Navigating the FTC's New Proposed Rule on Unfair or Deceptive Fees: What Businesses Need to Know
The Federal Trade Commission (FTC) has introduced a proposed regulation aimed at curbing hidden and misleading fees within live-event ticketing and short-term lodging industries. Known as the “Rule on Unfair or Deceptive Fees,” this proposed rule imposes new compliance obligations that businesses must address to avoid legal and financial risks.
Purpose and Scope of the Rule
The FTC’s primary goal is to promote price transparency and eliminate “drip pricing” — a practice where businesses display an initial low price but add mandatory fees later in the transaction.
The rule specifically targets:
Live-Event Ticket Sales: Concerts, sporting events, theater performances, and similar events.
Short-Term Lodging: Hotels, vacation rentals, and other short-term accommodations.
This regulation applies to all businesses in these sectors, including third-party vendors and online marketplaces.
Key Requirements for Affected Businesses
Businesses must comply with the following core obligations:
a) Total Price Disclosure
Businesses must prominently display the total price, inclusive of all mandatory fees, whenever any price is shown.
The total price must be more prominent than any other pricing information.
This should be the first price a consumer sees.
b) Prohibition on Misrepresentation
Businesses are strictly prohibited from misrepresenting:
The nature, purpose, or refundability of fees.
Fees that are unclear, vague, or misleading to reasonable consumers.
c) Clear and Conspicuous Fee Disclosures
If certain fees are not included in the total price, they must be:
Clearly and conspicuously disclosed before a consumer agrees to pay.
Easily noticeable, understandable, and readable.
Defining “Total Price” and Permitted Exclusions
The “total price” includes all fees mandatory for consumers to purchase the service. Fees that are not reasonably avoidable must also be included.
Permitted Exclusions:
Government Charges: Taxes and regulatory fees can be listed separately.
Shipping Fees: Can be disclosed outside the total price.
Optional Fees: Charges for ancillary goods or services that consumers can opt-in for.
Exclusion of Vehicle Towing from the Final Rule
Initially, the FTC considered expanding the rule to other industries, including towing services. However, towing was excluded in the final version due to concerns about scope and focus.
Why Towing Was Considered:
The Federal Motor Carrier Safety Administration (FMCSA) previously highlighted pricing practices by towing businesses, particularly affecting truckers.
Why It Was Excluded:
The FTC prioritized industries with significant consumer complaints and pricing confusion, such as live-event ticketing and lodging.
While towing was excluded, its inclusion in discussions underscores the wider concern about hidden fees in other sectors.
Economic and Industry Impact
The FTC anticipates significant benefits for both businesses and consumers:
Reduced Search Costs: Consumers can quickly identify the true cost of goods or services.
Informed Decision-Making: Upfront pricing enables better purchasing decisions.
Fair Competition: Businesses must compete transparently without relying on hidden fees to appear cheaper.
Enforcement and Effective Date
The FTC will begin enforcing the rule 120 days after its publication in the Federal Register. Businesses must ensure compliance by this deadline to avoid:
Financial penalties.
Legal action.
Refund obligations to consumers.
Resources for Further Information
For detailed guidance and official documentation, consider these resources:
FTC Website: The FTC's website provides a range of legal resources and guidance for businesses: www.ftc.gov.
Statement of Basis and Purpose: The official FTC document, including the "Statement of Basis and Purpose," provides detailed information on the rule: "FTC Proposed Rule.pdf".
FTC Press Release: Read the FTC's official announcement about this rule: Federal Trade Commission Announces Bipartisan Rule Banning Junk Ticket and Hotel Fees.
FTC Business Guidance: See the FTC's blog post about this rule and how it impacts businesses: Blog: Getting to the bottom line: The FTC’s bipartisan Junk Fees Rule and your business.
FTC Fact Sheet: See the FTC’s Fact Sheet on the Junk Fees Rule.
Conclusion
The FTC’s Rule on Unfair or Deceptive Fees introduces new obligations that businesses must navigate carefully. While the current rule focuses on live-event ticketing and short-term lodging, it shows the FTC’s interest in implementing a policy that favors price transparency.