Alert

“Junk Fee” Revolution Continues: FTC Prohibits “Junk Fees” in Live-Event Ticketing and Short-Term Lodging Industries

December 18, 2024

Yesterday, the Federal Trade Commission (FTC) finalized its “Rule on Unfair or Deceptive Fees” (Junk Fees Rule) designed, the FTC noted, to prohibit bait-and-switch pricing and mandate clear and conspicuous price disclosures in the live-event ticketing and short-term lodging industries. While similar in nature to some of the junk fee rules finalized by the Consumer Financial Protection Bureau (CFPB), the FTC’s Final Rule targets industries outside of the CFPB’s authority and highlights the Biden Administration’s continued focus on all things junk fees, even in the waning moments of the Biden presidency.

To Whom Does the Junk Fees Rule Apply?

Initially, the FTC had proposed the Junk Fees Rule apply to any “business,” which it defined 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.” After receiving significant comments, the FTC narrowed the definition to businesses that offer “covered goods or services,” which the Junk Fees Rule defines as “live-event tickets or short-term lodging, including temporary sleeping accommodations at a hotel, motel, inn, short-term rental, vacation rental, or other place of lodging.”

Notably, the FTC declined to include other industry-specific carve-outs to live-event tickets or short-term lodging businesses that are otherwise covered by the Junk Fees Rule.

What Does the Final Rule Do?

The Junk Fees Rule does not prohibit any type or amount of fee or outlaw any specific pricing strategy. Hiding or misrepresenting a fee, however, would constitute an unfair or deceptive practice. A covered business that charges a fee must “tell consumers the whole truth up-front about fees and prices” by providing clear and conspicuous price and fee disclosures in a manner that is “easily noticeable (i.e., difficult to miss) and easily understandable by ordinary consumers.”

To accomplish this:

1. the disclosure must be made in the same way the communication or advertisement is made (i.e. visual, audible, or both);
2. a visual disclosure, by size, contrast, location, and length, must “stand out” from other text;
3. an audible disclosure must be delivered in volume, speed, and cadence sufficient for an ordinary consumer to hear and understand it;
4. disclosures in online communications (e.g., the internet or mobile app) must be “unavoidable;”
5. the disclosure must use diction and syntax understandable to the ordinary consumer and must be in every language in which the representation or communication is;
6. the disclosure must comply with all of these requirements in each medium used;
7. the disclosure must not be contradicted or mitigated by anything else in the communication; and
8. when a communication targets a specific audience, “ordinary consumers” as defined by the Junk Fees Rule, includes members of that specific audience.

The Junk Fees Rule also requires covered businesses to prominently display the “total price” of a covered good or service. The “total price” is 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.

What Comes Next?

The FTC voted 4-1 in favor of publishing the Final Rule, but the dissenter, Commissioner Andrew Ferguson, is a notable one. Commissioner Ferguson was recently tapped by President-Elect Trump as the FTC’s next chair. In his dissenting statement, Commissioner Ferguson took no issue with the substance of the Junk Fees Rule. Rather, his dissent focused on his belief that “the time for rulemaking by the Biden-Harris FTC is over.”

That being said, Commissioner Ferguson did appear to leave the door open for enforcement of the Junk Fees Rule during the Trump Administration, noting:

My vote, however, should not be understood to state my position on the Final Rule’s merits, or on whether the Commission under President Trump should enforce the Final Rule. On the merits, Commissioner Holyoak correctly points out that the Final Rule bears little resemblance to the flagrantly unlawful version of the rule the Commission proposed more than a year ago. The Final Rule addresses practices and industries for which the Commission has some evidence of prevalence as Section 18 requires. It is therefore a significant improvement over what the Commission originally threatened to inflict on the American economy.

Nevertheless, because the Junk Fees Rule is subject to the Congressional Review Act (CRA), it may never take effect. Under the CRA, Congress has the ability to enact a resolution of disapproval, which, if done, would invalidate the Junk Fees Rule and prevent its implementation. But, while it is likely that Congress will use the CRA to invalidate some of the CFPB’s “junk fees” rulemaking, the FTC’s Junk Fees Rule is narrow, as Commission Ferguson noted, and it does not cap fees. It is also likely to be extremely popular with the public, as evidenced by the overwhelmingly positive comments the FTC received during the comment period. So, it is not clear whether a Republican Congress would feel compelled to add this one to the CRA pile. Tune in next year.

If Congress does not invalidate the Junk Fees Rule, it will take effect 120 days after its publication in the Federal Register.