New FTC Rule Will Force Companies Make Hidden Fees Obvious, but That Doesn’t Mean They’re Going Away

The FTC swung down its hammer on junk fees this week, passing a rule that bans businesses from hiding extra costs related to “service” or “convenience.” However, this doesn’t mean these fees are going away, they’ll just have to be presented differently.

“[P]layed for suckers.” Last year, President Joe Biden called out businesses that sneak fees into the final bill, saying that they take money out of family budgets and make it harder for them to pay household bills.

“Folks are tired of being taken advantage of and played for suckers,” Biden said.

The president’s remarks coincided with the FTC’s proposed rule to ban hidden fees, also known as junk fees. The commission announced the final rule on Tuesday, which will go into effect in April 2025. It specifically applies to companies selling live-event tickets or short-term lodging.

How it will work. Under the Junk Fees Rule, companies are required to present the total cost of goods they are selling “clearly and conspicuously,” the FTC said. The rule also prevents businesses from misrepresenting the fees or price of their products in any offers, displays, or ads for live events or short-term lodging.

Importantly, the agency will require businesses to display the final price more prominently than other information.

“This means that the most prominent price in an ad needs to be the all-in total price—truthful itemization and breakdowns are fine but should not overshadow what consumers want to know: the real total,” the FTC said.

53 million hours. That’s how time consumers per year waste looking for the real price of live-event tickets and lodging, according to the agency. With the new rule, it’s time that they’ll get back. The FTC pointed out that the time savings is the equivalent of more than $11 billion over the next decade.

Mixed response for the business community. Not everyone is happy with the FTC’s new rule. The U.S. Chamber of Commerce, which represents more than 3 million businesses, is one of the most prominent critics.

“The Biden Administration’s sweeping agenda to crack down on so-called ‘junk fees’ is nothing more than an attempt to micromanage businesses’ pricing structures, often undermining businesses’ ability to give consumers options at different price points,” Sean Heather, the U.S. Chamber’s senior vice president for regulatory affairs, said in February.

Heather added that the rule could eliminate discounts and dynamic pricing, the former of which he claims leads to consumer savings.

Final impact. It’s important to note that the FTC’s new rule does not ban businesses from charging junk fees, it just forces them to be upfront about it. In cases when a company doesn’t include certain fees, such as shipping and tax, into the price, the rule requires that they explicitly make it clear.

Images | MJ Jo | Ian Hutchinson

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