule would help
small businesses because small
businesses that advertise the entire price
of their goods and services are at a
competitive disadvantage compared to
larger businesses that advertise lower
prices and only disclose fees at the end
of a transaction.674 Consumer advocacy
groups urged the Commission not to
exempt small businesses, arguing that
consumers and small businesses alike
will benefit from greater pricing
transparency and a prohibition on
deceptive pricing.675 The Commission
also received numerous individual
comments, including from small
business owners, expressing support for
671 See, e.g., FTC–2023–0064–3033 (The Rebel
Lounge et al.); FTC–2023–0064–3078 (Washington
Hospitality Association); FTC–2023–0064–2367
(Small Business Majority).
672 FTC–2023–0064–3292 (National Association
of Theater Owners).
673 FTC–2023–0064–2840 (Indie Sellers Guild);
FTC–2023–0064–2341 (New Hampshire State
Representative Lindsay Sabadosa); FTC–2023–
0064–3302 (Public Citizen); FTC–2023–0064–3160
(Consumer Federation of America); FTC–2023–
0064–3141 (Coalition of Franchisee Associations).
674 FTC–2023–0064–2341 (New Hampshire State
Representative Lindsay Sabadosa).
675 FTC–2023–0064–3302 (Public Citizen); FTC–
2023–0064–3160 (Consumer Federation of
America).
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the rule, because it would benefit small
businesses.676
The Commission notes that the final
rule does not prohibit any business
offering live-event ticketing or shortterm lodging from charging consumers
fees or raising prices to support
necessary operating costs, such as labor
costs or rising expenses. The final rule
instead requires that such charges and
fees be incorporated in total price and
that they not be misleading.
C. Comment by the Small Business
Administration, Office of Advocacy, the
Commission’s Assessment and
Response, and Any Changes Made as a
Result
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The SBA Office of Advocacy filed a
comment requesting that the
Commission ‘‘prepare a supplemental
initial regulatory flexibility analysis that
fully considers the economic impact of
the proposed rulemaking on small
entities and alternatives that may reduce
that burden,’’ as well as ‘‘clarify that
this rulemaking will not apply to small
non-profit organizations.’’ 677 The SBA
Office of Advocacy argues that the
Commission’s IRFA did not comply
with the requirements of the Regulatory
Flexibility Act because it ‘‘fail[ed] to
provide an accurate description of the
small entities to which the proposed
rule will apply,’’ and failed to provide
‘‘an accurate description of the costs
associated with the compliance
requirements.’’ 678 According to the SBA
Office of Advocacy, the Commission
also ‘‘failed to consider significant
alternatives that would minimize any
significant economic impact of the
proposed rule on small businesses.’’ 679
The Commission has considered this
comment, which it further summarizes
herein, and responds as follows.
The SBA Office of Advocacy
recommended that the Commission
count small businesses using NAICScode specific thresholds defined by the
SBA, rather than using a threshold of
500 employees.680 In response to this
comment, the Commission now uses the
NAICS-code specific thresholds set by
the SBA to determine the number of
small businesses in the Final Regulatory
676 See, e.g., FTC–2023–0064–0105 (Individual
Commenter); FTC–2023–0064–2422 (Individual
Commenter); FTC–2023–0064–2697 (Individual
Commenter).
677 U.S. Small Bus. Admin., Office of Advocacy,
Re: Trade Regulation Rule on Unfair or Deceptive
Fees FTC–2023–0064–0001, https://
advocacy.sba.gov/wp-content/uploads/2024/03/
Comment-Letter-Trade-Regulation-Rule-on-Unfairor-Deceptive-Fees.pdf.
678 Id.
679 Id.
680 Id.
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Flexibility Analysis contained in section
VII.D.
The comment further contended that
‘‘there are other alternatives that the
FTC should have considered in its
IRFA,’’ such as ‘‘exempting certain
sectors of small businesses or imposing
a limit on certain fees’’ and ‘‘allowing
businesses more time to comply with
the rule.681 The Commission did
consider such alternatives and narrows
the scope of the final rule to covered
goods or services, thereby limiting the
rule’s application to only those
businesses, including small businesses,
that offer, display, or advertise such
goods or services. The Commission
declines, however, to impose a limit on
the amount of fees, so long as they are
disclosed and not misleading in
accordance with the rule’s
requirements, including as discussed in
section III.
As to the suggestion to give
businesses more time to comply with
the rule, the Commission adopts a
compliance date of 120 days after
publication of the final rule in the
Federal Register. The final rule will go
into effect, and compliance with the
final rule will be required, on that date.
This extended timeline considers
comments received from the SBA Office
of Advocacy and small businesses,
underscoring the time it might take to
come into compliance with the final
rule. For example, some small
businesses may decide to seek outside
guidance about whether they need to
make adjustments to come into
compliance, while others will conduct
their own compliance review.682 The
Commission finds 120 days should be
enough time even for small businesses
conducting their own compliance
review, and that a 120-day period
between publication in the Federal
Register and the rule’s compliance date
appropriately balances the interests of
small businesses with the interests of
protecting consumers. Further, in
addition to guidance in this SBP, the
Commission also will publish a small
entity compliance guide to assist small
businesses in complying with the rule.
681 Id.
682 See, e.g., id. (SBA urged the Commission to
consider ‘‘allowing small businesses more time to
comply with the rule’’ and to provide clear
compliance guidance); FTC–2023–0064–2367
(Small Business Majority urged the Commission to
issue comprehensive guidance and commented:
‘‘[M]any small businesses do not have access to
legal staff or consultants, and without clear and
specific disclosure requirements provided by
industry, small businesses run the risk of occupying
a substantial amount of time to understand how
exactly they need to adjust their pricing models to
comply with the new rule.’’).
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Finally, the SBA Office of Advocacy
‘‘encourages the FTC to clarify that this
rulemaking will not apply to nonprofits.’’ 683 The final rule can be
enforced to the full scope of the
Commission’s jurisdiction. Congress
empowered the Commission to ‘‘prevent
persons, partnerships, or corporations’’
from engaging in ‘‘unfair or deceptive
acts or practices in or affecting
commerce.’’ 684 To fall within the
definition of ‘‘corporation’’ under the
FTC Act, an entity must be ‘‘organized
to carry on business for its own profit
or that of its members.’’ 685 These FTC
Act provisions, taken together, have
been interpreted in Commission
precedent 686 and judicial decisions 687
to mean that the Commission lacks
jurisdiction to prevent section 5
violations by a corporation not
organized to carry on business for its
own profit or that of its members. The
Commission stresses, however, that both
judicial decisions and Commission
precedent recognize that not all entities
claiming tax-exempt status as nonprofits fall outside the Commission’s
jurisdiction.688 ‘‘Congress took pains in
drafting § 4 [15 U.S.C. 44] to authorize
the Commission to regulate so-called
nonprofit corporations, associations and
all other entities if they are in fact
profit-making enterprises.’’ 689
D. Description and Estimate of the
Number of Small Entities To Which the
Rule Will Apply
The final rule covers businesses that
offer short-term lodging and live-event
tickets. Small businesses that currently
comply with the final rule will have a
relatively trivial cost of assessing
whether they are currently in
683 U.S. Small Bus. Admin., Office of Advocacy,
Re: Trade Regulation Rule on Unfair or Deceptive
Fees FTC–2023–0064–0001, https://
advocacy.sba.gov/wp-content/uploads/2024/03/
Comment-Letter-Trade-Regulation-Rule-on-Unfairor-Deceptive-Fees.pdf.
684 15 U.S.C. 45(a)(2). The Commission herein
focuses on coverage of ‘‘corporations.’’
685 15 U.S.C. 44.
686 In re Coll. Football Ass’n, 117 F.T.C. 971, 994
(1994).
687 Cal. Dental Ass’n v. FTC, 526 U.S. 756, 766–
67 (1999); Cmty. Blood Bank of Kansas City Area,
Inc. v. FTC, 405 F.2d 1011, 1019 (8th Cir. 1969);
FTC v. Univ. Health, Inc., 938 F.2d 1206, 1214 (11th
Cir. 1991).
688 The Commission has determined that
‘‘[r]ulings of the Internal Revenue Service are not
binding upon the Commission, . . . but a
determination by another Federal agency that a
respondent is or is not organized and operated
exclusively for eleemosynary purposes should not
be disregarded.’’ In re Am. Med. Ass’n, 94 F.T.C.
701, 990 (1979) (citing In re Ohio Christian Coll.,
80 F.T.C. 815, 848 (1972)).
689 Cmty. Blood Bank, 405 F.2d at 1018; see also,
e.g., FTC v. Nat’l Comm’n on Egg Nutrition, 517
F.2d 485, 488 (7th Cir. 1975); In re Coll. Football
Ass’n, 117 F.T.C. at 998.
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compliance, and the Commission
assumes these firms will require at most
one hour of lawyer time to confirm
compliance. Small businesses that offer
covered goods or services and currently
do not disclose total price will incur
additional costs to adjust advertised
prices, their marketing campaigns, and
the consumer purchase process to
comply with the rule.
Using the size standards set by the
SBA,690 the Commission calculates that
there are potentially as many as 9,034
small firms in the U.S that may sell
tickets for live events.691 For the
economic regulatory analysis in section
V, the Commission assumes all liveevent ticketing firms will incur
additional costs to adjust advertised
prices, their marketing campaigns, and
the consumer purchase process to
comply with the rule. The Commission
notes that there may be some live-event
ticket sellers that are currently in
compliance and will therefore have a
trivial cost of compliance with the final
rule.
For the short-term lodging industry,
the Commission separately estimates
there are as many as 675,603 home
share hosts in the U.S. The Commission
assumes that these home share hosts are
all considered small entities. Using the
NAICS-code specific thresholds set by
the SBA, the Commission calculates that
there are potentially as many as 2,798
small firms within NAICS code 7211
(‘‘Accommodation’’).692
690 See U.S. Small Bus. Admin., Table of Small
Bus. Size Standards, https://www.sba.gov/
document/support-table-size-standards.
691 The Commission uses the latest data available
from the Census Bureau’s Statistics of U.S.
Businesses database, available based on firm
revenue and firm size. U.S. Census Bureau, Stat. of
U.S. Bus. (last revised July 9, 2024), https://
www.census.gov/programs-surveys/susb.html. The
calculation of 9,034 live-event ticketing firms is
likely an overestimate of the number of small
businesses due to data incompatibility and the use
of the high-end assumption regarding how liveevent ticketing firms are categorized using NAICS
codes. The U.S. SBA sets different revenue
thresholds for different NAICS codes. However, the
Statistics of U.S. Businesses does not necessarily
report the number of firms with earnings under
those particular thresholds. Therefore, the
Commission calculates there may be as many as
3,094 firms in NAICS code 711310 with receipts
under the SBA threshold of $40 million, 4,358 firms
in NAICS code 711320 with receipts under $25
million (an overestimate given the SBA threshold
of $22 million for NAICS code 711320), and 1,582
firms in NAICS code 561599 with receipts under
$35 million (an overestimate given the SBA
threshold of $32.5 million for NAICS code 561599).
692 Id. The calculation of 2,798 small hotels firms
is likely an overestimate of the number of small
businesses due to data incompatibility. The U.S.
SBA sets a revenue threshold of $9 million for
NAICS code 721191 and NAICS code 721199.
However, the Statistics of U.S. Businesses does not
report number of firms for those particular
thresholds. Therefore, the Commission calculates
there are as many as 42,186 firms in NAICS code
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E. Description of the Projected
Reporting, Recordkeeping, and Other
Compliance Requirements
The final rule contains no reporting or
recordkeeping requirements; however,
the final rule imposes disclosure
obligations. Only small entities that
offer, display, or advertise covered
goods or services must comply with the
rule and, therefore, will incur
compliance costs. To comply with the
final rule, small entities that offer,
display, or advertise any price of a
covered good or service are required to
disclose the total price clearly and
conspicuously and, generally, more
prominently than any other pricing
information. Small entities must also
disclose other imposed fees and charges
before a consumer consents to pay and
must not misrepresent any fee or charge.
For firms that already comply with the
final rule, the one-time indirect cost per
firm is assumed to be, at most, one hour
of lawyer time for regulatory
familiarization. This cost is excluded
from the Regulatory Flexibility Analysis
since such familiarization is not a
compliance requirement.
For small businesses subject to the
rule that are not currently in compliance
with the rule’s requirements, the
Commission has determined that firms
will need to adjust advertised prices,
marketing campaigns, and the purchase
process to comply with the rule. These
firms may also incur recurring annual
costs of additional lawyer time to assess
and confirm annual compliance. As
discussed in more detail in section V,
the Commission estimates that direct
compliance costs in the live-event
ticketing industry, over a ten-year
period, would result in annualized costs
of $648–$2,144 per firm assuming a 7%
discount rate or $534–$1,916 per firm
assuming a 3% discount rate. U.S. home
share hosts would incur one-time costs
re-optimizing prices of $30.42–$91.27.
The Commission also estimates direct
compliance costs for U.S. hotels, over a
ten-year period, would result in
annualized costs of $527–$2,011 per
firm assuming a 7% discount rate or
$434–$1,825 per firm assuming a 3%
discount rate. These estimates, however,
are for firms of all sizes; the
Commission has not separately
estimated the costs for small businesses
specifically.
721110 with receipts under the SBA threshold of
$40 million, 101 firms in NAICS code 721120 with
receipts under the SBA threshold of $40 million,
2,960 firms in NAICS code 7211191 with receipts
under $10 million (an overestimate given the SBA
threshold), and 1,384 firms with receipts under $10
million (an overestimate given the SBA threshold).
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2165
F. Discussion of Significant Alternatives
the Commission Considered That Would
Accomplish the Stated Objectives of the
Final Rule and That Would Minimize
Any Significant Economic Impact of the
Final Rule on Small Entities
The Regulatory Flexibility Act
requires that agencies include a
description of the steps the agency has
taken to minimize the significant
economic impact on small entities
consistent with the stated objectives of
applicable statutes, including a
statement of the factual, policy, and
legal reasons for selecting the alternative
adopted in the final rule and the other
significant alternatives to the rule
considered by the agency which affect
the impact on small entities was
rejected.693 Statutory examples of
‘‘significant alternatives’’ include
different requirements or timetables that
take into account the resources available
to small entities; the clarification,
consolidation, or simplification of
compliance and reporting requirements
under the rule for small entities; the use
of performance rather than design
standards; and an exemption from
coverage of the rule, or any part thereof,
for small entities.694
In the NPRM, the Commission sought
comment on various potential
alternatives to the proposed rule,
including alternatives that were tailored
to the needs of small businesses and
that addressed the impact (including
costs) that would be incurred by
businesses to comply with the proposed
rule.695 Specifically, the Commission
sought comment on the estimated
number and the nature of small business
entities for which the proposed rule
would have a significant economic
impact, whether the proposed rule
would have a significant economic
impact on a substantial number of small
entities, and if so, how it could be
modified to avoid such an impact, as
well as whether the proposed definition
for ‘‘business’’ should exclude certain
businesses, including small businesses
meeting the SBA’s definition of a ‘‘small
business concern’’ and the SBA’s Table
of Size Standards, or simply certain
limited-service and full-service
restaurants meeting such
requirements.696 The Commission also
inquired as to whether the ‘‘total price’’
definition should exclude mandatory
charges by restaurants for service
performed for the customer in lieu of
tips, as defined by the Department of
693 5
U.S.C. 604(a)(6).
5 U.S.C. 603(c).
695 NPRM, 88 FR 77479–83.
696 Id.
694 See
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Labor.697 The Commission also
considered alternatives that would
otherwise narrow the scope of the
proposed rule, including limiting
application of the rule to ‘‘Covered
Businesses’’ as defined in the NPRM,
ultimately adopting a variation of this
approach in the final rule.
The Commission requested this
information to minimize the final rule’s
burden on all businesses, including
small entities. As explained through this
SBP, the Commission has considered
the comments and alternatives proposed
by the commenters, including the SBA
Office of Advocacy, and finds that the
final rule will not create a significant
impact on small entities. Indeed, the
type of deception that will be unlawful
under the final rule is already unlawful
under the FTC Act, but the final rule
would allow the Commission to obtain
monetary relief more efficiently than it
could solely under section 19(a)(2) of
the FTC Act (i.e., without a rule
violation), thereby deterring current and
would be violators of the FTC Act.
In its Preliminary Regulatory
Analysis, the Commission described an
alternative to the proposed rule, namely,
to terminate the rulemaking and rely
instead on the Commission’s previously
existing tools, such as consumer
education and enforcement actions
brought under sections 5 and 19 of the
FTC Act, to combat the specified unfair
or deceptive pricing practices. The
Commission believes that promulgation
of the rule will result in greater net
benefits to the marketplace while
imposing no additional burdens beyond
what is required by the FTC Act. As the
Commission describes further in section
V, the rule will not only result in
significant benefits to consumers but
also improve the competitive
environment, particularly for small,
independent, or new firms. Therefore,
the rule appears to be superior to this
alternative for small entities.
As discussed herein, the Commission
narrows the rule by adding a definition
for ‘‘covered good or service’’ that is
limited to Live-event tickets or Shortterm lodging. The Commission also
modifies the definition of government
charges to replace the language that
included only those government charges
levied ‘‘on consumers,’’ with language
clarifying that any government charge
‘‘imposed on the transaction’’ may be
excluded from total price. Finally, the
Commission addresses in section III
how the rule would apply to credit card
processing fees and contingent fees
charged by small businesses.
697 Id.,
88 FR 77481.
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The Commission notes that it has
designed the final rule to minimize
compliance costs for all businesses. As
stated in section V, the Commission
estimates that direct compliance costs in
the live-event ticketing industry, over a
ten-year period, would result in
annualized costs of $648–$2,144 per
firm assuming a 7% discount rate or
$534–$1,916 per firm assuming a 3%
discount rate. U.S. home share hosts
would incur one-time costs reoptimizing prices of $30.42–$91.27. The
Commission also estimates direct
compliance costs for U.S. hotels, over a
ten-year period, would result in
annualized costs of $527–$2,011 per
firm assuming a 7% discount rate or
$434–$1,825 per firm assuming a 3%
discount rate. Based on the available
evidence, the Commission does not
believe that the analysis in section V is
fundamentally different for small
entities. For this reason, the
Commission is not creating an exception
for small entities or creating different
regulatory requirements for small
entities.
The Commission also is not delaying
the effective date of the final rule solely
for small entities. The final rule’s
effective date is 120 days after
publication in the Federal Register on
May 9, 2025. In the Commission’s view,
the rule’s effective date of May 9, 2025
will afford small entities sufficient time
to comply with the final rule, and
commenters have not provided evidence
that more time is necessary. The
Commission declines to set different
effective dates for small businesses and
larger businesses because the final rule’s
core objectives include promoting
comparison shopping for consumers
and leveling the playing field for honest
competitors. For all of the reasons
stated, these objectives would be
thwarted in a marketplace where certain
businesses must comply with the rule’s
requirements for a period of time while
others have more time to continue
engaging in unfair or deceptive pricing
practices.
VIII. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs has
designated this rule as a ‘‘major rule,’’
as defined by 5 U.S.C. 804(2).
List of Subjects in 16 CFR Part 464
Advertising, Consumer protection,
Trade practices.
■ For the reasons set forth above, the
Federal Trade Commission adds part
464 to chapter I of title 16 of the Code
of Federal Regulations to read as
follows:
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PART 464—RULE ON UNFAIR OR
DECEPTIVE FEES
Sec.
464.1
464.2
464.3
464.4
464.5
Definitions.
Hidden fees prohibited.
Misleading fees prohibited.
Relation to State laws.
Severability.
Authority: 15 U.S.C. 41 through 58.
§ 464.1
Definitions.
Ancillary good or service means any
additional good(s) or service(s) offered
to a consumer as part of the same
transaction.
Business means an individual,
corporation, partnership, association, or
any other entity that offers goods or
services, including, but not limited to,
online, in mobile applications, and in
physical locations.
Clear(ly) and conspicuous(ly) means a
required disclosure that is easily
noticeable (i.e., difficult to miss) and
easily understandable by ordinary
consumers, including in all of the
following ways:
(1) In any communication that is
solely visual or solely audible, the
disclosure must be made through the
same means through which the
communication is presented. In any
communication made through both
visual and audible means, such as a
television advertisement, the disclosure
must be presented simultaneously in
both the visual and audible portions of
the communication even if the
representation requiring the disclosure
is made in only one means.
(2) A visual disclosure, by its size,
contrast, location, the length of time it
appears, and other characteristics, must
stand out from any accompanying text
or other visual elements so that it is
easily noticed, read, and understood.
(3) An audible disclosure, including
by telephone or streaming video, must
be delivered in a volume, speed, and
cadence sufficient for ordinary
consumers to easily hear and
understand it.
(4) In any communication using an
interactive electronic medium, such as
the internet, a mobile application, or
software, the disclosure must be
unavoidable.
(5) The disclosure must use diction
and syntax understandable to ordinary
consumers and must appear in each
language in which the representation
that requires the disclosure appears.
(6) The disclosure must comply with
these requirements in each medium
through which it is received, including
all electronic devices and face-to-face
communications.
(7) The disclosure must not be
contradicted or mitigated by, or
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inconsistent with, anything else in the
communication.
(8) When the representation or sales
practice targets a specific audience,
such as children, older adults, or the
terminally ill, ‘‘ordinary consumers’’
includes members of that group.
Covered good or service means:
(1) Live-event tickets; or
(2) Short-term lodging, including
temporary sleeping accommodations at
a hotel, motel, inn, short-term rental,
vacation rental, or other place of
lodging.
Government charges means the fees or
charges imposed on the transaction by
a Federal, State, Tribal, or local
government agency, unit, or department.
Pricing information means any
information relating to an amount a
consumer may pay.
Shipping charges means the fees or
charges that reasonably reflect the
amount a business incurs to send
physical goods to a consumer, including
through the mail, private mail and
shipping services, or by freight.
Total price means the maximum total
of all fees or charges a consumer must
pay for any good(s) or service(s) and any
mandatory ancillary good or service,
except that government charges,
shipping charges, and fees or charges for
any optional ancillary good or service
may be excluded.
§ 464.2
Hidden fees prohibited.
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§ 464.3
Misleading fees prohibited.
In any offer, display, or advertisement
for a covered good or service it is an
unfair and deceptive practice and a
violation of this part for any business to
misrepresent any fee or charge,
including: the nature, purpose, amount,
or refundability of any fee or charge;
and the identity of the good or service
for which the fee or charge is imposed.
§ 464.4
(a) It is an unfair and deceptive
practice and a violation of this part for
any business to offer, display, or
advertise any price of a covered good or
VerDate Sep<11>2014
service without clearly and
conspicuously disclosing the total price.
(b) In any offer, display, or
advertisement that represents any price
of a covered good or service, a business
must disclose the total price more
prominently than any other pricing
information. However, where the final
amount of payment for the transaction
is displayed, the final amount of
payment must be disclosed more
prominently than, or as prominently as,
the total price.
(c) A business must disclose clearly
and conspicuously, before the consumer
consents to pay for any covered good or
service:
(1) The nature, purpose, and amount
of any fee or charge imposed on the
transaction that has been excluded from
total price and the identity of the good
or service for which the fee or charge is
imposed; and
(2) The final amount of payment for
the transaction.
Relation to State laws.
(a) In general. This part will not be
construed as superseding, altering, or
affecting any State statute, regulation,
order, or interpretation relating to unfair
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2167
or deceptive fees or charges, except to
the extent that such statute, regulation,
order, or interpretation is inconsistent
with the provisions of this part, and
then only to the extent of the
inconsistency.
(b) Greater protection under State law.
For purposes of this section, a State
statute, regulation, order, or
interpretation is not inconsistent with
the provisions of this part if the
protection such statute, regulation,
order, or interpretation affords any
consumer is greater than the protection
provided under this part.
§ 464.5
Severability.
If any provision of this part is held to
be invalid or unenforceable by its terms,
or as applied to any person, industry, or
circumstance, or stayed pending further
agency action, the provision shall be
construed so as to continue to give the
maximum effect to the provision
permitted by law and such invalidity
shall not affect the application of the
provision to other persons, industries,
or circumstances or the validity or
application of other provisions. If any
provision or application of this part is
held to be invalid or unenforceable, the
provision or application shall be
severable from this part and shall not
affect the remainder thereof.
By direction of the Commission,
Commissioner Ferguson dissenting.
Joel Christie,
Acting Secretary.
[FR Doc. 2024–30293 Filed 1–8–25; 8:45 am]
BILLING CODE 6750–01–P
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]]>Agencies
[Federal Register Volume 90, Number 6 (Friday, January 10, 2025)]
[Rules and Regulations]
[Pages 2066-2167]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30293]
[[Page 2065]]
Vol. 90
Friday,
No. 6
January 10, 2025
Part II
Federal Trade Commission
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16 CFR Part 464
Trade Regulation Rule on Unfair or Deceptive Fees; Final Rule
Federal Register / Vol. 90 , No. 6 / Friday, January 10, 2025 / Rules
and Regulations
[[Page 2066]]
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FEDERAL TRADE COMMISSION
16 CFR Part 464
RIN 3084-AB77
Trade Regulation Rule on Unfair or Deceptive Fees
AGENCY: Federal Trade Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is
issuing a final trade regulation rule entitled ``Rule on Unfair or
Deceptive Fees'' (``rule'' or ``final rule'') and Statement of Basis
and Purpose addressing certain unfair or deceptive practices involving
fees or charges for live-event tickets and short-term lodging: bait-
and-switch pricing that hides the total price by omitting mandatory
fees and charges from advertised prices; and misrepresenting the
nature, purpose, amount, and refundability of fees or charges. The
final rule specifies that it is an unfair and deceptive practice for
businesses to offer, display, or advertise any price of live-event
tickets or short-term lodging without clearly, conspicuously and
prominently disclosing the total price. The rule also requires
businesses to clearly and conspicuously make certain disclosures before
a consumer consents to pay. The rule further specifies that it is an
unfair and deceptive practice for businesses to misrepresent any fee or
charge in any offer, display, or advertisement for live-event tickets
or short-term lodging.
DATES: This rule is effective May 12, 2025.
ADDRESSES: Copies of this document are available on the Commission's
website, www.ftc.gov.
FOR FURTHER INFORMATION CONTACT: Janice Kopec or Annette Soberats,
Division of Advertising Practices, Bureau of Consumer Protection,
Federal Trade Commission, 202-326-2550 (Kopec), 202-326-2921
(Soberats), [email protected], [email protected].
SUPPLEMENTARY INFORMATION:
Statement of Basis and Purpose
Table of Contents
I. Background
A. Advance Notice of Proposed Rulemaking
B. Notice of Proposed Rulemaking
C. Informal Public Hearing
II. The Legal Standard for Promulgating the Rule
A. Prevalence of Acts or Practices Addressed by the Rule
B. Manner and Context in Which the Acts or Practices Are
Deceptive or Unfair
C. The Economic Effect of the Rule
III. Section-by-Section Analysis
A. Sec. 464.1: Definitions
1. Ancillary Good or Service
2. Business
3. Clear(ly) and Conspicuous(ly)
4. Covered Good or Service
5. Government Charges
6. Pricing Information
7. Shipping Charges
8. Total Price
(a) Mandatory Fees
(b) Maximum Total
(c) Itemization
(d) Exclusions From Total Price
(e) Intersection With IRS Requirements
B. Sec. 464.2 Hidden Fees Prohibited
1. Sec. 464.2(a)
(a) Contingent Fees
(b) Ticket Service Fees
(c) Credit Card and Other Payment Processing Surcharges
(d) Dynamic Pricing and National Advertising
(e) Rebates, Bundled Pricing, and Other Discounts: Compliance
When Promotional Pricing Models Have Different Fees
(f) Online Marketplaces
2. Sec. 464.2(b)
3. Sec. 464.2(c)
C. Sec. 464.3 Misleading Fees Prohibited
D. Sec. 464.4 Relation to State Laws
E. Sec. 464.5 Severability
IV. Challenges to the FTC's Legal Authority To Promulgate the Rule
A. Major Questions Doctrine
1. The Rule Does Not Address a Major Question
(a) The Commission Has a Long History of Addressing Unfair or
Deceptive Acts or Practices Related to Pricing Information
(b) Commenters' Claims About the Scope of the Acts or Practices
Covered by the Rule Are Inapplicable or Overstated
2. Congress Provided the Commission With a Clear Grant of
Authority To Promulgate This Rule
B. Non-Delegation Doctrine
C. First Amendment
1. Comments
2. Legal Standard
3. The Rule's Disclosure Requirements Are Constitutional Under
Zauderer
4. The Rule Does Not Prohibit Truthful Speech
5. The Rule's Treatment of Credit Card Fees and Government
Charges Does Not Violate the First Amendment
D. Commission Structure
E. Administrative Procedure Act
V. Final Regulatory Analysis Under Section 22 of the FTC Act
A. Concise Statement of the Need for, and Objectives of, the
Final Rule
B. Alternatives to the Final Rule the Commission Considered,
Reasons for the Commission's Determination That the Final Rule Will
Attain Its Objectives in a Manner Consistent With Applicable Law,
and the Reasons the Particular Alternative Was Chosen
C. The NPRM's Preliminary Regulatory Analysis
D. Significant Issues Raised by Comments, the Commission's
Assessment and Response, and Any Changes Made as a Result
1. Comments on Costs
(a) Public Comments: Estimated Costs Are Too Low
(b) Public Comments: Unquantified Costs to Firms
(c) Public Comments: Unquantified Costs to Consumers
(d) Public Comments: Unquantified Costs to Third Parties
(e) Public Comments: Costs From Incorporating Contingent Fees
Into Total Price
2. Comments on Benefits
(a) Public Comments: Benefits Are Too High
(b) Public Comments: Unquantified Benefits
3. Comments on the Economy-Wide Break-Even Analysis
(a) Public Comments: Break-Even Analysis Has Incorrect
Assumptions or Contains Errors
(b) Public Comments: Break-Even Analysis Is Not Enough To
Justify an Economy-Wide Rule
(c) Public Comments: Break-Even Analysis Is Satisfactory
E. Economic Regulatory Analysis of the Final Rule's Costs and
Benefits
1. Economic Rationale for the Final Rule
(a) Shrouded Pricing as a Cause of Market Failure
(b) Shrouded Pricing as a Source of Biased Expectations
2. Economic Effects of the Final Rule
(a) General Benefits of the Final Rule
i. Reductions in Search Costs
ii. Reductions in Deadweight Loss
(b) Welfare Transfers
(c) General Costs of the Final Rule
3. Quantified Welfare Effects
(a) Quantified Compliance Costs
(b) Break-Even Analysis
i. Sensitivity Analysis: Assume Higher Wage Rates
(c) Quantified Benefits and Costs: Live-Event Ticketing Industry
i. Live-Event Ticketing: Estimated Benefits of the Final Rule
(a) Consumer Time Savings When Shopping for Live-Event Tickets
(b) Additional Unquantified Benefits: Reductions in Deadweight
Loss and Abandoned Transactions
ii. Live-Event Ticketing: Estimated Costs of the Final Rule
iii. Live-Event Ticketing: Net Benefits
iv. Live-Event Ticketing: Uncertainties
(d) Quantified Benefits and Costs: Short-Term Lodging Industry
i. Short-Term Lodging: Estimated Benefits of the Final Rule
(a) Search Statistics
(b) U.S. Hotels and Home Shares
(c) Foreign Hotels and Home Shares With U.S.-Facing websites
(d) All Hotels and Home Shares
(e) Additional Unquantified Benefits: Reductions In Deadweight
Loss and Abandoned Transactions
ii. Short-Term Lodging: Estimated Costs of the Final Rule
(a) Panel A: U.S. Hotels and Home Share Hosts
(b) Panel B: Foreign Hotels and Home Share Hosts
[[Page 2067]]
(c) Panel C: All Hotels and Home Share Hosts (US + Foreign)
iii. Short-Term Lodging: Net Benefits
iv. Short-Term Lodging: Uncertainties
4. Economic Evaluation of Alternatives
5. Summary of Results
6. Appendix A: Model of Market Distortion Caused by Drip Pricing
7. Appendix B: Short-Term Lodging Industry Minutes per Listing
Calculations
(a) Low-End Estimate of Minutes per Listing Calculation
(b) High-End Estimate of Minutes per Listing Calculation
VI. Paperwork Reduction Act
A. Disclosures Related to Final Sec. 464.2(a) Through (c)
1. Number of Respondents
2. Estimated One-Time Hour Burden
3. Estimated One-Time Labor Costs
4. Estimated One-Time Non-Labor Costs
5. Projected Labor Costs Likely Overestimated
B. Prohibited Misrepresentations Under Final Sec. 464.3
VII. Regulatory Flexibility Act--Final Regulatory Flexibility
Analysis
A. Statement of the Need for, and Objectives of, the Rule
B. Significant Issues Raised by Comments, the Commission's
Assessment and Response, and Any Changes Made as a Result
C. Comment by the Small Business Administration, Office of
Advocacy, the Commission's Assessment and Response, and Any Changes
Made as a Result
D. Description and Estimate of the Number of Small Entities To
Which the Rule Will Apply
E. Description of the Projected Reporting, Recordkeeping, and
Other Compliance Requirements
F. Discussion of Significant Alternatives the Commission
Considered That Would Accomplish the Stated Objectives of the Final
Rule and That Would Minimize Any Significant Economic Impact of the
Final Rule on Small Entities
VIII. Congressional Review Act
I. Background
When shopping for a good or service, consumers want to know: how
much? It is a bedrock principle of FTC law that price is material to a
consumer's decision about whether to purchase a good or service.
Consumers look for prices to comparison shop and to weigh what a good
or service might be worth. Most consumers also rely on price to answer
critical budgeting questions such as: Can I afford this hotel or short-
term rental for my upcoming vacation? Can I afford these concert
tickets? Unfortunately, consumers face widespread and growing unfair
and deceptive fee practices that make it much harder to find out: how
much will this cost?
There is nothing new about businesses using bait-and-switch tactics
to reel in and deceive consumers. The Commission has a long history of
bringing enforcement actions against these unfair and deceptive
practices. Quoting a misleading, artificially low price and then adding
in mandatory fees and other charges throughout the buying process--a
practice known today as drip pricing--is a quintessential example of
bait-and-switch pricing and is a practice that falls squarely within
the scope of the Commission's long history of work to protect
consumers. While today this practice goes by a different name, the
playbook has not changed: lure in consumers with a low price, then hit
them with a higher price after they have invested in the transaction
and sunk time and effort into trying to buy a good or service for an
illusory price. Behavioral and economic research explains that
piecemeal numbers and explanations cannot cure the deception or
mitigate the harms to consumers when businesses employ these pricing
tactics. Often consumers finish the transaction without an accurate
understanding of the total price of goods or services.
In recent years, bait-and-switch pricing has garnered widespread
public attention. Consumers have cried foul when they discovered the
cost of their hotel stays were significantly higher than expected due
to a mandatory, hidden ``resort fee,'' typically charged for services
that consumers expected to be a part of staying in a hotel. Consumers
have also complained when they tried to purchase tickets to a live
event, only to find out that the quoted ticket price almost doubled by
the time they reached the final checkout page. Consumers have
confronted a host of mysterious, mandatory, ``convenience,''
``processing,'' or ``service'' charges that are either non-descript or
otherwise misleading. These practices are frustrating for consumers
when they shop for travel and entertainment especially because these
purchases can be significant expenditures. This rulemaking record is
replete with individual stories of consumers inundated by bait-and-
switch pricing and misleading fees and charges.
For example, an individual commenter lamented the pervasiveness of
bait-and-switch pricing tactics across everyday purchases:
Like almost every American consumer, I have had to pay these
``junk fees'' in various circumstances. I consider myself reasonably
well informed, yet have been surprised by them, because they keep
[c]ropping up in unexpected places. Like many, I've experienced them
in hotels, with car rentals and telecom providers. In these
instances, the consumer has no real recourse, as the bargaining
power is wholly unequal. However, these fees are now impacting every
aspect of commerce. ``Convenience'' fees have impacted me with food
service. ``Facility'' fees charges at fitness facilities. Credit
card fees in excess of the actual interchange fees being charged at
restaurants. It's endless, ubiquitous and makes it extremely
difficult for consumers to make informed decisions.\1\
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\1\ FTC-2023-0064-0886 (Individual Commenter).
As another individual commenter aptly put it, ``It's one thing to
be on guard when walking down a dark alley, but being on guard every
time you want to take a vacation, go to a concert, fly home to see a
sick loved one--that's just not fair.'' \2\
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\2\ FTC-2023-0064-1576 (Individual Commenter).
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It is no surprise that, once bait-and-switch pricing tactics are
used by some businesses to obscure the cost of a good or service, they
tend to spread. Businesses that want to compete on the true price of
their offering are undercut by businesses that use hidden or misleading
fees to display an artificially low price. As studies confirm, in such
instances, consumers cannot shop for price effectively. This forces
businesses into a race to the bottom and results in more and more
businesses using hidden and misleading fees to remain competitive. When
these types of fees are eventually revealed, consumers are left
frustrated with a new and unexpected higher price and misleading fees
and charges that prevent them from having a real understanding of what
they are getting in return for these additional fees.
The Rule on Unfair or Deceptive Fees addresses these problems
directly in the live-event ticketing industry and the short-term
lodging industry, which includes temporary sleeping accommodations at a
hotel, motel, inn, short-term rental, vacation rental, or other place
of lodging. These two industries have engaged in bait-and-switch
pricing tactics for years. The rule ensures that when businesses
advertise a price for live-event tickets or short-term lodging, it is
the total price, and when they explain a fee or charge, the description
is truthful. In simple terms: tell consumers the real price and do not
lie about the fees or charges. The final rule does this by addressing
two specific and prevalent unfair and deceptive practices: (1) bait-
and-switch pricing that hides the total price of live-event tickets and
short-term lodging by omitting mandatory fees and charges from
advertised prices, including through drip pricing, and (2)
misrepresenting the nature, purpose, amount, and refundability of fees
or charges. The rule has two main
[[Page 2068]]
components. First, the final rule requires businesses that offer a
price for live-event tickets or short-term lodging to disclose the
total price, inclusive of most mandatory charges, and to make sure that
the total price is disclosed more prominently than other pricing
information, except the final amount of payment. Second, the final rule
prohibits misrepresentations about fees or charges in any offer,
display, or advertisement for live-event tickets and short-term
lodging.
The final rule is tailored to target these specific unfair and
deceptive pricing practices, while preserving flexibility for live-
event ticket and short-term lodging businesses. The rule does not
prohibit any one type of fee, nor does it prohibit specific pricing
practices such as itemization of fees or dynamic pricing. The rule does
not require that all fees be included when offering a price--just
mandatory ones. The rule gives businesses discretion to list optional
fees selected by the consumer and government and shipping charges
separately. The discretion to set prices remains squarely with
businesses; the rule simply requires that they tell consumers the truth
about prices for live-event tickets and short-term lodging.
A. Advance Notice of Proposed Rulemaking
The Commission published, on November 8, 2022, an advance notice of
proposed rulemaking (``ANPR'') \3\ under the authority of section 18 of
the Federal Trade Commission Act (``FTC Act'') \4\ to address certain
unfair or deceptive acts or practices involving fees. The ANPR
described the Commission's history of taking law enforcement action
against, and educating consumers about, unfair or deceptive practices
relating to fees, and it asked a series of questions to help inform the
Commission about whether such practices are prevalent and, if so,
whether and how to proceed with a notice of proposed rulemaking
(``NPRM''). The Commission was particularly interested in the following
practices that it identified as the subjects of investigations,
enforcement actions, workshops, research, and consumer education: (a)
misrepresenting or failing to disclose clearly and conspicuously, on
any advertisement or in any marketing, the total price of any good or
service for sale; (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; (c) misrepresenting or
failing to disclose clearly and conspicuously whether fees, interest,
charges, products, or services are optional or required; (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; (e)
misrepresenting that a consumer owes payments for any product or
service the consumer did not agree to purchase; (f) billing or charging
consumers for fees, interest, goods, services, or programs without
express and informed consent; (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;[thinsp]and (h)
misrepresenting or failing to disclose clearly and conspicuously, on
any advertisement or in any marketing, the nature or purpose of any
fees, interest, charges, or other costs.
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\3\ Advance notice of proposed rulemaking; request for public
comment: Unfair or Deceptive Fees Trade Regulation Rule Commission
Matter No. R207011, 87 FR 67413 (Nov. 8, 2022). The ANPR and other
documents pertaining to this rulemaking are available on the FTC web
page, Rulemaking: Unfair or Deceptive Fees, https://www.ftc.gov/legal-library/browse/rules/rulemaking-unfair-or-deceptive-fees.
\4\ 15 U.S.C. 57a(b)(2). Section 18 authorizes the Commission to
promulgate, modify, or 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).
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The Commission specifically sought public comment on the prevalence
of such practices and the costs and benefits of a rule that would
require upfront inclusion of mandatory fees whenever consumers are
quoted a price, including by asking a series of questions to solicit
data and commentary. The Commission took comments for sixty days,
extended the comment period by an additional thirty days,\5\ and
carefully considered the more than 12,000 comments received.\6\
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\5\ Notice; extension of public comment period: Unfair or
Deceptive Fees Trade Regulation Rule, 88 FR 4796 (Jan. 25, 2023).
\6\ Publicly posted comments are available to view through
Regulations.gov under Docket ID FTC-2022-0069 at https://www.regulations.gov/docket/FTC-2022-0069/comments.
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B. Notice of Proposed Rulemaking
Based on the substance of the comments received in response to the
ANPR, as well as the Commission's history of enforcement and other
information, on November 9, 2023, the Commission published an NPRM,
which proposed an industry-neutral rule that would prohibit
misrepresenting the total price of goods or services by omitting
mandatory fees from advertised prices and misrepresenting the nature
and purpose of fees.\7\ The NPRM described the comments received in
response to the ANPR and examined the Commission's prior enforcement
actions and other responses concerning unfair and deceptive fees. In
the NPRM, the Commission stated that it has reason to believe that
certain unfair or deceptive acts or practices involving fees are
prevalent, specifically: (1) misrepresenting the total price of goods
and services by omitting mandatory fees from advertised prices and (2)
misrepresenting the nature and purpose of fees. After discussing the
comments and explaining its considerations in developing a proposed
rule, the Commission also posed specific questions for comment and
provided explanation of the proposed rule text. Finally, the NPRM set
out the Commission's proposed regulatory text.\8\ The Commission took
public comments for sixty days, and extended the comment period for an
additional thirty days.\9\
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\7\ Notice of proposed rulemaking; request for public comment:
Trade Regulation Rule on Unfair or Deceptive Fees, 88 FR 77420 (Nov.
9, 2023). In accordance with section 18(b)(2)(C) of the FTC Act, 15
U.S.C. 57a(b)(2)(C), on October 10, 2023, the Commission sent
notices to the House Committee on Energy and Commerce and the Senate
Committee on Commerce, Science and Transportation seeking comment
concerning the utility and scope of the trade regulation rule
proposed in the NPRM and including the full text of the NPRM.
\8\ NPRM, 88 FR 77483.
\9\ Notice of proposed rulemaking; extension of public comment
period: Trade Regulation Rule on Unfair or Deceptive Fees, 89 FR 38
(Jan. 2, 2024).
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In response to the NPRM, the Commission received over 60,800
comments from stakeholders representing a wide range of viewpoints and
industries.\10\ These stakeholders
[[Page 2069]]
included numerous individual consumers and consumer groups who
described examples and experiences with the unfair and deceptive fee
practices identified by the Commission. Commenters also included a
range of business owners, trade associations, and other industry
groups; academics; and government officials and agencies from all
levels of government. While some commenters raised concerns and
recommended specific modifications to, or exemptions from, the
Commission's proposal, the overwhelming majority of commenters strongly
supported the Commission's proposed rule.
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\10\ Publicly available comments are available to view through
Regulations.gov under Docket ID FTC-2023-0064 at https://www.regulations.gov/document/FTC-2023-0064-0001/comment. As noted on
Regulations.gov, not every comment is made publicly available. For
example, ``[a]gencies may redact or withhold certain Comment
Submissions . . . , such as those containing . . . duplicate/near
duplicate examples of a mass-mail campaign. Therefore, the total in
the Number of Comments Posted Box may be lower than the total in the
Comments Received Box.'' See https://www.regulations.gov/faq,
Frequently Asked Questions, General FAQs, Find Dockets, Documents,
and Comments FAQs, answer to How are Comments counted and posted to
Regulations.gov?. In this rulemaking, Regulations.gov identified ten
mass-mail campaigns as part of the total number of comments received
of over 60,800. One mass-mail campaign alone accounted for close to
48,200 comments, and all mass-mail campaigns combined accounted for
more than 57,400 comments. Because comments within each mass-mail
campaign are highly similar, only representative comments of each
mass-mail campaign are publicly posted on Regulations.gov. In
addition to representative mass-mail comments, the more than 3,300
comments that Regulations.gov did not identify as belonging to a
mass-mail campaign are publicly posted. The Commission received and
considered all filed comments, including all mass-mail comments.
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The proposed rule received widespread support in comments from
Federal,\11\ State, and local \12\ elected officials; State Attorneys
General; \13\ Federal,\14\ State, and local \15\ government agencies;
public policy and consumer advocates,\16\ including housing advocates
\17\ and advocates for the incarcerated or formerly incarcerated; \18\
university public policy advocates and clinics; \19\ academics; \20\
legal services providers; \21\ and industry members from a broad range
of market sectors, including online merchants,\22\ live-event
ticketing,\23\ and hotels and other short-term lodging.\24\ These
commenters supporting the rule confirmed the prevalence of hidden and
misrepresented fees throughout the economy, across large and small
industries subject to the Commission's jurisdiction, ranging, for
example, from travel, live events, restaurants, delivery, rental
housing, and correctional services to carpet cleaning, dietary
supplements, moving companies, and gyms. These commenters supported the
rule for its benefits to both consumers and honest businesses.
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\11\ See, e.g., FTC-2023-0064-3135 (U.S. Senate, Sen. Robert P.
Casey, Jr.); FTC-2023-0064-3271 (U.S. Senate, Sen. Amy Klobuchar);
FTC-2023-0064-2858 (U.S. House of Representatives, Rep. Maxwell
Alejandro Frost, Rep. Jimmy Gomez, Rep. Barbara Lee, Rep. Rashida
Tlaib, Rep. Kevin Mullin, Rep. Dwight Evans, Rep. Judy Chu, Rep.
Greg Casar, Rep. Dan Goldman, Rep. Salud Carbajal).
\12\ See, e.g., FTC-2023-0064-1411 (Arizona House of
Representatives, Rep. Analise Ortiz); FTC-2023-0064-2938 (Colorado
House of Representatives, Rep. Naquetta Ricks); FTC-2023-0064-2926
(Florida House of Representatives, Rep. Rita Harris); FTC-2023-0064-
3081 (Florida House of Representatives, Rep. Anna V. Eskamani); FTC-
2023-0064-3103 (Florida House of Representatives, Rep. Angela
Nixon); FTC-2023-0064-3117 (Maryland House of Delegates, Del. Julie
Palakovich Carr); FTC-2023-0064-2341 (Massachusetts House of
Representatives, Rep. Lindsay Sabadosa); FTC-2023-0064-3072
(Michigan Senate and House of Representatives, Sen. Darrin
Camilleri, Sen. Mary Cavanagh, and Rep. Betsy Coffia); FTC-2023-
0064-3079 (Montana State Senate, Senate Democratic Caucus, Sen. Pat
Flowers, Sen. Susan Webber, Sen. Andrea Olsen, Sen. Edie
McClafferty, Sen. Jen Gross, Sen. Janet Ellis, Sen. Shane Morigeau,
Sen. Ellie Boldman, Sen. Ryan Lynch, Sen. Christopher Pope, Sen.
Mike Fox, Sen. Denise Hayman, Sen. Willis Curdy, and Sen. Mary Ann
Dunwell); FTC-2023-0064-3184 (New York Senate, Sen. Michael
Gianaris); FTC-2023-0064-3123 (Syracuse, New York, City Auditor
Alexander Marion); FTC-2023-0064-3149 (North Carolina House of
Representatives, Rep. Julie von Haefen); FTC-2023-0064-3237 (North
Carolina House of Representatives, Rep. Pricey Harrison).
\13\ See, e.g., FTC-2023-0064-3150 (Attorney General of the
State of California); FTC-2023-0064-3215 (Attorneys General of the
States of North Carolina and Pennsylvania, along with Attorneys
General of the States or Territories of Arizona, Colorado,
Connecticut, Delaware, District of Columbia, Hawaii, Illinois,
Maine, Michigan, Minnesota, New Jersey, New York, Oklahoma, Oregon,
Vermont, Washington, and Wisconsin).
\14\ See, e.g., FTC-2023-0064-3134 (U.S. Department of
Transportation, Federal Motor Carrier Safety Administration); FTC-
2023-0064-3187 (U.S. Department of Justice, Antitrust Division).
\15\ See, e.g., FTC-2023-0064-1519 (New York City Department of
Consumer and Worker Protection); FTC-2023-0064-2883 (District of
Columbia, Office of the People's Counsel); FTC-2023-0064-3196 (South
Carolina Department of Consumer Affairs).
\16\ See, e.g., FTC-2023-0064-1028 (Complex Trauma Project);
FTC-2023-0064-2885 (AARP); FTC-2023-0064-3104 (Truth in Advertising,
Inc.); FTC-2023-0064-3160 (Consumer Federation of America on behalf
of itself and 51 other national and State consumer advocacy groups,
authored by American Economic Liberties Project, Consumer Action,
Consumer Federation of America, National Association of Consumer
Advocates, National Consumer Law Center, National Consumers League,
U.S. Public Interest Research Group); FTC-2023-0064-3162 (BBB
National Programs, Inc.); FTC-2023-0064-3191 (Community Catalyst and
32 other organizations focused on health care and consumer
protection issues); FTC-2023-0064-3205 (Consumer Reports); FTC-2023-
0064-3216 (Demand Progress Education Fund); FTC-2023-0064-3218
(National Consumer Law Center); FTC-2023-0064-3242 (William E.
Morris Institute for Justice); FTC-2023-0064-3246 (Coalition for App
Fairness); FTC-2023-0064-3248 (DC Jobs With Justice on behalf of
Fair Price, Fair Wage Coalition); FTC-2023-0064-3259 (National
Women's Law Center); FTC-2023-0064-3270 (Consumer Federation of
America, National Consumer Law Center, and National Association of
Consumer Advocates); FTC-2023-0064-3290 (U.S. Public Interest
Research Group Education Fund); FTC-2023-0064-3302 (Public Citizen).
\17\ See, e.g., FTC-2023-0064-1431 (McPherson Housing
Coalition); FTC-2023-0064-2851 (Housing Action Illinois); FTC-2023-
0064-3102 (Corporation for Supportive Housing); FTC-2023-0064-3235
(National Housing Law Project).
\18\ See, e.g., FTC-2023-0064-2915 (Voice of the Experienced);
FTC-2023-0064-2696 (Safe Return Project); FTC-2023-0064-3253
(Fortune Society); FTC-2023-0064-3260 (Formerly Incarcerated,
Convicted People & Families Movement, in collaboration with the
Partnership for Just Housing); FTC-2023-0064-3283 (National Consumer
Law Center, Prison Policy Initiative, and advocate Stephen Raher).
\19\ See, e.g., FTC-2023-0064-1939 (Tzedek DC, David A. Clarke
School of Law, University of the District of Columbia); FTC-2023-
0064-2888 (Housing Policy Clinic, University of Texas School of
Law); FTC-2023-0064-3146 (Institute for Policy Integrity, New York
University School of Law); FTC-2023-0064-3255 (Carrie Floyd,
Clinical Teaching Fellow, Veterans Legal Clinic, and Mira Edmonds,
Clinical Assistant Professor of Law, Civil-Criminal Litigation
Clinic, University of Michigan Law School); FTC-2023-0064-3275
(Berkeley Center for Consumer Law & Economic Justice, University of
California, Berkeley School of Law, and Consumer Law Advocates,
Scholars & Students Network); FTC-2023-0064-3268 (Housing & Eviction
Defense Clinic, University of Connecticut School of Law).
\20\ See, e.g., FTC-2023-0064-1294 (James J. Angel, Ph.D., CFP,
CFA, Professor, Georgetown University, McDonough School of
Business); FTC-2023-0064-1467 (Richard J. Peltz-Steele, Chancellor
Professor, University of Massachusetts Law School).
\21\ See, e.g., FTC-2023-0064-2862 (Legal Aid Foundation of Los
Angeles); FTC-2023-0064-2892 (Community Legal Services of
Philadelphia); FTC-2023-0064-2920 (Colorado Poverty Law Project);
FTC-2023-0064-3090 (Atlanta Legal Aid Society, Inc.); FTC-2023-0064-
3225 (CED Law); FTC-2023-0064-3278 (Southeast Louisiana Legal
Services).
\22\ See, e.g., FTC-2023-0064-2840 (Indie Sellers Guild); FTC-
2023-0064-2901 (E-Merchants Trade Council, Inc.).
\23\ See, e.g., FTC-2023-0064-2856 (National Football League);
FTC-2023-0064-3108 (Christian L. Castle, Esq.; Mala Sharma,
President, Georgia Music Partners; and Dr. David C. Lowery, founder
of musical groups Cracker and Camper Van Beethoven, and a lecturer
at the University of Georgia Terry College of Business); FTC-2023-
0064-3122 (Vivid Seats); FTC-2023-0064-3195 (League of American
Orchestras on behalf of itself and Association of Performing Arts
Professionals, Carnegie Hall, Dance/USA, Folk Alliance
International, Future of Music Coalition, National Performance
Network, OPERA America, PAVA--Performing Arts Venues Alliance,
Performing Arts Alliance, and Theatre Communications Group); FTC-
2023-0064-3212 (TickPick, LLC); FTC-2023-0064-3230 (Future of Music
Coalition); FTC-2023-0064-3250 (National Independent Talent
Organization); FTC-2023-0064-3266 (StubHub, Inc.); FTC-2023-0064-
3292 (National Association of Theatre Owners); FTC-2023-0064-3304
(Recording Academy); FTC-2023-0064-3306 (Live Nation Entertainment
and its subsidiary Ticketmaster North America); FTC-2023-0064-3105
(Charleston Symphony); FTC-2023-0064-3241 (National Association of
Ticket Brokers).
\24\ See, e.g., FTC-2023-0064-3077 (Far Horizons Travel); FTC-
2023-0064-3094 (American Hotel & Lodging Association); FTC-2023-
0064-3106 (American Society of Travel Advisors, Inc.); FTC-2023-
0064-3204 (Expedia Group); FTC-2023-0064-3244 (Vacation Rental
Management Association).
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Individual consumers overwhelmingly supported the rule. Out of
60,853 total comments received, a mass mailing of close to 48,186
consumer commenters stated that they supported ``the FTC's efforts to
protect American consumers and crack down on unscrupulous businesses
that tack on junk fees at the end of the purchasing process,'' and
urged the Commission ``to pass this rule to not only save consumers
tens of billions of dollars each year, but to level the playing field
for honest businesses who are transparent about their costs and
[[Page 2070]]
fees.'' \25\ Other mass mailings contained similar comments in support.
In a mass mailing of about 344 comments, consumer commenters made near-
identical statements to the aforementioned mass mailing and added:
``Junk fees are monies a business tacks on at the end of the purchasing
process instead of being transparent about the full price upfront.
These fees are common when people are purchasing airline and concert
tickets, booking hotel rooms, paying utility bills, and renting
apartments.'' \26\ A mass mailing submitted by about 315 consumer
commenters stated, ``I support cracking down on hidden junk fees that
cost Americans billions of dollars each year.'' \27\ A mass mailing by
about nineteen consumer commenters stated, ``For too long, individuals
have been subjected to misleading practices, such as the omission of
mandatory fees from advertised prices and misrepresentation of the
nature and purpose of fees. These practices not only erode trust but
also hinder informed decision-making by consumers.'' \28\ A mass
mailing by about thirteen consumer commenters simply urged: ``Stop junk
fees!'' \29\ Additional comments from individual consumers also
supported the rule.
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\25\ See, e.g., FTC-2023-0064-0962, FTC-2023-0064-1186, FTC-
2023-0064-1219, FTC-2023-0064-1230, FTC-2023-0064-1826, FTC-2023-
0064-1827, FTC-2023-0064-1933, FTC-2023-0064-1946.
\26\ See, e.g., FTC-2023-0064-2290.
\27\ See, e.g., FTC-2023-0064-3156.
\28\ See, e.g., FTC-2023-0064-2962.
\29\ See, e.g., FTC-2023-0064-2964.
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Other commenters opposed the rule, sought exemptions from the rule,
or expressed concern about the rule's definitions or application to
specific pricing scenarios. They included a Federal government agency;
\30\ national business groups and public policy advocates,\31\
including tax groups and advisors; \32\ academics; \33\ representatives
from auto dealers and service providers; \34\ app-based delivery
platforms; \35\ financial and real estate settlement services; \36\
franchised businesses; \37\ representatives of housing providers,\38\
including apartment associations \39\ and a housing advertising
platform; \40\ hospitality groups, including hotel \41\ and restaurant
associations; \42\ funeral and cemetery providers; \43\ gaming
associations; \44\ telecommunications providers; \45\ live-event
venues; \46\ a law firm; \47\ providers of communications services to
incarcerated people; \48\ and other sectors.\49\ The commenters argued
that the FTC failed to establish the prevalence of the defined unfair
and deceptive practices and failed to conduct an adequate cost-benefit
analysis, and that the proposed rule would interfere with established
pricing models, could not be applied to all pricing scenarios, would
overlap with other laws and regulations, or would exceed the FTC's
rulemaking authority or jurisdiction.
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\30\ U.S. Small Bus. Admin., Office of Advocacy, Re: Trade
Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001,
https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
\31\ See, e.g., FTC-2023-0064-2367 (Small Business Majority);
FTC-2023-0064-2887 (Progressive Policy Institute); FTC-2023-0064-
2919 (National Automatic Merchandising Association); FTC-2023-0064-
3028 (Competitive Enterprise Institute); FTC-2023-0064-3016
(National Federation of Independent Business, Inc.); FTC-2023-0064-
3127 (U.S. Chamber of Commerce); FTC-2023-0064-3128 (Merchants
Payments Coalition); FTC-2023-0064-3137 (Chamber of Progress); FTC-
2023-0064-3140 (Merchant Advisory Group); FTC-2023-0064-3145
(Association of National Advertisers, Inc.); FTC-2023-0064-3147
(American Land Title Association); FTC-2023-0064-3173 (Center for
Individual Freedom); FTC-2023-0064-3186 (National LGBT Chamber of
Commerce and National Asian/Pacific Islander American Chamber of
Commerce & Entrepreneurship); FTC-2023-0064-3208 (FreedomWorks);
FTC-2023-0064-3267 (National Retail Federation).
\32\ See, e.g., FTC-2023-0064-3100 (Civitas Advisors, Inc.);
FTC-2023-0064-3126 (Tax Foundation); FTC-2023-0064-3258 (National
Taxpayers Union Foundation).
\33\ See, e.g., FTC-2023-0064-2891 (Mary Sullivan, George
Washington University, Regulatory Studies Center); FTC-2023-0064-
3264 (Mark J. Perry, Ph.D., Professor Emeritus of Economics at
University of Michigan-Flint and Senior Fellow Emeritus at the
American Enterprise Institute).
\34\ See, e.g., FTC-2023-0064-3121 (National Independent
Automobile Dealers Association); FTC-2023-0064-3189 (National
Automobile Dealers Association); FTC-2023-0064-3206 (Motor Vehicle
Protection Products Association, Guaranteed Asset Protection
Alliance, and Service Contract Industry Council); FTC-2023-0064-3276
(Automotive Service Association).
\35\ See, e.g., FTC-2023-0064-3263 (Flex Association); FTC-2023-
0064-3202 (TechNet).
\36\ See, e.g., FTC-2023-0064-1425 (Iowa Bankers Association);
FTC-2023-0064-1941 (Independent Bankers Association of Texas); FTC-
2023-0064-2574 (BattleLine LLC via Investor Protection Initiative);
FTC-2023-0064-2893 (America's Credit Unions); FTC-2023-0064-3119
(Money Services Business Association, Inc.); FTC-2023-0064-3138
(Independent Community Bankers of America); FTC-2023-0064-3139
(American Bankers Association and Consumer Bankers Association);
FTC-2023-0064-3142 (American Escrow Association); FTC-2023-0064-3144
(Mortgage Bankers Association); FTC-2023-0064-3168 (American
Financial Services Association); FTC-2023-0064-3182 (Massachusetts
Bankers Association).
\37\ See, e.g., FTC-2023-0064-3141 (Coalition of Franchisee
Associations); FTC-2023-0064-3211 (American Association of
Franchisees & Dealers); FTC-2023-0064-3294 (International Franchise
Association).
\38\ See, e.g., FTC-2023-0064-3066 (Norhart, Inc.); FTC-2023-
0064-3115 (National Association of Residential Property Managers);
FTC-2023-0064-3116 (Manufactured Housing Institute); FTC-2023-0064-
3133 (National Multifamily Housing Council and National Apartment
Association); FTC-2023-0064-3152 (Building Owners & Managers
Association, Council for Affordable & Rural Housing, Housing
Advisory Group, Institute of Real Estate Management, Manufactured
Housing Institute, National Apartment Association, National
Association of Home Builders, National Association of Residential
Property Managers, National Leased Housing Association, National
Multifamily Housing Council, and Real Estate Roundtable).
\39\ See, e.g., FTC-2023-0064-2981 (Apartment & Office Building
Association of Metropolitan Washington); FTC-2023-0064-3042 (Nevada
State Apartment Association); FTC-2023-0064-3044 (San Angelo
Apartment Association); FTC-2023-0064-3045 (Chicagoland Apartment
Association); FTC-2023-0064-3089 (Apartment Association of Northeast
Wisconsin and Fox Valley Apartment Association); FTC-2023-0064-3111
(Houston Apartment Association); FTC-2023-0064-3172 (New Jersey
Apartment Association); FTC-2023-0064-3296 (Bay Area Apartment
Association); FTC-2023-0064-3311 (Greater Cincinnati Northern
Kentucky Apartment Association); FTC-2023-0064-3312 (Tulsa Apartment
Association); FTC-2023-0064-3313 (Property Management Association of
Michigan).
\40\ FTC-2023-0064-3289 (Zillow Group).
\41\ See, e.g., FTC-2023-0064-3262 (Skyscanner); FTC-2023-0064-
3293 (Travel Technology Association).
\42\ See, e.g., FTC-2023-0064-2918 (Elite Catering + Event
Professionals); FTC-2023-0064-3078 (Washington Hospitality
Association); FTC-2023-0064-3080 (UNITE HERE); FTC-2023-0064-3101
(High Road Restaurants); FTC-2023-0064-3180 (Independent Restaurant
Coalition); FTC-2023-0064-3197 (American Beverage Licensees); FTC-
2023-0064-3203 (American Pizza Community); FTC-2023-0064-3219
(Georgia Restaurant Association); FTC-2023-0064-3300 (National
Restaurant Association).
\43\ See, e.g., FTC-2023-0064-3065 (Carriage Services, Inc.);
FTC-2023-0064-3130 (International Cemetery, Cremation & Funeral
Association); FTC-2023-0064-3210 (Service Corporation
International).
\44\ See, e.g., FTC-2023-0064-2886 (American Gaming
Association); FTC-2023-0064-3120 (Arizona Indian Gaming
Association).
\45\ See, e.g., FTC-2023-0064-3261 (National Association of
Broadcasters); FTC-2023-0064-2884 (NTCA--The Rural Broadband
Association); FTC-2023-0064-3143 (ACA Connects--America's
Communications Association); FTC-2023-0064-3233 (NCTA--The internet
& Television Association); FTC-2023-0064-3234 (CTIA--The Wireless
Association); FTC-2023-0064-3295 (USTelecom--The Broadband
Association).
\46\ See, e.g., FTC-2023-0064-3033 (The Rebel Lounge, Lucky Man
Concerts LLC, PHX Fest, RelentlessBeats LLC).
\47\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\48\ See, e.g., FTC-2023-0064-3236 (NCIC Inmate Communications);
FTC-2023-0064-3284 (Global Tel*link Corporation d/b/a ViaPath
Technologies).
\49\ See, e.g., FTC-2023-0064-2906 (National Association of
College & University Business Officers, American Council on
Education); FTC-2023-0064-3217 (Bowling Proprietors' Association of
America); FTC-2023-0064-3249 (Marine Retailers Association of the
Americas); FTC-2023-0064-3251 (National RV Dealers Association);
FTC-2023-0064-3269 (IHRSA--The Health & Fitness Association). Towing
& Recovery Association of America, Inc. submitted a late comment,
which the Commission considered in its discretion and makes
available at https://www.ftc.gov/system/files/ftc_gov/pdf/R207011TRAAComment.pdf.
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Members of the restaurant industry voiced opposition to the
proposal. A mass mailing from about 4,650
[[Page 2071]]
restaurant owners criticized the rule as a one-size-fits-all approach
that would be unworkable for the restaurant industry. In addition,
members of the rental housing industry also submitted comments in
opposition to the proposed rule. A mass mailing from about 3,781
members of the rental housing industry stated that it is virtually
impossible to predict and disclose in advertisements total prices that
include all mandatory fees that residents could incur during lease
terms. The Commission does not address the specific issues raised by
these industries and others that fall outside the scope of this final
rule.\50\
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\50\ See, e.g., FTC-2023-0064-2953, FTC-2023-0064-2961, FTC-
2023-0064-2972; FTC-2023-0064-2971.
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C. Informal Public Hearing
On March 27, 2024, the Commission published an initial notice of
informal hearing, which also served as the final notice of informal
hearing (``Informal Hearing Notice'').\51\ The Informal Hearing Notice
was published in accordance with section 18(b)(1) of the FTC Act, 15
U.S.C. 57a(b)(1), which requires the Commission to provide an
opportunity for an informal hearing in section 18 rulemaking
proceedings. The Informal Hearing Notice identified eight commenters to
the NPRM that requested an informal hearing in accordance with the
requirements of 16 CFR 1.11(e), as well as nine additional commenters
that requested the opportunity to make an oral presentation if the
Commission was to hold an informal hearing at others' requests. A
number of commenters, including several who requested an informal
hearing, proposed potential disputed issues of material fact for the
Commission's consideration.\52\ The Commission reviewed these potential
issues and concluded in its Informal Hearing Notice that there were no
disputed issues of material fact to resolve at the hearing.
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\51\ Initial notice of informal hearing; final notice of
informal hearing; list of Hearing Participants; requests for
submissions from Hearing Participants: Trade Regulation Rule on
Unfair or Deceptive Fees, 89 FR 21216 (Mar. 27, 2024).
\52\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce);
FTC-2023-0064-3143 (ACA Connects); FTC-2023-0064-3139 (American
Bankers Association and Consumer Bankers Association); FTC-2023-
0064-3294 (International Franchise Association); FTC-2023-0064-3233
(NCTA--The internet & Television Association).
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On April 24, 2024, the Commission conducted an informal public
hearing. In the Informal Hearing Notice, which was formally approved by
vote of the Commission, the Commission's Chief Presiding Officer, the
Chair, designated the Honorable Jay L. Himes, an Administrative Law
Judge for the Federal Trade Commission, to serve as the presiding
officer of the informal hearing. Seventeen interested parties were
identified in the Informal Hearing Notice,\53\ and six of them made
documentary submissions in support of their hearing testimony.\54\
Fifteen interested parties made presentations,\55\ and two did not
appear at the hearing.\56\ The majority of interested parties that
appeared spoke in support of the proposed rule. However, several voiced
opposition to the rule, explained perceived problems with the proposed
rule text, or argued that the Commission incorrectly concluded that
there were no disputed issues of material fact raised in response to
the NPRM.
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\53\ The interested parties were: ACA Connects--America's
Communication Association; American Bankers Association and Consumer
Bankers Association; U.S. Chamber of Commerce; NCTA--The internet &
Television Association; International Franchise Association;
BattleLine LLC; IHRSA--The Global Health & Fitness Association;
National Taxpayers Union Foundation; Consumer Federation of America,
representing a coalition of 52 national and state consumer advocacy
groups; Consumer Federation of America with National Consumer Law
Center and National Association of Consumer Advocates; Community
Catalyst, representing a coalition of 33 health and consumer
protection advocacy groups; National Housing Law Project,
representing a coalition of 39 housing justice advocacy
organizations; National Consumer Law Center, Prison Policy
Initiative, and Stephen Raher; Formerly Incarcerated, Convicted
People & Families Movement; Truth in Advertising, Inc.; National
Consumer Law Center; and Fair Price, Fair Wage Coalition.
\54\ The interested parties that made documentary submissions in
connection with the informal hearing were: National Taxpayers Union
Foundation; Community Catalyst; National Housing Law Project;
Consumer Federation of America; U.S. Chamber of Commerce; and NCTA--
The internet & Television Association. Each of the documentary
submissions is posted in the Informal Hearing Documents folder
available at https://www.ftc.gov/legal-library/browse/rules/rulemaking-unfair-or-deceptive-fees.
\55\ Transcript, Informal Hearing on Proposed Trade Regulation
Rule on Unfair or Deceptive Fees (Apr. 24, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/transcript-deceptive-fees.pdf.
\56\ American Bankers Association and Consumer Bankers
Association and the U.S. Chamber of Commerce did not appear at the
Informal Hearing despite being given the opportunity to do so.
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II. The Legal Standard for Promulgating the Rule
The Commission is promulgating 16 CFR part 464 (``final rule'' or
``rule'') pursuant to section 18 of the FTC Act, 15 U.S.C. 57a, which
authorizes the Commission to promulgate, modify, and repeal trade
regulation rules that define with specificity acts or practices in or
affecting commerce that are unfair or deceptive within the meaning of
section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).\57\ Whenever the
Commission promulgates a rule under section 18(a)(1)(B), the rule must
include a Statement of Basis and Purpose (``SBP'') that addresses: (1)
the prevalence of the acts or practices addressed by the rule; (2) the
manner and context in which the acts or practices are unfair or
deceptive; and (3) the economic effect of the rule, taking into account
the effect on small businesses and consumers.\58\ The Commission
summarizes in this section its findings regarding each of these
requirements.
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\57\ See 15 U.S.C. 57a(a)(1)(B).
\58\ 15 U.S.C. 57a(b)(3). In addition, section 22(b)(2) of the
FTC Act, 15 U.S.C. 57b-3(b)(2), requires the Commission to prepare a
final regulatory analysis, which it discusses in section V.
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Substantial evidence exists supporting the prevalence of bait-and-
switch pricing and misleading fees and charges economy-wide as well as
in the live-event ticketing and short-term lodging industries. As
documented by the rulemaking record, the Commission's work on these
pricing issues for over a decade, and the complementary actions of the
Commission's local, State, and international counterparts, these
specific practices are widespread across the economy and are harmful to
consumers and honest businesses. Nevertheless, the Commission has
decided, in its discretion, to focus this final rule on the industries
in which the Commission first evaluated drip pricing--live-event
ticketing and short-term lodging--and have a long history of harming
consumers and honest competitors.
The Commission notes that the harms of bait-and-switch pricing and
the misrepresentation of fees and charges are particularly pronounced
in industries such as these, in which most transactions occur online.
Consumers trying to comparison shop across multiple websites, or even
on the same website, when deciding what tickets to purchase or where to
travel are unable to do so effectively because some businesses hide the
true total price and instead force consumers to go to different sites
and click through multiple web pages for each offer to learn the true
total price.
Consumer harm is also pronounced in these industries because the
offered goods and services are often identical (as is the case with
live-event tickets), or nearly identical (as is the case with competing
short-term lodging offers in a particular destination and for a
particular star rating), and the most salient feature is the total
price, which is shrouded from consumers. Indeed, for some consumers,
hotel rooms are interchangeable so long as the location, star rating,
and reviews are similar
[[Page 2072]]
across offers, and what matters most is the total price.
In the future, the Commission may address these unfair and
deceptive practices across industries as discussed in the NPRM. For
now, however, the Commission will address unfair and deceptive pricing
practices in other industries using its existing section 5 authority.
A. Prevalence of Acts or Practices Addressed by the Rule
As discussed herein, and in the NPRM, the Commission finds that
unfair or deceptive pricing practices involving bait-and-switch pricing
and misleading fees or charges are prevalent throughout the economy and
affect, or have the potential to affect, virtually every purchasing
transaction a consumer undertakes, including decisions about basic
goods or services; where to live, dine, stay, or travel; and what
events to attend. Specifically, the Commission finds that the following
unfair or deceptive practices relating to fees are prevalent generally
throughout the economy and specifically in the live-event ticketing and
short-term lodging industries: (1) bait-and-switch pricing practices
that hide the total price of goods or services by omitting mandatory
fees and charges from advertised prices, including through drip
pricing, and (2) misrepresenting the nature, purpose, amount, and
refundability of fees or charges.
Section 18 of the FTC Act instructs that the Commission may
determine that unfair or deceptive acts or practices are prevalent if:
``it has issued cease and desist orders regarding such acts or
practices'' or ``any other information available to the Commission
indicates a widespread pattern of unfair or deceptive acts or
practices.'' \59\ In support of its preliminary finding that these
practices are prevalent, the NPRM cited enforcement evidence, including
prior work by the Commission, complementary actions by State Attorneys
General, private lawsuits, and international actions to address unfair
or deceptive pricing practices, as well as comments received in
response to the ANPR.\60\ The NPRM also described legislative and
regulatory action taken by multiple States to address unfair or
deceptive fees.
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\59\ 15 U.S.C. 57a(b)(3).
\60\ NPRM, 88 FR 77435; see also, e.g., FTC-2022-0069-6099
(ANPR) (Consumer Reports discussed its WTFee?! Survey, 2018
Nationally-Representative Multi-Mode Survey of hidden fees in
multiple sectors of the economy and the prevalence of unfair or
deceptive fees practices.); FTC-2022-0069-6095 (ANPR) (Consumer
Federation of America noted that the Washington Attorney General's
Hidden Fee Survey showed that consumers experienced unexpected fees
in a wide range of industries.); FTC-2022-0069-6113 (ANPR) (UnidosUS
cited surveys or studies by itself, the Financial Health Network,
and the Center for Responsible Lending that documented the impact of
fees related to financial services products.).
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To support its prevalence determination herein as to the economy
generally, and as to the live-event ticketing and short-term lodging
industries specifically, the Commission reiterates that it has a long
history of enforcement actions, as well as a plethora of other
information, indicating a widespread pattern of bait-and-switch pricing
practices, including drip pricing and misleading fees or charges. In
addition, the Commission's prevalence determination is further
supported by the Commission's workshops and warning letters relating to
bait-and-switch pricing and misleading fees or charges; the behavioral
and economic research documenting consumer harm from these practices;
and consumer surveys and reports. The Commission also relies on the
great majority of the more than 60,800 comments filed in response to
the NPRM--one of the largest number of comments filed in any Commission
rulemaking to date--including comments by consumers, consumer groups,
academics, businesses, and government officials highlighting the
prevalence of these unfair and deceptive practices and urging the
Commission to promulgate a final rule to combat them.
As explained in the NPRM, the Commission has a long history of
enforcement actions targeting unfair and deceptive bait-and-switch
pricing tactics concerning hidden fees \61\ and misrepresentations
regarding the nature and purpose of fees.\62\ The takeaway
[[Page 2073]]
from this enforcement history is clear--businesses cannot hide or
misrepresent the true cost of a good or service or mislead consumers
about the nature, purpose, amount, or refundability of fees or charges.
Some commenters suggested consent orders are not cease-and-desist
orders that the Commission can rely upon to support a finding of
prevalence, but that is incorrect. The FTC Act makes clear when it
intends to exclude consent orders from the ambit of ``cease and desist
orders,'' and does not do so in section 18.\63\
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\61\ See, e.g., Complaint ]] 4-5, 106-14, FTC v. Invitation
Homes, Inc., No. 24-cv-04280 (N.D. Ga. Sept. 24, 2024) (alleging
that defendant, among other deceptive and unfair practices,
deceptively advertised monthly home rental prices that omitted and
used confusing and buried language about mandatory fees); Complaint
]] 39-46, FTC v. Vonage Holdings Corp., No. 3:22-cv-6435 (D.N.J.
Nov. 3, 2022) (alleging in part that defendant charged undisclosed
large cancellation fees); Complaint ]] 42-44, 50, United States v.
Funeral Cremation Grp. of N. Am., LLC (``Legacy Cremation Servs.''),
No. 0:22-cv-60779 (S.D. Fla. Apr. 22, 2022) (alleging defendants
advertised artificially low prices for cremation services which
ultimately included undisclosed additional charges and, in some
cases where consumers contested these charges, defendants refused to
return remains); Complaint ] 9, FTC v. Liberty Chevrolet, Inc.
(``Bronx Honda''), No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020)
(alleging defendants advertised low sales prices but later told
consumers they were required to pay additional charges including
certification charges); Complaint ] 13, FTC v. NetSpend Corp., No.
1:16-cv-04203 (N.D. Ga. Apr. 11, 2017) (alleging in part that
defendant charged maintenance and usage fees to consumers who were
unable to use all, or even a portion of, the funds of their prepaid
debit cards); see also Complaint ]] 24-25, 29, 40-42, FTC v. AT&T
Mobility LLC, No. 3:14-cv-04785 (N.D. Cal. Oct. 28, 2014) (alleging
defendant did not adequately disclose the limitations of defendant's
data plan offerings and subsequently charged high cancellation fees
for consumers who chose to end their contracts); Complaint ]] 1, 26,
39-40, FTC v. Millennium Telecard, Inc., No. 2:11-cv-02479 (D.N.J.
May 2, 2011) (alleging defendants deceptively marketed prepaid
credit calling cards by failing to adequately disclose fees that
substantially limited the number of minutes consumers had
purchased); Complaint ] 15, FTC v. CompuCredit Corp., No. 1:08-cv-
01976 (N.D. Ga. June 10, 2008) (alleging in part that defendants
misrepresented the credit limits on various credit cards and failed
to disclose fees charged upfront).
\62\ See, e.g., Complaint ]] 4-5, 106-14, 118-23, Invitation
Homes, Inc., No. 24-cv-04280 (alleging that defendant, among other
deceptive and unfair practices, misled consumers about fees by using
confusing and buried language); Complaint ]] 39-46, Vonage Holdings
Corp., No. 3:22-cv-6435; Complaint ]] 61-63, FTC v. Benefytt Techs.,
Inc., No. 8:22-cv-1794 (M.D. Fla. Aug. 8, 2022) (alleging in part
that defendants bundled and charged fees for unwanted products with
sham health insurance plans); Complaint ]] 17-20, FTC v. Passport
Auto Grp., Inc., No. 8:22-cv-02670 (D. Md. Oct. 18, 2022) (alleging
in part that defendants advertised vehicle prices that did not
include redundant fees ranging from hundreds to thousands of dollars
for inspection, reconditioning, preparation, and certification);
Complaint ]] 3, 33, 41, FTC v. N. Am. Auto. Serv., Inc. (``Napleton
Auto''), No. 1:22-cv-01690 (E.D. Ill. Mar. 31, 2022) (alleging
defendants charged consumers for additional products and services
without their consent and misrepresented the fees as mandatory,
resulting in artificially low advertised prices); Complaint ]] 50-
51, Amazon.com, Inc. (``Amazon Flex''), No. C-4746 (FTC June 9,
2021) (alleging respondents falsely represented that 100% of tips
would go to the driver in addition to the pay respondents offered
drivers); Complaint ]] 37-39, FTC v. Lead Express, Inc., No. 2:20-
cv-00840 (D. Nev. May 11, 2020) (alleging in part that defendants
did not clearly and conspicuously disclose material information
related to the total amount of payments related to loans and also
withdrew significantly more than the stated total cost of the loan
from consumers' accounts); Complaint ]] 9-10, FTC v. FleetCor Techs,
Inc., No. 1:19-cv-05727, 2019 WL 13081514 (N.D. Ga. Dec. 20, 2019)
(alleging defendants charged consumers arbitrary and unexpected fees
related to pre-paid fuel cards without consumers' consent);
Complaint ]] 4, 30-32, 36-37, FTC v. BCO Consulting Servs., Inc.,
No. 8:23-cv-00699 (C.D. Cal. Apr. 24, 2023) (alleging defendants
enticed consumers with false promises to alleviate student loan debt
despite not applying any payments to the student loan balances and
collecting illegal advance fees without providing any services);
Complaint ]] 31-36, FTC v. OMICS Grp. Inc., No. 2:16-cv-02022 (D.
Nev. Aug. 25, 2016) (alleging in part defendants misrepresented the
publishing process of academic papers and only disclosed large
publishing fees after notifying consumers that their papers had been
approved for publication); Complaint ]] 12, 23-25, FTC v. Lending
Club Corp., No. 3:18-cv-02454 (N.D. Cal. Apr. 25, 2018) (alleging
defendant charged consumers an upfront fee based on a percentage of
the loan requested that was not clearly and conspicuously disclosed;
this hidden fee caused loans received to be substantially smaller
than advertised); Complaint ] 37, FTC v. T-Mobile USA, Inc., No.
2:14-cv-00967 (W.D. Wash. July 1, 2014) (alleging defendant added
unauthorized third-party charges to the telephone bills of
consumers); Amended Complaint ]] 21-22, FTC v. Websource Media, LLC,
No. 4:06-cv-01980 (S.D. Tex. June 21, 2006) (alleging defendants
placed charges on consumer telephone bills despite representations
that there would be no charges or obligations); FTC v. Mercury Mktg.
of Del., Inc., No. 00-cv-3281, 2004 WL 2677177, *1 (E.D. Pa. Nov.
22, 2004) (finding defendants billed consumers without their consent
after misleading consumers about introductory internet packages);
Complaint ]] 25-27, FTC v. Stewart Fin. Co., No. 1:03-cv-02648 (N.D.
Ga. Sept. 4, 2003) (alleging in part that defendants package
undisclosed add-on products with consumer loans and in some cases
describe those add-on products as mandatory); Complaint ]] 19-21,
24, FTC v. Hold Billing Serv., Ltd., No. SA-98-CA-0629-FB (W.D. Tex.
July 16, 1998) (alleging defendants had previously added third-party
charges to consumers' phone bills without permission by using
sweepstakes entry forms as contracts to authorize charges);
Complaint ]] 18, 33, 56-58, FTC v. Lake, No. 8:15-cv-
00585–CJC-JPR (C.D. Cal. Apr. 14, 2015) (alleging defendants
misrepresented that trial loan payments or reinstatement fee
payments would be held in escrow and refunded to the consumer if the
loan modification was not approved); FTC v. Hope for Car Owners,
LLC, No. 2:12-CV-778-GEB-EFB, 2013 WL 322895, at *3-4 (E.D. Cal.
Jan. 24, 2013) (finding that the FTC sufficiently stated a claim for
misrepresentation of the refundability of vehicle loan modification
fees and entering default judgment); Amended Complaint ]] 38-39, 58-
60, FTC v. U.S. Mortg. Funding, Inc., No. 9:11-cv-80155-JIC (S.D.
Fla. July 26, 2011) (alleging defendants misrepresented that an
upfront loan modification fee was refundable); FTC v. Nat'l Bus.
Consultants, Inc., 781 F. Supp. 1136, 1143 (E.D. La. 1991) (finding
that ``defendants' misrepresentations regarding the ease with which
the `performance deposit' could be refunded composed a large part of
the various and sundry misrepresentations'').
\63\ Compare 15 U.S.C. 45(m) (excluding consent orders from the
type of cease and desist orders that could support an action for
civil penalties under 15 U.S.C. 45(m)(1)(B)) and 108 Stat. 1691
(1994) (amending 15 U.S.C. 45(m) to add ``other than a consent
order'' after the term ``cease and desist order'') with 15 U.S.C.
57a(b)(3) (stating that the Commission may make a determination of
prevalence if ``it has issued cease and desist orders regarding such
acts or practices or any other information available to the
Commission indicat[ing] a widespread pattern of unfair or deceptive
acts or practices''). Even if consent orders and the investigations
that lead up to them are not ``cease and desist orders,'' in making
a determination of prevalence, the Commission can still rely upon
them as ``other information.''
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In addition to the Commission's enforcement actions, for more than
a decade, the Commission has engaged with the public and issued
guidance to industry on issues related to bait-and-switch tactics,
including drip pricing, and the misrepresentation of fees or charges.
The Commission first engaged with the public on the concept of drip
pricing in 2012 by convening a conference, titled ``The Economics of
Drip Pricing,'' to bring together economists and marketing academics to
``examine the theoretical motivation for drip pricing and its impact on
consumers, empirical studies, and policy issues pertaining to drip
pricing.'' \64\ Several psychological theories were discussed at this
conference, and these theories explain why consumers cannot reasonably
avoid making errors when the total price is not revealed upfront.\65\
Following the workshop, Commission staff sent warning letters to hotels
and online travel agents that were not adequately disclosing resort
fees or including those fees in the total price.\66\ These hotels and
online travel agents were employing drip pricing tactics as well as
another bait-and-switch pricing tactic, partitioned pricing, to
inadequately disclose resort fees and hide the total price of a hotel
stay. Partitioned pricing consists of dividing a price into multiple
components without ever disclosing the total and leaving consumers to
figure out the true total price on their own. Hotels, for example,
might separately list the room rate and ``resort fee'' but never add
them up and quote an all-inclusive total price. In 2017, the
Commission's Bureau of Economics published a report that reviewed the
existing literature on drip pricing and partitioned pricing and
examined the costs and benefits of disclosing hotel resort fees.\67\
The report found that ``[u]nless the total price is disclosed up front,
separating resort fees from the room rate is unlikely to result in
benefits that offset the likely harm to consumers.'' \68\ Specifically,
---------------------------------------------------------------------------
\64\ Fed. Trade Comm'n, The Economics of Drip Pricing (May 21,
2012), https://www.ftc.gov/news-events/events/2012/05/economics-drip-pricing.
\65\ See, e.g., Fed. Trade Comm'n, The Economics of Drip
Pricing: Conference Transcript 76-111 (May 21, 2012), https://www.ftc.gov/sites/default/files/documents/public_events/economics-drip-pricing/transcript.pdf.
\66\ 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.
\67\ Mary Sullivan, Fed. Trade Comm'n, Economic Analysis of
Hotel Resort Fees 4 (2017), https://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf.
\68\ Id.
separating mandatory resort fees from posted room rates without
first disclosing the total price is likely to harm consumers by
increasing the search costs and cognitive costs of finding and
choosing hotel accommodations. Forcing consumers to click through
additional web pages to see a hotel's resort fee increases the cost
of learning the hotel's price. Separating the room rate from the
resort fee increases the cognitive costs of remembering the hotel's
price. When it becomes more costly to search and evaluate an
additional hotel, a consumer's choice is either to incur higher
total search and cognitive costs or to make an incomplete, less
informed decision that may result in a more costly room, or
both.\69\
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\69\ Id.
The report observed that hotels could eliminate these costs to
consumers by including the resort fee in the advertised price; bundling
the same resort services with the room and charging the same total
price; listing the components of the total price separately, as long as
the total price is the most prominently disclosed price; or changing to
unbundled, optional resort services which would not be included in the
advertised price.\70\ Finally, the report did not find ``any benefits
to consumers from separately-disclosed mandatory resort fees that could
not be achieved by first listing the total price and then disclosing
the resort fee.'' \71\
---------------------------------------------------------------------------
\70\ Id.
\71\ Id.
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In 2019, the Commission hosted a workshop and issued a staff
perspective report that examined pricing and fees in the live-event
tickets market.\72\ The report observed,
---------------------------------------------------------------------------
\72\ Fed. Trade Comm'n, ``That's the Ticket'' Workshop: Staff
Perspective 4 (May 2020), https://www.ftc.gov/system/files/documents/reports/thats-ticket-workshop-staff-perspective/staffperspective_tickets_final-508.pdf.
On most primary and resale platforms, the ticket price a consumer
first sees is not what the consumer will pay. Mandatory fees, such as
`venue' and `ticket processing' fees, bulk up the price-often by as
much as thirty percent . . . . The late disclosure of fees increases
search costs for consumers and makes it harder to comparison shop.\73\
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\73\ Id.
The report remarked that ``[a]ll of the workshop panelists who
discussed the fees issue, including each participating ticket seller
that does not currently provide upfront all-in pricing, favored
requiring all-in pricing through federal legislation or rulemaking.''
\74\
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\74\ Id.
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The Commission's finding of prevalence is further supported by the
complementary enforcement actions brought by its law enforcement
partners, most of which have resulted in orders prohibiting bait-and-
switch pricing and misrepresenting fees and charges in the short-term
lodging, live-event ticketing, delivery services, rental cars, travel,
and tax filing preparation services
[[Page 2074]]
industries.\75\ Indeed, a group of State Attorneys General wrote in
support of a finding of prevalence of these practices across
industries, including event ticket sellers, and hotels and other short-
term lodging providers.\76\ They have attempted to address some, but
not all, of these fees in their own States.\77\ The State Attorneys
General cited a number of cases across industries demonstrating that
bait-and-switch pricing and misleading fees are ``a chronic, prolific
problem confronting many consumers across numerous sectors of the
economy.'' \78\ Further, they agreed with the Commission's assertion
that ``charges that misrepresent their nature and purpose are unfair
and deceptive because they mislead consumers and make it more difficult
for truthful businesses to compete on price.'' \79\ The Commission
takes note of legislative and regulatory efforts in Minnesota,
California, Pennsylvania, New York, Massachusetts, and North Carolina
to combat hidden and misleading fees \80\ which further support its
finding of prevalence.
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\75\ See, e.g., Complaint ] 3, Rhode Island v. UPP Global, LLC,
No. PC-2024-04453 (R.I. Super. Ct. Aug. 13, 2024) (alleging in part
that defendant charges a fee as a tax, fails to disclose prices
until after consumers have elected to use defendant's service, and
advertises hourly prices and then requires consumers to pay for
multiple hours at a minimum); Complaint ]] 3-4, District of Columbia
v. StubHub, Inc., No. 2024-CAB-004794 (D.C. Super. Ct. July 31,
2024) (alleging defendant uses drip pricing and entices consumers to
shop for tickets by displaying artificially low prices and revealing
mandatory fees later in the checkout process which defendant also
misrepresents the purpose of); Consent Decree ]] 10-24, Arizona v.
Cox Enterprises, Inc., No. CV-2023-019752 (Ariz. Sup. Ct. Jan. 2,
2024) (alleging defendants failed to disclose additional fees to
consumers who purchased services through long-term contracts based
on ``price-lock'' guarantee); Assurance of Voluntary Compliance ] 2,
Texas v. Marriott Int'l, Inc., No. 2023-CI09717 (Tex. Dist. Ct. May
16, 2023) (alleging defendant misrepresented various fees, including
resort fees, and did not include all mandatory fees in the
advertised room rate in violation of the Texas Deceptive Trade
Practices Act); Plaintiff's Original Pet. ] 1, Texas v. Hyatt Hotels
Corp., No. C2023-0884D (TX. Dist. Ct. May 15, 2023) (alleging
defendant did not include mandatory fees in advertised room rates in
violation of the Texas Deceptive Trade Practices Act); Consent Order
] 20, District of Columbia v. Grubhub Holdings, Inc., No. 2022 CA
001199 B (D.C. Super. Ct. Jan. 4, 2023) (alleging in part that
defendants misrepresented menu prices to consumers and deceptively
advertised that consumers could ``order online for free'');
Assurance of Voluntary Compliance ] 4, Commonwealth v. Omni Hotels
Mgmt., GD-23-013056 (Pa. Commw. Ct. Nov. 9, 2023) (alleging
defendants failed to advertise room prices including mandatory fees,
misleading consumers); Assurance of Voluntary Compliance ] 2,
Commonwealth v. Choice Hotels Intl., Inc., GD-23-011023 (Pa. Commw.
Ct. Sept. 21, 2023) (alleging defendants failed to advertise room
prices including mandatory fees misleading consumers); Assurance of
Voluntary Compliance ]] 1-5, Commonwealth v. RYADD, Inc., No. 2022-
07262 (Pa. Commw. Ct. Sept. 8, 2022) (alleging defendants failed to
advertise ticket prices including service fees and failed to clearly
disclose an itemization of the total cost); Complaint ] 1,
Commonwealth v. Mariner Finance, LLC, No. 2:22-cv-03235-MAK (E.D.
Pa. Sept. 6, 2022) (alleging defendant charged consumers for hidden
add-on products without consumer knowledge and in some cases after
explicit rejection); Consent Order ] 6, District of Columbia v.
Maplebear, Inc., No. 2020 CA 003777B (D.C. Super. Ct. Aug. 19, 2022)
(prohibiting defendant from misrepresenting the nature and purpose
of fees applied to consumers' orders); Assurance of Voluntary
Compliance ] 2, Commonwealth v. Marriott Int'l, Inc., No. GD-21-
014016 (Pa. Ct. C.P. Nov. 16, 2021) (alleging defendant
misrepresented its room rates by failing to include items such as
mandatory fees in its pricing); Consent Order ] 3.1-3.18, Drivo LLC,
N.J. Div. Consumer Aff. (Sept. 16, 2020) (prohibiting unfair and
deceptive practices relating to damage fees and third party
reservation fees for rental vehicles); Press Release, Off. Minn.
Att'y Gen., Attorney General Ellison Obtains Relief for More than
30,000 Comcast/Xfinity Customers (Jan. 15, 2020) (alleging in part
that defendants misrepresented prices for their services and added
services without consumer consent), https://www.ag.state.mn.us/Office/Communications/2020/01/15_ComcastXfinity.asp; Press Release,
Off. Minn. Att'y Gen., Attorney General Ellison Obtains Nearly $9
Million Settlement with CenturyLink for Overcharging Minnesota
Customers (Jan. 8, 2020) (alleging defendant misrepresented the
price of its services and used a complex pricing scheme to mislead
consumers), https://www.ag.state.mn.us/Office/Communications/2020/01/08_CenturyLinkSettlement.asp.; Assurance of Voluntary Compliance
]] 1-12, Commonwealth v. Event Ticket Sales, LLC, No. 201101873 (Pa.
Commw. Ct. Nov. 19, 2020) (alleging defendants failed to advertise
ticket prices including service fees and failed to clearly disclose
an itemization of the total cost); Assurance of Voluntary Compliance
] 7, CenturyLink, Inc., No. 19-CV-56401 (Or. Cir. Ct., 2019)
(alleging defendants charged undisclosed fees and failing to
disclose all mandatory fees and charges); Agreed Final J. ] 8, Texas
v. Guided Tourist, LLC, No. D-1-GN-19-001618 (Tex. Dist. Ct. Mar.
26, 2019) (enjoining defendant from advertising ticket prices other
than the total ticket price, including all mandatory fees);
Settlement Agreement ] 8(b)-(c), Florida v. Dollar Thrifty Auto.
Grp., Inc., No. 16-2018-cv-005938 (Fla. Cir. Ct., Jan. 14, 2019)
(alleging in part that defendant misrepresented optional charges as
mandatory and did not sufficiently disclose toll-related fees).
Additionally, Intuit recently entered a multistate settlement of
allegations that it misrepresented its tax filing products would
come at no cost. Assurance of Voluntary Compliance, Commonwealth v.
Intuit Inc., No. 220500324 (Pa. Ct. C.P. May 4, 2022).
\76\ FTC-2023-0064-3215 (Attorneys General of the States of
North Carolina and Pennsylvania, along with Attorneys General of the
States or Territories of Arizona, Colorado, Connecticut, Delaware,
District of Columbia, Hawaii, Illinois, Maine, Michigan, Minnesota,
New Jersey, New York, Oklahoma, Oregon, Vermont, Washington, and
Wisconsin). The Attorneys General also pointed to prevalence of
these practices in residential leasing, payday lending, internet
applications, online shopping, automobile rentals, carpet cleaners,
dietary supplement sellers, moving companies, gyms, travel
companies, outlet stores, and online auctions.
\77\ Id. (The Attorneys General highlighted actions each has
taken in their own states to address financial services fees, hotel
fees, live-event ticket fees, rental housing fees, auto rental fees,
and telecommunication fees.)
\78\ Id.
\79\ Id.
\80\ N.Y. Arts & Cult. Aff. Law sec. 25.01-25.33 (McKinney 2023)
(Effective Jun. 30, 2022) (requiring that the sellers and resellers
of live-event tickets disclose the total cost of a ticket, upfront,
and clearly and conspicuously disclose the amount of the price that
is made up of fees and other charges); An Act Ensuring Transparent
Ticket Pricing, H. 259, 193rd Gen. Court (Mass. 2023) (proposed
legislation requiring in part that the sellers and resellers of
live-event tickets disclose the total cost inclusive of all
ancillary fees that must be paid and the portion of the ticket price
that represents a service charge or any other fee or surcharge);
H.B. 714 (2023-2024 Session) (N.C. 2023) (proposed legislation that
requires, among other things, that providers of short-term lodging
and live-event ticketing clearly display the total price of goods
and services inclusive of mandatory fees a consumer would incur
during a transaction); see also 2023 Minn. H.B. 3438 (Enacted May
20, 2024) (stating that it is a deceptive trade practice for a
business to not include all mandatory fees or surcharges when
advertising, displaying or offering a price for goods or services);
Cal. S.B. 478 (2023-2024 Regular Session) (Enacted Oct. 7, 2023)
(amending the California Consumer Legal Remedies Act to state that
it is unlawful to advertise, display, or offer a price for a good or
service that does not include all mandatory fees or charges other
than taxes or fees imposed by a government on the transaction); Cal.
S.B. 1524 (2023-2024 Regular Session) (clarifying and amending S.B.
478 to include that additional fees such as service charges for food
services businesses including bars and restaurants could appear
separately so long as they were displayed on the menu); H.B. 636
(2023-2024) (Pa. 2023) (Engrossed Oct. 19, 2023) (proposed
legislation amending the Pennsylvania Unfair Trade Practices and
Consumer Protection Law to require the disclosure of all mandatory
fees and charges included in the advertised and displayed price of
any good or service); Conn. Gen. Stat. sec. 53-289a (2023)
(requiring conspicuous disclosure in the advertisement of total
price of live-event tickets including service charges); Conn. Gen.
Stat. sec. 53-289a (2023) (requiring conspicuous disclosure in the
advertisement of total price of live-event tickets including service
charges); SB 329 (2024 Reg. Sess.) (Md.) (requiring all-in pricing
throughout the purchase process of a live-event ticket); SB 329
(2024 Reg. Sess.) (Md.) (requiring all-in pricing throughout the
purchase process of a live-event ticket); 1510 Mass. Reg. 5 (Dec. 8,
2023) (Proposed Regulations 940 C.M.R. 38.00: Unfair and Deceptive
Fees) (proposed regulation stating that it is an unfair and
deceptive practice to misrepresent or fail to disclose at the time
of initial presentation of the price of any product the total price
of that product inclusive of all fees, interest, charges, or other
expenses necessary or required in order to complete the
transaction).
---------------------------------------------------------------------------
Comments submitted by Federal and State elected officials echoing
the widespread practice of misleading consumers about total prices and
fees or charges further strengthen the Commission's prevalence finding.
For example, U.S. Senator Amy Klobuchar stated that she held a hearing
focusing on the lack of transparency in the live-event ticketing
industry as well as a hearing on fees in the rental housing market that
prevent renters from having meaningful opportunities to compare
prices.\81\ U.S. Senator Robert Casey discussed a report released on
January 24, 2024, ``Additional Charges May Apply: How Big Corporations
Use
[[Page 2075]]
Hidden Fees to Nickel, Dime, and Deceive American Families,'' tracking
the variety of junk fees facing Pennsylvania families, including in the
short-term lodging industry.\82\ A group of Congressional
representatives raised concerns regarding misleading fees and a lack of
price transparency in the rental housing market.\83\ Concerns over
unfair and deceptive pricing were also raised by a variety of State
legislators and officials.\84\ There has also been significant
bipartisan interest in passing legislation targeting fees in the live-
event ticketing and short-term lodging industries.\85\
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\81\ FTC-2023-0064-3271 (U.S. Senate, Sen. Amy Klobuchar).
\82\ FTC-2023-0064-3135 (U.S. Senate, Sen. Robert P. Casey, Jr.
noted that his report ``details how corporations use hidden fees to
deceive consumers and increase corporate profits, which leaves
families paying more than they should and puts honest businesses at
a disadvantage.'') The report is available at https://www.casey.senate.gov/imo/media/doc/greedflation_junk_fees3.pdf.
\83\ FTC-2023-0064-2858 (U.S. House of Representatives, Rep.
Maxwell Alejandro Frost, Rep. Jimmy Gomez, Rep. Barbara Lee, Rep.
Rashida Tlaib, Rep. Kevin Mullin, Rep. Dwight Evans, Rep. Judy Chu,
Rep. Greg Casar, Rep. Dan Goldman, and Rep. Salud Carbajal stated
that the rule would help eliminate some of the barriers to those
seeking rental housing as renters ``often face ambiguous or
misleading fees'' and ``bring much needed transparency to the rental
housing market.'').
\84\ FTC-2023-0064-2341 (Massachusetts House of Representatives,
Rep. Lindsay Sabadosa); FTC-2023-0064-1411 (Arizona House of
Representatives, Rep. Analise Ortiz); FTC-2023-0064-3072 (Michigan
Senate and House of Representatives, Sen. Darrin Camilleri, Sen.
Mary Cavanagh, and Rep. Betsy Coffia); FTC-2023-0064-3079 (Montana
State Senate, Senate Democratic Caucus, Sen. Pat Flowers, Sen. Susan
Webber, Sen. Andrea Olsen, Sen. Edie McClafferty, Sen. Jen Gross,
Sen. Janet Ellis, Sen. Shane Morigeau, Sen. Ellie Boldman, Sen. Ryan
Lynch, Sen. Christopher Pope, Sen. Mike Fox, Sen. Denise Hayman,
Sen. Willis Curdy, and Sen. Mary Ann Dunwell); FTC-2023-0064-3103
(Florida House of Representatives, Rep. Angela Nixon); FTC-2023-
0064-3123 (Syracuse, New York, City Auditor Alexander Marion); FTC-
2023-0064-3117 (Maryland House of Delegates, Del. Julie Palakovich
Carr); FTC-2023-0064-3149 (North Carolina House of Representatives,
Rep. Julie von Haefen); FTC-2023-0064-3237 (North Carolina House of
Representatives, Rep. Pricey Harrison).
\85\ See, e.g., Transparency In Charges for Key Events Ticketing
Act (``TICKET Act''), H.R. 3950, sec. 2, 118th Cong. (as engrossed
in the House, May 15, 2024) (among other provisions, requiring
ticket sellers, including secondary markets and exchanges, to
clearly and conspicuously disclose the total ticket price for an
event in any advertisement and each time the ticket is displayed in
the purchasing process, and to provide an itemized list of the base
ticket price and each fee or charge prior to completion of the
purchase; violations of the TICKET Act would be treated as violation
of a rule defining an unfair or deceptive act or practice under
section 18(a)(1)(B) of the FTC Act); No Hidden Fees on Extra
Expenses for Stays Act of 2023 (``No Hidden FEES Act of 2023''),
H.R. 6543, sec. 2(a), 118th Cong. (as engrossed in the House, June
11, 2024) (among other provisions, prohibiting providers of short-
term lodging, including providers of a website or other centralized
platform that advertises or otherwise offers the price of a
reservation for short-term lodging, from advertising, displaying,
marketing, or otherwise offering for sale, including through a
direct offering, third-party distribution, or metasearch referral, a
price of a reservation that does not include each mandatory fee;
violations of sec. 2(a) would be treated as violation of a rule
defining an unfair or deceptive act or practice under section
18(a)(1)(B) of the FTC Act).
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The Commission also takes notice of the work of its international
counterparts, as well as private lawsuits in the United States
concerning unfair and deceptive fee practices. Regulatory actions in
Canada, Australia, the European Union, and the United Kingdom with
respect to such conduct include paragraph 74.01(1.1) of the Canadian
Competition Act,\86\ the Australian Competition and Consumer Protection
Act of 2010,\87\ EU Directive 2005/29/EC of the European Parliament and
of the Council,\88\ and the UK Digital Markets, Competition and
Consumers Act 2024.\89\ In addition, private lawsuits filed against
businesses in the live-event ticketing, short-term lodging, banking,
and delivery service industries challenging these practices lend
further support to the Commission's prevalence determination.\90\
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\86\ Competition Act, R.S.C., 1985, c. C-34, ] 74.01(1.1) (Can.)
(providing with respect to ``drip pricing'' that ``the making of a
representation of a price that is not attainable due to fixed
obligatory charges or fees constitutes a false or misleading
representation''), https://laws.justice.gc.ca/eng/acts/C-34/FullText.html.
\87\ Competition and Consumer Act 2010, Vol. 4, Sched. 2, Ch. 3,
P. 3-1, Sec. 48, Ch. 4, P. 4-1, Sec. 166 (Austl.) (prohibiting
``mak[ing] a representation with respect to an amount that, if paid,
would constitute a part of the consideration for the supply of the
goods or services unless the person also specifies, in a prominent
way and as a single figure, the single price for the goods or
services''), https://www.legislation.gov.au/C2004A00109/latest/text.
\88\ Directive 2005/29/EC of the European Parliament and of the
Council of 11 May 2005 concerning unfair business-to-consumer
commercial practices in the internal market, art. 7, 2005 O.J. (L
149) (providing that it is a misleading commercial practice to
engage in ``bait advertising'' or offering products at a specified
price if not able to provide the products at that price for a period
and in quantities reasonable with regard to the product, the scale
of advertising of the product and the price offered), https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32005L0029; see also
Directive 2011/83/EU of the European Parliament and of the Council
of 25 October 2011 on consumer rights, art. 5 and art. 6, 2011 O.J.
(L 304), https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32011L0083&qid=1726109600968. Additionally, a 1998
Directive required that the selling price should be indicated for
all products referred to in the Article, which means a price that is
the final price for a unit of the product including VAT and all
other taxes. See Directive 98/6/EC of the European Parliament and of
the Council of 16 February 1998 on consumer protection in the
indication of the prices of products offered to consumers, 1998 O.J.
(L 80), https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A31998L0006&qid=1726109951386.
\89\ Digital Markets, Competition and Consumers Act 2024, c. 13,
sec. 230 (providing that an invitation to purchase omits material
information if it omits the total price of the product or, if the
nature of the product prevents all or a part of the total price from
reasonably being calculated in advance, how the price (or that part
of it) will be calculated), https://www.legislation.gov.uk/ukpga/2024/13/section/230. Reports preceding this legislation included: UK
Department for Business & Trade, Estimating the Prevalence and
Impact of Online Drip Pricing (2023), https://assets.publishing.service.gov.uk/media/64f1ebd7a78c5f000dc6f448/estimating-the-prevalence-and-impact-of-online-drip-pricing.pdf; and
UK Department for Business & Trade, Government response to
consultation on ``Smarter Regulation: Consultation on Improving
Price Transparency and Product Information for Consumers'' (2023),
https://www.gov.uk/government/consultations/smarter-regulation-improving-price-transparency-and-product-information-for-consumers/outcome/government-response-to-consultation-on-smarter-regulation-improving-consumer-price-transparency-and-product-information-for-consumers#introduction.
\90\ See, e.g., Class Action Complaint ]] 2-3, Abdelsayed v.
Marriot Int'l, Inc., No. 3:21-cv-00402-JLS-AHG (S.D. Cal. Mar. 5,
2021) (alleging defendant misled consumers into believing that hotel
rooms were cheaper that they actually were by engaging in drip
pricing that baited consumers with lower prices and adding charges,
such as resort fees, amenity fees, and destination fees, throughout
the vending process); Complaint ]] 1, 3-5, Travelers United v. MGM
Resorts Int'l, Inc., No. 2021-CA-00477-B (D.C. Super. Ct. Feb. 18,
2021) (alleging defendant misled consumers into believing hotel
rooms were cheaper that they actually were by using drip pricing
that hid resort fees from advertised daily room rates); Class Action
Complaint ]] 18, 31, 43, 69-71, Lee v. Ticketmaster LLC, No. 3:18-
cv-05987-VC (N.D. Cal. Sept. 28, 2018) (alleging, in part, that
defendants were unjustly enriched through service charges added to
resale tickets); Second Amended Class Action Complaint ]] 1-2, Wang
v. StubHub, Inc., No. CGC-18564120 (Cal. Super. Ct. Feb. 25, 2019)
(alleging defendant intentionally hid additional fees in order to
advertise artificially low-ticket prices); Class Action Complaint ]]
1-3, 33-34, Holl v. United Parcel Service, Inc., No. 4:16-cv-05856-
HSG (N.D. Cal., Oct. 11, 2016) (alleging defendant created a bait
and switch by falsely advertising low published rates that were
later inflated); (Truth in Advertising, Inc., submitted information
about its tracking of class action cases related to unfair and
deceptive fees, including cases involving event ticket sellers
charging and misrepresenting the purpose of ``junk fees'' and hotels
advertising a low base rate for rooms and then charging consumers
more than the advertised rate by imposing additional fees.); see
also Second Amended Class Action Complaint ]] 5-7, Hecox v.
DoorDash, Inc., No. 1:23-cv-01006-JRR (D. Md. Sept. 5, 2023)
(alleging in part that defendant employed deceptively named fees
misleading consumers to believe the fees were for delivery personnel
or for government imposed fees); Class Action Complaint ]] 7-16,
Ramirez v. Bank of Am., N.A., No. 4:22-cv-00859-YGR (N.D. Cal., Feb.
10, 2022) (alleging misrepresentations about the refundability of
fees); Class Action Complaint ]] 27, 36, 46-51, Cross v. Point and
Pay LLC, No. 6:16-cv-01182 (M.D. Fla., June 29, 2016) (alleging
defendant made representations about its services and fees that
contained false, misleading, and deceptive and unfair statements and
omissions about fees for online payment processing services); Class
Action Complaint ]] 1-2, 9-12, DeSimone v. LOOK Brands, LLC, No. 23-
cv-11144 (S.D.N.Y. Dec. 22, 2023) (alleging defendant failed to
disclose the total cost of movie ticket prices, inclusive of all
fees, in violation of New York state law); Class Action Complaint ]]
1-2, 9-15, Jones v. Regal Cinemas, Inc., No. 23-CV-11145 (S.D.N.Y.
Dec. 22, 2023) (alleging defendant failed to disclose total cost of
movie ticket prices, inclusive of all fees, in violation of New York
state law); see also FTC-2022-0069-6042 (ANPR).
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[[Page 2076]]
The Commission takes notice of additional indications of prevalence
identified in response to the NPRM. Commenters to the NPRM noted that
unfair or deceptive pricing practices exist economy-wide.\91\ For
instance, Consumer Reports conducted a nationally representative survey
and found that many consumers experienced unexpected fees in a variety
of industries and that more than two-thirds of Americans report paying
more in hidden fees now than they did five years ago.\92\ Similarly,
Consumer Federation of American submitted an extensive compilation of
stories from consumers about their experiences with junk fees that
recounted hidden and misleading fees being applied across a wide range
of industries.\93\ Truth in Advertising, Inc. provided a sampling of
consumer complaints it had received over the years and noted the
pervasiveness of hidden and misleading fees in multiple industries,
including event ticket sales, hotel and travel companies, short-term
lodging, internet apps, automobile rentals, communication services,
carpet cleaning, auto/truck sales, dietary supplement orders, food
services, airlines, moving services, credit unions and banks, payday
lending services, gym memberships, outlet stores, sports betting, and
online auctions.\94\ Public Citizen commented about ``the widespread
use of the deceptive practice of charging undisclosed fees by major
industries . . . including communication carriers, air carriers, ticket
sales, auto dealers, credit card companies, cable giants, and property
owners,'' as well as ``event ticketing, hotels, funeral homes,'' and
other industries.\95\ Additionally, AARP pointed to a myriad of
confusing fees charged by assisted living facilities.\96\ Commenters
also noted that instances of unfair and deceptive fees or charges have
increased over time.\97\
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\91\ See, e.g., FTC-2023-0064-3216 (Demand Progress Education
Fund noted that consumers face surprise or ``bogus'' fees across
industries, including rental housing, cell phone service, utilities,
and ticketing, and cited a Consumer Reports study finding that 85%
of Americans have dealt with fees of this nature.).
\92\ FTC-2023-0064-3205 (Consumer Reports noted the prevalence
of unexpected fees in live entertainment or sporting events, hotels,
telecommunication services, gas or electric utilities, air travel,
credit cards, auto loans and purchases, and personal banking
services.).
\93\ FTC-2023-0064-3160 (Consumer Federation of America
submitted the compilation as Appendix B to its comment.).
\94\ FTC-2023-0064-3104 (Truth in Advertising, Inc.).
\95\ FTC-2023-0064-3302 (Public Citizen).
\96\ FTC-2023-0064-2885 (AARP argued these fees are not well
understood by potential residents and that renters are charged
``many superfluous fees, including application fees, credit check
fees, pet fees, excessive late fees, utility-related fees, mail
sorting fees, inspection fees, convenience fees, common area fees,
guest fees, trash fees, notice fees, security deposit fees, check
cashing fees, cleaning or repair fees, and other mandatory fees for
services that a renter does not need or want.'').
\97\ See, e.g., FTC-2023-0064-3290 (U.S. Public Interest
Research Group Education Fund commented that consumers have faced
more unfair and deceptive fees as consumers ``have become accustomed
to online transactions.''); FTC-2023-0064-3090 (Atlanta Legal Aid
Society, Inc. noted the ubiquity of unfair and deceptive fees and
that these types of fees in the rental housing context have been
steadily rising for years.).
---------------------------------------------------------------------------
Commenters also raised concerns about the prevalence of hidden fees
in specific industries such as live-event ticketing and short-term
lodging. The American Society of Travel Advisors, Travel Technology
Association, and a travel agent observed that, despite increased
scrutiny over hotel resort fees, there remains little uniformity in
pricing practices, and bait-and-switch pricing remains an issue.\98\
Multiple commenters raised continued concerns over hidden fee pricing
practices in the live-event ticketing market. TickPick, LLC observed
the ``widespread'' deceptive practice of bait-and-switch pricing
rampant in this industry. Chamber of Progress noted that deceptive and
unfair fees are ``rampant in some industries and pose clear threats to
consumers,'' including ``hotel stays, live sports or concert tickets,
and airline tickets.'' Future of Music Coalition commented that they
have worked to ``deal[ ] with the scourge of junk fees in various parts
of the economy,'' including live touring. The Charleston Symphony
affirmed that ``requiring sellers to disclose the total price clearly
and conspicuously[ ] addresses a pressing issue in the nonprofit
performing arts sector.'' \99\
---------------------------------------------------------------------------
\98\ FTC-2023-0064-3106 (American Society of Travel Advisors
stated that resort fees are disclosed in a highly inconsistent
manner, even between hotels doing business under the same brand
name.); FTC-2023-0064-3293 (Travel Technology Association commented
that hotels have been known to surprise guests at check-in with
these fees and ``guests have no reasonable recourse but to pay
them.''); FTC-2023-0064-3077 (Far Horizons Travel, by its owner, a
travel agent of almost 40 years, called hotel fees ``out of
control'' and stated: ``I am appalled by these fees and how much
they have risen over the years. . . . They say it's for extra
amenities but that is not always the case and more often not the
case at all.'').
\99\ FTC-2023-0064-3212 (TickPick, LLC); FTC-2023-0064-3137
(Chamber of Progress); FTC-2023-0064-3230 (Future of Music
Coalition); FTC-2023-0064-3105 (Charleston Symphony).
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Despite the overwhelming evidence supporting the prevalence of
bait-and-switch pricing and misleading fee practices economy-wide, a
minority of commenters argued that the Commission has failed to meet
its burden of establishing prevalence. Some commenters contended that
the Commission's evidence focuses on a small number of problematic
industries and does not demonstrate prevalence in every single industry
across the economy.\100\ Some commenters similarly contended that the
proposed rule was an attempt to impose a ``one-size-fits-all'' solution
on distinct industries, not all of which are engaging in unfair or
deceptive practices, and thus the proposed rule is overbroad and not
supported by the requisite evidence of prevalence.\101\
---------------------------------------------------------------------------
\100\ FTC-2023-0064-3143 (ACA Connects--America's Communication
Association argued that the NPRM contained no meaningful discussion
of prevalence of unfair or deceptive pricing disclosures with
respect to communication services.); FTC-2023-0064-3186 (National
LGBT Chamber of Commerce and the National Asian/Pacific Islander
American Chamber of Commerce & Entrepreneurship argued that
``prepared food and grocery delivery applications . . . have
demonstrated transparency and accessibility, providing clear
explanations about fees.''); FTC-2023-0064-3292 (National
Association of Theatre Owners argued that the NPRM failed to
demonstrate prevalence with respect to the theatre industry,
identifying only fifty comments received in response to the ANPR
that reference movie theatre convenience fees.); FTC-2023-0064-3238
(Gibson, Dunn & Crutcher LLP argued that the Commission has failed
to reliably demonstrate the prevalence of unfair or deceptive fees
across any industry or sector.); FTC-2023-0064-3233 (NCTA--The
Internet & Television Association argued that the only mention of
telecommunication fees is anecdotal, and the Commission has failed
to show prevalence with respect to any NCTA member.); FTC-2023-0064-
3263 (Flex Association stated that ``[t]he Commission has not
pointed to evidence of any prevalent consumer harm that justifies
imposing new pricing and disclosure rules on app-based delivery
platforms.''); FTC-2023-0064-3130 (International Cemetery, Cremation
& Funeral Association argued that over the last several reviews of
the Funeral Rule the Commission has not found evidence of widespread
consumer abuse among cemeteries or third-party suppliers.).
\101\ FTC-2023-0064-3258 (National Taxpayers Union Foundation);
FTC-2023-0064-3173 (Center for Individual Freedom argued that the
Commission was overly reliant on lodging, ticketing, and restaurants
in justifying an economy-wide rule.); FTC-2023-0064-3251 (National
RV Dealers Association argued the proposed rule ``is an
overextension from this drip pricing concern, and not only strays
from the FTC's traditional areas of concern but also risks impeding
the normal business operations and innovation across a multitude of
sectors.'').
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First, the Commission disagrees that it must find that the unfair
or deceptive act or practice is widespread within every individual
context or industry to issue a rule targeting a specific practice
across industries. To begin with, the Commission's prevalence findings
need only have ``some basis or evidence'' to show ``the practice the
FTC rule seeks to regulate does indeed occur.'' \102\ While many trade
regulation rules promulgated under section 18 focus on a particular
industry, as discussed in
[[Page 2077]]
section IV.A.1, others apply to specific practices across industries
regardless of product or service, such as the Cooling-Off Period for
Door-to-Door Sales Rule (the ``Cooling-Off Rule''), the Rule on the
Preservation of Consumers' Claims and Defenses (the ``Holder Rule''),
the Rule on Retail Food Store Advertising and Marketing Practices (the
``Unavailability Rule''), the mail, Internet, or Telephone Order
Merchandise Rule (the ``Mail Order Rule''), the Rule on the Use of
Prenotification Negative Option Plans (the ``Negative Option Rule''),
the Rule on Impersonation of Government and Businesses (the
``Impersonator Rule''), and the Rule on the Use of Consumer Reviews and
Testimonials.\103\ While the Commission agrees that minimal evidence of
a practice would be insufficient to meet the prevalence standard,
section 18 did not require the Commission to find for its economy-wide
rulemakings that every industry engaged in sales made at a consumer's
home or at certain other locations (Cooling-Off Rule), used credit
contracts (Holder Rule), offered products at an advertised price when
they did not have the advertised products in stock (Unavailability
Rule), or had a robust mail, internet or telephone order business (Mail
Order Rule); or that every industry used negative options (Negative
Option Rule), had an issue with impersonating government agencies or
businesses (Impersonator Rule), or used and abused reviews (Rule on the
Use of Consumer Reviews and Testimonials). Imposing such a standard
would artificially limit the Commission's rulemaking authority under
section 18 in a way that does not align with the Commission's mandate
or the text of the statute, which focuses on acts or practices
generally and never mentions the need to define markets or industries.
As explained herein and in the NPRM, the information evidencing
prevalence of bait-and-switch pricing and misleading fees more than
meets section 18's standard for prevalence for the economy generally,
and for the live-event ticketing and short-term lodging industries,
specifically, by demonstrating that the practices are widespread and,
further, that such practices are occurring across a wide range of
industries.
---------------------------------------------------------------------------
\102\ Pa. Funeral Dirs. Ass'n. v. FTC, 41 F.3d 81, 87 (3d Cir.
1994).
\103\ 16 CFR part 429; 16 CFR part 433; 16 CFR part 424; 16 CFR
part 435; 16 CFR part 425; 16 CFR part 461; 16 CFR part 465.
---------------------------------------------------------------------------
Second, the Commission notes that, even when commenters challenged
the application of the rule to specific pricing scenarios or to their
own industries, they also appeared to concede that advertising a base
price to which mandatory fees are added later is a frequent practice
even in their own industries. While some commenters raised genuine
challenges or questions about the application of the rule, others
attempted to conflate such genuine challenges with their desire to
continue to use drip or partition pricing.
As discussed in section III.B.1, commenters from some ticket
sellers did not contest that their advertised prices failed to include
all mandatory fees and to provide the total price of goods or services.
Instead, they attempted to explain why they engaged in those practices.
Finally, some commenters from industries other than live-event
ticketing and short-term lodging argued that the Commission's NPRM
failed to establish prevalence because of the following reasons: the
cited cases focused on inapplicable fact patterns or resulted in
settlement; the cited conferences called for additional research rather
than regulatory strategy, or were narrow in scope as to the industries
covered; and the resort fee warning letters failed to result in
enforcement action.\104\ Commenters such as the U.S. Chamber of
Commerce argued that the enforcement record should rely only on cease-
and-desist orders or ``extensive empirical research.'' \105\ Other
commenters also raised concerns about a lack of empirical
research.\106\ These commenters overlook section 18's clear instruction
that the Commission's prevalence determination can be based on ``any
other information available to the Commission'' that indicates a
widespread pattern, which the Commission thoroughly laid out in the
NPRM and expands upon herein.
---------------------------------------------------------------------------
\104\ FTC-2023-0064-3127 (U.S. Chamber of Commerce argued the
NPRM failed to cite any cases holding that late in time fee
disclosures are unfair or deceptive and the settlements described by
the Commission only raised the failure of companies to disclose
certain applicable fees prior to purchase or at all.).
\105\ Id.
\106\ FTC-2023-0064-3152 (Building Owners & Managers Association
et al. commented that the proposed rule ``lacks any reasonable
factual underpinning as applied to the rental housing industry
because it is not based on any statistical data relevant to the
industry,'' but is ``based solely upon anecdotal, conclusory, and
non-representative justification.''); FTC-2023-0064-3172 (New Jersey
Apartment Association stated that the NPRM lacked ``statistical
basis'' for claims that unfair and deceptive fees were an issue in
the rental housing context and that the Commission relied on
anecdotal evidence.).
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In sum, the Commission's enforcement history, workshops, and
reports, together with the record of this rulemaking and the
enforcement cases brought by the Commission's local, State, and
international enforcement counterparts fully support a finding that
bait-and-switch pricing that hides the total price of goods or services
and misrepresenting the nature, purpose, amount, and refundability of
fees or charges are prevalent across the economy, including in the
live-event ticketing and short-term lodging industries.\107\ Despite
the evidence that these specific practices are prevalent economy wide,
the Commission will first focus its rulemaking authority on combatting
these practices in the live-event ticketing and short-term lodging
industries, the two industries in which the Commission first began
evaluating drip pricing more than a decade ago and for which there is a
long history of consumer harm.
---------------------------------------------------------------------------
\107\ See, e.g., supra notes 66, 67, 72, 75, 80, 85, 90
(detailing the Commission's enforcement history, workshops, and
reports, class action lawsuits, state and local enforcement and
regulations, and other efforts to curb unfair or deceptive pricing
practices in the live-event ticket and short-term lodging
industries). The Commission also received thousands of comments from
individual consumers detailing bait-and-switch pricing and deceptive
fees in the live-event ticket and short-term lodging industries in
response to the ANPR and the NPRM. See, e.g., FTC-2023-0064-0820
(Individual Commenter stated ``I was just considering buying some
event tickets on Vivid Seats and was shocked to see that they add a
full 33% in bogus fees.''); FTC-2023-0064-0058 (Individual Commenter
stated: ``The worst offenders are ticket sellers/resellers, who
advertise baseline ticket prices in their search engines and then
include some unknown amount of fees when it's time to pay.''); FTC-
2023-0064-0102 (Individual Commenter stated: ``I recently went to a
MLB game and the fees were $21 for a $75 ticket or greater than 20%.
I went to a concert and the tickets were $55 but the fees brought
the price to over $100. On both cases, the fees were not disclosed
until the payment screen.''); FTC-2023-0064-0145 (Individual
Commenter described purchasing tickets to a musical: ``Nearly 20% of
the total cost was for fees that were not disclosed until I was at
the payment step ($119 ticket + $4.55 order processing fee + $4.00
facility charge + $20.50 service fee). I don't understand what any
of those fees are actually for.''); FTC-2023-0064-0040 (Individual
Commenter described hotel resort fees as ``egregious and opaque''
and stated they learned of an additional $50 per night resort fee
upon check-in: ``I asked what the purpose of the fee was and was
told by the staff person, `I'm not really sure.' ''); FTC-2023-0064-
1462 (Individual Commenter stated: ``Recently I found an
``affordable'' hotel in a city and booked a 4 night stay, but was
not informed until after I checked in that parking cost extra each
day . . . . which made the hotel no longer affordable for me'');
FTC-2023-0064-0977 (Individual Commenter described spending hours
trying to book a hotel to face ``mandatory hotel fees for a pool, a
gym and 24 hour security totalled $50/night''); FTC-2023-0064-0152
(Individual Commenter stated that fees through services including
Airbnb and VRBO are ``often vague and undefined'' and described fees
including a ``host fee,'' ``booking fee,'' ``safety fee,'' and
``resort fee'').
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B. Manner and Context in Which the Acts or Practices Are Deceptive or
Unfair
The final rule curbs certain unfair or deceptive pricing practices
by requiring
[[Page 2078]]
truthfulness and transparency in pricing for live-event ticketing and
short-term lodging. Truthful, timely, and transparent pricing,
including the nature, purpose, and amount of any fees or charges
imposed, is critical for consumers--and also for honest businesses. The
legal underpinning of the rule, or the manner and context in which the
acts or practices defined by the rule are unfair or deceptive, is not
complex. By identifying and targeting pricing tactics that hide the
true price of live-event tickets and short-term lodging from consumers,
the rule's central provisions prohibit conduct that is inherently
deceptive or unfair, including: (1) offering prices that do not include
all mandatory fees or charges and (2) misrepresenting the nature,
purpose, amount, and refundability of fees or charges, and the identity
of the good or service for which the fees or charges are imposed. Thus,
the final rule will allow American consumers to make better-informed
purchasing decisions when purchasing live-event tickets or deciding
where to stay on a short-term basis and level the playing field for
honest businesses in these industries that truthfully, timely, and
transparently disclose their pricing information.
A representation, omission, or practice is deceptive under section
5 of the FTC Act if it is likely to mislead consumers acting reasonably
under the circumstances and is material to consumers--that is, it would
likely affect the consumer's conduct or decisions with regard to a good
or service.\108\ Price is a material term.\109\ It is a deceptive
practice to misrepresent the price of a good or service,\110\ including
through a deceptive first contact.\111\ Through its false savings
cases, the Commission repeatedly found that it was deceptive under
section 5 to present an inflated list price or comparison price, from
which consumers were misled to believe that the business offered a
lower-than-normal price.\112\ The inverse--luring consumers to a good
or service with a false low price--is also deceptive.\113\ For example,
in In re Filderman Corp., 64 F.T.C. 427 (1964), the Commission found
that the defendant violated section 5 both when it displayed misleading
list prices and when it later imposed mandatory service charges on top
of the advertised price.\114\ Once a consumer has been lured in by
deception, including about the cost of the good or service, it is well
established that a later disclosure cannot cure that deception.\115\
Thus, bait-and-switch pricing, where the initial contact with a
consumer shows a lower or partial price without including mandatory
fees, violates the FTC Act even if the total price is later disclosed.
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\108\ See Fed. Trade Comm'n, FTC Policy Statement on Deception,
103 F.T.C. 174, 175 (1984) (appended to In re Cliffdale Assocs.,
Inc., 103 F.T.C. 110, 174 (1984) (hereinafter ``Deception Policy
Statement''), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-103/ftc_volume_decision_103_january_-_june_1984pages_103-203.pdf.
\109\ Deception Policy Statement, 103 F.T.C. at 182-83 (listing
claims or omissions involving cost among those that are
presumptively material); see also, e.g., FTC v. FleetCor Techs.,
Inc., 620 F. Supp. 3d 1268, 1303-04, 1311 (N.D. Ga. 2022) (finding
that representations about discounts and transaction fees were
material).
\110\ Deception Policy Statement, 103 F.T.C. at 175 (listing
``misleading price claims'' among those claims that the FTC has
found to be deceptive); see also, e.g., In re Resort Car Rental
Sys., Inc., 83 F.T.C. 234, 281-82, 300 (1973), https://www.ftc.gov/system/files/ftc_gov/pdf/Resort%20Car%20Rental%20System%2C%20Inc.%2083%20FTC%20234%20%281973%29.pdf (finding that using the name ``Dollar-A-Day'' misrepresented
the price of car rentals in violation of section 5 of the FTC Act
where a rental could not be attained for one dollar per day due to
mileage, insurance, and other mandatory charges), aff'd sub. nom.
Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962, 964 (9th Cir.
1975).
\111\ See, e.g., Opinion of the Commission at 37-40, 47-50, In
re Intuit Inc., No. 9408 (FTC Jan. 22, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/d09408_commission_opinion_redacted_public.pdf (finding that under
the legal doctrine known as the first-contact or deceptive door-
opener rule, respondent's first contact with consumers was deceptive
because its advertising falsely claimed that consumers can file
their taxes for free with TurboTax and that later disclosures did
not cure the deception); Complaint ]] 12, 46-49, In re LCA-Vision,
No. C-4789 (FTC Mar. 13, 2023) (alleging respondent's advertisements
misrepresented the price of surgery and failed to disclose
eligibility limitations for a promotional price); Complaint ]] 8-10,
In re Progressive Chevrolet Company, No. C-4578 (FTC Jun. 16, 2016)
(alleging that respondents represented that consumers could lease
vehicles at advertised down payment and monthly payment amounts, and
deceptively failed to disclose a material condition that meant few
consumers would qualify for the advertised terms); Resort Car Rental
Sys., 518 F.2d at 964 (upholding the Commission's order finding that
the name ``Dollar-A-Day'' was deceptive when charges adding up to
more than one dollar per day were disclosed later).
\112\ E.g., In re Giant Food, Inc., 61 F.T.C. 326, 341-42, 361
(1962), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-61/ftcd-vol61july-december1962pages306-404.pdf (finding that comparative-price
advertising of household goods and appliances created false,
misleading, and deceptive impressions that induced consumers to make
purchases based on mistaken beliefs); In re George's Radio &
Television Co., 60 F.T.C. 179, 193-94, 196 (1962), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-60/ftcd-vol60january-june1962pages107-211.pdf (collecting cases and finding that
advertisements including manufacturer's suggested list prices that
were higher than the customary retail prices were deceptive).
\113\ See, e.g., In re Filderman Corp., 64 F.T.C. 427, 442-43,
461 (1964), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-64/ftcd-vol64january-march1964pages409-511.pdf (finding, among other things, that
respondents unlawfully advertised prices that were later inflated
with mandatory service charges); In re Resort Car Rental Sys., 83
F.T.C. at 281-82, 300; Opinion of the Commission at 37-40, 47-50, In
re Intuit Inc., No. 9408 (finding that respondent's advertising that
falsely claimed that consumers can file their taxes for free with
TurboTax was deceptive); Complaint ]] 12, 46-49, In re LCA-Vision,
No. C-4789 (alleging respondent's advertisements misrepresented the
price of surgery and failed to disclose eligibility limitations for
a promotional price). See also cases cited supra note 61 (collecting
FTC enforcement actions alleging that bait-and-switch pricing
tactics concerning hidden fees violated section 5).
\114\ In re Filderman Corp., 64 F.T.C. at 461 (ordering
respondents to stop ``[r]epresenting, directly or by implication:
That any amount is the price of merchandise when an additional
amount is required to be paid before the merchandise will be
sold.'')
\115\ Fed. Trade Comm'n, Enforcement Policy Statement on
Deceptively Formatted Advertisements 7 n.25 (2015), https://www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf; see also Opinion of the Commission
at 28-30, In re Intuit Inc., No. 9408, https://www.ftc.gov/system/files/ftc_gov/pdf/d09408_commission_opinion_redacted_public.pdf
(finding that disclosures on Intuit's websites were ``inadequate to
cure a misimpression for Intuit's ads,'' which used ``false claims
to engage consumers and induce them to further interact with the
company''); Resort Car Rental Sys, 518 F.2d at 964 (``The Federal
Trade [Commission] Act is violated if it induces first contact
through deception, even if the buyer later becomes fully informed
before entering the contract.'') (bracketed text added); Exposition
Press, Inc. v. FTC, 295 F.2d 869 (2d Cir. 1961) (``The law is
violated if the first contact is secured by deception, even though
the true facts are made known to the buyer before he enters into the
contract of purchase.'' (citations omitted)); FTC v. City W.
Advantage, Inc., No. 2:08-cv-00609-BES-GWF, 2008 WL 2844696, at *3
(D. Nev., 123 July 22, 2008) (finding defendant likely employed
``deceptive door openers . . . to induce consumers to stay on the
line'').
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A practice is considered unfair under section 5 if: (1) it causes,
or is likely to cause, substantial injury; (2) the injury is not
reasonably avoidable by consumers; and (3) the injury is not outweighed
by benefits to consumers or competition.\116\ Pricing that is not
truthful or transparent causes or is likely to cause substantial
injury; such injury is not reasonably avoidable by consumers or
outweighed by benefits to consumers or competition.
---------------------------------------------------------------------------
\116\ 15 U.S.C. 45(n).
---------------------------------------------------------------------------
Drip pricing and other bait-and-switch tactics that hide the true
price cause substantial injury, as the Commission discusses in detail
in section V.E, by leading consumers to buy more goods or services, pay
more for those goods or services, and incur higher search costs than
they otherwise would have if they had been presented with the true
price upfront. Studies have shown that consumers spend more money on
the same goods when faced with drip pricing, i.e., when they are not
shown the total price upfront, but instead are shown a base price, with
mandatory fees or charges added later
[[Page 2079]]
throughout the buying process.\117\ Where mandatory fees or charges are
disclosed at the same time as, but separately from, the base price,
consumers are still harmed. The practice of dividing the price into
multiple components without disclosing the total, generally referred to
as partitioned pricing, distorts consumer choice.\118\ Consumers
confronted with partitioned pricing, on average, underestimate the
total price of the good or service, likely because they use mental
shortcuts to estimate price that do not fully account for each
component.\119\
---------------------------------------------------------------------------
\117\ Alexander Rasch et al., Drip Pricing and its Regulation:
Experimental Evidence, 176 J. Econ. Behav. & Org. 353 (2020)
(``[E]xperimental evidence suggests that consumers indeed strongly
and systematically underestimate the total price under drip pricing,
and that they make mistakes when searching''); Shelle Santana et
al., Consumer Reactions to Drip Pricing, 39 Mktg. Sci. 188 (2020)
(``Across six studies, we find that drip pricing (versus nondrip
pricing) increases the likelihood that consumers will both initially
and ultimately select a lower base price option, even though the
surcharges for optional add-ons cause this base price to balloon--
making the lower base fare option more expensive than the
alternative''); Tom Blake et al., Price Salience and Product Choice,
40 Mktg. Sci. 619 (2021); Steffen Huck et al., The Impact of Price
Frames on Consumer Decision Making: Experimental Evidence (2015);
Meghan R. Busse & Jorge M. Silva-Risso, ``One Discriminatory Rent''
or ``Double Jeopardy'': Multi-component Negotiation for New Car
Purchases, 100 a.m. Econ. Rev. 470 (2010); Raj Chetty et al.,
Salience and Taxation: Theory and Evidence, 99 a.m. Econ. Rev. 1145
(2009) (``[C]ommodity taxes that are included in posted prices
reduce demand significantly more than taxes that are not included in
posted prices.''); see also FTC-2023-0064-3247 (Private Law Clinic
at Yale Law School).
\118\ Sullivan, supra note 67, at 4; FTC-2023-0064-3271 (U.S.
Senate, Sen. Amy Klobuchar).
\119\ Sullivan, supra note 67, at 22-24; Vicki G. Morowitz et
al., Divide and Prosper: Consumers' Reactions to Partitioned Prices,
35 J. Mktg. Rsch. 453 (1998) (subjects exposed to partitioned prices
recalled significantly lower total product costs than subjects
exposed to combined prices).
---------------------------------------------------------------------------
In addition, consumers who wish to compare prices incur additional
search costs to make direct comparisons of goods or services when the
full price is not disclosed upfront.\120\ For example, in an online
transaction to book a hotel room, consumers cannot simply view the
first price displayed on each website, but instead need to navigate to
subsequent pages or even enter all their payment information and reach
the checkout page for each website to determine the true total price of
their hotel stay.\121\ The same is true on live-event ticketing
websites. As TickPick, LLC noted, ``[m]ajor ticketing marketplaces
often require consumers to enter their credit card or other payment
information prior to disclosing mandatory fees. On these marketplaces,
the full purchase price is only disclosed after payment information is
collected.'' \122\ Under such circumstances, consumers waste time and
effort pursuing an offer that is not actually available at the promised
price. Such search costs that result from unfair or deceptive practices
are legally cognizable injuries under the FTC Act.\123\
---------------------------------------------------------------------------
\120\ Sullivan, supra note 67, at 4; Fed. Trade Comm'n, ``That's
the Ticket'' Workshop: Staff Perspective 4 (May 2020), https://www.ftc.gov/system/files/documents/reports/thats-ticket-workshop-staff-perspective/staffperspective_tickets_final-508.pdf; see also
Han Hong et al., Using Price Distributions to Estimate Search Costs,
37 RAND J. Econ. 257 (2006) (describing methods of estimating search
costs).
\121\ NPRM, 88 FR 77433 n.170.
\122\ FTC-2023-0064-3212 (TickPick, LLC) (``[On] StubHub's
website, for example, a consumer can be required to click 12 times
after being shown the first price before being shown the total price
they will pay.'')
\123\ See, e.g., Decision & Order at 3-4, In re LCA-Vision, No.
C-4789 (FTC Mar. 13, 2023) (settling allegations that deceptive
advertising caused consumers to ``waste[ ] 90 minutes to two hours
of their time'' responding to a deceptive promotion, Complaint ] 35,
and prohibiting misrepresentations of price and requiring disclosure
of price or discount qualification requirements), https://www.ftc.gov/system/files/ftc_gov/pdf/1923157-lca-vision-consent-package.pdf; Decision & Order at 2-3, In re Credit Karma, LLC, No.
C-4781 (FTC, Jan. 19, 2023) (settling allegations that deceptive
advertising caused consumers to waste significant time in applying
for ``pre-approved'' offers that were denied, Complaint ] 13, and
requiring Credit Karma to pay $3 million in monetary relief),
https://www.ftc.gov/system/files/ftc_gov/pdf/2023138-credit-karma-combined-final-consent-without-signatures.pdf; FTC v. Amazon.com,
Inc., No. C14-1038-JCC, 2016 U.S. Dist. LEXIS 55569, at *17 (W.D.
Wash., Apr. 26, 2016) (finding consumer injury included ``time spent
pursuing those refunds''); FTC v. Neovi, Inc., 598 F. Supp. 2d 1104,
1115 (S.D. Cal. 2008) (finding ``no genuine issue of material fact
that consumers suffered substantial injury'' based on ``considerable
amount of time'' spent by consumers); FTC v. Accusearch, Inc., No.
06-cv-105-D, 2007 U.S. Dist. LEXIS 74905, at *22-23 (D. Wyo., Sept.
28, 2007) (granting summary judgment in favor of FTC based in part
on finding of consumer injury for ``lost time and productivity'').
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Misrepresented fees also cause or are likely to cause substantial
injury--they harm consumers as well as businesses that do not engage in
these practices. For example, as discussed in section III.C, a hotel
might charge a resort fee when only typical and ordinary accommodations
and amenities are offered, an environmental fee that serves no
environmental purpose, or a fee misrepresented as a government charge.
As TickPick, LLC put it, misrepresented fees trick consumers into
paying more and ultimately inhibit competition by providing an unfair
advantage to businesses that misrepresent their fees.\124\ Likewise,
when businesses misrepresent fees, consumers are unable to make
informed choices about the value of the fee or charge, or the good or
service it represents, because their understanding of the fee or charge
is predicated on false, vague, or otherwise misleading information. As
such, consumers are unable to understand what they have purchased, or
to which charges they have consented.\125\
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\124\ FTC-2023-0064-3212 (TickPick, LLC).
\125\ Id.
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Consumers cannot reasonably avoid these harms. As explained in the
NPRM, studies suggest that cognitive bias may prevent consumers from
reasonably avoiding injury caused by unfair and deceptive pricing
practices.\126\ Several behavioral studies explain why consumers cannot
reasonably avoid making errors when the true price is not displayed
upfront. Behavioral research shows that consumers who first learn of a
lower price do not properly adjust their calculations when additional
fees are added, thereby underestimating the total price.\127\ It also
shows that consumers attach value to things they perceive to be theirs
and, once consumers begin the purchase process, their perception shifts
so that stopping the transaction feels like a loss.\128\ The research
shows that consumers who already have invested in an endeavor, such as
by taking time to make selections on a travel or live-event ticket
website, continue that endeavor even if they would pay less if they
began again elsewhere.\129\ Lastly, consumers necessarily incur search
costs when mandatory fees are obscured because it takes them longer to
discover the full price within a single transaction and to comparison
shop across transactions.\130\ Notably, it is unlikely that the market
can correct for these injuries because once the practice of displaying
incomplete initial prices takes hold, honest businesses will struggle
to compete. For example, as noted in the NPRM, one market participant
in the live-event ticketing industry, StubHub, unilaterally adopted
all-in pricing in 2014 but soon reverted back to its original model
after it lost significant market share when customers
[[Page 2080]]
incorrectly perceived StubHub's prices to be higher.\131\
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\126\ NPRM, 88 FR 77434 (discussing various cognitive biases
that contribute to the unavoidability of consumer injury, including
the anchoring theory, the endowment theory, and the sunken cost
fallacy).
\127\ Inst. for Policy Integrity, Pet. for Rulemaking Concerning
Drip Pricing 18 (2021), https://policyintegrity.org/documents/Petition_for_Rulemaking_Concerning_Drip_Pricing.pdf.
\128\ Steffen Huck et al., The Impact of Price Frames on
Consumer Decision Making: Experimental Evidence (2015).
\129\ David A. Friedman, Regulating Drip Pricing, 31 Stan. L. &
Pol'y Rev. 51, 55 n.13 (2020).
\130\ See NPRM, 88 FR 77447 (discussing reductions in search
costs from the proposed rule).
\131\ See NPRM, 88 FR 77434 (quoting Fed. Trade Comm'n, ``That's
the Ticket'' Workshop: Staff Perspective 4 (May 2020), https://www.ftc.gov/system/files/documents/reports/thats-ticket-workshop-staff-perspective/staffperspective_tickets_final-508.pdf.). See
also, e.g., https://www.contactlensking.com/faq.aspx (describing a
contact lens company's decrease in traffic and total orders when it
displayed a total price while competitors implemented ``processing''
fees).
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The consumer injury caused by these bait-and-switch pricing
practices is not outweighed by any benefits to consumers or
competition. Consumers receive no benefit from businesses that use drip
pricing, partitioned pricing, or misleading price presentation while
they obscure the total price. To the extent that consumers could
benefit from itemized information about price components, such
itemization can be done in conjunction with clear total price
information. Consumers receive no benefit from businesses partitioning
or breaking up mandatory price components while they obscuring the
total price.
Likewise, as discussed in section V.E, there is no benefit to
competition, as honest businesses that disclose all-inclusive total
prices lose market share to businesses that do not. Bait-and-switch
pricing and misleading fees undermine the ability of honest businesses
to compete on price and therefore diminish the competitive pressure in
a market that pushes prices downward. As a result, these practices lead
to higher prices than would be supported in a competitive marketplace.
The Antitrust Division of the U.S. Department of Justice noted that
``companies that impose mandatory hidden fees'' have ``an unfair
advantage over honest brokers'' and interfere with consumers' ability
to ``choose between competitors based on the important considerations
of price and what, exactly, the consumer is purchasing.'' \132\ Some
commenters, including those from the live-event ticketing and short-
term lodging industries, noted that bait-and-switch pricing not only
confuses consumers, but harms honest businesses that offer truthful,
timely, and transparent pricing because their prices initially may seem
higher than competitors that use bait-and-switch pricing and misleading
fees. For example, TickPick, LLC commended the Commission for proposing
to curb the widespread practice of bait-and-switch pricing and observed
that ``the proposed rule would significantly benefit consumers and
competition in the live-event ticketing industry.'' \133\ The American
Society of Travel Advisors argued that, in addition to consumer harm,
``the imposition of undisclosed fees also unfairly places honest
retailers--those that do disclose the full, all-in price upfront--at a
competitive disadvantage relative to those that do not.'' \134\
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\132\ FTC-2023-0064-3187 (U.S. Department of Justice, Antitrust
Division, observed that ``[w]hen consumers lack choice and
information, and are saddled with mandatory hidden fees, the
benefits of the competitive process break down.''); see also FTC-
2023-0064-3106 (American Society of Travel Advisors); FTC-2023-0064-
3184 (New York State Sen. Michael Gianaris); FTC-2023-0064-1294
(James J. Angel, Ph.D., CFP, CFA, Professor, Georgetown University,
McDonough School of Business).
\133\ FTC-2023-0064-3212 (TickPick, LLC).
\134\ FTC-2023-0064-3106 (American Society of Travel Advisors).
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A minority of commenters stated that hidden and misleading fees do
not harm consumers. For instance, the Competitive Enterprise Institute
argued that consumers' search costs do not increase when advertisements
lack a single total price, as the consumer is better informed after
watching the advertisement despite the omission.\135\
---------------------------------------------------------------------------
\135\ FTC-2023-0064-3028 (Competitive Enterprise Institute
argued that consumers already bear a search cost merely by looking
for a product, and that any advertisement that includes some, but
not all, pricing information, benefits the searching consumer if the
information is accurate and non-deceptive.).
---------------------------------------------------------------------------
While the commenter conceded that consumers may benefit more if a
total price is disclosed, the commenter argued that any harm could be
easily avoidable by consumers calculating the total themselves.\136\
Some commenters also argued that these types of fees often benefit
consumers and are openly disclosed.\137\ Indeed, the American Gaming
Association stated that resort fees enhance a consumer's stay,
distinguish resorts from more standard lodging offerings, are openly
disclosed to consumers, and often appear several times throughout the
search and purchasing process. As the Commission already noted, drip
and partitioned pricing and other bait-and-switch pricing harm
consumers for numerous reasons, including because consumers
underestimate the total price of a good or service, overconsume,
overpay, and waste time. The U.S. Chamber of Commerce argued that there
are pro-consumer and pro-competitive justifications for this type of
pricing, including allowing for dynamic pricing strategies and
preventing consumers from paying for services that they do not
use.\138\ The rule, however, does not prohibit the use of dynamic
pricing strategies, itemization, or offering optional goods or services
for consumers to select; it simply prohibits offering a price that is
not inclusive of all mandatory fees and charges, as well as prohibiting
misrepresented fees and charges.
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\136\ Id.
\137\ FTC-2023-0064-2886.
\138\ FTC-2023-0064-3127 (U.S. Chamber of Commerce noted that,
among these pricing practices, dynamic pricing strategies provide
these benefits to consumers and this was ignored in the conclusions
of the NPRM.).
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As stated herein, the Commission and courts have previously
recognized that price is a material term \139\ and that it is a
violation of section 5 of the FTC Act to misrepresent the price of a
good or service.\140\ Commenters emphasized the materiality of price to
consumers.\141\ The commenters who argue that bait-and-switch pricing
does not harm consumers ignore the large body of literature
demonstrating that drip pricing and partitioned pricing have a negative
impact on consumers and competition. The economic analysis in Section V
provides additional discussion regarding the economic harms from bait-
and-switch pricing tactics, including drip pricing and partitioned
pricing in the live-event and short-term lodging industries.
---------------------------------------------------------------------------
\139\ Deception Policy Statement, 103 F.T.C. at 182-183, 183
n.55 (listing claims or omissions involving cost among those that
are presumptively material); see also, e.g., FleetCor Techs., Inc.,
620 F. Supp. 3d at 1303-04, 1311 (finding that representations about
discounts and transaction fees were material); FTC v. Windward
Marketing, Inc., No. 1:96-CV-615F, 1997 WL-33642380, at *10 (N.D.
Ga., Sept. 30, 1997) (``[A]ny representations concerning the price
of a product or service are presumptively material'').
\140\ Deception Policy Statement, 103 F.T.C. at 175 (listing
``misleading price claims'' among those claims that the FTC has
found to be deceptive); see also, e.g., Resort Car Rental Sys., 518
F.2d at 964 (upholding the Commission's order finding that using the
name ``Dollar-A-Day'' misrepresented the price of car rentals in
violation of section 5 of the FTC Act).
\141\ See, e.g., FTC-2023-0064-3162 (BBB National Programs Inc.
stated that BBB National Advertising Division ``precedent is clear
that the advertised price for a product or service is among one of
the most material terms to a consumer's purchasing decision.'').
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C. The Economic Effect of the Rule
As part of the rulemaking proceeding, the Commission solicited
public comment and data (both qualitative and quantitative) on the
economic impact of the proposed rule and its costs and benefits. In
issuing this final rule, the Commission has carefully considered the
comments received and the costs and benefits of each provision, taking
into account the effects on small businesses and consumers, as
discussed in more detail in sections V and VII.
The record demonstrates that the most significant anticipated
benefits of the final rule are promoting transparent pricing,
facilitating comparison shopping for consumers, and leveling
[[Page 2081]]
the playing field for businesses in the live-event ticketing and short-
term lodging industries. By prohibiting drip pricing, the final rule
also will promote social trust, which is a necessary component of
successful market interactions.\142\ Most participants in a market
transaction do not have prior experience with one another and consumers
must rely on some degree of trust that the business will provide the
good or service in question, at the stated price and quality level.
Without social trust, it would be costlier for both consumers and
businesses to acquire all the necessary information to participate in
the market. While there has been less research on the relationship
between social trust and previous market interactions, there is some
evidence that bad market experiences can reduce social trust.\143\
Thus, prohibiting these types of deceptive and unfair practices will
promote social trust, which can be a measure of a well-functioning
market.\144\
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\142\ The relationship between social trust and market outcomes
is well established. See, e.g., Paul J. Zak & Stephen Knack, Trust
and growth. 111 Econ. J., 470 (Mar. 2001), https://doi.org/10.1111/1468-0297.00609; Philip Keefer & Stephen Knack, Does Social Capital
Have an Economic Payoff? A Cross-Country Investigation, 112 Q.J.
Econ. 4 (Nov. 1997), https://doi.org/10.1162/003355300555475. Social
trust is particularly necessary for participation in financial
markets. See Jesse Bricker & Geng Li, Fed. Reserve Bd., Credit
Scores, Social Trust, and Stock Market Participation, Finance and
Economics Discussion Series 2017-008r1, https://doi.org/10.17016/FEDS.2017.008r1; Luigi Guiso, Paola Sapienza, & Luigi Zingales,
Trust the Stock Market, 63 J. Fin. (Dec. 2008), https://www.jstor.org/stable/20487944?seq=1.
\143\ Ginny Seung Choi & Virgil Henry Storr, Market
interactions, trust and reciprocity, 15 PLOS One 5 (May 7, 2020),
https://doi.org/10.1371/journal.pone.0232704.
\144\ Joshua Kleinfeld & Hadar Dancig-Rosenberg, Social Trust in
Criminal Justice: A Metric, 98 Notre Dame L. Rev. 815 (2022),
https://scholarship.law.nd.edu/ndlr/vol98/iss2/6.
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Another beneficial consequence would be the expansion of the
remedies available for violations of the final rule, including the
ability to more effectively obtain monetary relief for consumers who
have been deceived about the true total price of live-event tickets or
short-term lodging. This is particularly critical given the U.S.
Supreme Court's decision in AMG Capital Mgmt., LLC v. FTC, 593 U.S. 67
(2021), which held that equitable monetary relief, including consumer
redress, is not available under section 13(b) of the FTC Act.\145\
Under the final rule, the Commission will now be able to seek court-
ordered consumer redress in one Federal district court action brought
under section 19(a)(1), rather than the longer, less efficient, two-
step process for obtaining redress under section 19(a)(2).\146\ By
allowing the Commission to secure redress more efficiently, this rule
will also allow the Commission to conserve its limited enforcement
resources for other mission priorities.
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\145\ AMG Cap. Mgmt., 593 U.S. at 82.
\146\ See 15 U.S.C. 57b(a)(1) and (2); see also NPRM, 88 FR
77438 (discussing impact of AMG Cap. Mgmt.). When the Commission has
reason to believe that the rule has been violated, the Commission
can commence a Federal court action to ask a Federal judge to
determine liability and, if proven, require violators to provide
redress. See 15 U.S.C. 57b(a)(1), (b). Without the rule, the path to
court-ordered redress is longer. The Commission must first conduct
an administrative proceeding to determine whether the respondent
engaged in unfair or deceptive acts or practices in violation of
section 5(a) of the FTC Act. If the Commission finds that the
respondent did so, the Commission issues a cease-and-desist order,
which might not become final until after the resolution of any
resulting appeal to a Federal court of appeals. Then, to obtain
redress, the Commission must initiate a second action in Federal
district court, in which it must prove that the violator engaged in
objectively fraudulent or dishonest conduct in order to obtain
court-ordered redress. See 15 U.S.C. 57b(a)(2), (b).
---------------------------------------------------------------------------
As an additional benefit, the rule will enable the Commission to
seek civil penalties against violators. The FTC Act generally does not
allow the Commission to obtain civil penalties against those who engage
in unfair or deceptive acts or practice in violation of section 5(a) of
the FTC Act. Section 5(m)(1)(A) of the FTC Act does, however, authorize
the Commission to seek civil penalties in court for violations of trade
regulation rules, such as the final rule here.\147\ The ability to
obtain civil penalties provides two benefits. First, court-ordered
civil penalties give the Commission the ability to ensure that
violators do not retain the profits they earn by engaging in the unfair
or deceptive pricing practices prohibited by the rule. Second, the
potential for civil penalties will deter violations and provide a
strong incentive for businesses providing live-event tickets and short-
term lodging to provide truthful and transparent pricing information in
compliance with the rule, which will have consumer welfare benefits and
will benefit honest competition.\148\
---------------------------------------------------------------------------
\147\ See section 5(m)(1)(A) of the FTC Act, 15 U.S.C.
45(m)(1)(A) (providing that those who violate a trade regulation
rule ``with actual knowledge or knowledge fairly implied on the
basis of objective circumstances that such act is unfair or
deceptive and is prohibited by such rule'' are liable for civil
penalties for each violation). In addition, any entity or person who
violates such a rule (irrespective of the state of knowledge) is
liable for any injury caused to consumers by the rule violation. The
Commission may pursue such recovery in a suit under section 19(a)(1)
of the FTC Act, 15 U.S.C. 57b(a)(1).
\148\ NPRM, 88 FR 77447-48.
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When promulgating a final rule, the Commission must prepare a final
regulatory analysis, which is contained in section V. The final
regulatory analysis contains an estimated cost-benefit analysis of the
final rule, as well as a more in-depth discussion of the comments the
Commission received in response to the NPRM. In addition, the
Commission's final regulatory flexibility analysis, which is contained
in section VII, discusses the final rule's economic impact on small
entities.
III. Section-by-Section Analysis
The Commission has carefully considered the rulemaking's extensive
comment record. It has weighed considerations raised by individual
consumers, businesses (including small businesses), industry advocates,
consumer advocates, labor representatives, academics, and other law
enforcement bodies. After considering these comments, the Commission
finalizes this rule to address a subset of the specific unfair and
deceptive practices identified in the NPRM. The rule will help ensure
that consumers shopping for live-event tickets and short-term lodging
see advertised prices that include all mandatory fees, can obtain such
goods or services at those prices, and know what they are paying for.
The rule promotes honest and transparent pricing for consumers and a
level playing field for businesses.
Numerous public comments in support of and in opposition to the
rule included discussions of the definitions and substantive provisions
of the proposed rule, and made various recommendations. The Commission
considered comments pointing out confusion about specific phrases in
the proposed rule, particularly phrases that commenters found vague or
overbroad. The Commission also took notice of comments that suggested
some entities or transactions would be subject to overlapping Federal
regulations regarding pricing disclosures that could result in
confusion to consumers or businesses. In addition, the Commission
appreciated comments from industry that identified potential gaps in
how the proposed rule would interact with certain types of pricing
practices.
The Commission makes a number of changes to the final rule.
Notably, the Commission narrows the application of the final rule to
offers, displays, or advertisements of a covered good or service--i.e.,
live-event tickets or short-term lodging. The Commission recognizes
that many comments to the proposed rule focused on the application of
the rule to specific industries or pricing scenarios. As a result of
the Commission's decision to limit this final rule to live-event
ticketing and short-term lodging, the
[[Page 2082]]
Commission need not respond to each of these comments at this time.
In addition, wherever possible, the Commission works to reduce
burden on, and maintain pricing flexibility for, businesses. Finally,
the Commission provides guidance and explanation to respond to specific
questions and hypotheticals posed by commenters to help give additional
clarity to businesses. The following discussion provides a section-by-
section analysis of the NPRM's proposed provisions and the provisions
adopted in the final rule, as well as a discussion of the comments
received and the Commission's responses.
A. Sec. 464.1 Definitions
Proposed Sec. 464.1 contained definitions for the following terms:
``ancillary good or service''; ``business''; ``clear(ly) and
conspicuous(ly)''; ``government charges''; ``pricing information'';
``shipping charges''; and ``total price.'' The Commission received
various comments with respect to these definitions, including
particular industries' requests for exemption from the definition of
``business'' and other suggestions. Section 464.1 of the final rule
adopts these definitions, in some instances with minor modifications
for clarification, and adds a definition for ``covered good or
service.'' In the definition-by-definition analysis, the Commission
discusses each definition proposed in the NPRM, any changes to the
definition's text, the added definition, and other comments relevant to
the definitions section that are not otherwise addressed in the
discussion of the final rule's substantive provisions.
1. Ancillary Good or Service
Proposed Sec. 464.1(a) in the NPRM defined ``ancillary good or
service'' as ``any additional good(s) or service(s) offered to a
consumer as part of the same transaction.'' This definition was
relevant to the definition of ``total price,'' in proposed Sec.
464.1(g), which specified that any mandatory fees or charges for such
goods or services would be included in total price. Commenters proposed
modifications to the definition of ``ancillary good or service'' but,
following review of those comments and as discussed in this section,
the Commission declines to adopt the suggested modifications. Final
Sec. 464.1 adopts the definition of ``ancillary good or service''
without modification.
Several commenters recommended that the Commission modify the
definition of ``ancillary good or service'' to state that fees charged
by a third party must be included in total price if those fees are part
of the same transaction.\149\ As stated in the NPRM, if a business
advertises a price for a good or service that requires an ancillary
good or service provided by another entity, the charge for the
mandatory ancillary good or service must be included in total price.
Additionally, the NPRM made clear that the definition includes goods
and services (whether from the seller or third parties) offered as part
of the same transaction, because it included examples of mandatory
ancillary goods or services that may be offered by third-party
providers but are part of the same transaction, such as a payment
processing fee for an online transaction. Accordingly, the Commission
does not believe that it is necessary to modify the definition of
``ancillary good or service'' to clarify that fees charged by a third
party must be included in total price if those fees are part of the
same transaction.
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\149\ FTC-2023-0064-3191 (Community Catalyst et al.); FTC-2023-
0064-3283 (National Consumer Law Center, Prison Policy Initiative,
and advocate Stephen Raher).
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Several commenters also suggested that the Commission add language
referring to a reasonable consumer in the definition of ``ancillary
good or service,'' to clarify that only goods or services that a
``reasonable consumer'' would expect to be included must be included in
total price.\150\ The Commission does not believe that adding
``reasonable consumer'' to the definition of ``ancillary good or
service'' is necessary, as the reasonable consumer standard is implicit
in the rule text. Under longstanding precedent, the Commission examines
conduct from the perspective of a consumer acting reasonably under the
circumstances.\151\ If a representation or practice affects or is
directed primarily to a particular group, the Commission examines
reasonableness from the perspective of an ordinary member of that
group.\152\ Accordingly, the Commission does not believe it is
necessary to modify the definition of ``ancillary good or service'' to
refer to a reasonable consumer.
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\150\ FTC-2023-0064-3268 (Housing & Eviction Defense Clinic,
University of Connecticut School of Law, commented ``the definition
of an `Ancillary Good or Service' should be amended to include all
fees that are not reasonably avoidable and all fees or charges for
goods or services that a reasonable consumer would expect to be
included with the purchase.''); FTC-2023-0064-3275 (Berkeley Center
for Consumer Law & Economic Justice et al. recommended the
definition of ``Ancillary Good or Service'' be revised ``to mean
`any optional, additional good(s) or service(s), offered to a
consumer as part of the same transaction, that a reasonable consumer
would not expect to be included with the purchase of the advertised
good or service.''); FTC-2023-0064-3160 (Consumer Federation of
America et al. proposed the definition of ``Ancillary Good or
Service'' be modified to ``any optional, additional good(s) or
service(s), offered to a consumer as part of the same transaction,
that a reasonable consumer would not expect to be included with the
purchase of the advertised good or service.'').
\151\ Deception Policy Statement, 103 F.T.C. at 175, 177-82; see
also FTC v. Cantkier, 767 F. Supp. 2d 147, 151-52 (D.D.C. 2011)
(applying deception standard set forth in the Deception Policy
Statement); POM Wonderful, LLC v. FTC, 777 F.3d 478, 490, 500 (D.C.
Cir. 2015) (applying deception standard set forth in the Deception
Policy Statement and upholding administrative law judge
determination that `` `a significant minority' of `reasonable'
consumers `would interpret [the ad] to be claiming that drinking
eight ounces of POM Juice daily prevents or reduces the risk of
heart disease.' ''); FTC v. World Travel Vacation Brokers, Inc., 861
F.2d 1020, 1029 (7th Cir. 1988) (upholding lower court's
determination that `` `the $29 airfare promotion constituted the
type of misrepresentation upon which a reasonably prudent person
would rely' ''); Fed. Trade Comm'n, FTC Policy Statement on
Unfairness (appended to In re Int'l Harvester Co., 104 F.T.C. 949,
1070, 1073 (1984), (hereinafter ``Unfairness Policy Statement''),
https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-104/ftc_volume_decision_104__july_-_december_1984pages949_-_1088.pdf
(``To justify a finding of unfairness the [consumer] injury must . .
. be an injury that consumers themselves could not reasonably have
avoided.'').
\152\ Deception Policy Statement, 103 F.T.C. at 175, 179 (``For
instance, if a company markets a cure to the terminally ill, the
practice will be evaluated from the perspective of how it affects
the ordinary member of that group.'').
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One commenter argued, in the context of online movie ticket
purchases, that online convenience fees are reasonably avoidable
because consumers can purchase tickets in-person at a theater without
incurring the fees.\153\ Although a movie ticket is not a covered good
or service, similar convenience fees are common in the live-event
ticketing industry. The Commission disagrees with the commenter that
online convenience fees are reasonably avoidable: If a consumer must
pay a service or other fee in order to purchase tickets online (i.e.,
as part of the same transaction), then such a fee must be included in
total price when it appears online. In addition, using vague fee
descriptions, such as an unspecified ``convenience'' fee, may violate
Sec. Sec. 464.2(c) and 464.3 by failing to disclose clearly and
conspicuously, and by misrepresenting, the nature or purpose of fees or
the identity of the good or service for which fees or charges are
imposed.
---------------------------------------------------------------------------
\153\ FTC-2023-0064-3292 (National Association of Theatre
Owners).
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Another commenter argued that the definition of ``ancillary good or
service'' should ``not turn on whether the good or service is `offered'
to a consumer but whether it is `required to be purchased' by the
consumer.'' \154\ The commenter proposed that the Commission
[[Page 2083]]
incorporate the word ``mandatory'' into the definition of ``ancillary
good or service.'' The Commission disagrees with this proposed
modification. As discussed in the NPRM, an ancillary good or service
may be mandatory or optional. Whether the cost of the ancillary good or
service must be incorporated into total price turns on whether the good
or service is mandatory, which depends on the facts of a
transaction.\155\ For example, if a hotel offers a consumer the option
to purchase or decline a trip protection plan with a room reservation,
the plan would be an optional ancillary good or service because the
consumer has the option to decline the trip insurance. Conversely, a
hotel may require all guests to purchase a daily breakfast voucher. In
this case, the hotel guest cannot avoid being charged for the voucher,
and it is a mandatory ancillary good or service. If a business charges
payment processing fees that the consumer cannot reasonably avoid, such
fees would be for a mandatory ancillary good or service.
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\154\ FTC-2023-0064-3206 (Motor Vehicle Protection Products
Association et al.).
\155\ See infra section III.A.8.a.
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It is also possible that a good or service may be mandatory in one
transaction but optional in another.\156\ For example, if a hotel
allows a guest to purchase amenities such as bottled water or pool
towels for an additional fee but permits each guest to supply their own
water or pool towels, such amenities would be optional ancillary goods
or services. If, however, the hotel requires all patrons to use the
hotel-provided amenities for a fee, then the amenities would be
mandatory ancillary goods or services. Because ancillary goods or
services may be either mandatory or optional, the Commission declines
to add the word ``mandatory'' into the definition of ``ancillary good
or service.''
---------------------------------------------------------------------------
\156\ The Commission notes that several commenters
misinterpreted the definition of ``Ancillary Good or Service'' as
necessarily being optional. See, e.g., FTC-2023-0064-3145
(Association of National Advertisers, Inc. stated that ``Ancillary
fees, by definition, are not `mandatory' and should not be
characterized as `mandatory' fees subject to the proposed disclosure
requirements.''); FTC-2023-0064-1425 (Iowa Bankers Association
stated, ``While the definition of Total Price includes `mandatory'
Ancillary Goods or Services, the actual definition [of Ancillary
Good or Service] seems to speak to the discretionary aspect of this
term.''). The Commission reiterates that the rule text is clear:
Ancillary Goods or Services may be mandatory or optional, depending
on the facts of a particular transaction.
---------------------------------------------------------------------------
Some commenters also asked the Commission for additional guidance
as to when a good or service might be considered ancillary,
particularly if a good or service includes variable costs.\157\ The
Commission addresses pricing scenarios, including those pertaining to
contingent or variable fees, in section III.B.1.a. Another commenter
stated that the use of the word ancillary was unclear, because it
``implies a relationship between a primary object and the ancillary
object'' and does not include guidance concerning the primary
object.\158\ The Commission cannot identify in every possible situation
which good or service would be the ``primary object'' versus an
ancillary good or service because such a determination is fact-specific
and will depend on the goods or services offered by individual
businesses.
---------------------------------------------------------------------------
\157\ FTC-2023-0064-3172 (New Jersey Apartment Association);
FTC-2023-0064-3296 (Bay Area Apartment Association).
\158\ FTC-2023-0064-3206 (Motor Vehicle Protection Products
Association et al.).
---------------------------------------------------------------------------
For the foregoing reasons, and based on its review of the comments
received, the Commission adopts the definition of ``ancillary good or
service'' set forth in the NPRM. As discussed in section III.A.8, to
address comments and clarify the rule, the Commission modifies the
definition of total price to further clarify that under final Sec.
464.2(a), Businesses may exclude from total price fees or charges for
any optional ancillary good or service.
2. Business
Proposed Sec. 464.1(b) defined ``business'' as ``an individual,
corporation, partnership, association, or any other entity that offers
goods or services, including, but not limited to, online, in mobile
applications, and in physical locations.'' As part of the NPRM, the
Commission also proposed a carve-out for certain motor vehicle dealers
required to comply with the Combating Auto Retail Scams Trade
Regulation Rule (``CARS Rule''),\159\ and for the carve-out to become
effective upon the CARS Rule's effective date. The CARS Rule provides
for certain pricing disclosure requirements and prohibits
misrepresentations. Final Sec. 464.1 adopts the first sentence of the
proposed definition of ``business,'' but removes the carve-out for
motor vehicles required to comply with the CARS Rule because of the
final rule's narrowed scope.
---------------------------------------------------------------------------
\159\ 16 CFR part 463.
---------------------------------------------------------------------------
In the NPRM, the Commission sought input as to whether it should
modify the proposed definition of ``business'' to exclude certain
businesses, or whether it should add a definition of ``covered
business'' to narrow the businesses subject to the rule. The NPRM also
included several questions concerning how to define ``covered
business'' in the event the Commission opted to adopt such a
definition. The Commission received broad support for an industry-
neutral rule from individual commenters, consumer groups, and industry
organizations. Commenters cited the prevalence of hidden and deceptive
fees across a variety of industries and argued that broad exemptions
would create an uneven economic playing field and confuse consumers by
creating unpredictability across industries.\160\ Conversely, the
Commission received numerous comments asking that it narrow the rule to
specific industries, including, for example, live-event ticketing and
short-term lodging. Several commenters also urged the Commission to
exempt certain industries, arguing that the rule would pose challenges
for those industries or that those industries are already subject to
existing regulations.
---------------------------------------------------------------------------
\160\ See, e.g., FTC-2023-0064-2887 (Progressive Policy
Institute); FTC-2023-0064-3160 (Consumer Federation of America et
al.); FTC-2023-0064-3275 (Berkeley Center for Consumer Law &
Economic Justice et al.).
---------------------------------------------------------------------------
Following its review of the comments, the Commission narrows
application of the final rule to covered goods or services, those
involving live-event tickets or short-term lodging. While the comments
demonstrated that bait-and-switch pricing and misleading fees and
charges inflict harms on consumers across the economy, the rulemaking
record reveals longstanding concerns with these unfair and deceptive
practices within the live-event ticketing and short-term lodging
industries in particular. The final rule addresses these industries
first. The Commission addresses the definition of ``covered good or
service'' in section III.A.4.
The Commission received comments requesting modifications to
various definitions, including the definition of ``business,'' or
wholesale exemptions from the proposed rule's coverage related to
issues in particular industries, including auto dealers and service
providers,\161\ app-based delivery platforms,\162\ financial services
[[Page 2084]]
providers,\163\ franchised businesses,\164\ funeral service
providers,\165\ rental housing,\166\ restaurants and other food and
beverage service providers,\167\ telecommunications providers,\168\
vending machine retailers,\169\ movie theaters,\170\ health and fitness
centers,\171\ higher education institutions,\172\ recreational vehicles
and marine crafts,\173\ and towing companies.\174\ The Commission's
decision to narrow the final rule to covered goods or services renders
these requests inapplicable, and as such, the Commission does not
address them at this time.
---------------------------------------------------------------------------
\161\ E.g., FTC-2023-0064-3276 (Automotive Service Association);
FTC-2023-0064-3206 (Motor Vehicle Protection Products Association et
al.); FTC-2023-0064-3189 (National Automobile Dealers Association);
FTC-2023-0064-3121 (National Independent Automobile Dealers
Association).
\162\ E.g., FTC-2023-0064-3263 (Flex Association); FTC-2023-
0064-3202 (TechNet); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher
LLP).
\163\ E.g., FTC-2023-0064-3139 (American Bankers Association and
Consumer Bankers Association); FTC-2023-0064-2893 (America's Credit
Unions); FTC-2023-0064-3168 (American Financial Services
Association); FTC-2023-0064-3147 (American Land Title Association);
FTC-2023-0064-1425 (Iowa Bankers Association); FTC-2023-0064-1941
(Independent Bankers Association of Texas); FTC-2023-0064-3182
(Massachusetts Bankers Association); FTC-2023-0064-3119 (Money
Services Business Association, Inc.); FTC-2023-0064-3144 (Mortgage
Bankers Association); FTC-2023-0064-3127 (U.S. Chamber of Commerce).
\164\ E.g., FTC-2023-0064-3294 (International Franchise
Association); FTC-2023-0064-3141 (Coalition of Franchisee
Associations); FTC-2023-0064-3211 (American Association of
Franchisees & Dealers).
\165\ E.g., FTC-2023-0064-3210 (Service Corporation
International); FTC-2023-0064-3065 (Carriage Services, Inc.); FTC-
2023-0064-3130 (International Cemetery, Cremation & Funeral
Association).
\166\ E.g., FTC-2023-0064-3152 (Building Owners & Managers
Association et al.); FTC-2023-0064-3116 (Manufactured Housing
Institute); FTC-2023-0064-3133 (National Multifamily Housing Council
and National Apartment Association); FTC-2023-0064-3172 (New Jersey
Apartment Association); FTC-2023-0064-3289 (Zillow Group). As
explained in section III.A.4, the Commission does not intend to
cover rental housing providers in its definition of ``Covered Good
or Service'' at this time.
\167\ E.g., FTC-2023-0064-0264 (Individual Commenter); FTC-2023-
0064-2953 (Individual Commenter); FTC-2023-0064-2124 (Individual
Commenter); FTC-2023-0064-3022 (Individual Commenter); FTC-2023-
0064-3021 (Individual Commenter); FTC-2023-0064-3300 (National
Restaurant Association); FTC-2023-0064-3219 (Georgia Restaurant
Association); FTC-2023-0064-3180 (Independent Restaurant Coalition);
FTC-2023-0064-3078 (Washington Hospitality Association); FTC-2023-
0064-3080 (UNITE HERE); FTC-2023-0064-2918 (Elite Catering + Event
Professionals).
\168\ E.g., FTC-2023-0064-3234 (CTIA--The Wireless Association);
FTC-2023-0064-3295 (USTelecom--The Broadband Association); FTC-2023-
0064-2884 (NTCA--The Rural Broadband Association); FTC-2023-0064-
3143 (ACA Connects).
\169\ E.g., FTC-2023-0064-2919 (National Automatic Merchandising
Association).
\170\ E.g., FTC-2023-0064-3292 (National Association of Theatre
Owners).
\171\ E.g., FTC-2023-0064-3269 (IHRSA--The Health & Fitness
Association).
\172\ E.g., FTC-2023-0064-2906 (National Association of College
& University Business Officers et al.).
\173\ E.g., FTC-2023-0064-3249 (Marine Retailers Association of
the Americas); FTC-2023-0064-3251 (National RV Dealers Association).
\174\ Towing & Recovery Association of America, Inc. submitted a
late comment, which the Commission considered in its discretion and
makes available at https://www.ftc.gov/system/files/ftc_gov/pdf/R207011TRAAComment.pdf.
---------------------------------------------------------------------------
The Commission received comments from various third-party travel
service providers, including online travel agencies and travel
advisors, arguing that third-party travel intermediaries and advisors
are situated differently from underlying travel service providers and
may be subject to existing Department of Transportation (``DOT'')
regulations. Online travel agencies and travel advisors routinely
offer, display, or advertise prices of covered goods or services to
consumers, including businesses, which is conduct covered by the final
rule. One industry group representing travel advisors argued that
travel advisors do not set the price of underlying travel products and
rely on the sellers of such products to provide accurate pricing
information.\175\ The commenter requested that the Commission include a
``safe harbor mechanism'' to protect travel advisors who may rely on
inaccurate pricing information provided by sellers. The Commission
declines to exclude travel advisors from the rule or to provide them
with a safe harbor. The Commission addresses in section III.B.1.f
requests for immunity for third-party intermediaries.
---------------------------------------------------------------------------
\175\ FTC-2023-0064-3106 (American Society of Travel Advisors).
---------------------------------------------------------------------------
The Commission also received comments from online travel agencies
seeking an exemption from the rule for airfare or bundled products that
include airfare, arguing that the FTC Act does not confer jurisdiction
over airlines and, further, that DOT's Full Fare Advertising Rule
requires certain pricing disclosures for airfare.\176\ As noted in the
NPRM, the Commission's enforcement of its rule is subject to all
existing limitations of the law and the Commission cannot bring a
complaint to enforce its rule if doing so would exceed the Commission's
jurisdiction or constitutional limitations. The Commission declines to
exempt online travel agencies from the rule. However, the Commission
notes that, where there is overlap between this rule and the DOT's Full
Fare Advertising Rule on the treatment of government charges (i.e., in
the context of bundled travel packages, such as for airfare and hotels,
the Full Fare Advertising Rule requires the inclusion of government
taxes and fees in the total price), complying with both rules is
feasible. While this rule permits businesses to exclude government
charges from total price, it does not require them to do so.
---------------------------------------------------------------------------
\176\ See, e.g., FTC-2023-0064-3293 (Travel Technology
Association); FTC-2023-0064-3262 (Skyscanner).
---------------------------------------------------------------------------
The Commission received a comment from a gaming association seeking
an exemption for Federally recognized Indian Tribes and Tribal entities
as governments that act for the benefit of their tribal citizens.\177\
The commenter asserted that the Commission does not generally exercise
regulatory authority over such entities. The comment focused on Tribal
government casinos and explained that Tribal casino revenues are used
for essential Tribal government services and community development,
including education, healthcare services, housing, and infrastructure
development.\178\
---------------------------------------------------------------------------
\177\ FTC-2023-0064-3120 (Arizona Indian Gaming Association).
\178\ Id.
---------------------------------------------------------------------------
The Commission recognizes that some Tribal Government casinos and
other businesses may operate as hotels or live-event venues, or may
otherwise offer goods or services that fit within the definition of
covered good or service. Nevertheless, the Commission declines to
exempt Federally recognized Indian Tribes and Tribal entities from
coverage under the final rule. The FTC Act is a law of general
applicability that applies to such entities, as well as individual
members thereof.\179\ The Commission recognizes that, in some
instances, these entities may be organized in such a way that they are
outside FTC jurisdiction, but whether a given Tribe or Tribal business
is a corporation within the scope of the FTC Act is a fact-dependent
inquiry.\180\ The Commission is not aware of any evidence to suggest
that the final rule would disproportionately impact such entities or
that it would have any impact on their ability to continue to use
revenues for government services or community development.
---------------------------------------------------------------------------
\179\ See Fed. Power Comm'n v. Tuscarora Indian Nation, 362 U.S.
99, 116-17 (1960) (examining case law supporting the conclusion that
``a general statute in terms applying to all persons includes
Indians and their property interests''); FTC v. AMG Servs., Inc.,
No. 2:12-CV-00536-GMN, 2013 WL 7870795, at * 16-21 (D. Nev. July 16,
2013), R. & R. adopted, 2014 WL 910302 (D. Nev. Mar. 7, 2014)
(discussing the FTC Act's applicability to Federally recognized
Tribes and Tribal businesses).
\180\ See, e.g., AMG Servs., 2013 WL 7870795, at * 22-23
(holding there was a genuine dispute of material fact barring
summary judgment on question of whether Tribal chartered
corporations were for-profit corporations under the FTC Act).
---------------------------------------------------------------------------
The Commission received a comment seeking an exemption for all
franchised businesses. The commenter raised concerns that franchised
businesses may lose out on the benefit of national
[[Page 2085]]
advertising campaigns, asserting that ``[u]nder the Proposed Rule,
national marketing campaigns are only workable if all franchised
businesses in a franchise system adhere to the same pricing regime
(including pass-through fees), regardless of the economic demands of
the market in which they operate.'' \181\ The commenter also raised
concerns particular to restaurant franchises.\182\
---------------------------------------------------------------------------
\181\ FTC-2023-0064-3294 (International Franchise Association).
\182\ Id.
---------------------------------------------------------------------------
The Commission declines to exclude franchised businesses from the
final rule. As the commenter notes, franchised businesses include
hotels, restaurants, and fitness centers, among other businesses. The
Commission's addition of the ``covered good or service'' definition
narrows the rule's application to businesses that make available live-
event tickets or short-term lodging and moots the commenter's concerns
regarding restaurants or other franchises. Further, the final rule
applies equally to franchised and non-franchised businesses, including
hotels. The commenter has not provided any evidence to suggest that the
rule will disproportionately impact franchised businesses. As to the
commenter's contention that application of the rule will negatively
impact franchised businesses' ability to benefit from national
advertising campaigns, the Commission addresses commenters' questions
and concerns about national advertising campaigns in section III.B.1.d.
The commenter also urged the Commission to exclude from the rule
sellers of franchises (``franchisors'') subject to the FTC's Disclosure
Requirements and Prohibitions Concerning Franchising Rule (``Franchise
Rule''), arguing that the rule's total price requirement would
undermine the Franchise Rule's requirement to itemize specific
fees.\183\ Two commenters representing franchised businesses
(``franchisees''), however, urged the Commission to address ``the types
of fees that are charged to franchisees by franchisors,'' which are not
subject to the Franchise Rule.\184\
---------------------------------------------------------------------------
\183\ Id.
\184\ FTC-2023-0064-3141 (Coalition of Franchisee Associations);
FTC-2023-0064-3211 (American Association of Franchisees & Dealers).
---------------------------------------------------------------------------
The Franchise Rule, 16 CFR part 436, requires franchisors, in
connection with the offer or sale of a franchise, to provide
prospective franchisees with specific information about the fees and
charges necessary to begin operation of the franchised business,
including the estimated initial investment, expected fees, and other
expenses.\185\ Because the final rule is limited to prices for covered
goods or services and ancillary goods or services offered as part of
the same transaction, it would not apply to an offer or sale of a
franchise, including a hotel franchise. However, the Commission
reiterates that franchised businesses must comply with the final rule
in its entirety when selling covered goods or services.
---------------------------------------------------------------------------
\185\ 16 CFR 436.5; see also Fed. Trade Comm'n, Staff Guidance
on the Unlawfulness of Undisclosed Fees Imposed on Franchisees (July
2024), https://www.ftc.gov/system/files?file=ftc_gov/pdf/Franchise-Staff-Guidance.pdf.
---------------------------------------------------------------------------
One industry group recommended that the definition of ``business''
be limited to ``an individual, corporation, partnership, association,
or any other entity that offers goods or services to consumers,'' with
the purpose of exempting business-to-business transactions from the
scope of the final rule.\186\ Another industry group similarly
requested that the Commission exempt business-to-business transactions
from the scope of the final rule.\187\ As set forth in section
III.B.1.f, the Commission believes that application of the rule to
business-to-business transactions is appropriate and necessary to
provide the Commission with the tools necessary to seek redress from
businesses that violate the law. The final rule covers both business-
to-consumer transactions and business-to-business transactions, so no
modification to the definition of ``business'' is required.
---------------------------------------------------------------------------
\186\ FTC-2023-0064-3189 (National Automobile Dealers
Association).
\187\ FTC-2023-0064-3294 (International Franchise Association).
---------------------------------------------------------------------------
3. Clear(ly) and Conspicuous(ly)
Proposed Sec. 464.1(c) in the NPRM defined ``clear(ly) and
conspicuous(ly),'' consistent with longstanding FTC practice, as ``a
required disclosure that is difficult to miss (i.e., easily noticeable)
and easily understandable,'' and listed proposed specifications for
``visual disclosure[s],'' ``audible disclosure[s],'' and ``any
communication using an interactive electronic medium.'' Among other
specifications, the definition explained that the disclosure ``must be
made through the same means through which the communication is
presented.'' The proposed definition also provided that disclosures
``must use diction and syntax understandable to ordinary consumers and
must appear in each language in which the representation that requires
disclosure appears'' and ``must not be contradicted or mitigated by, or
inconsistent with, anything else in the communication.'' The proposed
definition further made clear that for ``representations or sales
practice[s]'' targeting specific audiences, ``such as children, older
adults, or the terminally ill, `ordinary consumers' includes reasonable
members of that group.'' The Commission finalizes the definition of
``clear(ly) and conspicuous(ly)'' proposed in Sec. 464.1(c) with minor
clarifications to harmonize the language and terminology used in this
provision with the terminology used in recent rulemakings and agency
guidance.
Specifically, proposed Sec. 464.1(c) provided that a required
disclosure must be ``difficult to miss (i.e., easily noticeable).''
Final Sec. 464.1 reverses the order of the phrases ``easily
noticeable'' and ``difficult to miss,'' and, thus, provides that a
required disclosure must be ``easily noticeable (i.e., difficult to
miss).'' Additionally, in final Sec. 464.1, the Commission adds
language to clarify that required disclosures must be ``easily
understandable by ordinary consumers.'' In final Sec. 464.1, the
Commission deletes reference to ``reasonable'' members of a
specifically targeted group. Each of these modifications is to comport
with the Commission's recently finalized Trade Regulation Rule on the
Use of Consumer Reviews and Testimonials and the Negative Option Rule,
as well as the Commission's Endorsement Guides.\188\ Moreover, as noted
in section II.B., the Commission examines conduct from the perspective
of a consumer acting reasonably under the circumstances, and if a
representation or practice affects or is directed primarily to a
particular group, the Commission examines reasonableness from the
perspective of an ordinary member of that group.\189\ In final Sec.
464.1, the Commission also includes ``mobile
[[Page 2086]]
applications'' within the definition of ``clear(ly) and
conspicuous(ly).'' This addition clarifies that ``mobile applications''
constitute interactive media devices under item (4) of the definition.
The Commission does not believe that these modifications substantively
alter the definition of ``clear(ly) and conspicuous(ly).''
---------------------------------------------------------------------------
\188\ See Promulgation of Trade Regulation Rule and Statement of
Basis and Purpose: Rule Concerning Recurring Subscriptions and Other
Negative Option Programs, 89 FR 90476 (Nov. 15, 2024), https://www.federalregister.gov/documents/2024/11/15/2024-25534/negative-option-rule (amending 16 CFR 425.4); 16 CFR part 465; Promulgation
of Trade Regulation Rule and Statement of Basis and Purpose: Rule on
the Use of Consumer Reviews and Testimonials, 89 FR 68034 (Oct. 22,
2024), https://www.federalregister.gov/documents/2024/08/22/2024-18519/trade-regulation-rule-on-the-use-of-consumer-reviews-and-testimonials; Guides Concerning Use of Endorsements and Testimonials
in Advertising, 16 CFR 255.0(f). The Commission notes that it
declines to adopt every modification adopted in the finalized Rule
on the Use of Consumer Reviews and Testimonials, based on the goals
of each rule and the comment record.
\189\ See Deception Policy Statement, 103 F.T.C. at 175, 177-82;
Unfairness Policy Statement, 104 F.T.C. at 1073; and other sources
cited supra notes 151-52.
---------------------------------------------------------------------------
The Commission declines to adopt several modifications to the
definition of ``clear(ly) and conspicuous(ly)'' proposed by a consumer
group. First, the commenter suggested that the Commission add ``limited
English proficient consumers'' to the list of specific audience-types
that a representation or sales practices may target in proposed Sec.
464.1(c)(8) to make clear that disclosures are understandable for both
English and limited-English speakers.\190\ The Commission does not
believe such a modification is necessary. While the definition includes
examples of specific audiences who may be targeted by particular sales
practices or representations, the use of ``such as'' is intended to
make clear these are examples, rather than an exhaustive list of
categories of consumers who may be targeted. The Commission further
notes that final Sec. 464.1 requires that the disclosures ``must
appear in each language in which the representation that requires the
disclosure appears.''
---------------------------------------------------------------------------
\190\ FTC-2023-0064-3160 (Consumer Federation of America et
al.).
---------------------------------------------------------------------------
The commenter also suggested that the Commission add language to
require that disclosures on interactive electronic media ``be capable
of being printed and saved in an easily readable format.'' \191\ The
Commission does not believe such a modification is necessary. The
definition considers the various types of media through which consumers
and businesses transact and, for all types of media, the definition
requires the disclosures to be ``easily noticeable (i.e., difficult to
miss).'' Thus, the Commission believes that the definition provides
businesses with flexibility to continue transacting effectively and
efficiently through different media, while ensuring sufficient consumer
understanding of required disclosures. The commenter further proposed
that the rule clarify that disclosures must be concise to discourage
businesses from ``listing hundreds of optional fees, identifying fees
that would not be applicable to the consumer, providing a description
that uses complex jargon, [or is] unnecessarily lengthy.'' \192\ The
definition already addresses these concerns by setting forth what
``clear(ly) and conspicuous(ly)'' means: using simple terms that
provide sufficient information about how businesses can formulate
disclosures that are easily understandable and noticeable to consumers.
The definition provides that disclosures ``must stand out from any
accompanying text or other visual elements'' to be ``easily noticed,
read, and understood.''
---------------------------------------------------------------------------
\191\ Id.
\192\ Id.
---------------------------------------------------------------------------
An automobile industry group urged the Commission to remove
``required disclosure'' from the definition of ``clear(ly) and
conspicuous(ly),'' arguing that ``the NPRM is silent on what those
required disclosures actually are.'' \193\ The Commission disagrees and
notes that the final rule modifies Sec. 464.2(a) through (c) to
provide greater clarity concerning what needs to be disclosed,
including total price and other information related to fees or charges
that were excluded from total price, and the nature, timing, and
prominence of those disclosures. Those modifications are discussed in
detail in section III.B.
---------------------------------------------------------------------------
\193\ FTC-2023-0064-3206 (Motor Vehicle Protection Products
Association et al.).
---------------------------------------------------------------------------
One commenter on behalf of members in the financial services
industry asserted that the definition of ``clear(ly) and
conspicuous(ly)'' may conflict with requirements of certain financial
services regulations, which do not generally require a certain text
size or placement, but do require that certain disclosures be made with
``equal prominence and in close proximity to certain trigger terms.''
\194\ The Commission does not believe that financial services
regulations are implicated by the final rule's more narrow application
to covered goods or services. Nonetheless, the Commission notes that
the definition does not require a particular text size or placement;
the definition states that ``clear(ly) and conspicuous(ly)'' requires a
visual disclosure to ``stand out from any accompanying text or other
visual elements so that it is easily noticed, read, and understood.''
---------------------------------------------------------------------------
\194\ FTC-2023-0064-1425 (Iowa Bankers Association).
---------------------------------------------------------------------------
A commenter on behalf of marketing and advertising businesses
criticized the proposed definition of ``clear(ly) and conspicuous(ly)''
as imposing ``prescriptive visual and audio disclosure[s] . . . that
may not cleanly map onto all advertising mediums'' and argued that a
business's compliance obligations may not be clear if the business
relies on advertising mediums not mentioned in the definition.\195\ The
commenter urged the Commission to allow for sufficient flexibility ``to
better accommodate current and future advertising mediums that may not
allow for the contemplated disclosures,'' in particular to make it
easier for small businesses to comply with the rule.\196\ The commenter
did not provide any examples of advertising media that would make it
difficult to comply with the rule and did not suggest alternative
language. Similarly, a commenter representing app-based delivery
platforms noted the limited space for disclosures on delivery platforms
and asserted that the rule lacked clarity as to how such platforms
should comply.\197\
---------------------------------------------------------------------------
\195\ FTC-2023-0064-3145 (Association of National Advertisers,
Inc.).
\196\ Id.
\197\ FTC-2023-0064-3263 (Flex Association).
---------------------------------------------------------------------------
The Commission believes that the definition of ``clear(ly) and
conspicuous(ly)'' provides basic, common-sense, and flexible principles
to address current and future advertising media. For example, the
definition requires that visual disclosures be in a size and font that
consumers will easily notice and not be obscured by other text and that
audible disclosures be at a volume, speed, and cadence that consumers
will easily understand. In keeping with longstanding Commission
interpretation and guidance, the definition does not mandate specific
fonts, text-size, or volume, or otherwise impose a one-size-fits-all
approach. Instead, it provides substantial flexibility to businesses in
meeting the rule's disclosure requirements so long as consumers take
away an accurate understanding of the disclosure. The Commission has
published multiple resources to assist businesses in ensuring that
disclosures are clear and conspicuous, including a guide specifically
geared toward digital and mobile advertising.\198\
---------------------------------------------------------------------------
\198\ See Fed. Trade Comm'n, Bureau of Consumer Protection
Business Guidance, .com Disclosures: How to Make Effective
Disclosures in Digital Advertising 7, 18 (Mar. 2013), https://www.ftc.gov/system/files/documents/plain-language/bus41-dot-com-disclosures-information-about-online-advertising.pdf.
---------------------------------------------------------------------------
4. Covered Good or Service
In the NPRM, the Commission solicited comment on whether it should
narrow the businesses covered by the rule to particular industries or
to covered businesses, and if so, how to define covered
businesses.\199\ The final rule includes a definition for ``covered
good or service'' to include: (1) Live-event tickets; or (2) Short-term
lodging, including temporary sleeping accommodations at a hotel, motel,
inn, short-term rental, vacation rental or other place of lodging.
Under Sec. 464.2(a),
[[Page 2087]]
the final rule requires businesses that offer, display, or advertise
any price of a covered good or service to clearly and conspicuously
disclose the total price. In addition, Sec. 464.3 of the final rule
prohibits businesses that offer, display, or advertise a covered good
or service from misrepresenting any fees or charges.
---------------------------------------------------------------------------
\199\ NPRM, 88 FR 77481, Question 14.
---------------------------------------------------------------------------
The Commission received comments encouraging it to adopt an
industry-neutral rule and urging it not to limit the rule's application
to particular industries, as well as comments conversely urging it to
limit the rule to live-event ticketing and short-term lodging
industries. One advocacy group argued that narrowing application of the
final rule to a subset of industries would ``create an unlevel playing
field'' and alter competitive incentives.\200\ Other commenters argued
that hidden or deceptive fees are present across industries and often
impact vulnerable populations.\201\ Several commenters did not
specifically address the Commission's question regarding whether to add
a definition of ``covered business'' or how to define ``covered
business,'' but instead submitted comments highlighting unfair and
deceptive pricing practices in certain industries, and encouraging the
Commission to adopt a final rule applicable to those industries. Those
included comments concerning the motor vehicle industry; \202\ delivery
applications; \203\ the financial services industry; \204\ the
restaurant industry; \205\ the movie theater industry; \206\ tax
preparation services; \207\ and the health care industry.\208\
---------------------------------------------------------------------------
\200\ FTC-2023-0064-2887 (Progressive Policy Institute).
\201\ FTC-2023-0064-1519 (NYC Consumer and Worker Protection
argued that ``[c]onsumers deserve every business to be transparent
and fair about prices.''); FTC-2023-0064 (Berkeley Law stated that
``[r]estricting the Rule to particular industries would exclude some
of the most critical sectors that low-income people especially rely
on,'' including ``the rental housing market, tax preparation
services, payday lenders, and gift card merchants''); FTC-2023-0064-
3282 (NCLC highlighted hidden or deceptive fees in ``businesses that
offer credit, lease, or savings products'')
\202\ See, e.g., FTC-2023-0064-3160 (Consumer Federation of
America et al.); FTC-2023-0064-3270 (Consumer Federation of America,
National Consumer Law Center, National Association of Consumer
Advocates); see also FTC-2023-0064-2853 (Performance Auto Inc., an
individual car dealership, supported application of the rule to car
dealers.).
\203\ See, e.g., FTC-2023-0064-1939 (Tzedek DC).
\204\ See, e.g., FTC-2023-0064-3160 (Consumer Federation of
America et al.); FTC-2023-0064-3275 (Berkeley Center for Consumer
Law & Economic Justice et al.); see also FTC-2023-0064-0199 (``I
don't understand why I have to pay to have my credit card bill
mailed to me . . . .''); FTC-2023-0064-0258 (``I checked our account
and discovered that they had charged $10.00 for maintenance
fees.''); FTC-2023-0064-0418 (``Even credit unions are charging
insane fees it is bleeding us dry if we are broke already why are we
getting hit with fees for being poor''); FTC-2023-0064-0396 (``My
son is on SSI, and his bank charges him fees when his account goes
below $100! . . . How does this make sense? Banks should not have
fees like this. It [is] penalizing the poorest people!''); FTC-2023-
0064-0425 (``What bothers me is that my bank charges me $35 for
every overdraft!! I find that excessive! It's a lot of money,
especially when you don't have enough in the first place. It's like
being punished for being poor.''); FTC-2023-0064-0762 (``We have and
continue to pay unnecessary costs for services especially personal
loans and credit card debt. This makes payments for these loans much
more of a hardship than the initial being in need of the card or
loans was in the first place.'').
\205\ See, e.g., FTC-2023-0064-3248 (DC Jobs With Justice on
behalf of Fair Price, Fair Wage Coalition encouraged the Commission
to maintain an industry-neutral rule applicable to the restaurant
industry); FTC-2023-0064-2885 (AARP commented that many consumers
``feel deceived when faced with an unexpected mandatory charge,''
such as ``service fees,'' ``living wage fees,'' or ``kitchen fees,''
and ``would prefer these costs be incorporated into the price of
food so that they better understand restaurants' costs upfront.'');
FTC-2023-0064-0103 (Individual Commenter stated: ``[R]estaurants are
adding surcharges [for] providing health insurance, or to make sure
that kitchen crew receives a tip. But these are existing operating
costs that can and should be factored into the price. . . . On at
least a couple occasions, the add-on fee wasn't even disclosed until
the check.''); FTC-2023-0064-0119 (Individual Commenter stated:
``Fees of approximately 5-20% are often added to restaurant bills. .
. . They are often written in small font in inconspicuous places on
the menu or past blank space on websites. It's often unclear where
these additional fees are going and should be simply incorporated
into the menu prices.''); FTC-2023-0064-0120 (Individual Commenter
stated: ``Now restaurants are adding service fees instead of
increasing food price. I want to buy goods and services, I want to
know the full price, with all the extra fees and taxes before, not
after selecting a goods or service.''); FTC-2023-0064-0152)
(Individual Commenter stated: ``Tipping since covid is crazy now
too--and now these add on fees appear to be creeping into
restaurants. A local pizza restaurant added a 20% `gratuity fee' on
the bill--this was not a tip but an additional charge for `business
costs' and does not go to employees.''); FTC-2023-0064-0065
(Individual Commenter stated: ``A number of restaurants here in
Chicago are now adding surcharges that are only disclosed after you
get the check, or they are disclosed in small print on the menu,
which effectively makes the prices displayed on the menu
deceptive.''); FTC-2023-0064-0052 (Individual Commenter stated:
``Small businesses, particularly restaurants, have grown their use
of the type of non-transparent pricing practices that this rule aims
to address . . ., such as the inclusion in bills of various fees
that cannot be avoided (and that therefore should be part of the
total price)'').
\206\ See, e.g., FTC-2026-0064-1303 (Individual Commenter
stated: ``Just last night I tried to buy movie tickets (from the
movie theater's own app no less!) but the fees added 25% more to the
cost of the ticket! Ten dollars in fees on an app that the big movie
chain runs on its own!''); FTC-2023-0064-1469 (Individual Commenter
stated: ``I'm sick of paying for `convenience fees' when purchasing
tickets online (to live events and even the local movie theater),
even though there is no other way to purchase them.''); see also
FTC-2023-0064-3104 (Truth in Advertising, Inc.) (highlighting class
action lawsuits alleging failure to disclose the total cost of movie
ticket prices, inclusive of fees, in violation of New York State
law).
\207\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for
Consumer Law & Economic Justice et al.).
\208\ See, e.g., FTC-2023-0064-3191 (Community Catalyst et al.).
---------------------------------------------------------------------------
Several commenters specifically urged the Commission to ensure that
the rental housing industry would be subject to the final rule,
including in any definition of ``covered business,'' to mitigate unfair
or deceptive fees imposed on renters.\209\ The Commission also received
numerous comments from individual consumers, consumer and policy
organizations, elected officials, legal service providers, and housing
advocates highlighting unfair and deceptive fees in the rental housing
industry.\210\ Conversely, advocates from
[[Page 2088]]
the rental housing industry urged the Commission to exempt rental
housing providers from any definition of ``covered business.'' \211\ A
rental housing advertising platform urged the Commission to adopt a
definition of ``covered business'' that excludes third-party
advertising platforms, arguing that third-party platforms do not direct
pricing and ``are not best positioned to meet the requirements of the
proposed rule.'' \212\
---------------------------------------------------------------------------
\209\ FTC-2023-0064-2888 (Housing Policy Clinic, University of
Texas School of Law stated, ``it is essential for the rule to cover
the rental housing industry in order to mitigate the harmful impacts
of unfair and deceptive fees on renters.''); FTC-2023-0064-2858
(U.S. House of Representatives, Rep. Maxwell Alejandro Frost, Rep.
Jimmy Gomez, Rep. Barbara Lee, Rep. Rashida Tlaib, Rep. Kevin
Mullin, Rep. Dwight Evans, Rep. Judy Chu, Rep. Greg Casar, Rep. Dan
Goldman, and Rep. Salud Carbajal encouraged an industry-neutral rule
but urged the Commission at minimum to include live-event ticketing,
short-term lodging, and the rental housing industries in the final
rule.); FTC-2023-0064-3275 (Berkeley Center for Consumer Law &
Economic Justice et al. commented that: ``Exempting landlords from
the Rule as other commenters have proposed would deprive the
Commission of a critical tool to challenge purveyors of junk fees
charged in connection with a basic necessity of life, one that is
disproportionately relevant to low-income consumers.'').
\210\ See, e.g., FTC-2023-0064-3218 (National Consumer Law
Center collected consumer comments highlighting: ``a `technology
fee' addendum that adds 1% fee of total rent on top of rental
cost''; ``an extra $255 in mandatory fees, for services I don't even
want''; and ``water, sewer, and garbage fees would be charged over
and above the base rent we agreed to . . . [that] could add as much
as $250 extra per month to our rent.''); FTC-2023-0064-3271 (U.S.
Senator Amy Klobuchar commented discussing a hearing conducted
concerning rental housing competition and noting that: ``[R]enters
are often hit with numerous junk fees that are only disclosed to
them when signing a lease--frequently after the renter has already
given notice to end a prior lease. . . . As a result, renters
struggle to meaningfully compare the cost of various housing
options.''); FTC-2023-0064-2888 (Housing Policy Clinic, University
of Texas School of Law commented: ``This lack of transparency robs
tenants of their opportunity to fairly participate in comparison
shopping in the rental housing market and can seriously disrupt
their financial well-being and housing stability.''); FTC-2023-0064-
3218 (National Consumer Law Center commented: ``With respect to the
rental housing market, the proposed rule would benefit consumers and
competition. By requiring disclosure of the actual cost of an
apartment, the rule would help renters to comparison shop and enable
them to find housing that fits their budget.''); FTC-2023-0064-3225
(CED Law described undisclosed fees experienced by its clients and
stated: ``Up front disclosure of all mandatory fees and accurate
representation of all fees charged would go a long way towards
ensuring low income renters like those we represent in Colorado
understand what their monthly housing expenses will be before being
locked into a lease agreement.''); FTC-2023-0064-0146 (Individual
Commenter stated they pay fees including for trash, electricity, and
``some other junk fees'' and argued that rental providers ``should
be forced to disclose all fees before lease signing and never be
able to add fees after the lease has been signed.''); FTC-2023-0064-
0157 (Individual Commenter highlighted mandatory added fees and
charges not disclosed in listed rental prices and stated:
``Landlords should not be allowed to force tenants into paying these
fees with no opt out or if the fees are allowed, then the landlord
must add that to the total monthly rent in advertisements so
prospective tenants have an accurate scope of what the real monthly
costs are.''); FTC-2023-0064-0229 (Individual Commenter described an
apartment company with fees: ``[I]ncluding a $20 mos. fee for
package delivery. It's a mandatory add-on. Many people do not get
packages. Including myself.''); FTC-2023-0064-0923 (Individual
Commenter stated their rental ``requires a number of fixed, non-
negotiable mandatory fees. . . . In my opinion, these fees allow the
company to advertise a lower monthly rental rate, intentionally
making it difficult for a prospective tenant to comparison shop and
compare rents from different organizations.'').
\211\ See, e.g., FTC-2023-0064-3172 (New Jersey Apartment
Association supported the rule's inclusion of a definition of
Covered Business and asked that rental housing providers be excluded
from the scope of Covered Business); see also FTC-2023-0064-3133
(National Multifamily Housing Council and National Apartment
Association).
\212\ FTC-2023-0064-3289 (Zillow Group).
---------------------------------------------------------------------------
On the other hand, the Commission also received comments in support
of a narrow definition of ``covered business'' limited to the live-
event ticketing and short-term lodging industries, including from
members of those industries.\213\ The U.S. Chamber of Commerce
recommended limiting the definition of covered businesses to ``the
live-event ticketing and/or short-term lodging industries,'' arguing
that unique aspects of these markets, including a robust secondary
market for live-event tickets and pressures on third-party lodging
intermediaries ``to advertise the lowest price to consumers to optimize
search outcomes,'' have shaped FTC research on all-in pricing and
appropriate remedies.\214\ One academic commenter likewise recommended
a definition of ``covered business'' limited to live-event ticketing
and short-term lodging, stating that these industries have been subject
to extensive research showing ``their use of across-the-board drip
pricing to be harmful.'' \215\
---------------------------------------------------------------------------
\213\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce);
FTC-2023-0064-2891 (Mary Sullivan, George Washington University,
Regulatory Studies Center); FTC-2023-0064-3233 (NCTA--The internet &
Television Association); see also FTC-2023-0064-3300 (National
Restaurant Association urged the Commission to exclude small
restaurants from a definition of ``Covered Business'').
\214\ FTC-2023-0064-3127 (U.S. Chamber of Commerce).
\215\ FTC-2023-0064-2891 (Mary Sullivan, George Washington
University, Regulatory Studies Center also stated that a rule
focused on the short-term lodging and live-event ticketing
industries would ``increase the chance of [the rule's] success'' and
provide well-defined limits for those Covered Businesses.)
---------------------------------------------------------------------------
Commenters from the live-event ticketing industry supported a rule
applicable to their industry, emphasizing that a total price
requirement will aid consumers and businesses alike if applied across
the entire industry.\216\ For example, TickPick, a secondary ticket
marketplace, commented that it already provides consumers with all-in
pricing and supports ``eliminating drip pricing from the live-event
ticketing industry,'' arguing that ``widespread use of hidden and/or
misleading fees harms consumers and market competition.'' \217\ StubHub
similarly commented that it ``strongly supports efforts to increase
price transparency for consumers nationwide with the federal adoption
of all-in pricing'' in the live-event ticketing industry. According to
StubHub, in 2014, it decided to display the all-in price to consumers
in the hopes of encouraging the remainder of the industry to follow
suit; however, it ``had no choice but to revert to its former pricing
display,'' which used dripped fees, because other platforms continued
to rely on drip pricing, making StubHub's all-in prices appear higher
than other platforms.\218\ Live Nation and its subsidiary, Ticketmaster
North America, likewise expressed concern that, absent a nationwide
rulemaking to implement all-in pricing, ``the current market realities
present barriers to implementing all-in pricing,'' because adopting
all-in pricing ``absent a mandate creates a first-mover disadvantage.''
\219\ Live Nation stated that the rule would ``increase pricing
transparency for fans and support competition in the ticketing
industry.'' \220\
---------------------------------------------------------------------------
\216\ See, e.g., FTC-2023-0064-3212 (TickPick, LLC stated that
it ``supports the Commission using its authority under Section 18 of
the FTC Act to address unfair and deceptive acts or practices
involving hidden and misleading fees.''); FTC-2023-0064-3266
(StubHub, Inc. commented that it ``strongly supports efforts to
increase price transparency for consumers nationwide with the
federal adoption of all-in pricing.''); FTC-2023-0064-3105
(Charleston Symphony commented: ``[R]equiring sellers to disclose
the total price clearly and conspicuously[ ] addresses a pressing
issue. . . . Predatory practices in the secondary ticket sales
market pose a significant threat to artists, venues, audiences, and
the future of nonprofit arts organizations, impacting the integrity
of the ticket-buying process and eroding audience confidence.'');
FTC-2023-0064-3122 (Vivid Seats stated that it ``supports additional
consumer disclosures, including all-in pricing,'' but the rule
should ``apply equally across all parts of the live-events ticketing
industry,'' so consumers can compare prices and businesses that
display total prices will not be at a competitive disadvantage.);
FTC-2023-0064-3241 (National Association of Ticket Brokers submitted
a comment supporting all-in pricing, but noting that it would only
work if ``(i) it was required of every ticket seller and (ii) there
was rigorous and expeditious enforcement.''); FTC-2023-0064-3306
(Live Nation Entertainment and its subsidiary Ticketmaster North
America commented that they ``support[ ] a definition of all-in
pricing that requires the first price for a live-event ticket shown
to consumers to be the price ultimately charged at checkout
(exclusive of state and local taxes and optional add-ons).''); see
also FTC-2023-0064-3264 (Mark J. Perry, Ph.D., Professor Emeritus of
Economics at University of Michigan-Flint and Senior Fellow Emeritus
at the American Enterprise Institute, ``urge[d] the FTC to ensure
that any rule requiring all-in pricing in live events apply equally
to all market participants.''). The Commission addresses other
comments and factual scenarios raised by commenters concerning live-
event ticketing, including those concerning ticket service fees, in
section III.B.1.b.
\217\ FTC-2023-0064-3212 (TickPick, LLC).
\218\ FTC-2023-0064-3212 (StubHub).
\219\ FTC-2023-0064-3306 (Live Nation Entertainment).
\220\ Id.
---------------------------------------------------------------------------
The Commission also received support from the representatives of
the short-term lodging industry for the rule's application to that
industry. The American Society of Travel Advisors commented that ``the
rule as proposed would greatly benefit consumers of hotel and other
short-term lodging services'' and applauded the proposed rule's
prohibition on misleading fees.\221\ The American Hotel & Lodging
Association also expressed support for implementation of clear total
price requirements and encouraged the Commission to ``ensure that any
final rule it promulgates . . . apply broadly to all industry
participants,'' including intermediaries such as online travel
agencies, short-term rental platforms, and metasearch sites.\222\ The
American Gaming Association, a trade group representing the casino
industry, contended that fees are adequately disclosed and provide
value to consumers, but stated that, if applied to the lodging
industry, the rule should be applied ``equitably across the industry. .
. . including search engines, online travel agencies, and other third-
party vendors.'' \223\
---------------------------------------------------------------------------
\221\ FTC-2023-0064-3106 (American Society of Travel Advisors).
\222\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
\223\ FTC-2023-0064-2886 (American Gaming Association). As
discussed in section II, bait-and-switch pricing, including drip
pricing, harms consumers even when charges are subsequently
disclosed.
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[[Page 2089]]
As described in section II, the Commission has determined, in its
discretion, to focus this final rule on the live-event ticketing and
short-term lodging industries. The Commission recognizes that
substantial evidence exists to support a finding of the prevalence of
bait-and-switch pricing and misleading fees throughout the economy;
nevertheless, the Commission elects to use its rulemaking authority
incrementally by first combatting these unfair and deceptive practices
in the two industries in which the Commission first began evaluating
drip pricing and that have a history of bait-and-switch pricing tactics
and misleading fees. Indeed, commenters representing the live-event
ticket and short-term lodging industries recognized the need for the
Commission's rulemaking and generally supported the rule's application
to those industries.
As described in this section, the Commission received comments
supporting a definition of ``covered business'' that is limited to the
live-event ticketing and short-term lodging industries.\224\ The
Commission also received comments emphasizing the need for a level
playing field among businesses and allowing consumers to comparison
shop.\225\ For reasons described herein, the final rule applies to a
defined set of covered goods or services, rather than to covered
businesses. Because some businesses in the live-event ticketing and
short-term lodging industries provide goods or services outside of
those industries, a narrowing of the businesses covered by the rule
rather than a narrowing of the goods or services covered by the rule,
might unintentionally create an uneven playing field. As a result, the
Commission instead narrows the rule to the defined covered goods and
services of live-event tickets and short-term lodging. The Commission
notes that the rule also applies to ancillary goods or services,
defined as additional goods or services offered to consumers as part of
the same transaction.
---------------------------------------------------------------------------
\224\ See, e.g., FTC-2023-0064-3212 (TickPick, LLC); FTC-2023-
0064-3106 (American Society of Travel Advisors).
\225\ See, e.g., FTC-2023-0064-2886 (American Gaming
Association); FTC-2023-0064-3106 (American Society of Travel
Advisors); FTC-2023-0064-3266 (StubHub, Inc.); FTC-2023-0064-3264
(Mark J. Perry, Ph.D., Professor Emeritus of Economics at University
of Michigan-Flint and Senior Fellow Emeritus at the American
Enterprise Institute); FTC-2023-0064-3162 (BBB National Programs,
Inc.); FTC-2023-0064-1000 (Individual Commenter).
---------------------------------------------------------------------------
The NPRM also solicited comment as to how to define businesses that
offer either live-event ticketing or short-term lodging, if the final
rule were narrowed to covered businesses.\226\ A third-party ticketing
marketplace commented that it ``supports inclusion of the live-event
ticketing industry as a `covered business' and is comfortable with the
proposed definition of `businesses in the live-event ticketing industry
. . . .' '' \227\ The final rule's inclusion of live-event tickets in
the definition of ``covered good or service'' is consistent with the
proposed definition of covered business in the NPRM.
---------------------------------------------------------------------------
\226\ NPRM, 88 FR 77481, Question 14(a)(i) (proposing to define
Businesses in the live-event ticketing as ``any Business that makes
live-event ticketing available, directly or indirectly, to the
general public''); Question 14(a)(ii) (proposing to define Business
in the short-term lodging industry as ``any Business that makes
temporary sleeping accommodations available, directly or indirectly,
to the general public'').
\227\ FTC-2023-0064-3212 (TickPick, LLC).
---------------------------------------------------------------------------
With respect to the proposed definition of the short-term lodging
industry, the American Hotel & Lodging Association commented that the
Commission should define short-term lodging as: ``a hotel, motel, inn,
short-term rental, or other place of lodging that advertises at a price
that is a nightly, hourly, or weekly rate.'' \228\ One commenter
representing the rental housing industry expressed concern that the
proposed definition of short-term lodging ``could mean different things
to different people, and that could be (mis)applied to rental housing
industry,'' including, for example, where an apartment community
provides temporary corporate housing subject to the same leasing
agreements as longer-term tenants or where a resident extends a lease
agreement for a few weeks or months.\229\ Conversely, another commenter
representing the rental housing industry explained that for rental
housing, ``the landlord-tenant relationship involves an ongoing
contractual relationship, typically at least a year-long commitment.''
\230\
---------------------------------------------------------------------------
\228\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
\229\ FTC-2023-0064-3296 (Bay Area Apartment Association).
\230\ FTC-2023-0064-3133 (National Multifamily Housing Council
and National Apartment Association).
---------------------------------------------------------------------------
The final rule incorporates portions of the American Hotel &
Lodging Association's suggested definition of short-term lodging and
the Commission modifies the rule text proposed in the NPRM to refer to
hotels, motels, inns, short-term rentals, vacation rentals, or other
places of lodging. The Commission declines to limit the definition of
short-term lodging based on the advertised payment period or length of
stay. In some instances, short-term lodging may include home shares and
vacation rentals, such as through platforms like Airbnb or VRBO, that
offer short-term rental accommodations for durations as long as several
months. The Commission clarifies that, with the addition of a
definition for ``covered good or service,'' it does not intend to cover
rental housing providers at this time. When a rental housing provider
offers a short-term extension on a lease, the extension typically would
not be considered short-term lodging under the rule. Similarly, an
apartment community that offers temporary corporate housing subject to
the same conditions as its long-term leases typically would not be
considered short-term lodging under the rule. On the other hand, a
hotel that offers discounted extended stays typically would be
considered short-term lodging under the rule. Whether any particular
good or service is short-term lodging within the rule's definition of
``covered good or service'' will depend on the specific factual
circumstances. In addition, the Commission may provide additional
business guidance to address nuanced pricing scenarios that may arise.
5. Government Charges
Proposed Sec. 464.1(d) in the NPRM defined ``government charges''
as ``all fees or charges imposed on consumers by a Federal, State, or
local government agency, unit, or department,'' and specified that
government charges did not encompass fees or charges that the
government imposes on a business and that a business chooses to pass on
to consumers. The proposed rule permitted businesses to exclude
government charges from total price. The Commission received comments
supporting and critiquing the proposed rule's treatment of government
charges. Final Sec. 464.1 adopts this provision with minor
modifications to add ``Tribal'' fees and charges and to clarify that
the definition of ``government charges'' includes ``the fees or charges
imposed on the transaction by a Federal, State, Tribal, or local
government agency, unit, or department.''
One consumer group supported the NPRM's exclusion of fees or
charges that businesses choose to pass onto consumers from the
definition of ``government charges'' (thus requiring their inclusion in
total price), and expressed concern that businesses may inflate such
fees to pad profits, rather than accurately reflect amounts paid in
fees or charges to the government.\231\ Two academic commenters
similarly supported the distinction between fees
[[Page 2090]]
or charges imposed on consumers and those that a business chooses to
pass onto consumers, stating that the latter should be incorporated
into total price to avoid creating a loophole that would undermine the
rule.\232\
---------------------------------------------------------------------------
\231\ FTC-2023-0064-3290 (U.S. Public Interest Research Group
Education Fund).
\232\ FTC-2023-0064-1467 (Richard J. Peltz-Steele, Chancellor
Professor, University of Massachusetts Law School); FTC-2023-0064-
1294 (James J. Angel, Ph.D., CFP, CFA, Professor, Georgetown
University, McDonough School of Business).
---------------------------------------------------------------------------
On the other hand, the Commission received several comments
expressing concern over the NPRM's definition of ``government charges''
as including only those charges ``imposed on consumers.'' Two
commenters argued that the proposed definition failed to consider
nuances in tax law across States and localities. They pointed out, for
example, that several State laws formally impose sales tax on
businesses, rather than on consumers.\233\ Under the proposed
definition, sales tax in those States would need to be included in
total price, while sales tax in other States could be excluded from
total price. These and other commenters also noted that many States
prohibit the inclusion of sales tax in total price, which would result
in direct conflict between the proposed rule and State laws that
formally impose sales tax on businesses.\234\ Relatedly, one tax policy
organization noted variation in how State laws treat hotel occupancy
taxes, with most State laws defining hotel occupancy taxes as imposed
on the hotel operator and just six States defining hotel occupancy
taxes as imposed on the consumer. Under the proposed definition of
``government charges,'' the commenter stated, hotel operators in all
but six States would be required to include occupancy taxes in total
price.\235\ As such, these commenters argued that the proposed
definition is unworkable and noted that businesses will spend
considerable time and resources in understanding the legal incidence of
Federal, State, and local taxes.\236\
---------------------------------------------------------------------------
\233\ FTC-2023-0064-3126 (Tax Foundation stated: ``In several
states, at least including Alabama, Arizona, Hawaii, and New Mexico,
and possibly California, the state sales tax would not meet the
Rule's definition of a government charge, since its legal incidence
(per statute, regulation, or court determination) is on the
seller.''); FTC-2023-0064-3258 (National Taxpayers Union Foundation
commented: ``Arizona, California, Hawaii, and New Mexico structure
their sales taxes as taxes on the business, as measured by its gross
receipts.'').
\234\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce);
FTC-2023-0064-3258 (National Taxpayers Union Foundation stated,
``[n]early all states with sales tax prohibit retailers from
including sales taxes, including taxes collected from both suppliers
and consumers, in the sales price,'' and cited to states including
Alabama, Florida, Georgia, Indiana, Maryland, Massachusetts,
Oklahoma, Pennsylvania, and others.); FTC-2023-0064-3126 (Tax
Foundation stated, ``many states prohibit sales tax-inclusive
pricing,'' highlighting Alabama as a State in which the legal
incidence of sales tax on the seller may ``obligate a vendor, per
the proposed Rule, to list the sales tax-inclusive price if selling
to an Alabama resident--which not only presupposes advance knowledge
of the consumer's location, but forces the vendor to disregard
Alabama's requirement that the list price not include sales tax.'').
\235\ FTC-2023-0064-3258 (National Taxpayers Union Foundation).
\236\ Id.
---------------------------------------------------------------------------
Industry groups also urged the Commission to modify the definition
of ``government charges'' to include charges and fees that the
government expressly permits, and sometimes requires, businesses to
pass through to consumers.\237\ One commenter noted that businesses may
be required to ``unfairly absorb'' the cost of these government
charges.\238\ Commenters also expressed concern that incorporating
pass-through taxes that consumers understand and have come to expect
into total price would obscure government fees, resulting in less
pricing transparency, because consumers will not understand that the
additional costs stem from the imposition of government fees.\239\
Relatedly, two industry groups argued that consumers should be made
aware through transparent pricing that additional costs stem from
government taxes and fees, rather than requiring businesses to include
them in total price.\240\
---------------------------------------------------------------------------
\237\ See, e.g., FTC-2023-0064-3100 (Civitas Advisors, Inc.);
FTC-2023-0064-3217 (Bowling Proprietors' Association of America);
FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3233
(NCTA--The internet & Television Association).
\238\ FTC-2023-0064-3234 (CTIA--The Wireless Association).
\239\ See, e.g., id.; FTC-2023-0064-3217 (Bowling Proprietors'
Association of America); FTC-2023-0064-3295 (USTelecom--The
Broadband Association).
\240\ FTC-2023-0064-3233 (NCTA--The internet & Television
Association); FTC-2023-0064-3127 (U.S. Chamber of Commerce).
---------------------------------------------------------------------------
After considering the comments, the Commission modifies the
definition of ``government charges'' from those fees or charges
``imposed on consumers'' to those ``imposed on the transaction.'' As
such, it eliminates the potential distinction between fees and charges
for the transaction a government imposes directly on consumers and
those imposed on businesses. Businesses may not exclude from total
price fees and charges that are wholly distinct from the relevant
transaction, such as a proportional share of a business's income or
property taxes, because they would not be government charges that were
``imposed on the transaction by a Federal, State, Tribal, or local
government agency, unit, or department.''
An online travel agency submitted a comment identifying concerns
about a potential conflict between the definition of ``government
charges'' and DOT's Full Fare Advertising Rule, 14 CFR 399.84, which
requires tax-inclusive pricing for certain travel products, including
airline tickets and bundled vacation packages (e.g., airline tickets
and hotel stays purchased together).\241\ Specifically, the commenter
asserted that the final rule should require that hotels and short-term
lodging providers incorporate government charges into total price
because, otherwise, consumers shopping for bundled vacation packages--
which are subject to the Full Fare Advertising Rule--could see
different prices from consumers who shop separately for flights and
lodging. The commenter also argued that the rule should require that
taxes and government-imposed fees be included in advertised lodging
prices, consistent with DOT's Full Fare Advertising Rule. The
Commission declines to require only short-term lodging providers, as
opposed to live-event ticket sellers and other businesses covered by
the rule, to incorporate government charges into total price. However,
the Commission notes that while the final rule provides that businesses
``may'' exclude government charges from total price, nothing in the
rule prevents businesses from advertising prices inclusive of those
charges, as required by DOT's Full Fare Advertising Rule.
---------------------------------------------------------------------------
\241\ FTC-2023-0064-3204 (Expedia Group).
---------------------------------------------------------------------------
Finally, an industry group representing certain Federally
recognized Arizona Indian Tribes that operate gaming entities urged the
Commission to include fees or charges imposed on consumers by
``tribal'' agencies, units, or departments in the definition of
``government charges,'' to recognize taxes or fees that Tribes might
impose.\242\ The Commission agrees and adds the word ``Tribal'' to the
definition of ``government charges'' to clarify that businesses may
exclude from total price fees or charges imposed on a transaction by a
Tribal government.
---------------------------------------------------------------------------
\242\ FTC-2023-0064-3120 (Arizona Indian Gaming Association).
---------------------------------------------------------------------------
The Commission notes that the modifications in the final rule to
the definition of ``government charges'' represent a narrowing of the
final rule. businesses must still make the disclosures required by
Sec. 464.2(c) in connection with government charges and are prohibited
by Sec. 464.3 from misrepresenting the nature, purpose,
[[Page 2091]]
amount, or refundability of government charges.
6. Pricing Information
Proposed Sec. 464.1(e) in the NPRM defined ``pricing information''
as ``any information relating to any amount a consumer may pay.'' The
final rule references pricing information in one provision: Sec.
464.2(b). As discussed in section III.B.2, final Sec. 464.2(b) is
limited to covered goods or services and requires that, in any offer,
display, or advertisement that represents any price of a covered good
or service, a business disclose the total price more prominently than
any other pricing information. However, where the final amount of
payment for the transaction is displayed, the final amount of payment
must be disclosed more prominently than, or as prominently as, the
total price.
A commenter from the financial services industry asserted that the
proposed definition of ``pricing information'' would be inappropriate
for ``standard bank products, such as checking, savings, CDs, consumer
loans, etc.'' and failed to address the treatment of interest rates for
products and services governed by existing financial regulations.\243\
The commenter's concerns about the definition of ``pricing
information'' are inapplicable because the final rule, including Sec.
464.2(b), is limited to covered goods or services. Accordingly, the
final rule adopts the proposed definition of ``pricing information'' at
Sec. 464.1 without modification.
---------------------------------------------------------------------------
\243\ FTC-2023-0064-1425 (Iowa Bankers Association argued that
the definition of ``Pricing Information'' is inappropriate for
``standard bank products'' and products earning interest).
---------------------------------------------------------------------------
7. Shipping Charges
Proposed Sec. 464.1(f) in the NPRM defined ``shipping charges'' as
``the fees or charges that reasonably reflect the amount a business
incurs to send physical goods to a consumer through the mail, including
private mail services.'' The NPRM made clear that businesses are not
permitted to artificially inflate the cost of shipping, and, instead,
shipping charges must reasonably reflect the cost incurred to send
goods to consumers. Final Sec. 464.1 adopts the proposed definition of
``shipping charges,'' with a minor modification to clarify that
shipping charges incurred through private mail and shipping services
such as FedEx and UPS, or by freight, fall within the definition.
One trade association raised numerous concerns about the proposed
definition of ``shipping charges.'' First, the commenter argued that
the proposed definition fails to consider the unpredictability of
shipping fees, noting that precise costs are difficult for retailers to
determine because shipping costs are frequently based on quotes or
estimates subject to change based on the carrier.\244\ The commenter
noted that businesses may face challenges using certain shipping
methods, including consolidating shipment of multiple orders or using
rail service for partial shipment, which it argued can be particularly
difficult to predict. Second, the commenter asked that the Commission
modify the definition of ``shipping charges'' to explicitly permit the
use of flat rate shipping, explaining that many businesses have
existing agreements with major freight carriers to provide flat rate
shipping. For example, the commenter asked whether the use of flat rate
shipping charges would be considered unlawful if the business shipped a
small, lightweight item for which the actual shipping costs are less
than the flat rate to ship. Finally, the commenter argued that the use
of the phrase ``reasonably reflect'' in the definition is ambiguous and
asked that the Commission clarify whether the definition includes a
scienter requirement. Two commenters also asserted that the rule would
``force'' businesses to disclose proprietary shipping calculations in a
threat to free market competition.\245\
---------------------------------------------------------------------------
\244\ FTC-2023-0064-3267 (National Retail Federation).
\245\ Id.; FTC-2023-0064-2901 (E-Merchants Trade Council).
---------------------------------------------------------------------------
The Commission's use of the phrase ``reasonably reflect'' is
intended to allow for flexibility in determining shipping costs. The
Commission recognizes that precise shipping costs may not be knowable
until the end of a transaction, and, for that reason, the final rule
permits businesses to exclude shipping charges from total price. The
rule does not require that the cost of shipping reflect an exact
certainty. Moreover, the rule does not require businesses to disclose
proprietary information pertaining to relationships with freight or
shipping providers because the rule does not require that shipping
charges be excluded from total price; instead, the rule permits
businesses to exclude shipping charges from total price if they choose.
The final rule does not prohibit businesses from incorporating the cost
of shipping into total price and thereby providing shipping to
consumers at no additional charge. Nor does the final rule prohibit the
use of flat rate shipping or shipping costs based on national averages.
Instead, the language is intended to prevent businesses from
inappropriately excluding from total price costs unrelated to shipping.
One live-event ticket platform supported the proposed rule's
exclusion of certain shipping costs from total price, noting that the
cost to ship physical tickets may vary based on factors determined
later in the transaction, such as the location of the buyer.\246\ The
commenter also noted that a variety of delivery and shipping methods
may be available to consumers purchasing live-event tickets, some of
which may be mandatory and therefore included in total price.\247\ The
Commission emphasizes that certain fees do not fall within the
definition of ``shipping charges,'' including online ``convenience'' or
other fees charged, for example, by online ticket agencies to
electronically ``deliver'' tickets or other processing fees associated
with certain online purchases. The Commission further notes that an
online convenience or other fee for electronic delivery of a ticket
should be included in total price if a consumer cannot obtain the
ticket as part of the same transaction (i.e., online) without incurring
a fee. While the Commission received comments raising concerns about
incorporating the cost of delivery, as opposed to shipping, into total
price,\248\ the Commission is not aware of any evidence that such
concerns would apply to sales of live-event tickets or short-term
lodging.
---------------------------------------------------------------------------
\246\ FTC-2023-0064-3266 (StubHub, Inc.).
\247\ Id.
\248\ See, e.g., FTC-2023-0064-3263 (Flex Association); FTC-
2023-0064-3137 (Chamber of Progress); FTC-2023-0064-3186 (National
LGBT Chamber of Commerce and National Asian/Pacific Islander
American Chamber of Commerce & Entrepreneurship); FTC-2023-0064-3238
(Gibson, Dunn & Crutcher LLP); FTC-2023-0064-3267 (National Retail
Federation).
---------------------------------------------------------------------------
Finally, the Commission also received a range of comments regarding
handling costs. Some commenters urged the Commission to amend the
definition of ``shipping charges'' to clarify that internal handling
costs do not constitute shipping costs and therefore must be included
in total price.\249\ The comments related to handling costs involving
goods or services covered by the broader proposed rule in the
NPRM.\250\ While the Commission has not received any evidence that the
[[Page 2092]]
concerns raised in these comments would impact covered goods or
services, the Commission clarifies that internal handling costs must be
included in total price. The Commission does not believe that a
modification to the ``shipping charges'' definition is necessary,
however, because the definition specifically states that shipping
charges include only those costs that reasonably reflect the cost to
``send physical goods'' to consumers. The Commission does not believe
that handling charges, like the cost to store goods or labor costs
associated with preparing items for shipment, reflect the costs to
``send physical goods'' to consumers. Accordingly, handling charges are
not shipping charges and must be included in total price.
---------------------------------------------------------------------------
\249\ See, e.g., FTC-2023-0064-3146 (Institute for Policy
Integrity, New York University School of Law); FTC-2023-0064-1294
(James J. Angel, Ph.D., CFP, CFA, Professor, Georgetown University,
McDonough School of Business).
\250\ FTC-2023-0064-3146 (Institute for Policy Integrity, New
York University School of Law); FTC-2023-0064-1294 (James J. Angel,
Ph.D., CFP, CFA, Professor, Georgetown University, McDonough School
of Business); FTC-2023-0064-3267 (National Retail Federation).
---------------------------------------------------------------------------
8. Total Price
Proposed Sec. 464.1(g) in the NPRM defined ``total price'' as
``the maximum total of all fees or charges a consumer must pay for a
good or service and any mandatory ancillary good or service, except
that shipping charges and government charges may be excluded.''
Although some commenters stated that the proposed definition was not
flexible enough to account for all pricing models, the Commission
believes the modified definition of ``total price'' is narrowly
tailored to protect consumers by addressing the identified unfair and
deceptive practice of hiding costs by omitting mandatory fees from
advertised prices for covered goods or services. Consumers must be able
to purchase and use goods or services at the advertised total price.
Final Sec. 464.1 differs from the proposed definition of ``total
price'' \251\ to the extent the definitions of ``government charges''
and ``shipping charges,'' as discussed in section III at A.5 and A.7,
are modified. In addition, the Commission clarifies in final Sec.
464.1 that businesses also may exclude from total price any fees or
charges for optional ancillary goods or services. Further, the
Commission notes herein that the rule does not directly address
concerns that fees imposed in connection with covered goods or services
are ``excessive''; the rule does not cap, ban, or prohibit the charging
of any fees, but requires certain disclosures and prohibits
misrepresentations to prevent unfair or deceptive pricing practices.
---------------------------------------------------------------------------
\251\ Although one commenter expressed concern that businesses
would use different terms for Total Price, and thereby create
confusion, the rule does not mandate that Businesses use the term
Total Price. See FTC-2023-0064-3290 (U.S. Public Interest Research
Group Education Fund).
---------------------------------------------------------------------------
As detailed herein, the Commission declines to accept commenters'
recommendations to define ``mandatory,'' to exclude ancillary goods or
services from the ``total price'' definition, to modify the ``maximum
total'' requirement, or to require the inclusion of shipping charges
and government charges in total price. However, the Commission
clarifies in final Sec. 464.2(c) that businesses must disclose the
final amount of payment for the transaction before a consumer consents
to pay.
(a) Mandatory Fees
Commenters noted that the rule does not define ``mandatory,'' and
expressed concern about identifying mandatory fees to be included in
total price.\252\ Some commenters recommended that the Commission
clarify the distinction between ``core'' goods and services and
ancillary goods or services,\253\ provide guidance as to which
ancillary goods or services are mandatory,\254\ and modify the ``total
price'' definition to exclude the reference to mandatory ancillary
goods or services.\255\
---------------------------------------------------------------------------
\252\ See, e.g., FTC-2023-0064-3133 (National Multifamily
Housing Council and National Apartment Association); FTC-2023-0064-
3134 (U.S. Department of Transportation, Federal Motor Carrier
Safety Administration); FTC-2023-0064-3145 (Association of National
Advertisers, Inc.).
\253\ See, e.g., FTC-2023-0064-2888 (Housing Policy Clinic,
University of Texas School of Law).
\254\ See, e.g., FTC-2023-0064-3267 (National Retail
Federation).
\255\ See, e.g., FTC-2023-0064-3160 (Consumer Federation of
America et al.); FTC-2023-0064-3258 (National Taxpayers Union
Foundation); FTC-2023-0064-3275 (Berkeley Center for Consumer Law &
Economic Justice et al.).
---------------------------------------------------------------------------
The Commission has considered these comments and declines to accept
these proposed modifications to the definition of ``total price.'' The
definition of ``total price'' specifies that it includes the cost of
the goods and services being offered and any mandatory ancillary goods
or services, subject to certain exceptions. The Commission retains in
the definition of ``total price'' fees and charges for ``any mandatory
ancillary good or service'' as necessary to protect consumers from the
identified unfair and deceptive practice of hidden fees.
The Commission also declines to modify the rule to add a definition
of ``mandatory fees.'' The Commission cannot identify in advance a
definitive list of mandatory fees because whether a particular fee will
be mandatory or optional will depend on the specific facts of an
individual business transaction, as described in section III.A.1.
Ancillary goods or services can be either optional or mandatory
depending on whether businesses require consumers to purchase them or
if they are necessary to make the principal goods or services fit for
their intended purpose. If businesses offer ancillary goods or services
and require consumers to purchase them to complete transactions for or
to use the covered goods or services being offered, the ancillary goods
or services are mandatory and their cost must be included in total
price.
In the NPRM, the Commission sought comment on whether it was clear
that the reference in the definition of ``total price'' to ``all fees
or charges a consumer must pay for a good or service and any mandatory
ancillary good or service'' includes (1) all fees or charges that are
not reasonably avoidable and (2) all fees or charges for goods or
services that a reasonable consumer would expect to be included with
the purchase.\256\ Commenters disagreed on whether the rule text is
clear that ``total price'' includes unavoidable fees and fees based on
consumer expectations, and recommended clarifying the definition of
``total price'' in this regard or adding a definition of mandatory
fees.\257\ Other commenters argued that the two types of fees described
are themselves vague and unclear.\258\
---------------------------------------------------------------------------
\256\ NPRM, 88 FR 77482, Question 19.
\257\ See, e.g., FTC-2023-0064-3134 (U.S. Department of
Transportation, Federal Motor Carrier Safety Administration); FTC-
2023-0064-3160 (Consumer Federation of America et al.); FTC-2023-
0064-3196 (South Carolina Department of Consumer Affairs); FTC-2023-
0064-3248 (DC Jobs With Justice on behalf of Fair Price, Fair Wage
Coalition); FTC-2023-0064-3146 (Institute for Policy Integrity, New
York University School of Law).
\258\ See, e.g., FTC-2023-0064-3233 (NCTA--The internet &
Television Association); FTC-2023-0064-3172 (New Jersey Apartment
Association).
---------------------------------------------------------------------------
Businesses should consider, in the context of their specific
business practices, the Commission's guidance that mandatory fees
include charges that consumers cannot reasonably avoid and charges for
goods or services that a reasonable consumer would expect to be
included with the purchase because they are necessary to make primary
goods or services fit for their intended purpose. The Commission
reiterates the guidance about total price that it provided in the NPRM:
It is well established that it is deceptive to offer goods or services
that are not fit for the purpose for which they are sold. By offering
goods or services, businesses impliedly represent that the goods or
services are fit for their intended purpose; reasonable consumers would
expect that, when they purchase a good or service, they will be able to
use it for
[[Page 2093]]
that purpose.\259\ It is therefore deceptive to advertise a total price
for a primary good or service that does not include fees for additional
purchases that are necessary to render the primary good or service fit
for its intended purpose.
---------------------------------------------------------------------------
\259\ NPRM, 88 FR 77432.
---------------------------------------------------------------------------
Further, businesses cannot treat additional purchases that are
necessary to render covered goods or services fit for their intended
purpose as optional and exclude the costs of these additional purchases
from total price. For example, businesses cannot treat credit card
surcharges or processing fees as optional and exclude them from total
price if they do not provide consumers with other payment options. The
rule does not require, as some commenters suggested, the inclusion of
fees for truly optional ancillary goods or services in total
price.\260\ Nonetheless, such fees and their nature, purpose, and
amount still must be clearly and conspicuously disclosed before the
consumer consents to pay and cannot be misrepresented.
---------------------------------------------------------------------------
\260\ See, e.g., FTC-2023-0064-2891 (Mary Sullivan, George
Washington University, Regulatory Studies Center, noted that
``purely optional'' subscription services, such ``optional features
that are installed in automobiles, like satellite radio'' are ``not
deceptive and unfair'' but are instead efficient. She further
contended that the proposed rule lacks specificity as to these types
of ``purely optional'' services.)
---------------------------------------------------------------------------
Commenters expressed the concern that businesses could misrepresent
mandatory fees as optional, for example, by including them by default
in bills, requiring consumers to opt out from them, or using other
deceptive practices, and recommended that the Commission include
safeguards in the rule to prevent these practices.\261\ The Commission
determines that the rule adequately protects consumers from the posited
scenarios without modification. businesses cannot characterize fees as
optional and exclude them from total price when businesses require
consumers to purchase the good or service for which the fees are
charged and employ practices, such as default billing or opt-out
provisions, that effectively take away consumers' ability to consent to
the fees. For example, a previously undisclosed resort fee that a hotel
discloses at check-in is not an optional fee if the hotel will charge
the fee unless the guest challenges the fee. Final Sec. 464.3
prohibits misrepresenting the nature, purpose, amount, and
refundability of fees, including misrepresenting mandatory fees as
optional fees from which consumers must opt out.\262\
---------------------------------------------------------------------------
\261\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for
Consumer Law & Economic Justice et al.); FTC-2023-0064-3160
(Consumer Federation of America et al.); FTC-2023-0064-3248 (DC Jobs
With Justice on behalf of Fair Price, Fair Wage Coalition); FTC-
2023-0064-0915 (Individual Commenter noted that businesses may
misrepresent optional fees as mandatory and ``[t]he consumer may not
realize they are optional when receiving a bill and may not realize
they can be removed.'').
\262\ See discussion infra section III.C and note 349.
---------------------------------------------------------------------------
Whether fees for ancillary goods or services must be included in
total price will depend on the specific factual circumstances. The
inclusion of the defined term ``ancillary good or service'' in the
definition of ``total price'' clarifies that total price includes
``additional good(s) or service(s) offered to a consumer as part of the
same transaction.'' Businesses cannot exclude mandatory fees from total
price simply by characterizing them as not part of the same transaction
if, in fact, they are.
(b) Maximum Total
The rule provides that ``total price'' is the ``maximum total'' of
all mandatory fees except identified permissible exclusions. Some
commenters objected to defining ``total price'' as the maximum total,
arguing that it could discourage advertising discounted rates or
misrepresent actual costs and interfere with comparison shopping.\263\
Other commenters suggested that the reference to maximum total would
require businesses that enter into continuous service contracts with
consumers (e.g., subscriptions) to include in total price all mandatory
fees that might arise over the duration of a contract, which they
argued would be difficult to determine at the time the rule requires a
total price disclosure.\264\ Some commenters argued that continuous
service contracts that reflect negotiated transactions do not raise
``bait and switch'' concerns and that total price is adequately
disclosed in such contracts.\265\
---------------------------------------------------------------------------
\263\ See, e.g., FTC-2023-0064-3293 (Travel Technology
Association); FTC-2023-0064-3233 (NCTA--The internet & Television
Association).
\264\ See, e.g., FTC-2023-0064-3116 (Manufactured Housing
Institute); FTC-2023-0064-3172 (New Jersey Apartment Association);
FTC-2023-0064-3121 (National Independent Automobile Dealers
Association); FTC-2023-0064-1425 (Iowa Bankers Association).
\265\ See, e.g., FTC-2023-0064-3289 (Zillow Group stated that
``rental housing market fees are distinct from fees in other
economic sectors'' because they are not charged in ``click-to-
purchase'' transactions, but involve an ``interactive process'' over
a ``much longer period of time'' and involved ``written agreements
that include all relevant binding terms and conditions, including
the total price.''); FTC-2023-0064-3269 (IHRSA--The Health & Fitness
Association).
---------------------------------------------------------------------------
The Commission has considered comments relating to the ``maximum
total'' requirement and retains that language in the definition of
``total price.'' The Commission determines that such language is
necessary to protect consumers from advertised total prices that are
deceptively lower than what businesses actually charge. As the
Commission noted in the NPRM, ``[t]he use of the phrase `maximum total'
would allow businesses to apply discounts and rebates after disclosing
total price.'' \266\ Since all businesses are subject to the maximum
total requirement for covered goods or services, the resulting level
playing field would allow for comparison shopping. The Commission does
not agree that disclosures in contracts or agreements adequately
protect consumers from deceptive advertising that omits mandatory fees.
---------------------------------------------------------------------------
\266\ NPRM, 88 FR 77439.
---------------------------------------------------------------------------
Commenters questioned how businesses should handle conditions or
limitations on advertised prices.\267\ Businesses must comply with the
rule and other disclosure requirements, including those related to
material conditions or limitations.\268\ Businesses that advertise
prices that are not attainable by consumers because the prices are
conditioned on undisclosed material conditions, restrictions, or
limitations may fail to disclose and misrepresent total price.
---------------------------------------------------------------------------
\267\ See, e.g., FTC-2023-0064-3162 (BBB National Programs, Inc.
commented that the definition of ``Total Price'' does not
specifically address ``how advertisers should disclose material
limitations to obtaining an advertised price.''); FTC-2023-0064-1294
(James J. Angel, Ph.D., CFP, CFA, Professor, Georgetown University,
McDonough School of Business, commented that ``[i]f there are any
restrictions, they must be as clear and conspicuous as the
price.'').
\268\ See, e.g., supra note 111.
---------------------------------------------------------------------------
(c) Itemization
The rule neither requires, nor prohibits, the itemization of
mandatory fees that must be included in total price. The Commission
notes that final Sec. 464.2(c) requires disclosure of the nature,
purpose, and amount of fees or charges imposed on the transaction that
have been excluded from total price but declines to modify the
regulatory text proposed in the NPRM to otherwise require or prohibit
the itemization of fees.
Some commenters recommended that the rule not require
itemization.\269\ Other commenters stated that including mandatory fees
in total price would obscure the nature and purpose of the fees and
provide less information to consumers,\270\ while others
[[Page 2094]]
recommended that the rule require itemization to provide more
information to consumers and to protect other transaction participants
by disclosing where mandatory fees go.\271\ Other commenters
recommended that the rule prohibit itemization because fees could be
arbitrary or invented by businesses and itemizing them could
misrepresent their nature and purpose.\272\
---------------------------------------------------------------------------
\269\ See, e.g., FTC-2023-0064-3293 (Travel Technology
Association ``recommends that any final rule refrain from imposing
an obligation to itemize mandatory fees.'').
\270\ See, e.g., FTC-2023-0064-3173 (Center for Individual
Freedom); FTC-2023-0064-3137 (Chamber of Progress); FTC-2023-0064-
3208 (FreedomWorks); FTC-2023-0064-3263 (Flex Association); FTC-
2023-0064-3258 (National Taxpayers Union Foundation).
\271\ See, e.g., FTC-2023-0064-3304 (Recording Academy stated:
``Price itemization is the only way to ensure pricing is transparent
and that all parties involved in setting the ticket's total price
are held accountable for what they charge.''); FTC-2023-0064-3230
(Future of Music Coalition); FTC-2023-0064-3250 (National
Independent Talent Organization); FTC-2023-0064-3283 (National
Consumer Law Center, Prison Policy Initiative, and advocate Stephen
Raher stated that itemization is necessary to clarify opaque charges
in the context of consumer correctional services.); FTC-2023-0064-
3290 (U.S. Public Interest Research Group Education Fund).
\272\ See, e.g., FTC-2023-0064-3212 (TickPick, LLC).
---------------------------------------------------------------------------
The Commission has considered the comments and declines to require
or prohibit the itemization of mandatory fees, except as provided by
Sec. 464.2(c). Section 464.2 of the rule permits, but does not
require, itemization of the components of total price, and therefore
allows businesses to break out transaction inputs, consistent with laws
that require itemization. When businesses choose to itemize mandatory
fees that are a part of total price or itemize fees pursuant to Sec.
464.2(c), total price must be displayed more prominently than itemized
fees. Further, Sec. 464.3 prohibits misrepresenting itemized fees.
(d) Exclusions From Total Price
The definition of ``total price'' in final Sec. 464.1 is modified
from the proposed definition to the extent that the definitions of
``government charges'' and ``shipping charges'' are modified, as
discussed in section III at A.5 and A.7. Finally, the definition of
``total price'' clarifies that businesses may exclude fees or charges
for optional ancillary goods or services.
(e) Intersection With IRS Requirements
One commenter sought clarification as to the intersection of the
total price requirements with Internal Revenue Service (``IRS'')
requirements regarding charitable gifts.\273\ The commenter
specifically highlighted a scenario in which charitable contributions
are made concurrent with ticket sales. The Commission is not aware of--
and indeed, the commenter did not cite to--any specific conflict with
the final rule. Instead, the commenter asked about the rule's
intersection with the IRS's Substantiation and Disclosure Requirements.
Based on the Commission's review, the IRS Substantiation and Disclosure
Requirements pertain to substantiation requirements for donors who
contribute to charitable organizations or causes, and disclosure
requirements for charitable organizations that provide goods or
services to donors for certain contributions. The Commission's rule has
no bearing on, and does not change or impact, any of these IRS
requirements. The commenter also stated that ``the concept of
`refundability''' is ``not common in charitable giving.'' As set forth
in section III.B.3, the Commission eliminates the requirement that
businesses affirmatively disclose the refundability of each fee or
charge imposed; however, Sec. 464.3 still prohibits businesses from
misrepresenting a fee's refundability.
---------------------------------------------------------------------------
\273\ FTC-2023-0064-3195 (League of American Orchestras et al.).
---------------------------------------------------------------------------
B. Sec. 464.2 Hidden Fees Prohibited
Proposed Sec. 464.2(a) and (b) in the NPRM provided, respectively,
that it would be a violation of the rule for a business to ``offer,
display, or advertise an amount a consumer may pay without clearly and
conspicuously disclosing total price'' and that ``[i]n any such offer,
display, or advertisement that contains an amount a consumer may pay, a
business must display total price more prominently than any other
pricing information.'' As discussed herein, final Sec. 464.2 makes
certain modifications to proposed Sec. 464.2(a) and (b) and
consolidates all provisions related to disclosures by relocating
proposed Sec. 464.3(b), with certain modifications, to final Sec.
464.2(c).
As discussed in section III.B.1 and III.B.2, to address commenter
concerns that ``an amount a consumer may pay'' is vague and overbroad,
the Commission modifies final Sec. 464.2(a) and (b) as compared to the
NPRM proposals to focus their required disclosures on offers, displays,
or advertisements that include ``any price of a covered good or
service.'' Final Sec. 464.2(b) also clarifies that, in any offer,
display, or advertisement that represents any price of a covered good
or service, total price must be more prominent than other pricing
information, except if the final amount of payment for a transaction is
displayed, the final amount of payment must be more prominent than, or
as prominent as, total price.
As discussed in section III.B.3, the Commission also consolidates
all provisions related to required disclosures under Sec. 464.2 of the
rule and, therefore, codifies proposed Sec. 464.3(b) with certain
modifications at final Sec. 464.2(c). Proposed Sec. 464.3(b)
specified that businesses must disclose clearly and conspicuously, and
before the consumer consents to pay, the nature and purpose of any
amount a consumer may pay that is excluded from total price. The
Commission clarifies that, in line with the narrower scope of the rule,
the trigger requiring disclosures in final Sec. 464.2(c) is ``before
the consumer consents to pay for any covered good or service.'' As with
final Sec. 464.2(a) and (b), final Sec. 464.2(c) also eliminates the
reference to ``any amount a consumer may pay'' to narrow the focus of
the disclosures required by Sec. 464.2(c)(1) to ``any fee or charge
imposed on the transaction that has been excluded from total price.''
Final Sec. 464.2(c) also differs from the NPRM proposal in that it
explicitly requires disclosure of the amount, nature, and purpose of
any fees or charges imposed on the transaction that have been excluded
from total price and the identity of the good or service for which the
fees or charge is imposed, as well as the final amount of payment for
the transaction. Importantly, to preserve choice and control for
businesses, Sec. 464.2(c)'s disclosures with respect to government
charges and shipping charges are only required if a business elects to
permissibly exclude such charges from total price. Similarly, Sec.
464.2(c)'s disclosures with respect to fees for optional ancillary
goods or services are only required if the consumer has elected to
purchase such goods or services as part of the same transaction and the
business has excluded their fees from total price. Nothing in the final
rule requires a business to disclose commercially sensitive information
regarding the components of its total price.
The Commission discusses herein changes to the text of the proposed
provisions and addresses substantive comments about these provisions,
including how Sec. 464.2 would apply to specific pricing scenarios
discussed in the comment record.
1. Sec. 464.2(a)
Proposed Sec. 464.2(a) in the NPRM provided that it would be a
violation of the rule for a business to ``offer, display, or advertise
an amount a consumer may pay without clearly and conspicuously
disclosing total price,'' which was defined in proposed Sec. 464.1(g)
as ``the maximum total of all fees or charges a consumer must pay for a
good or service and any mandatory ancillary good or service, except
that shipping charges
[[Page 2095]]
and government charges may be excluded.'' In final Sec. 464.2(a), the
Commission changes the reference to ``an amount a consumer may pay'' to
the more limited ``any price of a covered good or service.'' Final
Sec. 464.2(a) also further clarifies that businesses may exclude from
total price fees or charges for any optional ancillary good or service.
The Commission makes these modifications to address NPRM comments and
to clarify the rule. The comments relating to the exclusion from total
price of charges for any optional ancillary good or service, and the
Commission's reasons for allowing these exclusions, are discussed in
section III at A.1 and A.8.
Commenters argued that the reference to ``an amount a consumer may
pay'' in proposed Sec. 464.2(a) and in other sections (i.e., proposed
Sec. Sec. 464.2(b) and 464.3(b)) was overbroad and that the Commission
failed to consider its application to various pricing scenarios.\274\
In response to these comments, the Commission finalizes Sec. 464.2(a)
with modification to limit the total price disclosure requirement from
each time businesses ``offer, display, or advertise an amount a
consumer may pay'' to only when they ``offer, display, or advertise any
price of a covered good or service.'' The Commission also provides
guidance regarding the application of Sec. 464.2(a) to various types
of fees and pricing scenarios, including: contingent fees; ticket
service fees; credit card surcharges; dynamic pricing and national
advertising; rebates, bundled pricing, and discounts; and online
marketplaces in section III.B.1.a through f.
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\274\ See, e.g., FTC-2023-0064-3206 (Motor Vehicle Protection
Products Association et al. commented that proposed Sec. 464.3, in
referring to any amount a consumer may pay, goes ``far broader than
`fees''' and ``the use of the verb `may' suggests that even offers
of goods or services--or, frankly, even goods or services that `may
be' available but not actually offered--impermissibly and
imprudently stretches this section.'').
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(a) Contingent Fees
Under certain circumstances discussed herein, total price can
exclude certain fees that businesses cannot calculate in advance
because they necessarily are contingent on consumer behavior or choice;
unknown, external factors; or pricing models that include variable
fees. The Commission notes that whether certain contingent fees cannot
be calculated and are truly unknown at the time the rule requires
disclosures may depend on the specific factual circumstances. The
Commission is not persuaded by the comments to change the rule as it
applies to contingent fees.
Certain commenters remarked that, in some instances, businesses
cannot quote an all-inclusive price due to unknown fees arising from
consumer behavior and choices during and after the purchasing process;
unknown, external factors; or pricing models that have variable rates
such as hourly rates or rates based on guest count and consumption.
Indeed, some commenters argued that the Commission's failure to
recognize the existence of variable marketplace fees is a significant
oversight of the proposed rule.\275\ Other commenters observed that
concerns about variable marketplace fees are overblown and stated that
the Commission should prohibit charging such fees if the full amount of
such fees cannot be calculated in the upfront price.\276\
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\275\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce
stated that variable fees should be excluded from Total Price
because: fees that ``vary based on volume, transaction type, and
region'' cannot be assessed until consumers take some action;
requiring their inclusion in Total Price ``could less efficiently
spread costs, undermine consumer choice, and eliminate price
competition on certain cost inputs''; and ``[t]he NPRM also provides
no reason to think that variable or dynamic pricing is necessarily
deceptive or unfair across all industries and sectors of the
economy.''); FTC-2023-0064-3137 (Chamber of Progress expressed
concern about the rule's impact on variable pricing models,
including delivery platforms, where ``the prices for delivery or
other services increase as the size of the order increases,'' which
it asserts is ``a more efficient way of distributing costs than flat
rates'' and asserted it is not clear how such platforms would comply
with the rule ``without creating confusion for customers or
misrepresenting prices.''); FTC-2023-0064-3173 (Center for
Individual Freedom argued that: ``Acknowledging the distinct roles
and objectives of both flat and variable fees in different
industries is crucial, and the proposed rule's failure to recognize
the benefits of variable pricing structures, which allow fees to
scale based on the nature of the items or services purchased, is a
significant oversight.''); FTC-2023-0064-3258 (National Taxpayers
Union Foundation stated that under the rule, ``it will be nearly
impossible for businesses using variable prices to display the Total
Price at all times, because businesses are unable to predict
consumer's choices.''); FTC-2023-0064-3202 (TechNet urged the
Commission to exclude from Total Price ``fees that are variable or
unknowable,'' such as in e-commerce marketplaces, or the rule
``would complicate the communication of pricing in situations where
the `total price cannot practically be determined' in advance.'');
FTC-2023-0064-3263 (Flex Association commented that app-based
delivery platforms could be ``forced to change the way they price
entirely--moving from variable . . . to static fees . . . that would
not benefit consumers''); FTC-2023-0064-3238 (Gibson, Dunn &
Crutcher LLP commented that the proposed rule failed to consider
reliance on dynamic pricing that depends on consumer choices
throughout the buying process).
\276\ See, e.g., FTC-2023-0064-3134 (U.S. Department of
Transportation, Federal Motor Carrier Safety Administration
recommended that the rule prohibit ``charging variable mandatory
ancillary fees if the full amount of such variable fees cannot be
calculated in the upfront price.''); FTC-2023-0064-3275 (Berkeley
Center for Consumer Law & Economic Justice et al. asserted that
concerns ``that it is impossible to accurately estimate all fees in
advance of providing a complex service'' or fees dependent on
consumer choice, are ``easily resolvable with minimal effort and
creativity on the part of vendors.'').
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The Commission finds that, to the extent that certain fees are
contingent on later conduct or choices by a consumer after purchase
(e.g., pet fees, fees for late payments, fees for property damage at a
rental accommodation, or smoking in a non-smoking hotel room), these
fees are not mandatory for purposes of the transaction, and as such, do
not need to be included in total price.\277\ The Commission notes that
fees that are unavoidable by the consumer, regardless of conduct or
choices, are not contingent. Ultimately, if a business cannot ascertain
whether certain fees or charges apply until after concluding a purchase
or transaction, the business need not include such fees or charges in
total price. Whether mandatory fees are truly unknown due to reasons
beyond a business's control will depend on specific factual
circumstances.
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\277\ See, e.g., FTC-2023-0064-3233 (NCTA--The internet &
Television Association commented that the definition of ``Total
Price'' is ambiguous as ``it does not clearly address fees that are
contingent on later actions by particular consumers . . . such as
for unreturned equipment or late payment of the consumer's bill''
and encouraged the Commission to ``resolve the ambiguity by, among
other things, making clear in the rule itself that contingent or
avoidable fees are to be excluded from the Total Price.'').
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Businesses should include in total price other fees that may vary
depending on a consumer's choices during the purchase process or
transaction as soon as consumers provide the business with the
information needed to determine the applicability or amount of those
fees. Indeed, some commenters discussed different scenarios in which
total price depends on a consumer's choices while buying a good or
service, such as season and flexible ticket packages for the arts.\278\
According to some commenters, consumers expect fees arising from their
personal choices and customizations to be disclosed only after
providing additional information to, or negotiating with, sellers.
Businesses can include in their advertisements ``starting at'' or base
prices to deal with situations in which ultimate price may depend on a
consumer's selection of various ticketing and lodging options, but only
if consumers can in fact obtain the
[[Page 2096]]
advertised ticket or lodging for the ``starting at'' or base
price.\279\
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\278\ See, e.g., FTC-2023-0064-3195 (League of American
Orchestras et al. requested the Commission's ``consideration for
season-based and flexible ticket packages in which multiple and
variable options are available to ticket-buyers, and the total price
will vary based on selection.'').
\279\ In some instances, advertising prices as a base or
starting price can be deceptive, depending on the relevant limiting
or qualifying criteria. In such instances, the material terms,
conditions and obligations upon which receipt and retention of the
base or starting price are contingent should be set forth clearly
and conspicuously at the outset of the offer so as to leave no
reasonable probability that the terms of the offer might be
misunderstood.
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Businesses still must clearly and conspicuously disclose the
nature, purpose, and amount of such fees or charges and the identity of
the good or service for which they are imposed, and the final amount of
payment, before a consumer consents to pay or, if the applicability of
a fee or charge is contingent on later conduct or choices by a consumer
after purchase, as soon as such circumstances arise. Businesses also
must not mispresent those or other fees or charges, including total
price.
(b) Ticket Service Fees
Businesses operating in the live-event ticketing industry,
including venues, ticket sellers, and ticket resellers, historically
have imposed on consumers a host of charges in addition to the ticket's
face value that are dripped in throughout the purchasing process. One
of the rule's principal purposes is to give consumers upfront knowledge
of the true cost of a good or service, including mandatory charges,
without being forced to navigate through a time-intensive search and
transaction. A broad swath of industry members supported a nationwide
total price requirement for ticket pricing,\280\ although some industry
commenters expressed concerns with certain aspects of the rule. The
Commission addresses commenters' concerns herein.
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\280\ See, e.g., FTC-2023-0064-3266 (StubHub, Inc. submitted a
comment supporting nationwide all-in pricing and including Total
Price in every advertisement to consumers and throughout the
transaction.); FTC-2023-0064-3105 (Charleston Symphony commented:
``[R]equiring sellers to disclose the total price clearly and
conspicuously[ ] addresses a pressing issue. . . . Predatory
practices in the secondary ticket sales market pose a significant
threat to artists, venues, audiences, and the future of nonprofit
arts organizations, impacting the integrity of the ticket-buying
process and eroding audience confidence.''); FTC-2023-0064-3122
(Vivid Seats stated that it ``supports additional consumer
disclosures, including all-in pricing,'' but the rule should ``apply
equally across all parts of the live-events ticketing industry,'' so
consumers can compare prices and businesses that display total
prices will not be at a competitive disadvantage.); FTC-2023-0064-
3241 (National Association of Ticket Brokers submitted a comment
supporting all-in pricing, but noting that it would only work if
``(i) it was required of every ticket seller and (ii) there was
rigorous and expeditious enforcement.''); FTC-2023-0064-3306 (Live
Nation Entertainment and its subsidiary Ticketmaster North America
commented that they ``support[ ] a definition of all-in pricing that
requires the first price for a live-event ticket shown to consumers
to be the price ultimately charged at checkout (exclusive of state
and local taxes and optional add-ons).''); see also FTC-2023-0064-
3264 (Mark J. Perry, Ph.D., Professor Emeritus of Economics at
University of Michigan-Flint and Senior Fellow Emeritus at the
American Enterprise Institute, ``urge[d] the FTC to ensure that any
rule requiring all-in pricing in live events apply equally to all
market participants.''); FTC-2023-0064-2856 (National Football
League stated that if the live-event ticket industry is included in
the rule's coverage, the Commission must ``include all sellers of
live-event tickets to prevent inconsistencies in its
application.'').
---------------------------------------------------------------------------
Some industry members emphasized that the added fees are their
primary source of revenue, since they typically do not share in the
revenue from the ticket's face value.\281\ Industry members and an
academic commenter also stated that certain added fees pay for valuable
services such as delivery and the convenience of selecting a seat from
home.\282\ An industry member emphasized, however, that although
consumers do expect additional fees, businesses nonetheless should
clearly disclose a ticket's true, all-in price (i.e., total
price).\283\ Another industry member commented that unless an added fee
is truly optional, it should be included in total price.\284\ The
Commission reiterates that businesses are not prohibited from charging
fees; instead Sec. 464.2(a) requires the disclosure of total price,
including fees for mandatory ancillary goods or services, when a price
for a good or service is displayed, while Sec. 464.2(c) requires
disclosures about fees being imposed on the transaction that have been
permissibly excluded from total price, including for optional ancillary
goods or services, before a consumer consents to pay for a covered good
or service. The Commission further reiterates that, in an online
transaction, fees such as for payment processing, electronic ticket
``delivery,'' ``convenience,'' or similar add-on ticketing fees are
mandatory and must be included in total price if a consumer cannot
obtain the covered good or service as part of the same transaction
(e.g., online) without incurring the fee. Final Sec. 464.3 also
prohibits businesses from misrepresenting the nature or purpose, or the
identity of the good or service for which fees are imposed.
---------------------------------------------------------------------------
\281\ See, e.g., FTC-2023-0064-3122 (Vivid Seats commented that
service fees ``are the TRM's [ticket resale marketplace's] sole
source of revenue and provide the capital necessary to operate the
TRM.''); FTC-2023-0064-3306 (Live Nation Entertainment and its
subsidiary Ticketmaster North America commented that a ticket
service charge ``compensates the venue for hosting the event and the
ticketing company for distributing tickets and related services--
important since venues and ticketing companies typically do not
share in revenues attributable to a ticket's face value.'').
\282\ See, e.g., FTC-2023-0064-3122 (Vivid Seats commented that
delivery fees cover costs associated with delivering a ticket.);
FTC-2023-0064-3306 (Live Nation Entertainment and its subsidiary
Ticketmaster North America); FTC-2023-0064-3292 (National
Association of Theatre Owners commented: ``These fees allow
moviegoers to purchase tickets and select their seats from home, and
this service requires ongoing support and management, entailing
operational costs that are offset by convenience fees. At the same
time customers can avoid the convenience fee altogether by
purchasing directly at the box office.'') FTC-2023-0064-3264 (Mark
J. Perry, Ph.D., Professor Emeritus of Economics at University of
Michigan-Flint and Senior Fellow Emeritus at the American Enterprise
Institute, commented that ticket resale marketplaces offer numerous
valuable services to ticket sellers and buyers that a single seller
or buyer could not access otherwise, including access to buyers or
tickets, inventory management, seller and customer support, secure
financial transactions, and guarantees.'').
\283\ FTC-2023-0064-3306 (Live Nation Entertainment and its
subsidiary Ticketmaster North America commented: ``Because the
practice of adding these charges to the ticket's face value has been
so longstanding, consumers have come to expect service fees when
purchasing a ticket to a live entertainment event--but it is
impossible for consumers to anticipate the amount of applicable fees
because those rates are set by hundreds of different venues and can
vary accordingly.'' The commenter continued, ``Consumers therefore
need clear disclosures about the true price of a ticket, including
the elements that constitute the all-in price.'').
\284\ FTC-2023-0064-3266 (StubHub, Inc. supported the exclusion
of ``fees for optional add-on features selected at the discretion of
the consumer.'' As an example, the commenter stated, ``[I]n some
instances, consumers may not have a choice on delivery method. In
those cases, delivery fees are mandatory and should be included in
the [Total Price] because the consumer has no discretion to choose.
In other instances, consumers have multiple delivery options at
different price points.'').
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Some industry members expressed concern that the rule would
prohibit itemization of fees in addition to total price, while others
argued that it should prohibit such itemization.\285\ The Commission
clarifies that, so long as total price is displayed clearly and
conspicuously, and more prominently than any itemized fees, the rule
does not prohibit businesses from itemizing the
[[Page 2097]]
charges imposed on a transaction. However, any such itemization must
not misrepresent the nature, purpose, amount, or refundability of the
itemized fees, including the identity of the goods or services for
which they are being charged.
---------------------------------------------------------------------------
\285\ See, e.g., FTC-2023-0064-3230 (Future of Music Coalition
commented that ``adopting all in pricing without itemization [of the
base ticket price or face value and of fee amounts] would be a gift
to . . . predatory resellers.''); FTC-2023-0064-3250 (National
Independent Talent Organization stressed ``the need for an itemized
breakdown of ticket fees'' and called for ``fees to be clearly
itemized throughout the purchasing process.''); FTC-2023-0064-3304
(Recording Academy commented: ``Price itemization is the only way to
effectively regulate transparent pricing in a manner that truly
informs the consumer about how their dollar is being spent . . . .
Additionally, price itemization is the only way to effectively hold
third party fees and charges in check.''). But see FTC-2023-0064-
3212 (TickPick, LLC commented that the rule ``must prohibit the
itemization of fees and charges that make up the Total Price (other
than breaking out government taxes and shipping fees) in order to
prevent harm from hidden and/or misleading fees.'' The commenter
stated concerns that such fees were ``arbitrary'' and ``any
secondary ticketing marketplace that itemizes mandatory fees and
charges is arguably misrepresenting the `nature and purpose of any
amount a consumer may pay.' '').
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(c) Credit Card and Other Payment Processing Surcharges
The rule requires businesses to include credit card surcharges or
processing fees in total price only if they choose to make payment by
credit card mandatory. If, on the other hand, credit card use is
optional because consumers can use multiple payment options, those fees
do not need to be included in total price. If the consumer chooses to
use a credit card, businesses must clearly and conspicuously disclose
the nature, purpose, and amount of any credit card surcharge before the
consumer consents to pay. Some commenters expressed concern about the
rule's application to credit card fees but, as discussed herein, the
Commission was not persuaded by the comments to change the proposed
rule as it applies to such fees.
Many commenters expressed concern that the rule would require total
price to include credit card processing fees or prohibit businesses
from passing through such fees to consumers. This was of particular
concern to small businesses.\286\ Numerous industry members also
commented that requiring such fees to be part of total price would
reduce price transparency and penalize customers who want or need to
pay with cash.\287\
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\286\ See, e.g., FTC-2023-0064-3217 (Bowling Proprietors'
Association of America); FTC-2023-0064-2755 (Caffe! Caffe!); FTC-
2023-0064-3114 (Shine Beer Sanctuary); FTC-2023-0064-1456 (MED
Murphy St. Enterprise); see also, e.g., FTC-2023-0064-2953; FTC-
2023-0064-2972 (Over 4,600 comments submitted through a National
Restaurant Association mass mailing campaign misinterpreted the rule
as ``eliminating the use of fees and surcharges.'').
\287\ See, e.g., FTC-2023-0064-3300 (National Restaurant
Association); FTC-2023-0064-3128 (Merchants Payments Coalition);
FTC-2023-0064-3219 (Georgia Restaurant Association); FTC-2023-0064-
3180 (Independent Restaurant Coalition).
---------------------------------------------------------------------------
Various commenters suggested that if businesses properly disclose
credit card processing charges and provide alternate payment methods,
both consumers and businesses would benefit.\288\ Commenters noted
that, when appropriately disclosed, consumers can avoid such fees by
choosing another form of payment.\289\ An academic commenter suggested
that prominent disclosure of a credit card surcharge in advance, so
consumers can avoid it, would benefit consumers and reduce business
costs more than requiring such charges to be included in total
price.\290\ A tenant advocacy legal clinic that generally supported
requiring credit card processing charges to be included in total price,
suggested that such charges might be reasonably avoidable if disclosed
in advance to let consumers use a different payment method.\291\
Another academic commenter recommended that the Commission clarify
that, while credit card surcharges need not be included in total price,
a business can only pass through the actual amount of the charge and
must clearly and conspicuously disclose any markup it imposes.\292\
---------------------------------------------------------------------------
\288\ See, e.g., FTC-2023-0064-3180 (Independent Restaurant
Coalition commented: ``Clearly and prominently displaying any fees
promotes transparency and fairness as well as allowing restaurants
to meet the needs of their workers and customers.''); FTC-2023-0064-
2891 (Mary Sullivan, George Washington University, Regulatory
Studies Center).
\289\ See, e.g., FTC-2023-0064-3128 (Merchants Payments
Coalition); FTC-2023-0064-3140 (Merchant Advisory Group stated:
``When appropriately disclosed, consumers can typically avoid these
fees by simply choosing lower-cost forms of payment, and this could
help keep prices down for consumers overall.''); FTC-2023-0064-3300
(National Restaurant Association commented: ``When a credit card
surcharge is properly disclosed via in-store signage, on the menu,
and on the receipt, customers have a clear understanding that the
fee is a product of the card companies, not the restaurant.'').
\290\ FTC-2023-0064-2891 (Mary Sullivan, George Washington
University, Regulatory Studies Center).
\291\ FTC-2023-0064-3268 (Housing & Eviction Defense Clinic,
University of Connecticut School of Law).
\292\ FTC-2023-0064-1294 (James J. Angel, Ph.D., CFP, CFA,
Professor, Georgetown University, McDonough School of Business).
---------------------------------------------------------------------------
The Commission notes that the rule does not prohibit a business
from charging or passing through credit card fees if otherwise allowed
by law. The rule does not affect State laws that prohibit credit card
surcharges. Whether credit card charges must be included in total
price, however, depends on whether a business makes such fees
mandatory, for example, by not providing any other payment option for
the transaction. For example, if a consumer is purchasing a ticket
online, there must be another online payment option that does not
require a fee, not merely an option to go in person to the box office
to purchase the ticket with cash for no additional fee.
In other words, if there is no other payment option for an offered
transaction, or if every payment option requires a fee or charge, such
fees are mandatory and must be included in total price.\293\ But, if a
business offers consumers multiple viable payment options for the
offered transaction, so that paying with a credit card is optional,
then credit card fees need not be included in total price. The same is
true for debit card surcharges and other payment processing fees.
---------------------------------------------------------------------------
\293\ This approach is consistent with the Telemarketing Sales
Rule, which requires sellers and telemarketers to disclose, in a
clear and conspicuous manner, the total cost of a good or service,
which would include any applicable credit card or other payment
processing charges, before a consumer consents to pay for that good
or service. 16 CFR 310.3(a)(1)(i) and (a)(2)(i).
---------------------------------------------------------------------------
A business that provides at least one viable method to pay for the
offered transaction without a fee, chooses to pass through payment
processing fees to consumers, and excludes such fees from total price
would have to clearly and conspicuously disclose the nature, purpose,
and amount of the processing fees before a consumer consents to pay. In
addition, nothing in the rule prohibits businesses that accept multiple
viable forms of payment from advertising two prices, one that includes
credit card or other payment processing fees and one that does not. It
is the Commission's understanding that some businesses already do this,
and such a strategy is consistent with the rule.
In addition, under final Sec. 464.3, a business that offers,
displays, or advertises a covered good or service cannot misrepresent
the nature, purpose, amount, or refundability of credit card or other
fees. Since the rule does not prohibit itemization, a business may
choose to also itemize mandatory credit card fees so long as they are
included in total price and total price is displayed more prominently.
The voluntary itemization of mandatory credit card fees addresses
commenters' concerns that consumers will not understand the different
costs affecting businesses.
(d) Dynamic Pricing and National Advertising
Some commenters expressed concern that the total price requirements
will interfere with dynamic pricing strategies where total price is not
fixed but changes based on supply, demand, or other factors.\294\ The
rule does not bar
[[Page 2098]]
businesses from engaging in dynamic pricing, but adjusted prices must
include all known mandatory fees and the advertised good or service
must be actually available to consumers at the quoted price. The
Commission's review of the comments did not identify any persuasive
reason to change the rule as it applies to dynamic pricing.
---------------------------------------------------------------------------
\294\ See, e.g., FTC-2023-0064-3195 (League of American
Orchestras et al. observed: ``It would be harmful to paint all
dynamic pricing strategies as `unfair.' Nonprofit performing arts
organizations often use variable pricing strategies to both maximize
the earned revenue that supports the nonprofit performing arts
workforce, as well as to offer reduced or free-of-charge ticketing
options for community-based partners.''); FTC-2023-0064-3230 (Future
of Music Coalition stated that dynamic pricing ``can certainly be
used in ways that frustrate consumers'' but ``can also solve
practical problems.'' It is ``often used by nonprofit arts
presenters in non-problematic ways.'' The commenter noted, however,
that ``disclosure of specific dynamic pricing strategies and tools,
whether manual or algorithmic[,] will only help predatory resellers
make purchasing decisions and maximize their extraction of
value.'').
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A few commenters noted that the rule could interfere with
businesses' ability to engage in national advertising or to advertise
to a broad audience because mandatory fees may vary by location, as is
often the case with franchisee costs and delivery costs.\295\ One
commenter argued that the rule would require either impractical and
challenging geo-targeted advertising or advertising a ``maximum total
price'' to any potential consumer in the businesses' footprint, which
would overstate the price that most consumers need to pay and defeat
comparison shopping.\296\ The commenter also noted that
``[a]lternatively, companies might respond to the proposed rule by
omitting pricing from advertising altogether, an option that would
defeat the [Commission's] goal of ensuring consumers have access to
accurate and reliable cost information as they shop for services.''
\297\
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\295\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce
commented that the Total Price requirements ``may eliminate the
opportunity for national advertising campaigns'' because
``[m]andatory fees [such as regional sports fees] may vary by
location or tie to specific franchisee costs.'' The commenter
recommended that the FTC ``consider revising the definition of
`Total Price' to exclude all charges that vary based on geographic
region.''); FTC-2023-0064-3294 (International Franchise Association
commented: ``Under the Proposed Rule, national marketing campaigns
are only workable if all franchised businesses in a franchise system
adhere to the same pricing regime (including pass-through fees),
regardless of the economic demands of the markets in which they
operate.''); FTC-2023-0064-3300 (National Restaurant Association
commented: ``Like `Shipping Charges,' delivery fees should be
excluded from the `Total Price' requirement since local or national
advertising may feature the cost of the food item but cannot
reasonably predict how regional market conditions will alter the
price of delivery.'').
\296\ See, e.g., FTC-2023-0064-3233 (NCTA--The Internet &
Television Association stated that the rule would interfere with
``efforts to advertise pricing nationwide or to a broad audience''
and would require impractical and technically challenging geo-
targeted advertising. The commenter further stated that businesses
may be incentivized to ````advertis[e] a Total Price for a
particular service option that overstates the price that most
consumers would actually end up paying at their service location
(i.e., the Total Price would be the maximum price that any potential
customer in the provider's footprint would have to pay for the
service),'' which would ``confuse consumers and undermine the type
of comparison-shopping the FTC is aiming to facilitate. Bundled
pricing would be even more challenging to calculate and represent in
advertising, given that each bundled service could have multiple
different applicable taxes or surcharges.'').
\297\ Id.
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The Commission determines that shipping charges may be excluded
from total price. As to other charges that may vary by time or
location, businesses can comply with the rule by advertising a maximum
total price either by region or nationwide. The Commission understands
that many businesses already engage in regional or geo-targeted
advertising that enables flexibility for pricing by time and locality.
Since the rule applies to all businesses offering covered goods or
services, it levels the playing field and preserves comparison-shopping
even when advertised prices are maximum totals.
(e) Rebates, Bundled Pricing, and Other Discounts: Compliance When
Promotional Pricing Models Have Different Fees
Promotional pricing models, such as two-for-one deals, bulk or
bundled pricing, unbundled or a la carte pricing, rebates, or other
discounts, can change the price a consumer ultimately may pay. Section
464.2(a)'s total price disclosure requirement applies whether a
consumer is purchasing a single covered good or service, multiple
covered goods or services, or covered goods or services combined with
ancillary goods or services, as well as when a discount or other
promotion affects the final amount of payment. If a consumer applies a
discount or otherwise qualifies for a promotional price, the business
can update the total price displayed. The Commission provides
clarification herein to address commenter concerns about the rule as it
applies to promotional pricing models.
Some commenters expressed concern that the rule's total price
requirement would prohibit or discourage businesses from offering
promotional prices to consumers.\298\ Two industry groups commented
that the potential difficulty of incorporating promotions into total
price might discourage businesses from offering them.\299\ A
competition policy group agreed and suggested modifications might be
``necessary to ensure that the proposed rules do not interfere with
such pricing models.'' \300\
---------------------------------------------------------------------------
\298\ See, e.g., FTC-2023-0064-2919 (National Automatic
Merchandising Association) (expressing concern that the rule would
ban offering cash discounts); see also, FTC-2023-0064-3217 (Bowling
Proprietors' Association of America) (stating that requiring
businesses to consolidate ``diverse pricing models into a single
displayed price could lead to significant consumer confusion and
dissatisfaction.'').
\299\ FTC-2023-0064-3263 (Flex Association commented that some
fees cannot be calculated at the start of a transaction, including
for discounts and special offers: ``For example, a `two-for-one'
offer cannot be activated until two eligible items are added to a
shopping cart.''); FTC-2023-0064-3137 (Chamber of Progress commented
that sellers may abandon discounts on bundles of goods or bulk
orders, because ``the total price of each good could vary depending
on the other items in the customer's cart.'').
\300\ FTC-2023-0064-2887 (Progressive Policy Institute
commented, ``the proposed disclosure requirements may interfere with
the use of different pricing models that provide value to consumers
and are the basis upon which some firms compete,'' such as unbundled
pricing models when ``the total price may not be known until the
consumer completes the purchase process,'' and therefore, a
``requirement to display prices before the purchase . . . may
mislead consumers and distort competition.'').
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The Antitrust Division of the U.S. Department of Justice commented
that ``[c]ompetition between companies that offer bundled and unbundled
pricing for core products and value-added features can play an
important role in preserving consumer choice . . . and unbundled
pricing can empower consumers who prefer to pay only for what they
value.'' \301\ The Antitrust Division further commented that the
proposed rule ``does not affect companies' ability to offer consumers a
choice whether to buy unbundled features that do not impose mandatory
fees.'' \302\ However, it asserted that ``[w]hen companies use
unbundled offerings to disguise mandatory fees, they undermine the
value to competition of that unbundled option.'' \303\
---------------------------------------------------------------------------
\301\ FTC-2023-0064-3187 (U.S. Department of Justice, Antitrust
Division).
\302\ Id.
\303\ Id.
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The rule does not prohibit businesses from using bundled, discount,
or similar pricing models if, when the business advertises any price of
a covered good or service, it discloses the total price the consumer
must pay for the good or service. The rule also does not require
businesses to incorporate different pricing models into a single price;
rather, under the rule, businesses advertising any price of a covered
good or service must only display the maximum total price. For example,
a hotel can display a regular total price and a loyalty program member
total price. Businesses also can display total price under a
promotional pricing model, such as a bundled price or a promotion
advertising, ``stay three nights, get one night free,'' when and to the
extent that model applies. The Commission notes that offering,
displaying, or advertising a general [x]% or $[y] discount, without
displaying the price of a covered good or service, does not require the
disclosure of total price under the rule.
[[Page 2099]]
(f) Online Marketplaces
The rule covers sellers and online marketplace platforms or other
intermediaries in the same manner as other businesses that offer
covered goods or services. Various commenters, however, highlighted the
challenges some businesses may face in implementing the rule if it is
applied equally to all online marketplace stakeholders. The
Commission's review of the comments, as discussed herein, did not
identify any persuasive reason to change the rule as it applies to
online marketplaces for covered goods or services.
Some commenters stated that certain businesses offering,
displaying, or advertising goods and services in an online marketplace
often must rely on other entities for accurate information about
pricing and expressed concern about liability under the rule if they
receive inaccurate pricing information. This concern arose both from
intermediaries that display prices provided by sellers and from sellers
who offer their goods or services through an intermediary.
Intermediaries are concerned about facing liability if they post prices
that are inaccurate because the seller of the good or service did not
provide complete and accurate pricing information. Commenters also
expressed concern about liability when sellers list their good or
service for sale on a platform but are not in control of how the
platform displays information about pricing.\304\
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\304\ See, e.g., FTC-2023-0064-3258 (National Taxpayers Union
Foundation stated that Total Price may be difficult or impossible to
implement with third-party marketplaces because ``while the platform
may control the display of prices, it is sellers and not the
platform that sets [sic] the prices.''); FTC-2023-0064-3293 (Travel
Technology Association stated that intermediaries may be ``similarly
situated to consumers in that they are also dependent on Travel
Service Providers such as hotels to provide accurate, complete, and
timely information before booking.''); FTC-2023-0064-3262
(Skyscanner Ltd. highlighted ``the numerous and complex ways in
which metasearch sites receive pricing information directly from
hotels and other short-term lodging providers'').
---------------------------------------------------------------------------
Travel Technology Association (``Travel Tech''), for instance,
observed the complex and multi-layered information flow from travel
service providers, such as hotels, motels, inns, vacation rentals, and
other short-term lodging providers, to different types of
intermediaries which operate either as business-to-business, consumer-
facing, or both, and include online travel agents, metasearch engines,
global distribution systems, travel management companies, short-term
rental platforms, ``brick-and-mortar'' or offline travel agents, tour
operators, and wholesalers.\305\ Travel Tech explained that travel
service providers determine the rates, terms, and mandatory fees,
including resort fees, applicable to their travel services, and that
only travel service providers know whether the nature and purpose of
any fee they impose is accurate.\306\ Travel Tech members, which
consist of the aforementioned intermediaries, use the information
provided to them directly from travel service providers, or indirectly
through other intermediaries, to aggregate, sort, and display offers on
their sites and applications, and consumers in turn use this
information to compare offers and make informed choices.\307\ Travel
Tech and one of its members, Skyscanner, a metasearch engine, suggested
that the rule should immunize intermediaries from liability if travel
service providers or other upstream distributors ``fail to provide
accurate, complete, and timely pricing information and such downstream
[i]ntermediaries have made reasonable efforts to receive such
information.'' \308\ Both commenters further requested that the
Commission make clear that travel service providers would be engaging
in an unfair or deceptive practice if they provide inaccurate,
incomplete, or untimely pricing information to intermediaries or seek
remuneration from intermediaries for information necessary for them to
comply with any final rule.\309\ Finally, Travel Tech further requested
that the Commission clarify that the rule applies to any business that
supplies or advertises pricing to consumers so all are held to the same
standard.\310\
---------------------------------------------------------------------------
\305\ FTC-2023-0064-3293 (Travel Technology Association).
\306\ Id.
\307\ Id.
\308\ FTC-2023-0064-3293 (Travel Technology Association); FTC-
2023-0064-3262 (Skyscanner Limited).
\309\ Id.
\310\ FTC-2023-0064-3293 (Travel Technology Association).
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The American Hotel & Lodging Association, a national association
representing all segments of the U.S. lodging industry, including hotel
owners, beds & breakfasts, State hotel associations, and industry
suppliers, also stressed that a final rule must apply broadly to all
industry participants, including online travel agencies, short-term
rental platforms, and metasearch sites.\311\ The commenter noted that
the industry broadly is moving to implement the clear publishing of
total price (including all mandatory, non-government fees) for lodging,
so that consumers can more easily navigate the myriad of choices they
have when it comes to places to stay.\312\
---------------------------------------------------------------------------
\311\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
\312\ Id.
---------------------------------------------------------------------------
The Commission declines to adopt blanket immunity from the rule for
intermediaries that depend on providers of live-event tickets and
short-term lodging for accurate pricing information. The Commission,
clarifies, however, that the final rule applies to business-to-business
(``B2B'') transactions as well as business-to-consumer transactions.
Businesses such as travel service providers that sell or advertise
through intermediaries must provide such entities with accurate pricing
information (including about total price, as well as mandatory and
optional fees). Platforms and other intermediaries that offer, display,
or advertise covered goods or services and ancillary goods or services
or allow third party sellers to do so must disclose the total price of
the goods and services, including all mandatory and optional fees and,
if applicable, provide third-party sellers with all necessary
information to calculate the total price. The rule's coverage of B2B
transactions in this manner protects not only individual consumers from
hidden and misleading fees, but also businesses.
The Commission also notes that at least one commenter, the
International Franchise Association, argued that the rule should exempt
B2B transactions, without providing any compelling justification for
why bait-and-switch pricing, including drip pricing, and the
misrepresentation of fees and charges should be allowed in transactions
involving businesses.\313\ This commenter noted that, for example,
``[f]ranchised hotels advertise large event spaces for consumers'
weddings and business conventions'' and the rule ``could be applied
against these businesses if they fail to display total price even
though no consumer is ever misled or deceived.'' \314\ The prohibition
in section 5 of the FTC Act against unfair or deceptive acts or
practices does not include any limitation on the ``consumers'' who can
be injured. Relying on this authority, the Commission has long
interpreted the FTC Act to apply to cases where the harmed consumers
are businesses, particularly small- and medium-sized businesses.\315\
---------------------------------------------------------------------------
\313\ FTC-2023-0064-3294 (International Franchise Association).
\314\ Id.
\315\ See, e.g., Complaint ]] 1-7, 13-87, FTC v. Arise Virtual
Solutions, Inc., No. 24-cv-61152 (S.D. Fla. July 2, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/arise_complaint.pdf (alleging
defendants made misleading and unsubstantiated earnings claims in
selling its Arise business opportunity to gig worker consumers
seeking to work from home in customer service and failed to provide
the disclosures required by the Business Opportunity Rule);
Complaint ]] 7-51, In re Amazon.com, Inc., 171 F.T.C. 860, 861-71
(2021), https://www.ftc.gov/system/files/ftc_gov/pdf/DV171.pdf
(alleging defendants deceptively claimed they would give their
Amazon Flex drivers 100% of consumer tips when in fact they withheld
nearly a third of the tips from their drivers); Complaint ]] 13-65,
FTC v. First American Payment Systems, LLC, No. 4:22-cv-00654 (E.D.
TX July 29, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/Complaint%20%28file%20stamped%29_0.pdf (alleging defendants made
false claims about their payment processing services, including
about total monthly fees, savings opportunities, and the ease of
cancelling automatically-renewing accounts, to small business
consumers such as restaurants, nail salons, or small retail
businesses); Complaint ]] 12-50, FTC v. Yellowstone Capital LLC, No.
1:20-cv-06023 (S.D.N.Y. Aug. 3, 2020), https://www.ftc.gov/system/files/documents/cases/1823202yellowstonecomplaint.pdf (alleging
defendants engaged in a pattern of deceptive and unfair conduct
involving their ``merchant cash advances'' to small business
consumers and made excess, unauthorized withdrawals from consumers'
accounts after consumers already repaid the full amount they owed);
Complaint ]] 9-104, FTC v. Fleetcor Technologies, Inc., No. 1:19-cv-
05727-ELR (N.D. Ga. December 20, 2019), https://www.ftc.gov/system/files/documents/cases/fleetcor_complaint_with_exhibits_002.pdf
(alleging defendants marketed fuel cards to business consumers that
operate vehicle fleets, including many small businesses and made
false claims about the fuel card's savings, fraud controls, and lack
of set-up, transaction, and membership fees, instead charging these
businesses hundreds of millions of dollars in unexpected fees); see
also Fed. Trade Comm'n, Policy Statement on Enforcement Related to
Gig Work (2022), https://www.ftc.gov/system/files/ftc_gov/pdf/Matter%20No.%20P227600%20Gig%20Policy%20Statement.pdf (noting that
protecting gig workers ``from unfair, deceptive, and anticompetitive
practices is a priority,'' and the FTC ``will use its full authority
to do so'').
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[[Page 2100]]
The Commission clarifies that it does not intend to treat
intermediaries as the publisher or speaker of information about pricing
or as controlling the manner of its display where the intermediary is
not responsible, in whole or in part, for such content or display.\316\
However, if intermediaries are responsible, in whole or in part, for
offering, displaying, or advertising any price, including any portion
thereof, of a covered good or service, then within the scope of that
responsibility, they must give sellers the information necessary to
calculate total price and, when uniquely situated to do so, such
intermediaries must ensure that they display total price. For example,
if an intermediary charges a fee for access to its platform and the
seller passes the fee through to consumers, the intermediary must
provide the seller with accurate information about the fee's amount so
the seller can accurately calculate total price, or otherwise ensure
that the total price is displayed. Travel service providers and other
sellers, by the same token, must provide intermediaries with accurate
price information.
---------------------------------------------------------------------------
\316\ See, e.g., FTC-2023-0064-3202 (TechNet stated: ``The FTC's
proposed rule also poses significant harm to online marketplaces by
potentially creating liability for platforms that merely display
pricing advertised by others. As publishers, such platforms are
likely protected from such responsibility by Section 230 of the
Communications Decency Act of 1996.'').
---------------------------------------------------------------------------
Whether an intermediary, seller, or other business is responsible
for offering, displaying, or advertising a price of a covered good or
service, may be a fact- and law-specific determination in which the
Commission can consider issues of participation in, and control of,
unfair or deceptive practices, as well as contractual obligations
between sellers and platforms and other intermediaries, and the
applicability of other Federal laws. The Commission will consider
issuing and updating business guidance to address particular or nuanced
scenarios, as it has done as a complement to other rulemakings.\317\
---------------------------------------------------------------------------
\317\ See, e.g., Fed. Trade Comm'n, Bureau of Consumer
Protection Business Guidance, FTC Safeguards Rule: What Your
Business Needs to Know (May 2022), https://www.ftc.gov/business-guidance/resources/ftc-safeguards-rule-what-your-business-needs-know; Fed. Trade Comm'n, Bureau of Consumer Protection Business
Guidance, FAQs: Complying with the Contact Lens Rule (June 2020),
https://www.ftc.gov/business-guidance/resources/faqs-complying-contact-lens-rule; Fed. Trade Comm'n, Bureau of Consumer Protection
Business Guidance, Complying with the Funeral Rule (Aug. 2012),
https://www.ftc.gov/business-guidance/resources/complying-funeral-rule.
---------------------------------------------------------------------------
2. Sec. 464.2(b)
Proposed Sec. 464.2(b) in the NPRM required businesses to display
total price more prominently than any other pricing information in any
offer, display, or advertisement that contains an amount a consumer may
pay. Following review of the comments, the Commission finalizes Sec.
464.2(b) with three modifications. First, as already discussed in this
section, the Commission limits the requirements of Sec. 464.2,
including Sec. 464.2(b), to covered goods or services. Second, as
discussed in section III.B.1, the Commission narrows the disclosure
trigger in Sec. 464.2(a) and (b) to ``an offer, display, or
advertisement that represents any price of a covered good or service.''
Third, as discussed herein, final Sec. 464.2(b) clarifies the
prominence requirement with respect to the final amount of payment for
a transaction. Final Sec. 464.2(b) thus provides that, in any offer,
display, or advertisement that represents any price of a covered good
or service, a business must disclose the total price more prominently
than any other pricing information. However, where the final amount of
payment for the transaction is displayed, the final amount of payment
must be disclosed more prominently than, or as prominently as, the
total price.
Various commenters voiced support for proposed Sec. 464.2(b)'s
requirement that total price must be displayed more prominently than
other pricing information.\318\ Certain commenters stated that the
prominence requirement will prevent consumer confusion as to the true
price of a good or service.\319\ Some commenters suggested
strengthening the prominence requirement or adding guidance about
it.\320\ Other commenters also suggested clarifying that the phrase
``an amount a consumer may pay'' refers only to truly mandatory
ancillary goods or services.\321\ On the other hand, some
[[Page 2101]]
industry commenters stated that the prominence requirement may have
unintended consequences that could harm consumers, such as consumers
not noticing an offered discount or a business deciding not to provide
any pricing information.\322\ As noted in section III.B.1.e, nothing in
the rule prohibits a business from adjusting total price to account for
any applied discounts or other promotional pricing and, given strong
market incentives, the Commission disagrees with comments that the
rule's prohibitions against hidden and misleading fees will deter
businesses from advertising prices.\323\
---------------------------------------------------------------------------
\318\ See, e.g., FTC-2023-0064-3266 (StubHub, Inc. agreed with
the FTC's proposal to require Total Price in every offer, display,
or advertisement presented to consumers and that Total Price must be
consistently displayed throughout the transaction); FTC-2023-0064-
3306 (Live Nation Entertainment and its subsidiary Ticketmaster
North America supported ``requir[ing] the first price for a live-
event ticket shown to consumers to be the price ultimately charged
at checkout (exclusive of state and local taxes and optional add-
ons). This price should be clearly displayed on the initial landing
page and easily discernible.'' The commenter proposed adding the
phrase, ``from the first instance a consumer sees a price for a good
or service'' to the end of proposed Sec. 464.2(a) and moving the
phrase, ``as soon as pricing information is provided to the
consumer'' before ``more prominently than any other Pricing
Information'' in proposed Sec. 464.2(b).); FTC-2023-0064-3290 (U.S.
Public Interest Research Group Education Fund commented: ``[T]he
Total Price should be provided first and with the most prominence.
Businesses must not be allowed to confuse consumers with a barrage
of numbers.''); FTC-2023-0064-1939 (Tzedek DC).
\319\ See, e.g., FTC-2023-0064-3290 (U.S. Public Interest
Research Group Education Fund); FTC-2023-0064-1939 (Tzedek DC
commented that proposed Sec. 464.2(b) ``will prevent companies from
hiding the real cost of goods and services in fine print or making
the total cost difficult to find.'').
\320\ See, e.g., FTC-2023-0064-3196 (South Carolina Department
of Consumer Affairs commented: ``Guidance on how the business can
simultaneously comply with the `Clearly and Conspicuously'
requirement and the prominence requirement may help with business
comprehension and compliance.'' The commenter suggested adding ``a
definition addressing the different mediums by which the offer,
display or advertisement may be relayed to a consumer (visual,
audio, print, online)'' and providing ``examples of compliance with
the requirement of prominent display'' such as ``in a visual
disclosure presentation of the Total Price in bolded typeface at
least two points larger than any other Pricing Information or 14-
point font, whichever is larger, satisfies the prominence
requirement.'').
\321\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for
Consumer Law & Economic Justice et al. suggested modifying proposed
Sec. 464.2(b) to include: ``[A] Business must not automatically
include Ancillary Goods or Services in the Total Price or
automatically select Ancillary Goods or Services for purchase on
behalf of the consumer.''); FTC-2023-0064-3160 (Consumer Federation
of America et al. made a similar suggestion and stated it would
``ensure that `must pay' is interpreted to include any fee or charge
that is included by default and that the consumer must pay unless
they take affirmative action to opt-out or avoid it.'' The commenter
proposed adding guidance that: ``A consumer must pay a fee or charge
if the fee or charge is not reasonably avoidable or if the consumer
must pay the fee or charge unless they take affirmative action to
avoid it. An ancillary good or service is mandatory if a reasonable
consumer would expect the good or service to be included with the
purchase.'').
\322\ See, e.g., FTC-2023-0064-3293 (Travel Technology
Association commented that if Total Price is ``clearly and
conspicuously'' displayed, a prominence requirement is unnecessary
and ``discounts would have to be less prominent than the Total
Price, potentially leading to a consumer missing out on a deal that
may have saved them money or led to a more enjoyable vacation.'' The
commenter suggested that the rule be more flexible ``so that
Intermediaries can use their expertise to relay the most appropriate
information to consumers.''); FTC-2023-0064-3296 (Bay Area Apartment
Association commented that the prominence requirement could have a
``chilling effect on the content of commercial speech,'' with some
rental housing providers choosing ``not to include pricing
information in their advertisements, and instead invite prospective
residents to learn about pricing on their website or to call their
leasing office,'' thereby ``undermining a key objective (better
consumer awareness of the price of goods and service[s]) the rule is
intended to accomplish.'').
\323\ See also Bates v. State Bar of Ariz., 433 U.S. 350, 383-84
(1977) (``Since the advertiser knows his product and has a
commercial interest in its dissemination, we have little worry that
regulation to assure truthfulness will discourage protected
speech.'') (citing Va. State Bd. of Pharm. v. Va. Citizens Consumer
Council, Inc., 425 U.S. 748, 771-772, 771 n. 24 (1976)).
---------------------------------------------------------------------------
Final Sec. 464.2(b) also clarifies how the prominence requirement
applies to the final amount of payment for a transaction. The
Commission recognizes that the final amount of payment, now an
explicitly required disclosure under final Sec. 464.2(c), may differ
from total price due to various factors, such as the exclusion from
total price of certain fees or charges, including for any optional
ancillary good or service, or the application of promotional pricing
models. The Commission determines that both total price and the final
amount of payment are material to consumers. The Commission therefore
clarifies that, when the final amount of payment is displayed, it must
be displayed as prominently as, or more prominently than, total price.
The modification avoids a potential unintended consequence of the rule,
which may have been read to require total price to obscure the final
amount of payment.
The Commission determines that, with these modifications, Sec.
464.2(b)'s prominence requirement is clear, understandable, and
unambiguous.
3. Sec. 464.2(c)
In final Sec. 464.2, the Commission consolidates all proposed
disclosure requirements; therefore, proposed Sec. 464.3(b) is codified
at final Sec. 464.2(c). Proposed Sec. 464.3(b) would have required
businesses to disclose clearly and conspicuously, before the consumer
consents to pay, the nature and purpose of any amount a consumer may
pay that is excluded from total price, including the fee's
refundability and the identity of the good or service for which the fee
is charged. Final Sec. 464.2(c) largely adopts the disclosure
requirements of proposed Sec. 464.3(b), with certain modifications.
Specifically, final Sec. 464.2(c) requires businesses to disclose
clearly and conspicuously, before the consumer consents to pay for any
covered good or service: The nature, purpose, and amount of any fee or
charge imposed on the transaction that has been excluded from total
price and the identity of the good or service for which the fee or
charge is imposed, but not the fee's refundability; and the final
amount of payment for the transaction.
The Commission makes these modifications, as discussed herein, in
response to the comments and to address related concerns. One commenter
recommended that the Commission provide greater specificity about which
fees excluded from total price must be disclosed under this provision,
and require the itemized disclosure of such fees.\324\ Some commenters
argued that the provision was vague and overbroad, and that its
application to ``any amount a consumer may pay'' would make complying
with the provision impracticable and result in excessive disclosures
that would confuse consumers into believing that all disclosed fees
apply to them when they might not.\325\ One commenter recommended that
the rule allow the required disclosures to be made at the time goods or
services are selected.\326\ Commenters argued that requiring businesses
to explain how fees will be used is not reasonable and may require the
disclosure of confidential, proprietary, or commercially sensitive
information, such as the business rationale for imposing fees and the
specific uses to which businesses put fees.\327\ Other commenters
recommended that the rule require the disclosure of the optional nature
of optional fees \328\ and regulate opt-in and opt-out procedures for
fees.\329\
---------------------------------------------------------------------------
\324\ FTC-2023-0064-3283 (National Consumer Law Center, Prison
Policy Initiative, and advocate Stephen Raher).
\325\ See, e.g., FTC-2023-0064-3094 (American Hotel & Lodging
Association asserted: ``The language of the proposed rule is vague,
overbroad, and not sufficiently specific to provide notice of what
types of fees businesses are required to display . . . . Businesses
could reasonably differ in their approaches to disclosing the
`nature and purpose' or `identity' of such fees.''); FTC-2023-0064-
3133 (National Multifamily Housing Council and National Apartment
Association commented that disclosing the nature and purpose of fees
is ``impracticable'' and requiring rental housing providers to
furnish prospective tenants ``with any fee or charge excluded from
the total price that the customer may (or may not) have to pay at
some point during the lease practically means housing providers will
need to disclose all possible fees.''); FTC-2023-0064-3263 (Flex
Association asserted that the ``requirement to disclose the `nature
and purpose' of a fee is vague'' and ``provide[s] no material
benefit to consumers.''); see also, FTC-2023-0064-2981 (Apartment &
Office Building Association of Metropolitan Washington); FTC-2023-
0064-3042 (Nevada State Apartment Association); FTC-2023-0064-3044
(San Angelo Apartment Association); FTC-2023-0064-3045 (Chicagoland
Apartment Association); FTC-2023-0064-3111 (Houston Apartment
Association); FTC-2023-0064-3116 (Manufactured Housing Institute);
FTC-2023-0064-3233 (NCTA--The internet & Television Association);
FTC-2023-0064-3296 (Bay Area Apartment Association); FTC-2023-0064-
3311 (Greater Cincinnati Northern Kentucky Apartment Association).
\326\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
\327\ See, e.g., FTC-2023-0064-1425 (Iowa Bankers Association);
FTC-2023-0064-3263 (Flex Association asserted that ``[i]t appears
that the Commission seeks to require disclosure of the business
rationale for imposing a fee and the specific uses to which proceeds
of a given fee will go,'' which would require businesses to
``divulge commercially sensitive information that could seriously
alter competition in a given marketplace.'').
\328\ See, e.g., FTC-2023-0064-2888 (Housing Policy Clinic,
University of Texas School of Law).
\329\ See, e.g., Id.; FTC-2023-0064-2883 (District of Columbia,
Office of the People's Counsel); FTC-2023-0064-3146 (Institute for
Policy Integrity, New York University School of Law).
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The Commission modifies the NPRM proposal so that final Sec.
464.2(c) requires businesses to disclose separately the amount, as well
as the nature and purpose, of each fee or charge imposed on the
transaction for the covered good or service that is excluded from total
price, and the final amount of payment, before the consumer consents to
pay. The Commission determines that these modifications are necessary
for price transparency and to protect consumers who would reasonably
expect to know the nature, purpose, and amount of fees they will have
to pay, as well as the
[[Page 2102]]
final amount of payment, before they consent to pay.
To provide clarification and address commenter concerns about
potential overbreadth and vagueness, the Commission narrows the NPRM
proposal so that final Sec. 464.2(c) requires the disclosures in
connection with ``any fee or charge imposed on the transaction that has
been excluded from total price'' instead of ``any amount a consumer may
pay.'' The provision therefore requires the disclosure, before the
consumer consents to pay, of the nature, purpose, and amount of
government charges, shipping charges, and any other fee or charge, such
as for optional ancillary goods or services, that permissibly were
excluded from total price but are being imposed on the transaction.
Final Sec. 464.2(c) also explicitly requires disclosure of ``the
final amount of payment for the transaction,'' as that amount may
differ from total price due to, for example, the application of
promotional pricing or the addition of any fees or charges permissibly
excluded from total price, including for any optional ancillary goods
or services. Where the final amount of payment is displayed, as
discussed in section III.B.2, final Sec. 464.2(b) requires it to be at
least as prominent as, or more prominent than, total price.
In most instances, the disclosure about the nature, purpose, and
amount of the excluded charge or fee will be minimal. For example,
using the defined term ``shipping charges'' is likely to convey the
nature and purpose of such charges. For government charges, a phrase
like ``sales tax'' or ``hotel occupancy tax'' would convey the nature
and purpose of an imposed sales tax or hotel occupancy tax. Similarly,
in most instances, simply identifying the ancillary good or service for
which a charge applies, such as ``valet parking,'' will sufficiently
convey the nature and purpose of the charge.
Some commenters observed that the timing of ``before the consumer
consents to pay'' is unclear. One commenter cautioned that the language
of the rule may open the door to the types of bait-and-switch pricing
that the total price disclosure requirement is meant to prevent.\330\
Other commenters recommended that the Commission clarify the meaning of
the phrase ``before the consumer consents to pay'' and the timing of
the required disclosures, for example, by specifying that it means
before businesses obtain consumers' billing information.\331\
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\330\ FTC-2023-0064-3160 (Consumer Federation of America et
al.).
\331\ See, e.g., FTC-2023-0064-3160 (Consumer Federation of
America et al.); FTC-2023-0064-3146 (Institute for Policy Integrity,
New York University School of Law); FTC-2023-0064-3283 (National
Consumer Law Center, Prison Policy Initiative, and advocate Stephen
Raher); FTC-2023-0064-3191 (Community Catalyst et al.).
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The Commission clarifies that, although when a consumer consents to
pay may depend on the facts and circumstances surrounding the
transaction, Sec. 464.2(c) requires businesses to clearly and
conspicuously disclose the nature, purpose, and amount of any fees or
charges imposed on the transaction that have been excluded from total
price and the identity of the good or service for which the fee or
charge is imposed, as well as the final amount of payment for the
transaction, before consumers are required to pay cash or provide their
payment information. The Commission notes that a default setting that
automatically opts-in consumers to pay for goods or services does not
constitute consent to pay nor does it satisfy Sec. 464.2(c)'s
disclosure requirements.
As part of final Sec. 464.2(c), the Commission does not adopt the
NPRM's proposed requirement to affirmatively disclose each fee's
refundability. The Commission determines that requiring clear and
conspicuous disclosure of each fee's refundability may be impractical
for businesses and confusing to consumers due to extensive
qualifications or other requirements for refunds. Such extensive,
itemized disclosures may impede the Commission's goal of ensuring
consumers receive clear and accurate pricing information. However, the
Commission finalizes Sec. 464.3's prohibition on misrepresenting a
fee's refundability.
C. Sec. 464.3 Misleading Fees Prohibited
Both practices that the Commission identified in the NPRM as unfair
or deceptive involve misleading practices: (1) bait-and-switch pricing
that hides the total price of goods or services by omitting mandatory
fees from advertised prices, including through drip pricing, and (2)
misrepresenting the nature, purpose, amount, and refundability of fees
or charges. Proposed Sec. 464.3(a) would have prohibited any business
from misrepresenting the nature and purpose of any amount a consumer
may pay, including the refundability of such fees and the identity of
any good or service for which fees are charged.\332\
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\332\ As noted supra section III.B, the Commission redesignates
proposed Sec. 464.3(b) as final Sec. 464.2(c) to consolidate all
provisions related to disclosures in final Sec. 464.2.
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The Commission finalizes proposed Sec. 464.3(a) in Sec. 464.3
with some modifications. Specifically, final Sec. 464.3 prohibits any
business, in any offer, display, or advertisement for a covered good or
service, from misrepresenting any fee or charge, including its nature,
purpose, amount or refundability, and the identity of the good or
service for which it is imposed. The Commission adds the phrase
``covered goods or services'' to reflect the narrower scope of the
final rule. The Commission also adds ``amount'' to ``nature'' and
``purpose,'' and clarifies that the prohibited misrepresentations
concern ``any fee or charge'' instead of ``any amount a consumer may
pay.'' This modified provision makes plain that, in connection with
covered goods or services, businesses cannot misrepresent the nature,
purpose, amount, or refundability of any fee or charge, including
government charges, shipping charges, any fees or charges for optional
ancillary goods or services, or any mandatory fees or charges. In
making these modifications, the Commission has considered
recommendations and alternatives suggested in NPRM comments, discussed
herein.
The Commission noted in the NPRM that it had received comments in
response to the ANPR stating that sellers often misrepresent the nature
or purpose of fees, leaving consumers wondering what they are paying
for, believing fees are arbitrary, or concerned that they are getting
nothing for the fees charged. The Commission received similar comments
in response to the NPRM.
The Attorneys General of nineteen States and the District of
Columbia commented that fee misrepresentations ``mislead consumers and
make it more difficult for truthful businesses to compete on price.''
\333\ Commenters supported prohibiting fee misrepresentations because
truthful information benefits both consumers and businesses.\334\ A
commenter
[[Page 2103]]
recommended that the Commission clarify that the provision includes
misrepresentations about fees included in total price and fees excluded
from total price.\335\
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\333\ FTC-2023-0064-3215 (Attorneys General of the States of
North Carolina and Pennsylvania, along with Attorneys General of the
States or Territories of Arizona, Colorado, Connecticut, Delaware,
District of Columbia, Hawaii, Illinois, Maine, Michigan, Minnesota,
New Jersey, New York, Oklahoma, Oregon, Vermont, Washington, and
Wisconsin stated: ``[C]harges that misrepresent their nature and
purpose are unfair and deceptive because they mislead consumers and
make it more difficult for truthful businesses to compete on
price.'' The Attorneys General asserted that ``this provision is
another straightforward, commonsense approach that should not
significantly burden businesses.'').
\334\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for
Consumer Law & Economic Justice et al. asserted: ``Prohibiting
misrepresentation of the identity and nature of fees further serves
the Commission's mandate to promote fair business practices and
competition.''); FTC-2023-0064-2892 (Community Legal Services of
Philadelphia stated that the rule's ``prohibition on
misrepresentation regarding the nature and cost of fees would also
be extremely beneficial for low-income renters, who often face
inflated fees that can contribute to housing insecurity.''); FTC-
2023-0064-3268 (Housing and Eviction Defense Clinic, University of
Connecticut School of Law stated: ``Prohibiting misleading fees will
not only properly inform the tenants of the charges but also hold
the landlords accountable for their fees.'').
\335\ FTC-2023-0064-3283 (National Consumer Law Center, Prison
Policy Initiative, and advocate Stephen Raher stated that Sec.
464.3(a) should make clear that it prohibits misrepresentations
regarding any amount included in Total Price as well as any other
fee or charge the consumer may pay, including ``Shipping Charges,
Government Charges, fines, penalties, optional charges, voluntary
gratuities, and invitations to tip,'' and proposed adding specific
text to that effect.).
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Commenters stated that businesses misrepresent fees by using
language that is vague and not understandable to consumers,\336\ and
provided examples of various types of misrepresentations about the
nature and purpose of fees, such as ``service'' fees that may not go to
service employees, ``environmental'' fees that may not have an
environmental purpose, ``resort'' fees for ordinary accommodations or
amenities,\337\ and fees misrepresented as government charges.\338\
Commenters also stated that businesses may misrepresent the mandatory
or optional nature of fees, or their amount, and recommended that the
Commission clarify that prohibiting misrepresentations about the nature
and purpose of fees includes misrepresentations about their mandatory
or optional nature.\339\ Another commenter argued that businesses can
misrepresent fees when they itemize mandatory fees that are arbitrary
and are not for identified goods or services, and recommended that the
Commission clarify that businesses must have adequate substantiation
for itemized fees.\340\ Commenters also argued that businesses
misrepresent fees when they do not provide the goods or services for
which fees are charged or provide nothing of value,\341\ and when fees
fail to reflect the cost of the goods or services provided.\342\
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\336\ See, e.g., FTC-2023-0064-3268 (Housing & Eviction Defense
Clinic, University of Connecticut School of Law stated that rental
fees may be ``for something the landlord/property manager cannot
explain.''); FTC-2023-0064-3283 (National Consumer Law Center,
Prison Policy Initiative, and advocate Stephen Raher stated the rule
should clarify that descriptions of fees which are not
understandable to reasonable consumers misrepresent their nature and
purpose.); FTC-2023-0064-3275 (Berkeley Center for Consumer Law &
Economic Justice et al. cited research showing that ``many
businesses characterize their hidden and unexpected fees using vague
or anodyne language that fails to succinctly explain to the consumer
exactly what the fee is for.'').
\337\ See, e.g., FTC-2023-0064-1939 (Tzedek DC expressed support
for the misleading fees provision because it ``will prevent
companies from making misleading claims about a fee, in example, a
company charging a `staff service fee' that does not go to
employees.''); FTC-2023-0064-3106 (American Society of Travel
Advisors noted: ``While admittedly there is no universally accepted
industry definition of what constitutes a `resort,' hotels offering
only typical or ordinary accommodations and/or amenities but
nevertheless characteriz[ing] their fees as such misrepresent the
nature of the property being booked.''); FTC-2023-0064-3275
(Berkeley Center for Consumer Law & Economic Justice et al.
identified ``environmental fees'' as one example of fees that may
``serve[ ] no apparent environmental sustainability or conservation
purpose.'').
\338\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for
Consumer Law & Economic Justice et al. stated that ``environmental''
fees ``are likely designed to trick consumers into thinking that the
added cost is either a government-imposed tax to protect the
environment, or a salutary contribution to somehow `offset' any
negative environmental impact caused by the good or service'' when
they may be ``charged simply to boost a business's profits.''); FTC-
2023-0064-3106 (American Society of Travel Advisors noted that ``use
of terms such as `destination fee' . . . will inevitably mislead
many consumers into mistakenly believing that it represents a tax or
government surcharge that must be collected from the consumer and
passed on to a local jurisdiction.'').
\339\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for
Consumer Law & Economic Justice et al. argued that the rule could be
strengthened by clarifying that the misleading fees provision
applies to mandatory and optional fees.); FTC-2023-0064-3160
(Consumer Federation of America et al. stated that the FTC should
make clear that the misleading fees provision applies to mandatory
and optional fees.).
\340\ FTC-2023-0064-3212 (TickPick, LLC argued: ``Due to the
arbitrary nature of the components that make up the Total Price of a
ticket, any secondary ticketing marketplace that itemizes mandatory
fees and charges is arguably misrepresenting the `nature and purpose
of any amount a consumer may pay.' '' The commenter proposed that
the Commission ``define any breakdown of the amounts that a consumer
may pay as a representation that requires adequate
substantiation.'').
\341\ See, e.g., FTC-2023-0064-3102 (Corporation for Supportive
Housing noted that landlords and property managers may collect
``fees for services that were not performed (e.g., running a
background check, credit check), [and] charg[e] fees in excess of
the actual amount to perform the service/run the check to generate
profit.''); FTC-2023-0064-3278 (Southeast Louisiana Legal Services
noted that low-income renters face unfair and deceptive fees during
residential leases that are ``frequently for services not
rendered.'' The commenter further noted: ``Without any restrictions
on hidden or misleading fees, landlords are free to use rental
applications as an independent source of profit for which there may
be no real service provided.''); FTC-2023-0064-1431 (McPherson
Housing Coalition stated that rental housing applicants who pay
application fees and do not get approved lose their money.); FTC-
2023-0064-2862 (Legal Aid Foundation of Los Angeles gave as examples
of misleading fees a repairs fee when the landlord is legally
obligated to provide the repairs and a parking fee when the tenant
does not have or park a car.); FTC-2023-0064-2920 (Colorado Poverty
Law Clinic stated, ``we often see fees added for services that the
tenant does not receive, or that are basic services that should only
reasonably be included in the tenant's monthly rent,'' such as for
common area maintenance or utilities.); FTC-2023-0064-3242 (William
E. Morris Institute for Justice expressed concern that ``housing
providers and landlords are charging junk fees untethered to any
real cost or business expense . . . or to any value or benefit
delivered to rental housing applicants.'').
\342\ See, e.g., FTC-2023-0064-3106 (American Society of Travel
Advisors noted that ``even where use of the term `resort' to
describe the property may be warranted, often the amount of the fee
collected appears arbitrary and bears no relationship to the value
of the services purportedly being provided.''); FTC-2023-0064-3278
(Southeast Louisiana Legal Services commented that rental housing
providers charge misleading fees when ``they do not appear to
correspond to the cost of service provided'' or are vaguely
identified, such as an ``administrative fee'' that causes
``confusion for tenants who believe it to be a security deposit.'');
FTC-2023-0064-3253 (Fortune Society commented that ``application
fees often do not reflect the actual costs of submitting a rental
application.'').
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The American Hotel & Lodging Association and other commenters
described the misleading fees provision as unnecessary given the
Commission's existing authority under section 5 of the FTC Act to
police misleading fees.\343\ It is true that section 5, which prohibits
unfair or deceptive practices, has long been used to protect against
misrepresentations regarding material terms of a transaction, including
price. False claims about fees or charges, as well as those claims that
lack a reasonable basis, are inherently likely to mislead. However, the
Commission disagrees with commenters' contentions that the rule's
prohibitions on misrepresentations are unnecessary given the existing
section 5 authority. As explained in section V, the final rule is
necessary to: (1) ensure all businesses offering covered goods or
services are held to the same standard so that consumers can
effectively comparison shop; (2) level the playing field for these
businesses so that they can compete based on truthful pricing
information; and (3) increase deterrence by allowing courts to impose
civil penalties and enabling the Commission to more readily obtain
redress and damages for consumers through section 19(b) of the FTC Act.
As it has become increasingly common for businesses offering covered
goods or services to charge or itemize discrete fees over the course of
a transaction, a specific prohibition on pricing misrepresentations is
necessary to ensure consumers receive truthful information about the
charges and fees they incur, and businesses are able to compete based
on truthful information.\344\
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\343\ See, e.g., FTC-2023-0064-3094 (American Hotel & Lodging
Association).
\344\ Given the prevalence of the defined unfair or deceptive
practices regarding the misrepresentation of total costs and the
nature and purpose of fees, the Commission finds that it is
necessary to require both affirmative disclosures and a prohibition
of misrepresentations, instead of limiting the rule to prohibiting
misrepresentations. See supra Parts II.A and II.B.
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[[Page 2104]]
Other commenters described the misrepresentations provision as
vague and overbroad.\345\ The Commission carefully considered comments
that suggested the language proposed in the NPRM prohibiting
misrepresentations lacked specificity and was vague or overbroad,
particularly the phrase ``any amount a consumer may pay.'' In final
Sec. 464.3, the Commission modifies the NPRM proposal to replace ``any
amount a consumer may pay'' with a reference to ``any fee or charge.''
In the NPRM, the Commission stated that ``[o]ther characteristics
included in the nature and purpose of a charge, such as the amount of
the charge and whether it is refundable, are also material.'' \346\ To
elaborate on this point in the final rule text, the Commission
specifies that the ``amount'' of any fee or charge cannot be
misrepresented. Taken together, these modifications provide clarity to
businesses that they cannot misrepresent the nature, purpose, amount,
or refundability of any fee or charge excluded from total price,
including government charges, shipping charges, any fees or charges for
optional ancillary goods or services, or any other itemized or totaled
fee or charge, including total price and the final amount of payment.
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\345\ See, e.g., FTC-2023-0064-3094 (American Hotel & Lodging
Association); FTC-2023-0064-3206 (Motor Vehicle Protection Products
Association et al.).
\346\ NPRM, 88 FR 77434.
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Final Sec. 464.3 prohibits misrepresentations about material
pricing terms of a transaction. The nature, purpose, amount, and
refundability of fees or charges and the identity of the good or
service for which they are imposed are material characteristics that
affect the value to consumers of the covered goods or services being
offered and businesses' ability to compete on price. As the Commission
noted in the NPRM, whether a consumer is required to pay a charge, the
amount of the charge, and what goods or services they will receive in
exchange for the charge, is necessarily material information that
affects a consumer's choice about whether to consent to a charge.\347\
Other characteristics included in the nature, purpose, and amount of a
charge, such as whether it is refundable, are also material.
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\347\ NPRM, 88 FR 77432; Deception Policy Statement, 103 F.T.C.
110, 175, 182-183, 183 n.55 (listing, respectively, ``misleading
price claims'' among those that the FTC has found to be deceptive,
and claims or omissions involving cost among those that are
presumptively material); see also FTC v. FleetCor Techs, Inc., 620
F. Supp. 3d 1268, 1303-04 (N.D. Ga. 2022) (finding that
representations about transaction fees and discounts were material).
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Under final Sec. 464.3, businesses cannot misrepresent the nature,
purpose, amount, or refundability of fees or charges and the identity
of the goods or services for which they are imposed.\348\ For example,
it would be a misrepresentation to characterize fees as mandatory when
they are optional, or to characterize fees as optional when they are
mandatory or consumers are automatically opted-in to pay them.\349\
Representations that fees are for identified goods or services when
those goods or services are not provided would also be a
misrepresentation. Further, although the rule does not govern how
businesses set their prices, if a business represents that it is
charging a fee for a specific good or service, but the amount of the
fee does not reflect the cost of that good or service, that may be
evidence that the business has misrepresented the nature or purpose of
the fee.
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\348\ As the Commission noted in the NPRM, if a delivery
application includes an invitation to tip a delivery driver without
disclosing that a portion of the tip is allocated to offset the
delivery driver's base wages or benefits, it would violate Sec.
464.3 in addition to other laws or regulations relating to the
distribution of tips. See Complaint ]] 50-51, In re Amazon.com, Inc.
(``Amazon Flex''), No. C-4746 (FTC June 9, 2021) (alleging
respondents falsely represented that 100% of tips would go to the
driver in addition to the pay respondents offered drivers).
\349\ See discussion of optional and mandatory fees supra Parts
III.A.1 and III.A.8.a; see also, e.g., Fed. Trade Comm'n, Bringing
Dark Patterns to Light: Staff Report 9, 15, 15 n.122, 22 (stating
``companies must not mislead consumers to believe that fees are
mandatory when they are not'' and describing the use of pre-selected
checkboxes as a dark pattern that tricks consumers into buying
unwanted goods and services) (Sept. 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/P214800%20Dark%20Patterns%20Report%209.14.2022%20-%20FINAL.pdf;
Stipulated Order for Permanent Injunction, Monetary Judgment, and
Other Relief as to Defendants Rhinelander Auto Grp. LLC, et al., FTC
v. Rhinelander Auto Ctr., Inc., No. 3:23-cv-00737-wmc (W.D. Wis.
Nov. 6, 2023) (settling allegations that defendants misrepresented
that consumers were required to purchase add-on products to
purchase, lease, or finance a vehicle and, among other provisions,
enjoining defendants from misrepresenting whether charges, products,
or services are optional or required), https://www.ftc.gov/system/files/ftc_gov/pdf/18-ConsentJudgmentEnteredastoRAGRMGandTowne.pdf.
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Misrepresentations can result from failing to disclose material
conditions or limitations relating to fees and charges, for example,
material conditions or limitations that would affect consumers' ability
to purchase covered goods or services at advertised prices.\350\
Describing a good or service as fully refundable without disclosing
material limitations on refundability (e.g., refunds are only accepted
for a specified amount of time) would also be misleading.
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\350\ See, e.g., cases cited supra note 111.
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The American Hotel & Lodging Association expressed the concern that
businesses may use inconsistent descriptions of similar fees and
confuse consumers in disclosing the nature and purpose of fees or the
identity of the goods or services for which fees are imposed.\351\
Using vague language or fee descriptions (e.g., unspecified service or
convenience fees) that do not accurately inform consumers of the nature
or purpose of fees or charges or the identity of the good or service
for which the fee or charge is imposed misrepresents those fees. In
addition, it would be misleading if a business conflates fees so that
consumers are unable to determine their nature, purpose, or the
identity of the goods or services for which the fees are charged.
Whether fee descriptions are adequate to avoid misrepresenting their
nature, purpose, or the identity of goods or services for which they
are charged will be case specific and may depend on the context.
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\351\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
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Another commenter argued that the rule would unfairly hold online
travel agencies and other intermediaries liable for fee
misrepresentations when only travel service providers can know whether
representations about the nature and purpose of fees are accurate.\352\
As discussed in section III.B.1.f, complying with the rule would
require businesses that sell or advertise covered goods or services
through platforms to provide the platforms with accurate pricing
information. Contractual relationships and the rule's application to
B2B transactions should ensure that businesses that rely on other
parties for pricing information receive accurate pricing information.
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\352\ FTC-2023-0064-3293 (Travel Technology Association).
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One commenter argued that charging consumers for ``speculative
tickets'' in the live-event sector is deceptive because it is
tantamount to ``charging consumers for something that doesn't exist,''
and suggested the rule should ``prohibit sellers or resellers from
charging the consumer for buying something the seller doesn't own, or
that does not even exist.'' \353\ The
[[Page 2105]]
Commission notes that the final rule does not directly address the sale
of speculative tickets. However, a business that represents that
tickets are in fact available when they are not may violate Sec. Sec.
464.2(c) and 464.3 by failing to disclose clearly and conspicuously,
and by misrepresenting, the identity of the good or service for which
fees or charges are imposed.
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\353\ FTC-2023-0064-3108 (Christian L. Castle, Esq.; Mala
Sharma, President, Georgia Music Partners; and Dr. David C. Lowery,
founder of musical groups Cracker and Camper Van Beethoven, and a
lecturer at the University of Georgia Terry College of Business).
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Commenters opposed the misrepresentation provision in the context
of negotiated contracts because negotiations arguably allow consumers
to seek clarification about fees.\354\ The Commission, however, has not
identified any justification for excluding contracts from the
misleading fees provision. Truthful fee disclosures in contract
negotiations are material to consumers. One commenter recommended
providing a safe harbor from the misleading fees provision if
businesses clearly and conspicuously disclose fees and make either no
statement or an accurate statement about the nature and purpose of
fees.\355\ The Commission declines to grant a safe harbor from the
misleading fees provision when businesses make affirmative disclosures.
Whether disclosures are adequate, clear and conspicuous, and not
misleading are issues that may depend on the specific facts and
circumstances of the transaction.
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\354\ See, e.g., FTC-2023-0064-2918 (Elite Catering + Event
Professionals opposed the misrepresentations provision for private
food services contracts because ``[t]hroughout the contracting
process, there are ample opportunities for the customer to seek
clarification or negotiate the applicability of the price and
fees.'').
\355\ FTC-2023-0064-3016 (National Federation of Independent
Business proposed modifying the rule as follows: ``(a) . . . [I]t is
an unfair and deceptive practice . . . for a Business to: (i)
misrepresent the total cost of a good or service by omitting a
mandatory fee from the advertised price of the good or service; or
(ii) misrepresent the nature and purpose of such a mandatory fee.''
The commenter also proposed exempting any business from that
requirement if it discloses the fee clearly and conspicuously
``before a consumer becomes obligated to pay the fee'' and ``either
makes no statement about the nature and purpose of the fee or makes
an accurate statement of the nature and purpose of the fee.'').
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The NPRM identified and sought comment on the proposed rule's
intersection with existing Federal rules and regulations containing
prohibitions on misrepresentations: the Business Opportunity Rule,\356\
the Mortgage Acts and Practices Advertising Rule (Regulation N),\357\
the Mortgage Assistance Relief Services Rule (Regulation O),\358\ the
amendments to the Negative Option Rule,\359\ and the Telemarketing
Sales Rule.\360\ The Commission did not receive substantive comments
about overlap or conflict with these rules.\361\ The Commission is not
aware of any evidence that there is a conflict between these rules and
the final rule. The Commission believes it is possible for businesses
to comply with each of them, as applicable.
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\356\ 16 CFR part 437.
\357\ 12 CFR part 1014.
\358\ 12 CFR part 1015.
\359\ Promulgation of Trade Regulation Rule and Statement of
Basis and Purpose: Rule Concerning Recurring Subscriptions and Other
Negative Option Programs, 89 FR 90476 (Nov. 15, 2024), https://www.federalregister.gov/documents/2024/11/15/2024-25534/negative-option-rule.
\360\ 16 CFR part 310.
\361\ In addition, the added definition of ``Covered Goods or
Services'' removes any potential overlap between the final rule and
Regulations N and O.
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D. Sec. 464.4 Relation to State laws
Proposed Sec. 464.4 addressed preemption and the proposed rule's
relation to State statutes, regulations, orders, or interpretations,
including State common law (hereinafter ``State law''). Proposed Sec.
464.4(a) provided that the rule would not supersede or otherwise affect
any State law unless the State law is inconsistent with the rule, and
then only to the extent of the inconsistency. Proposed Sec. 464.4(b)
specified that a State law providing consumers with greater protections
than the rule does not, solely for that reason, make the State law
inconsistent with the rule. When a State law offers greater (or, in
some circumstances, even lesser) protection than the rule, if
businesses can comply with both, they are not inconsistent. Thus, as
commenters noted, the rule would establish a regulatory floor rather
than a ceiling.\362\ After reviewing the comments, the Commission
adopts the provision as proposed in the NPRM.
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\362\ See, e.g., FTC-2023-0064-3150 (Attorney General of the
State of California ``appreciate[d] that the FTC's rule respects the
states' role in protecting consumers from deceptive price
advertising, and the rule's clear intent to create a federal floor,
rather than a ceiling, for consumer protection.''); FTC-2023-0064-
3212 (TickPick, LLC).
---------------------------------------------------------------------------
The Commission finds it has the authority to promulgate regulations
that preempt inconsistent State laws under section 5 of the FTC Act.
Even without an express preemption provision, Federal statutes and
regulations preempt conflicting State laws. Under the Supreme Court's
conflict preemption doctrine, a Federal statute or regulation impliedly
preempts State law when it is impossible for the regulated parties to
comply with both the Federal and the State law, or when a State law is
an obstacle to achieving the full purposes and objectives of the
Federal law.\363\ ``Federal regulations have no less pre-emptive effect
than [F]ederal statutes.'' \364\ Accordingly, the rule preempts a State
law only to the extent it is inconsistent with the rule and compliance
with both is impossible, or it is an obstacle to achieving the full
purposes and objectives of the rule. To provide a clear explanation of
the Commission's intent and the rule's scope of preemption, the rule
includes an express preemption provision at Sec. 464.4.\365\
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\363\ See, e.g., Cong. Rsch. Serv., R45825, Federal Preemption:
A Legal Primer 23 (2023), https://crsreports.congress.gov/product/pdf/R/R45825/3.
\364\ Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141,
153 (1982).
\365\ Many FTC regulations, including regulations promulgated
under section 18 of the FTC Act, include provisions addressing State
laws and preemption. See, e.g., Funeral Rule, 16 CFR 453.9
(exempting from preemption State laws that ``afford[ ] an overall
level of protection [that] is as great as, or greater than, the
protection afforded by'' the FTC's Rule); Rule Concerning Cooling
Off Period for Sales Made at Homes or at Certain Other Locations, 16
CFR 429.2(b) (exempting laws and ordinances that provide ``a right
to cancel a door-to-door sale that is substantially the same or
greater than that provided in this part''); Business Opportunity
Rule, 16 CFR 437.9(b) (``The FTC does not intend to preempt the
business opportunity sales practices laws of any state or local
government, except to the extent of any conflict with this part. A
law is not in conflict with this Rule if it affords prospective
purchasers equal or greater protection . . . .''); Mail, Internet,
or Telephone Order Merchandise Rule, 16 CFR 435.3(b) (``This part
does supersede those provisions of any State law, municipal
ordinance, or other local regulation which are inconsistent with
this part to the extent that those provisions do not provide a buyer
with rights which are equal to or greater than those rights granted
a buyer by this part.''); Franchise Rule, 16 CFR 436.10(b) (``The
FTC does not intend to preempt the franchise practices laws of any
state or local government, except to the extent of any inconsistency
with part 436. A law is not inconsistent with part 436 if it affords
prospective franchisees equal or greater protection . . . .'');
Labeling and Advertising of Home Insulation, 16 CFR 460.24(b)
(preemption of ``State and local laws and regulations that are
inconsistent with, or frustrate the purposes of, this regulation'').
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Numerous commenters supported proposed Sec. 464.4(b)'s targeted
approach of preempting only inconsistent parts of State laws.\366\ Some
commenters,
[[Page 2106]]
however, stated that the rule should completely preempt all State laws
to provide greater consistency and clarity and to lower compliance
costs,\367\ particularly when State laws provide greater
protections.\368\ However, if a business subject to both the rule and a
State law that imposes greater protections does not want to use
different practices for that State versus the rest of the country, it
can choose to comply with both by using a single set of practices
consistent with the greater protections afforded under the applicable
State law. Nothing in the rule prohibits businesses from giving
consumers greater protections than the rule requires. Another commenter
expressed concern that some State laws create loopholes that allow
businesses to mischaracterize fees as government charges that they then
can exclude from total price.\369\ The Commission discusses issues
related to the rule's treatment of government charges in section
III.A.5 and notes here that final Sec. 464.3 would prohibit
misrepresenting that a fee is a Government Charge, or otherwise
misrepresenting the nature, purpose, amount, or refundability of any
fee or charge.
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\366\ See, e.g., FTC-2023-0064-3150 (Attorney General of the
State of California commented that consumer protection is also a
state concern, so, ``it is appropriate, then, that the rule does not
preempt a state law unless the rule and the state law conflict and
then only to the extent of the inconsistency.''); FTC-2023-0064-3215
(Attorneys General of the States of North Carolina and Pennsylvania,
along with Attorneys General of the States or Territories of
Arizona, Colorado, Connecticut, Delaware, District of Columbia,
Hawaii, Illinois, Maine, Michigan, Minnesota, New Jersey, New York,
Oklahoma, Oregon, Vermont, Washington, and Wisconsin, supported the
rule's preemption provision because it ``recognizes and preserves
the interest that individual states have in combatting unfair or
deceptive acts or practices committed in our respective
jurisdictions.''); FTC-2023-0064-3275 (Berkeley Center for Consumer
Law and Economic Justice et al. commented that the rule is ``an
invaluable complement to state and private actions to challenge
hidden and deceptive pricing practices.''); FTC-2023-0064-3293
(Travel Technology Association); FTC-2023-0064-3262 (Skyscanner);
FTC-2023-0064-3266 (StubHub, Inc.); FTC-2023-0064-3212 (TickPick,
LLC); FTC-2023-0064-3267 (National Retail Federation).
\367\ See, e.g., FTC-2023-0064-2886 (American Gaming
Association); FTC-2023-0064-3094 (American Hotel & Lodging
Association); FTC-2023-0064-3122 (Vivid Seats); FTC-2023-0064-3204
(Expedia Group); FTC-2023-0064-3137 (Chamber of Progress); FTC-2023-
0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3233 (NCTA--The
Internet & Television Association); FTC-2023-0064-3238 (Gibson, Dunn
& Crutcher LLP); FTC-2023-0064-2856 (National Football League).
\368\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce);
FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\369\ FTC-2023-0064-3137 (Chamber of Progress).
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Other commenters suggested that the Commission provide compliance
guidance that addresses when State law differs from the rule and
identify which State laws are not preempted.\370\ Some commenters
suggested that existing State and local industry regulations can make
the rule unnecessary, duplicative, and confusing due to conflicting
requirements.\371\ The Commission reiterates that a State law is
preempted only to the extent it conflicts with the rule's requirements
and complying with both is impossible, or it is an obstacle to
achieving the full purposes and objectives of the rule. A State law can
provide greater protections and, solely for that reason, will not be
inconsistent with the rule; a business can comply with both. A business
also can comply with both when the State law provides lesser
protections, although businesses still would have to comply with the
greater protections of the rule. Only if a State law provides
conflicting requirements, and a business cannot comply with both, or it
is an obstacle to achieving the full purposes and objectives of the
rule, will the State law be preempted, and then only to the extent of
that conflict or obstacle.
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\370\ See, e.g., FTC-2023-0064-3244 (Vacation Rental Management
Association); FTC-2023-0064-3206 (Motor Vehicle Protection Products
Association et al.); FTC-2023-0064-3143 (ACA Connects--America's
Communications Association).
\371\ See, e.g., FTC-2023-0064-3152 (Building Owners & Managers
Association et al.); FTC-2023-0064-3133 (National Multifamily
Housing Council and the National Apartment Association); FTC-2023-
0064-3115 (National Association of Residential Property Managers);
FTC-2023-0064-3116 (Manufactured Housing Institute); FTC-2023-0064-
3172 (New Jersey Apartment Association); FTC-2023-0064-3289 (Zillow
Group).
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Moreover, preemption furthers a primary goal of the final rule,
discussed in section V.A: to provide a uniform, minimum standard for
pricing disclosures for covered goods or services that is easy for
businesses and consumers to understand. The Commission also determines,
as discussed in section V.B, that declining to issue this final rule
and continuing to rely solely on State laws and piecemeal adjudication
would be less effective. The Commission believes the final rule's
establishment of nationwide minimum standard will functionally reduce
many variations among State laws,\372\ because businesses will have to
conform their practices to meet the rule's standards for covered goods
or services to the extent those standards exceed or directly conflict
with State law requirements. Moreover, to the extent State law is not
inconsistent with the final rule, additional State authority and
resources will only serve to further protect consumers and competition.
To that end, the Commission will continue to work with its State law
enforcement partners in battling unfair and deceptive pricing
disclosure practices.\373\ For the reasons stated herein, the
Commission adopts Sec. 464.4 as proposed.
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\372\ The Commission has made similar findings in previous
regulations. See, e.g., Final rule: Non-Compete Clause Rule, 89 FR
38342, 38453-54 (May 7, 2024) (finding that the Non-Complete Clause
Rule sets a Federal floor that will reduce the variations in a
patchwork of State regulations); Promulgation of Trade Regulation
Rule and Statement of Its Basis and Purpose: Cooling-Off Period for
Door-to-Door Sales, 37 FR 22934, 22958 (Oct. 26, 1972) (finding
that, when State laws ``give the consumer greater benefit and
protection . . ., there seems to be no reason to deprive the
affected consumers of these additional benefits,'' but when State
laws do not, ``the rule would supply the needed protection or be
construed to supersede the weak statute to the extent necessary to
give the consumer the desired protection.'').
\373\ See, e.g., Final Trade Regulation Rule: Trade Regulation
Rule; Funeral Industry Practices, 47 FR 42260, 42287 (Sept. 24,
1982) (codified at 16 CFR part 453) (noting the purpose of the
rule's provision addressing relation of the rule to State law is
``to encourage federal-state cooperation by permitting appropriate
state agencies to enforce their own state laws that are equal to or
more stringent than the trade regulation rule'').
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E. Sec. 464.5 Severability
The Commission includes a severability clause at final Sec. 464.5,
which provides that, if any provision of the final rule is held to be
invalid or unenforceable either by its terms, or as applied to any
person, industry, or circumstance, or stayed pending further agency
action, the provision shall be construed to continue to give the
maximum effect to the provision permitted by law. It further provides
that any such invalidity shall not affect the application of the
provision to other persons, industries, or circumstances, or the
validity or application of other provisions. Final Sec. 464.5 also
states that, if any provision or application of the final rule is held
to be invalid or unenforceable, the provision or application shall be
severable from the final rule and shall not affect the remainder
thereof. This provision confirms the Commission's intent, as discussed
herein, that the final rule be given the maximum effect permitted by
law even if a reviewing court stays or invalidates any provision, any
component of any provision, or any application of the rule, in whole or
in part, to any person, industry, or circumstance.
In issuing this final rule, as discussed in section II.A and II.B,
the Commission finds bait-and-switch pricing tactics and misleading fee
practices to be unfair and deceptive because they deceive consumers
about the true cost of goods and services, prevent price comparison,
and harm competitors that do accurately disclose true cost. The
Commission also finds such practices to be widespread and to affect
many types of consumer purchasing transactions, particularly with
respect to covered goods or services. The Commission adopts this rule
to comprehensively address the practices and to provide a consistent,
administrable standard with respect to covered goods or services. The
Commission finds in section V.E that, for covered goods or services,
the benefits of the rule exceed its costs.
At the same time, the Commission finds that each of the provisions,
[[Page 2107]]
components of the provisions, and applications of the final rule
operate independently, and that the evidence and findings supporting
each stand independent of one another. The Commission finds that
realizing the benefits of the rule does not require the joint adoption
or operation of each provision. In addition, while the Commission
believes applying the same restrictions to all pricing representations
would provide even greater overall benefits, as explained in Parts II.B
and V.B, the Commission finds the benefits of the final rule exceed the
costs as to covered goods or services, both overall and with respect to
each substantive provision of the rule. For covered goods or services,
as discussed in section V.E, ample data show the rule would have
positive quantified net benefits, including by reducing search costs,
as well as unquantified reductions in deadweight loss and consumer
frustration. Similarly, consumers would benefit from the misleading
fees prohibition even if the requirement to disclose total price were
stayed or invalidated. The benefits would also justify the costs if the
total price provision were further limited to either just the live-
event ticketing or just the short-term lodging industry.
Based on the available data, the Commission concludes that, even if
the rule were more limited in scope or if it applied to a more limited
set of transactions, such as to a single industry or to particular
circumstances, it would still achieve some of the Commission's
objectives and the benefits of the rule would still exceed the costs.
Although a more limited scope or application would change the magnitude
of the overall benefit of the final rule, it would not undermine the
valid and measurable benefit of, and justification for, the remaining
provisions or applications of the final rule. Thus, were a court to
stay or invalidate any provision, any component of any provision, or
any application of the rule, the Commission intends the remainder of
the rule to remain in force.
As described in section V.B, the Commission considered alternatives
to the final rule that would have applied the rule to other
transactions or industries or expanded it to all goods and services
within the Commission's jurisdiction. The Commission finds that each
such alternative would be an appropriate exercise of the Commission's
authority under sections 5 and 18 of the FTC Act as stand-alone
regulations because disclosure of total price in any type of
transaction or industry--whether or not the same is required in other
transactions or industries--mitigates the harms caused by the unfair or
deceptive pricing tactics in those transactions or industries to which
the rule does apply. At the same time, as discussed in parts I and
II.A, the Commission finds bait-and-switch pricing tactics and
misleading fee practices are widespread and potentially growing. As a
result, the Commission may later find that a rule of expanded or even
general applicability, to the extent of its jurisdiction, would be
appropriate and would result in benefits to consumers and competition
that are greater in magnitude than a rule with more limited
applicability. However, such findings do not invalidate this final
rule's quantifiable positive benefits, in whole or in part.
Accordingly, the Commission considers and intends each of the
provisions adopted in the final rule to be severable, within each
provision, from other provisions in Part 464, and as applied to
different persons, industries, or circumstances. In the event of a stay
or invalidation of any provision, any component of any provision, or of
any provision as it applies to certain persons, conduct, or industry,
the Commission's intent is to otherwise preserve and enforce the final
rule to the fullest possible extent. Therefore, if a reviewing court
were to stay or invalidate a particular application of the final rule,
or a provision thereof, as to certain persons, industries, or
circumstances, other businesses that remain covered by the rule should
be required to comply with the applicable provisions of the final rule
that remain in effect.
IV. Challenges to the FTC's Legal Authority To Promulgate the Rule
As explained in the NPRM and section II, this rule is consistent
with decades of FTC adjudications and enforcement actions addressing
the standards governing unfair or deceptive pricing practices.\374\ The
Commission issues this rule to prevent prevalent unfair or deceptive
acts or practices and to promote compliance in a manner that accounts
for and balances the needs of consumers and regulated entities. The
rule falls squarely within the Commission's legal authority, is based
on substantial evidence in the rulemaking record, and clearly defines
specific unfair and deceptive practices regarding fees or charges.
---------------------------------------------------------------------------
\374\ See, e.g., In re Filderman Corp., 64 F.T.C. 427, 442-43,
461 (1964), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-64/ftcd-vol64january-march1964pages409-511.pdf; In re Resort Car Rental Sys., Inc., 83
F.T.C. 234, 281-82, 300 (1973), https://www.ftc.gov/system/files/ftc_gov/pdf/Resort%20Car%20Rental%20System%2C%20Inc.%2083%20FTC%20234%20%281973%29.pdf, aff'd sub. nom. Resort Car Rental Sys., Inc. v. FTC, 518 F.2d
962, 964 (9th Cir. 1975); Opinion of the Commission at 28-30, 47-50,
In re Intuit Inc., No. 9408 (FTC Jan. 22, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/d09408_commission_opinion_redacted_public.pdf; In re George's Radio
& Television Co., 60 F.T.C. 179, 193-94 (1962), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-60/ftcd-vol60january-june1962pages107-211.pdf (collecting cases
involving false savings claims); cases cited supra notes 61-62
(collecting FTC enforcement actions alleging, respectively, that
bait-and-switch pricing tactics concerning hidden fees and
misrepresentations regarding the nature and purpose of fees violated
section 5); NPRM, 88 FR 77435-37 (section III.C (``Law Enforcement
Actions and Other Responses'')). See also supra note 115 (collecting
cases holding that later disclosures cannot cure deceptive door
openers).
---------------------------------------------------------------------------
The Commission received comments supporting, discussing, or
questioning its authority to promulgate the final rule. Commenters
supporting the Commission's authority noted the rule falls squarely
within the Commission's mandate to prevent unfair and deceptive acts
and practices through rulemaking under sections 5 and 18 of the FTC
Act.\375\ Commenters questioning the Commission's rulemaking authority
typically advanced one of three arguments. First, some commenters
argued that requiring disclosures related to pricing is a major
question that Congress has not given the Commission authority to
address.\376\ Second, some commenters argued that if the rule was in
fact consistent with the Commission's authority under sections 5 and 18
of the FTC Act, Congress had impermissibly delegated this authority to
the Commission.\377\ Third, some commenters argued that the disclosures
required by the rule violate the First Amendment.\378\ In addition to
these arguments, one commenter asserted that the rule is invalid
because the
[[Page 2108]]
Commission is unconstitutionally structured.\379\ Finally, some
commenters asserted the Commission has not complied with the
Administrative Procedure Act (``APA'').\380\
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\375\ See, e.g., FTC-2023-0064-2883 (District of Columbia,
Office of the People's Counsel); FTC-2023-0064-3104 (Truth in
Advertising, Inc.); see also FTC-2022-0069-6077 (ANPR) (Institute
for Policy Integrity, New York University School of Law).
\376\ FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-
0064-3133 (National Multifamily Housing Council and National
Apartment Association); FTC-2023-0064-3152 (Building Owners &
Managers Association et al.); FTC-2023-0064-3202 (TechNet); FTC-
2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-2023-0064-3251
(National RV Dealers Association); FTC-2023-0064-3263 (Flex
Association); FTC-2023-0064-3294 (International Franchise
Association).
\377\ FTC-2023-0064-3233 (NCTA--The internet & Television
Association); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3294 (International Franchise Association).
\378\ FTC-2023-0064-3016 (National Federation of Independent
Business, Inc.); FTC-2023-0064-3028 (Competitive Enterprise
Institute); FTC-2023-0064-3233 (NCTA--The internet & Television
Association); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3267 (National Retail Federation).
\379\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\380\ See, e.g., id.; FTC-2023-0064-3133 (National Multifamily
Housing Council and National Apartment Association); FTC-2023-0064-
3152 (Building Owners & Managers Association et al.); FTC-2023-0064-
3263 (Flex Association); FTC-2023-0064-3294 (International Franchise
Association).
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Most of the commenters challenging the Commission's authority
represent businesses that offer goods or services other than covered
goods or services. Thus, the concerns raised by these commenters may
not be relevant to the narrowed scope of the final rule. Further, the
NPRM's industry-neutral approach was central to nearly all of the
critiques of the rule that raised questions regarding the Commission's
authority to promulgate the rule; while the Commission disagrees with
such critiques, they are not applicable to this final rule, which
focuses on two industries, live-event tickets and short-term lodging.
Notably, the vast majority of comments from businesses offering live-
event tickets and short-term lodging and their direct representatives
did not raise challenges to the Commission's authority to promulgate
the rule.\381\ Nevertheless, the Commission has considered the comments
challenging its authority and explains in this section why it disagrees
with those.
---------------------------------------------------------------------------
\381\ The International Franchise Association, which represents
franchised businesses offering short-term lodging, raised challenges
to the Commission's authority to promulgate the rule. IFA's comment,
however, primarily focused on the NPRM's industry-neutral scope and
its implications for franchised businesses that do not offer Covered
Goods or Services. Regarding the short-term lodging industry
specifically, IFA's comment challenged certain aspects of the
Commission's estimate of compliance costs, which are addressed in
section V. See FTC-2023-0064-3294 (International Franchise
Association).
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A. Major Questions Doctrine
Some commenters invoked the major questions doctrine to argue that
the Commission lacks authority to adopt the rule. Commenters argued the
rule raises a major question because addressing consumer fees and
pricing across industries is of vast political and economic
significance.\382\ Some commenters also argued that the rule is broader
than the agency's prior rules, based on the assertion that the rule
regulates pricing.\383\ Commenters concluded that Congress has not
authorized the Commission to promulgate the rule.\384\
---------------------------------------------------------------------------
\382\ See, e.g., FTC-2023-0064-3263 (Flex Association); FTC-
2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3152
(Building Owners & Managers Association et al.); FTC-2023-0064-3202
(TechNet); FTC-2023-0064-3133 (National Multifamily Housing Council
and National Apartment Association); FTC-2023-0064-3238 (Gibson,
Dunn & Crutcher LLP). While commenters suggested that the rule would
have ``political and economic significance,'' no commenters pointed
to any specific political significance.
\383\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3127 (U.S. Chamber of Commerce).
\384\ FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-
0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-2023-0064-3152
(Building Owners & Managers Association et al.); FTC-2023-0064-3202
(TechNet); FTC-2023-0064-3133 (National Multifamily Housing Council
and National Apartment Association).
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The major questions doctrine, as the Supreme Court recently
explained in West Virginia v. EPA, 597 U.S. 697 (2022), applies to ``
`extraordinary cases' . . . in which the `history and the breadth of
the authority that [the agency] has asserted,' and the `economic and
political significance' of that assertion, provide a `reason to
hesitate before concluding that Congress' meant to confer such
authority.'' \385\ When an agency claims a `` `transformative expansion
in [its] regulatory authority,' '' it ``must point to `clear
congressional authorization' for the power it claims.'' \386\
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\385\ West Virginia v. EPA, 597 U.S. at 721 (quoting FDA v.
Brown & Williamson Tobacco Corp., 529 U.S. 120, 159-60 (2000)).
\386\ Id. at 723-24 (quoting Util. Air Regulatory Group v. EPA,
573 U.S. 302, 324 (2014).
---------------------------------------------------------------------------
Having considered the factors that the Supreme Court has used to
identify major questions, the Commission, as discussed herein,
concludes that the final rule does not implicate the major questions
doctrine. The FTC does not claim a transformative change in its
rulemaking authority. The final rule comports with the history and
breadth of prior rules that the FTC has promulgated pursuant to its
existing rulemaking authority, which Congress conferred to allow the
Commission to address prevalent unfair or deceptive practices. Even if
the major questions doctrine did apply, the Commission concludes that
Congress provided clear authorization for the Commission to promulgate
this rule.
1. The Rule Does Not Address a Major Question
(a) The Commission Has a Long History of Addressing Unfair or Deceptive
Acts or Practices Related to Pricing Information
Identifying unfair or deceptive acts or practices related to the
disclosure of the price and purpose of goods and services is at the
core of the Commission's mandate under section 5.\387\ The Commission
has the authority to address these unfair or deceptive acts or
practices both through case-by-case enforcement, either
administratively or in Federal court, or through rulemaking if the
unfair or deceptive practices are prevalent as established by the
rulemaking record. The Commission may choose case-by-case adjudication
or rulemaking at its discretion.\388\
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\387\ See generally supra section II.B; NPRM, 88 FR 77432,
77434.
\388\ Cf. NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974)
(holding that ``the Board is not precluded from announcing new
principles in an adjudicative proceeding,'' that ``the choice
between rulemaking and adjudication lies in the first instance
within the Board's discretion,'' and that the agency's choice
between adjudication and rulemaking was ``entitled to great
weight''); SEC v. Chenery Corp., 332 U.S. 194, 203 (1947) (``[T]he
choice made between proceeding by general rule or by individual, ad
hoc litigation is one that lies primarily in the informed discretion
of the administrative agency.'').
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The Commission's authority to promulgate rules to define with
specificity unfair or deceptive acts or practices under section 18 of
the FTC Act, 15 U.S.C. 57a, is not extraordinary and is undisputed,
resting on firm historical footing.\389\ Indeed, when consumers have
faced bait-and-switch tactics in the past, including being unable to
get accurate material information about what they must pay and what
they will receive in return, the Commission has repeatedly issued rules
that define unfair or deceptive acts or practices related to the
disclosure of that material information.\390\ For example,
[[Page 2109]]
the Commission initiated the rulemaking resulting in the Rule on Retail
Food Store Advertising and Marketing Practices (the ``Unavailability
Rule''), 16 CFR part 424, based in part on findings in a Commission
report that items priced at or below the advertised price were
frequently unavailable and that in ``a very substantial majority of the
instances of the deviations, the prices marked on the items were higher
than the advertised price.'' \391\
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\389\ Congress added section 18, 15 U.S.C. 57a, to the FTC Act
in 1975, and that section provides the process the Commission must
follow to promulgate rules defining unfair or deceptive acts or
practices. See Magnuson-Moss Warranty--Federal Trade Commission
Improvement Act, Public Law 93-637, sec. 202, Sec. 18, 88 Stat.
2183, 2193 (1975) (hereinafter ``Magnuson-Moss Warranty Act''); see
also Am. Fin. Servs. Ass'n v. FTC, 767 F.2d 957, 967 (D.C. Cir.
1985) (summarizing the historical backdrop to the Commission's
authority to prevent unfair or deceptive acts or practices including
the adoption of the Magnuson-Moss Warranty Act, which codified
section 18 of the FTC Act and confirmed the Commission's authority
to promulgate rules defining acts or practices that are unfair or
deceptive).
\390\ See, e.g., Franchise Rule, 16 CFR 436.2(a), 436.5(e) and
(f) (defining as an unfair or deceptive act or practice to fail to
provide prospective franchisees with the franchisor's disclosure
document, which includes, among other things, disclosure of
``initial fees''--i.e., ``all fees and payments, or commitments to
pay . . . whether payable in lump sum or installments'' and of ``all
other fees that the franchisee must pay to the franchisor or its
affiliates''); Business Opportunity Rule, 16 CFR 437.4(d) (defining
as an unfair or deceptive act or practice to ``[f]ail to notify any
prospective purchaser in writing of any material changes affecting
the relevance or reliability of the information contained in an
earnings claim statement before the prospective purchaser . . .
makes a payment''); Business Opportunity Rule, 16 CFR 437.6(h)
(defining as an unfair or deceptive act or practice to
``[m]ispresent the cost . . . of the business opportunity or the
goods or services offered to a prospective purchaser''); Funeral
Rule, 16 CFR 453.2(a) and (b) (defining as an unfair or deceptive
act or practice to ``fail to furnish accurate price information
disclosing the cost to the purchaser for each of the specific
funeral goods and funeral services used in connection with the
disposition of deceased human bodies'' and requiring funeral
providers to provide specific price lists in writing).
\391\ Statement of Basis and Purpose: Retail Food Store
Advertising and Marketing Practices, 36 FR 8777, 8777-78 (May 13,
1971) (citing a Bureau of Economics staff report titled ``Economic
Report on Food Chain Selling Practices in the District of Columbia
and San Francisco''). Similarly, when the Commission later amended
the Unavailability Rule, it again stressed that food retailers must
not engage in bait and switch advertising--where the seller
advertises an unavailable good at a low price to get the consumer in
the door--or deception regarding availability of advertised goods.
Final amendments to trade regulation rule: Amendment to Trade
Regulation Rule Concerning Retail Food Store Advertising and
Marketing Practices, 54 FR 35456, 35462-63 (Aug. 28, 1989).
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As discussed in parts I and II, there is nothing new about
businesses using bait-and-switch tactics to reel in and deceive
consumers, just as there is nothing new about the Commission exercising
its authority to limit such tactics and the harms they cause.\392\ This
rule is tailored to address practices squarely within the scope of the
Commission's core work to protect consumers: bait-and-switch pricing
tactics, including drip pricing, and misrepresentations regarding a
material term. As described in section II.A and II.B, the Commission
adopts this rule now because bait-and-switch tactics, including drip
pricing, and misrepresentations as to the nature and purpose of fees
and charges are prevalent and continue to harm consumers. This is
precisely what section 18 of the FTC Act envisions and is consistent
with the Commission's exercise of the same authority in the past.
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\392\ E.g., In re Filderman Corp., 64 F.T.C. 427, 442-43, 461
(1964); Resort Car Rental Sys., 83 F.T.C. at 281-82, 300 (1973);
Complaint ]] 12, 46-49, In re LCA-Vision, No. C-4789 (FTC Mar. 13,
2023); Opinion of the Commission at 37-40, 47-50, In re Intuit Inc.,
No. 9408 (FTC Jan. 22, 2024). See generally supra section I.A.-I.C
(discussing the comment and hearing record in response to the ANPR
and NPRM); section II.A (discussing the prevalence of the practices
that the rule addresses).
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(b) Commenters' Claims About the Scope of the Acts or Practices Covered
by the Rule Are Inapplicable or Overstated
Commenters suggested that the major questions doctrine is
implicated simply because the rule proposed by the NPRM was industry-
neutral.\393\ The Commission disagrees. Congress authorized the
Commission to prevent unfair or deceptive practices in or affecting
commerce across the economy while specifying a limited number of
industries, activities, or entities that are exempt.\394\ These
comments are inapposite, however, because the final rule is limited to
covered goods or services: live-event ticketing and short-term lodging.
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\393\ See, e.g., FTC-2023-0064-3263 (Flex Association); FTC-
2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3152
(Building Owners & Managers Association et al.); FTC-2023-0064-3202
(TechNet); FTC-2023-0064-3133 (National Multifamily Housing Council
and National Apartment Association).
\394\ 15 U.S.C. 45.
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Commenters also contended that the rule implicates a major question
because it regulates pricing practices broadly or supposedly will have
effects on a wide array of pricing strategies.\395\ The Commission
disagrees. The rule focuses on hidden mandatory fees or charges that
obscure the total price of a covered good or service and
misrepresentations about the nature, purpose, amount, and refundability
of fees or charges. The rule has no effect on many pricing practices
and strategies, including a business's fundamental decision about what
price to charge consumers for its goods or services.\396\ Nor does the
rule affect a business's ability to use dynamic pricing, to offer or
use sales, discounts, rebates, or special offers, or to truthfully
itemize fees and costs so long as the business accurately describes the
total price upfront.\397\ With respect to mandatory fees, the rule does
not prevent businesses from continuing to charge such fees as a pricing
strategy, itemizing them in addition to stating the total price, or
from providing non-misleading information about those fees. Indeed, a
number of commenters have misunderstood the rule to act as a
prohibition or limitation on itemization; as explained in section III,
truthful itemization is not prohibited.
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\395\ Commenters did not argue or provide substantive support
for any argument that a major question was raised by proposed Sec.
464.3(a), which would have prohibited any Business from
misrepresenting the nature and purpose of any amount a consumer may
pay, including its refundability and the identity of any good or
service for which it is charged. The Commission is finalizing Sec.
464.3 more narrowly to prohibit any Business, in any offer, display,
or advertisement for a Covered Good or Service, from misrepresenting
any fee or charge, including its nature, purpose, amount, or
refundability, and the identity of the good or service for which it
is imposed.
\396\ See supra section I (``The discretion to set prices
remains squarely with businesses; the rule simply requires that they
tell consumers the truth about those prices.'').
\397\ See supra section III.A.8.c (``The rule neither requires,
nor prohibits, the itemization of mandatory fees that must be
included in Total Price.''); section III.B.1.d-e (responding to
comments about dynamic pricing, rebates, bundled pricing, and other
discounts).
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In sum, the rule does not address a major question because it
focuses on traditional types of unfair or deceptive acts or practices
that have long been the subject of Commission rulemaking and
enforcement activity and targets only those acts or practices.
2. Congress Provided the Commission With a Clear Grant of Authority To
Promulgate This Rule
Even if the final rule did present a major question, the FTC Act
provides clear authorization for the rule. In cases involving major
questions, courts expect Congress to ``speak clearly'' if it wishes to
assign the disputed power.\398\ In the FTC Act, Congress vested the
Commission with enforcement powers and the authority to promulgate
rules to carry out the Commission's mandate to prevent unfair or
deceptive acts or practices.\399\ Rather than trying to define all
unfair or deceptive acts and practices, Congress empowered the
Commission to respond to changing market conditions and to identify
conduct that is unfair or deceptive.\400\
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\398\ West Virginia v. EPA, 597 U.S. at 716, 723 (quoting Util.
Air, 573 U.S. at 324).
\399\ 15 U.S.C. 45, 57a.
\400\ See S. Rep. No. 75-221, at 2 (1937) (report on Amendments
to the Federal Trade Commission Act (S.1077), explaining Congress's
reasoning in granting the Commission authority in 1914 to define
specific unfair methods of competition, and then applying the same
reasoning to the proposed grant of authority to prohibit unfair or
deceptive acts or practices: ``The committee gave careful
consideration to the question as to whether it would attempt to
define the many and variable unfair practices . . . or whether it
would by a general declaration . . . condemn[ ] unfair practices,
leav[ing] it to the Commission to determine what practices were
unfair.'' The Committee ``concluded that the latter course would be
the better, for the reason . . . that there were too many unfair
practices to define, and after writing 20 of them into the law it
would be quite possible to invent others.''); see also H.R. Rep. No.
93-1606, at H 12060 (1974) (Conf. Rep.) (report on Consumer Product
Warranty and Federal Trade Commission Improvement Act, stating:
``[section 18] is an important power by which the Commission can
fairly and efficiently pursue its important statutory mission.''
Further, ``[b]ecause the prohibitions of section 5 of the Act are
quite broad, trade regulation rules are needed to define with
specificity conduct that violates the statute and to establish
requirements to prevent unlawful conduct.'').
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When the Commission was created by the FTC Act in 1914, the Act
prohibited ``unfair methods of competition'' in
[[Page 2110]]
section 5 and granted the Commission authority to promulgate rules to
effectuate the Act's provisions in section 6(g), including the
prohibition on unfair methods of competition.\401\ The Act did not
expressly prohibit deception. While deception could qualify as an
unfair method of competition, courts required the Commission to show
harm to competition or rivals in each instance; harm to consumers alone
was insufficient to meet the standard.\402\ In response, Congress
amended the FTC Act in 1938 to include a prohibition, not just against
unfair methods of competition, but against unfair or deceptive acts or
practices as well.\403\
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\401\ Federal Trade Commission Act, Public Law 63-203, secs. 5,
6(g), 38 Stat. 717, 719, 722 (1914).
\402\ FTC v. Raladam Co., 283 U.S. 643, 647-49 (1931) (``The
paramount aim of the [FTC] act is the protection of the public from
the evils likely to result from the destruction of competition or
the restriction of it in a substantial degree. . . . Unfair trade
methods are not per se unfair methods of competition.'').
\403\ Federal Trade Commission Act Amendments of 1938 (Wheeler-
Lea Act), Public Law 75-447, sec. 3, sec. 5, 52 Stat. 111, 111
(1938).
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Congress affirmed the Commission's authority to issue rules like
the one here through amendments to the FTC Act in 1975 and 1980. First,
in the Magnuson-Moss Warranty Act of 1975, Congress added section 18 of
the FTC Act, 15 U.S.C. 57a, confirming the Commission's authority to
issue rules that ``define with specificity acts or practices which are
unfair or deceptive acts or practices,'' and requiring the Commission
to follow specific procedures for promulgating rules.\404\ Among the
substantially completed rules at the time were the Rule on the
Preservation of Consumers' Claims and Defenses \405\ and the Mail Order
Rule,\406\ which proposed to define as an unfair or deceptive act--and
upon promulgation did so define--certain conduct that the rulemaking
record showed was causing harm across various industries. As Congress
added procedural requirements to the Commission's rulemaking authority
through section 18, Congress did not limit these existing cross-
industry rules targeting unfair or deceptive acts or practices, but
instead created an exception under which the Commission could finalize
them without following section 18's procedural requirements.\407\
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\404\ Magnuson-Moss Warranty--Federal Trade Commission
Improvement Act, Public Law 93-637, sec. 202, sec. 18, 88 Stat.
2183, 2193 (1975) (codified at 15 U.S.C. 57a).
\405\ Promulgation of Trade Regulation Rule and Statement of
Basis and Purpose: Preservation of Consumers' Claims and Defenses
(Holder Rule), 40 FR 53506 (Nov. 18, 1975).
\406\ Promulgation of Trade Regulation Rule and Statement of
Basis and Purpose: Mail Order Merchandise, 40 FR 51582 (Nov. 5,
1975).
\407\ Magnuson-Moss Warranty--Federal Trade Commission
Improvement Act, Public Law 93-637, sec. 202, sec. 18(c)(1), 88
Stat. 2183, 2198 (1975) (Specifically, section 18(c)(1) provided
that ``[a]ny proposed rule under section 6(g)'' with certain
components that were ``substantially completed before'' section 18's
enactment ``may be promulgated in the same manner and with the same
validity as such rule could have been promulgated had this section
not been enacted.'').
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Congress again confirmed the Commission's authority to promulgate
rules defining unfair and deceptive acts or practices in 1980 when it
enacted section 22 of the FTC Act, 15 U.S.C. 57b-3(b), as part of the
Federal Trade Commission Improvements Act of 1980.\408\ Section 22
imposes certain additional procedural requirements the Commission must
follow when it promulgates any ``rule,'' including rules promulgated
under section 18. Section 22(b) contemplates the FTC's authority to
promulgate rules that are substantive and economically significant by
requiring, for example, that the Commission conduct a cost-benefit
analysis.\409\ In addition, section 22(a) imposes the same requirements
on amendments to existing rules if they may ``have an annual effect on
the national economy of $100,000,000 or more,'' ``cause a substantial
change in the cost or price of goods or services,'' or ``have a
significant impact upon'' persons and consumers.\410\ Thus, Congress
explicitly authorized the Commission to issue rules and amendments that
address major economic questions, so long as the rulemaking complies
with section 22.
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\408\ Federal Trade Commission Improvements Act of 1980, Public
Law 96-252, sec. 15, sec. 22, 94 Stat. 374, 388 (1980) (codified at
15 U.S.C. 57b-3).
\409\ 15 U.S.C. 57b-3(b).
\581\ 15 U.S.C. 57b-3(a).
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The Commission has exercised its authority to promulgate numerous
rules and rule amendments defining unfair or deceptive acts or
practices pursuant to sections 18 and 22.\411\ Central to many of these
rules is a rulemaking record establishing that businesses misrepresent
or fail to disclose certain material terms in a transaction, including
information related to price, and that these practices are unfair or
deceptive.\412\ Unlike in West Virginia v. EPA, courts have upheld
Commission rules similar to the one here--that prohibit
misrepresentations, define unfair or deceptive conduct, and require
specific disclosures to avoid deception--against a myriad of legal
challenges.\413\
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\411\ See, e.g., Franchise Rule, 16 CFR part 436; Business
Opportunity Rule, 16 CFR part 437; Funeral Rule, 16 CFR part 453;
Negative Option Rule, 16 CFR part 425; Cooling Off Rule, 16 CFR part
429; see also discussion supra section IV.1.a.
\412\ See, e.g., 16 CFR 437.6(d), (h), (i) (The Business
Opportunity Rule provides that it is an ``unfair or deceptive act or
practice'' to misrepresent, among other information, ``the amount of
sales, or gross or net income or profits a prospective purchaser may
earn''; ``the cost, or the performance, efficacy, nature, or central
characteristics of the business opportunity or the goods or services
offered''; or ``any material aspect of any assistance offered to a
prospective purchaser''); 16 CFR 436.9(a) and (c) (The Franchise
Rule provides that it is an ``unfair or deceptive act or practice''
to ``[m]ake any claim or representation . . . that contradicts'' the
required disclosures, which include certain pricing information and
fees, or to ``[d]isseminate any financial performance
representations to prospective franchisees unless the franchisor has
a reasonable basis and written substantiation for the
representation[.]'').
\413\ See, e.g., Harry & Bryant Co. v. FTC, 726 F.2d 993, 999-
1001 (4th Cir. 1984) (holding that petitioners challenging Funeral
Rule were not denied procedural due process, and that the rule was
within the Commission's statutory authority and supported by
substantial evidence); Am. Fin. Servs. Ass'n v. FTC, 767 F.2d 957,
983-88, 991 (D.C. Cir. 1985) (holding that the FTC did not exceed
its authority when promulgating the Trade Regulation Rule on Credit
Practices under sections 5 and 18 of the FTC Act, and that the rule
was supported by substantial evidence and not arbitrary, capricious,
or an abuse of discretion); Consumers Union of U.S., Inc. v. FTC,
801 F.2d 417, 422, 426 (D.C. Cir. 1986) (denying petition for review
of FTC Used Car Rule and holding that Commission's decision to omit
a proposed disclosure requirement from the rule had evidentiary
support under both the FTC's substantial evidence test and the APA's
arbitrary and capricious test, which are one and the same as to the
requisite degree of evidence); Pa. Funeral Dirs. Ass'n v. FTC, 41
F.3d 81, 92 (3d Cir. 1994) (denying petition for review of Funeral
Rule and finding that Commission decision to regulate casket
handling fees was not arbitrary or capricious and was supported by
substantial evidence).
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In sum, this is a far cry from a situation where Congress
``conspicuously and repeatedly'' declined to grant the agency the
claimed power.\414\ Quite the opposite--Congress has conspicuously and
repeatedly confirmed that promulgating a rule like this final rule is
precisely how Congress expects the Commission to use its rulemaking
authority. For these reasons, even if the final rule involves a major
question, Congress has clearly delegated to the Commission the
authority to address that question.
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\414\ West Virginia v. EPA, 597 U.S. at 724.
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B. Non-Delegation Doctrine
One commenter contended that the Commission's issuance of the rule
violates the non-delegation doctrine.\415\ The commenter argued that,
given the rule's breadth, section 5 lacks an intelligible principle if
it authorizes the Commission to promulgate the rule. The commenter
asserted that the rule regulates pricing economy-wide and that Congress
has not made ``the necessary fundamental policy-decision'' underlying
the rule. The commenter
[[Page 2111]]
also asserted that the Commission's authority to promulgate the rule is
an unconstitutional delegation under a ``history and tradition test,''
citing to a dissenting opinion in Gundy v. United States, 588 U.S. 128
(2019).\416\ The Commission disagrees. The Commission notes that this
commenter's argument that the proposed rule violated the non-delegation
doctrine was predicated on its assertion that the proposed rule
regulated ``the disclosing and collecting [of] consumer fees for all
businesses.'' \417\ Since the focus of the final rule is narrowed to
covered goods or services, the comment may not be relevant to the final
rule. Nevertheless, the Commission addresses the arguments herein.
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\415\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\416\ Id. (citing Gundy, 588 U.S. at 159 (Gorsuch, J.,
dissenting, joined by Roberts, C.J. and Thomas, J.)).
\417\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
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``Only twice in this country's history has the Court found a
delegation excessive, in each case because `Congress had failed to
articulate any policy or standard' to confine discretion.'' \418\
Article I of the Constitution vests the Federal government's
legislative powers in Congress, and Congress may not delegate those
powers to an executive agency absent an intelligible principle to guide
the exercise of discretion.\419\ The ``intelligible principle''
standard is ``not demanding.'' \420\ This is because of the practical
understanding that `` `in our increasingly complex society, replete
with ever changing and more technical problems,' . . . `Congress simply
cannot do its job absent an ability to delegate power under broad
general directives.' '' \421\ For that reason, the Supreme Court has
repeatedly held that ``a statutory delegation is constitutional as long
as Congress `lay[s] down by legislative act an intelligible principle
to which the person or body authorized to [exercise the delegated
authority] is directed to conform.' '' \422\
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\418\ Gundy, 588 U.S. at 130 (plurality op.) (quoting Mistretta
v. United States, 488 U.S. 361, 373 n.3 (1989)).
\419\ U.S. Const. art. I, sec. 1; see also, e.g., Mistretta, 488
U.S. at 372.
\420\ Gundy, 588 U.S. at 146.
\421\ Id. at 135 (quoting Mistretta, 488 U.S. at 372).
\422\ Id. (quoting J.W. Hampton, Jr., & Co. v. United States,
276 U.S. 394, 409 (1928)) (brackets in original).
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As described throughout section IV.A, Congress, the Commission, and
the courts have long understood the Commission's mandate to prevent
both unfair and deceptive acts or practices as providing intelligible
principles to guide the exercise of the Commission's discretion. In
A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935),
the Court observed that conduct that fell within the ambit of section 5
of the FTC Act was ``to be determined in particular instances, upon
evidence, in the light of particular competitive conditions and of what
is found to be a specific and substantial public interest.'' \423\ The
Court ultimately concluded that Congress properly delegated authority
to the FTC under the FTC Act based, among other things, on the subject
matter and procedural requirements Congress placed on the Commission--
which involves ``notice and hearing,'' ``appropriate findings of fact
supported by adequate evidence,'' and ``judicial review.'' \424\
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\423\ A.L.A. Schechter, 295 U.S. at 532-33. In so holding, the
Supreme Court in A.L.A. Schechter referred to cases in which both
unfair and deceptive practices were determined to be unfair methods
of competition. 295 U.S. at 532-33 (citing FTC v. R.F. Keppel, 291
U.S. 304 (1934) and FTC v. Algoma Lumber Co., 291 U.S. 67 (1934)).
Congress later clarified in the Wheeler-Lea Act of 1938 that unfair
and deceptive practices are unlawful under the FTC Act independent
of any effect they may have on competition. 52 Stat. 111.
Accordingly, the A.L.A. Schechter Court's conclusion that Congress's
grant of authority to the Commission is guided by intelligible
principles applies equally to the Commission's authority to identify
unfair or deceptive acts or practices and to the Commission's
authority to identify unfair methods of competition.
\424\ A.L.A. Schechter, 295 U.S. at 533-36.
---------------------------------------------------------------------------
FTC rulemaking under section 18 features similar procedural
safeguards to FTC adjudication and thus comports with the nondelegation
doctrine for the same reasons. For example, section 18's rulemaking
process requires the Commission to: (1) notify Congress; (2) publish
multiple public notices of the proposed rulemaking; (3) provide all
interested persons the opportunity to ``submi[t] . . . written data,
views, or arguments''; (4) consider all submissions; (5) provide the
opportunity for an informal hearing; (6) determine, based on all
available information, that the unfair or deceptive acts or practices
are prevalent; and (7) determine, based on the rulemaking record, that
the final rule is appropriate. In addition, once the rule is finalized,
it is subject to judicial review in a court of appeals.\425\ The
rulemaking process thus ``may actually be fairer to regulated parties
than total reliance on case-by-case adjudication'' because the process
allows all interested parties the opportunity to weigh in by submitting
data, views, and arguments and by participating in a hearing.\426\ In
this rulemaking, interested parties had numerous opportunities to be
heard by the Commission, including through ninety-day public comment
periods on both an advance notice of proposed rulemaking and a notice
of proposed rulemaking, as well as an informal hearing. These
procedures helped to ensure that the Commission properly applied its
statutory mandate when adopting the rule to prevent prevalent unfair
and deceptive practices concerning hidden and misleading fees.
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\425\ 15 U.S.C. 57a(b)(1)-(2). Section 18 requires both an
advance notice of proposed rulemaking and a notice of proposed
rulemaking to engage with and solicit comment from interested
parties.
\426\ Nat'l Petroleum Refiners Ass'n v. FTC, 482 F.2d 672, 681-
83 (D.C. Cir. 1973).
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Like the FTC's Act's procedural requirements, the subject matter
requirements that apply to the FTC's statutory authority are well
established. With respect to unfairness, Congress articulated in
section 5(n) of the FTC Act the factors the Commission must apply.\427\
For deception, virtually all courts have adopted the three-part test
put forward by the Commission in its Deception Policy Statement: (1)
there is a representation, omission, or practice that (2) is likely to
mislead consumers acting reasonably under the circumstances, and (3)
the representation, omission, or practice is material.\428\ For
decades, courts have reviewed and upheld the Commission's application
of unfairness and deception authority in enforcement actions and rules.
Moreover, the Supreme Court has recognized the ability of regulators,
courts, and regulated entities to distinguish deceptive from
nondeceptive claims or advertisements under section 5 of the FTC
Act.\429\ In sum, the subject matter requirements of the FTC Act's
statutory authority as to unfair and deceptive practices are well
settled.
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\427\ 15 U.S.C. 45(n).
\428\ Fed. Trade Comm'n, FTC Policy Statement on Deception, 103
F.T.C. 174, 175 (1984) (sent by letter to Congress on October 14,
1983 and appended to In re Cliffdale Assocs., Inc., 103 F.T.C. 110,
174 (1984) (hereinafter ``Deception Policy Statement''), https://www.ftc.gov/system/files/ftc_gov/pdf/Cliffdale-Assocs-103-FTC-110.pdf.
\429\ FTC v. Colgate-Palmolive Co., 380 U.S. 374, 387 (1965);
Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 645-46
(1985).
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Finally, the Supreme Court has not adopted the commenter's
suggested ``history and tradition test'' as the applicable standard for
determining whether congressional delegation of authority is
constitutional. The intelligible principle test is binding precedent on
that question, and the final rule complies with the intelligible
principle test.
C. First Amendment
Some commenters argued that Sec. 464.2 impermissibly prohibits and
compels speech in violation of the First
[[Page 2112]]
Amendment.\430\ The Commission disagrees. The rule addresses unfair and
deceptive conduct and does not otherwise affect businesses' ability to
express truthful and accurate price information.
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\430\ See, e.g., FTC-2023-0064-3028 (Competitive Enterprise
Institute); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3233 (NCTA--The internet and Television Association); FTC-
2023-0064-3016 (National Federation of Independent Business). In
opposing Sec. 464.2, the commenters did not argue that Sec. 464.3,
which simply prohibits misrepresentations related to prices and
fees, implicates the First Amendment.
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1. Comments
Some commenters argued the rule's disclosure requirements compel
speech in violation of the First Amendment. Some commenters also
contended that Sec. 464.2 would prohibit businesses from advertising
aspects or parts of truthful and accurate price information. They
argued that conditioning the ability to provide some truthful
information--such as a partial price without including certain fees--on
total price being disclosed violates the First Amendment.\431\
Commenters asserted that consumers are not injured where a business
presents a price that omits fees or fails to add up the fees for the
consumer. They argued that this type of price information is useful and
truthful even if it is only partial. A commenter argued that how the
price of goods and services is displayed is a message under the First
Amendment and the rule's requirement that total price be displayed
clearly and conspicuously is unconstitutional compelled speech.\432\
One academic commenter supported the rule and argued it does not
unconstitutionally compel speech because it only requires disclosure of
factual, non-controversial information, without which the prices
disclosed or advertised would be misleading.\433\
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\431\ E.g., FTC-2023-0064-3028 (Competitive Enterprise Institute
provided examples of pricing information it argued was not unfair or
deceptive that involve drip pricing with disclaimers, contingent
pricing, and partition pricing.) The Commission addresses in section
III.B.1 when and to what extent the rule covers these types of
information and also explains why the omission of Total Price is
unfair and deceptive in those circumstances.
\432\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\433\ FTC-2023-0064-3275 (Berkeley Law Center for Consumer Law &
Economic Justice et al.).
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Some commenters argued the requirement to disclose total price
clearly and conspicuously should be subject to strict scrutiny,\434\
while others argued it should be reviewed under a heightened scrutiny
standard \435\ or intermediate scrutiny.\436\ One commenter argued that
the rule is a content-based regulation subject to strict scrutiny
because, where a business presents any type of price information, it is
required to display total price and in a particular way--i.e., clearly,
conspicuously, and prominently.\437\ The commenter argued that the
Commission failed to demonstrate the rule directly advances any
compelling government interest. Another commenter argued that price
information is commercial speech subject to intermediate scrutiny and
that the rule fails to meet the standard because, even if some price
displays without total price are deceptive, not all such displays are
deceptive.\438\
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\434\ FTC-2023-0064-3028 (Competitive Enterprise Institute);
FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\435\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\436\ FTC-2023-0064-3016 (National Federation of Independent
Business).
\437\ FTC-2023-0064-3028 (Competitive Enterprise Institute).
\438\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
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Some commenters asserted that the rule's application to credit card
surcharges and government charges violated the First Amendment. An
industry commenter interpreted the rule to require all credit card
surcharges to be included in total price. The commenter argued that
this amounts to a ban on presenting credit card surcharges to
consumers, which is regulation of commercial speech that violates
merchants' First Amendment rights. The commenter cited to several State
laws banning credit card surcharges or fees, but allowing cash
discounts, that were struck down by Federal courts of appeals.\439\ Two
commenters argued that the rule's allowance for government charges to
be excluded from total price--while other fees or charges cannot be
excluded--amounts to content-based regulation of speech that provides
preferential treatment to the government.\440\ One commenter argued
that the rule would allow businesses to conceal government charges and
shows favoritism for government speech to assist it in raising tax
revenues; the commenter proposed the alternative of marginally raising
the tax rate.\441\ The commenter also argued that the rule is
underinclusive because total price does not include government charges,
arguing that consumers suffer the same harm of being surprised by
government fees as with non-government charges required to be included
in total price. Finally, other commenters recommended that the
Commission adopt a rule that only prohibits deceptive conduct without
requiring specific affirmative disclosures.\442\
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\439\ FTC-2023-0064-3128 (Merchants Payments Coalition).
\440\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3233 (NCTA--The Internet & Television Association).
\441\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP
``assume[d]'' that in allowing government charges to be excluded
from Total Price, the Commission aims to ``rais[e] tax revenues''
because the Commission believes ``disclosing a tax upfront will lead
to fewer people making purchases, resulting in a decline in
revenue''). The commenter did not address the fact that the
Commission does not have authority over taxation, or whether the
commenter's proposed alternative of raising marginal tax rates would
fulfill the Commission's goal in this rulemaking of preventing
unfair or deceptive conduct related to mandatory fees and charges.
The Commission finds that marginally raising the tax rate is not a
viable alternative because the Commission does not have taxing
authority and raising the tax rate would not achieve the
Commission's stated goal of preventing unfair or deceptive conduct.
\442\ FTC-2023-0064-3016 (National Federation of Independent
Business); FTC-2023-0064-3028 (Competitive Enterprise Institute).
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2. Legal Standard
The Commission finds that businesses' First Amendment rights are
adequately protected because Sec. 464.2's compelled disclosures are in
a commercial context and meet the longstanding legal standards
governing commercial speech. Courts apply one of two standards in the
context of commercial speech. In Cent. Hudson Gas & Electric Corp. v.
Pub. Serv. Comm'n of N.Y., 447 U.S. 557, 563-64 (1980), the Supreme
Court established the analytical framework for determining the
constitutionality of a regulation of commercial speech that is not
misleading and does not involve illegal activity. Under that framework,
described as intermediate scrutiny, the regulation must: (1) serve a
substantial governmental interest; (2) directly advance this interest;
and (3) not be more extensive than necessary to serve the government's
interests.\443\ The third prong does not require the government to
adopt the least restrictive means. Instead, it simply calls for a ``
`fit' between the legislature's ends and the means chosen to accomplish
those ends . . . a fit that is not necessarily perfect, but
reasonable.'' \444\
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\443\ Cent. Hudson Gas & Elec. Corp., 447 U.S. at 564.
\444\ Bd. of Trs. of State Univ. of N.Y. v. Fox, 492 U.S. 469,
480 (1989) (internal citations omitted).
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The Supreme Court's ``precedents have applied a lower level of
scrutiny to laws that compel disclosures in certain contexts,'' such as
in commercial speech, as set forth in Zauderer v. Office of
Disciplinary Counsel, 471 U.S. 626 (1985).\445\ Contrary to commenters'
[[Page 2113]]
assertions, compelled speech in the commercial context is neither
unequivocally prohibited nor subject to strict scrutiny under the First
Amendment. Rather, the First Amendment permits required disclosures
that are: (1) factual and uncontroversial; (2) reasonably related to
the government's interest--here, preventing unfair and deceptive
commercial practices that harm consumers; and (3) not ``unjustified or
unduly burdensome.'' \446\ The final rule's disclosure requirements
satisfy these parameters.
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\445\ Zauderer, 471 U.S. at 650-53; Nat'l Inst. of Family & Life
Advocates v. Becerra (``NIFLA''), 585 U.S. 755, 768 (2018); see also
Milavetz, Gallop & Milavetz P.A. v. United States, 559 U.S. 229,
249-50 (2010) (applying ``the less exacting scrutiny described in
Zauderer'' and upholding a requirement that advertisements include a
disclosure ``intended to combat the problem of inherently misleading
commercial advertisements'').
\446\ Zauderer, 471 U.S. at 653; see also Am. Meat Inst. v.
USDA, 760 F.3d 18, 22-23 (D.C. Cir. 2014) (en banc) (holding
Zauderer applies to compelled commercial speech in service of
government interests in addition to preventing and correcting
deception); CTIA--The Wireless Ass'n v. City of Berkeley, 928 F.3d
832, 844 (9th Cir. 2019) (holding Zauderer applies to compelled
commercial health and safety disclosures if they further a
substantial government interest) (citing Central Hudson Gas & Elec.
Corp., 447 U.S. at 564; NIFLA, 585 U.S. at 768, 775)); Pharm. Care
Mgmt. Ass'n v. Rowe, 429 F.3d 294, 310, 310 n.8 (1st Cir. 2005)
(clarifying that the application of Zauderer is not limited to cases
in which the compelled disclosure prevents deception and upholding
compelled commercial disclosures based on government interests in
preventing deception and ``increasing public access to prescription
drugs''); Nat'l Elec. Mfrs. Ass'n v. Sorrell, 272 F.3d 104, 116 (2d
Cir. 2001) (applying Zauderer to compelled commercial disclosure
even though it ``was not intended to prevent `consumer confusion or
deception' per se, . . . but rather to better inform consumers about
the products they purchase'') (internal citation and quotation marks
omitted) (citing Zauderer, 471 U.S. at 651).
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3. The Rule's Disclosure Requirements Are Constitutional Under Zauderer
Section 464.2 applies to speech that is, at its core, commercial--
the disclosure and advertising of the price for goods and
services.\447\ It requires precisely the type of disclosure the Supreme
Court has confirmed is constitutional under Zauderer.\448\ In Zauderer,
the Supreme Court considered a challenge to government-compelled
commercial speech in an advertisement by an attorney. The advertisement
stated that certain types of cases were handled on a contingent fee
basis for which the client owed no legal fees if the lawsuit was
unsuccessful. The State required such advertisements to disclose that
clients may be liable for litigation costs even if their lawsuit is
unsuccessful. The attorney argued such a requirement was compelled
speech in violation of the First Amendment. The Supreme Court
disagreed. Noting that the disclosure applied to commercial
advertising, the Court held that an advertiser's ``constitutionally
protected interest in not providing any particular factual information
in his advertising is minimal.'' \449\ The Court concluded, ``The
State's position that it is deceptive to employ advertising that refers
to contingent-fee arrangements without mentioning the client's
liability for costs is reasonable enough to support a requirement that
information regarding the client's liability for costs be disclosed.''
\450\ The Court also noted that attorneys were not prevented from
conveying information to the public--they were merely required ``to
provide somewhat more information than they might otherwise be inclined
to present . . . in order to dissipate the possibility of consumer
confusion or deception.'' \451\
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\447\ See Expressions Hair Design v. Schneiderman, 581 U.S. 37,
48 (2017) (reviewing State law regulating disclosure of
differentiation of prices for credit card versus other types of
payment and remanding for determination of whether the statute ``is
a valid commercial speech'' regulation); City of Cincinnati v.
Discovery Network, Inc., 507 U.S. 410, 422 (1993) (``Most of the
appellee's mailings consisted primarily of price and quantity
information, and thus fell within the core notion of commercial
speech--speech which does `no more than propose a commercial
transaction.''') (cleaned up) (citing Bolger v. Young's Prods.
Corp., 463 U.S. 60, 66 (1983)); see generally Cent. Hudson Gas &
Elec. Corp., 447 U.S. at 561 (referring to commercial speech as
``expression related solely to the economic interests of the speaker
and its audience''); Va. State Bd. of Pharmacy v. Va. Citizens
Consumer Council, Inc., 425 U.S. 748, 762 (1976) (commercial speech
includes speech that does ``no more than propose a commercial
transaction'' (internal citations omitted)); see also Bates v. State
Bar of Ariz., 433 U.S. 350, 383 (1977) (``the advertiser knows his
product and has a commercial interest in its dissemination''; ``any
concern that strict requirements for truthfulness will undesirably
inhibit spontaneity seems inapplicable because commercial speech
generally is calculated. Indeed, the public and private benefits
from commercial speech derive from confidence in its accuracy and
reliability.'').
\448\ Zauderer, 471 U.S. at 651-53; see also NIFLA, 585 U.S. at
768-69 (restating the Zauderer standard, noting that ``purely
factual and uncontroversial information about the terms under which
. . . services will be available . . . should be upheld unless they
are unjustified or unduly burdensome'' (internal citations
omitted)).
\449\ Zauderer, 471 U.S. at 651.
\450\ Id. at 653.
\451\ Id. at 650-51 (internal quotation omitted).
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Section 464.2 satisfies all prongs of Zauderer. First, Sec. 464.2
only requires businesses to disclose factual and noncontroversial
pricing information, by incorporating known mandatory fees or charges
into total price, with exceptions, and by disclosing certain other
customary pricing information before a consumer consents to pay. As
described in section II.B, the purpose of the rule is to ensure that
consumers know the total amount they will have to pay because this
information is material to consumer decision making.
Second, parts II.B and III lay out in detail how the rule is
reasonably related to--and, in fact, directly advances--the
government's interest in preventing unfairness and deception in the
marketplace. Preventing unfair and deceptive conduct is the
Commission's mandate under sections 5 and 18 of the FTC Act.\452\ And
based on voluminous comments from the public as well as significant
empirical evidence, the Commission finds that consumers seeking to
purchase covered goods or services are likely to be deceived and harmed
if the required disclosures are not made.
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\452\ 15 U.S.C. 45, 57a.
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Finally, Sec. 464.2 is neither unduly burdensome nor unjustified.
The Commission set forth the justification for the required disclosures
in parts II and III, including the harms to consumers and to
competition from drip or partitioned pricing. Further, the rule does
not impose an undue burden; businesses offering covered goods or
services are simply required ``to provide somewhat more information
than they might otherwise be inclined to present.'' \453\ The rule
merely requires clear and conspicuous display of total price if other
pricing information is displayed, and requires certain pricing and
informational disclosures before the consumer consents to pay. As
described in detail in section III, the final rule permits businesses
to exclude from total price certain mandatory fees or charges that
industry commenters stated would be impractical or burdensome for
inclusion in total price.
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\453\ Zauderer, 471 U.S. at 650.
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The Commission disagrees with a commenter who seemed to argue that
because the rule imposes disclosure requirements as to ``how'' total
price is displayed, the rule ``offends the First Amendment'' by
compelling speech.\454\ In so arguing, the commenter cited to 303
Creative, LLC v. Elenis, 600 U.S. 570 (2023). The Supreme Court in 303
Creative considered an as-applied challenge to the Colorado Anti-
Discrimination Act (``CAD'') by a sole proprietor who designed
individualized websites the Court concluded ``qualify as pure speech,''
with each website being an ``original, customized creation.'' \455\
While the Court in that case held that the CAD violated the First
Amendment as applied to the plaintiff, the rule here is distinguishable
from the facts of 303 Creative. First, both price
[[Page 2114]]
and how price is displayed (here, how total price is displayed) relate
solely to proposing a commercial transaction and to the economic
interests of the speaker and its audience.\456\ Second, the Court based
its decision in 303 Creative on the unique nature of the plaintiff's
work, noting the plaintiff ``does not seek to sell an ordinary
commercial good.'' \457\ In comparison, the rule merely requires the
display of the total price of a covered good or service--live-event
tickets and short-term lodging--which is core commercial speech.
---------------------------------------------------------------------------
\454\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\455\ 303 Creative, 600 U.S. at 587-88.
\456\ See cases cited supra note 447 (defining commercial
speech).
\457\ 303 Creative, 600 U.S. at 593-94.
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Therefore, the Commission finds that the disclosure requirements
are consistent with the compelled speech analysis under Zauderer.
Clear, conspicuous, and prominent disclosure of total price in
advertisements, displays, or offers, and the disclosure of complete
pricing information of covered goods or services before the consumer
consents to pay, directly advance the Commission's interest in
preventing deception and harm. The rule's requirements enable consumers
to receive the information they need to make informed purchasing
decisions about live-event tickets and short-term lodging based on
complete and truthful information.
4. The Rule Does Not Prohibit Truthful Speech
Commenters asserted that the rule amounts to a prohibition on the
display of truthful price information in violation of the First
Amendment because the rule prohibits certain information (like partial
prices without mandatory fees) from being displayed without displaying
total price. Commenters also asserted that, because the rule prohibits
certain displays of price, like parts of prices without fees, it should
be evaluated under Central Hudson. The Commission disagrees. First, the
commenters ``overlook[ ] material differences between disclosure
requirements and outright prohibitions on speech.'' \458\ The rule does
not prevent businesses from conveying information to the public and, in
particular, it does not prohibit the disclosure of the components of
total price. Businesses remain free to describe, disclose, or convey
price, fee, and charge information.\459\ Put differently, the rule
permits any truthful pricing claims an advertiser wants to make; what
it forbids is half-truths that omit total price.
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\458\ Zauderer, 471 U.S. at 650.
\459\ Of course, Businesses offering, displaying, or advertising
a Covered Good or Service cannot misrepresent the nature, purpose,
amount, or refundability of any fee or charge under Sec. 464.3;
this requirement is consistent with the First Amendment. See Ibanez
v. Fla. Dep't of Bus. & Prof'l. Regul., 512 U.S. 136, 142 (1994)
(``false, deceptive, or misleading commercial speech may be banned''
(citations omitted)). Commenters did not argue Sec. 464.3 violates
the First Amendment.
---------------------------------------------------------------------------
Section 464.2 does require a business that displays certain pricing
information about covered goods or services to also provide factual and
non-controversial information in the form of total price. Although
total price may be ``somewhat more information than they might be
otherwise inclined to present,'' such a requirement is allowed by
Zauderer.\460\ With the rule's requirement that total price be clear,
conspicuous, and prominent, the Commission balances industry
commenters' stated desire to display other price information with its
finding that total price is a necessary piece of price information for
consumers if any other price information is displayed.\461\
---------------------------------------------------------------------------
\460\ Zauderer, 471 U.S. at 650.
\461\ Indeed, the Zauderer Court noted that ``because disclosure
requirements trench much more narrowly on an advertiser's interests
than do flat prohibitions on speech, `warning[s] or disclaimer[s]
might be appropriately required . . . in order to dissipate the
possibility of consumer confusion or deception.' '' Id. at 651
(citation omitted).
---------------------------------------------------------------------------
Because the rule does not restrict truthful speech, and because the
conduct the rule addresses (advertising prices without mandatory fees)
is deceptive, the Commission need not apply the Central Hudson factors.
Nevertheless, the rule would meet them. Under Central Hudson, the
regulation must serve a substantial governmental interest, must
directly advance that interest, and must not be more extensive than
necessary to serve the government's interest.\462\ As outlined in parts
II and III, the rule serves the substantial governmental interest of
providing material price information to consumers purchasing live-event
tickets and short-term lodging to allow them to make accurate price
comparisons and informed purchasing decisions, and to allow businesses
to compete on price in a level playing field. And consistent with the
third prong of Central Hudson, the rule is no more extensive than
necessary to serve the government's interests in preventing unfairness,
deception, and harm, as the rule simply requires clear, conspicuous,
and prominent display of total price. Central Hudson acknowledges that
the government can regulate the format of advertising, including by
requiring a disclosure.\463\
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\462\ Cent. Hudson Gas & Elec. Corp., 447 U.S. at 566.
\463\ See id. at 570-71 (``To further its policy of
conservation, the Commission could attempt to restrict the format
and content of Central Hudson's advertising. It might, for example,
require that the advertisements include information about the
relative efficiency and expense of the offered service, both under
current conditions and for the foreseeable future.'').
---------------------------------------------------------------------------
The Commission also disagrees with commenters arguing the rule
violates is overinclusive and would prohibit some displays of partial
price that are not deceptive or unfair without the display of total
price. Again, because truthful itemization of price components is not
prohibited by the rule, commenters' contention that the rule is a
prohibition on speech misses the mark. The Commission finds, however,
that the display of the price of a good or service without disclosing
total price clearly, conspicuously, and prominently is unfair and
deceptive and harms consumers and honest competitors. Because the third
prong of Central Hudson does not require the government to use the
least restrictive means necessary to advance its interest, the rule
would be constitutional even if it prohibited displaying partial price
in instances that, in isolation, may not be unfair or deceptive. The
same is true under Zauderer, where the Court held that the State's
``assumption that substantial numbers of potential clients would be . .
. misled'' about the possibility that they would be responsible for
litigation costs--in contrast to proving that all potential clients
would be misled--was sufficient to meet the standard.\464\
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\464\ Zauderer, 471 U.S. at 652-53.
---------------------------------------------------------------------------
The Commission addresses in section III commenters who argued that
it should adopt alternative policies, such as prohibiting
misrepresentations and allowing businesses to disclose amounts or fees
as they wish. As relevant here, commenters argued that the Commission
should adopt those alternatives because they would not violate the
First Amendment. The Commission finds that the rule, including Sec.
464.2, does not violate the First Amendment. Given the Commission's
finding that failure to disclose total price is unfair and deceptive,
the rule's affirmative disclosure requirements are needed to achieve
the Commission's goal of preventing this unfair and deceptive conduct.
[[Page 2115]]
5. The Rule's Treatment of Credit Card Fees and Government Charges Does
Not Violate the First Amendment
The rule does not violate the First Amendment in its treatment of
credit card fees and government charges. First, as noted in section
III.B.1.c, the rule does not prohibit a business from charging or
passing through credit card fees if otherwise allowed by law. The rule
also does not affect State laws that prohibit credit card surcharges.
Whether credit card charges must be included in total price depends on
whether a business makes such fees mandatory. If a business offers
consumers multiple viable payment methods for the offered transaction,
so that paying with a credit card is optional, then credit card fees
are not for a ``mandatory ancillary good or service'' under the rule
and need not be included in total price. In addition, where credit card
fees are mandatory, the rule does not prohibit businesses from
itemizing them as long as they are also included in total price.
Accordingly, there is no merit to commenters' concerns that consumers
will not understand the impact of costs affecting businesses, since
businesses can itemize those costs under the rule.
The Commission also disagrees with commenters' argument that Sec.
464.2 violates the First Amendment as a content-based regulation
because it does not require businesses to include government charges in
total price. One commenter, who argued the point in detail, relied on
Barr v. American Ass'n of Political Consultants, Inc., 591 U.S. 610
(2020), in which the Supreme Court held that an exclusion for
collectors of government debt from the Telephone Consumer Protection
Act (``TCPA''), which generally prohibits robocalls, violated the First
Amendment. A majority agreed that the exclusion for collectors of
government debt was severable--the prohibition on robocalls was upheld.
The exclusion provision in the TCPA addressed in Barr is
distinguishable from the final rule in several ways. At the outset, the
rule does not favor government charges unequivocally. While the rule
allows businesses to exclude government charges from total price, it
does not require businesses to do so. Businesses have a choice--they
may include government charges in total price. Second, the commenter
makes specific and erroneous assumptions about the Commission's
reasoning for excluding government charges from total price, such as
that the Commission's interest in adopting the rule includes favoring
taxes and increasing tax revenue. Tax revenues have no bearing on the
Commission's decision to adopt this rule. As noted in section III.A.5,
consumers have come to understand and expect sales tax to be added at
the end of a purchase, and there are other Federal, State, and local
laws that have specific requirements about disclosing taxes and other
government charges. In addition, in many online transactions,
businesses are unable to fully calculate certain components of
government charges until a consumer provides their location
information. Thus, the Commission has good reason to allow businesses
to exclude government charges from total price if they choose.\465\
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\465\ The Commission modifies the definition of ``Government
Charges'' from those fees or charges ``imposed on consumers'' to
those ``imposed on the transaction'' to limit the potential
distinction between fees and charges imposed directly on consumers
and those imposed on Businesses. See supra section III.A.5.
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D. Commission Structure
One commenter argued the Commission is unconstitutionally
structured because the Commissioners are shielded from removal and
asserts that Humphrey's Executor v. United States, 295 U.S. 602 (1935),
either no longer applies or was wrongly decided by the Supreme
Court.\466\ The same commenter asserted that the Commission's
administrative law judges are unconstitutionally appointed by the
Commission Chair and are unconstitutionally shielded from removal.\467\
The Commission disagrees.
---------------------------------------------------------------------------
\466\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\467\ Id.
---------------------------------------------------------------------------
In Humphrey's Executor, the Supreme Court addressed the crux of the
commenter's first argument and concluded that the Commission's
structure is constitutional. In that case, President Roosevelt sought
to remove a Commissioner without cause. The Court held that the FTC Act
authorized removal of Commissioners only on the grounds specified in
the statute (``inefficiency, neglect of duty, or malfeasance in
office'') and that this limitation on the President's removal power was
constitutional given the ``character of the [C]ommission and the
legislative history which accompanied and preceded the passage of the
act.'' \468\ The commenter's arguments that Humphrey's Executor is no
longer applicable are unavailing. The Supreme Court's decision is not
rendered any less binding because Congress has refined the Commission's
authorities during the course of its more than 100-year tenure.\469\
The key policy rationale underlying Humphrey's Executor remains valid
today. The Commissioners collectively act as an adjudicatory body, and
the for-cause removal standard ensures that they are free from
``suspicion of partisan direction'' or ``political domination or
control.'' \470\ Congress has similarly provided for-cause removal
standards for the members of many other non-Article III tribunals
composed of multiple members who perform adjudicatory functions as an
expert body within a specific area of the law.\471\
---------------------------------------------------------------------------
\468\ Humphrey's Executor, 295 U.S. at 624-32.
\469\ See FTC v. Am. Nat'l Cellular, Inc., 810 F.2d 1511, 1513-
14 (9th Cir. 1987) (enactment of section 13(b) of the FTC Act did
not render Humphrey's Executor inapposite).
\470\ Humphrey's Executor, 295 U.S. at 625.
\471\ See Collins v. Yellen, 594 U.S. 220, 250 n.18 (2021);
Wiener v. United States, 357 U.S. 349, 353 (1958).
---------------------------------------------------------------------------
Next, the commenter incorrectly asserted that administrative law
judges are appointed by the Chair and are unconstitutionally shielded
from removal. The commenter argued that under Free Enter. Fund v. Pub.
Co. Accounting Oversight Bd., 561 U.S. 477 (2010), administrative law
judges must be appointed by the full Commission and that the
appointment process for administrative law judges at the FTC is
unconstitutional because administrative law judges are appointed by the
Commission Chair alone.\472\ The commenter is mistaken. The Commission
voted in December 2023 to approve the appointment of Administrative Law
Judge Jay L. Himes.\473\ The Chief Presiding Officer--here, the Chair
pursuant to 16 CFR 0.8--then selected Judge Himes to be the presiding
officer for this rulemaking, and Judge Himes was properly designated as
the presiding officer in the Commission's notice of informal
hearing.\474\
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\472\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\473\ Press Release, Fed. Trade Comm'n, FTC Announces
Appointment of Jay L. Himes as New Administrative Law Judge (Mar.
12, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/03/ftc-announces-appointment-jay-l-himes-new-administrative-law-judge.
\474\ Initial notice of informal hearing; final notice of
informal hearing; list of Hearing Participants; requests for
submissions from Hearing Participants: Trade Regulation Rule on
Unfair or Deceptive Fees, 89 FR 21216 (Mar. 27, 2024); see also 16
CFR 0.8, 1.13.
---------------------------------------------------------------------------
In response to the commenter's contention that the removal
protections for the Commission's administrative law judges are
unconstitutional, the Commission notes that the Supreme Court has
recognized in recent decisions that Congress may constitutionally
[[Page 2116]]
restrict the President's at-will removal power with regard to inferior
officers.\475\ In Collins v. Yellen, 594 U.S. 220 (2021), for example,
the Court declined to ``revisit . . . prior decisions allowing certain
limitations on the President's removal power,'' \476\ which include the
``good cause'' protections for inferior officers ``with limited duties
and no policymaking or administrative authority'' described by the
Court in Seila Law LLC v. CFPB, 591 U.S. 197 (2020).\477\ In Free
Enter. Fund, the Court held removal protections for Public Company
Accounting Oversight Board members unconstitutional and contrasted the
duties of those members with the lesser duties of administrative law
judges: ``[U]nlike members of the [Public Company Accounting Oversight]
Board,'' administrative law judges (1) ``perform adjudicative rather
than enforcement or policy making functions,'' or (2) ``possess purely
recommendatory powers.'' \478\ The FTC's administrative law judges fit
squarely within both of those descriptions.
---------------------------------------------------------------------------
\475\ See, e.g., Decker Coal Co. v. Pehringer, 8 F.4th 1123,
1133-36 (9th Cir. 2021) (holding that administrative law judge
removal protections are constitutional).
\476\ Collins, 594 U.S. at 250-51 (discussing Seila Law LLC v.
CFPB, 591 U.S. 197 (2020)).
\477\ Seila Law, 591 U.S. at 217-18.
\478\ Free Enter. Fund, 561 U.S. at 507 n.10.
---------------------------------------------------------------------------
Even if the appointment procedures and removal protections of
administrative law judges were unconstitutional because of their role
as inferior officers under Article II, the constitutionality of the
rule would not be in question because presiding officers under section
18 are not ``officers'' under Article II. Notably, while the presiding
officer in the Informal Hearing for this rulemaking happened to be an
administrative law judge, neither section 18(c)(1)(B) nor the
Commission's rules implementing that provision require an
administrative law judge to preside over section 18 informal
hearings.\479\
---------------------------------------------------------------------------
\479\ 15 U.S.C. 57a(c)(1)(B); 16 CFR 1.13.
---------------------------------------------------------------------------
Instead, the presiding officer is a specific, temporary designation
made under section 18(c) and its implementing rules, 16 CFR 1.11
through 1.13. The Supreme Court's framework for distinguishing between
officers and employees asks whether an individual ``exercise[s]
significant authority pursuant to the laws of the United States'' and
occupies a position that is ``continu[ous] and permanent.'' \480\ For
presiding officers, neither is true. As relevant here, the role of the
presiding officer in section 18 rulemakings--assisting in the
collection of necessary information for the rulemaking to proceed,
ensuring hearings proceed methodically, and maintaining the rulemaking
record \481\--is not policymaking; that role is reserved for the
Commission.\482\ Moreover, an administrative law judge, whether or not
he or she is serving as a presiding officer, cannot initiate a
rulemaking, decide its subject, decide whether a rule should issue, or
establish its content. The Commission performs all of these
functions.\483\
---------------------------------------------------------------------------
\480\ Lucia v. SEC, 585 U.S. 237, 245 (2018) (in the ``Court's
basic framework for distinguishing between officers and employees[,]
. . . an individual must occupy a `continuing' position established
by law to qualify as an officer . . . [and] `exercise[ ] significant
authority pursuant to the laws of the United States' '' (citations
omitted)).
\481\ 15 U.S.C. 57a; 16 CFR 0.14.
\482\ 16 CFR 1.13.
\483\ 16 CFR 1.9, 16 CFR 1.13(i), 16 CFR 1.14, 16 CFR 1.25, 16
CFR 1.26(d).
---------------------------------------------------------------------------
As an initial matter, the Commission determines whether an informal
hearing will be conducted; presiding officers do not have discretion
over whether the hearing will occur. The presiding officer simply
``presides over the rulemaking proceedings'' and, when appropriate,
makes a ``recommended decision based upon the findings and conclusions
of such officer.'' \484\ The presiding officer's powers in the conduct
of the hearing are also limited. For example, the officer may not
extend the time allotted for the informal hearing beyond a certain
period ``unless the Commission, upon a showing of good cause, extends
the number of days for the hearing.'' \485\ The commenter is correct
that the presiding officer is initially chosen by the ``chief presiding
officer,'' who is the Chair of the FTC under 16 CFR 0.8. However, the
formal assignment of that presiding officer to a particular hearing is
in the initial notice of informal hearing, which is issued by vote of
the Commission. Although the presiding officer reports to the chief
presiding officer, again, the powers of the two together amount to no
more than conducting the informal hearing and making a recommended
decision based on the presiding officer's findings to the
Commission.\486\ All substantive decisions are made by the Commission.
These are temporary assignments that begin and end with the informal
hearing process.
---------------------------------------------------------------------------
\484\ 15 U.S.C. 57a(c).
\485\ 16 CFR 1.13(a)(2)(ii).
\486\ 16 CFR 1.13.
---------------------------------------------------------------------------
Accordingly, neither the Commission's structure nor the role of the
presiding officer in section 18 violates the Constitution.
E. Administrative Procedure Act
Several commenters asserted the Commission has not complied with
the APA.\487\ The Commission disagrees. The Commission complies with
the APA's requirements, including by explaining the rule's relationship
to the unfair and deceptive conduct the Commission seeks to prevent and
by responding to all significant comments.\488\ As explained herein,
the Commission also complies with the additional requirements of
sections 18 and 22 of the FTC Act.
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\487\ FTC-2023-0064-3133 (National Multifamily Housing Council
and National Apartment Association); FTC-2023-0064-3152 (Building
Owners & Managers Association et al.); FTC-2023-0064-3238 (Gibson,
Dunn & Crutcher LLP); FTC-2023-0064-3263 (Flex Association); FTC-
2023-0064-3294 (International Franchise Association).
\488\ Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto Ins.,
463 U.S. 29, 43 (1983) (holding that an agency must articulate a
satisfactory explanation for its action including a ``rational
connection between the facts found and the choices made.'' (citing
Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168
(1962))).
---------------------------------------------------------------------------
Commenters claimed that the rule is arbitrary and capricious
because it is not based on sufficient facts or data, and lacks a
rational connection between the facts and the regulatory choices.\489\
These commenters argued that the factual record does not support the
Commission's decision to promulgate an industry-neutral rule or to
apply the rule to particular industries.\490\ One commenter criticized
various substantive aspects of the rule including its breadth,
consideration of alternatives, and costs.\491\ The commenter also
argued that the rule is duplicative and could lead to regulatory
confusion.\492\
---------------------------------------------------------------------------
\489\ See, e.g., FTC-2023-0064-3294 (International Franchise
Association); FTC-2023-0064-3133 (National Multifamily Housing
Council and National Apartment Association); FTC-2023-0064-3152
(Building Owners & Managers Association et al.); FTC-2023-0064-3263
(Flex Association).
\490\ See, e.g., FTC-2023-0064-3294 (International Franchise
Association); FTC-2023-0064-3133 (National Multifamily Housing
Council and National Apartment Association); FTC-2023-0064-3152
(Building Owners & Managers Association et al.); FTC-2023-0064-3263
(Flex Association).
\491\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\492\ Id.
---------------------------------------------------------------------------
The Commission has carefully reviewed and considered the comments
and information it received in this rulemaking. As a preliminary
matter, the NPRM engaged in extensive discussion concerning the
comments received in response to the ANPR and followed up with
additional questions and requests for empirical data and proposed rule
text. Likewise, the analysis contained throughout this SBP,
particularly Parts III-VII, similarly
[[Page 2117]]
engages with and considers the additional significant comments and
information received in response to the NPRM. Commenters raising
questions regarding APA compliance primarily critiqued the industry-
neutral nature of the proposal advanced in the NPRM. The Commission
disagrees with these critiques. The Commission, however, has determined
to limit this final rule to covered goods or services and need not
address arguments regarding the application of the rule to a wide range
of industries at this time. Further, both the NPRM and this SBP explain
in detail the factual record and its relationship to the provisions
finalized in the rule. While empirical data is not required, the
Commission in section V presents an analysis for the final rule,
identifying benefits, such as reductions in consumer search cost time
and deadweight loss, and quantifying compliance costs. Finally, in
section V.E.2.d, the Commission finds that the rule's benefits to the
public will exceed its costs.
V. Final Regulatory Analysis Under Section 22 of the FTC Act
Under section 22 of the FTC Act, when the Commission promulgates
any final rule as a ``rule'' as defined in section 22(a)(1), it must
include a ``final regulatory analysis.'' 15 U.S.C. 57b-3(b)(2). The
final regulatory analysis must contain: (1) a concise statement of the
need for, and objectives of, the final rule; (2) a description of any
alternatives to the final rule that were considered by the Commission;
(3) an explanation of the reasons for the Commission's determination
that the final rule will attain its objectives in a manner consistent
with applicable law and the reasons the particular alternative was
chosen; (4) an analysis of the projected benefits, any adverse economic
effects, and any other effects of the final rule; and (5) a summary of
any significant issues raised by the comments submitted during the
public comment period in response to the Preliminary Regulatory
Analysis, and the Commission's assessment of such issues. 15 U.S.C.
57b-3(b)(2)(A) through (E). The Commission analyzes each of these
components in the following final regulatory analysis.
The Commission has the authority to promulgate this rule under
section 18 of the FTC Act, 15 U.S.C. 57a, which authorizes the
Commission to promulgate, modify, and repeal trade regulation rules
that define with specificity acts or practices in or affecting commerce
that are unfair or deceptive within the meaning of section 5(a)(1) of
the FTC Act, 15 U.S.C. 45(a)(1). In explaining the need for, and
objectives of, the rule, the Commission observes that a clear rule is
the best way to accomplish its goals of: (1) ensuring that consumers
receive truthful, timely, and transparent information about price to
permit them to comparison shop effectively and (2) leveling the playing
field for honest competitors. In addition, a clear rule would deter the
defined unfair or deceptive pricing practices by enabling the
Commission to more readily obtain monetary relief and civil penalties.
The Commission carefully considered several alternatives to the rule,
including terminating the rulemaking and pursuing a broader, industry-
neutral alternative. The Commission determined that the alternative of
terminating the rulemaking would not accomplish these objectives. As
explained in section II, the Commission finds that bait-and-switch
pricing and misleading fees and charges are prevalent economy-wide, but
chooses to begin by tackling these practices in the live-event
ticketing and short-term lodging industries, where the Commission first
began evaluating drip pricing more than a decade ago and which have a
long history of harming consumers and businesses. The final rule will
attain its objectives of promoting truthful, timely, and transparent
pricing, comparison shopping, and fair competition in the live-event
ticketing and short-term lodging industries in a manner consistent with
applicable law. The Commission will rely on its existing section 5
authority in pursuing case-by-case enforcement actions against
businesses in other industries that engage in the specific unfair and
deceptive pricing practices that are the subject of the industry-
specific coverage in this rule.
The Commission's final regulatory analysis indicates that adoption
of the rule will result in benefits to the public that exceed the
costs. As described further herein, the rule will not only result in
significant benefits to consumers but also improve the competitive
environment in the live-event ticketing and short-term lodging
industries, particularly for small, independent, or new firms. One such
benefit is that the final rule will reduce deadweight loss.
``Deadweight loss'' is a term used to describe the loss of efficiency
or economic welfare, a cost to society, that occurs when resources are
not used as efficiently as possible. At a competitive equilibrium, in
which the marginal benefit for consumers equals the marginal cost for
firms, there is no deadweight loss. When firms, including those in the
live-event ticketing and short-term lodging industries, engage in bait-
and-switch tactics, consumers purchase more goods and services than
they would otherwise because they do not understand the full price. In
other words, in such cases, consumers overconsume beyond the quantity
necessary for competitive equilibrium. This overconsumption is a
deadweight loss because, if they had full information, consumers would
shift their spending toward more beneficial and efficient spending
patterns that reflect their true preferences. Deadweight loss is
discussed more fully in section V.E.2.a.ii.
The rule provides a net benefit to society if its benefits exceed
its costs. The Commission quantifies the incremental benefits for the
live-event ticketing and short-term lodging industries and shows that
the rule's benefits exceed the costs in these industries.
The Commission reviewed the comments relating to its Preliminary
Regulatory Analysis, some of which challenged the Commission's
estimation of the rule's potential costs and benefits. In response to
these comments, the Commission herein clarifies its analysis and adds a
sensitivity analysis to the baseline estimation. The Commission
concludes that these comments do not affect the Commission's finding
that the potential benefits of the rule exceed the potential costs.
A. Concise Statement of the Need for, and Objectives of, the Final Rule
The Commission believes the final rule is needed to ensure that
consumers receive truthful, timely, and transparent information about
the total price of goods or services, including the nature, purpose,
and amount of any fees or charges imposed on the transaction, so that
they can effectively comparison shop and budget their spending dollars
when deciding what live-event tickets to purchase or where to stay when
traveling. Although bait-and-switch pricing and misleading fees are
already unlawful unfair or deceptive acts or practices under section 5
of the FTC Act, the Commission concludes that a clear rule is the best
way to accomplish its goal of preventing the rule's defined, specific
unfair and deceptive pricing practices in the live-event ticketing and
short-term lodging industries while fostering a level playing field for
honest competitors to be able to compete truthfully and fairly based on
price. In addition, the final rule aims to increase deterrence of the
defined unfair or deceptive pricing practices in these industries by
enabling the Commission
[[Page 2118]]
to more readily obtain redress for injury to consumers through section
19(a)(1) of the FTC Act, 15 U.S.C. 57b(a)(1), and by allowing courts to
impose civil penalties where appropriate. The Commission believes that
the rule will accomplish these goals without significantly burdening
businesses and will provide significant benefits to consumers and
honest competitors.
The record of this rulemaking is replete with comments from
consumers, consumer groups, industry members, academics, and policy
organizations, as well as officials and agencies across all levels of
government, emphasizing the importance of consumers' ability to
effectively comparison shop and businesses' ability to honestly compete
against each other based on price. Regardless of industry, consumers
want to comparison shop when deciding where to purchase their goods or
services from among various competing offers. In many instances,
consumers have found it increasingly difficult, if not impossible, to
effectively comparison shop because businesses fail to provide the
total price when they display a purported amount a consumer will pay
for a good or service. Consumers are also misled as to the nature,
purpose, amount, and refundability of fees and charges, and are unable
to make informed choices about the value of the fee or charge, or the
good or service it represents, because their understanding of the fee
or charge is predicated on deceptive omissions or false or misleading
information. As a result, consumers are harmed because they consume
more goods or services, pay more for a good or service, and incur
higher search costs than they otherwise would have if they had been
presented with the total price upfront and truthful, timely, and
transparent information regarding fees and charges. Businesses that
honestly present the total price of a good or service and accurately
disclose the nature, purpose, and amount of fees and charges are at a
competitive disadvantage to those that mislead consumers by presenting
purportedly lower prices and inaccurate information about fees and
charges. As explained in section II, the record, as well as the
Commission's law enforcement actions, outreach, and other engagement
with businesses and consumers, support a finding that these practices
pervade the economy across industries. Fundamentally, the rule will
help consumers make informed decisions when comparison shopping and
level the playing field for honest businesses in the live-event
ticketing and short-term lodging industries, two industries that have a
long history of bait-and-switch pricing and misrepresentations
regarding fees and charges.
In addition, the final rule is necessary to allow the Commission to
recover redress more efficiently in cases where there is quantifiable
consumer harm resulting from bait-and-switch pricing and misleading
fees and charges. The final rule will also deter live-event ticketing
and short-term lodging businesses from engaging in these practices by
allowing for the imposition of monetary relief in the form of consumer
redress and civil penalties.
In 2021, the Supreme Court in AMG Capital Mgmt., LLC v. FTC, 593
U.S. 67, 82 (2021), held that section 13(b) of the FTC Act \493\ did
not authorize the Commission to seek, or a court to order, equitable
monetary relief for consumers such as restitution or disgorgement. The
AMG ruling has made it significantly more difficult for the Commission
to return money to injured consumers, particularly in cases that do not
involve rule violations.\494\
---------------------------------------------------------------------------
\493\ 15 U.S.C. 53(b).
\494\ See NPRM, 88 FR 77436-38, nn.122, 211, 232 (discussing
AMG).
---------------------------------------------------------------------------
Since AMG, the primary means for the Commission to return money
unlawfully taken from consumers has been through section 19 of the FTC
Act, 15 U.S.C. 57b, which provides two paths for consumer redress. One
path, under section 19(a)(2), typically requires the Commission to
first conduct an administrative proceeding to determine whether the
respondent violated the FTC Act; if the Commission finds that the
respondent did so, the Commission can issue a cease-and-desist order,
which might not become final until after the resolution of any appeals.
To obtain monetary relief, the Commission then must initiate a separate
action in Federal court under section 19 and, in that action, the
Commission must prove that the violator in the administrative action
engaged in objectively fraudulent or dishonest conduct.\495\
---------------------------------------------------------------------------
\495\ See 15 U.S.C. 57b(a)(2) (``If the Commission satisfies the
court that the act or practice to which the cease and desist order
relates is one which a reasonable man would have known under the
circumstances was dishonest or fraudulent, the court may grant
relief under subsection (b) of this section.'').
---------------------------------------------------------------------------
The more efficient path to monetary relief is under section
19(a)(1), which allows the Commission to recover redress in a single
Federal court action for violations of a Commission rule relating to
unfair or deceptive acts or practices.\496\ Under the rule, the
Commission will now be able to use the section 19(a)(1) pathway to
obtain redress for losses attributable to the specific unfair or
deceptive practices the rule defines and prohibits.
---------------------------------------------------------------------------
\496\ Certain statutes, such as the Restore Online Shoppers'
Confidence Act, 15 U.S.C. 8401 through 8405, include provisions that
treat violations of the statute as a violation of a rule for
purposes of section 19(a)(1). See, e.g., 15 U.S.C. 8404(a).
---------------------------------------------------------------------------
In addition, the final rule will allow courts to impose civil
penalties under section 5(m)(1)(A) of the FTC Act, 15 U.S.C.
45(m)(1)(A). Civil penalties will provide the deterrence necessary to
incentivize compliance with the law, even in cases when it is difficult
to quantify consumer harm.
Overall, the rule's prohibition of bait-and-switch pricing tactics,
including drip pricing, and misleading fees in the live-event ticketing
and short-term lodging industries expands the Commission's enforcement
toolkit and allows it to deliver on its consumer protection mission by
stopping and deterring harmful conduct in these industries and making
consumers whole when they have been harmed. The unfair or deceptive
acts or practices involving bait-and-switch pricing and misleading fees
encompassed by this final rule are prevalent and harmful to consumers
and honest competitors. Thus, the unlocking of additional remedies
through this rulemaking--particularly, the ability to obtain redress
for consumers injured by misconduct and civil penalties against
violators, where appropriate--will allow the Commission to more
effectively police and deter unfair or deceptive pricing practices in
these industries.
B. Alternatives to the Final Rule the Commission Considered, Reasons
for the Commission's Determination That the Final Rule Will Attain Its
Objectives in a Manner Consistent With Applicable Law, and the Reasons
the Particular Alternative Was Chosen
In analyzing the potential costs and benefits of the proposed rule,
the Commission considered several alternatives, including terminating
the rulemaking and a broader rule alternative. As the Commission
observed in the NPRM, one potential alternative is to terminate the
rulemaking and rely instead on the Commission's existing tools to
combat unfair or deceptive practices relating to pricing, such as
consumer education and enforcement actions brought under sections 5 and
19(a)(2) of the FTC Act. However, terminating the rulemaking would
deprive consumers of live-event tickets and short-term lodging of
quantifiable time savings, and unquantifiable benefits including
reduced frustration, less consumer
[[Page 2119]]
stress, and improved economic efficiency through a reduction of
deadweight loss, as outlined in section V. Implementation of the rule
also strengthens the Commission's enforcement program against unfair or
deceptive pricing practices in the live-event ticketing and short-term
lodging industries.
As noted in the NPRM, given the strong indicators that bait-and-
switch pricing, including drip pricing, and misleading fees and charges
are prevalent and worsening across industries, the Commission
considered adopting a final rule that would have applied to all
industries nationwide. The Commission declines to adopt such an
industry-neutral rule at this time and instead chooses, in its
discretion, to use its rulemaking authority incrementally. The
Commission's rule first targets the two industries where the Commission
first began evaluating drip pricing more than a decade ago and where
consumer harm has been longstanding and continues to be pronounced. As
noted in section II, most transactions in the live-event ticketing and
short-term lodging industries occur online, where bait-and-switch
pricing and misleading fees and charges have the highest potential to
thwart the rule's stated objectives, namely price transparency and
timeliness, as well as comparison shopping. In addition, consumers are
often presented with identical offers (as is the case with live-event
ticketing) or near-identical offers (as is the case with short-term
lodging), and as such, price is the most salient feature for consumers
in these transactions.
The NPRM also discussed, and the Commission also considered, a
small business exemption. Small businesses, which may have smaller
profit margins, may be disproportionately affected by initial
compliance costs associated with Sec. 464.2's disclosure requirements.
On the other hand, a rule exempting small businesses would fail to
accomplish the rule's core objectives of transparency in pricing and
facilitating comparison shopping because consumers would continue to be
subject to a mix of pricing disclosures in the live-event ticketing and
short-term lodging industries that could include bait-and-switch
pricing and misleading fees. As one commenter noted, ``Small businesses
will benefit from the rule because it eliminates the deceptive
practices that keep consumers from being able to comparison shop.''
\497\ The commenter also stated that a small business ``exception will
undermine the ability of consumers to make purchasing decisions based
on transparent and honest information.'' \498\ A small business
exemption could also reduce consumer benefits arising from increased
price transparency across markets and lower consumer confidence
regarding whether the rule applies to specific purchases.
---------------------------------------------------------------------------
\497\ FTC-2023-0064-3302 (Public Citizen).
\498\ Id.
---------------------------------------------------------------------------
Excluding small businesses could also harm honest competition
because such an exemption might impose more uncertainty and compliance
costs for businesses to determine whether the rule applies to them. In
addition, as noted in section III, some industry commenters favored a
rule that applied equally to all industry members, to facilitate
comparison shopping and avoid the creation of competitive advantages.
Some commenters, as noted in section III, expressed frustration
with fees or charges they described as ``excessive'' or ``worthless.''
As discussed in the NPRM, an alternative to the final rule could be to
explicitly prohibit excessive or worthless fees or charges in the live-
event ticketing and short-term lodging industries. This alternative may
benefit consumers who pay excessive amounts for goods or services in
these industries or for fees or charges that provide them little to no
value, allowing them instead to save their money or spend it elsewhere.
The Commission declines to adopt an alternative rule prohibiting
worthless or excessive fees or charges, because doing so may raise
additional questions for these industries and for the Commission
regarding how to assess the value of fees or charges. In addition, the
final rule may already accomplish some of the benefits of such an
alternative. For example, the final rule requires total price to
include all mandatory fees or charges (with limited exceptions for
government charges and shipping charges). Transparency and competition
on price could then disincentivize live-event ticketing and short-term
lodging businesses from incorporating such fees into their pricing
schemes altogether. In addition, consumer confusion related to the
purpose or value of fees or charges would be addressed by the final
rule's requirement to disclose the nature, purpose, and amount of any
fees or charges lawfully excluded from total price, as well as the
prohibition against misrepresenting any fees or charges.
In sum, the rule accomplishes the Commission's objectives in the
areas of live-event ticketing and short-term lodging consistent with
applicable law, while providing the Commission additional time to
consider further action. As explained in section V.E, the Commission
believes the rule's benefits exceed the costs of the rule. Notably, the
Commission believes, as detailed in Parts II, III, and V, that the rule
also will result in additional tangible benefits from consumers'
ability to accurately comparison shop for live-event tickets and short-
term lodging. Therefore, the Commission finds in this final regulatory
analysis that adoption of the rule will result in benefits to the
public that exceed the costs.
C. The NPRM's Preliminary Regulatory Analysis
In the Economic Analysis of Costs and Benefits of the Proposed Rule
in section VII.C of the NPRM (hereafter, ``Preliminary Regulatory
Analysis''), the Commission described the anticipated effects of the
proposed rule and quantified the expected benefits and costs to the
extent possible. For each benefit or cost quantified, the analysis
identified the data sources relied upon and, where relevant, the
quantitative assumptions made. The Preliminary Regulatory Analysis
measured the benefits and costs of the proposed rule against a baseline
in which the Commission did not promulgate a rule addressing the unfair
or deceptive practices of presenting incomplete or inaccurate pricing
information that obscures total price and misrepresenting the nature
and purpose of fees. Several of the benefits and costs were
quantifiable for specific industries, but the Commission found that
benefits at the economy-wide level were not quantifiable. The
Preliminary Regulatory Analysis discussed the bases for uncertainty in
the estimates.
In the Preliminary Regulatory Analysis, the Commission performed a
break-even analysis under various assumptions to determine the required
benefits necessary to justify the estimated costs. Under the
assumptions of high-end compliance costs and a 7% discount rate, the
Commission found that if the average benefit to consumers from the
proposed rule exceeded $6.65 per year over ten years, then the proposed
rule's benefits would exceed its quantified economy-wide compliance
costs. The expected benefit could be a result of reduced consumer
search time, of increased consumer surplus from more efficient
purchasing decisions, or a combination of the two. The Commission found
in the Preliminary Regulatory Analysis that if the proposed rule
resulted in savings from reduced search time that exceeded 15.82
minutes per consumer per year over ten years, then the benefits from
reduced search time alone would
[[Page 2120]]
exceed quantified compliance costs under the assumption of high-end
costs and a 7% discount rate.
D. Significant Issues Raised by Comments, the Commission's Assessment
and Response, and Any Changes Made as a Result
In this section, the Commission summarizes its assessment of, and
response to, the major concerns, comments, and suggestions raised by
commenters about the Preliminary Regulatory Analysis. The Commission
received comments about the Preliminary Regulatory Analysis from
industry groups, law firms, consumer advocacy groups, think tanks,
consumers, and business owners. Section V.D.1 addresses comments about
the Commission's cost estimates, section V.D.2 addresses comments about
the Commission's the benefits estimates, and section V.D.3 addresses
comments specific to the economy-wide break-even analysis.
1. Comments on Costs
In section V.D.1.a through d, the Commission addresses four major
comments regarding the NPRM's cost estimates: (a) the estimated costs
are too low; (b) there are unquantified costs to firms; (c) there are
unquantified costs to consumers; and (d) there are unquantified costs
to third parties. Section V.D.1.e addresses commenter concerns about
costs that may stem from applying the rule to variable, dynamic, or
contingent fees.
(a) Public Comments: Estimated Costs Are Too Low
Commenters from members and representatives of the live-event
ticketing and short-term lodging industries, among others, argued that
estimated costs in the NPRM were too low because the analysis
underestimated the number of attorney, data scientist, and web
developer hours needed to comply with the proposed rule.\499\ These
commenters contended that some businesses will require more time than
the assumed average estimates of labor hours used in the Preliminary
Regulatory Analysis. The Commission acknowledges the possibility that
some businesses will incur a greater number of hours to comply with the
final rule, but notes that this is consistent with the Preliminary
Regulatory Analysis because the employee hour estimates used represent
averages. These estimates capture the fact that some businesses will
require more time than the average and some will require less. The
Commission received additional comments with similar concerns about the
Commission's compliance hours estimates as they apply to other specific
industries such as movie theater ticketing, delivery apps, restaurants,
bowling, and cable and broadband, which are no longer subject to the
final rule.\500\ However, the Commission's argument that the compliance
hours represent averages holds more broadly.
---------------------------------------------------------------------------
\499\ FTC-2023-0064-2856 (National Football League); FTC-2023-
0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3238 (Gibson,
Dunn, & Crutcher LLP); FTC-2023-0064-3122 (Vivid Seats); FTC-2023-
0064-3094 (American Hotel & Lodging Association); FTC-2023-0064-3292
(National Association of Theatre Owners); FTC-2023-0064-3293 (Travel
Technology Association); FTC-2023-0064-3294 (International Franchise
Association).
\500\ FTC-2023-0064-3263 (Flex Association); FTC-2023-0064-3300
(National Restaurant Association); FTC-2023-0064-3217 (Bowling
Proprietors' Association of America); FTC-2023-0064-3233 (NCTA--The
internet & Television Association).
---------------------------------------------------------------------------
Two commenters in the live-event ticketing industry provided
alternative estimates of average employee hours necessary to comply
with the rule. Vivid Seats stated that, from its experience
implementing upfront pricing as a ticket seller in three states, the
Commission underestimated the employee hours needed for live-event
ticket sellers by at least a factor of five.\501\ Conversely, another
live-event ticket seller, TickPick, commented that, for the most part,
live-event ticketing companies would incur an immaterial cost to
implement all-in pricing because ``the technology already exists within
ticketing platforms to eliminate drip pricing and would simply need to
be applied to events in the U.S.'' \502\ Again, the Commission notes
that the estimated employee hours reflect an average and, as these
commenters stated, it is possible that firms like Vivid Seats may
require more hours, while others, like TickPick, may require fewer.
---------------------------------------------------------------------------
\501\ FTC-2023-0064-3122 (Vivid Seats).
\502\ FTC-2023-0064-3212 (TickPick, LLC).
---------------------------------------------------------------------------
The National Restaurant Association stated that it would take
restaurants at least twenty hours a year to reoptimize menu prices
because the Commission's estimates did not account for supply chain
issues that may change prices or consider that some restaurants may
offer seasonal menus.\503\ The Preliminary Regulatory Analysis omitted
these costs because they are not a result of the rule; restaurants will
face supply chain fluctuations and seasonal changes to their menus
regardless of the rule.\504\ However, this is no longer a concern in
the final rule, which does not apply to restaurants.
---------------------------------------------------------------------------
\503\ FTC-2023-0064-3300 (National Restaurant Association).
\504\ See, e.g., id. (National Restaurant Association commented
that there are ``common supply chain issues that may cause certain
food items to increase or decrease in price'' and ``thousands of
restaurants . . . offer varying seasonal menus with completely
different offerings''); FTC-2023-0064-2992 (Individual Commenter who
owns a restaurant commented that complying with the rule would not
be complex for restaurants because ``[t]hey reprice and change
dishes frequently''); FTC-2023-0064-3219 (Georgia Restaurant
Association also referred to ``rising food costs [and] supply chain
disruptions''); FTC-2023-0064-3180 (Independent Restaurant Coalition
commented about ``increasing food costs''); FTC-2023-0064-3078
(Washington Hospitality Association referred to supply chain issues,
inflation, and other rising costs).
---------------------------------------------------------------------------
The Office of Advocacy of the United States Small Business
Administration (``SBA Office of Advocacy'') argued that costs estimated
in the Preliminary Regulatory Analysis are too low because data
scientist and web developer hours should be ongoing costs, rather than
one-time costs.\505\ It argued that ``the FTC should assume a
percentage of firms that in the previous year were in compliance will
not be the following year.'' The Commission does not believe that these
ongoing costs are attributable to the rule. Once firms have adjusted to
the rule, making sure new pricing strategies comply with the rule is
considered a part of the normal course of business, as is ensuring
compliance with other existing laws and regulations.
---------------------------------------------------------------------------
\505\ U.S. Small Bus. Admin., Office of Advocacy, Re: Trade
Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001,
https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
---------------------------------------------------------------------------
Some commenters identified purported costs that were either already
captured in the economic analysis or would not be affected by the rule.
The U.S. Chamber of Commerce and SBA Office of Advocacy argued that the
Preliminary Regulatory Analysis did not account for the time needed to
train staff to provide new upfront prices to customers for in-person,
online, and phone sales.\506\ The Commission believes training time, to
the extent that it exists, is already captured in the assumed range of
data scientist and web developer hours, which the Commission has noted
serves as a proxy for any rule-associated costs from adjusting pricing
strategies and displaying prices to consumers. Another commenter argued
that businesses would need to ``hire graphic designers to make
advertisements look appealing and web designers or software engineers
to rebuild entire websites.'' \507\ In addition, it argued that the
Preliminary Regulatory Analysis did not account for
[[Page 2121]]
costs needed to replace physical ads, subway ads, and billboards and
speculated that would take ``thousands of hours.'' The final rule has
no bearing on a firm's decision to engage graphic designers to ensure
its advertisements are ``appealing,'' and the Commission does not
believe--and commenters have failed to cite evidence demonstrating--
that the need to update prices will require rebuilding entire websites.
Moreover, as discussed in more detail in section V.E.3.a, the estimated
range of web developer time is a proxy for any costs associated with
changing price displays to comply with the rule.
---------------------------------------------------------------------------
\506\ See, e.g., id.; FTC-2023-0064-3127 (U.S. Chamber of
Commerce).
\507\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------
Two commenters argued that the Preliminary Regulatory Analysis
underestimated costs because the wage rates for attorneys and data
scientists were too low and were not the same as, for example,
attorneys fees.\508\ One commenter stated that the estimated wages did
not account for overhead costs or reflect the higher costs of hiring
outside counsel and data scientists and suggested using $306 in
attorney wages and $59 in data scientist wages to reflect these higher
costs.\509\ In response to these suggestions, the Commission conducted
a sensitivity analysis that multiplied wage rates by two to reflect
overhead and hiring costs for the short-term lodging and live-event
ticket industries. The results of the sensitivity analysis are provided
in section V.E.3.b.i and do not impact the Commission's assessment that
the benefits exceed the costs. The Commission received two additional
comments with similar concerns about the Commission's wage estimates as
they apply to the restaurant industry and the innovation economy, which
are no longer subject to the final rule.\510\
---------------------------------------------------------------------------
\508\ Id.; U.S. Small Bus. Admin., Office of Advocacy, Re: Trade
Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001,
https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
\509\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\510\ FTC-2023-0064-3300 (National Restaurant Association); FTC-
2023-0064-3202 (TechNet).
---------------------------------------------------------------------------
(b) Public Comments: Unquantified Costs to Firms
The NPRM noted that there are unquantified costs of the rule,
primarily in the form of unintended consequences to consumers as they
adjust to upfront pricing. In addition, commenters identified
additional types of unquantified costs to firms.
An academic commenter argued that there may be unintended
consequences to firms from partial compliance.\511\ The commenter
stated that no firm would want to be the first in its market to comply,
and the resulting ``partial or uneven compliance would cause compliant
firms to lose business to firms that ignored the rule. Implementing
coordinated compliance for the entire economy would be difficult with
the [Commission's] limited resources.'' The Commission believes that
the partial compliance described by this commenter is the current
status quo in the absence of a rule. Currently, some firms impose drip
pricing, and these firms may have a competitive advantage over those
that do not impose drip pricing. Under the rule, the Commission expects
all firms in the short-term lodging and live-event ticket industries to
provide total price, which is an improvement relative to the status
quo. If, as the commenter argues, some degree of partial compliance
remains, the potential competitive advantage from non-compliance would
be similar to the status quo, with the additional risk to non-compliant
firms of law enforcement actions with potential exposure to consumer
redress and penalties. In other words, even with some degree of partial
compliance after the final rule, such an equilibrium would still result
in more benefits for consumers than a world without the final rule. The
commenter's concern that implementing coordinated compliance for the
whole economy may be difficult is mitigated in the final rule, which
only applies to two industries. In addition, while the Commission may
have limited enforcement resources, it expects consumer behavior
regarding fees to adjust over time due to the final rule. Once upfront
pricing becomes the new norm, consumers will expect to see total prices
displayed upfront and will be more likely to punish firms that ignore
the rule by taking their business elsewhere. Therefore, any partial
compliance is likely to be temporary.
---------------------------------------------------------------------------
\511\ FTC-2023-0064-2891 (Mary Sullivan, George Washington
University, Regulatory Studies Center).
---------------------------------------------------------------------------
Nine commenters stated the NPRM's assertion that the rule will
provide a harmonized legal framework for all States is incorrect
because, as discussed in section III, the rule only preempts State laws
if they are inconsistent with the rule.\512\ Commenters noted that an
added layer of regulation is an additional cost for businesses as they
determine whether they are compliant with the various rules to which
they are subject. The Commission updates the final regulatory analysis
to reflect this concern as it applies to covered goods or services, but
notes that the cost was already captured by the assumption that all
firms within the live-event ticketing and short-term lodging industries
will spend on average one hour to determine whether the rule applies to
them.
---------------------------------------------------------------------------
\512\ FTC-2023-0064-2856 (National Football League); FTC-2023-
0064-2887 (Progressive Policy Institute); FTC-2023-0064-3122 (Vivid
Seats); FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-
0064-3133 (National Multifamily Housing Council and National
Apartment Association); FTC-2023-0064-3143 (ACA Connects--America's
Communications Association); FTC-2023-0064-3233 (NCTA--The internet
& Television Association); FTC-2023-0064-3238 (Gibson, Dunn &
Crutcher LLP); FTC-2023-0064-3258 (National Taxpayers Union
Foundation).
---------------------------------------------------------------------------
One commenter asserted that ``[t]he Commission erroneously
disclaims the possibility of losses to producer surplus.'' \513\ The
commenter argued that the Commission's statement that consumer surplus
is reduced due to consumer search costs under drip pricing ignores the
countervailing increase of producer surplus. The commenter further
contended that the Preliminary Regulatory Analysis omits that, under
drip pricing, consumers purchase more expensive products, which
amounts, in part, to a transfer of surplus from consumers to sellers.
The Commission acknowledges the transfer of surplus due to higher
prices. However, the commenter incorrectly assumes that the movement of
surplus from consumers to producers will be a one-to-one transfer and
presupposes that there will be no increase in consumer search time or
deadweight loss. As is discussed in section V.E.2.a.i, the increased,
unnecessary consumer search time due to drip pricing results in a net
cost to society--no one benefits from the additional hours consumers
collectively spend searching for price information and then being
surprised with a higher final amount at the time of purchase. In
addition, as is discussed in section V.E.2.a.ii, inefficient
overconsumption under drip pricing generates a deadweight loss.
Inefficiently high spending under drip pricing thus results in a cost
to society in the form of higher search costs and a deadweight loss in
addition to a transfer of surplus from consumers to sellers in the form
of higher seller revenue. Overall, this results in a net loss to
society.
---------------------------------------------------------------------------
\513\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------
Lastly, some commenters representing the communications services
industry noted that there are unquantified costs to cable, broadband,
and wireless providers due to similar upfront pricing requirements from
the FCC.\514\ The
[[Page 2122]]
Commission's decision to narrow the final rule to covered goods or
services renders these comments inapplicable.
---------------------------------------------------------------------------
\514\ FTC-2023-0064-2884 (NTCA--The Rural Broadband
Association); FTC-2023-0064-3143 (ACA Connects--America's
Communications Association); FTC-2023-0064-3233 (NCTA--The internet
& Television Association); FTC-2023-0064-3234 (CTIA--The Wireless
Association).
---------------------------------------------------------------------------
(c) Public Comments: Unquantified Costs to Consumers
The NPRM noted that there may be unquantified costs of the rule in
the form of consumer confusion as consumers adjust to upfront pricing.
Commenters argued there were several additional unquantified costs to
consumers. One commenter suggested that consumers would experience
higher search time if companies limit or eliminate price advertising to
avoid the regulatory risk of providing an inaccurate total price.\515\
The Commission reiterates that the rule does not require firms to
eliminate price advertising; rather the rule requires covered firms to
present total price to consumers whenever businesses offer, display, or
advertise any price of a covered good or service. The Commission
believes that unnecessarily high consumer search time and
anticompetitive effects resulting from different pricing strategies are
already a problem absent the rule, where firms advertise a mix of
dripped prices, upfront prices, and no prices. The commenter did not
provide evidence for why, under the rule, some firms are, or would be,
unable to advertise total price or why it would result in higher search
time and a less competitive equilibrium than the status quo. The
Commission received two additional comments with similar concerns as
they apply to the telecommunications and rental housing industries,
which are no longer subject to the final rule.\516\
---------------------------------------------------------------------------
\515\ FTC-2023-0064-3127 (U.S. Chamber of Commerce).
\516\ FTC-2023-0064-3143 (ACA Connects--America's Communication
Association; FTC-2023-0064-3296 (Bay Area Apartment Association).
---------------------------------------------------------------------------
Two commenters also suggested there might be potentially higher
consumer search time if businesses unbundle previously bundled options
in an effort to reduce the advertised price in response to the rule,
stating that hotels, for example, may make amenities such as wi-fi, gym
access, and parking pay-per-use.\517\ The Commission acknowledges that
some businesses may unbundle previously bundled options but reiterates
that the rule prohibits businesses from treating features as optional
if they are necessary to render the good or service fit for its
intended use. The Commission also notes that consumers are likely to
punish firms that unbundle features that they expect to be included in
total price by taking their business elsewhere. A commenter also
speculated that there may be an increase in deadweight loss if
businesses set inefficiently high prices as they reoptimize prices or
seek to cut costs by reducing the quality of goods and services.\518\
The Commission believes this is unlikely. Under the rule, there will be
competitive pressure to adjust both price and product quality to more
efficient levels when firms must present total price. As discussed in
section V.E.1.b, drip pricing sometimes leads consumers to
underestimate the total price of a good or service. The result is that
consumers start transactions not understanding that the final amount of
payment will be higher than what they are willing or able to pay. For
example, consumers may book premium seats to a concert believing they
could afford the purchase, only to realize afterward that the total
price was understated. Had they understood the final amount of payment,
they would have selected seats at a lower price point or skipped the
concert altogether. The final rule will help ensure that consumers'
preferences, both in terms of cost and quality, can be realized.
---------------------------------------------------------------------------
\517\ FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-
0064-3238 (Gibson, Dunn & Crutcher LLP).
\518\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------
One industry group argued that because intermediary travel websites
rely on short-term lodging firms for accurate price information, the
proposed rule may incentivize these firms to charge intermediaries a
premium for accurate pricing information, ``knowing that the
intermediaries face significant regulatory risk without access to such
information.'' \519\ The commenter suggested that these additional
costs could be passed onto consumers without adding any value. As
explained in section III, the Commission reiterates that the rule
requires businesses that sell or advertise through intermediaries to
provide the intermediaries with accurate pricing information (including
about mandatory and optional fees). The rule's coverage of business-to-
business transactions protects consumers when they purchase goods or
services, the sellers that do business with intermediaries, and the
intermediaries themselves. The Commission further notes that hotels are
already free to charge travel websites and intermediaries money in
exchange for pricing information, yet they do not because these travel
websites and intermediaries allow the hotels to reach more consumers.
In addition, under the status quo, intermediaries already contend with
different fee practices across short-term lodging firms and are
required to ensure they consistently disclose pricing information to
consumers; the final rule should obviate the need for intermediaries to
deal with inconsistent fee practices moving forward. Therefore, the
final rule should not change any incentives relative to the status quo,
and it is unlikely that hotels will change their behavior in this
respect as a result of the rule.
---------------------------------------------------------------------------
\519\ FTC-2023-0064-3293 (Travel Technology Association).
---------------------------------------------------------------------------
A commenter disagreed with the Commission's statement that consumer
confusion will be a temporary cost as prices adjust.\520\ The commenter
also argued that consumers may inefficiently under-consume when
confronted with higher upfront prices. The Commission believes that
consumers who may inefficiently under-consume due to the rule because
they are anticipating hidden fees are the same consumers who are
accurately accounting for hidden fees and efficiently consuming under
the status quo. The percentage of consumers who expect and anticipate
hidden fees is likely to be very small because, as discussed in the
NPRM, empirical and theoretical models consistently show that consumers
strongly and systematically underestimate the full price they will pay
when faced with drip pricing, and they pay more than they otherwise
would in a transparent marketplace.\521\ Therefore, if these consumers
are savvy enough to adjust their expectations and accurately account
for hidden fees under the status quo, then it is likely that they will
quickly adjust their expectations after the final rule becomes
effective and any under-consumption will be temporary.
---------------------------------------------------------------------------
\520\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\521\ Tom Blake et al., Price Salience and Product Choice, 40
Mktg. Sci. 619 (2021), https://doi.org/10.1287/mksc.2020.1261;
Michael R. Baye et al., Search Costs, Hassle Costs, and Drip
Pricing: Equilibria with Rational Consumers and Firms (Nash-Equilibrium.com Working Paper, 2019), https://nash-equilibrium.com/PDFs/Drip.pdf; Alexander Rasch et al., Drip Pricing and its
Regulation: Experimental Evidence, 176 J. Econ. Behav. & Org. 353
(2020), https://doi.org/10.1016/j.jebo.2020.04.007.
---------------------------------------------------------------------------
The commenter also misinterpreted the results of a study conducted
in the live-event ticketing market, Blake et al. (2021) (the ``Blake
Study''), in an effort to support the claim that seeing total price
will deter consumers from making efficient and economically desirable
purchases.\522\ The Blake Study found
[[Page 2123]]
that providing an upfront total price reduces both the quantity and
quality of purchases relative to the inefficiently high levels of
quantity and quality purchased under dripped prices. In other words,
when consumers do not have truthful, timely, and transparent
information about the final price, they purchase goods of higher
quality and make more purchases than they would if they had full
information. The commenter incorrectly implied that this reduction
amounts to inefficient underconsumption when, in fact, it represents a
return to an efficient level and quality of consumption compared to
drip pricing. The authors explicitly concluded: ``Our empirical results
support our hypotheses: price obfuscation distorts both quality and
quantity decisions.'' \523\
---------------------------------------------------------------------------
\522\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP,
discussing Blake, supra note 521).
\523\ Blake, supra note 521.
---------------------------------------------------------------------------
Five industry groups identified what they incorrectly labeled as
three additional types of unquantified costs for consumers. The
``costs'' identified actually are either transfers from consumers to
producers (resulting in no net loss for society) or reflect
misunderstandings of the rule. These commenters claimed that prices
would increase as businesses pass compliance costs onto consumers,\524\
that prohibiting businesses from displaying partitioned pricing would
decrease transparency for consumers,\525\ and that forcing businesses
to display all optional fees upfront would overload and confuse
consumers with often irrelevant information.\526\ None of these are
true costs resulting from the final rule. First, increased prices that
result from the sellers' increased compliance costs are a transfer of
consumer surplus to producer surplus and do not result in a cost to
society. Second, the rule does not prohibit itemization. As long as
total price is clear and conspicuous and most prominent, businesses are
free to display the components of total price if they so choose.
Finally, the rule does not require businesses to display all optional
fees upfront. Rather, businesses must disclose clearly and
conspicuously, before the consumer consents to pay, the nature,
purpose, and amount of any fee or charge imposed on the transaction
that been excluded from total price.
---------------------------------------------------------------------------
\524\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3033 (The Rebel Lounge et al.).
\525\ FTC-2023-0064-3028 (Competitive Enterprise Institute);
FTC-2023-0064-3208 (FreedomWorks).
\526\ FTC-2023-0064-3127 (U.S. Chamber of Commerce).
---------------------------------------------------------------------------
One policy organization commented on the study \527\ cited in the
NPRM that shows partitioned pricing decreases consumers' ability to
accurately recall total costs and increases their demand.\528\ The
commenter argued that the conclusion cited in the NPRM does not follow
from the study because participants who recalled a lower price could
have known the total cost but misunderstood the question to be asking
for the base price excluding the fees. This interpretation is incorrect
because there was no ambiguity in the study question at issue; it
explicitly asked for the total cost inclusive of all fees.
---------------------------------------------------------------------------
\527\ Vicki G. Morwitz et al., Divide and Prosper: Consumers'
Reactions to Partitioned Prices, 35 J. Mktg. Rsch. 453 (1998),
https://doi.org/10.1177/002224379803500404.
\528\ FTC-2023-0064-3028 (Competitive Enterprise Institute).
---------------------------------------------------------------------------
(d) Public Comments: Unquantified Costs to Third Parties
One commenter argued that, as consumer expectations adjust to
upfront prices, inefficiently low spending may affect other businesses
in the supply chain such as manufacturers, packagers, shippers, and
warehouses.\529\ The commenter also argued that lower spending may
affect live-event venues and ticket resellers due to decreased sales in
food, drinks, and merchandise. In addition, the commenter claimed that
lower spending will lead to lower sales tax revenue for State and local
governments, causing them to borrow more money at high interest rates,
raise taxes, or eliminate services. As discussed in detail in section
V.E.2.c, the Commission believes that any inefficient underconsumption
due to consumer confusion is likely to be temporary, as are any
resulting costs to third parties.
---------------------------------------------------------------------------
\529\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------
(e) Public Comments: Costs From Incorporating Contingent Fees Into
Total Price
Several commenters, including industry groups, policy
organizations, and an academic, expressed concern that it would be
difficult for firms to display total price in cases where total price
is unknown because it depends on consumer conduct or choices.\530\ In
cases where price is determined through customization, total price may
not be known until after consumers have finalized their selection of
options. The Commission addresses contingent fees in section III.
---------------------------------------------------------------------------
\530\ See, e.g., id.; FTC-2023-0064-3140 (Merchant Advisory
Group); FTC-2023-0064-3180 (Independent Restaurant Coalition); FTC-
2023-0064-3300 (National Restaurant Association); FTC-2023-0064-3202
(TechNet); FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-
0064-3173 (Center for Individual Freedom); FTC-2023-0064-3258
(National Taxpayers Union Foundation); FTC-2023-0064-2891 (Mary
Sullivan, George Washington University, Regulatory Studies Center);
FTC-2023-0064-3293 (Travel Technology Association); FTC-2023-0064-
3133 (National Multifamily Housing Council and National Apartment
Association); FTC-2023-0064-3296 (Bay Area Apartment Association).
---------------------------------------------------------------------------
2. Comments on Benefits
Section V.D.2.a addresses the concern of some commenters that the
NPRM's benefit calculations are too high, and section V.D.2.b outlines
several unquantified benefits identified by commenters.
(a) Public Comments: Benefits Are Too High
One commenter argued that benefits are too high because the
Preliminary Regulatory Analysis overestimated consumer search costs
that result from drip pricing.\531\ It argued that consumers benefit
from seeing an advertisement with dripped fees compared to their
position before seeing any advertisement. The Commission believes this
is not the correct comparison to make when determining whether consumer
search time will change as a result of the rule; a more apt comparison
considers consumer benefit when faced with total price versus drip
pricing. The Commission expects that the rule will decrease consumer
search time, because consumers will spend less time searching for total
price under the rule's framework versus a dripped pricing framework.
---------------------------------------------------------------------------
\531\ FTC-2023-0064-3028 (Competitive Enterprise Institute).
---------------------------------------------------------------------------
A commenter argued that the rule's estimated benefits are too high
because the value-of-time estimate of $24.40 is too high.\532\ The
$24.40 figure is calculated by taking 82% of the 2022 mean hourly wage
from the Bureau of Labor Statistics. A meta-analysis of eleven studies
conducted between 2004-2015 finds that the value of time as a
percentage of mean wage is about 82% in the United States.\533\ In
addition, previous studies indicate that, over time, people's time has
become more valuable as a fraction of what they earn.\534\ So, it is
possible that the current percentage in 2024 may actually be higher
than 82%. The final regulatory analysis in section V.E updates the
value of time using the same method but
[[Page 2124]]
with the more recent 2023 mean hourly wage.
---------------------------------------------------------------------------
\532\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
\533\ Daniel S. Hamermesh, What's to Know About Time Use?, 30 J.
Econ. Surv. 198 (2016), https://doi.org/10.1111/joes.12107.
\534\ Id.
---------------------------------------------------------------------------
The commenter further asserted that it would be more accurate to
calculate the value of time as a percentage of the median hourly wage
instead of the mean hourly wage, stating that ``the mean wage is driven
by a few outliers.'' \535\ Relying on the median hourly wage, however,
would be incorrect and reflects a misunderstanding of how the value of
time is calculated. The value of time initially was calculated as an
absolute dollar amount per hour in the studies reviewed by the
Hamermesh (2016) paper, and then expressed as a percentage of the mean
hourly wage at that time. That percentage can be applied to the current
mean hourly wage to calculate an updated value of time. If the
Commission expressed the value of time as a percentage of the median
wage, this would not be a ``more accurate'' calculation of the value of
time as the commenter suggests, but simply a different way of
expressing the same value of time estimated by Hamermesh (2016).
---------------------------------------------------------------------------
\535\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------
The commenter also argued that the Commission's valuation of time
estimate is inaccurate because some consumers may have lower valuations
of time, such as consumers who earn no wages or lower wages, and
consumers who ``enjoy shopping'' and may not believe they incur costs
from searching.\536\ These concerns are consistent with the
Commission's estimated value of time, which captures an average of a
representative group of American consumers across eleven studies; some
individuals will have lower valuations of time, and some will have
higher.
---------------------------------------------------------------------------
\536\ Id.
---------------------------------------------------------------------------
Furthermore, the Commission distinguishes between efficient and
inefficient searching by consumers. Consumers, based on their
preferences, may find some amount of search, or comparison shopping, to
be beneficial to their consumption choices. A consumer will naturally
choose an efficient level of search such that the marginal benefit of
discovering an additional different price or comparable good equals the
marginal cost of the time and effort to perform the additional search.
The Commission recognizes the purpose of this efficient level of search
and does not count it as a harm. When consumers face drip pricing, they
must spend additional time and effort to acquire full pricing
information allowing them to properly comparison shop. This additional
time and effort results in an inefficient level of search that harms
consumers with no countervailing benefit. In the Commission's final
regulatory analysis, the estimate of cost savings through reduced
search time is based on the estimated difference between consumer
search time under drip pricing and consumer search time under upfront
pricing; that is, the estimate is based solely on the estimate of the
inefficient level of search.
Finally, another commenter argued that benefits are too high in the
short-term lodging calculation because the Preliminary Regulatory
Analysis estimated the reduction in listings viewed as a result of the
proposed rule using data from a study done in the live-event ticketing
market.\537\ However, the Commission's base number of listings viewed
under the status quo was taken from studies conducted in the short-term
lodging industry. The live-event ticketing study provided a scaling
factor that the Commission used to estimate a percentage reduction in
listings viewed in response to the rule. The commenter neither
demonstrated why the Commission's method overestimated the reduction in
listings viewed nor provided the Commission with additional data.
---------------------------------------------------------------------------
\537\ FTC-2023-0064-3127 (U.S. Chamber of Commerce).
---------------------------------------------------------------------------
(b) Public Comments: Unquantified Benefits
The NPRM identified the rule's unquantified benefits, primarily a
reduction in deadweight loss as consumers make more efficient
purchasing decisions. Several comments from consumer and worker
protection groups identified additional unquantified benefits of the
rule to low-income households,\538\ incarcerated people and their
families,\539\ and to restaurant workers.\540\ Although these comments
no longer apply to the final rule, the Commission acknowledges that the
broader rule was likely to positively impact some vulnerable
populations like those discussed in the comments and may have had
second-order effects on housing security and the labor market.
---------------------------------------------------------------------------
\538\ FTC-2023-0064-2883 (District of Columbia, Office of the
People's Counsel).
\539\ FTC-2023-0064-3283 (National Consumer Law Center, Prison
Policy Initiative, and advocate Stephen Raher).
\540\ FTC-2023-0064-3248 (DC Jobs With Justice on behalf of Fair
Price, Fair Wage Coalition).
---------------------------------------------------------------------------
One commenter also recommended that the Commission further explain
or quantify why the rule would result in enforcement resource savings
as stated in the NPRM.\541\ The Commission does not quantify the net
effect of the rule on enforcement resources due to a lack of data, but
discusses in detail the rule's enforcement benefits in section V.A.
Based on its experience, the Commission finds that the resources it
needs to expend under the two-step pathway pursuant to section 19(a)(2)
are typically greater because the Commission needs to initiate two
separate proceedings.
---------------------------------------------------------------------------
\541\ FTC-2023-0064-3146 (Institute for Policy Integrity, New
York University School of Law).
---------------------------------------------------------------------------
3. Comments on the Economy-Wide Break-Even Analysis
In this section, the Commission addresses comments specific to the
economy-wide break-even analysis of the Preliminary Regulatory
Analysis. Section V.D.3.a addresses comments that argued the
Commission's break-even analysis contained incorrect assumptions or
errors; section V.D.3.b addresses comments that claimed a break-even
analysis is not enough to justify an economy-wide rule; and section
V.D.3.c addresses a comment that argued the break-even analysis is
satisfactory and recommended further analysis to strengthen it.
(a) Public Comments: Break-Even Analysis Has Incorrect Assumptions or
Contains Errors
Three commenters argued that the Commission's assumption that 90%
of firms are already in compliance with the proposed rule was
inaccurate.\542\ This comment does not apply to the final rule, which
no longer contains an economy-wide analysis. However, the Commission
reaffirms its break-even calculation in the Preliminary Regulatory
Analysis, and acknowledges uncertainty regarding the number of firms in
the economy that currently employ unfair or deceptive fees or charges
and that would need to incur additional costs to comply with the rule.
To address the uncertainty, the Preliminary Regulatory Analysis
provided both the break-even benefits required if 90% of firms in the
economy are already compliant with the rule, as well as the break-even
benefits required if 50% of the firms were already compliant with the
rule.
---------------------------------------------------------------------------
\542\ FTC-2023-0064-3233 (NCTA--The Internet & Television
Association); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3294 (International Franchise Association).
---------------------------------------------------------------------------
[[Page 2125]]
One commenter also argued that the $6.65 average annual per-
consumer benefit number in the Preliminary Regulatory Analysis is too
low because the Commission calculated the necessary break-even benefit
level by dividing estimated costs by all U.S. adults, rather than only
consumers who make live-event ticket and short-term lodging
purchases.\543\ The Commission emphasizes that the $6.65 figure from
the Preliminary Regulatory Analysis is an average per-person benefit.
In the same way that the estimated attorney hours assumes that some
small businesses will not hire an attorney to ensure compliance, the
benefit per consumer figure reflects the fact that some adults will not
encounter dripped fees. The Commission does not dispute that some
consumers will see much higher benefits than others. The same argument
applies to the final rule, where the Commission recalculates the
average annual per-consumer break-even benefit level using only the
costs from covered goods or services.
---------------------------------------------------------------------------
\543\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------
Finally, the same commenter contended that both the one-time and
annual costs for the high-end estimates in table 2 of the Preliminary
Regulatory Analysis were calculated incorrectly.\544\ This comment no
longer applies to the final rule, which does not contain an economy-
wide break-even analysis.
---------------------------------------------------------------------------
\544\ Id.
---------------------------------------------------------------------------
(b) Public Comments: Break-Even Analysis Is Not Enough To Justify an
Economy-Wide Rule
Some commenters disagreed that the rule should apply to the whole
economy when the Preliminary Regulatory Analysis quantifies a net
benefit for two industries and relies on a break-even analysis for the
remainder of the economy.\545\ Other commenters similarly stated that
the Preliminary Regulatory Analysis should include an industry-by-
industry cost-benefit analysis.\546\ The final rule is limited to only
covered goods or services, which are offered by the live-event
ticketing and short-term lodging industries.
---------------------------------------------------------------------------
\545\ See, e.g., id.; FTC-2023-0064-3127 (U.S. Chamber of
Commerce); FTC-2023-0064-2891 (Mary Sullivan, George Washington
University, Regulatory Studies Center); FTC-2023-0064-3173 (Center
for Individual Freedom); FTC-2023-0064-3208 (FreedomWorks); FTC-
2023-0064-3143 (ACA Connects--America's Communications Association);
FTC-2023-0064-3258 (National Taxpayers Union Foundation).
\546\ See, e.g., FTC-2023-0064-3133 (National Multifamily
Housing Council and National Apartment Association); FTC-2023-0064-
3143 (ACA Connects--America's Communications Association); FTC-2023-
0064-3258 (National Taxpayers Union Foundation); FTC-2023-0064-3197
(American Beverage Licensees).
---------------------------------------------------------------------------
The Commission emphasizes that a break-even analysis is encouraged
by OMB Circular A-4 when there are unquantifiable costs or benefits,
and affirms that its break-even analysis in the Preliminary Regulatory
Analysis is consistent with OMB guidance.\547\ In the final regulatory
analysis, the Commission identifies some of the unquantified benefits
to the rule and provides a similar break-even analysis for the live-
event ticketing and short-term lodging industries. The Commission also
provides benefit-cost analyses demonstrating that the quantified
benefits exceed the quantified costs.
---------------------------------------------------------------------------
\547\ Office of Mgmt. & Budget, Circular A-4 (Sep. 17, 2003)
(hereinafter, OMB Circular A-4), https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/.
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(c) Public Comments: Break-Even Analysis Is Satisfactory
Conversely, another commenter noted that the Commission's break-
even analysis is satisfactory and suggested the Commission provide
further analysis to support the conclusion that time savings resulting
from the rule are likely to exceed the break-even threshold.\548\
Although this comment no longer applies to the final rule, which
focuses on addressing hidden and misleading fees in the live-event
ticketing and short-term lodging industries, the Commission
acknowledges that there is economic support for a broader rule.
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\548\ FTC-2023-0064-3146 (Institute for Policy Integrity, New
York University School of Law).
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E. Economic Regulatory Analysis of the Final Rule's Costs and Benefits
The Commission has narrowed the application of the final rule to a
limited set of covered goods or services, which comprise live-event
ticketing and short-term lodging. This in turn necessitates revisions
to the Preliminary Regulatory Analysis. The final regulatory analysis
no longer includes the economy-wide break-even analysis. The Commission
provides the per-consumer break-even benefit levels for the live-event
ticketing and short-term lodging industries, as well as quantified
benefits and costs for these industries. After incorporating these
revisions and updating numbers based on recent data releases, the
Commission confirms in the final regulatory analysis that the benefits
of the rule exceed the costs. Specifically, the Commission estimates
that the quantified benefits of the rule will exceed its quantified
costs, and the Commission believes that the total benefits of the rule
(quantified and unquantified) will outweigh its total costs (quantified
and unquantified).
The Commission discusses in the final regulatory analysis the
projected impact of the rule's prohibition on offering, displaying, or
advertising any price of a covered good or service without clearly and
conspicuously disclosing total price, as well as the rule's prohibition
on misrepresentations regarding any fee or charge, including the
nature, purpose, amount, or refundability of any fee or charge, and the
identity of the good or service for which the fee or charge is imposed.
The Commission's analysis also assesses the impact of the rule's
required disclosures of the nature, purpose, and amount of any fee or
charge imposed on the transaction that has been lawfully excluded from
total price, the identity of the good or service for which the fee or
charge is imposed, and the final amount of payment. When possible, the
Commission quantifies the benefits and costs and notes where some
potential benefits and costs are unquantified. If a benefit or cost is
quantified, the sources of the data relied upon are indicated. If an
assumption is needed, the Commission makes clear which quantities are
being assumed.
The Commission uses ten years for the time period of analysis
because the Commission's trade regulation rules are subject to review
every ten years. Tables 1 and 2 summarize the main findings of the
final regulatory analysis. Table 1 presents the potential costs,
benefits, and resulting net benefits for the live-event ticketing and
short-term lodging industries. Quantified benefits in these industries
derive from time savings consumers would experience due to greater
price transparency, leading to more efficient shopping processes.
Quantified costs derive from the costs firms would incur to comply with
the rule.
[[Page 2126]]
The quantified net benefits for the live-event ticketing and short-
term lodging industries are positive. There are also unquantified
benefits, which may arise from a reduction in deadweight loss as
consumers experience greater price transparency and make fewer mistake
purchases. Unquantified costs may stem from potential adjustment costs
or consumer confusion as expectations adjust under the rule.
For both quantified benefits and costs, the final regulatory
analysis provides a range representing the set of assumptions that
result in a ``low-end'' or ``high-end'' estimate. These estimates are
calculated as present values over a ten-year period. Benefits and costs
are more valuable to society the sooner they occur. A discount rate (3%
or 7%) is used to adjust estimated benefits and costs for differences
in timing; a higher discount rate is associated with a greater value
for benefits and costs in the present.\549\
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\549\ We use 3% and 7% for the discount rate, consistent with
Office of Management and Budget's guidance. OMB Circular A-4, supra
note 547.
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BILLING CODE 6750-01-P
[[Page 2127]]
[GRAPHIC] [TIFF OMITTED] TR10JA25.048
[[Page 2128]]
[GRAPHIC] [TIFF OMITTED] TR10JA25.049
BILLING CODE 6750-01-C
As discussed in more detail in section V.E.3, the Commission only
quantifies benefits from reductions in consumer search costs. However,
the Commission notes there are likely additional consumer benefits in
the form of reduced deadweight loss. Since the Commission is unable to
quantify all of the final rule's potential benefits, the final
regulatory analysis instead calculates the minimum value for the
average consumer that the final rule would need to generate in order
for its benefits to outweigh its quantified costs. Table 2 presents
low-end and high-end estimates of the total quantified costs and the
necessary ``break-even benefit'' per consumer. Under the high-end cost
assumptions with a 7% discount rate, the Commission's analysis finds
that each consumer would need to experience a benefit of $0.33 per year
over ten years for the rule's benefits to exceed its quantified
compliance costs. Under the low-end cost assumptions with a 3% discount
rate, that per-consumer amount is $0.08 per year over ten years. As
noted, the Commission believes that the necessary break-even benefit
per consumer is likely between $0.08 and $0.33 per year over ten years,
depending on which set of assumptions is used.
[GRAPHIC] [TIFF OMITTED] TR10JA25.050
1. Economic Rationale for the Final Rule
The final rule addresses the economic problem of incomplete and
insufficient price information by businesses that shroud the full price
from the consumer during parts of the purchasing process, which harms
both consumers and honest competitors. Not including mandatory fees in
the full price when consumers start the purchasing process for a good
or service may result in a market failure. Firms may shroud the full
price to the consumer through the practice of ``drip pricing,'' which
is ``a pricing technique in which firms advertise only part of a
product's price and reveal other charges later as the customer goes
through the buying process.'' \550\ Discovering the lowest full price
prior to a final purchase by going through the checkout process with
multiple firms is inefficient and involves additional consumer search
costs. In some cases, taking the time to search for the full price from
one firm may result in the consumer losing the opportunity to purchase
the product from another firm. Drip pricing and the resulting
imposition of additional search costs make it more difficult for
consumers to compare prices across platforms, which may soften price
competition in the market.\551\
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\550\ Howard A. Shelanski et al., Economics at the FTC: Drug and
PBM Mergers and Drip Pricing, 41 Rev. Indus. Org. 303 (2012),
https://doi.org/10.1007/s11151-012-9360-x.
\551\ White House, How Junk Fees Distort Competition (Mar. 21,
2023), https://www.whitehouse.gov/cea/written-materials/2023/03/21/how-junk-fees-distort-competition/; Brian Deese et al., White House,
The President's Initiative on Junk Fees and Related Pricing Practice
(Oct. 26, 2022), https://www.whitehouse.gov/briefing-room/blog/2022/10/26/the-presidents-initiative-on-junk-fees-and-related-pricing-practices/; Glenn Ellison, A Model of Add-On Pricing, 120 Q.J. Econ.
585 (2005), https://www.jstor.org/stable/25098747.
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[[Page 2129]]
A market failure may also occur when firms shroud full price
through non-aggregated partitioned pricing, in which all of the
components of the full price (base price, fees, etc.) are presented to
consumers without the full price itself.\552\ Non-aggregated
partitioned pricing, like drip pricing, imposes costs on consumers by
requiring them to spend additional time to calculate the full price for
themselves. Consumers tend to underestimate the full price when faced
with partitioned pricing, and this underestimation leads to an increase
in demand. The increased demand from erroneous price calculations, in
turn, leads to inefficient overconsumption by consumers.
---------------------------------------------------------------------------
\552\ Morwitz, supra note 527.
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(a) Shrouded Pricing as a Cause of Market Failure
A well-functioning market depends, in part, on consumers having
accurate information regarding the price, and other attributes, of the
goods or services being offered. Firms that engage in drip pricing or
employ partitioned pricing create a friction in the operation of the
market by imposing costs on consumers to acquire price information.
Several economic harms may arise from this friction. First, holding
consumer choices and prices fixed, the added search cost to acquire
price information harms consumers with no countervailing benefit to
firms. Second, because shrouded prices make comparison shopping more
difficult, consumers might make suboptimal consumption decisions. In
fact, consumers may find it too costly to search for full and accurate
price information for some or all goods or services under
consideration. The lack of full price information may lead consumer
demand to become less sensitive, i.e., less elastic, to changes in
price, and consumers will accept higher (quality-adjusted) prices than
they would if they were fully informed with clear and upfront pricing.
This, in turn, leads to a third effect: since shrouded prices make it
harder for consumers to compare prices, some firms may gain market
power that allows them to raise prices or decrease quality.\553\ Firms
may further distort the market outcome by changing the products they
offer to consumers relative to a market where prices are transparent.
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\553\ Baye, supra note 521.
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The Commission discusses further the first of these effects, the
added search costs incurred by consumers to acquire complete price
information, in section V.E.2.a.i and quantifies these costs in the
live-event ticketing and short-term lodging industries in section
V.E.3.c and V.E.3.d. The Commission discusses the welfare impact of the
second of these effects, the distortion of consumers' decisions due to
lack of full information, in this section. The third effect, firms
increasing their market power in response to increases in search costs,
would exacerbate any welfare losses caused by the distortion of
consumers' decisions due to the lack of full price information.
However, the Commission lacks the data to quantify or distinguish their
effects on deadweight loss.
The distortion of consumers' decisions due to the lack of full
price information, the second effect discussed in the previous
paragraph, can be illustrated through a simple model of supply and
demand. For simplicity of exposition, the analysis assumes that there
are many firms, each selling a homogeneous product (i.e., good or
service). The analysis further assumes that firms can adjust their
prices and pricing strategies, but that the quality of the product is
fixed.\554\
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\554\ These assumptions are made for exposition purposes to
abstract from the issues of market power in pricing and strategic
interactions between firms. The general ideas from this simple
framework extend to differentiated products and strategic
interactions between a smaller number of firms.
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A useful starting point is to consider the baseline market outcome
where consumers are fully informed; that is, consumers know the full
price upfront (either because firms state the full price upfront or
because consumers can fully and correctly predict any add-on prices).
Since all firms sell the same product, competition will lead all firms
to set equal prices at marginal cost. Figure 1 illustrates the baseline
market outcome. The curve Dupfront represents consumers' demand when
they are fully informed. The supply curve S represents the marginal
cost to firms of producing a given quantity of the product. The
intersection of Dupfront with S, denoted by point A, at quantity
Qupfront and price Pupfront, represents the outcome. The analysis will
refer to this as the ``fully informed outcome.'' At point A, the
marginal benefit to consumers from consuming one additional unit is
equal to the marginal cost to firms from the production of one more
unit of the product.
As long as there are no externalities (i.e., impacts on third
parties beyond the consumers and firms under consideration) from the
consumption of the product, this outcome is efficient; that is, point A
represents the consumption level of the product that provides the
greatest benefit to society. The benefit to society is measured by the
sum of the benefit to consumers, called consumer surplus, and the
benefit to firms, called producer surplus or profit. Consumer surplus
is the net benefit consumers experience from consuming the product
after accounting for their expenditure on the product. Consumer surplus
is given by the difference between the area of trapezoid ACFG, the
value to consumers from consuming Qupfront units of the product, and
the area of rectangle ABFG, the total expenditure on the product
(Pupfront * Qupfront); thus, consumer surplus is given by the area of
triangle ABC. Producer surplus is the net benefit to firms from selling
the product after accounting for their costs to provide the product.
Producer surplus is given by the difference between rectangle ABFG, the
total revenue from the product, and the area of trapezoid AEFG, the
cost to firms from producing Qupfront units of the product; thus,
producer surplus is given by the area of triangle ABE. The net benefit
to society is then given by the area of triangle ACE.
[[Page 2130]]
[GRAPHIC] [TIFF OMITTED] TR10JA25.000
As previously discussed, shrouded pricing makes it more difficult
for consumers to ascertain the full price of the product. In the case
of drip pricing, consumers will see the base price before seeing
additional mandatory price components such as convenience fees.
Consumers may or may not be unaware of the additional fees at the time
they make a purchase decision. If consumers are fully aware of the
additional fees, or anticipate them correctly, the outcome remains
point A, which is efficient. However, there is evidence that consumers
respond differently to a change in the base price offered upfront than
to changes in the fees disclosed separately from the base price.
Specifically, economic studies provide evidence that consumers react
less to price changes through fees than they do to price changes
through the base price.\555\ That is, consumer demand is less elastic
to the fee component of the full price than it is to the base price.
One possible rationale for this phenomenon is that consumers are fully
aware of base prices but are not, or only partially, aware of fees.
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\555\ Blake, supra note 521; Raj Chetty et al., Salience and
Taxation: Theory and Evidence, 99 Am. Econ. Rev. 1145 (2009),
https://doi.org/10.1257/aer.99.4.1145.
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The Commission analyzes the impact drip pricing has on market
outcomes in the previous framework in two stages. The analysis starts
by examining the case where consumers are completely unaware of the
additional fees, namely, they assume that the base price offered
upfront is the full price. The analysis then examines the case where
consumers are aware that a fee might be added later but do not
correctly estimate the size of this fee. Note that this case may arise
under a variety of circumstances. For example, all consumers could be
partially aware of the fees, some consumers could be fully aware of the
fees while others are totally unaware, or there could be a mixture of
consumers exhibiting different degrees of awareness.
In the first stage of the analysis, Pbase,unaware denotes the base
prices firms offer upfront, and Ptotal,unaware denotes the full price
firms charge, which is equal to the base price plus t, the sum of
mandatory per unit fees not included in the base price: Ptotal,unaware
= Pbase,unaware + t.556 Consumers determine their
consumption according to Pbase,unaware, unaware that they are actually
going to pay Ptotal,unaware. This difference between the price
consumers believe they are paying and the price firms are actually
charging leads to an expansion in consumer demand relative to demand
when consumers are fully informed. Specifically, as illustrated by
Figure 2, the firms' deception causes an upward shift in demand equal
to the price difference, t, from Dupfront to Dunaware. The intersection
of Dunaware with S, illustrated by point J, at quantity Qunaware and
price Ptotal,unaware,represents the outcome when consumers are unaware
of the fee and only observe the base price.\557\
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\556\ For simplicity of exposition, the analysis assumes that
all firms follow the same shrouding strategy and set the same t.
\557\ This shift is entirely analogous to the shift that would
occur from a government subsidy. When a subsidy is provided, the
price consumers pay is lower than the price charged by firms.
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[[Page 2131]]
[GRAPHIC] [TIFF OMITTED] TR10JA25.001
Consumer surplus is now equal to the area of triangle CHI minus the
area of triangle IJK. Relative to the fully informed outcome, consumer
surplus decreases by the area of trapezoid ABHI, the decrease in
consumer surplus due to the price increase, and the area of triangle
IJK, the decrease in consumer surplus due to the deceptive pricing
strategy. Producer surplus is now equal to the area of triangle EHJ. It
increases, relative to the fully informed outcome, by the area of
trapezoid ABHJ. This trapezoid illustrates the transfer of surplus from
consumers to firms due to the deceptive practice of shrouded pricing.
The net effect on society is now the area of triangle ACE minus the
area of triangle AJK. Relative to the fully informed outcome, the
benefit to society decreases by the area of triangle AJK (the combined
change in consumer and producer surplus). This decrease in social
surplus is the harm, also referred to as deadweight loss, caused by the
full shrouding of the fee.
The analysis now turns to the case where consumers are aware of the
possibility of additional fees but do not fully anticipate their
magnitude. As previously discussed, academic research suggests that
this might be the case.\558\ This reduced salience would increase
quantity demanded and incur a deadweight loss compared to the fully
informed outcome (illustrated in Figure 1), although both the increase
in quantity demanded and the deadweight loss would be smaller than in
the case where consumers were fully unaware of the fees (illustrated in
Figure 2). Essentially, the aggregate demand curve will lie somewhere
between the upfront demand curve in Figure 1 and the fully shrouded
demand in Figure 2. This aggregate demand can come from (the same)
partial awareness by all consumers or a mixture of different degrees of
awareness by different consumers. A technical appendix in section V.E.6
provides a more detailed model of the impact of consumers' partial
awareness.
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\558\ Blake, supra note 521; Chetty, supra note 555.
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In summary, the shrouding of prices distorts the market outcome by
leading consumers to consume more than they would if they were fully
aware of the full price. The overconsumption by consumers leads to a
social cost in the form of deadweight loss because the resources used
to produce the product would have been put to better use if consumer
demand had not been distorted in this manner. The deadweight loss from
the inefficient consumption level is one component of the welfare loss
generated by drip pricing, in addition to the increase in consumer
search costs and the possible shift in pricing and product offerings
due to increased market power. Collectively, these effects represent a
market failure.
Shrouded pricing likely cannot be mitigated by competitive forces
alone once it has become pervasive in a market. Although consumers
would prefer upfront full prices, it is unlikely that an individual
firm in a market with shrouded prices could increase its market share
by providing its full price upfront. Under the expectation of shrouded
prices, consumers may inadvertently interpret such a firm's upfront
full price as a higher base price, with fees added separately, leading
the firm to lose, rather than gain, business. The distortion of
consumer expectations caused by shrouded pricing thus prevents a shift
to upfront pricing through competition.
In many markets, goods and services are differentiated, with higher
quality items selling at higher prices. In such markets, drip pricing
may lead to outcomes characterized by inefficiently high qualities in
addition to the inefficiently high quantities previously
discussed.\559\ Consumers may respond to fully disclosed prices in
these markets by purchasing goods or services of lower, more efficient
quality in addition to purchasing lower, more efficient quantities of
goods or services.
---------------------------------------------------------------------------
\559\ This phenomenon has been observed, for example, in the
live-event ticketing industry. See Blake, supra note 521.
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(b) Shrouded Pricing as a Source of Biased Expectations
As explained in section V.E.1.a, firms have incentives to distort
consumer demand toward an inefficient equilibrium. This inefficiency
may also
[[Page 2132]]
arise in a behavioral context.\560\ By shrouding full prices through
drip or partitioned pricing, a firm may bias its consumers' price
expectations. For example, consumers may respond to dripped prices by
anchoring their beliefs on the base price and, thus, systematically
underestimate the price of the good or service.\561\ This
underestimation, whether by all consumers, or a subset of consumers,
leads to a similarly inefficient equilibrium in which the good or
service is overconsumed and society suffers a deadweight loss.
---------------------------------------------------------------------------
\560\ David Laibson, Harvard U., Drip Pricing: A Behavioral
Economics Perspective, Address at the FTC (May 21, 2012), https://www.ftc.gov/sites/default/files/documents/public_events/economics-drip-pricing/dlaibson.pdf.
\561\ Morwitz, supra note 527.
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Several studies show how consumer behavior changes because of drip
pricing. One study found that when optional surcharges are dripped,
individuals are more likely to select a more expensive option (after
including surcharges) than what they would have chosen under upfront
pricing.\562\ Even when the participants became aware of the additional
fees, they were reluctant to restart the purchase process because they
perceived high search costs from doing so and inaccurately assumed that
all firms charge the same fees. A different economics experiment found
that consumers encountering drip pricing are more likely to make
purchasing mistakes if they are uncertain about the extent of the drip
pricing.\563\
---------------------------------------------------------------------------
\562\ Shelle Santana et al., Consumer Reactions to Drip Pricing,
39 Mktg. Sci. 188 (2020), https://doi.org/10.1287/mksc.2019.1207.
\563\ Rasch, supra note 521.
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Another prominent study looked at how consumers respond to the
salience of sales tax on goods, which affects the full price of a
product.\564\ In this study, when the grocery store displayed the full
price of each item on shelves as part of a field experiment, people
purchased fewer goods relative to the control scenario in which sales
tax was added at checkout, despite knowing that the final price being
charged had not changed. In 2014, StubHub conducted an experiment in
which some consumers were presented with upfront prices inclusive of
fees while other consumers were presented a base price upfront with
fees hidden until checkout. This experiment revealed that presenting
consumers with full prices upfront reduced both the quantity and
quality of tickets purchased relative to presenting consumers with
dripped prices.\565\
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\564\ Chetty, supra note 555.
\565\ See Blake, supra note 521.
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2. Economic Effects of the Final Rule
The model of incomplete price information, described in section
V.E.1.a, provides a framework for assessing the potential costs,
benefits, and transfers associated with the final rule in the live-
event ticketing and short-term lodging industries. The rule will result
in positive net benefits if it allows consumers to learn total price
more easily, improves consumer comprehension of fees and charges as
they relate to total price, facilitates comparison shopping, reduces
search costs, or otherwise allows consumers to make choices that
increase net welfare. The Commission believes the rule will accomplish
these goals in the live-event ticketing and short-term lodging
industries.
The Commission finds in section V.E.1 that consumer demand in the
live-event ticketing and short-term lodging industries is distorted by
incomplete price information--in simple terms, consumers respond to
lower base prices even if fees are revealed or added up later in a
transaction. Thus, if a seller in these industries uses hidden fees,
that seller may acquire a larger market share by advertising lower
initial prices than other sellers not using hidden fees. Absent the
rule, competitive forces will drive other firms in these industries to
also use hidden fees, as has become evident as noted in section II.B.
If firms do not use hidden fees, they may have to accept a lower market
share, even though their full prices to consumers are similar to (or
lower than) their competitors. Thus, the Commission finds that with the
final rule, firms that currently do not use drip pricing will no longer
face the competitive pressure to employ hidden fees and may experience
higher revenue if consumers can more easily compare prices across
firms. The Commission also finds that the rule will generate costs as
firms that currently employ hidden or misleading fees adjust how they
convey prices to consumers.
Overall, the Commission expects the rule will increase economic
efficiency through improved consumer price calculations, resulting in
reduced deadweight loss and reduced consumer search time that exceeds
the costs to firms of providing more transparent pricing. It may also
facilitate price comparison by consumers, increase competition among
sellers, and put downward pressure on prices. Due to a lack of data, it
is difficult to fully quantify all the potential effects of the final
rule. Where there may be impacts that the Commission is unable to
quantify, it provides a qualitative description.
(a) General Benefits of the Final Rule
Consumers will benefit from the rule in several ways. In addition
to reductions in search costs and deadweight loss, which are described
in greater detail herein, the Commission expects there to be
unquantified benefits for consumers from the rule, including reduced
frustration and consumer stress associated with surprise fees that
distort the purchasing process.
i. Reductions in Search Costs
Consumers will save time searching for the total price of live-
event tickets and short-term lodging as a result of the rule. In a
well-functioning market, consumers find it beneficial to comparison
shop for low prices. When mandatory fees are obscured or
misrepresented, however, consumers learn the full price at the end of
the process and may need to re-assess whether they wish to purchase at
a higher price than originally expected or to look for other options.
Consumers incur longer search times to discover full prices and make
informed purchasing decisions. The final rule will eliminate the need
for additional, inefficient amounts of time to determine total price
from sellers that do not already provide total price upfront. The
Commission quantifies the reduction in search costs in the live-event
ticketing and short-term lodging industries.
ii. Reductions in Deadweight Loss
As discussed in section V.E.1.a, incomplete pricing information may
distort consumer demand. This distortion will lead to an inefficient
market equilibrium and generate deadweight loss, which results from
consumers purchasing higher quantities of the good or service than they
would if fully informed. Under the final rule, consumers will learn
total price upfront. Thus, the rule will likely mitigate distorted
consumer demand and prevent welfare-reducing transactions. Resources
supporting overconsumption will become available for better societal
use, and the deadweight loss will be reduced or eliminated.
The disclosure of total price may also reduce mistake purchases
with respect to product quality. Drip pricing can lead consumers to
purchase goods of inefficient quality; the final rule will allow
consumers to choose more efficient levels of quality. The Commission
does not quantify the reduction in deadweight loss but finds
[[Page 2133]]
that it is a positive benefit to the final rule.
(b) Welfare Transfers
The Commission expects that prices in the live-event ticketing and
short-term lodging industries will adjust in response to the
transparency facilitated by the rule. These price adjustments transfer
welfare from one side of the market to the other; consumer welfare will
increase, and producer profits will decrease by the same amount.
Typically, transfers of welfare from one set of people in the economy
to another are documented in a regulatory analysis, but do not change
net social welfare.\566\ Consequently, while it is likely that the rule
will result in transfers of welfare, the Commission does not attempt to
estimate these transfers.
---------------------------------------------------------------------------
\566\ See OMB Circular A-4, supra note 547 (``Transfer payments
are monetary payments from one group to another that do not affect
total resources available to society. A regulation that restricts
the supply of a good, causing its price to rise, produces a transfer
from buyers to sellers.'' Even though a ``net reduction in the total
surplus (consumer plus producer) is a real cost to society, [ ] the
transfer from buyers to sellers resulting from a higher price is not
a real cost since the net reduction automatically accounts for the
transfer from buyers to sellers.'').
---------------------------------------------------------------------------
(c) General Costs of the Final Rule
Firms in the live-event ticketing and short-term lodging industries
will likely do a basic regulatory review to determine how the rule
applies to them.\567\ Firms that are not already in compliance with the
rule may incur additional costs to re-optimize the price of goods and
services. These firms may also incur costs to adjust how they display
pricing information to disclose total price whenever the price of a
good or service is displayed. For example, firms may need to update
websites or reprint advertisements to comply with the rule.
---------------------------------------------------------------------------
\567\ This basic regulatory review also captures the time it
takes for firms to determine how a nationwide rule interacts with
any state-level regulations to which they are already subject.
---------------------------------------------------------------------------
In addition, the Commission notes that there may be other indirect
short-term costs that the Commission cannot quantify. For instance,
consumers who are used to an existing pricing structure that separately
discloses mandatory fees at the end of the purchase process may
mistakenly make inefficient purchases while adjusting to the new regime
of upfront total price. Specifically, consumers accustomed to dripped
live-event ticketing fees may initially under-consume when shopping for
tickets with upfront total price. The societal cost of such
inefficiencies would be temporary and decrease as consumers adjust to
the truthful, timely, and transparent pricing required by the rule.
While the rule allows businesses to exclude shipping charges from
total price until the point at which a consumer may consent to pay, the
rule requires any internal handling costs that were previously
disclosed at the end of the purchase process to be incorporated in
total price. Since shipping and handling charges are sometimes
combined, businesses may have to change how they account for handling
costs and how they advertise shipping and handling costs to comply with
this provision.
3. Quantified Welfare Effects
This section quantifies the potential benefits and costs of the
final rule for the live-event ticketing industry and the short-term
lodging industry. The Commission provides quantitative estimates where
possible for these industries, and it describes benefits and costs that
can only be assessed qualitatively. The Commission estimates that the
quantified benefits will exceed the quantified costs, and the
Commission believes that the total benefits (quantified and
unquantified) will outweigh the total costs (quantified and
unquantified) of the rule.
(a) Quantified Compliance Costs
The Commission quantifies the compliance costs for both industries
utilizing assumptions about the number of hours required to determine
and, if necessary, come into compliance with the final rule. The
Commission expects that, in response to the final rule, firms will
initially determine whether and how the rule applies to their current
pricing and fee disclosure practices. The Commission assumes firms with
current practices that align with the final rule will incur, at most,
one hour of lawyer time to confirm compliance. This hour of lawyer time
is a proxy for the average amount of time firms will need to determine
whether the final rule applies to them. For example, some firms may not
employ an attorney at all but may instead have a staff member review
the rule.
The Commission does not have data on the exact costs noncompliant
firms will incur to comply with the final rule. Some firms already may
have developed tools to comply with the rule because they operate in
jurisdictions, such as California, with existing similar all-in pricing
requirements. Coming into compliance with the rule should be relatively
easy for these firms. For other firms, complying with the final rule
may require additional time and costs. To capture both the variation
and uncertainty of costs across the two industries, the analysis
includes a series of low- and high-end assumptions about the number of
hours required to comply with the rule.\568\ For example, the
Commission's analysis assumes that firms not presently compliant will
employ a low end of five hours and a high end of ten hours of lawyer
time to determine necessary steps to comply with the rule. While some
firms may forgo legal advice, this range of lawyer time serves as a
proxy for any costs associated with understanding and preparing to
comply with the rule.
---------------------------------------------------------------------------
\568\ The Commission requested additional information on
potential compliance hours in the NPRM, but it did not receive
consistent data. Therefore, the Commission uses the same set of
assumptions on hours as used in the NPRM but notes that the live-
event ticketing and short-term lodging industries are likely to have
already established systems necessary to comply with the final rule
due to operating in jurisdictions with similar regulations.
---------------------------------------------------------------------------
The final rule's requirement to display total price may lead to
shifts in consumer demand and, consequently, market equilibria. In
response, firms transitioning away from drip pricing may need to
determine new optimal prices. The Commission's analysis assumes that
these price re-optimizations will require firms to incur a one-time,
upfront cost of data scientist time to perform this work. The analysis
assumes firms not presently compliant will employ a low-end of forty
hours and a high-end of eighty hours of data scientist time. Similar to
the use of lawyer hours in estimating compliance costs, this range of
data scientist time serves as a proxy for any costs associated with
adjusting pricing strategies in response to the rule.\569\
---------------------------------------------------------------------------
\569\ It is possible that presently compliant firms would also
need to reoptimize prices in response to shifts in market
equilibria. That is, the shift in an industry's equilibrium
resulting from the rule could be significant enough that all firms
in the industry, compliant or not, would need to adjust prices.
Firms regularly reoptimize prices in response to market shifts, but
it is possible that this price adjustment would require already
compliant firms to incur additional costs. The Commission solicited,
but did not receive, the data necessary to quantify this potential
cost to firms.
---------------------------------------------------------------------------
The Commission expects that the drip pricing employed by firms not
presently compliant with the rule is, in many cases, manifested in
online sales. In such cases, firms also will need to adjust advertised
prices as well as purchase processes for online sales, and the analysis
assumes these adjustments require firms to incur a one-time, upfront
cost of web developer time. The analysis assumes firms not presently
compliant will employ a low end of forty hours and a high end of eighty
hours of web developer time to become
[[Page 2134]]
compliant with the final rule.\570\ Once firms are compliant with the
rule, any future changes to pricing displays or purchasing systems are
not a direct consequence of the rule. Since the rule will not take
effect for four months, some of these pricing display and advertising
updates may come at no additional cost to certain firms. Many firms
regularly update their pricing displays and advertisements. Any firms
that would, in their normal course of business, update their displays
and advertising during the four month window prior to the rule taking
effect would not incur the additional one-time cost of updating their
displays and advertisements in response to the rule. Because the
Commission lacks data on these business practices, the Commission
conservatively assumes that all firms not presently compliant with the
rule will incur these costs. As such, the Commission's analysis likely
represents an overestimate of compliance costs.
---------------------------------------------------------------------------
\570\ The U.S. Department of Transportation also uses an
assumption of 80 hours of time to reprogram flight quotation
websites for the Enhancing Airline Passenger Protections II rule.
U.S. Dep't Transp., Preliminary Regulatory Analysis: Enhancing
Airline Passenger Protections II (May 24, 2010), https://www.regulations.gov/document/DOT-OST-2010-0140-0003 (``Consumer Rule
II'').
---------------------------------------------------------------------------
It may be the case that once the firm incurs the one-time
transition costs, there are no additional costs. For a low-end estimate
of costs, the Commission's analysis assumes annual costs are $0 because
there are zero additional hours of labor. However, it may be the case
that, as firms transition into compliance with the final rule, firms
need to reevaluate their pricing policies to ensure continued
compliance by employing additional lawyer time on an annual basis.
Available data do not allow the Commission to estimate the exact annual
compliance costs firms may incur as various industries adapt to the
final rule. For the high-end cost estimate, the Commission's analysis
assumes firms require an average of ten hours of lawyer time for annual
compliance checks. The Commission recognizes some firms may not utilize
lawyer time but may delegate compliance to non-attorney employees and
still incur annual compliance costs. Data on non-lawyer compliance
costs are not available, and these potential annual compliance costs
are proxied with lawyer time with the implicit assumption that non-
attorney employee hourly wages are lower than lawyer wages.
Table 3 presents the total compliance costs as the sum of the
industry-specific compliance costs described in more detail in section
V.E.3.c and V.E.3.d. The cost of employee time is monetized using wages
obtained from the Bureau of Labor Statistics' May 2023 National
Occupational Employment and Wage Estimates for the live-event ticketing
industry.\571\ For the short-term lodging industry, the analysis uses
industry-specific wages associated with the North American Industry
Classification System (``NAICS'') codes.
---------------------------------------------------------------------------
\571\ U.S. Bureau Lab. Stat., Occupational Employment and Wage
Statistics, May 2023 National Occupational Employment and Wage
Estimates United States (May 2023), https://www.bls.gov/oes/current/oes_nat.htm (``OEWS National''); U.S. Bureau Lab. Stat.,
Occupational Employment and Wage Statistics, Occupational Employment
and Wages, May 2023: 15-2051 Data Scientists (May 2023), https://www.bls.gov/oes/current/oes152051.htm (``OEWS Data Scientists'')
(providing the hourly wages for data scientists); U.S. Bureau Lab.
Stat., Occupational Employment and Wage Statistics, Occupational
Employment and Wages, May 20231: 15-1254 Web Developers (May 2023),
https://www.bls.gov/oes/current/oes151254.htm (``OEWS Web
Developers'') (providing the hourly wages for web developers); U.S.
Bureau Lab. Stat., Occupational Employment and Wage Statistics,
Occupational Employment and Wages, May 2023: 23-1011 Lawyers (May
2023), https://www.bls.gov/oes/current/oes231011.htm (``OEWS
Lawyers'') (providing the hourly wages for lawyers). This assumption
is valid if hours spent in compliance activities would otherwise be
spent in other productive work-related activities, the social value
of which is summarized by the employee's wage. To the extent that
these activities can be accomplished using time during which
employees would otherwise be idle in the absence of a rule, our
estimates will overstate the welfare costs of the final rule.
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[[Page 2135]]
[GRAPHIC] [TIFF OMITTED] TR10JA25.051
Table 4 presents the ten-year per-firm annualized compliance costs
for the live-event ticketing and short-term lodging industries,
separated by firms already in compliance, which incur a one-time
compliance check, and firms not presently in compliance, which incur
both one-time and recurring costs. Compliance costs for the short-term
lodging industry are further disaggregated into costs for U.S. hotels
and U.S. home share hosts. Costs to foreign hotels and home share hosts
are discussed in section V.E.3.d.ii.
[[Page 2136]]
[GRAPHIC] [TIFF OMITTED] TR10JA25.052
(b) Break-Even Analysis
To have a positive net benefit, the final rule's benefits must
outweigh its costs. The Commission calculates the break-even benefit
per consumer based on the quantified costs presented in section
V.E.3.b.\572\ That is, the Commission determines the minimum value the
final rule would need to generate for the average consumer for its
total benefits to outweigh its quantified costs. The rule's benefits
may include reduced search costs, reduced deadweight loss, and reduced
psychological distress or frustration from surprise fees. For this
analysis, the Commission considers costs in annualized terms--the
average discounted cost of compliance per year over 10 years.\573\ As
such, the analysis expresses the break-even benefit as an average
benefit per consumer per year over ten years.\574\
---------------------------------------------------------------------------
\572\ In section V.E.3.c and V.E.3.d, the Commission quantifies
the final rule's net social benefits for the live-event ticketing
and short-term lodging industries.
\573\ For purposes of discounting and annualizing costs, the
analysis assumes that firms incur one-time costs immediately, at the
beginning of year 1, and potential costs of annual compliance checks
at the end of each year.
\574\ Benefits to consumers, such as reductions in search costs,
will accrue continually over time. For simplicity, the break-even
analysis assumes that annualized benefits accrue all at once at the
end of each year. As such, the break-even analysis may overestimate
the benefits required to outweigh costs.
---------------------------------------------------------------------------
From Table 3, under the assumption that firms and consumers
discount future years at 3%, the Commission's analysis estimates that
the final rule may result in costs as high as $644 million over 10
years. Assuming instead a discount rate of 7% for future years, the
analysis estimates that the final rule may result in costs as high as
$603 million over ten years. To determine the break-even benefit, the
Commission's analysis begins with the total present value of total
costs and calculates the annualized total costs across both
industries.\575\ Next, the Commission calculates what the break-even
benefit would be per consumer, according to the following formula:
---------------------------------------------------------------------------
\575\ While total costs are higher with a smaller discount rate,
annualized costs are higher with a larger discount rate due to
higher upfront costs and lower recurring costs.
Per Consumer Annualized Benefits >= (Annualized Quantified Compliance
---------------------------------------------------------------------------
Costs/Population)
Table 5 presents the results of this break-even analysis. According
to the 2020 Census, there are 258,343,281 adults living in the United
States. Thus, the analysis divides the estimates of annualized costs by
the number of U.S. adults to find the average consumer benefit per year
for 10 years required to exceed quantified compliance costs. For
example, if the final rule results in an average benefit to consumers
that exceeds $0.33 per year over ten years, then the final rule's
benefits exceed its quantified compliance costs under the high-end
assumption and an assumed 7% discount rate.
Table 5 also provides the break-even benefit per consumer in terms
of minutes saved as a result of the final rule. According to the Bureau
of Labor Statistics' Occupational Employment Statistics, the average
hourly wage of U.S. workers in 2023 was $31.48, and recent research
suggests that individuals living in the U.S. value their non-work time
at 82% of average hourly earnings. Thus, the value of non-work time for
the average U.S. worker would be $25.81 per hour.\576\ If the analysis
divides the
[[Page 2137]]
break-even dollar benefit per consumer, using the high-end assumptions
and a discount rate of 7% ($0.33), by the value of saved search time
($25.81/hour) and converts to minutes, the break-even saved search time
per consumer is 0.77 minutes. That is, if the final rule results in
savings from reduced search time that exceed 0.77 minutes per consumer
per year over ten years, then the benefits solely from reduced search
time will exceed quantified compliance costs.\577\ Although the
Commission acknowledges that benefits of the final rule may vary across
consumers, as some consumers may be more likely than others to consume
live-event tickets and/or short-term lodging, the Commission finds it
highly likely that consumers would experience average search time
savings of this amount.
---------------------------------------------------------------------------
\576\ See OEWS National, supra note 571 (providing the mean
hourly wage); Hamermesh, supra note 533 (providing the value of
consumer time).
\577\ Assuming a 3% discount rate and the high-end assumptions,
the break-even time saved per consumer per year would be 0.68
minutes.
[GRAPHIC] [TIFF OMITTED] TR10JA25.053
There are a few important caveats to this break-even analysis. This
analysis may overestimate the number of noncompliant firms in the live-
event ticketing and short-term lodging industries. In that case, this
assumption leads to an overestimate of both costs and necessary break-
even benefits. On the other hand, there may be more firms not already
in compliance with the final rule, in which case this assumption
results in an underestimate of both costs and break-even benefits.
The Commission cannot forecast all potential consequences and
costs. This break-even analysis does not account for any unquantified
benefits or costs due to unintended consequences. However, if the
benefits from reduced deadweight loss caused by consumers' incomplete
price information, reduced search time, and beneficial unintended
consequences outweigh the costs from compliance and harmful unintended
consequences, then the rule results in positive net social benefits.
The Commission believes benefits will exceed the costs.
i. Sensitivity Analysis: Assume Higher Wage Rates
The Commission received comments regarding the wage rates used in
the cost estimation. To address these comments, this section provides
the break-even analysis described in section V.E.3.b using rates that
are double the average wage rate obtained from the Bureau of Labor
Statistics May 2023 National Occupational Employment and Wage
Estimates.\578\ Specifically, the wage rates used for this analysis are
$169.68 for lawyer time to review compliance, $114.46 for data
scientist time to re-optimize pricing, and $91.90 for web developer
time. Using these higher wage rates, the break-even benefit required to
exceed quantified compliance costs is provided in Table 6.\579\
---------------------------------------------------------------------------
\578\ See sources cited supra note 571, including OEWS National
(providing the mean hourly wage); OEWS Data Scientists (providing
the hourly wages for data scientists); OEWS Web Developers
(providing the hourly wages for web developers); and OEWS Lawyers
(providing the hourly wages for lawyers).
\579\ Wages are doubled in this sensitivity analysis, but the
break-even benefit per consumer does not exactly double because not
all costs depend on wages. One component of the cost calculation in
the short-term lodging industry is the cost to home share hosts of
re-optimizing prices. This cost is evaluated using an estimate of
hosts' hourly value of time rather than wages, which is not doubled.
Therefore, the break-even benefits per consumer presented in Table 6
are slightly less than double those in Table 5.
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[[Page 2138]]
[GRAPHIC] [TIFF OMITTED] TR10JA25.054
The break-even analysis under the assumption of doubled wages
implies that if the final rule results in an average benefit to
consumers that exceeds $0.59 per year over ten years, then the final
rule's benefits exceed its quantified compliance costs under the high-
end assumption and an assumed 7% discount rate. In terms of minutes
saved per consumer, the high-end cost assumptions with doubled wages
and a 7% discount rate imply that if the final rule results in savings
from reduced search time that exceed 1.36 minutes per consumer per year
over ten years, then the benefits solely from reduced search time will
exceed quantified compliance costs.
(c) Quantified Benefits and Costs: Live-Event Ticketing Industry
This section analyzes the final rule's quantified benefits and
costs in the live-event ticketing industry. Quantified benefits are
limited to the expected reductions in search costs to consumers. Since
there is an additional, unquantified benefit of reduced deadweight
loss, which is discussed conceptually in section V.E.2.a.ii, the net
benefit estimated in the following analysis is conservative. The
Commission finds that the quantified benefits and costs indicate that
the rule will have a positive net benefit, even without accounting for
the unquantified benefit of reducing deadweight loss.
Consumers in the live-event ticketing industry are often surprised
by mandatory fees at the end of the purchase process.\580\ In 2022,
online event ticket sales were reported to be $8.1 billion.\581\ Live
events include concerts (30.3%), sporting events (33%), and dance,
opera, and theater productions (12.4%).\582\ For many consumers, there
are no close substitutes for the specific product that they wish to
purchase: a ticket to attend a live event. Thus, when consumers are
presented with surprise mandatory fees, the consumer either pays the
full price including the fees, spends time searching for a new option
such as a different seat or a different seller, or forgoes the purchase
entirely.
---------------------------------------------------------------------------
\580\ E.g., White House, How Junk Fees Distort Competition,
supra note 551.
\581\ Michal Dalal, Online Event Ticket Sales in the US, IBIS
World (May 2023) (``Ticket Sales Industry Report'').
\582\ Id.
---------------------------------------------------------------------------
The live-event ticketing industry is unique relative to other
industries because there is a large and robust secondary market. A
given ticket to an event may be sold in the primary market, and then
resold multiple times in the secondary market. It is difficult to fully
quantify how many live-event ticket purchases are made in the U.S., how
many involve mandatory fees, and the typical amount of the fee. Many
live-event ticket sellers appear to include some kind of fee, although
the size and type of the fees vary across sellers.\583\ In a non-
generalizable sample, the GAO found live-event ticketing fees in
primary and secondary ticket markets averaged 27% and 31% of the
ticket's price, respectively.\584\
---------------------------------------------------------------------------
\583\ Numerous commenters from the live-event ticketing industry
recognized the pervasiveness of various ticketing fees. See, e.g.,
FTC-2023-0064-3212 (TickPick, LLC observed the ``widespread''
deceptive practice of bait-and-switch pricing); FTC-2023-0064-3230
(Future of Music Coalition commented that they have worked to
``deal[ ] with the scourge of junk fees in various parts of the
economy,'' including live touring); FTC-2023-0064-3105 (Charleston
Symphony affirmed that ``requiring sellers to disclose the total
price clearly and conspicuously[ ] addresses a pressing issue in the
nonprofit performing arts sector'').
\584\ U.S. Gov't Accountability Office, Event Ticket Sales:
Market Characteristics and Consumer Protection Issues, (Apr. 12,
2018), (``GAO Report''), https://www.gao.gov/products/gao-18-347.
---------------------------------------------------------------------------
Following White House and Congressional calls for disclosure of
hidden fees, and after the ANPR was announced, some ticket sellers
pledged to show all-in prices when the consumer begins the purchase
process.\585\ However, absent the final rule, market forces would
likely return to the equilibrium of hidden mandatory fees. In fact, the
National Association of Ticket Brokers and StubHub, Inc. submitted
comments to the ANPR in support of a rule requiring all-in pricing, but
commented that such a rule would only be effective if applied to all
ticket sellers and rigorously enforced.\586\ As discussed in section
III.B.1.b, the
---------------------------------------------------------------------------
\585\ See, e.g., White House, President Biden Recognizes Actions
by Private Sector Ticketing and Travel Companies to Eliminate Hidden
Junk Fees and Provide Millions of Customers with Transparent Pricing
(Jun. 15, 2023) https://www.whitehouse.gov/briefing-room/statements-releases/2023/06/15/president-biden-recognizes-actions-by-private-sector-ticketing-and-travel-companies-to-eliminate-hidden-junk-fees-and-provide-millions-of-customers-with-transparent-pricing/. Some
ticket sellers, such as TickPick, LLC, have never used hidden fees;
S. Comm. on Commerce, Sci., & Transp., TICKET Act, https://www.commerce.senate.gov/services/files/071401A3-D280-414C-AEDB-A9B57F276067.
\586\ FTC-2022-0069-6089 (ANPR) (National Association of Ticket
Brokers); FTC-2022-0069-6079 (ANPR) (StubHub, Inc.).
---------------------------------------------------------------------------
[[Page 2139]]
Commission received similar comments in response to the NPRM
emphasizing that the benefit of the rule requires industry-wide
coverage so that no single seller is allowed to charge surprise fees at
the end of the transaction. If any seller utilizes hidden fees, they
may capture a larger market share by advertising lower initial prices.
Absent a Federal rule applying to all sellers, competitive forces might
drive ticket sellers to return to the use of hidden fees. Thus, the
Commission's analysis quantifies benefits and costs relative to the
baseline equilibrium where sellers do not disclose total price upfront.
In this final live-event ticketing net benefit analysis, the
Commission updates firm counts, wage rates, any inflation-adjusted
values, value of time, and 10-K live-event ticket revenue information
to reflect the most recent available data. The Commission was unable to
update any numbers from IBISWorld Reports.
i. Live-Event Ticketing: Estimated Benefits of the Final Rule
(a) Consumer Time Savings When Shopping for Live-Event Tickets
The final rule requires disclosure of total price inclusive of all
fees or charges that a consumer must pay in order to use the good or
service for its intended purpose. Required disclosure of total price
and prohibitions on misrepresentations save consumers time when
shopping for a live-event ticket by requiring the provision of salient,
material information upfront and eliminating time spent pursuing ticket
offers priced above the amount the consumer is willing to spend, also
known as the consumer's reservation price.
The Commission's analysis assumes that, as a result of the rule,
the total time spent by a consumer conducting the transaction will
decrease, because some consumers will reduce the number of ticket
listings they view prior to making a ticket purchase. For example, the
Blake Study examined an experiment on StubHub where fees were presented
upfront to some consumers and at the end of the purchase to
others.\587\ The experiment found that the percentage of consumers who
only view one listing is 74% when fees are presented at the end of the
transaction versus 83% when fees are presented upfront. Using the
distribution of listings viewed by consumers as reported in the Blake
Study, the analysis calculates that the reduction in the average number
of listings a consumer views when fees are displayed upfront is 0.1525
listings.
---------------------------------------------------------------------------
\587\ Blake, supra note 521.
---------------------------------------------------------------------------
To calculate the reduction in consumer search time resulting from
upfront pricing, the Commission requires information on the length of
time a consumer spends viewing a single listing. The Commission is not
aware of any data available on this. However, many ticket sellers
utilize a ``countdown clock'' where the selected tickets in the
consumer's shopping cart expire and are returned to the marketplace.
During this countdown clock, a consumer who was unhappy with the
revealed total price could search for another ticket without losing the
original ticket. The Commission uses this range of countdown clock time
as a proxy for a low-end and high-end estimate of the time spent
viewing a listing. These countdown clocks range from five to ten
minutes per ticket transaction.\588\ Multiplying the assumed length of
a ticket transaction of five or ten minutes by the estimated reduction
in viewed listings from the Blake Study results in a search time
savings of 0.7625 to 1.525 minutes per consumer transaction.\589\
---------------------------------------------------------------------------
\588\ Ticketmaster states that the amount of time it imposes
varies by event but references a five-minute purchasing period.
FAQ's: Why does Ticketmaster enforce a time limit when making
purchases online?, Ticketmaster.com.au, https://www.ticketmaster.com.au/h/faq.html. Based on a small, non-
representative sample of ticket purchase attempts, StubHub appears
to generally offer ten minutes to complete a ticket purchase.
\589\ See also Consumer Rule II, supra note 570, at 39. The
Preliminary Regulatory Impact Analysis for Consumer Rule II assumed
airfare consumers would save five minutes of search and estimation
time if all websites provided full-fare information upfront.
---------------------------------------------------------------------------
Next, the Commission's analysis estimates the number of consumer
purchases of live-event tickets. Live Nation (which owns Ticketmaster)
reported selling over 329 million fee-bearing tickets in the primary
and secondary markets using the Ticketmaster system in its 2023 10-K
SEC filing.\590\ However, this figure combines North American and
international ticket sales. Live Nation also reported that slightly
more than two-thirds of concert events were in North America, so the
analysis applies that proportion to the total combined ticket sales and
assumes that Ticketmaster sold more than 221 million tickets in North
America. To estimate the number of tickets sold solely in the U.S., the
analysis then also adjusts the number of tickets by the share of North
American GDP attributable to the U.S. (0.87 in 2023), which results in
an estimated 192 million tickets sold in the primary and secondary
markets by Ticketmaster in the U.S.\591\
---------------------------------------------------------------------------
\590\ Live Nation Entm't Inc., Annual Report (Form 10-K) (Feb.
22, 2024) (``Live Nation 10-K''), https://investors.livenationentertainment.com/sec-filings/annual-reports/content/0001335258-24-000017/0001335258-24-000017.pdf.
\591\ U.S. GDP in 2023 was estimated to be $27.36 trillion and
GDP for North America was estimated to be $31.4 trillion. IMF
DataMapper United States Datasets, IMF.org, https://www.imf.org/external/datamapper/profile/USA; IMF DataMapper North America
Datasets, IMF.org, https://www.imf.org/external/datamapper/profile/NMQ. The Commission's analysis adjusts North American tickets (221
million) by 87% to estimate the number of tickets sold in the United
States, resulting in 192 million.
---------------------------------------------------------------------------
To find the total number of tickets sold in the U.S. by all live-
event ticket sellers, the Commission's analysis extrapolates from
Ticketmaster's ticket sales using its market share. However,
Ticketmaster's market share is uncertain. In 2010, the Department of
Justice found that Ticketmaster had maintained a market share of more
than 80% for the previous fifteen years.\592\ If the Commission's
analysis assumes that Ticketmaster still has an 80% share of the live-
event ticket market (which includes both primary and secondary ticket
markets), it can estimate the total number of tickets sold in the U.S.
by dividing Ticketmaster's ticket sales in the U.S. by 80%. This
provides a low-end estimate of the number of tickets sold in the U.S.
of 240 million tickets.
---------------------------------------------------------------------------
\592\ See Christine A. Varney, Assistant Attorney General,
Antitrust Division, U.S. Dep't of Justice, Remarks at the South by
Southwest Conference: The TicketMaster/Live Nation Merger Review and
Consent Decree in Perspective (Mar. 18, 2010), https://www.justice.gov/atr/speech/ticketmasterlive-nation-merger-review-and-consent-decree-perspective.
\593\ The Live Nation 10-K, supra note 590, does not separate
out tickets sold by Ticketmaster in the primary versus secondary
markets. Ticketmaster now sells tickets on the secondary market,
which includes several other sellers such as StubHub, Inc., Vivid
Seats, TickPick, LLC, Ace Ticket, Alliance Tickets, Coast to Coast
Tickets, and others.
---------------------------------------------------------------------------
However, Ticketmaster did not begin selling in the secondary market
until after it merged with Live Nation. Based on publicly available
information, the Commission is uncertain of Ticketmaster's market share
in the secondary market for tickets.\593\ If Ticketmaster does not have
80% of the ticket market (both primary and secondary), the number of
tickets sold in the U.S. would exceed the low-end estimate of 240
million tickets. To generate a high-end estimate of the total number of
tickets sold in the U.S., the Commission's analysis uses the reported
revenue for the full online ticket sales industry provided by the
private research firm IBISWorld and calculates Ticketmaster's revenue
share of the industry. IBISWorld reports the online ticket sales
industry, including both primary ticket sellers and ticket
[[Page 2140]]
resellers, earned $12.5 billion in revenue in 2023.\594\ The Live
Nation 10-K reported ticketing revenue of $3 billion in 2023, which
suggests that Ticketmaster has a 24% revenue share of the online
ticketing industry.\595\ The Commission's analysis extrapolates a high-
end estimate of the total number of tickets sold in the U.S. by
dividing Ticketmaster ticket sales in the U.S. by 24%, which results in
an estimate of 801 million live-event tickets sold in the U.S.
---------------------------------------------------------------------------
\594\ See https://www.ibisworld.com/industry-statistics/market-size/online-event-ticket-sales-united-states/.
\595\ Assuming Ticketmaster's market share is equivalent to its
revenue share (of the primary and secondary markets) also assumes
that the average price of a ticket sold by Ticketmaster is the same
as (or lower than) the average price of a ticket sold by the rest of
the industry. If, however, the average price of a ticket sold by
Ticketmaster is higher than average prices in the rest of the
industry, then Ticketmaster's revenue share is higher than its
ticket share, and the extrapolation understates the total number of
tickets sold in the U.S.
---------------------------------------------------------------------------
Lastly, the reduction in search time of 0.7625 to 1.525 minutes is
per consumer purchase, not per ticket purchase. The Commission's
analysis assumes that the average consumer purchase is between 1.5 and
3 tickets.\596\ Thus, the total number of tickets sold is divided by
1.5 or 3 to arrive at an estimated range for the number of consumer
purchases. The analysis estimates the range of live event consumer
purchases in the U.S. to be 80 million on the low end and 534 million
on the high end.
---------------------------------------------------------------------------
\596\ The Commission does not currently have information on the
average number of tickets purchased in a transaction. However, there
is reason to believe the average would be greater than one because
most venues limit the number of tickets that can be purchased in a
given transaction, suggesting that there is consumer demand for
purchases of more than a single ticket. The limit is dependent on
the event. Ticketmaster, Why is there a ticket limit?, https://help.ticketmaster.com/hc/en-us/articles/9781245025937-Why-is-there-a-ticket-limit.
---------------------------------------------------------------------------
When multiplied by the number of transactions per year, the
reduction in minutes spent viewing ticket listings will generate a
total time savings of 1.02 million to 13.6 million hours per year.
Using the value of non-work time for the average U.S. worker of $25.81
per hour, the Commission's analysis estimates that the total benefit
from time savings for completed transactions is roughly $26.3 million
to $350.6 million per year, depending on how conservative its
assumptions are. Table 7 presents the expected benefits of time savings
over the next ten years in present value.
BILLING CODE 6750-01-P
[[Page 2141]]
[GRAPHIC] [TIFF OMITTED] TR10JA25.055
BILLING CODE 6750-01-C
(b) Additional Unquantified Benefits: Reductions in Deadweight Loss and
Abandoned Transactions
Due to the incomplete price information problem described in
section V.E.1, the final rule requiring ticket sellers to show total
price of tickets upfront will likely result in a reduction of
deadweight loss. Recent research suggests that when consumers know
total prices for tickets upfront, consumers are better able to find the
tickets that match their desired quantity and quality (seat type or
location).\599\ The analysis does not quantify the reduction in
deadweight loss, but such a reduction is a positive benefit of the
rule.
---------------------------------------------------------------------------
\597\ Live Nation 10-K, supra note 590.
\598\ OEWS National, supra note 571; Hamermesh, supra note 533.
\599\ Blake, supra note 521. Live-event tickets are an example
of a differentiated product; there are higher quality tickets (e.g.,
better views, more comfortable seats, cover from the elements) that
are associated with higher price tiers. Blake et al. find that
consumers who face drip pricing purchase more expensive, higher
quality tickets than they would if provided with upfront pricing.
---------------------------------------------------------------------------
Another unquantified benefit to the final rule is a potential
decrease in abandoned transactions. For example, in some cases, once
the additional information impacting full price is revealed, consumers
may fully abandon the transaction (i.e., not purchase any ticket).
Although the Commission solicited comment in the NPRM on the
[[Page 2142]]
frequency of, and the reasons for, abandoned transactions in the live-
event ticket market to help quantify this benefit, it did not receive
this data and cannot determine the quantity of such abandoned
transactions and the amount of time spent pursuing them. As a result,
this benefit is unquantified.
ii. Live-Event Ticketing: Estimated Costs of the Final Rule
This section describes the potential costs of the final rule's
provisions and provides quantitative estimates where possible. For
live-event ticketing, the cost of employee time is again monetized
using wages obtained from the Bureau of Labor Statistics' May 2023
National Occupational Employment and Wage Estimates.\600\ Because live-
event ticketing is not associated with a specific NAICS code, the
Commission uses wages at the national level rather than the industry-
specific wages that are used to calculate costs for the short-term
lodging industry.
---------------------------------------------------------------------------
\600\ OEWS National, supra note 571.
---------------------------------------------------------------------------
The costs to sellers from the rule include a review of whether the
rule applies, and, if the firm is not currently compliant with the
rule, one-time costs to comply with the rule, as well as recurring
annual costs to review and ensure ongoing compliance. The Commission's
analysis presents two cost scenarios corresponding to different
assumptions of how many hours are required to comply with the rule and
how many firms would be affected by the rule. The analysis presents
these as low-end and high-end cost scenarios.
To estimate costs for the entire live-event ticket-selling
industry, the Commission's analysis calculates the cost per seller and
multiplies that by the number of sellers in the industry. There is some
uncertainty about the number of live-event ticket sellers that would be
affected by the rule because, while the NAICS classification system
does not define a classification solely for ticket sellers, two
different NAICS codes might include ticket sellers. The GAO Report used
the NAICS code 561599, which is ``All Other Travel Arrangement and
Reservation Services.'' \601\ This NAICS category includes 1,442 firms;
some live-event ticket sellers, such as Tickets.com and Vivid Seats,
use this classification.\602\ Other live-event ticket sellers, such as
Ticketmaster and StubHub, however, are classified as NAICS code 7113,
which is ``Promoters of Performing Arts, Sports, and Similar Events,''
and includes 7,998 firms.\603\ As a high-end estimate of the number of
live-event ticket sellers, the Commission's analysis uses the sum of
the firms within these two NAICS code and assumes there are 9,440 firms
potentially impacted by the final rule.\604\
---------------------------------------------------------------------------
\601\ NAICS code 561599 ``comprises establishments (except
travel agencies, tour operators, and convention and visitors
bureaus) primarily engaged in providing travel arrangement and
reservation services.'' U.S. Census Bureau, North American Industry
Classification System, 561599 All Other Travel Arrangement and
Reservation Services (2022), https://www.census.gov/naics/?input=561599&year=2022&details=561599.
\602\ U.S. Census Bureau, 2021 SUSB Annual Datasets by
Establishment Industry (Dec. 2023), https://www.census.gov/data/datasets/2021/econ/susb/2021-susb.html.
\603\ Id.
\604\ Note that some live-event ticket sellers may be organized
as non-profit entities and thus could fall outside of the
Commission's jurisdiction. The Commission did not find data on the
proportion of ticket sellers that are non-profits and thus uses the
full number of firms. If a non-trivial number of ticket sellers are
outside the jurisdiction of the Commission and not subject to the
provisions of the rule, then the total costs to ticket sellers is
overestimated.
---------------------------------------------------------------------------
The 9,440 figure is potentially over-inclusive, as many firms
within NAICS code 561599 and 7113 do not directly sell tickets or
charge mandatory fees, and thus would not be impacted by the final
rule. The private research firm IBISWorld estimated that the number of
firms in the online live-event ticket selling industry was 3,326.\605\
The Commission's analysis uses the 3,326 figure as a low-end estimate
of the number of firms.
---------------------------------------------------------------------------
\605\ Ticket Sales Industry Report, supra note 581.
---------------------------------------------------------------------------
Next, the Commission's analysis estimates the number of hours a
firm would spend complying with the rule. As with assumptions regarding
the number of firms, the following estimation utilizes low-end and
high-end values for the number of hours necessary for compliance.
Because many ticket sellers operate in other countries that currently
have requirements similar to the final rule (Canada, Australia, the
United Kingdom, and the European Union member states), ticket sellers
already may have incorporated any changes required by the final rule to
their operating practices. The websites already may be programmed; the
lawyers already may be prepared to advise on compliance with the rule;
and the data scientists already may have determined the optimal pricing
strategy. Thus, sellers would have relatively low costs to transition
to all-in pricing in the U.S.\606\
---------------------------------------------------------------------------
\606\ FTC-2023-0064-3212 (TickPick, LLC commented: ``For the
most part, ticketing marketplaces would incur an immaterial cost to
implement all-in pricing. Internationally, major ticket marketplaces
are already required to comply with true all-in pricing in Canada
and the United Kingdom. The technology to display tickets inclusive
of fees in the form of a toggle is a widely available functionality.
Put differently, the technology already exists within ticketing
platforms to eliminate drip pricing and would simply need to be
applied to events in the U.S.'').
---------------------------------------------------------------------------
In this low-end cost scenario, because live-event ticket sellers
already are prepared to advertise total prices to consumers, the one-
time, upfront cost of determining optimal prices and updating the
purchase systems in terms of the number of required hours is
negligible. The Commission's analysis assumes five hours of lawyer time
to determine if the rule applies, forty hours of data scientist time to
re-optimize pricing strategy, and forty hours of web developer time to
edit and reprogram the website to display upfront prices. For the low-
end cost scenario, the analysis also assumes there are no annual costs
after the firm has incurred the one-time transition costs.
In the high-end cost scenario, the Commission's analysis assumes
that ticket sellers have not laid the groundwork to comply with the
rule. The high-end cost scenario assumes sellers require twice the
number of hours to determine optimal prices, re-program the website to
include total price, and review and confirm compliance. Thus, the one-
time costs include 10 hours of lawyer time, 80 hours of data scientist
time, and eighty hours of web developer time. For the high-end cost
estimate, the analysis assumes there are recurring annual costs of ten
hours of lawyer time per year to review and confirm compliance.\607\
---------------------------------------------------------------------------
\607\ FTC-2023-0064-3122 (Vivid Seats commented: ``We believe
that the FTC is underestimating the amount of employee time required
by at least a factor of five.''). The Commission notes that other
commenters stated the transition to upfront pricing for ticket
sellers would be as simple as a toggle switch and that most ticket
sellers already have the capability to provide Total Price due to
existing regulations in other countries. See, e.g., FTC-2023-0064-
3212 (TickPick, LLC); FTC-2023-0064-0132 (Individual Commenter who
purchased tickets from GameStop and StubHub noted that ``on all of
these sites the fees are not explained until the final page unless
you go find the toggle to include fees as you are looking for
tickets''); FTC-2023-0064-3207 (Consumer Reports noted a consumer
who commented: ``While I appreciate that TM [Ticketmaster] now has
the option to view all your fees up front as part of the price if
you toggle that option, its totally insane that fees can be 25% of
the cost at LEAST.''); FTC-2022-0069-6162 (ANPR) (Recording Academy
noted that ``StubHub allows the consumer to toggle `Show prices with
estimated fees' filter during the ticket search''). The Commission
did not receive any definitive data on the number of hours this
change would take and thus retains the low-end and high-end hours
estimates presented in the NPRM.
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iii. Live-Event Ticketing: Net Benefits
---------------------------------------------------------------------------
\608\ U.S. Census Bureau, 2021 SUSB Annual Datasets by
Establishment Industry, supra note 602. Hourly wages are from the
Bureau of Labor Statistics. See sources cited supra note 571,
including OEWS Data Scientists (providing the hourly wages for data
scientists); OEWS Web Developers (providing the hourly wages for web
developers); and OEWS Lawyers (providing the hourly wages for
lawyers).
---------------------------------------------------------------------------
In Table 9, the Commission's analysis presents net benefits using
the quantified benefits and costs discussed in section V.E.3.c.i and
V.E.3.c.ii. To calculate the low-end of the range for net benefits, the
analysis subtracts the total quantified costs using the high-end cost
assumptions from the total quantified benefits using the low-end
benefit assumptions. For the high-end of the range for net benefits,
the analysis subtracts the low-end estimate of total quantified costs
from the high-end estimate of total quantified benefits.
[[Page 2144]]
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Using various assumptions, the quantified benefits and costs imply
that the rule will have a positive net benefit, even without accounting
for the additional benefit of reducing deadweight loss.
iv. Live-Event Ticketing: Uncertainties
The Commission's ability to precisely estimate benefits and costs
is limited due to uncertainties in key parameters. The quantified
benefits and costs for the live-event ticketing industry rely on a set
of assumptions, based on the best available public information. When
the data are unclear, the analysis relies on assumptions that generate
a range of low-end and high-end estimates. In Table 10, the analysis
summarizes those key assumptions and their effect on the resulting
estimate of quantified benefits and costs.
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[[Page 2146]]
(d) Quantified Benefits and Costs: Short-Term Lodging Industry
Businesses in the short-term lodging industry, which include both
traditional hotels \609\ as well as home share options like Airbnb and
VRBO, often charge a variety of mandatory add-on fees. These fees are
typically either disclosed upfront but separately from the base price
(a practice known as partitioned pricing), or revealed just before
payment, after the consumer has clicked through multiple pages of a
listing (a practice known as drip pricing). Sometimes, these fees are
not disclosed at all or are disclosed only when a consumer checks out
at the conclusion of their stay. These fees may include mandatory
surcharges referred to by hotels as ``resort fees,'' ``amenity fees,''
or ``destination fees.'' Hotels often justify charging these fees as
necessary to cover the costs of amenities that are not reflected in the
base rate, such as Wi-Fi, pool and gym access, towels, parking, or
shuttle services. Home share websites like Airbnb and VRBO may include
mandatory fees such as ``cleaning fees,'' ``service fees,'' or ``host
fees.'' These fees are mandatory and do not depend on the consumer's
use of the amenities or services.
---------------------------------------------------------------------------
\609\ Throughout this section, we use ``hotel'' as an umbrella
term for hotels, motels, inns, short-term rentals, vacation rentals,
traditional bed and breakfasts, hostels, and other places of
lodging.
---------------------------------------------------------------------------
Consumer behavior studies have shown that both partitioned pricing
and drip pricing cause consumers to underestimate the full price of the
product, even when all components of the price are disclosed
upfront.\610\ As a result, disclosing mandatory surcharges separately
from the room rate without more prominently disclosing total price is
likely to harm consumers by increasing search costs and reducing
consumer surplus.\611\ These fees may reduce consumer surplus if
consumers respond by booking a room that is more expensive than the
room they would have chosen under upfront total pricing. Partitioned
pricing and drip pricing may also increase search costs if consumers
spend more time looking at additional listings in search of a cheaper
hotel.
---------------------------------------------------------------------------
\610\ Shelanski, supra note 550.
\611\ Mary Sullivan, Fed. Trade Comm'n, Economic Analysis of
Hotel Resort Fees 4 (2017), https://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf.
---------------------------------------------------------------------------
One industry group states that 6% of U.S. hotels charge mandatory
fees, which amounts to over $2.5 billion paid in resort fees annually
by U.S. consumers.\612\ This number underestimates how much U.S.
consumers pay in mandatory fees because it does not include fees from
finding accommodations on the home share market through websites like
Airbnb and VRBO, or fees incurred from booking at foreign hotels with
U.S.-facing websites. Resort fees in the U.S. average 3.9% of the per-
night cost of a room, and can exceed 20% of the per-night cost,
especially at lower cost hotels.\613\
---------------------------------------------------------------------------
\612\ FTC-2023-0064-3094 (American Hotel & Lodging Association);
Bjorn Hanson, U.S. Lodging Industry Fees and Surcharges Forecast to
Increase to a New Record Level in 2018--$2.93 Billion, and Another
Record Anticipated for 2019--the Newest Emerging Category is
``Resort Fees'' for Urban Luxury and Full Service Hotels (Aug. 27,
2018), https://bjornhansonhospitality.com/fees-%26-surcharges.
\613\ Sally French & Sam Kemmis, How to Avoid Hotel Resort Fees
(and Which Brands Are the Worst), NerdWallet (updated Aug. 1, 2024,
11:53 a.m. PDT), https://www.nerdwallet.com/article/travel/hotel-resort-fees.
---------------------------------------------------------------------------
This section analyzes the final rule's quantified benefits and
costs in the short-term lodging industry. Quantified benefits are
limited to the expected reductions in search costs to consumers. Since
there is an additional, unquantified benefit of reduced deadweight
loss, which is discussed conceptually in section V.E.2.a.ii, the net
benefit estimated in the following analysis is conservative. The
Commission finds that the quantified benefits and costs indicate that
the rule will have a positive net benefit, even without accounting for
the unquantified benefit of reducing deadweight loss.\614\
---------------------------------------------------------------------------
\614\ In this final short-term lodging net benefit analysis, the
Commission updates firm counts, wage rates, any inflation-adjusted
values, value of time, and 10-K hotel revenue information to reflect
the most recent available data. The Commission was unable to update
any numbers from IBISWorld Reports.
---------------------------------------------------------------------------
i. Short-Term Lodging: Estimated Benefits of the Final Rule
As a result of the final rule, the Commission expects that the time
consumers spend searching for short-term lodging will decrease because
prices will be easier to compare within and across websites. Some
consumers will reduce the number of short-term lodging listings they
view prior to booking or spend less time understanding and assessing
the full price.\615\ In its analysis, the Commission makes the
conservative and simpler assumption that the time spent viewing a
listing remains the same, and that consumers reduce the number of
listings they view. Table 11 quantifies the benefits of such time
savings and provides low- and high-end estimates to account for
uncertainty in the available statistics.
---------------------------------------------------------------------------
\615\ The drip pricing literature suggests that, because time to
view one listing is lower under upfront pricing, a subset of
consumers may view more listings rather than fewer because the cost
of viewing an additional listing has decreased. Sullivan, supra note
611. It is unclear how this affects total search time. If the higher
number of listings viewed is offset by the lower time it takes to
view each listing, the total search time will be lower under upfront
pricing for this subset of consumers. If total time increases, it
can be classified as ``good'' search time for this subset of
consumers because it results in consumers purchasing their preferred
hotel room. Alternatively, another group of consumers could view
fewer listings because upfront prices allow consumers to compare
rooms more easily and select their preferred hotel room more
quickly. Blake, supra note 521. The total search time for these
consumers will decrease. The Commission's analysis focuses on the
latter group of consumers because the change in their search time
represents a decrease in ``bad'' or unnecessary searches caused by
drip pricing.
---------------------------------------------------------------------------
The Commission's analysis focuses on the benefits that accrue to
consumers who book rooms from within the United States on any U.S.-
facing website, which can include bookings at both domestic and foreign
short-term lodgings. Short-term lodgings include both traditional
hotels as well as rooms booked through home share websites like Airbnb
and VRBO. In this section, the Commission outlines how it calculates
the benefits listed in Table 11 as well as the assumptions made. The
table reports a set of basic search statistics used in the calculation,
the savings per year for consumers who book at U.S. short-term
lodgings, the savings per year for consumers who book at foreign short-
term lodgings with U.S.-facing websites, and the combined total savings
for all U.S. consumers per year.
Although not all short-term lodgings charge resort fees, the lack
of a unified standard of upfront pricing across listings makes
comparing prices difficult and time consuming for consumers. Even a
single short-term lodging website can vary in whether listings have
hidden fees. Different hotel brands belonging to the same larger hotel
company may impose hidden fees for listings in some cities but not in
others. Some listings may note whether resort fees are included in the
base price, but in very fine print under the listed price. Some
listings may not say anything, requiring consumers to click through the
listing to learn whether there are hidden fees at the end of the
booking process. Given that a minimum of 6% of hotels \616\ impose drip
or partitioned pricing, and the average hotel shopper visits seventeen
travel websites before booking,\617\ consumers
[[Page 2147]]
are likely to encounter at least one website that imposes dripped or
partitioned pricing in their search for a hotel. Even if consumers
complete their whole search and booking process without visiting any
websites that impose hidden resort fees, the fact that there could be
hidden fees creates uncertainty and may cause consumers to click
through more listings than they otherwise would have to learn if the
initial price is truly the final price. Therefore, the Commission
quantifies the benefits for all U.S. consumers who book a room in a
given year, regardless of whether they interacted with a website that
imposed dripped or partitioned pricing.
---------------------------------------------------------------------------
\616\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
\617\ Chris Anderson & Saram Han, The Billboard Effect: Still
Alive and Well, 17 Cornell Hosp. Rpt. 1 (2017), https://hdl.handle.net/1813/70982. The Commission calculates the average
number of websites visited by summing the average number of OTAs,
Hotel Sites, TripAdvisor, and Other Meta websites visited sixty days
prior to reserving a room.
---------------------------------------------------------------------------
(a) Search Statistics
The Commission uses two different studies to calculate low- and
high-end estimates for the average number of minutes it takes to view
one listing. On the low end, the analysis uses statistics on Airbnb
user search behavior collected by Fradkin (2017) to calculate that
consumers spend 9.48 minutes to view one listing.\618\ On the high end,
the analysis uses a hotel search cost model developed by Chen and Yao
(2016) to calculate the average search cost per listing.\619\ Using
this average search cost, the Commission estimates that consumers spend
14.18 minutes viewing one listing. Appendix B in section V.E.7 contains
calculation details for both estimates. Using the estimates from each
study as low- and high-end estimates ensures that the analysis captures
user search behavior when shopping on home share websites like Airbnb
and when shopping for a traditional hotel.
---------------------------------------------------------------------------
\618\ Andrey Fradkin, Search, Matching, and the Role of Digital
Marketplace Design in Enabling Trade: Evidence from Airbnb (MIT
Initiative on the Digit. Econ., Working Paper, 2017), https://ide.mit.edu/wp-content/uploads/2017/07/SearchMatchingEfficiency.pdf.
\619\ Yuxin Chen & Song Yao, Sequential Search with Refinement:
Model and Application with Click-Stream Data, 63 Mgmt. Sci. 4345
(2016), https://doi.org/10.1287/mnsc.2016.2557.
---------------------------------------------------------------------------
To estimate the reduction in average listings viewed due to dripped
or partitioned pricing, the Commission's analysis uses results on the
average reduction in listings viewed under upfront pricing from an
experiment in the live-event ticket industry.\620\ That study found
that the average reduction in listings viewed under upfront pricing was
10.6% of the mean listings viewed under drip pricing. For the low-end
estimate, the analysis applies the same proportion to the mean listings
viewed by Airbnb users in Fradkin (2017) (2.367 listings, proxied by
number of contacts) and finds a reduction of 0.25 listings. On the high
end, the Commission applies this to the mean listings viewed by hotel
searchers in Chen and Yao (2016), 2.3 listings, and finds a reduction
of 0.24 listings.\621\
---------------------------------------------------------------------------
\620\ Blake, supra note 521.
\621\ Although the Commission is basing its estimate about
reduction in listings on data that comes from the ticketing
industry, this method results in the most conservative reduction of
viewed listings compared to other methods. The most relevant study
from the hotel search cost literature estimates that improvements in
hotel rankings (which may be loosely comparable to removing drip
pricing) reduces search costs by $11.50. See Raluca M. Ursu, The
Power of Rankings: Quantifying the Effect of Rankings on Online
Consumer Search and Purchase Decisions, 37 Mktg. Sci. 530 (2018),
https://doi.org/10.1287/mksc.2017.1072. Given the Commission's
estimates of the time to view one listing (between 9.48 and 14.18
minutes), this suggests an average reduction of between 2.95 and
1.95 listings viewed, which is implausible given that various papers
find the average number of listings viewed at baseline to be between
2 and 3. Thus, while some papers find substantially higher search
costs than the Commission's method, these findings reinforce that,
if anything, the benefits estimates presented here are likely
conservative.
---------------------------------------------------------------------------
Multiplying these numbers by the minutes to view one listing
results in 2.39 to 3.47 minutes saved per transaction. These are likely
conservative estimates, given that they assume consumers only view one
website before booking a room. As previously stated, one study
suggested that consumers visit an average of seventeen websites before
booking.\622\ The average reduction in listings viewed may also
underestimate benefits from eliminating dripped and partitioned pricing
because it is more difficult to adapt to the wide variability of fees
in the short-term lodging industry than it is in the live-event
ticketing industry, where listings have the same percentage fee. Short-
term lodgings have different fees, and the number of lodgings with such
fees will vary across markets.
---------------------------------------------------------------------------
\622\ See Anderson & Han, supra note 800. It is unclear whether
the relationship between websites viewed and time saved is linear,
as consumers may save less time on the fifteenth website they view
than they do on the first. As such, it is difficult to extrapolate
from the Commission's estimates to the total time saved for
consumers who view multiple websites. Therefore, to remain
conservative in its estimate of benefits, the Commission's analysis
assumes that consumers visit only one website.
---------------------------------------------------------------------------
Finally, as is described in detail in section V.E.3.b, the
Commission's analysis uses $25.81 as the value of one hour work time.
(b) U.S. Hotels and Home Shares
Next, the Commission calculates the total savings per year for U.S.
consumers who book at U.S. short-term lodgings, which includes both
U.S. hotels and home shares. The Commission's analysis finds the total
number of nights booked in the U.S. in 2022 by dividing the total
revenue the U.S. short-term lodgings industry earned from rooms by the
average daily rate (``ADR'').\623\ The ADR is the average revenue per
room-night booked in the U.S. The total number of nights booked in the
U.S. in 2022 that would potentially be affected by this rule is about
1.29 billion.
---------------------------------------------------------------------------
\623\ Revenue equals about $192.23 billion. Alexia Moreno
Zambrano, Hotels & Motels in the US, IBISWorld (Jan. 2023) (``Hotels
& Motels Industry Report''); Thi Le, Bed & Breakfast & Hostel
Accommodations in the US, IBISWorld (Jan. 2023) (``Bed & Breakfast
Industry Report''). The ADR is about $149. STR: U.S. hotel ADR and
RevPAR reached record highs in 2022, STR (Jan. 20, 2023), https://str.com/press-release/str-us-hotel-adr-and-revpar-reached-record-highs-2022.
---------------------------------------------------------------------------
Dividing the total number of nights booked by the average number of
nights per booking gives 715 million total bookings.\624\ About 91.8%,
or 657 million, of these bookings are made by U.S. consumers.\625\
Finally, the Commission calculates the total savings for U.S. consumers
per year by multiplying the number of bookings made by U.S. consumers
by the minutes saved per transaction and the value of time for
consumers. This results in total savings ranging from about $674
million to $980.3 million.
---------------------------------------------------------------------------
\624\ Consumers book on average 1.8 nights per booking. Jordan
Hollander, 75+ Hospitality Statistics You Should Know (2024), Hotel
Tech Report (updated July 9, 2024), https://hoteltechreport.com/news/hospitality-statistics.
\625\ How much do U.S. hotels depend on international guest
stays?, CBRE Econometric Advisors' Blog (Oct. 10, 2017), https://www.cbre-ea.com/public-home/deconstructing-cre/2017/10/10/how-much-do-u.s.-hotels-depend-on-international-guest-stays.
---------------------------------------------------------------------------
(c) Foreign Hotels and Home Shares with U.S.-Facing websites
To estimate the number of foreign short-term lodging bookings made
by U.S. consumers, the Commission uses the fact that 96% of all trips
taken by U.S. consumers are domestic.\626\ Multiplying the number of
bookings made by U.S. consumers by ((1-0.96)/0.96)) gives 27.4 million
foreign bookings. The total savings for this category ranges from about
$28.1 to $40.8 million.
---------------------------------------------------------------------------
\626\ Adrian, U.S. Travel & Tourism Statistics 2020-2021,
Tourism Academy Blog (Sep. 15, 2021 12:39:18 p.m.), https://blog.tourismacademy.org/us-tourism-travel-statistics-2020-2021.
---------------------------------------------------------------------------
(d) All Hotels and Home Shares
Together, U.S. and foreign bookings amount to about 683.9 million
bookings per year. This corresponds to between 27.2 and 39.6 million
hours saved by U.S. consumers per year, and between
[[Page 2148]]
$702.1 million and $1.02 billion total savings per year. Table 11
presents the expected benefits of time savings over the next ten years
in present value.
---------------------------------------------------------------------------
\627\ OEWS National, supra note 571; Hamermesh, supra note 533.
\628\ Hollander, supra note 624.
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[[Page 2149]]
(e) Additional Unquantified Benefits: Reductions in Deadweight Loss and
Abandoned Transactions
As is discussed in section V.E.2.a.ii, the final rule requiring
short-term lodgings to display total price of rooms will likely result
in a reduction of deadweight loss. When consumers are not provided
total price at the beginning of the booking process, sellers likely are
able to charge higher prices than under the final rule. The rule's
total price requirement may provide consumers with more complete
pricing information so that they can make informed decisions about
short-term lodging reservations, thus reducing deadweight loss. The
Commission does not quantify the reduction in deadweight loss but
acknowledges that it is a positive benefit to the final rule.
In some cases, once total price is provided, consumers may fully
abandon the transaction (i.e., not book any room). Since lodging cost
is only a part of overall trip cost, abandoning a transaction may be
less likely for short-term lodging than other industries. In that case,
the unquantified benefit is likely to be small. The Commission
solicited comment in the NPRM on the frequency of, and reasons for,
abandoned transactions in the short-term lodging industry to help
quantify this benefit, but did not receive adequate information in
response, so this benefit remains unquantified.
ii. Short-Term Lodging: Estimated Costs of the Final Rule
The Commission herein describes the final rule's potential costs to
the short-term lodging industry and, where possible, provides
quantitative estimates of those costs. The costs to hotels from the
final rule include a review of whether the rule applies and, in cases
of noncompliance with the final rule, one-time costs to come into
compliance and recurring annual costs to ensure ongoing compliance. The
cost of employee time is monetized using wages obtained from the Bureau
of Labor Statistics' National Industry-Specific Occupational Employment
and Wage Estimates.\629\ The Commission uses wages specific to the
Traveler Accommodation industry (associated with NAICS code 721100).
This industry includes traditional hotels and motels, casino hotels,
bed and breakfast inns, hostels, and home share platforms.\630\ The
Commission also quantifies the cost to individual home share hosts in
the form of a one-time cost to adjust prices on home share listings.
---------------------------------------------------------------------------
\629\ U.S. Bureau Lab. Stat., Occupational Employment and Wage
Statistics, May 2023 National Industry-Specific Occupational
Employment and Wage Estimates: NAICS 721100--Traveler Accommodation
(May 2023), https://www.bls.gov/oes/current/naics4_721100.htm
(``OEWS Traveler Accommodation'').
\630\ NAICS code 721100 does not capture intermediary travel
websites, which display pricing information and offer booking
options for various short-term lodging firms. Because these
intermediaries constantly update pricing information obtained
directly from short-term lodging firms (see, e.g., FTC-2023-0064-
3293, Travel Technology Association), and do not need to reoptimize
prices or drastically change displays themselves, the Commission
believes that intermediary firms will not face additional compliance
costs from the rule.
---------------------------------------------------------------------------
Table 12 outlines the estimated costs of the final rule. Panel A
shows the costs for U.S. hotels and home share hosts; Panel B shows the
costs for foreign hotels and home share hosts who post listings on
U.S.-facing websites; \631\ and Panel C shows the total combined costs
for both groups.
---------------------------------------------------------------------------
\631\ The Commission's analysis includes costs to foreign hotels
with U.S.-facing websites because complying with the rule may cause
them to pass through some costs to U.S. hotel shoppers. The
Commission is unable to quantify what percentage of costs will be
passed through; to be conservative, the analysis includes all costs
to foreign hotels and home share hosts.
---------------------------------------------------------------------------
(a) Panel A: U.S. Hotels and Home Share Hosts
There are 49,216 U.S. hotels associated with the ``Traveler
Accommodation'' NAICS code. Of these firms, 6% impose resort fees,
bringing the high-end number of U.S. firms affected to 2,953. The low-
end number of firms affected is 2,948 after removing Marriott
International, Inc., Omni Hotels Management Corporation, Choice Hotels
International, Inc., Hilton Worldwide Inc., and Hyatt Hotels
Corporation to account for the possibility that these hotels will
eliminate dripped and partitioned pricing from their websites
regardless of this rule to comply with any existing or forthcoming
settlements with various State Attorneys General.\632\
---------------------------------------------------------------------------
\632\ In 2021, Marriott agreed to a settlement with the
Commonwealth of Pennsylvania, Office of the Attorney General, in
which Marriott agreed to include mandatory resort fees in the base
rate of its hotel rooms on the first page of the booking process.
Assurance of Voluntary Compliance, Commonwealth v. Marriott Int'l,
Inc., No. GD-21-014016 (Pa. Ct. C.P. Nov. 16, 2021). In 2023 and
2024, Marriott entered into similar settlements with the Offices of
the Attorney General in both the State of Nebraska and the State of
Texas. Assurance of Voluntary Compliance, Texas v. Marriott Int'l,
Inc., No. 2023-CI09717 (Tex. Dist. Ct. May 16, 2023); Order
Approving Assurance of Voluntary Compliance, Nebraska v. Marriott
Int'l, Inc., No. CI 23-3860 (Neb. Dist. Ct. Jan. 18, 2024). In 2023,
Omni and Choice Hotels both agreed to similar multi-state
settlements with the Offices of the Attorney General in the State of
Colorado, the Commonwealth of Pennsylvania, and the State of
Nebraska. See, e.g., Assurance of Discontinuance, In re Choice
Hotels Int'l Inc. Resort Fees (Colo. Sept. 21, 2023); Assurance of
Discontinuance, In re Omni Hotels Mgmt. Corp. Resort Fees (Colo. Nov
9, 2023); Assurance of Voluntary Compliance, Commonwealth v. Omni
Hotels Mgmt., GD-23-013056 (Pa. Commw. Ct. Nov. 9, 2023); Assurance
of Voluntary Compliance, Commonwealth v. Choice Hotels Intl., Inc.,
GD-23-011023 (Pa. Commw. Ct. Sept. 21, 2023); Order Approving
Assurance of Voluntary Compliance, Nebraska v. Choice Hotels Int'l,
Inc., No. CI 23-3269 (Neb. Dist. Ct. Sept. 27, 2023); Order
Approving Assurance of Voluntary Compliance, Nebraska v. Omni Hotels
Mgmt. Corp., No. CI 23-3641 (Neb. Dist. Ct. Oct. 27, 2023). Choice
Hotels agreed to an additional settlement with the Oregon Department
of Justice. Assurance of Voluntary Compliance, In re Choice Hotels,
Int'l, Inc., No. 23-CV-39128 (Or. Cir. Ct. Sept. 21, 2023). In 2024,
Hilton Hotels agreed to a settlement with the State of Nebraska,
Office of the Attorney General. Final Consent Judgment, Nebraska v.
Hilton Dopco, Inc., No. CI 19-2366 (Neb. Dist. Ct. Jan. 29, 2024).
Finally, Hyatt Hotels faces an ongoing lawsuit filed in 2023 by the
State of Texas, Office of the Attorney General, which seeks to
require Hyatt to display full prices in the initial advertised price
of any hotel room. Plaintiff's Original Pet., Texas v. Hyatt Hotels
Corp., No. C2023-0884D (Tex. Dist. Ct. May 15, 2023).
---------------------------------------------------------------------------
Next, the Commission's analysis estimates the number of hours a
U.S. hotel would spend complying with the final rule. The analysis
assumes all hotels that do not impose dripped or partitioned pricing
will spend one hour of lawyer time determining if the final rule
requires any changes to their advertising. Hotels that are not
presently compliant with the rule will incur additional costs to come
into compliance. In the low-end estimate, the analysis assumes that,
because many hotels have websites facing other countries that already
have similar requirements to the final rule (e.g., Canada, Australia,
and the European Union member states), hotels already may have the
experience and infrastructure required to incorporate the necessary
changes to their operating practices. In this scenario, hotels have
relatively low costs to transition to all-in pricing for their U.S.-
facing websites. The analysis assumes five hours of lawyer time to
determine how the final rule applies to the firm, forty hours of data
scientist time to re-optimize the pricing strategy, and forty hours of
web developer time to edit the website to display total prices and make
other requisite disclosures.
In addition to hotels, the final rule also would affect individuals
who participate in the home share market by listing their properties
for short-term rentals on websites like Airbnb and VRBO. The
Commission's analysis estimates the total number of home share hosts in
the U.S. by starting with the number of Airbnb hosts in the U.S. who
post home share listings (not including larger bed and breakfast or
hostel establishments) and extrapolating to the full U.S. market using
Airbnb's
[[Page 2150]]
U.S. market share.\633\ On the low-end, the analysis assumes that each
host will take one hour to reprice each listing. Hosts have, on
average, 1.18 listings, resulting in 1.18 hours of time per host.\634\
The value of time comes from the same source as in Table 11.
---------------------------------------------------------------------------
\633\ See Clark Shultz, Airbnb increases market share in latest
read from M Science, Seeking Alpha (June 6, 2022 1:32 p.m. ET),
https://seekingalpha.com/news/3846023-airbnb-increases-market-share-in-latest-read-from-m-science (providing Airbnb's market share);
Thibault Masson, Airbnb Host Data: Who are Airbnb hosts? Why are
individual hosts more important than professional ones?, Rental
Scale-Up (updated Dec. 19, 2020), https://www.rentalscaleup.com/airbnb-host-data-who-are-airbnb-hosts-why-are-individual-hosts-more-important-than-professional-ones/ (providing the statistics used to
estimate the number of Airbnb home share hosts in the U.S.). The
estimated total number of home share hosts in the U.S. is 675,603,
which is calculated as 504,000/.746, where 504,000 is the number of
Airbnb home share hosts in the U.S. and .746 is Airbnb's U.S. market
share. The number of Airbnb home share hosts is calculated as
560,000 * .9 = 504,000, where 560,000 is the number of Airbnb hosts
in the U.S., and 90% of these hosts are individual hosts (people who
rent individual rooms or entire primary homes rather than
traditional bed and breakfasts or hostels; traditional bed and
breakfasts or hostels are already captured in the hotel firms
defined by Traveler Accommodation NAICS code 721100).
\634\ The average number of listings per host is calculated from
the total number of U.S. listings and the total number of U.S.
hosts. Steve Deane, 2022 Airbnb Statistics: Usage, Demographics, and
Revenue Growth, Stratos Jet Charters, Inc. Blog (Jan. 4, 2022),
https://www.stratosjets.com/blog/airbnb-statistics/ [https://web.archive.org/web/20220219093345/https://www.stratosjets.com/blog/airbnb-statistics/] (providing the total number of U.S. listings);
Masson, supra note 633 (providing the total number of U.S. hosts).
---------------------------------------------------------------------------
In the high-end cost scenario, the Commission's analysis assumes
that hotels have not laid the groundwork for upfront pricing. The
analysis assumes under this scenario that hotels require twice the
number of hours to determine optimal prices, re-program the website to
include total price, and review and confirm compliance. Thus, the one-
time costs for hotels include ten hours of lawyer time, eighty hours of
data scientist time, and eighty hours of web developer time. The
analysis further assumes home share hosts spend three hours repricing
each listing, resulting in 3.5 hours per host.
In addition to the one-time costs, the Commission's analysis also
assumes hotels incur annual costs of between zero to ten hours of
lawyer time per year to review and confirm compliance with the final
rule.\635\ The total costs, which include both the one-time fixed cost
and the annual costs for the next ten years in present value, range
from $35.9 million to $107.8 million using a 7% discount rate, and from
$35.9 million to $112 million using a 3% discount rate. The Commission
also finds that the per firm annualized cost to U.S. hotels that are
not presently compliant with the rule ranges from $527 to $2,011 using
a 7% discount rate, and from $434 to $1,825 using a 3% discount rate.
Home share hosts in the U.S. incur an average one-time cost between
$30.42 to $91.27.
---------------------------------------------------------------------------
\635\ Since home share hosts are not operating large,
sophisticated firms and will likely not spend additional time
ensuring compliance beyond year one, the analysis assumes home share
hosts do not incur annual costs due to the rule.
---------------------------------------------------------------------------
All ranges of lawyer, data scientist, web developer, and home share
host time used in the analysis serve as proxies for any costs
associated with reviewing and ensuring compliance, adjusting pricing
strategies, ensuring consumers are presented with total price, and re-
evaluating home share listings, respectively, in response to the final
rule.
(b) Panel B: Foreign Hotels and Home Share Hosts
The Commission acknowledges that non-U.S. firms and home share
hosts with U.S.-facing websites may bear compliance costs from the
final rule that may be passed on to consumers. Therefore, the
Commission estimates these costs using the best available data.
Estimating costs for foreign hotels and home share hosts using the same
method in Panel A would be difficult because there are no reliable
estimates for the number of foreign hotels and home share hosts or for
the relevant international wage rate for lawyers, data scientists, and
web developers. The Commission's analysis instead estimates foreign
costs by extrapolating from the estimated U.S. costs in Panel A. Since
the U.S. hotel industry's global market share is about 14.5%,\636\ the
one-time and annual costs for foreign hotels each can be calculated by
multiplying the one-time and annual costs for U.S. hotels by (1-0.145)/
0.145. This method captures the cost of all foreign hotels, including
ones that will not be subject to the final rule because they do not
have U.S.-facing advertising. Therefore, the costs to foreign hotels
may be overestimated.
---------------------------------------------------------------------------
\636\ The U.S. hotel industry's global market share in 2022 is
calculated by adding the revenues reported in the IBISWorld Reports
for ``Hotels and Motels in the US,'' ``Casino Hotels in the US,''
and ``Bed and Breakfast and Hostel Accommodations in the US,'' and
dividing it by the global revenue found in IBISWorld Global Hotels &
Resorts Industry Report. Hotels & Motels Industry Report, supra note
623; Bed & Breakfast Industry Report, supra note 623; Demetrios
Berdousis, Casino Hotels in the US, IBISWorld (Jan. 2023).
---------------------------------------------------------------------------
The Commission's analysis uses the percentage of Airbnb's U.S.
revenue (43%) \637\ as a proxy for the U.S. home share market's global
market share. Using this proxy, the analysis estimates the one-time
cost for foreign home share hosts to be equal to the total one-time
cost for U.S. home share hosts multiplied by (1-0.43)/0.43. The total
one-time and annual foreign hotel and home-share costs for the next ten
years in present value range from $117.4 million to $352.8 million
using a 7% discount rate, and from $117.4 million to $377.9 million
using a 3% discount rate. The Commission is unable to provide the per
firm annualized cost for foreign hotels and non-U.S. home share hosts
because the number of foreign hotels and home share hosts is not known.
---------------------------------------------------------------------------
\637\ Airbnb, Inc., Annual Report (Form 10-K) (Feb. 16, 2024)
(``Airbnb 10-K''), https://investors.airbnb.com/financials/sec-filings/sec-filings-details/default.aspx?FilingId=17283799.
---------------------------------------------------------------------------
(c) Panel C: All Hotels and Home Share Hosts (US + Foreign)
The total cost for all affected hotels and home share hosts over
ten years in present value is estimated to be from $153.3 million to
$460.6 million using a 7% discount rate and from $153.3 million to
$489.9 million using a 3% discount rate.
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BILLING CODE 6750-01-C
iii. Short-Term Lodging: Net Benefits
---------------------------------------------------------------------------
\638\ U.S. Census Bureau, 2021 SUSB Annual Datasets by
Establishment Industry, supra note 602.
\639\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
\640\ OEWS Traveler Accommodation, supra note 629.
\641\ See OEWS National, supra note 571 (providing the mean
hourly wage); Hamermesh, supra note 533 (providing the value of
time).
\642\ See infra section V.E.3.d.ii.b (describing the
calculations).
\643\ Airbnb 10-K, supra note 637.
---------------------------------------------------------------------------
Table 13 presents the net benefits of the final rule in the short-
term lodging industry using the quantified benefits and costs discussed
in section V.E.3.d.i and V.E.3.d.ii. To calculate the low-end of the
range for net benefits, the Commission's analysis subtracts the total
costs using the high-end cost assumptions from the total benefits using
the low-end benefit assumptions. For the high-end of the range for net
benefits, the analysis subtracts the total costs using the low-end cost
assumptions from the total benefits using the high-end benefit
assumptions.
[[Page 2153]]
The quantified benefits and costs imply that the final rule will
have a positive net benefit, even without accounting for the
unquantified benefit of reducing deadweight loss.
[GRAPHIC] [TIFF OMITTED] TR10JA25.062
iv. Short-Term Lodging: Uncertainties
The Commission's ability to precisely estimate benefits and costs
is limited due to uncertainties in key parameters. The quantified
benefits and costs for the short-term lodging industry rely on a set of
assumptions based on the best available public information. When the
data are unclear, the analysis uses sets of assumptions that would
generate a range of low- and high-end estimates. Table 14 summarizes
the key assumptions and how they may affect the resulting estimate of
quantified benefits and costs. When possible, the analysis
underestimates benefits and overestimates costs in order to
conservatively estimate net benefits.
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[[Page 2155]]
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BILLING CODE 6750-01-C
4. Economic Evaluation of Alternatives
As an alternative to the rule, the Commission considered not
pursuing rulemaking and instead relying on its existing tools of
enforcement actions and consumer education. This approach is equivalent
to a no-action baseline and would result in no incremental benefits or
costs. The prevalence of drip pricing and hidden mandatory fees would
persist.
The Commission also alternatively considered, as discussed in the
Preliminary Regulatory Analysis, promulgating an industry-neutral
version of the rule. The Commission was unable to quantify economy-wide
benefits and provided a break-even analysis using quantified compliance
costs for the entire economy.\644\ The economy-wide break-even analysis
implied there would be positive net benefits to the rule if the benefit
per consumer was at least $6.65 per consumer per year over a ten-year
period assuming a 7% discount rate or at least $5.95 assuming a 3%
discount rate. The Commission estimated that per firm annualized costs
for an economy-wide rule would be between $691 and $2,010 assuming a 7%
discount rate and between $569 and $1,803 assuming a 3% discount rate.
---------------------------------------------------------------------------
\644\ The break-even analysis provided in the Preliminary
Regulatory Analysis utilized the same set of assumptions regarding
the high-end and low-end numbers of hours required for firms to
comply with the proposed economy-wide rule. The preliminary break-
even analysis also made a set of assumptions about what proportion
of the economy currently complied with the provisions of the
proposed rule.
---------------------------------------------------------------------------
The Commission sets forth additional alternatives to the final rule
that it considered in section V.B but does not have sufficient data to
prepare a quantitative analysis of those alternatives.
5. Summary of Results
The Commission's final regulatory analysis catalogs and, where
possible, quantifies the incremental benefits and costs of the final
rule for the live-event ticketing and short-term lodging industries.
The Commission estimates that the quantified benefits of the rule will
exceed its quantified costs, and the Commission believes that the total
benefits of the rule (quantified and unquantified) will outweigh the
total costs (quantified and unquantified). The Commission estimates
that the benefits of the final rule over the next ten years accruing
solely from reduced consumer
[[Page 2156]]
search costs in the live-event ticketing industry range from $184
million to $2.46 billion under an assumed 7% discount rate, and $224
million to $2.99 billion using an assumed 3% discount rate. The
Commission estimates compliance costs for live-event ticketing firms
over the ten-year period to be between $15 million and $142 million
using a 7% discount rate, and between $15 million and $154 million
using a 3% discount rate.
For the short-term lodging industry, the Commission estimates ten-
year benefits to consumers from reduced search costs to range from
$4.93 billion to $7.17 billion using a 7% discount rate, and between
$5.99 billion and $8.71 billion using a 3% discount rate. The
Commission estimates compliance costs for short-term lodging firms for
the ten-year period to be between $153 million and $461 million using a
7% discount rate and between $153 million and $490 million using a 3%
discount rate.
The Commission also provides a break-even analysis using quantified
compliance costs that are aggregated for the live-event ticketing and
short-term lodging industries. The break-even analysis demonstrates
that there are positive net benefits to the rule if the benefit per
consumer is at least $0.33 per consumer per year over a ten-year period
using a 7% discount rate. The break-even analysis does not account for
costs from unintended consequences of the rule or the potential
benefits from reducing deadweight loss by providing consumers with full
information.
6. Appendix A: Model of Market Distortion Caused by Drip Pricing
Measuring the deadweight loss, the surplus transfer from consumers
to firms, and the shift in quantity demanded requires a quantification
of consumers' aggregate level of awareness. Academic research provides
a model that relates consumers' partial awareness to the resulting
shift in aggregate demand.\645\ Specifically, the model assumes, based
on empirical evidence, the elasticity of demand with respect to the fee
equals the elasticity of demand with respect to the base price scaled
by a factor of [thetas], where 0 < [thetas] < 1. This factor, [thetas],
serves as a measure of consumers' awareness of the fee. When consumers
are fully aware of the fee, [thetas] = 1; when consumers are completely
unaware, [thetas] = 0. As a working example, if demand is given by the
equation Q(Pbase,t) = a + bPbase + ct, where a,
b, and c are constants, the previous assumption implies that c =
[thetas]b. At [thetas] = 1, shrouding the fee has no effect, and the
demand function simplifies to Q(Ptotal, t) = a +
bPtotal. At [thetas] = 0, shrouding the fee leaves consumers
completely unaware of it, and demand is solely a function of the base
price: Q(Pbase, t) = a + bPbase. Assuming 0 <
[thetas] < 1, instead, one may note that, for any given change in the
base price and the corresponding change to the quantity demanded, a
larger change in the fee would be needed to effect the same change in
quantity, reflecting consumers' partial awareness of, and decreased
sensitivity to, the fee.
---------------------------------------------------------------------------
\645\ Chetty, supra note 555.
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[[Page 2158]]
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BILLING CODE 6750-01-C
Figure 4 illustrates how consumers' partial awareness of fees
impacts the effect of shrouded pricing on consumer and producer
surplus. The intersection of Dpartial with S, illustrated by
point R, at quantity Qpartial and price
Ptotal,partial, represents the outcome when consumers are
partially aware of the fee. In this figure,
Dfee,Pbase,partial (not shown) would go through point U
(equivalent to point A in Figure 3) and point R (equivalent to point B
in Figure 3). For comparison, in the case of complete unawareness
([thetas] = 0), Dfee,Pbase,unaware (not shown) would go
vertically through point K (equivalent to point A in Figure 3) and
point J (equivalent to point B in Figure 3). As illustrated in Figure
4, the more consumers are aware of the fee, i.e., the larger the
[thetas], the smaller the market clearing full price and, hence, the
base price, must be. As an additional example, when consumers are fully
aware of the fee ([thetas] = 1), the market clearing full price under
shrouded pricing equals the market clearing price under upfront
pricing, Pupfront, and the base price,
Pbase,aware (not shown), is lower than
Pbase,partial.
Consumer surplus is now equal to the area of triangle CMN minus the
area of triangle NRT. Producer surplus is now equal to the area of
triangle EMR. The deceptive shrouding of the price leads to a transfer
of surplus from consumers to firms equal to the area of trapezoid ABMR
as well as an additional decrease in consumer surplus not captured by
firms, the deadweight loss, equal to the area of triangle ART. The
surplus transfer from consumers to firms and the deadweight loss are
both smaller in this case of partial awareness relative to the case
where consumers are completely unaware of the fee. That is, the harm
caused by the firms' deception is mitigated by the extent to which
consumers are aware of and account for the fee.
[[Page 2159]]
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7. Appendix B: Short-Term Lodging Industry Minutes per Listing
Calculations
(a) Low-End Estimate of Minutes per Listing Calculation
The Commission's analysis uses the Airbnb user search statistics
reported in Fradkin (2017) \646\ to obtain a low-end time estimate to
view one listing after clicking on it. The paper provides data on a
random sample of users who searched for short-term rentals on Airbnb in
a large U.S. city. It reports search behavior separately for all
searchers and for searchers who contacted the host, either to inquire
about a listing or to book it. The analysis uses those numbers to
calculate search behavior for the group of searchers who did not send a
contact. The relevant statistics for these three groups are summarized
in Table B.1.
---------------------------------------------------------------------------
\646\ Andrey Fradkin, Search, Matching, and the Role of Digital
Marketplace Design in Enabling Trade: Evidence from Airbnb, (MIT
Initiative on the Digit. Econ., Working Paper, 2017), https://ide.mit.edu/wp-content/uploads/2017/07/SearchMatchingEfficiency.pdf.
---------------------------------------------------------------------------
``Average unique listings seen'' includes all listings users see on
a search result page, including listings users do not click on.
``Average time spent browsing'' includes entering search parameters,
scrolling through results, and viewing listings after clicking on them.
``Average number of contacts'' is the average number of times searchers
contacted a host for a listing. Since contacting the host requires
users to click on the listing, the analysis uses this as a proxy for
number of clicked-on listings.
[GRAPHIC] [TIFF OMITTED] TR10JA25.065
From the third column, we calculate:
Time to view each listing without clicks = Average time spent browsing/
Average unique listings seen = 23.253/57.61 = .40 minutes per listing.
Because the average time spent browsing for the group in column (2)
is inclusive of the amount of time spent sending contacts, not just
viewing listings that were not contacted, we use the preceding value
calculated from the group in column (3) to estimate the
[[Page 2160]]
following that applies to searchers in column 2:
Time spent viewing listings without clicks = Time to view each listing
without clicks * Average unique listings seen = .40 * 87.812 = 35.44
minutes
and
Average total time viewing listings after clicking = Average time spent
browsing-Time spent viewing listings without clicks = 57.874-35.44 =
22.43 minutes.
Finally, we calculate time to view one listing:
Time per listing = Average total time viewing listings after clicking/
Average number of contacts = 22.43/2.367 = 9.48 minutes per
listing.\647\
---------------------------------------------------------------------------
\647\ The numerator of ``Time per listing'' is an underestimate
because ``Time spent browsing without clicks'' may capture some time
spent viewing clicked-on listings that did not result in a contact.
The denominator of ``Time per listing'' is also an underestimate
because the number of listings clicked on is proxied using the
number of listings users inquire about or book. Users may click on
more listings than just the ones they want to inquire about or book.
The two values are related. If the true denominator is higher than
estimated, then the true numerator also will be higher. Higher
listing clicks beyond those that resulted in a contact means more
time spent viewing clicked-on listings that did not result in a
contact. The ratio should remain about the same.
---------------------------------------------------------------------------
(b) High-End Estimate of Minutes per Listing Calculation
The Commission's analysis uses the hotel search cost model
developed by Chen and Yao (2016) \648\ to calculate a high-end estimate
of minutes to view one listing. The paper uses data from consumer
search behavior when booking hotels in four major international cities
on an anonymous major U.S. online travel website.
---------------------------------------------------------------------------
\648\ Yuxin Chen & Song Yao, Sequential Search with Refinement:
Model and Application with Click-Stream Data, 63 Mgmt. Sci. 4345
(2016), https://doi.org/10.1287/mnsc.2016.2557.
---------------------------------------------------------------------------
A search is defined as a listing click-through, and the search cost
for a listing is specified as:
Cij = Ci (TimeConstrainti, Slotj) = exp([gamma]i0 +
[gamma]i1TimeConstrainti + [gamma]i2Slotj) =
exp(3.07 - .05 * TimeConstrainti + .01 * Slotj)
where TimeConstrainti is the number of days between consumer i's search
and her check-in. Slotj is the slot position of the j-th search. The
exponential operator ensures that the costs are positive. The gammas
are mean levels of cost coefficients.
Using this formula, the analysis can find that the mean search cost
per listing when 30 days in advance (the sample average) is exp(3.07 -
(.05*30)) = $4.81 per listing. The inflation adjusted value is $6.10.
The resulting total search cost is then $6.10 per listing * 2.3
searches on average = $14.04. This total cost can be conceptualized as
the number of minutes of viewing listings multiplied by the consumer's
value of time. Using $25.81 per hour as the value of time, the time
spent viewing listings is ($14.04/$25.81 per hour) * 60 minutes per
hour = 32.62 minutes.
The minutes to view one listing is then calculated as 32.62
minutes/2.3 searches = 14.18 minutes per listing.
VI. Paperwork Reduction Act
The Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501-3520,
requires Federal agencies to seek and obtain OMB approval before
collecting information directed to ten or more persons. The term
``collection of information,'' as used in the PRA, includes any
requirement or request for persons to obtain, maintain, retain, report,
or publicly disclose information.\649\ The PRA analysis requires an
estimate of the burden associated with a collection of
information.\650\
---------------------------------------------------------------------------
\649\ 44 U.S.C. 3502(3); 5 CFR 1320.3(c).
\650\ 5 CFR 1320.8(a)(4).
---------------------------------------------------------------------------
Upon publication of the NPRM, the Commission submitted an
associated clearance request with a Supporting Statement to OMB for
review under the PRA. In response, OMB filed a comment on December 11,
2023 (OMB Control No. 3084-0176), requesting that the Commission
resubmit the clearance request upon the finalization of the proposed
rule.\651\ Accordingly, simultaneously with the publication of this
final rule, the Commission is resubmitting its clearance request and a
Supplemental Supporting Statement to OMB for review under the PRA. For
the reasons discussed below, the Commission has made adjustments to its
initial burden analysis. The Commission's updated burden analysis
follows.
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\651\ See Office of Info. and Regul. Aff., Office of Mgmt. and
Budget, OMB Control Number History for OMB Control Number 3084-0176,
https://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3084-0176#.
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A. Disclosures Related to Final Sec. 464.2(a) Through (c)
Final Sec. 464.2(a) through (c) provide clarity as to how
businesses should disclose total price, optional exclusions from total
price, and the final amount of payment. This information is readily
available to businesses, and many businesses already disclose this
information in the course of their regular business activities.
However, the Commission is aware that in some instances the
requirements in final Sec. 464.2(a) through (c) may require some
businesses to display readily available information more clearly. OMB
guidance is unclear regarding whether, and to what extent, requiring
displays of information to be clearer amounts to a collection of
information. The Commission is of the view that the rule's requirements
regarding disclosure of total price, exclusions from total price and
the final amount of payment are unlikely to qualify as collections of
information. Nevertheless, the Commission includes this analysis out of
an abundance of caution and not because it concedes that such standard
pricing disclosures constitute collections of information.
Final Sec. 464.2(a) provides it is an unfair and deceptive
practice for a business to offer, display, or advertise any price of a
covered good or service without clearly and conspicuously disclosing
total price, which is defined in final Sec. 464.1 to permit the
exclusion of government charges, shipping charges, and fees or charges
for any optional ancillary good or service. While businesses may
exclude these charges from total price in offers, displays, and
advertisements, final Sec. 464.2(c) provides that, before a consumer
consents to pay for any covered good or service, a business must
disclose clearly and conspicuously: The nature, purpose, and amount of
any fee or charge imposed on the transaction that has been excluded
from total price and the identity of the good or service for which the
fee or charge is imposed; and the final amount of payment for the
transaction. Final Sec. 464.2(b) relatedly provides that in any offer,
display, or advertisement that represents any price of a covered good
or service, total price must be disclosed more prominently than any
other pricing information; however, where the final amount of payment
for the transaction is displayed, it must be more prominent than, or as
prominent as, total price. As discussed in section III, the Commission
is not finalizing the proposed affirmative refundability disclosure
requirement.
As part of the NPRM, the Commission assumed that, except for the
proposed affirmative refundability disclosure requirement, the
Commission's proposal was limited to disclosure activities that
businesses already perform in the course of their regular business
activities. However, following its review
[[Page 2161]]
of the comments,\652\ the Commission determines that, although many
businesses already make the disclosures required by final Sec.
464.2(a) through (c) in the usual course of their regular business
activities, it is possible that some businesses in the live-event
ticketing and short-term lodging industries may nonetheless incur
incremental labor costs in ensuring that their disclosure activities
are fully aligned with the requirements that are set forth in final
Sec. 464.2(a) through (c). As a result, out of an abundance of
caution, the Commission updates its burden analysis in recognition of
these comments. As described in section VI.A.5, however, the estimated
costs may be overestimated.
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\652\ See, e.g., FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP
argued that businesses would need to hire, among other
professionals, web designers or software engineers ``to rebuild
entire websites.'' In addition, it argued that the Preliminary
Regulatory Analysis did not account for costs needed to replace
physical ads, subway ads, and billboards and speculated that would
take ``thousands of hours.''); FTC-2023-0064-2856 (National Football
League called on the Commission to reexamine the estimated
compliance costs because it did not adequately take into account
``the additional legal, developer, and data personnel time that
would be required from live-event industry participants--and
especially industry participants dealing in large volumes of live-
event ticket sales in complying with a final rule.''); FTC-2023-
0064-3122 (Vivid Seats commented: ``We believe that the FTC is
underestimating the amount of employee time required by at least a
factor of five.'').
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1. Number of Respondents
The Commission estimates that there are 12,393 entities that may
incur additional incremental labor costs to refine their disclosure
activities so that they are fully compliant with final Sec. 464.2.
This estimate of 12,393 entities takes the high-end estimate of the
number of firms in the United States in the live-event ticketing
industry (9,440 firms) and the number of firms in the United States in
the short-term lodging industry (2,953) that will incur additional
compliance costs related to disclosure activities.
2. Estimated One-Time Hour Burden
In section V.E.3, the Commission estimates the cost of adjusting
the presentation of advertised prices and the purchase process for
online sales. The final regulatory analysis in section V assumes live-
event ticketing and short-term lodging firms not presently compliant
with the final rule will employ a low end of forty hours and a high end
of eighty hours of web developer time to become compliant with the
final rule. For purposes of this PRA analysis, the Commission uses the
midpoint of the range of web developer hours presented in section
V.E.3; that is, the Commission assumes sixty hours of web developer
time will be necessary to adjust advertised prices and purchase
processes to comply with final Sec. 464.2's disclosure
requirements.\653\ Once firms adjust advertised prices and purchase
process displays to be compliant with the final rule, any future
changes to pricing displays or purchasing systems are part of the
regular course of business and are not a direct consequence of the
rule. The Commission finds that any ongoing additional costs associated
with these activities are de minimis. Thus, the Commission estimates
the total web developer hours to adjust price displays and purchase
processes is 743,580 hours (12,393 firms x 60 web developer hours per
firm).
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\653\ Brick-and-mortar firms that do not currently comply with
the rule would update the price presentation and purchase process by
printing new price displays, revising advertising campaigns, adding
required disclosures, and potentially updating websites. The
Commission uses web developer hours as a proxy for any costs
associated with updating the price presentation and purchase process
to become compliant with the final rule.
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3. Estimated One-Time Labor Costs
The estimated one-time labor cost that live-event ticketing and
short-term lodging firms may incur to comply with final Sec. 464.2's
disclosure requirements is $32,990,931. This total is calculated by
summing the labor costs for the live-event ticketing and short-term
lodging industries. The labor cost for the live-event ticketing
industry is calculated by applying the hourly wage for web developer
time in the live-event ticketing industry of $45.95 to the estimate of
60 hours of web developer time multiplied by the number of U.S. firms
in the live-event ticketing industry that incur additional compliance
costs ($45.95/hour x 60 hours per firm x 9,440 firms) resulting in
$26,026,080.\654\ The labor cost for the short-term lodging industry is
calculated by applying the hourly wage for web developer time in the
short-term lodging industry of $39.31 to the estimate of sixty hours of
web developer time multiplied by the number of U.S. firms in the short-
term lodging industry that incur additional compliance costs ($39.31/
hour x 60 hours per firm x 2,953 firms) resulting in $6,964,851.\655\
The total for the two industries is $32,990,931 ($26,026,080 +
$6,964,851).
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\654\ The estimated mean hourly wages for a web developer are
$45.95. OEWS Web Developers, supra note 571.
\655\ The estimated mean hourly wages for a web developer are
$39.31 in the short-term lodging industry. OEWS Web Developers,
supra note 571.
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4. Estimated One-Time Non-Labor Costs
The capital and start-up costs associated with the final rule's
disclosure are de minimis. Any disclosure capital costs involved with
the final rule, such as equipment and office supplies, would be costs
borne by businesses in the normal course of business.
5. Projected Labor Costs Likely Overestimated
In preparing its burden estimate for compliance with final Sec.
464.2(a) through (c), the Commission considered comments noting that
some businesses may incur incremental labor costs to come into
compliance with the rule, though commenters did not submit specific
data for the Commission to evaluate this contention. As a result, the
Commission's updated burden calculation relies in part on cost
assumptions from its final regulatory analysis in section V. Applying
these cost assumptions as one-time fixed costs in this burden analysis
likely generates an overestimate of incremental labor costs for a
number of reasons. First, the number of respondents that will have to
make changes to their price displays and offers is likely to be
significantly inflated. Since the Commission announced its NPRM,
California's Honest Pricing Law, SB 478, which was amended by SB 1524,
went into effect, making it illegal for businesses to advertise or list
prices that do not include all mandatory fees or charges other than
certain government taxes and shipping costs. As such, many national
firms doing business in California, including live-event ticketing and
short-term lodging firms, will already have incurred costs to develop
the capabilities to comply with the Commission's rule even if they are
currently only fully deploying such capabilities in California. Similar
legislative and regulatory efforts have been enacted in New York,
Massachusetts, North Carolina, Minnesota, Tennessee, Connecticut,
Maryland, and Colorado.\656\ Second, to the extent that live-event
ticketing and short-term lodging firms opt to present all-inclusive
total prices that obviate the need for the disclosures set forth in
final Sec. 464.2(b) through (c), such firms will require less web
developer time to
[[Page 2162]]
comply, and the Commission is likely overestimating total labor hours.
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\656\ See, e.g., N.Y. Arts & Cult. Aff. Law sec. 25.01-25.33
(McKinney 2023) (Effective Jun. 30, 2022); An Act Ensuring
Transparent Ticket Pricing, H. 259, 193rd Gen. Court (Mass. 2023);
S. 607 (2023-2024 Session) (N.C. 2023) (Enacted July 9, 2024); 2023
Minn. H.B. 3438 (Enacted May 20, 2024) (Minn.); H.B. 1231 (113th
G.A.) (Tenn.) (Enacted May 24, 2023); Conn. Gen. Stat. Sec. 53-289a
(2023); S.B. 329 (2024 Reg. Sess.) (Md.); S.B. 329 (2024 Reg. Sess.)
(Md.) (Enacted May, 9, 2024); H.B. 23-1378 (2024 Reg. Sess.) (Colo.)
(Enacted June 5, 2024).
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B. Prohibited Misrepresentations Under Final Sec. 464.3
Final Sec. 464.3, which the Commission proposed in similar form as
Sec. 464.3(a), sets forth that in any offer, display, or advertisement
for a covered good or service, it is an unfair and deceptive practice
for a business to misrepresent any fee or charge, including its nature,
purpose, amount, or refundability, and the identity of the good or
service for which the fee or charge is imposed. Consistent with the
NPRM's discussion of proposed Sec. 464.3(a), the Commission notes that
final Sec. 464.3 does not impose any information collection
requirement for the purpose of the PRA. Rather than imposing any
affirmative disclosure, reporting, or recordkeeping obligations,\657\
final Sec. 464.3 merely prohibits businesses from making certain
misrepresentations that are already prohibited under section 5 of the
FTC Act. As noted in the NPRM, any additional costs that might be
associated with these prohibitions are de minimis.\658\
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\657\ See 5 CFR 1320.3(c) (definition of the term ``collection
of information'').
\658\ See NPRM, 88 FR 77478.
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VII. Regulatory Flexibility Act--Final Regulatory Flexibility Analysis
The Regulatory Flexibility Act (``RFA''), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996, requires an
agency to provide an Initial Regulatory Flexibility Analysis (``IRFA'')
and Final Regulatory Flexibility Analysis (``FRFA'') of any final rule
subject to notice-and-comment requirements, unless the agency head
certifies that the regulatory action will not have a significant
economic impact on a substantial number of small entities.\659\ In
developing the final rule, the Commission carefully considered whether
the rule would have a significant impact on a substantial number of
small entities. The Commission continues to believe that the final
rule's impact will not be substantial for most small entities and, in
many cases, will likely positively impact small businesses by enabling
them to compete fairly in the marketplace with larger players. However,
the Commission cannot fully quantify the impact the final rule will
have on such entities. Therefore, in the interest of thoroughness and
an abundance of caution, the Commission has prepared the following FRFA
for this final rule.
---------------------------------------------------------------------------
\659\ 5 U.S.C. 603-605.
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In the NPRM, the Commission provided an IRFA and solicited comments
on the burden on any small entities that would be covered.\660\ The
Commission received comments in response to the IRFA.\661\ The
Commission received comments from two industry groups requesting that
the Commission conduct a Small Business Regulatory Impact Analysis to
analyze the impact of small businesses in particular industries.\662\
The Commission also received comments from small business owners and
industry groups in support of the rule and its impact on small
businesses, as well as from commenters concerned about potential costs
to small businesses. Consistent with the requirements of the FRFA, the
Commission has considered the comments received, and the final rule's
impact on small entities, including alternatives to the final rule.
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\660\ NPRM, 88 FR 77479-80.
\661\ See, e.g., FTC-2023-0064-3251 (National RV Dealers
Association); FTC-2023-0064-2367 (Small Business Majority). The
Small Business Administration, Office of Advocacy raised similar
criticisms of the proposed rule. See U.S. Small Bus. Admin., Office
of Advocacy, Re: Trade Regulation Rule on Unfair or Deceptive Fees
FTC-2023-0064-0001, https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf. The Commission addresses that comment infra section VII.C.
\662\ FTC-2023-0064-3269 (IHRSA--The Health & Fitness
Association); FTC-2023-0064-3294 (International Franchise
Association). The Commission notes that the final rule is limited to
Covered Good or Services, which does not include the health and
fitness industry.
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The Commission thoroughly considered the feedback it received from
the SBA Office of Advocacy, the Small Business Majority, and other
commenters in developing the final rule. The Commission modifies the
proposed rule in response, in part, to such feedback. The Commission
will continue to engage with small business stakeholders to facilitate
implementation of, and compliance with, the final rule and other
guidance as necessary to assist small entities in complying with the
rule.
Based on the Commission's expertise, and after careful review and
consideration of the entire rulemaking record--including the more than
60,800 comments the Commission received in response to the NPRM,
empirical research on how bait-and-switch pricing tactics, including
drip pricing and partitioned pricing, harm consumers and honest
competitors, and the Commission's Final Regulatory Analysis in section
V--the Commission adopts this final rule focused on covered goods or
services with certain additional revisions to reduce compliance burdens
on small businesses and other entities. To begin with, because this
final rule is limited to covered goods or services, many industries
that have significant small business participants are no longer
covered. Second, the Commission adopts an extended compliance date--120
days--to ensure that small businesses have adequate time to come into
compliance with the rule's requirements.\663\ Third, as discussed in
section III, in response to feedback from commenters representing the
interests of small businesses, the Commission clarifies in this SBP
that businesses may exclude from total price pass-through credit card
or other payment processing fees if they give consumers a viable
payment alternative without a fee (e.g., cash is accepted). In
addition, as discussed in section III, the final rule adopts
definitions of government charges to increase flexibility for
businesses, including small businesses.
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\663\ A 120-day compliance date after publication in the Federal
Register complies with the requirements of the Congressional Review
Act that a ``major rule'' may not take effect fewer than sixty days
after the rule is published in the Federal Register. 5 U.S.C.
801(a)(1)(3).
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A. Statement of the Need for, and Objectives of, the Rule
The Commission describes the need for, and objectives of, the rule
in section V.A. The legal basis for the rule is section 18 of the FTC
Act, 15 U.S.C. 57a, which authorizes the Commission to promulgate,
modify, and repeal trade regulation rules that define with specificity
acts or practices in or affecting commerce that are unfair or deceptive
within the meaning of section 5(a)(1) of the FTC Act, 15 U.S.C.
45(a)(1).
B. Significant Issues Raised by Comments, the Commission's Assessment
and Response, and Any Changes Made as a Result
Commenters, including the Small Business Majority, argued that the
IRFA failed to appropriately assess the impact of the proposed rule on
small businesses.\664\ The NPRM assumed that of the total estimated
firms in the United States (6,140,612),\665\ only a
[[Page 2163]]
small fraction (818,178 or about 13%) would incur additional costs
beyond the initial one-hour compliance review to comply fully with the
proposed rule. Commenters, including the Small Business Majority,
argued that the IRFA failed to appropriately assess the impact of the
proposed rule on small businesses.\666\ For the purpose of the IRFA,
the Commission concluded that the proposed rule would not have a
significant economic impact on a substantial number of small entities
and solicited comment on its analysis, including the submission of
supporting or contradictory empirical data. The Commission did not
receive any data or other evidence to suggest that the number of firms
incurring additional costs should be higher. The Commission anticipates
that modifications made in the final rule will reduce the number of
businesses that are likely to incur additional costs.
---------------------------------------------------------------------------
\664\ FTC-2023-0064-3251 (National RV Dealers Association); FTC-
2023-0064-2367 (Small Business Majority).
\665\ The number of firms used in the NPRM was provided by the
United States Census Bureau's Statistics of United States
Businesses. U.S. Census Bureau, 2020 SUSB Annual Datasets by
Establishment Industry (Mar. 2023), https://www.census.gov/data/datasets/2020/econ/susb/2020-susb.html.
\666\ FTC-2023-0064-3251 (National RV Dealers Association); FTC-
2023-0064-2367 (Small Business Majority).
---------------------------------------------------------------------------
These commenters further asserted the rule's proposed economic
analysis underestimated the cost of attorneys' fees and ongoing costs
to comply with the rule.\667\ The Commission addresses comments and
concerns related to its economic analysis in section V, including
estimates for attorneys' fees and ongoing compliance costs.
---------------------------------------------------------------------------
\667\ FTC-2023-0064-3251 (National RV Dealers Association); FTC-
2023-0064-2367 (Small Business Majority).
---------------------------------------------------------------------------
The same commenters also noted that the Commission's IRFA failed to
appropriately consider alternatives to the proposed rule for small
businesses.\668\ The Commission disagrees. The NPRM stated that the
Commission had considered alternatives, including: (1) a rule that
would exempt small businesses from the proposed rule; (2) a rule that
would apply to online-only businesses; (3) alternatives that would
otherwise narrow the scope of the proposed rule, including limiting
application of the rule to Covered Businesses as defined in the NPRM;
or (4) terminating the rulemaking entirely. Consistent with the NPRM,
the Commission declines to exempt small businesses, including those
that offer live-event ticketing and short-term lodging, from the rule
to avoid creating uncertainty across businesses as to whether the rule
applies to them, to avoid creating unfair competitive advantages for
those businesses that engage in bait-and-switch pricing and
misrepresent fees, and to ensure maximum consumer benefits from
increased price transparency. The NPRM also invited comment on
questions and concerns related to small businesses, including the
estimated number of small businesses and the impact on those
businesses, as well as alternatives to the rule for small businesses.
The Commission's FRFA includes further discussion of the alternatives
considered in section V.B.
---------------------------------------------------------------------------
\668\ FTC-2023-0064-3251 (National RV Dealers Association); FTC-
2023-0064-2367 (Small Business Majority).
---------------------------------------------------------------------------
The Small Business Majority noted that many small businesses lack
access to legal staff and ``run the risk of occupying a substantial
amount of time to understand how exactly they need to adjust their
pricing models to comply with the new rule.'' \669\ As a result, the
Small Business Majority encouraged the Commission to provide guidance
to small businesses, including through outreach, education, and
compliance guidance, as well as working directly with small businesses,
to help small businesses comply with the final rule.\670\ The
Commission highlights and discusses herein that, in response to the
comments, the final rule both narrows the NPRM proposal as well as
clarifies it in certain respects, thereby decreasing the burden on
small businesses. The SBP also discusses various pricing scenarios
raised by commenters, and the Commission believes that such discussion
will aid businesses, including small businesses, in complying with the
final rule. Finally, the Commission routinely provides guidance and
conducts outreach to businesses on complying with the FTC Act and
regulations that it enforces and, as required by law, the Commission
will publish a small entity compliance guide to assist small businesses
in complying with the rule.
---------------------------------------------------------------------------
\669\ FTC-2023-0064-2367 (Small Business Majority).
\670\ Id.; see also U.S. Small Bus. Admin., Office of Advocacy,
Re: Trade Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-
0001, https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
---------------------------------------------------------------------------
The Commission received numerous comments from industry groups and
individual small business owners, including comments highlighting the
benefits of the proposed rule on small businesses, as well as comments
identifying certain concerns about application of the proposed rule to
small businesses. The Commission addresses many of these comments in
other parts of the SBP, including section III, and accordingly
incorporates that analysis into its FRFA, and addresses the remainder
of these comments herein.
Some commenters argued that fees help small businesses offset
rising costs and staff salaries and benefits, especially for small
businesses operating on thin margins.\671\ One industry group argued
that the rule might place small businesses at a competitive
disadvantage compared to larger businesses.\672\ As discussed in Parts
III and V, the Commission narrows the scope of the rule to address
concerns affecting small businesses by, for example, modifying the
definition of government charges and addressing factual scenarios and
questions concerning application of the rule to small businesses,
including related to credit card surcharges and contingent fees. In
making these clarifications and modifications, the Commission narrows
the total price requirement for, and thereby reduces the compliance
burden on businesses, including small businesses, offering covered
goods or services. As discussed in section VII.C, the Commission is
also adopting an extended 120-day compliance date to allow more time
for businesses, including small businesses, to assess and come into
compliance with the final rule.
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\671\ See, e.g., FTC-2023-0064-3033 (The Rebel Lounge et al.);
FTC-2023-0064-3078 (Washington Hospitality Association); FTC-2023-
0064-2367 (Small Business Majority).
\672\ FTC-2023-0064-3292 (National Association of Theater
Owners).
---------------------------------------------------------------------------
Conversely, other commenters noted that bait-and-switch practices
and misleading fees harm small businesses, and that the rule will help
small businesses.\673\ One State representative asserted that the final
rule would help small businesses because small businesses that
advertise the entire price of their goods and services are at a
competitive disadvantage compared to larger businesses that advertise
lower prices and only disclose fees at the end of a transaction.\674\
Consumer advocacy groups urged the Commission not to exempt small
businesses, arguing that consumers and small businesses alike will
benefit from greater pricing transparency and a prohibition on
deceptive pricing.\675\ The Commission also received numerous
individual comments, including from small business owners, expressing
support for
[[Page 2164]]
the rule, because it would benefit small businesses.\676\
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\673\ FTC-2023-0064-2840 (Indie Sellers Guild); FTC-2023-0064-
2341 (New Hampshire State Representative Lindsay Sabadosa); FTC-
2023-0064-3302 (Public Citizen); FTC-2023-0064-3160 (Consumer
Federation of America); FTC-2023-0064-3141 (Coalition of Franchisee
Associations).
\674\ FTC-2023-0064-2341 (New Hampshire State Representative
Lindsay Sabadosa).
\675\ FTC-2023-0064-3302 (Public Citizen); FTC-2023-0064-3160
(Consumer Federation of America).
\676\ See, e.g., FTC-2023-0064-0105 (Individual Commenter); FTC-
2023-0064-2422 (Individual Commenter); FTC-2023-0064-2697
(Individual Commenter).
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The Commission notes that the final rule does not prohibit any
business offering live-event ticketing or short-term lodging from
charging consumers fees or raising prices to support necessary
operating costs, such as labor costs or rising expenses. The final rule
instead requires that such charges and fees be incorporated in total
price and that they not be misleading.
C. Comment by the Small Business Administration, Office of Advocacy,
the Commission's Assessment and Response, and Any Changes Made as a
Result
The SBA Office of Advocacy filed a comment requesting that the
Commission ``prepare a supplemental initial regulatory flexibility
analysis that fully considers the economic impact of the proposed
rulemaking on small entities and alternatives that may reduce that
burden,'' as well as ``clarify that this rulemaking will not apply to
small non-profit organizations.'' \677\ The SBA Office of Advocacy
argues that the Commission's IRFA did not comply with the requirements
of the Regulatory Flexibility Act because it ``fail[ed] to provide an
accurate description of the small entities to which the proposed rule
will apply,'' and failed to provide ``an accurate description of the
costs associated with the compliance requirements.'' \678\ According to
the SBA Office of Advocacy, the Commission also ``failed to consider
significant alternatives that would minimize any significant economic
impact of the proposed rule on small businesses.'' \679\ The Commission
has considered this comment, which it further summarizes herein, and
responds as follows.
---------------------------------------------------------------------------
\677\ U.S. Small Bus. Admin., Office of Advocacy, Re: Trade
Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001,
https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
\678\ Id.
\679\ Id.
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The SBA Office of Advocacy recommended that the Commission count
small businesses using NAICS-code specific thresholds defined by the
SBA, rather than using a threshold of 500 employees.\680\ In response
to this comment, the Commission now uses the NAICS-code specific
thresholds set by the SBA to determine the number of small businesses
in the Final Regulatory Flexibility Analysis contained in section
VII.D.
---------------------------------------------------------------------------
\680\ Id.
---------------------------------------------------------------------------
The comment further contended that ``there are other alternatives
that the FTC should have considered in its IRFA,'' such as ``exempting
certain sectors of small businesses or imposing a limit on certain
fees'' and ``allowing businesses more time to comply with the
rule.\681\ The Commission did consider such alternatives and narrows
the scope of the final rule to covered goods or services, thereby
limiting the rule's application to only those businesses, including
small businesses, that offer, display, or advertise such goods or
services. The Commission declines, however, to impose a limit on the
amount of fees, so long as they are disclosed and not misleading in
accordance with the rule's requirements, including as discussed in
section III.
---------------------------------------------------------------------------
\681\ Id.
---------------------------------------------------------------------------
As to the suggestion to give businesses more time to comply with
the rule, the Commission adopts a compliance date of 120 days after
publication of the final rule in the Federal Register. The final rule
will go into effect, and compliance with the final rule will be
required, on that date. This extended timeline considers comments
received from the SBA Office of Advocacy and small businesses,
underscoring the time it might take to come into compliance with the
final rule. For example, some small businesses may decide to seek
outside guidance about whether they need to make adjustments to come
into compliance, while others will conduct their own compliance
review.\682\ The Commission finds 120 days should be enough time even
for small businesses conducting their own compliance review, and that a
120-day period between publication in the Federal Register and the
rule's compliance date appropriately balances the interests of small
businesses with the interests of protecting consumers. Further, in
addition to guidance in this SBP, the Commission also will publish a
small entity compliance guide to assist small businesses in complying
with the rule.
---------------------------------------------------------------------------
\682\ See, e.g., id. (SBA urged the Commission to consider
``allowing small businesses more time to comply with the rule'' and
to provide clear compliance guidance); FTC-2023-0064-2367 (Small
Business Majority urged the Commission to issue comprehensive
guidance and commented: ``[M]any small businesses do not have access
to legal staff or consultants, and without clear and specific
disclosure requirements provided by industry, small businesses run
the risk of occupying a substantial amount of time to understand how
exactly they need to adjust their pricing models to comply with the
new rule.'').
---------------------------------------------------------------------------
Finally, the SBA Office of Advocacy ``encourages the FTC to clarify
that this rulemaking will not apply to non-profits.'' \683\ The final
rule can be enforced to the full scope of the Commission's
jurisdiction. Congress empowered the Commission to ``prevent persons,
partnerships, or corporations'' from engaging in ``unfair or deceptive
acts or practices in or affecting commerce.'' \684\ To fall within the
definition of ``corporation'' under the FTC Act, an entity must be
``organized to carry on business for its own profit or that of its
members.'' \685\ These FTC Act provisions, taken together, have been
interpreted in Commission precedent \686\ and judicial decisions \687\
to mean that the Commission lacks jurisdiction to prevent section 5
violations by a corporation not organized to carry on business for its
own profit or that of its members. The Commission stresses, however,
that both judicial decisions and Commission precedent recognize that
not all entities claiming tax-exempt status as non-profits fall outside
the Commission's jurisdiction.\688\ ``Congress took pains in drafting
Sec. 4 [15 U.S.C. 44] to authorize the Commission to regulate so-
called nonprofit corporations, associations and all other entities if
they are in fact profit-making enterprises.'' \689\
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\683\ U.S. Small Bus. Admin., Office of Advocacy, Re: Trade
Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001,
https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
\684\ 15 U.S.C. 45(a)(2). The Commission herein focuses on
coverage of ``corporations.''
\685\ 15 U.S.C. 44.
\686\ In re Coll. Football Ass'n, 117 F.T.C. 971, 994 (1994).
\687\ Cal. Dental Ass'n v. FTC, 526 U.S. 756, 766-67 (1999);
Cmty. Blood Bank of Kansas City Area, Inc. v. FTC, 405 F.2d 1011,
1019 (8th Cir. 1969); FTC v. Univ. Health, Inc., 938 F.2d 1206, 1214
(11th Cir. 1991).
\688\ The Commission has determined that ``[r]ulings of the
Internal Revenue Service are not binding upon the Commission, . . .
but a determination by another Federal agency that a respondent is
or is not organized and operated exclusively for eleemosynary
purposes should not be disregarded.'' In re Am. Med. Ass'n, 94
F.T.C. 701, 990 (1979) (citing In re Ohio Christian Coll., 80 F.T.C.
815, 848 (1972)).
\689\ Cmty. Blood Bank, 405 F.2d at 1018; see also, e.g., FTC v.
Nat'l Comm'n on Egg Nutrition, 517 F.2d 485, 488 (7th Cir. 1975); In
re Coll. Football Ass'n, 117 F.T.C. at 998.
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D. Description and Estimate of the Number of Small Entities To Which
the Rule Will Apply
The final rule covers businesses that offer short-term lodging and
live-event tickets. Small businesses that currently comply with the
final rule will have a relatively trivial cost of assessing whether
they are currently in
[[Page 2165]]
compliance, and the Commission assumes these firms will require at most
one hour of lawyer time to confirm compliance. Small businesses that
offer covered goods or services and currently do not disclose total
price will incur additional costs to adjust advertised prices, their
marketing campaigns, and the consumer purchase process to comply with
the rule.
Using the size standards set by the SBA,\690\ the Commission
calculates that there are potentially as many as 9,034 small firms in
the U.S that may sell tickets for live events.\691\ For the economic
regulatory analysis in section V, the Commission assumes all live-event
ticketing firms will incur additional costs to adjust advertised
prices, their marketing campaigns, and the consumer purchase process to
comply with the rule. The Commission notes that there may be some live-
event ticket sellers that are currently in compliance and will
therefore have a trivial cost of compliance with the final rule.
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\690\ See U.S. Small Bus. Admin., Table of Small Bus. Size
Standards, https://www.sba.gov/document/support-table-size-standards.
\691\ The Commission uses the latest data available from the
Census Bureau's Statistics of U.S. Businesses database, available
based on firm revenue and firm size. U.S. Census Bureau, Stat. of
U.S. Bus. (last revised July 9, 2024), https://www.census.gov/programs-surveys/susb.html. The calculation of 9,034 live-event
ticketing firms is likely an overestimate of the number of small
businesses due to data incompatibility and the use of the high-end
assumption regarding how live-event ticketing firms are categorized
using NAICS codes. The U.S. SBA sets different revenue thresholds
for different NAICS codes. However, the Statistics of U.S.
Businesses does not necessarily report the number of firms with
earnings under those particular thresholds. Therefore, the
Commission calculates there may be as many as 3,094 firms in NAICS
code 711310 with receipts under the SBA threshold of $40 million,
4,358 firms in NAICS code 711320 with receipts under $25 million (an
overestimate given the SBA threshold of $22 million for NAICS code
711320), and 1,582 firms in NAICS code 561599 with receipts under
$35 million (an overestimate given the SBA threshold of $32.5
million for NAICS code 561599).
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For the short-term lodging industry, the Commission separately
estimates there are as many as 675,603 home share hosts in the U.S. The
Commission assumes that these home share hosts are all considered small
entities. Using the NAICS-code specific thresholds set by the SBA, the
Commission calculates that there are potentially as many as 2,798 small
firms within NAICS code 7211 (``Accommodation'').\692\
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\692\ Id. The calculation of 2,798 small hotels firms is likely
an overestimate of the number of small businesses due to data
incompatibility. The U.S. SBA sets a revenue threshold of $9 million
for NAICS code 721191 and NAICS code 721199. However, the Statistics
of U.S. Businesses does not report number of firms for those
particular thresholds. Therefore, the Commission calculates there
are as many as 42,186 firms in NAICS code 721110 with receipts under
the SBA threshold of $40 million, 101 firms in NAICS code 721120
with receipts under the SBA threshold of $40 million, 2,960 firms in
NAICS code 7211191 with receipts under $10 million (an overestimate
given the SBA threshold), and 1,384 firms with receipts under $10
million (an overestimate given the SBA threshold).
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E. Description of the Projected Reporting, Recordkeeping, and Other
Compliance Requirements
The final rule contains no reporting or recordkeeping requirements;
however, the final rule imposes disclosure obligations. Only small
entities that offer, display, or advertise covered goods or services
must comply with the rule and, therefore, will incur compliance costs.
To comply with the final rule, small entities that offer, display, or
advertise any price of a covered good or service are required to
disclose the total price clearly and conspicuously and, generally, more
prominently than any other pricing information. Small entities must
also disclose other imposed fees and charges before a consumer consents
to pay and must not misrepresent any fee or charge. For firms that
already comply with the final rule, the one-time indirect cost per firm
is assumed to be, at most, one hour of lawyer time for regulatory
familiarization. This cost is excluded from the Regulatory Flexibility
Analysis since such familiarization is not a compliance requirement.
For small businesses subject to the rule that are not currently in
compliance with the rule's requirements, the Commission has determined
that firms will need to adjust advertised prices, marketing campaigns,
and the purchase process to comply with the rule. These firms may also
incur recurring annual costs of additional lawyer time to assess and
confirm annual compliance. As discussed in more detail in section V,
the Commission estimates that direct compliance costs in the live-event
ticketing industry, over a ten-year period, would result in annualized
costs of $648-$2,144 per firm assuming a 7% discount rate or $534-
$1,916 per firm assuming a 3% discount rate. U.S. home share hosts
would incur one-time costs re-optimizing prices of $30.42-$91.27. The
Commission also estimates direct compliance costs for U.S. hotels, over
a ten-year period, would result in annualized costs of $527-$2,011 per
firm assuming a 7% discount rate or $434-$1,825 per firm assuming a 3%
discount rate. These estimates, however, are for firms of all sizes;
the Commission has not separately estimated the costs for small
businesses specifically.
F. Discussion of Significant Alternatives the Commission Considered
That Would Accomplish the Stated Objectives of the Final Rule and That
Would Minimize Any Significant Economic Impact of the Final Rule on
Small Entities
The Regulatory Flexibility Act requires that agencies include a
description of the steps the agency has taken to minimize the
significant economic impact on small entities consistent with the
stated objectives of applicable statutes, including a statement of the
factual, policy, and legal reasons for selecting the alternative
adopted in the final rule and the other significant alternatives to the
rule considered by the agency which affect the impact on small entities
was rejected.\693\ Statutory examples of ``significant alternatives''
include different requirements or timetables that take into account the
resources available to small entities; the clarification,
consolidation, or simplification of compliance and reporting
requirements under the rule for small entities; the use of performance
rather than design standards; and an exemption from coverage of the
rule, or any part thereof, for small entities.\694\
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\693\ 5 U.S.C. 604(a)(6).
\694\ See 5 U.S.C. 603(c).
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In the NPRM, the Commission sought comment on various potential
alternatives to the proposed rule, including alternatives that were
tailored to the needs of small businesses and that addressed the impact
(including costs) that would be incurred by businesses to comply with
the proposed rule.\695\ Specifically, the Commission sought comment on
the estimated number and the nature of small business entities for
which the proposed rule would have a significant economic impact,
whether the proposed rule would have a significant economic impact on a
substantial number of small entities, and if so, how it could be
modified to avoid such an impact, as well as whether the proposed
definition for ``business'' should exclude certain businesses,
including small businesses meeting the SBA's definition of a ``small
business concern'' and the SBA's Table of Size Standards, or simply
certain limited-service and full-service restaurants meeting such
requirements.\696\ The Commission also inquired as to whether the
``total price'' definition should exclude mandatory charges by
restaurants for service performed for the customer in lieu of tips, as
defined by the Department of
[[Page 2166]]
Labor.\697\ The Commission also considered alternatives that would
otherwise narrow the scope of the proposed rule, including limiting
application of the rule to ``Covered Businesses'' as defined in the
NPRM, ultimately adopting a variation of this approach in the final
rule.
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\695\ NPRM, 88 FR 77479-83.
\696\ Id.
\697\ Id., 88 FR 77481.
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The Commission requested this information to minimize the final
rule's burden on all businesses, including small entities. As explained
through this SBP, the Commission has considered the comments and
alternatives proposed by the commenters, including the SBA Office of
Advocacy, and finds that the final rule will not create a significant
impact on small entities. Indeed, the type of deception that will be
unlawful under the final rule is already unlawful under the FTC Act,
but the final rule would allow the Commission to obtain monetary relief
more efficiently than it could solely under section 19(a)(2) of the FTC
Act (i.e., without a rule violation), thereby deterring current and
would be violators of the FTC Act.
In its Preliminary Regulatory Analysis, the Commission described an
alternative to the proposed rule, namely, to terminate the rulemaking
and rely instead on the Commission's previously existing tools, such as
consumer education and enforcement actions brought under sections 5 and
19 of the FTC Act, to combat the specified unfair or deceptive pricing
practices. The Commission believes that promulgation of the rule will
result in greater net benefits to the marketplace while imposing no
additional burdens beyond what is required by the FTC Act. As the
Commission describes further in section V, the rule will not only
result in significant benefits to consumers but also improve the
competitive environment, particularly for small, independent, or new
firms. Therefore, the rule appears to be superior to this alternative
for small entities.
As discussed herein, the Commission narrows the rule by adding a
definition for ``covered good or service'' that is limited to Live-
event tickets or Short-term lodging. The Commission also modifies the
definition of government charges to replace the language that included
only those government charges levied ``on consumers,'' with language
clarifying that any government charge ``imposed on the transaction''
may be excluded from total price. Finally, the Commission addresses in
section III how the rule would apply to credit card processing fees and
contingent fees charged by small businesses.
The Commission notes that it has designed the final rule to
minimize compliance costs for all businesses. As stated in section V,
the Commission estimates that direct compliance costs in the live-event
ticketing industry, over a ten-year period, would result in annualized
costs of $648-$2,144 per firm assuming a 7% discount rate or $534-
$1,916 per firm assuming a 3% discount rate. U.S. home share hosts
would incur one-time costs re-optimizing prices of $30.42-$91.27. The
Commission also estimates direct compliance costs for U.S. hotels, over
a ten-year period, would result in annualized costs of $527-$2,011 per
firm assuming a 7% discount rate or $434-$1,825 per firm assuming a 3%
discount rate. Based on the available evidence, the Commission does not
believe that the analysis in section V is fundamentally different for
small entities. For this reason, the Commission is not creating an
exception for small entities or creating different regulatory
requirements for small entities.
The Commission also is not delaying the effective date of the final
rule solely for small entities. The final rule's effective date is 120
days after publication in the Federal Register on May 9, 2025. In the
Commission's view, the rule's effective date of May 9, 2025 will afford
small entities sufficient time to comply with the final rule, and
commenters have not provided evidence that more time is necessary. The
Commission declines to set different effective dates for small
businesses and larger businesses because the final rule's core
objectives include promoting comparison shopping for consumers and
leveling the playing field for honest competitors. For all of the
reasons stated, these objectives would be thwarted in a marketplace
where certain businesses must comply with the rule's requirements for a
period of time while others have more time to continue engaging in
unfair or deceptive pricing practices.
VIII. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs has designated this
rule as a ``major rule,'' as defined by 5 U.S.C. 804(2).
List of Subjects in 16 CFR Part 464
Advertising, Consumer protection, Trade practices.
0
For the reasons set forth above, the Federal Trade Commission adds part
464 to chapter I of title 16 of the Code of Federal Regulations to read
as follows:
PART 464--RULE ON UNFAIR OR DECEPTIVE FEES
Sec.
464.1 Definitions.
464.2 Hidden fees prohibited.
464.3 Misleading fees prohibited.
464.4 Relation to State laws.
464.5 Severability.
Authority: 15 U.S.C. 41 through 58.
Sec. [thinsp]464.1 Definitions.
Ancillary good or service means any additional good(s) or
service(s) offered to a consumer as part of the same transaction.
Business means an individual, corporation, partnership,
association, or any other entity that offers goods or services,
including, but not limited to, online, in mobile applications, and in
physical locations.
Clear(ly) and conspicuous(ly) means a required disclosure that is
easily noticeable (i.e., difficult to miss) and easily understandable
by ordinary consumers, including in all of the following ways:
(1) In any communication that is solely visual or solely audible,
the disclosure must be made through the same means through which the
communication is presented. In any communication made through both
visual and audible means, such as a television advertisement, the
disclosure must be presented simultaneously in both the visual and
audible portions of the communication even if the representation
requiring the disclosure is made in only one means.
(2) A visual disclosure, by its size, contrast, location, the
length of time it appears, and other characteristics, must stand out
from any accompanying text or other visual elements so that it is
easily noticed, read, and understood.
(3) An audible disclosure, including by telephone or streaming
video, must be delivered in a volume, speed, and cadence sufficient for
ordinary consumers to easily hear and understand it.
(4) In any communication using an interactive electronic medium,
such as the internet, a mobile application, or software, the disclosure
must be unavoidable.
(5) The disclosure must use diction and syntax understandable to
ordinary consumers and must appear in each language in which the
representation that requires the disclosure appears.
(6) The disclosure must comply with these requirements in each
medium through which it is received, including all electronic devices
and face-to-face communications.
(7) The disclosure must not be contradicted or mitigated by, or
[[Page 2167]]
inconsistent with, anything else in the communication.
(8) When the representation or sales practice targets a specific
audience, such as children, older adults, or the terminally ill,
``ordinary consumers'' includes members of that group.
Covered good or service means:
(1) Live-event tickets; or
(2) Short-term lodging, including temporary sleeping accommodations
at a hotel, motel, inn, short-term rental, vacation rental, or other
place of lodging.
Government charges means the fees or charges imposed on the
transaction by a Federal, State, Tribal, or local government agency,
unit, or department.
Pricing information means any information relating to an amount a
consumer may pay.
Shipping charges means the fees or charges that reasonably reflect
the amount a business incurs to send physical goods to a consumer,
including through the mail, private mail and shipping services, or by
freight.
Total price means the maximum total of all fees or charges a
consumer must pay for any good(s) or service(s) and any mandatory
ancillary good or service, except that government charges, shipping
charges, and fees or charges for any optional ancillary good or service
may be excluded.
Sec. [thinsp]464.2 Hidden fees prohibited.
(a) It is an unfair and deceptive practice and a violation of this
part for any business to offer, display, or advertise any price of a
covered good or service without clearly and conspicuously disclosing
the total price.
(b) In any offer, display, or advertisement that represents any
price of a covered good or service, a business must disclose the total
price more prominently than any other pricing information. However,
where the final amount of payment for the transaction is displayed, the
final amount of payment must be disclosed more prominently than, or as
prominently as, the total price.
(c) A business must disclose clearly and conspicuously, before the
consumer consents to pay for any covered good or service:
(1) The nature, purpose, and amount of any fee or charge imposed on
the transaction that has been excluded from total price and the
identity of the good or service for which the fee or charge is imposed;
and
(2) The final amount of payment for the transaction.
Sec. [thinsp]464.3 Misleading fees prohibited.
In any offer, display, or advertisement for a covered good or
service it is an unfair and deceptive practice and a violation of this
part for any business to misrepresent any fee or charge, including: the
nature, purpose, amount, or refundability of any fee or charge; and the
identity of the good or service for which the fee or charge is imposed.
Sec. [thinsp]464.4 Relation to State laws.
(a) In general. This part will not be construed as superseding,
altering, or affecting any State statute, regulation, order, or
interpretation relating to unfair or deceptive fees or charges, except
to the extent that such statute, regulation, order, or interpretation
is inconsistent with the provisions of this part, and then only to the
extent of the inconsistency.
(b) Greater protection under State law. For purposes of this
section, a State statute, regulation, order, or interpretation is not
inconsistent with the provisions of this part if the protection such
statute, regulation, order, or interpretation affords any consumer is
greater than the protection provided under this part.
Sec. 464.5 Severability.
If any provision of this part is held to be invalid or
unenforceable by its terms, or as applied to any person, industry, or
circumstance, or stayed pending further agency action, the provision
shall be construed so as to continue to give the maximum effect to the
provision permitted by law and such invalidity shall not affect the
application of the provision to other persons, industries, or
circumstances or the validity or application of other provisions. If
any provision or application of this part is held to be invalid or
unenforceable, the provision or application shall be severable from
this part and shall not affect the remainder thereof.
By direction of the Commission, Commissioner Ferguson
dissenting.
Joel Christie,
Acting Secretary.
[FR Doc. 2024-30293 Filed 1-8-25; 8:45 am]
BILLING CODE 6750-01-P
