FTC Prohibits Hidden Junk Fees

#1 · December 27, 2024, 2:30 pm

Quote from WebWeaver on December 27, 2024, 2:30 pm
From Matt Stoller’s Substack blog comes news of a 4–1 decision by the FTC to pass a regulation banning companies—at least hotels and ticket sellers, the worst offenders—from tacking fees onto a purchase without notice. For instance, one might check into a hotel and find a “resort” or “facility” fee that was not seen on the Web site when booking; a ticket agent’s fee might not appear in the ticket price when buying a concert ticket on line.

The article notes a commission finding of 53 million lost hours by customers searching for accurate prices. “[T]he FTC rule states, ‘to offer, display, or advertise any price of live-event tickets or short-term lodging without clearly, conspicuously and prominently disclosing the total price’ is an unlawful and deceptive practice.” The new rule goes into effect 120 days after it is published in the Federal Register, so look for an end to this practice by Spring.

Mr. Stoller quotes from his post from the previous year:

Typically, consumers will buy tickets or hotel rooms based on price comparison sites, which show a list price. An unscrupulous firm which lists a hidden fee has an advantage, since its list price will look lower than a firm without such a hidden fee. A buyer will purchase the good or service, and then end up paying a higher price when the hidden fee is added back in. But in addition, the honest firm loses a sale, and ultimately, will either start charging its own hidden fees or go out of business. Put differently, junk fees are a form of mass deception, and they turn everyone into a cheater.

Even businesses are caught up in the issue; Grubhub charges restaurants for participating in their service, and should they choose not to do so, they have been known to pirate a menu and set up a site for a restaurant—but sales do not necessarily go through, and hungry, angry customers call the restaurant to complain. In an open letter to Grubhub, restaurant owner Erin Wade wrote,

When my manager called customer service to tell you how unfair it is that we are paying for your mistakes, he was told, “Well, none of this would happen if you would just sign up with us.” Which sounds a lot like what the mob boss says, after they burn down your house.

The FTC and Illinois AG took action against Grubhub’s deceptive practices, with a $25million fine and consent decree.

Thank you, Lina Khan and FTC commissioners for addressing this issue that has affected the 85% of USAmericans who have been charged such a hidden fee, annoying 96% of us. Let’s hope that the new chairperson and commissioners continue to protect We the People.

From Matt Stoller’s Substack blog comes news of a 4–1 decision by the FTC to pass a regulation banning companies—at least hotels and ticket sellers, the worst offenders—from tacking fees onto a purchase without notice. For instance, one might check into a hotel and find a “resort” or “facility” fee that was not seen on the Web site when booking; a ticket agent’s fee might not appear in the ticket price when buying a concert ticket on line.

The article notes a commission finding of 53 million lost hours by customers searching for accurate prices. “[T]he FTC rule states, ‘to offer, display, or advertise any price of live-event tickets or short-term lodging without clearly, conspicuously and prominently disclosing the total price’ is an unlawful and deceptive practice.” The new rule goes into effect 120 days after it is published in the Federal Register, so look for an end to this practice by Spring.

Mr. Stoller quotes from his post from the previous year:

Typically, consumers will buy tickets or hotel rooms based on price comparison sites, which show a list price. An unscrupulous firm which lists a hidden fee has an advantage, since its list price will look lower than a firm without such a hidden fee. A buyer will purchase the good or service, and then end up paying a higher price when the hidden fee is added back in. But in addition, the honest firm loses a sale, and ultimately, will either start charging its own hidden fees or go out of business. Put differently, junk fees are a form of mass deception, and they turn everyone into a cheater.

Even businesses are caught up in the issue; Grubhub charges restaurants for participating in their service, and should they choose not to do so, they have been known to pirate a menu and set up a site for a restaurant—but sales do not necessarily go through, and hungry, angry customers call the restaurant to complain. In an open letter to Grubhub, restaurant owner Erin Wade wrote,

When my manager called customer service to tell you how unfair it is that we are paying for your mistakes, he was told, “Well, none of this would happen if you would just sign up with us.” Which sounds a lot like what the mob boss says, after they burn down your house.

The FTC and Illinois AG took action against Grubhub’s deceptive practices, with a $25million fine and consent decree.

Thank you, Lina Khan and FTC commissioners for addressing this issue that has affected the 85% of USAmericans who have been charged such a hidden fee, annoying 96% of us. Let’s hope that the new chairperson and commissioners continue to protect We the People.