[Federal Register Volume 87, Number 215 (Tuesday, November 8, 2022)]
[Proposed Rules]
[Pages 67413-67424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24326]


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FEDERAL TRADE COMMISSION

16 CFR Part 464


Unfair or Deceptive Fees Trade Regulation Rule Commission Matter 
No. R207011

AGENCY: Federal Trade Commission

ACTION: Advance notice of proposed rulemaking; request for public 
comment.

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SUMMARY: The Federal Trade Commission (``Commission'') proposes to 
commence a rulemaking proceeding to address certain deceptive or unfair 
acts or practices relating to fees. The Commission is soliciting 
written comment, data, and argument concerning the need for such a 
rulemaking to prevent persons, entities, and organizations from 
imposing such fees on consumers.

DATES: Comments must be received on or before January 9, 2023.

ADDRESSES: Interested parties may file a comment online or on paper by 
following the instructions in the Comment Submissions part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Unfair or Deceptive 
Fees ANPR, R207011'' on your comment and file your comment online at 
https://www.regulations.gov. If you prefer to file your comment on 
paper, mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex B), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Austin King, Associate General Counsel 
for Rulemaking, phone: 202-326-3166.

SUPPLEMENTARY INFORMATION: 

I. General Background Information

    The Federal Trade Commission publishes this advance notice of 
proposed rulemaking (``ANPR'') pursuant to Section 18 of the Federal 
Trade Commission Act (``FTC Act''), 15 U.S.C. 57a, the provisions of 
part 1, subpart B, of the Commission's Rules of Practice, 16 CFR 1.7-
1.20, and 5 U.S.C. 553. This authority permits the Commission to 
promulgate, modify, and repeal trade regulation rules that define with 
specificity acts or practices that are unfair or deceptive in or 
affecting commerce within the meaning of Section 5(a)(1) of the FTC 
Act, 15 U.S.C. 45(a)(1).

II. Objectives the Commission Seeks To Achieve and Possible Regulatory 
Alternatives

A. Background

    American consumers, workers, and small businesses today are swamped 
with junk fees that frustrate consumers, erode trust, impair comparison 
shopping, and facilitate inflation. For this ANPR, the term ``junk 
fees'' refers to unfair or deceptive fees that are charged for goods or 
services that have little or no added value to the consumer, including 
goods or services that consumers would reasonably assume to be included 
within the overall advertised price; the term also encompasses ``hidden 
fees,'' which are fees for goods or services that are deceptive or 
unfair, including because they are disclosed only at a later stage in 
the consumer's purchasing process or not at all, whether or not the 
fees are described as corresponding to goods or services that have 
independent value to the consumer. These terms may overlap--a junk fee 
can be a hidden fee, but not all junk fees are hidden fees.
    Frequently, these unfair or deceptive fees are bundled as 
``ancillary products'' in conjunction with loans, auto financing, or 
some other complicated or

[[Page 67414]]

expensive transaction, ending up on the final bill without the 
consumer's awareness or express and informed consent. Junk fees are 
especially likely to cause consumer harm when they arise ``without real 
notice, unconnected to any additional service, in an industry where 
advertising is essential.'' \1\ Junk fees manifest in markets ranging 
from auto financing to international calling cards and payday loans. A 
2019 poll conducted by Consumer Reports found eighty-two percent of 
those surveyed had spent money on hidden fees in the previous year.\2\ 
The respondents cited telecommunications and live entertainment as 
sources of hidden fees more than any other industries.\3\
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    \1\ Nat'l Econ. Council, The Competition Initiative and Hidden 
Fees 7-15 (2016) (``Competition Initiative''), https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf.
    \2\ See Consumer Reports, WTFee Survey: 2018 Nationally 
Representative Multi-Mode Survey, at 7 (Jan. 3, 2019), https://advocacy.consumerreports.org/wp-content/uploads/2019/09/2018-WTFee-Survey-Report-_-Public-Report-1.pdf.
    \3\ See id. at 4.
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    Junk fees not only are widespread but also are growing. In various 
industries, fees are increasing at higher rates than the base prices of 
the goods or services to which they are added. For example, in higher 
education and hospitality,\4\ fees are increasing faster than tuition 
or posted room rates. After first emerging in the late 1990s, hotel 
``resort fees'' accounted for $2 billion, or one-sixth of total hotel 
revenue, by 2015.\5\ With rising prices, fees are becoming more 
prevalent, allowing some businesses to raise effective prices without 
appearing to do so.\6\
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    \4\ See Christopher Elliott, There may be an end in sight for 
controversial--and often invisible--resort fees, Wash. Post (June 
16, 2016), https://www.washingtonpost.com/lifestyle/travel/there-
may-be-an-end-in-sight-for-controversial_and-often-invisible_
resort-fees/2016/06/16/101f6074-317e-11e6-8758-
d58e76e11b12_story.html; Farran Powell & Emma Kerr, 11 Surprising 
College Fees You May Have to Pay, U.S. News & World Report (Feb. 12, 
2020), https://www.usnews.com/education/best-colleges/paying-for-college/slideshows/10-surprising-college-fees-you-may-have-to-pay.
    \5\ Competition Initiative at 7.
    \6\ See, e.g., J.J. McOrvey, Restaurants add new fees to your 
check to counter inflation, Wall St. J. (June 2, 2022), https://www.wsj.com/articles/waiter-theres-a-fee-in-my-soup-11654139870.
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    Junk fees impose substantial economic harms on consumers and impede 
the dissemination of important market information. A Commission 
analysis of hotel ``resort fees'' that were mandatory and undisclosed 
in the posted room rates concluded such fees ``artificially increas[e] 
the search costs and the cognitive costs'' for consumers carrying out 
the transaction.\7\ Junk fees force consumers either to accept a higher 
actual price for a service or product after beginning the transaction 
or to spend more time searching for lower actual prices elsewhere. 
Consumers faced with such fees pay upward of twenty percent more than 
when the actual price was disclosed upfront.\8\ These fee practices can 
be found throughout the economy but appear to be particularly 
widespread in markets for travel such as hotels, room-sharing, car 
rentals, and cruises.
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    \7\ Mary W. Sullivan, Fed. Trade Comm'n, Economic Analysis of 
Hotel Resort Fees 37 (2017), https://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf.
    \8\ See Tom Blake et al., Price Salience and Product Choice 16, 
40 Marketing Science 619 (2021) (finding that consumers paid 19.5% 
more when the actual price was not disclosed upfront); Morgan Foy, 
University of California-Berkley, Haas School of Business, Buyer 
Beware: Massive Experiment Shows Why Ticket Sellers Hit You With 
Last-Second Fees (Feb. 9, 2021), https://newsroom.haas.berkeley.edu/research/buyer-beware-massive-experiment-shows-why-ticket-sellers-hit-you-with-hidden-fees-drip-pricing/ (concluding that consumer 
expenditure on tickets increased 21% when true price not disclosed 
initially); Danielle Douglas-Gabriel, Tuition at public colleges has 
soared in the past decade, but student fees have risen faster, Wash. 
Post (June 22, 2016), https://www.washingtonpost.com/news/grade-point/wp/2016/06/22/tuition-at-public-colleges-has-soared-in-the-last-decade-but-student-fees-have-risen-faster/ (noting that 
mandatory fees imposed by colleges for campus facilities, library 
services, and information technology increased the median four-year 
tuition at public university by twenty percent).
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    Tickets for live events appear to be another market with widespread 
junk fees. A Commission workshop focused on the event-tickets market 
found such fees result in significant market misallocations. Because in 
a price-obscuring transaction consumers initiate purchasing decisions 
without knowing the actual cost, ``[t]ickets will not necessarily go to 
the consumers who value them the most.'' \9\ The workshop also 
highlighted the inability of market participants to correct this course 
without intervention: After a market leader took unilateral action to 
phase out hidden fees, the platform ``lost significant market share and 
abandoned the policy after a year because consumers perceived the 
platform's advertised prices to be higher than its competitors' 
displayed prices.'' \10\ The president of another significant market 
actor testified before a Congressional subcommittee that, ``for any 
single [company] to avoid being disproportionately harmed by using all-
in pricing, all members of the live event ticket industry must be 
legally required to list all prices and fees up-front.'' \11\ At the 
Commission workshop, ``each participating ticket seller that [did] not 
[ ] provide upfront all-in pricing [ ] favored requiring all-in pricing 
through federal legislation or rulemaking.'' \12\ A market 
characterized by both consumers and merchants calling for clearer 
pricing suggests further Commission action may be justified.
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    \9\ Fed. Trade Comm'n, ``That's the Ticket'' Workshop: Staff 
Perspective, 4 (May 2020).
    \10\ Id.
    \11\ ``In the Dark: Lack of Transparency in the Live Event 
Ticketing Industry'': Hearing Before the Oversight and 
Investigations Subcomm. of the H. Comm. on Energy and Commerce, 
116th Cong., 6 (Feb. 26, 2020) (Questions for the Record Responses, 
Amy Howe, President and Chief Operating Officer, Ticketmaster, North 
America).
    \12\ Fed. Trade Comm'n, Staff Perspective at 4 (emphases added).
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    Many measures to tackle junk fees have already been considered or 
implemented by Congress, federal agencies, states, and peer countries. 
The Full Fare Advertising Rule issued by the U.S. Department of 
Transportation states any ``advertising or solicitation'' that ``states 
a price'' constitutes an ``unfair or deceptive practice . . . unless 
the price stated is the entire price to be paid.'' \13\ The 
Telemarketing Sales Rule defines as a deceptive act or practice the 
misrepresentation of, and failure to, ``disclose truthfully, in a clear 
and conspicuous manner,'' the ``total costs to purchase, receive, or 
use, . . . any goods or services that are the subject of [a] sales 
offer.'' \14\ The Commission's Funeral Rule provides it is an unfair or 
deceptive act or practice ``to fail to furnish accurate price 
information . . . for each of the specific funeral goods and funeral 
services.'' \15\ The Restore Online Shoppers' Confidence Act requires 
post-transaction third-party sellers online to clearly and 
conspicuously disclose the cost of a good or service and obtain 
``express informed consent for the charge'' from the consumer.\16\ 
Congress enacted the Ocean Shipping Reform Act of 2022, which grants 
the Federal Maritime Commission greater authority to investigate, make 
determinations of reasonableness about, and order refunds for, fees 
charged by common ocean carriers.\17\ The Commission's Negative Option 
Rule, which regulates ``a common form of marketing where the

[[Page 67415]]

absence of affirmative consumer action constitutes assent to be charged 
for goods or services,'' also reflects the importance of disclosure and 
consent in transactions.\18\
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    \13\ 14 CFR 399.84(a).
    \14\ 16 CFR 310.3(a)(1)-(2). See also 16 CFR 310.4(a)(7) (``In 
any telemarketing transaction, the seller or telemarketer must 
obtain the express informed consent of the customer or donor to be 
charged for the goods or services or charitable contribution and to 
be charged using the identified account.'').
    \15\ 16 CFR 453.2(a).
    \16\ 15 U.S.C. 8402(a)(1)-(2).
    \17\ See Ocean Shipping Reform Act of 2022, Public Law 117-146.
    \18\ Rule Concerning the Use of Prenotification Negative Option 
Plans, 84 FR 52393 (Oct. 2, 2019). See also 16 CFR 425; Compl. at 
20-21, FTC v. Age of Learning, Inc., No. 2:20-cv-07996 (C.D. Cal. 
filed Sept. 1, 2020) (billing consumers without their authorization 
and making cancellation difficult, resulting in unwanted additional 
charges); Am. Compl. at 17-20, FTC v. Triangle Media Corp., No. 
3:18-cv-01388 (S.D. Cal. filed Dec. 11, 2018) (advertising online 
``free'' trials of skincare and supplements before enrolling 
consumers in expensive subscriptions without consent).
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    The Consumer Financial Protection Bureau (``CFPB'') requested 
public comment on fees levied on consumer financial products or 
services.\19\ The CFPB expressed concern such fees carry the risk that 
``companies are not just shifting costs to consumers'' but also 
``taking advantage of a captive relationship with the consumer to drive 
excess profits.'' \20\ Connecticut has passed a law requiring that 
``any advertisement for an in-state event [ ] conspicuously disclose 
the total price for each ticket and what portion . . . represents a 
service charge.'' \21\ New York State recently adopted a similar 
law.\22\ The European Union implemented a directive in 1998 requiring 
the ``selling price,'' defined as the ``final price of a unit of the 
product,'' must be ``unambiguous, easily identifiable, and clearly 
legible.'' \23\
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    \19\ Consumer Fin. Prot. Bureau, Request for Info. Regarding 
Fees Imposed by Providers of Consumer Fin. Prods. or Servs., 71 FR 
5801, 5801 (Feb. 2, 2022), https://www.federalregister.gov/documents/2022/02/02/2022-02071/request-for-information-regarding-fees-imposed-by-providers-of-consumer-financial-products-or.
    \20\ Id. at 5802.
    \21\ Conn. Gen. Stat. 53-289a.
    \22\ See Press Release, Gov. Kathy Hochul, Governor Hochul Signs 
Legislation Targeting Unfair Ticketing Practices in Live Event 
Industry (June 30, 2022), https://www.governor.ny.gov/news/governor-hochul-signs-legislation-targeting-unfair-ticketing-practices-live-event-industry; see also Anne Steele, New York to Ban Hidden Fees in 
Live-Event Ticketing, Wall St. J. (June 7, 2022), https://www.wsj.com/articles/new-york-to-ban-hidden-fees-in-live-event-ticketing-11654606800.
    \23\ Council Directive 98/6, art. 2 and 4, 1998 O.J. (L 80) 27 
(EC), https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.L_.1998.080.01.0027.01.ENG&toc=OJ%3AL%3A1998%3A080%3ATOC.
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    Based on the Commission's substantial work in this area, the 
Commission's initial view is junk fees appear to be prevalent in many 
sectors of the American economy. The Commission's actions to address 
such fees encompass ``mobile cramming'' charges,\24\ connection and 
maintenance fees on prepaid phone cards,\25\ account fees,\26\ fees 
that diminish the amount a borrower receives from a loan,\27\ 
miscellaneous fees levied on fuel cards,\28\ auto dealer fees,\29\ 
undisclosed fees for funeral services,\30\ hotel ``resort'' fees,\31\ 
hidden fees for academic publishing,\32\ poorly disclosed ancillary 
insurance products,\33\ membership programs,\34\ and discounts for 
food, travel, long-distance calls, and merchandise.\35\
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    \24\ ``Mobile cramming'' fees refer to charges on mobile phones 
that the consumers did not order or authorize. See, e.g., Stipulated 
Order at 2, FTC v. Hold Billing Servs., Ltd., No. 98-cv-00629 (W.D. 
Tex. May 4, 2016) (placing charges on consumers' bills without 
authorization); Compl. at 3, FTC v. T-Mobile USA, Inc., No. 14-cv-
967 (W.D. Wash. filed July 1, 2014); Compl. at 3, FTC v. AT&T 
Mobility, LLC, No. 14-cv-3227 (N.D. Ga. Oct. 8, 2014); FTC v. 
Inc21.com Corp., 745 F. Supp. 2d 975, 982 (N.D. Cal. 2010) (ninety-
seven percent of customers had not agreed to purchase the products 
for which defendant billed them); Stipulated Order at 8, FTC v. 
Websource Media, LLC, No. H-06-1980 (S.D. Tex. July 17, 2007) 
(restraining defendants from charging purchasers without express 
informed consent); Compl. at 8, FTC v. Nationwide Connections, Inc., 
No. 06-80180 (S.D. Fla. filed Feb. 27, 2006) (charging consumers for 
long distance calls that were either unauthorized or never made); 
Stipulated Judgment and Order, FTC v. Mercury Mktg. of Del., Inc., 
No. 00-cv-3281, 2004 WL 2677177, *1 (E.D. Pa. Nov. 22, 2004) 
(``Defendants [ ] engaged in a telemarketing scheme designed to 
mislead unsuspecting small businesses into receiving its 
introductory internet package and without consent of the businesses 
to bill and collect monthly charges'').
    \25\ See, e.g., Compl. at 2, FTC v. Millennium Telecard, Inc., 
No. 2:11-cv-02479 (D.N.J. filed May 2, 2011) (``failing to disclose 
or disclose adequately fees that have the effect of reducing the 
number of calling minutes available to consumers using Defendants' 
prepaid calling cards'').
    \26\ See, e.g., Compl. at 6, FTC v. NetSpend Corp., No. 1:16-cv-
04203 (N.D. Ga. filed Apr. 11, 2017) (charging account maintenance 
and inactivity fees on blocked or inaccessible accounts).
    \27\ See, e.g., Compl. at 13, FTC v. Lead Express, Inc., No. 
2:20-cv-00840 (D. Nev. filed May 11, 2020) (payday loan company 
continually withdrew finance charges from consumers' bank accounts 
without decreasing outstanding principal, resulting in significantly 
greater costs than represented by Defendants); First Am. Compl. at 
3, FTC v. LendingClub Corp., No. 3:18-cv-02454 (N.D. Cal. filed Oct. 
22, 2018) (promising ``no hidden fees'' but delivering loans 
significantly lower than expected due to hidden fees deducted from 
consumers' loan proceeds).
    \28\ See, e.g., Compl. at 14-16, FTC v. FleetCor Techs., Inc., 
No. 1:19-cv-05727 (N.D. Ga. filed Dec. 10, 2019) (charging hundreds 
of millions of dollars of unexpected fees after selling charge cards 
for transportation costs to businesses through promises of savings 
and no fees).
    \29\ See generally Fed. Trade Comm'n, Notice of Proposed 
Rulemaking: Motor Vehicle Dealers Trade Regulation Rule, 78 FR 
42012, 42023 & n.113 (July 23, 2022) (describing rationale for 
requiring upfront pricing and exploring Commission's history of work 
to combat unfair or deceptive fees), https://www.federalregister.gov/documents/2022/07/13/2022-14214/motor-vehicle-dealers-trade-regulation-rule. See also, e.g., Compl. at 3, 
FTC v. Liberty Chevrolet, Inc., No. 20-cv-3945 (S.D.N.Y. filed May 
21, 2020) (automobile dealer charged consumers for fees relating to 
``certification,'' ``shop,'' and ``reconditioning,'' and levied 
documentation fees that greatly exceeded statutory limits); Compl. 
at 7-8, FTC v. N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. 
Ill. filed Mar. 31, 2022) (auto dealer charged consumers additional 
fees falsely claimed to be not optional after failing to disclose 
such fees in advertising or to consumers who called ahead to confirm 
low advertised prices).
    \30\ See, e.g., Compl. at 11-14, United States v. Funeral & 
Cremation Grp. of N. Am. LLC, No. 0:22-cv-60779 (S.D. Fla. filed 
Apr. 22, 2022) (advertising low prices for cremation services and 
then charging additional undisclosed fees for filing, death 
certificates, and county permits).
    \31\ See, e.g., Press Release, Fed. Trade Comm'n, FTC Warns 
Hotel Operators that Price Quotes that Exclude `Resort Fees' and 
Other Mandatory Surcharges May Be Deceptive (Nov. 28, 2012), https://www.ftc.gov/news-events/news/press-releases/2012/11/ftc-warns-hotel-operators-price-quotes-exclude-resort-fees-other-mandatory-surcharges-may-be.
    \32\ See, e.g., Compl. at 12-14, FTC v. OMICS Grp. Inc., No. 
2:16-cv-02022 (D. Nev. filed Aug. 25, 2016) (academic publisher 
charged authors hefty publication fees that were previously 
undisclosed).
    \33\ One defendant ``induce[d] borrowers unknowingly to purchase 
optional credit insurance products'' and imposed various obstacles 
to removing such charges if a consumer asked for the removal of the 
optional products. Press Release, Fed. Trade Comm'n, Citigroup 
Settles FTC Charges Against the Associates Record-Setting $215 
Million for Subprime Lending Victims (Sept. 19, 2002); see Compl. at 
12-13, FTC v. Citigroup Inc., No. 010-cv-0606 (N.D. Ga. filed Mar. 
6, 2001). See also, e.g., Compl. at 11, FTC v. Stewart Fin. Co. 
Holdings, Inc., No. 1:03-cv-2648 (N.D. Ga. Filed Sept. 4, 2003) 
(``in quoting the monthly amount, [Defendant] employees do not even 
mention the existence of [ ] ancillary products, much less that the 
consumer has the option to decline them'').
    \34\ See, e.g., Stewart Fin. Co. Holdings, Inc., No. 1:03-cv-
2648; Compl. at 21, FTC v. Simple Health Plans LLC, No. 0:18-cv-
62593 (S.D. Fla. filed Oct. 29, 2018) (advertising comprehensive 
health insurance plans while actually enrolling consumers in limited 
benefit plans and medical discount memberships).
    \35\ See, e.g., Compl. at 5-7, FTC v. Direct Benefits Grp., LLC, 
No. 6:11-cv-01186 (M.D. Fla. filed July 18, 2011) (enrolling 
consumers without consent in a discount program for gas, groceries, 
restaurants, and more).
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    Certain unlawful fee practices may be covered by existing rules and 
statutes. The Commission lacks authority, however, to seek redress for 
consumers or penalties against violators for everyday junk fees that 
fall outside those specific prohibitions. Indeed, although the 
Commission has brought many cases that challenge junk fees and hidden 
fees under Section 5 of the FTC Act, 15 U.S.C. 45, and other statutes, 
its current remedial authority is limited. The U.S. Supreme Court 
recently held equitable monetary relief, including consumer redress, is 
unavailable under Section 13(b) of the FTC Act.\36\ Consumer redress 
under Section 19(b), 15 U.S.C. 57b(b), is limited and

[[Page 67416]]

challenging to obtain without a rule violation. The Commission believes 
a rule addressing certain types of unfair or deceptive acts or 
practices involving junk fees could help reduce the level of unlawful 
activity in this area, serving as a deterrent against these practices 
because such a trade regulation rule would allow for civil penalties to 
be sought against violators.\37\ It also would enable the Commission 
more readily to obtain redress and damages for consumers through 
Section 19(b) of the FTC Act, 15 U.S.C. 57b(b).
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    \36\ See AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1352 
(2021). See generally Fed. Trade Comm'n, Notice of Proposed 
Rulemaking: Trade Regulation Rule on Impersonation of Government and 
Businesses, 87 FR 62741 (Oct. 17, 2022) (describing in greater 
detail the Commission's perspective that promulgating new rules can 
be worth the cost because of the benefit in providing consumer 
redress when lawbreakers violate not only Section 5 of the FTC Act 
but also a specific rule promulgated under Section 18 or treated as 
such).
    \37\ See 15 U.S.C. 45(m)(1)(A).
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B. Objectives and Regulatory Alternatives

    The Commission requests input on whether and how it should use its 
authority under Section 18 of the FTC Act, 15 U.S.C. 57a, to address 
deceptive or unfair acts or practices involving junk fees and hidden 
fees. Specifically, the Commission proposes addressing the following 
practices, which have been the subject of Commission investigations, 
enforcement actions, workshops, research, and consumer education, among 
other activities: (a) misrepresenting or failing to disclose clearly 
and conspicuously, on any advertisement or in any marketing, the total 
cost of any good or service for sale; \38\ (b) misrepresenting or 
failing to disclose clearly and conspicuously, on any advertisement or 
in any marketing, the existence of any fees, interest, charges, or 
other costs that are not reasonably avoidable for any good or service; 
\39\ (c) misrepresenting or failing to disclose clearly and 
conspicuously whether fees, interest, charges, products, or services 
are optional or required; \40\ (d) misrepresenting or failing to 
disclose clearly and conspicuously any material restriction, 
limitation, or condition concerning any good or service that may result 
in a mandatory charge in addition to the cost of the good or service or 
that may diminish the consumer's use of the good or service, including 
the amount the consumer receives; \41\ (e) misrepresenting that a 
consumer owes payments for any product or service the consumer did not 
agree to purchase; \42\ (f) billing or charging consumers for fees, 
interest, goods, services, or programs without express and informed 
consent; \43\ (g) billing or charging consumers for fees, interest, 
goods, services, or programs that have little or no added value to the 
consumer or that consumers would reasonably assume to be included 
within the overall advertised price; \44\ and (h)

[[Page 67417]]

misrepresenting or failing to disclose clearly and conspicuously on an 
advertisement or in marketing the nature or purpose of any fees, 
interest, charges, or other costs.\45\
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    \38\ See, e.g., Compl. at 16, FTC v. Funeral & Cremation Grp. of 
N. Am. (``Defendants represent[ed] that the prices they quote for 
cremation packages include all or substantially all the fees and 
costs that they will charge consumers for their goods and 
services''); Order at 31, OMICS Grp. (Mar. 29, 2019) (permanently 
enjoining defendant from ``soliciting from a consumer or publishing 
articles, manuscripts, or other works solicited from a consumer, 
without disclosing Clearly and Conspicuously [ ] all costs to the 
consumer''); Stipulation to Enter Order at 5, Lead Express (Jan. 27, 
2021) (permanently enjoining defendant from misrepresenting ``[a]ny 
fact material to Consumers concerning any product or service, such 
as the total costs''); Stipulated Order at 7, Simple Health Plans 
(Feb. 4, 2021) (permanently enjoining defendants from 
misrepresenting ``[a]ny other fact material to consumers concerning 
any good or service, such as [ ] the total costs'').
    \39\ See, e.g., Stipulated Final Order at 10-11, Millennium 
Telecard, Inc. (Jan. 26, 2012) (permanently enjoining defendants 
from failing to clearly and conspicuously disclose all material 
limitations including ``[t]he existence and amount of all fees or 
charges of any type, including, but not limited to, maintenance 
fees, weekly fees, monthly fees, connection fees, hang-up fees, 
pagyphone fees, cell phone fees, access number fees, and when and 
under what circumstances such fees or charges will apply when using 
[the product]''); Stipulated Order at 5-6, LendingClub (July 14, 
2021) (permanently enjoining defendant from misrepresenting ``[t]he 
existence of amount of any fees or charges'' and ``the dollar amount 
of any prepaid, up-front, or origination fee''); Compl. at 3, In re 
Value Rent-A-Car, Inc., FTC Dkt. No. C-3420 (Mar. 29, 1993) 
(Defendants ``stated prices [of] rental vehicles without disclosing: 
(A) the existence and amount of a mandatory airport surcharge or fee 
that is imposed on consumers who travel from certain airport 
locations to one of respondent's rental stations in one of 
respondent's shuttle vehicles; and (B) the existence and amount of 
an under 25 years of age driver charge''); Decision and Order at 3-
4, In re Budget Rent-A-Car Systems, Inc., FTC Dkt. No. C-4212 (Jan. 
2, 2008) (Defendant ordered to ``disclose clearly and conspicuously, 
at the time of the rental transaction, A. any fuel-related charges, 
fees, or costs, including any fuel-related charges, fees, or costs 
which a renter who drives the vehicle less than any specified amount 
may incur; B. any requirements related to [such charges]; C. the 
manner, if any, in which a renter can avoid such fuel-related 
charges, fees, or costs, or related requirements''); Compl. at 3, 
FTC v. First Am. Payment Sys., No. 22-cv-00654 (N.D. Tex. filed July 
29, 2022) (alleging that defendants ``failed to disclose, clearly 
and conspicuously, key terms of their agreements, including the . . 
. early termination fee'').
    \40\ See, e.g., Stipulated Order for Permanent Injunction at 9, 
N. Am. Auto. Servs. (Mar. 31, 2022) (permanently restraining 
defendants from misrepresenting ``whether charges, products, or 
services are optional or required''); Stipulated Order at 45, 
Liberty Chevrolet (May 22, 2020) (permanently enjoining defendants 
from misrepresenting ``whether charges, products, or services are 
optional or required'' and ``whether sales tax charges are in 
amounts required by state and local law''); Stipulated Final 
Judgment and Order at 14, Stewart Fin. Co. Holdings, Inc. (Nov. 9, 
2005) (permanently enjoining defendants from failing to disclose 
clearly and conspicuously ``all material terms of any Direct Deposit 
program including but not limited to the costs, requirements, 
mandatory or optional nature''); Compl. at 19, Citigroup Inc. 
(charging defendants with failing to disclose ``that the purchase of 
credit insurance was optional and not required to obtain [a] 
loan'').
    \41\ See, e.g., Stipulated Final Order at 6-7, FTC v. 
Alternatel, Inc., No. 08-21433-cv (S.D. Fla. Apr. 1, 2009) 
(permanently restraining defendants from misrepresenting ``all 
Material Limitations, including . . . That the number of Talk 
Minutes is only available on a single call, to the extent Talk 
Minutes are advertised; [ ] The existence and amount of all fees or 
charges of any type . . . and when and under what circumstances such 
fees or charges will apply when using a Prepaid Calling Card; [ ] 
Any limit on the period of time during which [ ] (1) the number of 
advertised Talk Minutes is available [ ] or (2) the advertised per 
minute rates are available''); Press Release, Fed. Trade Comm'n, FTC 
Order Against Four Car Rental Firms Halts Deceptive Practices (Aug. 
21, 1973) (announcing order that compels defendants to ``clearly 
disclose in advertising and rental agreements all charges and 
conditions imposed for rental of cars''); Stipulated Judgment and 
Order at 2-3, Mercury Mktg. of Del. (permanently restraining 
defendants from failing to clearly disclose material terms of the 
transactions, including ``the intended method of billing [and] 
Defendants' policies concerning cancellations or refunds''); 
Stipulated Order at 5, NetSpend Corp. (Apr. 10, 2017) (permanently 
enjoining defendant from misrepresenting: ``A. Any fact regarding 
the length of time or conditions necessary before (1) [the product] 
will be ready to use, or (2) consumers will have access to funds; B. 
Any fact regarding the length of time or conditions necessary to 
gain approval to use [the product], including that consumers are 
guaranteed approval; [and] C. Any fact regarding the protections 
consumers have in the event of account errors, including the terms 
under which Defendant will provide provisional credits.'').
    \42\ See, e.g., Inc21.com, 745 F. Supp. 2d at 1001 (order on 
cross-motions for summary judgment, holding as deceptive the 
``representation that consumers owed defendants monthly payments for 
products that they had never agreed to purchase''); Stipulated Order 
at 9, Nationwide Connections (restraining defendants from 
misrepresenting that a consumer ``is obligated to pay any 
Telecommunications Charge that has not been Expressly Authorized''); 
Stipulated Order at 7-8, Websource Media (restraining defendants 
from misrepresenting that ``an authorized purchaser is obligated to 
pay any charge for which the authorized purchaser has not given 
express informed consent'').
    \43\ See, e.g., Compl. at 63, FTC v. Benefytt Techs., No. 22-cv-
01794 (M.D. Fla. filed Aug. 8, 2022) (``Defendants have charged 
consumers for products or services for which consumers have not 
provided express, informed consent.''); Stipulated Order at 10, Hold 
Billing Servs. (``Defendants shall not, directly or through an 
intermediary, place charges for any products or services on any bill 
to consumers unless the consumer has expressly authorized such 
charge''); Compl. at 52, FleetCor (``Defendants have billed 
consumers for fees, interest, and finance charges, and programs for 
which consumers have not provided express, informed consent''); 
Final Judgment and Order at 4-6, Direct Benefits Grp. (Aug. 12, 
2013) (permanently enjoining defendants from ``[c]harging or 
attempting to charge any consumer unless the consumer has provided 
express informed consent to be charged'').
    \44\ See, e.g., Prepared Statement of the Fed. Trade Comm'n, 
``Prepaid Calling Cards'' Before Subcommittee on Commerce, Trade and 
Consumer Protection of the House Committee on Energy and Commerce, 
110th Congr., (Sept. 16, 2008), https://www.ftc.gov/sites/default/files/documents/public_statements/prepared-statement-federal-trade-commission-prepaid-calling-cards/p074406prepaidcc_0.pdf (describing 
enforcement actions against prepaid calling card distributors for 
failing to disclose prepaid calling cards' connection and 
maintenance fees); Warning Ltr., Fed. Trade Comm'n (Nov. 28, 2012), 
https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-warns-hotel-operators-price-quotes-exclude-resort-fees-other-mandatory-surcharges-may-be/121128hoteloperatorsletter.pdf 
(announcing investigations into whether certain hotel operators 
mispresented hotel room prices to consumers by failing to disclose 
mandatory ``resort'' fees); Compl. at 13, Funeral & Cremation Grp. 
of N. Am. (``Defendants charge consumers additional fees Defendants 
have not previously disclosed for goods and services such as death 
certificates, death certificate filing fees, county permits, heavy 
duty vinyl pouches, or alternative containers.''); Compl. at 7, 
Liberty Chevrolet, (falsely telling consumers they must pay ``dealer 
prep,'' ``air money,'' ``reconditioning,'' and ``documentation'' 
fees as part of auto sale).
    \45\ See, e.g., Compl. at 2-4, In re Value Rent-A-Car (failing 
to disclose airport surcharge fees); Compl. at 13, Funeral & 
Cremation Grp. of N. Am. (failing to disclose funeral-related fees 
for filing, permits, death certificates); 16 CFR 453.2(a) (requiring 
funeral providers to ``furnish accurate price information disclosing 
the cost to the purchaser of each of the specific funeral goods and 
funeral services used in connection with the disposition of deceased 
human bodies'').
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    The Commission seeks comment on, among other things, the prevalence 
of each of the above practices, the costs and benefits of a rule that 
would require upfront inclusion of any mandatory fees whenever 
consumers are quoted a price for a good or service and other potential 
rule requirements to curtail unfair or deceptive fees, and alternative 
or additional action to such a rulemaking, such as the publication of 
additional consumer and business education materials and hosting of 
public workshops. In their replies, commenters should provide any 
available evidence and data that support their position, such as 
empirical data, consumer-perception studies, and consumer complaints.

C. Public Comments on a Related Petition and Request for Comment

    On December 27, 2021, the Federal Trade Commission published a 
petition for rulemaking submitted by the Institute for Policy Integrity 
(``Policy Integrity'').\46\ The petition asks the Commission to 
promulgate rules to address the practice it identifies as ``drip 
pricing.'' Drip pricing is defined by the petition as ``the practice of 
advertising only part of a product's price upfront and revealing 
additional charges later as consumers go through the buying process.'' 
\47\ The petition itself addressed only some of the issues explored in 
this ANPR. The comment period for the petition closed on January 26, 
2022.\48\ The petition received 25 comments from individual consumers, 
trade associations, and industry leaders.\49\ Of these comments 
received, only one comment, by a ticket-broker corporation, urged 
caution as to drip-pricing rulemaking, while the rest supported 
granting the petition.
---------------------------------------------------------------------------

    \46\ See Inst. for Policy Integrity, Pet. for Rulemaking 
Concerning Drip Pricing 1 (2021), https://policyintegrity.org/documents/Petition_for_Rulemaking_Concerning_Drip_Pricing.pdf 
(``Policy Integrity Pet.'').
    \47\ Pet. at 1 (quoting Mary Sullivan, supra n.7).
    \48\ See Fed. Trade Comm'n, Notice of Pet., 87 FR 73207 (Dec. 
27, 2021), https://www.federalregister.gov/documents/2021/12/27/2021-27435/petition-for-rulemaking-by-institute-for-policy-integrity.
    \49\ See Policy Integrity Pet. Rulemaking Dkt. (``Browse All 
Comments'' tab), https://www.regulations.gov/docket/FTC-2021-0074/comments.
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    The petition argues that, by initially withholding crucial pricing 
information, sellers manipulate market pressures to consumers' 
detriment.\50\ Consumers then cannot effectively comparison-shop to 
find the best value or must devote an undue amount of time to making 
cost-appropriate decisions. According to the National Economic Council, 
these skewed market dynamics may cause consumers to ``systematically . 
. . pay more for goods and services.'' \51\ Policy Integrity recommends 
the Commission require sellers to provide prominent indication of the 
entire price imposed by a seller, including all mandatory fees and 
service charges (but excluding optional add-on features and taxes 
imposed by government).\52\ The petition identifies Commission 
authority to impose such a rule as stemming from the Commission's 
Section 5 mandate to protect consumers and competition by preventing 
unfair, deceptive, and anticompetitive practices.\53\ By 
misrepresenting a product's true cost, drip pricing, according to the 
petition, deceives consumers acting reasonably under the circumstances, 
unfairly imposes injury not reasonably avoidable and not outweighed by 
countervailing benefits, and disadvantages parties who disclose entire 
prices upfront, which makes it an unfair method of competition.\54\
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    \50\ Pet. at 1.
    \51\ Competition Initiative at 9.
    \52\ See Pet. at 2.
    \53\ See 15 U.S.C. 45(a)(2) (``The Commission is hereby 
empowered and directed to prevent persons, partnerships, or 
corporations . . . from using unfair methods of competition in or 
affecting commerce and unfair or deceptive acts or practices in or 
affecting commerce'').
    \54\ See Pet. at 3, 10, 16.
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    Policy Integrity notes the Commission's long record of related 
enforcement actions, such as: preventing door-to-door encyclopedia 
salespersons from initially posing as advertising researchers; \55\ 
enforcing the Telemarketing Sales Rule against parties 
mischaracterizing the commercial nature of their calls; \56\ 
prohibiting a rental car company from using the misleading name 
``Dollar-a-Day'' to lure customers; \57\ and disciplining a debt-
negotiation company for its false pledge to settle all client accounts 
for 40-60% of the debt owed.\58\ Specific to drip pricing, Policy 
Integrity points to Commission actions including: the convening of a 
2012 conference \59\ and the 2019 workshop on tickets, a 2012 warning 
to hotel operators of potential Section 5 violations through their 
reservation websites,\60\ and a broader declaration by then-Chair Jon 
Leibowitz that drip-pricing practices do ``a huge disservice to 
American consumers.'' \61\
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    \55\ See Encyc. Britannica, Inc., 87 F.T.C. 421, 495-97, 531 
(1976), aff'd, 605 F.2d 964 (7th Cir. 1979), as modified, 100 F.T.C. 
500 (1982).
    \56\ See Fed. Trade Comm'n, FTC Enforcement Policy Statement on 
Deceptively Formatted Advertisements 8 & n.29 (2015) (collecting 
such cases), https://www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf.
    \57\ See Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962, 964 
(9th Cir. 1975).
    \58\ See FTC v. Connelly, No. 06-cv-701, 2006 WL 6267337, at 
*11-12 (C.D. Cal. Dec. 20, 2006).
    \59\ See Fed. Trade Comm'n, The Economics of Drip Pricing (May 
21, 2012), https://www.ftc.gov/news-events/events-calendar/2012/05/economics-drip-pricing.
    \60\ See Warning Ltr., supra n.44.
    \61\ Press Release, Fed. Trade Comm'n, FTC Warns Hotel Operators 
that Price Quotes that Exclude `Resort Fees' and Other Mandatory 
Surcharges May Be Deceptive (Nov. 28, 2012), https://www.ftc.gov/news-events/news/press-releases/2012/11/ftc-warns-hotel-operators-price-quotes-exclude-resort-fees-other-mandatory-surcharges-may-be.
---------------------------------------------------------------------------

    The petition identifies the Department of Transportation's 2011 
Full Fare Advertising Rule as a useful regulatory precedent for 
requiring clear indication of ``the entire price to be paid.'' \62\ It 
also highlights that the District of Columbia \63\ and Nebraska \64\ 
have filed parallel suits against Marriott and Hilton, respectively, 
while the City and County of San Francisco filed suits against the 
operators of online travel sites JustFly and FlightHub.\65\ 
Congressional leaders recently called on the Commission to act against 
deceptive and unfair practices related to hidden fees in the event-
ticket-sales industry.\66\

[[Page 67418]]

Policy Integrity argues such piecemeal policies limited to particular 
sectors or regions cannot substitute for comprehensive nationwide 
regulation.\67\ Policy Integrity's petition outlines the legal bases 
for determining an act or practice is deceptive, unfair, or an unfair 
method of competition, concluding that drip pricing falls under each of 
these categories.\68\
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    \62\ 14 CFR 399.84(a).
    \63\ See Compl. at 1, D.C. v. Marriott International, Inc. (D.C. 
Super. Ct. July 9, 2019), https://oag.dc.gov/sites/default/files/2019-07/Marriott-Complaint.pdf.
    \64\ See Am. Compl. at 4, Nebraska v. Hilton Dopco., Inc., No. 
CI 19-2366 (Lancaster Cty. Neb., July 24, 2019), https://hotellaw.jmbm.com/files/2019/07/Nebraska-v-Hilton-resort-fee-complaint-7-24-19.pdf.
    \65\ See Press Release, City Att'y of S.F., Herrera Sues JustFly 
and FlightHub Over Hidden Fees and Other Predatory Scams (Sept. 19, 
2019), https://www.sfcityattorney.org/2019/09/19/herrera-sues-justfly-and-flighthub-over-hidden-fees-and-other-predatory-scams/.
    \66\ Ltr. to Chairman Simons from Congressmen Pallone and 
Pascrell (June 20, 2018), https://pascrell.house.gov/sites/pascrell.house.gov/files/ftc%20letter%20on%20ticket%20sales_072018.pdf.
    \67\ See Pet. at 7.
    \68\ See id. at 10-24.
---------------------------------------------------------------------------

    The petition also explores at length what benefit-cost analyses may 
be required to promulgate the rule the petition proposes.\69\ While the 
Commission, as an independent regulatory agency, is not subject to 
Executive Order 12866, it faces a similar obligation to assess the 
economic effect of its rulemaking under Section 22 of the FTC Act, 15 
U.S.C. 57b-3. Policy Integrity cites as primary benefits of drip-
pricing regulation the corresponding decrease in consumer search time 
and a decrease in overpriced transactions.\70\ Policy Integrity 
considers the primary cost of drip-pricing regulation to come through 
private-sector compliance in the form of substantial modification of 
solicitation schemes and online ticket portals, with possible secondary 
costs from administrative and enforcement efforts.\71\ Policy Integrity 
stresses that, because redistributed costs between buyers and sellers 
are ``monetary payments from one group to another, that do not affect 
total resources available to society,'' these are neither ``costs'' nor 
``benefits'' in the strict economic sense.\72\
---------------------------------------------------------------------------

    \69\ See generally id. at 25-31.
    \70\ See id. at 28-29.
    \71\ See id. at 27-28.
    \72\ See id. at 30-31.
---------------------------------------------------------------------------

    Policy Integrity proposes the following rulemaking language:

    It is an unfair or deceptive act or practice and unfair method 
of competition to advertise or solicit the sale of a product or 
service without prominently disclosing the entire price to be paid 
by the customer inclusive of all unavoidable fees and service 
charges (excluding government taxes). Although unavoidable fees and 
charges included within the single total price disclosed may also be 
stated separately from the total price, such statement of fees and 
charges may not be false or misleading and may not be presented more 
prominently or in the same or larger size as the total price. In 
addition, all other fees or service charges that might foreseeably 
be assessed in connection with the sale of the product or service, 
including additional fees for optional services, must be 
conspicuously disclosed in the advertisement or solicitation.\73\
---------------------------------------------------------------------------

    \73\ Id. at 5.

    Comments to Policy Integrity's petition largely supported its 
effort, with 24 in support and one urging caution.\74\ Policy Integrity 
itself comments on its own petition, focusing on findings from two 
recent studies: ``These studies find that, absent regulation, online 
platforms have strong incentives to hide fees and that drip pricing 
lowers consumers' perceived price fairness.'' \75\
---------------------------------------------------------------------------

    \74\ See Policy Integrity Pet. Rulemaking Dkt. (``Browse All 
Comments'' tab), https://www.regulations.gov/docket/FTC-2021-0074/comments.
    \75\ Cmt. of Policy Integrity on Pet. at 1 (Jan. 25, 2022), 
https://www.regulations.gov/comment/FTC-2021-0074-0003.
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    The first study, ``Deceptive Features on Platforms,'' analyzed 
``incentives of online platforms to hide additional'' mandatory fees, 
such as service charges, from the market.\76\ Platforms have the 
capability either to hide the mandatory fees or to disclose them 
transparently to consumers upfront, and the study found, even though 
the platforms will not themselves receive the hidden fees or 
commissions, a platform still has ``stronger incentives'' to hide the 
fees than sellers do themselves.\77\ This is because platforms that 
hide these additional fees for all sellers make ``overall product 
prices seem lower'' and ``are more likely to attract more buyers.'' 
\78\ Even as sophisticated buyers might avoid these platforms, 
unsuspecting buyers will still use such platform and raise their 
revenues. There is a ``spillover effect on obscuring platform fees: a 
platform can shroud seller fees to increase the number of buyers, and 
that increase in turn incentives platforms to hide their own fees.'' 
\79\ The study concludes that policies such as the Policy Integrity 
petition's upfront pricing model is ``likely, in aggregate, to increase 
consumer surplus.'' \80\
---------------------------------------------------------------------------

    \76\ Id.
    \77\ Id. at 2 (quoting study).
    \78\ Id.
    \79\ Id.
    \80\ Id.
---------------------------------------------------------------------------

    The second study, ``Many a Little Makes a Mickle: Why Do Consumers 
Negatively React to Sequential Price Disclosure?,'' used ``eye-tracking 
data'' to analyze consumer reaction to the ``timing of price 
disclosures and the number of sequentially presented surcharges.'' \81\ 
The study found sequential final price disclosures both increased ``a 
consumer's perceived price complexity'' and ``decreased their perceived 
transparency of a firm's pricing.'' \82\ Consumers, as a result, find 
sequential pricing is less fair but upfront disclosure of the final 
price is ``more transparent'' and fair.\83\ The study concluded drip 
pricing injures consumers because it increases ``the amount of effort 
they must exert to understand the total price and to compare prices 
between products and sellers.'' \84\
---------------------------------------------------------------------------

    \81\ Id. at 3.
    \82\ Id.
    \83\ Id.
    \84\ Id.
---------------------------------------------------------------------------

    The Commission received three comments from industry participants 
and four from consumer organizations on Policy Integrity's petition. 
Notably, the National Association of Ticket Brokers urges caution in 
its comment.\85\ As a general matter, ``NATB supports fair and 
transparent live event ticket sales and has supported a requirement of 
`all-in pricing' which would be the outcome of a prohibition on drip 
pricing.'' \86\ NATB warns, however, as it did in the 2019 Commission 
workshop on online ticket sales, a rule will be effective only if (1) 
it were required of every ticket seller and (2) there were ``rigorous 
and expeditious enforcement.'' \87\ The NATB comment also mentions a 
variety of other issues facing the ticket industry, including 
transferability, ticket holdbacks when tickets go on sale, cancellation 
of season tickets, locking tickets in a single platform, deceptive 
websites, non-transparent fees, bots, and others. The comment letter 
agrees reform in the ticket market is needed, suggests the Commission 
take action under its existing authority, and states new federal 
legislation is needed to provide broader authority to the 
Commission.\88\
---------------------------------------------------------------------------

    \85\ See Cmt. of Nat'l Ass'n of Ticket Brokers on Pet. 1 (Jan. 
26, 2022), https://www.regulations.gov/comment/FTC-2021-0074-0024.
    \86\ Id.
    \87\ Id.
    \88\ See id.
---------------------------------------------------------------------------

    On the other hand, the National Consumers League ``strongly 
supports the petition'' to promulgate rules governing drip pricing.\89\ 
NCL notes its history of fighting drip pricing in live event ticketing, 
hotel accommodations, and airline tickets, having joined the Sports 
Fans Coalition to ask the Commission to prohibit drip pricing for live 
event ticketing in 2018.\90\ The comment argues that, following the 
Live Nation-Ticketmaster merger in 2010, the ``unfair and deceptive 
practices have gone largely unchecked.'' \91\ The

[[Page 67419]]

comment notes that, while drip pricing is particularly prevalent in the 
live-event, hotel, and airline industries, other industries use drip 
pricing as well.\92\
---------------------------------------------------------------------------

    \89\ Cmt. of Nat'l Consumers League on Pet. 1 (Jan. 26, 2022), 
https://www.regulations.gov/comment/FTC-2021-0074-0019.
    \90\ See id.
    \91\ Id. at 2.
    \92\ See id. at 3.
---------------------------------------------------------------------------

    The U.S. Public Interest Research Group and Education Fund notes in 
its comment ``[t]here are no circumstances where a reasonable person 
could think it's OK to reveal only part of the cost of a product or 
service'' and ``[t]ransparency is a moral obligation.'' \93\ The 
comment advocates that promulgation of a rule would ensure other 
industries would be required to disclose all mandatory fees, like the 
``full-fare advertising rule.'' \94\ The comment also notes the CFPB is 
exploring a similar effort to reduce junk fees charged by banks and 
other financial institutions. The comment points out a new rule would 
not control how much businesses charge for their goods and services; it 
would instead require them to disclose all those charges to the 
consumer at the outset of a purchase.\95\
---------------------------------------------------------------------------

    \93\ Cmt. of U.S. Public Interest Research Grp. Educ. Fund on 
Pet. (Jan. 26, 2022), https://www.regulations.gov/comment/FTC-2021-0074-0022.
    \94\ Id.
    \95\ See id.
---------------------------------------------------------------------------

    Travelers United notes it has been very active on the issue of drip 
pricing for over a decade.\96\ The comment emphasizes the Commission 
has extensively studied the issue of drip pricing and published reports 
in the past decade. The comment notes ``[e]very action has determined 
that drip pricing is harmful to consumers, and it undermines market 
competition.'' \97\ The comment also discusses Travelers United's 
extensive work with the Department of Transportation to create the Full 
Fare Advertising Rule, which requires airlines to disclose all 
mandatory taxes and fees in its advertising of ticket prices.\98\ After 
its passage, several airlines unsuccessfully sued the DOT to overturn 
the rule. The comment advocates that the Commission must work to close 
this loophole that ``allows hotel drip pricing even when accommodations 
are sold together with regulated airfares.'' \99\ Travelers United also 
discussed its advocacy work with NAAG which resulted in lawsuits by 
state attorneys general against Marriot and Hilton. The comment notes 
``American consumers are facing an assault of deceptive fees'' and 
``[w]orse yet, the growth of drip pricing harms not only consumers but 
also sellers who attempt to be honest and decline participation in the 
practice.'' \100\
---------------------------------------------------------------------------

    \96\ See Cmt. of Travelers United, Inc. on Pet. (Jan. 26, 2022), 
https://www.regulations.gov/comment/FTC-2021-0074-0021.
    \97\ Id. at 2.
    \98\ See id. at 2-3.
    \99\ Id. at 3.
    \100\ Id. at 4.
---------------------------------------------------------------------------

    Consumer Reports likewise has opposed drip pricing for years, 
describing the practice as ``a particularly pernicious form of `bait 
and switch,' made even more potent with the growing use of the internet 
for consumer transactions.'' \101\ Consumer Reports states the 
Department of Transportation's Full Fare Advertising Rule is a ready 
model and a good start, ``although Consumer Reports to improve 
transparency for non-mandatory but common ancillary fees, such as for 
seat assignments and baggage.'' \102\
---------------------------------------------------------------------------

    \101\ Cmt. of Consumer Reports on Pet. 1 (Jan. 26, 2022), 
https://www.regulations.gov/comment/FTC-2021-0074-0023.
    \102\ Id. at 2.
---------------------------------------------------------------------------

    Two online ticket sellers, TickPick \103\ and TicketNetwork,\104\ 
voice their strong support for the petition and note their websites 
feature straightforward models that do not hide fees from consumers. 
Both companies stress that, without Commission intervention, companies 
that adopt more-straightforward pricing models will continue to play on 
an uneven playing field. TicketNetwork notes, according to a survey it 
conducted, ``most major ticket marketplaces allow for this all-in model 
after comments from FTC Commissioner Rebecca Kelly Slaughter . . . 
indicated support for a move away from drip pricing.'' \105\ TickPick 
states it was the first in the industry to offer a ``no-fee'' 
marketplace and it has saved consumers more than $50 million by not 
charging service fees.\106\ TickPick expresses that the ``base price of 
a ticket'' and the ``service'' or ``convenience fees'' are often 
``contrived by primary and/or secondary ticket sellers to increase 
consumer demand.'' \107\ TickPick supports elimination of drip pricing 
but recommends the proposed language from the petition be modified to 
``ensure companies are fully apprised of what is required for 
compliance.'' \108\ Specifically, the comment suggests two key 
principles to guide the Commission: (1) the all-in prices should be 
``prominently disclosed to the consumer on the ticketing platform, as 
well as in any advertising'' before any component prices are broken 
out; and (2) ``all-in'' prices should not include taxes or any optional 
fees that the customer may or may not decide to purchase, and the terms 
``optional fees,'' ``service charges,'' and ``mandatory'' or 
``unavoidable fees'' must be carefully defined.\109\
---------------------------------------------------------------------------

    \103\ See Cmt. of TickPick, LLC on Pet. 1 (Jan. 26, 2022), 
https://www.regulations.gov/comment/FTC-2021-0074-0026.
    \104\ See Cmt. of TicketNetwork on Pet. 1 (Jan. 26, 2022), 
https://www.regulations.gov/comment/FTC-2021-0074-0027.
    \105\ Id.
    \106\ Cmt. of TickPick at 1.
    \107\ Id. at 1-2.
    \108\ Id. at 2.
    \109\ Id.
---------------------------------------------------------------------------

    Seventeen individual consumers offer comment in support of Policy 
Integrity's petition. The consumers' comments evince a general sense of 
frustration with drip pricing, and several directly plea for the 
Commission to act. As Colleen Welch puts it, ``There are few things 
more irritating when shopping than to have the final price be way more 
than expected due to mandatory fees.'' \110\ An anonymous commenter 
underscores the hardship these fees cause: ``As someone making minimum 
wage, it's impossible to budget and attend these events when prices sky 
rocket with hidden fees.'' \111\ Many comments reflect that consumers 
are generally upset when they feel as if the price is a surprise. Amy 
Lebetsamer states, ``My purchase should be straight-forward and I 
should know exactly what I'm paying for.'' \112\ One commenter 
describes receiving an unwelcome surprise when a Boston hotel slid a 
piece of paper under her door the night before check-out with a $50 
``resort fee'' that had not been previously disclosed.\113\ Another 
commenter, Daniel Melling, expresses his dismay after seeing L.A. 
Lakers basketball tickets advertised as $42.00, he clicked to the 
checkout page and saw service fees totaling $13.95.\114\ Mr. Melling 
states, ``Drip pricing wastes time as I have to take extra steps in 
online purchases to reach the checkout window before the vendor 
provides me with a final price.'' \115\ Many consumers note the lack of 
transparency among

[[Page 67420]]

ticket sellers is unfair because consumers are at an information 
disadvantage. One commenter, Janice Hough, is a travel agent who spent 
``HOURS'' trying to figure out the total price of a trip because of the 
various additional fees.\116\ Commenter Scott Ogawa notes that, if the 
Commission promulgates a rule banning drip pricing, the rule may become 
``self-enforcing'' because consumers will be irritated by violations of 
new norms and look to alternative choices.\117\ Other individual 
consumers' comments express their dismay at the practice of drip 
pricing and urge the Commission to take action to prevent it.\118\
---------------------------------------------------------------------------

    \110\ Cmt. of Colleen Welch on Pet. (Jan. 26, 2022), https://www.regulations.gov/comment/FTC-2021-0074-0010.
    \111\ Cmt. of Anonymous on Pet. (Jan. 26, 2022), https://www.regulations.gov/comment/FTC-2021-0074-0016.
    \112\ Cmt. of Amy Lebetsamer on Pet. (Jan. 26, 2022), https://www.regulations.gov/comment/FTC-2021-0074-0008.
    \113\ See Cmt. of Anonymous on Pet. (Jan. 26, 2022), https://www.regulations.gov/comment/FTC-2021-0074-0025.
    \114\ See Cmt. of Daniel Melling on Pet. (Jan. 26, 2022), 
https://www.regulations.gov/comment/FTC-2021-0074-0011 (attaching 
screenshots).
    \115\ Id. See also id. (``With more consumers relying on e-
commerce and online purchases of goods and services, now is an 
important time for FTC to initiate this rulemaking process and 
provide consumers with the fair and transparent pricing they 
deserve.'').
    \116\ Cmt. of Janice Hough on Pet. (Jan. 26, 2022), https://www.regulations.gov/comment/FTC-2021-0074-0012.
    \117\ Cmt. of Scott Ogawa on Pet. (Jan. 26, 2022), https://www.regulations.gov/comment/FTC-2021-0074-0020.
    \118\ See generally Policy Integrity Pet. Rulemaking Dkt. 
(``Browse All Comments'' tab), https://www.regulations.gov/docket/FTC-2021-0074/comments.
---------------------------------------------------------------------------

    The comments received by the CFPB in response to its request for 
comments on fees imposed by providers of consumer financial products 
and services express the same frustrations and concerns, albeit in 
greater volume: The CFPB received 50,007 comments, which suggests drip 
pricing may be ripe for action. Many commenters submitted comments 
relaying their frustration with encountering hidden fees when seeking 
to purchase live event tickets, hotel, and travel accommodations. A 
graduate student, Ray Stevens, related his frustrations with travel-
related companies that hide additional fees, writing, ``I don't object 
to paying fair prices for goods and services, but in order to be 
responsible for myself and my family, I want to know what I will be 
charged up front when I do business with, and feel that what I am 
paying is the actual price of the purchase . . . .'' \119\ Tens of 
thousands of other comments offer a similar perspective. This parallel 
inquiry at the CFPB further reinforces the importance of the rulemaking 
proceeding initiated by the Commission with this ANPR. The CFPB does 
not have authority to address drip pricing beyond its jurisdiction of 
consumer financial products and services, but the Commission can go 
further and address unfair or deceptive fee practices in interstate 
commerce.
---------------------------------------------------------------------------

    \119\ Cmt. of Ray Stevens on CFPB Request for Info. Regarding 
Fees Imposed by Providers of Consumer Fin. Prods. or Servs. (Feb. 
17, 2022), https://www.regulations.gov/comment/CFPB-2022-0003-0790.
---------------------------------------------------------------------------

    The Commission finds Policy Integrity's petition and the public 
comments submitted in response to it persuasive. Accordingly, the 
Commission, through its publication of this ANPR and a corresponding 
Order, grants Policy Integrity's petition for rulemaking.

D. The Rulemaking Process

    The Commission seeks the broadest participation by the affected 
interests in the rulemaking. The Commission encourages all interested 
parties to submit written comments. The Commission also expects 
affected interests to assist the Commission in analyzing various 
options and in drafting any proposed rule. After reviewing comments 
submitted in response to this ANPR, the Commission may proceed with 
further steps outlined in Section 18 of the FTC Act and Part 1, Subpart 
B, of the Commission's Rules of Practice.

III. Request for Comments

    Members of the public are invited to comment on any issues or 
concerns they believe are relevant to the Commission's consideration of 
the proposed rulemaking. In addition to the issues raised above, the 
Commission solicits public comment on the specific questions identified 
below. These questions are designed to assist the public and should not 
be construed as a limitation on the issues on which public comment may 
be submitted. For all questions, the Commission seeks commenters' 
views, arguments, experiences, and the qualitative and quantitative 
data that support or inform their answers.\120\ The Commission requests 
that factual data upon which the comments are based be submitted with 
the comments.
---------------------------------------------------------------------------

    \120\ See Fed. Trade Comm'n, Public Participation in the 
Rulemaking Process, https://www.ftc.gov/enforcement/rulemaking/public-participation-rulemaking-process. Commenters who filed 
comments on other rulemaking dockets that address related issues, 
such as the notice of proposed rulemaking concerning a Motor Vehicle 
Dealers Trade Regulation Rule or the Regulatory Review of the 
Funeral Rule, are welcome to re-file those comments, or update them 
as commenters think appropriate, on this rulemaking docket. The 
Commission's analysis of public comments in considering whether to 
proceed to a notice of proposed rulemaking on Unfair or Deceptive 
Fees will be based only on comments filed on this docket in response 
to this ANPR and not on any other rulemaking dockets.
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Questions

    1. How widespread is the practice of misrepresenting or failing to 
disclose on any advertisement or marketing the total cost for a good or 
service for sale? To what extent are total costs misrepresented during 
the advertising or marketing of a good or service? Provide all 
available data and evidence that supports your answer, such as 
empirical data, consumer-perception studies, and consumer complaints.
    2. How widespread is the practice of misrepresenting or failing to 
disclose on any advertisement or marketing the existence of any fees, 
interest, charges, or costs that cannot be reasonably avoided or are 
mandatory? To what extent are those mandatory fees misrepresented 
during the advertising or marketing of a good or service?
    3. How widespread is the practice of misrepresenting or failing to 
disclose clearly and conspicuously on an advertisement or in marketing 
whether fees, interest, charges, products, or services are optional or 
required? To what extent is the optional or required nature of a fee, 
interest, charge, product, or service misrepresented during the 
advertising or marketing of a good or service? To what extent are such 
optional or required fees, interest, charges, products, or services 
related to the product or service that is the primary purpose of the 
transaction?
    4. How widespread is the practice of misrepresenting or failing to 
disclose clearly and conspicuously on an advertisement or in marketing 
any material restriction, limitation, or condition that may result in a 
mandatory charge in addition to the cost of the good or service or that 
may diminish the consumer's use of the good or service, including the 
amount the consumer receives? To what extent are those material 
restrictions, limitations, or conditions misrepresented during the 
advertising or marketing of the good or service?
    5. How widespread is the practice of misrepresenting that a 
consumer owes payment for any product or service the consumer did not 
agree to purchase? To what extent are such claims made expressly in 
written text or oral communications and to what extent are they made 
indirectly?
    6. How widespread is the practice of billing or charging consumers 
for fees, interest, goods, services, or programs without the consumer's 
express and informed agreement? To what extent are third parties 
engaging in such practices, including add-ons and upsells to which 
consumers did not agree?
    7. How widespread is the practice of charging consumers for fees, 
interest, goods, services, or programs that have little or no added 
value to the consumer? Are there specific industries or market sectors 
in which this practice occurs more often? How, if at all, should the 
value of fees be defined or determined?
    8. How widespread is the practice of charging fees for goods or 
services that

[[Page 67421]]

consumers would reasonably assume to be included within the overall 
advertised price? Are there specific industries or market sectors in 
which this practice occurs more often? Please share any evidence of 
consumer perception, such as copy tests or surveys.
    9. How widespread is the practice of misrepresenting or failing to 
disclose clearly and conspicuously on an advertisement or in marketing 
the nature or purpose of any fee, interest, charge, or other costs? To 
what extent are such claims made expressly and to what extent are they 
made indirectly?
    10. How widespread is the practice of misrepresenting that a fee or 
charge is a mandatory fee, charge, or tax imposed by a government 
entity? To what extent are such claims made expressly and to what 
extent are they made indirectly?
    11. How widespread is the practice of misrepresenting or failing to 
disclose clearly and conspicuously fees or charges for terminating 
services or contracts? To what extent are those fees misrepresented 
expressly or indirectly during the marketing of a good or service?
    12. For any practices discussed in Questions 1 through 11, above, 
does the practice cause consumer injury? If so, what type of consumer 
injury does it cause?
    13. For each of the practices described in Questions 1 through 11, 
above, are there circumstances in which such practices would not be 
deceptive or unfair? If so, what are those circumstances, and could and 
should the Commission exclude such circumstances from the scope of any 
rulemaking? Why or why not?
    14. Is there a need for new regulatory provisions to prevent the 
practices described in Questions 1 through 11, above? If yes, why? If 
no, why not?
    15. How should a rule addressing the practices described in 
Questions 1 through 11, above, be crafted to maximize the benefits to 
consumers and to minimize the costs to legitimate businesses?
    16. Should a rule addressing the practices described in Questions 1 
through 11, above, require businesses to disclose in all advertising 
one price that encompasses all mandatory component parts, otherwise 
known as ``all-in pricing''? Why or why not? Should any such rule also 
require that the advertised price include government-imposed taxes or 
fees? Why or why not?
    17. Should a rule addressing the practices described in Questions 1 
through 11, above, forbid misrepresentations as to the nature, 
optionality, value, price, recurrence, or other material features of 
any fees? Why or why not?
    18. Should a rule addressing the practices described in Questions 1 
through 11, above, including any rule requiring disclosure of all-in 
pricing, apply to all industries? Would such a rule be better if it 
expressly applied only to certain industries? Are there any industries 
for which such a rule should not apply? Why or why not?
    19. How would a rule addressing the practices described in 
Questions 1 through 11, above, intersect with existing industry 
practices, norms, rules, laws, or regulations? Are there any existing 
laws or regulations that would affect or interfere with the 
implementation of a rule addressing the practices described in 
Questions 1 through 11, above?
    20. Should the Commission consider publishing additional consumer 
and business education materials or hosting public workshops to reduce 
consumer harm associated with the practices described in Questions 1 
through 11, above? If so, what should such education materials include, 
and how should the Commission communicate that information to consumers 
and businesses?
    21. Are there other commercial acts or practices involving junk 
fees or hidden fees that are deceptive or unfair that should be 
addressed in the proposed rulemaking? If so, describe the practices. 
How widespread are the practices? Please answer Questions 12 through 
20, above, with respect to these practices.

IV. Comment Submissions

    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before January 9, 2023. 
Write ``Unfair or Deceptive Fees ANPR, R207011'' on your comment. Your 
comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the website https://www.regulations.gov.
    Because of the public health protections and the agency's 
heightened security screening, postal mail addressed to the Commission 
will be subject to delay. We strongly encourage you to submit your 
comments online through the https://www.regulations.gov website. To 
ensure the Commission considers your online comment, please follow the 
instructions on the web-based form.
    If you file your comment on paper, write ``Unfair or Deceptive Fees 
ANPR, R207011'' on your comment and on the envelope, and mail your 
comment to the following address: Federal Trade Commission, Office of 
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex B), 
Washington, DC 20580.
    Because your comment will be placed on the public record, you are 
solely responsible for making sure your comment does not include any 
sensitive or confidential information. In particular, your comment 
should not contain sensitive personal information, such as your or 
anyone else's Social Security number; date of birth; driver's license 
number or other state identification number or foreign country 
equivalent; passport number; financial account number; or credit or 
debit card number. You are also solely responsible for making sure your 
comment does not include any sensitive health information, such as 
medical records or other individually identifiable health information. 
In addition, your comment should not include any ``[t]rade secret or 
any commercial or financial information which . . . is privileged or 
confidential''--as provided in Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and Commission Rule 4.10(a)(2), 16 CFR 4.10(a)(2)--including in 
particular competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with Commission Rule 4.9(c), 16 CFR 
4.9(c). In particular, the written request for confidential treatment 
that accompanies the comment must include the factual and legal basis 
for the request and must identify the specific portions of the comment 
to be withheld from the public record. See Commission Rule 4.9(c). Your 
comment will be kept confidential only if the General Counsel grants 
your request in accordance with the law and the public interest. Once 
your comment has been posted publicly at https://www.regulations.gov--
as legally required by Commission Rule 4.9(b), 16 CFR 4.9(b)--we cannot 
redact or remove your comment, unless you submit a confidentiality 
request that meets the requirements for such treatment under Commission 
Rule 4.9(c), and the General Counsel grants that request.
    Visit the Commission's website to read this document and the news 
release describing it. The FTC Act and other laws the Commission 
administers permit the collection of public comments to consider and 
use in this proceeding as appropriate. The Commission will consider all 
timely

[[Page 67422]]

and responsive public comments it receives on or before January 9, 
2023. For information on the Commission's privacy policy, including 
routine uses permitted by the Privacy Act, see https://www.ftc.gov/siteinformation/privacypolicy.

    By direction of the Commission, Commissioner Wilson dissenting.
April J. Tabor,
Secretary.

    Note: the following statements will not appear in the Code of 
Federal Regulations.

Statement of Chair Lina M. Khan

    Today we are considering the publication of an advance notice of 
proposed rulemaking to address the problem of junk fees. ``Junk fees'' 
are extra charges associated with unnecessary or worthless services. 
Companies often fail to disclose these fees up front. Earlier this 
week, the Commission announced a quintessential junk fee case. 
According to the complaint, Passport Auto advertised a price for cars 
that were certified, reconditioned, and inspected. But when people went 
to buy a car, they were hit with charges for certification, 
reconditioning, and inspection.
    These types of extra or redundant fees can mislead consumers or 
prevent them from knowing the true cost of a purchase until they've 
already invested substantial time and energy. At that point, they may 
feel like it's too late to walk away. Junk fees also prevent consumers 
from making accurate price comparisons, which means they end up 
spending more than they expected or wanted to.
    These fees don't only harm consumers--they can also force honest 
businesses to compete on an unfair playing field. A company selling a 
widget for 25 dollars might lose sales to a company selling a 
comparable widget for 20 dollars, plus a six-dollar widget-
certification fee tacked on at the end.
    Junk fees have come to feel like an inevitable fact of life. 
Consumer Reports found that eighty-two percent of those surveyed had 
spent money on hidden fees in the previous year. In reality, there's 
nothing inevitable about this.\1\ These fees are a surprisingly recent 
phenomenon. So-called ``resort fees'' at hotels, for example, first 
emerged in the late 1990s. By 2015, they accounted for one-sixth of 
total hotel revenue. That's $2 billion per year.\2\ In higher education 
and hospitality, fees are increasing faster than tuition or posted room 
rates.\3\
---------------------------------------------------------------------------

    \1\ See Consumer Reports, WTFee Survey: 2018 Nationally 
Representative Multi-Mode Survey 7 (2019), https://advocacy.consumerreports.org/wp-content/uploads/2019/09/2018-WTFee-Survey-Report-_-Public-Report-1.pdf.
    \2\ Nat'l Econ. Council, The Competition Initiative and Hidden 
Fees 7-15 (2016), https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf.
    \3\ See Christopher Elliott, There May Be an End in Sight for 
Controversial--And Often Invisible--Resort Fees, Wash. Post (June 
16, 2016), https://www.washingtonpost.com/lifestyle/travel/there-may-be-an-end-in-sight-for-controversial-and-often-invisible-resort-fees/2016/06/16/101f6074-317e-11e6-8758-d58e76e11b12_story.html; 
Farran Powell & Emma Kerr, 11 Surprising College Fees You May Have 
to Pay, U.S. News & World Report (Feb. 12, 2020), https://www.usnews.com/education/best-colleges/paying-for-college/slideshows/10-surprising-college-fees-you-may-have-to-pay.
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    The Commission has a long track record of taking action against 
junk fees, and that deep experience would inform any potential 
rulemaking we undertake here. The FTC has regulated junk fees in 
sector-specific contexts, including telemarketing and funeral homes. It 
has also brought many enforcement cases, including against junk fees on 
prepaid phone cards, loan servicing, insurance-related products, and 
more. Merchants are free to set prices for services rendered. But when 
they add arbitrary, opaque fees that seem calibrated to squeeze more 
money out of customers--sometimes without their knowledge, or once it 
feels too late to back out--consumer protection laws can kick in.
    Unfortunately, in areas where there is no specific rule or sector-
specific law, the Commission lacks authority to seek penalties against 
violators or readily get financial compensation for victims. A forward-
looking rule classifying certain junk fees as unfair or deceptive could 
give us that authority, allowing us to make wronged consumers whole and 
to seek penalties from lawbreakers. That, in turn, would help create a 
powerful deterrent against imposing junk fees. If we move forward with 
considering a rulemaking, we will carefully review public comments when 
deciding whether and how to craft a rule that would protect consumers 
from these potentially unfair or deceptive practices.
    In fact, the public has already played a key role. Last fall, the 
Commission voted to make it easier for the public to submit petitions 
to the FTC.\4\ One petition that came in concerned ``drip pricing,'' a 
business practice companies can use to try and hide junk fees. That 
petition helped spur the action we're announcing today. The goal of our 
procedural change was to make the rulemaking process more open and 
democratic, and I'm glad that we have been able to follow through.
---------------------------------------------------------------------------

    \4\ Press Release, Fed. Trade Comm'n, FTC Opens Rulemaking 
Petition Process, Promoting Public Participation and Accountability 
(Sept. 15, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/09/ftc-opens-rulemaking-petition-process-promoting-public-participation-accountability.
---------------------------------------------------------------------------

    I also want to extend my gratitude to staff for their hard work on 
this effort. I strongly support moving forward with this ANPR and 
beginning this process.

Statement of Commissioner Rebecca Kelly Slaughter

    I'm sure that to the public some of the work we do at the 
Commission can seem obscure--only affecting a part of the market they 
don't really participate in. This matter is emphatically the opposite. 
There is probably no greater and universal frustration in modern 
American life than seeing an advertised price for a product or service 
and then getting to the cashier or online payment page and seeing that 
price balloon to what can feel like twice as much.
    Unfair and deceptive pricing practices aren't just annoying, they 
can prey on people's sunk costs in a transaction to squeeze even more 
money out of them at the last minute--effectively raising prices 
without appearing to do so. Empirical research on hidden fees and drip 
pricing have suggested that these fees ``cause, or even trick, people 
into buying things they would not otherwise.'' \1\ In a time when many 
folks need to make hard choices about what to spend money on this kind 
of deception is even more unconscionable.
---------------------------------------------------------------------------

    \1\ Nat'l Econ. Council, The Competition Initiative and Hidden 
Fees 8 (2016), http://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf.
---------------------------------------------------------------------------

    These practices undermine effective competition as well. As I 
mentioned during our vote for the Earnings Claims ANPR: Markets cannot 
function effectively without honest and transparent pricing. A market 
without transparent price signals can encourage deception and rent-
seeking incentivizing creative ways to extract wealth instead of 
providing the goods and services people value.
    The FTC has done great work in combating some of these practices. 
We've addressed mobile cramming charges, phone card charges, and fees 
in discount programs for goods and travel. We've also deployed our 
existing rules to combat hidden fees in telemarking scams, funerals, 
and to prevent companies from billing consumers without authorization. 
But, as in other areas where we have opened a rulemaking inquiry, case-
by-case enforcement has not effectively deterred these practices. Our 
inquiry into the prevalence and harms of practices like junk-fees, 
drip-pricing, resort fees,

[[Page 67423]]

service fees, and others is as necessary as it is timely.
    I want to thank BCP's Division of Advertising Practices and the 
Office of the General Counsel for their partnership and hard work in 
developing this ANPR. I look forward to hearing more from the public on 
this matter.

Dissenting Statement of Commissioner Christine S. Wilson

    Today the Commission votes to issue an advance notice of proposed 
rulemaking to address how prices are conveyed to consumers. Before 
discussing the substance of the ANPR, two procedural issues merit 
attention. First, the ANPR is based on the submission of a petition for 
rulemaking submitted by the Institute for Policy Integrity. I encourage 
consumer and industry groups to monitor the FTC's rulemaking docket and 
take seriously the public petitions that get published there--
yesterday's petition may very well become today's ANPR.
    Second, I was given less than three weeks to consider a rulemaking 
effort that, if adopted, could impact billions or even trillions of 
dollars in commerce, as well as millions of consumers and companies. I 
posed dozens of questions, many of which went unanswered. Today's 
proposal could launch rules that regulate the way prices are conveyed 
to consumers across nearly every sector of the economy. I understand 
that President Biden referenced so-called ``junk fees'' in remarks to 
the White House Competition Council on September 26, just three weeks 
ago.\1\ Chair Khan sits on that Council. And I recognize that some of 
these fees may be inadequately disclosed. But manufactured deadlines 
based on our monthly open commission meeting schedule to demonstrate 
that the Commission is in lockstep with the Biden Administration should 
not override our obligation to exercise our significant authority in 
sober and thoughtful ways. If FTC leadership truly believes that this 
proposal will result in a rule, then it is irresponsible to shortchange 
the Commission on the time required to perform our due diligence.
---------------------------------------------------------------------------

    \1\ Remarks by President Biden at the Third Meeting of the White 
House Competition Council (referencing many industries that do not 
fall within the FTC's jurisdiction) (Sept. 26, 2022), https://whitehouse.gov/briefing-room/speeches-remarks/2022/09/26/remarks-by-president-biden-at-the-third-meeting-of-the-white-house-competition-council/.
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    There are kernels of utility in the ANPR that I had hoped to 
explore with my fellow Commissioners and staff. I agree with ensuring 
that consumers (1) have access to sufficient information to make 
informed decisions and (2) are not charged for products or services 
they did not agree to purchase. I would have looked more favorably on a 
rulemaking effort narrowly focused on those issues, particularly where 
we have an enforcement track record. But the version of the ANPR we 
discuss today is sweeping in its breadth; may duplicate, or contradict, 
existing laws and rules; is untethered from a solid foundation of FTC 
enforcement; relies on flawed assumptions and vague definitions; 
ignores impacts on competition; and diverts scarce agency resources 
from important law enforcement efforts. For these reasons, I cannot 
support the issuance of this ANPR.
    Given my concerns, I would like to highlight issues on which 
stakeholder input would be constructive.

Breadth

     The ANPR explicitly mentions pricing practices in a wide 
array of industries, including auto financing, phone cards, fuel cards, 
payday lending, telecommunications, live entertainment, travel 
(including airlines, hotels, room-sharing, car rentals, and cruises), 
higher education, financial products and services, telemarketing, 
funeral services, publishing, insurance, and membership programs. Some 
of these sectors fall outside the FTC's jurisdiction. Of course, it is 
likely that a future rule will cover other industries not explicitly 
discussed in the ANPR, including e-commerce, retail, food services, 
healthcare, administration and business support, repair services, 
dating services, apartment rentals, commercial leasing, warehousing, 
logistics assistance, and professional and technical services. What 
other markets or industries could be covered by an omnibus pricing 
disclosure rule?\2\
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    \2\ Trade associations and consumer groups should take a close 
look at this ANPR to determine whether their members' practices 
could be impacted by any future rule.
---------------------------------------------------------------------------

     The GDP of the United States in 2021 totaled roughly $23 
trillion dollars. What percentage of the goods and services for sale in 
the United States would be covered by the ANPR?
     Given the potential scope of this rule, it appears likely 
to be exercising a claim of authority that concerns an issue of ``vast 
economic and political significance'' and thereby could implicate the 
Major Questions Doctrine discussed in the recent Supreme Court 
decision, West Virginia v. EPA.\3\ What precedent would support the 
perspective that Congress has clearly empowered the FTC to promulgate a 
rule that would regulate pricing disclosures for the breadth of good 
and services identified in the ANPR?
---------------------------------------------------------------------------

    \3\ 142 S. Ct. 2587 (June 20, 2022).
---------------------------------------------------------------------------

     Do pricing practices and fee disclosures vary across 
industries and markets? How would a rule requiring that marketing 
materials explain the purpose of any fees, interest, charges, or other 
costs work with the FTC's approach to clear and conspicuous disclosures 
across advertising mediums (e.g., mobile screens or television ads)? 
Should the FTC mandate that marketing materials aimed at sophisticated 
business consumers include the same breadth and depth of fee 
disclosures as marketing materials targeting an individual consumer?
     Do consumer expectations about pricing practices and fee 
disclosures for repair services differ from those for healthcare? 
Across what sectors do consumers have homogenous expectations around 
pricing and fee disclosures?
     Are the harms from inadequately disclosed fees or 
illegitimate fees the same in all sectors? Do all industries lend 
themselves to a uniform pricing regime?

Rule Duplication

     The ANPR appears to overlap with several existing 
regulations related to advertising and disclosures enforced by the FTC 
and/or other expert agencies. How would industry and markets determine 
which rule controls should conflicts arise?
     How does this ANPR relate to the proposed Motor Vehicle 
Dealers Trade Regulation Rule, approved by the Commission on June 23, 
2022, which focuses on pricing practices and fee disclosures in the 
automobile industry?
     The Truth in Lending Act (``TILA'') and Regulation Z 
outline complex credit disclosure requirements for open and closed-end 
credit, including advertisement terms that trigger disclosures about 
fees, interest, charges, or other costs. This ANPR considers imposing 
more stringent requirements by requiring disclosure of all fees, 
interest, and charges regardless of whether the advertisement contains 
trigger terms. Are there prevalent unfair or deceptive practices that 
would support the FTC's adoption of more stringent advertising 
requirements on the marketing of consumer products, e.g., an Xbox, than 
the federal government imposes on the marketing of a home loan or 
credit card?
     The FTC enforces several laws and rules that govern when 
and how pricing information should be conveyed to

[[Page 67424]]

consumers, including the Telemarketing Sales Rule (``TSR''), the 
Funeral Rule, the Restore Online Shoppers' Confidence Act (``ROSCA''), 
and the Rule Concerning the Use of Prenotification Negative Option 
Plans (``Negative Option Rule''). Is there evidence that we have been 
unable to address specific types of deceptive and unfair pricing 
practices, for example in the marketing of negative option 
transactions, with these marketing-specific rules? Do we need a rule 
that covers all transactions? If industry-specific rules have not 
prevented harm from pricing practices, how would additional rules bring 
about greater compliance?
     The Funeral Rule's goals are to lower barriers to price 
competition in the funeral goods and services market and to facilitate 
informed consumer choice. One way the Funeral Rule helps achieve these 
goals is to require funeral providers to ``unbundle'' the goods and 
services they sell and instead to offer them on an itemized basis. But 
this ANPR takes the opposite approach by favoring up-front, all-in 
pricing. How might this ANPR impact price transparency and competition?

Basis for the Rule

     Section 18 rules must be based on ``prevalent'' deceptive 
or unfair practices. Notably, this ANPR references several potentially 
deceptive and unfair fees that have been the subject of FTC workshops, 
business guidance, and even investigations, but not enforcement 
actions. Can the FTC meet the requisite showing of prevalence without 
any underlying FTC enforcement?
     What evidence, beyond law enforcement, can be used to 
demonstrate prevalence? Can a showing of prevalence be satisfied by a 
workshop or roundtable? News articles?

Flawed Assumptions and Vague Definitions

     The ANPR defines the term ``junk fees'' to include ``fees 
for goods or services that are deceptive or unfair . . . whether or not 
the fees are described as corresponding to goods or services that have 
independent value to the consumer.'' How should the Commission 
determine whether fees correspond to goods and services that consumers 
value? What percentage of consumers should be the threshold? A majority 
of consumers? A significant minority?
     Do fees sometimes viewed as unnecessary by consumers 
reflect attempts by businesses to recover incremental costs? Is it 
reasonable for businesses to impose fees to recover incremental costs? 
What percentage of incremental costs can a business recover before it 
becomes a ``junk fee''?
     The ANPR defines ``junk fees'' to include ``goods or 
services that consumers would reasonably assume to be included within 
the overall advertised price.'' What evidence does the FTC need to 
demonstrate consumer expectations about what services, products, or 
fees are covered by a published price? Should the FTC be required to 
demonstrate quantitative or qualitative measures of consumer 
expectations?
     The ANPR defines ``hidden fees'' as fees that ``are 
deceptive or unfair, including because they are disclosed only at a 
later stage in the consumer's purchasing process or not at all.'' At 
what point in a transaction should fees be disclosed to consumers? Is 
disclosing a fee before a consumer makes a purchase too late? Should 
disclosures occur at the same point in a transaction regardless of the 
industry or market? Why or why not?
     The ANPR indicates that the Commission is exploring the 
``costs and benefits of a rule that would require upfront inclusion of 
any mandatory fees whenever consumers are quoted a price for a good or 
service.'' How would this proposal work for dynamic fees, like shipping 
and handling, that are based on consumer input?
     The ANPR asserts that ``junk fees . . . facilitate 
inflation.'' What evidence points to a connection between fees and 
inflation?

Impact on Competition

     To what extent does competition discipline suboptimal 
pricing practices?
     Would a government requirement for all-in pricing 
facilitate coordination among regulated companies in the same industry?
     Could a potential rule incentivize all-in pricing and the 
bundling of products and services, which would then require consumers 
to pay for goods and services they may not want or need?

Opportunity Costs

     In 2022, including proposals that I anticipate will be 
voted out during the open Commission meeting, the FTC has initiated the 
rulemaking process for a total of six new rules. These massive 
regulatory undertakings require substantial FTC resources. To what 
extent does our current rulemaking agenda divert resources from our 
primary law enforcement mandate? Are there other risks associated with 
our apparent attempt to become a powerful legislature?
    [cir] Are there existing or emerging threats to consumers and 
competition we are not pursuing because resources are focused on rules 
instead of cases?
    [cir] Will the credibility of the FTC be tarnished if we pursue 
broad rulemaking efforts without qualitative and quantitative evidence 
of consumer injury?

[FR Doc. 2022-24326 Filed 11-7-22; 8:45 am]
BILLING CODE 6750-01-P