Got Junk? FTC’s Proposed Rule Targets Junk Fees

On October 11, the Federal Trade Commission announced a proposed rule designed to increase transparency in pricing practices. The proposed Rule on Unfair or Deceptive Fees would prohibit businesses from misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and mispresenting the nature and purpose of fees. If the rule goes into effect, which we anticipate will happen following the comment period, businesses will be required to disclose all mandatory fees and do so at the start of the purchasing process, rather than waiting to disclose such fees after consumers have invested time in navigating purchase flows (or failing to disclose them altogether). Once the rule publishes in the Federal Register, there will be a sixty-day comment period, after which the FTC will consider a final rule.

The proposed rule would (1) prohibit businesses from advertising prices that hide or omit the existence and amount of mandatory fees at the beginning of the purchasing process; and (2) prohibit sellers from misrepresenting or withholding information regarding the purpose of fees and require them to disclose upfront the amount, purpose, and refundability of fees. The rule will enable the FTC to secure refunds for consumers and seek civil penalties in the amount of $50,120 per violation.

The FTC is not alone in its focus on junk fees. In fact, Consumer Financial Protection Bureau director Rohit Chopra has indicated that the CFPB would enforce the rule against financial services companies. And Federal Communications Commission Chairwoman Jessica Rosenworcel has made clear that the FCC is implementing new labeling requirements that will require increased pricing transparency in the telecommunications industry. The FTC’s proposed rule will require businesses in various industries, including hospitality, entertainment, telecommunications, and transportation, to alter how they communicate pricing information to consumers. And importantly, companies would be well advised to ensure compliance, as violations of the proposed rule could result in significant financial consequences.