[Federal Register Volume 88, Number 216 (Thursday, November 9, 2023)]
[Proposed Rules]
[Pages 77420-77485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24234]



[[Page 77419]]

Vol. 88

Thursday,

No. 216

November 9, 2023

Part II





Federal Trade Commission





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16 CFR Part 464





Trade Regulation Rule on Unfair or Deceptive Fees; Proposed Rule

  Federal Register / Vol. 88 , No. 216 / Thursday, November 9, 2023 / 
Proposed Rules  

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FEDERAL TRADE COMMISSION

16 CFR Part 464


Trade Regulation Rule on Unfair or Deceptive Fees

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking; request for public comment.

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SUMMARY: The Federal Trade Commission commences a rulemaking to 
promulgate a trade regulation rule entitled ``Rule on Unfair or 
Deceptive Fees,'' which would prohibit unfair or deceptive practices 
relating to fees for goods or services, specifically, misrepresenting 
the total costs of goods and services by omitting mandatory fees from 
advertised prices and misrepresenting the nature and purpose of fees. 
The Commission finds these unfair or deceptive practices relating to 
fees to be prevalent based on prior enforcement, the comments it 
received in response to an advance notice of proposed rulemaking, and 
other information discussed in this proposal. The Commission now 
solicits written comment, data, and arguments concerning the utility 
and scope of the trade regulation rule proposed in this notice of 
proposed rulemaking to prevent the identified unfair or deceptive 
practices.

DATES: Comments must be received on or before January 8, 2024.

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 in this preamble. Write ``Unfair or 
Deceptive Fees NPRM, 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, 
Mail Stop H-144 (Annex J), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Janice Kopec or Stacy Cammarano, 
Division of Advertising Practices, Bureau of Consumer Protection, 
Federal Trade Commission, 202-326-2550 (Kopec), 202-326-3308 
(Cammarano), [email protected], [email protected].

SUPPLEMENTARY INFORMATION: The Federal Trade Commission (``FTC'' or 
``Commission'') invites interested parties to submit data, views, and 
arguments on the proposed Rule on Unfair or Deceptive Fees and, 
specifically, on the questions set forth in Section X of this notice of 
proposed rulemaking (``NPRM''). The comment period will remain open 
until January 8, 2024.\1\ To the extent practicable, all comments will 
be available on the public record and posted at the docket for this 
rulemaking on https://www.regulations.gov. The Commission will provide 
an opportunity for an informal hearing if an interested person requests 
to present their position orally. See 15 U.S.C. 57a(c). Any person 
interested in making a presentation at an informal hearing must submit 
a comment requesting to make an oral submission, and the request must 
identify the person's interests in the proceeding and indicate whether 
there are any disputed issues of material fact that need to be resolved 
during the hearing. See 16 CFR 1.11(e). The comment should also include 
a statement explaining why an informal hearing is warranted and a 
summary of any anticipated testimony. If the Commission schedules an 
informal hearing, either on its own initiative or in response to 
request by an interested party, a separate notice will issue. See id. 
at 1.12(a).
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    \1\ The Commission elects not to provide a separate, second 
comment period for rebuttal comments. See 16 CFR 1.11(e) (``The 
Commission may in its discretion provide for a separate rebuttal 
period following the comment period.'').
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I. Background

    The Commission published, on November 8, 2022, an Advance notice of 
proposed rulemaking (``ANPR'') under the authority of Section 18 of the 
Federal Trade Commission Act (``FTC Act''), 15 U.S.C. 57a(b)(2); the 
provisions of Part 1, Subpart B, of the Commission's Rules of Practice, 
16 CFR 1.7 through 1.20; and 5 U.S.C. 553.\2\ This authority permits 
the Commission to promulgate, modify, or 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).
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    \2\ Fed. Trade Comm'n, ANPR: Unfair or Deceptive Fees Trade 
Regulation Rule Commission Matter No. R207011, 87 FR 67413 (Nov. 8, 
2022), https://www.federalregister.gov/documents/2022/11/08/2022-24326/unfair-or-deceptive-fees-trade-regulation-rule-commission-matter-no-r207011 or https://www.regulations.gov/document/FTC-2022-0069-0001.
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    The ANPR described the Commission's history of taking law 
enforcement action against, and educating consumers about, unfair or 
deceptive practices relating to fees, and it asked a series of 
questions to inform the Commission about whether such practices are 
prevalent and, if so, whether and how to proceed with a NPRM.\3\ The 
Commission took comments for 60 days, extended the comment period,\4\ 
and received over 12,000 comments, which it has thoroughly considered.
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    \3\ Id.
    \4\ 88 FR 4796 (Jan. 25, 2023).
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    Based on the substance of these comments, as well as the 
Commission's history of enforcement and other information discussed in 
this preamble, the Commission has reason to believe that unfair or 
deceptive practices relating to fees are prevalent \5\ and that 
proceeding with this rulemaking is in the public interest. After 
discussing the comments and explaining its considerations in developing 
the proposed rule, the Commission poses specific questions for comment 
and provides the text of its proposed rule.
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    \5\ See 15 U.S.C. 57a(b)(3) (``The Commission shall issue a 
notice of proposed rulemaking pursuant to paragraph (1)(A) only 
where it has reason to believe that the unfair or deceptive acts or 
practices which are the subject of the proposed rulemaking are 
prevalent.'').
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II. Summary of Comments to the ANPR

    The Commission received over 12,000 comments in response to the 
ANPR. Publicly posted comments are available on this rulemaking's 
docket at https://www.regulations.gov/docket/FTC-2022-0069/comments.\6\ 
The majority of comments expressly supported government action or 
described negative experiences relating to fees that suggested support 
for such action. The comments generally supported a rulemaking to 
improve pricing transparency--including requiring advertised prices to 
include mandatory fees--and to prohibit misrepresentations about the 
nature, purpose, or amount of fees. The Commission has carefully 
considered the views expressed in the comments, and proposes the rule 
described in Section XIV.
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    \6\ For Docket ID FTC-2022-0069, Regulations.gov lists the 
``Number of Comments Posted to this Docket'' as 6,166 out of a total 
``Number of Comments Received'' of 12,046. As noted in the responses 
to Frequently Asked Questions at Regulations.gov, ``Not every 
comment is made publicly available to read. Comment counts that 
refer to `comments posted' reflect the number of comments that an 
agency has posted to Regulations.gov to be publicly viewable. 
Agencies may choose to redact or withhold certain submissions (or 
portions thereof) such as those containing private or proprietary 
information, inappropriate language, or duplicate/near duplicate 
examples of a mass-mail campaign. Therefore, the number of comments 
posted may be lower than the comments received.'' In connection with 
this docket, over 5,700 comments were a part of a single mass-mail 
campaign, which is represented in the posted comments by comment 
FTC-2022-0069-5989.
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    As discussed in this preamble, the comments raised concerns about 
widespread deceptive practices in

[[Page 77421]]

connection with fees. In particular, they raised concerns that sellers 
do not advertise the total amount consumers will have to pay and 
disclose fees only after consumers are well into purchasing 
transactions, harming both consumers and businesses. They also stated 
sellers misrepresent or do not adequately disclose the nature or 
purpose of fees, leaving consumers wondering what they are paying for 
or believing fees are arbitrary, and they are getting nothing for the 
fees charged.\7\
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    \7\ The comments also stated in large numbers that the amounts 
of fees charged are often excessive, increasing prices by large 
percentages and making purchases unaffordable, particularly, in the 
live-event ticketing industry. The rule proposed by the FTC does not 
limit the amount that businesses may charge for goods or services.
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    Commenters provided examples of these practices related to a wide 
array of goods and services, such as hotels, short-term lodging, ticket 
sales, rental housing, financial services, auto sales, internet service 
providers, and other market sectors. Many commenters addressed multiple 
sectors in a single comment. In this section, we discuss comments from 
individual commenters and other stakeholders, including consumer, 
policy, and industry groups, about these widespread practices. The 
breadth and number of comments strongly support a rule to tackle the 
harm caused to consumers and businesses from these practices across 
various industries, by requiring all-in pricing and other measures to 
prevent false and misleading representations about fees.

A. Overview of Prevalent Unfair or Deceptive Fee Practices Identified 
in Comments

1. Comments on Bait-and-Switch Tactics: Misrepresenting Total Costs by 
Omitting Mandatory Fees From Advertised Prices
    Commenters stated businesses routinely engage in deceptive bait-
and-switch pricing tactics by advertising prices that fail to include 
mandatory fees and that end up misrepresenting total prices because 
fees imposed later increase total prices significantly.\8\ In many 
comments, mandatory add-on fees omitted from an initial offer were not 
disclosed until checkout,\9\ and some comments raised concerns about 
advertisements that omitted key terms that required consumers to pay 
more to fully use the good or service.\10\ They stated fees can inflate 
advertised prices by amounts that are large percentages of the base 
prices of goods or services.\11\ Commenters described this bait-and-
switch practice as misrepresenting the total costs consumers must pay 
and as false advertising that is deceptive and unfair to consumers, and 
asked the FTC to take action.\12\
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    \8\ FTC-2022-0069-1046 (``Consumers should not have to guess 
what their total outlay for a purchase will be . . . . Not revealing 
the true cost of something is deceptive and anti-competitive (How 
can you comparison-shop if you don't know the price?)''); FTC-2022-
0069-1481 (``the price advertised is significantly less then [sic] 
the final price once convenience fees and other hidden fees with 
vague justifications are added to the cost''); FTC-2022-0069-2582 
(``These fees serve to mask the true price of any service.''); FTC-
2022-0069-3420 (delayed disclosures ``artificially lower prices''); 
FTC-2022-0069-3498 (``[O]nline businesses . . . advertise a low cost 
to attract attention, then add on a fee at checkout that eliminates 
any benefit from the initial advertised price.''); FTC-2022-0069-
4064 (``In a time when information is readily available to hide it 
when it comes to costs is nefarious.''); FTC-2022-0069-4120 (``If 
the fees are not optional, they need to be included in the initial 
price; otherwise, it's false advertising[.]''); FTC-2022-0069-4724 
(``It has gotten to the point that fees mis-represent [sic] the true 
cost of the product or service until after the purchase.''); FTC-
2022-0069-6104 (``Advertising low prices and tacking on various fees 
is nothing more than bait and switch.'').
    \9\ FTC-2022-0069-0040 (describing additional mandatory fees 
disclosed at the checkout page in a live-event ticket purchase); 
FTC-2022-0069-0103 (describing additional mandatory fees disclosed 
at the hotel checkout); FTC-2022-0069-0120 (same); FTC-2022-0069-
0116 (describing additional mandatory fees disclosed at the rental 
car checkout); FTC-2022-0069-0842 (describing late-disclosed fees in 
a variety of industries); FTC-2022-0069-1437 (describing late-
disclosed fees in delivery applications and vacation rentals).
    \10\ FTC-2022-0069-1622 (describing subscription models to use 
features that are already part of a product); FTC-2022-0069-1915 
(same); FTC-2022-0069-5913 (``We need to ban having subscription 
services attached to vehicle features, requiring you to pay monthly 
fees for items already installed in the vehicle.''); FTC-2022-0069-
1638 (complaining of a video subscription service with undisclosed 
limitations on the shows included and requiring additional 
payments); FTC-2022-0069-5434 (describing recurring fees for rental 
apartments disclosed after the lease application was submitted); 
FTC-2022-0069-5419 (describing a gym membership with a late-
disclosed policy of add-on fees, including extra charges to access 
classes); FTC-2022-0069-5353 (describing a security camera that 
requires additional purchases to use).
    \11\ FTC-2022-0069-0048 (``I've seen situations where the resort 
fee can be 2-3 times the `room rate.' ''); FTC-2022-0069-1862 
(``Norwegian Cruise Line recently increased their service charge to 
$20 per person per day. That's $560 for a week-long cruise for a 
family of four and accounts for 17% of the total cost of a cruise. 
It's clear that cruise lines have been increasing these fees to pay 
their workers more without increasing the base fare they 
advertise.''); FTC-2022-0069-2154 (``Often times these fees are a 
considerable percentage of the advertised price, and there is no 
obvious rationale for how they quantify these massive and varying 
amounts.''); FTC-2022-0069-3434 (``[C]ompanies should not be allowed 
to advertise one price and then tack on enough fees to almost double 
the cost to consumers.''); FTC-2022-0069-5892 (``a `Processing fee' 
of $299.11, which is more than the total quoted price for a year's 
supply of contact lenses, is added to the order, increasing the 
total purchase price from $271.92 to $579.98. This clearly shows how 
these deceptive junk fees more than double the advertised price of a 
year's supply of contact lenses.'').
    \12\ FTC-2022-0069-3415 (``false advertising at best''); FTC-
2022-0069-0111 (``a way to falsely advertise a lower price''); FTC-
2022-0069-3435 (``Advertising one price when you know there is more 
to it, or more that you as a business will have to pay, is deceptive 
and unfair to the consumer[.]''); FTC-2022-0069-6167 (``Please put a 
STOP to this deceptive, dishonest practice'').

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2. Comments on Misrepresenting the Nature and Purpose of Fees
    Commenters stated consumers often do not know what fees are for 
because businesses routinely do not clearly or conspicuously disclose 
the nature or purpose of fees, including the identity of the goods or 
services for which the fees are charged.\13\ Commenters explained that 
businesses employ vague names like convenience fees, economic impact 
fees, or improvement fees that do not adequately disclose to consumers 
what they are paying for.\14\ Commenters also noted prices are 
sometimes advertised as ``free,'' but are not in fact free when fees 
are added.\15\
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    \13\ FTC-2022-0069-0489 (``it is unclear what purpose they 
serve''); FTC-2022-0069-0493 (``fee system'' is ``clouded in 
secrecy''); FTC-2022-0069-0603 (``what are they for?''); FTC-2022-
0069-1301 (``These fees are terrible, they're an added cost with no 
apparent purpose or meaning.''); FTC-2022-0069-1748 (``Besides 
ticketing sites, utilities have service fees, banks have statement 
fees, retail stores may have convenience fees, ride sharing apps 
have service fees, food delivery apps have service fees, and many 
other business types have fees that the consumer is expected to pay 
for without clarity to their purpose.''); FTC-2022-0069-1794 
(``[h]aving a name for a fee [that] doesn't really describe what it 
does or why I have to pay it''); FTC-2022-0069-2187 (``[I]t seems 
too easy for companies across the spectrum to both `hide' fees from 
the consumer in the initial pricing, but then also avoid explain 
[sic] to the purchaser what those fees are actually for.''); FTC-
2022-0069-2189 (``it's often unclear what these fees are for''); 
FTC-2022-0069-2346 (``A reasonable person can't fathom what these 
`fees' are for and most times these fees are not explicit in their 
purpose.''); FTC-2022-0069-3784 (``Not only are the fees added 
later, their [sic] is no insight as to what these fees are.''); FTC-
2022-0069-2566 (``it has never been clear what they are actually 
for''); FTC-2022-0069-3148 (``Fees are going up and up and it's 
never clear what, exactly, they're being charged for.''); FTC-2022-
0069-3686 (``organizations do not make the knowledge of what the 
fees are used for public, or at least accessible/obvious''); FTC-
2022-0069-4067 (``It would be better also if an explanation of the 
fees and what their purpose is was present.'').
    \14\ FTC-2022-0069-1477 (``some secret convenience fee pushing 
the actual cost up''); FTC-2022-0069-1612 (``The fees are vague and 
there's not [sic] reason for them to not be included in the 
advertised price, unless the company is utilizing a marketing 
strategy with the intention of deceiving the customer.''); FTC-2022-
0069-1947 (``Why are companies allowed to charge an abstract 
`convenience fee' with no further explanation of what the fee is 
for?''); FTC-2022-0069-3766 (``restaurant . . . deceptively adds a 
20% `equity fee' to every bill instead of fairly displaying a 
price''); FTC-2022-0069-3880 (commenter wrote about a fluctuating 
``Economic Impact Fee''); FTC-2022-0069-4405 (``From hotels to 
online delivery companies to service providers, it seems that nearly 
all companies are tackling [sic] on additional costs without 
explaining why they are necessary to provide the service.'').
    \15\ FTC-2022-0069-1676 (``Turbo tax. Waiting until I've done 
all of my paperwork to tell me that I need to upgrade my package to 
file.''); FTC-2022-0069-2986 (``the cruise line included room 
service at no charge,'' but ``they added a $9,95 [sic] plus 18% 
gratuity charge to all room service services''); FTC-2022-0069-0688 
(``During on-line Christmas shopping, one company offered `Free 
Shipping' as a promotion. At checkout, even though there was a $0 
charge for `Shipping', I was charged $2.99 for `Shipping Service 
Fees'. How is this considered FREE shipping?'').
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    Commenters stated that, even when businesses purport to disclose 
the nature or purpose of fees, the disclosures may not be truthful. 
Commenters described fees as arbitrary and not bearing any reasonable 
relationship to the costs of goods or services provided.\16\ Commenters 
stated fees provided them with little or no value, were not for goods 
or services they received, and were merely revenue sources for 
businesses.\17\
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    \16\ FTC-2022-0069-2433 (``These fees are not representative of 
any actual cost of processing an electronic payment or other 
transaction and without regulation any price can be set arbitrarily 
resulting in extra cost to the consumer for no reason at all.''); 
FTC-2022-0069-2558 (``whatever fees they decide to make up''); FTC-
2022-0069-3492 (Consumers are under the impression that ``fees do 
not cover any actual costs'').
    \17\ FTC-2022-0069-0605 (``just an unfair profit markup, there 
is not benefit or service for the ticket transaction''); FTC-2022-
0069-0443 (``Pure income generation scams''); FTC-2022-0069-3664 
(``fee is used merely to generate profit rather than cover a 
cost'').
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B. The Comments Show the Identified Deceptive Practices Are Widespread

    The FTC received comments regarding a wide range of industries from 
individual commenters and consumer, policy, and industry groups. 
Individual commenters frequently raised concerns about these practices 
in connection with more than one industry in a single comment, with 
some describing the existence of mandatory, hidden, or misrepresented 
fees across the economy.\18\ Although many individual commenters wrote 
about online purchases, they also noted that stores with physical 
locations also engage in advertising prices that do not include 
mandatory fees, and only later disclose fees using names that do not 
clearly inform consumers of the nature or purpose of fees.\19\ 
Individual commenters noted that businesses also face undisclosed fees 
for which the nature or purpose is not clear.\20\
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    \18\ FTC-2022-0069-0450 (``As a consumer, I despise being duped 
with advertised pricing only to be alarmingly surprised at checkout 
that there are ancillary fees, convenience charges, special handling 
charges, resort fees, extended warranty charges, restocking fees, 
waste disposal fees, entry fees, exit fees, toll charges, health 
mandate fees, CRV fees, upgrade fees, downgrade fees, overweight 
baggage fees, extra baggage fees, additional BBQ sauce fees, monthly 
service fees if your balance falls below $xxx, overdraft fees, 
mystery gasoline tax for winter blends and/or summer blends, to-go 
bag and container fees, delivery fees, etc.''); FTC-2022-0069-0688 
(``These fees in various forms, are appearing everywhere: through 
entertainment ticket sales, hotels and resorts, banks, credit card 
companies, car dealerships, on-line retail companies, etc.''); FTC-
2022-0069-1634 (``Unduly forcing frivolous and intentionally vague 
monetary fees on anything, whether necessary (utility payments, 
rent, phone bills, etc.) or recreational (concerts, hotels, short-
term rental properties, etc.) is unethical); FTC-2022-0069-1940 
(``This is everything from Ticketmaster, ticket processing fees, 
doordash/food delivery, convenience fees, bank fees, landlords 
charging admin fees, restaurants charging a service surcharge, and 
many more. These hidden fees that are not upfront greatly affect 
consumers and do not give them the proper knowledge of the true cost 
upfront.''); FTC-2022-0069-3323 (``Hidden fees just feel way too 
common nowadays. Credit cards, software, subscriptions, travel, and 
the vast majority of other industries are making it too difficult 
for consumers to find the right business to work with.''); FTC-2022-
0069-3374 (``Lately most companies are using hidden fees to falsely 
advertise low prices. Delivery companies, Ticketmaster, 
telecommunications companies, car dealerships, airbnb, rentals, 
hotels, credit card companies, banks, convenience fees for payment 
types, airlines, and others.''); FTC-2022-0069-3932 (``Consumers 
across so many industries are increasingly subject to fees that are 
not conveyed at the time of the purchase . . . surprise service fees 
in hospitality, surprise interest fees in financial services, 
surprise charges in healthcare that even insurance providers cannot 
explain''); FTC-2022-0069-5743 (``The FTC needs to regulate the 
transparency of prices for EVERYTHING, online and in person.'').
    \19\ FTC-2022-0069-0427 (Pottery shop ``receipt said C19 
surcharge. What? I had to look it up. Never heard of it before now. 
. . . There was no signage about this extra surcharge. The sales 
clerk didn't say there would be extra fees.''); FTC-2022-0069-2242 
(Grocery ``store charges a .5% `improvement fee' that no employee 
can give me a straight answer as to why it exists.''); FTC-2022-
0069-5616 (``there are some areas that have a `Public improvement 
fee.' These are nice areas that I have no issue shopping at, but why 
do I not know what the fee is or where it is applied? These fees and 
taxes should be included in the listing price. Stores have price 
guns, so I know they can set the price on each item in the 
store.'').
    \20\ For example, individual commenters noted that merchant 
account payment processors charged previously undisclosed fees for 
no clear purpose. See, e.g., FTC-2022-0069-1922 (``without warning 
or justification, we have been charged $149 for an `annual 
compliance fee' and $169 for an `annual member fee.' I assure you 
that these fees were not part of our original contract.''); FTC-
2022-0069-6159 (``These, often bogus, fees go by many names and in 
some cases there are `duplicate' fees for the same purpose only 
under different names on the same monthly statements.'').
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    Consumer groups--the Consumer Federation of America, Consumer 
Reports, Truth in Advertising, UnidosUS, and the Institute for Policy 
Integrity--expressed support for rulemaking.\21\ Although the U.S. 
Chamber of Commerce and the Association of National Advertisers

[[Page 77423]]

(``ANA'') argued the FTC has not presented evidence that unfair or 
deceptive practices related to fees are prevalent, and opposed 
rulemaking,\22\ consumer groups raised concerns shared by individual 
commenters and provided information about existing regulations and 
legislation,\23\ enforcement actions,\24\ and studies and surveys,\25\ 
demonstrating (along with other evidence described in this NPRM) that 
it is a prevalent practice for businesses to advertise prices that fail 
to disclose mandatory fees.\26\
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    \21\ FTC-2022-0069-6077 (The Institute for Policy Integrity at 
New York University School of Law (``Policy Integrity'') submitted a 
comment in support of rulemaking); FTC-2022-0069-6095 (The Consumer 
Federation of America (``CFA'') submitted comments from 42 national 
and State consumer advocates, supporting FTC rulemaking); FTC-2022-
0069-6042 (Truth in Advertising, Inc. (``TINA.org'') supports FTC 
rulemaking); FTC-2022-0069-6099 (Consumer Reports (``CR'') supports 
FTC rulemaking relating to junk fees, and joins the comment of CFA); 
FTC-2022-0069-6113 (UnidosUS, the nation's largest Hispanic civil 
rights and advocacy organization, submitted a comment in support of 
rulemaking, and endorsing the comment of the CFA.).
    \22\ FTC-2022-0069-6047 (The U.S. Chamber of Commerce (``the 
Chamber'') did not support rulemaking, argued that fees rulemaking 
should be based on whether practices are unfair or deceptive under 
Section 5 of the FTC, not on a lack of remedies, such as monetary 
relief after AMG, and recommended that the FTC withdraw from 
rulemaking); FTC-2022-0069-6093 (ANA also did not support 
rulemaking.).
    \23\ Consumer groups noted that the Consumer Financial 
Protection Bureau, the Department of Transportation, and the Federal 
Communications Commission are tackling junk fees through regulation, 
and that the States are also tackling deceptive junk fees through 
legislation. See, e.g., FTC-2022-0069-6095 (CFA discussed efforts by 
other Federal agencies (e.g., CFPB, DOT, FCC) and New York 
legislation related to junk fees.).
    \24\ FTC-2022-0069-6095 (CFA cited enforcement actions that 
addressed deceptive practices relating to junk fees); FTC-2022-0069-
6042 (TINA.org has tracked and published information about class-
action lawsuits related to fees in various industries in its Class 
Action Tracker); FTC-2022-0069-6113 (UnidosUS cited enforcement 
actions regarding auto-dealer fees and subprime installment lending 
fees as evidence of problematic fees and unfair or deceptive 
practices.).
    \25\ FTC-2022-0069-6099 (CR discussed its WTFee?! Survey, 2018 
Nationally-Representative Multi-Mode Survey of hidden fees in 
multiple sectors of the economy and the prevalence of unfair or 
deceptive fees practices in specific ``priority economic sectors,'' 
including telecommunications, travel, banking and financial 
services, automotive sales and services, utilities, retail sales and 
e-commerce, and live entertainment and sporting events.); FTC-2022-
0069-6095 (CFA noted that the Washington Attorney General's Hidden 
Fee Survey showed that consumers experienced unexpected fees in a 
wide range of industries.); FTC-2022-0069-6113 (UnidosUS cited 
surveys or studies by UnidosUS, the Financial Health Network, and 
the Center for Responsible Lending that documented the impact of 
fees related to financial services products.).
    \26\ FTC-2022-0069-6095 (CFA provided information relating to 
the prevalence of unfair or deceptive practices relating to junk 
fees); FTC-2022-0069-6042 (TINA.org stated its ``work tracking and 
exposing junk and hidden fees makes clear that it is a pervasive 
problem that causes real financial harm to consumers''); FTC-2022-
0069-6113 (UnidosUS endorsed the comment by the Consumer Federation 
of America in connection with that comment's discussion of evidence 
of how junk fees in connection with financial products and 
transactions, such as overdraft, auto-buying fees, mortgage 
delinquency-related fees, education tuition and loan fees, and 
installment loan fees, disproportionally harm low-income consumers, 
consumers of color, and those who are limited English proficient.).
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    The information presented by consumer groups shows that false 
advertising of total prices occurs across industries. Consumer Reports' 
2018 WTFee?! Survey ``found that at least 85% of Americans have 
experienced a hidden or unexpected fee for a service in the previous 
two years, and 96% found them highly annoying'' and that ``[n]early 
two-thirds of those surveyed by [Consumer Reports] said they were 
paying more now in surprise charges than they did five years ago.'' 
\27\ Truth in Advertising noted that hidden fees are a prevalent 
problem related to internet apps, automobile rentals, communications 
companies, event ticket sellers, carpet cleaners, auto dealers, dietary 
supplement sellers, restaurants, airlines, moving companies, credit 
unions and banks, payday lenders, gyms, hotel and travel companies, 
outlet stores, sports betting, and online auctions.\28\ Some of the 
market sectors about which the FTC received comments are discussed in 
this section of the preamble.\29\
---------------------------------------------------------------------------

    \27\ FTC-2022-0069-6099 (CR submitted its WTFee?! Survey, a 
related 2019 article, Protect Yourself from Hidden Fees, and 
``consumer stories collected by CR in January 2023'' detailing many 
personal experiences with hidden fees). Another survey was published 
after the close of the comment period showed that a significant 
percentage of consumers encountered unexpected or hidden fees across 
a variety of industries, including telecommunications, utilities, 
auto loans and purchases, financial services, college tuition, 
hotels, rental cars, and live entertainment. Consumer Reports, 
American Experiences Survey: A Nationally Representative Multi-Mode 
Survey (April 2023), available at https://article.images.consumerreports.org/image/upload/v1682544745/prod/content/dam/surveys/April_2023_AES_Toplines.pdf.
    \28\ FTC-2022-0069-6042 (TINA.org).
    \29\ In addition to these market sectors, the FTC also received 
comments about many other market sectors, such as healthcare, 
subscriptions, electronic payment services, and utilities, and from 
other industry groups. For example, one industry commenter reported 
that remittance fees are often hidden in artificially inflated 
exchange rates and that the nature of these fees is not disclosed to 
consumers who do not have an adequate opportunity to comparison shop 
among different methods to transfer money. FTC-2022-0069-2523 (Wise 
supported rulemaking and recommended that any rule address pricing 
practices in cross-border payments (remittances)). Another industry 
commenter stated chain Fixed-Base Operators (``FBOs''), which are 
businesses or organizations which provide commercial aeronautical 
services, ``might disclose pricing for their services only after an 
aircraft has arrived at the Chain FBO or, even more troubling, after 
rendering the services[,]'' and therefore supported enhancing 
pricing transparency by requiring chain FBOs, to disclose pricing 
for their services before aircrafts arrive at airports. FTC-2022-
0069-2615 (The Aircraft Owners and Pilots Association (``AOPA'') 
also stated some chain FBOs may also charge fees that ``often offer 
little or no added value or discernable benefit[.]'').
---------------------------------------------------------------------------

1. Hotel and Short-Term Lodging Fees
    Individual commenters stated hotels, online travel agencies 
(``OTAs''), and vacation rental providers often do not include fees, 
such as hotel resort fees and vacation rental fees such as cleaning 
fees, in advertised nightly rates, artificially lowering the true cost 
of hotel rooms and rentals vis-a-vis competitors.\30\ Other comments 
stated fees may be misrepresented, for example, fees charged as 
vacation rental cleaning fees when hosts require renters to clean 
accommodations.\31\ Consumer Reports commented that hotels and OTAs 
have continued to charge hidden resort fees after the FTC issued 
warning letters in 2012.\32\
---------------------------------------------------------------------------

    \30\ FTC-2022-0069-0084 (``[Y]ou have hotels around the country 
that are now adding in destination fees, resort fees, etc. Not only 
are these fees hidden, they also add these fees to `free' night 
stays.''); FTC-2022-0069-2350 (``Vacation accommodation platforms 
are becoming increasingly misleading with the listed price on the 
initial search nearly doubling by the time you reach checkout for 
fees that, by explanation, dont [sic] seem to differ from what you 
are already paying for; `destination fee' and `property service 
fee'. This practice seems to be common with most booking sites but I 
specifically use Booking.com so I will keep my complaint specific to 
their hidden fees. . . . [O]nce I reach checkout, the price has been 
increased by 78% to $853.10. This makes it impossible to search by 
cost on this site because these final hidden fees differ between 
accommodations and are not clearly explained why they exist in the 
first place. . . . I have called and discussed this with Booking.com 
and lodged a formal complaint but their response was that they have 
no control over this. I believe all of these fees should be listed 
up front as the final price when conducting a search comparing 
cost.''); FTC-2022-0069-3459 (``Lodging: Both hotels (including 
travel agencies) and short term private lodging (like AirBnB) 
falsely advertise low `nightly rates' to appear better on upfront/
initial comparison screens than alternatives. However, once you 
select them the fees can be 2x what the base rate is. This is 
blatant misrepresentation; they know the total cost and are hiding 
it.''); FTC-2022-0069-3469 (``Hotel `Resort Fees' = When comparing 
prices online, calling, etc--If a hotel subtracts a fraction of the 
true cost and hides it in the back end (fees), it suddenly looks a 
lot more affordable in reservations searches.''); FTC-2022-0069-3484 
(``Hotel hidden fees are insidious. They allow hotels to `compete' 
with seemingly low rates, then use fees to increase the actual 
amount paid after you've already booked. . . . This results in 
significant increase in consumer burden to avoid fees or eat the 
additional cost, and stifles competition and innovation.'').
    \31\ FTC-2022-0069-1759 (commenter complained about ``mandatory 
charges that are not initially disclosed in listed pricing, cleaning 
fees for vacation home rentals after mandatory cleaning by the 
renter''); FTC-2022-0069-2131 (``Cleaning Fees for Airbnb; these 
fees significantly increase the price of the room, and it often 
involves hosts essentially charging guests to clean the room they 
stayed in.''); FTC-2022-0069-3470 (``Homes often ask you to clean 
before you go but then add several hundred dollars in cleaning 
fees.'').
    \32\ FTC-2022-0069-6099 (CR).
---------------------------------------------------------------------------

    Comments from the lodging industry generally argued further 
regulation is not necessary because resort fees provide value to 
consumers \33\ and the

[[Page 77424]]

industry already engages in pricing transparency.\34\ However, these 
comments do not dispute that resort fee disclosures routinely occur 
after base room rates are advertised.\35\ Some industry members 
cautioned that requiring all-in pricing may have unintended 
consequences,\36\ and recommended that, if the FTC decides to proceed 
with a rulemaking, any rule apply across the board, online and offline, 
to all short-term lodging providers to provide a level playing 
field.\37\
---------------------------------------------------------------------------

    \33\ FTC-2022-0069-6037 (American Hotel and Lodging Association 
(``AHLA'') stated resort fees at hotel properties provide guests 
with value that includes various goods and services); FTC-2022-0069-
6057 (American Gaming Association (``AGA'') contended that resort 
fees provide value to consumers). The AHLA stated some of the data 
about resort fees that the FTC provided in the ANPR were incorrect. 
AHLA stated ``only 6% of hotels nationwide charge a mandatory 
resort/destination/amenity fee, at an average of $26 per night[,]'' 
and that ``80% of hotel-goers are willing to pay additional fees if 
doing so will provide access to certain amenities or better 
service.'' FTC-2022-0069-6037.
    \34\ FTC-2022-0069-6037 (AHLA stated ``[t]he hotel industry 
embraces a competitive business model that is driven by transparency 
and customer satisfaction'' and that hotels ``disclose resort and 
amenity fees at or before the time of booking.''); FTC-2022-0069-
6111 (Travel Technology Association (Travel Tech) stated its members 
``publish, disclose and share . . . rates, terms, and fees'' 
provided to them by accommodation suppliers and other travel service 
providers ``in a clear and conspicuous manner . . . prior to 
consumers completing their bookings.''); FTC-2022-0069-6057 (AGA 
stated businesses properly disclose ``how much and what the resort 
fee pays for'').
    \35\ FTC-2022-0069-6057 (AGA stated the disclosures occur after 
the base room rate is advertised (i.e., ``typically no more than one 
screen following the base room rate, and at least one web page 
before consumers commit to the room and before any payment is 
required or made.'').
    \36\ FTC-2022-0069-6057 (AGA stated companies may roll resort 
fees into base room rates and not itemize fees to the detriment of 
consumers' ability to review amenities and services on offer and 
compare them with competitors and to the detriment of businesses' 
ability to distinguish themselves from competitors, for example, 
through loyalty programs that waive resort fees, a practice that the 
comment claimed would be difficult if itemized pricing were 
eliminated or limited).
    \37\ FTC-2022-0069-6037 (AHLA urged that any rule requirements 
proposed by the FTC apply to all industry participants, including 
``the short-term rental market, metasearch sites, and online travel 
agencies (`OTAs')''); FTC-2022-0069-6111 (Travel Tech recommends 
that any regulation adopted by the FTC ``apply to any entity that 
supplies or advertises travel pricing information to consumers, 
including, for example, travel provider direct sites, metasearch, 
and both online and offline advertisements.'').
---------------------------------------------------------------------------

2. Live-Event Ticket Fees
    In connection with tickets for live entertainment, individual 
commenters noted that it is nearly impossible to obtain tickets at 
advertised prices because ticket sellers inflate these prices with 
fees.\38\ Consumer Reports noted that hidden fees can increase the 
price of tickets by as much as 30% to 40%.\39\ Individual commenters 
questioned the meaning of fees that are vaguely identified, such as 
``convenience'' fees,\40\ and the stated purposes of ticket fees. For 
example, individual commenters questioned whether processing fees 
really pay for ticket processing and whether delivery fees really pay 
for delivery expenses.\41\ The comments opined that fees appear to be 
arbitrary.\42\
---------------------------------------------------------------------------

    \38\ FTC-2022-0069-0448 (``My wife and I regularly attend metal 
and punk concerts, and sometimes we cannot justify attending a show 
we thought we were going to attend because, rather than pay the 
amount we expected to pay, we are sometimes looking at $50 or more 
of additional costs and fees.''); FTC-2022-0069-0530 (``They wait 
until a buyer has waited in queues for long, stressful delays and 
spring substantial (nonsense) fees on them last minute knowing they 
are more likely to pay them than if they had been upfront with the 
cost of the purchase to begin with.''); FTC-2022-0069-1323 (``I 
personally am always very frustrated when I go to buy so something, 
like a concert ticket, and try to get the advertised price. It has 
never, in my entire life, been as simple as handing over $100 for a 
$100 ticket. It always ends up costing much more, whether through a 
fee to hand them the money, soem [sic] contrived surcharge, or 
simply outright undisclosed and wholly newly made up miscellaneous 
charges.''); FTC-2022-0069-2086 (``Time and time again, as a 
consumer I and many I know have been discouraged from purchasing 
things we like or going to events we wanted to, simply because the 
amount we had allocated based on the cost was not enough in the end 
due to hidden fees.''); FTC-2022-0069-2144 (``I also feel that it is 
deception to say a ticket is price X. Then when all the fees 
collapse on top of you that the total price is now $80-$100 more 
than price X PER ticket.''); FTC-2022-0069-2154 (``It is incredibly 
deceptive that a company can advertise a particular price for a 
ticket but then stack substantial fees at the end of the check-out 
process onto the consumer. Often times these fees are a considerable 
percentage of the advertised price, and there is no obvious 
rationale for how they quantify these massive and varying 
amounts.''); FTC-2022-0069-3128 (``A face value ticket can have fees 
that nearly equal the original price, making the end consumer cost 
nearly double the advertised price. This is unfair and deceptive 
practice.''); FTC-2022-0069-3595 (``It is uncommon to find tickets 
at advertised prices as [sic] Ticketmaster''); FTC-2022-0069-5435 
(``Ticketmaster, StubHub, & other ticket retailers: These companies 
abuse the fact that there's limited competition in their industry, 
and tack on predatory fees during check out that can double or 
triple the originally advertised price of the ticket.''); FTC-2022-
0069-5886 (``It is very disheartening to be told that the price of a 
ticket is one thing and then be met by service fees, convenience 
fees, and additional unknown fees that bring the price up to almost 
2 times what the original price was listed at.''); FTC-2022-0069-
5971 (``Ticketmaster routinely and repeatedly pulls a bait-and-
switch with ticket pricing--and the size of their final price 
inflations are egregious, reaching 50%.'').
    \39\ FTC-2022-0069-6099 (CR).
    \40\ FTC-2022-0069-0226 (``The `convenience' fees and processing 
fees charged by Ticketmaster and others, are not only inconvenient 
but excessive and provide no benefit.''); FTC-2022-0069-2281 
(``These fees are often labeled as `convenience fees', however they 
serve no real purpose and the consumer is often left with no other 
option.'').
    \41\ FTC-2022-0069-0603 (``How much money does it take for a 
computer to process a ticket order?''); FTC-2022-0069-2123 
(``Ticketmaster is not printing physical tickets, yet charges a 
significant delivery fee''); FTC-2022-0069-2665 (`` `order 
processing fee' . . . . fine. Whatever. Even though this is an 
automated software system that requires no additional time or effort 
for a human to process''); FTC-2022-0069-3500 (``ensure the scam of 
`processing fees' is ended, because its [sic] all digital, there are 
no fees on their end''); FTC-2022-0069-3592 (``there is no reason 
for it to cost more to process a more expensive ticket'').
    \42\ FTC-2022-0069-1972 (``Something has to be done to protect 
consumers from runaway ticket prices and these unbelievable fees 
with no discernable or knowable purpose.''); FTC-2022-0069-2970 
(``fees were added with no detail of why or for what purpose''); 
FTC-2022-0069-3571 (``fees often feel completely arbitrary . . . . 
the fees vary wildly depending on what show I'm purchasing tickets 
for''); FTC-2022-0069-0489 (``Although the fees are disclosed, it is 
unclear what purpose they serve.'').
---------------------------------------------------------------------------

    One ticket seller argued that State and Federal laws prohibiting 
unfair or deceptive trade practices already adequately address any 
problems with unfair or deceptive fees,\43\ but most comments received 
from ticket sellers or entities representing them,\44\ and from 
entities representing the interests of musicians, artists, managers, 
agents; \45\ independent venues, promoters, festivals; \46\ and 
audience groups; \47\ expressed concerns about deceptive practices and 
supported a rulemaking with some conditions. Some of these comments 
noted that ticket sellers routinely do not disclose the total cost of 
tickets in advertising,\48\ and that the

[[Page 77425]]

nature and purpose of fees is not always clear.\49\ The comments 
emphasized that ticket fees raise competition issues separate from the 
deceptive advertising practices and recommended that the FTC address 
alleged anticompetitive practices that result in fees consumers 
consider excessive.\50\
---------------------------------------------------------------------------

    \43\ FTC-2022-0069-3347 (AXS opposed all-in pricing, arguing 
that it would be less transparent to consumers, and recommended that 
any rule require sellers to disclose to consumers whether the ticket 
is being sold ``from the artist/venue's official ticket seller, at 
the face price set by the artist or venue, or, alternatively, from a 
ticket broker or resale marketplace where ticket prices are set by 
the reseller.'').
    \44\ The following ticket sellers support rulemaking: FTC-2022-
0069-6089 (National Association of Ticket Brokers (``NATB''); FTC-
2022-0069-6078 (TickPick, LLC); FTC-2022-0069-6079 (StubHub). AXS 
Group LLC does not support a rulemaking. FTC-2022-0069-3347.
    \45\ FTC-2022-0069-6162 (Recording Academy recommends that any 
rule include strong protections for artists); FTC-2022-0069-6048 
(Future of Music Coalition (``FMC'')); FTC-2022-0069-6041 (National 
Independent Talent Organization (``NITO'')).
    \46\ FTC-2022-0069-6046 (National Independent Venue 
Association); FTC-2022-0069-0501 (Annual International Ballet 
Festival of Miami and Cuban Classical Ballet of Miami).
    \47\ FTC-2022-0069-6110 (Sports Fans Coalition described harm to 
consumers from drip pricing); FTC-2022-0069-2581 (Dunsmoor Law, 
P.C.).
    \48\ FTC-2022-0069-6162 (The Recording Academy believes that the 
majority of concerts listed for sale in the United States do not 
disclose the total cost or mandatory fees in advertising, but that 
some sellers advertise a base cost ``plus fees''); FTC-2022-0069-
6048 (FMC noted that ``pervasive problems currently exist where 
ticketing fees are not disclosed''); FTC-2022-0069-6078 (TickPick 
stated other jurisdictions have taken action against drip-pricing, 
including Canada which enacted a law providing that ``the making of 
a representation of a price that is not attainable due to fixed 
obligatory charges or fees constitutes a false or misleading 
representation, unless the obligatory charges or fees'' are imposed 
by the Canadian federal government or a provincial government (e.g., 
taxes).'').
    \49\ FTC-2022-0069-6048 (FMC stated it ``can be challenging to 
distinguish between a fee that can reasonably be connected to an 
actual expense, and what is just tacked on to the ticket base price 
to provide a venue or ticketing company with an additional revenue 
stream.'')
    \50\ FTC-2022-0069-6065 (The Break Up Ticketmaster Coalition 
argued that Ticketmaster's market dominance, including in secondary 
markets, has resulted in excessive fees that consumers cannot 
reasonably avoid.); FTC-2022-0069-6162 (The Recording Academy 
recommended strong enforcement and improved regulation of the 
secondary ticket market, including requiring disclosure by resellers 
that tickets are resale tickets and that fees do not go to artists); 
FTC-2022-0069-6041 (NITO raised concerns that ticket fees are 
excessive, often as a result of the secondary market, and asked the 
FTC to take all measures within its authority to stop the growth of 
ticket fees for live events); FTC-2022-0069-6048 (FMC noted that it 
is a part of the Break Up Ticketmaster coalition and that it also 
broadly shares the concerns expressed in the comments by NITO and 
the Recording Academy, relating to problems stemming from secondary 
ticketing companies, and the importance of considering cultural 
diversity and community health, including the music community); FTC-
2022-0069-0501 (Annual International Ballet Festival of Miami and 
Cuban Classical Ballet of Miami commented that Ticketmaster adds 
``exorbitant fees . . . in some cases more than 20%'' to its ticket 
prices, resulting in many people not being able to afford tickets, 
``particularly those with children or elderly'' and reducing ticket 
sales and profits); FTC-2022-0069-6110 (SFC noted a lack of 
competition among ticket sellers and problematic behavior in the 
secondary ticket marketplace, including transferability 
restrictions, disclosures of holdbacks, speculative ticket 
disclosures, and the use of bots, and recommended that the FTC 
conduct a 6(b) study of Ticketmaster/Live Nation's business conduct, 
and that the FTC support Federal and State legislation to address 
harm to consumers in ticket sales); FTC-2022-0069-2581 (Dunsmoor Law 
stated Ticketmaster's practices are harmful to artists and 
consumers, including dynamic pricing which ``makes it nearly 
impossible to comparison shop,'' and recommended that the FTC 
consider limiting fees and addressing Ticketmaster's monopolistic 
behavior.); FTC-2022-0069-6046 (NIVA stated apart from practices 
related to fees, secondary markets use predatory and deceptive 
practices in connection with ticket resales); FTC-2022-0069-6089 
(NATB described the practice of holding back tickets or ``slow 
ticketing'' to be a deceptive marketing tactic that distorts the 
market and urged the FTC to require disclosures of how many tickets 
are available for sale, but argued that the transferability of 
tickets should be protected in any rulemaking.); FTC-2022-0069-6079 
(StubHub expressed concerns regarding the lack of competition in the 
live events industry, and requested that the FTC investigate 
anticompetitive and anti-consumer behaviors in the industry brought 
about by the merger of Live Nation and Ticketmaster.).
---------------------------------------------------------------------------

    Although entities in the ticketing sector argued that ticket fees 
are not ``junk'' fees, but provide value to consumers \51\ and are 
already adequately disclosed,\52\ a ticket seller in the secondary 
market, TickPick, disagreed. TickPick stated other members of the 
secondary market, including all of TickPick's larger peers, have gained 
a competitive advantage by omitting mandatory fees from the total cost 
of tickets in advertising and luring consumers with deceptively low 
prices only to impose substantial back-end fees, sometimes after 
customers provide payment information.\53\ TickPick also noted that 
ticket sellers misrepresent the nature or purpose of their mandatory 
fees when fees do not provide anything of value to consumers and are 
used only to generate additional profit.\54\
---------------------------------------------------------------------------

    \51\ FTC-2022-0069-6046 (NIVA stated many fees add value, such 
as facilities fees charged by independent venues and promoters to 
pay for overhead costs such as staffing, rent, insurance, heating 
and cooling, repairs and maintenance, and property taxes, but notes 
that there are differences between facilities fees charged by 
independent venues and promoters and fees charged on secondary 
resale exchanges that do not support venues); FTC-2022-0069-6089 
(NATB recommended that any rule differentiate between types of 
ticket fees, arguing that fees imposed by secondary ticket brokers 
account for a valuable service, while fees imposed by the original 
ticket sellers may not); FTC-2022-0069-6079 (StubHub objected to the 
characterization of fees it charges as ``junk'' or ``hidden'' fees 
because its service fees enable it to provide valuable services to 
StubHub users and partners); FTC-2022-0069-3347 (AXS argues that its 
fees provide value to consumers).
    \52\ FTC-2022-0069-6079 (StubHub stated its fees are transparent 
and fully disclosed before it collects payment information and 
before consumers complete transactions); FTC-2022-0069-3347 (AXS 
argued that its fees are adequately disclosed).
    \53\ FTC-2022-0069-6078 (TickPick).
    \54\ Id.
---------------------------------------------------------------------------

    Comments related to ticket sales supported greater pricing 
transparency with most supporting all-in pricing that specifies the 
full final cost to consumers including mandatory, but not optional, 
fees.\55\ Most comments from ticket sellers supported all-in pricing if 
the requirement would apply to all ticket sellers to establish a level 
playing field.\56\ They argued that, without a level playing field, 
businesses that display all-in pricing would be at a competitive 
disadvantage.\57\ Many of these comments recommended that itemization 
of fees should also be required so consumers see a breakdown of the 
fees charged,\58\ but one comment argued that itemization of fees harms 
consumers.\59\ Some of these comments recommended an industry-neutral 
rule while others did not express an opinion.\60\ The comments also 
noted the importance of FTC guidance and enforcement action relating to 
fees.\61\
---------------------------------------------------------------------------

    \55\ FTC-2022-0069-6110 (Sports Fans Coalition); FTC-2022-0069-
6041 (NITO): FTC-2022-0069-6046 (NIVA); FTC-2022-0069-6089 (NATB); 
FTC-2022-0069-6078 (TickPick); FTC-2022-0069-2581-A2 (Dunsmoor Law 
recommended that the FTC ``evaluate all possible legal outcomes from 
the disclosing of fees.''); FTC-2022-0069-6078 (TickPick supported 
model rule language proposed by the Institute for Policy Integrity 
with minor modifications, and proposed definitions for ``all-in 
price,'' ``unavoidable fee or charge,'' and ``avoidable fee or 
charge.''); FTC-2022-0069-6048 (FMC described music royalty fees 
that are a part of a subscription music service as an example of 
unavoidable or mandatory fees); FTC-2022-0069-6079 (StubHub 
supported Policy Integrity's recommendation to exclude fees for 
optional add-on purchases that are fully disclosed to consumers 
prior to payment).
    \56\ FTC-2022-0069-6089 (NATB commented that it will only be 
effective if applicable to all ticket sellers); FTC-2022-0069-6078 
(TickPick); FTC-2022-0069-6079 (StubHub).
    \57\ FTC-2022-0069-6078 (TickPick stated its all-in pricing has 
not caused competitors to engage in the practice, that a competitor 
temporarily adopted all-in pricing but abandoned the practice after 
losing market share, and that regulatory intervention is necessary 
to establish an even playing field); FTC-2022-0069-6079 (StubHub 
stated that in 2014 it voluntarily began displaying all-in pricing 
to buyers, but this practice put StubHub at a disadvantage in 
comparison to competitors who did not display all-in pricing, 
causing StubHub to discontinue the practice).
    \58\ FTC-2022-0069-6162 (The Recording Academy recommended that 
any rule require the disclosure of the face value of tickets to 
avoid consumer misperception that artists are responsible for any 
increase in total cost that results from the rule); FTC-2022-0069-
6048 (FMC recommended requiring full fee itemization so consumers 
can still see the base price so artists are not blamed for fees and 
can identify increases in fees); FTC-2022-0069-6041 (NITO's support 
for rulemaking is conditioned on requiring that ticket fees are 
clearly separated and itemized from the face value of the ticket); 
FTC-2022-0069-6046 (NIVA recommends requiring itemization of the 
face value of tickets and all fees so that consumers know what they 
are paying for); FTC-2022-0069-3347 (AXS recommended, if the FTC 
determines that a new rule is necessary, that instead of all-in 
pricing, the FTC require sellers to disclose all components of the 
ticket price).
    \59\ FTC-2022-0069-6078 (TickPick opposed itemization of fees 
and recommends that the all-in price be the only price a consumer 
sees in all advertising and marketing materials; itemization of fees 
is not helpful to consumers because the fees are contrived and only 
serve to mislead consumers and inhibit competition).
    \60\ FTC-2022-0069-6079 (StubHub supported an industry-neutral 
rule establishing price transparency across market sectors. StubHub 
supported a Federal solution, consistent enforcement of a rule with 
sufficient specificity to avoid varying interpretations.); FTC-2022-
0069-6078 (TickPick reserved judgment on whether the rule should be 
industry-neutral or specific to the ticketing industry).
    \61\ FTC-2022-0069-6078 (TickPick recommended that the FTC 
create a procedure to provide staff interpretations and guidance 
regarding what constitutes an unavoidable fee); FTC-2022-0069-6048 
(FMC recommended that the FTC take enforcement action in connection 
with live-event ticketing, and other instances of problematic fee 
practices); FTC-2022-0069-6089 (NATB commented that a rule will only 
be effective if the FTC undertakes rigorous enforcement).
---------------------------------------------------------------------------

3. Fees Related to Restaurants and Prepared Food and Grocery Delivery 
Apps
    Individual commenters submitted many observations about restaurants 
and prepared food and grocery delivery services. They noted that 
restaurants routinely add fees to bills that were not

[[Page 77426]]

previously disclosed, using various names (e.g., ``service fee,'' 
``hospitality fee,'' ``kitchen fee,'' ``equity fee,'' ``economic impact 
fee,'' ``temporary inflation fee'') that do not clearly or 
conspicuously identify their nature or purpose.\62\ Commenters 
expressed particular concern about the true purpose of restaurant 
``service'' charges, which they expected would go entirely to wait 
staff.\63\ As these comments imply, while a restaurant's management may 
not keep tips received by its employees for any purposes,\64\ no such 
prohibition exists for service fees imposed by a restaurant.\65\ In 
connection with food delivery, individual commenters similarly stated 
delivery apps charge fees that are not reflected in advertised food 
prices,\66\ and that the nature or purpose of these fees is not always 
clear or is misrepresented, for example, when fees identified as 
delivery fees do not go to delivery personnel.\67\ The Consumer 
Federation of America noted that prepared food and grocery delivery 
apps have been the subject of law enforcement actions challenging 
misrepresentations relating to fees.\68\
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    \62\ FTC-2022-0069-3423 (``I don't know what the ``HOSPITALITY 
FE'' [sic] is for, but it doesn't appear anywhere on the menu of 
this restaurant we attended.''); FTC-2022-0069-3459 (restaurants 
``started adding a `kitchen fee' in the small foot notes of the 
menu. Why not just include this in the cost of the food. Otherwise 
all menu items can be misrepresented as very low and high fees added 
in the foot notes.''); FTC-2022-0069-3766 (restaurant ``deceptively 
adds a 20% `equity fee' to every bill instead of fairly displaying a 
price.''); FTC-2022-0069-3880 (restaurant ``started putting an 
undisclosed `Economic Impact Fee' on their bills''); FTC-2022-0069-
3885 (``local businesses have been tacking on `service fees' when 
ringing up at the register. This is most noticeable at restaurants, 
for dine-in, takeout, and delivery. The fees are not disclosed on 
the menu or anywhere at the physical establishments or on their 
websites before placing an order.''); FTC-2022-0069-4428 (``I would 
like to add that lately, I've seen the restaurant industry adding-on 
junk fees to post-meal restaurant bills named `temporary inflation 
fee' or similar which are not disclaimed prior to eating. It's 
difficult to un-eat a meal if you disagree with these fees.''); FTC-
2022-0069-5999 (``And restaurants that charge a surcharge fee for 
various things at the final bill which ate [sic] not disclosed on 
the menu or stated by the wait staff or posted at the door!'').
    \63\ FTC-2022-0069-0244 (``Another, more recent, development has 
been the addition of a `service charge' on a restaurant check, 
calculated as a percent of the check total. Is this in place of a 
tip? Who receives it?''); FTC-2022-0069-1988 (``I visited a bar that 
had a sign which stated `we add on a 20% service fee to all 
transactions which goes directly to the staff as a tip.' Then, on 
the payment screen, I was prompted AGAIN to tip for 15%, 20%, or 25% 
by the software.''); FTC-2022-0069-2131 (``Service Charges at 
restaurants. I am fine with these when 100% of the charge goes to 
the waiter, but it's not always clear and I've heard that many 
restaurants hold it for themselves.'').
    \64\ 29 CFR 531.52(b).
    \65\ See 29 CFR 531.52(a) (distinguishing tips--which are 
entirely at the discretion of the customer--from the payment of a 
charge made for service).
    \66\ FTC-2022-0069-2089 (``Many food delivery services, are 
deceptive in their pricing. . . . They are advertising a price much 
lower than it truly is''); FTC-2022-0069-2997 (``these companies add 
multiple different fees and charges to the final bill that are not 
seen until check-out''); FTC-2022-0069-4617 (``Doordash, Ubereats, 
Postmates, and every other food delivery app uses hidden fees to 
somehow make a $10 order double in price through several different 
fees that have no explanation as to what they are and there is no 
transparency on how much they will be when the customer is building 
their order.'').
    \67\ FTC-2022-0069-0581 (``Delivery app services similarly 
charge fees which are not clearly related to a service or function 
of the business''); FTC-2022-0069-1545 (``it isn't plainly clear 
that the fees are non refundable even when the company fails to 
properly provide the service they are charging you a fee to 
perform''); FTC-2022-0069-1672 (``why am I being charged a delivery 
fee for my food, when the fee doesn't go to the driver?''); FTC-
2022-0069-2190 (``Charges extra fees without explanation. How are 
there 2 delivery fees?''); FTC-2022-0069-2316 (``The delivery fee I 
pay to the national pizza chain that doesn't go to the delivery 
person, instead I still have to tip the delivery driver because the 
fee doesn't go to him/her''); FTC-2022-0069-4400 (``I have to pay 
unexplained additional fees for delivery services that don't seem to 
have a good explanation when there is already a base fee and travel 
fee.'').
    \68\ FTC-2022-0069-6095 (CFA).
---------------------------------------------------------------------------

4. Transportation Fees
    Individual commenters made similar observations about 
transportation-related goods and services. They noted that airlines 
fail to include mandatory fees in advertised prices and misrepresent 
fees.\69\ They also described advertising for car rentals \70\ and car 
sales \71\ that misrepresented total costs to consumers by delaying the 
disclosure of mandatory fees that inflated amounts consumers had to 
pay. The Consumer Federation of America noted that rental car companies 
impose fees that are not always clearly disclosed up front,\72\ and 
that ``[d]ishonest auto dealers have an established history of failing 
to clearly disclose mandatory fees in their advertised prices.'' It 
noted that numerous State attorneys general have taken related 
enforcement action.\73\
---------------------------------------------------------------------------

    \69\ FTC-2022-0069-0084 (``Airlines, if they are offering a 
`free' flight, should ONLY charge you the fees charged by 
governments or airports. They shouldn't be taking on junk fees, fuel 
surcharges, etc.''); FTC-2022-0069-1676 (``Airline fees for bags, 
seats etc. Its [sic] not transparent until you get to the last page. 
Last minute fees for changes.''); FTC-2022-0069-3724 (``Airlines 
obscure the true price of tickets until the very end of the purchase 
process wasting customer's time in a cynical effort to leverage sunk 
cost biases so we just buy the misleading ticket price because we've 
spent the last 30 minutes filling in every detail.''); FTC-2022-
0069-2055 (``I recently paid a `plane usage' fee on plane ticket, 
purchased directly from the airline's website. This fee implies 
there's a possible travel option I could have booked that didn't 
involve flying, which is deceptive.'').
    \70\ FTC-2022-0069-0013 (``I recently reserved a rental car with 
a `total' of $856. When I got to the final booking page, the total 
was $600 more. `Total' should mean exactly that, all-in, no further 
charges.''); FTC-2022-0069-3459 (``Renting either a car or a moving 
van; they advertise $10/day. After all the fees which are standard 
and they are already aware of (nothing dependent on your choices) 
the actual cost is $40/day.''); FTC-2022-0069-3785 ``(For my rental 
car, I got charged a tourism commission fee, county bus license fee, 
customer facility charge, airport tram fee, vehicle license recovery 
fee, and concession recovery fee in addition to the base rate. 
Prices jump up to 30% higher when fee after fee is added''.).
    \71\ FTC-2022-0069-0688 (``It wasn't until we sat down to fill 
out the contract, that we were informed of an additional mandatory 
fee of $3,000 for a clear-coat finish.''); FTC-2022-0069-5435 (auto 
dealers ``tack on a number of fees during the contract process such 
as `dealer fees' and `transportation fees' that were not included in 
price discussions'').
    \72\ FTC-2022-0069-6095 (CFA).
    \73\ Id.
---------------------------------------------------------------------------

    Industry comments related to auto sales, including ancillary goods 
and services, did not support a rulemaking.\74\ These comments stated 
that the definition of junk fees is too vague,\75\ and questioned 
whether fees that are not mandatory because they relate to voluntary 
ancillary products offered as part of auto sales transactions (e.g., 
voluntary protection products) would be covered by the ANPR definition 
of ``junk'' fees.\76\ The comments stated that fees for ancillary

[[Page 77427]]

goods and services provide value to consumers.\77\
---------------------------------------------------------------------------

    \74\ FTC-2022-0069 6043 (The National Automobile Dealers 
Association (NADA) stated rulemaking is not necessary, and 
recommended advertising guidance and business education); FTC-2022-
0069-6106 (American Property Casualty Insurance Association (APCIA) 
stated fees rulemaking would impact several industries and business 
activities, and suggested that the FTC engage in more stakeholder 
engagement and analysis of the marketplace before moving forward); 
FTC-2022-0069-6058 (The Service Contract Industry Council (SCIC), 
the Motor Vehicle Protection Products Association (MVPPA), and the 
Guaranteed Asset Protection Alliance (GAPA)); FTC-2022-0069-5983 
(The Motorcycle Industry Council (MIC), the Specialty Vehicle 
Institute of America (SVIA), and the Recreational Off-Highway 
Vehicle Association (ROHVA)); FTC-2022-0069-0124 (The National 
Association of Mutual Insurance Companies (NAMIC) objected that the 
ANPR created a false impression that junk fees are a problem in the 
property casualty insurance market, including automobile insurance, 
and argued that the FTC may not have the jurisdiction to regulate 
fees in insurance). All of these commenters, except NAMIC, 
referenced comments they previously submitted in connection with the 
Motor Vehicle Dealers Trade Regulation Rule matter.
    \75\ FTC-2022-0069-6043 (NADA stated the scope of the ANPR 
requires clarification regarding the definition of ``junk'' fees, 
and proposed defining a ``junk'' fee as one that ``is mandatory and 
yet provides no additional benefit of any kind beyond that included 
in the advertised price of the specific good or service and does not 
have any other business justifications.''); FTC-2022-0069-6058 
(SCIC, MVPPA, and GAPA argued that the definition of junk fees is 
too vague to provide any notice as to what the FTC may seek to 
regulate.).
    \76\ FTC-2022-0069-6106 (APCIA expressed concern that the 
definition of ``junk fees'' in the ANPR could unintentionally 
include products such as voluntary protection products (i.e., VPPs) 
that have proven to be beneficial to consumers and are sold in a 
transparent manner); FTC-2022-0069-6058 (SCIC, MVPPA, and GAPA 
argued that fees for VPPs in auto sales do not meet the definition 
of junk fees.)
    \77\ FTC-2022-0069-6106 (APCIA stated VPPs that motor vehicle 
dealers make available at the time of auto sales provide valuable 
services and benefits to consumers); FTC-2022-0069-6058 (SCIC, 
MVPPA, and GAPA argued that VPPs provide value to consumers by 
facilitating the filing of product claims and providing financial 
security). See also supra nn. 33, 51.
---------------------------------------------------------------------------

    The comments from auto industry representatives stated the law 
already prohibits failing to disclose mandatory fees, and that fees are 
adequately disclosed.\78\ Commenters stated ``total cost'' often varies 
in negotiated sales transactions and there is no clear reason why the 
disclosure of fees later in purchasing transactions should be deemed 
categorically deceptive or unfair because there are often good reasons 
why certain fees cannot be disclosed earlier in sales transactions.\79\
---------------------------------------------------------------------------

    \78\ FTC-2022-0069-6043 (NADA stated failing to disclose 
mandatory fees is already prohibited and opined that the FTC's 
desire to obtain authority for monetary relief is not a legally 
adequate basis for rulemaking.
    \79\ FTC-2022-0069-6043 (NADA); FTC-2022-0069-5983 (MIC, SVIA, 
and ROHVA argued that it would be burdensome for smaller powersports 
dealers to implement disclosure requirements); FTC-2022-0069-6058 
(SCIC, MVPPA, and GAPA argued that the disclosure of all-in prices 
at the beginning of auto sale transactions is impracticable and 
likely impossible).
---------------------------------------------------------------------------

    Comments noted that a fees rule could overlap or conflict with 
State and Federal laws and regulations.\80\ Commenters recommended 
excluding auto dealers from a rule on unfair or deceptive fees because 
fees related to auto sales transactions are already the subject of the 
FTC's rulemaking in the Motor Vehicle Dealers Trade Regulation Rule 
(``proposed Motor Vehicle Dealers Rule'') matter.\81\
---------------------------------------------------------------------------

    \80\ FTC-2022-0069-6106 (APCIA noted that VPPs are subject to 
Truth in Lending Act Regulation Z as well as state lending laws 
similar to other voluntary products sold in connection with vehicle 
loans, and that an Unfair or Deceptive Fees rule would be 
duplicative and conflict with existing Federal and State laws and 
regulations); FTC-2022-0069-0124 (NAMIC noted that casualty 
insurance payments are strictly regulated by state insurance codes).
    \81\ FTC-2022-0069-6043 (NADA recommended that auto dealers be 
exempt from any fees rule ``given that the Proposed Vehicle Shopping 
Rule addresses this type of disclosure in a more comprehensive, and 
vastly different, manner.''); FTC-2022-0069-5983 (MIC, SVIA, and 
ROHVA recommended exempting powersports vehicle dealerships, 
including motorcycles, ATVs, and ROVs, from the rule and adopting an 
incremental response to regulation).
---------------------------------------------------------------------------

    One commenter, the National Automobile Dealers Association 
(``NADA''), urged that, if the FTC proceeds with rulemaking, such a 
rulemaking should have ``a strict focus with clear rules on how to 
adequately disclose so as to avoid consumer harm.'' Any rule should not 
go beyond addressing the failure to disclose mandatory costs.\82\
---------------------------------------------------------------------------

    \82\ FTC-2022-0069-6043 (NADA).
---------------------------------------------------------------------------

5. Telecommunications Fees
    Individual comments about telecommunications, including internet, 
television, and telephone services, noted that consumers are confronted 
with advertised rates that do not include mandatory fees, which are 
only disclosed after consumers contract for services and in ways that 
consumers find difficult to understand.\83\
---------------------------------------------------------------------------

    \83\ FTC-2022-0069-0138 (cable ``fees do not appear on their 
advertised rates . . . to appear cheaper than they really are. In 
actuality it is impossible to subscribe at advertised rates.''); 
FTC-2022-0069-2124 (``Cell phone companies, advertise $69 dollars 
unlimited, my bill has never been under $100, carrier fees, service 
fees, premium data charges. If its [sic] impossible to access the 
$69 dollar charge then thats [sic] false advertising.''); FTC-2022-
0069-2892 (``The advertised price from my cable package is $99.99 a 
month, so why am I paying $160 a month? I can understand the 
equipment rental fees, but the broadcasting and regional fees make 
no sense and seem to go up every time I turn around.''); FTC-2022-
0069-2382 (``Often, consumers are not aware that their cable or 
internet bill includes a monthly `rental' fee for the hardware modem 
that is provided by the cable or telephone company.''); FTC-2022-
0069-5435 (``Spectrum, Comcast, Verizon, & other internet/cable/
phone providers: The advertised price becomes bloated with 
unnecessary surcharges such as `economic adjustment' fees and 
recurring charges to use their mandated hardware.''); FTC-2022-0069-
5631 (telecommunication company ``charged a mandatory $9.95 
`Technology Service Fee' and a $4.95 `Billing Fee' on top of their 
normal rates. It is absolutely a ploy to artificially advertise a 
lower monthly payment for service even though it's guaranteed to be 
no less than $14.90 higher every month than they say it's going to 
be.'').
---------------------------------------------------------------------------

    Citing a Consumer Reports study and its own research, New America's 
Open Technology Institute (``OTI'') stated internet service providers 
routinely do not include internet service fees, such as installation 
and activation fees, equipment fees, penalties for exceeding data caps, 
and early termination fees, in advertised prices, and that these fees 
should be considered as part of the true monthly cost of internet 
service that should be incorporated into advertised prices or 
prohibited when they are arbitrary or do not reflect added value.\84\ 
OTI supported a rulemaking to increase price transparency and eliminate 
junk fees that provide no value to consumers, particularly in 
connection with wireless and wired internet connections, and urged the 
FTC to consider standardized price disclosures across industries.\85\ 
The Consumer Federation of America cited a review of internet bills by 
Consumer Reports that showed providers using terminology such as 
``network enhancement fee,'' ``internet infrastructure fee,'' 
``deregulated administration fee,'' and ``technology service fee,'' 
that made fees look like government-imposed, mandatory fees.\86\
---------------------------------------------------------------------------

    \84\ FTC-2022-0069-6087 (New America's Open Technology Institute 
(``OTI'')).
    \85\ Id.
    \86\ FTC-2022-0069-6095 (CFA).
---------------------------------------------------------------------------

    The Rural Broadband Association (``NTCA'') noted that many internet 
service provider fees are related to mandatory government programs that 
provide value to consumers.\87\ It argued that the FTC does not have 
jurisdiction over common carriers, and that broadband internet 
providers, while not common carriers, are already regulated by the FCC, 
and should be exempt from a fees rule.\88\ NTCA acknowledged, however, 
that certain types of retransmission fees that are opaque to consumers 
because broadcasters' confidentiality terms preclude transparent 
explanation of the fees could be examined to determine whether greater 
transparency can be achieved without imposing burdens in the generation 
of invoices.\89\
---------------------------------------------------------------------------

    \87\ FTC-2022-0069-3393 (NTCA--The Rural Broadband Association 
(``NTCA'')).
    \88\ Id.
    \89\ Id.
---------------------------------------------------------------------------

6. Rental Housing Fees
    Comments from individual consumers about rental housing fees stated 
leasing companies advertise monthly rents that do not include fees for 
mandatory ancillary services that unexpectedly and significantly 
increase renters' monthly expenditures.\90\ The comments stated leasing 
companies do not always identify the purpose of these fees.\91\
---------------------------------------------------------------------------

    \90\ FTC-2022-0069-1391 (landlord ``charges for extra programs 
that I was not informed about nor able to opt out easily''); FTC-
2022-0069-1677 (``In the realm of rental housing, any and all fees 
should be included into advertised rental prices.''); FTC-2022-0069-
1717 (``when looking for apartment rentals, they are never honest 
about upfront costs until you sign a lease and get your first 
bill.''); FTC-2022-0069-1782 (``When we started getting the bills, 
we were being charged electric, common area, utility admin, and pest 
fees that were not disclosed upfront.''); FTC-2022-0069-2242 (``When 
renting my unit we were told the cost was $1500 utilities included 
and were completely strong armed at lease signing with the new cost 
of $1650 `to cover the utilities', and given 0 wiggle room or time 
to work out an alternate place to live.''); FTC-2022-0069-2858 
(``Property management companies include excessive hidden fees that 
are not included in base rent and can make the cost of rent several 
hundred dollars more than what is advertised.''); FTC-2022-0069-4455 
(``I am writing about the practice of apartment companies 
advertising misleading prices and including hidden fees for renters. 
. . . It is extremely widespread. I looked for a new apartment 
around north Dallas twice in the past year, and every single one I 
visited had mandatory monthly fees not included in the monthly rate 
and not listed at all on their website (at least not anywhere I 
saw).'').
    \91\ FTC-2022-0069-3129 (``Junk fees have become fundamentally 
ridiculous, especially as these companies cannot even describe what 
the fee is for. In my monthly rent, I have a $34 service fee (that 
the . . . rental management company . . . has not been able to 
identify the reason for)'').

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[[Page 77428]]

    Consumer and policy groups noted that landlords do not adequately 
disclose many unavoidable fees or fail to explain the purpose of 
fees,\92\ and supported a rulemaking pertaining to fees in connection 
with rental housing, including apartments, house rentals, and 
manufactured housing communities (``MHCs'').\93\ The National Consumer 
Law Center (``NCLC'') conducted a survey of legal services and 
nonprofit attorneys that identified many unavoidable fees faced by 
tenants,\94\ and recommended that the FTC require that online platforms 
for rental advertisements disclose all fees, including fees charged 
before and after signing rental leases.\95\ Private Equity Stakeholder 
Project supported enhanced fee disclosure requirements and upfront 
disclosure of the costs of goods and services to protect consumers and 
the economy at large.\96\ The comments also recommended that the FTC 
investigate unfair or deceptive practices related to housing fees \97\ 
and provide guidance on fees.\98\
---------------------------------------------------------------------------

    \92\ FTC-2022-0069-6091 (NCLC argues that landlords fail to 
explain the purpose of fees.).
    \93\ FTC-2022-0069-6085 (Michigan Law School endorses NCLC's 
recommendations in connection with the rental housing market 
generally and recommends that the FTC investigate and regulate junk 
fees in the manufactured housing industry.)
    \94\ FTC-2022-0069-6091 (NCLC noted that the survey was 
conducted between November and December of 2022, and showed that 
tenants face an array of unavoidable fees, including rental 
application fees, sometimes charged even if landlords know 
applications will never be approved, excessive late fees, utilities-
related fees, processing or administrative fees, convenience fees, 
insurance fees, notice fees, trash fees, pest control fees, 
technology fees, common area and amenity-related fees, inspection 
fees, and mail sorting fees.).
    \95\ FTC-2022-0069-6091 (NCLC).
    \96\ FTC-2022-0069-6094 (Private Equity Stakeholder Project 
(``PESP'')).
    \97\ FTC-2022-0069-6091 (NCLC recommends that the FTC 
investigate deceptive or unconscionable practices by corporate and 
large landlords that impose unavoidable and exploitative fees).
    \98\ FTC-2022-0069-6091 (NCLC recommends that the FTC develop 
guidance).
---------------------------------------------------------------------------

    The comments also recommended that a rule prohibit certain rental-
related fees as invalid per se because they are exploitative \99\ and 
target captive renters who often come from vulnerable groups.\100\ The 
comments stated fees make rental housing even more unaffordable and 
jeopardize access to future housing and financial stability.\101\
---------------------------------------------------------------------------

    \99\ FTC-2022-0069-6091 (NCLC stated corporate and large 
landlords often impose fees that are excessive in amount or greater 
than the cost to the landlord of providing a service, that are for 
services not provided, that are for services that landlords are 
legally obligated to provide as part of renting habitable premises, 
or that prevent competition); FTC-2022-0069-6094 (PESP recommended 
that the FTC identify specific fees charged by landlords that would 
be invalid per se and take strong enforcement action, and referred 
to the comment of the NCLC (FTC-2022-0069-6091) in identifying fees 
that should be invalid, including fees that are excessive in amount 
or greater than the cost to the landlord of a service, fees for 
services not provided, and fees for services that landlords are 
legally obligated to provide as part of renting habitable premises); 
FTC-2022-0069-6085 (Michigan Law School stated additional fees faced 
by tenants of MHCs include application fees that may violate or 
attempt to circumvent state laws that prohibit MHCs from imposing 
entrance fees, community rule violation fees, and unilateral 
increases in lot rent.).
    \100\ FTC-2022-0069-6085 (Michigan Law School notes that tenants 
in manufactured housing communities (MHC) are disproportionately 
low-income, disabled, and elderly, and are a captive audience of the 
owners of the land on which mobile homes sit.).
    \101\ FTC-2022-0069-6091 (NCLC).
---------------------------------------------------------------------------

7. Education Fees
    The comments further noted that institutions of higher learning 
often charge mandatory fees that are not included in advertised tuition 
fees.\102\ The Consumer Federation of America noted that the rate of 
fees is increasing faster than the cost of tuition and non-transparent 
tuition and fee pricing models particularly affect Black and Indigenous 
communities and other communities of color.\103\
---------------------------------------------------------------------------

    \102\ FTC-2022-0069-2288 (``This rule should apply to `non-
profit' institutions such as colleges and universities as they use 
them [fees] in the same predatory ways as for profit companies but 
have the advantage of exploiting a captive consumer population that 
is younger and naive.''); FTC-2022-0069-2616 (``Tuition bills for 
higher education have also added increasing amounts of charges with 
no opt-out's.''); FTC-2022-0069-4375 (University charged 
``miscellaneous' fees that aren't included in the tuition cost. When 
looking at the price of tuition it is not included and is only seen 
on the final bill. When confronted they couldn't give an itemized 
list for the charge.'').
    \103\ FTC-2022-0069-6095 (CFA). See also FTC-2022-0069-6113 
(UnidosUS endorsing the comment of the CFA).

---------------------------------------------------------------------------

[[Page 77429]]

8. Financial Services Fees
    Individual commenters argued that fees charged in connection with 
bank accounts, credit cards, and other financial products are excessive 
and not adequately disclosed.\104\ Consumer Reports noted that 
``[a]ccording to the 2018 Consumer Reports national survey, 37% of 
consumers said they had received a hidden fee for personal banking in 
the previous two years, while 36% had received a hidden fee for credit 
cards and 24% for investment services.'' \105\ Consumer groups noted 
that financial services fees are particularly burdensome to vulnerable, 
low-income, Black, and Latino consumers.\106\
---------------------------------------------------------------------------

    \104\ FTC-2022-0069-0450 (``monthly service fees if your balance 
falls below $xxx, overdraft fees''); FTC-2022-0069-0488 (``Then 
there are the account fees, service fees, and atm fees at banks, 
which are ridiculous considering they loan out your money and pay a 
half a percent interest to you.''); FTC-2022-0069-0550 (``Junk fees 
manifest in markets ranging from auto financing to international 
calling cards and payday loans.''); FTC-2022-0069-1676 (``Banks 
charging overdraft fees and then when you link a credit card to 
cover the overdraft, the credit card charges you a fee. This can be 
for every single overdraft! Ridiculous!''); FTC-2022-0069-1974 (``I 
also am charged $12 anytime my savings account goes below 1500 
dollars by chase bank.''); FTC-2022-0069-2131 (`` `Convenience' fees 
for paying bills online. A literal scam. It's more convenient for 
businesses to take electronic payments.''); FTC-2022-0069-5995 
(``Fees to pay with a credit card when the fee wasn't posted or 
disclosed anywhere. Usually at least 3 to 5% of the total 
transaction and that would include taxes. It's insane. Prices not 
posted. Fees added. Consumers are being robbed at will.''); FTC-
2022-0069-2262 (``Convenience fees in general are outrageous. It's 
2023, credit cards and online payments aren't novel, they're the 
norm. Cable/internet companies do it (xfinity/Comcast and Cox). Cell 
phone companies do it, Verizon. It's outrageous.''); FTC-2022-0069-
2312 (``Fees should also be collected in one place and easy to read. 
Some places like banks list fees but they're usually not collected 
in one place. You have to go looking for them. This feels a little 
hidden and anti-consumer.''); FTC-2022-0069-2729 (``When I opened a 
bank account at a small local bank they charged a monthly fee for 
even opening a savings account. They claimed this fee for 
`maintenance' of the account.''); FTC-2022-0069-3052 (``My employer 
opened an HSA account for me at First Financial Bank. I started 
receiving statements in the mail that they took a monthly $3 paper 
statement fee out of my account, which I had not consented to. When 
I went online to change it to email statements, the first thing they 
made me do is accept an agreement saying that I acknowledge the 
validity of paper statement fees.''); FTC-2022-0069-3675 (``You know 
how sometimes you get those visa style gift cards that work as debit 
cards with the pre-loaded amounts? Some of those companies will 
charge you a monthly fee on those types of cards that isn't 
mentioned literally anywhere and that you won't know about until you 
go to check the balance and find out that they've literally been 
robbing you of your own money.''); FTC-2022-0069-3681 (``Some 
examples of companies that include hidden fees at significant cost 
to the consumer include: . . . USBank/Wells Fargo/BoA/WaFD Bank--
Monthly maintenance fees/overdraft fees (These also 
disproportionately impact the poor).''); FTC-2022-0069-3932 
(``Consumers across so many industries are increasingly subject to 
fees that are not conveyed at the time of the purchase . . . 
surprise service fees in hospitality, surprise interest fees in 
financial services, surprise charges in healthcare that even 
insurance providers cannot explain and are unwilling to pay 
themselves. Consumers should simply not be required to pay fees that 
were not agreed to and understood in advance.''); FTC-2022-0069-5652 
(``Banks disclose their fees for `overdraft protection' or 
`insufficient funds fees' buried in a massive packet of information 
and on their websites. Meanwhile advertisements excitedly talk about 
interest rates or joining bonuses. Most banking customers find out 
about these fees when they are the most vulnerable: low on funds. 
They then have to pay nearly $30 for being poor.''); FTC-2022-0069-
5896 (``Fees should be disclosed. Misleading ads that lure consumers 
in. Hidden disclosures that change to benefit financial is [sic] 
institutes and further burden consumers should be disclosed in 
larger print, and announced more than advertisements.'');
    \105\ FTC-2022-0069-6099 (CR also noted that, in March 2022, it 
asked its member to share experiences regarding junk financial fees, 
and collected over 1,800 comments identifying hidden financial fees, 
including overdraft and insufficient fund fees, account maintenance 
fees, late fees, dormancy and inactivity fees, check cashing fees, 
fees for minimum purchase transactions, fees for paper statements, 
and fees to pay bills).
    \106\ FTC-2022-0069-6095 (CFA noted that fees represent a 
disproportionately high cost to low-income consumers and may 
destabilize household budgets and ``ultimately push consumers out of 
mainstream financial products and into fringe financial services and 
predatory financial products.''); FTC-2022-0069-6113 (UnidosUS 
referenced a comment it submitted to the Consumer Financial Products 
Bureau, highlighting ways that junk fees in the financial system 
disproportionately impact Latinos and lower-income people.)
---------------------------------------------------------------------------

    Some comments from the consumer financial services industry 
supported a rulemaking to create a more transparent financial services 
sector and to address bad actors who mislead consumers about fees.\107\ 
Other comments opposed a rulemaking.\108\
---------------------------------------------------------------------------

    \107\ FTC-2022-0069-6044 (The American Fintech Council (``AFC'') 
acknowledged and supported the FTC's jurisdiction over the issues 
raised in the ANPR and supported regulation that will create a 
fairer and more transparent financial services ecosystem to provide 
for sustainable access to credit and to foster responsible practices 
and fair lending in consumer financial markets); FTC-2022-0069-2623 
(The American Land Title Association (``ALTA'') supported the FTC 
rulemaking to address bad actors who mislead consumers about fees). 
Some commenters framed their comments within the context of previous 
comments they submitted in connection with Motor Vehicle Trade 
Regulation Rule--Rulemaking, No. P204800. See FTC-2022-0069-6045 
(The Credit Union National Association (``CUNA'') submitted a 
comment that referred to and incorporated its comment to Motor 
Vehicle Trade Regulation Rule--Rulemaking, No. P204800, in which it 
stated it supports ``the FTC's effort to develop a rule that 
addresses bad actors in the auto dealer market''); FTC-2022-0069-
6114 (The Consumer Credit Industry Association (``CCIA'') similarly 
referred the FTC to its comments submitted in response to the Motor 
Vehicle Dealers Trade Regulation Proposed Rule).
    \108\ FTC-2022-0069-6090 (The American Financial Services 
Association (``AFSA'') opposed rulemaking and argued that the unfair 
or deceptive practices on which the FTC sought comment in the ANPR 
are not widespread in the consumer financial services market.).
---------------------------------------------------------------------------

    Industry comments recommended that the FTC clearly define or 
clarify the meaning of ``junk fees,'' \109\ and objected that fees in 
the consumer financial sector are for legitimate services that add 
value to consumers \110\ and are already adequately regulated by State 
and Federal laws.\111\ For example, AFSA argued that there is already 
sufficient regulation of fees in the financial services sector, 
including through the Truth in Lending Act (``TILA''), the Real Estate 
Settlement Procedures Act (``RESPA''), the Truth in Savings Act 
(``TISA''), and the Consumer Financial Protection Act of 2010 
(``CFPA'')).\112\ Comments also stated competitive pressures within the 
industry tend to reduce fees.\113\
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    \109\ FTC-2022-0069-2623 (ALTA recommended that the FTC clearly 
define what ``junk'' fees are because the definition in the ANPRM is 
too broad); FTC-2022-0069-6114 (CCIA suggested that there is no 
objective standard for identifying junk fees for goods or services 
that have little or no added value to consumers); FTC-2022-0069-6045 
(CUNA strongly urged the Commission to further clarify the 
definition of the term ``junk fee.'').
    \110\ FTC-2022-0069-2623 (ALTA noted that title insurance and 
settlement services fees commonly charged in real estate 
transactions are for legitimate services); FTC-2022-0069-6090 (AFSA 
argued that junk fees are misnamed because they provide value to 
consumers who are in the best position to determine whether fees add 
value to them through their purchasing decisions, and that such fees 
compensate financial services providers, including when they are 
placed in a worse position as a result of subsequent consumer 
action); FTC-2022-0069-6114 (CCIA commented that ancillary products 
offered in conjunction with auto financing loans provide value to 
consumers by protecting auto financing loans and consumer credit); 
FTC-2022-0069-6040 (Online Lenders Alliance (``OLA'') argued that 
three types of fees, mandatory fees, misconduct fees, and 
enhancement fees, have been mislabeled as junk fees by the Consumer 
Financial Protection Bureau); FTC-2022-0069-6045 (CUNA argued that 
describing fees as ``junk fees'' does a disservice to responsible 
actors like credit unions and their partners that charge well-
disclosed fees to recoup costs and encourage positive behavior.).
    \111\ FTC-2022-0069-2623 (ALTA noted that title insurance and 
settlement services fees are highly regulated to provide protection 
for consumers and ensure that fees are adequately disclosed); FTC-
2022-0069-6045 (CUNA); FTC-2022-0069-6114 (CCIA commented that 
Federal and State regulations adequately protect consumers by 
ensuring that their purchase of ancillary products is voluntary and 
express); FTC-2022-0069-6040 (OLA noted that the financial services 
sector is already heavily regulated and numerous types of fee 
disclosures are already required.).
    \112\ FTC-2022-0069-6090 (AFSA).
    \113\ FTC-2022-0069-6044 (AFC).
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    The comments stated fees in the consumer financial services market 
cannot be equated with fees charged in other markets, such as live 
event or resort fees.\114\ They stated there may be

[[Page 77430]]

legitimate reasons for disclosing fees other than at the beginning of 
sales transactions.\115\ The comments noted that regulating fees in the 
consumer financial services sector could have negative consequences 
such as limiting services and raising prices.\116\ The comments stated 
the FTC should coordinate with other agencies to harmonize rules.\117\
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    \114\ FTC-2022-0069-6045 (CUNA stated fees in the heavily 
regulated consumer financial services market cannot be equated with 
opaque fees for live-event tickets or hotel resorts); FTC-2022-0069-
6040 (OLA criticized oft-cited studies on fees, particularly, ``The 
Impact of Price Frames on Consumer Decision Making Experimental 
Evidence'' and ``The Competition Initiative And Hidden Fees,'' 
arguing that they are not applicable to fees in the financial 
services industry.).
    \115\ FTC-2022-0069-6114 (CCIA objected that fees are not hidden 
or deceptive if they are offered to consumers at different steps of 
the sales process because disclosing fees later in the process may 
be necessitated by the fact that consumers must first be approved 
for loans); FTC-2022-0069-6045 (CUNA noted that late fees are 
disclosed on fee schedules and only levied if payments are not 
rendered by their due dates.); FTC-2022-0069-6090 (AFSA argued that 
the FTC should not seek comments about how widespread certain unfair 
or deceptive practice are but should instead identify such 
widespread problems on its own.).
    \116\ FTC-2022-0069-6090 (AFSA claimed that limiting fees in the 
financial services sector would cool competition, raise prices, and 
harm consumers who do not use services but may be required to pay 
fees that are built into overall costs.); FTC-2022-0069-6045 (CUNA 
urged the FTC to avoid adopting regulatory changes that will 
negatively impact the ability of credit unions or their system 
partners from serving members.).
    \117\ FTC-2022-0069-6044 (AFC noted that the CFPB has 
jurisdiction over several topics addressed in the ANPR, as reflected 
in the CFPB's ``Request for Information Regarding Fees Imposed by 
Providers of Consumer Financial Products or Services,'' and 
recommended that the FTC coordinate with the CFPB and other relevant 
agencies to ensure that any rule fit within the FTC's jurisdictional 
authority and is not duplicative or contradictory of CFPB rules.).
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9. Correctional Services Fees
    Consumer and policy groups also commented on a number of unfair or 
deceptive practices regarding fees imposed on incarcerated people and 
supported rulemaking.\118\ These comments stated that incarcerated 
people are a captive audience who are forced to pay excessive fees by 
monopolistic or oligopolistic service providers in connection with 
private correctional services.\119\ Commenters stated these fees are 
often deceptive because service providers fail to comply with Federal 
disclosure requirements, omit fee information, and present pricing 
information in confusing ways that are likely to mislead consumers, for 
example, by bundling services that make identifying fees 
difficult.\120\ Commenters also stated these fees are often unfair 
because they cause substantial harm to incarcerated people who are the 
least able to afford them, cannot reasonably be avoided because the 
consumers are captive to private companies with exclusive contracts, 
provide little or no added value to consumers, and do not benefit 
competition.\121\
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    \118\ FTC-2022-0069-6088 (National Consumer Law Center submitted 
a comment on behalf of a group of civil rights, consumer rights, 
faith-based, criminal justice, and reentry organizations supporting 
rulemaking.); FTC-2022-0069-6082 (Fines and Fees Justice Center 
(``FFJC''), ``a national center for advocacy, policy, information, 
and collaboration on effective solutions to the unjust and harmful 
imposition and enforcement of fine and fees in the criminal legal 
system,'' submitted a comment in support of rulemaking, and noted 
that the CFPB and FCC are considering fees imposed on incarcerated 
persons.).
    \119\ FTC-2022-0069-6088 (NCLC noted that these services include 
money-transfer services, release cards, and various technology 
services, including technologies incarcerated people use to 
communicate with loved ones, such as electronic messaging 
services.); FTC-2022-0069-6082 (FFJC noted that these correctional 
services include money transfers, release cards, and technology 
services, such as phone calls, emails, tablets, and music and e-book 
subscriptions, and that providers often charge fees far in excess of 
the cost of the services to the companies providing them.).
    \120\ FTC-2022-0069-6088 (NCLC); FTC-2022-0069-6082 (FFJC).
    \121\ Id.
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C. Comment Recommendations

    Many commenters argued that the prevalence of hidden fees cannot be 
effectively addressed by tools currently available to the FTC without a 
rulemaking.\122\ The Consumer Federation of America argued that a 
rulemaking is necessary to address ``the root cause of the `junk fee' 
problem--rampant deceptive advertising and impaired competition.'' 
\123\
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    \122\ FTC-2022-0069-6095 (CFA noted that AMG prevents the FTC 
from seeking monetary relief under Section 13(b) of the FTC Act, and 
that consumer contracts requiring arbitration would not deter 
misconduct or provide appropriate remedies for unfair and deceptive 
junk fee conduct.); FTC-2022-0069-6042 (TINA.org stated the 
prevalence of junk and hidden fees cannot be effectively addressed 
by tools currently available to the FTC, particularly in the wake of 
the AMG decision, and that a junk fees rule would be in the public's 
best interest.).
    \123\ FTC-2022-0069-6095 (CFA noted that advertising deceptively 
low prices then tacking on mandatory fees harms honest businesses 
and consumers, and disproportionately impacts vulnerable consumers, 
limited English-speaking consumers, and consumers with 
disabilities.).
    \124\ FTC-2022-0069-0032 (``I agree with the proposed rule and 
requiring all unavoidable fees, including taxes, be included in the 
published price.''); FTC-2022-0069-0117 (``I wholeheartedly support 
the FTC's proposal to force companies to show ALL mandatory fees and 
charges in the initial price search or quote.''); FTC-2022-0069-0457 
(``Forcing all fees to appear in any advertised price would be a 
help. Prohibition of those fees would be even better''); FTC-2022-
0069-1087 (``Except with respect to taxes and voluntary add-ons 
which exceed normal expectations, no one should be able to legally 
charge more than the price they advertise.''); FTC-2022-0069-2144 
(``Not just for ticket master but for all companies. Put the real 
price up front and don't hide behind other fees you earmark 2/3rds 
of the way down the page.''); FTC-2022-0069-2178 (``All fees and 
charges should always be clear and upfront in the price. Nothing 
should be hidden. It is deceptive to state otherwise.''); FTC-2022-
0069-3017 (``[T]he rule should require all-in pricing, because that 
is the simplest and most honest way to disclose the actual cost to 
the consumer.''); FTC-2022-0069-3083 (``MAKE ALL BUSINESSES SHOW THE 
REAL TRUE PRICE (TAX INCLUDED) ON THE LABEL AT EVERY STORE AND 
BUSINESS IN THE UNITED STATES.''); FTC-2022-0069-3423 (``I urge the 
FTC to act to bring these business practices in line with the 
customary way business has been conducted in our society in stores 
for a very long time by banning the practice and requiring listed 
and/or advertised prices to include all costs, beginning with the 
first time the price is presented to customers.''); FTC-2022-0069-
3459 (`` Please move towards upfront pricing, for all taxes, service 
charges and other charges that are standard should be included in 
the first price you see.''); FTC-2022-0069-3469 (``The only way, in 
my opinion, to solve this problem is to implement a rule/law where 
the ONLY additional charges allowed for an invoice or service is 
GOVERNMENT fees and taxes. . . . There would be no additional costs 
incurred by a business/service to change to this rule, just a change 
forcing them to advertise the TRUE COST for using their service or 
business.''); FTC-2022-0069-3659 (``Please have merchants show the 
actual final cost of a product or service as opposed to providing a 
sale price and then adding additional charges.''); FTC-2022-0069-
3708 (``Companies should be required to show the TOTAL price, 
including all applicable fees, on any advertisements or listings on 
their website.''); FTC-2022-0069-3746 (``The total cost of an e-
commerce purchase should be required to be displayed alongside the 
listing for the item.''); FTC-2022-0069-3859 (``Corporations should 
be mandated to advertise full-prices including fees.''); FTC-2022-
0069-4151 (``Every company in every scenario possible should be 
forced to advertise only the true combined total cost.''); FTC-2022-
0069-4176 (``Please step up and make retailera [sic] at all levels 
advertise the real true cost of their goods and services so 
consumers can make reasonable choices without being lured or baited 
and switched.''); FTC-2022-0069-4252 (``Everyday, I am lured into a 
transaction, told I am going to pay one price, only to have it 
raised by a large percentage at checkout due to fees that are non-
negotiable or part of processing. If these are standard fees, they 
need to be added to the price of the item, service etc. These are a 
bait and switch tactic that I don't know how became legal.''); FTC-
2022-0069-4253 (``What's the point of a price if that's not the 
price? Advertised price should be the finial [sic] price. Nothing 
more nothing less.''); FTC-2022-0069-4255 (``Fees should be 
transparent and included in advertised prices. This should go for 
everything from airbnb rentals, to airfare, to concert tickets, to 
retail, to grocery stores. The price you see advertised should be 
the price you pay.''); FTC-2022-0069-5144 (``All business should be 
legally required to post the all-in or `total' price of goods, 
including taxes and fees. Many other countries practice this, 
promoting transparency and allowing the consumer to shop with clear 
pricing.''); FTC-2022-0069-5332 (``[T]he advertised/shown price 
should be the price.''); FTC-2022-0069-5517 (``We need price 
transparency for the services we buy. I advocate for requiring all 
services to be forced to advertise and display FINAL prices, after 
all fees.''); FTC-2022-0069-5692 (``Taxes and fees should be 
included in the listed price every time. This is for every service 
and every good everywhere in the country. This should be for every 
label, advertisement, coupon, and other reasonable statement of 
price.'').
---------------------------------------------------------------------------

    The comments broadly supported FTC action to address the identified 
deceptive practices by requiring price transparency. Many individual 
commenters,\124\ consumer groups,\125\

[[Page 77431]]

and industry members \126\ recommended an industry-neutral rule 
requiring the disclosure of all-in pricing that includes all mandatory 
fees.
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    \125\ FTC-2022-0069-6095 (CFA supports an industry-neutral rule 
requiring disclosure of all-in pricing, including all fees that are 
unavoidable or mandatory, at the beginning of transactions to allow 
consumers to comparison shop and foster competition); FTC-2022-0069-
6099 (CR recommended, as an alternative to prohibiting fees, 
requiring the clear, upfront disclosure of fees, stated consumers 
``would greatly benefit from a comprehensive national rule to ban 
hidden and surprise junk fees and improve the transparency and 
comparability of any truly optional add-on services,'' and advocated 
for a ``strong economy-wide initiative'' to create ``marketplace 
standards and ethical norms . . . in all or most economic 
sectors''); FTC-2022-0069-6113 (UnidosUS endorsed the recommendation 
of the CFA for a rule that requires ``all-in'' pricing for goods and 
services at the beginning of purchase transactions, and that the 
rule identify prohibited unfair and deceptive conduct relating to 
junk and hidden fees).
    \126\ See Section II.B.
---------------------------------------------------------------------------

    Many individual commenters and consumer groups, concerned with the 
cumulative impact of fees, also recommended that the FTC prohibit or 
limit fees, such as fees that are of little to no value to 
consumers,\127\ or require that fees bear a reasonable relationship to 
the cost of the services provided.\128\ Some consumer groups 
recommended that the rule incorporate a reasonable consumer standard 
and that the FTC develop model fee disclosures.\129\
---------------------------------------------------------------------------

    \127\ FTC-2022-0069-6095 (CFA recommended that fees that provide 
little or no value to consumers or which consumers reasonably 
believe would be included in advertised prices should be 
prohibited); FTC-2022-0069-6099 (CR commented that junk fees that 
add little or no value or would reasonably be included in the base 
price of goods or services should be reduced or banned).
    \128\ FTC-2022-0069-6099 (CR recommended, as an alternative to 
prohibiting fees, that fees ``bear a reasonable and proportionate 
relationship to the underlying costs of providing the particular 
service for which they are charged.'').
    \129\ FTC-2022-0069-6095 (CFA recommended that the FTC develop 
model fee disclosures); FTC-2022-0069-6113 (UnidosUS recommended 
that a rule require disclosures that take into account consumers' 
language proficiency, include model fees disclosures, and 
incorporate a reasonable consumer standard).
---------------------------------------------------------------------------

    The U.S. Chamber of Commerce and the Association of National 
Advertisers argued that Congress has not authorized comprehensive 
unfair or deceptive fees rulemaking, and that the ANPR is too broad to 
comply with rulemaking procedures.\130\ They acknowledged that existing 
FTC rules include disclosure requirements related to pricing, citing 
the Telemarketing Sales Rule, the Restore Online Shoppers' Confidence 
Act, and the Funeral Rule, but objected that the FTC has not shown that 
existing rules are insufficient to protect consumers or explained how a 
proposed rule would work with other rules.\131\ They also objected to 
an economy-wide rule because it would overlap with industry-specific 
rules and recommended that the FTC narrowly tailor rulemaking to 
specific industries engaging in unfair or deceptive practices.\132\ ANA 
recommended alternatives to rulemaking, such as industry-specific 
workshops, consumer and business education, and individual enforcement 
actions.\133\
---------------------------------------------------------------------------

    \130\ FTC-2022-0069-6047 (The Chamber stated the proposed 
rulemaking implicates the Major Questions Doctrine, Congress has not 
clearly authorized comprehensive unfair and deceptive fees 
rulemaking, and the proposed rulemaking does not meet the 
requirements of the FTC Act and would constitute unauthorized 
competition rulemaking to the extent it relates to concerns about 
monopoly and anticompetitive behavior. The Chamber also stated the 
FTC has not shown practices related to fees are unfair because 
requiring extensive fee disclosures upfront would harm businesses 
without countervailing benefits to consumers.).
    \131\ FTC-2022-0069-6047 (The Chamber stated the FTC has not 
explained how existing rules are ``insufficient from a deterrence or 
consumer-protection standpoint.''); FTC-2022-0069-6093 (ANA stated 
the ANPR fails to discuss how the proposed rulemaking will apply 
when it overlaps with existing regulations related to advertising 
and disclosures.). The Commission addresses and seeks comment on 
other rules with disclosure requirements related to pricing 
information in Sections IX.C and X.
    \132\ FTC-2022-0069-6047 (The Chamber stated an economy-wide 
rule would likely overlap with existing sectoral rules); FTC-2022-
0069-6093 (ANA urged the FTC to identify specific industries 
engaging in unfair or deceptive practices and narrowly tailor 
rulemaking to those industries.).
    \133\ FTC-2022-0069-6093 (ANA).
---------------------------------------------------------------------------

    Other commenters disagreed. For example, Policy Integrity argued 
that the FTC has clear congressional authority to tackle deceptive or 
unfair practices through rulemaking, and that doing so would not 
supersede that authority.\134\ Policy Integrity pointed out that FTC 
rulemaking relating to all-in pricing would be in keeping with other 
FTC rules that relate to unfair or deceptive fee disclosure practices, 
such as the Unavailability Rule or Raincheck Rule, the Funeral Rule, 
the Negative Option Rule, the Mail, internet, or Telephone Order 
Merchandise Rule, and the Cooling-Off Rule.\135\ Policy Integrity 
pointed out that these FTC rules ``imposed disclosure requirements 
targeting unfair and deceptive fee-disclosure practices that apply to a 
vast number of entities across numerous industries, similar to its 
present effort to regulate junk fees and hidden fees.'' \136\
---------------------------------------------------------------------------

    \134\ FTC-2022-0069-6077 (Policy Integrity argued that the FTC 
has clear congressional authorization in the FTC Act to tackle 
deceptive practices related to fees under Section 5(a) and unfair 
practices under Section 5(n), and that regulating junk fees, hidden 
fees, and related practices would not implicate the Major Questions 
Doctrine because FTC regulatory and enforcement antecedents 
demonstrate that FTC action in this area would not be ``unheralded'' 
and would not represent a ``transformative'' change in the FTC's 
authority, under West Virginia v. EPA.).
    \135\ FTC-2022-0069-6077 (Policy Integrity argued that FTC 
rulemaking related to all-in pricing would not be ``unheralded'' 
under West Virginia v. EPA given prior rulemaking related to pricing 
disclosures.).
    \136\ FTC-2022-0069-6077 (Policy Integrity).
---------------------------------------------------------------------------

III. Prevalence of Unfair and Deceptive Fee Practices

    This proposed rule addresses prevalent fee practices that are 
unlawful under Section 5 of the FTC Act, 15 U.S.C. 45, because they are 
unfair or deceptive to consumers. The Commission has identified two 
practices that, for the reasons described herein, are unfair or 
deceptive practices under Section 5 of the FTC Act: (1) practices that 
misrepresent the total costs by omitting mandatory fees from advertised 
prices, and (2) practices that misrepresent the nature and purpose of 
fees or charges. The comments received in response to the ANPR and the 
Commission's history of enforcement actions and other complementary 
work, discussed in Section III.C, demonstrate the prevalence of these 
practices.\137\
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    \137\ The Commission can support a finding that practices are 
prevalent by showing that it has issued cease and desist orders or 
by providing information that indicates a widespread pattern of 
unfair or deceptive acts or practices. 15 U.S.C. 57a(b)(3).
---------------------------------------------------------------------------

    As shown in the comments received, advertising misrepresentations 
and unlawful practices related to pricing and added fees are chronic 
problems confronting consumers. These problems are prolific and occur 
across industries affecting a large majority of the population.\138\ 
The FTC uses its authority under Section 5 to stop deceptive or unfair 
acts or practices. A representation, omission, or practice is deceptive 
if it is likely to mislead consumers acting reasonably under the 
circumstances and is material to consumers--that is, it would likely 
affect the consumer's conduct or decisions with regard to a product or 
service.\139\ False and misleading statements are unlawful regardless 
of an intent to deceive.\140\ Some deception cases involve omission of 
material information, the disclosure of which is necessary to prevent 
the claim, practice, or sale from being misleading.\141\ A practice is 
considered unfair under Section 5 if: (1) it causes, or is likely to

[[Page 77432]]

cause, substantial injury; (2) the injury is not reasonably avoidable 
by consumers; and, (3) the injury is not outweighed by benefits to 
consumers or competition.\142\
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    \138\ FTC-2022-0069-6095 (describing a survey in which 85% of 
respondents encountered fees that were not initially disclosed and 
listing a range of industries in which the fees occurred); supra 
Section II.B.
    \139\ See Fed. Trade Comm'n, FTC Policy Statement on Deception, 
103 F.T.C. 174, 175 (1984) (appended to In re Cliffdale Assocs., 
Inc., 103 F.T.C. 110, 183 (1984)), (hereinafter ``Deception Policy 
Statement''), https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.
    \140\ In re Sears, Roebuck & Co., 95 F.T.C. 406, 517 n. 9 (1980) 
(citing Regina Corp. v. FTC, 322 F.2d 765, 768 (3d Cir. 1963)).
    \141\ Id. at 175 & 175 n. 4, 176-77.
    \142\ 15 U.S.C. 45(n).
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A. Bait-and-Switch Tactics: Misrepresenting Total Costs by Omitting 
Mandatory Fees From Advertised Prices

    The comment record supports a finding that bait-and-switch pricing 
practices are prevalent. Specifically, commenters identified pricing 
structures that do not disclose the total price for goods or services, 
but instead advertise a lower cost to consumers that is ultimately 
inflated by mandatory charges.\143\ These pricing structures take a 
variety of forms, including pure misrepresentations through initial 
advertisements displaying a lower price, advertisements that 
inadequately disclose mandatory add-on charges,\144\ tactics that 
disclose mandatory add-on charges late in the purchasing process, and 
sales that omit material terms such as requiring an additional purchase 
to make full use of the good or service.\145\ All of these practices 
render the quoted price misleading because they lead consumers to 
believe that the cost for the good or service is lower than it actually 
is--put another way, the advertised good or service is not actually 
attainable for the quoted price.
---------------------------------------------------------------------------

    \143\ See discussion, supra Section II.A.1.
    \144\ This practice would include advertisements where 
additional charges are not disclosed clearly and conspicuously--for 
example, they appear only in fine print--and advertisements that 
partition the total cost into various components without displaying 
the total price most prominently.
    \145\ See discussion, supra Section II.A.1. & nn. 9-10.
---------------------------------------------------------------------------

    Pricing structures that do not initially disclose the total cost of 
a good or service are deceptive even if the total cost is disclosed at 
some point during the transaction. It has long been the FTC's position 
that misleading door openers are deceptive.\146\ Further, numerous 
courts have recognized that it is a violation of the FTC Act if a 
consumer's first contact is induced through deception, even if the 
truth is clarified prior to purchase.\147\ Thus, when the initial 
contact with a consumer shows a lower or partial price without 
disclosing the total cost, it violates the FTC Act even if the total 
cost is later disclosed.
---------------------------------------------------------------------------

    \146\ Fed. Trade Comm'n, Enforcement Policy Statement on 
Deceptively Formatted Advertisements at 7 (2015), https://www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf (hereinafter ``Policy Statement on 
Deceptive Ad Formats'') (describing the FTC's enforcement actions 
against misleading door openers since at least 1976). See also, 
Intuit, Inc., Docket No. 9408 (FTC Initial Decision Sept. 6, 2023) 
(finding that Respondent's advertisements employed a deceptive door 
opener claiming that consumers can file their taxes for free with 
TurboTax and that Respondent's later disclosures did not clearly and 
conspicuously disclose material facts explaining the limitations on 
the free offer).
    \147\ Policy Statement on Deceptive Ad Formats at 7 & n. 25 
(collecting cases before 2015); FTC v. FleetCor Techs., Inc., 620 F. 
Supp. 3d 1268, 1298-99 (N.D. Ga. 2022); FTC v. Elegant Sols., Inc., 
No. SACV 19-1333 JVS (KESx), 2020 WL 4390381, at *9-10 (C.D. Cal. 
July 6, 2020), aff'd, No. 20-55766, 2022 WL 2072735 (9th Cir. June 
9, 2022); FTC v. Am. Fin. Benefits Ctr., No. C 18-00806 SBA, 2018 WL 
11354861, at *9 (N.D. Cal. Nov. 29, 2018); FTC v. All. Document 
Preparation, 296 F. Supp. 3d 1197, 1209 (C.D. Cal. 2017); FTC v. 
OMICS Grp. Inc., 302 F. Supp. 3d 1184, 1190 (D. Nev. 2017).
---------------------------------------------------------------------------

    It is also well established that it is deceptive to sell a product 
that is not fit for the purpose for which it is sold.\148\ By offering 
a good or service, a seller impliedly represents that it is fit for the 
purpose for which it is sold.\149\ As a result, it is deceptive when a 
good or service cannot be used for its intended purpose without an 
additional purchase.
---------------------------------------------------------------------------

    \148\ Deception Policy Statement, 103 F.T.C. at 175 n.4, 177; In 
re Int'l Harvester Co., 104 F.T.C. 949, 1058 & n.35 (1984); 
Tomasella v. Nestle USA, Inc., 962 F.3d 60, 72 & n.11 (1st Cir. 
2020).
    \149\ Deception Policy Statement, 103 F.T.C. at 175 n.4, 177; In 
re Int'l Harvester Co., 104 F.T.C. at 1058 & n.35; Tomasella, 962 
F.3d at 72, 72 n.11.
---------------------------------------------------------------------------

    The pricing structures described in this section are material where 
they are likely to affect consumers' choices or conduct regarding the 
goods or services at issue. Material facts are those that are important 
to consumers' choices or conduct regarding a product, and certain 
categories of information are presumptively material.\150\ The 
Commission has previously recognized that price is a material 
term,\151\ and that it is a deceptive practice to misrepresent the 
price of a product.\152\
---------------------------------------------------------------------------

    \150\ Deception Policy Statement, 103 F.T.C. at 182.
    \151\ Id. at 182 & 182 n.55 (listing claims or omissions 
involving cost among those that are presumptively material); see 
also FleetCor Techs., 620 F. Supp. 3d at 1303-04 (finding that 
representations about transaction fees and discounts were material).
    \152\ Deception Policy Statement, 103 F.T.C. at 175 (listing 
``misleading price claims'' among those claims that the FTC has 
found to be deceptive); see, e.g., Resort Car Rental Sys., Inc. v. 
Fed. Trade Comm'n, 518 F.2d 962, 964 (9th Cir. 1975) (upholding the 
Commission's order finding that using the name ``Dollar-A-Day'' 
misrepresented the price of car rentals in violation of Section 5 of 
the FTC Act).
---------------------------------------------------------------------------

    Pricing structures that do not clearly and conspicuously disclose 
the total price are also unfair under Section 5 because they are likely 
to cause substantial injury, they are not reasonably avoidable by 
consumers, and the injury is not outweighed by benefits to consumers or 
competition. Unfair or deceptive fee practices can cause significant 
consumer harm and reduce competition.\153\ When sellers advertise 
prices that are artificially low because they do not include mandatory 
fees that are disclosed only later in the purchasing transaction, 
consumers end up transacting with those sellers under false pretenses. 
Injury to consumers can occur even when all fees are disclosed up 
front, but separately from the base price.\154\ Businesses that 
accurately represent the total amount consumers will pay up front are 
at a competitive disadvantage to those that do not.\155\
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    \153\ See, e.g., Mary Sullivan, Fed. Trade Comm'n, Economic 
Analysis of Hotel Resort Fees 4 (2017) https://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf; Alexander Rasch 
et al., Drip Pricing and its Regulation: Experimental Evidence, 176 
J. Econ. Behav. & Org., 353, 362-63 (2020) (``[E]xperimental 
evidence suggests that consumers indeed strongly and systematically 
underestimate the total price under drip pricing and make mistakes 
when searching.''); Shelle Santana et al., Consumer Reactions to 
Drip Pricing, 39 Mktg. Sci. 1, 188 (2020), https://doi.org/10.1287/mksc.2019.1207 (``Across six studies, we find that when optional 
surcharges are dripped (versus revealed up front) consumers are more 
likely to initially select a lower base priced option which, after 
surcharges are included, is often more expensive than the 
alternative.''); Howard A. Shelanski et al., Economics at the FTC: 
Drug and PBM Mergers and Drip Pricing, 41 Rev. Indus. Org., 314-16 
(2012). https://doi.org/10.1007/s11151-012-9360-x; Tom Blake et al., 
Price Salience and Product Choice, 40 Marketing Science 4, 619-36 
(2021), https://doi.org/10.1287/mksc2020.1261; Steffen Huck et al., 
The Impact of Price Frames on Consumer Decision Making: Experimental 
Evidence, at 4 (2015), https://www.ucl.ac.uk/~uctpbwa/papers/price-
framing.pdf; Ellison & Ellison, Search and Obfuscation in a 
Technologically Changing Retail Environment: Some Thoughts on 
Implications and Policy, 6 NBER Innovation Pol'y & Econ. 18, 2-6 
(2018); Busse, M., & Silva-Risso, J., ``One Discriminatory Rent'' or 
``Double Jeopardy'': Multi-component Negotiation for New Car 
Purchases, 100 Am. Econ. Rev. 2, 470-74 (2010).
    \154\ E.g., Sullivan, supra n. 153, at 22, 24-25 (describing 
empirical studies on partitioned pricing); Vicki G. Morowitz et al., 
Divide and Prosper: Consumers' Reactions to Partitioned Prices, 35 
J. Mktg. Rsch., 455 (1998) (on average, subjects shown partitioned 
pricing underestimated the total price relative to subjects who 
received the total price up front); Bertini, M., & Wathieu, L., 
Attention Arousal through Price Partitioning, 27 Mktg. Sci. 2, 236, 
239-41 (2008) (showing that when prices are partitioned, subjects 
give outsized attention to attributes associated with mandatory 
surcharges rather than the primary product).
    \155\ See, e.g., FTC-2022-0069-6095 (describing harm to 
competition and honest businesses through price obfuscation).
---------------------------------------------------------------------------

    Often, these harms disproportionately impact consumers who are 
already targets of discrimination. The Consumer Federation of America, 
along with ten other organizations, submitted a comment that compiled 
examples of how unfair or deceptive fees uniquely harm low-income, 
Black, Latino, limited English-speaking, and disabled consumers.\156\ 
For example, unfair or deceptive fees represent a

[[Page 77433]]

disproportionately high cost for low-income consumers and can have 
cascading effects that destabilize their budgets and push them to rely 
on predatory financial products.\157\ Black and Latino consumers often 
pay a disproportionate amount of junk fees in banking,\158\ have been 
targeted with junk fees in auto-lending, and because of inequities in 
generational wealth are more likely to be harmed more severely by 
foreclosure.\159\ Fees that are not clearly and conspicuously 
disclosed, such as those that are obscured in fine print, while 
affecting all consumers, can be especially difficult to spot for 
consumers whose English proficiency is limited.\160\ Finally, the 
comment provided examples of disabled consumers being charged extra 
fees to accommodate the consumers' disabilities while providing the 
agreed upon services.\161\
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    \156\ FTC-2022-0069-6095 at 7-11.
    \157\ Id. at 7, 9.
    \158\ Although the Commission generally does not have 
jurisdiction over banks and Federal credit unions for purposes of 
Section 5(a), 15 U.S.C. 45(a), other financial services entities are 
covered under its authority. See generally, e.g., FTC v. FleetCor 
Techs., Inc., 620 F. Supp. 3d 1268 (N.D. Ga. 2022); Stipulated 
Order, FTC v. Beam Financial Inc., No. 3:20-cv-08119-AGT (N.D. Ca. 
Mar. 30, 2021); Compl., FTC v. LendingClub Corp., No. 3:18-cv-02454 
(N.D. Cal. filed Apr. 25, 2018); Stipulated Order, FTC v. Avant, 
LLC, No. 19-cv-2517 (N.D. Ill. May 19, 2019); Stipulated Order, FTC 
v. Western Union Co., No. 1:17-cv-0110 (M.D. Pa. Jan. 20, 2017).
    \159\ FTC-2022-0069-6095 at 7-8.
    \160\ Id. at 9.
    \161\ Id. at 10-11 (describing wait time fees for disabled 
passengers who needed more time to get to rideshare vehicles, and 
paper statement fee for a consumer with cognitive disabilities).
---------------------------------------------------------------------------

    Injury to consumers comes in the form of higher prices and search 
costs. Several studies have shown that consumers spend more money on 
the same goods when they are not shown the total price up front.\162\ 
For example, a study by the live-event ticket seller StubHub found that 
consumers spent more money--they purchased more tickets and upgraded to 
more expensive seats--when the total price was not displayed at the 
beginning of the transaction.\163\ One laboratory experiment examined, 
among other things, how consumers reacted when the total price was 
divided into three parts, with each part being revealed at different 
points in the transaction.\164\ This experiment found that a 
measurement of consumer savings was reduced by 22%.\165\ Further, the 
monetary cost to consumers is significant. For example, in 2018 resort 
fees generated an estimated $2.9 billion in revenue for the hotel 
industry,\166\ and in the most recent fiscal year, ``service'' fees for 
Live Nation Entertainment, the largest business in the live-event 
ticket market, accounted for over $2.2 billion in revenue.\167\ Many 
consumer comments in response to the ANPR stated they paid more as a 
result of businesses failing to disclose the total price up front.\168\
---------------------------------------------------------------------------

    \162\ Rasch, supra n. 153, at 6-8, 20-22, 30-31; Santana, supra 
n. 153, at 197; Blake, supra n. 153, at 16; Huck & Wallace, supra n. 
153, at 2; Busse & Risso, supra n. 153, at 474.
    \163\ Blake, supra n. 153, at 16.
    \164\ Huck & Wallace, supra n. 153, at 2.
    \165\ Id. Specifically, the experiment examined ``consumer 
surplus,'' which is the difference between the highest price a 
consumer is willing to pay and the price they ultimately pay.
    \166\ Beth Braverman, Avoid Sneaky Hotel Fees on Your Next 
Vacation, Consumer Reports (May 29, 2019), https://www.consumerreports.org/fees-billing/how-to-avoid-sneaky-hotel-fees/.
    \167\ LYC 10K at 37, 60 (showing $2,238,618,000 in Ticketing 
Operations revenue and explaining that such revenue ``primarily 
consists of service fees . . . .''). The scale of such fees is not 
new. In 2015, resort fees reportedly accounted for $2.04 billion in 
revenue while ticket service fees accounted for more than $1.6 
billion. Nat'l Econ. Council, The Competition Initiative and Hidden 
Fees (Dec. 2016), https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf.
    \168\ FTC-2022-0069-3260 (``It's just extremely frustrating and 
I always end up spending more than I would like because of these 
practices''); FTC-2022-0069-6168 (``By the time I've done my 
research and chosen a product or service and I'm checking out, if a 
fee comes up, it's often too late to make a different choice.''); 
FTC-2022-0069-3631(``Fans have no choice but to pay these fees if 
they want to see their favorite performers and acts.''); FTC-2022-
0069-4056 (``Hidden additional fees cost me over four HUNDRED 
dollars for just a three-night stay, about 38% of the total cost.'')
---------------------------------------------------------------------------

    In addition, consumers who wish to compare prices incur additional 
search costs to make direct comparisons of products when the full price 
is not disclosed up front.\169\ For example, in an online transaction, 
consumers cannot simply view the first price displayed on each website, 
but instead need to navigate to subsequent pages or even enter all 
their payment information and reach the checkout page for each website 
to determine the total price.\170\ Such search costs that result from 
unfair or deceptive practices are legally cognizable injuries under the 
FTC Act.\171\ Consumer comments also describe harms in the form of 
search costs.\172\
---------------------------------------------------------------------------

    \169\ Sullivan, supra n. 153, at 4; Fed. Trade Comm'n, ``That's 
the Ticket'' Workshop: Staff Perspective, 4 (May 2020), https://www.ftc.gov/reports/thats-ticket-workshop-staff-perspective; see 
also Hong, H. & Shum, M. Using Price Distributions to Estimate 
Search Costs, RAND J. Econ. 37:2 (2006) (describing methods of 
estimating search costs); Huck & Wallace, supra n. 153, at 13 
(applying search costs in economic models); and discussion, infra, 
Section VII.
    \170\ E.g., FTC-2022-0069-2005 (``The number of times I have 
wanted to go to a concert or book an Airbnb only to get to the last 
page before entering in my payment details, only to find out that 
the expected price is suddenly up to 50% higher due to various fees 
tacked on at the last second is absolutely ridiculous.''); FTC-2022-
0069-6099 at 424 (including a complaint from a consumer who went 
through various ``fill-in forms, adding my name, address, credit 
card number,'' and chose a printed ticket for delivery, but was 
charged an $8.95 ``delivery fee'' and a $231.88 ``Service Fee'' on 
the last page of the transaction); FTC-2022-0069-1331 (``Turbo tax 
has a lot of hidden fees that make you spend hours of time to fill 
out information and then if you don't pay you lose hours of input 
data.''); FTC-2022-0069-6095 at 20 (``Consumers are required to fill 
out forms, provide personal information, click through unrelated and 
difficult to understand links, and sometimes spend several hours at 
a dealership or loan store to obtain sufficient information to 
enable comparison shopping.'').
    \171\ See, e.g., FTC v. Amazon.com, Inc., No. C14-1038-JCC, 2016 
U.S. Dist. LEXIS 55569, at *17 (W.D. Wash. Apr. 26, 2016) (finding 
consumer injury included ``time spent pursuing those refunds''); In 
re LCA-Vision, No. C-4789 (Decision & Order entered Mar. 13, 2023) 
(settling allegations that deceptive practices caused consumers to 
``waste[ ] 90 minutes to two hours of their time,'' Compl. at 17), 
https://www.ftc.gov/system/files/ftc_gov/pdf/1923157-lca-vision-consent-package.pdf.
    \172\ E.g., FTC-2022-0069-0032 (``In some markets, this makes it 
nearly impossible to find the actual hotels within my price range 
since I have to go through the process of attempting to book each 
hotel to find the actual, final cost. What should be a 5 minutes 
search can turn into hours or days.''); FTC-2022-0069-6095 
(describing, on behalf of constituent consumers, the difficulty of 
searching for prices and incorporating fees into price comparisons); 
FTC-2022-0069-6082 at 12 (describing the difficulty of comparing 
price for electronic messaging services in prisons); FTC-2022-0069-
4424 (``The consumer is left vulnerable and with two options. 
Proceed with the transaction and pay a higher cost than originally 
anticipated. Or decline the transaction and have wasted time and 
effort.''); FTC-2022-0069-4773 (``It is impossible to compare prices 
online for so many things now.'').
---------------------------------------------------------------------------

    Where mandatory fees are disclosed at the same time as but 
separately from the base price, consumers are nevertheless harmed. The 
practice of dividing the price into multiple components without 
disclosing the total, generally referred to as partitioned pricing, 
distorts consumer choice.\173\ Consumers confronted with partitioned 
pricing, on average, underestimate the total cost of the good or 
service, likely because they use mental shortcuts to estimate the price 
that do not fully account for each component.\174\ Partitioned pricing 
also leads consumers to pay disproportionate attention to secondary 
features of a product associated with ancillary fees, which impedes 
consumers' ability to accurately compare products.\175\
---------------------------------------------------------------------------

    \173\ Sullivan, supra n. 153, at 21-25;
    \174\ Id. at 22-24; Morwitz, supra n. 154 at 455.
    \175\ Bertini & Wathieu, supra n. 154 at 239-41.
---------------------------------------------------------------------------

    Consumers cannot reasonably avoid these injuries. First, as 
explained in this section, the search costs necessary to avoid the harm 
of paying higher prices are themselves a harm to consumers. As the 
Institute for Policy Integrity explained in its petition for a 
rulemaking on these practices, also

[[Page 77434]]

called drip pricing, ``either the consumer must spend additional time 
searching for full pricing information to engage in comparison 
shopping, or must make an uninformed decision.'' \176\ Moreover, 
studies suggest that cognitive biases may exist that prevent consumers 
from avoiding injury. Several psychological theories explain why 
consumers make errors when the total price is not revealed up front: 
(1) under the anchoring theory, consumers who first learn of a lower 
price do not properly adjust their calculations when additional fees 
are added, thereby underestimating the total cost; \177\ (2) under the 
endowment theory, consumers attach value to things they perceive to be 
theirs and when consumers begin the purchase process their perception 
shifts so that stopping the transaction feels like a loss; \178\ and 
(3) under the sunk cost fallacy, consumers who have already invested in 
an endeavor, such as by taking time to make selections on a website or 
travel to a store, continue that endeavor even if it would benefit them 
more to begin again elsewhere.\179\ In addition, the market cannot 
correct for these injuries because the practice of displaying 
incomplete initial prices is so prevalent that honest businesses cannot 
compete.\180\ For example, after StubHub unilaterally adopted an all-in 
pricing model in 2014, it soon reverted back to its original model 
after it lost significant market share when customers incorrectly 
perceived StubHub's prices to be higher.\181\
---------------------------------------------------------------------------

    \176\ Inst. for Policy Integrity, Pet. for Rulemaking Concerning 
Drip Pricing at 17 (2021), https://www.regulations.gov/docket/FTC-2021-0074/document.
    \177\ Id. at 18.
    \178\ Huck & Wallace, supra n. 153, at 32.
    \179\ David A. Friedman, Regulating Drip Pricing, 31 Stan. L. & 
Pol'y Rev. 51, 55 n.13 (2020).
    \180\ FTC-2022-0069-6088 at 13; FTC-2022-0069-6095 at 3, 6; FTC-
2022-0069-6082 at 12.
    \181\ Fed. Trade Comm'n, ``That's the Ticket'' Workshop: Staff 
Perspective, supra n. 163, at 4 & n.15.
---------------------------------------------------------------------------

    Finally, consumer injury is not outweighed by benefits to consumers 
or competition. The practice of advertising prices that are not the 
full price does not benefit consumers or competition. Consumers do not 
receive any benefit from the misleading price presentation.\182\ Even 
where the undisclosed fees are used to pay for something of value to 
consumers, omitting that fee from the initial price does not benefit 
consumers. Nor does this practice benefit competition, as it acts as a 
hindrance to businesses that opt to disclose the true price, as 
illustrated by real-world examples.\183\ This price obfuscation, in 
turn, undermines the ability of businesses to compete on price and 
inhibits the market from driving down prices overall.
---------------------------------------------------------------------------

    \182\ Inst. for Policy Integrity, Pet. for Rulemaking Concerning 
Drip Pricing at 20 (2021), https://policyintegrity.org/documents/Petition_for_Rulemaking_Concerning_Drip_Pricing.pdf.
    \183\ Friedman, supra n. 179, at 65-66; U.K. Off. Fair Trading, 
Advertising of Prices at 25 (2010), https://webarchive.nationalarchives.gov.uk/20140402173016/http://oft.gov.uk/shared_oft/market-studies/AoP/OFT1291.pdf.
---------------------------------------------------------------------------

B. Misrepresenting the Nature and Purpose of Charges

    The comment record supports a finding that practices that 
misrepresent the nature and purpose of fees are prevalent. 
Specifically, commenters identified pricing structures that 
misrepresented information about the nature and purpose of fees and 
charges.\184\ These complaints included instances in which consumers 
were misled about the identity of the good or service for which a fee 
was charged, such as a ``cleaning fee'' for a vacation rental where the 
consumer was also required to conduct extensive cleaning,\185\ or a 
``convenience fee'' to purchase a ticket when the purchasing method is 
not more convenient to the consumer than any alternative.\186\ They 
also included instances in which consumers were misled about other 
material aspects of the fee or charge. For example, consumers 
complained that businesses led them to believe a charge was a mandatory 
tax on consumers imposed by the government when it was actually a 
charge the business chose to impose to offset increased costs to the 
business.\187\ Consumers also commented that they were misled about the 
amount of fees, particularly when a service was advertised as ``free'' 
but nevertheless incurred a fee.\188\ Consumers also complained that 
they believed certain charges for goods or services were refundable and 
discovered only after the purchase that they were either not refundable 
at all or that a portion of the fees was not refundable.\189\
---------------------------------------------------------------------------

    \184\ More than 250 comments identified misrepresentations 
across many industries about the nature and purpose of fees.
    \185\ E.g., FTC-2022-0069-2389; FTC-2022-0069-0874; FTC-2022-
0069-1571; FTC-2022-0069-2359; FTC-2022-0069-5078; see also FTC-
2022-0069-5665 (describing a daily cleaning fee for cleaning 
services that were not provided until the end of the stay).
    \186\ E.g., FTC-2022-0069-6166; see also FTC-2022-0069-0634 
(describing misleading fees for ``maintenance'' that do not 
correspond to the actual maintenance of a product); FTC-2022-0069-
0700 (describing a ``service'' fee that a business claimed covered 
water and other services but the consumer was not provided water); 
FTC-2022-0069-0729 (describing ``amenity'' fees for amenities that 
were not available because of COVID-19); FTC-2022-0069-5991 
(describing resort fees to cover services that were already provided 
through a consumer loyalty plan); FTC-2022-0069-1746 (describing an 
apartment rental fee for valet trash services that were not usually 
provided).
    \187\ FTC-2022-0069-6095 at 14; FTC-2022-0069-0138; FTC-2022-
0069-0765; FTC-2022-0069-1600; FTC-2022-0069-2387; FTC-2022-0069-
0637; FTC-2022-0069-2338; FTC-2022-0069-3036.
    \188\ FTC-2022-0069-1676 (``Turbo tax. Waiting until I've done 
all of my paperwork to tell me that I need to upgrade my package to 
file.''); FTC-2022-0069-2986 (``the cruise line included room 
service at no charge,'' but ``they added a $9,95 [sic] plus 18% 
gratuity charge to all room service services''); FTC-2022-0069-0688 
(``During on-line Christmas shopping, one company offered `Free 
Shipping' as a promotion. At checkout, even though there was a $0 
charge for `Shipping', I was charged $2.99 for `Shipping Service 
Fees'. How is this considered FREE shipping?'').
    \189\ E.g., FTC-2022-0069-0556; FTC-2022-0069-1545; FTC-2022-
0069-2096; FTC-2022-0069-2190.
---------------------------------------------------------------------------

    Charges that misrepresent their nature and purpose are deceptive 
because they mislead reasonable consumers. False claims and those that 
lack a reasonable basis are inherently likely to mislead 
consumers.\190\ Further, the nature and purpose of charges are core 
characteristics that affect the value to consumers of the goods or 
services being offered. A representation is material if it conveys 
information `` `that is important to consumers and, hence, likely to 
affect their choice of, or conduct regarding, a product.' '' \191\ 
Whether a consumer is required to pay a charge, and what goods or 
services they will receive in exchange for the charge, necessarily 
affect a consumer's choice whether to pay a charge.\192\ Other 
characteristics included in the nature and purpose of a charge, such as 
the amount of the charge and whether it is refundable, are also 
material.\193\
---------------------------------------------------------------------------

    \190\ Deception Policy Statement, 103 F.T.C. at 175 n.5; FTC v. 
Direct Mktg. Concepts, Inc., No. 04-11136-GAO, 2004 U.S. Dist. Lexis 
11628, *13 (D. Mass. June 23, 2004) (citing In re Thompson Med. Co., 
104 F.T.C. 648, 788, 818-19 (1984)).
    \191\ FTC v. Cyberspace.com, 453 F.3d 1196, 1201 (9th Cir. 2006) 
(quoting Cliffdale Assocs., Inc., 103 F.T.C. 110, 165 (1984)).
    \192\  See, e.g., FleetCor Techs., 620 F. Supp. at 1310 (finding 
it was deceptive to charge fees with different names that were 
functionally transaction fees after stating that consumers would not 
be charged transaction fees).
    \193\ See FTC v. Windward Mktg., Ltd., No. Civ. A. 1:96-CV-615F, 
1997 WL 33642380, at *10 (N.D. Ga. Sept. 30, 1997) (``[A]ny 
representations concerning the price of a product or service are 
presumptively material.''); see, e.g., FTC v. MOBE Ltd., No. 6:18-
cv-862-Orl-37DCI, 2020 WL 3250220, at *4 (M.D. Fla. Mar. 26, 2020), 
adopted by, 2020 WL 1847354 (M.D. Fla. Apr. 13, 2020) (finding that 
representations about the availability of refunds and money-back 
guarantees were presumptively material); FTC v. Ewing, No. 2:14-cv-
00683-RFB-VCF, 2017 WL 4797516, at *6 (D. Nev. Oct. 24, 2017) 
(finding that ``100% no strings-attached refund policy'' was 
presumptively material); FTC v. Lead Express, Inc., No. 2:20-cv-
00840-JAD-NJK, 2020 WL 2615685, at *7 (D. Nev. May 19, 2020) 
(prohibiting misrepresentations about material terms, including fees 
and payment amounts); FTC v. BlueHippo Funding, LLC, 762 F.3d 238, 
246 (2d Cir. 2014) (stating that refund information would have 
influenced consumer purchasing decisions and remanding to the 
district court to determine whether to apply a presumption of 
reliance in calculating damages); FTC v. Lucaslaw Ctr. Inc., No. 
SACV 09-0770 DOC (ANx), 2010 WL 11506885, at *6 (C.D. Cal. June 3, 
2010) (finding that the representations that a large up-front fee 
was refundable if a loan modification was not approved were 
material), aff'd sub nom. FTC. v. Lucas, No. 10-56985, 483 F. App'x 
378 (9th Cir. 2012).

---------------------------------------------------------------------------

[[Page 77435]]

    Moreover, it is unfair for businesses to misrepresent the nature 
and purpose of charges. Charging consumers under false pretenses causes 
substantial injury, including where the injury is a ``small harm to a 
large number of people'' or ``where it raises a significant risk of 
concrete harm.'' \194\ Where businesses obscure information about the 
nature and purpose of fees or provide false information to consumers, 
injury from the misrepresentations is not reasonably avoidable.\195\ 
Such practices have no countervailing benefits to consumers and 
competition--they simply make it more difficult for consumers to 
comparison shop and for truthful businesses to compete on price.
---------------------------------------------------------------------------

    \194\ Am. Fin. Servs. Ass'n v. FTC, 767 F.2d 957, 972 (D.C. Cir. 
1985); Orkin Exterminating Co. v. FTC, 849 F.2d 1354, 1365 (11th 
Cir. 1988).
    \195\ E.g., FleetCor Techs., 620 F. Supp. 3d at 1334 (N.D. Ga. 
2022) (finding that fees that were not listed, ``obscured by vague 
language and tiny print'' in the terms and conditions, or described 
vaguely in billing statements, were not unavoidable).
---------------------------------------------------------------------------

    To prevent the misrepresentations described in this section, it is 
necessary for businesses to clearly and conspicuously disclose the 
nature and purpose of any amount a consumer may pay that is excluded 
from the total price. Where charges are excluded from the total price, 
disclosures of the nature and purpose of such charges are necessary to 
determine whether such fees are truly optional and properly excluded 
from the total price, and for the consumer to decide whether to accept 
the optional charge.
    The FTC has brought many cases concerning misrepresentations of the 
total price of goods or services and the nature and purpose of charges, 
which are described in greater detail in Section III.C.

C. Law Enforcement Actions and Other Responses

    The Commission's prior work, and complementary actions by State and 
private actors, further support a finding that the unfair or deceptive 
practices identified in Sections III.A. and III.B. are prevalent. To 
address these unfair or deceptive practices, the Commission has brought 
enforcement actions and engaged in other efforts to address unfair or 
deceptive fee practices. The Commission has brought numerous cases 
alleging businesses have misrepresented the total costs of goods and 
services because their prices do not include all mandatory fees.\196\ 
Among the challenged fees were undisclosed fees that increased the 
total cost to consumers \197\ and fees that diminished the value of the 
good or service the consumer received.\198\ For example, in United 
States v. Funeral & Cremation Group of North America, LLC, the 
Department of Justice brought suit on behalf of the Commission alleging 
the defendants misrepresented the price of funeral services by listing 
low prices on websites that were later inflated with various fees.\199\ 
The case resulted in a settlement requiring, among other things, that 
the defendants provide accurate price lists during or immediately after 
their first interaction with consumers and pay a civil penalty.\200\ 
Similarly, in FTC v. FleetCor Technologies, Inc., the FTC alleged the 
defendant misrepresented the cost of its fuel cards when it ``charged 
customers at least hundreds of millions of dollars in unexpected 
fees.'' \201\ In FTC v. LendingClub Corp., the FTC charged that the 
loan company offered loan applicants specific loan amounts with ``no 
hidden fees,'' but actually deducted hundreds or even thousands of 
dollars of hidden upfront fees from consumers' loan disbursements.\202\ 
And in FTC v. Millennium Telecard, Inc., the Commission alleged the 
defendants advertised prepaid calling cards, including a specified 
dollar value for a certain number of minutes, but failed to disclose 
numerous fees that reduced the number of available minutes.\203\
---------------------------------------------------------------------------

    \196\ Compl. ]] 42-44, 50, United States v. Funeral Cremation 
Grp. of N. Am., LLC (``Legacy Cremation Servs.''), No. 0:22-cv-60779 
(S.D. Fla. filed Apr. 22, 2022) (alleging defendants advertised 
artificially low prices for cremation services which ultimately 
included undisclosed additional charges and, in some cases where 
consumers contested these charges, defendants refused to return 
remains); Compl. ] 9, FTC v. Liberty Chevrolet, Inc. (``Bronx 
Honda''), No. 1:20-cv-03945 (S.D.N.Y. filed May 21, 2020) (alleging 
defendants advertised low sales prices but later told consumers they 
were required to pay additional charges including certification 
charges); Compl. ] 13, FTC v. NetSpend Corp., No. 1:16-cv-04203 
(N.D. Ga. filed Apr. 11, 2017) (alleging in part that defendant 
charged maintenance and usage fees to consumers who were unable to 
use all, or even a portion of, the funds of their prepaid debit 
cards); see also Compl. ]] 24-25, 40-42, FTC v. AT&T Mobility LLC, 
No. 3:14-cv-04785 (N.D. Cal. filed Oct. 28, 2014) (alleging 
defendant did not adequately disclose the limitations of defendant's 
data plan offerings and subsequently charged high cancellation fees 
for consumers who chose to end their contracts); Compl. ]] 1, 26, 
39-40, FTC v. Millennium Telecard, Inc., No. 2:11-cv-02479 (D.N.J. 
filed May 2, 2011) (alleging defendants deceptively marketed prepaid 
credit calling cards by failing to adequately disclose fees that 
substantially limited the number of minutes consumers had 
purchased); Compl. ] 15, FTC v. CompuCredit Corp., No. 1:08-cv-01976 
(N.D. Ga. filed June 10, 2008) (alleging in part that defendants 
misrepresented the credit limits on various credit cards and failed 
to disclose fees charged upfront); Compl. ]] 15-17, FTC v. 
Nationwide Connections, Inc., No. 06-cv-80180 (S.D. Fla. filed Feb. 
27, 2006) (alleging in part that defendants crammed unauthorized 
charges for long distance service onto consumers' phone bills).
    \197\ E.g., Compl. ]] 42-44, 50, Funeral & Cremation Grp. of N. 
Am., No. 0:22-cv-60779, supra n. 196; Compl. ]] 39-46, FTC v. Vonage 
Holdings Corp., No. 3:22-cv-6435 (D.N.J. filed Nov. 3, 2022).
    \198\ E.g., Compl. ] 13, NetSpend Corp., No. 1:16-cv-04203, 
supra n. 196 (N.D. Ga. filed Apr. 11, 2017); Compl. ]] 1, 26, 39-40, 
Millennium Telecard, No. 2:11-cv-02479, supra n. 196.
    \199\ Compl. ]] 42-57, Funeral & Cremation Grp. of N. Am., LLC, 
No. 0:22-cv-60779, supra n. 196.
    \200\ Stipulated Order at 7-10, U.S. v. Funeral & Cremation Grp. 
of N. Am., LLC, No. 0:22-cv-60779 (S.D. Fla. Apr. 6, 2023).
    \201\ Compl. ]] 10, 29-31, 36, 96-98, 102-04, FTC v. FleetCor 
Techs., Inc., No. 1:19-cv-05727, 2019 WL 13081514 (N.D. Ga. filed 
Dec. 20, 2019). The Court granted summary judgment on the FTC's 
claims, among others, that FleetCor falsely represented that 
customers would not pay transaction fees. FleetCor Techs., 620 F. 
Supp. 3d at 1307-10.
    \202\ Compl. ]] 9, 10, 12-16, 22-25, FTC v. LendingClub Corp., 
No. 3:18-cv-02454 (N.D. Cal. filed Apr. 25, 2018).
    \203\ Compl. ]] 1, 26, 39-40, Millennium Telecard, No. 2:11-cv-
02479, supra n. 196.
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    The Commission has similarly brought numerous cases alleging 
businesses have mispresented the nature and purpose of fees.\204\ For

[[Page 77436]]

example, in The Matter of Amazon.com, the Commission alleged Amazon 
made unlawful misrepresentations in violation of Section 5 of the FTC 
Act when it claimed that it would give to Amazon Flex drivers, in 
addition to their regular pay, 100% of tips consumers elected to 
leave.\205\ Instead, the FTC alleged, Amazon used the tips to subsidize 
its own pay to drivers.\206\ The case, which was brought under the 
FTC's Section 19 administrative procedure, resulted in a settlement 
through which the FTC returned nearly $60 million to Amazon Flex 
drivers.\207\ The Commission similarly addressed misrepresentations 
about what charges were for in FTC v. Benefytt Technologies Inc., 
alleging in part that the defendants misled consumers about whether 
ancillary products were included in the price of an insurance plan, 
using dark patterns in the enrollment process and a single bill to 
obscure the boundaries of each separate product.\208\ The parties 
agreed to a settlement, providing $100 million in redress to consumers 
and prohibiting defendants from misrepresenting the nature of their 
products, among other terms.\209\
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    \204\ Compl. ]] 39-46, Vonage Holdings, No. 3:22-cv-6435, supra 
n. 197 (alleging in part that defendant charged undisclosed large 
cancellation fees); Compl. ]] 61-63, FTC v. Benefytt Techs., Inc., 
No. 8:22-cv-1794 (M.D. Fla. filed Aug. 8, 2022) (alleging in part 
that defendants bundled and charged fees for unwanted products with 
sham health insurance plans); Compl. ]] 17-20, FTC v. Passport Auto 
Grp., Inc., No. 8:22-cv-02670 (D. Md. filed Oct. 18, 2022) (alleging 
in part that defendants advertised vehicle prices that did not 
include redundant fees ranging from hundreds to thousands of dollars 
for inspection, reconditioning, preparation, and certification); 
Compl. ]] 3, 33, 41, FTC v. N. Am. Auto. Serv., Inc. (``Napleton 
Auto''), No. 1:22-cv-01690 (E.D. Ill. filed Mar. 31, 2022) (alleging 
defendants charged consumers for additional products and services 
without their consent and misrepresented the fees as mandatory, 
resulting in artificially low advertised prices); Final Compl. ]] 
50-51, In re Amazon.com, Inc. (``Amazon Flex''), No C-4746 (F.T.C. 
filed June 10, 2021) (alleging respondents falsely represented that 
100% of tips would go to the driver in addition to the pay 
respondents offered drivers); Compl. ]] 37-39, FTC v. Lead Express, 
Inc., No. 2:20-cv-00840 (D. Nev. filed May 11, 2020) (alleging in 
part that defendants did not clearly and conspicuously disclose 
material information related to the total amount of payments related 
to loans and also withdrew significantly more than the stated total 
cost of the loan from consumers' accounts); Compl. ]] 9-10, FleetCor 
Tech., No. 1:19-cv-05727, 2019 WL 13081514 (alleging defendants 
charged consumers arbitrary and unexpected fees related to pre-paid 
fuel cards without consumers' consent); Compl. ]] 4, 30-32, 36-37, 
FTC v. BCO Consulting Servs., Inc., No. 8:23-cv-00699 (C.D. Cal. 
filed Apr. 24, 2023) (alleging defendants enticed consumers with 
false promises to alleviate student loan debt despite not applying 
any payments to the student loan balances and collecting illegal 
advance fees without providing any services); Compl. ]] 31-36, FTC 
v. OMICS Grp. Inc., No. 2:16-cv-02022 (D. Nev. filed Aug. 25, 2016) 
(alleging in part defendants misrepresented the publishing process 
of academic papers and only disclosed large publishing fees after 
notifying consumers that their papers had been approved for 
publication); Compl. ]] 12, 23-25, FTC v. LendingClub Corp., No. 
3:18-cv-02454 (N.D. Cal. filed Apr. 25, 2018) (alleging defendant 
charged consumers an upfront fee based on a percentage of the loan 
requested that was not clearly and conspicuously disclosed; this 
hidden fee caused loans received to be substantially smaller than 
advertised); Compl. ] 37, FTC v. T-Mobile USA, Inc., No. 2:14-cv-
00967 (W.D. Wash. filed July 1, 2014) (alleging defendant added 
unauthorized third-party charges to the telephone bills of 
consumers); Am. Compl. ]] 21-22, FTC v. Websource Media, LLC, No. 
4:06-cv-01980 (S.D. Tex. filed June 21, 2006) (alleging defendants 
placed charges on consumer telephone bills despite representations 
that there would be no charges or obligations); FTC v. Mercury Mktg. 
of Del., Inc., No. 00-cv-3281, 2004 WL 2677177, *1 (E.D. Pa. Nov. 
22, 2004) (finding defendants billed consumers without their consent 
after misleading consumers about introductory internet packages); 
Compl. ]] 25-27, FTC v. Stewart Fin. Co., No. 1:03-cv-02648 (N.D. 
Ga. filed Sept. 4, 2003) (alleging in part that defendants package 
undisclosed add-on products with consumer loans and in some cases 
describe those add-on products as mandatory); Compl. ]] 19-21, 24, 
FTC v. Hold Billing Serv., Ltd., No. SA-98-CA-0629-FB (W.D. Tex. 
filed July 16, 1998) (alleging defendants had previously added 
third-party charges to consumers' phone bills without permission by 
using sweepstakes entry forms as contracts to authorize charges); 
Compl. ]] 18, 33, 56-58, FTC v. Lake, No. 8:15-cv-00585-CJC-JPR 
(C.D. Cal. filed Apr. 14, 2015) (alleging defendants misrepresented 
that trial loan payments or reinstatement fee payments would be held 
in escrow and refunded to the consumer if the loan modification was 
not approved); FTC. v. Hope for Car Owners, LLC, No. 2:12-CV-
778–GEB-EFB, 2013 WL 322895, at *3-4 (E.D. Cal. Jan. 24, 2013) 
(finding that the FTC sufficiently stated a claim for 
misrepresentation of the refundability of vehicle loan modification 
fees and entering default judgment); Am. Compl. ]] 38-39, 58-60, FTC 
v. U.S. Mortg. Funding, Inc., No. 9:11-cv-80155-JIC (S.D. Fla. filed 
July 26, 2011) (alleging defendants misrepresented that an upfront 
loan modification fee was refundable); FTC v. Nat'l Bus. 
Consultants, Inc., 781 F. Supp. 1136, 1143 (E.D. La. 1991) (``The 
defendants' misrepresentations regarding the ease with which the 
`performance deposit' could be refunded composed a large part of the 
various and sundry misrepresentations.'').
    \205\ Final Compl. ]] 7-8, 12-20, 26-34, 50-52, Amazon Flex, No. 
C-4746, supra n. 204.
    \206\ Id. at ]] 26-34.
    \207\ Press Release, Fed. Trade Comm'n, FTC Returns Nearly $60 
Million to Drivers Whose Tips Were Illegally Withheld by Amazon 
(Nov. 2, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/11/ftc-returns-nearly-60-million-drivers-whose-tips-were-illegally-withheld-amazon.
    \208\ Compl. ]] 20-24, 60-70, Benefytt Techs., No. 8:22-cv-1794, 
supra n. 204.
    \209\ E.g., Stipulated Order against corporate defendants at 8-
9, 26, 27, Benefytt Techs., No. 8:22-cv-1794 (M.D. Fla. Aug. 11, 
2022).
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    The Commission also addressed misrepresentations about the nature 
and purpose of fees, including their amount and whether they were 
mandatory, in FTC v. Stewart Finance Company Holdings. The Commission 
alleged in part that defendants misrepresented optional ancillary 
products as mandatory and misrepresented the cost of a direct deposit 
option as free when it incurred a monthly charge.\210\ The case, which 
was resolved before the Supreme Court's decision in AMG Capital 
Management v. FTC limited avenues for the Commission to obtain monetary 
relief,\211\ resulted in a settlement that provided monetary redress to 
consumers and, among other terms, prohibited the defendants from 
misrepresenting the cost, benefit, or optional nature of any ancillary 
loan products and from misrepresenting direct deposit as a ``free'' 
service, or misrepresenting its costs and terms.\212\ Similarly, in FTC 
v. Websource Media, LLC, the Commission addressed misrepresentations 
about the amount of fees when it alleged defendants offered a free 
trial for a website design but added fees for the website to consumers' 
telephone bills.\213\ Settlements reached in 2007 and 2009 provided 
monetary redress to consumers and prohibited the defendants from making 
various misrepresentations.\214\ In FTC v. U.S. Mortgage Funding, Inc., 
the Commission alleged the defendants violated Section 5 of the FTC Act 
when they misrepresented that large upfront fees charged to homeowners 
to negotiate loan modifications would be refunded if a modification was 
not obtained.\215\ The case resulted in default judgments against two 
defendants and settlements with the remaining four defendants that 
included monetary judgments and bans on providing mortgage relief 
services, among other things.\216\
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    \210\ Compl. ]] 25-27, 54-56, Stewart Fin. Co., No. 1:03-cv-
02648, supra n. 204.
    \211\ AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1352 (2021)
    \212\ Stipulated Final J. against defendants and relief 
defendant 12-16, Stewart Fin. Co., No. 1:03-cv-02648 (N.D. Ga. Oct. 
28, 2003).
    \213\ Am. Compl. ]] 20-21, Websource Media, No. 4:06-cv-01980, 
supra n. 204.
    \214\ E.g., Stipulated Final J. against Websource Media, et al. 
7-12, Websource Media, No. 4:06-cv-01980 (S.D. Tex. July 17, 2007); 
Stipulated Final J. against Steven L. Kennedy 6-9, Websource Media, 
No. 4:06-cv-01980 (S.D. Tex. July 29, 2009).
    \215\ Am. Compl. ]] 38-39, 58-60, U.S. Mortg. Funding, No. 9:11-
cv-80155-JIC, supra n. 204.
    \216\ Press Release, Fed. Trade Comm'n, FTC Action Leads to Ban 
on Alleged Mortgage Relief Scammers Who Harmed Thousands of 
Consumers (Feb. 14, 2012), https://www.ftc.gov/news-events/news/press-releases/2012/02/ftc-action-leads-ban-alleged-mortgage-relief-scammers-who-harmed-thousands-consumers.
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    To complement its law enforcement efforts, the FTC has engaged with 
the public through a variety of measures over more than a decade to 
address unfair or deceptive practices related to fees. For example, in 
2012, the FTC's Bureau of Economics held a conference designed to 
``examine the theoretical motivation for drip pricing and its impact on 
consumers, empirical studies, and policy issues pertaining to drip 
pricing.'' \217\ The conference brought together a variety of experts 
including economists and policy experts to give an overview of drip 
pricing and look at its impact on the market. Following the workshop, 
Commission staff sent warning letters to hotels and online travel 
agents, stating that they were not adequately disclosing resort fees or 
including those fees in the total price.\218\ Likewise, in 2017, the 
Commission published a report that reviewed the existing literature on 
shrouded pricing and examined the costs and benefits of disclosing 
resort fees.\219\ In 2019, the Commission hosted a workshop that 
examined pricing and fee issues in the

[[Page 77437]]

live-event tickets market and subsequently issued a staff report on the 
subject.\220\
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    \217\ Fed. Trade Comm'n, The Economics of Drip Pricing (May 21, 
2012), https://www.ftc.gov/news-events/events/2012/05/economics-drip-pricing.
    \218\ 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.
    \219\ Sullivan, supra n. 153. As used in this NPRM, the term 
shrouded pricing includes practices related to both drip pricing and 
partitioned pricing, which the Commission has previously defined as 
follows: ``Partitioned pricing entails dividing the price into 
multiple components without disclosing the total. Drip pricing is 
the practice of advertising only part of a product's price upfront 
and revealing additional charges later as consumers go through the 
buying process.'' Id. at v.
    \220\ Fed. Trade Comm'n, ``That's the Ticket'' Workshop: Staff 
Perspective, 4 (May 2020).
---------------------------------------------------------------------------

    The Commission's law enforcement partners have also brought actions 
addressing unfair or deceptive practices relating to fees. For example, 
State Attorneys General have brought cases against hotel chains and 
delivery apps involving unfair or deceptive fees.\221\ Numerous private 
lawsuits have involved unfair or deceptive fees across various 
industries.\222\
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    \221\ See, e.g., Assurance of Voluntary Compliance ] 2, Texas v. 
Marriott Int'l, Inc., No. 2023CI09717 (Tex. Dist. Ct. May 16, 2023) 
(alleging defendant misrepresented various fees, including resort 
fees, and did not include all mandatory fees in the advertised room 
rate in violation of the Texas Deceptive Trade Practices Act); 
Plaintiff's Original Pet. ] 1, Texas v. Hyatt Hotels Corp., No. 
C2023-0884D (Tex. Dist. Ct. May 15, 2023) (alleging defendant did 
not include mandatory fees in advertised room rates in violation of 
the Texas Deceptive Trade Practices Act); Consent Order ] 6, 
District of Columbia v. Maplebear, Inc., No. 2020 CA 003777B (D.C. 
Super. Ct. Aug. 19, 2022) (prohibiting defendant from 
misrepresenting the nature and purpose of fees applied to consumers' 
orders); Compl. ]] 2, 5-8, District of Columbia v. Grubhub Holdings, 
Inc., No. 2022 CA 001199 B, (D.C. Super. Ct. filed Mar. 21, 2022) 
(alleging in part that defendants misrepresented to consumers that 
defendants' only fee was a ``Delivery Fee'' while obscuring a 
``Service Fee'' or disclosing a ``Small order fee'' only at the end 
of the checkout process); Assurance of Voluntary Compliance ] 2, 
Commonwealth v. Marriott Int'l, Inc., No. GD-21-014016 (Pa. Ct. C.P. 
Nov. 16, 2021) (alleging defendant misrepresented its room rates by 
failing to include items such as mandatory fees in its pricing); 
Consent Order ] 3.1-3.18, In re Drivo LLC, N.J. Div. Consumer Aff. 
(Sept. 16, 2020) (prohibiting unfair and deceptive practices 
relating to damage fees and third party reservation fees for rental 
vehicles); Agreed Final J. ] 8, Texas v. Guided Tourist, LLC, No. D-
1-GN-19-001618 (Tex. Dist. Ct. Mar. 26, 2019) (enjoining defendant 
from advertising ticket prices other than the total ticket price, 
including all mandatory fees); Settlement Agreement ]] 8(b)-(c), 
Florida v. Dollar Thrifty Auto. Grp., Inc., Case No. 16-2018-cv-
005938, (Fla. Cir. Ct. Jan. 14, 2019) (alleging in part that 
defendant misrepresented optional charges as mandatory and did not 
sufficiently disclose toll-related fees). Additionally, Intuit 
recently entered into a multistate settlement of allegations that it 
misrepresented its tax filing products would come at no cost. See 
generally, Assurance of Voluntary Compliance, Commonwealth v. Intuit 
Inc., No. 220500324 (Pa. Ct. C.P. May 4, 2022).
    \222\ See, e.g., Compl. ]] 4-6, Hecox v. DoorDash, Inc., No. 
1:23-cv-01006 (D. Md. filed Apr. 14, 2023) (alleging in part that 
defendant employs deceptively named fees leading consumers to 
mistakenly believe the fees were for delivery people or the 
municipality); Class Action Compl. ]] 7-16, Ramirez v. Bank of Am., 
N.A., No. 5:22-cv-00859 (N.D. Cal. filed Feb. 10, 2022) (alleging 
misrepresentations about the refundability of fees); Compl. ]] 2-3, 
Abdelsayed v. Marriot Int'l, Inc., No. 3:21-cv-00402 (S.D. Cal. 
filed Mar. 5, 2021) (alleging defendant engaged in drip pricing by 
baiting consumers with lower prices and adding charges, such as 
resort fees, amenity fees, and destination fees, throughout the 
vending process); Compl. ]] 1, 3-5, Travelers United v. MGM Resorts 
Int'l, Inc., No. 2021-CA-00477-B (D.C. Super. Ct. filed Feb. 18, 
2021) (alleging defendant hid portions of daily room rates via 
resort fees and ultimately misled consumers); Compl. ]] 18, 31, 43, 
Lee v. Ticketmaster LLC, No. 18-cv-05987 (N.D. Cal. filed Sept. 28, 
2018) (alleging, in part, that defendants were unjustly enriched 
through service charges added to resale tickets); Second Am. Compl. 
]] 1-2, Wang v. Stubhub, Inc., No. CGC-18564120 (Cal. Super. Ct. 
filed Feb. 25, 2019) (alleging defendant intentionally hid 
additional fees in order to advertise artificially low ticket 
prices); Class Action Compl. ]] 1, 33-34, Holl v. United Parcel 
Service, Inc., No. 3:16-cv-05856 (N.D. Cal. filed Oct. 11, 2016) 
(alleging misrepresentations about the amount of fees); Class Action 
Compl. ]] 27, 36, 46-51, Cross v. Point and Pay LLC, No. 6:16-cv-
01182 (M.D. Fla. filed June 29, 2016) (same). See also FTC-2022-
0069-6042 (tracking class action cases related to unfair and 
deceptive fees).
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    Some States have also taken legislative or regulatory action 
involving unfair or deceptive fees. For example, California \223\ and 
Pennsylvania \224\ legislators have introduced legislation prohibiting 
advertising prices that do not include all mandatory fees, with some 
exceptions. In June 2022, New York passed legislation directed at 
increasing transparency during the ticket-buying process, banning 
hidden fees for live events, and prohibiting delivery fees on tickets 
delivered electronically or printed at home.\225\ Similar legislation 
has been introduced in Massachusetts.\226\
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    \223\ Cal. S.B. 478, (2023-2024) Regular Session.
    \224\ H.B. 636 (2023-2024) (Pa. 2023).
    \225\ N.Y. Arts & Cult. Aff. Law Sec. 25.01-25.33 (McKinney 
2023); see also 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.
    \226\ An Act Ensuring Transparent Ticket Pricing, H.259, 193rd 
Gen. Court (Mass. 2023) (would amend Massachusetts' law licensing 
the sale of admission tickets, Mass. Gen. Laws ch. 140, Sec. 182A, 
to require the truthful, non-deceptive, clear, and conspicuous 
disclosure of the total cost of a ticket, and what portions 
represent a service charge or other ancillary fee, prior to 
selection, and to prohibit the price from increasing, except for 
certain delivery fees, prior to payment).
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    Regulators in countries such as Canada and Australia, as well as 
international bodies such as the European Union, have also begun 
regulating unfair and deceptive fee practices. In September 2023, the 
United Kingdom solicited public comment on drip pricing. That numerous 
countries outside of the United States have addressed fees and 
deceptive pricing through legislation and law enforcement lends 
additional support to the conclusion that these types of fees are 
prevalent. Paragraph 74.01(1.1) of the Canadian Competition Act \227\ 
regulates drip pricing and has resulted in actions against online 
ticket sellers, car rental services, and flight-booking services.\228\ 
Similarly, the Australian Competition and Consumer Act of 2010 requires 
businesses to prominently display a figure that represents the single 
price for goods or services.\229\ European Union law prohibits 
misleading and aggressive commercial practices toward consumers, with 
specific directives requiring that consumers be informed of the total 
price of goods and services.\230\ The UK Department for Business & 
Trade commissioned research demonstrating that drip pricing is 
prevalent across the economy and started a ``consultation'' soliciting 
public views.\231\
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    \227\ Competition Act, R.S.C., 1985, c. C-34, ] 74.01(1.1) 
(Can.), https://laws.justice.gc.ca/eng/acts/C-34/FullText.html.
    \228\ See, e.g., several deceptive pricing cases, among others, 
made public by the Canadian Competition Bureau at https://ised-isde.canada.ca/site/competition-bureau-canada/en/deceptive-marketing-practices/cases-and-outcomes.
    \229\ Competition and Consumer Act 2010,Vol. 4, Sched. 2, Ch. 3, 
P. 3-1, Sec. 48 (Austl.), https://www.legislation.gov.au/Details/C2023C00043.
    \230\ Directive 2005/29/EC of the European Parliament and of the 
Council of 11 May 2005 concerning unfair business-to-consumer 
commercial practices in the internal market, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02005L0029-20220528; 
see also Directive 2011/83/EU of the European Parliament and of the 
Council of 25 October 2011 on consumer rights, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02011L0083-20220528. 
Additionally, a 1998 Directive required that the selling price 
should be indicated for all products referred to in the Article, 
which means a price that is the final price for a unit of the 
product including VAT and all other taxes. Directive 98/6/EC of the 
European Parliament and of the Council of 16 February 1998 on 
consumer protection in the indication of the prices of products 
offered to consumers, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A01998L0006-20220528.
    \231\ UK Department for Business & Trade, Estimating the 
Prevalence and Impact of Online Drip Pricing (2023), https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1182208/estimating-the-prevalence-and-impact-of-online-drip-pricing.pdf; UK Department for Business & Trade, 
Smarter Regulation: Consultation on Improving Price Transparency and 
Product Information for Consumers (2023), https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1182962/consultation-on-improving-price-transparency-and-product-information-for-consumers.pdf.
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IV. Reasons for the Proposed Rule on Unfair or Deceptive Fees

    The Commission believes that the proposed rule will substantially 
improve its ability to combat the most prevalent unfair or deceptive 
practices relating to fees and other charges and may also strengthen 
deterrence against these practices in the first instance. While unfair 
or deceptive practices relating to fees are already unlawful under 
Section 5 of the FTC Act, which prohibits unfair or deceptive acts or 
practices, the proposed rule (if finalized) will allow the Commission 
to seek civil penalties against violators and

[[Page 77438]]

more readily obtain monetary redress for the consumers who are harmed.
    The Commission's objectives in commencing this rulemaking are to 
deter deceptive and unfair acts or practices involving fees, to promote 
a level playing field that enables comparison shopping and allows 
honest businesses to compete, and to expand the available remedies 
where such practices are uncovered. In the ANPR, the Commission 
described how a recent U.S. Supreme Court decision,\232\ which 
overturned 40 years of precedent from the U.S. Circuit Courts of Appeal 
that uniformly held the Commission could take action under Section 
13(b) of the FTC Act to return money unlawfully taken from consumers 
through unfair or deceptive acts or practices, has made it 
significantly more difficult for the Commission to return money to 
injured consumers.\233\ Without Section 13(b) as it had historically 
been understood, the Commission's only means to return money unlawfully 
taken from consumers is Section 19, which provides two paths for 
consumer redress. The longer path under Section 19(a)(2) requires the 
Commission to first obtain a final administrative order. Then, to 
recover money for consumers, the Commission must prove in Federal court 
that the violator engaged in fraudulent or dishonest conduct.\234\ The 
shorter path under Section 19(a)(1), which allows the Commission to 
recover consumer redress directly through a Federal court action or 
obtain civil penalties, is available only when a rule has been 
violated.\235\
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    \232\ AMG Cap. Mgmt., 141 S. Ct. 1341.
    \233\ Fed. Trade Comm'n, ANPR: Unfair or Deceptive Fees Trade 
Regulation Rule Commission Matter No. R207011, 87 FR 67413 at 67415 
(Nov. 8, 2022), https://www.federalregister.gov/documents/2022/11/08/2022-24326/unfair-or-deceptive-fees-trade-regulation-rule-commission-matter-no-r207011.
    \234\ See 15 U.S.C. 57b(a)(2) (``If the Commission satisfies the 
court that the act or practice to which the cease and desist order 
relates is one which a reasonable man would have known under the 
circumstances was dishonest or fraudulent, the court may grant 
relief.'').
    \235\ Compare 15 U.S.C. 57b(a)(1) (rule violations), with id. 
57b(a)(2) (Section 5 violations).
---------------------------------------------------------------------------

    The proposed rule will make available the shorter path in a broader 
set of Commission enforcement actions so that it can more efficiently 
redress consumers. Currently, the Commission can directly pursue in 
Federal court Section 19 remedies, including civil penalties and 
consumer redress, for unfair or deceptive practices relating to fees 
only if those practices violate certain other rules or statutes 
enforced by the Commission, such as the Commission's Telemarketing 
Sales Rule (``TSR''),\236\ the Restore Online Shoppers' Confidence Act 
(``ROSCA''),\237\ Negative Option Rule,\238\ or Funeral Rule,\239\ 
which prohibit unfair or deceptive pricing practices, but apply only in 
specific contexts. Further, the FTC has addressed unfair or deceptive 
fee practices through numerous enforcement actions, warning letters, 
workshops, and reports spanning more than a decade.\240\ Despite these 
efforts, the issues associated with unfair or deceptive fees have 
persisted. Prohibiting unfair or deceptive practices relating to fees 
across industries expands the Commission's enforcement toolkit and 
allows it to deliver on its mission by stopping and deterring harmful 
conduct and making American consumers whole when they have been 
wronged. Because unfair or deceptive practices relating to fees are so 
prevalent and so harmful, the unlocking of additional remedies through 
this rulemaking, particularly the possibility of seeking civil 
penalties against violators as well as obtaining redress for consumers 
who are harmed, will allow the Commission to more effectively police 
unfair or deceptive fee practices.
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    \236\ 16 CFR 310.
    \237\ 15 U.S.C. 8401-8405.
    \238\ 16 CFR 425.
    \239\ 16 CFR 453.
    \240\ See discussion supra Section III.C.
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V. Overview and Scope of the Proposed Rule on Unfair or Deceptive Fees

    The Commission's proposed rule is straightforward. It borrows from 
existing rules and statutory definitions by declaring that unfair or 
deceptive practices with respect to fees are unlawful. These unfair or 
deceptive practices include bait-and-switch pricing and misrepresenting 
the nature and purpose of fees. As noted in Section III, case law, the 
Commission's experience, the experience of commenters, and other 
evidence cited herein are replete with examples of such unfair or 
deceptive practices.
    Several commenters raised questions about jurisdiction. The 
Commission's enforcement of the proposed rule is subject to all 
existing limitations of the law: of unfair or deceptive acts or 
practices under the FTC Act; of the FTC's jurisdiction; and of the U.S. 
Constitution--the Commission cannot bring a complaint to enforce the 
rule if the complaint would exceed the Commission's jurisdiction or 
offend the Constitution.
    The Commission invites written comments on the proposed Rule, and, 
in particular, answers to the specific questions set forth in Section 
X.

A. Sec.  464.1 Definitions

    Proposed Sec.  464.1 contains definitions for the following terms: 
``Ancillary Good or Service,'' ``Business,'' ``Clear(ly) and 
Conspicuous(ly),'' ``Government Charges,'' ``Pricing Information,'' 
``Shipping Charges,'' and ``Total Price.'' Each of these terms is used 
in the proposed Rule.
    ``Ancillary Good or Service'' is defined as any additional good(s) 
or service(s) offered to a consumer as part of the same transaction. 
This would include goods or services not necessary to render the 
primary good or service fit for its intended use but are nevertheless 
offered as part of the same transaction. An Ancillary Good or Service 
may be mandatory or optional. For example, if a hotel offers a consumer 
the option to purchase or decline trip insurance with a room 
reservation, the insurance would be an optional ancillary service. If a 
housing rental agreement includes a fee that the consumer cannot 
reasonably avoid for a trash valet service, it would be a mandatory 
ancillary service. If a business includes a fee the consumer cannot 
reasonably avoid to process the payment for any good or service, such 
payment processing would be a mandatory ancillary service.
    ``Business'' is defined as an individual, corporation, partnership, 
association, or any other entity that offers goods or services, 
including, but not limited to, online, in mobile applications, and in 
physical locations. This definition is industry neutral. However, this 
definition contains a carveout for certain motor vehicle dealers that 
must comply with 16 CFR 463, requiring a cash price disclosure and 
prohibiting misrepresentations. On July 13, 2022, the Commission 
published in the Federal Register a notice of proposed rulemaking for a 
Motor Vehicle Dealers Trade Regulation Rule, which if finalized would 
be published at 16 CFR 463. The proposed Motor Vehicle Dealers Rule 
would require covered motor vehicle dealers to, among other things, 
disclose the true ``Offering Price'' of a vehicle in advertisements or 
communications that reference a specific vehicle or any monetary amount 
or financing term for any vehicle, and would prohibit dealers from 
making certain misrepresentations. The proposed Rule on Unfair or 
Deceptive Fees provides that if the Commission finalizes the proposed 
Motor Vehicle Dealers Rule's Offering Price and misrepresentations 
provisions and such rule is published and in effect at 16 CFR 463, 
motor vehicle dealers subject to that part would be excluded from 
coverage under the proposed Rule

[[Page 77439]]

on Unfair or Deceptive Fees. If there is no provision published and in 
effect at 16 CFR 463 requiring motor vehicle dealers to disclose the 
cash price and prohibiting misrepresentations, motor vehicle dealers 
would not be exempt from the definition of ``Business'' and therefore 
would be subject to the proposed Rule on Unfair and Deceptive Fees.
    ``Clear(ly) and Conspicuous(ly)'' is defined consistently with 
longstanding Commission interpretation and practice.
    ``Government Charges'' means all fees or charges imposed on 
consumers by a Federal, State, or local government agency, unit, or 
department. This definition covers only fees or charges imposed by the 
government on consumers and does not encompass fees or charges that the 
government imposes on a business and that the business chooses to pass 
on to consumers.
    ``Pricing Information'' is defined as any information relating to 
any amount a consumer may pay.
    ``Shipping Charges'' is defined as all fees or charges that 
reasonably reflect the amount a Business incurs to send physical goods 
to a consumer through the mail, including private mail services. This 
definition does not include delivery through couriers, such as those in 
mobile delivery applications. This definition is limited to the amount 
that reasonably reflects what a Business incurs to send goods. Thus, 
for the purposes of the provision that references Shipping Charges, a 
Business cannot artificially inflate the cost of shipping.
    ``Total Price'' is defined as the maximum total of all fees or 
charges a consumer must pay for a good or service and any mandatory 
Ancillary Good or Service, except that Shipping Charges and Government 
Charges may be excluded. The use of the phrase ``maximum total'' would 
allow businesses to apply discounts and rebates after disclosing the 
Total Price. Because the Total Price includes all charges that a 
consumer must pay, it covers mandatory charges. As explained in Section 
III.A., because there is an implied representation that a good or 
service offered for sale is fit for the purposes for which it is sold, 
a Business cannot treat a feature as optional if it is necessary to 
render the good or service fit for its intended use. The Total Price 
need not include Shipping Charges (all fees or charges that reasonably 
reflect the amount a Business incurs to send physical goods to a 
consumer through the mail, including private mail services) and 
Government Charges (all fees or charges imposed on consumers by a 
Federal, State, or local government agency, unit, or department). 
Because the Shipping Charges must reasonably reflect the amount a 
Business incurs, a Business cannot artificially inflate the cost of 
shipping that is excluded from the Total Price. A Business likewise 
cannot artificially inflate taxes excluded from the Total Price because 
the definition of Government Charges covers only those charges imposed 
by the government on consumers.

B. Sec.  464.2 Hidden Fees Prohibited

    The prohibition against bait-and-switch pricing in proposed Sec.  
464.2(a) would cover unlawful conduct by Businesses that offer, 
display, or advertise an amount a consumer may pay without Clearly and 
Conspicuously disclosing the Total Price. In this rule, the Total Price 
includes all charges that a consumer must pay for a good or service, 
including any mandatory Ancillary Good or Service. As explained in 
Section V.A., Total Price need not include Shipping Charges and 
Government Charges. Proposed Sec.  464.2(b) clarifies that a Business 
that is required to disclose the Total Price in an offer, display, or 
advertisement under Sec.  464.2(a) must disclose it more prominently 
than any other Pricing Information.
    The prohibition on hidden fees applies to amounts ``offered, 
displayed, or advertised'' by a Business even if a different entity 
provides the good or service. For example, if an online travel agent 
advertises a price for a hotel room provided by a hotel chain, the 
online travel agent must display the Total Price, inclusive of 
mandatory fees charged by the hotel chain. Similarly, if a Business 
advertises a price for a product that it provides to the consumer and 
requires an ancillary good or service provided by another entity, such 
as payment processing, the charge for the mandatory ancillary good or 
service must be included in the Total Price.
    The Commission anticipates the possibility of providing certain 
exclusions from the proposed rule, including for some financial 
products where the Total Price cannot practically be determined. As 
discussed in Section X, the Commission is seeking comment on the proper 
scope of any such exclusion. Further, as discussed in Section V.A., the 
proposed rule also contains a carveout for certain motor vehicle 
dealers that must comply with 16 CFR 463, which requires cash price 
disclosures and prohibits certain misrepresentations.

B. Sec.  464.3 Misleading Fees Prohibited

    The prohibition against misrepresenting the nature and purpose of 
any amount a consumer may pay in Sec.  464.3(a) covers 
misrepresentations about a fee's nature and purpose, which includes the 
refundability of such fees as well as the identity of any good or 
service for which fees are charged.
    Section 464.3 includes a preventative disclosure requirement 
pursuant to the Commission's Section 5 authority.\241\ The preventative 
disclosure requirement in Sec.  464.3(b) requires Businesses to 
disclose, Clearly and Conspicuously and before the consumer consents to 
pay, the nature and purpose of any amount a consumer may pay that is 
excluded from the Total Price. An amount a consumer may pay that is 
excluded from the Total Price includes any Shipping Charges, Government 
Charges, optional fees, voluntary gratuities, and invitations to tip. 
As with Sec.  464.3(a), the nature and purpose of fees includes the 
refundability of such fees and the identity of any good or service for 
which fees are charged. By requiring disclosure of the nature and 
purpose of fees, this provision helps prevent Businesses from omitting 
mandatory fees from the Total Price in violation of Sec.  464.2(a) and 
misrepresenting the nature and purpose of fees in violation of Sec.  
464.3(a). For example, if a Business discloses the identity of the good 
or service for which an additional fee is charged, it becomes apparent 
what benefit a consumer can reasonably expect from it and whether the 
feature is something that is necessary for the intended use of the 
primary purchase. This information is necessary for a consumer to 
understand what they are purchasing and to decide whether to consent to 
the charge.
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    \241\ 15 U.S.C. 57a(a)(1)(B) (``Rules under this subparagraph 
may include requirements prescribed for the purpose of preventing 
such acts or practices.'').
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    Sections 464.3(a) and (b) operate together to prohibit Businesses 
from misrepresenting the nature and purpose of fees by using vague 
descriptions. For example, a meal delivery app that chooses to itemize 
a mandatory service charge as part of the Total Price cannot mislead 
consumers about the service for which the fee is charged. If a portion 
of the service charge is used to compensate a delivery driver while 
another portion is used to compensate the Business for providing the 
online application, a description that combines both portions without 
specifying the recipient of each portion of the service charge would 
violate Sec.  464.3(a). Similarly, a Business must disclose, and cannot 
misrepresent the nature and purpose of, Shipping Charges, Government 
Charges, optional fees, voluntary gratuities, and invitations to tip 
that are excluded from

[[Page 77440]]

the Total Price. If a delivery application includes an invitation to 
tip a delivery driver without disclosing that a portion of the tip is 
allocated to offset the delivery driver's base wages or benefits, it 
would violate Sec.  s 464.3(a) and (b), in addition to any other laws 
or regulations relating to the distribution of tips.

D. Sec.  464.4 Relation to State Laws Provision

    The relation to State laws provision in Sec.  464.4 would prevent 
the rule from superseding State laws unless there is an inconsistency.

VI. The Rulemaking Process

    The Commission can decide to finalize the proposed rule if the 
rulemaking record, including the public comments in response to this 
NPRM, supports such a conclusion. The Commission may, either on its own 
initiative or in response to a commenter's request, engage in 
additional processes, which are described in 16 CFR 1.12 and 1.13. If 
the Commission on its own initiative decides to conduct an informal 
hearing, or if a commenter files an adequate request for such a 
hearing, then a separate notice will issue under 16 CFR. 1.12(a). Based 
on the comment record and existing prohibitions against unfair or 
deceptive practices relating to fees under Section 5 of the FTC Act, 
the Commission does not currently identify any disputed issues of 
material fact that need to be resolved at an informal hearing.\242\
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    \242\ The Commission may still do so later, on its own 
initiative or in response to a persuasive showing from a commenter.
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VII. Preliminary Regulatory Analysis

    Under Section 22 of the FTC Act, the Commission, when it publishes 
any NPRM, must include a ``preliminary regulatory analysis.'' 15 U.S.C. 
57b-3(b)(1). The required contents of a preliminary regulatory analysis 
are (1) ``a concise statement of the need for, and the objectives of, 
the proposed rule,'' (2) ``a description of any reasonable alternatives 
to the proposed rule which may accomplish the stated objective,'' and 
(3) ``a preliminary analysis of the projected benefits and any adverse 
economic effects and any other effects'' for the proposed rule and each 
alternative, along with an analysis ``of the effectiveness of the 
proposed rule and each alternative in meeting the stated objectives of 
the proposed rule.'' 15 U.S.C. 57b-3(b)(1)(A)-(C).

A. Concise Statement of the Need for the Rule and Its Objectives

    This proposed rule is needed to address the prevalent business 
practices of presenting incomplete pricing information that obscures 
the total price and misrepresenting the nature and purpose of fees, 
which are unfair or deceptive practices. The proposed rule aims to (a) 
prohibit and prevent these unlawful practices, (b) foreclose businesses 
from circumventing the purpose of the rule, such as by 
mischaracterizing essential components of a product as optional add-on 
components, shipping, or taxes, (c) promote a level playing field that 
enables comparison shopping and allows honest businesses to compete, 
and (d) empower the Commission to provide monetary redress to consumers 
and to seek civil penalties if warranted. Section IV provides more 
detail regarding the need for, and the objectives of, the proposed 
rule. The NPRM addresses the other requirements in this section.

B. Reasonable Alternatives and Anticipated Costs and Benefits

    The Commission believes that the benefits of proceeding with the 
rulemaking will significantly outweigh the costs, but it welcomes 
public comment and data (both qualitative and quantitative) on any 
benefits and costs to inform a final regulatory analysis. Critical to 
the Commission's analysis is the legal consequence that any eventual 
rule would allow not only for the ability to redress consumers who are 
harmed by rule violations, but also for the deterrence value of the 
threat of civil penalties against violators. Such results are likely to 
provide benefits to consumers and competition, as well as to the 
agency, without imposing any significant costs on consumers or 
competition. It is difficult to quantify with precision what all those 
benefits may be, but it is possible to describe them qualitatively.
    It is useful to begin with the scope of the problem the proposed 
rule would address. As discussed in the ANPR and documented in the 
comments received and existing literature on shrouded pricing, unfair 
or deceptive practices relating to fees pervade various industries, 
harming consumers and competition. For example, empirical and 
theoretical models suggest that mandatory hidden fees may lead 
consumers to pay more than they otherwise would in a truly transparent 
marketplace. This can lead to a transfer of wealth away from consumers 
to the firms who successfully hide their true prices. Studies suggest 
that unfair or deceptive pricing strategies may also lead consumers to 
put less effort into searching for lower prices. Deceptive pricing may 
harm competition by directing consumers away from businesses with the 
best price and honest practices to businesses with prices that are 
higher, less transparent, and more deceptive. This makes it harder for 
the genuine price cutter to attract consumers and enables the higher-
priced rival to effectively shroud its comparatively higher prices, 
thereby reducing real price competition.\243\
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    \243\ See, e.g., FTC-2022-0069-6095 (describing harm to 
competition and honest businesses through price obfuscation); 
Sullivan, supra n. 153, at 4; Rasch, supra n. 153, at 362-63 
(``[E]xperimental evidence suggests that consumers indeed strongly 
and systematically underestimate the total price under drip pricing 
and make mistakes when searching''); Shelanski, supra n. 153, at 
314-16; Blake, supra n. 153, at 16; Huck & Wallace, supra n. 153, at 
4; Ellison & Ellison, supra n. 153, at 2-6; Busse & Silva Risso 
supra n. 153, at 470-74; National Economic Council, The Competition 
Initiative and Hidden Fees, supra n. 167.
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    Given the proliferation of unfair or deceptive pricing practices 
relating to fees, it is not surprising that cases relating to unfair or 
deceptive fee practices have recently constituted, and are likely to 
constitute in the future, a meaningful share of Commission enforcement 
actions, and in many of those actions a rule may prove to be the only 
or the most practicable means for achieving consumer redress. As such, 
a significant anticipated benefit of a final rule is the ability to 
obtain monetary relief, especially consumer redress, as well as civil 
penalties. While such relief could also be obtained for certain fee-
related practices with an existing rule or statute, such as the TSR, 
ROSCA, and the Negative Option Rule, by no means do all unfair or 
deceptive practices relating to fees implicate an existing rule or 
statute.
    To succeed at obtaining consumer redress without a rule violation, 
the Commission must first obtain an administrative cease-and-desist 
order based on Section 5 violations. Then, to secure consumer redress 
for victims, the Commission must file an action in Federal court under 
Section 19(a)(2) and persuade a court in each case that the conduct at 
issue is ``one which a reasonable man would have known under the 
circumstances was dishonest or fraudulent.'' \244\ Although this 
standard is likely to be met in some cases relating to unfair or 
deceptive practices relating to fees, having to prove as much in each 
case requires a

[[Page 77441]]

greater expenditure of Commission resources than in cases with a rule 
violation, which allow the Commission to proceed directly in Federal 
court and do not require separate proof of knowledge that the conduct 
was dishonest or fraudulent.
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    \244\ 15 U.S.C. 57b(a)(2). Depending on the egregiousness of the 
misconduct and the harm it is causing, the Commission also may seek 
preliminary injunctive relief in Federal court. 15 U.S.C. 53(b).
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    Accordingly, without a rule, the Section 19(a)(2) path often 
requires consumer victims to wait many years before the Commission can 
deliver redress to them, even six years or more.\245\ The Commission's 
experience supports a reasonable estimate that administrative 
litigation can take at least twice as long as Federal litigation with a 
rule violation. Because of the prevalence of unfair or deceptive 
practices relating to fees, the Commission will not have a shortage of 
actors to investigate. Having a rule would result in a savings of 
enforcement resources, which could be invested into investigating and, 
where the facts warrant, bringing additional enforcement actions. In 
sum, significant potential benefits of a rule are that the Commission 
could put a stop to more unfair or deceptive practices relating to 
fees, return money to more victims, and obtain that redress more 
quickly.
---------------------------------------------------------------------------

    \245\ See, e.g., Press Release, Fed. Trade Comm'n, Marketers of 
Ab Force Weight Loss Device Agree to Pay $7 Million for Consumer 
Redress (Jan. 14, 2009), https://www.ftc.gov/news-events/news/press-releases/2009/01/marketers-ab-force-weight-loss-device-agree-pay-7-million-consumer-redress (describing a 2009 settlement of a follow-
on Section 19 action against Telebrands Corp. that was brought after 
litigation finally concluded of a 2003 administrative complaint 
alleging violations of Section 5--in this case, the Section 19 
action settled instead of being litigated to judgment, which would 
have taken more time).
---------------------------------------------------------------------------

    Another potential significant benefit is deterrence of unfair or 
deceptive practices relating to fees. The Commission anticipates that 
most companies that are subject to any eventual rule would comply with 
it right away, especially as their competitors would also be bound by 
it. And for companies that do not immediately comply, an eventual rule 
that makes it less likely they could evade redressing consumers and 
more likely that they have to pay civil penalties can have only helpful 
deterrence effects, whatever their magnitude.\246\ Any eventual rule 
could also have the salutary effect of complementing the Commission's 
consumer education work by elevating public awareness of these 
prevalent unfair or deceptive practices relating to fees, which could 
increase how often they are detected and reported.
---------------------------------------------------------------------------

    \246\ In its comment, the National Automobile Dealers 
Association, FTC-2022-0069-6043, noted that ``the Commission's 
desire for monetary penalty authority over a practice that is 
already impermissible under current law is not a legally adequate 
basis for the issuance of a trade regulation rule.'' This argument 
misses the mark because an eventual rule would not merely constitute 
a restatement of existing law. As noted in this preamble, the 
Commission has carefully analyzed the unfair or deceptive nature of 
failing to include mandatory fees and charges in total price quotes 
and misrepresenting the nature or purpose of fees. Moreover, an 
eventual rule would provide consumers with monetary relief in cases 
where the Commission is unable to allege a rule violation currently, 
and it would have a deterrent effect on businesses that, to date, 
continue to engage in these unfair or deceptive pricing practices.
---------------------------------------------------------------------------

    In analyzing the potential costs and benefits of the proposed rule, 
the Commission also considered several alternatives to the rule 
including terminating the rulemaking, pursuing narrower rule 
alternatives and pursuing broader rule alternatives. One potentially 
reasonable alternative to the proposed rule is to terminate the 
rulemaking and rely instead on the existing tools that the Commission 
currently possesses to combat unfair or deceptive practices relating to 
fees, such as consumer education and enforcement actions brought under 
Sections 5 and 19(a)(2) of the FTC Act. Termination of the rulemaking 
would offer the benefit of preserving some Commission resources that 
would be required to continue the rulemaking in the short term, but it 
would come at a significant cost. The cost that is most significant is 
the failure to strengthen the set of tools available in support of the 
Commission's enforcement program against unfair or deceptive practices 
relating to fees, depriving it of the benefits outlined in this 
section.
    Other potential reasonable alternatives to the proposed rule could 
narrow the proposed rule's scope. As discussed in Section III, bait-
and-switch pricing and misrepresentations relating to fees are 
prevalent across the economy. However, much media attention has been 
focused on fees related to live-event ticketing and short-term lodging, 
and the Commission received many comments related to these two sectors 
in response to the ANPR. An alternative to the proposed rule would be 
to propose a rule addressing pricing only in these specific sectors. 
The Commission believes, however, that limiting the proposed rule to 
specific sectors that have received extensive attention would leave the 
door open to widespread unfair or deceptive practices in other sectors. 
One benefit of the proposed industry-neutral rule is that consumers 
will likely have greater confidence in knowing when the rule applies to 
their purchases compared to a sectoral rule in which only certain 
industries are required to show Total Price. Further, comments received 
in response to the ANPR, described in Section II, noted the importance 
of applying a proposed rule to all market sector members to establish a 
level playing field and to avoid granting individual industry members 
competitive advantages by excluding them from rule coverage. A narrower 
alternative rule could fail to address the identified unfair or 
deceptive fee practices in large swaths of the economy and give some 
businesses an unfair competitive advantage.\247\
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    \247\ As part of its broader analysis, this NPRM considered the 
costs and benefits of the proposed rule as it applied to three 
specific industries: short-term lodging, live-event ticketing, and 
restaurants. There is a potential cost savings associated with not 
requiring compliance with the proposed rule for industries outside 
of live-event ticketing and short-term lodging. Further, there may 
be unintended consequences of the proposed rule on some industries. 
This NPRM seeks comment on these potential unintended consequences 
and seeks data that would facilitate further analysis of the costs 
and benefits of narrowing the proposed rule to specific sectors.
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    In addition, the proposed rule could have been subject to further 
narrowing principles, including proposing a rule that exempted small 
businesses or focused solely on online-only transactions. An 
alternative rule that exempted small businesses from the proposed 
requirements in Sec.  464.2 could have the benefit of avoiding 
compliance costs borne by small businesses with smaller profit margins 
that might cause them to be impacted disproportionately by the proposed 
rule. On the other hand, a rule exempting small businesses might impose 
more uncertainty and compliance costs for businesses to determine 
whether the rule applies to them and, as noted in this section, 
comments from industry favored a rule that applied to industry members 
equally to avoid the creation of competitive advantages. Narrowing the 
scope of the rule in this way could also reduce consumer benefits 
arising from increased price transparency across markets and lower 
consumer confidence regarding whether the rule applies to specific 
purchases.
    Another narrower alternative rule focused on online-only 
transactions could preserve many benefits discussed in this section of 
an industry-neutral rule because it would cover many of the industries 
about which the Commission received a large number of comments. As a 
result, this alternative would likely still benefit a large number of 
consumers. It may also avoid unintended consequences in some 
industries, particularly those with complicated pricing structures.

[[Page 77442]]

However, a rule that focused exclusively on online-only transactions 
could fail to address prevalent unfair and deceptive practices that 
occur in-person or incentivize businesses with online and in-person 
customer interactions to bifurcate transactions.\248\ Further, it might 
introduce uncertainty and compliance costs for businesses that operate 
both online and in-person. Section X seeks comment on these potential 
narrowing alternatives, including requests for data not currently 
available to the Commission to develop a quantitative analysis of the 
costs and benefits.
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    \248\ For example, many commenters flagged common practices in 
the hotel and car rental industries that occur at the check-in or 
check-out counter after the initial ``online'' booking. FTC-2022-
0069-0821 (``Another hidden fee is the cost to park your vehicle. 
You're trapped at the check in desk when you're told it's $60 per 
night to self park.''); FTC-2022-0069-1746 (``Tricky or deceptive 
rental car insurance packages that the companies try to sell you at 
a desk. These details are either not online or very difficult to 
find.''); FTC-2022-0069-2668 (describing a ``destination fee'' 
charged in person at a hotel); FTC-2022-0069-5937 (``When I tried to 
check in I was told a different price for my suite than the one I 
had booked online. I explained to the front desk assistance that I 
had booked at a different price. She informed me that their prices 
include a `resort fee,' which covers use of the pool, phone, and 
gym.''); FTC-2022-0069-5944 (describing car rental fees ``not even 
mentioned to the consumer until they reach the checkout counter''). 
See also Compl. ] 8, Abdelsayed, supra n. 222 (``When a consumer 
books online, they cannot tell . . . what they will be separately 
charged for upon arrival and/or at checkout, well past the point the 
consumer could make an informed decision.''); Settlement Agreement ] 
6, Dollar Thrifty Auto. Grp., Inc., supra n. 221 (settling claims 
that defendant misrepresented toll-related fees charged after the 
consumers drove rental cars on toll roads); Compl. ]] 1, 3-5, 8, 
Travelers United, supra n. 222 (describing resort fees due 
separately at the property); Compl. ] 13, Shahar v. Hotwire, Inc. et 
al., No. 12-CV-6027 (N.D. Cal. filed Nov. 27, 2012) (``[W]hen the 
customer arrives at the airline ticket counter, hotel check-in desk, 
or car rental desk, he learns for the first time that he will be 
unable to obtain the promised services for the agreed upon price, 
but instead must pay significantly more.'').
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    As noted in Section II, many comments to the ANPR expressed 
frustration with fees commenters deemed ``excessive'' or ``worthless.'' 
An alternative to the proposed rule would be to address these fees 
explicitly. Such an alternative would benefit consumers who are paying 
excessive amounts for basic goods or services and those who are paying 
for goods or services that provide them little to no value by 
prohibiting businesses from charging such fees. This economic transfer 
would allow consumers to save their money or spend it elsewhere on 
other goods or services that do provide them value. However, a rule 
prohibiting worthless and excessive fees could incur additional costs 
for industry to determine whether a fee qualified as worthless or 
excessive under the rule. In addition, some of the benefits of an 
alternative rule prohibiting worthless or excessive fees may already be 
accomplished by the proposed rule. For example, in connection with 
worthless fees, the proposed rule would require all mandatory fees to 
be included in the Total Price whether those fees arguably add value to 
consumers or not. Transparency and competition on price could then 
disincentivize businesses from incorporating such fees into their 
pricing schemes altogether. In addition, consumer confusion related to 
the purpose of worthless fees would be addressed by the provisions in 
the proposed rule that prohibit misrepresenting fees and require the 
disclosure of the nature and purpose of optional fees. Section X 
requests comment on potential alternatives prohibiting fees that 
provide little or no value to consumers and fees that are excessive, 
including how to define such fees.
    In sum, the alternative of terminating the rulemaking would not 
sufficiently accomplish the Commission's objectives. Other alternatives 
discussed here would accomplish some, but not all, of the Commission's 
objectives. The Commission seeks comment on these alternatives and any 
other potentially reasonable alternatives. While there may be other 
alternatives that could potentially accomplish the stated objectives, 
the Commission would benefit from additional data to conduct 
preliminary analyses of projected benefits and adverse economic 
effects.\249\ Therefore, the Commission seeks comment on whether there 
are other potentially reasonable alternatives, including any relevant 
sources of data that reflect the costs and benefits of such 
alternatives.
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    \249\ Within the Commission's Preliminary Regulatory Analysis is 
a preliminary analysis of the costs and benefits of the proposed 
rule, which includes analyses of subsets of the proposed rule. The 
Commission seeks comment on whether any narrower subset of the 
proposed rule would constitute a better rule than the proposed rule.
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C. Economic Analysis of Costs and Benefits of the Proposed Rule

    The following analysis describes the anticipated impacts of the 
proposed rule. Our analysis concludes that on an economy-wide basis, 
there are positive benefits to the proposed rule if the benefit per 
consumer is at least $6.65 per consumer per year over a 10-year 
period.\250\ This NPRM discusses the proposed regulatory requirements 
in the following areas:
---------------------------------------------------------------------------

    \250\ See infra Section VII.C.5.
---------------------------------------------------------------------------

    1. Prohibits offering, displaying, or advertising an amount a 
consumer may pay without adequate disclosure of the Total Price, as 
defined in the proposed rule.
    2. Prohibits misrepresentations regarding the nature and purpose of 
any amount a consumer may pay, and requires disclosures of the nature 
and purpose of any amount a consumer may pay that is excluded from the 
Total Price. This includes disclosing the refundability of such fees, 
and the identity of any good or service for which fees are charged.
    Where possible, the Commission quantifies the benefits and costs 
and notes that some potential benefits and costs are unquantified. If a 
benefit or cost is quantified, the sources of the data relied upon are 
indicated. If an assumption is needed, the text makes clear which 
quantities are being assumed. Because there is data available to 
quantify some of the potential benefits and costs in the live-event 
ticketing and short-term lodging industries and mandatory fees are 
commonplace in these industries, this preliminary analysis provides 
quantified benefits and costs for these specific industries separately. 
Mandatory fees are also common in the restaurant industry. Some of the 
costs for this industry are quantified, but there is insufficient data 
to quantify benefits for this industry.
    The Commission uses 10 years for the time period of analysis 
because FTC rules are subject to review every 10 years. Tables 1.A and 
1.B summarize the main findings of the regulatory impact analysis. 
Table 1.A presents the potential benefits and costs of the proposed 
rulemaking. Panel A summarizes the costs, benefits, and resulting net 
benefits for the live-event ticketing and short-term lodging 
industries--the two industries for which data are available to estimate 
both costs and benefits of the proposed rule. Quantified benefits in 
these industries derive from time savings consumers would experience 
due to greater price transparency, leading to more efficient shopping 
processes. Quantified costs derive from the costs to firms of complying 
with the proposed rule.
    The quantified net benefits for both the live-event ticketing and 
short-term lodging industries are positive. There are also unquantified 
benefits and costs. Unquantified benefits may arise from a reduction in 
deadweight loss as consumers experience greater price transparency and 
make fewer mistake purchases. Unquantified costs may stem from 
unintended consequences of the rule, such as any adjustment costs or

[[Page 77443]]

consumer confusion as expectations adjust.
    Panel B summarizes the costs and benefits for the restaurant 
industry and all other remaining industries. Quantified costs derive 
from compliance. Due to a lack of data, all benefits, including both 
the increase in time savings and reduction in deadweight loss, of the 
proposed rule for these industries are unquantified. The inability to 
quantify such benefits does not indicate that such benefits are 
trivial; indeed, such unquantified benefits may be substantial.
    For both quantified benefits and costs, we provide a range 
representing the set of assumptions that result in a ``low-end'' or 
``high-end'' estimate. These estimates are calculated as present values 
over the 10-year time frame. Benefits and costs are more valuable to 
society the sooner they occur. A discount rate (3% or 7%) is used to 
adjust estimated benefits and costs for differences in timing; a higher 
discount rate is associated with a greater value for benefits and costs 
in the present.\251\
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    \251\ We use 3% and 7% for the discount rate consistent with 
Office of Management and Budget's guidance. OMB, Circular A-4 (Sep. 
17, 2023), https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/.
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    Table 1.B presents low-end and high-end estimates of the total 
quantified economy-wide costs and the necessary ``break-even benefit'' 
per consumer. Since the Commission is unable to quantify the benefits 
of the proposed rule at the economy level, we instead calculate the 
minimum value the proposed rule would need to generate for the average 
consumer in order for the total benefits of the proposed rule to 
outweigh its quantified costs. Under the high-end cost assumptions with 
a 7% discount rate, we find that each consumer would need to experience 
a benefit of $6.65 per year over 10 years for the proposed rule's 
benefits to exceed its quantified economy-wide compliance costs.

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[[Page 77445]]


[GRAPHIC] [TIFF OMITTED] TP09NO23.003

1. Economic Rationale for Proposed Rule
    Insufficient information about or salience of mandatory fees when 
consumers start the purchasing process for a product may result in a 
market failure.\252\ This incomplete information and lack of 
transparency leads to a market failure because the true price is 
shrouded for the consumer. Firms may shroud total prices through the 
practice of ``drip pricing,'' which is ``a pricing technique in which 
firms advertise only part of a product's price and reveal other charges 
later as the customer goes through the buying process.'' \253\ While 
consumers may be able to comparison shop and discover the total price 
prior to final purchase by going through the checkout process across 
multiple sellers, this strategy involves additional search costs for 
the consumer. In some cases, taking the time to search for the total 
price at a different seller may result in the consumer losing the 
product at the original seller. Drip pricing and the resulting 
imposition of additional search costs may make it more difficult for 
consumers to compare prices across platforms, which may soften price 
competition in the market.\254\
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    \252\ See Section VII.A., ``Concise Statement of the Need for 
the Rule and Its Objectives'' for a discussion of the legal 
rationale for the proposed rule.
    \253\ Howard A. Shelanski et al., Economics at the FTC: Drug and 
PBM Mergers and Drip Pricing, 41 Rev. Indus. Org., 303-19 (2012), 
https://doi.org/10.1007/s11151-012-9360-x.
    \254\ The White House, How Junk Fees Distort Competition (Mar. 
21, 2023), https://www.whitehouse.gov/cea/written-materials/2023/03/21/how-junk-fees-distort-competition/; The White House, The 
President's Initiative on Junk Fees and Related Pricing Practices 
(Oct. 26, 2022), https://www.whitehouse.gov/briefing-room/blog/2022/10/26/the-presidents-initiative-on-junk-fees-and-related-pricing-practices/; Glenn Ellison, A Model of Add-On Pricing, 120 Q.J. Econ. 
2, 585-637 (2005), https://www.jstor.org/stable/25098747.
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    A market failure may also occur when firms shroud total prices 
through non-aggregated partitioned pricing, in which all of the 
components of the total price (base price, fees, etc.) are presented to 
consumers up front but without the total price itself.\255\ Non-
aggregated partitioned pricing, like drip pricing, imposes costs on 
consumers by requiring them to spend additional time to calculate total 
prices for themselves and by increasing the likelihood of suboptimal 
choices through erroneous total price calculations.
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    \255\ Vicki G. Morwitz et al., Divide and Prosper: Consumers' 
Reactions to Partitioned Prices, 35 J. Mktg. Rsch. 4, 453-63 (1998), 
https://doi.org/10.1177/002224379803500404.
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a. Incomplete Pricing Information and Search Costs
    A well-functioning market for a good (or service) depends, in part, 
on its consumers having accurate information regarding the price of the 
good. By revealing hidden mandatory fees later in the purchasing 
process through drip pricing, a firm imposes additional costs on 
consumers of acquiring this information. By employing partitioned 
pricing but failing to provide an upfront total price, a firm imposes 
similar added costs. In either case, several harms may arise. First, 
keeping consumer choices fixed, the added search cost to acquire price 
information reduces consumer surplus with no countervailing increase of 
producer surplus. Second, shrouded prices make comparison shopping more 
difficult, leading consumers to make suboptimal consumption decisions.
    Overall, consumers may find it too costly to search for total price 
information for some or all goods under consideration. This leads 
consumer demand to become less elastic, and consumers will accept 
higher prices relative to an efficient equilibrium. Additionally, as 
shrouded prices make it harder for consumers to comparison shop, firms 
may gain more market power that allows them to raise prices.\256\
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    \256\ Michael R. Baye et al., Search Costs, Hassle Costs, and 
Drip Pricing: Equilibria with Rational Consumers and Firms, (Nash-Equilibrium.com, Working Paper, 2019), http://nash-equilibrium.com/PDFs/Drip.pdf.
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    Figure 1 illustrates this effect of shrouded prices on consumer 
demand. In this model, the demand curve Dupfront-total represents 
consumers' true preferences when presented with an upfront total price. 
When a shrouded price hinders consumers' ability to learn

[[Page 77446]]

total prices and efficiently compare competing goods, consumer demand 
will swing out, as a result of decreased elasticity, as represented by 
Dshrouded. Consequently, incomplete price information may lead 
consumers to purchase more of the good or service at a higher price 
than they would if they had complete price information.
    As a consequence of the higher price paid by consumers, there is a 
transfer of surplus from consumers to sellers. This transfer correlates 
with additional profit for producers, who thus have an incentive to 
increase consumer costs in this manner.\257\ Whereas such transfers are 
neither benefits nor costs in this analysis, the overconsumption also 
leads to a societal cost in the form of deadweight loss because the 
resources used to produce the good would have been put to a better use 
if consumer demand had not been distorted in this manner. This 
inefficient consumption level and the accompanying increase in consumer 
search costs represent a market failure.\258\
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    \257\ Although consumers in this model would prefer upfront 
pricing, it is unlikely that any individual firm in a market with 
shrouded prices could increase its market share by providing upfront 
total prices. Under the expectation of shrouded prices, consumers 
may inadvertently interpret such a firm's upfront prices as higher 
base prices, leading the firm to lose rather than gain business. In 
this way, shrouded prices create a prisoners' dilemma in the market 
that cannot be undone through competition.
    \258\ For expositional simplicity, Figure 1 does not include the 
shift to the supply curve resulting from firms' increased market 
power. This shift in supply would likely lead to similar shifts in 
the market equilibrium: higher prices, a transfer of surplus from 
consumers to producers, and a deadweight loss to society.
[GRAPHIC] [TIFF OMITTED] TP09NO23.004

    Additionally, products are vertically differentiated in many 
markets, with higher quality items selling at higher prices. In such 
markets, drip pricing may lead to equilibria characterized by 
inefficiently high qualities in addition to inefficiently high 
quantities.\259\ Consumers may respond to fully disclosed prices in 
these markets by purchasing lower quality products in addition to 
purchasing fewer products.
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    \259\ This phenomenon has been observed, for example, in the 
live-event ticketing industry. See Blake et al., supra n. 153.
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b. Shrouded Pricing as a Source of Biased Expectations
    As explained in Section VII.C.1.a, sellers have incentives to 
distort consumer demand toward an inefficient equilibrium. This 
inefficiency may also arise in a behavioral context.\260\ By shrouding 
total prices through drip or partitioned pricing, a firm may bias its 
consumers' price expectations. For example, consumers may respond to 
driped prices by anchoring their beliefs on the base price and, thus, 
systematically underestimate the price of the good. This 
underestimation, whether by all consumers or merely by a suset of 
consumers, would lead to an outward shift in consumer demand. While 
this outward shift would look different than the demand distortion in 
Figure 1, it would lead to a similiarly inefficient equilibrium in 
which the good is overconsumed and society suffers a deadweight loss.
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    \260\ David Laibson, Harvard U., Drip pricing: A Behavioral 
Economics Perspective, Address at the F.T.C. (May 21, 2012), https://www.ftc.gov/sites/default/files/documents/public_events/economics-drip-pricing/dlaibson.pdf.
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    There are several studies that show how consumer behavior changes 
as a result of drip pricing. One study found that when optional 
surcharges are dripped, individuals are more likely to select a more 
expensive option (after including surcharges) than what they would have 
chosen under upfront pricing.\261\ Even when the participants became 
aware of the additional fees, they were reluctant to restart the 
purchase process because they perceived high search costs and 
inaccurately assumed that all companies charge the same fees. A 
different economics paper conducted an experiment and found that 
consumers encountering drip pricing are more likely to make purchasing 
mistakes if they are uncertain about the extent of the drip 
pricing.\262\
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    \261\ Shelle Santana et al., Consumer Reactions to Drip Pricing, 
39 Mktg. Sci. 1, 188-210 (2020), https://doi.org/10.1287/mksc.2019.1207.
    \262\ Alexander Rasch et al., Drip Pricing and its Regulation: 
Experimental Evidence, 176 J. Econ. Behav. & Org., 353-70 (2020), 
https://doi.org/10.1016/j.jebo.2020.04.007.

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[[Page 77447]]

    Another prominent study looked at how consumers respond to the 
salience of sales tax on goods, which affects the full price of a 
product.\263\ In this study, when the grocery store displayed the full 
price of each item on shelves as part of a field experiment, people 
purchased fewer products, relative to the control scenario in which 
sales tax was added at checkout, despite knowing that the final price 
being charged had not changed. In 2014, StubHub conducted an experiment 
in which some consumers were presented total prices inclusive of fees 
up front while other consumers were presented a base price up front 
with fees revealed at checkout. An analysis of this experiment revealed 
that presenting consumers with total prices up front reduced both the 
quantity and quality of tickets purchased relative to presenting 
consumers with dripped prices.\264\
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    \263\ Raj Chetty et al., Salience and Taxation: Theory and 
Evidence, 99 Am. Econ. Rev. 4, 1145-77 (2009).
    \264\ See Blake et al., supra n. 153.
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2. Economic Effects of the Proposed Rule
    The model of incomplete price information, described in Section 
VII.C.1.a, provides a framework for assessing the potential costs, 
benefits, and transfers associated with the proposed rule. The proposed 
rule would result in positive net benefits if it increases the ease 
with which consumers can learn total prices and if the proposed rule 
improves consumer comprehension of fees as they relate to total price, 
facilitates comparison shopping, reduces search costs, or otherwise 
allows consumers to make choices that increase net welfare.
    Under the current regime, if a seller in a given industry utilizes 
hidden fees, that seller may acquire a larger market share by 
advertising lower initial prices than other sellers not using hidden 
fees. Absent a Federal rule, competitive forces will drive other firms 
within an industry to also use hidden fees. These firms may have to 
accept a lower market share if they don't use hidden fees, even though 
their total prices are similar to their competitors. Thus, one 
potential outcome of the proposed rule is that firms that currently do 
not use drip pricing (in an industry where drip pricing is common) will 
no longer face the competitive pressure to employ hidden fees and may 
experience higher revenue if consumers can more easily compare prices 
across firms.
    The proposed rule would also generate societal costs as firms would 
have to adjust how they convey prices to consumers. The proposed rule 
could increase economic efficiency if it improves consumers' price 
calculations and the resulting reduction in deadweight loss exceeds the 
cost to firms of providing more transparent pricing. It may also 
facilitate price comparisons by consumers, increase competition among 
sellers, and put downward pressure on prices. Due to a lack of data, it 
is difficult to fully quantify all the potential effects of the 
proposed rule on the full economy. Where there may be impacts that we 
are unable to quantify, we provide a qualitative description.
c. General Benefits of Proposed Rule
    Consumers would benefit from the proposed rule in several ways. In 
addition to reductions in search costs and deadweight loss, which are 
described in greater detail in Section VII.C.1, there may be 
unquantified benefits from Sec.  464.3 of the proposed rule, which in 
part prohibits misrepresentation regarding the nature and purpose of 
any amount a consumer may pay that is excluded from the Total Price. 
Another potential unquantified benefit to consumers from the proposed 
rule is reduced frustration and consumer stress that is often 
associated with surprise fees that distort the purchasing process.
    The proposed rule may also provide a benefit to firms in the form 
of harmonized, nation-wide compliance requirements. In the absence of 
the proposed rule, individual States may pursue enforcement actions 
against firms using drip pricing or enact their own drip pricing 
prohibitions.\265\ Such regulations could vary from State to State, and 
firm would incur greater costs to ensure simultaneous compliance with 
this patchwork of regulations. A single rule at the Federal level would 
reduce the need for regulations at the State level and provide a 
simpler regulatory framework for firms. The Commission solicits 
comments on whether there are any additional benefits of the proposed 
rule that are not currently explored in this analysis and any data that 
may support estimating those benefits.
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    \265\ See, e.g., enforcement by the State of Pennsylvania 
against Marriott International, discussed in Section VII.C.3.b(2).
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(1) Reductions in Search Costs
    Consumers may save time searching for total price on goods and 
services as a result of the proposed rule. In a well-functioning 
market, consumers find it beneficial to spend time comparison shopping 
for low prices. When mandatory fees are obscured, however, consumers 
incur longer search times to discover full prices and make informed 
purchasing decisions. The purchase process for a given transaction 
takes longer than it would otherwise, as a consumer learns the full 
price at the end of the process and may need to re-assess whether they 
wish to purchase at a higher price than originally expected or look for 
other options. The proposed rule would eliminate the need for 
additional, inefficient amounts of time to determine the total price 
from sellers who do not provide the total price up front. At this time, 
we quantify the reduction in search costs in the live-event ticketing 
and short-term lodging industries. We do not quantify the benefits of 
the reductions in search costs in other industries because we lack the 
data to quantify such benefits, but we acknowledge that it is a 
positive benefit to the proposed rule.
(2) Reductions in Deadweight Loss
    As discussed in Section VII.C.1.a, consumers' incomplete price 
information may distort consumer demand. This distortion may shift a 
market to an inefficient equilibrium and generate deadweight loss, 
which results from consumers purchasing higher quantities of the good 
than they would if fully informed. Under the proposed rule, consumers 
would learn the total price up front. Thus, consumers' demand 
distortion would likely be mitigated, and some fraction of the welfare-
reducing transactions would be prevented. In other words, resources 
supporting overconsumption become available for better societal use, 
and the deadweight loss is reduced or eliminated. The provision of full 
pricing information may also reduce consumers' mistake purchases with 
respect to product quality. Drip pricing might lead consumers to 
purchase goods of inefficiently high quality; the proposed rule may 
allow consumers to choose efficient levels of quality. In addition, the 
requirement to disclose the refundability of any fees not included in 
the total price may also reduce the quantity of consumers' mistake 
purchases. Absent the proposed rule, if businesses do not disclose that 
certain charges are not refundable, consumers might make purchases 
assuming that they are refundable. Thus, the proposed rule may result 
in consumers purchasing closer to the efficient quantity of goods. We 
do not quantify the reduction in deadweight loss, but we acknowledge 
that it is a positive benefit to the proposed rule.

[[Page 77448]]

d. Welfare Transfers
    The Commission expects that prices are likely to adjust in response 
to the transparency facilitated by the proposed rule. These price 
adjustments serve to transfer welfare from one side of the market to 
the other; consumer welfare would increase, and producer profits would 
decrease by the same amount. Typically, transfers of welfare from one 
set of people in the economy to another are documented in a regulatory 
analysis, but do not change net social welfare.\266\ While it is likely 
that the proposed rule may result in transfers of welfare, we do not 
attempt to estimate these transfers.
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    \266\ See Off. Mgmt. & Budget, supra n. 251 (``A regulation that 
restricts the supply of a good, causing its price to rise, produces 
a transfer from buyers to sellers. The net reduction in the total 
surplus (consumer plus producer) is a real cost to society, but the 
transfer from buyers to sellers resulting from a higher price is not 
a real cost since the net reduction automatically accounts for the 
transfer from buyers to sellers.'').
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e. General Costs of Proposed Rule
    Because the proposed rule is sector-neutral and economy-wide, all 
firms will be affected to some degree. Firms operating in the United 
States will likely do a basic regulatory review to determine how the 
proposed rule applies to them. Firms that are not already in compliance 
with the proposed rule may incur additional costs to re-optimize prices 
of goods and services. These firms may also incur costs to adjust how 
they display price information in order to disclose the full price 
whenever a price is quoted, and add required disclosures regarding 
refundability of fees not included in Total Price (e.g., fees for 
optional goods and services). For example, firms may need to reprogram 
websites, reprint advertisements, or redesign menus to comply with the 
proposed rule.
    In addition, there may be some costs related to unintended 
consequences of the proposed rule. For instance, consumers who are used 
to an existing pricing structure that separately discloses mandatory 
fees at the end of the purchase process may mistakenly make inefficient 
purchases while adjusting to the new regime of all-in total pricing. 
For example, consumers accustomed to dripped ticketing fees may 
initially under-consume when shopping for tickets with upfront all-in 
pricing. The societal cost of such inefficiencies would be temporary 
and decrease as consumers adjust to the all-in pricing required by the 
proposed rule.
    As another example, while the proposed rule excludes government 
charges and shipping from the required disclosure of total price, the 
proposed rule requires any internal handling costs associated with 
packaging a good that were previously presented as fees at the end of 
the purchase process to be incorporated in the total price. Internal 
handling costs include costs not attributable to the amount sellers are 
charged by third party shipping services like UPS or USPS. Since 
shipping and handling charges are currently often combined into one 
fee, businesses may have to change how they account for handling costs 
and how they advertise shipping and handling costs in order to comply 
with this provision.
f. Comparison of Benefits and Costs
    The total costs of the proposed rule are uncertain because it is 
unclear how, across a variety of industries, firms would adjust prices, 
change their price displays and disclosures, and upgrade their systems 
in response to the proposed rule. This section quantifies economy-wide 
compliance costs to the extent possible, while recognizing that we 
cannot quantify all costs. The degree to which the proposed rule 
generates benefits for all industries in the economy is unclear, due to 
a lack of reliable information on how these fees affect search and 
decision-making at the economy level and the way in which pricing and 
search costs vary across industries. As such, we are unable to quantify 
economy-wide benefits. Instead, we determine the break-even level of 
benefits the proposed rule must generate in order to outweigh the 
quantified costs we estimate and, thus, generate a net positive benefit 
to society.
    As a preview, we conclude in Section VII.C.2.d.(2) that if the 
proposed rule results in a benefit of at least $6.65 per consumer per 
year over 10 years, then the benefits from reduced search time will 
exceed quantified compliance costs. It seems likely that consumers 
would experience search time savings of this amount.
(1) Quantified Costs
    Section VII.C.3 provides more detailed quantitative analyses of 
costs for three specific industries about which we have more 
information regarding mandatory fees: live-event ticketing, short-term 
lodging, and restaurants. However, there are likely other industries 
that may need to change their current practices to comply with the 
proposed rule, if finalized. To determine compliance costs for the 
remainder of the economy, we assume that 90% of these firms already 
comply with the proposed rule and that the other 10% of these firms do 
not currently comply with the proposed rule.
    The Commission quantifies the compliance costs utilizing 
assumptions on the number of hours required to check compliance with 
and, if necessary, come into compliance with the proposed rule. We 
expect that in response to the proposed rule, firms will initially 
determine whether and how the proposed rule applies to them given their 
current pricing and fee disclosure strategies. We assume firms whose 
current practices align with the proposed rule will incur one hour of 
lawyer time to confirm their compliance.\267\
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    \267\ Note that one hour of lawyer time is a proxy for the 
average amount of time firms will need to check whether the proposed 
rule applies to them. For example, some small businesses may not 
employ an attorney, but may instead have a staff member review the 
rule.
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    We do not have data on the exact costs firms not presently 
compliant will incur to comply with the proposed rule. We acknowledge 
that some firms in some industries may have already developed the tools 
required to comply with the proposed rule because they operate in 
jurisdictions with similar rules, such as all-in pricing requirements.
    Transitioning to compliance for these types of firms should be 
relatively straightforward. For other firms and in other industries, 
transitioning to compliance may require additional time and costs. To 
capture both the variation and uncertainty of costs across industries, 
we make a series of low-end and high-end assumptions on the number of 
hours required to comply with the proposed rule. For example, we assume 
that firms not presently compliant will employ a low end of 5 hours and 
a high end of 10 hours of lawyer time to determine what is necessary to 
comply with the proposed rule. While some firms may forgo formal legal 
advice, this range of lawyer time serves as a proxy for any costs 
associated with understanding the proposed rule and preparing to comply 
with it.
    The proposed rule's prohibition on drip pricing may lead to shifts 
in consumer demand, and consequently, shifts in market equilibria. In 
response, firms transitioning away from drip pricing may need to 
determine new optimal prices and contracts. In addition, the proposed 
rule's requirement that internal handling fees must be separated from 
shipping fees and included in the total price may require firms to 
invest more resources to better monitor, measure, and adjust both the 
shipping cost and the total price to comply with this provision. We 
assume these price re-optimizations require

[[Page 77449]]

firms to incur a one-time, upfront cost of data scientist time to 
perform this work. We assume firms not presently compliant will employ 
a low end of 40 hours and a high end of 80 hours of data scientist 
time.\268\ Similar to the use of lawyer hours in estimating compliance 
costs, this range of data scientist time serves as a proxy for any 
costs associated with adjusting pricing strategies in response to the 
proposed rule.\269\
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    \268\ While there may be some firms that have already 
established the systems necessary to comply with the proposed rule, 
there may be other firms that will require a large number of hours 
to re-optimize prices. The assumed 40 and 80 hours represent 
averages over all firms affected by the proposed rule.
    \269\ Some industries may comprise a mix of firms that are 
presently compliant and not presently compliant with the proposed 
rule. It is possible that, within these mixed industries, presently 
compliant firms would also need to reoptimize prices in response to 
shifts in market equilibria. That is, the shift in an industry's 
equilibrium resulting from the proposed rule could be significant 
enough that all firms in the industry, compliant or not, would need 
to adjust prices. Firms regularly reoptimize prices in response to 
market shifts, but it is possible that this price adjustment would 
require already compliant firms to incur additional costs. We lack 
data to quantify this potential cost to firms. The Commission 
solicits comments and data to better understand this potential 
source of costs.
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    The Commission expects that the drip pricing employed by firms not 
presently compliant with the proposed rule is, in many cases, 
manifested in online sales. In such cases, firms will also need to 
adjust both advertised prices as well as purchase processes for online 
sales, and we assume these adjustments require firms to incur a one-
time, upfront cost of web developer time. Firms may also need to add 
required disclosures regarding the refundability of any fees not 
included in the Total Price. We assume firms not presently compliant 
will employ a low end of 40 hours and a high end of 80 hours of web 
developer time to become compliant with the proposed rule.\270\ Once 
firms become compliant with the proposed rule, any future changes to 
pricing displays or purchasing systems are not a direct consequence of 
the proposed rule. For brick-andmortar firms the conduct in-person 
sales of goods and services and do not currently comply with the 
propsed rule, updating the price presentation and purchase process may 
include printing new price displays, revising advertising campaigns, 
adding required disclosures, as well as updating websites. For such 
firms, this range of web developer times serves as a proxy for any 
costs associated with ensuring the firm is compliant with the proposed 
rule.
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    \270\ Note that Consumer Rule II also uses an assumption of 80 
hours of time to reprogram flight quotation websites. U.S. Dep't 
Transp., Preliminary Regulatory Analysis: Enhancing Airline 
Passenger Protections II (May 24, 2010), https://www.regulations.gov/document/DOT-OST-2010-0140-0003 (``Consumer Rule 
II'').
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    It may be the case that once the firm incurs the one-time 
transition costs, there are no additional costs. For a low-end estimate 
of costs, we assume annual costs are $0 because there are zero 
additional hours of labor. However, it may be the case that as firms 
transition into compliance with the proposed rule, firms need to 
reevaluate their pricing policies to ensure continued compliance by 
employing additional lawyer time on an annual basis. Because the 
proposed rule applies to the entire economy, it is difficult to know 
the exact annual compliance costs that firms may incur as the various 
industries adapt to the proposed rule. For the high-end cost estimate, 
we assume firms require an average of 10 hours of lawyer time for 
annual compliance checks. These potential annual compliance costs are 
proxied with lawyer time but may take other forms that are unknown at 
this time.
    Table 2 presents the economy-wide compliance costs, as well as the 
sum of the industry-specific compliance costs described in more detail 
in Section VII.C.3. Since the proposed rule is sector-neutral and 
economy-wide, we begin with the total number of firms in the U.S. 
(6,140,612), subtract the number of firms in the live-event ticketing, 
short-term lodging, and restaurant industries, and then assume that 90% 
of the remaining firms are already in compliance with the proposed 
rule.\271\ This assumption implies that while 5.1 million U.S. firms 
will only incur one hour of lawyer time to review and confirm 
compliance, over 500 thousand firms outside of the specific industries 
analyzed in Section VII.C.3 will incur additional expenses to comply 
with the proposed rule.
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    \271\ The number of firms is provided by the United States 
Census Bureau's Statistics of United States Businesses. U.S. Census 
Bureau, 2020 SUSB Annual Datasets by Establishment Industry (Mar. 
2023), https://www.census.gov/data/datasets/2020/econ/susb/2020-susb.html. The estimate of 6,140,612 covered firms may be 
overinclusive as it includes firms that would be exempted from the 
definition of Business as described in 464.1(b) of the proposed rule 
if the proposed Motor Vehicle Dealers Rule is finalized. When 
subtracting the number of firms in the specific industries, we use 
the low-end estimate of the number of firms in the live-event 
ticketing and short-term lodging industries, which results in a 
higher number of firms for the rest of the economy that may incur 
costs associated with the proposed rule.
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    For firms not presently in compliance with the proposed rule, we 
express compliance costs as present values, and we estimate them by 
adding one-time costs with recurring annual costs, discounted at either 
3% or 7%. We add to these costs the regulatory familiarization costs 
for firms in the remainder of the economy already compliant with the 
proposed rule as well as the present value of compliance costs for the 
three industries discussed in Section VII.C.3 to arrive at the total 
present value of compliance costs for the economy as a whole. Table 3 
presents the per-firm annualized compliance costs for the economy as a 
whole, separated by firms already in compliance, which incur a one-time 
compliance check, and firms not presently in compliance, which incur 
both one-time and recurring costs.
    The cost of employee time is monetized using wages obtained from 
the Bureau of Labor Statistics May 2022 National Occupational 
Employment and Wage Estimates.\272\ This assumption is valid if hours 
spent in compliance activities would otherwise be spent in other 
productive work-related activities, the social value of which is 
summarized by the employee's wage.\273\ To the extent that these 
activities can be accomplished using time during which employees would 
otherwise be idle in the absense of a rule, our estimates will 
overstate the welfare costs of the propsed rule. For the short-term 
lodging and restaurant industries, we use the industry specific wages 
associated with the North American Industry Classification System 
(``NAICS'') codes for those industries:
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    \272\ U.S. Bureau Lab. Stat., Occupational Employment and Wage 
Statistics, May 2022 National Occupational Employment and Wage 
Estimates United States (May 2022) (``OEWS National''), https://www.bls.gov/oes/current/oes_nat.htm. U.S. Bureau Lab. Stat., 
Occupational Employment and Wage Statistics, Occupational Employment 
and Wages, May 2022: 15-2051 Data Scientists (May 2022) (``OEWS Data 
Scientists''), https://www.bls.gov/oes/current/oes152051.htm 
(providing the hourly wages for data scientists); U.S. Bureau Lab. 
Stat., Occupational Employment and Wage Statistics, Occupational 
Employment and Wages, May 2022: 15-1254 Web Developers (May 2022) 
(``OEWS Web Developers''), https://www.bls.gov/oes/current/oes151254.htm (providing the hourly wages for web developers); U.S. 
Bureau Lab. Stat., Occupational Employment and Wage Statistics, 
Occupational Employment and Wages, May 2022: 23-1011 Lawyers (May 
2022) (``OEWS Lawyers''), https://www.bls.gov/oes/current/oes231011.htm (providing the hourly wages for lawyers).
    \273\ This assumption would hold, for example, if both the 
product and labor markets in this industry were competitive.
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BILLING CODE 6750-01-C
(2) Break-Even Analysis of Economy-Wide Costs and Benefits
    In order for the proposed rule to have a positive net benefit, its 
benefits must outweigh its costs. It is difficult to quantify the net 
social benefits of the proposed rule at the economy level because it 
depends on the extent to which drip pricing exists and the degree to 
which the rule would result in more informed decisions for consumers, 
which vary by industry. Since the Commission is unable to quantify the 
benefits of the proposed rule at the economy level, we instead 
calculate the break-even benefit per consumer based on the quantified 
costs presented in Section VII.C.2.d.(1). That is, we determine the 
minimum value the proposed rule would need to generate for the average 
consumer in order for the total benefit of the proposed rule to 
outweigh its quantified costs. This benefit may include reduced search 
costs (as described in the live-event ticketing and short-term lodging 
industry analysis), reduced deadweight loss, and reduced psychological 
distress from surprise fees. For this analysis, we consider costs in 
annualized terms--the average discounted cost of compliance per year 
over 10 years.\276\ As such, we express the break-even benefit as an 
average benefit per consumer per year over 10 years.\277\
---------------------------------------------------------------------------

    \274\ See U.S. Census Bureau, supra n. 271.
    \275\ U.S. Bureau Lab. Stat., Occupational Employment and Wage 
Statistics, Occupational Employment and Wages, May 2022: 15-2051 
Data Scientists (May 2022) (``OEWS Data Scientists''), https://www.bls.gov/oes/current/oes152051.htm (providing the hourly wages 
for data scientists); U.S. Bureau Lab. Stat., Occupational 
Employment and Wage Statistics, Occupational Employment and Wages, 
May 2022: 15-1254 Web Developers (May 2022) (``OEWS Web 
Developers''), https://www.bls.gov/oes/current/oes151254.htm 
(providing the hourly wages for web developers); U.S. Bureau Lab. 
Stat., Occupational Employment and Wage Statistics, Occupational 
Employment and Wages, May 2022: 23-1011 Lawyers (May 2022) (``OEWS 
Lawyers''), https://www.bls.gov/oes/current/oes231011.htm (providing 
the hourly wages for lawyers).
    \276\ For the purposes of discounting and annualizing costs, we 
assume that firms incur their one-time costs immediately, at the 
beginning of year 1, while they incur the potential costs of annual 
compliance checks at the end of each year.
    \277\ Benefits to consumers, such as reductions in search costs, 
will accrue continuously over time. For simplicity, we assume for 
the break-even analysis that annualized benefits accrue all at once 
at the end of each year. As such, the break-even analysis may 
overestimate the level of benefits required to outweigh costs.
---------------------------------------------------------------------------

    From Table 2, under the assumption that firms and consumers 
discount future years at 3%, we estimate that the proposed rule may 
result in costs as high as $13.1 billion over 10 years. Assuming a 
discount rate of 7% for future years, we estimate that the proposed 
rule may result in costs as high as $12.1 billion over 10 years. To 
determine the break-even benefit, we begin with the total present value 
of total costs and calculate the annualized total costs across all 
industries.\278\ Next, we calculate what the break-even benefit would 
be per consumer, according to this forumla:
---------------------------------------------------------------------------

    \278\ Note that while total costs are higher with a smaller 
discount rate, annualized costs are higher with a larger discount 
rate due to the high upfront costs and relatively low recurring 
costs.

Per Consumer Annualized Benefits = Annualized Quantified 
---------------------------------------------------------------------------
Compliance Costs/Population

    Table 4 presents the results of this break-even analysis. According 
to the 2020 Census, there are 258,343,281 adults living in the United 
States. Thus, we divide the estimates of annualized costs by the number 
of U.S. adults to find the average consumer benefit per year for 10 
years required to exceed quantified compliance costs. For example, if 
the proposed rule results in an average benefit to consumers that 
exceeds $6.65 per year over 10 years, then the proposed rule's benefits 
exceed its quantified economy-wide compliance costs under the high-end 
assumption and an assumed 7% discount rate.
    Table 4 also provides the break-even benefit per consumer in terms 
of minutes saved as a result of the proposed rule. Given that the mean 
wage is $29.76 and consumers reportedly value time at 82% of their mean 
wage, an hour of saved search time is worth $24.40/hour.\279\ If we 
divide the break-even dollar benefit per

[[Page 77453]]

consumer using the high-end assumptions and a discount rate of 7% 
($6.65) by the value of saved search time ($24.40/hour) and convert to 
minutes, the break-even saved search time per consumer is 16.35 
minutes. That is, if the proposed rule results in savings from reduced 
search time that exceed 16.35 minutes per consumer per year over 10 
years, then the benefits from reduced search time will exceed 
quantified compliance costs.\280\ It seems likely that consumers would 
experience search time savings of this amount.
---------------------------------------------------------------------------

    \279\ See OEWS National, supra n. 272 (providing the mean hourly 
wage); Daniel S. Hamermesh, What's to Know About Time Use?, 30 J. 
Econ. Surv. 1, 198-203 (2015) (providing the value of consumer 
time).
[GRAPHIC] [TIFF OMITTED] TP09NO23.008

    There are a few important caveats to this break-even analysis. It 
is possible that some industries may have more firms that are already 
in compliance with the rule than others. In the absence of data on 
compliance across industries, the analysis relies on the assumption 
that 10% of the firms in the remainder of the economy (excluding live-
event ticketing, short-term lodging, and restaurants) are not already 
in compliance with the proposed rule. This assumption may overestimate 
the number of non-compliant firms in the remainder of the economy. In 
this case, this assumption leads to an overestimate of both costs and 
break-even benefits.
---------------------------------------------------------------------------

    \280\ Under the assumption of a 3% discount rate, the break-even 
time saved per consumer per year would be 14.62 minutes.
---------------------------------------------------------------------------

    On the other hand, there may be many more firms not already in 
compliance with the proposed rule, in which case this assumption 
results in an underestimate of both costs and break-even benefits. 
Using the same break-even benefits approach with high-end cost 
assumptions but assuming that 50% of firms in the remainder of the 
economy are not already in compliance, the proposed rule would need to 
result in an annual benefit of $24.04, or 59.09 minutes saved, per 
consumer per year over 10 years in order to exceed quantified 
compliance costs.
    This break-even analysis does not account for any unquantified 
costs. For instance, some potential unintended consequences are 
discussed in the restaurant industry section. The proposed rule applies 
to the entire economy, and we acknowledge that we cannot forecast all 
potential consequences and costs. On the other hand, there are 
additional unquantified benefits from the proposed rule beyond reducing 
search time such as the reduction in deadweight loss caused by 
consumers' incomplete price information. The proposed rule may also 
affect unintended consequences that are beneficial. If the benefits 
from reduced deadweight loss, reduced search time, and beneficial 
unintended consequences outweigh the costs from compliance and harmful 
unintended consequences, then the proposed rule results in positive net 
social benefits.
    Finally, a break-even analysis cannot reveal whether the net 
benefits from the proposed rule will be positive in some industries and 
negative in others.
1. Welfare Effects in Specific Industries
    Although the proposed rule would apply to nearly all industries and 
sectors under the jurisdiction of the Commission, it is difficult to 
quantify benefits and costs economy-wide beyond the break-even analysis 
presented in Section VII.C.2.d.(2). However, there are some industries 
where drip pricing is commonplace and there may be better data 
available for estimation of the benefits and costs of the proposed 
rule.
    This section describes the potential benefits and costs of the 
proposed rule on two specific industries that have been highlighted as 
being severely impacted by these undisclosed mandatory fees: the live-
event ticketing industry and the short-term lodging industry. It also 
discusses the potential costs and benefits of the proposed rule in the 
restaurant industry, where new types of mandatory fees are emerging. 
The Commission provides quantitative estimates where possible for these 
industries and describe benefits and costs that we can only assess 
qualitatively.
a. Live-Event Ticketing Industry
    This section provides analysis of the quantified benefits and costs 
of the proposed rule for the live-event ticketing industry. As 
discussed in Section VII.C.1, there are some benefits and costs that 
are unquantified, such as reductions in deadweight loss. Using

[[Page 77454]]

various assumptions, the quantified benefits and costs imply that the 
rule will have a positive net benefit.
    The live-event ticketing industry is often used as an example where 
consumers are surprised by mandatory fees at the end of the purchase 
process.\281\ Online event ticket sales were reported to be $8.1 
billion in 2022.\282\ Live events include music concerts (30.3%), 
sporting events (33%), and dance, opera, and theater productions 
(12.4%).\283\ For many consumers, there are no close substitutes for 
the specific product, a live-event ticket, that they wish to purchase. 
Thus, when consumers are presented with surprise mandatory fees, the 
consumer either pays the full price including the fee, spends time 
searching for a new option such as a different seat, or foregoes the 
purchase entirely.
---------------------------------------------------------------------------

    \281\ E.g., The White House, How Junk Fees Distort Competition, 
supra n. 254.
    \282\ Michal Dalal, Online Event Ticket Sales in the US, 
IBISWorld (May 2023) (``Ticket Sales Industry Report'').
    \283\ Id.
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    The live-event ticketing industry is unique relative to other 
industries because there is a large and robust secondary market. A 
given ticket to an event may be sold in the primary market, and then 
resold multiple times in the secondary market. It is difficult to fully 
quantify how many live-event ticket purchases are made in the US, how 
many involve mandatory fees, and what the typical size of the fee is. 
Anecdotally, it appears that most live-event ticket sellers include 
some kind of fee, although the size of the fee varies across sellers. 
In a non-generalizable sample, the GAO found live-event ticketing fees 
in primary and secondary ticket markets averaged 27% and 31%, 
respectively, of the ticket's price.\284\
---------------------------------------------------------------------------

    \284\ U.S. Gov't Accountability Off., Event Ticket Sales: Market 
Characteristics and Consumer Protection Issues, (April 12 2018), 
https://www.gao.gov/products/gao-18-347.
---------------------------------------------------------------------------

    In response to the White House calling for disclosure of hidden 
fees, some ticket sellers have voluntarily pledged to show ``all-in 
prices'' when the consumer begins the purchase process.\285\ However, 
these voluntary pledges were announced after the Advance notice of 
proposed rulemaking for the proposed rule and may be in response to 
proposed national legislation.\286\ Absent the proposed rule, market 
forces would likely return to the equilibrium of hidden mandatory fees. 
In fact, the National Association of Ticket Brokers (``NATB'') and 
StubHub submitted comments in support of the proposed rule requiring 
all-in pricing, but commented that the rule will only be effective if 
the rule is applied to all ticket sellers and rigorously enforced.\287\ 
If any seller utilizes hidden fees, they may get a larger market share 
by advertising lower initial prices. Absent a Federal rule applying to 
all sellers, competitive forces might drive ticket sellers to return to 
the use of hidden fees. Thus, when quantifying the benefits and costs, 
we quantify relative to the baseline equilibrium where sellers do not 
disclose the Total Price up front.
---------------------------------------------------------------------------

    \285\ The White House, President Biden Recognizes Actions by 
Private Sector Ticketing and Travel Companies to Eliminate Hidden 
Junk Fees and Provide Millions of Customers with Transparent Pricing 
(Jun. 15, 2023) https://www.whitehouse.gov/briefing-room/statements-releases/2023/06/15/president-biden-recognizes-actions-by-private-sector-ticketing-and-travel-companies-to-eliminate-hidden-junk-fees-and-provide-millions-of-customers-with-transparent-pricing/. Some 
ticket sellers, such as TickPick.com, have never used hidden fees.
    \286\ See, e.g., U.S. Senate Comm. Com. Science Trans., The 
TICKET Act, https://www.commerce.senate.gov/services/files/071401A3-D280-414C-AEDB-A9B57F276067.
    \287\ FTC-2022-0069-6089.
---------------------------------------------------------------------------

(1) Live-Event Ticketing: Estimated Benefits of Proposed Rule
(a) Consumer Time Savings When Shopping for Live-Event Tickets
    The proposed rule would require disclosures of the Total Price 
inclusive of all mandatory charges that a consumer must pay in order to 
make full use of the good or service. Required disclosure of the 
relevant prices and prohibitions on misrepresentations save consumers 
time when shopping for a live-event ticket by requiring the provision 
of salient, material information early in the process and eliminating 
time spent pursuing ticket offers priced above the consumer's 
reservation price.
    The Commission assumes that, as a result of the proposed rulemaking 
provisions prohibiting misrepresentations and requiring price 
transparency, the total time spent by a consumer conducting the 
transaction will decrease, because some consumers will reduce the 
number of ticket listings they view prior to making a ticket purchase. 
For example, Blake et al. (2021) examine an experiment on StubHub where 
fees are presented up front to some consumers and at the backend of the 
purchase to others.\288\ They find that the fraction of consumers who 
only view one listing is 74% when fees are presented at the end of the 
transaction versus 83% when fees are presented up front. Using the 
distribution of listings viewed by consumers reported in Blake et al. 
(2021), we calculate that the reductio in the average number of 
listings viewed from showing fees up front is 0.1525 listings.
---------------------------------------------------------------------------

    \288\ Blake et al., supra n. 153.
---------------------------------------------------------------------------

    The amount of time the average consumer spends viewing a listing 
for a live event is uncertain. However, many ticket sellers utilize a 
``countdown clock'' where the selected tickets in the consumer's 
shopping cart expire and are returned to the marketplace. These 
countdown clocks range from 5 to 10 minutes per ticket 
transaction.\289\ Multiplying the assumed length of a ticket 
transaction of 5 or 10 minutes by the estimated reduction in viewed 
listings from Blake et al. (2021) results in a search time savings of 
0.7625 to 1.525 minutes per consumer transaction.\290\
---------------------------------------------------------------------------

    \289\ Ticketmaster reports that the amount of time varies by 
event but references a 5-minute purchasing period. Ticketmaster, Why 
does Ticketmaster enforce a time limit when making purchases 
online?, https://help.ticketmasterksa.com/hc/en-us/articles/360017497557-Why-does-Ticketmaster-enforce-a-time-limit-when-making-purchases-online-. Based on a small, non-representative sample of 
ticket purchase attempts, StubHub appears to generally offer 10 
minutes to complete a ticket purchase.
    \290\ See also Consumer Rule II., supra n. 270. The Preliminary 
Regulatory Impact Analysis for Consumer Rule II assumed consumers 
would save 5 minutes of search and estimation time if all websites 
provided full-fare information up front.
---------------------------------------------------------------------------

    Next, we estimate the number of consumer purchases of live-event 
tickets. Live Nation (which okwns Ticketmaster) reported selling 281 
million fee-bearing tickets in the primary and secondary markets using 
the Ticketmaster system in its 2022 10-K SEC filing.\291\ However, this 
is the total for combined North America and International ticket sales. 
Live Nation also reports that roughly \2/3\ of concert events were in 
North America, so we apply that proportion to ticket sales and assume 
that Ticketmaster sold almost 188 million tickets in North America. To 
estimate the number of tickets sold in the U.S., we adjust the number 
of tickets by the share of North American GDP attributable to the U.S, 
which results in an estimated 165 million tickets sold in the primary 
and secondary market by Ticketmaster in the U.S.\292\
---------------------------------------------------------------------------

    \291\ U.S. Sec. & Exchange Comm'n, Form 10-K, Live Nation 
Entertainment, Inc. (Feb. 23, 2023) (``Live Nation 10-K'') https://www.sec.gov/ix?doc=/Archives/edgar/data/1335258/000133525823000014/lyv-20221231.htm.
    \292\ U.S. GDP in 2022 was estimated to be $25.46 trillion, GDP 
in Mexico was estimated to be $1.41 trillion, and Canadian GDP was 
estimated to be $2.14 trillion in 2022. We adjust North American 
tickets by 88% to estimate the number of tickets sold in the United 
States.
---------------------------------------------------------------------------

    To find the total number of tickets sold in the U.S., we 
extrapolate from the Ticketmaster ticket sales using the

[[Page 77455]]

market share of Ticketmaster. Our main uncertainty is in Ticketmaster's 
market share. In 2010, the DOJ approved the merger between Ticketmaster 
and Live Nation, and reported that Ticketmaster had maintained a market 
share of over 80% for the previous 15 years.\293\ If we assume that 
Ticketmaster still has an 80% share of the ticket market (which 
includes both the primary and secondary ticket markets), we can 
extrapolate an estimate of the total number of tickets sold in the U.S. 
by dividing Ticketmaster ticket sales in the U.S. by 80%.\294\ This 
provides a low-end estimate of the number of tickets sold in the U.S. 
of 206 million tickets.
---------------------------------------------------------------------------

    \293\ See, U.S. Dep't of Justice, The TicketMaster/Live Nation 
Merger Review And Consent Decree In Perspective (Mar. 18, 2010), 
https://www.justice.gov/atr/speech/ticketmasterlive-nation-merger-review-and-consent-decree-in-perspective.
    \294\ Note that the Live Nation 10-K filing does not separate 
out tickets sold by Ticketmaster in the primary versus secondary 
market. The 80% market share of Ticketmaster reported by the 
Department of Justice was only in the primary market; the secondary 
market includes StubHub, VividSeats, TickPick.com, Ace Ticket, 
Alliance Tickets, Coast to Coast Tickets, and others. Because we do 
not have information on the proportion of Ticketmaster tickets sold 
in the secondary market and market share of Ticketmaster in the 
secondary market, the estimated number of tickets sold in the U.S. 
is under-estimated. This also implies that the benefits of the 
proposed rule may be under-estimated under this assumption, because 
we are under-counting the number of tickets sold currently with 
hidden fees.
---------------------------------------------------------------------------

    However, Ticketmaster did not begin selling in the secondary market 
until after the merger with Live Nation. Based on publicly available 
information, we are uncertain of Ticketmaster's market share in the 
secondary market for tickets. If Ticketmaster does not have 80% of the 
ticket market (both primary and secondary), the number of tickets sold 
in the U.S. exceeds the low-end estimate of 206 million tickets. To 
generate a high-end estimate of the total number of tickets sold in the 
U.S., we use the reported revenue for the full online ticket sales 
industry provided by the private research firm IBISWorld and calculate 
Ticketmaster's revenue share of the industry.\295\ IBISWorld reports 
the online ticket sales industry, including both primary ticket sellers 
and ticket resellers, earned $8.1 billion in revenue in 2022. The Live 
Nation 10-K filing reports ticketing revenue of $2.2 billion in 2022, 
which suggests that Ticketmaster has a 27% revenue share of the online 
ticketing industry.\296\ We extrapolate a high-end estimate of the 
total number of tickets sold in the U.S. by dividing Ticketmaster 
ticket sales in the U.S. by 27%, which results in an estimate of 612 
million tickets.
---------------------------------------------------------------------------

    \295\ Ticket Sales Industry Report, supra n. 282.
    \296\ Note that assuming Ticketmaster's market share is 
equivalent to its revenue share (of the primary and secondary 
market) assumes that the average price of a ticket sold by 
Ticketmaster is the same as (or lower than) the average price of a 
ticket sold by the rest of the industry. If, however, the average 
price of a ticket sold by Ticketmaster is higher than average prices 
in the rest of the ticket selling industry, then Ticketmaster's 
revenue share is higher than its ticket share, and this 
extrapolation understates the total number of tickets sold in the 
U.S.
---------------------------------------------------------------------------

    Lastly, the reduction in search time of 0.7625 to 1.525 minutes is 
per consumer purchase, not per ticket purchase. We assume that the 
average consumer purchase is either 1.5 or 3 tickets.\297\
---------------------------------------------------------------------------

    \297\ The Commission does not currently have information on the 
average number of tickets purchased in a transaction. There is 
reason to believe the average would be greater than 1, because most 
venues limit the number of tickets that can be purchased in a given 
transaction. The limit is dependent on the event. Ticketmaster, Why 
is there a ticket limit?, https://help.ticketmaster.com/hc/en-us/
articles/9781245025937-Why-is-there-a-ticket-limit-
#:~:text=Event%20organizers%20can%20choose%20to,or%20exceed%20publish
ed%20ticket%20limits.

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[[Page 77456]]

    When multiplied by the number of transactions per year, the 
reduction in minutes spent viewing ticket listings will generate a 
total time savings of 875 thousand to 10.4 million hours per year. 
According to the Bureau of Labor Statistics Occupational Employment 
Statistics, the average hourly wage of U.S. workers in 2022 was 
$29.76,\298\ and recent research suggests that individuals living in 
the U.S. value their non-work time at 82% of average hourly 
earnings.\299\
---------------------------------------------------------------------------

    \298\ OEWS National, supra n. 272.
    \299\ Hamermesh, supra n. 279 at 198-203.
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BILLING CODE 6750-01-P
[GRAPHIC] [TIFF OMITTED] TP09NO23.009

(b) Additional Unquantified Benefits: Reductions in Deadweight Loss and 
Abandoned Transactions
    Due to the incomplete price information problem described in 
Section VII.C.1, the proposed rule requiring ticket sellers to show the 
total price of tickets will likely result in a reduction of deadweight 
loss. When consumers are not able to observe total prices in the 
beginning of the purchase process, sellers are likely able to charge 
higher prices than could be supported under the proposed rule. Recent 
research suggests that when consumers are able to observe total prices 
for tickets up front--as is intended under the proposed rule--consumers 
purchase fewer and lower quality tickets and seller revenue is 
reduced.\302\
---------------------------------------------------------------------------

    \300\ Live Nation 10-K, supra n. 291.
    \301\ OEWS National, supra n. 272; Hamermesh, supra n. 279.
    \302\ Blake et al., supra n. 153.
---------------------------------------------------------------------------

    Another unquantified potential benefit to the proposed rule is a 
decrease in abandoned transactions. For example, in some cases, once 
the additional information about full price is revealed, consumers may 
fully abandon the transaction (i.e., not purchase a ticket at all). 
Unfortunately, the Commission lacks adequate information to determine 
the quantity of such abandoned transactions and the amount of time 
spent pursuing them. As a result, this benefit is unquantified in the 
current analysis. The Commission solicits comment on the frequency of, 
and reasons for, abandoned transactions in the live-event ticket market 
in order to help quantify this benefit.
(2) Live-Event Ticketing: Estimated Costs of Proposed Rule
    This section describes the potential costs of the proposed rule 
provisions and provide quantitative estimates where possible. For live-
event ticketing, the cost of employee time is again monetized using 
wages obtained from the Bureau of Labor Statistics May 2022 National 
Occupational Employment and Wage Estimates.\303\
---------------------------------------------------------------------------

    \303\ OEWS National, supra n. 272.
---------------------------------------------------------------------------

    The costs to sellers from the proposed rule include a review of 
whether the rule applies, and, if the firm is not currently compliant 
with the proposed rule, one-time costs to comply with the

[[Page 77457]]

rule and recurring annual costs to review and ensure on-going 
compliance. The Commission's preliminary analysis presents two cost 
scenarios corresponding to different assumptions on how many hours are 
required to comply with the rule and how many firms would be affected 
by the rule. We present these as a low-end cost scenario and a high-end 
cost scenario.
    In order to estimate costs for the entire ticket-selling industry, 
we calculate the cost per seller and multiply by the number of sellers 
in the industry. However, there is some uncertainty about the number of 
live-event ticket sellers that would be affected by the rule. The NAICS 
classification system does not define a classification solely for 
ticket sellers, but there are two NAICS codes that might include ticket 
sellers. The GAO report used the NAICS code 561599, which is ``All 
Other Travel Arrangement and Reservation Services'' and includes 1,545 
firms such as Tickets.com and VividSeats.\304\ However, firms such as 
Ticketmaster and StubHub are classified as NAICS code 7113, which is 
``Promoters of Performing Arts, Sports, and Similar Events'' and 
includes 7,624 firms.\305\
---------------------------------------------------------------------------

    \304\ NAICS code 561599 ``comprises establishments (except 
travel agencies, tour operators, and convention and visitors 
bureaus) primarily engaged in providing travel arrangement and 
reservation services.'' U.S. Census Bureau, North American Industry 
Classification System, 561599 All Other Travel Arrangement and 
Reservation Services, https://www.census.gov/naics/?input=561599&year=2022&details=561599.
    \305\ U.S. Census Bureau, supra n. 271.
---------------------------------------------------------------------------

    We recognize this number is potentially over-inclusive, as many 
firms within NAICS code 561599 and 7113 do not directly sell tickets or 
charge mandatory fees, and thus would not be impacted by the proposed 
rule. The private research firm IBISWorld estimates that the number of 
firms in the online ticket selling industry is 3,528 in 2022.\306\ We 
use this number of firms as a low-end estimate of the number of firms.
---------------------------------------------------------------------------

    \306\ Ticket Sales Industry Report, supra n. 282.
---------------------------------------------------------------------------

    Next, we estimate the number of hours a firm would spend complying 
with the proposed rule. As with assumptions regarding the number of 
firms, the following estimation utilizes a low-end and high-end value 
for the number of hours necessary for compliance. Because many ticket 
sellers operate in other countries that already have requirements 
similar to the proposed rule (Canada, Australia, EU), ticket sellers 
may have already incorporated the changes contemplated by the proposed 
rule to their operating practices. The websites may be already 
programmed, the lawyers already prepped about the rule, and the data 
scientists may have already determined the optimal pricing strategy; 
thus, sellers would have relatively low costs to transition to all-in 
pricing in the U.S.
    In this low-end cost scenario, because live-event ticket sellers 
are already largely prepared to advertise total prices to consumers, 
the one-time, upfront cost of determining optimal prices and updating 
the purchase systems in terms of the number of required hours is 
negligible. We assume 5 hours of lawyer time to determine if the 
proposed rule applies, 40 hours of data scientist time to re-optimize 
the pricing strategy, and 40 hours of web developer time to edit and 
reprogram the website to display upfront prices. For the low-end cost 
scenario, we also assume there are no annual costs after the firm has 
incurred the one-time transition costs.
    In the high-cost scenario, we assume that ticket sellers have not 
laid the groundwork for upfront pricing. We assume sellers require 
twice the number of hours to determine optimal prices, re-program the 
website to include the total price, and review and confirm compliance. 
Thus, the one-time costs include 10 hours of lawyer time, 80 hours of 
data scientist time, and 80 hours of web developer time. For the high-
end cost estimate, we assume there are recurring annual costs of 10 
hours of lawyer time per year to review and confirm compliance.
    Table 6 presents the low-end and high-end estimates of costs for 
the live-event ticketing industry.

[[Page 77458]]

[GRAPHIC] [TIFF OMITTED] TP09NO23.010

(3) Live-Event Ticketing: Net Benefits
    Next, in Table 7 we present the net benefits using the quantified 
benefits and costs discussed in Sections VII.C.3.a.(1) and 
VII.C.3.a.(2). To calculate the low end of the range for net benefits, 
we subtract the total quantified costs using the high-end cost 
assumptions from the total quantified benefits using the low-end 
benefit assumptions. For the high end of the range for net benefits, we 
subtract the low-end estimate of total quantified costs from the high-
end estimate of total quantified benefits.
---------------------------------------------------------------------------

    \307\ U.S. Census Bureau, supra n. 271. Hourly wages are from 
the Bureau of Labor Statistics. OEWS Data Scientist, supra n. 272 
(providing the hourly wages for data scientists); OEWS Web 
Developers, supra n. 272 (providing the hourly wages for web 
developers); and OEWS Lawyers, supra n. 272 (providing the hourly 
wages for lawyers).

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[[Page 77459]]

[GRAPHIC] [TIFF OMITTED] TP09NO23.011

    Using various assumptions, the quantified benefits and costs imply 
that the rule will have a positive net benefit, even without accounting 
for the benefit of reducing deadweight loss.
(4) Live-Event Ticketing: Uncertainties
    Our ability to precisely estimate benefits and costs is limited due 
to uncertainties in key parameters. The quantified benefits and costs 
for the live-event ticketing industry rely on a set of assumptions, 
based on the best available public information. When the data were 
unclear, we used sets of assumptions that would generate a range of 
low-end and high-end estimates. In Table 8 we summarize the key 
assumptions and how those assumptions may affect the resulting estimate 
of quantified benefits and costs.

[[Page 77460]]

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[[Page 77461]]


[GRAPHIC] [TIFF OMITTED] TP09NO23.013

BILLING CODE 6750-01-C
    The Commission is expressly soliciting comments regarding the 
uncertainties described in Table 8. Specifically, the Commission 
requests data that would allow for more refined estimation of the 
benefits of the proposed rule, including data on the total annual 
number of consumer live-event ticket purchases and the average search 
time saved for consumers as a result of the proposed rule. The 
Commission also requests data to refine the estimated cost of the 
proposed rule, including information on the number of live-event ticket 
sellers currently charging hidden mandatory fees, and the anticipated 
cost to firms from complying with the proposed rule.
b. Short-Term Lodging Industry
    Businesses in the short-term lodging industry often charge a 
variety of mandatory add-on fees. These fees are typically either 
disclosed up front in fine print separately from the base price (a 
practice known as partitioned pricing) or revealed just before payment, 
after the consumer has clicked through multiple pages of a listing 
(known as drip pricing).\308\ Hotels may impose these mandatory 
surcharges as ``resort fees or ``destination fees.'' Hotels often 
justify charging these fees as necessary to cover the costs of 
amenities that are not reflected in the base rate, such as Wi-Fi, pool, 
and gym access, towels, parking, and shuttle service. These fees are 
not optional and do not depend on the use of these amenities. Home 
share websites like Airbnb and VRBO label these mandatory fees as 
``cleaning fees,'', ``service fees'', or ``host fees.''
---------------------------------------------------------------------------

    \308\ Sometimes these fees are not disclosed altogether or are 
not disclosed until a customer has arrived at the lodging to check 
in.
---------------------------------------------------------------------------

    Consumer behavior studies have shown that both partitioned pricing 
and drip pricing causes consumers to underestimate the total price of 
the product, even when all components of the price are disclosed up 
front.\309\ As a result, disclosing mandatory surcharges separately 
from the room rate without first disclosing the total price is likely 
to harm consumers by increasing search costs and reducing consumer 
surplus.\310\ These fees may reduce consumer surplus if consumers 
respond by booking a room that is more expensive than the room they 
would have chosen under upfront total pricing. It may also increase 
search costs if consumers spend more time looking at additional 
listings in search for a cheaper hotel.
---------------------------------------------------------------------------

    \309\ Howard A. Shelanski et al., Economics at the FTC: Drug and 
PBM Mergers and Drip Pricing, 41 Rev. Indus. Org., 303 319 (2012).
    \310\ See Sullivan, supra n. 153.
---------------------------------------------------------------------------

    AHLA states that 6% of U.S. hotels charge resort fees, which 
amounts to $2.93 billion dollars paid in resort fees annually by U.S. 
consumers.\311\ This number underestimates how much U.S. consumers pay 
in mandatory fees because it does not include fees from finding 
accommodations on the home share market through websites like Airbnb 
and VRBO or fees incurred from booking at foreign hotels with U.S. 
facing websites. Resort fees in the U.S. average 11% of the per night 
cost of a room, and can be as high as 35%, especially at lower cost 
hotels.\312\
---------------------------------------------------------------------------

    \311\ FTC-2022-0069 6037 (AHLA); Bjorn Hanson, U.S. Lodging 
Industry Fees and Surcharges Forecast to Increase to a New Record 
Level in 2018--$2.93 Billion, and Another Record Anticipated for 
2019--the Newest Emerging Category is ``Resort Fees'' for Urban 
Luxury and Full Service Hotels (Aug. 27, 2018), https://bjornhansonhospitality.com/fees-%26-surcharges.
    \312\ Sally French Sam Kemmis, How to Avoid Hotel Resort Fees 
(and Which Brands Are the Worst), NerdWallet (Aug. 9, 2023), https://www.nerdwallet.com/article/travel/hotel-resort-fees.
---------------------------------------------------------------------------

    This section includes an estimate of the benefits and costs 
associated with the reduced search costs as a result of the proposed 
rule. Since there is an additional, unquantified benefit of reduced 
deadweight loss, which is discussed conceptually in Section VII.C.2.a, 
the net benefit estimated in the following analysis is conservative. 
The Commission finds that the quantified benefits and costs imply that 
the rule will have a positive net benefit, even without accounting for 
the unquantified benefit of reducing deadweight loss.

(1) Short-Term Lodging: Estimated Benefits of Proposed Rule

(a) Consumer Time Savings When Shopping for Hotels

    As a result of the proposed rule, the Commission expects that the 
time

[[Page 77462]]

consumers spend searching for short-term lodging will decrease because 
prices will be easier to compare within and across websites. Some 
consumers will reduce the number of short-term lodging listings they 
view prior to making a booking or spend less time understanding and 
assessing the full price.\313\ In our analysis we make the conservative 
and simplifying assumption that the time spent viewing a listing 
remains the same, and that consumers reduce the average number of 
listings they view. Table 9 quantifies the benefits of such time 
savings and provides lower and upper-end estimates to account for 
uncertainty in the available statistics.
---------------------------------------------------------------------------

    \313\ The drip pricing literature suggests that because time to 
view one listing is lower under upfront pricing, there may also be a 
subset of consumers who view more listings because the cost of 
viewing an additional listing has decreased. Sullivan, supra n. 153. 
It is unclear how this affects total time spent searching. If the 
higher number of listings viewed is offset by the lower time it 
takes to view each listing, the total time spent searching will be 
lower under upfront pricing for this subset of consumers. If total 
time increases, it can be classified as ``good'' search time for 
this particular group of consumers because it results in consumers 
purchasing their preferred hotel room. Alternatively, another group 
of consumers could view fewer listings because upfront prices allow 
consumers to compare rooms more easily and select their preferred 
hotel room more quickly. Blake et al., supra n. 153. The total 
search time for these consumers will decrease. We focus on the 
latter group of consumers because the change in their search time 
represents a decrease in ``bad'' or unnecessary search caused by 
drip pricing.
---------------------------------------------------------------------------

    The Commission specifically focuses on the benefits that accrue to 
consumers who book rooms from within the United States on any US-facing 
website, which can include bookings at both domestic and foreign short-
term lodgings. Short-term lodgings include both traditional hotels as 
well as rooms booked through home share websites like Airbnb and 
VRBO.\314\ In this section, we outline how the benefits are calculated 
in Table 9 and the assumptions we make. The table reports a set of 
basic search statistics used in the calculation, the savings per year 
for consumers who book at U.S. short-terms lodgings, the savings per 
year for consumers who book at foreign short-term lodgings with US-
facing websites, and the combined total savings for all U.S. consumers 
per year.
---------------------------------------------------------------------------

    \314\ Airbnb currently includes a toggle for consumers to click 
to switch to viewing all listing prices up front. However, the 
default option is to view listings with drip pricing, and the toggle 
is not visible if a consumer starts their search from any Airbnb 
page other than the homepage. VRBO includes the total price 
including fees on the first page of search results in very fine 
print under the much larger base price. Neither Airbnb nor VRBO are 
currently in compliance with the proposed rule, which would require 
the total price to be the most prominent default upfront price.
---------------------------------------------------------------------------

    Although not all short-term lodgings charge resort fees, the lack 
of a unified standard of upfront pricing across listings makes 
comparing prices difficult and time consuming for consumers. Even 
within a single short-term lodging website, there is variation in 
whether listings have hidden fees. For example, Marriott's 32 hotel 
brands impose hidden fees for listings in some cities but not in 
others. Some listings, in very fine print under the listed price, note 
whether resort fees are included or excluded in the base price. Some 
listings do not say anything, requiring consumers to click through the 
listing to learn whether there are hidden fees at the end. Given that 
6% of hotels impose drip pricing, and the average hotel shopper visits 
17 travel websites before booking, consumers are likely to encounter at 
least one website that imposes drip pricing in their search for a 
hotel.\315\ Even for consumers who complete their whole search and 
booking process without visiting any websites that impose hidden resort 
fees, the fact that there could be hidden fees creates uncertainty and 
my cause consumers to click through more listings than they otherwise 
would have to learn if the initial price is truly the final price. 
Therefore, we quantify the benefits for all U.S. consumers who book a 
room in a given year, regardless of whether they interacted with a 
website that imposed drip pricing.
---------------------------------------------------------------------------

    \315\ Chris Anderson et al., The Billboard Effect: Still Alive 
and Well, 17 Ctr. Hosp. Rpt. 11 (2017), https://hdl.handle.net/1813/70982. The Commission calculates the average number of websites 
visited by summing the average number of OTAs, Hotel Sites, 
TripAdvisor, and Other Meta websites visited 60 days prior to 
reserving a room.
---------------------------------------------------------------------------

(i) Search Statistics
    The Commission uses two different studies to calculate lower and 
upper-end estimates for the average number of minutes it takes to view 
one listing. On the lower end, we use statistics on Airbnb user search 
behavior collected by Fradkin (2017) to calculate that consumers spend 
9.48 minutes to view one listing.\316\ On the upper end, we use a hotel 
search cost model developed by Chen and Yao (2016) to calculate the 
average search cost per listing.\317\ Using this average search cost, 
we estimate that consumers spend 14.3 minutes viewing one listing. See 
Appendix A for calculation details for both estimates. Using the 
estimates from each study as lower and upper-end estimates ensures that 
we capture user search behavior on both home share websites like Airbnb 
and more traditional hotel websites.
---------------------------------------------------------------------------

    \316\ Andrey Fradkin, Search, Matching, and the Role of Digital 
Marketplace Design in Enabling Trade: Evidence from Airbnb, (MIT 
Initiative on the Digit. Econ., Working Paper, 2017). Using this 
average search cost, we estimate that consumers spend 14.3 minutes 
viewing one listing. See Appendix A for calculation details for both 
estimates. Using the estimates from each study as lower and upper-
end estimates ensures that we capture user search behavior on both 
home share websites like Airbnb and more traditional hotel websites.
    \317\ Yuxin Chen Song Yao, Sequential Search with Refinement: 
Model and Application with Click-Stream Data, 63 Mgmt. Sci. 12, 4345 
4365 (2017), https://doi.org/10.1287/mnsc.2016.2557.
---------------------------------------------------------------------------

    To estimate the reduction in average listings viewed due to drip 
pricing, we use results on the average reduction in listings viewed 
under upfront pricing from an experiment in the ticketing 
industry.\318\ The study finds that the average reduction in listings 
viewed under upfront pricing is 10.6% of the mean listings viewed under 
drip pricing. For the low-end estimate, we apply the same proportion to 
the mean listings viewed by Airbnb users in Fradkin (2017) (2.367 
listings, proxied by number of contacts) and find a reduction of 
0.25listings. On the upper end, we apply this to the mean listings 
viewed by hotel searchers in Chen and Yao (2016), 2.3 listings, and 
find a reduction of 0.24 listings.\319\
---------------------------------------------------------------------------

    \318\ Blake et al., supra n. 153.
    \319\ Although we are basing our reduction in listings estimates 
on data that comes from the ticketing industry, our method results 
in the most conservative reduction of viewed listings compared to 
other methods. The most relevant study from the hotel search cost 
literature estimates that improvements in hotel rankings (which may 
be loosely comparable to removing drip pricing) reduces search costs 
by $11.50. See Raluca M. Ursu, The Power of Rankings: Quantifying 
the Effect of Rankings on Online Consumer Search and Purchase 
Decisions, 37 Mktg. Sci. 4, 507-684 (2018). Given our estimates of 
the time to view one listing (between 9.48 and 14.30 minutes), this 
suggests an average reduction of between 2.95 and 1.95 listings 
viewed, which is implausible given that various papers find the 
average number of listings viewed at baseline to be between 2 and 3. 
Thus, while some papers find substantially higher search costs than 
our method, this provides assurance that, if anything, our benefits 
estimates are likely conservative.
---------------------------------------------------------------------------

    Multiplying this number by the minutes to view one listing results 
in 2.39 to 3.53 minutes saved per transaction. These estimates are 
likely conservative, given that they assume consumers only view one 
website before booking a room. One study suggests that consumers in 
fact visit an average of 17 websites before booking.\320\ In addition, 
the average reduction in listings viewed may also underestimate 
benefits from eliminating drip pricing because it is

[[Page 77463]]

more difficult to adapt to the wide variability of fees in the short-
term lodging industry than it is in the ticketing industry, where 
listings have the same percentage fee. Short-term lodgings have 
different fees, and the number of lodgings with such fees will vary 
across markets.
---------------------------------------------------------------------------

    \320\ See Anderson & Han, supra n. 315. It is unclear whether 
the relationship between websites viewed and time saved is linear, 
as consumers may save less time on the 15th website they view as 
they do on the first, so it is difficult to extrapolate from our 
estimates to the total time saved for consumers who view multiple 
websites. Therefore, to remain conservative in our estimate of 
benefits, we assume that consumers visit only one website.
---------------------------------------------------------------------------

    According to the Bureau of Labor Statistics Occupational Employment 
Statistics,\321\ the average hourly wage of U.S. workers in 2022 was 
$29.76, and recent research suggests that individuals living in the 
U.S. value their non-work time at 82% of average hourly earnings.\322\ 
Thus, the value of non-work time for the average U.S. worker is 
estimated to be $24.40 per hour.
---------------------------------------------------------------------------

    \321\ OEWS National, supra n. 272.
    \322\ Hamermesh, supra n. 279 at 198-203.
---------------------------------------------------------------------------

(ii) US Hotels and Home Share
    Next, the Commission calculates the total savings per year for U.S. 
consumers who book at U.S. short-term lodgings, which includes both 
U.S. hotels and home shares. We find the total number of nights booked 
in the U.S.in 2022 by dividing the total revenue the U.S. short-term 
lodgings industry earned from rooms by the average daily rate 
(ADR).\323\ The ADR is the average revenue per room-night booked in the 
U.S. The total number of nights booked in the U.S. in 2022 that would 
potentially be affected by this rule is about 1.29 billion.
---------------------------------------------------------------------------

    \323\ Revenue equals about 192.23 billion. Alexia Moreno 
Zambrano, Hotels & Motels in the US, IBISWorld (Jan. 2023) (``Hotels 
& Motels Industry Report''); Thi Le, Bed & Breakfast & Hostel 
Accommodations in the US, IBISWorld (Jan. 2023) (``Bed & Breakfast 
Industry Report''). The ADR is about $149. STR: U.S. hotel ADR and 
RevPAR reached record highs in 2022, STR (Jan. 20, 2023), https://str.com/press-release/str-us-hotel-adr-and-revpar-reached-record-highs-2022.
---------------------------------------------------------------------------

    Dividing the total number of nights booked by the average number of 
nights per booking gives 715 million total bookings.\324\ About 91.8%, 
or 657 million, of these bookings are made by U.S. consumers.\325\ 
Finally, we calculate the total savings for U.S. consumers per year by 
multiplying the number of bookings made by U.S. consumers by the 
minutes saved per transaction and the value of time for consumers. This 
results in total savings of about $637.2$941.6 million dollars.
---------------------------------------------------------------------------

    \324\ Consumers book on average 1.8 nights per booking. Jordan 
Hollander, 75+ Hospitality Statistics You Should Know (2023), Hotel 
tech Report (Aug. 9, 2023).
    \325\ How much do U.S. hotels depend on international guest 
stays?, CRBE Econometric Advisors' Blog (Oct. 10, 2017), https://
www.cbre-ea.com/public-home/deconstructing-cre/2017/10/10/how-much-
do-u.s.-hotels-depend-on-international-guest-
stays#:~:text=We%20estimate%20that%208.2%25%20of%20all%20hotel%20gues
ts,Miami%20at%2057.5%25%E2%80%94are%20highly%20dependent%20on%20inter
national%20guests.
---------------------------------------------------------------------------

(iii) Foreign Hotels and Home Share With US-Facing Websites
    To estimate the number of foreign short-term lodging bookings made 
by U.S. consumers, the Commission uses the fact that 96% of all trips 
taken by U.S. consumers are domestic.\326\ Multiplying the number of 
bookings made by U.S. consumers by ((1-.96)/.96)) gives the number of 
foreign bookings, which is between 26.8 and 27.4 million. The total 
savings for this category amounts to about $26.5-$39.2 million dollars.
---------------------------------------------------------------------------

    \326\ Adrian, U.S. Travel & Tourism Statistics 2020-2021, 
Tourism Academy Blog (Sep. 15, 2021), https://blog.tourismacademy.org/us-tourism-travel-statistics-2020-2021.
---------------------------------------------------------------------------

(iv) All Hotels and Home Share
    Together, U.S. and foreign bookings amount to about 683.9 million 
bookings per year. This corresponds to between 27.2 and 40.2 million 
hours saved by U.S. consumers per year, and between $663.7 million and 
$980.9 million total savings per year. Table 9 presents the expected 
benefits of time savings over the next 10 years in present value.
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BILLING CODE 6750-01-C
(b) Additional Unquantified Benefits: Reductions in Deadweight Loss and 
Abandoned Transactions
---------------------------------------------------------------------------

    \327\ OEWS National, supra n. 272; Hamermesh, supra n. 279.
    \328\ Hotel Tech Report, supra n. 324.
---------------------------------------------------------------------------

    Due to the incomplete price information problem described in 
Section VII.C.1.a, the proposed rule requiring short-term lodgings to 
show the total price of rooms will likely result in a reduction of 
deadweight loss. When consumers are not able to observe total prices in 
the beginning of the booking process, sellers are likely able to charge 
higher prices than could be supported under the proposed rule. In 
addition, the requirement to disclose the refundability of any fees not 
included in the total price may also result in fewer mistake purchases 
stemming from incomplete information. Both the total price provision 
and the refundability disclosure provision may provide consumers with 
more complete pricing information necessary when making decisions about 
purchasing hotel rooms, thus reducing deadweight loss. At this time, we 
do not quantify the reduction in deadweight loss, but acknowledge that 
it is a positive benefit to the proposed rule.
    In some cases, once the additional information about full price is 
revealed, consumers may fully abandon the transaction (i.e., not book a 
room at all). Since the lodging cost is only a part of the overall cost 
of a trip, abandoning a transaction may be less likely for short-term 
lodging than other industries. In

[[Page 77465]]

that case, the unquantified benefit is likely to be small. The 
Commission lacks adequate information to determine the quantity of such 
abandoned transactions and the amount of time spent pursuing them. As a 
result, this benefit is unquantified in the current analysis. The 
Commission solicits comment on the frequency of and reasons for 
abandoned transactions in the short-term lodging industry in order to 
help quantify this benefit.
(2) Short-Term Lodging: Estimated Costs of Proposed Rule
    This section describes the potential costs of the proposed rule 
provisions to the short-term lodging industry and provide quantitative 
estimates where possible. The costs to hotels from the proposed rule 
include a review of whether the rule applies, and, if the firm is not 
currently compliant with the proposed rule, one-time costs to comply 
with the rule and recurring annual costs to review and ensure on-going 
compliance. The cost of employee time is monetized using wages obtained 
from the Bureau of Labor Statistics National Industry-Specific 
Occupational Employment and Wage Estimates.\329\ We use wages specific 
to the Traveler Accommodation industry (associated with NAICS code 
721100). This industry includes traditional hotels and motels, casino 
hotels, bed and breakfast inns, and hostels. The Commission also 
quantifies the cost to individual home share hosts in the form of a 
one-time cost to adjust prices on home share listings.
---------------------------------------------------------------------------

    \329\ U.S. Bureau Lab. Stat., Occupational Employment and Wage 
Statistics. May 2022 National Industry-Specific Occupational 
Employment and Wage Estimates: NAICS 721100--Traveler Accommodation 
(May 2022) (``OEWS Traveler Accommodation''), https://www.bls.gov/oes/current/naics4_721100.htm.
---------------------------------------------------------------------------

    Table 10 outlines the estimated costs of the proposed rule. Panel A 
shows the costs for U.S. hotels and home share hosts, Panel B shows 
costs for foreign hotels and home share hosts who post listings on 
U.S.-facing websites,\330\ and Panel C shows the total combined costs 
for both groups.
---------------------------------------------------------------------------

    \330\ We include costs to foreign hotels with U.S.-facing 
websites because complying with the proposed rule may cause them to 
pass through some costs to U.S. hotel shoppers. We are unable to 
quantify what percentage of costs will be passed through, so to be 
conservative we include all costs to foreign hotels and home share 
hosts.
---------------------------------------------------------------------------

(i) Panel A: U.S. Hotels and Home Share Hosts
    There are 47,817 U.S. hotels associated with the ``Traveler 
Accommodation'' NAICS code. Of these firms, 6% impose resort fees, 
bringing the number of U.S. firms affected to 2,869 firms. We assume 
that this is inclusive of hotels that do not disclose the refundability 
of any optional add-on charges for additional goods and services. We 
remove one firm from the low-end estimate to account for the 
possibility that Marriott fully complies with its settlement with 
Pennsylvania and removes drip pricing absent the rule.\331\
---------------------------------------------------------------------------

    \331\ In 2021, Marriott agreed to a settlement with the 
Pennsylvania Attorney General in which they are required to include 
mandatory resort fees in the base rate on the first page of the 
booking process. So far, Marriott has missed multiple deadlines to 
make this change and today has only partially complied with this 
settlement, incorporating resort fees in the base price for some of 
its hotel brands, but not for others.
---------------------------------------------------------------------------

    Next, we estimate the number of hours a U.S. hotel would spend 
complying with the proposed rule. We assume all hotels that do not 
impose drip pricing and already disclose refundability of optional 
charges will spend one hour of lawyer time determining if the proposed 
rule applies to them. Hotels that are not presently compliant with the 
rule will incur additional costs to comply with the proposed rule. In 
the low-end estimate, we assume that because many hotels have websites 
facing other countries that already have similar requirements to the 
proposed rule (e.g., Canada, Australia, EU), hotels may already have 
experience incorporating the necessary changes to their operating 
practices. In this scenario, hotels have relatively low costs to 
transition to all-in pricing for their US-facing websites. We assume 5 
hours of lawyer time to determine how the proposed rule applies to the 
firm, 40 hours of data scientist time to re-optimize the pricing 
strategy, and 40 hours of web developer time to edit and reprogram the 
website to display upfront prices and make refundability disclosures.
    In addition to hotels, the proposed rule would also affect 
individuals who participate in the home share market by listing their 
property for short term rentals on websites like Airbnb and VRBO. We 
estimate the total number of home share hosts in the U.S. by starting 
with the number of Airbnb hosts in the U.S. who post home share 
listings (not including larger bed and breakfast or hostel 
establishments) and extrapolating to the full U.S. market using 
Airbnb's market share in the U.S. \332\ On the low-end, we assume that 
each host will take 1 hour to reprice each listing. Hosts have on 
average 1.18 listings, resulting in 1.18 hours of time per host.\333\ 
The value of time comes from the same source as in Table 9.
---------------------------------------------------------------------------

    \332\ See Clark Shultz, Airbnb increases market share in latest 
read from M Science, Seeking Alpha (June 6, 2022), https://seekingalpha.com/news/3846023-airbnb-increases-market-share-in-latest-read-from-m-science (providing Airbnb's market share). This 
results in 504,000 Airbnb home share hosts/.746 = 675,603 home share 
hosts in the US.
    \333\ The average number of listings per host is calculated from 
the total number of U.S. listings and the total number of U.S. 
hosts. Steve Deane, 2022 Airbnb Statistics: Usage, Demographics, and 
Revenue Growth, the Stratos Blog (Jan. 4, 2022), https://
www.stratosjets.com/blog/airbnb-statistics/
#:~:text=People%20stay%20an%20average%20of%202.4%20times%20longer,hig
hest%20number%20of%20any%20country%20in%20the%20world. (providing 
the U.S. listings); Thibault Masson, Airbnb host data: Who are 
Airbnb hosts? Why are individual hosts more important than 
professional ones?, Rental Scale-Up (Dec. 6, 2020), https://
www.rentalscaleup.com/airbnb-host-data-who-are-airbnb-hosts-why-are-
individual-hosts-more-important-than-professional-ones/
#:~:text=About%2086%25%20of%20the%204%20million%20Airbnb%20hosts,roug
hly%20560%2C000%20operate%20in%20the%20United%20States%20%2814%25%29 
(providing the number of U.S. hosts).
---------------------------------------------------------------------------

    In the high-cost scenario, we assume that hotels have not laid the 
groundwork for upfront pricing. We assume hotels require twice the 
number of hours to determine optimal prices, re-program the website to 
include the total price, and review and confirm compliance. Thus, the 
one-time costs for hotels include 10 hours of lawyer time, 80 hours of 
data scientist time, and 80 hours of web developer time. We assume home 
share hosts spend 3 hours repricing each listing, resulting in 3.5 
hours per host.
    In addition to the one-time costs, we also assume hotels incur 
annual costs of between 0 to 10 hours of lawyer time per year to review 
and confirm compliance with the proposed rule.\334\ The total costs, 
which include both the one-time fixed cost and the annual costs for the 
next ten years in present value, range from $331 million and $1,001 
million using a 7% discount rate, and between $331 million and $1,040 
million using a 3% discount rate.
---------------------------------------------------------------------------

    \334\ Since home share hosts are not operating large, 
sophisticated firms and will likely not spend additional time 
ensuring compliance beyond year one, we assume home share hosts do 
not incur annual costs due to the rule.
---------------------------------------------------------------------------

    Note that all ranges of lawyer, data scientist, web developer, and 
home share host time serve as proxies for any costs associated with 
reviewing and ensuring compliance, adjusting pricing strategies, 
ensuring consumers are presented with total price, and re-evaluating 
home share listings respectively in response to the proposed rule.
(ii) Panel B: Foreign Hotels and Home Share Hosts
    It is difficult to estimate costs for foreign hotels and home share 
hosts using the same method in Panel A

[[Page 77466]]

because there are no reliable estimates for the number of foreign 
hotels and home share hosts, as well as the relevant international wage 
rate for lawyers, data scientists, and web developers. We instead 
estimate foreign costs by extrapolating from the U.S. costs estimated 
in Panel A. Since the U.S. hotel industry's global market share is 
about 14.5%,\335\ the one-time and annual costs for foreign hotels can 
each be calculated by multiplying the one-time and annual costs for 
U.S. hotels by (1-.145)/.145. U.S. facing website and thus will not be 
subject to the proposed rule. Therefore, the costs to foreign hotels 
may be an overestimate.
---------------------------------------------------------------------------

    \335\ The U.S. hotel industry's global market share in 2022 is 
calculated by adding the revenues reported in the IBISWorld Reports 
for ``Hotels and Motels in the US'', ``Casino Hotels in the US'', 
and ``Bed and Breakfast and Hostel Accommodations in the US'' and 
dividing it by the global revenue found in IBISWorld Global Hotels & 
Resorts Industry Report. Hotels & Motels Industry Report, supra n. 
323; Bed & Breakfast Industry Report, supra n. 323; Demetrios 
Berdousis, Casino Hotels in the US, IBISWorld (Jan. 2023).
---------------------------------------------------------------------------

    We use the percentage of Airbnb's U.S. revenue (46%) \336\ to proxy 
for the U.S. home share market's global market share. Using this, we 
estimate the one-time cost for foreign home share hosts to be equal to 
the total one-time cost for U.S. home share hosts multiplied by (1-
0.46)/0.46. The total one-time and annual foreign hotel and home-share 
costs for the next ten years in present value range from $103.3-$313.7 
million using a 7% discount rate, and $103.3-$337.1 million using a 3% 
discount rate.
---------------------------------------------------------------------------

    \336\ U.S. Sec. & Exchange Comm'n, Form 10-K, Airbnb, Inc. (Feb. 
17, 2023) https://www.sec.gov/ix?doc=/Archives/edgar/data/1559720/000155972023000003/abnb-20221231.htm.
---------------------------------------------------------------------------

(iii) Panel C: All Hotels and Home Share Hosts (US + Foreign)
    The total cost for all affected hotels and home share hosts over 10 
years in present value is estimated to be between $136.5 and $413.8 
million using a 7% discount rate and $136.5-$441.1 million using a 3% 
discount rate. This amounts to approximately between $406 to $1,232 
annually per firm using a 7% discount rate and between $335 to $1,081 
using a 3% discount rate.
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(3) Short-Term Lodging: Net Benefits
    Table 11 presents the net benefits of the proposed rule in the 
short-term lodging industry using the quantified benefits and costs 
discussed in Sections VII.C.3.b.(1) and VII.C.3.b.(2). To calculate the 
low end of the range for net benefits, we subtract the total costs 
using the high-end cost assumptions from the total benefits using the 
low-end benefit assumptions. For the high end of the range for net 
benefits, we subtract the total costs using the low-end cost 
assumptions from the total benefits using the high-end benefit 
assumptions.
---------------------------------------------------------------------------

    \337\ U.S. Census Bureau, supra n. 271.
    \338\ FTC-2022-0069-6037 (AHLA).
    \339\ OEWS Traveler Accommodation, supra n. 329.
    \340\ See OEWS National, supra n. 272 (providing the mean hourly 
wage); Hamermesh, supra n. 279 (providing the value of time).
    \341\ See supra n. 335 (describing the calculations).
    \342\ U.S. Sec. & Exchange Comm'n, Form 10-K, Airbnb, Inc. (Feb. 
17, 2023).
---------------------------------------------------------------------------

    The quantified benefits and costs imply that the proposed rule will 
have a positive net benefit, even without accounting for the 
unquantified benefit of reducing deadweight loss.
[GRAPHIC] [TIFF OMITTED] TP09NO23.017


[[Page 77469]]


(4) Short-Term Lodging: Uncertainties
    The Commission's ability to precisely estimate benefits and costs 
is limited due to uncertainties in key parameters. The quantified 
benefits and costs for the short-term lodging industry rely on a set of 
assumptions based on the best available public information. When the 
data were unclear, we used sets of assumptions that would generate a 
range of low-end and high-end estimates. Table 12 summarizes the key 
assumptions and how they may affect the resulting estimate of 
quantified benefits and costs. When possible, we attempted to 
underestimate benefits and overestimate costs in order to estimate 
conservative net benefits.

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[[Page 77471]]


[GRAPHIC] [TIFF OMITTED] TP09NO23.019

BILLING CODE 6750-01-C
    The Commission is expressly soliciting comments regarding the 
uncertainties described in Table 12. Specifically, the Commission 
requests data that would allow for more refined estimation of benefits 
of the proposed rule, including statistics on domestic versus foreign 
bookings by U.S. consumers, data on the reduction of average listings 
viewed as a result of the proposed rule, and data on the average search 
time saved for consumers as a result of the proposed rule. The 
Commission also requests data to refine the estimated cost of the 
proposed rule, including whether the 6% resort fee statistic from the 
AHLA applies to firms or establishments, the anticipated cost to firms 
and home share hosts from complying with the proposed rule, and data on 
the number of home share hosts in the US.
c. Restaurant Industry
    This section considers the impact of the proposed rule on 
restaurants and drinking establishments, collectively referred to as 
``restaurants,'' and discuss the potential benefits and costs of the 
proposed rule within this industry. While we focus here on the 
restaurant industry, many of the benefit and cost considerations 
presented here likely apply in similar fashion to other service 
industries in which either tipping is common or service fees are being 
employed. Examples of businesses in these industries include nail 
salons and massage studios. We lack data to quantify several of these 
benefits and costs, but we estimate compliance costs and determine a 
break-even level of benefit.
    The restaurant industry has seen a recent spike in the use of 
hidden fees. In its 2023 State of the Industry Report, the National 
Restaurant Association notes that 15% of restaurants (13% of limited-
service restaurants and 17% of full-service restaurants) are adding 
fees to bills.\343\ These fees are typically a percentage of the 
subtotal before sales tax. Futhermore, 81% of the restaurants adding 
these fees plan to continue adding these charges for more than a year.
---------------------------------------------------------------------------

    \343\ State of the Restaurant Industry 2023, National Restaurant 
Association (2023).
---------------------------------------------------------------------------

    Fees in the restaurant industry take several forms. First, it has 
been a long-standing practice for most, if not all, full-service 
restaurants to charge mandatory service fees for large parties 
(typically a minimum of 6 or 8 consumers). We assume in our cost 
calculations that all full-service restaurants employ large-party 
mandatory charges.
    Second, some restaurants have added mandatory service fees for 
parties of any size. These fees equal a percentage of the bill, 
typically 18%, 20%, or 22%, in line with customary percentages 
consumers use to calculate gratuities. Third, some restaurants are 
charging 5-10% fees they describe as supporting higher wages or 
enhanced benefits for workers. In State or local jurisdictions that are 
eliminating the distinction between tipped and standard minimum wages 
by raising the tipped minimum wage to equal the corresponding standard 
minimum wage, some restaurants are including specific fees as part of 
the transition.\344\ Finally, some

[[Page 77472]]

restaurants have added inflation-related charges and others are 
charging consumers a fee for paying with credit cards instead of cash.
---------------------------------------------------------------------------

    \344\ Seven States (Alaska, California, Minnesota, Montana, 
Nevada, Oregon, and Washington) and one territory (Guam) have a 
uniform minimum wage, regardless of tips. U.S. Dep't of Lab., 
Minimum Wages for Tipped Employees (July 1, 2023), https://www.dol.gov/agencies/whd/state/minimum-wage/tipped. Several States 
and the District of Columbia are currently considering a transition 
or are in the process of transitioning to a uniform minimum wage. 
Talmon Joseph Smith, Battle Over Wage Rules for Tipped Workers Is 
Heating Up, N.Y. Times (Oct. 14, 2022), https://www.nytimes.com/2022/10/13/business/economy/tipped-wage-subminimum.html.
---------------------------------------------------------------------------

    The expectations that consumers have regarding fees will depend 
upon the type of fees. For example, consumers likely expect mandatory 
service charges for large parties given that they are a common industry 
practice. On the other hand, recently introduced fees may be a surprise 
to consumers. Consumers' expectations will depend on how such fees are 
disclosed. In addition, restaurants rely on local demand and so repeat 
customers may come to learn about the fees that restaurants charge--
such as whether they have substituted mandatory service charges for 
tips--over time. In line with observations in the drip pricing 
literature, consumers are more likely to choose restaurants based on 
their expectations on cost, which may not incorporate the added costs 
of fees.
    In the absence of a rule, restaurants have discretion as to how 
they disclose these fees to consumers. Some restaurants may make 
prominent statements that they have moved to mandatory service charges 
or instruct consumers not to provide tips. Others may disclose such 
fees on their menus, which some consumers may not read and so only 
learn of the fees after receiving the bill at the end of the meal. At 
this point, consumers have no choice but to accept the fees. 
Restaurants may characterize some fees as optional and, thus, avoidable 
in principle, but these fees are mandatory in effect because consumers 
may not have a way to practicably avoid them if they do not learn of 
them until receiving the bill. For example, a consumer can avoid a 
credit card usage fee by paying with cash. If, however, the consumer 
does not know about this fee in advance and does not have sufficient 
cash on hand, it is unlikely that the consumer can obtain cash on the 
spot to cover the bill. As with mandatory fees, the consumer has no 
reasonable choice but to accept and pay the unexpected credit card 
usage fee.
    Mandatory service charges, the largest fees being added to bills, 
are commensurate with customary levels of tipping, but they are not 
necessarily used as a substitute for tipping; in fact, tips and 
mandatory service fees are distinct under tax and labor laws.\345\ All 
fees imposed by a restaurant, including mandatory service charges, 
accrue to the restaurant's owner, and the owner has full descretion 
regarding the use of these fees, including whether fees are passed on 
to waitstaff. For example, a restaurant may choose to pay a higher wage 
(``fair wage'') out of all the income it receives. In addition, a 
restaurant may choose to disclose how these mandatory services fees 
will be used. Some restaurants, for example, have waitstaff explicitly 
inform consumers that their bills include a mandatory service charge 
and, thus, no tip is necessary.
---------------------------------------------------------------------------

    \345\ See, e.g., I.R.S., Internal Revenue Bulletin: 2012-26 
(June 25, 2012), https://www.irs.gov/irb/2012-26_IRB; U.S. Dep't of 
Lab., Tip Regulations under the Fair Labor Standards Act (FLSA), 
https://www.dol.gov/agencies/whd/flsa/tips.
---------------------------------------------------------------------------

    The variation across restaurants in types of fees and use of those 
fees is likely to affect how consumers tip. It is reasonable to assume 
that most consumers will not tip when explicitly informed that a tip is 
not necessary. In the absence of such instruction, fees will still 
likely have a crowding out effect on consumer tipping.\346\ Regardless 
of how restaurants emplooying mandatory service fees are using or 
distributing these fees, consumers likely view these larger fees as tip 
replacements; consequently, consumers will leave little or not tip when 
make aware of restaurants' service fees. Changes in tipping will 
subsequently impace the labor market for waitstaff.
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    \346\ In some cases, consumers may ``overtip'' if they are 
unaware of mandatory service fees. We do not consider this issue or 
other similar issues related to tip adjustments because they involve 
transfers and, thus, have a net neutral impact on social welfare.
---------------------------------------------------------------------------

(1) Restaurants: Benefits of Proposed Rule
    As applied to restaurants, the proposed rule would require the 
prices of menu items to be inclusive of any mandatory fees. Restaurants 
that have implemented mandatory service fees intended as substitutes 
for tipping could satisfy the proposed rule in one of two ways. First, 
restaurants could maintain menu prices and eliminate mandatory service 
fees with the expectation that consumers will resume tipping as is 
customary. This would represent a return to the traditional tipping 
model, the typical pricing structure of most restaurants. 
Alternatively, restaurants could increase menu prices to incorporate 
the mandatory service charge and continue to operate on a no-tipping-
expected model.\347\ Since most restaurants use the traditional tipping 
model, a restaurant including manatory service charges in its prices 
would look more expensive than most of its competitors that have 
optional tips and so lose out on customers to its competitors. We thus 
assume these restaurants will choose a return to the traditional 
tipping model in response to the proposed rule.
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    \347\ Restaurants could continue to include tip lines in bills; 
the proposed rule does not proscribe tipping in any way. Consumers 
who wish to leave additional gratuities would still be able to do 
so.
---------------------------------------------------------------------------

    Given the long-standing usage of large party fees, we assume 
restaurants currently imposing these fees would respond to the proposed 
rule by printing separate small party and large party menus, the latter 
of which would incorporate the large party fees into menu prices. 
Finally, since non-service-related fees, such as credit card usage 
fees, are generally not as well established, we assume restaurants 
would eliminate these fees and adjust menu prices in response to the 
proposed rule.
    The primary benefit in the restaurant industry from the proposed 
rule would be the reduction or elimination of deadweight loss in the 
current, inefficient market equilibrium. An additional, unquantifiable 
benefit would be the reduction or elimination of psychological costs to 
consumers caused by the frustration of surprise fees. Furthermore, much 
confusion and frustration exists among consumers regarding the use of 
newer restaurant fees. For example, many consumers are confused by 
``service'' charges or fees where those fees do not go to service 
workers. The proposed rule's prohibition on misrepresenting the nature 
and purpose of such fees would provide the additional unquantified 
benefit of lessening consumer confusion around such service charges. 
This benefit serves both consumers as well as service workers as it 
increases transparency.
    Due to the incomplete price information problem described in 
Section VII.C.1, the proposed rule requiring restaurants to show the 
total price of menu items will likely result in a reduction of 
deadweight loss. Consumers, initially unaware of restaurant fees, are 
likely spending more on menu items than they would if they knew the 
full prices. This market inefficiency may be exacerbated in the 
restaurant industry since consumers often learn of fees when receiving 
bills and, thus, are unable to adjust their choices in response to the 
fees.

[[Page 77473]]

However, widespread practices understood by consumers like mandatory 
service charges for large parties are less likely to create such 
inefficiencies. The proposed rule would allow consumers to make fully 
informed decisions that would lead to a more efficient market 
equilibrium and reduce or eliminate the deadweight loss in the 
prevailing equilibrium. We lack data to quantify this reduction in 
deadweight loss.
(2) Restaurants: Costs of Proposed Rule
    This section describes the potential costs of the proposed rule's 
provisions and provide quantitative estimates where possible. We obtain 
the number of firms and establishments in the restaurant industry from 
the 2020 SUSB Annual Dataset. For restaurants, the cost of worker time 
is monetized using wages obtained from the Bureau of Labor Statistics 
May 2022 National Occupational Employment and Wage Estimates.\348\ 
Restaurants and drinking establishments fall under the two-digit NAICS 
code of 72 for accommodation and food services, and we use industry-
specific average wages for this sector to estimate costs.
---------------------------------------------------------------------------

    \348\ U.S. Bureau Lab. Stat., Occupational Employment and Wage 
Statistics, May 2022 National Industry-Specific Occupational 
Employment and Wage Estimates: Sector 72--Accommodation and Food 
Services (May 2022) (``OEWS Accommodation and Food Services''), 
https://www.bls.gov/oes/current/naics2_72.htm.
---------------------------------------------------------------------------

(a) Compliance Costs
    The costs to firms from the proposed rule include a review of how 
the proposed rule applies to the firm, one-time costs to comply with 
the proposed rule, and annual costs to review and ensure on-going 
compliance. Our preliminary analysis presents two cost scenarios 
corresponding to different assumptions on how many hours are required 
to comply with the proposed rule and how many firms would be impacted 
by the proposed rule. We present these as a low-end cost scenario and a 
high-end cost scenario. Table 13 summarizes compliance costs under both 
of these scenarios.
    As in the general discussion of compliance costs in Section 
VII.C.2.c, we assume that restaurants already in compliance with the 
proposed rule would incur one hour of lawyer time to confirm this 
compliance. Similarly, we assume that restaurants not currently in 
compliance would incur five to ten hours of legal advice to understand 
the impact of the proposed rule and five to ten hours of legal advice 
to come into compliance with the proposed rule. Pricing in the 
restaurant industry is less complex than in the previously discussed 
industries. We assume that restaurant owners themselves spend five to 
ten hours reoptimizing prices, and we use the wage of food service 
managers as a proxy for the cost of this time. These costs would be 
incurred at the firm level; that is, a firm operating multiple 
identically branded restaurants would incur these costs once.\349\
---------------------------------------------------------------------------

    \349\ These calculations will underestimate the costs of firms 
that operate a portfolio of heterogeneous restaurants. We do not 
expect the additional cost to such firms to significantly impact the 
industry-wide cost estimates.
---------------------------------------------------------------------------

    Restaurants not currently in compliance with the proposed rule 
would need to update and possibly redesign menus or menu boards. To 
estimate menu-related costs, a cost specific to this industry, we use 
the assumptions and prices of the FDA's Regulatory Impact Analysis for 
its 2014 Menu Labeling Rule \350\ (``Menu Labeling RIA''), with prices 
inflated to 2023 levels according to the BLS CPI Inflation 
Calculator.\351\ Thus, we assume that the average cost for a restaurant 
firm to redesign its menu is $4,818. One potential source of 
uncertainty in this estimate is the adoption of QR codes and online 
menus, which may reduce physical menu costs. However, we are unaware of 
evidence on the adoption of these new technologies.
---------------------------------------------------------------------------

    \350\ Food & Drug Admin., Final Rule, Food Labeling; Nutrition 
Labeling of Standard Menu Items in Restaurants and Similar Retail 
Food Establishments, 79 Fed. Reg. 71155 (Dec. 1, 2014).
    \351\ U.S. Bureau Lab. Stat., CPI Inflation Calculator, https://www.bls.gov/data/inflation_calculator.htm. Costs inflated from 
November 2014 to June 2023.
---------------------------------------------------------------------------

    After the relevant firms redesign their menus, menu replacement 
would need to occur at each establishment. Following the Menu Labeling 
RIA, we assume between 0% and 50% of full-service restaurants and bars 
would have to replace printed menus, at an average cost of $2.60 per 
menu, at their establishments in response to the proposed rule. Since 
printed menus are regularly replaced, many establishments would already 
be in the process of reprinting menus that could be coordinated with 
any changes needed to be made at the time the rule goes into effect; 
the proposed rule would not impact printing costs for these 
establishments.\352\ For other establishments (limited-service 
restaurants, cafeterias, coffee shops, etc.), we assume that menu 
boards have an average replacement cost of $715. For all establisments 
replacing menus or menu boards, we assume replacement requires one hour 
of managerial time at a wage of $31.47 and one hour of waitstaff time 
at a wage of $15.89. We acknowledge that it is uncertain how 
appropriately the menu redesign costs from the Menu Labeling Regulatory 
Impact Analysis would represent the menu redesign costs in this 
context. The costs used in this analysis may also serve as a proxy for 
any additional costs restaurants may incur that are not captured in 
this analysis.
---------------------------------------------------------------------------

    \352\ Since large party service fees are widespread and well-
established, it may be the case that full-service restaurants 
respond to the rule by setting two sets of prices, one for large 
parties and one for small parties. We assume that this choice would 
not affect menu printing costs since restaurants could select the 
number of each type of menu according to their established seating 
arrangements. Restaurants have flexibility in accommodating large 
parties by combining tables, but we assume that maintaining this 
flexibility would have little effect on menu printing costs as our 
estimate already accounts for extra menus.
---------------------------------------------------------------------------

    As in the general discussion of compliance costs, we assume that 
restaurant firms not currently in compliance would incur zero to ten 
hours of attorney time to ensure continued compliance in future years. 
Table 13 provides the total quantified costs (one-time upfront costs 
plus annual costs) for both the low-end and high-end cost scenarios, 
and these costs are calculated as present values using discount rates 
of 7% and 3%. Annualized per firm costs are also provided; for 
parsimony, these annualized costs are presented for two consolidated 
categories of restaurant types: (1) full-service restaurants and bars 
and (2) limited-service restaurants and cafeterias, buffets, snack/
coffee shops, etc.

[[Page 77474]]

[GRAPHIC] [TIFF OMITTED] TP09NO23.020


[[Page 77475]]


[GRAPHIC] [TIFF OMITTED] TP09NO23.021

(b) Labor Market Effects
    We have assumed that the proposed rule would lead any restaurants 
that have adopted mandatory service charges in lieu of tipping to 
return to the traditional tipping model. Adjustments in tipping and 
restaurant worker compensation will likely lead to a shift in the labor 
market equilibrium for restaurant workers. This shift could generate a 
net benefit or a net cost to society, as well as transfers to or from 
restaurant workers, but we lack the data to quantitatively or 
qualitatively determine the welfare effect of the equilibrium shift.
---------------------------------------------------------------------------

    \353\ OEWS Accommodation and Food Services, supra n. 348.
---------------------------------------------------------------------------

    In addition, this shift would generate differing welfare impacts 
across the waitstaff labor market. For example, moving away from the 
traditional tipping model and toward standardized wages, would mitigate 
discrimination that occurs through tipping. The literature has found 
that Black employees tend to receive lower tips than White employees, 
and that the black-white gap in tipping cannot be explained by 
differences in service quality.\354\ There is also evidence that, after 
controlling for other factors, women earn less in tips than men.\355\ 
Thus, by causing restaurants to revert to the traditional tipping model 
as we have assumed, the proposed rule may have the unintended 
consequence of increasing racial gender disparities in the waitstaff 
labor market.
---------------------------------------------------------------------------

    \354\ See, e.g., Michael Lynn et al., Consumer Racial 
Discrimination in Tipping: A Replication and Extension, 38 J. 
Applied Soc. Psych. 4, 1045-60 (2008), https://doi.org/10.1111/j.1559-1816.2008.00338.x; Zachary W. Brewster et al., Black-White 
Earnings Gap among Restaurant Servers: A Replication, Extension, and 
Exploration of Consumer Racial Discrimination in Tipping, 84 Socio. 
Inquiry 4 (2013), https://doi.org/10.1111/soin.12056.
    \355\ See Matthew Parrett, Customer Discrimination in 
Restaurants: Dining Frequency Matters, 32 J. Lab. Rsch. 2, 87-112 
(2011), https://doi.org/10.1007/s12122-011-9107-8.
---------------------------------------------------------------------------

(3) Restaurants: Break-Even Analysis
    As discussed in Section VII.C.1, we lack data to quantify the 
benefits of the proposed rule within the restaurant

[[Page 77476]]

industry. Instead, we calculate what the benefits would need to be in 
order for the proposed rule to have a positive net benefit. We 
calculate that if the proposed rule results in a benefit of at least 
$1.76 per consumer per year over 10 years, then the benefits to the 
restaurant industry of the proposed rule will exceed the industry's 
compliance costs under the high-end cost assumptions with a 7% discount 
rate.
(4) Restaurants: Uncertainties
    Our ability to precisely estimate benefits and costs is limited due 
to uncertainties in key parameters. The quantified benefits and costs 
for the restaurant industry rely on a set of assumptions, based on the 
best available public information. When the data were unclear, we used 
sets of assumptions that would generate a range of low-end and high-end 
estimates. Table 14 summarizes the key assumptions and how those 
assumptions may affect the resulting estimate of quantified benefits 
and costs.
[GRAPHIC] [TIFF OMITTED] TP09NO23.022


[[Page 77477]]


[GRAPHIC] [TIFF OMITTED] TP09NO23.023

    The Commission is expressly soliciting comments regarding the 
uncertainties described in Table 14. Specifically, the Commission 
requests data that would allow for more refined estimation of benefits 
of the proposed rule. The Commission also requests data to refine the 
estimated cost of the proposed rule, including information on the 
number of restaurants currently charging hidden or misleading mandatory 
fees, and the anticipated cost to firms from complying with the 
proposed rule.
4. Economic Evaluation of Alternatives
    As an alternative to the proposed rule, the Commission has 
considered not pursuing rulemaking and to rely on its existing tools 
through enforcement actions and consumer education instead. Relative to 
a no-action baseline, by definition, there would be no incremental 
benefits or costs. The prevalence of drip pricing and hidden mandatory 
fees would continue to persist.
    Another potential alternative as discussed in Section VII.B. is 
whether the rule should be limited to businesses in the live-event 
ticketing and/or short-term lodging industries. For these specific 
industries where we are able to quantify both benefits and costs, we 
have the following evaluation of costs and benefits of such an 
alternative. In the live-event ticketing industry, the estimated 
present value of net benefits due to the proposed rule over a 10-year 
period with a 7% discount rate is between $20,464,879 and 
$1,762,524,107. Using a 3% rate, the present value of net benefits in 
the live-event ticketing industry is estimated to be between 
$41,746,333 and $2,143,665,007. The present value of net benefits from 
the proposed rule's requirements over a 10-year period using a 7% 
discount rate in the short-term lodging industry is estimated to be 
between $4,247,948,290-$6,752,614,872. Using a 3% rate, the present 
value of net benefits in the short-term lodging industry is estimated 
to be between $5,220,642,791 and $8,230,386,045.
    The Commission does not have the data to prepare a quantitative 
analysis of the other alternatives discussed in Section VII.B. The 
final regulatory analysis may include additional quantification of 
alternative proposals if the Commission receives data and relevant 
information in response to the questions for public comment in Section 
X.
5. Summary of Results
    The preceding regulatory analysis has attempted to catalog and, 
where possible, quantify the potential costs for the economy as a 
whole, as well as the incremental benefits and costs of the proposed 
rule for specific industries. At the economy level, we estimate that, 
for most firms in the economy, the per firm cost will be a one-time 
cost of $78.74. For firms and industries that currently rely on hidden 
mandatory fees and require more time to comply, we estimate the 
annualized per firm cost might be as high as $2,010.
    Because the Commission is unable to quantify economy-wide benefits 
to the proposed rule, at the economy level we provide a break-even 
analysis using quantified compliance costs. The break-even analysis 
implies there are positive net benefits to the proposed rule if the 
benefit per consumer is at least $6.65 per consumer per year over a 10-
year period. Note that this analysis does not account for costs from 
unintended consequences of the proposed rule or the potential benefits 
from reducing deadweight loss by providing consumers with full 
information.

VIII. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501 et seq., 
requires Federal agencies to seek and obtain Office of Management and 
Budget (``OMB'') approval before undertaking a collection of 
information directed to ten or more persons. The term ``collection of 
information'' includes any requirement or request for persons to 
obtain, maintain, retain, report, or publicly disclose 
information.\356\ The Commission believes the proposed rule contains a 
disclosure requirement that would constitute a collection of 
information requiring OMB approval under the PRA. The Commission has 
submitted the proposed rule to OMB for review and approval of any 
collection of information requirements.
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    \356\ 44 U.S.C. 3502(3); 5 CFR 1320.3(c).

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[[Page 77478]]

A. Hidden Fees Prohibited

    Section 464.2(a) of the proposed rule defines it as an unfair and 
deceptive practice for businesses to offer, display, or advertise 
amounts consumers may pay without clearly and conspicuously disclosing 
the Total Price, as defined in the proposed rule. Sec.  464.2(b) 
specifies that, as a preventative measure, businesses that offer, 
display, or advertise an amount a consumer may pay must display the 
Total Price more prominently than any other pricing information. While 
these provisions may alter when and how, in the course of transactions, 
businesses disclose Total Price, the disclosure itself provides 
consumers with information readily available to businesses and is 
something businesses must do in the course of their regular business 
activities. Thus, the Commission concludes that the Total Price 
disclosure does not constitute a collection of information for PRA 
purposes and estimates that any additional attendant costs are de 
minimis.

B. Misleading Fees Prohibited

    Section 464.3(a) of the proposed rule prohibits businesses from 
misrepresenting the nature and purpose of any amount a consumer may 
pay, including the refundability of such fees and the identity of any 
good or service for which fees are charged. This Section does not 
require any additional disclosures or information collection, and only 
requires businesses to refrain from making misrepresentations. The 
Commission concludes that any additional costs that might be associated 
with the prohibitions in Sec.  464.3(a) against making 
misrepresentations are de minimis.
    Section 464.3(b) of the proposed rule requires businesses to 
disclose clearly and conspicuously before consumers consent to pay the 
nature and purpose of any amount a consumer may pay that is excluded 
from the Total Price, including the refundability of such fees and the 
identity of any good or service for which fees are charged. The 
information required by Sec.  464.3(b) is necessary as a preventative 
measure to address the unfair and deceptive conduct of misrepresenting 
the nature and purpose of fees. Disclosing the amount of fees and the 
identity of goods or services for which the fees are charged provides 
consumers with information readily available to businesses and is 
something businesses do in the course of their regular business 
activities. The Commission concludes that disclosing the amount of fees 
and the identity of goods or services does not constitute a collection 
of information for PRA purposes, and that any costs associated with 
making these disclosures are de minimis. In connection with the 
requirement in Sec.  464.3(b) that businesses disclose the 
refundability of fees and charges, businesses may not routinely 
disclose this information as part of business transactions, and there 
may be costs associated with developing procedures to provide this 
disclosure. The Commission estimates such costs as follows:
1. Estimated One-Time Hours Burden: 245,454 Hours
    The estimated hours of one-time burden for the required disclosures 
is 245,454 hours. This estimate is explained in this section.
2. Number of Respondents
    The proposed rule applies to all firms in the economy and may 
result in all firms conducting a compliance review, which we proxy with 
one hour of attorney time. FTC staff estimates there are 818,178 
entities that will incur additional costs beyond the initial one-hour 
compliance review to comply fully with the proposed rule, including 
firms in the live-event ticketing industry, the hospitality industry, 
and restaurants. This estimate is based on the total number of firms in 
the United States according to data from the U.S. Census North American 
Industry Classification System (NAICS). This estimate relies on the 
assumption that 10% of all firms in the U.S. (outside of the three 
specific industries) will incur additional compliance costs.
    Of the 818,178 total entities incurring additional costs, only some 
firms will incur costs directly related to the disclosure requirement. 
The remaining firms may incur compliance costs due to other provisions 
of the rule. For example, some firms may only need to re-optimize price 
and adjust price displays (because they previously charged hidden 
mandatory fees), but these firms do not need to add disclosures. 
Lastly, many firms that charge fees for optional goods and services may 
already disclose whether those optional fees are refundable. 
Accordingly, we assume that 20% of the 818,178 total firms that incur 
additional compliance costs would be required to add disclosures 
regarding the refundability of fees not included in Total Price, 
resulting in an estimated 163,636 number of respondents.\357\
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    \357\ This number may be overinclusive as it as it includes 
firms that would be exempted from the definition of Business as 
described in 464.1(b) of the proposed rule if the proposed Motor 
Vehicle Dealers Rule is finalized.
---------------------------------------------------------------------------

3. Disclosure Hours
    The proposed rule would require firms to disclose the nature and 
purpose of any amount a consumer may pay that is excluded from the 
Total Price, including the refundability of such fees and the identity 
of any good or service for which fees are charged. We anticipate that 
the substantial majority of sellers routinely provide these disclosures 
in the ordinary course of business as a matter of good business 
practice. For these sellers, the time and financial resources 
associated with making these disclosures do not constitute a ``burden'' 
under the PRA because they are a usual and customary part of regular 
business practice. 5 CFR 1320.3(b)(2). Moreover, some State laws 
require the same or similar disclosures as the proposed rule mandates. 
In addition, some firms may be covered by disclosure requirements of 
other rules.
    Accordingly, to reflect these various considerations, we estimate 
the disclosure burden required by the proposed rule will be, on 
average, 90 minutes (or 1.5 hours) for each entity estimated to not be 
currently compliant with the disclosure requirement of the proposed 
rule. Of this 90-minute total, we estimate that 30 minutes will be time 
spent by attorneys reviewing the disclosure and 60 minutes will be time 
spent to update the website or physical price display. The total 
estimated one-time burden is 245,454 hours (163,636 firms x 1.5 hours).
4. Estimated One-Time Labor Cost
    The estimated one-time labor cost for disclosures is $13,305,243. 
This total is the sum of the total cost of attorney time calculated by 
applying the hourly wage for attorney time of $78.40 to the estimate of 
30 minutes of attorney time and applying the hourly wage for web 
developer time of $42.11 to the estimate of 60 minutes (1 hour) of web 
developer time ($81.31 per entity x 163,636 entities).\358\
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    \358\ Web developer time is a proxy for any costs associated 
with changing the firm's disclosures to comply with the proposed 
rule, such as the time spent adjusting websites or adjusting any 
physical price displays to include the disclosure. The estimated 
mean hourly wages for a web developer is $42.11. OEWS Web 
Developers, supra n. 272.
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5. Estimated Non-Labor Cost
    The capital and start-up costs associated with the proposed rule's 
disclosure are de minimis. Any disclosure capital costs involved with 
the proposed rule, such as equipment and office supplies, would be 
costs

[[Page 77479]]

borne by sellers in the normal course of business.
    Under Section 3506(c)(2)(A) of the Paperwork Reduction Act, the 
Commission invites comments on: (1) whether the disclosure requirements 
are necessary, including whether the resulting information will be 
practically useful; (2) the accuracy of our burden estimates, including 
whether the methodology and assumptions used are valid; (3) how to 
improve the quality, utility, and clarity of the disclosure 
requirements; and (4) how to minimize the burden of providing the 
required information to consumers.
    Comments on the proposed disclosure requirement subject to 
Paperwork Reduction Act review by OMB should additionally be submitted 
to www.reginfo.gov/public/do/PRAMain. Find this particular information 
collection by selecting ``Currently under 30-day Review--Open for 
Public Comments'' or by using the search function. The reginfo.gov web 
link is a United States Government website operated by OMB and the 
General Services Administration (GSA). Under PRA requirements, OMB's 
Office of Information and Regulatory Affairs (OIRA) reviews Federal 
information collections.

IX. Regulatory Flexibility Act--Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires the 
Commission to prepare and make available for public comment an 
``initial regulatory flexibility analysis'' (``IRFA'') in connection 
with any NPRM. 5 U.S.C. 603. An IRFA requires many of the same 
components as Section 22 of the FTC Act and the Paperwork Reduction 
Act, including (1) a description of the reasons that agency action is 
being considered, (2) a statement of the objectives of, and legal basis 
for, the proposed rule, and (3) a description of any significant 
alternatives to the proposed rule which accomplish the stated 
objectives and minimize any significant economic impact of the proposed 
rule on small entities. Where the Commission has already addressed 
these components, it incorporates that analysis into its IRFA.\359\ The 
remaining requirements are addressed in this section.
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    \359\ See Sections III and VII A-B. of this preamble.
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    The Commission invites comment on the burden on any small entities 
that would be covered and has prepared the following analysis.

A. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rule Will Apply

    Most firms in the U.S. economy would be subject to this proposed 
rule, but only firms that do not currently disclose total price will 
need to adjust their pricing strategy. According to the Statistics of 
U.S. Businesses, there were 6,119,657 firms in the United States with 
fewer than 500 employees, representing 99.7% of all U.S. firms.\360\ 
Small businesses that currently comply with the proposed rule will have 
a relatively trivial cost of assessing whether they are currently in 
compliance, and we assume at most these firms will use one hour of 
lawyer time to confirm compliance. Small businesses that currently do 
not disclose total price (such as restaurants charging mandatory 
service fees), will incur additional costs to re-optimize prices and 
adjust the marketing campaigns and the consumer purchase process to 
include full total cost. The Commission seeks comment and information 
regarding the estimated number and the nature of small business 
entities for which the proposed rule would have a significant economic 
impact.
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    \360\ U.S. Census Bureau, supra n. 271. Employment of fewer than 
500 employees is a commonly used metric for classifying a firm as a 
``small business.''
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B. Description of the Projected Reporting, Recordkeeping and Other 
Compliance Requirements of the Proposed Rule

    The proposed rule contains no reporting or recordkeeping 
requirements. To comply with the proposed rule, small entities are 
required to disclose total price prominently and not misrepresent the 
nature and purpose of any amount a consumer may pay. Almost all firms, 
including small entities, are subject to the requirements of the 
proposed rule. For firms that already comply with the proposed rule, 
the one-time cost per firm is assumed to be one hour of lawyer time at 
$78.74.
    For small businesses that are not currently in compliance, firms 
will need to re-optimize prices, adjust marketing campaigns, and adapt 
the purchase process to include full total cost. These firms may also 
incur recurring annual costs of additional lawyer time to assess and 
confirm annual compliance. The annualized costs of the one-time cost 
and the annual costs for the next 10 years is estimated to be as much 
as $2,010 per firm averaged over all industries. Industry-specific per 
firm costs, however, may be smaller or larger than this estimate.

C. Identification, to the Extent Practicable, of All Relevant Federal 
Rules That May Duplicate, Overlap or Conflict With the Proposed Rule

    The FTC has not identified any other Federal statutes, rules, or 
policies currently in effect that may directly duplicate or conflict 
with the proposed rule. The Commission has identified a number of other 
rules or laws that contain provisions that potentially overlap with 
certain provisions of the proposed rule.\361\ First, several other 
rules or laws contain requirements regarding the disclosure of pricing 
information in specific industries or in connection with specific 
transactions, including: the Consumer Leasing Act,\362\ the Electronic 
Fund Transfer Act,\363\ the Franchise Rule,\364\ the Funeral Rule,\365\ 
the Truth in Lending Act,\366\ the

[[Page 77480]]

proposed amendments to the Negative Option Rule,\367\ the Real Estate 
Settlement Procedures Act,\368\ the Telemarketing Sales Rule,\369\ the 
Truth in Savings Act,\370\ the Empowering Broadband Consumers through 
Transparency Rule,\371\ and the Full Fare Advertising Rule.\372\ These 
provisions appear generally compatible with the proposed rule's 
requirements regarding the disclosure of pricing information. In areas 
of shared jurisdiction, the Commission seeks comment and information to 
determine if compliance with the proposed rule along with the specific 
disclosure provisions for certain types of sectors or transactions 
would be impossible, overly burdensome, or beneficial.
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    \361\ The proposed rule is intended to supplement or complement 
these existing laws and rules.
    \362\ For example, Regulation M, which implements the Consumer 
Leasing Act (``CLA''), requires that an advertisement for a consumer 
lease, among other things, ``may state that a specific lease of 
property at specific amounts or terms is available only if the 
lessor usually and customarily leases or will lease the property at 
those amounts or terms,'' and the Regulation also requires a series 
of written disclosures with pricing information, prior to 
consummation of a consumer lease. See 12 CFR 1013.7 and 213.7; 12 
CFR 1013.4 and 213.4. Model forms for written disclosures are in 
Regulation M, Appendix A, 12 CFR 1013 and 213. The CLA is at 15 
U.S.C. 1667-1667f.
    \363\ For example, Regulation E, which implements the Electronic 
Fund Transfer Act (``EFTA''), requires financial institutions to 
disclose fees, among other things, at the time a consumer contracts 
for the service or before the first electronic fund transfer is 
made. See 12 CFR 1005.7 and 205.7. In some instances, Regulation E 
applies to other entities, including persons and remittance transfer 
providers, and requires written disclosures or authorizations as to 
certain costs or payments and pricing terms for gift cards, prepaid 
accounts, certain remittance transfers and preauthorized transfers. 
Model forms for written disclosures are found in Regulation E, 
Appendix A, 12 CFR 1005 and 205. The EFTA is at 15 U.S.C. 1693-
1693r.
    \364\ The Franchise Rule requires sellers of franchises to make 
specific disclosures in a prescribed form regarding the total 
investment necessary to begin operation of a franchise, as well as 
other costs. The Franchise Rule also requires the disclosure of any 
initial fees and their refundability. 16 CFR 436.
    \365\ The Funeral Rule requires specific pricing disclosures and 
itemizations for funeral goods and services. 16 CFR 453.
    \366\ For example, Regulation Z, which implements the Truth in 
Lending Act (``TILA''), requires that an advertisement for credit, 
among other things, that states specific credit terms ``shall state 
only those terms that actually are or will be arranged or offered by 
the creditor,'' and the Regulation also requires written disclosures 
of costs and terms for many consumer credit products including 
mortgage loans, personal loans, credit cards, open-end credit, 
automobile financing, and student loans. See e.g., 12 CFR 1026.24 
and 226.24, 1026.16 and 226.16, 1026.6 and 226.6, 1026.18-.19, 
1026.37-.38, 1026.46, and 1026.60-61. Model forms for written 
disclosures are in Regulation Z, Appendices G-H, 12 CFR 1026 and 
226. The TILA is at 15 U.S.C. 1601-1666j.
    \367\ The proposed amendments to the Negative Option Rule 
require, for all transactions involving a negative option feature, 
the disclosure of the amount or range of costs a consumer will be 
charged, the frequency of the charges and the date each charge will 
be submitted for payment. These disclosures must be clear and 
conspicuous and occur before a consumer enters their billing 
information. Negative Option Rule, 88 FR 24716 (amendments proposed 
Apr. 24, 2023).
    \368\ For example, Regulation X, which implements certain 
aspects of the Real Estate Settlement Procedures Act (``RESPA''), 
among other things, requires disclosure of settlement service costs 
and other information and sets other requirements for certain 
mortgages. See generally 12 CFR 1024. Various forms and statements 
are in Regulation X, including but not limited to Appendices A-D. 
The RESPA is at 12 U.S.C. 2601 et seq.
    \369\ The Telemarketing Sales Rule (``TSR'') requires 
telemarketing sellers to clearly and conspicuously disclose, before 
a consumer consents to pay, the total costs to purchase, receive, or 
use, and the quantity of, any goods or services. 16 CFR 310.
    \370\ For example, Regulation DD, which implements the Truth in 
Savings Act (``TISA''), and which applies to deposit brokers, among 
others, for certain advertisements, includes various disclosures, 
including for certain overdraft charges. See generally 12 CFR 1030. 
Additionally, for credit unions insured by or eligible for insurance 
by NCUSIF (including state-chartered credit unions), a separate 
regulation generally applies; the advertising provisions of that 
credit union regulation also apply to persons who advertise such 
credit union accounts. These credit union-related requirements 
include, in some instances, disclosures, including for certain 
overdraft charges. See generally 12 CFR 707. The TISA is at 12 
U.S.C. 4301-4313.
    \371\ The recently adopted Empowering Broadband Consumers 
through Transparency Rule requires internet service providers (ISPs) 
to display at the point of sale labels that disclose certain 
information about broadband prices, introductory rates, data 
allowances, and broadband speeds. The broadband label requires 
prominent disclosure of monthly price and itemization of monthly 
provider fees, one time fees, early termination fees and government 
taxes. The total monthly price does not include the itemized fees. 
Empowering Broadband Consumers Through Transparency, 87 FR 76959 
(Dec. 16, 2022) (to be codified at 47 CFR 8).
    \372\ The Full Fare Advertising Rule covers advertising or 
solicitation by a direct air carrier, indirect air carrier, an agent 
of either, or a ticket agent, for passenger air transportation or 
tour requiring a component of air transportation. The Rule prohibits 
stating a price that is not the ``entire price to be paid by the 
customer to the carrier, or agent, for such air transportation, 
tour, or tour component.'' 14 CFR 399.84.
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    The Commission has also identified several rules and laws that 
prohibit misrepresentations potentially related to charges and fees in 
connection with specific industries or transactions. Specifically, 
several rules and statutes prohibit misrepresentations that overlap 
with the proposed rule's prohibition against misrepresenting the nature 
and purpose of any amount a consumer may pay, including: the Business 
Opportunity Rule,\373\ the Mortgage Acts and Practices Advertising Rule 
(Regulation N),\374\ the Mortgage Assistance Relief Services Rule 
(Regulation O),\375\ the proposed amendments to the Negative Option 
Rule,\376\ the Telemarketing Sales Rule,\377\ the TILA,\378\ and the 
TISA.\379\ The Commission has not identified any conflict arising from 
complying with these sector or transaction-specific rules and statutes 
and the proposed rule's prohibition against misrepresenting the nature 
and purpose of any amount a consumer may pay. The Commission invites 
comment and information regarding any potentially duplicative, 
overlapping, or conflicting Federal statutes, rules, or policies.
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    \373\ The Business Opportunity Rule prohibits certain 
misrepresentations as to cost. In addition, the Business Opportunity 
Rule requires an affirmative disclosure of refundability for covered 
transactions that is broader than the provisions of the proposed 
rule. 16 CFR 437.
    \374\ The Mortgage Acts and Practices Advertising Rule, 
Regulation N (MAPS) prohibits misrepresentations regarding mortgage 
credit products including ``the existence, nature, or amount of fees 
or costs to the consumer'' associated with the credit product. The 
MAPS rule also prohibits misrepresentations regarding ``existence, 
cost, payment terms, or other terms'' associated with any addition 
product or feature sold in connection with a mortgage credit 
product. 12 CFR 1014.
    \375\ The Mortgage Assistance Relief Services Rule (Regulation 
O) prohibits misrepresentations regarding total costs and refunds 
related to mortgage assistance services. 12 CFR 1015.
    \376\ The proposed amendments to the Negative Option Rule 
prohibits misrepresentations of material facts related to any 
negative option transaction. Negative Option Rule, 88 FR 24716 
(amendments proposed Apr. 24, 2023).
    \377\ In connection with telemarketing, the TSR prohibits the 
misrepresentation of material information, including the total costs 
to purchase, receive, or use, and the quantity of any goods or 
services that are the subject of a sales offer. 16 CFR 310.
    \378\ 15 U.S.C. 1601-1666j. Regulation Z implements the TILA. 12 
CFR 1026. Among other things, Regulation Z prohibits misleading 
advertising of ``fixed'' rates and payments, and misleading 
comparisons in advertisements, in advertisements for credit secured 
by a dwelling. See 12 CFR 1026.24(i).
    \379\ Among other things, the TISA (Regulation DD and NCUA's 
separate implementing regulation) prohibits misleading or inaccurate 
advertisements. See, generally, 12 CFR 1030.8 and 707.8.
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X. Request for Comments

    Members of the public are invited to comment on any issues or 
concerns they believe are relevant or appropriate to the Commission's 
consideration of the proposed rule. The Commission requests that 
factual data on which the comments are based be submitted with the 
comments. In addition to the issues raised in this preamble, the 
Commission solicits public comment on the specific questions identified 
in this section. 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.

A. General Questions for Comment

    (1) Should the Commission finalize the proposed rule as a final 
rule? Why or why not? How, if at all, should the Commission change the 
proposed rule in promulgating a final rule?
    (2) Please provide comment, including relevant data, statistics, 
consumer complaint information, or any other evidence, on each 
different provision of the proposed rule. Regarding each provision, 
please include answers to the following questions:
    (a) What is the provision's impact (including any benefits and 
costs), if any, on consumers, governments, and businesses, both those 
existing and those yet to be started?
    (b) What alternative provision(s) should the Commission consider?
    (3) Would the proposed rule, if promulgated, benefit consumers and 
competition? Provide all available data and evidence that supports your 
answer, such as empirical data, statistics, consumer-perception 
studies, and consumer complaints.
    (4) What are the relevant sources of data that reflect the benefits 
to consumers and competition from the proposed rule, if promulgated? 
Provide all available data, statistics, and evidence.
    (5) What are the relevant sources of data that reflect the average 
search time saved for consumers as a result of the proposed rule? 
Provide all available data, statistics, and evidence.
    (6) What are the relevant sources of data that reflect the 
compliance costs that may apply to businesses from the proposed rule, 
if promulgated? Provide all available data, statistics, and evidence.
    (a) What are the relevant sources of data that reflect the number 
of firms that will be affected by the proposed rule?

[[Page 77481]]

Provide all available data, statistics, and evidence.
    (b) What are the relevant sources of data that reflect the number 
of lawyer hours a firm in each industry would need to review compliance 
with the rule? Provide all available data, statistics, and evidence.
    (c) What are the relevant sources of data that reflect the number 
of data scientist hours a firm in each industry would need to comply 
with the proposed rule? Provide all available data, statistics, and 
evidence.
    (d) What are the relevant sources of data that reflect the number 
of web developer hours a firm in each industry would need to comply 
with the proposed rule? Provide all available data, statistics, and 
evidence.
    (e) What are the relevant sources of data that reflect other 
possible costs that have not already been considered that may apply to 
businesses, consumers, or workers from the proposed rule, if 
promulgated? Provide all available data, statistics, and evidence.
    (f) What are the relevant sources of data that reflect the number 
of firms in each industry that use third-party services to display 
pricing information that would reduce the costs of compliance? What are 
the relevant sources of data that reflect how much such services would 
cost in order to comply with the proposed rule? Provide all available 
data, statistics, and evidence.
    (7) Would the proposed rule, if promulgated, have a significant 
economic impact on a substantial number of small entities? If so, how 
could it be modified to avoid a significant economic impact on a 
substantial number of small entities?
    (8) How would the proposed rule, if promulgated, 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 the proposed rule?
    (9) Is the proposed rule adequate to address the two practices 
identified as prevalent, misrepresenting the total costs of goods and 
services by omitting mandatory fees from advertised prices and 
misrepresenting the nature and purpose of fees? Are there additional 
provisions necessary to prevent these practices in specific industries?

B. Sec.  464.1: Definitions

    (10) Are the proposed definitions clear? Should any changes be made 
to any definitions? Are additional definitions needed?
    (11) Should the scope of any of the proposed definitions be 
expanded or narrowed, and if so, how and why?
    (12) Should the proposed definition for ``Business'' exclude 
certain businesses, and if so, why?
    (13) The proposed definition for ``Business'' contains an exclusion 
for ``motor vehicle dealers that must comply with 16 CFR 463, requiring 
motor vehicle dealers to disclose the full cash price for which a 
dealer will sell or finance the motor vehicle to any consumer, and 
prohibiting motor vehicle dealers from making misrepresentations.'' Is 
this definition clear and understandable? Is this definition ambiguous 
in any way? How, if at all, should this definition be improved? This 
exception would only apply if the proposed Motor Vehicle Dealers Rule 
is finalized and in effect and not subsequently narrowed, altered, or 
otherwise not in effect. Is having such an exclusion appropriate?
    (14) Should a new definition of ``Covered Business'' be added to 
narrow the Businesses covered by specific requirements of the rule, in 
particular the preventative requirements in Sec.  464.2(b)? If so, how 
should ``Covered Businesses'' be defined?
    (a) Should the definition of ``Covered Business'' be limited to 
businesses in the live-event ticketing and/or short-term lodging 
industries?
    i. If so, how should Businesses in the live-event ticketing 
industry be defined? If they are defined as ``any Business that makes 
live-event tickets available, directly or indirectly, to the general 
public,'' is that definition clear and understandable? Is it ambiguous 
in any way? How, if at all, should that definition be improved?
    ii. If so, how should Businesses in the short-term lodging industry 
be defined? If they are defined as ``any Business that makes temporary 
sleeping accommodations available, directly or indirectly, to the 
general public,'' is that definition clear and understandable? Is it 
ambiguous in any way? How, if at all, should that definition be 
improved?
    (b) Should the definition of ``Covered Business'' exclude small 
businesses? If so, how should ``small businesses'' be defined?
    i. If ``Covered Business'' is defined to ``include all of the 
following: (1) any Business that does not satisfy both the Small 
Business Administration's definition of a small business concern (13 
CFR 121.105) and the Small Business Administration's Table of Size 
Standards (13 CFR 121.201); (2) any Business, regardless of size, that 
offers goods or services in the live-event ticketing industry; and (3) 
any Business, regardless of size, that offers goods or services in the 
short-term accommodations industry,'' is that definition clear and 
understandable? Is it ambiguous in any way? How, if at all, should that 
definition be improved? Are there industries other than live-event 
ticketing and short-term accommodations that should be subject to all 
the proposed requirements of the rule, regardless of size?
    ii. What are the relevant sources of data that reflect the costs 
and benefits that the proposed rule would have on Covered Businesses if 
this definition is added to the proposed rule?
    (c) Should a definition of ``Covered Business'' exclude businesses 
to the extent that they offer or advertise credit, lease, or savings 
products, or to the extent that they extend credit or leases or provide 
savings products to consumers? In the alternative, should the 
definition exclude certain of these businesses or products from only 
certain provisions? If so, specifically, which businesses and products, 
which provisions of the proposed rule, and why and how, or why not?
    (d) Should a definition for ``Covered Business'' be limited to 
businesses that offer goods or services online and in mobile 
applications? Why or why not?
    i. If so, how should such businesses be defined?
    ii. What are the relevant sources of data that reflect the costs 
and benefits that the proposed rule would have on Covered Businesses if 
they are defined in this way?
    iii. What are the relevant sources of data that reflect differences 
in costs for online versus brick-and-mortar stores? Provide all 
available data, statistics, and evidence.
    (15) Should a definition for ``Covered Business'' exclude limited-
service and full-service restaurants that satisfy both the Small 
Business Administration's definition of a small business concern (13 
CFR 121.105) and the Small Business Administration's Table of Size 
Standards (13 CFR 121.201)?
    (16) Should the proposed definition for ``Total Price'' contain an 
exception for ``mandatory charges by restaurants for service performed 
for the customer in lieu of tips, as defined by the Department of Labor 
(29 CFR 531.52)''?
    (17) Does the proposed definition for ``Total Price'' provide 
sufficient clarity for industries that calculate charges based on 
increments of time? Why or why not?
    (18) The proposed definition of Total Price allows Shipping Charges 
to be excluded. Shipping Charges are defined as ``the fees or charges 
that reasonably reflect the amount a Business incurs to

[[Page 77482]]

send physical goods to a consumer through the mail, including private 
mail services'' Sec.  464.1(f). Is this provision clear and 
understandable? Is this provision ambiguous in any way? How, if at all, 
should this provision be improved?
    (a) Does the proposed definition of ``Shipping Charges'' 
effectively allow Businesses to pass along reasonable costs of shipping 
to consumers without permitting artificial inflation of such costs?
    (b) How would this provision impact the assessment and calculation 
of shipping costs across industries, and in particular industries?
    (c) What are the relevant sources of data that reflect the manner 
in which firms calculate shipping costs? Provide all available data, 
statistics, and evidence.
    (19) Does the proposed definition of Total Price provide sufficient 
clarity for industries that ``all fees or charges a consumer must pay 
for a good or service and any mandatory Ancillary Good or Service'' 
includes (1) all fees or charges that are not reasonably avoidable and 
(2) all fees or charges for goods or services that a reasonable 
consumer would expect to be included with the purchase?

C. Sec.  464.2: Hidden Fees Prohibited

    (20) Section 464.2(a) of the proposed rule states, ``[i]t is an 
unfair and deceptive practice and a violation of this part for any 
Business to offer, display, or advertise an amount a consumer may pay 
without Clearly and Conspicuously disclosing the Total Price.'' Is this 
prohibition clear and understandable? Is this prohibition ambiguous in 
any way? How, if at all, should this prohibition be improved?
    (21) Section 464.2(b) of the proposed rule states, ``[i]n any 
offer, display, or advertisement that contains an amount a consumer may 
pay, a Business must display the Total Price more prominently than any 
other Pricing Information.'' Is this prohibition clear and 
understandable? Is this prohibition ambiguous in any way? How, if at 
all, should this prohibition be improved?
    (22) Should the proposed rule address the itemization of fees and 
charges that make up the ``Total Price?'' If so, how should the 
proposed rule address itemization and why?
    (23) By requiring mandatory fees to be included in the Total Price, 
does the requirement in 464.2(a) effectively eliminate fees that 
provide little or no value to the consumer in exchange for the charge? 
Why or why not? Are there any such fees that would not be eliminated by 
the proposed rule?
    (24) Should the proposed rule explicitly prohibit fees that provide 
little or no value to the consumer in exchange for the charge? Why or 
why not? Should such a rule apply to optional fees? Why or why not? 
What should the Commission consider in determining if a fee provides 
little or no value to the consumer?
    (25) Should the proposed rule prohibit fees that are excessive? Why 
or why not? How would such a rule define excessive fees?

D. Sec.  464.3: Misleading Fees Prohibited

    (26) Section 464.3(a) of the proposed rule states, ``[i]t is an 
unfair and deceptive practice and a violation of this part for any 
Business to misrepresent the nature and purpose of any amount a 
consumer may pay, including the refundability of such fees and the 
identity of any good or service for which fees are charged.'' Is this 
prohibition clear and understandable? Is this prohibition ambiguous in 
any way? How, if at all, should this prohibition be improved?
    (a) Does Sec.  464.3(a)'s provision prohibiting misrepresentations 
regarding ``the nature and purpose of any amount a consumer may pay'' 
provide sufficient clarity that it includes any amount included in the 
Total Price if that amount is also itemized separately from the Total 
Price?
    (b) Does Sec.  464.3(a)'s provision prohibiting misrepresentations 
regarding ``the nature and purpose of any amount a consumer may pay'' 
provide sufficient clarity that it includes any amount excluded from 
the Total Price such as Shipping Charges, Government Charges, optional 
charges, voluntary gratuities, and invitations to tip?
    (27) Section 464.3(b) of the proposed rule states, ``[a] Business 
must disclose Clearly and Conspicuously before the consumer consents to 
pay the nature and purpose of any amount a consumer may pay that is 
excluded from the Total Price, including the refundability of such fees 
and the identity of any good or service for which fees are charged.'' 
Is this prohibition clear and understandable? Is this prohibition 
ambiguous in any way? How, if at all, should this prohibition be 
improved?
    (a) Section 464.3(b) of the proposed rule requires certain 
disclosures ``before the consumer consents to pay.'' Should the 
proposed rule instead require Businesses to disclose Clearly and 
Conspicuously the nature and purpose of any amount a consumer may pay 
that is excluded from the Total Price ``before the consumer consents to 
pay and before obtaining a consumer's billing information''?
    (b) Section 464.3(b) of the proposed rule requires disclosures 
regarding ``the nature and purpose of any amount a consumer may pay 
that is excluded from the Total Price.'' Does this provision provide 
sufficient clarity that it includes Shipping Charges, Government 
Charges, optional charges, voluntary gratuities, and invitations to 
tip?

E. Industry-Specific Practices

    (28) What are the relevant sources of data that reflect the 
frequency of, and reasons for, abandoned transactions in the live-event 
ticket market? Provide all available data, statistics, and evidence.
    (29) What are the relevant sources of data that reflect the total 
annual number of live-event ticket purchases? What are the relevant 
sources of information that separate total annual ticket purchases into 
primary and secondary ticket sales? Provide all available data, 
statistics, and evidence.
    (30) What are the relevant sources of data that reflect the number 
of live-event ticket sellers currently charging hidden mandatory fees? 
Provide all available data, statistics, and evidence.
    (31) The comments identified additional problematic practices 
regarding live events, including unfair dynamic pricing, 
transferability restrictions, lack of transparency regarding ticket 
holdbacks, lack of transparency regarding speculative tickets, and the 
use of bots. How prevalent are these acts and practices and should the 
proposed rule be modified to address any of these practices? Provide 
all available data and evidence that supports your answer, such as 
empirical data, statistics, consumer-perception studies, and consumer 
complaints.
    (32) What are the relevant sources of data that reflect the 
frequency of, and reasons for, abandoned transactions in the short-term 
lodging industry? Provide all available data, statistics, and evidence.
    (33) What are the relevant sources of data that reflect the number 
of hotel firms that impose resort fees or other similar mandatory fees? 
Provide all available data, statistics, and evidence.
    (34) What are the relevant sources of data that reflect the number 
of individual home share hosts in the US? Provide all available data, 
statistics, and evidence.
    (35) What are the relevant sources of data that reflect the number 
of restaurants currently charging mandatory fees?

[[Page 77483]]

    (36) What are the relevant sources of data that reflect the number 
of restaurants that charge each type of fee (such as credit card 
surcharge fees, kitchen fees, economic impact or inflation fees, 
mandatory service fees in lieu of tips, or mandatory service fees that 
do not replace tips) being used by restaurants?
    (37) What are the relevant sources of data that reflect the number 
of restaurants that have moved away from the traditional tipping model? 
Provide all available data, statistics, and evidence.
    (a) What are the relevant sources of data that reflect the number 
of such restaurants that do not request tips?
    (b) What are the relevant sources of data that reflect the number 
of such restaurants that impose on customers, regardless of the size of 
the party, mandatory charges for service performed for the customer in 
lieu of tips?

XI. 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 8, 2024. 
Write ``Unfair or Deceptive Fees, 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 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 that 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 
NPRM, 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, Mail Stop H-144 (Annex J), 
Washington, DC 20580. If possible, please submit your paper comment to 
the Commission by overnight service.
    Because your comment will be placed on the public record, you are 
solely responsible for making sure that 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 FTC 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 FTC 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 FTC 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 FTC 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 FTC Rule 4.9(c), and 
the General Counsel grants that request.
    Visit the FTC website to read this document and the news release 
describing it, and visit https://www.regulations.gov/docket/FTC-2023-0064 to read a plain-language summary of the proposed rule. 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 and responsive public comments 
it receives on or before January 8, 2024. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/siteinformation/privacypolicy.

XII. Communications by Outside Parties to the Commissioners or Their 
Advisors

    Under Commission Rule 1.18(c)(1), 16 CFR 1.18(c)(1), the Commission 
has determined that communications with respect to the merits of this 
proceeding from any outside party to any Commissioner or Commissioner 
advisor will be subject to the following treatment: written 
communications and summaries or transcripts of all oral communications 
must be placed on the rulemaking record. Unless the outside party 
making an oral communication is a member of Congress, communications 
received after the close of the public-comment period are permitted 
only if advance notice is published in the Weekly Calendar and Notice 
of ``Sunshine'' Meetings.

List of Subjects in 16 CFR Part 464

    Consumer protection, Trade practices, Advertising.


0
For the reasons set forth in the preamble, the Federal Trade Commission 
proposes to amend 16 CFR Chapter I by adding part 464 to read as 
follows:

PART 464--RULE ON UNFAIR OR DECEPTIVE FEES

Sec.
464.1 Definitions
464.2 Hidden Fees Prohibited
464.3 Misleading Fees Prohibited
464.4 Relation to State Laws
Appendix A to Part 464: Short-Term Lodging Industry Minutes Per Listing 
Calculations

    Authority:  15 U.S.C. 41-58.


Sec.  464.1  Definitions

    (a) Ancillary Good or Service means any additional good(s) or 
service(s) offered to a consumer as part of the same transaction.
    (b) Business means an individual, corporation, partnership, 
association, or any other entity that offers goods or services, 
including, but not limited to, online, in mobile applications, and in 
physical locations. Motor vehicle dealers that must comply with 16 CFR 
part 463, requiring motor vehicle dealers to disclose the full cash 
price for which a dealer will sell or finance the motor vehicle to any 
consumer, and prohibiting motor vehicle dealers from making 
misrepresentations, are exempted from the definition of ``Business'' 
for all purposes under this part.
    (c) Clear(ly) and Conspicuous(ly) means a required disclosure that 
is difficult to miss (i.e., easily noticeable) and easily 
understandable, including in all of the following ways:
    (1) In any communication that is solely visual or solely audible, 
the disclosure must be made through the same means through which the

[[Page 77484]]

communication is presented. In any communication made through both 
visual and audible means, such as a television advertisement, the 
disclosure must be presented simultaneously in both the visual and 
audible portions of the communication even if the representation 
requiring the disclosure is made in only one means.
    (2) A visual disclosure, by its size, contrast, location, the 
length of time it appears, and other characteristics, must stand out 
from any accompanying text or other visual elements so that it is 
easily noticed, read, and understood.
    (3) An audible disclosure, including by telephone or streaming 
video, must be delivered in a volume, speed, and cadence sufficient for 
ordinary consumers to easily hear and understand it.
    (4) In any communication using an interactive electronic medium, 
such as the internet or software, the disclosure must be unavoidable.
    (5) The disclosure must use diction and syntax understandable to 
ordinary consumers and must appear in each language in which the 
representation that requires the disclosure appears.
    (6) The disclosure must comply with these requirements in each 
medium through which it is received, including all electronic devices 
and face-to-face communications.
    (7) The disclosure must not be contradicted or mitigated by, or 
inconsistent with, anything else in the communication.
    (8) When the representation or sales practice targets a specific 
audience, such as children, older adults, or the terminally ill, 
``ordinary consumers'' includes reasonable members of that group.
    (d) Government Charges means all fees or charges imposed on 
consumers by a Federal, State, or local government agency, unit, or 
department.
    (e) Pricing Information means any information relating to an amount 
a consumer may pay.
    (f) Shipping Charges means the fees or charges that reasonably 
reflect the amount a Business incurs to send physical goods to a 
consumer through the mail, including private mail services.
    (g) Total Price means the maximum total of all fees or charges a 
consumer must pay for a good or service and any mandatory Ancillary 
Good or Service, except that Shipping Charges and Government Charges 
may be excluded.


Sec.  464.2  Hidden Fees Prohibited.

    (a) It is an unfair and deceptive practice and a violation of this 
part for any Business to offer, display, or advertise an amount a 
consumer may pay without Clearly and Conspicuously disclosing the Total 
Price.
    (b) In any offer, display, or advertisement that contains an amount 
a consumer may pay, a Business must display the Total Price more 
prominently than any other Pricing Information.


Sec.  464.3  Misleading Fees Prohibited.

    (a) It is an unfair and deceptive practice and a violation of this 
part for any Business to misrepresent the nature and purpose of any 
amount a consumer may pay, including the refundability of such fees and 
the identity of any good or service for which fees are charged.
    (b) A Business must disclose Clearly and Conspicuously before the 
consumer consents to pay the nature and purpose of any amount a 
consumer may pay that is excluded from the Total Price, including the 
refundability of such fees and the identity of any good or service for 
which fees are charged.


Sec.  464.4  Relation to State Laws.

    (a) In General. This part will not be construed as superseding, 
altering, or affecting any State statute, regulation, order, or 
interpretation relating to unfair or deceptive fees or charges, except 
to the extent that such statute, regulation, order, or interpretation 
is inconsistent with the provisions of this part, and then only to the 
extent of the inconsistency.
    (b) Greater protection under State law. For purposes of this 
Section, a State statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part.

Appendix A to Part 464: Short-Term Lodging Industry Minutes per Listing 
Calculations

1. Low-End Estimate of Minutes per Listing Calculation

    We use the Airbnb user search statistics reported in Fradkin 
(2017) to obtain a low-end estimate of minutes to view one listing 
after clicking on it. The paper provides data on a random sample of 
users who searched for short-term rentals on Airbnb in a large U.S. 
city. It reports search behavior separately for all searchers and 
for searchers who contacted the host, either to inquire about a 
listing or to book it. We use those numbers to calculate search 
behavior for the group of searchers who did not send a contact. The 
relevant statistics for these three groups are summarized in Table 
A.1.
    ``Average unique listings seen'' includes all listings users see 
on a search result page, including listings users do not click on. 
``Average time spent browsing'' includes entering search parameters, 
scrolling through results, and viewing listings after clicking on 
them. ``Average number of contacts'' is the average number of times 
searchers contacted a host for a listing. Since contacting the host 
requires users to click on the listing, we use this to proxy for 
number of clicked-on listings.

                                                    Table A.1
----------------------------------------------------------------------------------------------------------------
                                                                              (2)  Searchers   (3) Searchers who
                                                              (1)  All      who sent at least    did not send a
                                                             searchers         one contact          contact
----------------------------------------------------------------------------------------------------------------
Observations...........................................             12,241              4,426              7,815
Average unique listings seen...........................              68.53              87.81              57.61
Average time spent browsing (min)......................              35.77              57.87              23.25
Average number of contacts (proxy for clicks)..........  .................               2.37  .................
----------------------------------------------------------------------------------------------------------------

    From the third column, we calculate:

Time to view each listing without clicks = Average time spent 
browsing/Average unique listings seen = 23.253/57.61 = .40 minutes 
per listing.

    Because the average time spent browsing for the group in column 
(2) is inclusive of the amount of time spent sending contacts, not 
just viewing listings that were not contacted, we use the preceding 
value calculated from the group in column (3) to estimate the 
following that applies to searchers in column 2:

Time spent viewing listings without clicks = Time to view each 
listing without clicks * Average unique listings seen = .40 * 87.812 
= 35.44 minutes

and

Average total time viewing listings after clicking = Average time 
spent

[[Page 77485]]

browsing-Time spent viewing listings without clicks = 57.874-35.44 = 
22.43 minutes.
    Finally, we calculate time to view one listing:

Time per listing = Average total time viewing listings after 
clicking/Average number of contacts = 22.43/2.367 = 9.48 minutes per 
listing.\380\
---------------------------------------------------------------------------

    \380\ The numerator of ``Time per listing'' is an underestimate 
because ``Time spent browsing without clicks'' may capture some time 
spent viewing clicked-on listings that didn't result in a contact. 
The denominator of ``Time per listing'' is also an underestimate 
because the number of listings clicked on is proxied using the 
number of listings users book or send an inquiry about. Users may 
click on more listings than just the ones they want to inquire about 
or book. The two values are related. If the true denominator is 
higher than what we estimate, then the true numerator will be higher 
too. Higher listing clicks beyond those that resulted in a contact 
means more time spent viewing clicked-on listings that didn't result 
in a contact. The ratio should remain about the same.
---------------------------------------------------------------------------

2. Upper-End Estimate of Minutes per Listing Calculation

    We use the hotel search cost model developed by Chen and Yao 
(2016) to calculate an upper-end estimate of minutes to view one 
listing. The paper uses data from consumer search behavior when 
booking hotels in four major international cities on an anonymous 
major U.S. online travel website.
    A search is defined as a listing click-through, and the search 
cost for a listing is specified as:

cij = ci(TimeConstrainti, Slotj) = exp(gi0 + gi1TimeConstrainti + 
gi2 Slotj) = exp(3.07-.05*TimeConstraintj +.01 * Slotj

where TimeConstrainti is the number of days between consumer i's 
search and her check-in. Slotj is the slot position of the j-th 
search. The exponential operator ensures that the costs are 
positive. The gammas are mean levels of cost coefficients.

    Using this we can find that the mean search cost per listing 
when 30 days in advance (the sample average) is exp(3.07-(.05*30)) = 
$4.81 per listing. The inflation adjusted value is $5.86.
    From this we find that total search cost is then $5.86 per 
listing * 2.3 searches on average = $13.48. This total cost can be 
conceptualized as the number of minutes of viewing listings 
multiplied by the consumer's value of time. Using $24.40 per hour as 
the value of time, we find that the time spent viewing listings is 
($13.48/$24.40 per hour) * 60 minutes per hour = 33.15 minutes.
    We can calculate the minutes to view one listing as 33.15 
minutes/2.3 searches = 14.41 minutes per listing.

    By direction of the Commission.
April J. Tabor,
Secretary.

[FR Doc. 2023-24234 Filed 11-8-23; 8:45 am]
BILLING CODE 6750-01-P