On October 20, 2022, the Federal Trade Commission (FTC) announced the launch of a new rule-making process to determine how fees are charged for goods or services, focusing on potentially ” misleading or unfair” which the FTC calls “junk fees”. .” As a first step in the process, the FTC issued an Notice of Proposed Rulemaking (ANPR), which asks questions about a number of practices regarding fee disclosure, and suggests that the FTC consider approaches such as “global pricing which more directly regulate how fees are disclosed in many contexts. ANPR is broad and focuses on the issue of ‘junk fees’ across the economy. As such, this procedure will potentially impact how fees are charged across many sectors and industries, including telecommunications, hospitality, e-commerce and financial services.
Below, we provide additional background and background information about ANPR, and note key next steps and issues the FTC seeks comment on.
ANPR Junk Fee. At the October 20, 2022 FTC Open Meeting (which we previewed here), the FTC voted to release the ANPR. ANPR notes that the FTC has filed numerous lawsuits alleging certain fees are misleading, including cases involving “hidden” fees. However, it deals more broadly with fees termed “unwanted fees”, which it defines as “unfair or misleading fees charged for goods or services that have little or no added value to the consumer, including goods or services that consumers would reasonably expect to be included in the overall advertised price.
ANPR examines pricing practices in a number of sectors representing a large share of the economy, including telecommunications, hospitality, financial services, e-commerce, travel, higher education, ticketing live events and car dealerships, among others. As an example, the ANPR describes what it calls “drip pricing”, which refers to the practice of announcing the base part of the price of a product or service. in advance and then disclose additional charges later in the purchase process. ANPR cites the example of resort fees being charged for many hospitality bookings as a form of “drip pricing” that it could address if regulation progresses.
In addition, ANPR asks about a number of issues, including:
- The prevalence of non-disclosure practices in advertising or marketing: the total costs of the goods or services; the existence of any fees, interest or charges; or any material restrictions, limitations or conditions resulting in mandatory charges.
- The prevalence of representing to a consumer that they owe payment for a product or service that they have not agreed to purchase or charge for goods and services to consumers without their express informed consent.
- The prevalence of termination fees, charges or costs that “consumers would reasonably assume to be included in the overall advertised price” for a product or service, and charges or costs charged without disclosure of the purpose of the charge.
- Whether a rule on pricing practices should require companies to disclose in all advertisements a price that includes all charges, known as an “all-in price”.
- Whether a “global pricing” rule should apply to certain industries or all industries.
As stated in the ANPR, the FTC is currently limited in seeking monetary relief for violations of law involving unfair or misleading charges, under the Supreme Court’s ruling. AMG decision. However, if the FTC makes a rule regarding these charges, it may seek monetary relief for violations.
The ANPR was released by a 3 to 1 vote, with Commissioner Wilson dissenting. In her dissent, Commissioner Wilson suggested a number of additional questions for commenters to answer, including:
- What markets or industries could possibly be covered by an omnibus pricing rule?
- What authority does the FTC have to enact a rule that would regulate price disclosure across the economy?
- Do pricing practices and fee disclosure vary across industries? How would a clear and visible disclosure requirement work with respect to these fees and charges?
- Does ANPR overlap with existing FTC rules and guidelines?
- Can the FTC meet the legal requirements for proof of “prevalence” under Section 18 of the FTC Act without underlying enforcement action? How?
- Could a potential rule requiring global pricing encourage the bundling of goods and services that a consumer may not want or need?
Next steps. ANPR is the first step in the rule making process. Comments will be due 60 days after publication of the Federal Register. The FTC will use the information gathered to determine whether to propose a rule, which could apply relatively narrowly to prohibit established misleading practices regarding misleading fees, or potentially attempt to mandate certain types of fee disclosure. It could also focus on certain industries or apply more broadly.
This ANPR “Junk Fees” is the latest in a series of regulatory proposals from the FTC, including its ongoing regulations on “commercial surveillance” involving privacy and data security, and its regulations on fraud by identity theft.
For more information about the FTC’s new ANPR or its other rulemaking efforts, please contact any of the authors listed in this alert.