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.

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 [INSERT DATE 60 DAYS AFTER DATE

OF PUBLICATION IN THE FEDERAL REGISTER].

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, Suite CC-5610 (Annex B), Washington, DC 20580, or

deliver your comment to the following address: Federal Trade Commission, Office of the

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Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex B), Washington,

DC 20024.

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), jkopec@ftc.gov, scammarano@ftc.gov.

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 [INSERT DATE 60 DAYS AFTER DATE

OF PUBLICATION IN THE FEDERAL REGISTER].0F

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. 1.12(a).

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 1.7–1.20; and 5 U.S.C. 553. 2

1F 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).

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. 2F

3 The Commission took comments for 60 days,

extended the comment period, 3F

4 and received over 12,000 comments, which it has thoroughly

considered.

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

4F and that proceeding with

this rulemaking is in the public interest. After discussing the comments and explaining its

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-deceptivefees-trade-regulation-rule-commission-matter-no-r207011 or https://www.regulations.gov/document/FTC-2022-0069-

0001.

3 Id.

4 88 FR 4796 (Jan. 25, 2023). 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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considerations in developing the proposed rule, the Commission poses specific questions for

comment and provides the text of its proposed rule.

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/FTC2022-0069/comments.5F

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.

As discussed in this preamble, the comments raised concerns about widespread deceptive

practices in 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 that sellers

misrepresent or do not adequately disclose the nature or purpose of fees, leaving consumers

wondering what they are paying for or believing that fees are arbitrary, and that they are getting

nothing for the fees charged.6F

7

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. 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 that 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

7F In many comments,

mandatory add-on fees omitted from an initial offer were not disclosed until checkout, 98F and some

comments raised concerns about advertisements that omitted key terms that required consumers to

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 latedisclosed fees in delivery applications and vacation rentals).

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pay more to fully use the good or service. 9F

10 They stated that fees can inflate advertised prices by

amounts that are large percentages of the base prices of goods or services. 11

10F 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

11F

2. Comments on Misrepresenting the Nature and Purpose of Fees

Commenters stated that 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

12F Commenters explained that

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.”); FTC2022-0069-2154 (“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”).

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.”); FTC2022-0069-2566 (“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

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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

13F Commenters also noted

that prices are sometimes advertised as “free,” but are not in fact free when fees are added. 1514F

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

15F Commenters stated that

fees provided them with little or no value, were not for goods or services they received, and were

merely revenue sources for businesses. 16F

17

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

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?”); FTC2022-0069-3766 (“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?”).

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”); FTC2022-0069-0443 (“Pure income generation scams”); FTC-2022-0069-3664 (“fee is used merely to generate profit

rather than cover a cost”).

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economy.17F

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.18F

19 Individual commenters noted that businesses also face undisclosed fees for

which the nature or purpose is not clear. 19F

20

Consumer groups—the Consumer Federation of America, Consumer Reports, Truth in

Advertising, UnidosUS, and the Institute for Policy Integrity—expressed support for rulemaking. 21

20F

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.”); FTC2022-0069-2242 (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.”). 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); FTC2022-0069-6042 (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); FTC8
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Although the U.S. Chamber of Commerce and the Association of National Advertisers (“ANA”)

argued that the FTC has not presented evidence that unfair or deceptive practices related to fees are

prevalent, and opposed rulemaking, 21F

22 consumer groups raised concerns shared by individual

commenters and provided information about existing regulations and legislation, 23

22F enforcement

actions,23F

24 and studies and surveys, 24F25 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.25F

26

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

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); FTC2022-0069-6093 (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); FTC2022-0069-6042 (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 autodealer 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 that 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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[Consumer Reports] said they were paying more now in surprise charges than they did five years

ago.”26F

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.27F

28 Some of the market sectors about which the FTC received comments are discussed in

this section of the preamble.28F

29

1. Hotel and Short-Term Lodging Fees

Individual commenters stated that 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. 29F

30 Other comments stated that fees may be misrepresented, for

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_T

oplines.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 that 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 that some chain FBOs may also charge fees that “often offer little

or no added value or discernable benefit[.]”).

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

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example, fees charged as vacation rental cleaning fees when hosts require renters to clean

accommodations.30F

31 Consumer Reports commented that hotels and OTAs have continued to charge

hidden resort fees after the FTC issued warning letters in 2012. 32

31F

Comments from the lodging industry generally argued that further regulation is not

necessary because resort fees provide value to consumers 32F

33 and the industry already engages in

pricing transparency. 33F

34 However, these comments do not dispute that resort fee disclosures

routinely occur after base room rates are advertised. 34F

35 Some industry members cautioned that

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).

33 FTC-2022-0069-6037 (American Hotel and Lodging Association (“AHLA”) stated that 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 that some of the data

about resort fees that the FTC provided in the ANPR were incorrect. AHLA stated that “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 that “[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 that 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 that businesses properly disclose “how much and what the resort fee pays for”).

35 FTC-2022-0069-6057 (AGA stated that 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.”).

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requiring all-in pricing may have unintended consequences, 35F

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

36F

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.37F

38 Consumer Reports noted that hidden fees can increase the price of tickets by as much

as 30% to 40%.38F

39 Individual commenters questioned the meaning of fees that are vaguely

36 FTC-2022-0069-6057 (AGA stated that 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’)”); FTC2022-0069-6111 (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.”).

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.”); FTC2022-0069-5971 (“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).

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identified, such as “convenience” fees, 39F

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. 40F

41 The comments opined that fees appear to

be arbitrary.41F

42

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

42F but most

comments received from ticket sellers or entities representing them, 4443F and from entities

representing the interests of musicians, artists, managers, agents; 4544F independent venues, promoters,

festivals; 45F

46 and audience groups; 46F47 expressed concerns about deceptive practices and supported a

rulemaking with some conditions. Some of these comments noted that ticket sellers routinely do

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.”).

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); FTC2022-0069-6048 (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.).

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not disclose the total cost of tickets in advertising, 47F

48 and that the nature and purpose of fees is not

always clear.48F

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. 49F

50

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 that 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 that 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 that 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 that 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.).

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Although entities in the ticketing sector argued that ticket fees are not “junk” fees, but

provide value to consumers 50F

51 and are already adequately disclosed, 51F52 a ticket seller in the

secondary market, TickPick, disagreed. TickPick stated that 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.52F

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. 53F

54

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.54F

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

55F They argued that, without a

51 FTC-2022-0069-6046 (NIVA stated that 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 that 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. 55 FTC-2022-0069-6110 (Sports Fans Coalition); FTC-2022-0069-6041 (NITO): FTC-2022-0069-6046 (NIVA); FTC2022-0069-6089 (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).

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level playing field, businesses that display all-in pricing would be at a competitive disadvantage. 5756F

Many of these comments recommended that itemization of fees should also be required so

consumers see a breakdown of the fees charged, 57F

58 but one comment argued that itemization of fees

harms consumers. 58F

59 Some of these comments recommended an industry-neutral rule while others

did not express an opinion. 59F

60 The comments also noted the importance of FTC guidance and

enforcement action relating to fees. 60F

61

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

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

57 FTC-2022-0069-6078 (TickPick stated that 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 industryneutral 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); FTC2022-0069-6089 (NATB commented that a rule will only be effective if the FTC undertakes rigorous enforcement).

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conspicuously identify their nature or purpose. 6261F Commenters expressed particular concern about

the true purpose of restaurant “service” charges, which they expected would go entirely to wait

staff.62F

63 As these comments imply, while a restaurant’s management may not keep tips received by

its employees for any purposes, 63F

64 no such prohibition exists for service fees imposed by a

restaurant.64F

65 In connection with food delivery, individual commenters similarly stated that delivery

apps charge fees that are not reflected in advertised food prices, 65F

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. 66F

67 The Consumer Federation of America noted that prepared

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.”).

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food and grocery delivery apps have been the subject of law enforcement actions challenging

misrepresentations relating to fees. 67F

68

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. 68F

69 They also described advertising for car rentals 69F70 and car sales70F71 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

71F 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

72F

68 FTC-2022-0069-6095 (CFA).

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.”); FTC2022-0069-3724 (“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.

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Industry comments related to auto sales, including ancillary goods and services, did not

support a rulemaking. 73F

74 These comments stated that the definition of junk fees is too vague, 75

74F 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. 75F

76 The comments stated that fees for ancillary goods and

services provide value to consumers. 76F

77

The comments from auto industry representatives stated that the law already prohibits

failing to disclose mandatory fees, and that fees are adequately disclosed. 78

77F Commenters stated that

“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

74 FTC-2022-0069-6043 (The National Automobile Dealers Association (NADA) stated that rulemaking is not

necessary, and recommended advertising guidance and business education); FTC-2022-0069-6106 (American Property

Casualty Insurance Association (APCIA) stated that 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 OffHighway 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 that 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 that 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.

78 FTC-2022-0069-6043 (NADA stated that 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.).

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unfair because there are often good reasons why certain fees cannot be disclosed earlier in sales

transactions.78F

79

Comments noted that a fees rule could overlap or conflict with state and federal laws and

regulations.79F

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. 8180F

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. 81F

82

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. 82F

83

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).

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).

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

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

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Citing a Consumer Reports study and its own research, New America’s Open Technology

Institute (“OTI”) stated that 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. 83F

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. 84F

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

85F

The Rural Broadband Association (“NTCA”) noted that many internet service provider fees

are related to mandatory government programs that provide value to consumers. 87

86F 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

87F

$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.”); FTC2022-0069-2382 (“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.”).

84 FTC-2022-0069-6087 (New America’s Open Technology Institute (“OTI”)).

85 Id. 86 FTC-2022-0069-6095 (CFA).

87 FTC-2022-0069-3393 (NTCA-The Rural Broadband Association (“NTCA”)).

88 Id.

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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. 88F

89

6. Rental Housing Fees

Comments from individual consumers about rental housing fees stated that leasing

companies advertise monthly rents that do not include fees for mandatory ancillary services that

unexpectedly and significantly increase renters’ monthly expenditures. 90

89F The comments stated that

leasing companies do not always identify the purpose of these fees. 90F

91

Consumer and policy groups noted that landlords do not adequately disclose many

unavoidable fees or fail to explain the purpose of fees, 91F

92 and supported a rulemaking pertaining to

fees in connection with rental housing, including apartments, house rentals, and manufactured

housing communities (“MHCs”). 92F

93 The National Consumer Law Center (“NCLC”) conducted a

survey of legal services and nonprofit attorneys that identified many unavoidable fees faced by

89 Id.

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)”).

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.)

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tenants,93F

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

94F 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

95F The comments also

recommended that the FTC investigate unfair or deceptive practices related to housing fees 9796F and

provide guidance on fees. 97F

98

The comments also recommended that a rule prohibit certain rental-related fees as invalid

per se because they are exploitative 98F

99 and target captive renters who often come from vulnerable

groups.99F

100 The comments stated that fees make rental housing even more unaffordable and

jeopardize access to future housing and financial stability. 100F

101

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).

99 FTC-2022-0069-6091 (NCLC stated that 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 that 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).

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7. Education Fees

The comments further noted that institutions of higher learning often charge mandatory fees

that are not included in advertised tuition fees. 101F

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.102F

103

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

103F Consumer

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).

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

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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

104F Consumer groups noted

that financial services fees are particularly burdensome to vulnerable, low-income, Black, and

Latino consumers. 105F

106

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.106F

107 Other comments opposed a rulemaking. 107F108

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.)

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 that 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.).

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Industry comments recommended that the FTC clearly define or clarify the meaning of

“junk fees,”108F

109 and objected that fees in the consumer financial sector are for legitimate services

that add value to consumers 109F

110 and are already adequately regulated by state and federal laws. 111

110F

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”)). 111F

112 Comments also stated that competitive pressures within the

industry tend to reduce fees. 112F

113

The comments stated that fees in the consumer financial services market cannot be equated

with fees charged in other markets, such as live event or resort fees. 114

113F They stated that there may

be legitimate reasons for disclosing fees other than at the beginning of sales transactions. 115114F The

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). 114 FTC-2022-0069-6045 (CUNA stated that 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

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comments noted that regulating fees in the consumer financial services sector could have negative

consequences such as limiting services and raising prices. 115F

116 The comments stated that the FTC

should coordinate with other agencies to harmonize rules. 117

116F

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

117F 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

118F

Commenters stated that 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.119F

120 Commenters also stated that these fees are often unfair because they cause

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.).

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).

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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

120F

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

121F 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

122F

121 Id. 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 that 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.).

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The comments broadly supported FTC action to address the identified deceptive practices

124 125 by requiring price transparency. Many individual commenters, 123F consumer groups, 124F and

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.”).

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 that 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).

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industry members 125F

126 recommended an industry-neutral rule requiring the disclosure of all-in

pricing that includes all mandatory fees.

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, 126F

127 or require that fees bear a reasonable relationship to the cost of the services

provided.127F

128 Some consumer groups recommended that the rule incorporate a reasonable consumer

standard and that the FTC develop model fee disclosures. 129

128F

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

129F 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. 130F

131 They also objected to an economy-wide rule because it would

126 See Section II.B.

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).

130 FTC-2022-0069-6047 (The Chamber stated that 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 that 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 that the FTC has not explained how existing rules are “insufficient from

a deterrence or consumer-protection standpoint.”); FTC-2022-0069-6093 (ANA stated that 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.

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overlap with industry-specific rules and recommended that the FTC narrowly tailor rulemaking to

specific industries engaging in unfair or deceptive practices. 132

131F ANA recommended alternatives to

rulemaking, such as industry-specific workshops, consumer and business education, and individual

enforcement actions. 132F

133

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. 133F

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 CoolingOff Rule.134F

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

135F

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

132 FTC-2022-0069-6047 (The Chamber stated that 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).

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).

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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. 136F

137

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

137F 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. 138F

139 False and misleading statements are unlawful

regardless of an intent to deceive. 139F

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.140F

141 A practice is considered unfair under Section 5 if: (1) it causes, or is likely to 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. 141F

142

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).

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. 142F

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, 143F

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.144F

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.

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. 145F

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. 146F

147 Thus, when the initial contact with a

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. & n. 9.

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);

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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.

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.147F

148 By offering a good or service, a seller impliedly represents that it is fit for

the purpose for which it is sold. 148F

149 As a result, it is deceptive when a good or service cannot be

used for its intended purpose without an additional purchase.

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. 149F

150 The Commission has previously recognized that price is

a material term,150F

151 and that it is a deceptive practice to misrepresent the price of a product. 152

151F

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

152F

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).

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.

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).

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-resortfees/p115503_hotel_resort_fees_economic_issues_paper.pdf; Alexander Rasch et al., Drip Pricing and its Regulation:

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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. 153F

154 Businesses that accurately represent the total amount

consumers will pay up front are at a competitive disadvantage to those that do not. 155

154F

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 lowincome, Black, Latino, limited English-speaking, and disabled consumers. 156

155F For example, unfair

or deceptive fees represent a 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.156F

157 Black and Latino consumers often pay a disproportionate amount of junk fees in

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/mksc.2020.1261; 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).

156 FTC-2022-0069-6095 at 7–11.

157 Id. at 7, 9.

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banking,157F

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

158F 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.159F

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

160F

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.161F

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

162F 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

163F This

experiment found that a measurement of consumer savings was reduced by 22%. 165164F Further, the

monetary cost to consumers is significant. For example, in 2018 resort fees generated an estimated

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).

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.

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$2.9 billion in revenue for the hotel industry, 165F

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. 166F

167 Many consumer comments in response to the ANPR stated that

they paid more as a result of businesses failing to disclose the total price up front. 168

167F

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

168F 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. 169F

170 Such search costs that result

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.”)

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.”).

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from unfair or deceptive practices are legally cognizable injuries under the FTC Act. 171170F Consumer

comments also describe harms in the form of search costs. 171F

172

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.172F

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. 173F

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

174F

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 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

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-lcavision-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.”).

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.

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decision.”175F

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; 176F

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

177F 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. 178F

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

179F 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. 180F

181

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

181F 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

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.

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.

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hindrance to businesses that opt to disclose the true price, as illustrated by real-world examples. 183182F

This price obfuscation, in turn, undermines the ability of businesses to compete on price and

inhibits the market from driving down prices overall.

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

183F 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, 184F

185 or a “convenience fee” to purchase a ticket when

the purchasing method is not more convenient to the consumer than any alternative. 186

185F 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

186F Consumers also commented

that they were misled about the amount of fees, particularly when a service was advertised as

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/marketstudies/AoP/OFT1291.pdf.

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.

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“free” but nevertheless incurred a fee. 187F

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

188F

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.189F

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.’”190F

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.191F

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

192F

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.

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).

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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.”193F

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

194F

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.

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

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).

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Commission has brought numerous cases alleging that businesses have misrepresented the total

costs of goods and services because their prices do not include all mandatory fees. 196

195F Among the

challenged fees were undisclosed fees that increased the total cost to consumers 197196F and fees that

diminished the value of the good or service the consumer received. 198197F 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 that the defendants misrepresented the price of funeral

services by listing low prices on websites that were later inflated with various fees. 199

198F 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

199F

Similarly, in FTC v. FleetCor Technologies, Inc., the FTC alleged that the defendant

misrepresented the cost of its fuel cards when it “charged customers at least hundreds of millions of

dollars in unexpected fees.”200F

201 In FTC v. LendingClub Corp., the FTC charged that the loan

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. filedOct. 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

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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.201F

202 And in FTC v. Millennium Telecard, Inc., the Commission alleged that 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

202F

The Commission has similarly brought numerous cases alleging that businesses have

mispresented the nature and purpose of fees. 203F

204 For example, in The Matter of Amazon.com, the

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.

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 C4746 (F.T.C. filed June 10, 2021) (alleging that 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-cv00840 (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-CA0629-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,

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Commission alleged that 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. 204F

205 Instead, the FTC alleged, Amazon used the tips to

subsidize its own pay to drivers. 205F

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. 206F

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.207F

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.208F

209

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

56–58, FTC v. Lake, No. 8:15-cv-00585-CJC-JPR (C.D. Cal. filed Apr. 14, 2015) (alleging that 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-GEBEFB, 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 that

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-nearly60-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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incurred a monthly charge. 209F

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,210F

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. 211F

212 Similarly, in FTC v. Websource Media, LLC, the

Commission addressed misrepresentations about the amount of fees when it alleged that defendants

offered a free trial for a website design but added fees for the website to consumers’ telephone

bills.212F

213 Settlements reached in 2007 and 2009 provided monetary redress to consumers and

prohibited the defendants from making various misrepresentations. 214

213F In FTC v. U.S. Mortgage

Funding, Inc., the Commission alleged that 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

214F 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

215F

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

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-actionleads-ban-alleged-mortgage-relief-scammers-who-harmed-thousands-consumers.

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theoretical motivation for drip pricing and its impact on consumers, empirical studies, and policy

issues pertaining to drip pricing.” 216F

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.217F

218 Likewise, in 2017, the Commission published a report that reviewed the existing

219 literature on shrouded pricing and examined the costs and benefits of disclosing resort fees. 218F In

2019, the Commission hosted a workshop that examined pricing and fee issues in the live-event

tickets market and subsequently issued a staff report on the subject. 220

219F

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

217 Fed. Trade Comm’n, The Economics of Drip Pricing (May 21, 2012), https://www.ftc.gov/newsevents/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/pressreleases/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).

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against hotel chains and delivery apps involving unfair or deceptive fees. 221220F Numerous private

lawsuits have involved unfair or deceptive fees across various industries. 222221F

Some states have also taken legislative or regulatory action involving unfair or deceptive

fees. For example, California 222F

223 and Pennsylvania223F224 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

221 See, e.g., Assurance of Voluntary Compliance ¶ 2, Texas v. Marriott Int’l, Inc., No. 2023CI09717 (Tex. Dist. Ct.

May 16, 2023) (alleging that 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 that 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 that 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 that 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

that 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).

223 Cal. S.B. 478, (2023-2024) Regular Session. 224 H.B. 636 (2023–2024) (Pa. 2023).

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process, banning hidden fees for live events, and prohibiting delivery fees on tickets delivered

electronically or printed at home. 224F

225 Similar legislation has been introduced in Massachusetts. 225F226

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 226F

227 regulates drip pricing and has

resulted in actions against online ticket sellers, car rental services, and flight-booking services. 228

227F

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

228F 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

229F

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-eventindustry.

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).

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 businessto-consumer commercial practices in the internal market, https://eur-lex.europa.eu/legalcontent/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/legalcontent/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://eurlex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A01998L0006-20220528.

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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

230F

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 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,231F

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. 232F

233 Without

Section 13(b) as it had historically been understood, the Commission’s only means to return money

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/estimatingthe-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/consultatio

n-on-improving-price-transparency-and-product-information-for-consumers.pdf.

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-ordeceptive-fees-trade-regulation-rule-commission-matter-no-r207011.

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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

233F 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

234F

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”),235F

236 the Restore Online Shoppers’ Confidence Act (“ROSCA”), 236F237 Negative Option

Rule,237F

238 or Funeral Rule,238F239 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.239F

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

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).

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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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.

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. Section 464.1 Definitions

Proposed Section 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.

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“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 that are 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 that 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 on

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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

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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 that are excluded from the Total

Price because the definition of Government Charges covers only those charges imposed by the

government on consumers.

B. Section 464.2 Hidden Fees Prohibited

The prohibition against bait-and-switch pricing in proposed Section 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 Section 464.2(b) clarifies that a Business that is required to

disclose the Total Price in an offer, display, or advertisement under Section 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

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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.

C. Section 464.3 Misleading Fees Prohibited

The prohibition against misrepresenting the nature and purpose of any amount a consumer

may pay in Section 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.241F

241 The preventative disclosure requirement in Section 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 Section

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

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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in violation of Section 464.2(a) and misrepresenting the nature and purpose of fees in violation of

Section 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.

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 Section 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 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 Sections 464.3(a) and (b), in addition to any other laws or regulations relating to the

distribution of tips.

D. Section 464.4 Relation to State Laws Provision

The relation to state laws provision in Section 464.4 would prevent the rule from

superseding state laws unless there is an inconsistency.

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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. 242F

242

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

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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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

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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

243F

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

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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would have known under the circumstances was dishonest or fraudulent.” 244244F 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 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.

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

245F 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.

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

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).

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-abforce-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).

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evade redressing consumers and more likely that they have to pay civil penalties can have only

helpful deterrence effects, whatever their magnitude. 246F

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.

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

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.

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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

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

Section 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

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 shortterm 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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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. 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.

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

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preliminary analyses of projected benefits and adverse economic effects. 249247F 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.

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:

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

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.

250 See infra Section VII.C.5.

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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 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

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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.248F

251

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.

Table 1A – Summary of Potential Benefits and Costs of Proposed Rule

Present Value Over a 10-Year Period

Low-end High-end

Estimate Estimate

Panel A: Costs and Benefits for Ticketing and Short-Term Lodging

Ticketing

Quantified Benefits (Time Savings) 7% discount rate

3% discount rate

$149,918,030

$182,076,794

$1,776,806,284

$2,157,947,183

Quantified Costs (Compliance)

Unquantified Benefits

Unquantified Costs

7% discount rate

3% discount rate

$14,282,177 $129,453,151

$14,282,177 $140,330,460

Reduced Deadweight Loss (e.g. efficient quality/quantity

purchased, fewer mistake purchases)

Unintended Consequences (e.g. adjustment costs,

consumer confusion as expectations adjust)

(Low Benefits – High Cost) (High Benefits – Low Cost)

Net Benefits (10 Years)

Net Benefits (10 Years)

7% discount rate

3% discount rate

$20,464,879

$41,746,333

$1,762,524,107

$2,143,665,007

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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Short-Term Lodging

Quantified Benefits (Time Savings)

Quantified Costs (Compliance)

7% discount rate

3% discount rate

7% discount rate

$4,661,731,460

$5,661,714,710

$136,472,889

$6,889,087,761

$8,366,858,934

$413,783,170

3% discount rate $136,472,889 $441,071,919

Unquantified Benefits

Unquantified Costs

Reduced Deadweight Loss (e.g. efficient quality/quantity

purchased, fewer mistake purchases)

Unintended Consequences (e.g. adjustment costs,

consumer confusion as expectations adjust)

(Low Benefits – High Cost) (High Benefits – Low Cost)

Net Benefits (10 Years) 7% discount rate $4,247,948,290 $6,752,614,872

Net Benefits (10 Years) 3% discount rate $5,220,642,791 $8,230,386,045

Panel B: Costs and Benefits for Restaurants and Remaining Industries

Quantified Costs (Compliance) 7% discount rate $4,264,844,809 $11,525,776,514

3% discount rate $4,264,844,809 $12,526,501,293

Unquantified Benefits Increased Time Savings and Reduced Deadweight Loss

Unquantified Costs

Unintended Consequences (e.g. adjustment costs,

consumer confusion as expectations adjust)

Note: “Low-End Estimate” reflects all scenarios that jointly result in lower estimates of benefits or costs and

“High-End Estimate” reflects all scenarios that jointly result in higher estimates of benefits or costs.

Table 1B – Summary of Quantified Costs and Break-Even Benefits of Proposed Rule

Present Value Over a 10-Year Period

Low-end

Estimate

High-end

Estimate

Total Quantified Costs

Total Quantified Costs

7% discount rate

3% discount rate

$4,415,599,874

$4,415,599,874

$12,069,012,836

$13,107,903,673

Break-even Benefit Per Consumer

Per Year

7% discount rate $2.43 $6.65

Break-even Benefit Per Consumer

Per Year

3% discount rate $2.00 $5.95

Note: “Low-End Estimate” reflects all scenarios that jointly result in lower estimates of benefits or costs and

“High-End Estimate” reflects all scenarios that jointly result in higher estimates of benefits or costs.

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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. 249F

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.” 250F

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. 251F

254

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

252F Non-aggregated partitioned

pricing, like drip pricing, imposes costs on consumers by requiring them to spend additional time to

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.

254The White House, How Junk Fees Distort Competition (Mar. 21, 2023), https://www.whitehouse.gov/cea/writtenmaterials/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/thepresidents-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. 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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calculate total prices for themselves and by increasing the likelihood of suboptimal choices through

erroneous total price calculations.

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.253F

256

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 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

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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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. 254F

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. 255F

258

Figure 1: Effects of price shrouding on consumer demand

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.

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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

256F Consumers may respond

to fully disclosed prices in these markets by purchasing lower quality products in addition to

purchasing fewer products.

b. Shrouded Pricing as a Source of Biased Expectations

As explained in Section VII.C.1.a, sellers have incentives to distort consumer demand

260 toward an inefficient equilibrium. This inefficiency may also arise in a behavioral context. 257F By

shrouding total prices through drip or partitioned pricing, a firm may bias its consumers’ price

expectations. For example, consumers may respond to dripped 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 subset 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 similarly inefficient equilibrium in which the good is overconsumed

and society suffers a deadweight loss.

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.258F

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

259 This phenomenon has been observed, for example, in the live-event ticketing industry. See Blake et al., supra n.

153.

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. 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.

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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

259F

Another prominent study looked at how consumers respond to the salience of sales tax on

goods, which affects the full price of a product. 260F

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

261F

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

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. 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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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.

a. 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 Section 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, nationwide compliance requirements. In the absence of the proposed rule, individual states may pursue

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enforcement actions against firms using drip pricing or enact their own drip pricing prohibitions. 265262F

Such regulations could vary from state to state, and firms 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.

(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.

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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(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 welfarereducing 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.

b. 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

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are documented in a regulatory analysis, but do not change net social welfare. 263F

266 While it is likely

that the proposed rule may result in transfers of welfare, we do not attempt to estimate these

transfers.

c. 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

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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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.

d. 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,

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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

264F

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

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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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 reoptimizations require 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.265F

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. 266F

269

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

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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high end of 80 hours of web developer time to become compliant with the proposed rule. 270267F 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-and-mortar firms

that conduct in-person sales of goods and services and do not currently comply with the proposed

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 time serves as a proxy for any costs associated with ensuring the

firm is compliant with the proposed rule.

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 industryspecific 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

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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industries, and then assume that 90% of the remaining firms are already in compliance with the

proposed rule.268F

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.

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

269F This assumption

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.

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,

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is valid if hours spent in compliance activities would otherwise be spent in other productive workrelated activities, the social value of which is summarized by the employee’s wage. 273

270F To the

extent that these activities can be accomplished using time during which employees would

otherwise be idle in the absence of a rule, our estimates will overstate the welfare costs of the

proposed 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.

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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Table 2 – Economy-Wide Compliance Costs

Firms that Already Comply

with Proposed Rule

Firms that Do Not Already

Comply with Proposed Rule

Number of Firms

Assumed Fraction of Firms in Compliance 90% 10%

(Exclusive of Live-Event Ticketing, Short-Term

Lodging, Restaurants)

Number of Firms Exclusive of Live-Event

Ticketing, Short-Term Lodging, and

Restaurants

5,060,244 562,249

Number of Firms Inclusive of Live-Event

Ticketing, Short-Term Lodging, and

Restaurants

5,322,434 818,178

Wages

Hourly Wage Rate Data Scientist $55.40 $55.40

Hourly Wage Rate Web Developer $42.11 $42.11

Hourly Wage Lawyer to Review Compliance $78.74 $78.74

One-time Hours for Regulatory

Familiarization or Compliance Low-end Estimate High-end Estimate

Lawyer Hours 1 5 10

Purchase Process Adjustment Hours 0 40 80

Data Analyst Hours 0 40 80

Lawyer Hours 0 0 10

One-Time Costs $398,443,589 $2,414,354,719 $4,823,690,494

Recurring (Annual) Costs $0 $0 $442,254,942

Total Present Value Costs (Annual + OneTime)

Total @ 7% Discount Rate $398,443,589 $2,414,354,719 $7,929,904,143

Recurring (Annual) Hours for Compliance

Total @ 3% Discount Rate $398,443,589 $2,414,354,719 $8,596,214,857

Live-Event Ticketing, Short-Term Lodging,

and Restaurants

Total Present Value Costs (Annual + One

Time) for Live-Event Ticketing, Short-Term

Lodging, and Restaurants

Total @ 7% Discount Rate

Total @ 3% Discount Rate

$47,785,835

$47,785,835

$1,555,015,731

$1,555,015,731

$3,692,879,269

$4,065,459,392

Total @ 7% Discount Rate

Total @ 3% Discount Rate

$4,415,599,874

$4,415,599,874

$12,069,012,836

$13,107,903,673

Grand Total (All Firms)

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Firms that Already

Comply with Proposed

Rule

Firms that Do Not Already

Comply with Proposed Rule

Number of Firms

Assumed Fraction of Firms in Compliance

(Exclusive of Live-Event Ticketing, ShortTerm Lodging, Restaurants)

90% 10%

Number of Firms Exclusive of Live-Event

Ticketing, Short-Term Lodging, and

Restaurants

5,060,244 562,249

Number of Firms Inclusive of Live-Event

Ticketing, Short-Term Lodging, and

Restaurants

5,322,434 818,178

Wages

Hourly Wage Rate Data Scientist

Hourly Wage Rate Web Developer

$55.40

$42.11

$55.40

$42.11

Hourly Wage Lawyer to Review

Compliance $78.74 $78.74

One-time Hours for Regulatory

Familiarization or Compliance

Low-end

Estimate

High-end

Estimate

Lawyer Hours 1 5 10

Purchase Process Adjustment Hours 0 40 80

Data Analyst Hours 0 40 80

Recurring (Annual) Hours for Compliance

Lawyer Hours 0 0 10

One-Time Costs $398,443,589 $2,414,354,719 $4,823,690,494

Recurring (Annual) Costs $0 $0 $442,254,942

Total Present Value Costs (Annual + OneTime)

Total @ 7% Discount Rate $398,443,589 $2,414,354,719 $7,929,904,143

Total @ 3% Discount Rate $398,443,589 $2,414,354,719 $8,596,214,857

Live-Event Ticketing, Short-Term Lodging,

and Restaurants

Total Present Value Costs (Annual + One

Time) for Live-Event Ticketing, Short-Term

Lodging, and Restaurants

Total @ 7% Discount Rate $47,785,835 $1,547,358,869 $3,685,664,727

Total @ 3% Discount Rate $47,785,835 $1,547,358,869 $4,058,244,850

Grand Total (All Firms)

Total @ 7% Discount Rate $4,407,943,013 $12,061,798,294

Total @ 3% Discount Rate $4,407,943,013 $13,100,689,131

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Note: The number of firms comes from the U.S. Census Bureau. 271F

274 Hourly wages are from the U.S. Bureau

of Labor Statistics. 272F

275 All Firms includes the live-event ticketing, short-term lodging, and restaurant

industries. For the independent values of these costs, please see the respective sections. This grand total also

includes the one-time costs to firms that already comply with the proposed rule. We relied upon publicly

available sources of data in our calculations. We recognize that there may be additional sources of data and

we encourage comments that provide alternative sources of data where they are available.

Table 3 – Per Firm Annualized Costs

Firms that Already Comply Firms that Do Not Already

with Proposed Rule Comply with Proposed Rule

All Industries Low-End High-End

Annualized Compliance Cost Per

Firm @ 7% Discount Rate $691 $2,010

Annualized Compliance Cost Per

Firm @ 3% Discount Rate $569 $1,803

One-Time Cost (Firms Already in

Compliance) $78.74

(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

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).

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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

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

273F

Next, we calculate what the break-even benefit would be per consumer, according to this formula:

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

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.

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.

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time at 82% of their mean wage, an hour of saved search time is worth $24.40/hour. 279274F If we divide

the break-even dollar benefit per 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

275F It seems likely that

consumers would experience search time savings of this amount.

Table 4 – Break-Even Analysis

Break-Even Benefit Per Consumer ($) Low-End Estimate High-End Estimate

Full Economy

Total @ 7% Discount Rate $2.43 $6.65

Total @ 3% Discount Rate $2.00 $5.95

Break-Even Time Savings Per Consumer

(Minutes)

Full Economy

Total @ 7% Discount Rate 5.98 16.35

Total @ 3% Discount Rate 4.93 14.62

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.

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).

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

minutes.

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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 breakeven 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.

3. 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.

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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 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

276F Online event ticket sales were reported to

be $8.1 billion in 2022. 277F

282 Live events include music concerts (30.3%), sporting events (33%), and

dance, opera, and theater productions (12.4%). 278F

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.

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

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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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. 279F

284

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.280F

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.281F

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

287 the rule will only be effective if the rule is applied to all ticket sellers and rigorously enforced. 282F 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.

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. 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-byprivate-sector-ticketing-and-travel-companies-to-eliminate-hidden-junk-fees-and-provide-millions-of-customers-withtransparent-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.

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(1) Live-Event Ticketing: Estimated Benefits of Proposed Rule

(a) Consumer Time Savings When Shopping for LiveEvent 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.283F

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 reduction in the average number of listings viewed from showing fees up front is

0.1525 listings.

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

288 Blake et al., supra n. 153.

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range from 5 to 10 minutes per ticket transaction. 284F

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

285F

Next, we estimate the number of consumer purchases of live-event tickets. Live Nation

(which owns 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

286F 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. 287F

292

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

ticket sales using the 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

288F

If we assume that Ticketmaster still has an 80% share of the ticket market (which includes both the

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-whenmaking-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.

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.

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-perspective.

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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

289F This provides a

low-end estimate of the number of tickets sold in the U.S. of 206 million tickets.

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

290F

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. 291F

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.

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.

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.

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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

292F

Thus, the total number of tickets sold is divided by 1.5 or 3 to arrive at an estimated range for the

number of consumer purchases. We estimate the range of live event consumer purchases in the

U.S. to be 69 million on the low end and 408 million on the high end.

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

293F and recent research suggests that individuals

living in the U.S. value their non-work time at 82% of average hourly earnings. 299294F Thus, the value

of non-work time for the average U.S. worker would be $24.40 per hour. As a result, our best

estimate of the total benefit from time savings for completed transactions is roughly $21.3 million

to $253 million per year, depending on how conservative our assumptions are. Table 5 presents the

expected benefits of time savings over the next 10 years in present value.

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%20published%20ticket%20limits.

298 OEWS National, supra n. 272.

299 Hamermesh, supra n. 279 at 198–203.

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Table 5 – Live-Event Ticketing: Estimated Benefits of Time Savings for Completed

Transactions

Low-End

Benefit Estimate

High-End

Benefit Estimate

Completed Transactions

Minutes Viewing Live-Event Ticket Listing

Reduction in Average Number of Listings

Viewed

5

0.1525

10

0.1525

Minutes Saved per Transaction 0.7625 1.525

Number of Tickets Sold in the United States 206,481,486 611,796,995

Average Number of Tickets in a Purchase

Number of Consumer Purchases

Hours Saved Per Year

Value of 1 hour of non-work time

3

68,827,162

874,679

$24.40

1.5

407,864,663

10,366,560

Total $ Saved per year

Abandoned Transactions

Reductions in Deadweight Loss

Total Quantified Benefits (10 Years)

Total Quantified Benefits (10 Years)

7% discount rate

3% discount rate

$21,344,955

Unquantified

Unquantified

$149,918,030

$182,076,794

$252,977,242

Unquantified

Unquantified

$1,776,806,284

$2,157,947,183

Note: Benefits have been discounted to the present value at both 3% and 7% rates. The total tickets sold in

the U.S. market is estimated using the reported number of tickets sold in the primary and secondary market

in the 10-K SEC filing for Live Nation.300 This number of tickets is then adjusted by the proportion of North

American events, and then adjusted by the share of North American GDP attributable to the U.S. Wage rates

are taken from the U.S. Bureau of Labor Statistics and adjusted by the consumer value of time reported in

Hamermesh (2016).301 We relied upon publicly available sources of data in our calculations. We recognize

that there may be additional sources of data and we encourage comments that provide alternative sources of

data where they are available.

(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

300 Live Nation 10-K, supra n. 291.

301 OEWS National, supra n. 272; Hamermesh, supra n. 279.

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prices for tickets up front—as is intended under the proposed rule—consumers purchase fewer and

lower quality tickets and seller revenue is reduced. 297F

302 At this time, we do not quantify the

reduction in deadweight loss, but acknowledge that it is a positive benefit to the rule.

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. 298F

303 Because live-event ticketing is not associated

with a specific NAICS code, we use wages at the national level rather than the industry-specific

wages that are used to calculate costs for the short-term lodging and restaurant industry.

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

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

302 Blake et al., supra n. 153.

303 OEWS National, supra n. 272.

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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. 299F

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. 300F

305 As a high-end estimate of the number of live-event ticket sellers, we use

the sum of the firms within these two NAICS code and assume there are 9,169 firms potentially

impacted by the proposed rule.

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. 301F

306 We use this number of firms as a lowend estimate of the number of firms.

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 low304 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.

306 Ticket Sales Industry Report, supra n. 282.

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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 reoptimize 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.

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Table 6 – Live-Event Ticketing: Estimated Costs of Compliance

Low-End Cost High-End Cost

Estimate Estimate

Number of Live-Event Ticket Sellers 3,326 9,169

Hours to Determine Optimal Pricing and

Contracts (Data Scientist Hours) 40 80

Hours to Update Purchasing Systems to

Reflect Total Price (Website Developer Hours) 40 80

Hours to Determine how Rule Applies (Lawyer

Hours) 5 10

Hourly Wage Rate Data Scientist $55.40 $55.40

Hourly Wage Rate Website Developer $42.11 $42.11

Hourly Wage Lawyer to Review Compliance $78.74 $78.74

One-Time Fixed Cost to Include Fees Up Front $14,282,177 $78,745,206

Hours for Reviewing Rule and Compliance

(Annual) 0 10

Hourly Wage Lawyer to Review Compliance $78.74 $78.74

Total Costs per year $0 $7,219,671

Total Quantified Costs (10 Years)

(One-Time + Annual)

Present Value at 7%

discount rate $14,282,177 $129,453,151

Total Quantified Costs (10 Years)

(One-Time + Annual)

Present Value at 3%

discount rate $14,282,177 $140,330,460

Annualized Compliance Cost Per Firm At 7% discount rate $611.38 $2,010.17

Annualized Compliance Cost Per Firm At 3% discount rate $503.40 $1,794.20

Note: Costs have been discounted to the present at both 3% and 7% rates. The per firm costs for the liveevent ticketing industry are the same as the per firm costs for the remaining firms in the economy (exclusive

of live-event ticketing, short-term lodging, and restaurants) because we assume that 100% of firms in the

live-event ticketing industry would incur additional costs to comply with the proposed rule and we use

national wages for the live-event ticketing industry, as opposed to industry specific wages for short-term

lodging and restaurants. The high-end estimate of firms is the sum of the number of firms in NAICS code

561599 and NAICS code 7113 reported by the U.S. Census Bureau. 302F

307 We relied upon publicly available

sources of data in our calculations. We recognize that there may be additional sources of data and we

encourage comments that provide alternative sources of data where they are available.

(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

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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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.

Table 7 – Live-Event Ticketing: Estimated Net Benefits

10-Year Period

Low-end High-end

Estimate Estimate

7% discount Total Quantified Benefits $149,918,030 $1,776,806,284 rate

3% discount Total Quantified Benefits $182,076,794 $2,157,947,183 rate

7% discount Total Quantified Costs (One-Time + Annual) $14,282,177 $129,453,151 rate

3% discount Total Quantified Costs (One-Time + Annual) $14,282,177 $140,330,460 rate

(Low Benefits – (High Benefits –

High Cost) Low Cost)

7% discount Net Benefits (10 Years) $20,464,879 $1,762,524,107 rate

3% discount Net Benefits (10 Years) $41,746,333 $2,143,665,007 rate

Note: Benefits have been discounted to the present at both 3% and 7% rates.

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.

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Table 8 – Live-Event Ticketing: Summary of Key Uncertainties

Assumption or Uncertainty Impact on Benefits

Assumptions to estimate total

number of consumers in the

United States purchasing liveevent tickets in a given year:

 Ticketmaster sales of

tickets in North America

are proportional to events

in North America

 Total tickets sold in U.S.

is proportional to

Ticketmaster share of

ticket market revenue

 Adjusting total Ticketmaster tickets sold (North

America + International) by proportion of events

in North America may overestimate or

underestimate tickets sold in North America.

 Market share extrapolation based on revenue share

may underestimate or overestimate the total

number of tickets sold in the U.S.

 Number of tickets

purchased in average

consumer transaction (1.5

or 3 tickets per consumer)

 Adjusting total tickets sold by number of tickets in

average transaction may overestimate or

underestimate the total number of consumer

transactions

Reduction in Listings Viewed

 Blake et al. (2021) paper

showing reduction of 0.16

listings viewed on

StubHub with upfront

pricing

 Assuming upfront pricing leads to 0.16 fewer

listings viewed may underestimate total search

time reduced, because it does not account for

consumers using other purchasing systems

(competitors)

Time to conduct ticket

transaction:

 Shopping cart clocks from

Ticketmaster and

StubHub sale pages (5 or

10 minutes)

 Assuming consumers use full timer clock may

overestimate transaction time

Assumption or Uncertainty Impact on Costs

Number of firms selling tickets:

 Sum of firms in potential

NAICS codes

 IBIS World report on

Online Ticket Sellers

 May overestimate total number of firms affected if

a large proportion of firms in these NAICS codes

are not subject to the proposed rule

 May underestimate total costs if there are a

meaningful number of firms selling tickets offline

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Number of hours to comply with

proposed rule:

 Hours of lawyer time, data

analyst time, and web

developer time

 May overestimate costs per firm if many firms

either already comply or have the systems in place

to easily comply with proposed rule. Also may

underestimate costs if compliance requires greater

number of hours.

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 liveevent 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

303F 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.

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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. 304F

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. 305F

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.

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. 306F

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

307F

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

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.

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.

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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 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

308F 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.

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

309F In this section, we

outline how the benefits are calculated in Table 9 and the assumptions we make. The table reports a

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.

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.

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set of basic search statistics used in the calculation, the savings per year for consumers who book at

U.S. short-term 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.

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.310F

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 may 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.

(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

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.

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Airbnb user search behavior collected by Fradkin (2017) to calculate that consumers spend 9.48

minutes to view one listing. 311F

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

312F 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.

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.313F

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.314F

319

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

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).

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

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.

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only view one website before booking a room. One study suggests that consumers in fact visit an

average of 17 websites before booking. 315F

320 In addition, the average reduction in listings viewed may

also underestimate benefits from eliminating drip pricing because it is 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.

According to the Bureau of Labor Statistics Occupational Employment Statistics, 321

316F 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

317F

Thus, the value of non-work time for the average U.S. worker is estimated to be $24.40 per hour.

(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). 318F

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.

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.

321 OEWS National, supra n. 272.

322 Hamermesh, supra n. 279 at 198–203.

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-recordhighs-2022.

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Dividing the total number of nights booked by the average number of nights per booking

gives 715 million total bookings. 319F

324 About 91.8%, or 657 million, of these bookings are made by

U.S. consumers. 320F

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.

(iii) Foreign Hotels and Home Share with USFacing 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

321F

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.

(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.

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-oninternational-gueststays#:~:text=We%20estimate%20that%208.2%25%20of%20all%20hotel%20guests,Miami%20at%2057.5%25%E2%

80%94are%20highly%20dependent%20on%20international%20guests.

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.

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Table 9 - Short-Term Lodging: Estimated Benefits of Time Savings for Completed

Transactions

10-Year Period

Low-end

Benefit Estimate

High-end

Benefit Estimate

Search Statistics

Minutes to View Listing

Reduction in Average Number of Listings Viewed

Minutes Saved Per Transaction

Value of 1 hour of non-work time

9.48

0.25

2.39

$24.40

14.41

0.24

3.53

$24.40

US Hotels and Home Share

Total Number of Nights Booked

Average Nights Per Booking

Number of Bookings

Number of Bookings Made by US Consumers

Total Savings Per Year

Foreign Hotels and Home Share

1,287,361,938

2

715,201,077

656,554,589

$637,176,656

1,287,361,938

2

715,201,077

656,554,589

$941,617,067

Number of Foreign Bookings Made by US Consumers 27,356,441 27,356,441

Total Savings Per Year $26,549,027 $39,234,044

All Hotels and Home Share

Total Bookings

Hours Saved by US Consumers Per Year

Total $ Saved Per Year

Abandoned Transactions

683,911,030

27,198,305

$663,725,684

Unquantified

683,911,030

40,193,545

$980,851,112

Unquantified

Reductions in Deadweight Loss

Total Quantified Benefits

Total Quantified Benefits

7% discount rate

3% discount rate

Unquantified

$4,661,731,460

$5,661,714,710

Unquantified

$6,889,087,761

$8,366,858,934

Note: Benefits over 10 years have been discounted to the present at both 3% and 7% rates. The value of time

for hotel consumers is the mean hourly wage and adjusted by the consumer value of time reported in

Hamermesh (2016).322F

327 Average nights per booking is from Hotel Tech Report. 323F328 We relied upon publicly

available sources of data in our calculations. We recognize that there may be additional sources of data and

we encourage comments that provide alternative sources of data where they are available.

327 OEWS National, supra n. 272; Hamermesh, supra n. 279.

328 Hotel Tech Report, supra n. 324.

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(b) Additional unquantified benefits: reductions in

deadweight loss and abandoned transactions

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 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

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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. 324F

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.

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, 325F

330 and Panel C shows the total combined costs for both groups.

(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 addon 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. 326F

331

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

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. 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.

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.

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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

327F 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. 333328F 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/airbnbstatistics/#:~:text=People%20stay%20an%20average%20of%202.4%20times%20longer,highest%20number%20of%2

0any%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-thanprofessional114
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, reprogram the website to include the total price, and review and confirm compliance. Thus, the onetime 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

329F 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 between $331 million and $1001 million using a 7% discount rate, and

between $331 million and $1040 million using a 3% discount rate.

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 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

ones/#:~:text=About%2086%25%20of%20the%204%20million%20Airbnb%20hosts,roughly%20560%2C000%20ope

rate%20in%20the%20United%20States%20%2814%25%29 (providing the number of U.S. hosts).

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.

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in Panel A. Since the U.S. hotel industry’s global market share is about 14.5%, 335330F 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. This method captures the cost of all foreign hotels, including

ones that may not have a U.S. facing website and thus will not be subject to the proposed rule.

Therefore, the costs to foreign hotels may be an overestimate.

We use the percentage of Airbnb’s U.S. revenue (46%) 331F

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.

(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.

Table 10 – Short-Term Lodging: Estimated Costs of Compliance

Low-Cost High-Cost

Estimate Estimate

Panel A: US Hotels and Home Share Hosts

A.1. US Hotels and Home Share Hosts: One Time Costs

Number of US Hotels 47,817 47,817

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).

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.

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Hotels That Impose Drip Pricing (6% of total) 2,868 2,869

Hours to Determine Whether Rule Applies (Non-drip

Price Firms) (Lawyer Hours) 1 1

Hours to Determine Whether Rule Applies (Drip price

firms) (Lawyer Hours) 5 10

Hours to Determine Optimal Pricing and Contracts

(Data Scientist Hours) 40 80

Hours to Update Purchasing Systems to Reflect Total

Price (Website Developer Hours) 40 80

Hourly Wage Rate - Lawyer $91.57 $91.57

Hourly Wage Rate - Data Scientist $39.07 $39.07

Hourly Wage Rate - Website Developer $33.11 $33.11

Total One-Time Fixed Cost for Hotels $13,709,648 $23,309,917

Home Share Hosts in the US 675,603 675,603

Hours to Determine Optimal Pricing for Home Share

Listing 1.18 3.54

Value of Time $24.40 $24.40

Total One-Time Fixed Cost for Home Share Hosts $19,430,966 $58,292,899

Total One-time fixed cost for Hotels + Home Share $33,140,615 $81,602,816 Hosts

A.2. US Hotels and Home Share Hosts: Annual Costs

Hours for Reviewing Rule and Compliance (Annual) 0 10

Hourly Wage - Lawyer $91.57 $91.57

Total annual costs $0 $2,627,162

A.3. US Hotels and Home Share Hosts: Total Costs

Total Costs (One-Time + Annual) 7% discount rate $33,140,615 $100,054,900

Total Costs (One-Time + Annual) 3% discount rate $33,140,615 $104,013,037

Panel B: Foreign Hotels and Home Share Hosts

B.1. Foreign Hotels and Home Share Hosts: One-Time Costs

Total Cost for Foreign Hotels $80,809,337 $137,396,592

Total Cost for Foreign Home Share Hosts $22,522,937 $67,568,812

Total One-Time Fixed Costs $103,332,275 $204,965,404

B.2. Foreign Hotels and Home Share Hosts: Annual costs

Total Annual Costs $0 $15,485,385

B.3. Foreign Hotels and Home Share Hosts: Total Costs

Total Costs (One-Time + Annual) 7% discount rate $103,332,275 $313,728,271

Total Costs (One-Time + Annual) 3% discount rate $103,332,275 $337,058,882

Panel C: All Hotels and Home Share Hosts (US + Foreign)

Total One-Time Fixed Costs $136,472,889 $286,568,220

Total Annual Costs $0 $18,112,547

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Grand Total Costs (One-Time + Annual) 7% discount rate $136,472,889 $413,783,170

Grand Total Costs (One-Time + Annual) 3% discount rate $136,472,889 $441,071,919

Annualized Cost Per firm 7% discount rate $406.35 $1,232.06

Annualized Cost Per firm 3% discount rate $334.58 $1,081.35

Note: Costs over 10 years have been discounted to the present at both 3% and 7% rates. The number of

U.S. hotels is from the U.S. Census Bureau. 332F

337 The statistic that 6% of U.S. hotels impose drip pricing

comes from an AHLA comment to the ANPR. 333F

338 All hourly wages come from the U.S. Bureau of Labor

Statistics.334F

339 The value of time for hotel consumers is the hourly wage rate adjusted by the consumer value

of time.335F

340 The total cost for foreign hotels is calculated by extrapolating from the total cost for U.S. hotels

using the U.S.’s global market share of the short-term lodging industry from IBISWorld Industry

Reports.336F

341 The total cost for foreign home share hosts is calculated by extrapolating from the total cost for

U.S. home share costs using Airbnb’s U.S. revenue as a percentage of its total revenue, as reported in

Airbnb’s 2022 10-K Filing.337F

342 We relied upon publicly available sources of data in our calculations. We

recognize that there may be additional sources of data and we encourage comments that provide alternative

sources of data where they are available.

(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.

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.

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).

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Table 11 - Short-Term Lodging: Estimated Net Benefits

Low-end High-end

Estimate Estimate

Total Benefits 7% discount rate $4,661,731,460 $6,889,087,761

Total Benefits 3% discount rate $5,661,714,710 $8,366,858,934

Total Costs (One-Time +

Annual) 7% discount rate $136,472,889 $413,783,170

Total Costs (One-Time +

Annual) 3% discount rate $136,472,889 $441,071,919

(Low Benefits – High Cost) (High Benefits – Low Cost)

$4,247,948,290 $6,752,614,872

Net Benefits 3% discount rate $5,220,642,791 $8,230,386,045

Net Benefits 7% discount rate

Note: Benefits have been discounted to the present at both 3% and 7%.

(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.

Table 12 – Short-Term Lodging: Summary of Key Uncertainties

Assumption or Uncertainty in

Benefits Calculation

We assume that reduction in

average listings viewed is

proportional (as a percentage of

the baseline mean) to the

reduction in average tickets

viewed in the Blake et al. (2021)

StubHub study.

Impact on Benefits

This likely underestimates benefits because short-term

lodgings vary substantially both within and across

locations in the magnitude of the resort fees they charge,

unlike tickets on a ticketing platform. In addition, the

hotel search cost literature finds search cost savings from

improved hotel ranking (which may be comparable to

removing drip pricing) that are very large and imply

bigger reductions in average listings viewed.

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We assume that because 96% of

all trips taken by U.S. consumers

are domestic, 96% of all rooms

booked by U.S. consumers are

located in the U.S.

Trips taken does not necessarily equal rooms booked, and

it is likely that only some subset of trips taken by U.S.

consumers also correspond to a room booking. If the true

percentage of domestic bookings is greater than 96%, our

estimate of the number of foreign hotel bookings will be

too small. If it is less than 96%, our estimate of foreign

hotel bookings will be too large.

We assume consumers only visit

one travel website before booking

a room.

If consumers visit more than one website before booking,

the average reductions in listings viewed in response to

this rule may be larger than our estimates, causing us to

underestimate benefits.

Assumption or Uncertainty in

Costs Calculation

Impact on Costs

6% of all firms impose drip

pricing.

The AHLA stated in a comment that “only 6% of hotels

nationwide charge a mandatory resort/destination/amenity

fee.” We assume that this means that 6% of firms impose

drip pricing, and not 6% of all establishments (physical

hotel buildings). If it is actually 6% of all establishments

that impose drip pricing, then our estimate likely

overestimates the number of firms that impose drip

pricing, leading to inflated costs. For example, if all chain

hotels impose drip pricing for at least one of their

establishments and none or very few independent hotels

do, the number of firms would be much smaller than 6%

of all firms.

Number of hours to comply with

proposed rule: Hours of lawyer

time, data analyst time, and web

developer time

May overestimate costs per firm if many firms either

already comply or have the systems in place to easily

comply with proposed rule. May underestimate costs if

compliance requires greater number of hours.

Airbnb’s market share in the U.S.

home share industry is the same

as its share of total hosts in the

US

If Airbnb’s share of hosts is smaller than its market share,

then the extrapolation to give the number of home share

hosts in the U.S. (and therefore their total costs) will be

underestimated. It will be overestimated if the share of

hosts is larger than the market share.

Hours each Airbnb host spends

repricing listings due to proposed

rule

May overestimate costs if hosts spend less time repricing,

or do not reprice at all. May underestimate costs if hosts

spend more time.

We assume that the U.S. hotel

industry’s global market share by

revenue is the same as its global

market share by cost.

May underestimate costs for foreign hotels if true global

cost share is smaller. May overestimate costs if true global

cost share is bigger.

We assume that the percentage of May underestimate costs for hosts located outside of the

revenue Airbnb made in the U.S. U.S. if the true market share is smaller. May overestimate

is the same as the U.S. home costs if true global cost share is bigger.

share market’s global market

share.

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We assume that 100% of all costs

to foreign hotels with U.S.-facing

websites will be passed on to U.S.

consumers.

We include costs to foreign hotels with US-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, though we believe it will be

trivial. Nevertheless, to be conservative we include all

costs to foreign hotels and home share hosts. This inflates

our cost estimates, resulting in a smaller, more

conservative net benefit.

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.

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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

338F These

fees are typically a percentage of the subtotal before sales tax. Furthermore, 81% of the restaurants

adding these fees plan to continue adding these charges for more than a year.

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. 339F

344 Finally, some restaurants have added inflationrelated charges and others are charging consumers a fee for paying with credit cards instead of

cash.

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

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

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.

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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

340F All fees imposed by a

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.

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restaurant, including mandatory service charges, accrue to the restaurant’s owner, and the owner

has full discretion 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 of the income it

receives. In addition, a restaurant may choose to disclose how these mandatory service 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.

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.341F

346 Regardless of how restaurants employing mandatory service

fees are using or distributing these fees, consumers likely view these larger fees as tip

replacements; consequently, consumers will leave little or no tip when made aware of restaurants’

service fees. Changes in tipping will subsequently impact the labor market for waitstaff.

(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 no346 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.

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tipping-expected model. 342F

347 Since most restaurants use the traditional tipping model, a restaurant

including mandatory 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.

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.

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.

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(a) Reductions in Deadweight Loss

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. 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. 343F

348 Restaurants and drinking establishments fall

under the two-digit NAICS code of 72 for accommodation and food services, and we use industryspecific 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.

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(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

349 once.344F

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 Rule345F

350 (“Menu Labeling RIA”), with prices inflated to 2023 levels according to

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.

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).

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the BLS CPI Inflation Calculator. 346F

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.

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 fullservice 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

347F For other establishments (limitedservice restaurants, cafeterias, coffee shops, etc.), we assume that menu boards have an average

replacement cost of $715. For all establishments 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.

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.

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.

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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.

Table 13 – Restaurants: Estimated Costs of Compliance

Present Value of Costs Over a 10-Year Period

Number of restaurants by type

All restaurant types

Full-service restaurants

Bars

Limited-service restaurants

Cafeterias, buffets, snacks, coffee shops, etc.

Firms

466,976

217,103

38,253

156,138

56,611

Establishments

615,135

249,975

39,129

251,533

74,498

Percentage of full-service firms charging fees

Percentage of other firms charging fees

Hourly Wages

Lawyers

Managers

Staff

100%

13%

Rate

$88.88

$31.47

$15.89

Upfront Costs

Per firm labor hours required for compliance

Hours to determine how rule applies, presently

compliant firms (lawyer hours)

Hours to determine how rule applies, presently

noncompliant firms (lawyer hours)

Hours to reoptimize prices (manager time)

Low-Cost

Estimate

1

5

5

High-Cost

Estimate

1

10

10

Per establishment hours required for compliance

Hours to swap out menus/menu boards (manager time)

Hours to swap out menus/menu boards (staff time)

1

1

1

1

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Per firm menu costs

Cost to redesign menus $4,818.27

Per establishment menu costs

Number of printed menus to be replaced

Full-service restaurants 91

Bars 78

Cost per printed menu $2.60

Percentage of menus to be replaced 0% 50%

Number of menu boards to be replaced

Limited-service restaurants 3

Cafeterias, buffets, snacks, coffee shops, etc. 1

Cost per menu board $715.07

One-Time Fixed Cost to Include Fees Up Front $1,452,046,501 $1,638,454,104

Annual Costs

Hours for Reviewing Rule and Compliance (Annual) 0 10

Total Annual Costs $0 $221,962,921

Total Costs

Total Quantified Costs (One-Time + Annual) 7% discount rate $1,452,046,501 $3,197,428,782

Total Quantified Costs (One-Time + Annual) 3% discount rate $1,452,046,501 $3,531,842,847

Annualized Per Firm Costs (Noncompliant Firms)

Full-Service/Bars 7% discount rate $772 $1,769

Full-Service/Bars 3% discount rate $1,179 $2,153

Limited-service/cafeterias/coffee shops 7% discount rate $635 $1,614

Limited-service/cafeterias/coffee shops 3% discount rate $971 $1,930

Note: Costs have been discounted to the present at both 3% and 7% rates. Numbers of firms and

establishments from NAICS codes 7224 (Drinking Places (Alcoholic Beverages)) and 7225 (Restaurants

and Other Eating Places). Hourly wages are from the Bureau of Labor Statistics. 348F

353 Annualized per firms

costs for firms that are not presently compliant represent a weighted average of the indicated restaurant

types. We relied upon publicly available sources of data in our calculations. We recognize that there may be

additional sources of data and we encourage comments that provide alternative sources of data where they

are available.

(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

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

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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.

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. 349F

354 There is also evidence that, after

controlling for other factors, women earn less in tips than men. 355

350F 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 and gender disparities in the waitstaff labor market.

(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 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.

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.

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(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.

Table 14 – Restaurants: Summary of Key Uncertainties

Assumption or Uncertainty Impact on Costs

Types of firm cost:

 Using NAICS codes to

determine which

restaurant firms count as

full-service versus nonfull-service

 Full-service restaurants

and bars use printed

menus while other

restaurant types use menu

boards

 May underestimate or overestimate percentage of

firms estimated to be out of compliance if NAICS

and NRA classifications do not line up

 May overestimate or underestimate aggregate

menu costs

Number of hours necessary to

comply with proposed rule:

 Hours of lawyer time,

restaurant manager time,

and restaurant employee

time

 May overestimate costs per firm if many firms

either already comply or have the systems in place

to easily comply with proposed rule. Also may

underestimate costs if compliance requires greater

number of hours

Menu costs:

 Using Menu Labeling

Regulatory Impact

Analysis assumptions on

costs of menu design,

May underestimate costs if menu costs have outpaced

inflation. May underestimate or overestimate costs since

menu redesign costs may not be comparable between this

context and Menu Labeling Rule context

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menu printing, and menu

board replacement

 Number of seats per

establishment

 May underestimate costs if restaurants have

increased capacity since 2014

Assumption or Uncertainty Impact on Break-Even Benefits Amount

Number of affected consumers:

 Assuming all adults are

affected

 Underestimates required break-even benefit

amount per consumer if some adults are not

impacted by the rule because they are not

restaurant consumers or they only consume from

establishments unaffected by the rule

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

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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 shortterm 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.

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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.351F

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.

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. Section 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.

356 44 U.S.C. 3502(3); 5 CFR 1320.3(c).

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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 Section 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 Section

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

Section 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:

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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.352F

357

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.

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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 *

163,636 entities).353F

358

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 wage 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 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

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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. 354F

359 The remaining requirements are addressed in this

section.

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. 355F

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.

359 See Sections III and VII A.–B. of this preamble.

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.356F

361 First, several other rules or laws contain requirements regarding

the disclosure of pricing information in specific industries or in connection with specific

361 The proposed rule is intended to supplement or complement these existing laws and rules.

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transactions, including: the Consumer Leasing Act, 357F

362 the Electronic Fund Transfer Act, 358F363 the

Franchise Rule,359F

364 the Funeral Rule,360F365 the Truth in Lending Act, 361F366 the proposed amendments to

the Negative Option Rule, 362F

367 the Real Estate Settlement Procedures Act, 363F368 the Telemarketing

Sales Rule,364F

369 the Truth in Savings Act, 365F370 the Empowering Broadband Consumers through

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.

363For 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.

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Transparency Rule,366F

371 and the Full Fare Advertising Rule. 367F372 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.

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, 368F

373 the Mortgage Acts and Practices Advertising

Rule (Regulation N),369F

374 the Mortgage Assistance Relief Services Rule (Regulation O), 370F375 the

proposed amendments to the Negative Option Rule, 371F

376 the Telemarketing Sales Rule, 372F377 the

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.

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.

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TILA,373F

378 and the TISA.374F379 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.

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?

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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(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? 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.

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(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. Section 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?

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(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 Section

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?

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(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?

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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 send physical goods to a consumer through the mail, including private mail services” §

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?

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(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. Section 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?

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(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. Section 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 Section 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 Section 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

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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.

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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?

(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?

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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 [INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION IN

THE FEDERAL REGISTER]. 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, Suite CC-5610 (Annex

B), 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

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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-2023-00XX to read a plain-language summary of the

proposed rule. The FTC Act and other laws that 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 [INSERT DATE 60

DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. 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

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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.

XIII. List of Subjects in 16 CFR Part 464

Consumer protection, Trade practices, Advertising

XIV. Proposed Rule on Unfair or Deceptive Fees, 16 CFR Part 464

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

Authority: 15 U.S.C. 41–58.

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 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.

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(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 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.

§ 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.

§ 464.3 Misleading Fees Prohibited

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(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.

§ 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.

By direction of the Commission.

AprilJ. Tabor, Secretary.

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XV. Appendix

A. Appendix A: 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 clickedon listings.

Table A.1

(1) (2) (3)

All Searchers

Searchers

who sent at

least one

contact

Searchers

who did not

send a

contact

Observations

Average unique listings seen

Average time spent browsing (min)

Average number of contacts (proxy for clicks)

12,241

68.53

35.77

4,426

87.81

57.87

2.37

7,815

57.61

23.25

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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 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. 375F

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.

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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:

c௜௝ = c௜൫TimeConstraint௜, Slot௝൯ = exp൫γ௜଴ + γ௜ଵTimeConstraint௜ + γ௜ଶSlot௝൯

= exp൫3.07 − . 05 ∗ TimeConstraint௜ + . 01 ∗ Slot௝൯

where TimeConstraint௜ is the number of days between consumer i’s search and her check-in.

Slot௝ 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.

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