`[Federal Register Volume 90, Number 6 (Friday, January 10, 2025)]
[Rules and Regulations]
[Pages 2066-2167]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30293]



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Vol. 90

Friday,

No. 6

January 10, 2025

Part II





Federal Trade Commission





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16 CFR Part 464





Trade Regulation Rule on Unfair or Deceptive Fees; Final Rule

  Federal Register / Vol. 90 , No. 6 / Friday, January 10, 2025 / Rules 
and Regulations  

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FEDERAL TRADE COMMISSION

16 CFR Part 464

RIN 3084-AB77


Trade Regulation Rule on Unfair or Deceptive Fees

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is 
issuing a final trade regulation rule entitled ``Rule on Unfair or 
Deceptive Fees'' (``rule'' or ``final rule'') and Statement of Basis 
and Purpose addressing certain unfair or deceptive practices involving 
fees or charges for live-event tickets and short-term lodging: bait-
and-switch pricing that hides the total price by omitting mandatory 
fees and charges from advertised prices; and misrepresenting the 
nature, purpose, amount, and refundability of fees or charges. The 
final rule specifies that it is an unfair and deceptive practice for 
businesses to offer, display, or advertise any price of live-event 
tickets or short-term lodging without clearly, conspicuously and 
prominently disclosing the total price. The rule also requires 
businesses to clearly and conspicuously make certain disclosures before 
a consumer consents to pay. The rule further specifies that it is an 
unfair and deceptive practice for businesses to misrepresent any fee or 
charge in any offer, display, or advertisement for live-event tickets 
or short-term lodging.

DATES: This rule is effective May 12, 2025.

ADDRESSES: Copies of this document are available on the Commission's 
website, www.ftc.gov.

FOR FURTHER INFORMATION CONTACT: Janice Kopec or Annette Soberats, 
Division of Advertising Practices, Bureau of Consumer Protection, 
Federal Trade Commission, 202-326-2550 (Kopec), 202-326-2921 
(Soberats), [email protected], [email protected].

SUPPLEMENTARY INFORMATION: 

Statement of Basis and Purpose

Table of Contents

I. Background
    A. Advance Notice of Proposed Rulemaking
    B. Notice of Proposed Rulemaking
    C. Informal Public Hearing
II. The Legal Standard for Promulgating the Rule
    A. Prevalence of Acts or Practices Addressed by the Rule
    B. Manner and Context in Which the Acts or Practices Are 
Deceptive or Unfair
    C. The Economic Effect of the Rule
III. Section-by-Section Analysis
    A. Sec.  464.1: Definitions
    1. Ancillary Good or Service
    2. Business
    3. Clear(ly) and Conspicuous(ly)
    4. Covered Good or Service
    5. Government Charges
    6. Pricing Information
    7. Shipping Charges
    8. Total Price
    (a) Mandatory Fees
    (b) Maximum Total
    (c) Itemization
    (d) Exclusions From Total Price
    (e) Intersection With IRS Requirements
    B. Sec.  464.2 Hidden Fees Prohibited
    1. Sec.  464.2(a)
    (a) Contingent Fees
    (b) Ticket Service Fees
    (c) Credit Card and Other Payment Processing Surcharges
    (d) Dynamic Pricing and National Advertising
    (e) Rebates, Bundled Pricing, and Other Discounts: Compliance 
When Promotional Pricing Models Have Different Fees
    (f) Online Marketplaces
    2. Sec.  464.2(b)
    3. Sec.  464.2(c)
    C. Sec.  464.3 Misleading Fees Prohibited
    D. Sec.  464.4 Relation to State Laws
    E. Sec.  464.5 Severability
IV. Challenges to the FTC's Legal Authority To Promulgate the Rule
    A. Major Questions Doctrine
    1. The Rule Does Not Address a Major Question
    (a) The Commission Has a Long History of Addressing Unfair or 
Deceptive Acts or Practices Related to Pricing Information
    (b) Commenters' Claims About the Scope of the Acts or Practices 
Covered by the Rule Are Inapplicable or Overstated
    2. Congress Provided the Commission With a Clear Grant of 
Authority To Promulgate This Rule
    B. Non-Delegation Doctrine
    C. First Amendment
    1. Comments
    2. Legal Standard
    3. The Rule's Disclosure Requirements Are Constitutional Under 
Zauderer
    4. The Rule Does Not Prohibit Truthful Speech
    5. The Rule's Treatment of Credit Card Fees and Government 
Charges Does Not Violate the First Amendment
    D. Commission Structure
    E. Administrative Procedure Act
V. Final Regulatory Analysis Under Section 22 of the FTC Act
    A. Concise Statement of the Need for, and Objectives of, the 
Final Rule
    B. Alternatives to the Final Rule the Commission Considered, 
Reasons for the Commission's Determination That the Final Rule Will 
Attain Its Objectives in a Manner Consistent With Applicable Law, 
and the Reasons the Particular Alternative Was Chosen
    C. The NPRM's Preliminary Regulatory Analysis
    D. Significant Issues Raised by Comments, the Commission's 
Assessment and Response, and Any Changes Made as a Result
    1. Comments on Costs
    (a) Public Comments: Estimated Costs Are Too Low
    (b) Public Comments: Unquantified Costs to Firms
    (c) Public Comments: Unquantified Costs to Consumers
    (d) Public Comments: Unquantified Costs to Third Parties
    (e) Public Comments: Costs From Incorporating Contingent Fees 
Into Total Price
    2. Comments on Benefits
    (a) Public Comments: Benefits Are Too High
    (b) Public Comments: Unquantified Benefits
    3. Comments on the Economy-Wide Break-Even Analysis
    (a) Public Comments: Break-Even Analysis Has Incorrect 
Assumptions or Contains Errors
    (b) Public Comments: Break-Even Analysis Is Not Enough To 
Justify an Economy-Wide Rule
    (c) Public Comments: Break-Even Analysis Is Satisfactory
    E. Economic Regulatory Analysis of the Final Rule's Costs and 
Benefits
    1. Economic Rationale for the Final Rule
    (a) Shrouded Pricing as a Cause of Market Failure
    (b) Shrouded Pricing as a Source of Biased Expectations
    2. Economic Effects of the Final Rule
    (a) General Benefits of the Final Rule
    i. Reductions in Search Costs
    ii. Reductions in Deadweight Loss
    (b) Welfare Transfers
    (c) General Costs of the Final Rule
    3. Quantified Welfare Effects
    (a) Quantified Compliance Costs
    (b) Break-Even Analysis
    i. Sensitivity Analysis: Assume Higher Wage Rates
    (c) Quantified Benefits and Costs: Live-Event Ticketing Industry
    i. Live-Event Ticketing: Estimated Benefits of the Final Rule
    (a) Consumer Time Savings When Shopping for Live-Event Tickets
    (b) Additional Unquantified Benefits: Reductions in Deadweight 
Loss and Abandoned Transactions
    ii. Live-Event Ticketing: Estimated Costs of the Final Rule
    iii. Live-Event Ticketing: Net Benefits
    iv. Live-Event Ticketing: Uncertainties
    (d) Quantified Benefits and Costs: Short-Term Lodging Industry
    i. Short-Term Lodging: Estimated Benefits of the Final Rule
    (a) Search Statistics
    (b) U.S. Hotels and Home Shares
    (c) Foreign Hotels and Home Shares With U.S.-Facing websites
    (d) All Hotels and Home Shares
    (e) Additional Unquantified Benefits: Reductions In Deadweight 
Loss and Abandoned Transactions
    ii. Short-Term Lodging: Estimated Costs of the Final Rule
    (a) Panel A: U.S. Hotels and Home Share Hosts
    (b) Panel B: Foreign Hotels and Home Share Hosts

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    (c) Panel C: All Hotels and Home Share Hosts (US + Foreign)
    iii. Short-Term Lodging: Net Benefits
    iv. Short-Term Lodging: Uncertainties
    4. Economic Evaluation of Alternatives
    5. Summary of Results
    6. Appendix A: Model of Market Distortion Caused by Drip Pricing
    7. Appendix B: Short-Term Lodging Industry Minutes per Listing 
Calculations
    (a) Low-End Estimate of Minutes per Listing Calculation
    (b) High-End Estimate of Minutes per Listing Calculation
VI. Paperwork Reduction Act
    A. Disclosures Related to Final Sec.  464.2(a) Through (c)
    1. Number of Respondents
    2. Estimated One-Time Hour Burden
    3. Estimated One-Time Labor Costs
    4. Estimated One-Time Non-Labor Costs
    5. Projected Labor Costs Likely Overestimated
    B. Prohibited Misrepresentations Under Final Sec.  464.3
VII. Regulatory Flexibility Act--Final Regulatory Flexibility 
Analysis
    A. Statement of the Need for, and Objectives of, the Rule
    B. Significant Issues Raised by Comments, the Commission's 
Assessment and Response, and Any Changes Made as a Result
    C. Comment by the Small Business Administration, Office of 
Advocacy, the Commission's Assessment and Response, and Any Changes 
Made as a Result
    D. Description and Estimate of the Number of Small Entities To 
Which the Rule Will Apply
    E. Description of the Projected Reporting, Recordkeeping, and 
Other Compliance Requirements
    F. Discussion of Significant Alternatives the Commission 
Considered That Would Accomplish the Stated Objectives of the Final 
Rule and That Would Minimize Any Significant Economic Impact of the 
Final Rule on Small Entities
VIII. Congressional Review Act

I. Background

    When shopping for a good or service, consumers want to know: how 
much? It is a bedrock principle of FTC law that price is material to a 
consumer's decision about whether to purchase a good or service. 
Consumers look for prices to comparison shop and to weigh what a good 
or service might be worth. Most consumers also rely on price to answer 
critical budgeting questions such as: Can I afford this hotel or short-
term rental for my upcoming vacation? Can I afford these concert 
tickets? Unfortunately, consumers face widespread and growing unfair 
and deceptive fee practices that make it much harder to find out: how 
much will this cost?
    There is nothing new about businesses using bait-and-switch tactics 
to reel in and deceive consumers. The Commission has a long history of 
bringing enforcement actions against these unfair and deceptive 
practices. Quoting a misleading, artificially low price and then adding 
in mandatory fees and other charges throughout the buying process--a 
practice known today as drip pricing--is a quintessential example of 
bait-and-switch pricing and is a practice that falls squarely within 
the scope of the Commission's long history of work to protect 
consumers. While today this practice goes by a different name, the 
playbook has not changed: lure in consumers with a low price, then hit 
them with a higher price after they have invested in the transaction 
and sunk time and effort into trying to buy a good or service for an 
illusory price. Behavioral and economic research explains that 
piecemeal numbers and explanations cannot cure the deception or 
mitigate the harms to consumers when businesses employ these pricing 
tactics. Often consumers finish the transaction without an accurate 
understanding of the total price of goods or services.
    In recent years, bait-and-switch pricing has garnered widespread 
public attention. Consumers have cried foul when they discovered the 
cost of their hotel stays were significantly higher than expected due 
to a mandatory, hidden ``resort fee,'' typically charged for services 
that consumers expected to be a part of staying in a hotel. Consumers 
have also complained when they tried to purchase tickets to a live 
event, only to find out that the quoted ticket price almost doubled by 
the time they reached the final checkout page. Consumers have 
confronted a host of mysterious, mandatory, ``convenience,'' 
``processing,'' or ``service'' charges that are either non-descript or 
otherwise misleading. These practices are frustrating for consumers 
when they shop for travel and entertainment especially because these 
purchases can be significant expenditures. This rulemaking record is 
replete with individual stories of consumers inundated by bait-and-
switch pricing and misleading fees and charges.
    For example, an individual commenter lamented the pervasiveness of 
bait-and-switch pricing tactics across everyday purchases:

    Like almost every American consumer, I have had to pay these 
``junk fees'' in various circumstances. I consider myself reasonably 
well informed, yet have been surprised by them, because they keep 
[c]ropping up in unexpected places. Like many, I've experienced them 
in hotels, with car rentals and telecom providers. In these 
instances, the consumer has no real recourse, as the bargaining 
power is wholly unequal. However, these fees are now impacting every 
aspect of commerce. ``Convenience'' fees have impacted me with food 
service. ``Facility'' fees charges at fitness facilities. Credit 
card fees in excess of the actual interchange fees being charged at 
restaurants. It's endless, ubiquitous and makes it extremely 
difficult for consumers to make informed decisions.\1\
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    \1\ FTC-2023-0064-0886 (Individual Commenter).

    As another individual commenter aptly put it, ``It's one thing to 
be on guard when walking down a dark alley, but being on guard every 
time you want to take a vacation, go to a concert, fly home to see a 
sick loved one--that's just not fair.'' \2\
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    \2\ FTC-2023-0064-1576 (Individual Commenter).
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    It is no surprise that, once bait-and-switch pricing tactics are 
used by some businesses to obscure the cost of a good or service, they 
tend to spread. Businesses that want to compete on the true price of 
their offering are undercut by businesses that use hidden or misleading 
fees to display an artificially low price. As studies confirm, in such 
instances, consumers cannot shop for price effectively. This forces 
businesses into a race to the bottom and results in more and more 
businesses using hidden and misleading fees to remain competitive. When 
these types of fees are eventually revealed, consumers are left 
frustrated with a new and unexpected higher price and misleading fees 
and charges that prevent them from having a real understanding of what 
they are getting in return for these additional fees.
    The Rule on Unfair or Deceptive Fees addresses these problems 
directly in the live-event ticketing industry and the short-term 
lodging industry, which includes temporary sleeping accommodations at a 
hotel, motel, inn, short-term rental, vacation rental, or other place 
of lodging. These two industries have engaged in bait-and-switch 
pricing tactics for years. The rule ensures that when businesses 
advertise a price for live-event tickets or short-term lodging, it is 
the total price, and when they explain a fee or charge, the description 
is truthful. In simple terms: tell consumers the real price and do not 
lie about the fees or charges. The final rule does this by addressing 
two specific and prevalent unfair and deceptive practices: (1) bait-
and-switch pricing that hides the total price of live-event tickets and 
short-term lodging by omitting mandatory fees and charges from 
advertised prices, including through drip pricing, and (2) 
misrepresenting the nature, purpose, amount, and refundability of fees 
or charges. The rule has two main

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components. First, the final rule requires businesses that offer a 
price for live-event tickets or short-term lodging to disclose the 
total price, inclusive of most mandatory charges, and to make sure that 
the total price is disclosed more prominently than other pricing 
information, except the final amount of payment. Second, the final rule 
prohibits misrepresentations about fees or charges in any offer, 
display, or advertisement for live-event tickets and short-term 
lodging.
    The final rule is tailored to target these specific unfair and 
deceptive pricing practices, while preserving flexibility for live-
event ticket and short-term lodging businesses. The rule does not 
prohibit any one type of fee, nor does it prohibit specific pricing 
practices such as itemization of fees or dynamic pricing. The rule does 
not require that all fees be included when offering a price--just 
mandatory ones. The rule gives businesses discretion to list optional 
fees selected by the consumer and government and shipping charges 
separately. The discretion to set prices remains squarely with 
businesses; the rule simply requires that they tell consumers the truth 
about prices for live-event tickets and short-term lodging.

A. Advance Notice of Proposed Rulemaking

    The Commission published, on November 8, 2022, an advance notice of 
proposed rulemaking (``ANPR'') \3\ under the authority of section 18 of 
the Federal Trade Commission Act (``FTC Act'') \4\ to address certain 
unfair or deceptive acts or practices involving fees. 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 help inform the 
Commission about whether such practices are prevalent and, if so, 
whether and how to proceed with a notice of proposed rulemaking 
(``NPRM''). The Commission was particularly interested in the following 
practices that it identified as the subjects of investigations, 
enforcement actions, workshops, research, and consumer education: (a) 
misrepresenting or failing to disclose clearly and conspicuously, on 
any advertisement or in any marketing, the total price of any good or 
service for sale; (b) misrepresenting or failing to disclose clearly 
and conspicuously, on any advertisement or in any marketing, the 
existence of any fees, interest, charges, or other costs that are not 
reasonably avoidable for any good or service; (c) misrepresenting or 
failing to disclose clearly and conspicuously whether fees, interest, 
charges, products, or services are optional or required; (d) 
misrepresenting or failing to disclose clearly and conspicuously any 
material restriction, limitation, or condition concerning any good or 
service that may result in a mandatory charge in addition to the cost 
of the good or service or that may diminish the consumer's use of the 
good or service, including the amount the consumer receives; (e) 
misrepresenting that a consumer owes payments for any product or 
service the consumer did not agree to purchase; (f) billing or charging 
consumers for fees, interest, goods, services, or programs without 
express and informed consent; (g) billing or charging consumers for 
fees, interest, goods, services, or programs that have little or no 
added value to the consumer or that consumers would reasonably assume 
to be included within the overall advertised price;[thinsp]and (h) 
misrepresenting or failing to disclose clearly and conspicuously, on 
any advertisement or in any marketing, the nature or purpose of any 
fees, interest, charges, or other costs.
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    \3\ Advance notice of proposed rulemaking; request for public 
comment: Unfair or Deceptive Fees Trade Regulation Rule Commission 
Matter No. R207011, 87 FR 67413 (Nov. 8, 2022). The ANPR and other 
documents pertaining to this rulemaking are available on the FTC web 
page, Rulemaking: Unfair or Deceptive Fees, https://www.ftc.gov/legal-library/browse/rules/rulemaking-unfair-or-deceptive-fees.
    \4\ 15 U.S.C. 57a(b)(2). Section 18 authorizes the Commission to 
promulgate, modify, or repeal trade regulation rules that define 
with specificity acts or practices that are unfair or deceptive in 
or affecting commerce within the meaning of section 5(a)(1) of the 
FTC Act, 15 U.S.C. 45(a)(1).
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    The Commission specifically sought public comment on the prevalence 
of such practices and the costs and benefits of a rule that would 
require upfront inclusion of mandatory fees whenever consumers are 
quoted a price, including by asking a series of questions to solicit 
data and commentary. The Commission took comments for sixty days, 
extended the comment period by an additional thirty days,\5\ and 
carefully considered the more than 12,000 comments received.\6\
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    \5\ Notice; extension of public comment period: Unfair or 
Deceptive Fees Trade Regulation Rule, 88 FR 4796 (Jan. 25, 2023).
    \6\ Publicly posted comments are available to view through 
Regulations.gov under Docket ID FTC-2022-0069 at https://www.regulations.gov/docket/FTC-2022-0069/comments.
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B. Notice of Proposed Rulemaking

    Based on the substance of the comments received in response to the 
ANPR, as well as the Commission's history of enforcement and other 
information, on November 9, 2023, the Commission published an NPRM, 
which proposed an industry-neutral rule that would prohibit 
misrepresenting the total price of goods or services by omitting 
mandatory fees from advertised prices and misrepresenting the nature 
and purpose of fees.\7\ The NPRM described the comments received in 
response to the ANPR and examined the Commission's prior enforcement 
actions and other responses concerning unfair and deceptive fees. In 
the NPRM, the Commission stated that it has reason to believe that 
certain unfair or deceptive acts or practices involving fees are 
prevalent, specifically: (1) misrepresenting the total price of goods 
and services by omitting mandatory fees from advertised prices and (2) 
misrepresenting the nature and purpose of fees. After discussing the 
comments and explaining its considerations in developing a proposed 
rule, the Commission also posed specific questions for comment and 
provided explanation of the proposed rule text. Finally, the NPRM set 
out the Commission's proposed regulatory text.\8\ The Commission took 
public comments for sixty days, and extended the comment period for an 
additional thirty days.\9\
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    \7\ Notice of proposed rulemaking; request for public comment: 
Trade Regulation Rule on Unfair or Deceptive Fees, 88 FR 77420 (Nov. 
9, 2023). In accordance with section 18(b)(2)(C) of the FTC Act, 15 
U.S.C. 57a(b)(2)(C), on October 10, 2023, the Commission sent 
notices to the House Committee on Energy and Commerce and the Senate 
Committee on Commerce, Science and Transportation seeking comment 
concerning the utility and scope of the trade regulation rule 
proposed in the NPRM and including the full text of the NPRM.
    \8\ NPRM, 88 FR 77483.
    \9\ Notice of proposed rulemaking; extension of public comment 
period: Trade Regulation Rule on Unfair or Deceptive Fees, 89 FR 38 
(Jan. 2, 2024).
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    In response to the NPRM, the Commission received over 60,800 
comments from stakeholders representing a wide range of viewpoints and 
industries.\10\ These stakeholders

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included numerous individual consumers and consumer groups who 
described examples and experiences with the unfair and deceptive fee 
practices identified by the Commission. Commenters also included a 
range of business owners, trade associations, and other industry 
groups; academics; and government officials and agencies from all 
levels of government. While some commenters raised concerns and 
recommended specific modifications to, or exemptions from, the 
Commission's proposal, the overwhelming majority of commenters strongly 
supported the Commission's proposed rule.
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    \10\ Publicly available comments are available to view through 
Regulations.gov under Docket ID FTC-2023-0064 at https://www.regulations.gov/document/FTC-2023-0064-0001/comment. As noted on 
Regulations.gov, not every comment is made publicly available. For 
example, ``[a]gencies may redact or withhold certain Comment 
Submissions . . . , such as those containing . . . duplicate/near 
duplicate examples of a mass-mail campaign. Therefore, the total in 
the Number of Comments Posted Box may be lower than the total in the 
Comments Received Box.'' See https://www.regulations.gov/faq, 
Frequently Asked Questions, General FAQs, Find Dockets, Documents, 
and Comments FAQs, answer to How are Comments counted and posted to 
Regulations.gov?. In this rulemaking, Regulations.gov identified ten 
mass-mail campaigns as part of the total number of comments received 
of over 60,800. One mass-mail campaign alone accounted for close to 
48,200 comments, and all mass-mail campaigns combined accounted for 
more than 57,400 comments. Because comments within each mass-mail 
campaign are highly similar, only representative comments of each 
mass-mail campaign are publicly posted on Regulations.gov. In 
addition to representative mass-mail comments, the more than 3,300 
comments that Regulations.gov did not identify as belonging to a 
mass-mail campaign are publicly posted. The Commission received and 
considered all filed comments, including all mass-mail comments.
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    The proposed rule received widespread support in comments from 
Federal,\11\ State, and local \12\ elected officials; State Attorneys 
General; \13\ Federal,\14\ State, and local \15\ government agencies; 
public policy and consumer advocates,\16\ including housing advocates 
\17\ and advocates for the incarcerated or formerly incarcerated; \18\ 
university public policy advocates and clinics; \19\ academics; \20\ 
legal services providers; \21\ and industry members from a broad range 
of market sectors, including online merchants,\22\ live-event 
ticketing,\23\ and hotels and other short-term lodging.\24\ These 
commenters supporting the rule confirmed the prevalence of hidden and 
misrepresented fees throughout the economy, across large and small 
industries subject to the Commission's jurisdiction, ranging, for 
example, from travel, live events, restaurants, delivery, rental 
housing, and correctional services to carpet cleaning, dietary 
supplements, moving companies, and gyms. These commenters supported the 
rule for its benefits to both consumers and honest businesses.
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    \11\ See, e.g., FTC-2023-0064-3135 (U.S. Senate, Sen. Robert P. 
Casey, Jr.); FTC-2023-0064-3271 (U.S. Senate, Sen. Amy Klobuchar); 
FTC-2023-0064-2858 (U.S. House of Representatives, Rep. Maxwell 
Alejandro Frost, Rep. Jimmy Gomez, Rep. Barbara Lee, Rep. Rashida 
Tlaib, Rep. Kevin Mullin, Rep. Dwight Evans, Rep. Judy Chu, Rep. 
Greg Casar, Rep. Dan Goldman, Rep. Salud Carbajal).
    \12\ See, e.g., FTC-2023-0064-1411 (Arizona House of 
Representatives, Rep. Analise Ortiz); FTC-2023-0064-2938 (Colorado 
House of Representatives, Rep. Naquetta Ricks); FTC-2023-0064-2926 
(Florida House of Representatives, Rep. Rita Harris); FTC-2023-0064-
3081 (Florida House of Representatives, Rep. Anna V. Eskamani); FTC-
2023-0064-3103 (Florida House of Representatives, Rep. Angela 
Nixon); FTC-2023-0064-3117 (Maryland House of Delegates, Del. Julie 
Palakovich Carr); FTC-2023-0064-2341 (Massachusetts House of 
Representatives, Rep. Lindsay Sabadosa); FTC-2023-0064-3072 
(Michigan Senate and House of Representatives, Sen. Darrin 
Camilleri, Sen. Mary Cavanagh, and Rep. Betsy Coffia); FTC-2023-
0064-3079 (Montana State Senate, Senate Democratic Caucus, Sen. Pat 
Flowers, Sen. Susan Webber, Sen. Andrea Olsen, Sen. Edie 
McClafferty, Sen. Jen Gross, Sen. Janet Ellis, Sen. Shane Morigeau, 
Sen. Ellie Boldman, Sen. Ryan Lynch, Sen. Christopher Pope, Sen. 
Mike Fox, Sen. Denise Hayman, Sen. Willis Curdy, and Sen. Mary Ann 
Dunwell); FTC-2023-0064-3184 (New York Senate, Sen. Michael 
Gianaris); FTC-2023-0064-3123 (Syracuse, New York, City Auditor 
Alexander Marion); FTC-2023-0064-3149 (North Carolina House of 
Representatives, Rep. Julie von Haefen); FTC-2023-0064-3237 (North 
Carolina House of Representatives, Rep. Pricey Harrison).
    \13\ See, e.g., FTC-2023-0064-3150 (Attorney General of the 
State of California); FTC-2023-0064-3215 (Attorneys General of the 
States of North Carolina and Pennsylvania, along with Attorneys 
General of the States or Territories of Arizona, Colorado, 
Connecticut, Delaware, District of Columbia, Hawaii, Illinois, 
Maine, Michigan, Minnesota, New Jersey, New York, Oklahoma, Oregon, 
Vermont, Washington, and Wisconsin).
    \14\ See, e.g., FTC-2023-0064-3134 (U.S. Department of 
Transportation, Federal Motor Carrier Safety Administration); FTC-
2023-0064-3187 (U.S. Department of Justice, Antitrust Division).
    \15\ See, e.g., FTC-2023-0064-1519 (New York City Department of 
Consumer and Worker Protection); FTC-2023-0064-2883 (District of 
Columbia, Office of the People's Counsel); FTC-2023-0064-3196 (South 
Carolina Department of Consumer Affairs).
    \16\ See, e.g., FTC-2023-0064-1028 (Complex Trauma Project); 
FTC-2023-0064-2885 (AARP); FTC-2023-0064-3104 (Truth in Advertising, 
Inc.); FTC-2023-0064-3160 (Consumer Federation of America on behalf 
of itself and 51 other national and State consumer advocacy groups, 
authored by American Economic Liberties Project, Consumer Action, 
Consumer Federation of America, National Association of Consumer 
Advocates, National Consumer Law Center, National Consumers League, 
U.S. Public Interest Research Group); FTC-2023-0064-3162 (BBB 
National Programs, Inc.); FTC-2023-0064-3191 (Community Catalyst and 
32 other organizations focused on health care and consumer 
protection issues); FTC-2023-0064-3205 (Consumer Reports); FTC-2023-
0064-3216 (Demand Progress Education Fund); FTC-2023-0064-3218 
(National Consumer Law Center); FTC-2023-0064-3242 (William E. 
Morris Institute for Justice); FTC-2023-0064-3246 (Coalition for App 
Fairness); FTC-2023-0064-3248 (DC Jobs With Justice on behalf of 
Fair Price, Fair Wage Coalition); FTC-2023-0064-3259 (National 
Women's Law Center); FTC-2023-0064-3270 (Consumer Federation of 
America, National Consumer Law Center, and National Association of 
Consumer Advocates); FTC-2023-0064-3290 (U.S. Public Interest 
Research Group Education Fund); FTC-2023-0064-3302 (Public Citizen).
    \17\ See, e.g., FTC-2023-0064-1431 (McPherson Housing 
Coalition); FTC-2023-0064-2851 (Housing Action Illinois); FTC-2023-
0064-3102 (Corporation for Supportive Housing); FTC-2023-0064-3235 
(National Housing Law Project).
    \18\ See, e.g., FTC-2023-0064-2915 (Voice of the Experienced); 
FTC-2023-0064-2696 (Safe Return Project); FTC-2023-0064-3253 
(Fortune Society); FTC-2023-0064-3260 (Formerly Incarcerated, 
Convicted People & Families Movement, in collaboration with the 
Partnership for Just Housing); FTC-2023-0064-3283 (National Consumer 
Law Center, Prison Policy Initiative, and advocate Stephen Raher).
    \19\ See, e.g., FTC-2023-0064-1939 (Tzedek DC, David A. Clarke 
School of Law, University of the District of Columbia); FTC-2023-
0064-2888 (Housing Policy Clinic, University of Texas School of 
Law); FTC-2023-0064-3146 (Institute for Policy Integrity, New York 
University School of Law); FTC-2023-0064-3255 (Carrie Floyd, 
Clinical Teaching Fellow, Veterans Legal Clinic, and Mira Edmonds, 
Clinical Assistant Professor of Law, Civil-Criminal Litigation 
Clinic, University of Michigan Law School); FTC-2023-0064-3275 
(Berkeley Center for Consumer Law & Economic Justice, University of 
California, Berkeley School of Law, and Consumer Law Advocates, 
Scholars & Students Network); FTC-2023-0064-3268 (Housing & Eviction 
Defense Clinic, University of Connecticut School of Law).
    \20\ See, e.g., FTC-2023-0064-1294 (James J. Angel, Ph.D., CFP, 
CFA, Professor, Georgetown University, McDonough School of 
Business); FTC-2023-0064-1467 (Richard J. Peltz-Steele, Chancellor 
Professor, University of Massachusetts Law School).
    \21\ See, e.g., FTC-2023-0064-2862 (Legal Aid Foundation of Los 
Angeles); FTC-2023-0064-2892 (Community Legal Services of 
Philadelphia); FTC-2023-0064-2920 (Colorado Poverty Law Project); 
FTC-2023-0064-3090 (Atlanta Legal Aid Society, Inc.); FTC-2023-0064-
3225 (CED Law); FTC-2023-0064-3278 (Southeast Louisiana Legal 
Services).
    \22\ See, e.g., FTC-2023-0064-2840 (Indie Sellers Guild); FTC-
2023-0064-2901 (E-Merchants Trade Council, Inc.).
    \23\ See, e.g., FTC-2023-0064-2856 (National Football League); 
FTC-2023-0064-3108 (Christian L. Castle, Esq.; Mala Sharma, 
President, Georgia Music Partners; and Dr. David C. Lowery, founder 
of musical groups Cracker and Camper Van Beethoven, and a lecturer 
at the University of Georgia Terry College of Business); FTC-2023-
0064-3122 (Vivid Seats); FTC-2023-0064-3195 (League of American 
Orchestras on behalf of itself and Association of Performing Arts 
Professionals, Carnegie Hall, Dance/USA, Folk Alliance 
International, Future of Music Coalition, National Performance 
Network, OPERA America, PAVA--Performing Arts Venues Alliance, 
Performing Arts Alliance, and Theatre Communications Group); FTC-
2023-0064-3212 (TickPick, LLC); FTC-2023-0064-3230 (Future of Music 
Coalition); FTC-2023-0064-3250 (National Independent Talent 
Organization); FTC-2023-0064-3266 (StubHub, Inc.); FTC-2023-0064-
3292 (National Association of Theatre Owners); FTC-2023-0064-3304 
(Recording Academy); FTC-2023-0064-3306 (Live Nation Entertainment 
and its subsidiary Ticketmaster North America); FTC-2023-0064-3105 
(Charleston Symphony); FTC-2023-0064-3241 (National Association of 
Ticket Brokers).
    \24\ See, e.g., FTC-2023-0064-3077 (Far Horizons Travel); FTC-
2023-0064-3094 (American Hotel & Lodging Association); FTC-2023-
0064-3106 (American Society of Travel Advisors, Inc.); FTC-2023-
0064-3204 (Expedia Group); FTC-2023-0064-3244 (Vacation Rental 
Management Association).
---------------------------------------------------------------------------

    Individual consumers overwhelmingly supported the rule. Out of 
60,853 total comments received, a mass mailing of close to 48,186 
consumer commenters stated that they supported ``the FTC's efforts to 
protect American consumers and crack down on unscrupulous businesses 
that tack on junk fees at the end of the purchasing process,'' and 
urged the Commission ``to pass this rule to not only save consumers 
tens of billions of dollars each year, but to level the playing field 
for honest businesses who are transparent about their costs and

[[Page 2070]]

fees.'' \25\ Other mass mailings contained similar comments in support. 
In a mass mailing of about 344 comments, consumer commenters made near-
identical statements to the aforementioned mass mailing and added: 
``Junk fees are monies a business tacks on at the end of the purchasing 
process instead of being transparent about the full price upfront. 
These fees are common when people are purchasing airline and concert 
tickets, booking hotel rooms, paying utility bills, and renting 
apartments.'' \26\ A mass mailing submitted by about 315 consumer 
commenters stated, ``I support cracking down on hidden junk fees that 
cost Americans billions of dollars each year.'' \27\ A mass mailing by 
about nineteen consumer commenters stated, ``For too long, individuals 
have been subjected to misleading practices, such as the omission of 
mandatory fees from advertised prices and misrepresentation of the 
nature and purpose of fees. These practices not only erode trust but 
also hinder informed decision-making by consumers.'' \28\ A mass 
mailing by about thirteen consumer commenters simply urged: ``Stop junk 
fees!'' \29\ Additional comments from individual consumers also 
supported the rule.
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    \25\ See, e.g., FTC-2023-0064-0962, FTC-2023-0064-1186, FTC-
2023-0064-1219, FTC-2023-0064-1230, FTC-2023-0064-1826, FTC-2023-
0064-1827, FTC-2023-0064-1933, FTC-2023-0064-1946.
    \26\ See, e.g., FTC-2023-0064-2290.
    \27\ See, e.g., FTC-2023-0064-3156.
    \28\ See, e.g., FTC-2023-0064-2962.
    \29\ See, e.g., FTC-2023-0064-2964.
---------------------------------------------------------------------------

    Other commenters opposed the rule, sought exemptions from the rule, 
or expressed concern about the rule's definitions or application to 
specific pricing scenarios. They included a Federal government agency; 
\30\ national business groups and public policy advocates,\31\ 
including tax groups and advisors; \32\ academics; \33\ representatives 
from auto dealers and service providers; \34\ app-based delivery 
platforms; \35\ financial and real estate settlement services; \36\ 
franchised businesses; \37\ representatives of housing providers,\38\ 
including apartment associations \39\ and a housing advertising 
platform; \40\ hospitality groups, including hotel \41\ and restaurant 
associations; \42\ funeral and cemetery providers; \43\ gaming 
associations; \44\ telecommunications providers; \45\ live-event 
venues; \46\ a law firm; \47\ providers of communications services to 
incarcerated people; \48\ and other sectors.\49\ The commenters argued 
that the FTC failed to establish the prevalence of the defined unfair 
and deceptive practices and failed to conduct an adequate cost-benefit 
analysis, and that the proposed rule would interfere with established 
pricing models, could not be applied to all pricing scenarios, would 
overlap with other laws and regulations, or would exceed the FTC's 
rulemaking authority or jurisdiction.
---------------------------------------------------------------------------

    \30\ U.S. Small Bus. Admin., Office of Advocacy, Re: Trade 
Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001, 
https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
    \31\ See, e.g., FTC-2023-0064-2367 (Small Business Majority); 
FTC-2023-0064-2887 (Progressive Policy Institute); FTC-2023-0064-
2919 (National Automatic Merchandising Association); FTC-2023-0064-
3028 (Competitive Enterprise Institute); FTC-2023-0064-3016 
(National Federation of Independent Business, Inc.); FTC-2023-0064-
3127 (U.S. Chamber of Commerce); FTC-2023-0064-3128 (Merchants 
Payments Coalition); FTC-2023-0064-3137 (Chamber of Progress); FTC-
2023-0064-3140 (Merchant Advisory Group); FTC-2023-0064-3145 
(Association of National Advertisers, Inc.); FTC-2023-0064-3147 
(American Land Title Association); FTC-2023-0064-3173 (Center for 
Individual Freedom); FTC-2023-0064-3186 (National LGBT Chamber of 
Commerce and National Asian/Pacific Islander American Chamber of 
Commerce & Entrepreneurship); FTC-2023-0064-3208 (FreedomWorks); 
FTC-2023-0064-3267 (National Retail Federation).
    \32\ See, e.g., FTC-2023-0064-3100 (Civitas Advisors, Inc.); 
FTC-2023-0064-3126 (Tax Foundation); FTC-2023-0064-3258 (National 
Taxpayers Union Foundation).
    \33\ See, e.g., FTC-2023-0064-2891 (Mary Sullivan, George 
Washington University, Regulatory Studies Center); FTC-2023-0064-
3264 (Mark J. Perry, Ph.D., Professor Emeritus of Economics at 
University of Michigan-Flint and Senior Fellow Emeritus at the 
American Enterprise Institute).
    \34\ See, e.g., FTC-2023-0064-3121 (National Independent 
Automobile Dealers Association); FTC-2023-0064-3189 (National 
Automobile Dealers Association); FTC-2023-0064-3206 (Motor Vehicle 
Protection Products Association, Guaranteed Asset Protection 
Alliance, and Service Contract Industry Council); FTC-2023-0064-3276 
(Automotive Service Association).
    \35\ See, e.g., FTC-2023-0064-3263 (Flex Association); FTC-2023-
0064-3202 (TechNet).
    \36\ See, e.g., FTC-2023-0064-1425 (Iowa Bankers Association); 
FTC-2023-0064-1941 (Independent Bankers Association of Texas); FTC-
2023-0064-2574 (BattleLine LLC via Investor Protection Initiative); 
FTC-2023-0064-2893 (America's Credit Unions); FTC-2023-0064-3119 
(Money Services Business Association, Inc.); FTC-2023-0064-3138 
(Independent Community Bankers of America); FTC-2023-0064-3139 
(American Bankers Association and Consumer Bankers Association); 
FTC-2023-0064-3142 (American Escrow Association); FTC-2023-0064-3144 
(Mortgage Bankers Association); FTC-2023-0064-3168 (American 
Financial Services Association); FTC-2023-0064-3182 (Massachusetts 
Bankers Association).
    \37\ See, e.g., FTC-2023-0064-3141 (Coalition of Franchisee 
Associations); FTC-2023-0064-3211 (American Association of 
Franchisees & Dealers); FTC-2023-0064-3294 (International Franchise 
Association).
    \38\ See, e.g., FTC-2023-0064-3066 (Norhart, Inc.); FTC-2023-
0064-3115 (National Association of Residential Property Managers); 
FTC-2023-0064-3116 (Manufactured Housing Institute); FTC-2023-0064-
3133 (National Multifamily Housing Council and National Apartment 
Association); FTC-2023-0064-3152 (Building Owners & Managers 
Association, Council for Affordable & Rural Housing, Housing 
Advisory Group, Institute of Real Estate Management, Manufactured 
Housing Institute, National Apartment Association, National 
Association of Home Builders, National Association of Residential 
Property Managers, National Leased Housing Association, National 
Multifamily Housing Council, and Real Estate Roundtable).
    \39\ See, e.g., FTC-2023-0064-2981 (Apartment & Office Building 
Association of Metropolitan Washington); FTC-2023-0064-3042 (Nevada 
State Apartment Association); FTC-2023-0064-3044 (San Angelo 
Apartment Association); FTC-2023-0064-3045 (Chicagoland Apartment 
Association); FTC-2023-0064-3089 (Apartment Association of Northeast 
Wisconsin and Fox Valley Apartment Association); FTC-2023-0064-3111 
(Houston Apartment Association); FTC-2023-0064-3172 (New Jersey 
Apartment Association); FTC-2023-0064-3296 (Bay Area Apartment 
Association); FTC-2023-0064-3311 (Greater Cincinnati Northern 
Kentucky Apartment Association); FTC-2023-0064-3312 (Tulsa Apartment 
Association); FTC-2023-0064-3313 (Property Management Association of 
Michigan).
    \40\ FTC-2023-0064-3289 (Zillow Group).
    \41\ See, e.g., FTC-2023-0064-3262 (Skyscanner); FTC-2023-0064-
3293 (Travel Technology Association).
    \42\ See, e.g., FTC-2023-0064-2918 (Elite Catering + Event 
Professionals); FTC-2023-0064-3078 (Washington Hospitality 
Association); FTC-2023-0064-3080 (UNITE HERE); FTC-2023-0064-3101 
(High Road Restaurants); FTC-2023-0064-3180 (Independent Restaurant 
Coalition); FTC-2023-0064-3197 (American Beverage Licensees); FTC-
2023-0064-3203 (American Pizza Community); FTC-2023-0064-3219 
(Georgia Restaurant Association); FTC-2023-0064-3300 (National 
Restaurant Association).
    \43\ See, e.g., FTC-2023-0064-3065 (Carriage Services, Inc.); 
FTC-2023-0064-3130 (International Cemetery, Cremation & Funeral 
Association); FTC-2023-0064-3210 (Service Corporation 
International).
    \44\ See, e.g., FTC-2023-0064-2886 (American Gaming 
Association); FTC-2023-0064-3120 (Arizona Indian Gaming 
Association).
    \45\ See, e.g., FTC-2023-0064-3261 (National Association of 
Broadcasters); FTC-2023-0064-2884 (NTCA--The Rural Broadband 
Association); FTC-2023-0064-3143 (ACA Connects--America's 
Communications Association); FTC-2023-0064-3233 (NCTA--The internet 
& Television Association); FTC-2023-0064-3234 (CTIA--The Wireless 
Association); FTC-2023-0064-3295 (USTelecom--The Broadband 
Association).
    \46\ See, e.g., FTC-2023-0064-3033 (The Rebel Lounge, Lucky Man 
Concerts LLC, PHX Fest, RelentlessBeats LLC).
    \47\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \48\ See, e.g., FTC-2023-0064-3236 (NCIC Inmate Communications); 
FTC-2023-0064-3284 (Global Tel*link Corporation d/b/a ViaPath 
Technologies).
    \49\ See, e.g., FTC-2023-0064-2906 (National Association of 
College & University Business Officers, American Council on 
Education); FTC-2023-0064-3217 (Bowling Proprietors' Association of 
America); FTC-2023-0064-3249 (Marine Retailers Association of the 
Americas); FTC-2023-0064-3251 (National RV Dealers Association); 
FTC-2023-0064-3269 (IHRSA--The Health & Fitness Association). Towing 
& Recovery Association of America, Inc. submitted a late comment, 
which the Commission considered in its discretion and makes 
available at https://www.ftc.gov/system/files/ftc_gov/pdf/R207011TRAAComment.pdf.
---------------------------------------------------------------------------

    Members of the restaurant industry voiced opposition to the 
proposal. A mass mailing from about 4,650

[[Page 2071]]

restaurant owners criticized the rule as a one-size-fits-all approach 
that would be unworkable for the restaurant industry. In addition, 
members of the rental housing industry also submitted comments in 
opposition to the proposed rule. A mass mailing from about 3,781 
members of the rental housing industry stated that it is virtually 
impossible to predict and disclose in advertisements total prices that 
include all mandatory fees that residents could incur during lease 
terms. The Commission does not address the specific issues raised by 
these industries and others that fall outside the scope of this final 
rule.\50\
---------------------------------------------------------------------------

    \50\ See, e.g., FTC-2023-0064-2953, FTC-2023-0064-2961, FTC-
2023-0064-2972; FTC-2023-0064-2971.
---------------------------------------------------------------------------

C. Informal Public Hearing

    On March 27, 2024, the Commission published an initial notice of 
informal hearing, which also served as the final notice of informal 
hearing (``Informal Hearing Notice'').\51\ The Informal Hearing Notice 
was published in accordance with section 18(b)(1) of the FTC Act, 15 
U.S.C. 57a(b)(1), which requires the Commission to provide an 
opportunity for an informal hearing in section 18 rulemaking 
proceedings. The Informal Hearing Notice identified eight commenters to 
the NPRM that requested an informal hearing in accordance with the 
requirements of 16 CFR 1.11(e), as well as nine additional commenters 
that requested the opportunity to make an oral presentation if the 
Commission was to hold an informal hearing at others' requests. A 
number of commenters, including several who requested an informal 
hearing, proposed potential disputed issues of material fact for the 
Commission's consideration.\52\ The Commission reviewed these potential 
issues and concluded in its Informal Hearing Notice that there were no 
disputed issues of material fact to resolve at the hearing.
---------------------------------------------------------------------------

    \51\ Initial notice of informal hearing; final notice of 
informal hearing; list of Hearing Participants; requests for 
submissions from Hearing Participants: Trade Regulation Rule on 
Unfair or Deceptive Fees, 89 FR 21216 (Mar. 27, 2024).
    \52\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce); 
FTC-2023-0064-3143 (ACA Connects); FTC-2023-0064-3139 (American 
Bankers Association and Consumer Bankers Association); FTC-2023-
0064-3294 (International Franchise Association); FTC-2023-0064-3233 
(NCTA--The internet & Television Association).
---------------------------------------------------------------------------

    On April 24, 2024, the Commission conducted an informal public 
hearing. In the Informal Hearing Notice, which was formally approved by 
vote of the Commission, the Commission's Chief Presiding Officer, the 
Chair, designated the Honorable Jay L. Himes, an Administrative Law 
Judge for the Federal Trade Commission, to serve as the presiding 
officer of the informal hearing. Seventeen interested parties were 
identified in the Informal Hearing Notice,\53\ and six of them made 
documentary submissions in support of their hearing testimony.\54\ 
Fifteen interested parties made presentations,\55\ and two did not 
appear at the hearing.\56\ The majority of interested parties that 
appeared spoke in support of the proposed rule. However, several voiced 
opposition to the rule, explained perceived problems with the proposed 
rule text, or argued that the Commission incorrectly concluded that 
there were no disputed issues of material fact raised in response to 
the NPRM.
---------------------------------------------------------------------------

    \53\ The interested parties were: ACA Connects--America's 
Communication Association; American Bankers Association and Consumer 
Bankers Association; U.S. Chamber of Commerce; NCTA--The internet & 
Television Association; International Franchise Association; 
BattleLine LLC; IHRSA--The Global Health & Fitness Association; 
National Taxpayers Union Foundation; Consumer Federation of America, 
representing a coalition of 52 national and state consumer advocacy 
groups; Consumer Federation of America with National Consumer Law 
Center and National Association of Consumer Advocates; Community 
Catalyst, representing a coalition of 33 health and consumer 
protection advocacy groups; National Housing Law Project, 
representing a coalition of 39 housing justice advocacy 
organizations; National Consumer Law Center, Prison Policy 
Initiative, and Stephen Raher; Formerly Incarcerated, Convicted 
People & Families Movement; Truth in Advertising, Inc.; National 
Consumer Law Center; and Fair Price, Fair Wage Coalition.
    \54\ The interested parties that made documentary submissions in 
connection with the informal hearing were: National Taxpayers Union 
Foundation; Community Catalyst; National Housing Law Project; 
Consumer Federation of America; U.S. Chamber of Commerce; and NCTA--
The internet & Television Association. Each of the documentary 
submissions is posted in the Informal Hearing Documents folder 
available at https://www.ftc.gov/legal-library/browse/rules/rulemaking-unfair-or-deceptive-fees.
    \55\ Transcript, Informal Hearing on Proposed Trade Regulation 
Rule on Unfair or Deceptive Fees (Apr. 24, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/transcript-deceptive-fees.pdf.
    \56\ American Bankers Association and Consumer Bankers 
Association and the U.S. Chamber of Commerce did not appear at the 
Informal Hearing despite being given the opportunity to do so.
---------------------------------------------------------------------------

II. The Legal Standard for Promulgating the Rule

    The Commission is promulgating 16 CFR part 464 (``final rule'' or 
``rule'') pursuant to section 18 of the FTC Act, 15 U.S.C. 57a, which 
authorizes the Commission to promulgate, modify, and repeal trade 
regulation rules that define with specificity acts or practices in or 
affecting commerce that are unfair or deceptive within the meaning of 
section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).\57\ Whenever the 
Commission promulgates a rule under section 18(a)(1)(B), the rule must 
include a Statement of Basis and Purpose (``SBP'') that addresses: (1) 
the prevalence of the acts or practices addressed by the rule; (2) the 
manner and context in which the acts or practices are unfair or 
deceptive; and (3) the economic effect of the rule, taking into account 
the effect on small businesses and consumers.\58\ The Commission 
summarizes in this section its findings regarding each of these 
requirements.
---------------------------------------------------------------------------

    \57\ See 15 U.S.C. 57a(a)(1)(B).
    \58\ 15 U.S.C. 57a(b)(3). In addition, section 22(b)(2) of the 
FTC Act, 15 U.S.C. 57b-3(b)(2), requires the Commission to prepare a 
final regulatory analysis, which it discusses in section V.
---------------------------------------------------------------------------

    Substantial evidence exists supporting the prevalence of bait-and-
switch pricing and misleading fees and charges economy-wide as well as 
in the live-event ticketing and short-term lodging industries. As 
documented by the rulemaking record, the Commission's work on these 
pricing issues for over a decade, and the complementary actions of the 
Commission's local, State, and international counterparts, these 
specific practices are widespread across the economy and are harmful to 
consumers and honest businesses. Nevertheless, the Commission has 
decided, in its discretion, to focus this final rule on the industries 
in which the Commission first evaluated drip pricing--live-event 
ticketing and short-term lodging--and have a long history of harming 
consumers and honest competitors.
    The Commission notes that the harms of bait-and-switch pricing and 
the misrepresentation of fees and charges are particularly pronounced 
in industries such as these, in which most transactions occur online. 
Consumers trying to comparison shop across multiple websites, or even 
on the same website, when deciding what tickets to purchase or where to 
travel are unable to do so effectively because some businesses hide the 
true total price and instead force consumers to go to different sites 
and click through multiple web pages for each offer to learn the true 
total price.
    Consumer harm is also pronounced in these industries because the 
offered goods and services are often identical (as is the case with 
live-event tickets), or nearly identical (as is the case with competing 
short-term lodging offers in a particular destination and for a 
particular star rating), and the most salient feature is the total 
price, which is shrouded from consumers. Indeed, for some consumers, 
hotel rooms are interchangeable so long as the location, star rating, 
and reviews are similar

[[Page 2072]]

across offers, and what matters most is the total price.
    In the future, the Commission may address these unfair and 
deceptive practices across industries as discussed in the NPRM. For 
now, however, the Commission will address unfair and deceptive pricing 
practices in other industries using its existing section 5 authority.

A. Prevalence of Acts or Practices Addressed by the Rule

    As discussed herein, and in the NPRM, the Commission finds that 
unfair or deceptive pricing practices involving bait-and-switch pricing 
and misleading fees or charges are prevalent throughout the economy and 
affect, or have the potential to affect, virtually every purchasing 
transaction a consumer undertakes, including decisions about basic 
goods or services; where to live, dine, stay, or travel; and what 
events to attend. Specifically, the Commission finds that the following 
unfair or deceptive practices relating to fees are prevalent generally 
throughout the economy and specifically in the live-event ticketing and 
short-term lodging industries: (1) bait-and-switch pricing practices 
that hide the total price of goods or services by omitting mandatory 
fees and charges from advertised prices, including through drip 
pricing, and (2) misrepresenting the nature, purpose, amount, and 
refundability of fees or charges.
    Section 18 of the FTC Act instructs that the Commission may 
determine that unfair or deceptive acts or practices are prevalent if: 
``it has issued cease and desist orders regarding such acts or 
practices'' or ``any other information available to the Commission 
indicates a widespread pattern of unfair or deceptive acts or 
practices.'' \59\ In support of its preliminary finding that these 
practices are prevalent, the NPRM cited enforcement evidence, including 
prior work by the Commission, complementary actions by State Attorneys 
General, private lawsuits, and international actions to address unfair 
or deceptive pricing practices, as well as comments received in 
response to the ANPR.\60\ The NPRM also described legislative and 
regulatory action taken by multiple States to address unfair or 
deceptive fees.
---------------------------------------------------------------------------

    \59\ 15 U.S.C. 57a(b)(3).
    \60\ NPRM, 88 FR 77435; see also, e.g., FTC-2022-0069-6099 
(ANPR) (Consumer Reports 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.); FTC-2022-0069-6095 (ANPR) (Consumer 
Federation of America 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 (ANPR) (UnidosUS 
cited surveys or studies by itself, the Financial Health Network, 
and the Center for Responsible Lending that documented the impact of 
fees related to financial services products.).
---------------------------------------------------------------------------

    To support its prevalence determination herein as to the economy 
generally, and as to the live-event ticketing and short-term lodging 
industries specifically, the Commission reiterates that it has a long 
history of enforcement actions, as well as a plethora of other 
information, indicating a widespread pattern of bait-and-switch pricing 
practices, including drip pricing and misleading fees or charges. In 
addition, the Commission's prevalence determination is further 
supported by the Commission's workshops and warning letters relating to 
bait-and-switch pricing and misleading fees or charges; the behavioral 
and economic research documenting consumer harm from these practices; 
and consumer surveys and reports. The Commission also relies on the 
great majority of the more than 60,800 comments filed in response to 
the NPRM--one of the largest number of comments filed in any Commission 
rulemaking to date--including comments by consumers, consumer groups, 
academics, businesses, and government officials highlighting the 
prevalence of these unfair and deceptive practices and urging the 
Commission to promulgate a final rule to combat them.
    As explained in the NPRM, the Commission has a long history of 
enforcement actions targeting unfair and deceptive bait-and-switch 
pricing tactics concerning hidden fees \61\ and misrepresentations 
regarding the nature and purpose of fees.\62\ The takeaway

[[Page 2073]]

from this enforcement history is clear--businesses cannot hide or 
misrepresent the true cost of a good or service or mislead consumers 
about the nature, purpose, amount, or refundability of fees or charges. 
Some commenters suggested consent orders are not cease-and-desist 
orders that the Commission can rely upon to support a finding of 
prevalence, but that is incorrect. The FTC Act makes clear when it 
intends to exclude consent orders from the ambit of ``cease and desist 
orders,'' and does not do so in section 18.\63\
---------------------------------------------------------------------------

    \61\ See, e.g., Complaint ]] 4-5, 106-14, FTC v. Invitation 
Homes, Inc., No. 24-cv-04280 (N.D. Ga. Sept. 24, 2024) (alleging 
that defendant, among other deceptive and unfair practices, 
deceptively advertised monthly home rental prices that omitted and 
used confusing and buried language about mandatory fees); Complaint 
]] 39-46, FTC v. Vonage Holdings Corp., No. 3:22-cv-6435 (D.N.J. 
Nov. 3, 2022) (alleging in part that defendant charged undisclosed 
large cancellation fees); Complaint ]] 42-44, 50, United States v. 
Funeral Cremation Grp. of N. Am., LLC (``Legacy Cremation Servs.''), 
No. 0:22-cv-60779 (S.D. Fla. 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); Complaint ] 9, FTC v. Liberty Chevrolet, Inc. 
(``Bronx Honda''), No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) 
(alleging defendants advertised low sales prices but later told 
consumers they were required to pay additional charges including 
certification charges); Complaint ] 13, FTC v. NetSpend Corp., No. 
1:16-cv-04203 (N.D. Ga. 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 Complaint ]] 24-25, 29, 40-42, FTC v. AT&T 
Mobility LLC, No. 3:14-cv-04785 (N.D. Cal. Oct. 28, 2014) (alleging 
defendant did not adequately disclose the limitations of defendant's 
data plan offerings and subsequently charged high cancellation fees 
for consumers who chose to end their contracts); Complaint ]] 1, 26, 
39-40, FTC v. Millennium Telecard, Inc., No. 2:11-cv-02479 (D.N.J. 
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); Complaint ] 15, FTC v. CompuCredit Corp., No. 1:08-cv-
01976 (N.D. Ga. June 10, 2008) (alleging in part that defendants 
misrepresented the credit limits on various credit cards and failed 
to disclose fees charged upfront).
    \62\ See, e.g., Complaint ]] 4-5, 106-14, 118-23, Invitation 
Homes, Inc., No. 24-cv-04280 (alleging that defendant, among other 
deceptive and unfair practices, misled consumers about fees by using 
confusing and buried language); Complaint ]] 39-46, Vonage Holdings 
Corp., No. 3:22-cv-6435; Complaint ]] 61-63, FTC v. Benefytt Techs., 
Inc., No. 8:22-cv-1794 (M.D. Fla. Aug. 8, 2022) (alleging in part 
that defendants bundled and charged fees for unwanted products with 
sham health insurance plans); Complaint ]] 17-20, FTC v. Passport 
Auto Grp., Inc., No. 8:22-cv-02670 (D. Md. 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); 
Complaint ]] 3, 33, 41, FTC v. N. Am. Auto. Serv., Inc. (``Napleton 
Auto''), No. 1:22-cv-01690 (E.D. Ill. 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); Complaint ]] 50-
51, Amazon.com, Inc. (``Amazon Flex''), No. C-4746 (FTC June 9, 
2021) (alleging respondents falsely represented that 100% of tips 
would go to the driver in addition to the pay respondents offered 
drivers); Complaint ]] 37-39, FTC v. Lead Express, Inc., No. 2:20-
cv-00840 (D. Nev. 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); Complaint ]] 9-10, FTC v. FleetCor Techs, 
Inc., No. 1:19-cv-05727, 2019 WL 13081514 (N.D. Ga. Dec. 20, 2019) 
(alleging defendants charged consumers arbitrary and unexpected fees 
related to pre-paid fuel cards without consumers' consent); 
Complaint ]] 4, 30-32, 36-37, FTC v. BCO Consulting Servs., Inc., 
No. 8:23-cv-00699 (C.D. Cal. 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); 
Complaint ]] 31-36, FTC v. OMICS Grp. Inc., No. 2:16-cv-02022 (D. 
Nev. 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); Complaint ]] 12, 23-25, FTC v. Lending 
Club Corp., No. 3:18-cv-02454 (N.D. Cal. 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); Complaint ] 37, FTC v. T-Mobile USA, Inc., No. 
2:14-cv-00967 (W.D. Wash. July 1, 2014) (alleging defendant added 
unauthorized third-party charges to the telephone bills of 
consumers); Amended Complaint ]] 21-22, FTC v. Websource Media, LLC, 
No. 4:06-cv-01980 (S.D. Tex. 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); 
Complaint ]] 25-27, FTC v. Stewart Fin. Co., No. 1:03-cv-02648 (N.D. 
Ga. 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); Complaint ]] 19-21, 
24, FTC v. Hold Billing Serv., Ltd., No. SA-98-CA-0629-FB (W.D. Tex. 
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); 
Complaint ]] 18, 33, 56-58, FTC v. Lake, No. 8:15-cv-
00585–CJC-JPR (C.D. Cal. Apr. 14, 2015) (alleging defendants 
misrepresented that trial loan payments or reinstatement fee 
payments would be held in escrow and refunded to the consumer if the 
loan modification was not approved); FTC v. Hope for Car Owners, 
LLC, No. 2:12-CV-778-GEB-EFB, 2013 WL 322895, at *3-4 (E.D. Cal. 
Jan. 24, 2013) (finding that the FTC sufficiently stated a claim for 
misrepresentation of the refundability of vehicle loan modification 
fees and entering default judgment); Amended Complaint ]] 38-39, 58-
60, FTC v. U.S. Mortg. Funding, Inc., No. 9:11-cv-80155-JIC (S.D. 
Fla. July 26, 2011) (alleging defendants misrepresented that an 
upfront loan modification fee was refundable); FTC v. Nat'l Bus. 
Consultants, Inc., 781 F. Supp. 1136, 1143 (E.D. La. 1991) (finding 
that ``defendants' misrepresentations regarding the ease with which 
the `performance deposit' could be refunded composed a large part of 
the various and sundry misrepresentations'').
    \63\ Compare 15 U.S.C. 45(m) (excluding consent orders from the 
type of cease and desist orders that could support an action for 
civil penalties under 15 U.S.C. 45(m)(1)(B)) and 108 Stat. 1691 
(1994) (amending 15 U.S.C. 45(m) to add ``other than a consent 
order'' after the term ``cease and desist order'') with 15 U.S.C. 
57a(b)(3) (stating that the Commission may make a determination of 
prevalence if ``it has issued cease and desist orders regarding such 
acts or practices or any other information available to the 
Commission indicat[ing] a widespread pattern of unfair or deceptive 
acts or practices''). Even if consent orders and the investigations 
that lead up to them are not ``cease and desist orders,'' in making 
a determination of prevalence, the Commission can still rely upon 
them as ``other information.''
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    In addition to the Commission's enforcement actions, for more than 
a decade, the Commission has engaged with the public and issued 
guidance to industry on issues related to bait-and-switch tactics, 
including drip pricing, and the misrepresentation of fees or charges. 
The Commission first engaged with the public on the concept of drip 
pricing in 2012 by convening a conference, titled ``The Economics of 
Drip Pricing,'' to bring together economists and marketing academics to 
``examine the theoretical motivation for drip pricing and its impact on 
consumers, empirical studies, and policy issues pertaining to drip 
pricing.'' \64\ Several psychological theories were discussed at this 
conference, and these theories explain why consumers cannot reasonably 
avoid making errors when the total price is not revealed upfront.\65\ 
Following the workshop, Commission staff sent warning letters to hotels 
and online travel agents that were not adequately disclosing resort 
fees or including those fees in the total price.\66\ These hotels and 
online travel agents were employing drip pricing tactics as well as 
another bait-and-switch pricing tactic, partitioned pricing, to 
inadequately disclose resort fees and hide the total price of a hotel 
stay. Partitioned pricing consists of dividing a price into multiple 
components without ever disclosing the total and leaving consumers to 
figure out the true total price on their own. Hotels, for example, 
might separately list the room rate and ``resort fee'' but never add 
them up and quote an all-inclusive total price. In 2017, the 
Commission's Bureau of Economics published a report that reviewed the 
existing literature on drip pricing and partitioned pricing and 
examined the costs and benefits of disclosing hotel resort fees.\67\ 
The report found that ``[u]nless the total price is disclosed up front, 
separating resort fees from the room rate is unlikely to result in 
benefits that offset the likely harm to consumers.'' \68\ Specifically,
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    \64\ Fed. Trade Comm'n, The Economics of Drip Pricing (May 21, 
2012), https://www.ftc.gov/news-events/events/2012/05/economics-drip-pricing.
    \65\ See, e.g., Fed. Trade Comm'n, The Economics of Drip 
Pricing: Conference Transcript 76-111 (May 21, 2012), https://www.ftc.gov/sites/default/files/documents/public_events/economics-drip-pricing/transcript.pdf.
    \66\ Press Release, Fed. Trade Comm'n, FTC Warns Hotel Operators 
that Price Quotes that Exclude ``Resort Fees'' and Other Mandatory 
Surcharges May Be Deceptive (Nov. 28, 2012), https://www.ftc.gov/news-events/news/press-releases/2012/11/ftc-warns-hotel-operators-price-quotes-exclude-resort-fees-other-mandatory-surcharges-may-be.
    \67\ Mary Sullivan, Fed. Trade Comm'n, Economic Analysis of 
Hotel Resort Fees 4 (2017), https://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf.
    \68\ Id.

separating mandatory resort fees from posted room rates without 
first disclosing the total price is likely to harm consumers by 
increasing the search costs and cognitive costs of finding and 
choosing hotel accommodations. Forcing consumers to click through 
additional web pages to see a hotel's resort fee increases the cost 
of learning the hotel's price. Separating the room rate from the 
resort fee increases the cognitive costs of remembering the hotel's 
price. When it becomes more costly to search and evaluate an 
additional hotel, a consumer's choice is either to incur higher 
total search and cognitive costs or to make an incomplete, less 
informed decision that may result in a more costly room, or 
both.\69\
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    \69\ Id.

    The report observed that hotels could eliminate these costs to 
consumers by including the resort fee in the advertised price; bundling 
the same resort services with the room and charging the same total 
price; listing the components of the total price separately, as long as 
the total price is the most prominently disclosed price; or changing to 
unbundled, optional resort services which would not be included in the 
advertised price.\70\ Finally, the report did not find ``any benefits 
to consumers from separately-disclosed mandatory resort fees that could 
not be achieved by first listing the total price and then disclosing 
the resort fee.'' \71\
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    \70\ Id.
    \71\ Id.
---------------------------------------------------------------------------

    In 2019, the Commission hosted a workshop and issued a staff 
perspective report that examined pricing and fees in the live-event 
tickets market.\72\ The report observed,
---------------------------------------------------------------------------

    \72\ Fed. Trade Comm'n, ``That's the Ticket'' Workshop: Staff 
Perspective 4 (May 2020), https://www.ftc.gov/system/files/documents/reports/thats-ticket-workshop-staff-perspective/staffperspective_tickets_final-508.pdf.

    On most primary and resale platforms, the ticket price a consumer 
first sees is not what the consumer will pay. Mandatory fees, such as 
`venue' and `ticket processing' fees, bulk up the price-often by as 
much as thirty percent . . . . The late disclosure of fees increases 
search costs for consumers and makes it harder to comparison shop.\73\
---------------------------------------------------------------------------

    \73\ Id.

    The report remarked that ``[a]ll of the workshop panelists who 
discussed the fees issue, including each participating ticket seller 
that does not currently provide upfront all-in pricing, favored 
requiring all-in pricing through federal legislation or rulemaking.'' 
\74\
---------------------------------------------------------------------------

    \74\ Id.
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    The Commission's finding of prevalence is further supported by the 
complementary enforcement actions brought by its law enforcement 
partners, most of which have resulted in orders prohibiting bait-and-
switch pricing and misrepresenting fees and charges in the short-term 
lodging, live-event ticketing, delivery services, rental cars, travel, 
and tax filing preparation services

[[Page 2074]]

industries.\75\ Indeed, a group of State Attorneys General wrote in 
support of a finding of prevalence of these practices across 
industries, including event ticket sellers, and hotels and other short-
term lodging providers.\76\ They have attempted to address some, but 
not all, of these fees in their own States.\77\ The State Attorneys 
General cited a number of cases across industries demonstrating that 
bait-and-switch pricing and misleading fees are ``a chronic, prolific 
problem confronting many consumers across numerous sectors of the 
economy.'' \78\ Further, they agreed with the Commission's assertion 
that ``charges that misrepresent their nature and purpose are unfair 
and deceptive because they mislead consumers and make it more difficult 
for truthful businesses to compete on price.'' \79\ The Commission 
takes note of legislative and regulatory efforts in Minnesota, 
California, Pennsylvania, New York, Massachusetts, and North Carolina 
to combat hidden and misleading fees \80\ which further support its 
finding of prevalence.
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    \75\ See, e.g., Complaint ] 3, Rhode Island v. UPP Global, LLC, 
No. PC-2024-04453 (R.I. Super. Ct. Aug. 13, 2024) (alleging in part 
that defendant charges a fee as a tax, fails to disclose prices 
until after consumers have elected to use defendant's service, and 
advertises hourly prices and then requires consumers to pay for 
multiple hours at a minimum); Complaint ]] 3-4, District of Columbia 
v. StubHub, Inc., No. 2024-CAB-004794 (D.C. Super. Ct. July 31, 
2024) (alleging defendant uses drip pricing and entices consumers to 
shop for tickets by displaying artificially low prices and revealing 
mandatory fees later in the checkout process which defendant also 
misrepresents the purpose of); Consent Decree ]] 10-24, Arizona v. 
Cox Enterprises, Inc., No. CV-2023-019752 (Ariz. Sup. Ct. Jan. 2, 
2024) (alleging defendants failed to disclose additional fees to 
consumers who purchased services through long-term contracts based 
on ``price-lock'' guarantee); Assurance of Voluntary Compliance ] 2, 
Texas v. Marriott Int'l, Inc., No. 2023-CI09717 (Tex. Dist. Ct. May 
16, 2023) (alleging defendant misrepresented various fees, including 
resort fees, and did not include all mandatory fees in the 
advertised room rate in violation of the Texas Deceptive Trade 
Practices Act); Plaintiff's Original Pet. ] 1, Texas v. Hyatt Hotels 
Corp., No. C2023-0884D (TX. 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 
] 20, District of Columbia v. Grubhub Holdings, Inc., No. 2022 CA 
001199 B (D.C. Super. Ct. Jan. 4, 2023) (alleging in part that 
defendants misrepresented menu prices to consumers and deceptively 
advertised that consumers could ``order online for free''); 
Assurance of Voluntary Compliance ] 4, Commonwealth v. Omni Hotels 
Mgmt., GD-23-013056 (Pa. Commw. Ct. Nov. 9, 2023) (alleging 
defendants failed to advertise room prices including mandatory fees, 
misleading consumers); Assurance of Voluntary Compliance ] 2, 
Commonwealth v. Choice Hotels Intl., Inc., GD-23-011023 (Pa. Commw. 
Ct. Sept. 21, 2023) (alleging defendants failed to advertise room 
prices including mandatory fees misleading consumers); Assurance of 
Voluntary Compliance ]] 1-5, Commonwealth v. RYADD, Inc., No. 2022-
07262 (Pa. Commw. Ct. Sept. 8, 2022) (alleging defendants failed to 
advertise ticket prices including service fees and failed to clearly 
disclose an itemization of the total cost); Complaint ] 1, 
Commonwealth v. Mariner Finance, LLC, No. 2:22-cv-03235-MAK (E.D. 
Pa. Sept. 6, 2022) (alleging defendant charged consumers for hidden 
add-on products without consumer knowledge and in some cases after 
explicit rejection); 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); Assurance of Voluntary 
Compliance ] 2, Commonwealth v. Marriott Int'l, Inc., No. GD-21-
014016 (Pa. Ct. C.P. Nov. 16, 2021) (alleging defendant 
misrepresented its room rates by failing to include items such as 
mandatory fees in its pricing); Consent Order ] 3.1-3.18, 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); Press Release, Off. Minn. 
Att'y Gen., Attorney General Ellison Obtains Relief for More than 
30,000 Comcast/Xfinity Customers (Jan. 15, 2020) (alleging in part 
that defendants misrepresented prices for their services and added 
services without consumer consent), https://www.ag.state.mn.us/Office/Communications/2020/01/15_ComcastXfinity.asp; Press Release, 
Off. Minn. Att'y Gen., Attorney General Ellison Obtains Nearly $9 
Million Settlement with CenturyLink for Overcharging Minnesota 
Customers (Jan. 8, 2020) (alleging defendant misrepresented the 
price of its services and used a complex pricing scheme to mislead 
consumers), https://www.ag.state.mn.us/Office/Communications/2020/01/08_CenturyLinkSettlement.asp.; Assurance of Voluntary Compliance 
]] 1-12, Commonwealth v. Event Ticket Sales, LLC, No. 201101873 (Pa. 
Commw. Ct. Nov. 19, 2020) (alleging defendants failed to advertise 
ticket prices including service fees and failed to clearly disclose 
an itemization of the total cost); Assurance of Voluntary Compliance 
] 7, CenturyLink, Inc., No. 19-CV-56401 (Or. Cir. Ct., 2019) 
(alleging defendants charged undisclosed fees and failing to 
disclose all mandatory fees and charges); 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., 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 a multistate settlement of 
allegations that it misrepresented its tax filing products would 
come at no cost. Assurance of Voluntary Compliance, Commonwealth v. 
Intuit Inc., No. 220500324 (Pa. Ct. C.P. May 4, 2022).
    \76\ FTC-2023-0064-3215 (Attorneys General of the States of 
North Carolina and Pennsylvania, along with Attorneys General of the 
States or Territories of Arizona, Colorado, Connecticut, Delaware, 
District of Columbia, Hawaii, Illinois, Maine, Michigan, Minnesota, 
New Jersey, New York, Oklahoma, Oregon, Vermont, Washington, and 
Wisconsin). The Attorneys General also pointed to prevalence of 
these practices in residential leasing, payday lending, internet 
applications, online shopping, automobile rentals, carpet cleaners, 
dietary supplement sellers, moving companies, gyms, travel 
companies, outlet stores, and online auctions.
    \77\ Id. (The Attorneys General highlighted actions each has 
taken in their own states to address financial services fees, hotel 
fees, live-event ticket fees, rental housing fees, auto rental fees, 
and telecommunication fees.)
    \78\ Id.
    \79\ Id.
    \80\ N.Y. Arts & Cult. Aff. Law sec. 25.01-25.33 (McKinney 2023) 
(Effective Jun. 30, 2022) (requiring that the sellers and resellers 
of live-event tickets disclose the total cost of a ticket, upfront, 
and clearly and conspicuously disclose the amount of the price that 
is made up of fees and other charges); An Act Ensuring Transparent 
Ticket Pricing, H. 259, 193rd Gen. Court (Mass. 2023) (proposed 
legislation requiring in part that the sellers and resellers of 
live-event tickets disclose the total cost inclusive of all 
ancillary fees that must be paid and the portion of the ticket price 
that represents a service charge or any other fee or surcharge); 
H.B. 714 (2023-2024 Session) (N.C. 2023) (proposed legislation that 
requires, among other things, that providers of short-term lodging 
and live-event ticketing clearly display the total price of goods 
and services inclusive of mandatory fees a consumer would incur 
during a transaction); see also 2023 Minn. H.B. 3438 (Enacted May 
20, 2024) (stating that it is a deceptive trade practice for a 
business to not include all mandatory fees or surcharges when 
advertising, displaying or offering a price for goods or services); 
Cal. S.B. 478 (2023-2024 Regular Session) (Enacted Oct. 7, 2023) 
(amending the California Consumer Legal Remedies Act to state that 
it is unlawful to advertise, display, or offer a price for a good or 
service that does not include all mandatory fees or charges other 
than taxes or fees imposed by a government on the transaction); Cal. 
S.B. 1524 (2023-2024 Regular Session) (clarifying and amending S.B. 
478 to include that additional fees such as service charges for food 
services businesses including bars and restaurants could appear 
separately so long as they were displayed on the menu); H.B. 636 
(2023-2024) (Pa. 2023) (Engrossed Oct. 19, 2023) (proposed 
legislation amending the Pennsylvania Unfair Trade Practices and 
Consumer Protection Law to require the disclosure of all mandatory 
fees and charges included in the advertised and displayed price of 
any good or service); Conn. Gen. Stat. sec. 53-289a (2023) 
(requiring conspicuous disclosure in the advertisement of total 
price of live-event tickets including service charges); Conn. Gen. 
Stat. sec. 53-289a (2023) (requiring conspicuous disclosure in the 
advertisement of total price of live-event tickets including service 
charges); SB 329 (2024 Reg. Sess.) (Md.) (requiring all-in pricing 
throughout the purchase process of a live-event ticket); SB 329 
(2024 Reg. Sess.) (Md.) (requiring all-in pricing throughout the 
purchase process of a live-event ticket); 1510 Mass. Reg. 5 (Dec. 8, 
2023) (Proposed Regulations 940 C.M.R. 38.00: Unfair and Deceptive 
Fees) (proposed regulation stating that it is an unfair and 
deceptive practice to misrepresent or fail to disclose at the time 
of initial presentation of the price of any product the total price 
of that product inclusive of all fees, interest, charges, or other 
expenses necessary or required in order to complete the 
transaction).
---------------------------------------------------------------------------

    Comments submitted by Federal and State elected officials echoing 
the widespread practice of misleading consumers about total prices and 
fees or charges further strengthen the Commission's prevalence finding. 
For example, U.S. Senator Amy Klobuchar stated that she held a hearing 
focusing on the lack of transparency in the live-event ticketing 
industry as well as a hearing on fees in the rental housing market that 
prevent renters from having meaningful opportunities to compare 
prices.\81\ U.S. Senator Robert Casey discussed a report released on 
January 24, 2024, ``Additional Charges May Apply: How Big Corporations 
Use

[[Page 2075]]

Hidden Fees to Nickel, Dime, and Deceive American Families,'' tracking 
the variety of junk fees facing Pennsylvania families, including in the 
short-term lodging industry.\82\ A group of Congressional 
representatives raised concerns regarding misleading fees and a lack of 
price transparency in the rental housing market.\83\ Concerns over 
unfair and deceptive pricing were also raised by a variety of State 
legislators and officials.\84\ There has also been significant 
bipartisan interest in passing legislation targeting fees in the live-
event ticketing and short-term lodging industries.\85\
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    \81\ FTC-2023-0064-3271 (U.S. Senate, Sen. Amy Klobuchar).
    \82\ FTC-2023-0064-3135 (U.S. Senate, Sen. Robert P. Casey, Jr. 
noted that his report ``details how corporations use hidden fees to 
deceive consumers and increase corporate profits, which leaves 
families paying more than they should and puts honest businesses at 
a disadvantage.'') The report is available at https://www.casey.senate.gov/imo/media/doc/greedflation_junk_fees3.pdf.
    \83\ FTC-2023-0064-2858 (U.S. House of Representatives, Rep. 
Maxwell Alejandro Frost, Rep. Jimmy Gomez, Rep. Barbara Lee, Rep. 
Rashida Tlaib, Rep. Kevin Mullin, Rep. Dwight Evans, Rep. Judy Chu, 
Rep. Greg Casar, Rep. Dan Goldman, and Rep. Salud Carbajal stated 
that the rule would help eliminate some of the barriers to those 
seeking rental housing as renters ``often face ambiguous or 
misleading fees'' and ``bring much needed transparency to the rental 
housing market.'').
    \84\ FTC-2023-0064-2341 (Massachusetts House of Representatives, 
Rep. Lindsay Sabadosa); FTC-2023-0064-1411 (Arizona House of 
Representatives, Rep. Analise Ortiz); FTC-2023-0064-3072 (Michigan 
Senate and House of Representatives, Sen. Darrin Camilleri, Sen. 
Mary Cavanagh, and Rep. Betsy Coffia); FTC-2023-0064-3079 (Montana 
State Senate, Senate Democratic Caucus, Sen. Pat Flowers, Sen. Susan 
Webber, Sen. Andrea Olsen, Sen. Edie McClafferty, Sen. Jen Gross, 
Sen. Janet Ellis, Sen. Shane Morigeau, Sen. Ellie Boldman, Sen. Ryan 
Lynch, Sen. Christopher Pope, Sen. Mike Fox, Sen. Denise Hayman, 
Sen. Willis Curdy, and Sen. Mary Ann Dunwell); FTC-2023-0064-3103 
(Florida House of Representatives, Rep. Angela Nixon); FTC-2023-
0064-3123 (Syracuse, New York, City Auditor Alexander Marion); FTC-
2023-0064-3117 (Maryland House of Delegates, Del. Julie Palakovich 
Carr); FTC-2023-0064-3149 (North Carolina House of Representatives, 
Rep. Julie von Haefen); FTC-2023-0064-3237 (North Carolina House of 
Representatives, Rep. Pricey Harrison).
    \85\ See, e.g., Transparency In Charges for Key Events Ticketing 
Act (``TICKET Act''), H.R. 3950, sec. 2, 118th Cong. (as engrossed 
in the House, May 15, 2024) (among other provisions, requiring 
ticket sellers, including secondary markets and exchanges, to 
clearly and conspicuously disclose the total ticket price for an 
event in any advertisement and each time the ticket is displayed in 
the purchasing process, and to provide an itemized list of the base 
ticket price and each fee or charge prior to completion of the 
purchase; violations of the TICKET Act would be treated as violation 
of a rule defining an unfair or deceptive act or practice under 
section 18(a)(1)(B) of the FTC Act); No Hidden Fees on Extra 
Expenses for Stays Act of 2023 (``No Hidden FEES Act of 2023''), 
H.R. 6543, sec. 2(a), 118th Cong. (as engrossed in the House, June 
11, 2024) (among other provisions, prohibiting providers of short-
term lodging, including providers of a website or other centralized 
platform that advertises or otherwise offers the price of a 
reservation for short-term lodging, from advertising, displaying, 
marketing, or otherwise offering for sale, including through a 
direct offering, third-party distribution, or metasearch referral, a 
price of a reservation that does not include each mandatory fee; 
violations of sec. 2(a) would be treated as violation of a rule 
defining an unfair or deceptive act or practice under section 
18(a)(1)(B) of the FTC Act).
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    The Commission also takes notice of the work of its international 
counterparts, as well as private lawsuits in the United States 
concerning unfair and deceptive fee practices. Regulatory actions in 
Canada, Australia, the European Union, and the United Kingdom with 
respect to such conduct include paragraph 74.01(1.1) of the Canadian 
Competition Act,\86\ the Australian Competition and Consumer Protection 
Act of 2010,\87\ EU Directive 2005/29/EC of the European Parliament and 
of the Council,\88\ and the UK Digital Markets, Competition and 
Consumers Act 2024.\89\ In addition, private lawsuits filed against 
businesses in the live-event ticketing, short-term lodging, banking, 
and delivery service industries challenging these practices lend 
further support to the Commission's prevalence determination.\90\
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    \86\ Competition Act, R.S.C., 1985, c. C-34, ] 74.01(1.1) (Can.) 
(providing with respect to ``drip pricing'' 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''), https://laws.justice.gc.ca/eng/acts/C-34/FullText.html.
    \87\ Competition and Consumer Act 2010, Vol. 4, Sched. 2, Ch. 3, 
P. 3-1, Sec. 48, Ch. 4, P. 4-1, Sec. 166 (Austl.) (prohibiting 
``mak[ing] a representation with respect to an amount that, if paid, 
would constitute a part of the consideration for the supply of the 
goods or services unless the person also specifies, in a prominent 
way and as a single figure, the single price for the goods or 
services''), https://www.legislation.gov.au/C2004A00109/latest/text.
    \88\ Directive 2005/29/EC of the European Parliament and of the 
Council of 11 May 2005 concerning unfair business-to-consumer 
commercial practices in the internal market, art. 7, 2005 O.J. (L 
149) (providing that it is a misleading commercial practice to 
engage in ``bait advertising'' or offering products at a specified 
price if not able to provide the products at that price for a period 
and in quantities reasonable with regard to the product, the scale 
of advertising of the product and the price offered), https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32005L0029; see also 
Directive 2011/83/EU of the European Parliament and of the Council 
of 25 October 2011 on consumer rights, art. 5 and art. 6, 2011 O.J. 
(L 304), https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32011L0083&qid=1726109600968. 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. See 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, 1998 O.J. 
(L 80), https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A31998L0006&qid=1726109951386.
    \89\ Digital Markets, Competition and Consumers Act 2024, c. 13, 
sec. 230 (providing that an invitation to purchase omits material 
information if it omits the total price of the product or, if the 
nature of the product prevents all or a part of the total price from 
reasonably being calculated in advance, how the price (or that part 
of it) will be calculated), https://www.legislation.gov.uk/ukpga/2024/13/section/230. Reports preceding this legislation included: UK 
Department for Business & Trade, Estimating the Prevalence and 
Impact of Online Drip Pricing (2023), https://assets.publishing.service.gov.uk/media/64f1ebd7a78c5f000dc6f448/estimating-the-prevalence-and-impact-of-online-drip-pricing.pdf; and 
UK Department for Business & Trade, Government response to 
consultation on ``Smarter Regulation: Consultation on Improving 
Price Transparency and Product Information for Consumers'' (2023), 
https://www.gov.uk/government/consultations/smarter-regulation-improving-price-transparency-and-product-information-for-consumers/outcome/government-response-to-consultation-on-smarter-regulation-improving-consumer-price-transparency-and-product-information-for-consumers#introduction.
    \90\ See, e.g., Class Action Complaint ]] 2-3, Abdelsayed v. 
Marriot Int'l, Inc., No. 3:21-cv-00402-JLS-AHG (S.D. Cal. Mar. 5, 
2021) (alleging defendant misled consumers into believing that hotel 
rooms were cheaper that they actually were by engaging in drip 
pricing that baited consumers with lower prices and adding charges, 
such as resort fees, amenity fees, and destination fees, throughout 
the vending process); Complaint ]] 1, 3-5, Travelers United v. MGM 
Resorts Int'l, Inc., No. 2021-CA-00477-B (D.C. Super. Ct. Feb. 18, 
2021) (alleging defendant misled consumers into believing hotel 
rooms were cheaper that they actually were by using drip pricing 
that hid resort fees from advertised daily room rates); Class Action 
Complaint ]] 18, 31, 43, 69-71, Lee v. Ticketmaster LLC, No. 3:18-
cv-05987-VC (N.D. Cal. Sept. 28, 2018) (alleging, in part, that 
defendants were unjustly enriched through service charges added to 
resale tickets); Second Amended Class Action Complaint ]] 1-2, Wang 
v. StubHub, Inc., No. CGC-18564120 (Cal. Super. Ct. Feb. 25, 2019) 
(alleging defendant intentionally hid additional fees in order to 
advertise artificially low-ticket prices); Class Action Complaint ]] 
1-3, 33-34, Holl v. United Parcel Service, Inc., No. 4:16-cv-05856-
HSG (N.D. Cal., Oct. 11, 2016) (alleging defendant created a bait 
and switch by falsely advertising low published rates that were 
later inflated); (Truth in Advertising, Inc., submitted information 
about its tracking of class action cases related to unfair and 
deceptive fees, including cases involving event ticket sellers 
charging and misrepresenting the purpose of ``junk fees'' and hotels 
advertising a low base rate for rooms and then charging consumers 
more than the advertised rate by imposing additional fees.); see 
also Second Amended Class Action Complaint ]] 5-7, Hecox v. 
DoorDash, Inc., No. 1:23-cv-01006-JRR (D. Md. Sept. 5, 2023) 
(alleging in part that defendant employed deceptively named fees 
misleading consumers to believe the fees were for delivery personnel 
or for government imposed fees); Class Action Complaint ]] 7-16, 
Ramirez v. Bank of Am., N.A., No. 4:22-cv-00859-YGR (N.D. Cal., Feb. 
10, 2022) (alleging misrepresentations about the refundability of 
fees); Class Action Complaint ]] 27, 36, 46-51, Cross v. Point and 
Pay LLC, No. 6:16-cv-01182 (M.D. Fla., June 29, 2016) (alleging 
defendant made representations about its services and fees that 
contained false, misleading, and deceptive and unfair statements and 
omissions about fees for online payment processing services); Class 
Action Complaint ]] 1-2, 9-12, DeSimone v. LOOK Brands, LLC, No. 23-
cv-11144 (S.D.N.Y. Dec. 22, 2023) (alleging defendant failed to 
disclose the total cost of movie ticket prices, inclusive of all 
fees, in violation of New York state law); Class Action Complaint ]] 
1-2, 9-15, Jones v. Regal Cinemas, Inc., No. 23-CV-11145 (S.D.N.Y. 
Dec. 22, 2023) (alleging defendant failed to disclose total cost of 
movie ticket prices, inclusive of all fees, in violation of New York 
state law); see also FTC-2022-0069-6042 (ANPR).

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[[Page 2076]]

    The Commission takes notice of additional indications of prevalence 
identified in response to the NPRM. Commenters to the NPRM noted that 
unfair or deceptive pricing practices exist economy-wide.\91\ For 
instance, Consumer Reports conducted a nationally representative survey 
and found that many consumers experienced unexpected fees in a variety 
of industries and that more than two-thirds of Americans report paying 
more in hidden fees now than they did five years ago.\92\ Similarly, 
Consumer Federation of American submitted an extensive compilation of 
stories from consumers about their experiences with junk fees that 
recounted hidden and misleading fees being applied across a wide range 
of industries.\93\ Truth in Advertising, Inc. provided a sampling of 
consumer complaints it had received over the years and noted the 
pervasiveness of hidden and misleading fees in multiple industries, 
including event ticket sales, hotel and travel companies, short-term 
lodging, internet apps, automobile rentals, communication services, 
carpet cleaning, auto/truck sales, dietary supplement orders, food 
services, airlines, moving services, credit unions and banks, payday 
lending services, gym memberships, outlet stores, sports betting, and 
online auctions.\94\ Public Citizen commented about ``the widespread 
use of the deceptive practice of charging undisclosed fees by major 
industries . . . including communication carriers, air carriers, ticket 
sales, auto dealers, credit card companies, cable giants, and property 
owners,'' as well as ``event ticketing, hotels, funeral homes,'' and 
other industries.\95\ Additionally, AARP pointed to a myriad of 
confusing fees charged by assisted living facilities.\96\ Commenters 
also noted that instances of unfair and deceptive fees or charges have 
increased over time.\97\
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    \91\ See, e.g., FTC-2023-0064-3216 (Demand Progress Education 
Fund noted that consumers face surprise or ``bogus'' fees across 
industries, including rental housing, cell phone service, utilities, 
and ticketing, and cited a Consumer Reports study finding that 85% 
of Americans have dealt with fees of this nature.).
    \92\ FTC-2023-0064-3205 (Consumer Reports noted the prevalence 
of unexpected fees in live entertainment or sporting events, hotels, 
telecommunication services, gas or electric utilities, air travel, 
credit cards, auto loans and purchases, and personal banking 
services.).
    \93\ FTC-2023-0064-3160 (Consumer Federation of America 
submitted the compilation as Appendix B to its comment.).
    \94\ FTC-2023-0064-3104 (Truth in Advertising, Inc.).
    \95\ FTC-2023-0064-3302 (Public Citizen).
    \96\ FTC-2023-0064-2885 (AARP argued these fees are not well 
understood by potential residents and that renters are charged 
``many superfluous fees, including application fees, credit check 
fees, pet fees, excessive late fees, utility-related fees, mail 
sorting fees, inspection fees, convenience fees, common area fees, 
guest fees, trash fees, notice fees, security deposit fees, check 
cashing fees, cleaning or repair fees, and other mandatory fees for 
services that a renter does not need or want.'').
    \97\ See, e.g., FTC-2023-0064-3290 (U.S. Public Interest 
Research Group Education Fund commented that consumers have faced 
more unfair and deceptive fees as consumers ``have become accustomed 
to online transactions.''); FTC-2023-0064-3090 (Atlanta Legal Aid 
Society, Inc. noted the ubiquity of unfair and deceptive fees and 
that these types of fees in the rental housing context have been 
steadily rising for years.).
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    Commenters also raised concerns about the prevalence of hidden fees 
in specific industries such as live-event ticketing and short-term 
lodging. The American Society of Travel Advisors, Travel Technology 
Association, and a travel agent observed that, despite increased 
scrutiny over hotel resort fees, there remains little uniformity in 
pricing practices, and bait-and-switch pricing remains an issue.\98\ 
Multiple commenters raised continued concerns over hidden fee pricing 
practices in the live-event ticketing market. TickPick, LLC observed 
the ``widespread'' deceptive practice of bait-and-switch pricing 
rampant in this industry. Chamber of Progress noted that deceptive and 
unfair fees are ``rampant in some industries and pose clear threats to 
consumers,'' including ``hotel stays, live sports or concert tickets, 
and airline tickets.'' Future of Music Coalition commented that they 
have worked to ``deal[ ] with the scourge of junk fees in various parts 
of the economy,'' including live touring. The Charleston Symphony 
affirmed that ``requiring sellers to disclose the total price clearly 
and conspicuously[ ] addresses a pressing issue in the nonprofit 
performing arts sector.'' \99\
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    \98\ FTC-2023-0064-3106 (American Society of Travel Advisors 
stated that resort fees are disclosed in a highly inconsistent 
manner, even between hotels doing business under the same brand 
name.); FTC-2023-0064-3293 (Travel Technology Association commented 
that hotels have been known to surprise guests at check-in with 
these fees and ``guests have no reasonable recourse but to pay 
them.''); FTC-2023-0064-3077 (Far Horizons Travel, by its owner, a 
travel agent of almost 40 years, called hotel fees ``out of 
control'' and stated: ``I am appalled by these fees and how much 
they have risen over the years. . . . They say it's for extra 
amenities but that is not always the case and more often not the 
case at all.'').
    \99\ FTC-2023-0064-3212 (TickPick, LLC); FTC-2023-0064-3137 
(Chamber of Progress); FTC-2023-0064-3230 (Future of Music 
Coalition); FTC-2023-0064-3105 (Charleston Symphony).
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    Despite the overwhelming evidence supporting the prevalence of 
bait-and-switch pricing and misleading fee practices economy-wide, a 
minority of commenters argued that the Commission has failed to meet 
its burden of establishing prevalence. Some commenters contended that 
the Commission's evidence focuses on a small number of problematic 
industries and does not demonstrate prevalence in every single industry 
across the economy.\100\ Some commenters similarly contended that the 
proposed rule was an attempt to impose a ``one-size-fits-all'' solution 
on distinct industries, not all of which are engaging in unfair or 
deceptive practices, and thus the proposed rule is overbroad and not 
supported by the requisite evidence of prevalence.\101\
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    \100\ FTC-2023-0064-3143 (ACA Connects--America's Communication 
Association argued that the NPRM contained no meaningful discussion 
of prevalence of unfair or deceptive pricing disclosures with 
respect to communication services.); FTC-2023-0064-3186 (National 
LGBT Chamber of Commerce and the National Asian/Pacific Islander 
American Chamber of Commerce & Entrepreneurship argued that 
``prepared food and grocery delivery applications . . . have 
demonstrated transparency and accessibility, providing clear 
explanations about fees.''); FTC-2023-0064-3292 (National 
Association of Theatre Owners argued that the NPRM failed to 
demonstrate prevalence with respect to the theatre industry, 
identifying only fifty comments received in response to the ANPR 
that reference movie theatre convenience fees.); FTC-2023-0064-3238 
(Gibson, Dunn & Crutcher LLP argued that the Commission has failed 
to reliably demonstrate the prevalence of unfair or deceptive fees 
across any industry or sector.); FTC-2023-0064-3233 (NCTA--The 
Internet & Television Association argued that the only mention of 
telecommunication fees is anecdotal, and the Commission has failed 
to show prevalence with respect to any NCTA member.); FTC-2023-0064-
3263 (Flex Association stated that ``[t]he Commission has not 
pointed to evidence of any prevalent consumer harm that justifies 
imposing new pricing and disclosure rules on app-based delivery 
platforms.''); FTC-2023-0064-3130 (International Cemetery, Cremation 
& Funeral Association argued that over the last several reviews of 
the Funeral Rule the Commission has not found evidence of widespread 
consumer abuse among cemeteries or third-party suppliers.).
    \101\ FTC-2023-0064-3258 (National Taxpayers Union Foundation); 
FTC-2023-0064-3173 (Center for Individual Freedom argued that the 
Commission was overly reliant on lodging, ticketing, and restaurants 
in justifying an economy-wide rule.); FTC-2023-0064-3251 (National 
RV Dealers Association argued the proposed rule ``is an 
overextension from this drip pricing concern, and not only strays 
from the FTC's traditional areas of concern but also risks impeding 
the normal business operations and innovation across a multitude of 
sectors.'').
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    First, the Commission disagrees that it must find that the unfair 
or deceptive act or practice is widespread within every individual 
context or industry to issue a rule targeting a specific practice 
across industries. To begin with, the Commission's prevalence findings 
need only have ``some basis or evidence'' to show ``the practice the 
FTC rule seeks to regulate does indeed occur.'' \102\ While many trade 
regulation rules promulgated under section 18 focus on a particular 
industry, as discussed in

[[Page 2077]]

section IV.A.1, others apply to specific practices across industries 
regardless of product or service, such as the Cooling-Off Period for 
Door-to-Door Sales Rule (the ``Cooling-Off Rule''), the Rule on the 
Preservation of Consumers' Claims and Defenses (the ``Holder Rule''), 
the Rule on Retail Food Store Advertising and Marketing Practices (the 
``Unavailability Rule''), the mail, Internet, or Telephone Order 
Merchandise Rule (the ``Mail Order Rule''), the Rule on the Use of 
Prenotification Negative Option Plans (the ``Negative Option Rule''), 
the Rule on Impersonation of Government and Businesses (the 
``Impersonator Rule''), and the Rule on the Use of Consumer Reviews and 
Testimonials.\103\ While the Commission agrees that minimal evidence of 
a practice would be insufficient to meet the prevalence standard, 
section 18 did not require the Commission to find for its economy-wide 
rulemakings that every industry engaged in sales made at a consumer's 
home or at certain other locations (Cooling-Off Rule), used credit 
contracts (Holder Rule), offered products at an advertised price when 
they did not have the advertised products in stock (Unavailability 
Rule), or had a robust mail, internet or telephone order business (Mail 
Order Rule); or that every industry used negative options (Negative 
Option Rule), had an issue with impersonating government agencies or 
businesses (Impersonator Rule), or used and abused reviews (Rule on the 
Use of Consumer Reviews and Testimonials). Imposing such a standard 
would artificially limit the Commission's rulemaking authority under 
section 18 in a way that does not align with the Commission's mandate 
or the text of the statute, which focuses on acts or practices 
generally and never mentions the need to define markets or industries. 
As explained herein and in the NPRM, the information evidencing 
prevalence of bait-and-switch pricing and misleading fees more than 
meets section 18's standard for prevalence for the economy generally, 
and for the live-event ticketing and short-term lodging industries, 
specifically, by demonstrating that the practices are widespread and, 
further, that such practices are occurring across a wide range of 
industries.
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    \102\ Pa. Funeral Dirs. Ass'n. v. FTC, 41 F.3d 81, 87 (3d Cir. 
1994).
    \103\ 16 CFR part 429; 16 CFR part 433; 16 CFR part 424; 16 CFR 
part 435; 16 CFR part 425; 16 CFR part 461; 16 CFR part 465.
---------------------------------------------------------------------------

    Second, the Commission notes that, even when commenters challenged 
the application of the rule to specific pricing scenarios or to their 
own industries, they also appeared to concede that advertising a base 
price to which mandatory fees are added later is a frequent practice 
even in their own industries. While some commenters raised genuine 
challenges or questions about the application of the rule, others 
attempted to conflate such genuine challenges with their desire to 
continue to use drip or partition pricing.
    As discussed in section III.B.1, commenters from some ticket 
sellers did not contest that their advertised prices failed to include 
all mandatory fees and to provide the total price of goods or services. 
Instead, they attempted to explain why they engaged in those practices.
    Finally, some commenters from industries other than live-event 
ticketing and short-term lodging argued that the Commission's NPRM 
failed to establish prevalence because of the following reasons: the 
cited cases focused on inapplicable fact patterns or resulted in 
settlement; the cited conferences called for additional research rather 
than regulatory strategy, or were narrow in scope as to the industries 
covered; and the resort fee warning letters failed to result in 
enforcement action.\104\ Commenters such as the U.S. Chamber of 
Commerce argued that the enforcement record should rely only on cease-
and-desist orders or ``extensive empirical research.'' \105\ Other 
commenters also raised concerns about a lack of empirical 
research.\106\ These commenters overlook section 18's clear instruction 
that the Commission's prevalence determination can be based on ``any 
other information available to the Commission'' that indicates a 
widespread pattern, which the Commission thoroughly laid out in the 
NPRM and expands upon herein.
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    \104\ FTC-2023-0064-3127 (U.S. Chamber of Commerce argued the 
NPRM failed to cite any cases holding that late in time fee 
disclosures are unfair or deceptive and the settlements described by 
the Commission only raised the failure of companies to disclose 
certain applicable fees prior to purchase or at all.).
    \105\ Id.
    \106\ FTC-2023-0064-3152 (Building Owners & Managers Association 
et al. commented that the proposed rule ``lacks any reasonable 
factual underpinning as applied to the rental housing industry 
because it is not based on any statistical data relevant to the 
industry,'' but is ``based solely upon anecdotal, conclusory, and 
non-representative justification.''); FTC-2023-0064-3172 (New Jersey 
Apartment Association stated that the NPRM lacked ``statistical 
basis'' for claims that unfair and deceptive fees were an issue in 
the rental housing context and that the Commission relied on 
anecdotal evidence.).
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    In sum, the Commission's enforcement history, workshops, and 
reports, together with the record of this rulemaking and the 
enforcement cases brought by the Commission's local, State, and 
international enforcement counterparts fully support a finding that 
bait-and-switch pricing that hides the total price of goods or services 
and misrepresenting the nature, purpose, amount, and refundability of 
fees or charges are prevalent across the economy, including in the 
live-event ticketing and short-term lodging industries.\107\ Despite 
the evidence that these specific practices are prevalent economy wide, 
the Commission will first focus its rulemaking authority on combatting 
these practices in the live-event ticketing and short-term lodging 
industries, the two industries in which the Commission first began 
evaluating drip pricing more than a decade ago and for which there is a 
long history of consumer harm.
---------------------------------------------------------------------------

    \107\ See, e.g., supra notes 66, 67, 72, 75, 80, 85, 90 
(detailing the Commission's enforcement history, workshops, and 
reports, class action lawsuits, state and local enforcement and 
regulations, and other efforts to curb unfair or deceptive pricing 
practices in the live-event ticket and short-term lodging 
industries). The Commission also received thousands of comments from 
individual consumers detailing bait-and-switch pricing and deceptive 
fees in the live-event ticket and short-term lodging industries in 
response to the ANPR and the NPRM. See, e.g., FTC-2023-0064-0820 
(Individual Commenter stated ``I was just considering buying some 
event tickets on Vivid Seats and was shocked to see that they add a 
full 33% in bogus fees.''); FTC-2023-0064-0058 (Individual Commenter 
stated: ``The worst offenders are ticket sellers/resellers, who 
advertise baseline ticket prices in their search engines and then 
include some unknown amount of fees when it's time to pay.''); FTC-
2023-0064-0102 (Individual Commenter stated: ``I recently went to a 
MLB game and the fees were $21 for a $75 ticket or greater than 20%. 
I went to a concert and the tickets were $55 but the fees brought 
the price to over $100. On both cases, the fees were not disclosed 
until the payment screen.''); FTC-2023-0064-0145 (Individual 
Commenter described purchasing tickets to a musical: ``Nearly 20% of 
the total cost was for fees that were not disclosed until I was at 
the payment step ($119 ticket + $4.55 order processing fee + $4.00 
facility charge + $20.50 service fee). I don't understand what any 
of those fees are actually for.''); FTC-2023-0064-0040 (Individual 
Commenter described hotel resort fees as ``egregious and opaque'' 
and stated they learned of an additional $50 per night resort fee 
upon check-in: ``I asked what the purpose of the fee was and was 
told by the staff person, `I'm not really sure.' ''); FTC-2023-0064-
1462 (Individual Commenter stated: ``Recently I found an 
``affordable'' hotel in a city and booked a 4 night stay, but was 
not informed until after I checked in that parking cost extra each 
day . . . . which made the hotel no longer affordable for me''); 
FTC-2023-0064-0977 (Individual Commenter described spending hours 
trying to book a hotel to face ``mandatory hotel fees for a pool, a 
gym and 24 hour security totalled $50/night''); FTC-2023-0064-0152 
(Individual Commenter stated that fees through services including 
Airbnb and VRBO are ``often vague and undefined'' and described fees 
including a ``host fee,'' ``booking fee,'' ``safety fee,'' and 
``resort fee'').
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B. Manner and Context in Which the Acts or Practices Are Deceptive or 
Unfair

    The final rule curbs certain unfair or deceptive pricing practices 
by requiring

[[Page 2078]]

truthfulness and transparency in pricing for live-event ticketing and 
short-term lodging. Truthful, timely, and transparent pricing, 
including the nature, purpose, and amount of any fees or charges 
imposed, is critical for consumers--and also for honest businesses. The 
legal underpinning of the rule, or the manner and context in which the 
acts or practices defined by the rule are unfair or deceptive, is not 
complex. By identifying and targeting pricing tactics that hide the 
true price of live-event tickets and short-term lodging from consumers, 
the rule's central provisions prohibit conduct that is inherently 
deceptive or unfair, including: (1) offering prices that do not include 
all mandatory fees or charges and (2) misrepresenting the nature, 
purpose, amount, and refundability of fees or charges, and the identity 
of the good or service for which the fees or charges are imposed. Thus, 
the final rule will allow American consumers to make better-informed 
purchasing decisions when purchasing live-event tickets or deciding 
where to stay on a short-term basis and level the playing field for 
honest businesses in these industries that truthfully, timely, and 
transparently disclose their pricing information.
    A representation, omission, or practice is deceptive under section 
5 of the FTC Act 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 good 
or service.\108\ Price is a material term.\109\ It is a deceptive 
practice to misrepresent the price of a good or service,\110\ including 
through a deceptive first contact.\111\ Through its false savings 
cases, the Commission repeatedly found that it was deceptive under 
section 5 to present an inflated list price or comparison price, from 
which consumers were misled to believe that the business offered a 
lower-than-normal price.\112\ The inverse--luring consumers to a good 
or service with a false low price--is also deceptive.\113\ For example, 
in In re Filderman Corp., 64 F.T.C. 427 (1964), the Commission found 
that the defendant violated section 5 both when it displayed misleading 
list prices and when it later imposed mandatory service charges on top 
of the advertised price.\114\ Once a consumer has been lured in by 
deception, including about the cost of the good or service, it is well 
established that a later disclosure cannot cure that deception.\115\ 
Thus, bait-and-switch pricing, where the initial contact with a 
consumer shows a lower or partial price without including mandatory 
fees, violates the FTC Act even if the total price is later disclosed.
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    \108\ 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, 174 (1984) (hereinafter ``Deception Policy 
Statement''), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-103/ftc_volume_decision_103_january_-_june_1984pages_103-203.pdf.
    \109\ Deception Policy Statement, 103 F.T.C. at 182-83 (listing 
claims or omissions involving cost among those that are 
presumptively material); see also, e.g., FTC v. FleetCor Techs., 
Inc., 620 F. Supp. 3d 1268, 1303-04, 1311 (N.D. Ga. 2022) (finding 
that representations about discounts and transaction fees were 
material).
    \110\ 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 also, e.g., In re Resort Car Rental 
Sys., Inc., 83 F.T.C. 234, 281-82, 300 (1973), https://www.ftc.gov/system/files/ftc_gov/pdf/Resort%20Car%20Rental%20System%2C%20Inc.%2083%20FTC%20234%20%281973%29.pdf (finding that using the name ``Dollar-A-Day'' misrepresented 
the price of car rentals in violation of section 5 of the FTC Act 
where a rental could not be attained for one dollar per day due to 
mileage, insurance, and other mandatory charges), aff'd sub. nom. 
Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962, 964 (9th Cir. 
1975).
    \111\ See, e.g., Opinion of the Commission at 37-40, 47-50, In 
re Intuit Inc., No. 9408 (FTC Jan. 22, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/d09408_commission_opinion_redacted_public.pdf (finding that under 
the legal doctrine known as the first-contact or deceptive door-
opener rule, respondent's first contact with consumers was deceptive 
because its advertising falsely claimed that consumers can file 
their taxes for free with TurboTax and that later disclosures did 
not cure the deception); Complaint ]] 12, 46-49, In re LCA-Vision, 
No. C-4789 (FTC Mar. 13, 2023) (alleging respondent's advertisements 
misrepresented the price of surgery and failed to disclose 
eligibility limitations for a promotional price); Complaint ]] 8-10, 
In re Progressive Chevrolet Company, No. C-4578 (FTC Jun. 16, 2016) 
(alleging that respondents represented that consumers could lease 
vehicles at advertised down payment and monthly payment amounts, and 
deceptively failed to disclose a material condition that meant few 
consumers would qualify for the advertised terms); Resort Car Rental 
Sys., 518 F.2d at 964 (upholding the Commission's order finding that 
the name ``Dollar-A-Day'' was deceptive when charges adding up to 
more than one dollar per day were disclosed later).
    \112\ E.g., In re Giant Food, Inc., 61 F.T.C. 326, 341-42, 361 
(1962), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-61/ftcd-vol61july-december1962pages306-404.pdf (finding that comparative-price 
advertising of household goods and appliances created false, 
misleading, and deceptive impressions that induced consumers to make 
purchases based on mistaken beliefs); In re George's Radio & 
Television Co., 60 F.T.C. 179, 193-94, 196 (1962), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-60/ftcd-vol60january-june1962pages107-211.pdf (collecting cases and finding that 
advertisements including manufacturer's suggested list prices that 
were higher than the customary retail prices were deceptive).
    \113\ See, e.g., In re Filderman Corp., 64 F.T.C. 427, 442-43, 
461 (1964), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-64/ftcd-vol64january-march1964pages409-511.pdf (finding, among other things, that 
respondents unlawfully advertised prices that were later inflated 
with mandatory service charges); In re Resort Car Rental Sys., 83 
F.T.C. at 281-82, 300; Opinion of the Commission at 37-40, 47-50, In 
re Intuit Inc., No. 9408 (finding that respondent's advertising that 
falsely claimed that consumers can file their taxes for free with 
TurboTax was deceptive); Complaint ]] 12, 46-49, In re LCA-Vision, 
No. C-4789 (alleging respondent's advertisements misrepresented the 
price of surgery and failed to disclose eligibility limitations for 
a promotional price). See also cases cited supra note 61 (collecting 
FTC enforcement actions alleging that bait-and-switch pricing 
tactics concerning hidden fees violated section 5).
    \114\ In re Filderman Corp., 64 F.T.C. at 461 (ordering 
respondents to stop ``[r]epresenting, directly or by implication: 
That any amount is the price of merchandise when an additional 
amount is required to be paid before the merchandise will be 
sold.'')
    \115\ Fed. Trade Comm'n, Enforcement Policy Statement on 
Deceptively Formatted Advertisements 7 n.25 (2015), https://www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf; see also Opinion of the Commission 
at 28-30, In re Intuit Inc., No. 9408, https://www.ftc.gov/system/files/ftc_gov/pdf/d09408_commission_opinion_redacted_public.pdf 
(finding that disclosures on Intuit's websites were ``inadequate to 
cure a misimpression for Intuit's ads,'' which used ``false claims 
to engage consumers and induce them to further interact with the 
company''); Resort Car Rental Sys, 518 F.2d at 964 (``The Federal 
Trade [Commission] Act is violated if it induces first contact 
through deception, even if the buyer later becomes fully informed 
before entering the contract.'') (bracketed text added); Exposition 
Press, Inc. v. FTC, 295 F.2d 869 (2d Cir. 1961) (``The law is 
violated if the first contact is secured by deception, even though 
the true facts are made known to the buyer before he enters into the 
contract of purchase.'' (citations omitted)); FTC v. City W. 
Advantage, Inc., No. 2:08-cv-00609-BES-GWF, 2008 WL 2844696, at *3 
(D. Nev., 123 July 22, 2008) (finding defendant likely employed 
``deceptive door openers . . . to induce consumers to stay on the 
line'').
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    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.\116\ Pricing that is not 
truthful or transparent causes or is likely to cause substantial 
injury; such injury is not reasonably avoidable by consumers or 
outweighed by benefits to consumers or competition.
---------------------------------------------------------------------------

    \116\ 15 U.S.C. 45(n).
---------------------------------------------------------------------------

    Drip pricing and other bait-and-switch tactics that hide the true 
price cause substantial injury, as the Commission discusses in detail 
in section V.E, by leading consumers to buy more goods or services, pay 
more for those goods or services, and incur higher search costs than 
they otherwise would have if they had been presented with the true 
price upfront. Studies have shown that consumers spend more money on 
the same goods when faced with drip pricing, i.e., when they are not 
shown the total price upfront, but instead are shown a base price, with 
mandatory fees or charges added later

[[Page 2079]]

throughout the buying process.\117\ Where mandatory fees or charges are 
disclosed at the same time as, but separately from, the base price, 
consumers are still harmed. The practice of dividing the price into 
multiple components without disclosing the total, generally referred to 
as partitioned pricing, distorts consumer choice.\118\ Consumers 
confronted with partitioned pricing, on average, underestimate the 
total price of the good or service, likely because they use mental 
shortcuts to estimate price that do not fully account for each 
component.\119\
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    \117\ Alexander Rasch et al., Drip Pricing and its Regulation: 
Experimental Evidence, 176 J. Econ. Behav. & Org. 353 (2020) 
(``[E]xperimental evidence suggests that consumers indeed strongly 
and systematically underestimate the total price under drip pricing, 
and that they make mistakes when searching''); Shelle Santana et 
al., Consumer Reactions to Drip Pricing, 39 Mktg. Sci. 188 (2020) 
(``Across six studies, we find that drip pricing (versus nondrip 
pricing) increases the likelihood that consumers will both initially 
and ultimately select a lower base price option, even though the 
surcharges for optional add-ons cause this base price to balloon--
making the lower base fare option more expensive than the 
alternative''); Tom Blake et al., Price Salience and Product Choice, 
40 Mktg. Sci. 619 (2021); Steffen Huck et al., The Impact of Price 
Frames on Consumer Decision Making: Experimental Evidence (2015); 
Meghan R. Busse & Jorge M. Silva-Risso, ``One Discriminatory Rent'' 
or ``Double Jeopardy'': Multi-component Negotiation for New Car 
Purchases, 100 a.m. Econ. Rev. 470 (2010); Raj Chetty et al., 
Salience and Taxation: Theory and Evidence, 99 a.m. Econ. Rev. 1145 
(2009) (``[C]ommodity taxes that are included in posted prices 
reduce demand significantly more than taxes that are not included in 
posted prices.''); see also FTC-2023-0064-3247 (Private Law Clinic 
at Yale Law School).
    \118\ Sullivan, supra note 67, at 4; FTC-2023-0064-3271 (U.S. 
Senate, Sen. Amy Klobuchar).
    \119\ Sullivan, supra note 67, at 22-24; Vicki G. Morowitz et 
al., Divide and Prosper: Consumers' Reactions to Partitioned Prices, 
35 J. Mktg. Rsch. 453 (1998) (subjects exposed to partitioned prices 
recalled significantly lower total product costs than subjects 
exposed to combined prices).
---------------------------------------------------------------------------

    In addition, consumers who wish to compare prices incur additional 
search costs to make direct comparisons of goods or services when the 
full price is not disclosed upfront.\120\ For example, in an online 
transaction to book a hotel room, 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 true total price of 
their hotel stay.\121\ The same is true on live-event ticketing 
websites. As TickPick, LLC noted, ``[m]ajor ticketing marketplaces 
often require consumers to enter their credit card or other payment 
information prior to disclosing mandatory fees. On these marketplaces, 
the full purchase price is only disclosed after payment information is 
collected.'' \122\ Under such circumstances, consumers waste time and 
effort pursuing an offer that is not actually available at the promised 
price. Such search costs that result from unfair or deceptive practices 
are legally cognizable injuries under the FTC Act.\123\
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    \120\ Sullivan, supra note 67, at 4; Fed. Trade Comm'n, ``That's 
the Ticket'' Workshop: Staff Perspective 4 (May 2020), https://www.ftc.gov/system/files/documents/reports/thats-ticket-workshop-staff-perspective/staffperspective_tickets_final-508.pdf; see also 
Han Hong et al., Using Price Distributions to Estimate Search Costs, 
37 RAND J. Econ. 257 (2006) (describing methods of estimating search 
costs).
    \121\ NPRM, 88 FR 77433 n.170.
    \122\ FTC-2023-0064-3212 (TickPick, LLC) (``[On] StubHub's 
website, for example, a consumer can be required to click 12 times 
after being shown the first price before being shown the total price 
they will pay.'')
    \123\ See, e.g., Decision & Order at 3-4, In re LCA-Vision, No. 
C-4789 (FTC Mar. 13, 2023) (settling allegations that deceptive 
advertising caused consumers to ``waste[ ] 90 minutes to two hours 
of their time'' responding to a deceptive promotion, Complaint ] 35, 
and prohibiting misrepresentations of price and requiring disclosure 
of price or discount qualification requirements), https://www.ftc.gov/system/files/ftc_gov/pdf/1923157-lca-vision-consent-package.pdf; Decision & Order at 2-3, In re Credit Karma, LLC, No. 
C-4781 (FTC, Jan. 19, 2023) (settling allegations that deceptive 
advertising caused consumers to waste significant time in applying 
for ``pre-approved'' offers that were denied, Complaint ] 13, and 
requiring Credit Karma to pay $3 million in monetary relief), 
https://www.ftc.gov/system/files/ftc_gov/pdf/2023138-credit-karma-combined-final-consent-without-signatures.pdf; 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''); FTC v. Neovi, Inc., 598 F. Supp. 2d 1104, 
1115 (S.D. Cal. 2008) (finding ``no genuine issue of material fact 
that consumers suffered substantial injury'' based on ``considerable 
amount of time'' spent by consumers); FTC v. Accusearch, Inc., No. 
06-cv-105-D, 2007 U.S. Dist. LEXIS 74905, at *22-23 (D. Wyo., Sept. 
28, 2007) (granting summary judgment in favor of FTC based in part 
on finding of consumer injury for ``lost time and productivity'').
---------------------------------------------------------------------------

    Misrepresented fees also cause or are likely to cause substantial 
injury--they harm consumers as well as businesses that do not engage in 
these practices. For example, as discussed in section III.C, a hotel 
might charge a resort fee when only typical and ordinary accommodations 
and amenities are offered, an environmental fee that serves no 
environmental purpose, or a fee misrepresented as a government charge. 
As TickPick, LLC put it, misrepresented fees trick consumers into 
paying more and ultimately inhibit competition by providing an unfair 
advantage to businesses that misrepresent their fees.\124\ Likewise, 
when businesses misrepresent fees, consumers are unable to make 
informed choices about the value of the fee or charge, or the good or 
service it represents, because their understanding of the fee or charge 
is predicated on false, vague, or otherwise misleading information. As 
such, consumers are unable to understand what they have purchased, or 
to which charges they have consented.\125\
---------------------------------------------------------------------------

    \124\ FTC-2023-0064-3212 (TickPick, LLC).
    \125\ Id.
---------------------------------------------------------------------------

    Consumers cannot reasonably avoid these harms. As explained in the 
NPRM, studies suggest that cognitive bias may prevent consumers from 
reasonably avoiding injury caused by unfair and deceptive pricing 
practices.\126\ Several behavioral studies explain why consumers cannot 
reasonably avoid making errors when the true price is not displayed 
upfront. Behavioral research shows that consumers who first learn of a 
lower price do not properly adjust their calculations when additional 
fees are added, thereby underestimating the total price.\127\ It also 
shows that consumers attach value to things they perceive to be theirs 
and, once consumers begin the purchase process, their perception shifts 
so that stopping the transaction feels like a loss.\128\ The research 
shows that consumers who already have invested in an endeavor, such as 
by taking time to make selections on a travel or live-event ticket 
website, continue that endeavor even if they would pay less if they 
began again elsewhere.\129\ Lastly, consumers necessarily incur search 
costs when mandatory fees are obscured because it takes them longer to 
discover the full price within a single transaction and to comparison 
shop across transactions.\130\ Notably, it is unlikely that the market 
can correct for these injuries because once the practice of displaying 
incomplete initial prices takes hold, honest businesses will struggle 
to compete. For example, as noted in the NPRM, one market participant 
in the live-event ticketing industry, StubHub, unilaterally adopted 
all-in pricing in 2014 but soon reverted back to its original model 
after it lost significant market share when customers

[[Page 2080]]

incorrectly perceived StubHub's prices to be higher.\131\
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    \126\ NPRM, 88 FR 77434 (discussing various cognitive biases 
that contribute to the unavoidability of consumer injury, including 
the anchoring theory, the endowment theory, and the sunken cost 
fallacy).
    \127\ Inst. for Policy Integrity, Pet. for Rulemaking Concerning 
Drip Pricing 18 (2021), https://policyintegrity.org/documents/Petition_for_Rulemaking_Concerning_Drip_Pricing.pdf.
    \128\ Steffen Huck et al., The Impact of Price Frames on 
Consumer Decision Making: Experimental Evidence (2015).
    \129\ David A. Friedman, Regulating Drip Pricing, 31 Stan. L. & 
Pol'y Rev. 51, 55 n.13 (2020).
    \130\ See NPRM, 88 FR 77447 (discussing reductions in search 
costs from the proposed rule).
    \131\ See NPRM, 88 FR 77434 (quoting Fed. Trade Comm'n, ``That's 
the Ticket'' Workshop: Staff Perspective 4 (May 2020), https://www.ftc.gov/system/files/documents/reports/thats-ticket-workshop-staff-perspective/staffperspective_tickets_final-508.pdf.). See 
also, e.g., https://www.contactlensking.com/faq.aspx (describing a 
contact lens company's decrease in traffic and total orders when it 
displayed a total price while competitors implemented ``processing'' 
fees).
---------------------------------------------------------------------------

    The consumer injury caused by these bait-and-switch pricing 
practices is not outweighed by any benefits to consumers or 
competition. Consumers receive no benefit from businesses that use drip 
pricing, partitioned pricing, or misleading price presentation while 
they obscure the total price. To the extent that consumers could 
benefit from itemized information about price components, such 
itemization can be done in conjunction with clear total price 
information. Consumers receive no benefit from businesses partitioning 
or breaking up mandatory price components while they obscuring the 
total price.
    Likewise, as discussed in section V.E, there is no benefit to 
competition, as honest businesses that disclose all-inclusive total 
prices lose market share to businesses that do not. Bait-and-switch 
pricing and misleading fees undermine the ability of honest businesses 
to compete on price and therefore diminish the competitive pressure in 
a market that pushes prices downward. As a result, these practices lead 
to higher prices than would be supported in a competitive marketplace. 
The Antitrust Division of the U.S. Department of Justice noted that 
``companies that impose mandatory hidden fees'' have ``an unfair 
advantage over honest brokers'' and interfere with consumers' ability 
to ``choose between competitors based on the important considerations 
of price and what, exactly, the consumer is purchasing.'' \132\ Some 
commenters, including those from the live-event ticketing and short-
term lodging industries, noted that bait-and-switch pricing not only 
confuses consumers, but harms honest businesses that offer truthful, 
timely, and transparent pricing because their prices initially may seem 
higher than competitors that use bait-and-switch pricing and misleading 
fees. For example, TickPick, LLC commended the Commission for proposing 
to curb the widespread practice of bait-and-switch pricing and observed 
that ``the proposed rule would significantly benefit consumers and 
competition in the live-event ticketing industry.'' \133\ The American 
Society of Travel Advisors argued that, in addition to consumer harm, 
``the imposition of undisclosed fees also unfairly places honest 
retailers--those that do disclose the full, all-in price upfront--at a 
competitive disadvantage relative to those that do not.'' \134\
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    \132\ FTC-2023-0064-3187 (U.S. Department of Justice, Antitrust 
Division, observed that ``[w]hen consumers lack choice and 
information, and are saddled with mandatory hidden fees, the 
benefits of the competitive process break down.''); see also FTC-
2023-0064-3106 (American Society of Travel Advisors); FTC-2023-0064-
3184 (New York State Sen. Michael Gianaris); FTC-2023-0064-1294 
(James J. Angel, Ph.D., CFP, CFA, Professor, Georgetown University, 
McDonough School of Business).
    \133\ FTC-2023-0064-3212 (TickPick, LLC).
    \134\ FTC-2023-0064-3106 (American Society of Travel Advisors).
---------------------------------------------------------------------------

    A minority of commenters stated that hidden and misleading fees do 
not harm consumers. For instance, the Competitive Enterprise Institute 
argued that consumers' search costs do not increase when advertisements 
lack a single total price, as the consumer is better informed after 
watching the advertisement despite the omission.\135\
---------------------------------------------------------------------------

    \135\ FTC-2023-0064-3028 (Competitive Enterprise Institute 
argued that consumers already bear a search cost merely by looking 
for a product, and that any advertisement that includes some, but 
not all, pricing information, benefits the searching consumer if the 
information is accurate and non-deceptive.).
---------------------------------------------------------------------------

    While the commenter conceded that consumers may benefit more if a 
total price is disclosed, the commenter argued that any harm could be 
easily avoidable by consumers calculating the total themselves.\136\ 
Some commenters also argued that these types of fees often benefit 
consumers and are openly disclosed.\137\ Indeed, the American Gaming 
Association stated that resort fees enhance a consumer's stay, 
distinguish resorts from more standard lodging offerings, are openly 
disclosed to consumers, and often appear several times throughout the 
search and purchasing process. As the Commission already noted, drip 
and partitioned pricing and other bait-and-switch pricing harm 
consumers for numerous reasons, including because consumers 
underestimate the total price of a good or service, overconsume, 
overpay, and waste time. The U.S. Chamber of Commerce argued that there 
are pro-consumer and pro-competitive justifications for this type of 
pricing, including allowing for dynamic pricing strategies and 
preventing consumers from paying for services that they do not 
use.\138\ The rule, however, does not prohibit the use of dynamic 
pricing strategies, itemization, or offering optional goods or services 
for consumers to select; it simply prohibits offering a price that is 
not inclusive of all mandatory fees and charges, as well as prohibiting 
misrepresented fees and charges.
---------------------------------------------------------------------------

    \136\ Id.
    \137\ FTC-2023-0064-2886.
    \138\ FTC-2023-0064-3127 (U.S. Chamber of Commerce noted that, 
among these pricing practices, dynamic pricing strategies provide 
these benefits to consumers and this was ignored in the conclusions 
of the NPRM.).
---------------------------------------------------------------------------

    As stated herein, the Commission and courts have previously 
recognized that price is a material term \139\ and that it is a 
violation of section 5 of the FTC Act to misrepresent the price of a 
good or service.\140\ Commenters emphasized the materiality of price to 
consumers.\141\ The commenters who argue that bait-and-switch pricing 
does not harm consumers ignore the large body of literature 
demonstrating that drip pricing and partitioned pricing have a negative 
impact on consumers and competition. The economic analysis in Section V 
provides additional discussion regarding the economic harms from bait-
and-switch pricing tactics, including drip pricing and partitioned 
pricing in the live-event and short-term lodging industries.
---------------------------------------------------------------------------

    \139\ Deception Policy Statement, 103 F.T.C. at 182-183, 183 
n.55 (listing claims or omissions involving cost among those that 
are presumptively material); see also, e.g., FleetCor Techs., Inc., 
620 F. Supp. 3d at 1303-04, 1311 (finding that representations about 
discounts and transaction fees were material); FTC v. Windward 
Marketing, Inc., No. 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'').
    \140\ 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 also, e.g., Resort Car Rental Sys., 518 
F.2d at 964 (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).
    \141\ See, e.g., FTC-2023-0064-3162 (BBB National Programs Inc. 
stated that BBB National Advertising Division ``precedent is clear 
that the advertised price for a product or service is among one of 
the most material terms to a consumer's purchasing decision.'').
---------------------------------------------------------------------------

C. The Economic Effect of the Rule

    As part of the rulemaking proceeding, the Commission solicited 
public comment and data (both qualitative and quantitative) on the 
economic impact of the proposed rule and its costs and benefits. In 
issuing this final rule, the Commission has carefully considered the 
comments received and the costs and benefits of each provision, taking 
into account the effects on small businesses and consumers, as 
discussed in more detail in sections V and VII.
    The record demonstrates that the most significant anticipated 
benefits of the final rule are promoting transparent pricing, 
facilitating comparison shopping for consumers, and leveling

[[Page 2081]]

the playing field for businesses in the live-event ticketing and short-
term lodging industries. By prohibiting drip pricing, the final rule 
also will promote social trust, which is a necessary component of 
successful market interactions.\142\ Most participants in a market 
transaction do not have prior experience with one another and consumers 
must rely on some degree of trust that the business will provide the 
good or service in question, at the stated price and quality level. 
Without social trust, it would be costlier for both consumers and 
businesses to acquire all the necessary information to participate in 
the market. While there has been less research on the relationship 
between social trust and previous market interactions, there is some 
evidence that bad market experiences can reduce social trust.\143\ 
Thus, prohibiting these types of deceptive and unfair practices will 
promote social trust, which can be a measure of a well-functioning 
market.\144\
---------------------------------------------------------------------------

    \142\ The relationship between social trust and market outcomes 
is well established. See, e.g., Paul J. Zak & Stephen Knack, Trust 
and growth. 111 Econ. J., 470 (Mar. 2001), https://doi.org/10.1111/1468-0297.00609; Philip Keefer & Stephen Knack, Does Social Capital 
Have an Economic Payoff? A Cross-Country Investigation, 112 Q.J. 
Econ. 4 (Nov. 1997), https://doi.org/10.1162/003355300555475. Social 
trust is particularly necessary for participation in financial 
markets. See Jesse Bricker & Geng Li, Fed. Reserve Bd., Credit 
Scores, Social Trust, and Stock Market Participation, Finance and 
Economics Discussion Series 2017-008r1, https://doi.org/10.17016/FEDS.2017.008r1; Luigi Guiso, Paola Sapienza, & Luigi Zingales, 
Trust the Stock Market, 63 J. Fin. (Dec. 2008), https://www.jstor.org/stable/20487944?seq=1.
    \143\ Ginny Seung Choi & Virgil Henry Storr, Market 
interactions, trust and reciprocity, 15 PLOS One 5 (May 7, 2020), 
https://doi.org/10.1371/journal.pone.0232704.
    \144\ Joshua Kleinfeld & Hadar Dancig-Rosenberg, Social Trust in 
Criminal Justice: A Metric, 98 Notre Dame L. Rev. 815 (2022), 
https://scholarship.law.nd.edu/ndlr/vol98/iss2/6.
---------------------------------------------------------------------------

    Another beneficial consequence would be the expansion of the 
remedies available for violations of the final rule, including the 
ability to more effectively obtain monetary relief for consumers who 
have been deceived about the true total price of live-event tickets or 
short-term lodging. This is particularly critical given the U.S. 
Supreme Court's decision in AMG Capital Mgmt., LLC v. FTC, 593 U.S. 67 
(2021), which held that equitable monetary relief, including consumer 
redress, is not available under section 13(b) of the FTC Act.\145\ 
Under the final rule, the Commission will now be able to seek court-
ordered consumer redress in one Federal district court action brought 
under section 19(a)(1), rather than the longer, less efficient, two-
step process for obtaining redress under section 19(a)(2).\146\ By 
allowing the Commission to secure redress more efficiently, this rule 
will also allow the Commission to conserve its limited enforcement 
resources for other mission priorities.
---------------------------------------------------------------------------

    \145\ AMG Cap. Mgmt., 593 U.S. at 82.
    \146\ See 15 U.S.C. 57b(a)(1) and (2); see also NPRM, 88 FR 
77438 (discussing impact of AMG Cap. Mgmt.). When the Commission has 
reason to believe that the rule has been violated, the Commission 
can commence a Federal court action to ask a Federal judge to 
determine liability and, if proven, require violators to provide 
redress. See 15 U.S.C. 57b(a)(1), (b). Without the rule, the path to 
court-ordered redress is longer. The Commission must first conduct 
an administrative proceeding to determine whether the respondent 
engaged in unfair or deceptive acts or practices in violation of 
section 5(a) of the FTC Act. If the Commission finds that the 
respondent did so, the Commission issues a cease-and-desist order, 
which might not become final until after the resolution of any 
resulting appeal to a Federal court of appeals. Then, to obtain 
redress, the Commission must initiate a second action in Federal 
district court, in which it must prove that the violator engaged in 
objectively fraudulent or dishonest conduct in order to obtain 
court-ordered redress. See 15 U.S.C. 57b(a)(2), (b).
---------------------------------------------------------------------------

    As an additional benefit, the rule will enable the Commission to 
seek civil penalties against violators. The FTC Act generally does not 
allow the Commission to obtain civil penalties against those who engage 
in unfair or deceptive acts or practice in violation of section 5(a) of 
the FTC Act. Section 5(m)(1)(A) of the FTC Act does, however, authorize 
the Commission to seek civil penalties in court for violations of trade 
regulation rules, such as the final rule here.\147\ The ability to 
obtain civil penalties provides two benefits. First, court-ordered 
civil penalties give the Commission the ability to ensure that 
violators do not retain the profits they earn by engaging in the unfair 
or deceptive pricing practices prohibited by the rule. Second, the 
potential for civil penalties will deter violations and provide a 
strong incentive for businesses providing live-event tickets and short-
term lodging to provide truthful and transparent pricing information in 
compliance with the rule, which will have consumer welfare benefits and 
will benefit honest competition.\148\
---------------------------------------------------------------------------

    \147\ See section 5(m)(1)(A) of the FTC Act, 15 U.S.C. 
45(m)(1)(A) (providing that those who violate a trade regulation 
rule ``with actual knowledge or knowledge fairly implied on the 
basis of objective circumstances that such act is unfair or 
deceptive and is prohibited by such rule'' are liable for civil 
penalties for each violation). In addition, any entity or person who 
violates such a rule (irrespective of the state of knowledge) is 
liable for any injury caused to consumers by the rule violation. The 
Commission may pursue such recovery in a suit under section 19(a)(1) 
of the FTC Act, 15 U.S.C. 57b(a)(1).
    \148\ NPRM, 88 FR 77447-48.
---------------------------------------------------------------------------

    When promulgating a final rule, the Commission must prepare a final 
regulatory analysis, which is contained in section V. The final 
regulatory analysis contains an estimated cost-benefit analysis of the 
final rule, as well as a more in-depth discussion of the comments the 
Commission received in response to the NPRM. In addition, the 
Commission's final regulatory flexibility analysis, which is contained 
in section VII, discusses the final rule's economic impact on small 
entities.

III. Section-by-Section Analysis

    The Commission has carefully considered the rulemaking's extensive 
comment record. It has weighed considerations raised by individual 
consumers, businesses (including small businesses), industry advocates, 
consumer advocates, labor representatives, academics, and other law 
enforcement bodies. After considering these comments, the Commission 
finalizes this rule to address a subset of the specific unfair and 
deceptive practices identified in the NPRM. The rule will help ensure 
that consumers shopping for live-event tickets and short-term lodging 
see advertised prices that include all mandatory fees, can obtain such 
goods or services at those prices, and know what they are paying for. 
The rule promotes honest and transparent pricing for consumers and a 
level playing field for businesses.
    Numerous public comments in support of and in opposition to the 
rule included discussions of the definitions and substantive provisions 
of the proposed rule, and made various recommendations. The Commission 
considered comments pointing out confusion about specific phrases in 
the proposed rule, particularly phrases that commenters found vague or 
overbroad. The Commission also took notice of comments that suggested 
some entities or transactions would be subject to overlapping Federal 
regulations regarding pricing disclosures that could result in 
confusion to consumers or businesses. In addition, the Commission 
appreciated comments from industry that identified potential gaps in 
how the proposed rule would interact with certain types of pricing 
practices.
    The Commission makes a number of changes to the final rule. 
Notably, the Commission narrows the application of the final rule to 
offers, displays, or advertisements of a covered good or service--i.e., 
live-event tickets or short-term lodging. The Commission recognizes 
that many comments to the proposed rule focused on the application of 
the rule to specific industries or pricing scenarios. As a result of 
the Commission's decision to limit this final rule to live-event 
ticketing and short-term lodging, the

[[Page 2082]]

Commission need not respond to each of these comments at this time.
    In addition, wherever possible, the Commission works to reduce 
burden on, and maintain pricing flexibility for, businesses. Finally, 
the Commission provides guidance and explanation to respond to specific 
questions and hypotheticals posed by commenters to help give additional 
clarity to businesses. The following discussion provides a section-by-
section analysis of the NPRM's proposed provisions and the provisions 
adopted in the final rule, as well as a discussion of the comments 
received and the Commission's responses.

A. Sec.  464.1 Definitions

    Proposed Sec.  464.1 contained definitions for the following terms: 
``ancillary good or service''; ``business''; ``clear(ly) and 
conspicuous(ly)''; ``government charges''; ``pricing information''; 
``shipping charges''; and ``total price.'' The Commission received 
various comments with respect to these definitions, including 
particular industries' requests for exemption from the definition of 
``business'' and other suggestions. Section 464.1 of the final rule 
adopts these definitions, in some instances with minor modifications 
for clarification, and adds a definition for ``covered good or 
service.'' In the definition-by-definition analysis, the Commission 
discusses each definition proposed in the NPRM, any changes to the 
definition's text, the added definition, and other comments relevant to 
the definitions section that are not otherwise addressed in the 
discussion of the final rule's substantive provisions.
1. Ancillary Good or Service
    Proposed Sec.  464.1(a) in the NPRM defined ``ancillary good or 
service'' as ``any additional good(s) or service(s) offered to a 
consumer as part of the same transaction.'' This definition was 
relevant to the definition of ``total price,'' in proposed Sec.  
464.1(g), which specified that any mandatory fees or charges for such 
goods or services would be included in total price. Commenters proposed 
modifications to the definition of ``ancillary good or service'' but, 
following review of those comments and as discussed in this section, 
the Commission declines to adopt the suggested modifications. Final 
Sec.  464.1 adopts the definition of ``ancillary good or service'' 
without modification.
    Several commenters recommended that the Commission modify the 
definition of ``ancillary good or service'' to state that fees charged 
by a third party must be included in total price if those fees are part 
of the same transaction.\149\ As stated in the NPRM, if a business 
advertises a price for a good or service that requires an ancillary 
good or service provided by another entity, the charge for the 
mandatory ancillary good or service must be included in total price. 
Additionally, the NPRM made clear that the definition includes goods 
and services (whether from the seller or third parties) offered as part 
of the same transaction, because it included examples of mandatory 
ancillary goods or services that may be offered by third-party 
providers but are part of the same transaction, such as a payment 
processing fee for an online transaction. Accordingly, the Commission 
does not believe that it is necessary to modify the definition of 
``ancillary good or service'' to clarify that fees charged by a third 
party must be included in total price if those fees are part of the 
same transaction.
---------------------------------------------------------------------------

    \149\ FTC-2023-0064-3191 (Community Catalyst et al.); FTC-2023-
0064-3283 (National Consumer Law Center, Prison Policy Initiative, 
and advocate Stephen Raher).
---------------------------------------------------------------------------

    Several commenters also suggested that the Commission add language 
referring to a reasonable consumer in the definition of ``ancillary 
good or service,'' to clarify that only goods or services that a 
``reasonable consumer'' would expect to be included must be included in 
total price.\150\ The Commission does not believe that adding 
``reasonable consumer'' to the definition of ``ancillary good or 
service'' is necessary, as the reasonable consumer standard is implicit 
in the rule text. Under longstanding precedent, the Commission examines 
conduct from the perspective of a consumer acting reasonably under the 
circumstances.\151\ If a representation or practice affects or is 
directed primarily to a particular group, the Commission examines 
reasonableness from the perspective of an ordinary member of that 
group.\152\ Accordingly, the Commission does not believe it is 
necessary to modify the definition of ``ancillary good or service'' to 
refer to a reasonable consumer.
---------------------------------------------------------------------------

    \150\ FTC-2023-0064-3268 (Housing & Eviction Defense Clinic, 
University of Connecticut School of Law, commented ``the definition 
of an `Ancillary Good or Service' should be amended to include all 
fees that are not reasonably avoidable and all fees or charges for 
goods or services that a reasonable consumer would expect to be 
included with the purchase.''); FTC-2023-0064-3275 (Berkeley Center 
for Consumer Law & Economic Justice et al. recommended the 
definition of ``Ancillary Good or Service'' be revised ``to mean 
`any optional, additional good(s) or service(s), offered to a 
consumer as part of the same transaction, that a reasonable consumer 
would not expect to be included with the purchase of the advertised 
good or service.''); FTC-2023-0064-3160 (Consumer Federation of 
America et al. proposed the definition of ``Ancillary Good or 
Service'' be modified to ``any optional, additional good(s) or 
service(s), offered to a consumer as part of the same transaction, 
that a reasonable consumer would not expect to be included with the 
purchase of the advertised good or service.'').
    \151\ Deception Policy Statement, 103 F.T.C. at 175, 177-82; see 
also FTC v. Cantkier, 767 F. Supp. 2d 147, 151-52 (D.D.C. 2011) 
(applying deception standard set forth in the Deception Policy 
Statement); POM Wonderful, LLC v. FTC, 777 F.3d 478, 490, 500 (D.C. 
Cir. 2015) (applying deception standard set forth in the Deception 
Policy Statement and upholding administrative law judge 
determination that `` `a significant minority' of `reasonable' 
consumers `would interpret [the ad] to be claiming that drinking 
eight ounces of POM Juice daily prevents or reduces the risk of 
heart disease.' ''); FTC v. World Travel Vacation Brokers, Inc., 861 
F.2d 1020, 1029 (7th Cir. 1988) (upholding lower court's 
determination that `` `the $29 airfare promotion constituted the 
type of misrepresentation upon which a reasonably prudent person 
would rely' ''); Fed. Trade Comm'n, FTC Policy Statement on 
Unfairness (appended to In re Int'l Harvester Co., 104 F.T.C. 949, 
1070, 1073 (1984), (hereinafter ``Unfairness Policy Statement''), 
https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-104/ftc_volume_decision_104__july_-_december_1984pages949_-_1088.pdf 
(``To justify a finding of unfairness the [consumer] injury must . . 
. be an injury that consumers themselves could not reasonably have 
avoided.'').
    \152\ Deception Policy Statement, 103 F.T.C. at 175, 179 (``For 
instance, if a company markets a cure to the terminally ill, the 
practice will be evaluated from the perspective of how it affects 
the ordinary member of that group.'').
---------------------------------------------------------------------------

    One commenter argued, in the context of online movie ticket 
purchases, that online convenience fees are reasonably avoidable 
because consumers can purchase tickets in-person at a theater without 
incurring the fees.\153\ Although a movie ticket is not a covered good 
or service, similar convenience fees are common in the live-event 
ticketing industry. The Commission disagrees with the commenter that 
online convenience fees are reasonably avoidable: If a consumer must 
pay a service or other fee in order to purchase tickets online (i.e., 
as part of the same transaction), then such a fee must be included in 
total price when it appears online. In addition, using vague fee 
descriptions, such as an unspecified ``convenience'' fee, may violate 
Sec. Sec.  464.2(c) and 464.3 by failing to disclose clearly and 
conspicuously, and by misrepresenting, the nature or purpose of fees or 
the identity of the good or service for which fees or charges are 
imposed.
---------------------------------------------------------------------------

    \153\ FTC-2023-0064-3292 (National Association of Theatre 
Owners).
---------------------------------------------------------------------------

    Another commenter argued that the definition of ``ancillary good or 
service'' should ``not turn on whether the good or service is `offered' 
to a consumer but whether it is `required to be purchased' by the 
consumer.'' \154\ The commenter proposed that the Commission

[[Page 2083]]

incorporate the word ``mandatory'' into the definition of ``ancillary 
good or service.'' The Commission disagrees with this proposed 
modification. As discussed in the NPRM, an ancillary good or service 
may be mandatory or optional. Whether the cost of the ancillary good or 
service must be incorporated into total price turns on whether the good 
or service is mandatory, which depends on the facts of a 
transaction.\155\ For example, if a hotel offers a consumer the option 
to purchase or decline a trip protection plan with a room reservation, 
the plan would be an optional ancillary good or service because the 
consumer has the option to decline the trip insurance. Conversely, a 
hotel may require all guests to purchase a daily breakfast voucher. In 
this case, the hotel guest cannot avoid being charged for the voucher, 
and it is a mandatory ancillary good or service. If a business charges 
payment processing fees that the consumer cannot reasonably avoid, such 
fees would be for a mandatory ancillary good or service.
---------------------------------------------------------------------------

    \154\ FTC-2023-0064-3206 (Motor Vehicle Protection Products 
Association et al.).
    \155\ See infra section III.A.8.a.
---------------------------------------------------------------------------

    It is also possible that a good or service may be mandatory in one 
transaction but optional in another.\156\ For example, if a hotel 
allows a guest to purchase amenities such as bottled water or pool 
towels for an additional fee but permits each guest to supply their own 
water or pool towels, such amenities would be optional ancillary goods 
or services. If, however, the hotel requires all patrons to use the 
hotel-provided amenities for a fee, then the amenities would be 
mandatory ancillary goods or services. Because ancillary goods or 
services may be either mandatory or optional, the Commission declines 
to add the word ``mandatory'' into the definition of ``ancillary good 
or service.''
---------------------------------------------------------------------------

    \156\ The Commission notes that several commenters 
misinterpreted the definition of ``Ancillary Good or Service'' as 
necessarily being optional. See, e.g., FTC-2023-0064-3145 
(Association of National Advertisers, Inc. stated that ``Ancillary 
fees, by definition, are not `mandatory' and should not be 
characterized as `mandatory' fees subject to the proposed disclosure 
requirements.''); FTC-2023-0064-1425 (Iowa Bankers Association 
stated, ``While the definition of Total Price includes `mandatory' 
Ancillary Goods or Services, the actual definition [of Ancillary 
Good or Service] seems to speak to the discretionary aspect of this 
term.''). The Commission reiterates that the rule text is clear: 
Ancillary Goods or Services may be mandatory or optional, depending 
on the facts of a particular transaction.
---------------------------------------------------------------------------

    Some commenters also asked the Commission for additional guidance 
as to when a good or service might be considered ancillary, 
particularly if a good or service includes variable costs.\157\ The 
Commission addresses pricing scenarios, including those pertaining to 
contingent or variable fees, in section III.B.1.a. Another commenter 
stated that the use of the word ancillary was unclear, because it 
``implies a relationship between a primary object and the ancillary 
object'' and does not include guidance concerning the primary 
object.\158\ The Commission cannot identify in every possible situation 
which good or service would be the ``primary object'' versus an 
ancillary good or service because such a determination is fact-specific 
and will depend on the goods or services offered by individual 
businesses.
---------------------------------------------------------------------------

    \157\ FTC-2023-0064-3172 (New Jersey Apartment Association); 
FTC-2023-0064-3296 (Bay Area Apartment Association).
    \158\ FTC-2023-0064-3206 (Motor Vehicle Protection Products 
Association et al.).
---------------------------------------------------------------------------

    For the foregoing reasons, and based on its review of the comments 
received, the Commission adopts the definition of ``ancillary good or 
service'' set forth in the NPRM. As discussed in section III.A.8, to 
address comments and clarify the rule, the Commission modifies the 
definition of total price to further clarify that under final Sec.  
464.2(a), Businesses may exclude from total price fees or charges for 
any optional ancillary good or service.
2. Business
    Proposed Sec.  464.1(b) defined ``business'' 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.'' As part of the NPRM, the 
Commission also proposed a carve-out for certain motor vehicle dealers 
required to comply with the Combating Auto Retail Scams Trade 
Regulation Rule (``CARS Rule''),\159\ and for the carve-out to become 
effective upon the CARS Rule's effective date. The CARS Rule provides 
for certain pricing disclosure requirements and prohibits 
misrepresentations. Final Sec.  464.1 adopts the first sentence of the 
proposed definition of ``business,'' but removes the carve-out for 
motor vehicles required to comply with the CARS Rule because of the 
final rule's narrowed scope.
---------------------------------------------------------------------------

    \159\ 16 CFR part 463.
---------------------------------------------------------------------------

    In the NPRM, the Commission sought input as to whether it should 
modify the proposed definition of ``business'' to exclude certain 
businesses, or whether it should add a definition of ``covered 
business'' to narrow the businesses subject to the rule. The NPRM also 
included several questions concerning how to define ``covered 
business'' in the event the Commission opted to adopt such a 
definition. The Commission received broad support for an industry-
neutral rule from individual commenters, consumer groups, and industry 
organizations. Commenters cited the prevalence of hidden and deceptive 
fees across a variety of industries and argued that broad exemptions 
would create an uneven economic playing field and confuse consumers by 
creating unpredictability across industries.\160\ Conversely, the 
Commission received numerous comments asking that it narrow the rule to 
specific industries, including, for example, live-event ticketing and 
short-term lodging. Several commenters also urged the Commission to 
exempt certain industries, arguing that the rule would pose challenges 
for those industries or that those industries are already subject to 
existing regulations.
---------------------------------------------------------------------------

    \160\ See, e.g., FTC-2023-0064-2887 (Progressive Policy 
Institute); FTC-2023-0064-3160 (Consumer Federation of America et 
al.); FTC-2023-0064-3275 (Berkeley Center for Consumer Law & 
Economic Justice et al.).
---------------------------------------------------------------------------

    Following its review of the comments, the Commission narrows 
application of the final rule to covered goods or services, those 
involving live-event tickets or short-term lodging. While the comments 
demonstrated that bait-and-switch pricing and misleading fees and 
charges inflict harms on consumers across the economy, the rulemaking 
record reveals longstanding concerns with these unfair and deceptive 
practices within the live-event ticketing and short-term lodging 
industries in particular. The final rule addresses these industries 
first. The Commission addresses the definition of ``covered good or 
service'' in section III.A.4.
    The Commission received comments requesting modifications to 
various definitions, including the definition of ``business,'' or 
wholesale exemptions from the proposed rule's coverage related to 
issues in particular industries, including auto dealers and service 
providers,\161\ app-based delivery platforms,\162\ financial services

[[Page 2084]]

providers,\163\ franchised businesses,\164\ funeral service 
providers,\165\ rental housing,\166\ restaurants and other food and 
beverage service providers,\167\ telecommunications providers,\168\ 
vending machine retailers,\169\ movie theaters,\170\ health and fitness 
centers,\171\ higher education institutions,\172\ recreational vehicles 
and marine crafts,\173\ and towing companies.\174\ The Commission's 
decision to narrow the final rule to covered goods or services renders 
these requests inapplicable, and as such, the Commission does not 
address them at this time.
---------------------------------------------------------------------------

    \161\ E.g., FTC-2023-0064-3276 (Automotive Service Association); 
FTC-2023-0064-3206 (Motor Vehicle Protection Products Association et 
al.); FTC-2023-0064-3189 (National Automobile Dealers Association); 
FTC-2023-0064-3121 (National Independent Automobile Dealers 
Association).
    \162\ E.g., FTC-2023-0064-3263 (Flex Association); FTC-2023-
0064-3202 (TechNet); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher 
LLP).
    \163\ E.g., FTC-2023-0064-3139 (American Bankers Association and 
Consumer Bankers Association); FTC-2023-0064-2893 (America's Credit 
Unions); FTC-2023-0064-3168 (American Financial Services 
Association); FTC-2023-0064-3147 (American Land Title Association); 
FTC-2023-0064-1425 (Iowa Bankers Association); FTC-2023-0064-1941 
(Independent Bankers Association of Texas); FTC-2023-0064-3182 
(Massachusetts Bankers Association); FTC-2023-0064-3119 (Money 
Services Business Association, Inc.); FTC-2023-0064-3144 (Mortgage 
Bankers Association); FTC-2023-0064-3127 (U.S. Chamber of Commerce).
    \164\ E.g., FTC-2023-0064-3294 (International Franchise 
Association); FTC-2023-0064-3141 (Coalition of Franchisee 
Associations); FTC-2023-0064-3211 (American Association of 
Franchisees & Dealers).
    \165\ E.g., FTC-2023-0064-3210 (Service Corporation 
International); FTC-2023-0064-3065 (Carriage Services, Inc.); FTC-
2023-0064-3130 (International Cemetery, Cremation & Funeral 
Association).
    \166\ E.g., FTC-2023-0064-3152 (Building Owners & Managers 
Association et al.); FTC-2023-0064-3116 (Manufactured Housing 
Institute); FTC-2023-0064-3133 (National Multifamily Housing Council 
and National Apartment Association); FTC-2023-0064-3172 (New Jersey 
Apartment Association); FTC-2023-0064-3289 (Zillow Group). As 
explained in section III.A.4, the Commission does not intend to 
cover rental housing providers in its definition of ``Covered Good 
or Service'' at this time.
    \167\ E.g., FTC-2023-0064-0264 (Individual Commenter); FTC-2023-
0064-2953 (Individual Commenter); FTC-2023-0064-2124 (Individual 
Commenter); FTC-2023-0064-3022 (Individual Commenter); FTC-2023-
0064-3021 (Individual Commenter); FTC-2023-0064-3300 (National 
Restaurant Association); FTC-2023-0064-3219 (Georgia Restaurant 
Association); FTC-2023-0064-3180 (Independent Restaurant Coalition); 
FTC-2023-0064-3078 (Washington Hospitality Association); FTC-2023-
0064-3080 (UNITE HERE); FTC-2023-0064-2918 (Elite Catering + Event 
Professionals).
    \168\ E.g., FTC-2023-0064-3234 (CTIA--The Wireless Association); 
FTC-2023-0064-3295 (USTelecom--The Broadband Association); FTC-2023-
0064-2884 (NTCA--The Rural Broadband Association); FTC-2023-0064-
3143 (ACA Connects).
    \169\ E.g., FTC-2023-0064-2919 (National Automatic Merchandising 
Association).
    \170\ E.g., FTC-2023-0064-3292 (National Association of Theatre 
Owners).
    \171\ E.g., FTC-2023-0064-3269 (IHRSA--The Health & Fitness 
Association).
    \172\ E.g., FTC-2023-0064-2906 (National Association of College 
& University Business Officers et al.).
    \173\ E.g., FTC-2023-0064-3249 (Marine Retailers Association of 
the Americas); FTC-2023-0064-3251 (National RV Dealers Association).
    \174\ Towing & Recovery Association of America, Inc. submitted a 
late comment, which the Commission considered in its discretion and 
makes available at https://www.ftc.gov/system/files/ftc_gov/pdf/R207011TRAAComment.pdf.
---------------------------------------------------------------------------

    The Commission received comments from various third-party travel 
service providers, including online travel agencies and travel 
advisors, arguing that third-party travel intermediaries and advisors 
are situated differently from underlying travel service providers and 
may be subject to existing Department of Transportation (``DOT'') 
regulations. Online travel agencies and travel advisors routinely 
offer, display, or advertise prices of covered goods or services to 
consumers, including businesses, which is conduct covered by the final 
rule. One industry group representing travel advisors argued that 
travel advisors do not set the price of underlying travel products and 
rely on the sellers of such products to provide accurate pricing 
information.\175\ The commenter requested that the Commission include a 
``safe harbor mechanism'' to protect travel advisors who may rely on 
inaccurate pricing information provided by sellers. The Commission 
declines to exclude travel advisors from the rule or to provide them 
with a safe harbor. The Commission addresses in section III.B.1.f 
requests for immunity for third-party intermediaries.
---------------------------------------------------------------------------

    \175\ FTC-2023-0064-3106 (American Society of Travel Advisors).
---------------------------------------------------------------------------

    The Commission also received comments from online travel agencies 
seeking an exemption from the rule for airfare or bundled products that 
include airfare, arguing that the FTC Act does not confer jurisdiction 
over airlines and, further, that DOT's Full Fare Advertising Rule 
requires certain pricing disclosures for airfare.\176\ As noted in the 
NPRM, the Commission's enforcement of its rule is subject to all 
existing limitations of the law and the Commission cannot bring a 
complaint to enforce its rule if doing so would exceed the Commission's 
jurisdiction or constitutional limitations. The Commission declines to 
exempt online travel agencies from the rule. However, the Commission 
notes that, where there is overlap between this rule and the DOT's Full 
Fare Advertising Rule on the treatment of government charges (i.e., in 
the context of bundled travel packages, such as for airfare and hotels, 
the Full Fare Advertising Rule requires the inclusion of government 
taxes and fees in the total price), complying with both rules is 
feasible. While this rule permits businesses to exclude government 
charges from total price, it does not require them to do so.
---------------------------------------------------------------------------

    \176\ See, e.g., FTC-2023-0064-3293 (Travel Technology 
Association); FTC-2023-0064-3262 (Skyscanner).
---------------------------------------------------------------------------

    The Commission received a comment from a gaming association seeking 
an exemption for Federally recognized Indian Tribes and Tribal entities 
as governments that act for the benefit of their tribal citizens.\177\ 
The commenter asserted that the Commission does not generally exercise 
regulatory authority over such entities. The comment focused on Tribal 
government casinos and explained that Tribal casino revenues are used 
for essential Tribal government services and community development, 
including education, healthcare services, housing, and infrastructure 
development.\178\
---------------------------------------------------------------------------

    \177\ FTC-2023-0064-3120 (Arizona Indian Gaming Association).
    \178\ Id.
---------------------------------------------------------------------------

    The Commission recognizes that some Tribal Government casinos and 
other businesses may operate as hotels or live-event venues, or may 
otherwise offer goods or services that fit within the definition of 
covered good or service. Nevertheless, the Commission declines to 
exempt Federally recognized Indian Tribes and Tribal entities from 
coverage under the final rule. The FTC Act is a law of general 
applicability that applies to such entities, as well as individual 
members thereof.\179\ The Commission recognizes that, in some 
instances, these entities may be organized in such a way that they are 
outside FTC jurisdiction, but whether a given Tribe or Tribal business 
is a corporation within the scope of the FTC Act is a fact-dependent 
inquiry.\180\ The Commission is not aware of any evidence to suggest 
that the final rule would disproportionately impact such entities or 
that it would have any impact on their ability to continue to use 
revenues for government services or community development.
---------------------------------------------------------------------------

    \179\ See Fed. Power Comm'n v. Tuscarora Indian Nation, 362 U.S. 
99, 116-17 (1960) (examining case law supporting the conclusion that 
``a general statute in terms applying to all persons includes 
Indians and their property interests''); FTC v. AMG Servs., Inc., 
No. 2:12-CV-00536-GMN, 2013 WL 7870795, at * 16-21 (D. Nev. July 16, 
2013), R. & R. adopted, 2014 WL 910302 (D. Nev. Mar. 7, 2014) 
(discussing the FTC Act's applicability to Federally recognized 
Tribes and Tribal businesses).
    \180\ See, e.g., AMG Servs., 2013 WL 7870795, at * 22-23 
(holding there was a genuine dispute of material fact barring 
summary judgment on question of whether Tribal chartered 
corporations were for-profit corporations under the FTC Act).
---------------------------------------------------------------------------

    The Commission received a comment seeking an exemption for all 
franchised businesses. The commenter raised concerns that franchised 
businesses may lose out on the benefit of national

[[Page 2085]]

advertising campaigns, asserting that ``[u]nder the Proposed Rule, 
national marketing campaigns are only workable if all franchised 
businesses in a franchise system adhere to the same pricing regime 
(including pass-through fees), regardless of the economic demands of 
the market in which they operate.'' \181\ The commenter also raised 
concerns particular to restaurant franchises.\182\
---------------------------------------------------------------------------

    \181\ FTC-2023-0064-3294 (International Franchise Association).
    \182\ Id.
---------------------------------------------------------------------------

    The Commission declines to exclude franchised businesses from the 
final rule. As the commenter notes, franchised businesses include 
hotels, restaurants, and fitness centers, among other businesses. The 
Commission's addition of the ``covered good or service'' definition 
narrows the rule's application to businesses that make available live-
event tickets or short-term lodging and moots the commenter's concerns 
regarding restaurants or other franchises. Further, the final rule 
applies equally to franchised and non-franchised businesses, including 
hotels. The commenter has not provided any evidence to suggest that the 
rule will disproportionately impact franchised businesses. As to the 
commenter's contention that application of the rule will negatively 
impact franchised businesses' ability to benefit from national 
advertising campaigns, the Commission addresses commenters' questions 
and concerns about national advertising campaigns in section III.B.1.d.
    The commenter also urged the Commission to exclude from the rule 
sellers of franchises (``franchisors'') subject to the FTC's Disclosure 
Requirements and Prohibitions Concerning Franchising Rule (``Franchise 
Rule''), arguing that the rule's total price requirement would 
undermine the Franchise Rule's requirement to itemize specific 
fees.\183\ Two commenters representing franchised businesses 
(``franchisees''), however, urged the Commission to address ``the types 
of fees that are charged to franchisees by franchisors,'' which are not 
subject to the Franchise Rule.\184\
---------------------------------------------------------------------------

    \183\ Id.
    \184\ FTC-2023-0064-3141 (Coalition of Franchisee Associations); 
FTC-2023-0064-3211 (American Association of Franchisees & Dealers).
---------------------------------------------------------------------------

    The Franchise Rule, 16 CFR part 436, requires franchisors, in 
connection with the offer or sale of a franchise, to provide 
prospective franchisees with specific information about the fees and 
charges necessary to begin operation of the franchised business, 
including the estimated initial investment, expected fees, and other 
expenses.\185\ Because the final rule is limited to prices for covered 
goods or services and ancillary goods or services offered as part of 
the same transaction, it would not apply to an offer or sale of a 
franchise, including a hotel franchise. However, the Commission 
reiterates that franchised businesses must comply with the final rule 
in its entirety when selling covered goods or services.
---------------------------------------------------------------------------

    \185\ 16 CFR 436.5; see also Fed. Trade Comm'n, Staff Guidance 
on the Unlawfulness of Undisclosed Fees Imposed on Franchisees (July 
2024), https://www.ftc.gov/system/files?file=ftc_gov/pdf/Franchise-Staff-Guidance.pdf.
---------------------------------------------------------------------------

    One industry group recommended that the definition of ``business'' 
be limited to ``an individual, corporation, partnership, association, 
or any other entity that offers goods or services to consumers,'' with 
the purpose of exempting business-to-business transactions from the 
scope of the final rule.\186\ Another industry group similarly 
requested that the Commission exempt business-to-business transactions 
from the scope of the final rule.\187\ As set forth in section 
III.B.1.f, the Commission believes that application of the rule to 
business-to-business transactions is appropriate and necessary to 
provide the Commission with the tools necessary to seek redress from 
businesses that violate the law. The final rule covers both business-
to-consumer transactions and business-to-business transactions, so no 
modification to the definition of ``business'' is required.
---------------------------------------------------------------------------

    \186\ FTC-2023-0064-3189 (National Automobile Dealers 
Association).
    \187\ FTC-2023-0064-3294 (International Franchise Association).
---------------------------------------------------------------------------

3. Clear(ly) and Conspicuous(ly)
    Proposed Sec.  464.1(c) in the NPRM defined ``clear(ly) and 
conspicuous(ly),'' consistent with longstanding FTC practice, as ``a 
required disclosure that is difficult to miss (i.e., easily noticeable) 
and easily understandable,'' and listed proposed specifications for 
``visual disclosure[s],'' ``audible disclosure[s],'' and ``any 
communication using an interactive electronic medium.'' Among other 
specifications, the definition explained that the disclosure ``must be 
made through the same means through which the communication is 
presented.'' The proposed definition also provided that disclosures 
``must use diction and syntax understandable to ordinary consumers and 
must appear in each language in which the representation that requires 
disclosure appears'' and ``must not be contradicted or mitigated by, or 
inconsistent with, anything else in the communication.'' The proposed 
definition further made clear that for ``representations or sales 
practice[s]'' targeting specific audiences, ``such as children, older 
adults, or the terminally ill, `ordinary consumers' includes reasonable 
members of that group.'' The Commission finalizes the definition of 
``clear(ly) and conspicuous(ly)'' proposed in Sec.  464.1(c) with minor 
clarifications to harmonize the language and terminology used in this 
provision with the terminology used in recent rulemakings and agency 
guidance.
    Specifically, proposed Sec.  464.1(c) provided that a required 
disclosure must be ``difficult to miss (i.e., easily noticeable).'' 
Final Sec.  464.1 reverses the order of the phrases ``easily 
noticeable'' and ``difficult to miss,'' and, thus, provides that a 
required disclosure must be ``easily noticeable (i.e., difficult to 
miss).'' Additionally, in final Sec.  464.1, the Commission adds 
language to clarify that required disclosures must be ``easily 
understandable by ordinary consumers.'' In final Sec.  464.1, the 
Commission deletes reference to ``reasonable'' members of a 
specifically targeted group. Each of these modifications is to comport 
with the Commission's recently finalized Trade Regulation Rule on the 
Use of Consumer Reviews and Testimonials and the Negative Option Rule, 
as well as the Commission's Endorsement Guides.\188\ Moreover, as noted 
in section II.B., the Commission examines conduct from the perspective 
of a consumer acting reasonably under the circumstances, and if a 
representation or practice affects or is directed primarily to a 
particular group, the Commission examines reasonableness from the 
perspective of an ordinary member of that group.\189\ In final Sec.  
464.1, the Commission also includes ``mobile

[[Page 2086]]

applications'' within the definition of ``clear(ly) and 
conspicuous(ly).'' This addition clarifies that ``mobile applications'' 
constitute interactive media devices under item (4) of the definition. 
The Commission does not believe that these modifications substantively 
alter the definition of ``clear(ly) and conspicuous(ly).''
---------------------------------------------------------------------------

    \188\ See Promulgation of Trade Regulation Rule and Statement of 
Basis and Purpose: Rule Concerning Recurring Subscriptions and Other 
Negative Option Programs, 89 FR 90476 (Nov. 15, 2024), https://www.federalregister.gov/documents/2024/11/15/2024-25534/negative-option-rule (amending 16 CFR 425.4); 16 CFR part 465; Promulgation 
of Trade Regulation Rule and Statement of Basis and Purpose: Rule on 
the Use of Consumer Reviews and Testimonials, 89 FR 68034 (Oct. 22, 
2024), https://www.federalregister.gov/documents/2024/08/22/2024-18519/trade-regulation-rule-on-the-use-of-consumer-reviews-and-testimonials; Guides Concerning Use of Endorsements and Testimonials 
in Advertising, 16 CFR 255.0(f). The Commission notes that it 
declines to adopt every modification adopted in the finalized Rule 
on the Use of Consumer Reviews and Testimonials, based on the goals 
of each rule and the comment record.
    \189\ See Deception Policy Statement, 103 F.T.C. at 175, 177-82; 
Unfairness Policy Statement, 104 F.T.C. at 1073; and other sources 
cited supra notes 151-52.
---------------------------------------------------------------------------

    The Commission declines to adopt several modifications to the 
definition of ``clear(ly) and conspicuous(ly)'' proposed by a consumer 
group. First, the commenter suggested that the Commission add ``limited 
English proficient consumers'' to the list of specific audience-types 
that a representation or sales practices may target in proposed Sec.  
464.1(c)(8) to make clear that disclosures are understandable for both 
English and limited-English speakers.\190\ The Commission does not 
believe such a modification is necessary. While the definition includes 
examples of specific audiences who may be targeted by particular sales 
practices or representations, the use of ``such as'' is intended to 
make clear these are examples, rather than an exhaustive list of 
categories of consumers who may be targeted. The Commission further 
notes that final Sec.  464.1 requires that the disclosures ``must 
appear in each language in which the representation that requires the 
disclosure appears.''
---------------------------------------------------------------------------

    \190\ FTC-2023-0064-3160 (Consumer Federation of America et 
al.).
---------------------------------------------------------------------------

    The commenter also suggested that the Commission add language to 
require that disclosures on interactive electronic media ``be capable 
of being printed and saved in an easily readable format.'' \191\ The 
Commission does not believe such a modification is necessary. The 
definition considers the various types of media through which consumers 
and businesses transact and, for all types of media, the definition 
requires the disclosures to be ``easily noticeable (i.e., difficult to 
miss).'' Thus, the Commission believes that the definition provides 
businesses with flexibility to continue transacting effectively and 
efficiently through different media, while ensuring sufficient consumer 
understanding of required disclosures. The commenter further proposed 
that the rule clarify that disclosures must be concise to discourage 
businesses from ``listing hundreds of optional fees, identifying fees 
that would not be applicable to the consumer, providing a description 
that uses complex jargon, [or is] unnecessarily lengthy.'' \192\ The 
definition already addresses these concerns by setting forth what 
``clear(ly) and conspicuous(ly)'' means: using simple terms that 
provide sufficient information about how businesses can formulate 
disclosures that are easily understandable and noticeable to consumers. 
The definition provides that disclosures ``must stand out from any 
accompanying text or other visual elements'' to be ``easily noticed, 
read, and understood.''
---------------------------------------------------------------------------

    \191\ Id.
    \192\ Id.
---------------------------------------------------------------------------

    An automobile industry group urged the Commission to remove 
``required disclosure'' from the definition of ``clear(ly) and 
conspicuous(ly),'' arguing that ``the NPRM is silent on what those 
required disclosures actually are.'' \193\ The Commission disagrees and 
notes that the final rule modifies Sec.  464.2(a) through (c) to 
provide greater clarity concerning what needs to be disclosed, 
including total price and other information related to fees or charges 
that were excluded from total price, and the nature, timing, and 
prominence of those disclosures. Those modifications are discussed in 
detail in section III.B.
---------------------------------------------------------------------------

    \193\ FTC-2023-0064-3206 (Motor Vehicle Protection Products 
Association et al.).
---------------------------------------------------------------------------

    One commenter on behalf of members in the financial services 
industry asserted that the definition of ``clear(ly) and 
conspicuous(ly)'' may conflict with requirements of certain financial 
services regulations, which do not generally require a certain text 
size or placement, but do require that certain disclosures be made with 
``equal prominence and in close proximity to certain trigger terms.'' 
\194\ The Commission does not believe that financial services 
regulations are implicated by the final rule's more narrow application 
to covered goods or services. Nonetheless, the Commission notes that 
the definition does not require a particular text size or placement; 
the definition states that ``clear(ly) and conspicuous(ly)'' requires a 
visual disclosure to ``stand out from any accompanying text or other 
visual elements so that it is easily noticed, read, and understood.''
---------------------------------------------------------------------------

    \194\ FTC-2023-0064-1425 (Iowa Bankers Association).
---------------------------------------------------------------------------

    A commenter on behalf of marketing and advertising businesses 
criticized the proposed definition of ``clear(ly) and conspicuous(ly)'' 
as imposing ``prescriptive visual and audio disclosure[s] . . . that 
may not cleanly map onto all advertising mediums'' and argued that a 
business's compliance obligations may not be clear if the business 
relies on advertising mediums not mentioned in the definition.\195\ The 
commenter urged the Commission to allow for sufficient flexibility ``to 
better accommodate current and future advertising mediums that may not 
allow for the contemplated disclosures,'' in particular to make it 
easier for small businesses to comply with the rule.\196\ The commenter 
did not provide any examples of advertising media that would make it 
difficult to comply with the rule and did not suggest alternative 
language. Similarly, a commenter representing app-based delivery 
platforms noted the limited space for disclosures on delivery platforms 
and asserted that the rule lacked clarity as to how such platforms 
should comply.\197\
---------------------------------------------------------------------------

    \195\ FTC-2023-0064-3145 (Association of National Advertisers, 
Inc.).
    \196\ Id.
    \197\ FTC-2023-0064-3263 (Flex Association).
---------------------------------------------------------------------------

    The Commission believes that the definition of ``clear(ly) and 
conspicuous(ly)'' provides basic, common-sense, and flexible principles 
to address current and future advertising media. For example, the 
definition requires that visual disclosures be in a size and font that 
consumers will easily notice and not be obscured by other text and that 
audible disclosures be at a volume, speed, and cadence that consumers 
will easily understand. In keeping with longstanding Commission 
interpretation and guidance, the definition does not mandate specific 
fonts, text-size, or volume, or otherwise impose a one-size-fits-all 
approach. Instead, it provides substantial flexibility to businesses in 
meeting the rule's disclosure requirements so long as consumers take 
away an accurate understanding of the disclosure. The Commission has 
published multiple resources to assist businesses in ensuring that 
disclosures are clear and conspicuous, including a guide specifically 
geared toward digital and mobile advertising.\198\
---------------------------------------------------------------------------

    \198\ See Fed. Trade Comm'n, Bureau of Consumer Protection 
Business Guidance, .com Disclosures: How to Make Effective 
Disclosures in Digital Advertising 7, 18 (Mar. 2013), https://www.ftc.gov/system/files/documents/plain-language/bus41-dot-com-disclosures-information-about-online-advertising.pdf.
---------------------------------------------------------------------------

4. Covered Good or Service
    In the NPRM, the Commission solicited comment on whether it should 
narrow the businesses covered by the rule to particular industries or 
to covered businesses, and if so, how to define covered 
businesses.\199\ The final rule includes a definition for ``covered 
good or service'' to include: (1) Live-event tickets; or (2) Short-term 
lodging, including temporary sleeping accommodations at a hotel, motel, 
inn, short-term rental, vacation rental or other place of lodging. 
Under Sec.  464.2(a),

[[Page 2087]]

the final rule requires businesses that offer, display, or advertise 
any price of a covered good or service to clearly and conspicuously 
disclose the total price. In addition, Sec.  464.3 of the final rule 
prohibits businesses that offer, display, or advertise a covered good 
or service from misrepresenting any fees or charges.
---------------------------------------------------------------------------

    \199\ NPRM, 88 FR 77481, Question 14.
---------------------------------------------------------------------------

    The Commission received comments encouraging it to adopt an 
industry-neutral rule and urging it not to limit the rule's application 
to particular industries, as well as comments conversely urging it to 
limit the rule to live-event ticketing and short-term lodging 
industries. One advocacy group argued that narrowing application of the 
final rule to a subset of industries would ``create an unlevel playing 
field'' and alter competitive incentives.\200\ Other commenters argued 
that hidden or deceptive fees are present across industries and often 
impact vulnerable populations.\201\ Several commenters did not 
specifically address the Commission's question regarding whether to add 
a definition of ``covered business'' or how to define ``covered 
business,'' but instead submitted comments highlighting unfair and 
deceptive pricing practices in certain industries, and encouraging the 
Commission to adopt a final rule applicable to those industries. Those 
included comments concerning the motor vehicle industry; \202\ delivery 
applications; \203\ the financial services industry; \204\ the 
restaurant industry; \205\ the movie theater industry; \206\ tax 
preparation services; \207\ and the health care industry.\208\
---------------------------------------------------------------------------

    \200\ FTC-2023-0064-2887 (Progressive Policy Institute).
    \201\ FTC-2023-0064-1519 (NYC Consumer and Worker Protection 
argued that ``[c]onsumers deserve every business to be transparent 
and fair about prices.''); FTC-2023-0064 (Berkeley Law stated that 
``[r]estricting the Rule to particular industries would exclude some 
of the most critical sectors that low-income people especially rely 
on,'' including ``the rental housing market, tax preparation 
services, payday lenders, and gift card merchants''); FTC-2023-0064-
3282 (NCLC highlighted hidden or deceptive fees in ``businesses that 
offer credit, lease, or savings products'')
    \202\ See, e.g., FTC-2023-0064-3160 (Consumer Federation of 
America et al.); FTC-2023-0064-3270 (Consumer Federation of America, 
National Consumer Law Center, National Association of Consumer 
Advocates); see also FTC-2023-0064-2853 (Performance Auto Inc., an 
individual car dealership, supported application of the rule to car 
dealers.).
    \203\ See, e.g., FTC-2023-0064-1939 (Tzedek DC).
    \204\ See, e.g., FTC-2023-0064-3160 (Consumer Federation of 
America et al.); FTC-2023-0064-3275 (Berkeley Center for Consumer 
Law & Economic Justice et al.); see also FTC-2023-0064-0199 (``I 
don't understand why I have to pay to have my credit card bill 
mailed to me . . . .''); FTC-2023-0064-0258 (``I checked our account 
and discovered that they had charged $10.00 for maintenance 
fees.''); FTC-2023-0064-0418 (``Even credit unions are charging 
insane fees it is bleeding us dry if we are broke already why are we 
getting hit with fees for being poor''); FTC-2023-0064-0396 (``My 
son is on SSI, and his bank charges him fees when his account goes 
below $100! . . . How does this make sense? Banks should not have 
fees like this. It [is] penalizing the poorest people!''); FTC-2023-
0064-0425 (``What bothers me is that my bank charges me $35 for 
every overdraft!! I find that excessive! It's a lot of money, 
especially when you don't have enough in the first place. It's like 
being punished for being poor.''); FTC-2023-0064-0762 (``We have and 
continue to pay unnecessary costs for services especially personal 
loans and credit card debt. This makes payments for these loans much 
more of a hardship than the initial being in need of the card or 
loans was in the first place.'').
    \205\ See, e.g., FTC-2023-0064-3248 (DC Jobs With Justice on 
behalf of Fair Price, Fair Wage Coalition encouraged the Commission 
to maintain an industry-neutral rule applicable to the restaurant 
industry); FTC-2023-0064-2885 (AARP commented that many consumers 
``feel deceived when faced with an unexpected mandatory charge,'' 
such as ``service fees,'' ``living wage fees,'' or ``kitchen fees,'' 
and ``would prefer these costs be incorporated into the price of 
food so that they better understand restaurants' costs upfront.''); 
FTC-2023-0064-0103 (Individual Commenter stated: ``[R]estaurants are 
adding surcharges [for] providing health insurance, or to make sure 
that kitchen crew receives a tip. But these are existing operating 
costs that can and should be factored into the price. . . . On at 
least a couple occasions, the add-on fee wasn't even disclosed until 
the check.''); FTC-2023-0064-0119 (Individual Commenter stated: 
``Fees of approximately 5-20% are often added to restaurant bills. . 
. . They are often written in small font in inconspicuous places on 
the menu or past blank space on websites. It's often unclear where 
these additional fees are going and should be simply incorporated 
into the menu prices.''); FTC-2023-0064-0120 (Individual Commenter 
stated: ``Now restaurants are adding service fees instead of 
increasing food price. I want to buy goods and services, I want to 
know the full price, with all the extra fees and taxes before, not 
after selecting a goods or service.''); FTC-2023-0064-0152) 
(Individual Commenter stated: ``Tipping since covid is crazy now 
too--and now these add on fees appear to be creeping into 
restaurants. A local pizza restaurant added a 20% `gratuity fee' on 
the bill--this was not a tip but an additional charge for `business 
costs' and does not go to employees.''); FTC-2023-0064-0065 
(Individual Commenter stated: ``A number of restaurants here in 
Chicago are now adding surcharges that are only disclosed after you 
get the check, or they are disclosed in small print on the menu, 
which effectively makes the prices displayed on the menu 
deceptive.''); FTC-2023-0064-0052 (Individual Commenter stated: 
``Small businesses, particularly restaurants, have grown their use 
of the type of non-transparent pricing practices that this rule aims 
to address . . ., such as the inclusion in bills of various fees 
that cannot be avoided (and that therefore should be part of the 
total price)'').
    \206\ See, e.g., FTC-2026-0064-1303 (Individual Commenter 
stated: ``Just last night I tried to buy movie tickets (from the 
movie theater's own app no less!) but the fees added 25% more to the 
cost of the ticket! Ten dollars in fees on an app that the big movie 
chain runs on its own!''); FTC-2023-0064-1469 (Individual Commenter 
stated: ``I'm sick of paying for `convenience fees' when purchasing 
tickets online (to live events and even the local movie theater), 
even though there is no other way to purchase them.''); see also 
FTC-2023-0064-3104 (Truth in Advertising, Inc.) (highlighting class 
action lawsuits alleging failure to disclose the total cost of movie 
ticket prices, inclusive of fees, in violation of New York State 
law).
    \207\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for 
Consumer Law & Economic Justice et al.).
    \208\ See, e.g., FTC-2023-0064-3191 (Community Catalyst et al.).
---------------------------------------------------------------------------

    Several commenters specifically urged the Commission to ensure that 
the rental housing industry would be subject to the final rule, 
including in any definition of ``covered business,'' to mitigate unfair 
or deceptive fees imposed on renters.\209\ The Commission also received 
numerous comments from individual consumers, consumer and policy 
organizations, elected officials, legal service providers, and housing 
advocates highlighting unfair and deceptive fees in the rental housing 
industry.\210\ Conversely, advocates from

[[Page 2088]]

the rental housing industry urged the Commission to exempt rental 
housing providers from any definition of ``covered business.'' \211\ A 
rental housing advertising platform urged the Commission to adopt a 
definition of ``covered business'' that excludes third-party 
advertising platforms, arguing that third-party platforms do not direct 
pricing and ``are not best positioned to meet the requirements of the 
proposed rule.'' \212\
---------------------------------------------------------------------------

    \209\ FTC-2023-0064-2888 (Housing Policy Clinic, University of 
Texas School of Law stated, ``it is essential for the rule to cover 
the rental housing industry in order to mitigate the harmful impacts 
of unfair and deceptive fees on renters.''); FTC-2023-0064-2858 
(U.S. House of Representatives, Rep. Maxwell Alejandro Frost, Rep. 
Jimmy Gomez, Rep. Barbara Lee, Rep. Rashida Tlaib, Rep. Kevin 
Mullin, Rep. Dwight Evans, Rep. Judy Chu, Rep. Greg Casar, Rep. Dan 
Goldman, and Rep. Salud Carbajal encouraged an industry-neutral rule 
but urged the Commission at minimum to include live-event ticketing, 
short-term lodging, and the rental housing industries in the final 
rule.); FTC-2023-0064-3275 (Berkeley Center for Consumer Law & 
Economic Justice et al. commented that: ``Exempting landlords from 
the Rule as other commenters have proposed would deprive the 
Commission of a critical tool to challenge purveyors of junk fees 
charged in connection with a basic necessity of life, one that is 
disproportionately relevant to low-income consumers.'').
    \210\ See, e.g., FTC-2023-0064-3218 (National Consumer Law 
Center collected consumer comments highlighting: ``a `technology 
fee' addendum that adds 1% fee of total rent on top of rental 
cost''; ``an extra $255 in mandatory fees, for services I don't even 
want''; and ``water, sewer, and garbage fees would be charged over 
and above the base rent we agreed to . . . [that] could add as much 
as $250 extra per month to our rent.''); FTC-2023-0064-3271 (U.S. 
Senator Amy Klobuchar commented discussing a hearing conducted 
concerning rental housing competition and noting that: ``[R]enters 
are often hit with numerous junk fees that are only disclosed to 
them when signing a lease--frequently after the renter has already 
given notice to end a prior lease. . . . As a result, renters 
struggle to meaningfully compare the cost of various housing 
options.''); FTC-2023-0064-2888 (Housing Policy Clinic, University 
of Texas School of Law commented: ``This lack of transparency robs 
tenants of their opportunity to fairly participate in comparison 
shopping in the rental housing market and can seriously disrupt 
their financial well-being and housing stability.''); FTC-2023-0064-
3218 (National Consumer Law Center commented: ``With respect to the 
rental housing market, the proposed rule would benefit consumers and 
competition. By requiring disclosure of the actual cost of an 
apartment, the rule would help renters to comparison shop and enable 
them to find housing that fits their budget.''); FTC-2023-0064-3225 
(CED Law described undisclosed fees experienced by its clients and 
stated: ``Up front disclosure of all mandatory fees and accurate 
representation of all fees charged would go a long way towards 
ensuring low income renters like those we represent in Colorado 
understand what their monthly housing expenses will be before being 
locked into a lease agreement.''); FTC-2023-0064-0146 (Individual 
Commenter stated they pay fees including for trash, electricity, and 
``some other junk fees'' and argued that rental providers ``should 
be forced to disclose all fees before lease signing and never be 
able to add fees after the lease has been signed.''); FTC-2023-0064-
0157 (Individual Commenter highlighted mandatory added fees and 
charges not disclosed in listed rental prices and stated: 
``Landlords should not be allowed to force tenants into paying these 
fees with no opt out or if the fees are allowed, then the landlord 
must add that to the total monthly rent in advertisements so 
prospective tenants have an accurate scope of what the real monthly 
costs are.''); FTC-2023-0064-0229 (Individual Commenter described an 
apartment company with fees: ``[I]ncluding a $20 mos. fee for 
package delivery. It's a mandatory add-on. Many people do not get 
packages. Including myself.''); FTC-2023-0064-0923 (Individual 
Commenter stated their rental ``requires a number of fixed, non-
negotiable mandatory fees. . . . In my opinion, these fees allow the 
company to advertise a lower monthly rental rate, intentionally 
making it difficult for a prospective tenant to comparison shop and 
compare rents from different organizations.'').
    \211\ See, e.g., FTC-2023-0064-3172 (New Jersey Apartment 
Association supported the rule's inclusion of a definition of 
Covered Business and asked that rental housing providers be excluded 
from the scope of Covered Business); see also FTC-2023-0064-3133 
(National Multifamily Housing Council and National Apartment 
Association).
    \212\ FTC-2023-0064-3289 (Zillow Group).
---------------------------------------------------------------------------

    On the other hand, the Commission also received comments in support 
of a narrow definition of ``covered business'' limited to the live-
event ticketing and short-term lodging industries, including from 
members of those industries.\213\ The U.S. Chamber of Commerce 
recommended limiting the definition of covered businesses to ``the 
live-event ticketing and/or short-term lodging industries,'' arguing 
that unique aspects of these markets, including a robust secondary 
market for live-event tickets and pressures on third-party lodging 
intermediaries ``to advertise the lowest price to consumers to optimize 
search outcomes,'' have shaped FTC research on all-in pricing and 
appropriate remedies.\214\ One academic commenter likewise recommended 
a definition of ``covered business'' limited to live-event ticketing 
and short-term lodging, stating that these industries have been subject 
to extensive research showing ``their use of across-the-board drip 
pricing to be harmful.'' \215\
---------------------------------------------------------------------------

    \213\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce); 
FTC-2023-0064-2891 (Mary Sullivan, George Washington University, 
Regulatory Studies Center); FTC-2023-0064-3233 (NCTA--The internet & 
Television Association); see also FTC-2023-0064-3300 (National 
Restaurant Association urged the Commission to exclude small 
restaurants from a definition of ``Covered Business'').
    \214\ FTC-2023-0064-3127 (U.S. Chamber of Commerce).
    \215\ FTC-2023-0064-2891 (Mary Sullivan, George Washington 
University, Regulatory Studies Center also stated that a rule 
focused on the short-term lodging and live-event ticketing 
industries would ``increase the chance of [the rule's] success'' and 
provide well-defined limits for those Covered Businesses.)
---------------------------------------------------------------------------

    Commenters from the live-event ticketing industry supported a rule 
applicable to their industry, emphasizing that a total price 
requirement will aid consumers and businesses alike if applied across 
the entire industry.\216\ For example, TickPick, a secondary ticket 
marketplace, commented that it already provides consumers with all-in 
pricing and supports ``eliminating drip pricing from the live-event 
ticketing industry,'' arguing that ``widespread use of hidden and/or 
misleading fees harms consumers and market competition.'' \217\ StubHub 
similarly commented that it ``strongly supports efforts to increase 
price transparency for consumers nationwide with the federal adoption 
of all-in pricing'' in the live-event ticketing industry. According to 
StubHub, in 2014, it decided to display the all-in price to consumers 
in the hopes of encouraging the remainder of the industry to follow 
suit; however, it ``had no choice but to revert to its former pricing 
display,'' which used dripped fees, because other platforms continued 
to rely on drip pricing, making StubHub's all-in prices appear higher 
than other platforms.\218\ Live Nation and its subsidiary, Ticketmaster 
North America, likewise expressed concern that, absent a nationwide 
rulemaking to implement all-in pricing, ``the current market realities 
present barriers to implementing all-in pricing,'' because adopting 
all-in pricing ``absent a mandate creates a first-mover disadvantage.'' 
\219\ Live Nation stated that the rule would ``increase pricing 
transparency for fans and support competition in the ticketing 
industry.'' \220\
---------------------------------------------------------------------------

    \216\ See, e.g., FTC-2023-0064-3212 (TickPick, LLC stated that 
it ``supports the Commission using its authority under Section 18 of 
the FTC Act to address unfair and deceptive acts or practices 
involving hidden and misleading fees.''); FTC-2023-0064-3266 
(StubHub, Inc. commented that it ``strongly supports efforts to 
increase price transparency for consumers nationwide with the 
federal adoption of all-in pricing.''); FTC-2023-0064-3105 
(Charleston Symphony commented: ``[R]equiring sellers to disclose 
the total price clearly and conspicuously[ ] addresses a pressing 
issue. . . . Predatory practices in the secondary ticket sales 
market pose a significant threat to artists, venues, audiences, and 
the future of nonprofit arts organizations, impacting the integrity 
of the ticket-buying process and eroding audience confidence.''); 
FTC-2023-0064-3122 (Vivid Seats stated that it ``supports additional 
consumer disclosures, including all-in pricing,'' but the rule 
should ``apply equally across all parts of the live-events ticketing 
industry,'' so consumers can compare prices and businesses that 
display total prices will not be at a competitive disadvantage.); 
FTC-2023-0064-3241 (National Association of Ticket Brokers submitted 
a comment supporting all-in pricing, but noting that it would only 
work if ``(i) it was required of every ticket seller and (ii) there 
was rigorous and expeditious enforcement.''); FTC-2023-0064-3306 
(Live Nation Entertainment and its subsidiary Ticketmaster North 
America commented that they ``support[ ] a definition of all-in 
pricing that requires the first price for a live-event ticket shown 
to consumers to be the price ultimately charged at checkout 
(exclusive of state and local taxes and optional add-ons).''); see 
also FTC-2023-0064-3264 (Mark J. Perry, Ph.D., Professor Emeritus of 
Economics at University of Michigan-Flint and Senior Fellow Emeritus 
at the American Enterprise Institute, ``urge[d] the FTC to ensure 
that any rule requiring all-in pricing in live events apply equally 
to all market participants.''). The Commission addresses other 
comments and factual scenarios raised by commenters concerning live-
event ticketing, including those concerning ticket service fees, in 
section III.B.1.b.
    \217\ FTC-2023-0064-3212 (TickPick, LLC).
    \218\ FTC-2023-0064-3212 (StubHub).
    \219\ FTC-2023-0064-3306 (Live Nation Entertainment).
    \220\ Id.
---------------------------------------------------------------------------

    The Commission also received support from the representatives of 
the short-term lodging industry for the rule's application to that 
industry. The American Society of Travel Advisors commented that ``the 
rule as proposed would greatly benefit consumers of hotel and other 
short-term lodging services'' and applauded the proposed rule's 
prohibition on misleading fees.\221\ The American Hotel & Lodging 
Association also expressed support for implementation of clear total 
price requirements and encouraged the Commission to ``ensure that any 
final rule it promulgates . . . apply broadly to all industry 
participants,'' including intermediaries such as online travel 
agencies, short-term rental platforms, and metasearch sites.\222\ The 
American Gaming Association, a trade group representing the casino 
industry, contended that fees are adequately disclosed and provide 
value to consumers, but stated that, if applied to the lodging 
industry, the rule should be applied ``equitably across the industry. . 
. . including search engines, online travel agencies, and other third-
party vendors.'' \223\
---------------------------------------------------------------------------

    \221\ FTC-2023-0064-3106 (American Society of Travel Advisors).
    \222\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
    \223\ FTC-2023-0064-2886 (American Gaming Association). As 
discussed in section II, bait-and-switch pricing, including drip 
pricing, harms consumers even when charges are subsequently 
disclosed.

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

[[Page 2089]]

    As described in section II, the Commission has determined, in its 
discretion, to focus this final rule on the live-event ticketing and 
short-term lodging industries. The Commission recognizes that 
substantial evidence exists to support a finding of the prevalence of 
bait-and-switch pricing and misleading fees throughout the economy; 
nevertheless, the Commission elects to use its rulemaking authority 
incrementally by first combatting these unfair and deceptive practices 
in the two industries in which the Commission first began evaluating 
drip pricing and that have a history of bait-and-switch pricing tactics 
and misleading fees. Indeed, commenters representing the live-event 
ticket and short-term lodging industries recognized the need for the 
Commission's rulemaking and generally supported the rule's application 
to those industries.
    As described in this section, the Commission received comments 
supporting a definition of ``covered business'' that is limited to the 
live-event ticketing and short-term lodging industries.\224\ The 
Commission also received comments emphasizing the need for a level 
playing field among businesses and allowing consumers to comparison 
shop.\225\ For reasons described herein, the final rule applies to a 
defined set of covered goods or services, rather than to covered 
businesses. Because some businesses in the live-event ticketing and 
short-term lodging industries provide goods or services outside of 
those industries, a narrowing of the businesses covered by the rule 
rather than a narrowing of the goods or services covered by the rule, 
might unintentionally create an uneven playing field. As a result, the 
Commission instead narrows the rule to the defined covered goods and 
services of live-event tickets and short-term lodging. The Commission 
notes that the rule also applies to ancillary goods or services, 
defined as additional goods or services offered to consumers as part of 
the same transaction.
---------------------------------------------------------------------------

    \224\ See, e.g., FTC-2023-0064-3212 (TickPick, LLC); FTC-2023-
0064-3106 (American Society of Travel Advisors).
    \225\ See, e.g., FTC-2023-0064-2886 (American Gaming 
Association); FTC-2023-0064-3106 (American Society of Travel 
Advisors); FTC-2023-0064-3266 (StubHub, Inc.); FTC-2023-0064-3264 
(Mark J. Perry, Ph.D., Professor Emeritus of Economics at University 
of Michigan-Flint and Senior Fellow Emeritus at the American 
Enterprise Institute); FTC-2023-0064-3162 (BBB National Programs, 
Inc.); FTC-2023-0064-1000 (Individual Commenter).
---------------------------------------------------------------------------

    The NPRM also solicited comment as to how to define businesses that 
offer either live-event ticketing or short-term lodging, if the final 
rule were narrowed to covered businesses.\226\ A third-party ticketing 
marketplace commented that it ``supports inclusion of the live-event 
ticketing industry as a `covered business' and is comfortable with the 
proposed definition of `businesses in the live-event ticketing industry 
. . . .' '' \227\ The final rule's inclusion of live-event tickets in 
the definition of ``covered good or service'' is consistent with the 
proposed definition of covered business in the NPRM.
---------------------------------------------------------------------------

    \226\ NPRM, 88 FR 77481, Question 14(a)(i) (proposing to define 
Businesses in the live-event ticketing as ``any Business that makes 
live-event ticketing available, directly or indirectly, to the 
general public''); Question 14(a)(ii) (proposing to define Business 
in the short-term lodging industry as ``any Business that makes 
temporary sleeping accommodations available, directly or indirectly, 
to the general public'').
    \227\ FTC-2023-0064-3212 (TickPick, LLC).
---------------------------------------------------------------------------

    With respect to the proposed definition of the short-term lodging 
industry, the American Hotel & Lodging Association commented that the 
Commission should define short-term lodging as: ``a hotel, motel, inn, 
short-term rental, or other place of lodging that advertises at a price 
that is a nightly, hourly, or weekly rate.'' \228\ One commenter 
representing the rental housing industry expressed concern that the 
proposed definition of short-term lodging ``could mean different things 
to different people, and that could be (mis)applied to rental housing 
industry,'' including, for example, where an apartment community 
provides temporary corporate housing subject to the same leasing 
agreements as longer-term tenants or where a resident extends a lease 
agreement for a few weeks or months.\229\ Conversely, another commenter 
representing the rental housing industry explained that for rental 
housing, ``the landlord-tenant relationship involves an ongoing 
contractual relationship, typically at least a year-long commitment.'' 
\230\
---------------------------------------------------------------------------

    \228\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
    \229\ FTC-2023-0064-3296 (Bay Area Apartment Association).
    \230\ FTC-2023-0064-3133 (National Multifamily Housing Council 
and National Apartment Association).
---------------------------------------------------------------------------

    The final rule incorporates portions of the American Hotel & 
Lodging Association's suggested definition of short-term lodging and 
the Commission modifies the rule text proposed in the NPRM to refer to 
hotels, motels, inns, short-term rentals, vacation rentals, or other 
places of lodging. The Commission declines to limit the definition of 
short-term lodging based on the advertised payment period or length of 
stay. In some instances, short-term lodging may include home shares and 
vacation rentals, such as through platforms like Airbnb or VRBO, that 
offer short-term rental accommodations for durations as long as several 
months. The Commission clarifies that, with the addition of a 
definition for ``covered good or service,'' it does not intend to cover 
rental housing providers at this time. When a rental housing provider 
offers a short-term extension on a lease, the extension typically would 
not be considered short-term lodging under the rule. Similarly, an 
apartment community that offers temporary corporate housing subject to 
the same conditions as its long-term leases typically would not be 
considered short-term lodging under the rule. On the other hand, a 
hotel that offers discounted extended stays typically would be 
considered short-term lodging under the rule. Whether any particular 
good or service is short-term lodging within the rule's definition of 
``covered good or service'' will depend on the specific factual 
circumstances. In addition, the Commission may provide additional 
business guidance to address nuanced pricing scenarios that may arise.
5. Government Charges
    Proposed Sec.  464.1(d) in the NPRM defined ``government charges'' 
as ``all fees or charges imposed on consumers by a Federal, State, or 
local government agency, unit, or department,'' and specified that 
government charges did not encompass fees or charges that the 
government imposes on a business and that a business chooses to pass on 
to consumers. The proposed rule permitted businesses to exclude 
government charges from total price. The Commission received comments 
supporting and critiquing the proposed rule's treatment of government 
charges. Final Sec.  464.1 adopts this provision with minor 
modifications to add ``Tribal'' fees and charges and to clarify that 
the definition of ``government charges'' includes ``the fees or charges 
imposed on the transaction by a Federal, State, Tribal, or local 
government agency, unit, or department.''
    One consumer group supported the NPRM's exclusion of fees or 
charges that businesses choose to pass onto consumers from the 
definition of ``government charges'' (thus requiring their inclusion in 
total price), and expressed concern that businesses may inflate such 
fees to pad profits, rather than accurately reflect amounts paid in 
fees or charges to the government.\231\ Two academic commenters 
similarly supported the distinction between fees

[[Page 2090]]

or charges imposed on consumers and those that a business chooses to 
pass onto consumers, stating that the latter should be incorporated 
into total price to avoid creating a loophole that would undermine the 
rule.\232\
---------------------------------------------------------------------------

    \231\ FTC-2023-0064-3290 (U.S. Public Interest Research Group 
Education Fund).
    \232\ FTC-2023-0064-1467 (Richard J. Peltz-Steele, Chancellor 
Professor, University of Massachusetts Law School); FTC-2023-0064-
1294 (James J. Angel, Ph.D., CFP, CFA, Professor, Georgetown 
University, McDonough School of Business).
---------------------------------------------------------------------------

    On the other hand, the Commission received several comments 
expressing concern over the NPRM's definition of ``government charges'' 
as including only those charges ``imposed on consumers.'' Two 
commenters argued that the proposed definition failed to consider 
nuances in tax law across States and localities. They pointed out, for 
example, that several State laws formally impose sales tax on 
businesses, rather than on consumers.\233\ Under the proposed 
definition, sales tax in those States would need to be included in 
total price, while sales tax in other States could be excluded from 
total price. These and other commenters also noted that many States 
prohibit the inclusion of sales tax in total price, which would result 
in direct conflict between the proposed rule and State laws that 
formally impose sales tax on businesses.\234\ Relatedly, one tax policy 
organization noted variation in how State laws treat hotel occupancy 
taxes, with most State laws defining hotel occupancy taxes as imposed 
on the hotel operator and just six States defining hotel occupancy 
taxes as imposed on the consumer. Under the proposed definition of 
``government charges,'' the commenter stated, hotel operators in all 
but six States would be required to include occupancy taxes in total 
price.\235\ As such, these commenters argued that the proposed 
definition is unworkable and noted that businesses will spend 
considerable time and resources in understanding the legal incidence of 
Federal, State, and local taxes.\236\
---------------------------------------------------------------------------

    \233\ FTC-2023-0064-3126 (Tax Foundation stated: ``In several 
states, at least including Alabama, Arizona, Hawaii, and New Mexico, 
and possibly California, the state sales tax would not meet the 
Rule's definition of a government charge, since its legal incidence 
(per statute, regulation, or court determination) is on the 
seller.''); FTC-2023-0064-3258 (National Taxpayers Union Foundation 
commented: ``Arizona, California, Hawaii, and New Mexico structure 
their sales taxes as taxes on the business, as measured by its gross 
receipts.'').
    \234\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce); 
FTC-2023-0064-3258 (National Taxpayers Union Foundation stated, 
``[n]early all states with sales tax prohibit retailers from 
including sales taxes, including taxes collected from both suppliers 
and consumers, in the sales price,'' and cited to states including 
Alabama, Florida, Georgia, Indiana, Maryland, Massachusetts, 
Oklahoma, Pennsylvania, and others.); FTC-2023-0064-3126 (Tax 
Foundation stated, ``many states prohibit sales tax-inclusive 
pricing,'' highlighting Alabama as a State in which the legal 
incidence of sales tax on the seller may ``obligate a vendor, per 
the proposed Rule, to list the sales tax-inclusive price if selling 
to an Alabama resident--which not only presupposes advance knowledge 
of the consumer's location, but forces the vendor to disregard 
Alabama's requirement that the list price not include sales tax.'').
    \235\ FTC-2023-0064-3258 (National Taxpayers Union Foundation).
    \236\ Id.
---------------------------------------------------------------------------

    Industry groups also urged the Commission to modify the definition 
of ``government charges'' to include charges and fees that the 
government expressly permits, and sometimes requires, businesses to 
pass through to consumers.\237\ One commenter noted that businesses may 
be required to ``unfairly absorb'' the cost of these government 
charges.\238\ Commenters also expressed concern that incorporating 
pass-through taxes that consumers understand and have come to expect 
into total price would obscure government fees, resulting in less 
pricing transparency, because consumers will not understand that the 
additional costs stem from the imposition of government fees.\239\ 
Relatedly, two industry groups argued that consumers should be made 
aware through transparent pricing that additional costs stem from 
government taxes and fees, rather than requiring businesses to include 
them in total price.\240\
---------------------------------------------------------------------------

    \237\ See, e.g., FTC-2023-0064-3100 (Civitas Advisors, Inc.); 
FTC-2023-0064-3217 (Bowling Proprietors' Association of America); 
FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3233 
(NCTA--The internet & Television Association).
    \238\ FTC-2023-0064-3234 (CTIA--The Wireless Association).
    \239\ See, e.g., id.; FTC-2023-0064-3217 (Bowling Proprietors' 
Association of America); FTC-2023-0064-3295 (USTelecom--The 
Broadband Association).
    \240\ FTC-2023-0064-3233 (NCTA--The internet & Television 
Association); FTC-2023-0064-3127 (U.S. Chamber of Commerce).
---------------------------------------------------------------------------

    After considering the comments, the Commission modifies the 
definition of ``government charges'' from those fees or charges 
``imposed on consumers'' to those ``imposed on the transaction.'' As 
such, it eliminates the potential distinction between fees and charges 
for the transaction a government imposes directly on consumers and 
those imposed on businesses. Businesses may not exclude from total 
price fees and charges that are wholly distinct from the relevant 
transaction, such as a proportional share of a business's income or 
property taxes, because they would not be government charges that were 
``imposed on the transaction by a Federal, State, Tribal, or local 
government agency, unit, or department.''
    An online travel agency submitted a comment identifying concerns 
about a potential conflict between the definition of ``government 
charges'' and DOT's Full Fare Advertising Rule, 14 CFR 399.84, which 
requires tax-inclusive pricing for certain travel products, including 
airline tickets and bundled vacation packages (e.g., airline tickets 
and hotel stays purchased together).\241\ Specifically, the commenter 
asserted that the final rule should require that hotels and short-term 
lodging providers incorporate government charges into total price 
because, otherwise, consumers shopping for bundled vacation packages--
which are subject to the Full Fare Advertising Rule--could see 
different prices from consumers who shop separately for flights and 
lodging. The commenter also argued that the rule should require that 
taxes and government-imposed fees be included in advertised lodging 
prices, consistent with DOT's Full Fare Advertising Rule. The 
Commission declines to require only short-term lodging providers, as 
opposed to live-event ticket sellers and other businesses covered by 
the rule, to incorporate government charges into total price. However, 
the Commission notes that while the final rule provides that businesses 
``may'' exclude government charges from total price, nothing in the 
rule prevents businesses from advertising prices inclusive of those 
charges, as required by DOT's Full Fare Advertising Rule.
---------------------------------------------------------------------------

    \241\ FTC-2023-0064-3204 (Expedia Group).
---------------------------------------------------------------------------

    Finally, an industry group representing certain Federally 
recognized Arizona Indian Tribes that operate gaming entities urged the 
Commission to include fees or charges imposed on consumers by 
``tribal'' agencies, units, or departments in the definition of 
``government charges,'' to recognize taxes or fees that Tribes might 
impose.\242\ The Commission agrees and adds the word ``Tribal'' to the 
definition of ``government charges'' to clarify that businesses may 
exclude from total price fees or charges imposed on a transaction by a 
Tribal government.
---------------------------------------------------------------------------

    \242\ FTC-2023-0064-3120 (Arizona Indian Gaming Association).
---------------------------------------------------------------------------

    The Commission notes that the modifications in the final rule to 
the definition of ``government charges'' represent a narrowing of the 
final rule. businesses must still make the disclosures required by 
Sec.  464.2(c) in connection with government charges and are prohibited 
by Sec.  464.3 from misrepresenting the nature, purpose,

[[Page 2091]]

amount, or refundability of government charges.
6. Pricing Information
    Proposed Sec.  464.1(e) in the NPRM defined ``pricing information'' 
as ``any information relating to any amount a consumer may pay.'' The 
final rule references pricing information in one provision: Sec.  
464.2(b). As discussed in section III.B.2, final Sec.  464.2(b) is 
limited to covered goods or services and requires that, in any offer, 
display, or advertisement that represents any price of a covered good 
or service, a business disclose the total price more prominently than 
any other pricing information. However, where the final amount of 
payment for the transaction is displayed, the final amount of payment 
must be disclosed more prominently than, or as prominently as, the 
total price.
    A commenter from the financial services industry asserted that the 
proposed definition of ``pricing information'' would be inappropriate 
for ``standard bank products, such as checking, savings, CDs, consumer 
loans, etc.'' and failed to address the treatment of interest rates for 
products and services governed by existing financial regulations.\243\ 
The commenter's concerns about the definition of ``pricing 
information'' are inapplicable because the final rule, including Sec.  
464.2(b), is limited to covered goods or services. Accordingly, the 
final rule adopts the proposed definition of ``pricing information'' at 
Sec.  464.1 without modification.
---------------------------------------------------------------------------

    \243\ FTC-2023-0064-1425 (Iowa Bankers Association argued that 
the definition of ``Pricing Information'' is inappropriate for 
``standard bank products'' and products earning interest).
---------------------------------------------------------------------------

7. Shipping Charges
    Proposed Sec.  464.1(f) in the NPRM defined ``shipping charges'' 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.'' The NPRM made clear that businesses are not 
permitted to artificially inflate the cost of shipping, and, instead, 
shipping charges must reasonably reflect the cost incurred to send 
goods to consumers. Final Sec.  464.1 adopts the proposed definition of 
``shipping charges,'' with a minor modification to clarify that 
shipping charges incurred through private mail and shipping services 
such as FedEx and UPS, or by freight, fall within the definition.
    One trade association raised numerous concerns about the proposed 
definition of ``shipping charges.'' First, the commenter argued that 
the proposed definition fails to consider the unpredictability of 
shipping fees, noting that precise costs are difficult for retailers to 
determine because shipping costs are frequently based on quotes or 
estimates subject to change based on the carrier.\244\ The commenter 
noted that businesses may face challenges using certain shipping 
methods, including consolidating shipment of multiple orders or using 
rail service for partial shipment, which it argued can be particularly 
difficult to predict. Second, the commenter asked that the Commission 
modify the definition of ``shipping charges'' to explicitly permit the 
use of flat rate shipping, explaining that many businesses have 
existing agreements with major freight carriers to provide flat rate 
shipping. For example, the commenter asked whether the use of flat rate 
shipping charges would be considered unlawful if the business shipped a 
small, lightweight item for which the actual shipping costs are less 
than the flat rate to ship. Finally, the commenter argued that the use 
of the phrase ``reasonably reflect'' in the definition is ambiguous and 
asked that the Commission clarify whether the definition includes a 
scienter requirement. Two commenters also asserted that the rule would 
``force'' businesses to disclose proprietary shipping calculations in a 
threat to free market competition.\245\
---------------------------------------------------------------------------

    \244\ FTC-2023-0064-3267 (National Retail Federation).
    \245\ Id.; FTC-2023-0064-2901 (E-Merchants Trade Council).
---------------------------------------------------------------------------

    The Commission's use of the phrase ``reasonably reflect'' is 
intended to allow for flexibility in determining shipping costs. The 
Commission recognizes that precise shipping costs may not be knowable 
until the end of a transaction, and, for that reason, the final rule 
permits businesses to exclude shipping charges from total price. The 
rule does not require that the cost of shipping reflect an exact 
certainty. Moreover, the rule does not require businesses to disclose 
proprietary information pertaining to relationships with freight or 
shipping providers because the rule does not require that shipping 
charges be excluded from total price; instead, the rule permits 
businesses to exclude shipping charges from total price if they choose. 
The final rule does not prohibit businesses from incorporating the cost 
of shipping into total price and thereby providing shipping to 
consumers at no additional charge. Nor does the final rule prohibit the 
use of flat rate shipping or shipping costs based on national averages. 
Instead, the language is intended to prevent businesses from 
inappropriately excluding from total price costs unrelated to shipping.
    One live-event ticket platform supported the proposed rule's 
exclusion of certain shipping costs from total price, noting that the 
cost to ship physical tickets may vary based on factors determined 
later in the transaction, such as the location of the buyer.\246\ The 
commenter also noted that a variety of delivery and shipping methods 
may be available to consumers purchasing live-event tickets, some of 
which may be mandatory and therefore included in total price.\247\ The 
Commission emphasizes that certain fees do not fall within the 
definition of ``shipping charges,'' including online ``convenience'' or 
other fees charged, for example, by online ticket agencies to 
electronically ``deliver'' tickets or other processing fees associated 
with certain online purchases. The Commission further notes that an 
online convenience or other fee for electronic delivery of a ticket 
should be included in total price if a consumer cannot obtain the 
ticket as part of the same transaction (i.e., online) without incurring 
a fee. While the Commission received comments raising concerns about 
incorporating the cost of delivery, as opposed to shipping, into total 
price,\248\ the Commission is not aware of any evidence that such 
concerns would apply to sales of live-event tickets or short-term 
lodging.
---------------------------------------------------------------------------

    \246\ FTC-2023-0064-3266 (StubHub, Inc.).
    \247\ Id.
    \248\ See, e.g., FTC-2023-0064-3263 (Flex Association); FTC-
2023-0064-3137 (Chamber of Progress); FTC-2023-0064-3186 (National 
LGBT Chamber of Commerce and National Asian/Pacific Islander 
American Chamber of Commerce & Entrepreneurship); FTC-2023-0064-3238 
(Gibson, Dunn & Crutcher LLP); FTC-2023-0064-3267 (National Retail 
Federation).
---------------------------------------------------------------------------

    Finally, the Commission also received a range of comments regarding 
handling costs. Some commenters urged the Commission to amend the 
definition of ``shipping charges'' to clarify that internal handling 
costs do not constitute shipping costs and therefore must be included 
in total price.\249\ The comments related to handling costs involving 
goods or services covered by the broader proposed rule in the 
NPRM.\250\ While the Commission has not received any evidence that the

[[Page 2092]]

concerns raised in these comments would impact covered goods or 
services, the Commission clarifies that internal handling costs must be 
included in total price. The Commission does not believe that a 
modification to the ``shipping charges'' definition is necessary, 
however, because the definition specifically states that shipping 
charges include only those costs that reasonably reflect the cost to 
``send physical goods'' to consumers. The Commission does not believe 
that handling charges, like the cost to store goods or labor costs 
associated with preparing items for shipment, reflect the costs to 
``send physical goods'' to consumers. Accordingly, handling charges are 
not shipping charges and must be included in total price.
---------------------------------------------------------------------------

    \249\ See, e.g., FTC-2023-0064-3146 (Institute for Policy 
Integrity, New York University School of Law); FTC-2023-0064-1294 
(James J. Angel, Ph.D., CFP, CFA, Professor, Georgetown University, 
McDonough School of Business).
    \250\ FTC-2023-0064-3146 (Institute for Policy Integrity, New 
York University School of Law); FTC-2023-0064-1294 (James J. Angel, 
Ph.D., CFP, CFA, Professor, Georgetown University, McDonough School 
of Business); FTC-2023-0064-3267 (National Retail Federation).
---------------------------------------------------------------------------

8. Total Price
    Proposed Sec.  464.1(g) in the NPRM defined ``total price'' 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.'' 
Although some commenters stated that the proposed definition was not 
flexible enough to account for all pricing models, the Commission 
believes the modified definition of ``total price'' is narrowly 
tailored to protect consumers by addressing the identified unfair and 
deceptive practice of hiding costs by omitting mandatory fees from 
advertised prices for covered goods or services. Consumers must be able 
to purchase and use goods or services at the advertised total price.
    Final Sec.  464.1 differs from the proposed definition of ``total 
price'' \251\ to the extent the definitions of ``government charges'' 
and ``shipping charges,'' as discussed in section III at A.5 and A.7, 
are modified. In addition, the Commission clarifies in final Sec.  
464.1 that businesses also may exclude from total price any fees or 
charges for optional ancillary goods or services. Further, the 
Commission notes herein that the rule does not directly address 
concerns that fees imposed in connection with covered goods or services 
are ``excessive''; the rule does not cap, ban, or prohibit the charging 
of any fees, but requires certain disclosures and prohibits 
misrepresentations to prevent unfair or deceptive pricing practices.
---------------------------------------------------------------------------

    \251\ Although one commenter expressed concern that businesses 
would use different terms for Total Price, and thereby create 
confusion, the rule does not mandate that Businesses use the term 
Total Price. See FTC-2023-0064-3290 (U.S. Public Interest Research 
Group Education Fund).
---------------------------------------------------------------------------

    As detailed herein, the Commission declines to accept commenters' 
recommendations to define ``mandatory,'' to exclude ancillary goods or 
services from the ``total price'' definition, to modify the ``maximum 
total'' requirement, or to require the inclusion of shipping charges 
and government charges in total price. However, the Commission 
clarifies in final Sec.  464.2(c) that businesses must disclose the 
final amount of payment for the transaction before a consumer consents 
to pay.
(a) Mandatory Fees
    Commenters noted that the rule does not define ``mandatory,'' and 
expressed concern about identifying mandatory fees to be included in 
total price.\252\ Some commenters recommended that the Commission 
clarify the distinction between ``core'' goods and services and 
ancillary goods or services,\253\ provide guidance as to which 
ancillary goods or services are mandatory,\254\ and modify the ``total 
price'' definition to exclude the reference to mandatory ancillary 
goods or services.\255\
---------------------------------------------------------------------------

    \252\ See, e.g., FTC-2023-0064-3133 (National Multifamily 
Housing Council and National Apartment Association); FTC-2023-0064-
3134 (U.S. Department of Transportation, Federal Motor Carrier 
Safety Administration); FTC-2023-0064-3145 (Association of National 
Advertisers, Inc.).
    \253\ See, e.g., FTC-2023-0064-2888 (Housing Policy Clinic, 
University of Texas School of Law).
    \254\ See, e.g., FTC-2023-0064-3267 (National Retail 
Federation).
    \255\ See, e.g., FTC-2023-0064-3160 (Consumer Federation of 
America et al.); FTC-2023-0064-3258 (National Taxpayers Union 
Foundation); FTC-2023-0064-3275 (Berkeley Center for Consumer Law & 
Economic Justice et al.).
---------------------------------------------------------------------------

    The Commission has considered these comments and declines to accept 
these proposed modifications to the definition of ``total price.'' The 
definition of ``total price'' specifies that it includes the cost of 
the goods and services being offered and any mandatory ancillary goods 
or services, subject to certain exceptions. The Commission retains in 
the definition of ``total price'' fees and charges for ``any mandatory 
ancillary good or service'' as necessary to protect consumers from the 
identified unfair and deceptive practice of hidden fees.
    The Commission also declines to modify the rule to add a definition 
of ``mandatory fees.'' The Commission cannot identify in advance a 
definitive list of mandatory fees because whether a particular fee will 
be mandatory or optional will depend on the specific facts of an 
individual business transaction, as described in section III.A.1.
    Ancillary goods or services can be either optional or mandatory 
depending on whether businesses require consumers to purchase them or 
if they are necessary to make the principal goods or services fit for 
their intended purpose. If businesses offer ancillary goods or services 
and require consumers to purchase them to complete transactions for or 
to use the covered goods or services being offered, the ancillary goods 
or services are mandatory and their cost must be included in total 
price.
    In the NPRM, the Commission sought comment on whether it was clear 
that the reference in the definition of ``total price'' to ``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.\256\ Commenters disagreed on whether the rule text is 
clear that ``total price'' includes unavoidable fees and fees based on 
consumer expectations, and recommended clarifying the definition of 
``total price'' in this regard or adding a definition of mandatory 
fees.\257\ Other commenters argued that the two types of fees described 
are themselves vague and unclear.\258\
---------------------------------------------------------------------------

    \256\ NPRM, 88 FR 77482, Question 19.
    \257\ See, e.g., FTC-2023-0064-3134 (U.S. Department of 
Transportation, Federal Motor Carrier Safety Administration); FTC-
2023-0064-3160 (Consumer Federation of America et al.); FTC-2023-
0064-3196 (South Carolina Department of Consumer Affairs); FTC-2023-
0064-3248 (DC Jobs With Justice on behalf of Fair Price, Fair Wage 
Coalition); FTC-2023-0064-3146 (Institute for Policy Integrity, New 
York University School of Law).
    \258\ See, e.g., FTC-2023-0064-3233 (NCTA--The internet & 
Television Association); FTC-2023-0064-3172 (New Jersey Apartment 
Association).
---------------------------------------------------------------------------

    Businesses should consider, in the context of their specific 
business practices, the Commission's guidance that mandatory fees 
include charges that consumers cannot reasonably avoid and charges for 
goods or services that a reasonable consumer would expect to be 
included with the purchase because they are necessary to make primary 
goods or services fit for their intended purpose. The Commission 
reiterates the guidance about total price that it provided in the NPRM: 
It is well established that it is deceptive to offer goods or services 
that are not fit for the purpose for which they are sold. By offering 
goods or services, businesses impliedly represent that the goods or 
services are fit for their intended purpose; reasonable consumers would 
expect that, when they purchase a good or service, they will be able to 
use it for

[[Page 2093]]

that purpose.\259\ It is therefore deceptive to advertise a total price 
for a primary good or service that does not include fees for additional 
purchases that are necessary to render the primary good or service fit 
for its intended purpose.
---------------------------------------------------------------------------

    \259\ NPRM, 88 FR 77432.
---------------------------------------------------------------------------

    Further, businesses cannot treat additional purchases that are 
necessary to render covered goods or services fit for their intended 
purpose as optional and exclude the costs of these additional purchases 
from total price. For example, businesses cannot treat credit card 
surcharges or processing fees as optional and exclude them from total 
price if they do not provide consumers with other payment options. The 
rule does not require, as some commenters suggested, the inclusion of 
fees for truly optional ancillary goods or services in total 
price.\260\ Nonetheless, such fees and their nature, purpose, and 
amount still must be clearly and conspicuously disclosed before the 
consumer consents to pay and cannot be misrepresented.
---------------------------------------------------------------------------

    \260\ See, e.g., FTC-2023-0064-2891 (Mary Sullivan, George 
Washington University, Regulatory Studies Center, noted that 
``purely optional'' subscription services, such ``optional features 
that are installed in automobiles, like satellite radio'' are ``not 
deceptive and unfair'' but are instead efficient. She further 
contended that the proposed rule lacks specificity as to these types 
of ``purely optional'' services.)
---------------------------------------------------------------------------

    Commenters expressed the concern that businesses could misrepresent 
mandatory fees as optional, for example, by including them by default 
in bills, requiring consumers to opt out from them, or using other 
deceptive practices, and recommended that the Commission include 
safeguards in the rule to prevent these practices.\261\ The Commission 
determines that the rule adequately protects consumers from the posited 
scenarios without modification. businesses cannot characterize fees as 
optional and exclude them from total price when businesses require 
consumers to purchase the good or service for which the fees are 
charged and employ practices, such as default billing or opt-out 
provisions, that effectively take away consumers' ability to consent to 
the fees. For example, a previously undisclosed resort fee that a hotel 
discloses at check-in is not an optional fee if the hotel will charge 
the fee unless the guest challenges the fee. Final Sec.  464.3 
prohibits misrepresenting the nature, purpose, amount, and 
refundability of fees, including misrepresenting mandatory fees as 
optional fees from which consumers must opt out.\262\
---------------------------------------------------------------------------

    \261\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for 
Consumer Law & Economic Justice et al.); FTC-2023-0064-3160 
(Consumer Federation of America et al.); FTC-2023-0064-3248 (DC Jobs 
With Justice on behalf of Fair Price, Fair Wage Coalition); FTC-
2023-0064-0915 (Individual Commenter noted that businesses may 
misrepresent optional fees as mandatory and ``[t]he consumer may not 
realize they are optional when receiving a bill and may not realize 
they can be removed.'').
    \262\ See discussion infra section III.C and note 349.
---------------------------------------------------------------------------

    Whether fees for ancillary goods or services must be included in 
total price will depend on the specific factual circumstances. The 
inclusion of the defined term ``ancillary good or service'' in the 
definition of ``total price'' clarifies that total price includes 
``additional good(s) or service(s) offered to a consumer as part of the 
same transaction.'' Businesses cannot exclude mandatory fees from total 
price simply by characterizing them as not part of the same transaction 
if, in fact, they are.
(b) Maximum Total
    The rule provides that ``total price'' is the ``maximum total'' of 
all mandatory fees except identified permissible exclusions. Some 
commenters objected to defining ``total price'' as the maximum total, 
arguing that it could discourage advertising discounted rates or 
misrepresent actual costs and interfere with comparison shopping.\263\ 
Other commenters suggested that the reference to maximum total would 
require businesses that enter into continuous service contracts with 
consumers (e.g., subscriptions) to include in total price all mandatory 
fees that might arise over the duration of a contract, which they 
argued would be difficult to determine at the time the rule requires a 
total price disclosure.\264\ Some commenters argued that continuous 
service contracts that reflect negotiated transactions do not raise 
``bait and switch'' concerns and that total price is adequately 
disclosed in such contracts.\265\
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    \263\ See, e.g., FTC-2023-0064-3293 (Travel Technology 
Association); FTC-2023-0064-3233 (NCTA--The internet & Television 
Association).
    \264\ See, e.g., FTC-2023-0064-3116 (Manufactured Housing 
Institute); FTC-2023-0064-3172 (New Jersey Apartment Association); 
FTC-2023-0064-3121 (National Independent Automobile Dealers 
Association); FTC-2023-0064-1425 (Iowa Bankers Association).
    \265\ See, e.g., FTC-2023-0064-3289 (Zillow Group stated that 
``rental housing market fees are distinct from fees in other 
economic sectors'' because they are not charged in ``click-to-
purchase'' transactions, but involve an ``interactive process'' over 
a ``much longer period of time'' and involved ``written agreements 
that include all relevant binding terms and conditions, including 
the total price.''); FTC-2023-0064-3269 (IHRSA--The Health & Fitness 
Association).
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    The Commission has considered comments relating to the ``maximum 
total'' requirement and retains that language in the definition of 
``total price.'' The Commission determines that such language is 
necessary to protect consumers from advertised total prices that are 
deceptively lower than what businesses actually charge. As the 
Commission noted in the NPRM, ``[t]he use of the phrase `maximum total' 
would allow businesses to apply discounts and rebates after disclosing 
total price.'' \266\ Since all businesses are subject to the maximum 
total requirement for covered goods or services, the resulting level 
playing field would allow for comparison shopping. The Commission does 
not agree that disclosures in contracts or agreements adequately 
protect consumers from deceptive advertising that omits mandatory fees.
---------------------------------------------------------------------------

    \266\ NPRM, 88 FR 77439.
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    Commenters questioned how businesses should handle conditions or 
limitations on advertised prices.\267\ Businesses must comply with the 
rule and other disclosure requirements, including those related to 
material conditions or limitations.\268\ Businesses that advertise 
prices that are not attainable by consumers because the prices are 
conditioned on undisclosed material conditions, restrictions, or 
limitations may fail to disclose and misrepresent total price.
---------------------------------------------------------------------------

    \267\ See, e.g., FTC-2023-0064-3162 (BBB National Programs, Inc. 
commented that the definition of ``Total Price'' does not 
specifically address ``how advertisers should disclose material 
limitations to obtaining an advertised price.''); FTC-2023-0064-1294 
(James J. Angel, Ph.D., CFP, CFA, Professor, Georgetown University, 
McDonough School of Business, commented that ``[i]f there are any 
restrictions, they must be as clear and conspicuous as the 
price.'').
    \268\ See, e.g., supra note 111.
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(c) Itemization
    The rule neither requires, nor prohibits, the itemization of 
mandatory fees that must be included in total price. The Commission 
notes that final Sec.  464.2(c) requires disclosure of the nature, 
purpose, and amount of fees or charges imposed on the transaction that 
have been excluded from total price but declines to modify the 
regulatory text proposed in the NPRM to otherwise require or prohibit 
the itemization of fees.
    Some commenters recommended that the rule not require 
itemization.\269\ Other commenters stated that including mandatory fees 
in total price would obscure the nature and purpose of the fees and 
provide less information to consumers,\270\ while others

[[Page 2094]]

recommended that the rule require itemization to provide more 
information to consumers and to protect other transaction participants 
by disclosing where mandatory fees go.\271\ Other commenters 
recommended that the rule prohibit itemization because fees could be 
arbitrary or invented by businesses and itemizing them could 
misrepresent their nature and purpose.\272\
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    \269\ See, e.g., FTC-2023-0064-3293 (Travel Technology 
Association ``recommends that any final rule refrain from imposing 
an obligation to itemize mandatory fees.'').
    \270\ See, e.g., FTC-2023-0064-3173 (Center for Individual 
Freedom); FTC-2023-0064-3137 (Chamber of Progress); FTC-2023-0064-
3208 (FreedomWorks); FTC-2023-0064-3263 (Flex Association); FTC-
2023-0064-3258 (National Taxpayers Union Foundation).
    \271\ See, e.g., FTC-2023-0064-3304 (Recording Academy stated: 
``Price itemization is the only way to ensure pricing is transparent 
and that all parties involved in setting the ticket's total price 
are held accountable for what they charge.''); FTC-2023-0064-3230 
(Future of Music Coalition); FTC-2023-0064-3250 (National 
Independent Talent Organization); FTC-2023-0064-3283 (National 
Consumer Law Center, Prison Policy Initiative, and advocate Stephen 
Raher stated that itemization is necessary to clarify opaque charges 
in the context of consumer correctional services.); FTC-2023-0064-
3290 (U.S. Public Interest Research Group Education Fund).
    \272\ See, e.g., FTC-2023-0064-3212 (TickPick, LLC).
---------------------------------------------------------------------------

    The Commission has considered the comments and declines to require 
or prohibit the itemization of mandatory fees, except as provided by 
Sec.  464.2(c). Section 464.2 of the rule permits, but does not 
require, itemization of the components of total price, and therefore 
allows businesses to break out transaction inputs, consistent with laws 
that require itemization. When businesses choose to itemize mandatory 
fees that are a part of total price or itemize fees pursuant to Sec.  
464.2(c), total price must be displayed more prominently than itemized 
fees. Further, Sec.  464.3 prohibits misrepresenting itemized fees.
(d) Exclusions From Total Price
    The definition of ``total price'' in final Sec.  464.1 is modified 
from the proposed definition to the extent that the definitions of 
``government charges'' and ``shipping charges'' are modified, as 
discussed in section III at A.5 and A.7. Finally, the definition of 
``total price'' clarifies that businesses may exclude fees or charges 
for optional ancillary goods or services.
(e) Intersection With IRS Requirements
    One commenter sought clarification as to the intersection of the 
total price requirements with Internal Revenue Service (``IRS'') 
requirements regarding charitable gifts.\273\ The commenter 
specifically highlighted a scenario in which charitable contributions 
are made concurrent with ticket sales. The Commission is not aware of--
and indeed, the commenter did not cite to--any specific conflict with 
the final rule. Instead, the commenter asked about the rule's 
intersection with the IRS's Substantiation and Disclosure Requirements. 
Based on the Commission's review, the IRS Substantiation and Disclosure 
Requirements pertain to substantiation requirements for donors who 
contribute to charitable organizations or causes, and disclosure 
requirements for charitable organizations that provide goods or 
services to donors for certain contributions. The Commission's rule has 
no bearing on, and does not change or impact, any of these IRS 
requirements. The commenter also stated that ``the concept of 
`refundability''' is ``not common in charitable giving.'' As set forth 
in section III.B.3, the Commission eliminates the requirement that 
businesses affirmatively disclose the refundability of each fee or 
charge imposed; however, Sec.  464.3 still prohibits businesses from 
misrepresenting a fee's refundability.
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    \273\ FTC-2023-0064-3195 (League of American Orchestras et al.).
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B. Sec.  464.2 Hidden Fees Prohibited

    Proposed Sec.  464.2(a) and (b) in the NPRM provided, respectively, 
that it would be a violation of the rule for a business to ``offer, 
display, or advertise an amount a consumer may pay without clearly and 
conspicuously disclosing total price'' and that ``[i]n any such offer, 
display, or advertisement that contains an amount a consumer may pay, a 
business must display total price more prominently than any other 
pricing information.'' As discussed herein, final Sec.  464.2 makes 
certain modifications to proposed Sec.  464.2(a) and (b) and 
consolidates all provisions related to disclosures by relocating 
proposed Sec.  464.3(b), with certain modifications, to final Sec.  
464.2(c).
    As discussed in section III.B.1 and III.B.2, to address commenter 
concerns that ``an amount a consumer may pay'' is vague and overbroad, 
the Commission modifies final Sec.  464.2(a) and (b) as compared to the 
NPRM proposals to focus their required disclosures on offers, displays, 
or advertisements that include ``any price of a covered good or 
service.'' Final Sec.  464.2(b) also clarifies that, in any offer, 
display, or advertisement that represents any price of a covered good 
or service, total price must be more prominent than other pricing 
information, except if the final amount of payment for a transaction is 
displayed, the final amount of payment must be more prominent than, or 
as prominent as, total price.
    As discussed in section III.B.3, the Commission also consolidates 
all provisions related to required disclosures under Sec.  464.2 of the 
rule and, therefore, codifies proposed Sec.  464.3(b) with certain 
modifications at final Sec.  464.2(c). Proposed Sec.  464.3(b) 
specified that businesses must 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 total price. The 
Commission clarifies that, in line with the narrower scope of the rule, 
the trigger requiring disclosures in final Sec.  464.2(c) is ``before 
the consumer consents to pay for any covered good or service.'' As with 
final Sec.  464.2(a) and (b), final Sec.  464.2(c) also eliminates the 
reference to ``any amount a consumer may pay'' to narrow the focus of 
the disclosures required by Sec.  464.2(c)(1) to ``any fee or charge 
imposed on the transaction that has been excluded from total price.''
    Final Sec.  464.2(c) also differs from the NPRM proposal in that it 
explicitly requires disclosure of the amount, nature, and purpose of 
any fees or charges imposed on the transaction that have been excluded 
from total price and the identity of the good or service for which the 
fees or charge is imposed, as well as the final amount of payment for 
the transaction. Importantly, to preserve choice and control for 
businesses, Sec.  464.2(c)'s disclosures with respect to government 
charges and shipping charges are only required if a business elects to 
permissibly exclude such charges from total price. Similarly, Sec.  
464.2(c)'s disclosures with respect to fees for optional ancillary 
goods or services are only required if the consumer has elected to 
purchase such goods or services as part of the same transaction and the 
business has excluded their fees from total price. Nothing in the final 
rule requires a business to disclose commercially sensitive information 
regarding the components of its total price.
    The Commission discusses herein changes to the text of the proposed 
provisions and addresses substantive comments about these provisions, 
including how Sec.  464.2 would apply to specific pricing scenarios 
discussed in the comment record.
1. Sec.  464.2(a)
    Proposed Sec.  464.2(a) in the NPRM provided that it would be a 
violation of the rule for a business to ``offer, display, or advertise 
an amount a consumer may pay without clearly and conspicuously 
disclosing total price,'' which was defined in proposed Sec.  464.1(g) 
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

[[Page 2095]]

and government charges may be excluded.'' In final Sec.  464.2(a), the 
Commission changes the reference to ``an amount a consumer may pay'' to 
the more limited ``any price of a covered good or service.'' Final 
Sec.  464.2(a) also further clarifies that businesses may exclude from 
total price fees or charges for any optional ancillary good or service. 
The Commission makes these modifications to address NPRM comments and 
to clarify the rule. The comments relating to the exclusion from total 
price of charges for any optional ancillary good or service, and the 
Commission's reasons for allowing these exclusions, are discussed in 
section III at A.1 and A.8.
    Commenters argued that the reference to ``an amount a consumer may 
pay'' in proposed Sec.  464.2(a) and in other sections (i.e., proposed 
Sec. Sec.  464.2(b) and 464.3(b)) was overbroad and that the Commission 
failed to consider its application to various pricing scenarios.\274\ 
In response to these comments, the Commission finalizes Sec.  464.2(a) 
with modification to limit the total price disclosure requirement from 
each time businesses ``offer, display, or advertise an amount a 
consumer may pay'' to only when they ``offer, display, or advertise any 
price of a covered good or service.'' The Commission also provides 
guidance regarding the application of Sec.  464.2(a) to various types 
of fees and pricing scenarios, including: contingent fees; ticket 
service fees; credit card surcharges; dynamic pricing and national 
advertising; rebates, bundled pricing, and discounts; and online 
marketplaces in section III.B.1.a through f.
---------------------------------------------------------------------------

    \274\ See, e.g., FTC-2023-0064-3206 (Motor Vehicle Protection 
Products Association et al. commented that proposed Sec.  464.3, in 
referring to any amount a consumer may pay, goes ``far broader than 
`fees''' and ``the use of the verb `may' suggests that even offers 
of goods or services--or, frankly, even goods or services that `may 
be' available but not actually offered--impermissibly and 
imprudently stretches this section.'').
---------------------------------------------------------------------------

(a) Contingent Fees
    Under certain circumstances discussed herein, total price can 
exclude certain fees that businesses cannot calculate in advance 
because they necessarily are contingent on consumer behavior or choice; 
unknown, external factors; or pricing models that include variable 
fees. The Commission notes that whether certain contingent fees cannot 
be calculated and are truly unknown at the time the rule requires 
disclosures may depend on the specific factual circumstances. The 
Commission is not persuaded by the comments to change the rule as it 
applies to contingent fees.
    Certain commenters remarked that, in some instances, businesses 
cannot quote an all-inclusive price due to unknown fees arising from 
consumer behavior and choices during and after the purchasing process; 
unknown, external factors; or pricing models that have variable rates 
such as hourly rates or rates based on guest count and consumption. 
Indeed, some commenters argued that the Commission's failure to 
recognize the existence of variable marketplace fees is a significant 
oversight of the proposed rule.\275\ Other commenters observed that 
concerns about variable marketplace fees are overblown and stated that 
the Commission should prohibit charging such fees if the full amount of 
such fees cannot be calculated in the upfront price.\276\
---------------------------------------------------------------------------

    \275\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce 
stated that variable fees should be excluded from Total Price 
because: fees that ``vary based on volume, transaction type, and 
region'' cannot be assessed until consumers take some action; 
requiring their inclusion in Total Price ``could less efficiently 
spread costs, undermine consumer choice, and eliminate price 
competition on certain cost inputs''; and ``[t]he NPRM also provides 
no reason to think that variable or dynamic pricing is necessarily 
deceptive or unfair across all industries and sectors of the 
economy.''); FTC-2023-0064-3137 (Chamber of Progress expressed 
concern about the rule's impact on variable pricing models, 
including delivery platforms, where ``the prices for delivery or 
other services increase as the size of the order increases,'' which 
it asserts is ``a more efficient way of distributing costs than flat 
rates'' and asserted it is not clear how such platforms would comply 
with the rule ``without creating confusion for customers or 
misrepresenting prices.''); FTC-2023-0064-3173 (Center for 
Individual Freedom argued that: ``Acknowledging the distinct roles 
and objectives of both flat and variable fees in different 
industries is crucial, and the proposed rule's failure to recognize 
the benefits of variable pricing structures, which allow fees to 
scale based on the nature of the items or services purchased, is a 
significant oversight.''); FTC-2023-0064-3258 (National Taxpayers 
Union Foundation stated that under the rule, ``it will be nearly 
impossible for businesses using variable prices to display the Total 
Price at all times, because businesses are unable to predict 
consumer's choices.''); FTC-2023-0064-3202 (TechNet urged the 
Commission to exclude from Total Price ``fees that are variable or 
unknowable,'' such as in e-commerce marketplaces, or the rule 
``would complicate the communication of pricing in situations where 
the `total price cannot practically be determined' in advance.''); 
FTC-2023-0064-3263 (Flex Association commented that app-based 
delivery platforms could be ``forced to change the way they price 
entirely--moving from variable . . . to static fees . . . that would 
not benefit consumers''); FTC-2023-0064-3238 (Gibson, Dunn & 
Crutcher LLP commented that the proposed rule failed to consider 
reliance on dynamic pricing that depends on consumer choices 
throughout the buying process).
    \276\ See, e.g., FTC-2023-0064-3134 (U.S. Department of 
Transportation, Federal Motor Carrier Safety Administration 
recommended that the rule prohibit ``charging variable mandatory 
ancillary fees if the full amount of such variable fees cannot be 
calculated in the upfront price.''); FTC-2023-0064-3275 (Berkeley 
Center for Consumer Law & Economic Justice et al. asserted that 
concerns ``that it is impossible to accurately estimate all fees in 
advance of providing a complex service'' or fees dependent on 
consumer choice, are ``easily resolvable with minimal effort and 
creativity on the part of vendors.'').
---------------------------------------------------------------------------

    The Commission finds that, to the extent that certain fees are 
contingent on later conduct or choices by a consumer after purchase 
(e.g., pet fees, fees for late payments, fees for property damage at a 
rental accommodation, or smoking in a non-smoking hotel room), these 
fees are not mandatory for purposes of the transaction, and as such, do 
not need to be included in total price.\277\ The Commission notes that 
fees that are unavoidable by the consumer, regardless of conduct or 
choices, are not contingent. Ultimately, if a business cannot ascertain 
whether certain fees or charges apply until after concluding a purchase 
or transaction, the business need not include such fees or charges in 
total price. Whether mandatory fees are truly unknown due to reasons 
beyond a business's control will depend on specific factual 
circumstances.
---------------------------------------------------------------------------

    \277\ See, e.g., FTC-2023-0064-3233 (NCTA--The internet & 
Television Association commented that the definition of ``Total 
Price'' is ambiguous as ``it does not clearly address fees that are 
contingent on later actions by particular consumers . . . such as 
for unreturned equipment or late payment of the consumer's bill'' 
and encouraged the Commission to ``resolve the ambiguity by, among 
other things, making clear in the rule itself that contingent or 
avoidable fees are to be excluded from the Total Price.'').
---------------------------------------------------------------------------

    Businesses should include in total price other fees that may vary 
depending on a consumer's choices during the purchase process or 
transaction as soon as consumers provide the business with the 
information needed to determine the applicability or amount of those 
fees. Indeed, some commenters discussed different scenarios in which 
total price depends on a consumer's choices while buying a good or 
service, such as season and flexible ticket packages for the arts.\278\ 
According to some commenters, consumers expect fees arising from their 
personal choices and customizations to be disclosed only after 
providing additional information to, or negotiating with, sellers. 
Businesses can include in their advertisements ``starting at'' or base 
prices to deal with situations in which ultimate price may depend on a 
consumer's selection of various ticketing and lodging options, but only 
if consumers can in fact obtain the

[[Page 2096]]

advertised ticket or lodging for the ``starting at'' or base 
price.\279\
---------------------------------------------------------------------------

    \278\ See, e.g., FTC-2023-0064-3195 (League of American 
Orchestras et al. requested the Commission's ``consideration for 
season-based and flexible ticket packages in which multiple and 
variable options are available to ticket-buyers, and the total price 
will vary based on selection.'').
    \279\ In some instances, advertising prices as a base or 
starting price can be deceptive, depending on the relevant limiting 
or qualifying criteria. In such instances, the material terms, 
conditions and obligations upon which receipt and retention of the 
base or starting price are contingent should be set forth clearly 
and conspicuously at the outset of the offer so as to leave no 
reasonable probability that the terms of the offer might be 
misunderstood.
---------------------------------------------------------------------------

    Businesses still must clearly and conspicuously disclose the 
nature, purpose, and amount of such fees or charges and the identity of 
the good or service for which they are imposed, and the final amount of 
payment, before a consumer consents to pay or, if the applicability of 
a fee or charge is contingent on later conduct or choices by a consumer 
after purchase, as soon as such circumstances arise. Businesses also 
must not mispresent those or other fees or charges, including total 
price.
(b) Ticket Service Fees
    Businesses operating in the live-event ticketing industry, 
including venues, ticket sellers, and ticket resellers, historically 
have imposed on consumers a host of charges in addition to the ticket's 
face value that are dripped in throughout the purchasing process. One 
of the rule's principal purposes is to give consumers upfront knowledge 
of the true cost of a good or service, including mandatory charges, 
without being forced to navigate through a time-intensive search and 
transaction. A broad swath of industry members supported a nationwide 
total price requirement for ticket pricing,\280\ although some industry 
commenters expressed concerns with certain aspects of the rule. The 
Commission addresses commenters' concerns herein.
---------------------------------------------------------------------------

    \280\ See, e.g., FTC-2023-0064-3266 (StubHub, Inc. submitted a 
comment supporting nationwide all-in pricing and including Total 
Price in every advertisement to consumers and throughout the 
transaction.); FTC-2023-0064-3105 (Charleston Symphony commented: 
``[R]equiring sellers to disclose the total price clearly and 
conspicuously[ ] addresses a pressing issue. . . . Predatory 
practices in the secondary ticket sales market pose a significant 
threat to artists, venues, audiences, and the future of nonprofit 
arts organizations, impacting the integrity of the ticket-buying 
process and eroding audience confidence.''); FTC-2023-0064-3122 
(Vivid Seats stated that it ``supports additional consumer 
disclosures, including all-in pricing,'' but the rule should ``apply 
equally across all parts of the live-events ticketing industry,'' so 
consumers can compare prices and businesses that display total 
prices will not be at a competitive disadvantage.); FTC-2023-0064-
3241 (National Association of Ticket Brokers submitted a comment 
supporting all-in pricing, but noting that it would only work if 
``(i) it was required of every ticket seller and (ii) there was 
rigorous and expeditious enforcement.''); FTC-2023-0064-3306 (Live 
Nation Entertainment and its subsidiary Ticketmaster North America 
commented that they ``support[ ] a definition of all-in pricing that 
requires the first price for a live-event ticket shown to consumers 
to be the price ultimately charged at checkout (exclusive of state 
and local taxes and optional add-ons).''); see also FTC-2023-0064-
3264 (Mark J. Perry, Ph.D., Professor Emeritus of Economics at 
University of Michigan-Flint and Senior Fellow Emeritus at the 
American Enterprise Institute, ``urge[d] the FTC to ensure that any 
rule requiring all-in pricing in live events apply equally to all 
market participants.''); FTC-2023-0064-2856 (National Football 
League stated that if the live-event ticket industry is included in 
the rule's coverage, the Commission must ``include all sellers of 
live-event tickets to prevent inconsistencies in its 
application.'').
---------------------------------------------------------------------------

    Some industry members emphasized that the added fees are their 
primary source of revenue, since they typically do not share in the 
revenue from the ticket's face value.\281\ Industry members and an 
academic commenter also stated that certain added fees pay for valuable 
services such as delivery and the convenience of selecting a seat from 
home.\282\ An industry member emphasized, however, that although 
consumers do expect additional fees, businesses nonetheless should 
clearly disclose a ticket's true, all-in price (i.e., total 
price).\283\ Another industry member commented that unless an added fee 
is truly optional, it should be included in total price.\284\ The 
Commission reiterates that businesses are not prohibited from charging 
fees; instead Sec.  464.2(a) requires the disclosure of total price, 
including fees for mandatory ancillary goods or services, when a price 
for a good or service is displayed, while Sec.  464.2(c) requires 
disclosures about fees being imposed on the transaction that have been 
permissibly excluded from total price, including for optional ancillary 
goods or services, before a consumer consents to pay for a covered good 
or service. The Commission further reiterates that, in an online 
transaction, fees such as for payment processing, electronic ticket 
``delivery,'' ``convenience,'' or similar add-on ticketing fees are 
mandatory and must be included in total price if a consumer cannot 
obtain the covered good or service as part of the same transaction 
(e.g., online) without incurring the fee. Final Sec.  464.3 also 
prohibits businesses from misrepresenting the nature or purpose, or the 
identity of the good or service for which fees are imposed.
---------------------------------------------------------------------------

    \281\ See, e.g., FTC-2023-0064-3122 (Vivid Seats commented that 
service fees ``are the TRM's [ticket resale marketplace's] sole 
source of revenue and provide the capital necessary to operate the 
TRM.''); FTC-2023-0064-3306 (Live Nation Entertainment and its 
subsidiary Ticketmaster North America commented that a ticket 
service charge ``compensates the venue for hosting the event and the 
ticketing company for distributing tickets and related services--
important since venues and ticketing companies typically do not 
share in revenues attributable to a ticket's face value.'').
    \282\ See, e.g., FTC-2023-0064-3122 (Vivid Seats commented that 
delivery fees cover costs associated with delivering a ticket.); 
FTC-2023-0064-3306 (Live Nation Entertainment and its subsidiary 
Ticketmaster North America); FTC-2023-0064-3292 (National 
Association of Theatre Owners commented: ``These fees allow 
moviegoers to purchase tickets and select their seats from home, and 
this service requires ongoing support and management, entailing 
operational costs that are offset by convenience fees. At the same 
time customers can avoid the convenience fee altogether by 
purchasing directly at the box office.'') FTC-2023-0064-3264 (Mark 
J. Perry, Ph.D., Professor Emeritus of Economics at University of 
Michigan-Flint and Senior Fellow Emeritus at the American Enterprise 
Institute, commented that ticket resale marketplaces offer numerous 
valuable services to ticket sellers and buyers that a single seller 
or buyer could not access otherwise, including access to buyers or 
tickets, inventory management, seller and customer support, secure 
financial transactions, and guarantees.'').
    \283\ FTC-2023-0064-3306 (Live Nation Entertainment and its 
subsidiary Ticketmaster North America commented: ``Because the 
practice of adding these charges to the ticket's face value has been 
so longstanding, consumers have come to expect service fees when 
purchasing a ticket to a live entertainment event--but it is 
impossible for consumers to anticipate the amount of applicable fees 
because those rates are set by hundreds of different venues and can 
vary accordingly.'' The commenter continued, ``Consumers therefore 
need clear disclosures about the true price of a ticket, including 
the elements that constitute the all-in price.'').
    \284\ FTC-2023-0064-3266 (StubHub, Inc. supported the exclusion 
of ``fees for optional add-on features selected at the discretion of 
the consumer.'' As an example, the commenter stated, ``[I]n some 
instances, consumers may not have a choice on delivery method. In 
those cases, delivery fees are mandatory and should be included in 
the [Total Price] because the consumer has no discretion to choose. 
In other instances, consumers have multiple delivery options at 
different price points.'').
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    Some industry members expressed concern that the rule would 
prohibit itemization of fees in addition to total price, while others 
argued that it should prohibit such itemization.\285\ The Commission 
clarifies that, so long as total price is displayed clearly and 
conspicuously, and more prominently than any itemized fees, the rule 
does not prohibit businesses from itemizing the

[[Page 2097]]

charges imposed on a transaction. However, any such itemization must 
not misrepresent the nature, purpose, amount, or refundability of the 
itemized fees, including the identity of the goods or services for 
which they are being charged.
---------------------------------------------------------------------------

    \285\ See, e.g., FTC-2023-0064-3230 (Future of Music Coalition 
commented that ``adopting all in pricing without itemization [of the 
base ticket price or face value and of fee amounts] would be a gift 
to . . . predatory resellers.''); FTC-2023-0064-3250 (National 
Independent Talent Organization stressed ``the need for an itemized 
breakdown of ticket fees'' and called for ``fees to be clearly 
itemized throughout the purchasing process.''); FTC-2023-0064-3304 
(Recording Academy commented: ``Price itemization is the only way to 
effectively regulate transparent pricing in a manner that truly 
informs the consumer about how their dollar is being spent . . . . 
Additionally, price itemization is the only way to effectively hold 
third party fees and charges in check.''). But see FTC-2023-0064-
3212 (TickPick, LLC commented that the rule ``must prohibit the 
itemization of fees and charges that make up the Total Price (other 
than breaking out government taxes and shipping fees) in order to 
prevent harm from hidden and/or misleading fees.'' The commenter 
stated concerns that such fees were ``arbitrary'' and ``any 
secondary ticketing marketplace that itemizes mandatory fees and 
charges is arguably misrepresenting the `nature and purpose of any 
amount a consumer may pay.' '').
---------------------------------------------------------------------------

(c) Credit Card and Other Payment Processing Surcharges
    The rule requires businesses to include credit card surcharges or 
processing fees in total price only if they choose to make payment by 
credit card mandatory. If, on the other hand, credit card use is 
optional because consumers can use multiple payment options, those fees 
do not need to be included in total price. If the consumer chooses to 
use a credit card, businesses must clearly and conspicuously disclose 
the nature, purpose, and amount of any credit card surcharge before the 
consumer consents to pay. Some commenters expressed concern about the 
rule's application to credit card fees but, as discussed herein, the 
Commission was not persuaded by the comments to change the proposed 
rule as it applies to such fees.
    Many commenters expressed concern that the rule would require total 
price to include credit card processing fees or prohibit businesses 
from passing through such fees to consumers. This was of particular 
concern to small businesses.\286\ Numerous industry members also 
commented that requiring such fees to be part of total price would 
reduce price transparency and penalize customers who want or need to 
pay with cash.\287\
---------------------------------------------------------------------------

    \286\ See, e.g., FTC-2023-0064-3217 (Bowling Proprietors' 
Association of America); FTC-2023-0064-2755 (Caffe! Caffe!); FTC-
2023-0064-3114 (Shine Beer Sanctuary); FTC-2023-0064-1456 (MED 
Murphy St. Enterprise); see also, e.g., FTC-2023-0064-2953; FTC-
2023-0064-2972 (Over 4,600 comments submitted through a National 
Restaurant Association mass mailing campaign misinterpreted the rule 
as ``eliminating the use of fees and surcharges.'').
    \287\ See, e.g., FTC-2023-0064-3300 (National Restaurant 
Association); FTC-2023-0064-3128 (Merchants Payments Coalition); 
FTC-2023-0064-3219 (Georgia Restaurant Association); FTC-2023-0064-
3180 (Independent Restaurant Coalition).
---------------------------------------------------------------------------

    Various commenters suggested that if businesses properly disclose 
credit card processing charges and provide alternate payment methods, 
both consumers and businesses would benefit.\288\ Commenters noted 
that, when appropriately disclosed, consumers can avoid such fees by 
choosing another form of payment.\289\ An academic commenter suggested 
that prominent disclosure of a credit card surcharge in advance, so 
consumers can avoid it, would benefit consumers and reduce business 
costs more than requiring such charges to be included in total 
price.\290\ A tenant advocacy legal clinic that generally supported 
requiring credit card processing charges to be included in total price, 
suggested that such charges might be reasonably avoidable if disclosed 
in advance to let consumers use a different payment method.\291\ 
Another academic commenter recommended that the Commission clarify 
that, while credit card surcharges need not be included in total price, 
a business can only pass through the actual amount of the charge and 
must clearly and conspicuously disclose any markup it imposes.\292\
---------------------------------------------------------------------------

    \288\ See, e.g., FTC-2023-0064-3180 (Independent Restaurant 
Coalition commented: ``Clearly and prominently displaying any fees 
promotes transparency and fairness as well as allowing restaurants 
to meet the needs of their workers and customers.''); FTC-2023-0064-
2891 (Mary Sullivan, George Washington University, Regulatory 
Studies Center).
    \289\ See, e.g., FTC-2023-0064-3128 (Merchants Payments 
Coalition); FTC-2023-0064-3140 (Merchant Advisory Group stated: 
``When appropriately disclosed, consumers can typically avoid these 
fees by simply choosing lower-cost forms of payment, and this could 
help keep prices down for consumers overall.''); FTC-2023-0064-3300 
(National Restaurant Association commented: ``When a credit card 
surcharge is properly disclosed via in-store signage, on the menu, 
and on the receipt, customers have a clear understanding that the 
fee is a product of the card companies, not the restaurant.'').
    \290\ FTC-2023-0064-2891 (Mary Sullivan, George Washington 
University, Regulatory Studies Center).
    \291\ FTC-2023-0064-3268 (Housing & Eviction Defense Clinic, 
University of Connecticut School of Law).
    \292\ FTC-2023-0064-1294 (James J. Angel, Ph.D., CFP, CFA, 
Professor, Georgetown University, McDonough School of Business).
---------------------------------------------------------------------------

    The Commission notes that the rule does not prohibit a business 
from charging or passing through credit card fees if otherwise allowed 
by law. The rule does not affect State laws that prohibit credit card 
surcharges. Whether credit card charges must be included in total 
price, however, depends on whether a business makes such fees 
mandatory, for example, by not providing any other payment option for 
the transaction. For example, if a consumer is purchasing a ticket 
online, there must be another online payment option that does not 
require a fee, not merely an option to go in person to the box office 
to purchase the ticket with cash for no additional fee.
    In other words, if there is no other payment option for an offered 
transaction, or if every payment option requires a fee or charge, such 
fees are mandatory and must be included in total price.\293\ But, if a 
business offers consumers multiple viable payment options for the 
offered transaction, so that paying with a credit card is optional, 
then credit card fees need not be included in total price. The same is 
true for debit card surcharges and other payment processing fees.
---------------------------------------------------------------------------

    \293\ This approach is consistent with the Telemarketing Sales 
Rule, which requires sellers and telemarketers to disclose, in a 
clear and conspicuous manner, the total cost of a good or service, 
which would include any applicable credit card or other payment 
processing charges, before a consumer consents to pay for that good 
or service. 16 CFR 310.3(a)(1)(i) and (a)(2)(i).
---------------------------------------------------------------------------

    A business that provides at least one viable method to pay for the 
offered transaction without a fee, chooses to pass through payment 
processing fees to consumers, and excludes such fees from total price 
would have to clearly and conspicuously disclose the nature, purpose, 
and amount of the processing fees before a consumer consents to pay. In 
addition, nothing in the rule prohibits businesses that accept multiple 
viable forms of payment from advertising two prices, one that includes 
credit card or other payment processing fees and one that does not. It 
is the Commission's understanding that some businesses already do this, 
and such a strategy is consistent with the rule.
    In addition, under final Sec.  464.3, a business that offers, 
displays, or advertises a covered good or service cannot misrepresent 
the nature, purpose, amount, or refundability of credit card or other 
fees. Since the rule does not prohibit itemization, a business may 
choose to also itemize mandatory credit card fees so long as they are 
included in total price and total price is displayed more prominently. 
The voluntary itemization of mandatory credit card fees addresses 
commenters' concerns that consumers will not understand the different 
costs affecting businesses.
(d) Dynamic Pricing and National Advertising
    Some commenters expressed concern that the total price requirements 
will interfere with dynamic pricing strategies where total price is not 
fixed but changes based on supply, demand, or other factors.\294\ The 
rule does not bar

[[Page 2098]]

businesses from engaging in dynamic pricing, but adjusted prices must 
include all known mandatory fees and the advertised good or service 
must be actually available to consumers at the quoted price. The 
Commission's review of the comments did not identify any persuasive 
reason to change the rule as it applies to dynamic pricing.
---------------------------------------------------------------------------

    \294\ See, e.g., FTC-2023-0064-3195 (League of American 
Orchestras et al. observed: ``It would be harmful to paint all 
dynamic pricing strategies as `unfair.' Nonprofit performing arts 
organizations often use variable pricing strategies to both maximize 
the earned revenue that supports the nonprofit performing arts 
workforce, as well as to offer reduced or free-of-charge ticketing 
options for community-based partners.''); FTC-2023-0064-3230 (Future 
of Music Coalition stated that dynamic pricing ``can certainly be 
used in ways that frustrate consumers'' but ``can also solve 
practical problems.'' It is ``often used by nonprofit arts 
presenters in non-problematic ways.'' The commenter noted, however, 
that ``disclosure of specific dynamic pricing strategies and tools, 
whether manual or algorithmic[,] will only help predatory resellers 
make purchasing decisions and maximize their extraction of 
value.'').
---------------------------------------------------------------------------

    A few commenters noted that the rule could interfere with 
businesses' ability to engage in national advertising or to advertise 
to a broad audience because mandatory fees may vary by location, as is 
often the case with franchisee costs and delivery costs.\295\ One 
commenter argued that the rule would require either impractical and 
challenging geo-targeted advertising or advertising a ``maximum total 
price'' to any potential consumer in the businesses' footprint, which 
would overstate the price that most consumers need to pay and defeat 
comparison shopping.\296\ The commenter also noted that 
``[a]lternatively, companies might respond to the proposed rule by 
omitting pricing from advertising altogether, an option that would 
defeat the [Commission's] goal of ensuring consumers have access to 
accurate and reliable cost information as they shop for services.'' 
\297\
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    \295\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce 
commented that the Total Price requirements ``may eliminate the 
opportunity for national advertising campaigns'' because 
``[m]andatory fees [such as regional sports fees] may vary by 
location or tie to specific franchisee costs.'' The commenter 
recommended that the FTC ``consider revising the definition of 
`Total Price' to exclude all charges that vary based on geographic 
region.''); FTC-2023-0064-3294 (International Franchise Association 
commented: ``Under the Proposed Rule, national marketing campaigns 
are only workable if all franchised businesses in a franchise system 
adhere to the same pricing regime (including pass-through fees), 
regardless of the economic demands of the markets in which they 
operate.''); FTC-2023-0064-3300 (National Restaurant Association 
commented: ``Like `Shipping Charges,' delivery fees should be 
excluded from the `Total Price' requirement since local or national 
advertising may feature the cost of the food item but cannot 
reasonably predict how regional market conditions will alter the 
price of delivery.'').
    \296\ See, e.g., FTC-2023-0064-3233 (NCTA--The Internet & 
Television Association stated that the rule would interfere with 
``efforts to advertise pricing nationwide or to a broad audience'' 
and would require impractical and technically challenging geo-
targeted advertising. The commenter further stated that businesses 
may be incentivized to ````advertis[e] a Total Price for a 
particular service option that overstates the price that most 
consumers would actually end up paying at their service location 
(i.e., the Total Price would be the maximum price that any potential 
customer in the provider's footprint would have to pay for the 
service),'' which would ``confuse consumers and undermine the type 
of comparison-shopping the FTC is aiming to facilitate. Bundled 
pricing would be even more challenging to calculate and represent in 
advertising, given that each bundled service could have multiple 
different applicable taxes or surcharges.'').
    \297\ Id.
---------------------------------------------------------------------------

    The Commission determines that shipping charges may be excluded 
from total price. As to other charges that may vary by time or 
location, businesses can comply with the rule by advertising a maximum 
total price either by region or nationwide. The Commission understands 
that many businesses already engage in regional or geo-targeted 
advertising that enables flexibility for pricing by time and locality. 
Since the rule applies to all businesses offering covered goods or 
services, it levels the playing field and preserves comparison-shopping 
even when advertised prices are maximum totals.
(e) Rebates, Bundled Pricing, and Other Discounts: Compliance When 
Promotional Pricing Models Have Different Fees
    Promotional pricing models, such as two-for-one deals, bulk or 
bundled pricing, unbundled or a la carte pricing, rebates, or other 
discounts, can change the price a consumer ultimately may pay. Section 
464.2(a)'s total price disclosure requirement applies whether a 
consumer is purchasing a single covered good or service, multiple 
covered goods or services, or covered goods or services combined with 
ancillary goods or services, as well as when a discount or other 
promotion affects the final amount of payment. If a consumer applies a 
discount or otherwise qualifies for a promotional price, the business 
can update the total price displayed. The Commission provides 
clarification herein to address commenter concerns about the rule as it 
applies to promotional pricing models.
    Some commenters expressed concern that the rule's total price 
requirement would prohibit or discourage businesses from offering 
promotional prices to consumers.\298\ Two industry groups commented 
that the potential difficulty of incorporating promotions into total 
price might discourage businesses from offering them.\299\ A 
competition policy group agreed and suggested modifications might be 
``necessary to ensure that the proposed rules do not interfere with 
such pricing models.'' \300\
---------------------------------------------------------------------------

    \298\ See, e.g., FTC-2023-0064-2919 (National Automatic 
Merchandising Association) (expressing concern that the rule would 
ban offering cash discounts); see also, FTC-2023-0064-3217 (Bowling 
Proprietors' Association of America) (stating that requiring 
businesses to consolidate ``diverse pricing models into a single 
displayed price could lead to significant consumer confusion and 
dissatisfaction.'').
    \299\ FTC-2023-0064-3263 (Flex Association commented that some 
fees cannot be calculated at the start of a transaction, including 
for discounts and special offers: ``For example, a `two-for-one' 
offer cannot be activated until two eligible items are added to a 
shopping cart.''); FTC-2023-0064-3137 (Chamber of Progress commented 
that sellers may abandon discounts on bundles of goods or bulk 
orders, because ``the total price of each good could vary depending 
on the other items in the customer's cart.'').
    \300\ FTC-2023-0064-2887 (Progressive Policy Institute 
commented, ``the proposed disclosure requirements may interfere with 
the use of different pricing models that provide value to consumers 
and are the basis upon which some firms compete,'' such as unbundled 
pricing models when ``the total price may not be known until the 
consumer completes the purchase process,'' and therefore, a 
``requirement to display prices before the purchase . . . may 
mislead consumers and distort competition.'').
---------------------------------------------------------------------------

    The Antitrust Division of the U.S. Department of Justice commented 
that ``[c]ompetition between companies that offer bundled and unbundled 
pricing for core products and value-added features can play an 
important role in preserving consumer choice . . . and unbundled 
pricing can empower consumers who prefer to pay only for what they 
value.'' \301\ The Antitrust Division further commented that the 
proposed rule ``does not affect companies' ability to offer consumers a 
choice whether to buy unbundled features that do not impose mandatory 
fees.'' \302\ However, it asserted that ``[w]hen companies use 
unbundled offerings to disguise mandatory fees, they undermine the 
value to competition of that unbundled option.'' \303\
---------------------------------------------------------------------------

    \301\ FTC-2023-0064-3187 (U.S. Department of Justice, Antitrust 
Division).
    \302\ Id.
    \303\ Id.
---------------------------------------------------------------------------

    The rule does not prohibit businesses from using bundled, discount, 
or similar pricing models if, when the business advertises any price of 
a covered good or service, it discloses the total price the consumer 
must pay for the good or service. The rule also does not require 
businesses to incorporate different pricing models into a single price; 
rather, under the rule, businesses advertising any price of a covered 
good or service must only display the maximum total price. For example, 
a hotel can display a regular total price and a loyalty program member 
total price. Businesses also can display total price under a 
promotional pricing model, such as a bundled price or a promotion 
advertising, ``stay three nights, get one night free,'' when and to the 
extent that model applies. The Commission notes that offering, 
displaying, or advertising a general [x]% or $[y] discount, without 
displaying the price of a covered good or service, does not require the 
disclosure of total price under the rule.

[[Page 2099]]

(f) Online Marketplaces
    The rule covers sellers and online marketplace platforms or other 
intermediaries in the same manner as other businesses that offer 
covered goods or services. Various commenters, however, highlighted the 
challenges some businesses may face in implementing the rule if it is 
applied equally to all online marketplace stakeholders. The 
Commission's review of the comments, as discussed herein, did not 
identify any persuasive reason to change the rule as it applies to 
online marketplaces for covered goods or services.
    Some commenters stated that certain businesses offering, 
displaying, or advertising goods and services in an online marketplace 
often must rely on other entities for accurate information about 
pricing and expressed concern about liability under the rule if they 
receive inaccurate pricing information. This concern arose both from 
intermediaries that display prices provided by sellers and from sellers 
who offer their goods or services through an intermediary. 
Intermediaries are concerned about facing liability if they post prices 
that are inaccurate because the seller of the good or service did not 
provide complete and accurate pricing information. Commenters also 
expressed concern about liability when sellers list their good or 
service for sale on a platform but are not in control of how the 
platform displays information about pricing.\304\
---------------------------------------------------------------------------

    \304\ See, e.g., FTC-2023-0064-3258 (National Taxpayers Union 
Foundation stated that Total Price may be difficult or impossible to 
implement with third-party marketplaces because ``while the platform 
may control the display of prices, it is sellers and not the 
platform that sets [sic] the prices.''); FTC-2023-0064-3293 (Travel 
Technology Association stated that intermediaries may be ``similarly 
situated to consumers in that they are also dependent on Travel 
Service Providers such as hotels to provide accurate, complete, and 
timely information before booking.''); FTC-2023-0064-3262 
(Skyscanner Ltd. highlighted ``the numerous and complex ways in 
which metasearch sites receive pricing information directly from 
hotels and other short-term lodging providers'').
---------------------------------------------------------------------------

    Travel Technology Association (``Travel Tech''), for instance, 
observed the complex and multi-layered information flow from travel 
service providers, such as hotels, motels, inns, vacation rentals, and 
other short-term lodging providers, to different types of 
intermediaries which operate either as business-to-business, consumer-
facing, or both, and include online travel agents, metasearch engines, 
global distribution systems, travel management companies, short-term 
rental platforms, ``brick-and-mortar'' or offline travel agents, tour 
operators, and wholesalers.\305\ Travel Tech explained that travel 
service providers determine the rates, terms, and mandatory fees, 
including resort fees, applicable to their travel services, and that 
only travel service providers know whether the nature and purpose of 
any fee they impose is accurate.\306\ Travel Tech members, which 
consist of the aforementioned intermediaries, use the information 
provided to them directly from travel service providers, or indirectly 
through other intermediaries, to aggregate, sort, and display offers on 
their sites and applications, and consumers in turn use this 
information to compare offers and make informed choices.\307\ Travel 
Tech and one of its members, Skyscanner, a metasearch engine, suggested 
that the rule should immunize intermediaries from liability if travel 
service providers or other upstream distributors ``fail to provide 
accurate, complete, and timely pricing information and such downstream 
[i]ntermediaries have made reasonable efforts to receive such 
information.'' \308\ Both commenters further requested that the 
Commission make clear that travel service providers would be engaging 
in an unfair or deceptive practice if they provide inaccurate, 
incomplete, or untimely pricing information to intermediaries or seek 
remuneration from intermediaries for information necessary for them to 
comply with any final rule.\309\ Finally, Travel Tech further requested 
that the Commission clarify that the rule applies to any business that 
supplies or advertises pricing to consumers so all are held to the same 
standard.\310\
---------------------------------------------------------------------------

    \305\ FTC-2023-0064-3293 (Travel Technology Association).
    \306\ Id.
    \307\ Id.
    \308\ FTC-2023-0064-3293 (Travel Technology Association); FTC-
2023-0064-3262 (Skyscanner Limited).
    \309\ Id.
    \310\ FTC-2023-0064-3293 (Travel Technology Association).
---------------------------------------------------------------------------

    The American Hotel & Lodging Association, a national association 
representing all segments of the U.S. lodging industry, including hotel 
owners, beds & breakfasts, State hotel associations, and industry 
suppliers, also stressed that a final rule must apply broadly to all 
industry participants, including online travel agencies, short-term 
rental platforms, and metasearch sites.\311\ The commenter noted that 
the industry broadly is moving to implement the clear publishing of 
total price (including all mandatory, non-government fees) for lodging, 
so that consumers can more easily navigate the myriad of choices they 
have when it comes to places to stay.\312\
---------------------------------------------------------------------------

    \311\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
    \312\ Id.
---------------------------------------------------------------------------

    The Commission declines to adopt blanket immunity from the rule for 
intermediaries that depend on providers of live-event tickets and 
short-term lodging for accurate pricing information. The Commission, 
clarifies, however, that the final rule applies to business-to-business 
(``B2B'') transactions as well as business-to-consumer transactions. 
Businesses such as travel service providers that sell or advertise 
through intermediaries must provide such entities with accurate pricing 
information (including about total price, as well as mandatory and 
optional fees). Platforms and other intermediaries that offer, display, 
or advertise covered goods or services and ancillary goods or services 
or allow third party sellers to do so must disclose the total price of 
the goods and services, including all mandatory and optional fees and, 
if applicable, provide third-party sellers with all necessary 
information to calculate the total price. The rule's coverage of B2B 
transactions in this manner protects not only individual consumers from 
hidden and misleading fees, but also businesses.
    The Commission also notes that at least one commenter, the 
International Franchise Association, argued that the rule should exempt 
B2B transactions, without providing any compelling justification for 
why bait-and-switch pricing, including drip pricing, and the 
misrepresentation of fees and charges should be allowed in transactions 
involving businesses.\313\ This commenter noted that, for example, 
``[f]ranchised hotels advertise large event spaces for consumers' 
weddings and business conventions'' and the rule ``could be applied 
against these businesses if they fail to display total price even 
though no consumer is ever misled or deceived.'' \314\ The prohibition 
in section 5 of the FTC Act against unfair or deceptive acts or 
practices does not include any limitation on the ``consumers'' who can 
be injured. Relying on this authority, the Commission has long 
interpreted the FTC Act to apply to cases where the harmed consumers 
are businesses, particularly small- and medium-sized businesses.\315\
---------------------------------------------------------------------------

    \313\ FTC-2023-0064-3294 (International Franchise Association).
    \314\ Id.
    \315\ See, e.g., Complaint ]] 1-7, 13-87, FTC v. Arise Virtual 
Solutions, Inc., No. 24-cv-61152 (S.D. Fla. July 2, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/arise_complaint.pdf (alleging 
defendants made misleading and unsubstantiated earnings claims in 
selling its Arise business opportunity to gig worker consumers 
seeking to work from home in customer service and failed to provide 
the disclosures required by the Business Opportunity Rule); 
Complaint ]] 7-51, In re Amazon.com, Inc., 171 F.T.C. 860, 861-71 
(2021), https://www.ftc.gov/system/files/ftc_gov/pdf/DV171.pdf 
(alleging defendants deceptively claimed they would give their 
Amazon Flex drivers 100% of consumer tips when in fact they withheld 
nearly a third of the tips from their drivers); Complaint ]] 13-65, 
FTC v. First American Payment Systems, LLC, No. 4:22-cv-00654 (E.D. 
TX July 29, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/Complaint%20%28file%20stamped%29_0.pdf (alleging defendants made 
false claims about their payment processing services, including 
about total monthly fees, savings opportunities, and the ease of 
cancelling automatically-renewing accounts, to small business 
consumers such as restaurants, nail salons, or small retail 
businesses); Complaint ]] 12-50, FTC v. Yellowstone Capital LLC, No. 
1:20-cv-06023 (S.D.N.Y. Aug. 3, 2020), https://www.ftc.gov/system/files/documents/cases/1823202yellowstonecomplaint.pdf (alleging 
defendants engaged in a pattern of deceptive and unfair conduct 
involving their ``merchant cash advances'' to small business 
consumers and made excess, unauthorized withdrawals from consumers' 
accounts after consumers already repaid the full amount they owed); 
Complaint ]] 9-104, FTC v. Fleetcor Technologies, Inc., No. 1:19-cv-
05727-ELR (N.D. Ga. December 20, 2019), https://www.ftc.gov/system/files/documents/cases/fleetcor_complaint_with_exhibits_002.pdf 
(alleging defendants marketed fuel cards to business consumers that 
operate vehicle fleets, including many small businesses and made 
false claims about the fuel card's savings, fraud controls, and lack 
of set-up, transaction, and membership fees, instead charging these 
businesses hundreds of millions of dollars in unexpected fees); see 
also Fed. Trade Comm'n, Policy Statement on Enforcement Related to 
Gig Work (2022), https://www.ftc.gov/system/files/ftc_gov/pdf/Matter%20No.%20P227600%20Gig%20Policy%20Statement.pdf (noting that 
protecting gig workers ``from unfair, deceptive, and anticompetitive 
practices is a priority,'' and the FTC ``will use its full authority 
to do so'').

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[[Page 2100]]

    The Commission clarifies that it does not intend to treat 
intermediaries as the publisher or speaker of information about pricing 
or as controlling the manner of its display where the intermediary is 
not responsible, in whole or in part, for such content or display.\316\ 
However, if intermediaries are responsible, in whole or in part, for 
offering, displaying, or advertising any price, including any portion 
thereof, of a covered good or service, then within the scope of that 
responsibility, they must give sellers the information necessary to 
calculate total price and, when uniquely situated to do so, such 
intermediaries must ensure that they display total price. For example, 
if an intermediary charges a fee for access to its platform and the 
seller passes the fee through to consumers, the intermediary must 
provide the seller with accurate information about the fee's amount so 
the seller can accurately calculate total price, or otherwise ensure 
that the total price is displayed. Travel service providers and other 
sellers, by the same token, must provide intermediaries with accurate 
price information.
---------------------------------------------------------------------------

    \316\ See, e.g., FTC-2023-0064-3202 (TechNet stated: ``The FTC's 
proposed rule also poses significant harm to online marketplaces by 
potentially creating liability for platforms that merely display 
pricing advertised by others. As publishers, such platforms are 
likely protected from such responsibility by Section 230 of the 
Communications Decency Act of 1996.'').
---------------------------------------------------------------------------

    Whether an intermediary, seller, or other business is responsible 
for offering, displaying, or advertising a price of a covered good or 
service, may be a fact- and law-specific determination in which the 
Commission can consider issues of participation in, and control of, 
unfair or deceptive practices, as well as contractual obligations 
between sellers and platforms and other intermediaries, and the 
applicability of other Federal laws. The Commission will consider 
issuing and updating business guidance to address particular or nuanced 
scenarios, as it has done as a complement to other rulemakings.\317\
---------------------------------------------------------------------------

    \317\ See, e.g., Fed. Trade Comm'n, Bureau of Consumer 
Protection Business Guidance, FTC Safeguards Rule: What Your 
Business Needs to Know (May 2022), https://www.ftc.gov/business-guidance/resources/ftc-safeguards-rule-what-your-business-needs-know; Fed. Trade Comm'n, Bureau of Consumer Protection Business 
Guidance, FAQs: Complying with the Contact Lens Rule (June 2020), 
https://www.ftc.gov/business-guidance/resources/faqs-complying-contact-lens-rule; Fed. Trade Comm'n, Bureau of Consumer Protection 
Business Guidance, Complying with the Funeral Rule (Aug. 2012), 
https://www.ftc.gov/business-guidance/resources/complying-funeral-rule.
---------------------------------------------------------------------------

2. Sec.  464.2(b)
    Proposed Sec.  464.2(b) in the NPRM required businesses to display 
total price more prominently than any other pricing information in any 
offer, display, or advertisement that contains an amount a consumer may 
pay. Following review of the comments, the Commission finalizes Sec.  
464.2(b) with three modifications. First, as already discussed in this 
section, the Commission limits the requirements of Sec.  464.2, 
including Sec.  464.2(b), to covered goods or services. Second, as 
discussed in section III.B.1, the Commission narrows the disclosure 
trigger in Sec.  464.2(a) and (b) to ``an offer, display, or 
advertisement that represents any price of a covered good or service.'' 
Third, as discussed herein, final Sec.  464.2(b) clarifies the 
prominence requirement with respect to the final amount of payment for 
a transaction. Final Sec.  464.2(b) thus provides that, in any offer, 
display, or advertisement that represents any price of a covered good 
or service, a business must disclose the total price more prominently 
than any other pricing information. However, where the final amount of 
payment for the transaction is displayed, the final amount of payment 
must be disclosed more prominently than, or as prominently as, the 
total price.
    Various commenters voiced support for proposed Sec.  464.2(b)'s 
requirement that total price must be displayed more prominently than 
other pricing information.\318\ Certain commenters stated that the 
prominence requirement will prevent consumer confusion as to the true 
price of a good or service.\319\ Some commenters suggested 
strengthening the prominence requirement or adding guidance about 
it.\320\ Other commenters also suggested clarifying that the phrase 
``an amount a consumer may pay'' refers only to truly mandatory 
ancillary goods or services.\321\ On the other hand, some

[[Page 2101]]

industry commenters stated that the prominence requirement may have 
unintended consequences that could harm consumers, such as consumers 
not noticing an offered discount or a business deciding not to provide 
any pricing information.\322\ As noted in section III.B.1.e, nothing in 
the rule prohibits a business from adjusting total price to account for 
any applied discounts or other promotional pricing and, given strong 
market incentives, the Commission disagrees with comments that the 
rule's prohibitions against hidden and misleading fees will deter 
businesses from advertising prices.\323\
---------------------------------------------------------------------------

    \318\ See, e.g., FTC-2023-0064-3266 (StubHub, Inc. agreed with 
the FTC's proposal to require Total Price in every offer, display, 
or advertisement presented to consumers and that Total Price must be 
consistently displayed throughout the transaction); FTC-2023-0064-
3306 (Live Nation Entertainment and its subsidiary Ticketmaster 
North America supported ``requir[ing] the first price for a live-
event ticket shown to consumers to be the price ultimately charged 
at checkout (exclusive of state and local taxes and optional add-
ons). This price should be clearly displayed on the initial landing 
page and easily discernible.'' The commenter proposed adding the 
phrase, ``from the first instance a consumer sees a price for a good 
or service'' to the end of proposed Sec.  464.2(a) and moving the 
phrase, ``as soon as pricing information is provided to the 
consumer'' before ``more prominently than any other Pricing 
Information'' in proposed Sec.  464.2(b).); FTC-2023-0064-3290 (U.S. 
Public Interest Research Group Education Fund commented: ``[T]he 
Total Price should be provided first and with the most prominence. 
Businesses must not be allowed to confuse consumers with a barrage 
of numbers.''); FTC-2023-0064-1939 (Tzedek DC).
    \319\ See, e.g., FTC-2023-0064-3290 (U.S. Public Interest 
Research Group Education Fund); FTC-2023-0064-1939 (Tzedek DC 
commented that proposed Sec.  464.2(b) ``will prevent companies from 
hiding the real cost of goods and services in fine print or making 
the total cost difficult to find.'').
    \320\ See, e.g., FTC-2023-0064-3196 (South Carolina Department 
of Consumer Affairs commented: ``Guidance on how the business can 
simultaneously comply with the `Clearly and Conspicuously' 
requirement and the prominence requirement may help with business 
comprehension and compliance.'' The commenter suggested adding ``a 
definition addressing the different mediums by which the offer, 
display or advertisement may be relayed to a consumer (visual, 
audio, print, online)'' and providing ``examples of compliance with 
the requirement of prominent display'' such as ``in a visual 
disclosure presentation of the Total Price in bolded typeface at 
least two points larger than any other Pricing Information or 14-
point font, whichever is larger, satisfies the prominence 
requirement.'').
    \321\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for 
Consumer Law & Economic Justice et al. suggested modifying proposed 
Sec.  464.2(b) to include: ``[A] Business must not automatically 
include Ancillary Goods or Services in the Total Price or 
automatically select Ancillary Goods or Services for purchase on 
behalf of the consumer.''); FTC-2023-0064-3160 (Consumer Federation 
of America et al. made a similar suggestion and stated it would 
``ensure that `must pay' is interpreted to include any fee or charge 
that is included by default and that the consumer must pay unless 
they take affirmative action to opt-out or avoid it.'' The commenter 
proposed adding guidance that: ``A consumer must pay a fee or charge 
if the fee or charge is not reasonably avoidable or if the consumer 
must pay the fee or charge unless they take affirmative action to 
avoid it. An ancillary good or service is mandatory if a reasonable 
consumer would expect the good or service to be included with the 
purchase.'').
    \322\ See, e.g., FTC-2023-0064-3293 (Travel Technology 
Association commented that if Total Price is ``clearly and 
conspicuously'' displayed, a prominence requirement is unnecessary 
and ``discounts would have to be less prominent than the Total 
Price, potentially leading to a consumer missing out on a deal that 
may have saved them money or led to a more enjoyable vacation.'' The 
commenter suggested that the rule be more flexible ``so that 
Intermediaries can use their expertise to relay the most appropriate 
information to consumers.''); FTC-2023-0064-3296 (Bay Area Apartment 
Association commented that the prominence requirement could have a 
``chilling effect on the content of commercial speech,'' with some 
rental housing providers choosing ``not to include pricing 
information in their advertisements, and instead invite prospective 
residents to learn about pricing on their website or to call their 
leasing office,'' thereby ``undermining a key objective (better 
consumer awareness of the price of goods and service[s]) the rule is 
intended to accomplish.'').
    \323\ See also Bates v. State Bar of Ariz., 433 U.S. 350, 383-84 
(1977) (``Since the advertiser knows his product and has a 
commercial interest in its dissemination, we have little worry that 
regulation to assure truthfulness will discourage protected 
speech.'') (citing Va. State Bd. of Pharm. v. Va. Citizens Consumer 
Council, Inc., 425 U.S. 748, 771-772, 771 n. 24 (1976)).
---------------------------------------------------------------------------

    Final Sec.  464.2(b) also clarifies how the prominence requirement 
applies to the final amount of payment for a transaction. The 
Commission recognizes that the final amount of payment, now an 
explicitly required disclosure under final Sec.  464.2(c), may differ 
from total price due to various factors, such as the exclusion from 
total price of certain fees or charges, including for any optional 
ancillary good or service, or the application of promotional pricing 
models. The Commission determines that both total price and the final 
amount of payment are material to consumers. The Commission therefore 
clarifies that, when the final amount of payment is displayed, it must 
be displayed as prominently as, or more prominently than, total price. 
The modification avoids a potential unintended consequence of the rule, 
which may have been read to require total price to obscure the final 
amount of payment.
    The Commission determines that, with these modifications, Sec.  
464.2(b)'s prominence requirement is clear, understandable, and 
unambiguous.
3. Sec.  464.2(c)
    In final Sec.  464.2, the Commission consolidates all proposed 
disclosure requirements; therefore, proposed Sec.  464.3(b) is codified 
at final Sec.  464.2(c). Proposed Sec.  464.3(b) would have required 
businesses to 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 total price, including the fee's 
refundability and the identity of the good or service for which the fee 
is charged. Final Sec.  464.2(c) largely adopts the disclosure 
requirements of proposed Sec.  464.3(b), with certain modifications. 
Specifically, final Sec.  464.2(c) requires businesses to disclose 
clearly and conspicuously, before the consumer consents to pay for any 
covered good or service: The nature, purpose, and amount of any fee or 
charge imposed on the transaction that has been excluded from total 
price and the identity of the good or service for which the fee or 
charge is imposed, but not the fee's refundability; and the final 
amount of payment for the transaction.
    The Commission makes these modifications, as discussed herein, in 
response to the comments and to address related concerns. One commenter 
recommended that the Commission provide greater specificity about which 
fees excluded from total price must be disclosed under this provision, 
and require the itemized disclosure of such fees.\324\ Some commenters 
argued that the provision was vague and overbroad, and that its 
application to ``any amount a consumer may pay'' would make complying 
with the provision impracticable and result in excessive disclosures 
that would confuse consumers into believing that all disclosed fees 
apply to them when they might not.\325\ One commenter recommended that 
the rule allow the required disclosures to be made at the time goods or 
services are selected.\326\ Commenters argued that requiring businesses 
to explain how fees will be used is not reasonable and may require the 
disclosure of confidential, proprietary, or commercially sensitive 
information, such as the business rationale for imposing fees and the 
specific uses to which businesses put fees.\327\ Other commenters 
recommended that the rule require the disclosure of the optional nature 
of optional fees \328\ and regulate opt-in and opt-out procedures for 
fees.\329\
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    \324\ FTC-2023-0064-3283 (National Consumer Law Center, Prison 
Policy Initiative, and advocate Stephen Raher).
    \325\ See, e.g., FTC-2023-0064-3094 (American Hotel & Lodging 
Association asserted: ``The language of the proposed rule is vague, 
overbroad, and not sufficiently specific to provide notice of what 
types of fees businesses are required to display . . . . Businesses 
could reasonably differ in their approaches to disclosing the 
`nature and purpose' or `identity' of such fees.''); FTC-2023-0064-
3133 (National Multifamily Housing Council and National Apartment 
Association commented that disclosing the nature and purpose of fees 
is ``impracticable'' and requiring rental housing providers to 
furnish prospective tenants ``with any fee or charge excluded from 
the total price that the customer may (or may not) have to pay at 
some point during the lease practically means housing providers will 
need to disclose all possible fees.''); FTC-2023-0064-3263 (Flex 
Association asserted that the ``requirement to disclose the `nature 
and purpose' of a fee is vague'' and ``provide[s] no material 
benefit to consumers.''); see also, FTC-2023-0064-2981 (Apartment & 
Office Building Association of Metropolitan Washington); FTC-2023-
0064-3042 (Nevada State Apartment Association); FTC-2023-0064-3044 
(San Angelo Apartment Association); FTC-2023-0064-3045 (Chicagoland 
Apartment Association); FTC-2023-0064-3111 (Houston Apartment 
Association); FTC-2023-0064-3116 (Manufactured Housing Institute); 
FTC-2023-0064-3233 (NCTA--The internet & Television Association); 
FTC-2023-0064-3296 (Bay Area Apartment Association); FTC-2023-0064-
3311 (Greater Cincinnati Northern Kentucky Apartment Association).
    \326\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
    \327\ See, e.g., FTC-2023-0064-1425 (Iowa Bankers Association); 
FTC-2023-0064-3263 (Flex Association asserted that ``[i]t appears 
that the Commission seeks to require disclosure of the business 
rationale for imposing a fee and the specific uses to which proceeds 
of a given fee will go,'' which would require businesses to 
``divulge commercially sensitive information that could seriously 
alter competition in a given marketplace.'').
    \328\ See, e.g., FTC-2023-0064-2888 (Housing Policy Clinic, 
University of Texas School of Law).
    \329\ See, e.g., Id.; FTC-2023-0064-2883 (District of Columbia, 
Office of the People's Counsel); FTC-2023-0064-3146 (Institute for 
Policy Integrity, New York University School of Law).
---------------------------------------------------------------------------

    The Commission modifies the NPRM proposal so that final Sec.  
464.2(c) requires businesses to disclose separately the amount, as well 
as the nature and purpose, of each fee or charge imposed on the 
transaction for the covered good or service that is excluded from total 
price, and the final amount of payment, before the consumer consents to 
pay. The Commission determines that these modifications are necessary 
for price transparency and to protect consumers who would reasonably 
expect to know the nature, purpose, and amount of fees they will have 
to pay, as well as the

[[Page 2102]]

final amount of payment, before they consent to pay.
    To provide clarification and address commenter concerns about 
potential overbreadth and vagueness, the Commission narrows the NPRM 
proposal so that final Sec.  464.2(c) requires the disclosures in 
connection with ``any fee or charge imposed on the transaction that has 
been excluded from total price'' instead of ``any amount a consumer may 
pay.'' The provision therefore requires the disclosure, before the 
consumer consents to pay, of the nature, purpose, and amount of 
government charges, shipping charges, and any other fee or charge, such 
as for optional ancillary goods or services, that permissibly were 
excluded from total price but are being imposed on the transaction.
    Final Sec.  464.2(c) also explicitly requires disclosure of ``the 
final amount of payment for the transaction,'' as that amount may 
differ from total price due to, for example, the application of 
promotional pricing or the addition of any fees or charges permissibly 
excluded from total price, including for any optional ancillary goods 
or services. Where the final amount of payment is displayed, as 
discussed in section III.B.2, final Sec.  464.2(b) requires it to be at 
least as prominent as, or more prominent than, total price.
    In most instances, the disclosure about the nature, purpose, and 
amount of the excluded charge or fee will be minimal. For example, 
using the defined term ``shipping charges'' is likely to convey the 
nature and purpose of such charges. For government charges, a phrase 
like ``sales tax'' or ``hotel occupancy tax'' would convey the nature 
and purpose of an imposed sales tax or hotel occupancy tax. Similarly, 
in most instances, simply identifying the ancillary good or service for 
which a charge applies, such as ``valet parking,'' will sufficiently 
convey the nature and purpose of the charge.
    Some commenters observed that the timing of ``before the consumer 
consents to pay'' is unclear. One commenter cautioned that the language 
of the rule may open the door to the types of bait-and-switch pricing 
that the total price disclosure requirement is meant to prevent.\330\ 
Other commenters recommended that the Commission clarify the meaning of 
the phrase ``before the consumer consents to pay'' and the timing of 
the required disclosures, for example, by specifying that it means 
before businesses obtain consumers' billing information.\331\
---------------------------------------------------------------------------

    \330\ FTC-2023-0064-3160 (Consumer Federation of America et 
al.).
    \331\ See, e.g., FTC-2023-0064-3160 (Consumer Federation of 
America et al.); FTC-2023-0064-3146 (Institute for Policy Integrity, 
New York University School of Law); FTC-2023-0064-3283 (National 
Consumer Law Center, Prison Policy Initiative, and advocate Stephen 
Raher); FTC-2023-0064-3191 (Community Catalyst et al.).
---------------------------------------------------------------------------

    The Commission clarifies that, although when a consumer consents to 
pay may depend on the facts and circumstances surrounding the 
transaction, Sec.  464.2(c) requires businesses to clearly and 
conspicuously disclose the nature, purpose, and amount of any fees or 
charges imposed on the transaction that have been excluded from total 
price and the identity of the good or service for which the fee or 
charge is imposed, as well as the final amount of payment for the 
transaction, before consumers are required to pay cash or provide their 
payment information. The Commission notes that a default setting that 
automatically opts-in consumers to pay for goods or services does not 
constitute consent to pay nor does it satisfy Sec.  464.2(c)'s 
disclosure requirements.
    As part of final Sec.  464.2(c), the Commission does not adopt the 
NPRM's proposed requirement to affirmatively disclose each fee's 
refundability. The Commission determines that requiring clear and 
conspicuous disclosure of each fee's refundability may be impractical 
for businesses and confusing to consumers due to extensive 
qualifications or other requirements for refunds. Such extensive, 
itemized disclosures may impede the Commission's goal of ensuring 
consumers receive clear and accurate pricing information. However, the 
Commission finalizes Sec.  464.3's prohibition on misrepresenting a 
fee's refundability.

C. Sec.  464.3 Misleading Fees Prohibited

    Both practices that the Commission identified in the NPRM as unfair 
or deceptive involve misleading practices: (1) bait-and-switch pricing 
that hides the total price of goods or services by omitting mandatory 
fees from advertised prices, including through drip pricing, and (2) 
misrepresenting the nature, purpose, amount, and refundability of fees 
or charges. Proposed Sec.  464.3(a) would have prohibited any business 
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.\332\
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    \332\ As noted supra section III.B, the Commission redesignates 
proposed Sec.  464.3(b) as final Sec.  464.2(c) to consolidate all 
provisions related to disclosures in final Sec.  464.2.
---------------------------------------------------------------------------

    The Commission finalizes proposed Sec.  464.3(a) in Sec.  464.3 
with some modifications. Specifically, final Sec.  464.3 prohibits any 
business, in any offer, display, or advertisement for a covered good or 
service, from misrepresenting any fee or charge, including its nature, 
purpose, amount or refundability, and the identity of the good or 
service for which it is imposed. The Commission adds the phrase 
``covered goods or services'' to reflect the narrower scope of the 
final rule. The Commission also adds ``amount'' to ``nature'' and 
``purpose,'' and clarifies that the prohibited misrepresentations 
concern ``any fee or charge'' instead of ``any amount a consumer may 
pay.'' This modified provision makes plain that, in connection with 
covered goods or services, businesses cannot misrepresent the nature, 
purpose, amount, or refundability of any fee or charge, including 
government charges, shipping charges, any fees or charges for optional 
ancillary goods or services, or any mandatory fees or charges. In 
making these modifications, the Commission has considered 
recommendations and alternatives suggested in NPRM comments, discussed 
herein.
    The Commission noted in the NPRM that it had received comments in 
response to the ANPR stating that sellers often misrepresent the nature 
or purpose of fees, leaving consumers wondering what they are paying 
for, believing fees are arbitrary, or concerned that they are getting 
nothing for the fees charged. The Commission received similar comments 
in response to the NPRM.
    The Attorneys General of nineteen States and the District of 
Columbia commented that fee misrepresentations ``mislead consumers and 
make it more difficult for truthful businesses to compete on price.'' 
\333\ Commenters supported prohibiting fee misrepresentations because 
truthful information benefits both consumers and businesses.\334\ A 
commenter

[[Page 2103]]

recommended that the Commission clarify that the provision includes 
misrepresentations about fees included in total price and fees excluded 
from total price.\335\
---------------------------------------------------------------------------

    \333\ FTC-2023-0064-3215 (Attorneys General of the States of 
North Carolina and Pennsylvania, along with Attorneys General of the 
States or Territories of Arizona, Colorado, Connecticut, Delaware, 
District of Columbia, Hawaii, Illinois, Maine, Michigan, Minnesota, 
New Jersey, New York, Oklahoma, Oregon, Vermont, Washington, and 
Wisconsin stated: ``[C]harges that misrepresent their nature and 
purpose are unfair and deceptive because they mislead consumers and 
make it more difficult for truthful businesses to compete on 
price.'' The Attorneys General asserted that ``this provision is 
another straightforward, commonsense approach that should not 
significantly burden businesses.'').
    \334\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for 
Consumer Law & Economic Justice et al. asserted: ``Prohibiting 
misrepresentation of the identity and nature of fees further serves 
the Commission's mandate to promote fair business practices and 
competition.''); FTC-2023-0064-2892 (Community Legal Services of 
Philadelphia stated that the rule's ``prohibition on 
misrepresentation regarding the nature and cost of fees would also 
be extremely beneficial for low-income renters, who often face 
inflated fees that can contribute to housing insecurity.''); FTC-
2023-0064-3268 (Housing and Eviction Defense Clinic, University of 
Connecticut School of Law stated: ``Prohibiting misleading fees will 
not only properly inform the tenants of the charges but also hold 
the landlords accountable for their fees.'').
    \335\ FTC-2023-0064-3283 (National Consumer Law Center, Prison 
Policy Initiative, and advocate Stephen Raher stated that Sec.  
464.3(a) should make clear that it prohibits misrepresentations 
regarding any amount included in Total Price as well as any other 
fee or charge the consumer may pay, including ``Shipping Charges, 
Government Charges, fines, penalties, optional charges, voluntary 
gratuities, and invitations to tip,'' and proposed adding specific 
text to that effect.).
---------------------------------------------------------------------------

    Commenters stated that businesses misrepresent fees by using 
language that is vague and not understandable to consumers,\336\ and 
provided examples of various types of misrepresentations about the 
nature and purpose of fees, such as ``service'' fees that may not go to 
service employees, ``environmental'' fees that may not have an 
environmental purpose, ``resort'' fees for ordinary accommodations or 
amenities,\337\ and fees misrepresented as government charges.\338\ 
Commenters also stated that businesses may misrepresent the mandatory 
or optional nature of fees, or their amount, and recommended that the 
Commission clarify that prohibiting misrepresentations about the nature 
and purpose of fees includes misrepresentations about their mandatory 
or optional nature.\339\ Another commenter argued that businesses can 
misrepresent fees when they itemize mandatory fees that are arbitrary 
and are not for identified goods or services, and recommended that the 
Commission clarify that businesses must have adequate substantiation 
for itemized fees.\340\ Commenters also argued that businesses 
misrepresent fees when they do not provide the goods or services for 
which fees are charged or provide nothing of value,\341\ and when fees 
fail to reflect the cost of the goods or services provided.\342\
---------------------------------------------------------------------------

    \336\ See, e.g., FTC-2023-0064-3268 (Housing & Eviction Defense 
Clinic, University of Connecticut School of Law stated that rental 
fees may be ``for something the landlord/property manager cannot 
explain.''); FTC-2023-0064-3283 (National Consumer Law Center, 
Prison Policy Initiative, and advocate Stephen Raher stated the rule 
should clarify that descriptions of fees which are not 
understandable to reasonable consumers misrepresent their nature and 
purpose.); FTC-2023-0064-3275 (Berkeley Center for Consumer Law & 
Economic Justice et al. cited research showing that ``many 
businesses characterize their hidden and unexpected fees using vague 
or anodyne language that fails to succinctly explain to the consumer 
exactly what the fee is for.'').
    \337\ See, e.g., FTC-2023-0064-1939 (Tzedek DC expressed support 
for the misleading fees provision because it ``will prevent 
companies from making misleading claims about a fee, in example, a 
company charging a `staff service fee' that does not go to 
employees.''); FTC-2023-0064-3106 (American Society of Travel 
Advisors noted: ``While admittedly there is no universally accepted 
industry definition of what constitutes a `resort,' hotels offering 
only typical or ordinary accommodations and/or amenities but 
nevertheless characteriz[ing] their fees as such misrepresent the 
nature of the property being booked.''); FTC-2023-0064-3275 
(Berkeley Center for Consumer Law & Economic Justice et al. 
identified ``environmental fees'' as one example of fees that may 
``serve[ ] no apparent environmental sustainability or conservation 
purpose.'').
    \338\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for 
Consumer Law & Economic Justice et al. stated that ``environmental'' 
fees ``are likely designed to trick consumers into thinking that the 
added cost is either a government-imposed tax to protect the 
environment, or a salutary contribution to somehow `offset' any 
negative environmental impact caused by the good or service'' when 
they may be ``charged simply to boost a business's profits.''); FTC-
2023-0064-3106 (American Society of Travel Advisors noted that ``use 
of terms such as `destination fee' . . . will inevitably mislead 
many consumers into mistakenly believing that it represents a tax or 
government surcharge that must be collected from the consumer and 
passed on to a local jurisdiction.'').
    \339\ See, e.g., FTC-2023-0064-3275 (Berkeley Center for 
Consumer Law & Economic Justice et al. argued that the rule could be 
strengthened by clarifying that the misleading fees provision 
applies to mandatory and optional fees.); FTC-2023-0064-3160 
(Consumer Federation of America et al. stated that the FTC should 
make clear that the misleading fees provision applies to mandatory 
and optional fees.).
    \340\ FTC-2023-0064-3212 (TickPick, LLC argued: ``Due to the 
arbitrary nature of the components that make up the Total Price of a 
ticket, any secondary ticketing marketplace that itemizes mandatory 
fees and charges is arguably misrepresenting the `nature and purpose 
of any amount a consumer may pay.' '' The commenter proposed that 
the Commission ``define any breakdown of the amounts that a consumer 
may pay as a representation that requires adequate 
substantiation.'').
    \341\ See, e.g., FTC-2023-0064-3102 (Corporation for Supportive 
Housing noted that landlords and property managers may collect 
``fees for services that were not performed (e.g., running a 
background check, credit check), [and] charg[e] fees in excess of 
the actual amount to perform the service/run the check to generate 
profit.''); FTC-2023-0064-3278 (Southeast Louisiana Legal Services 
noted that low-income renters face unfair and deceptive fees during 
residential leases that are ``frequently for services not 
rendered.'' The commenter further noted: ``Without any restrictions 
on hidden or misleading fees, landlords are free to use rental 
applications as an independent source of profit for which there may 
be no real service provided.''); FTC-2023-0064-1431 (McPherson 
Housing Coalition stated that rental housing applicants who pay 
application fees and do not get approved lose their money.); FTC-
2023-0064-2862 (Legal Aid Foundation of Los Angeles gave as examples 
of misleading fees a repairs fee when the landlord is legally 
obligated to provide the repairs and a parking fee when the tenant 
does not have or park a car.); FTC-2023-0064-2920 (Colorado Poverty 
Law Clinic stated, ``we often see fees added for services that the 
tenant does not receive, or that are basic services that should only 
reasonably be included in the tenant's monthly rent,'' such as for 
common area maintenance or utilities.); FTC-2023-0064-3242 (William 
E. Morris Institute for Justice expressed concern that ``housing 
providers and landlords are charging junk fees untethered to any 
real cost or business expense . . . or to any value or benefit 
delivered to rental housing applicants.'').
    \342\ See, e.g., FTC-2023-0064-3106 (American Society of Travel 
Advisors noted that ``even where use of the term `resort' to 
describe the property may be warranted, often the amount of the fee 
collected appears arbitrary and bears no relationship to the value 
of the services purportedly being provided.''); FTC-2023-0064-3278 
(Southeast Louisiana Legal Services commented that rental housing 
providers charge misleading fees when ``they do not appear to 
correspond to the cost of service provided'' or are vaguely 
identified, such as an ``administrative fee'' that causes 
``confusion for tenants who believe it to be a security deposit.''); 
FTC-2023-0064-3253 (Fortune Society commented that ``application 
fees often do not reflect the actual costs of submitting a rental 
application.'').
---------------------------------------------------------------------------

    The American Hotel & Lodging Association and other commenters 
described the misleading fees provision as unnecessary given the 
Commission's existing authority under section 5 of the FTC Act to 
police misleading fees.\343\ It is true that section 5, which prohibits 
unfair or deceptive practices, has long been used to protect against 
misrepresentations regarding material terms of a transaction, including 
price. False claims about fees or charges, as well as those claims that 
lack a reasonable basis, are inherently likely to mislead. However, the 
Commission disagrees with commenters' contentions that the rule's 
prohibitions on misrepresentations are unnecessary given the existing 
section 5 authority. As explained in section V, the final rule is 
necessary to: (1) ensure all businesses offering covered goods or 
services are held to the same standard so that consumers can 
effectively comparison shop; (2) level the playing field for these 
businesses so that they can compete based on truthful pricing 
information; and (3) increase deterrence by allowing courts to impose 
civil penalties and enabling the Commission to more readily obtain 
redress and damages for consumers through section 19(b) of the FTC Act. 
As it has become increasingly common for businesses offering covered 
goods or services to charge or itemize discrete fees over the course of 
a transaction, a specific prohibition on pricing misrepresentations is 
necessary to ensure consumers receive truthful information about the 
charges and fees they incur, and businesses are able to compete based 
on truthful information.\344\
---------------------------------------------------------------------------

    \343\ See, e.g., FTC-2023-0064-3094 (American Hotel & Lodging 
Association).
    \344\ Given the prevalence of the defined unfair or deceptive 
practices regarding the misrepresentation of total costs and the 
nature and purpose of fees, the Commission finds that it is 
necessary to require both affirmative disclosures and a prohibition 
of misrepresentations, instead of limiting the rule to prohibiting 
misrepresentations. See supra Parts II.A and II.B.

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

[[Page 2104]]

    Other commenters described the misrepresentations provision as 
vague and overbroad.\345\ The Commission carefully considered comments 
that suggested the language proposed in the NPRM prohibiting 
misrepresentations lacked specificity and was vague or overbroad, 
particularly the phrase ``any amount a consumer may pay.'' In final 
Sec.  464.3, the Commission modifies the NPRM proposal to replace ``any 
amount a consumer may pay'' with a reference to ``any fee or charge.'' 
In the NPRM, the Commission stated that ``[o]ther 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.'' \346\ To 
elaborate on this point in the final rule text, the Commission 
specifies that the ``amount'' of any fee or charge cannot be 
misrepresented. Taken together, these modifications provide clarity to 
businesses that they cannot misrepresent the nature, purpose, amount, 
or refundability of any fee or charge excluded from total price, 
including government charges, shipping charges, any fees or charges for 
optional ancillary goods or services, or any other itemized or totaled 
fee or charge, including total price and the final amount of payment.
---------------------------------------------------------------------------

    \345\ See, e.g., FTC-2023-0064-3094 (American Hotel & Lodging 
Association); FTC-2023-0064-3206 (Motor Vehicle Protection Products 
Association et al.).
    \346\ NPRM, 88 FR 77434.
---------------------------------------------------------------------------

    Final Sec.  464.3 prohibits misrepresentations about material 
pricing terms of a transaction. The nature, purpose, amount, and 
refundability of fees or charges and the identity of the good or 
service for which they are imposed are material characteristics that 
affect the value to consumers of the covered goods or services being 
offered and businesses' ability to compete on price. As the Commission 
noted in the NPRM, whether a consumer is required to pay a charge, the 
amount of the charge, and what goods or services they will receive in 
exchange for the charge, is necessarily material information that 
affects a consumer's choice about whether to consent to a charge.\347\ 
Other characteristics included in the nature, purpose, and amount of a 
charge, such as whether it is refundable, are also material.
---------------------------------------------------------------------------

    \347\ NPRM, 88 FR 77432; Deception Policy Statement, 103 F.T.C. 
110, 175, 182-183, 183 n.55 (listing, respectively, ``misleading 
price claims'' among those that the FTC has found to be deceptive, 
and claims or omissions involving cost among those that are 
presumptively material); see also FTC v. FleetCor Techs, Inc., 620 
F. Supp. 3d 1268, 1303-04 (N.D. Ga. 2022) (finding that 
representations about transaction fees and discounts were material).
---------------------------------------------------------------------------

    Under final Sec.  464.3, businesses cannot misrepresent the nature, 
purpose, amount, or refundability of fees or charges and the identity 
of the goods or services for which they are imposed.\348\ For example, 
it would be a misrepresentation to characterize fees as mandatory when 
they are optional, or to characterize fees as optional when they are 
mandatory or consumers are automatically opted-in to pay them.\349\ 
Representations that fees are for identified goods or services when 
those goods or services are not provided would also be a 
misrepresentation. Further, although the rule does not govern how 
businesses set their prices, if a business represents that it is 
charging a fee for a specific good or service, but the amount of the 
fee does not reflect the cost of that good or service, that may be 
evidence that the business has misrepresented the nature or purpose of 
the fee.
---------------------------------------------------------------------------

    \348\ As the Commission noted in the NPRM, if a delivery 
application includes an invitation to tip a delivery driver without 
disclosing that a portion of the tip is allocated to offset the 
delivery driver's base wages or benefits, it would violate Sec.  
464.3 in addition to other laws or regulations relating to the 
distribution of tips. See Complaint ]] 50-51, In re Amazon.com, Inc. 
(``Amazon Flex''), No. C-4746 (FTC June 9, 2021) (alleging 
respondents falsely represented that 100% of tips would go to the 
driver in addition to the pay respondents offered drivers).
    \349\ See discussion of optional and mandatory fees supra Parts 
III.A.1 and III.A.8.a; see also, e.g., Fed. Trade Comm'n, Bringing 
Dark Patterns to Light: Staff Report 9, 15, 15 n.122, 22 (stating 
``companies must not mislead consumers to believe that fees are 
mandatory when they are not'' and describing the use of pre-selected 
checkboxes as a dark pattern that tricks consumers into buying 
unwanted goods and services) (Sept. 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/P214800%20Dark%20Patterns%20Report%209.14.2022%20-%20FINAL.pdf; 
Stipulated Order for Permanent Injunction, Monetary Judgment, and 
Other Relief as to Defendants Rhinelander Auto Grp. LLC, et al., FTC 
v. Rhinelander Auto Ctr., Inc., No. 3:23-cv-00737-wmc (W.D. Wis. 
Nov. 6, 2023) (settling allegations that defendants misrepresented 
that consumers were required to purchase add-on products to 
purchase, lease, or finance a vehicle and, among other provisions, 
enjoining defendants from misrepresenting whether charges, products, 
or services are optional or required), https://www.ftc.gov/system/files/ftc_gov/pdf/18-ConsentJudgmentEnteredastoRAGRMGandTowne.pdf.
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    Misrepresentations can result from failing to disclose material 
conditions or limitations relating to fees and charges, for example, 
material conditions or limitations that would affect consumers' ability 
to purchase covered goods or services at advertised prices.\350\ 
Describing a good or service as fully refundable without disclosing 
material limitations on refundability (e.g., refunds are only accepted 
for a specified amount of time) would also be misleading.
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    \350\ See, e.g., cases cited supra note 111.
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    The American Hotel & Lodging Association expressed the concern that 
businesses may use inconsistent descriptions of similar fees and 
confuse consumers in disclosing the nature and purpose of fees or the 
identity of the goods or services for which fees are imposed.\351\ 
Using vague language or fee descriptions (e.g., unspecified service or 
convenience fees) that do not accurately inform consumers of the nature 
or purpose of fees or charges or the identity of the good or service 
for which the fee or charge is imposed misrepresents those fees. In 
addition, it would be misleading if a business conflates fees so that 
consumers are unable to determine their nature, purpose, or the 
identity of the goods or services for which the fees are charged. 
Whether fee descriptions are adequate to avoid misrepresenting their 
nature, purpose, or the identity of goods or services for which they 
are charged will be case specific and may depend on the context.
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    \351\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
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    Another commenter argued that the rule would unfairly hold online 
travel agencies and other intermediaries liable for fee 
misrepresentations when only travel service providers can know whether 
representations about the nature and purpose of fees are accurate.\352\ 
As discussed in section III.B.1.f, complying with the rule would 
require businesses that sell or advertise covered goods or services 
through platforms to provide the platforms with accurate pricing 
information. Contractual relationships and the rule's application to 
B2B transactions should ensure that businesses that rely on other 
parties for pricing information receive accurate pricing information.
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    \352\ FTC-2023-0064-3293 (Travel Technology Association).
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    One commenter argued that charging consumers for ``speculative 
tickets'' in the live-event sector is deceptive because it is 
tantamount to ``charging consumers for something that doesn't exist,'' 
and suggested the rule should ``prohibit sellers or resellers from 
charging the consumer for buying something the seller doesn't own, or 
that does not even exist.'' \353\ The

[[Page 2105]]

Commission notes that the final rule does not directly address the sale 
of speculative tickets. However, a business that represents that 
tickets are in fact available when they are not may violate Sec. Sec.  
464.2(c) and 464.3 by failing to disclose clearly and conspicuously, 
and by misrepresenting, the identity of the good or service for which 
fees or charges are imposed.
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    \353\ FTC-2023-0064-3108 (Christian L. Castle, Esq.; Mala 
Sharma, President, Georgia Music Partners; and Dr. David C. Lowery, 
founder of musical groups Cracker and Camper Van Beethoven, and a 
lecturer at the University of Georgia Terry College of Business).
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    Commenters opposed the misrepresentation provision in the context 
of negotiated contracts because negotiations arguably allow consumers 
to seek clarification about fees.\354\ The Commission, however, has not 
identified any justification for excluding contracts from the 
misleading fees provision. Truthful fee disclosures in contract 
negotiations are material to consumers. One commenter recommended 
providing a safe harbor from the misleading fees provision if 
businesses clearly and conspicuously disclose fees and make either no 
statement or an accurate statement about the nature and purpose of 
fees.\355\ The Commission declines to grant a safe harbor from the 
misleading fees provision when businesses make affirmative disclosures. 
Whether disclosures are adequate, clear and conspicuous, and not 
misleading are issues that may depend on the specific facts and 
circumstances of the transaction.
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    \354\ See, e.g., FTC-2023-0064-2918 (Elite Catering + Event 
Professionals opposed the misrepresentations provision for private 
food services contracts because ``[t]hroughout the contracting 
process, there are ample opportunities for the customer to seek 
clarification or negotiate the applicability of the price and 
fees.'').
    \355\ FTC-2023-0064-3016 (National Federation of Independent 
Business proposed modifying the rule as follows: ``(a) . . . [I]t is 
an unfair and deceptive practice . . . for a Business to: (i) 
misrepresent the total cost of a good or service by omitting a 
mandatory fee from the advertised price of the good or service; or 
(ii) misrepresent the nature and purpose of such a mandatory fee.'' 
The commenter also proposed exempting any business from that 
requirement if it discloses the fee clearly and conspicuously 
``before a consumer becomes obligated to pay the fee'' and ``either 
makes no statement about the nature and purpose of the fee or makes 
an accurate statement of the nature and purpose of the fee.'').
---------------------------------------------------------------------------

    The NPRM identified and sought comment on the proposed rule's 
intersection with existing Federal rules and regulations containing 
prohibitions on misrepresentations: the Business Opportunity Rule,\356\ 
the Mortgage Acts and Practices Advertising Rule (Regulation N),\357\ 
the Mortgage Assistance Relief Services Rule (Regulation O),\358\ the 
amendments to the Negative Option Rule,\359\ and the Telemarketing 
Sales Rule.\360\ The Commission did not receive substantive comments 
about overlap or conflict with these rules.\361\ The Commission is not 
aware of any evidence that there is a conflict between these rules and 
the final rule. The Commission believes it is possible for businesses 
to comply with each of them, as applicable.
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    \356\ 16 CFR part 437.
    \357\ 12 CFR part 1014.
    \358\ 12 CFR part 1015.
    \359\ Promulgation of Trade Regulation Rule and Statement of 
Basis and Purpose: Rule Concerning Recurring Subscriptions and Other 
Negative Option Programs, 89 FR 90476 (Nov. 15, 2024), https://www.federalregister.gov/documents/2024/11/15/2024-25534/negative-option-rule.
    \360\ 16 CFR part 310.
    \361\ In addition, the added definition of ``Covered Goods or 
Services'' removes any potential overlap between the final rule and 
Regulations N and O.
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D. Sec.  464.4 Relation to State laws

    Proposed Sec.  464.4 addressed preemption and the proposed rule's 
relation to State statutes, regulations, orders, or interpretations, 
including State common law (hereinafter ``State law''). Proposed Sec.  
464.4(a) provided that the rule would not supersede or otherwise affect 
any State law unless the State law is inconsistent with the rule, and 
then only to the extent of the inconsistency. Proposed Sec.  464.4(b) 
specified that a State law providing consumers with greater protections 
than the rule does not, solely for that reason, make the State law 
inconsistent with the rule. When a State law offers greater (or, in 
some circumstances, even lesser) protection than the rule, if 
businesses can comply with both, they are not inconsistent. Thus, as 
commenters noted, the rule would establish a regulatory floor rather 
than a ceiling.\362\ After reviewing the comments, the Commission 
adopts the provision as proposed in the NPRM.
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    \362\ See, e.g., FTC-2023-0064-3150 (Attorney General of the 
State of California ``appreciate[d] that the FTC's rule respects the 
states' role in protecting consumers from deceptive price 
advertising, and the rule's clear intent to create a federal floor, 
rather than a ceiling, for consumer protection.''); FTC-2023-0064-
3212 (TickPick, LLC).
---------------------------------------------------------------------------

    The Commission finds it has the authority to promulgate regulations 
that preempt inconsistent State laws under section 5 of the FTC Act. 
Even without an express preemption provision, Federal statutes and 
regulations preempt conflicting State laws. Under the Supreme Court's 
conflict preemption doctrine, a Federal statute or regulation impliedly 
preempts State law when it is impossible for the regulated parties to 
comply with both the Federal and the State law, or when a State law is 
an obstacle to achieving the full purposes and objectives of the 
Federal law.\363\ ``Federal regulations have no less pre-emptive effect 
than [F]ederal statutes.'' \364\ Accordingly, the rule preempts a State 
law only to the extent it is inconsistent with the rule and compliance 
with both is impossible, or it is an obstacle to achieving the full 
purposes and objectives of the rule. To provide a clear explanation of 
the Commission's intent and the rule's scope of preemption, the rule 
includes an express preemption provision at Sec.  464.4.\365\
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    \363\ See, e.g., Cong. Rsch. Serv., R45825, Federal Preemption: 
A Legal Primer 23 (2023), https://crsreports.congress.gov/product/pdf/R/R45825/3.
    \364\ Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 
153 (1982).
    \365\ Many FTC regulations, including regulations promulgated 
under section 18 of the FTC Act, include provisions addressing State 
laws and preemption. See, e.g., Funeral Rule, 16 CFR 453.9 
(exempting from preemption State laws that ``afford[ ] an overall 
level of protection [that] is as great as, or greater than, the 
protection afforded by'' the FTC's Rule); Rule Concerning Cooling 
Off Period for Sales Made at Homes or at Certain Other Locations, 16 
CFR 429.2(b) (exempting laws and ordinances that provide ``a right 
to cancel a door-to-door sale that is substantially the same or 
greater than that provided in this part''); Business Opportunity 
Rule, 16 CFR 437.9(b) (``The FTC does not intend to preempt the 
business opportunity sales practices laws of any state or local 
government, except to the extent of any conflict with this part. A 
law is not in conflict with this Rule if it affords prospective 
purchasers equal or greater protection . . . .''); Mail, Internet, 
or Telephone Order Merchandise Rule, 16 CFR 435.3(b) (``This part 
does supersede those provisions of any State law, municipal 
ordinance, or other local regulation which are inconsistent with 
this part to the extent that those provisions do not provide a buyer 
with rights which are equal to or greater than those rights granted 
a buyer by this part.''); Franchise Rule, 16 CFR 436.10(b) (``The 
FTC does not intend to preempt the franchise practices laws of any 
state or local government, except to the extent of any inconsistency 
with part 436. A law is not inconsistent with part 436 if it affords 
prospective franchisees equal or greater protection . . . .''); 
Labeling and Advertising of Home Insulation, 16 CFR 460.24(b) 
(preemption of ``State and local laws and regulations that are 
inconsistent with, or frustrate the purposes of, this regulation'').
---------------------------------------------------------------------------

    Numerous commenters supported proposed Sec.  464.4(b)'s targeted 
approach of preempting only inconsistent parts of State laws.\366\ Some 
commenters,

[[Page 2106]]

however, stated that the rule should completely preempt all State laws 
to provide greater consistency and clarity and to lower compliance 
costs,\367\ particularly when State laws provide greater 
protections.\368\ However, if a business subject to both the rule and a 
State law that imposes greater protections does not want to use 
different practices for that State versus the rest of the country, it 
can choose to comply with both by using a single set of practices 
consistent with the greater protections afforded under the applicable 
State law. Nothing in the rule prohibits businesses from giving 
consumers greater protections than the rule requires. Another commenter 
expressed concern that some State laws create loopholes that allow 
businesses to mischaracterize fees as government charges that they then 
can exclude from total price.\369\ The Commission discusses issues 
related to the rule's treatment of government charges in section 
III.A.5 and notes here that final Sec.  464.3 would prohibit 
misrepresenting that a fee is a Government Charge, or otherwise 
misrepresenting the nature, purpose, amount, or refundability of any 
fee or charge.
---------------------------------------------------------------------------

    \366\ See, e.g., FTC-2023-0064-3150 (Attorney General of the 
State of California commented that consumer protection is also a 
state concern, so, ``it is appropriate, then, that the rule does not 
preempt a state law unless the rule and the state law conflict and 
then only to the extent of the inconsistency.''); FTC-2023-0064-3215 
(Attorneys General of the States of North Carolina and Pennsylvania, 
along with Attorneys General of the States or Territories of 
Arizona, Colorado, Connecticut, Delaware, District of Columbia, 
Hawaii, Illinois, Maine, Michigan, Minnesota, New Jersey, New York, 
Oklahoma, Oregon, Vermont, Washington, and Wisconsin, supported the 
rule's preemption provision because it ``recognizes and preserves 
the interest that individual states have in combatting unfair or 
deceptive acts or practices committed in our respective 
jurisdictions.''); FTC-2023-0064-3275 (Berkeley Center for Consumer 
Law and Economic Justice et al. commented that the rule is ``an 
invaluable complement to state and private actions to challenge 
hidden and deceptive pricing practices.''); FTC-2023-0064-3293 
(Travel Technology Association); FTC-2023-0064-3262 (Skyscanner); 
FTC-2023-0064-3266 (StubHub, Inc.); FTC-2023-0064-3212 (TickPick, 
LLC); FTC-2023-0064-3267 (National Retail Federation).
    \367\ See, e.g., FTC-2023-0064-2886 (American Gaming 
Association); FTC-2023-0064-3094 (American Hotel & Lodging 
Association); FTC-2023-0064-3122 (Vivid Seats); FTC-2023-0064-3204 
(Expedia Group); FTC-2023-0064-3137 (Chamber of Progress); FTC-2023-
0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3233 (NCTA--The 
Internet & Television Association); FTC-2023-0064-3238 (Gibson, Dunn 
& Crutcher LLP); FTC-2023-0064-2856 (National Football League).
    \368\ See, e.g., FTC-2023-0064-3127 (U.S. Chamber of Commerce); 
FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \369\ FTC-2023-0064-3137 (Chamber of Progress).
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    Other commenters suggested that the Commission provide compliance 
guidance that addresses when State law differs from the rule and 
identify which State laws are not preempted.\370\ Some commenters 
suggested that existing State and local industry regulations can make 
the rule unnecessary, duplicative, and confusing due to conflicting 
requirements.\371\ The Commission reiterates that a State law is 
preempted only to the extent it conflicts with the rule's requirements 
and complying with both is impossible, or it is an obstacle to 
achieving the full purposes and objectives of the rule. A State law can 
provide greater protections and, solely for that reason, will not be 
inconsistent with the rule; a business can comply with both. A business 
also can comply with both when the State law provides lesser 
protections, although businesses still would have to comply with the 
greater protections of the rule. Only if a State law provides 
conflicting requirements, and a business cannot comply with both, or it 
is an obstacle to achieving the full purposes and objectives of the 
rule, will the State law be preempted, and then only to the extent of 
that conflict or obstacle.
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    \370\ See, e.g., FTC-2023-0064-3244 (Vacation Rental Management 
Association); FTC-2023-0064-3206 (Motor Vehicle Protection Products 
Association et al.); FTC-2023-0064-3143 (ACA Connects--America's 
Communications Association).
    \371\ See, e.g., FTC-2023-0064-3152 (Building Owners & Managers 
Association et al.); FTC-2023-0064-3133 (National Multifamily 
Housing Council and the National Apartment Association); FTC-2023-
0064-3115 (National Association of Residential Property Managers); 
FTC-2023-0064-3116 (Manufactured Housing Institute); FTC-2023-0064-
3172 (New Jersey Apartment Association); FTC-2023-0064-3289 (Zillow 
Group).
---------------------------------------------------------------------------

    Moreover, preemption furthers a primary goal of the final rule, 
discussed in section V.A: to provide a uniform, minimum standard for 
pricing disclosures for covered goods or services that is easy for 
businesses and consumers to understand. The Commission also determines, 
as discussed in section V.B, that declining to issue this final rule 
and continuing to rely solely on State laws and piecemeal adjudication 
would be less effective. The Commission believes the final rule's 
establishment of nationwide minimum standard will functionally reduce 
many variations among State laws,\372\ because businesses will have to 
conform their practices to meet the rule's standards for covered goods 
or services to the extent those standards exceed or directly conflict 
with State law requirements. Moreover, to the extent State law is not 
inconsistent with the final rule, additional State authority and 
resources will only serve to further protect consumers and competition. 
To that end, the Commission will continue to work with its State law 
enforcement partners in battling unfair and deceptive pricing 
disclosure practices.\373\ For the reasons stated herein, the 
Commission adopts Sec.  464.4 as proposed.
---------------------------------------------------------------------------

    \372\ The Commission has made similar findings in previous 
regulations. See, e.g., Final rule: Non-Compete Clause Rule, 89 FR 
38342, 38453-54 (May 7, 2024) (finding that the Non-Complete Clause 
Rule sets a Federal floor that will reduce the variations in a 
patchwork of State regulations); Promulgation of Trade Regulation 
Rule and Statement of Its Basis and Purpose: Cooling-Off Period for 
Door-to-Door Sales, 37 FR 22934, 22958 (Oct. 26, 1972) (finding 
that, when State laws ``give the consumer greater benefit and 
protection . . ., there seems to be no reason to deprive the 
affected consumers of these additional benefits,'' but when State 
laws do not, ``the rule would supply the needed protection or be 
construed to supersede the weak statute to the extent necessary to 
give the consumer the desired protection.'').
    \373\ See, e.g., Final Trade Regulation Rule: Trade Regulation 
Rule; Funeral Industry Practices, 47 FR 42260, 42287 (Sept. 24, 
1982) (codified at 16 CFR part 453) (noting the purpose of the 
rule's provision addressing relation of the rule to State law is 
``to encourage federal-state cooperation by permitting appropriate 
state agencies to enforce their own state laws that are equal to or 
more stringent than the trade regulation rule'').
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E. Sec.  464.5 Severability

    The Commission includes a severability clause at final Sec.  464.5, 
which provides that, if any provision of the final rule is held to be 
invalid or unenforceable either by its terms, or as applied to any 
person, industry, or circumstance, or stayed pending further agency 
action, the provision shall be construed to continue to give the 
maximum effect to the provision permitted by law. It further provides 
that any such invalidity shall not affect the application of the 
provision to other persons, industries, or circumstances, or the 
validity or application of other provisions. Final Sec.  464.5 also 
states that, if any provision or application of the final rule is held 
to be invalid or unenforceable, the provision or application shall be 
severable from the final rule and shall not affect the remainder 
thereof. This provision confirms the Commission's intent, as discussed 
herein, that the final rule be given the maximum effect permitted by 
law even if a reviewing court stays or invalidates any provision, any 
component of any provision, or any application of the rule, in whole or 
in part, to any person, industry, or circumstance.
    In issuing this final rule, as discussed in section II.A and II.B, 
the Commission finds bait-and-switch pricing tactics and misleading fee 
practices to be unfair and deceptive because they deceive consumers 
about the true cost of goods and services, prevent price comparison, 
and harm competitors that do accurately disclose true cost. The 
Commission also finds such practices to be widespread and to affect 
many types of consumer purchasing transactions, particularly with 
respect to covered goods or services. The Commission adopts this rule 
to comprehensively address the practices and to provide a consistent, 
administrable standard with respect to covered goods or services. The 
Commission finds in section V.E that, for covered goods or services, 
the benefits of the rule exceed its costs.
    At the same time, the Commission finds that each of the provisions,

[[Page 2107]]

components of the provisions, and applications of the final rule 
operate independently, and that the evidence and findings supporting 
each stand independent of one another. The Commission finds that 
realizing the benefits of the rule does not require the joint adoption 
or operation of each provision. In addition, while the Commission 
believes applying the same restrictions to all pricing representations 
would provide even greater overall benefits, as explained in Parts II.B 
and V.B, the Commission finds the benefits of the final rule exceed the 
costs as to covered goods or services, both overall and with respect to 
each substantive provision of the rule. For covered goods or services, 
as discussed in section V.E, ample data show the rule would have 
positive quantified net benefits, including by reducing search costs, 
as well as unquantified reductions in deadweight loss and consumer 
frustration. Similarly, consumers would benefit from the misleading 
fees prohibition even if the requirement to disclose total price were 
stayed or invalidated. The benefits would also justify the costs if the 
total price provision were further limited to either just the live-
event ticketing or just the short-term lodging industry.
    Based on the available data, the Commission concludes that, even if 
the rule were more limited in scope or if it applied to a more limited 
set of transactions, such as to a single industry or to particular 
circumstances, it would still achieve some of the Commission's 
objectives and the benefits of the rule would still exceed the costs. 
Although a more limited scope or application would change the magnitude 
of the overall benefit of the final rule, it would not undermine the 
valid and measurable benefit of, and justification for, the remaining 
provisions or applications of the final rule. Thus, were a court to 
stay or invalidate any provision, any component of any provision, or 
any application of the rule, the Commission intends the remainder of 
the rule to remain in force.
    As described in section V.B, the Commission considered alternatives 
to the final rule that would have applied the rule to other 
transactions or industries or expanded it to all goods and services 
within the Commission's jurisdiction. The Commission finds that each 
such alternative would be an appropriate exercise of the Commission's 
authority under sections 5 and 18 of the FTC Act as stand-alone 
regulations because disclosure of total price in any type of 
transaction or industry--whether or not the same is required in other 
transactions or industries--mitigates the harms caused by the unfair or 
deceptive pricing tactics in those transactions or industries to which 
the rule does apply. At the same time, as discussed in parts I and 
II.A, the Commission finds bait-and-switch pricing tactics and 
misleading fee practices are widespread and potentially growing. As a 
result, the Commission may later find that a rule of expanded or even 
general applicability, to the extent of its jurisdiction, would be 
appropriate and would result in benefits to consumers and competition 
that are greater in magnitude than a rule with more limited 
applicability. However, such findings do not invalidate this final 
rule's quantifiable positive benefits, in whole or in part.
    Accordingly, the Commission considers and intends each of the 
provisions adopted in the final rule to be severable, within each 
provision, from other provisions in Part 464, and as applied to 
different persons, industries, or circumstances. In the event of a stay 
or invalidation of any provision, any component of any provision, or of 
any provision as it applies to certain persons, conduct, or industry, 
the Commission's intent is to otherwise preserve and enforce the final 
rule to the fullest possible extent. Therefore, if a reviewing court 
were to stay or invalidate a particular application of the final rule, 
or a provision thereof, as to certain persons, industries, or 
circumstances, other businesses that remain covered by the rule should 
be required to comply with the applicable provisions of the final rule 
that remain in effect.

IV. Challenges to the FTC's Legal Authority To Promulgate the Rule

    As explained in the NPRM and section II, this rule is consistent 
with decades of FTC adjudications and enforcement actions addressing 
the standards governing unfair or deceptive pricing practices.\374\ The 
Commission issues this rule to prevent prevalent unfair or deceptive 
acts or practices and to promote compliance in a manner that accounts 
for and balances the needs of consumers and regulated entities. The 
rule falls squarely within the Commission's legal authority, is based 
on substantial evidence in the rulemaking record, and clearly defines 
specific unfair and deceptive practices regarding fees or charges.
---------------------------------------------------------------------------

    \374\ See, e.g., In re Filderman Corp., 64 F.T.C. 427, 442-43, 
461 (1964), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-64/ftcd-vol64january-march1964pages409-511.pdf; In re Resort Car Rental Sys., Inc., 83 
F.T.C. 234, 281-82, 300 (1973), https://www.ftc.gov/system/files/ftc_gov/pdf/Resort%20Car%20Rental%20System%2C%20Inc.%2083%20FTC%20234%20%281973%29.pdf, aff'd sub. nom. Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 
962, 964 (9th Cir. 1975); Opinion of the Commission at 28-30, 47-50, 
In re Intuit Inc., No. 9408 (FTC Jan. 22, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/d09408_commission_opinion_redacted_public.pdf; In re George's Radio 
& Television Co., 60 F.T.C. 179, 193-94 (1962), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-60/ftcd-vol60january-june1962pages107-211.pdf (collecting cases 
involving false savings claims); cases cited supra notes 61-62 
(collecting FTC enforcement actions alleging, respectively, that 
bait-and-switch pricing tactics concerning hidden fees and 
misrepresentations regarding the nature and purpose of fees violated 
section 5); NPRM, 88 FR 77435-37 (section III.C (``Law Enforcement 
Actions and Other Responses'')). See also supra note 115 (collecting 
cases holding that later disclosures cannot cure deceptive door 
openers).
---------------------------------------------------------------------------

    The Commission received comments supporting, discussing, or 
questioning its authority to promulgate the final rule. Commenters 
supporting the Commission's authority noted the rule falls squarely 
within the Commission's mandate to prevent unfair and deceptive acts 
and practices through rulemaking under sections 5 and 18 of the FTC 
Act.\375\ Commenters questioning the Commission's rulemaking authority 
typically advanced one of three arguments. First, some commenters 
argued that requiring disclosures related to pricing is a major 
question that Congress has not given the Commission authority to 
address.\376\ Second, some commenters argued that if the rule was in 
fact consistent with the Commission's authority under sections 5 and 18 
of the FTC Act, Congress had impermissibly delegated this authority to 
the Commission.\377\ Third, some commenters argued that the disclosures 
required by the rule violate the First Amendment.\378\ In addition to 
these arguments, one commenter asserted that the rule is invalid 
because the

[[Page 2108]]

Commission is unconstitutionally structured.\379\ Finally, some 
commenters asserted the Commission has not complied with the 
Administrative Procedure Act (``APA'').\380\
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    \375\ See, e.g., FTC-2023-0064-2883 (District of Columbia, 
Office of the People's Counsel); FTC-2023-0064-3104 (Truth in 
Advertising, Inc.); see also FTC-2022-0069-6077 (ANPR) (Institute 
for Policy Integrity, New York University School of Law).
    \376\ FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-
0064-3133 (National Multifamily Housing Council and National 
Apartment Association); FTC-2023-0064-3152 (Building Owners & 
Managers Association et al.); FTC-2023-0064-3202 (TechNet); FTC-
2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-2023-0064-3251 
(National RV Dealers Association); FTC-2023-0064-3263 (Flex 
Association); FTC-2023-0064-3294 (International Franchise 
Association).
    \377\ FTC-2023-0064-3233 (NCTA--The internet & Television 
Association); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3294 (International Franchise Association).
    \378\ FTC-2023-0064-3016 (National Federation of Independent 
Business, Inc.); FTC-2023-0064-3028 (Competitive Enterprise 
Institute); FTC-2023-0064-3233 (NCTA--The internet & Television 
Association); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3267 (National Retail Federation).
    \379\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \380\ See, e.g., id.; FTC-2023-0064-3133 (National Multifamily 
Housing Council and National Apartment Association); FTC-2023-0064-
3152 (Building Owners & Managers Association et al.); FTC-2023-0064-
3263 (Flex Association); FTC-2023-0064-3294 (International Franchise 
Association).
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    Most of the commenters challenging the Commission's authority 
represent businesses that offer goods or services other than covered 
goods or services. Thus, the concerns raised by these commenters may 
not be relevant to the narrowed scope of the final rule. Further, the 
NPRM's industry-neutral approach was central to nearly all of the 
critiques of the rule that raised questions regarding the Commission's 
authority to promulgate the rule; while the Commission disagrees with 
such critiques, they are not applicable to this final rule, which 
focuses on two industries, live-event tickets and short-term lodging. 
Notably, the vast majority of comments from businesses offering live-
event tickets and short-term lodging and their direct representatives 
did not raise challenges to the Commission's authority to promulgate 
the rule.\381\ Nevertheless, the Commission has considered the comments 
challenging its authority and explains in this section why it disagrees 
with those.
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    \381\ The International Franchise Association, which represents 
franchised businesses offering short-term lodging, raised challenges 
to the Commission's authority to promulgate the rule. IFA's comment, 
however, primarily focused on the NPRM's industry-neutral scope and 
its implications for franchised businesses that do not offer Covered 
Goods or Services. Regarding the short-term lodging industry 
specifically, IFA's comment challenged certain aspects of the 
Commission's estimate of compliance costs, which are addressed in 
section V. See FTC-2023-0064-3294 (International Franchise 
Association).
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A. Major Questions Doctrine

    Some commenters invoked the major questions doctrine to argue that 
the Commission lacks authority to adopt the rule. Commenters argued the 
rule raises a major question because addressing consumer fees and 
pricing across industries is of vast political and economic 
significance.\382\ Some commenters also argued that the rule is broader 
than the agency's prior rules, based on the assertion that the rule 
regulates pricing.\383\ Commenters concluded that Congress has not 
authorized the Commission to promulgate the rule.\384\
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    \382\ See, e.g., FTC-2023-0064-3263 (Flex Association); FTC-
2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3152 
(Building Owners & Managers Association et al.); FTC-2023-0064-3202 
(TechNet); FTC-2023-0064-3133 (National Multifamily Housing Council 
and National Apartment Association); FTC-2023-0064-3238 (Gibson, 
Dunn & Crutcher LLP). While commenters suggested that the rule would 
have ``political and economic significance,'' no commenters pointed 
to any specific political significance.
    \383\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3127 (U.S. Chamber of Commerce).
    \384\ FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-
0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-2023-0064-3152 
(Building Owners & Managers Association et al.); FTC-2023-0064-3202 
(TechNet); FTC-2023-0064-3133 (National Multifamily Housing Council 
and National Apartment Association).
---------------------------------------------------------------------------

    The major questions doctrine, as the Supreme Court recently 
explained in West Virginia v. EPA, 597 U.S. 697 (2022), applies to `` 
`extraordinary cases' . . . in which the `history and the breadth of 
the authority that [the agency] has asserted,' and the `economic and 
political significance' of that assertion, provide a `reason to 
hesitate before concluding that Congress' meant to confer such 
authority.'' \385\ When an agency claims a `` `transformative expansion 
in [its] regulatory authority,' '' it ``must point to `clear 
congressional authorization' for the power it claims.'' \386\
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    \385\ West Virginia v. EPA, 597 U.S. at 721 (quoting FDA v. 
Brown & Williamson Tobacco Corp., 529 U.S. 120, 159-60 (2000)).
    \386\ Id. at 723-24 (quoting Util. Air Regulatory Group v. EPA, 
573 U.S. 302, 324 (2014).
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    Having considered the factors that the Supreme Court has used to 
identify major questions, the Commission, as discussed herein, 
concludes that the final rule does not implicate the major questions 
doctrine. The FTC does not claim a transformative change in its 
rulemaking authority. The final rule comports with the history and 
breadth of prior rules that the FTC has promulgated pursuant to its 
existing rulemaking authority, which Congress conferred to allow the 
Commission to address prevalent unfair or deceptive practices. Even if 
the major questions doctrine did apply, the Commission concludes that 
Congress provided clear authorization for the Commission to promulgate 
this rule.
1. The Rule Does Not Address a Major Question
(a) The Commission Has a Long History of Addressing Unfair or Deceptive 
Acts or Practices Related to Pricing Information
    Identifying unfair or deceptive acts or practices related to the 
disclosure of the price and purpose of goods and services is at the 
core of the Commission's mandate under section 5.\387\ The Commission 
has the authority to address these unfair or deceptive acts or 
practices both through case-by-case enforcement, either 
administratively or in Federal court, or through rulemaking if the 
unfair or deceptive practices are prevalent as established by the 
rulemaking record. The Commission may choose case-by-case adjudication 
or rulemaking at its discretion.\388\
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    \387\ See generally supra section II.B; NPRM, 88 FR 77432, 
77434.
    \388\ Cf. NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974) 
(holding that ``the Board is not precluded from announcing new 
principles in an adjudicative proceeding,'' that ``the choice 
between rulemaking and adjudication lies in the first instance 
within the Board's discretion,'' and that the agency's choice 
between adjudication and rulemaking was ``entitled to great 
weight''); SEC v. Chenery Corp., 332 U.S. 194, 203 (1947) (``[T]he 
choice made between proceeding by general rule or by individual, ad 
hoc litigation is one that lies primarily in the informed discretion 
of the administrative agency.'').
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    The Commission's authority to promulgate rules to define with 
specificity unfair or deceptive acts or practices under section 18 of 
the FTC Act, 15 U.S.C. 57a, is not extraordinary and is undisputed, 
resting on firm historical footing.\389\ Indeed, when consumers have 
faced bait-and-switch tactics in the past, including being unable to 
get accurate material information about what they must pay and what 
they will receive in return, the Commission has repeatedly issued rules 
that define unfair or deceptive acts or practices related to the 
disclosure of that material information.\390\ For example,

[[Page 2109]]

the Commission initiated the rulemaking resulting in the Rule on Retail 
Food Store Advertising and Marketing Practices (the ``Unavailability 
Rule''), 16 CFR part 424, based in part on findings in a Commission 
report that items priced at or below the advertised price were 
frequently unavailable and that in ``a very substantial majority of the 
instances of the deviations, the prices marked on the items were higher 
than the advertised price.'' \391\
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    \389\ Congress added section 18, 15 U.S.C. 57a, to the FTC Act 
in 1975, and that section provides the process the Commission must 
follow to promulgate rules defining unfair or deceptive acts or 
practices. See Magnuson-Moss Warranty--Federal Trade Commission 
Improvement Act, Public Law 93-637, sec. 202, Sec.  18, 88 Stat. 
2183, 2193 (1975) (hereinafter ``Magnuson-Moss Warranty Act''); see 
also Am. Fin. Servs. Ass'n v. FTC, 767 F.2d 957, 967 (D.C. Cir. 
1985) (summarizing the historical backdrop to the Commission's 
authority to prevent unfair or deceptive acts or practices including 
the adoption of the Magnuson-Moss Warranty Act, which codified 
section 18 of the FTC Act and confirmed the Commission's authority 
to promulgate rules defining acts or practices that are unfair or 
deceptive).
    \390\ See, e.g., Franchise Rule, 16 CFR 436.2(a), 436.5(e) and 
(f) (defining as an unfair or deceptive act or practice to fail to 
provide prospective franchisees with the franchisor's disclosure 
document, which includes, among other things, disclosure of 
``initial fees''--i.e., ``all fees and payments, or commitments to 
pay . . . whether payable in lump sum or installments'' and of ``all 
other fees that the franchisee must pay to the franchisor or its 
affiliates''); Business Opportunity Rule, 16 CFR 437.4(d) (defining 
as an unfair or deceptive act or practice to ``[f]ail to notify any 
prospective purchaser in writing of any material changes affecting 
the relevance or reliability of the information contained in an 
earnings claim statement before the prospective purchaser . . . 
makes a payment''); Business Opportunity Rule, 16 CFR 437.6(h) 
(defining as an unfair or deceptive act or practice to 
``[m]ispresent the cost . . . of the business opportunity or the 
goods or services offered to a prospective purchaser''); Funeral 
Rule, 16 CFR 453.2(a) and (b) (defining as an unfair or deceptive 
act or practice to ``fail to furnish accurate price information 
disclosing the cost to the purchaser for each of the specific 
funeral goods and funeral services used in connection with the 
disposition of deceased human bodies'' and requiring funeral 
providers to provide specific price lists in writing).
    \391\ Statement of Basis and Purpose: Retail Food Store 
Advertising and Marketing Practices, 36 FR 8777, 8777-78 (May 13, 
1971) (citing a Bureau of Economics staff report titled ``Economic 
Report on Food Chain Selling Practices in the District of Columbia 
and San Francisco''). Similarly, when the Commission later amended 
the Unavailability Rule, it again stressed that food retailers must 
not engage in bait and switch advertising--where the seller 
advertises an unavailable good at a low price to get the consumer in 
the door--or deception regarding availability of advertised goods. 
Final amendments to trade regulation rule: Amendment to Trade 
Regulation Rule Concerning Retail Food Store Advertising and 
Marketing Practices, 54 FR 35456, 35462-63 (Aug. 28, 1989).
---------------------------------------------------------------------------

    As discussed in parts I and II, there is nothing new about 
businesses using bait-and-switch tactics to reel in and deceive 
consumers, just as there is nothing new about the Commission exercising 
its authority to limit such tactics and the harms they cause.\392\ This 
rule is tailored to address practices squarely within the scope of the 
Commission's core work to protect consumers: bait-and-switch pricing 
tactics, including drip pricing, and misrepresentations regarding a 
material term. As described in section II.A and II.B, the Commission 
adopts this rule now because bait-and-switch tactics, including drip 
pricing, and misrepresentations as to the nature and purpose of fees 
and charges are prevalent and continue to harm consumers. This is 
precisely what section 18 of the FTC Act envisions and is consistent 
with the Commission's exercise of the same authority in the past.
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    \392\ E.g., In re Filderman Corp., 64 F.T.C. 427, 442-43, 461 
(1964); Resort Car Rental Sys., 83 F.T.C. at 281-82, 300 (1973); 
Complaint ]] 12, 46-49, In re LCA-Vision, No. C-4789 (FTC Mar. 13, 
2023); Opinion of the Commission at 37-40, 47-50, In re Intuit Inc., 
No. 9408 (FTC Jan. 22, 2024). See generally supra section I.A.-I.C 
(discussing the comment and hearing record in response to the ANPR 
and NPRM); section II.A (discussing the prevalence of the practices 
that the rule addresses).
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(b) Commenters' Claims About the Scope of the Acts or Practices Covered 
by the Rule Are Inapplicable or Overstated
    Commenters suggested that the major questions doctrine is 
implicated simply because the rule proposed by the NPRM was industry-
neutral.\393\ The Commission disagrees. Congress authorized the 
Commission to prevent unfair or deceptive practices in or affecting 
commerce across the economy while specifying a limited number of 
industries, activities, or entities that are exempt.\394\ These 
comments are inapposite, however, because the final rule is limited to 
covered goods or services: live-event ticketing and short-term lodging.
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    \393\ See, e.g., FTC-2023-0064-3263 (Flex Association); FTC-
2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3152 
(Building Owners & Managers Association et al.); FTC-2023-0064-3202 
(TechNet); FTC-2023-0064-3133 (National Multifamily Housing Council 
and National Apartment Association).
    \394\ 15 U.S.C. 45.
---------------------------------------------------------------------------

    Commenters also contended that the rule implicates a major question 
because it regulates pricing practices broadly or supposedly will have 
effects on a wide array of pricing strategies.\395\ The Commission 
disagrees. The rule focuses on hidden mandatory fees or charges that 
obscure the total price of a covered good or service and 
misrepresentations about the nature, purpose, amount, and refundability 
of fees or charges. The rule has no effect on many pricing practices 
and strategies, including a business's fundamental decision about what 
price to charge consumers for its goods or services.\396\ Nor does the 
rule affect a business's ability to use dynamic pricing, to offer or 
use sales, discounts, rebates, or special offers, or to truthfully 
itemize fees and costs so long as the business accurately describes the 
total price upfront.\397\ With respect to mandatory fees, the rule does 
not prevent businesses from continuing to charge such fees as a pricing 
strategy, itemizing them in addition to stating the total price, or 
from providing non-misleading information about those fees. Indeed, a 
number of commenters have misunderstood the rule to act as a 
prohibition or limitation on itemization; as explained in section III, 
truthful itemization is not prohibited.
---------------------------------------------------------------------------

    \395\ Commenters did not argue or provide substantive support 
for any argument that a major question was raised by proposed Sec.  
464.3(a), which would have prohibited any Business from 
misrepresenting the nature and purpose of any amount a consumer may 
pay, including its refundability and the identity of any good or 
service for which it is charged. The Commission is finalizing Sec.  
464.3 more narrowly to prohibit any Business, in any offer, display, 
or advertisement for a Covered Good or Service, from misrepresenting 
any fee or charge, including its nature, purpose, amount, or 
refundability, and the identity of the good or service for which it 
is imposed.
    \396\ See supra section I (``The discretion to set prices 
remains squarely with businesses; the rule simply requires that they 
tell consumers the truth about those prices.'').
    \397\ See supra section III.A.8.c (``The rule neither requires, 
nor prohibits, the itemization of mandatory fees that must be 
included in Total Price.''); section III.B.1.d-e (responding to 
comments about dynamic pricing, rebates, bundled pricing, and other 
discounts).
---------------------------------------------------------------------------

    In sum, the rule does not address a major question because it 
focuses on traditional types of unfair or deceptive acts or practices 
that have long been the subject of Commission rulemaking and 
enforcement activity and targets only those acts or practices.
2. Congress Provided the Commission With a Clear Grant of Authority To 
Promulgate This Rule
    Even if the final rule did present a major question, the FTC Act 
provides clear authorization for the rule. In cases involving major 
questions, courts expect Congress to ``speak clearly'' if it wishes to 
assign the disputed power.\398\ In the FTC Act, Congress vested the 
Commission with enforcement powers and the authority to promulgate 
rules to carry out the Commission's mandate to prevent unfair or 
deceptive acts or practices.\399\ Rather than trying to define all 
unfair or deceptive acts and practices, Congress empowered the 
Commission to respond to changing market conditions and to identify 
conduct that is unfair or deceptive.\400\
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    \398\ West Virginia v. EPA, 597 U.S. at 716, 723 (quoting Util. 
Air, 573 U.S. at 324).
    \399\ 15 U.S.C. 45, 57a.
    \400\ See S. Rep. No. 75-221, at 2 (1937) (report on Amendments 
to the Federal Trade Commission Act (S.1077), explaining Congress's 
reasoning in granting the Commission authority in 1914 to define 
specific unfair methods of competition, and then applying the same 
reasoning to the proposed grant of authority to prohibit unfair or 
deceptive acts or practices: ``The committee gave careful 
consideration to the question as to whether it would attempt to 
define the many and variable unfair practices . . . or whether it 
would by a general declaration . . . condemn[ ] unfair practices, 
leav[ing] it to the Commission to determine what practices were 
unfair.'' The Committee ``concluded that the latter course would be 
the better, for the reason . . . that there were too many unfair 
practices to define, and after writing 20 of them into the law it 
would be quite possible to invent others.''); see also H.R. Rep. No. 
93-1606, at H 12060 (1974) (Conf. Rep.) (report on Consumer Product 
Warranty and Federal Trade Commission Improvement Act, stating: 
``[section 18] is an important power by which the Commission can 
fairly and efficiently pursue its important statutory mission.'' 
Further, ``[b]ecause the prohibitions of section 5 of the Act are 
quite broad, trade regulation rules are needed to define with 
specificity conduct that violates the statute and to establish 
requirements to prevent unlawful conduct.'').
---------------------------------------------------------------------------

    When the Commission was created by the FTC Act in 1914, the Act 
prohibited ``unfair methods of competition'' in

[[Page 2110]]

section 5 and granted the Commission authority to promulgate rules to 
effectuate the Act's provisions in section 6(g), including the 
prohibition on unfair methods of competition.\401\ The Act did not 
expressly prohibit deception. While deception could qualify as an 
unfair method of competition, courts required the Commission to show 
harm to competition or rivals in each instance; harm to consumers alone 
was insufficient to meet the standard.\402\ In response, Congress 
amended the FTC Act in 1938 to include a prohibition, not just against 
unfair methods of competition, but against unfair or deceptive acts or 
practices as well.\403\
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    \401\ Federal Trade Commission Act, Public Law 63-203, secs. 5, 
6(g), 38 Stat. 717, 719, 722 (1914).
    \402\ FTC v. Raladam Co., 283 U.S. 643, 647-49 (1931) (``The 
paramount aim of the [FTC] act is the protection of the public from 
the evils likely to result from the destruction of competition or 
the restriction of it in a substantial degree. . . . Unfair trade 
methods are not per se unfair methods of competition.'').
    \403\ Federal Trade Commission Act Amendments of 1938 (Wheeler-
Lea Act), Public Law 75-447, sec. 3, sec. 5, 52 Stat. 111, 111 
(1938).
---------------------------------------------------------------------------

    Congress affirmed the Commission's authority to issue rules like 
the one here through amendments to the FTC Act in 1975 and 1980. First, 
in the Magnuson-Moss Warranty Act of 1975, Congress added section 18 of 
the FTC Act, 15 U.S.C. 57a, confirming the Commission's authority to 
issue rules that ``define with specificity acts or practices which are 
unfair or deceptive acts or practices,'' and requiring the Commission 
to follow specific procedures for promulgating rules.\404\ Among the 
substantially completed rules at the time were the Rule on the 
Preservation of Consumers' Claims and Defenses \405\ and the Mail Order 
Rule,\406\ which proposed to define as an unfair or deceptive act--and 
upon promulgation did so define--certain conduct that the rulemaking 
record showed was causing harm across various industries. As Congress 
added procedural requirements to the Commission's rulemaking authority 
through section 18, Congress did not limit these existing cross-
industry rules targeting unfair or deceptive acts or practices, but 
instead created an exception under which the Commission could finalize 
them without following section 18's procedural requirements.\407\
---------------------------------------------------------------------------

    \404\ Magnuson-Moss Warranty--Federal Trade Commission 
Improvement Act, Public Law 93-637, sec. 202, sec. 18, 88 Stat. 
2183, 2193 (1975) (codified at 15 U.S.C. 57a).
    \405\ Promulgation of Trade Regulation Rule and Statement of 
Basis and Purpose: Preservation of Consumers' Claims and Defenses 
(Holder Rule), 40 FR 53506 (Nov. 18, 1975).
    \406\ Promulgation of Trade Regulation Rule and Statement of 
Basis and Purpose: Mail Order Merchandise, 40 FR 51582 (Nov. 5, 
1975).
    \407\ Magnuson-Moss Warranty--Federal Trade Commission 
Improvement Act, Public Law 93-637, sec. 202, sec. 18(c)(1), 88 
Stat. 2183, 2198 (1975) (Specifically, section 18(c)(1) provided 
that ``[a]ny proposed rule under section 6(g)'' with certain 
components that were ``substantially completed before'' section 18's 
enactment ``may be promulgated in the same manner and with the same 
validity as such rule could have been promulgated had this section 
not been enacted.'').
---------------------------------------------------------------------------

    Congress again confirmed the Commission's authority to promulgate 
rules defining unfair and deceptive acts or practices in 1980 when it 
enacted section 22 of the FTC Act, 15 U.S.C. 57b-3(b), as part of the 
Federal Trade Commission Improvements Act of 1980.\408\ Section 22 
imposes certain additional procedural requirements the Commission must 
follow when it promulgates any ``rule,'' including rules promulgated 
under section 18. Section 22(b) contemplates the FTC's authority to 
promulgate rules that are substantive and economically significant by 
requiring, for example, that the Commission conduct a cost-benefit 
analysis.\409\ In addition, section 22(a) imposes the same requirements 
on amendments to existing rules if they may ``have an annual effect on 
the national economy of $100,000,000 or more,'' ``cause a substantial 
change in the cost or price of goods or services,'' or ``have a 
significant impact upon'' persons and consumers.\410\ Thus, Congress 
explicitly authorized the Commission to issue rules and amendments that 
address major economic questions, so long as the rulemaking complies 
with section 22.
---------------------------------------------------------------------------

    \408\ Federal Trade Commission Improvements Act of 1980, Public 
Law 96-252, sec. 15, sec. 22, 94 Stat. 374, 388 (1980) (codified at 
15 U.S.C. 57b-3).
    \409\ 15 U.S.C. 57b-3(b).
    \581\ 15 U.S.C. 57b-3(a).
---------------------------------------------------------------------------

    The Commission has exercised its authority to promulgate numerous 
rules and rule amendments defining unfair or deceptive acts or 
practices pursuant to sections 18 and 22.\411\ Central to many of these 
rules is a rulemaking record establishing that businesses misrepresent 
or fail to disclose certain material terms in a transaction, including 
information related to price, and that these practices are unfair or 
deceptive.\412\ Unlike in West Virginia v. EPA, courts have upheld 
Commission rules similar to the one here--that prohibit 
misrepresentations, define unfair or deceptive conduct, and require 
specific disclosures to avoid deception--against a myriad of legal 
challenges.\413\
---------------------------------------------------------------------------

    \411\ See, e.g., Franchise Rule, 16 CFR part 436; Business 
Opportunity Rule, 16 CFR part 437; Funeral Rule, 16 CFR part 453; 
Negative Option Rule, 16 CFR part 425; Cooling Off Rule, 16 CFR part 
429; see also discussion supra section IV.1.a.
    \412\ See, e.g., 16 CFR 437.6(d), (h), (i) (The Business 
Opportunity Rule provides that it is an ``unfair or deceptive act or 
practice'' to misrepresent, among other information, ``the amount of 
sales, or gross or net income or profits a prospective purchaser may 
earn''; ``the cost, or the performance, efficacy, nature, or central 
characteristics of the business opportunity or the goods or services 
offered''; or ``any material aspect of any assistance offered to a 
prospective purchaser''); 16 CFR 436.9(a) and (c) (The Franchise 
Rule provides that it is an ``unfair or deceptive act or practice'' 
to ``[m]ake any claim or representation . . . that contradicts'' the 
required disclosures, which include certain pricing information and 
fees, or to ``[d]isseminate any financial performance 
representations to prospective franchisees unless the franchisor has 
a reasonable basis and written substantiation for the 
representation[.]'').
    \413\ See, e.g., Harry & Bryant Co. v. FTC, 726 F.2d 993, 999-
1001 (4th Cir. 1984) (holding that petitioners challenging Funeral 
Rule were not denied procedural due process, and that the rule was 
within the Commission's statutory authority and supported by 
substantial evidence); Am. Fin. Servs. Ass'n v. FTC, 767 F.2d 957, 
983-88, 991 (D.C. Cir. 1985) (holding that the FTC did not exceed 
its authority when promulgating the Trade Regulation Rule on Credit 
Practices under sections 5 and 18 of the FTC Act, and that the rule 
was supported by substantial evidence and not arbitrary, capricious, 
or an abuse of discretion); Consumers Union of U.S., Inc. v. FTC, 
801 F.2d 417, 422, 426 (D.C. Cir. 1986) (denying petition for review 
of FTC Used Car Rule and holding that Commission's decision to omit 
a proposed disclosure requirement from the rule had evidentiary 
support under both the FTC's substantial evidence test and the APA's 
arbitrary and capricious test, which are one and the same as to the 
requisite degree of evidence); Pa. Funeral Dirs. Ass'n v. FTC, 41 
F.3d 81, 92 (3d Cir. 1994) (denying petition for review of Funeral 
Rule and finding that Commission decision to regulate casket 
handling fees was not arbitrary or capricious and was supported by 
substantial evidence).
---------------------------------------------------------------------------

    In sum, this is a far cry from a situation where Congress 
``conspicuously and repeatedly'' declined to grant the agency the 
claimed power.\414\ Quite the opposite--Congress has conspicuously and 
repeatedly confirmed that promulgating a rule like this final rule is 
precisely how Congress expects the Commission to use its rulemaking 
authority. For these reasons, even if the final rule involves a major 
question, Congress has clearly delegated to the Commission the 
authority to address that question.
---------------------------------------------------------------------------

    \414\ West Virginia v. EPA, 597 U.S. at 724.
---------------------------------------------------------------------------

B. Non-Delegation Doctrine

    One commenter contended that the Commission's issuance of the rule 
violates the non-delegation doctrine.\415\ The commenter argued that, 
given the rule's breadth, section 5 lacks an intelligible principle if 
it authorizes the Commission to promulgate the rule. The commenter 
asserted that the rule regulates pricing economy-wide and that Congress 
has not made ``the necessary fundamental policy-decision'' underlying 
the rule. The commenter

[[Page 2111]]

also asserted that the Commission's authority to promulgate the rule is 
an unconstitutional delegation under a ``history and tradition test,'' 
citing to a dissenting opinion in Gundy v. United States, 588 U.S. 128 
(2019).\416\ The Commission disagrees. The Commission notes that this 
commenter's argument that the proposed rule violated the non-delegation 
doctrine was predicated on its assertion that the proposed rule 
regulated ``the disclosing and collecting [of] consumer fees for all 
businesses.'' \417\ Since the focus of the final rule is narrowed to 
covered goods or services, the comment may not be relevant to the final 
rule. Nevertheless, the Commission addresses the arguments herein.
---------------------------------------------------------------------------

    \415\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \416\ Id. (citing Gundy, 588 U.S. at 159 (Gorsuch, J., 
dissenting, joined by Roberts, C.J. and Thomas, J.)).
    \417\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------

    ``Only twice in this country's history has the Court found a 
delegation excessive, in each case because `Congress had failed to 
articulate any policy or standard' to confine discretion.'' \418\ 
Article I of the Constitution vests the Federal government's 
legislative powers in Congress, and Congress may not delegate those 
powers to an executive agency absent an intelligible principle to guide 
the exercise of discretion.\419\ The ``intelligible principle'' 
standard is ``not demanding.'' \420\ This is because of the practical 
understanding that `` `in our increasingly complex society, replete 
with ever changing and more technical problems,' . . . `Congress simply 
cannot do its job absent an ability to delegate power under broad 
general directives.' '' \421\ For that reason, the Supreme Court has 
repeatedly held that ``a statutory delegation is constitutional as long 
as Congress `lay[s] down by legislative act an intelligible principle 
to which the person or body authorized to [exercise the delegated 
authority] is directed to conform.' '' \422\
---------------------------------------------------------------------------

    \418\ Gundy, 588 U.S. at 130 (plurality op.) (quoting Mistretta 
v. United States, 488 U.S. 361, 373 n.3 (1989)).
    \419\ U.S. Const. art. I, sec. 1; see also, e.g., Mistretta, 488 
U.S. at 372.
    \420\ Gundy, 588 U.S. at 146.
    \421\ Id. at 135 (quoting Mistretta, 488 U.S. at 372).
    \422\ Id. (quoting J.W. Hampton, Jr., & Co. v. United States, 
276 U.S. 394, 409 (1928)) (brackets in original).
---------------------------------------------------------------------------

    As described throughout section IV.A, Congress, the Commission, and 
the courts have long understood the Commission's mandate to prevent 
both unfair and deceptive acts or practices as providing intelligible 
principles to guide the exercise of the Commission's discretion. In 
A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935), 
the Court observed that conduct that fell within the ambit of section 5 
of the FTC Act was ``to be determined in particular instances, upon 
evidence, in the light of particular competitive conditions and of what 
is found to be a specific and substantial public interest.'' \423\ The 
Court ultimately concluded that Congress properly delegated authority 
to the FTC under the FTC Act based, among other things, on the subject 
matter and procedural requirements Congress placed on the Commission--
which involves ``notice and hearing,'' ``appropriate findings of fact 
supported by adequate evidence,'' and ``judicial review.'' \424\
---------------------------------------------------------------------------

    \423\ A.L.A. Schechter, 295 U.S. at 532-33. In so holding, the 
Supreme Court in A.L.A. Schechter referred to cases in which both 
unfair and deceptive practices were determined to be unfair methods 
of competition. 295 U.S. at 532-33 (citing FTC v. R.F. Keppel, 291 
U.S. 304 (1934) and FTC v. Algoma Lumber Co., 291 U.S. 67 (1934)). 
Congress later clarified in the Wheeler-Lea Act of 1938 that unfair 
and deceptive practices are unlawful under the FTC Act independent 
of any effect they may have on competition. 52 Stat. 111. 
Accordingly, the A.L.A. Schechter Court's conclusion that Congress's 
grant of authority to the Commission is guided by intelligible 
principles applies equally to the Commission's authority to identify 
unfair or deceptive acts or practices and to the Commission's 
authority to identify unfair methods of competition.
    \424\ A.L.A. Schechter, 295 U.S. at 533-36.
---------------------------------------------------------------------------

    FTC rulemaking under section 18 features similar procedural 
safeguards to FTC adjudication and thus comports with the nondelegation 
doctrine for the same reasons. For example, section 18's rulemaking 
process requires the Commission to: (1) notify Congress; (2) publish 
multiple public notices of the proposed rulemaking; (3) provide all 
interested persons the opportunity to ``submi[t] . . . written data, 
views, or arguments''; (4) consider all submissions; (5) provide the 
opportunity for an informal hearing; (6) determine, based on all 
available information, that the unfair or deceptive acts or practices 
are prevalent; and (7) determine, based on the rulemaking record, that 
the final rule is appropriate. In addition, once the rule is finalized, 
it is subject to judicial review in a court of appeals.\425\ The 
rulemaking process thus ``may actually be fairer to regulated parties 
than total reliance on case-by-case adjudication'' because the process 
allows all interested parties the opportunity to weigh in by submitting 
data, views, and arguments and by participating in a hearing.\426\ In 
this rulemaking, interested parties had numerous opportunities to be 
heard by the Commission, including through ninety-day public comment 
periods on both an advance notice of proposed rulemaking and a notice 
of proposed rulemaking, as well as an informal hearing. These 
procedures helped to ensure that the Commission properly applied its 
statutory mandate when adopting the rule to prevent prevalent unfair 
and deceptive practices concerning hidden and misleading fees.
---------------------------------------------------------------------------

    \425\ 15 U.S.C. 57a(b)(1)-(2). Section 18 requires both an 
advance notice of proposed rulemaking and a notice of proposed 
rulemaking to engage with and solicit comment from interested 
parties.
    \426\ Nat'l Petroleum Refiners Ass'n v. FTC, 482 F.2d 672, 681-
83 (D.C. Cir. 1973).
---------------------------------------------------------------------------

    Like the FTC's Act's procedural requirements, the subject matter 
requirements that apply to the FTC's statutory authority are well 
established. With respect to unfairness, Congress articulated in 
section 5(n) of the FTC Act the factors the Commission must apply.\427\ 
For deception, virtually all courts have adopted the three-part test 
put forward by the Commission in its Deception Policy Statement: (1) 
there is a representation, omission, or practice that (2) is likely to 
mislead consumers acting reasonably under the circumstances, and (3) 
the representation, omission, or practice is material.\428\ For 
decades, courts have reviewed and upheld the Commission's application 
of unfairness and deception authority in enforcement actions and rules. 
Moreover, the Supreme Court has recognized the ability of regulators, 
courts, and regulated entities to distinguish deceptive from 
nondeceptive claims or advertisements under section 5 of the FTC 
Act.\429\ In sum, the subject matter requirements of the FTC Act's 
statutory authority as to unfair and deceptive practices are well 
settled.
---------------------------------------------------------------------------

    \427\ 15 U.S.C. 45(n).
    \428\ Fed. Trade Comm'n, FTC Policy Statement on Deception, 103 
F.T.C. 174, 175 (1984) (sent by letter to Congress on October 14, 
1983 and appended to In re Cliffdale Assocs., Inc., 103 F.T.C. 110, 
174 (1984) (hereinafter ``Deception Policy Statement''), https://www.ftc.gov/system/files/ftc_gov/pdf/Cliffdale-Assocs-103-FTC-110.pdf.
    \429\ FTC v. Colgate-Palmolive Co., 380 U.S. 374, 387 (1965); 
Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 645-46 
(1985).
---------------------------------------------------------------------------

    Finally, the Supreme Court has not adopted the commenter's 
suggested ``history and tradition test'' as the applicable standard for 
determining whether congressional delegation of authority is 
constitutional. The intelligible principle test is binding precedent on 
that question, and the final rule complies with the intelligible 
principle test.

C. First Amendment

    Some commenters argued that Sec.  464.2 impermissibly prohibits and 
compels speech in violation of the First

[[Page 2112]]

Amendment.\430\ The Commission disagrees. The rule addresses unfair and 
deceptive conduct and does not otherwise affect businesses' ability to 
express truthful and accurate price information.
---------------------------------------------------------------------------

    \430\ See, e.g., FTC-2023-0064-3028 (Competitive Enterprise 
Institute); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3233 (NCTA--The internet and Television Association); FTC-
2023-0064-3016 (National Federation of Independent Business). In 
opposing Sec.  464.2, the commenters did not argue that Sec.  464.3, 
which simply prohibits misrepresentations related to prices and 
fees, implicates the First Amendment.
---------------------------------------------------------------------------

1. Comments
    Some commenters argued the rule's disclosure requirements compel 
speech in violation of the First Amendment. Some commenters also 
contended that Sec.  464.2 would prohibit businesses from advertising 
aspects or parts of truthful and accurate price information. They 
argued that conditioning the ability to provide some truthful 
information--such as a partial price without including certain fees--on 
total price being disclosed violates the First Amendment.\431\ 
Commenters asserted that consumers are not injured where a business 
presents a price that omits fees or fails to add up the fees for the 
consumer. They argued that this type of price information is useful and 
truthful even if it is only partial. A commenter argued that how the 
price of goods and services is displayed is a message under the First 
Amendment and the rule's requirement that total price be displayed 
clearly and conspicuously is unconstitutional compelled speech.\432\ 
One academic commenter supported the rule and argued it does not 
unconstitutionally compel speech because it only requires disclosure of 
factual, non-controversial information, without which the prices 
disclosed or advertised would be misleading.\433\
---------------------------------------------------------------------------

    \431\ E.g., FTC-2023-0064-3028 (Competitive Enterprise Institute 
provided examples of pricing information it argued was not unfair or 
deceptive that involve drip pricing with disclaimers, contingent 
pricing, and partition pricing.) The Commission addresses in section 
III.B.1 when and to what extent the rule covers these types of 
information and also explains why the omission of Total Price is 
unfair and deceptive in those circumstances.
    \432\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \433\ FTC-2023-0064-3275 (Berkeley Law Center for Consumer Law & 
Economic Justice et al.).
---------------------------------------------------------------------------

    Some commenters argued the requirement to disclose total price 
clearly and conspicuously should be subject to strict scrutiny,\434\ 
while others argued it should be reviewed under a heightened scrutiny 
standard \435\ or intermediate scrutiny.\436\ One commenter argued that 
the rule is a content-based regulation subject to strict scrutiny 
because, where a business presents any type of price information, it is 
required to display total price and in a particular way--i.e., clearly, 
conspicuously, and prominently.\437\ The commenter argued that the 
Commission failed to demonstrate the rule directly advances any 
compelling government interest. Another commenter argued that price 
information is commercial speech subject to intermediate scrutiny and 
that the rule fails to meet the standard because, even if some price 
displays without total price are deceptive, not all such displays are 
deceptive.\438\
---------------------------------------------------------------------------

    \434\ FTC-2023-0064-3028 (Competitive Enterprise Institute); 
FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \435\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \436\ FTC-2023-0064-3016 (National Federation of Independent 
Business).
    \437\ FTC-2023-0064-3028 (Competitive Enterprise Institute).
    \438\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------

    Some commenters asserted that the rule's application to credit card 
surcharges and government charges violated the First Amendment. An 
industry commenter interpreted the rule to require all credit card 
surcharges to be included in total price. The commenter argued that 
this amounts to a ban on presenting credit card surcharges to 
consumers, which is regulation of commercial speech that violates 
merchants' First Amendment rights. The commenter cited to several State 
laws banning credit card surcharges or fees, but allowing cash 
discounts, that were struck down by Federal courts of appeals.\439\ Two 
commenters argued that the rule's allowance for government charges to 
be excluded from total price--while other fees or charges cannot be 
excluded--amounts to content-based regulation of speech that provides 
preferential treatment to the government.\440\ One commenter argued 
that the rule would allow businesses to conceal government charges and 
shows favoritism for government speech to assist it in raising tax 
revenues; the commenter proposed the alternative of marginally raising 
the tax rate.\441\ The commenter also argued that the rule is 
underinclusive because total price does not include government charges, 
arguing that consumers suffer the same harm of being surprised by 
government fees as with non-government charges required to be included 
in total price. Finally, other commenters recommended that the 
Commission adopt a rule that only prohibits deceptive conduct without 
requiring specific affirmative disclosures.\442\
---------------------------------------------------------------------------

    \439\ FTC-2023-0064-3128 (Merchants Payments Coalition).
    \440\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3233 (NCTA--The Internet & Television Association).
    \441\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP 
``assume[d]'' that in allowing government charges to be excluded 
from Total Price, the Commission aims to ``rais[e] tax revenues'' 
because the Commission believes ``disclosing a tax upfront will lead 
to fewer people making purchases, resulting in a decline in 
revenue''). The commenter did not address the fact that the 
Commission does not have authority over taxation, or whether the 
commenter's proposed alternative of raising marginal tax rates would 
fulfill the Commission's goal in this rulemaking of preventing 
unfair or deceptive conduct related to mandatory fees and charges. 
The Commission finds that marginally raising the tax rate is not a 
viable alternative because the Commission does not have taxing 
authority and raising the tax rate would not achieve the 
Commission's stated goal of preventing unfair or deceptive conduct.
    \442\ FTC-2023-0064-3016 (National Federation of Independent 
Business); FTC-2023-0064-3028 (Competitive Enterprise Institute).
---------------------------------------------------------------------------

2. Legal Standard
    The Commission finds that businesses' First Amendment rights are 
adequately protected because Sec.  464.2's compelled disclosures are in 
a commercial context and meet the longstanding legal standards 
governing commercial speech. Courts apply one of two standards in the 
context of commercial speech. In Cent. Hudson Gas & Electric Corp. v. 
Pub. Serv. Comm'n of N.Y., 447 U.S. 557, 563-64 (1980), the Supreme 
Court established the analytical framework for determining the 
constitutionality of a regulation of commercial speech that is not 
misleading and does not involve illegal activity. Under that framework, 
described as intermediate scrutiny, the regulation must: (1) serve a 
substantial governmental interest; (2) directly advance this interest; 
and (3) not be more extensive than necessary to serve the government's 
interests.\443\ The third prong does not require the government to 
adopt the least restrictive means. Instead, it simply calls for a `` 
`fit' between the legislature's ends and the means chosen to accomplish 
those ends . . . a fit that is not necessarily perfect, but 
reasonable.'' \444\
---------------------------------------------------------------------------

    \443\ Cent. Hudson Gas & Elec. Corp., 447 U.S. at 564.
    \444\ Bd. of Trs. of State Univ. of N.Y. v. Fox, 492 U.S. 469, 
480 (1989) (internal citations omitted).
---------------------------------------------------------------------------

    The Supreme Court's ``precedents have applied a lower level of 
scrutiny to laws that compel disclosures in certain contexts,'' such as 
in commercial speech, as set forth in Zauderer v. Office of 
Disciplinary Counsel, 471 U.S. 626 (1985).\445\ Contrary to commenters'

[[Page 2113]]

assertions, compelled speech in the commercial context is neither 
unequivocally prohibited nor subject to strict scrutiny under the First 
Amendment. Rather, the First Amendment permits required disclosures 
that are: (1) factual and uncontroversial; (2) reasonably related to 
the government's interest--here, preventing unfair and deceptive 
commercial practices that harm consumers; and (3) not ``unjustified or 
unduly burdensome.'' \446\ The final rule's disclosure requirements 
satisfy these parameters.
---------------------------------------------------------------------------

    \445\ Zauderer, 471 U.S. at 650-53; Nat'l Inst. of Family & Life 
Advocates v. Becerra (``NIFLA''), 585 U.S. 755, 768 (2018); see also 
Milavetz, Gallop & Milavetz P.A. v. United States, 559 U.S. 229, 
249-50 (2010) (applying ``the less exacting scrutiny described in 
Zauderer'' and upholding a requirement that advertisements include a 
disclosure ``intended to combat the problem of inherently misleading 
commercial advertisements'').
    \446\ Zauderer, 471 U.S. at 653; see also Am. Meat Inst. v. 
USDA, 760 F.3d 18, 22-23 (D.C. Cir. 2014) (en banc) (holding 
Zauderer applies to compelled commercial speech in service of 
government interests in addition to preventing and correcting 
deception); CTIA--The Wireless Ass'n v. City of Berkeley, 928 F.3d 
832, 844 (9th Cir. 2019) (holding Zauderer applies to compelled 
commercial health and safety disclosures if they further a 
substantial government interest) (citing Central Hudson Gas & Elec. 
Corp., 447 U.S. at 564; NIFLA, 585 U.S. at 768, 775)); Pharm. Care 
Mgmt. Ass'n v. Rowe, 429 F.3d 294, 310, 310 n.8 (1st Cir. 2005) 
(clarifying that the application of Zauderer is not limited to cases 
in which the compelled disclosure prevents deception and upholding 
compelled commercial disclosures based on government interests in 
preventing deception and ``increasing public access to prescription 
drugs''); Nat'l Elec. Mfrs. Ass'n v. Sorrell, 272 F.3d 104, 116 (2d 
Cir. 2001) (applying Zauderer to compelled commercial disclosure 
even though it ``was not intended to prevent `consumer confusion or 
deception' per se, . . . but rather to better inform consumers about 
the products they purchase'') (internal citation and quotation marks 
omitted) (citing Zauderer, 471 U.S. at 651).
---------------------------------------------------------------------------

3. The Rule's Disclosure Requirements Are Constitutional Under Zauderer
    Section 464.2 applies to speech that is, at its core, commercial--
the disclosure and advertising of the price for goods and 
services.\447\ It requires precisely the type of disclosure the Supreme 
Court has confirmed is constitutional under Zauderer.\448\ In Zauderer, 
the Supreme Court considered a challenge to government-compelled 
commercial speech in an advertisement by an attorney. The advertisement 
stated that certain types of cases were handled on a contingent fee 
basis for which the client owed no legal fees if the lawsuit was 
unsuccessful. The State required such advertisements to disclose that 
clients may be liable for litigation costs even if their lawsuit is 
unsuccessful. The attorney argued such a requirement was compelled 
speech in violation of the First Amendment. The Supreme Court 
disagreed. Noting that the disclosure applied to commercial 
advertising, the Court held that an advertiser's ``constitutionally 
protected interest in not providing any particular factual information 
in his advertising is minimal.'' \449\ The Court concluded, ``The 
State's position that it is deceptive to employ advertising that refers 
to contingent-fee arrangements without mentioning the client's 
liability for costs is reasonable enough to support a requirement that 
information regarding the client's liability for costs be disclosed.'' 
\450\ The Court also noted that attorneys were not prevented from 
conveying information to the public--they were merely required ``to 
provide somewhat more information than they might otherwise be inclined 
to present . . . in order to dissipate the possibility of consumer 
confusion or deception.'' \451\
---------------------------------------------------------------------------

    \447\ See Expressions Hair Design v. Schneiderman, 581 U.S. 37, 
48 (2017) (reviewing State law regulating disclosure of 
differentiation of prices for credit card versus other types of 
payment and remanding for determination of whether the statute ``is 
a valid commercial speech'' regulation); City of Cincinnati v. 
Discovery Network, Inc., 507 U.S. 410, 422 (1993) (``Most of the 
appellee's mailings consisted primarily of price and quantity 
information, and thus fell within the core notion of commercial 
speech--speech which does `no more than propose a commercial 
transaction.''') (cleaned up) (citing Bolger v. Young's Prods. 
Corp., 463 U.S. 60, 66 (1983)); see generally Cent. Hudson Gas & 
Elec. Corp., 447 U.S. at 561 (referring to commercial speech as 
``expression related solely to the economic interests of the speaker 
and its audience''); Va. State Bd. of Pharmacy v. Va. Citizens 
Consumer Council, Inc., 425 U.S. 748, 762 (1976) (commercial speech 
includes speech that does ``no more than propose a commercial 
transaction'' (internal citations omitted)); see also Bates v. State 
Bar of Ariz., 433 U.S. 350, 383 (1977) (``the advertiser knows his 
product and has a commercial interest in its dissemination''; ``any 
concern that strict requirements for truthfulness will undesirably 
inhibit spontaneity seems inapplicable because commercial speech 
generally is calculated. Indeed, the public and private benefits 
from commercial speech derive from confidence in its accuracy and 
reliability.'').
    \448\ Zauderer, 471 U.S. at 651-53; see also NIFLA, 585 U.S. at 
768-69 (restating the Zauderer standard, noting that ``purely 
factual and uncontroversial information about the terms under which 
. . . services will be available . . . should be upheld unless they 
are unjustified or unduly burdensome'' (internal citations 
omitted)).
    \449\ Zauderer, 471 U.S. at 651.
    \450\ Id. at 653.
    \451\ Id. at 650-51 (internal quotation omitted).
---------------------------------------------------------------------------

    Section 464.2 satisfies all prongs of Zauderer. First, Sec.  464.2 
only requires businesses to disclose factual and noncontroversial 
pricing information, by incorporating known mandatory fees or charges 
into total price, with exceptions, and by disclosing certain other 
customary pricing information before a consumer consents to pay. As 
described in section II.B, the purpose of the rule is to ensure that 
consumers know the total amount they will have to pay because this 
information is material to consumer decision making.
    Second, parts II.B and III lay out in detail how the rule is 
reasonably related to--and, in fact, directly advances--the 
government's interest in preventing unfairness and deception in the 
marketplace. Preventing unfair and deceptive conduct is the 
Commission's mandate under sections 5 and 18 of the FTC Act.\452\ And 
based on voluminous comments from the public as well as significant 
empirical evidence, the Commission finds that consumers seeking to 
purchase covered goods or services are likely to be deceived and harmed 
if the required disclosures are not made.
---------------------------------------------------------------------------

    \452\ 15 U.S.C. 45, 57a.
---------------------------------------------------------------------------

    Finally, Sec.  464.2 is neither unduly burdensome nor unjustified. 
The Commission set forth the justification for the required disclosures 
in parts II and III, including the harms to consumers and to 
competition from drip or partitioned pricing. Further, the rule does 
not impose an undue burden; businesses offering covered goods or 
services are simply required ``to provide somewhat more information 
than they might otherwise be inclined to present.'' \453\ The rule 
merely requires clear and conspicuous display of total price if other 
pricing information is displayed, and requires certain pricing and 
informational disclosures before the consumer consents to pay. As 
described in detail in section III, the final rule permits businesses 
to exclude from total price certain mandatory fees or charges that 
industry commenters stated would be impractical or burdensome for 
inclusion in total price.
---------------------------------------------------------------------------

    \453\ Zauderer, 471 U.S. at 650.
---------------------------------------------------------------------------

    The Commission disagrees with a commenter who seemed to argue that 
because the rule imposes disclosure requirements as to ``how'' total 
price is displayed, the rule ``offends the First Amendment'' by 
compelling speech.\454\ In so arguing, the commenter cited to 303 
Creative, LLC v. Elenis, 600 U.S. 570 (2023). The Supreme Court in 303 
Creative considered an as-applied challenge to the Colorado Anti-
Discrimination Act (``CAD'') by a sole proprietor who designed 
individualized websites the Court concluded ``qualify as pure speech,'' 
with each website being an ``original, customized creation.'' \455\ 
While the Court in that case held that the CAD violated the First 
Amendment as applied to the plaintiff, the rule here is distinguishable 
from the facts of 303 Creative. First, both price

[[Page 2114]]

and how price is displayed (here, how total price is displayed) relate 
solely to proposing a commercial transaction and to the economic 
interests of the speaker and its audience.\456\ Second, the Court based 
its decision in 303 Creative on the unique nature of the plaintiff's 
work, noting the plaintiff ``does not seek to sell an ordinary 
commercial good.'' \457\ In comparison, the rule merely requires the 
display of the total price of a covered good or service--live-event 
tickets and short-term lodging--which is core commercial speech.
---------------------------------------------------------------------------

    \454\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \455\ 303 Creative, 600 U.S. at 587-88.
    \456\ See cases cited supra note 447 (defining commercial 
speech).
    \457\ 303 Creative, 600 U.S. at 593-94.
---------------------------------------------------------------------------

    Therefore, the Commission finds that the disclosure requirements 
are consistent with the compelled speech analysis under Zauderer. 
Clear, conspicuous, and prominent disclosure of total price in 
advertisements, displays, or offers, and the disclosure of complete 
pricing information of covered goods or services before the consumer 
consents to pay, directly advance the Commission's interest in 
preventing deception and harm. The rule's requirements enable consumers 
to receive the information they need to make informed purchasing 
decisions about live-event tickets and short-term lodging based on 
complete and truthful information.
4. The Rule Does Not Prohibit Truthful Speech
    Commenters asserted that the rule amounts to a prohibition on the 
display of truthful price information in violation of the First 
Amendment because the rule prohibits certain information (like partial 
prices without mandatory fees) from being displayed without displaying 
total price. Commenters also asserted that, because the rule prohibits 
certain displays of price, like parts of prices without fees, it should 
be evaluated under Central Hudson. The Commission disagrees. First, the 
commenters ``overlook[ ] material differences between disclosure 
requirements and outright prohibitions on speech.'' \458\ The rule does 
not prevent businesses from conveying information to the public and, in 
particular, it does not prohibit the disclosure of the components of 
total price. Businesses remain free to describe, disclose, or convey 
price, fee, and charge information.\459\ Put differently, the rule 
permits any truthful pricing claims an advertiser wants to make; what 
it forbids is half-truths that omit total price.
---------------------------------------------------------------------------

    \458\ Zauderer, 471 U.S. at 650.
    \459\ Of course, Businesses offering, displaying, or advertising 
a Covered Good or Service cannot misrepresent the nature, purpose, 
amount, or refundability of any fee or charge under Sec.  464.3; 
this requirement is consistent with the First Amendment. See Ibanez 
v. Fla. Dep't of Bus. & Prof'l. Regul., 512 U.S. 136, 142 (1994) 
(``false, deceptive, or misleading commercial speech may be banned'' 
(citations omitted)). Commenters did not argue Sec.  464.3 violates 
the First Amendment.
---------------------------------------------------------------------------

    Section 464.2 does require a business that displays certain pricing 
information about covered goods or services to also provide factual and 
non-controversial information in the form of total price. Although 
total price may be ``somewhat more information than they might be 
otherwise inclined to present,'' such a requirement is allowed by 
Zauderer.\460\ With the rule's requirement that total price be clear, 
conspicuous, and prominent, the Commission balances industry 
commenters' stated desire to display other price information with its 
finding that total price is a necessary piece of price information for 
consumers if any other price information is displayed.\461\
---------------------------------------------------------------------------

    \460\ Zauderer, 471 U.S. at 650.
    \461\ Indeed, the Zauderer Court noted that ``because disclosure 
requirements trench much more narrowly on an advertiser's interests 
than do flat prohibitions on speech, `warning[s] or disclaimer[s] 
might be appropriately required . . . in order to dissipate the 
possibility of consumer confusion or deception.' '' Id. at 651 
(citation omitted).
---------------------------------------------------------------------------

    Because the rule does not restrict truthful speech, and because the 
conduct the rule addresses (advertising prices without mandatory fees) 
is deceptive, the Commission need not apply the Central Hudson factors. 
Nevertheless, the rule would meet them. Under Central Hudson, the 
regulation must serve a substantial governmental interest, must 
directly advance that interest, and must not be more extensive than 
necessary to serve the government's interest.\462\ As outlined in parts 
II and III, the rule serves the substantial governmental interest of 
providing material price information to consumers purchasing live-event 
tickets and short-term lodging to allow them to make accurate price 
comparisons and informed purchasing decisions, and to allow businesses 
to compete on price in a level playing field. And consistent with the 
third prong of Central Hudson, the rule is no more extensive than 
necessary to serve the government's interests in preventing unfairness, 
deception, and harm, as the rule simply requires clear, conspicuous, 
and prominent display of total price. Central Hudson acknowledges that 
the government can regulate the format of advertising, including by 
requiring a disclosure.\463\
---------------------------------------------------------------------------

    \462\ Cent. Hudson Gas & Elec. Corp., 447 U.S. at 566.
    \463\ See id. at 570-71 (``To further its policy of 
conservation, the Commission could attempt to restrict the format 
and content of Central Hudson's advertising. It might, for example, 
require that the advertisements include information about the 
relative efficiency and expense of the offered service, both under 
current conditions and for the foreseeable future.'').
---------------------------------------------------------------------------

    The Commission also disagrees with commenters arguing the rule 
violates is overinclusive and would prohibit some displays of partial 
price that are not deceptive or unfair without the display of total 
price. Again, because truthful itemization of price components is not 
prohibited by the rule, commenters' contention that the rule is a 
prohibition on speech misses the mark. The Commission finds, however, 
that the display of the price of a good or service without disclosing 
total price clearly, conspicuously, and prominently is unfair and 
deceptive and harms consumers and honest competitors. Because the third 
prong of Central Hudson does not require the government to use the 
least restrictive means necessary to advance its interest, the rule 
would be constitutional even if it prohibited displaying partial price 
in instances that, in isolation, may not be unfair or deceptive. The 
same is true under Zauderer, where the Court held that the State's 
``assumption that substantial numbers of potential clients would be . . 
. misled'' about the possibility that they would be responsible for 
litigation costs--in contrast to proving that all potential clients 
would be misled--was sufficient to meet the standard.\464\
---------------------------------------------------------------------------

    \464\ Zauderer, 471 U.S. at 652-53.
---------------------------------------------------------------------------

    The Commission addresses in section III commenters who argued that 
it should adopt alternative policies, such as prohibiting 
misrepresentations and allowing businesses to disclose amounts or fees 
as they wish. As relevant here, commenters argued that the Commission 
should adopt those alternatives because they would not violate the 
First Amendment. The Commission finds that the rule, including Sec.  
464.2, does not violate the First Amendment. Given the Commission's 
finding that failure to disclose total price is unfair and deceptive, 
the rule's affirmative disclosure requirements are needed to achieve 
the Commission's goal of preventing this unfair and deceptive conduct.

[[Page 2115]]

5. The Rule's Treatment of Credit Card Fees and Government Charges Does 
Not Violate the First Amendment
    The rule does not violate the First Amendment in its treatment of 
credit card fees and government charges. First, as noted in section 
III.B.1.c, the rule does not prohibit a business from charging or 
passing through credit card fees if otherwise allowed by law. The rule 
also does not affect State laws that prohibit credit card surcharges. 
Whether credit card charges must be included in total price depends on 
whether a business makes such fees mandatory. If a business offers 
consumers multiple viable payment methods for the offered transaction, 
so that paying with a credit card is optional, then credit card fees 
are not for a ``mandatory ancillary good or service'' under the rule 
and need not be included in total price. In addition, where credit card 
fees are mandatory, the rule does not prohibit businesses from 
itemizing them as long as they are also included in total price. 
Accordingly, there is no merit to commenters' concerns that consumers 
will not understand the impact of costs affecting businesses, since 
businesses can itemize those costs under the rule.
    The Commission also disagrees with commenters' argument that Sec.  
464.2 violates the First Amendment as a content-based regulation 
because it does not require businesses to include government charges in 
total price. One commenter, who argued the point in detail, relied on 
Barr v. American Ass'n of Political Consultants, Inc., 591 U.S. 610 
(2020), in which the Supreme Court held that an exclusion for 
collectors of government debt from the Telephone Consumer Protection 
Act (``TCPA''), which generally prohibits robocalls, violated the First 
Amendment. A majority agreed that the exclusion for collectors of 
government debt was severable--the prohibition on robocalls was upheld.
    The exclusion provision in the TCPA addressed in Barr is 
distinguishable from the final rule in several ways. At the outset, the 
rule does not favor government charges unequivocally. While the rule 
allows businesses to exclude government charges from total price, it 
does not require businesses to do so. Businesses have a choice--they 
may include government charges in total price. Second, the commenter 
makes specific and erroneous assumptions about the Commission's 
reasoning for excluding government charges from total price, such as 
that the Commission's interest in adopting the rule includes favoring 
taxes and increasing tax revenue. Tax revenues have no bearing on the 
Commission's decision to adopt this rule. As noted in section III.A.5, 
consumers have come to understand and expect sales tax to be added at 
the end of a purchase, and there are other Federal, State, and local 
laws that have specific requirements about disclosing taxes and other 
government charges. In addition, in many online transactions, 
businesses are unable to fully calculate certain components of 
government charges until a consumer provides their location 
information. Thus, the Commission has good reason to allow businesses 
to exclude government charges from total price if they choose.\465\
---------------------------------------------------------------------------

    \465\ The Commission modifies the definition of ``Government 
Charges'' from those fees or charges ``imposed on consumers'' to 
those ``imposed on the transaction'' to limit the potential 
distinction between fees and charges imposed directly on consumers 
and those imposed on Businesses. See supra section III.A.5.
---------------------------------------------------------------------------

D. Commission Structure

    One commenter argued the Commission is unconstitutionally 
structured because the Commissioners are shielded from removal and 
asserts that Humphrey's Executor v. United States, 295 U.S. 602 (1935), 
either no longer applies or was wrongly decided by the Supreme 
Court.\466\ The same commenter asserted that the Commission's 
administrative law judges are unconstitutionally appointed by the 
Commission Chair and are unconstitutionally shielded from removal.\467\ 
The Commission disagrees.
---------------------------------------------------------------------------

    \466\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \467\ Id.
---------------------------------------------------------------------------

    In Humphrey's Executor, the Supreme Court addressed the crux of the 
commenter's first argument and concluded that the Commission's 
structure is constitutional. In that case, President Roosevelt sought 
to remove a Commissioner without cause. The Court held that the FTC Act 
authorized removal of Commissioners only on the grounds specified in 
the statute (``inefficiency, neglect of duty, or malfeasance in 
office'') and that this limitation on the President's removal power was 
constitutional given the ``character of the [C]ommission and the 
legislative history which accompanied and preceded the passage of the 
act.'' \468\ The commenter's arguments that Humphrey's Executor is no 
longer applicable are unavailing. The Supreme Court's decision is not 
rendered any less binding because Congress has refined the Commission's 
authorities during the course of its more than 100-year tenure.\469\ 
The key policy rationale underlying Humphrey's Executor remains valid 
today. The Commissioners collectively act as an adjudicatory body, and 
the for-cause removal standard ensures that they are free from 
``suspicion of partisan direction'' or ``political domination or 
control.'' \470\ Congress has similarly provided for-cause removal 
standards for the members of many other non-Article III tribunals 
composed of multiple members who perform adjudicatory functions as an 
expert body within a specific area of the law.\471\
---------------------------------------------------------------------------

    \468\ Humphrey's Executor, 295 U.S. at 624-32.
    \469\ See FTC v. Am. Nat'l Cellular, Inc., 810 F.2d 1511, 1513-
14 (9th Cir. 1987) (enactment of section 13(b) of the FTC Act did 
not render Humphrey's Executor inapposite).
    \470\ Humphrey's Executor, 295 U.S. at 625.
    \471\ See Collins v. Yellen, 594 U.S. 220, 250 n.18 (2021); 
Wiener v. United States, 357 U.S. 349, 353 (1958).
---------------------------------------------------------------------------

    Next, the commenter incorrectly asserted that administrative law 
judges are appointed by the Chair and are unconstitutionally shielded 
from removal. The commenter argued that under Free Enter. Fund v. Pub. 
Co. Accounting Oversight Bd., 561 U.S. 477 (2010), administrative law 
judges must be appointed by the full Commission and that the 
appointment process for administrative law judges at the FTC is 
unconstitutional because administrative law judges are appointed by the 
Commission Chair alone.\472\ The commenter is mistaken. The Commission 
voted in December 2023 to approve the appointment of Administrative Law 
Judge Jay L. Himes.\473\ The Chief Presiding Officer--here, the Chair 
pursuant to 16 CFR 0.8--then selected Judge Himes to be the presiding 
officer for this rulemaking, and Judge Himes was properly designated as 
the presiding officer in the Commission's notice of informal 
hearing.\474\
---------------------------------------------------------------------------

    \472\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \473\ Press Release, Fed. Trade Comm'n, FTC Announces 
Appointment of Jay L. Himes as New Administrative Law Judge (Mar. 
12, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/03/ftc-announces-appointment-jay-l-himes-new-administrative-law-judge.
    \474\ Initial notice of informal hearing; final notice of 
informal hearing; list of Hearing Participants; requests for 
submissions from Hearing Participants: Trade Regulation Rule on 
Unfair or Deceptive Fees, 89 FR 21216 (Mar. 27, 2024); see also 16 
CFR 0.8, 1.13.
---------------------------------------------------------------------------

    In response to the commenter's contention that the removal 
protections for the Commission's administrative law judges are 
unconstitutional, the Commission notes that the Supreme Court has 
recognized in recent decisions that Congress may constitutionally

[[Page 2116]]

restrict the President's at-will removal power with regard to inferior 
officers.\475\ In Collins v. Yellen, 594 U.S. 220 (2021), for example, 
the Court declined to ``revisit . . . prior decisions allowing certain 
limitations on the President's removal power,'' \476\ which include the 
``good cause'' protections for inferior officers ``with limited duties 
and no policymaking or administrative authority'' described by the 
Court in Seila Law LLC v. CFPB, 591 U.S. 197 (2020).\477\ In Free 
Enter. Fund, the Court held removal protections for Public Company 
Accounting Oversight Board members unconstitutional and contrasted the 
duties of those members with the lesser duties of administrative law 
judges: ``[U]nlike members of the [Public Company Accounting Oversight] 
Board,'' administrative law judges (1) ``perform adjudicative rather 
than enforcement or policy making functions,'' or (2) ``possess purely 
recommendatory powers.'' \478\ The FTC's administrative law judges fit 
squarely within both of those descriptions.
---------------------------------------------------------------------------

    \475\ See, e.g., Decker Coal Co. v. Pehringer, 8 F.4th 1123, 
1133-36 (9th Cir. 2021) (holding that administrative law judge 
removal protections are constitutional).
    \476\ Collins, 594 U.S. at 250-51 (discussing Seila Law LLC v. 
CFPB, 591 U.S. 197 (2020)).
    \477\ Seila Law, 591 U.S. at 217-18.
    \478\ Free Enter. Fund, 561 U.S. at 507 n.10.
---------------------------------------------------------------------------

    Even if the appointment procedures and removal protections of 
administrative law judges were unconstitutional because of their role 
as inferior officers under Article II, the constitutionality of the 
rule would not be in question because presiding officers under section 
18 are not ``officers'' under Article II. Notably, while the presiding 
officer in the Informal Hearing for this rulemaking happened to be an 
administrative law judge, neither section 18(c)(1)(B) nor the 
Commission's rules implementing that provision require an 
administrative law judge to preside over section 18 informal 
hearings.\479\
---------------------------------------------------------------------------

    \479\ 15 U.S.C. 57a(c)(1)(B); 16 CFR 1.13.
---------------------------------------------------------------------------

    Instead, the presiding officer is a specific, temporary designation 
made under section 18(c) and its implementing rules, 16 CFR 1.11 
through 1.13. The Supreme Court's framework for distinguishing between 
officers and employees asks whether an individual ``exercise[s] 
significant authority pursuant to the laws of the United States'' and 
occupies a position that is ``continu[ous] and permanent.'' \480\ For 
presiding officers, neither is true. As relevant here, the role of the 
presiding officer in section 18 rulemakings--assisting in the 
collection of necessary information for the rulemaking to proceed, 
ensuring hearings proceed methodically, and maintaining the rulemaking 
record \481\--is not policymaking; that role is reserved for the 
Commission.\482\ Moreover, an administrative law judge, whether or not 
he or she is serving as a presiding officer, cannot initiate a 
rulemaking, decide its subject, decide whether a rule should issue, or 
establish its content. The Commission performs all of these 
functions.\483\
---------------------------------------------------------------------------

    \480\ Lucia v. SEC, 585 U.S. 237, 245 (2018) (in the ``Court's 
basic framework for distinguishing between officers and employees[,] 
. . . an individual must occupy a `continuing' position established 
by law to qualify as an officer . . . [and] `exercise[ ] significant 
authority pursuant to the laws of the United States' '' (citations 
omitted)).
    \481\ 15 U.S.C. 57a; 16 CFR 0.14.
    \482\ 16 CFR 1.13.
    \483\ 16 CFR 1.9, 16 CFR 1.13(i), 16 CFR 1.14, 16 CFR 1.25, 16 
CFR 1.26(d).
---------------------------------------------------------------------------

    As an initial matter, the Commission determines whether an informal 
hearing will be conducted; presiding officers do not have discretion 
over whether the hearing will occur. The presiding officer simply 
``presides over the rulemaking proceedings'' and, when appropriate, 
makes a ``recommended decision based upon the findings and conclusions 
of such officer.'' \484\ The presiding officer's powers in the conduct 
of the hearing are also limited. For example, the officer may not 
extend the time allotted for the informal hearing beyond a certain 
period ``unless the Commission, upon a showing of good cause, extends 
the number of days for the hearing.'' \485\ The commenter is correct 
that the presiding officer is initially chosen by the ``chief presiding 
officer,'' who is the Chair of the FTC under 16 CFR 0.8. However, the 
formal assignment of that presiding officer to a particular hearing is 
in the initial notice of informal hearing, which is issued by vote of 
the Commission. Although the presiding officer reports to the chief 
presiding officer, again, the powers of the two together amount to no 
more than conducting the informal hearing and making a recommended 
decision based on the presiding officer's findings to the 
Commission.\486\ All substantive decisions are made by the Commission. 
These are temporary assignments that begin and end with the informal 
hearing process.
---------------------------------------------------------------------------

    \484\ 15 U.S.C. 57a(c).
    \485\ 16 CFR 1.13(a)(2)(ii).
    \486\ 16 CFR 1.13.
---------------------------------------------------------------------------

    Accordingly, neither the Commission's structure nor the role of the 
presiding officer in section 18 violates the Constitution.

E. Administrative Procedure Act

    Several commenters asserted the Commission has not complied with 
the APA.\487\ The Commission disagrees. The Commission complies with 
the APA's requirements, including by explaining the rule's relationship 
to the unfair and deceptive conduct the Commission seeks to prevent and 
by responding to all significant comments.\488\ As explained herein, 
the Commission also complies with the additional requirements of 
sections 18 and 22 of the FTC Act.
---------------------------------------------------------------------------

    \487\ FTC-2023-0064-3133 (National Multifamily Housing Council 
and National Apartment Association); FTC-2023-0064-3152 (Building 
Owners & Managers Association et al.); FTC-2023-0064-3238 (Gibson, 
Dunn & Crutcher LLP); FTC-2023-0064-3263 (Flex Association); FTC-
2023-0064-3294 (International Franchise Association).
    \488\ Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto Ins., 
463 U.S. 29, 43 (1983) (holding that an agency must articulate a 
satisfactory explanation for its action including a ``rational 
connection between the facts found and the choices made.'' (citing 
Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 
(1962))).
---------------------------------------------------------------------------

    Commenters claimed that the rule is arbitrary and capricious 
because it is not based on sufficient facts or data, and lacks a 
rational connection between the facts and the regulatory choices.\489\ 
These commenters argued that the factual record does not support the 
Commission's decision to promulgate an industry-neutral rule or to 
apply the rule to particular industries.\490\ One commenter criticized 
various substantive aspects of the rule including its breadth, 
consideration of alternatives, and costs.\491\ The commenter also 
argued that the rule is duplicative and could lead to regulatory 
confusion.\492\
---------------------------------------------------------------------------

    \489\ See, e.g., FTC-2023-0064-3294 (International Franchise 
Association); FTC-2023-0064-3133 (National Multifamily Housing 
Council and National Apartment Association); FTC-2023-0064-3152 
(Building Owners & Managers Association et al.); FTC-2023-0064-3263 
(Flex Association).
    \490\ See, e.g., FTC-2023-0064-3294 (International Franchise 
Association); FTC-2023-0064-3133 (National Multifamily Housing 
Council and National Apartment Association); FTC-2023-0064-3152 
(Building Owners & Managers Association et al.); FTC-2023-0064-3263 
(Flex Association).
    \491\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \492\ Id.
---------------------------------------------------------------------------

    The Commission has carefully reviewed and considered the comments 
and information it received in this rulemaking. As a preliminary 
matter, the NPRM engaged in extensive discussion concerning the 
comments received in response to the ANPR and followed up with 
additional questions and requests for empirical data and proposed rule 
text. Likewise, the analysis contained throughout this SBP, 
particularly Parts III-VII, similarly

[[Page 2117]]

engages with and considers the additional significant comments and 
information received in response to the NPRM. Commenters raising 
questions regarding APA compliance primarily critiqued the industry-
neutral nature of the proposal advanced in the NPRM. The Commission 
disagrees with these critiques. The Commission, however, has determined 
to limit this final rule to covered goods or services and need not 
address arguments regarding the application of the rule to a wide range 
of industries at this time. Further, both the NPRM and this SBP explain 
in detail the factual record and its relationship to the provisions 
finalized in the rule. While empirical data is not required, the 
Commission in section V presents an analysis for the final rule, 
identifying benefits, such as reductions in consumer search cost time 
and deadweight loss, and quantifying compliance costs. Finally, in 
section V.E.2.d, the Commission finds that the rule's benefits to the 
public will exceed its costs.

V. Final Regulatory Analysis Under Section 22 of the FTC Act

    Under section 22 of the FTC Act, when the Commission promulgates 
any final rule as a ``rule'' as defined in section 22(a)(1), it must 
include a ``final regulatory analysis.'' 15 U.S.C. 57b-3(b)(2). The 
final regulatory analysis must contain: (1) a concise statement of the 
need for, and objectives of, the final rule; (2) a description of any 
alternatives to the final rule that were considered by the Commission; 
(3) an explanation of the reasons for the Commission's determination 
that the final rule will attain its objectives in a manner consistent 
with applicable law and the reasons the particular alternative was 
chosen; (4) an analysis of the projected benefits, any adverse economic 
effects, and any other effects of the final rule; and (5) a summary of 
any significant issues raised by the comments submitted during the 
public comment period in response to the Preliminary Regulatory 
Analysis, and the Commission's assessment of such issues. 15 U.S.C. 
57b-3(b)(2)(A) through (E). The Commission analyzes each of these 
components in the following final regulatory analysis.
    The Commission has the authority to promulgate this rule under 
section 18 of the FTC Act, 15 U.S.C. 57a, which authorizes the 
Commission to promulgate, modify, and repeal trade regulation rules 
that define with specificity acts or practices in or affecting commerce 
that are unfair or deceptive within the meaning of section 5(a)(1) of 
the FTC Act, 15 U.S.C. 45(a)(1). In explaining the need for, and 
objectives of, the rule, the Commission observes that a clear rule is 
the best way to accomplish its goals of: (1) ensuring that consumers 
receive truthful, timely, and transparent information about price to 
permit them to comparison shop effectively and (2) leveling the playing 
field for honest competitors. In addition, a clear rule would deter the 
defined unfair or deceptive pricing practices by enabling the 
Commission to more readily obtain monetary relief and civil penalties. 
The Commission carefully considered several alternatives to the rule, 
including terminating the rulemaking and pursuing a broader, industry-
neutral alternative. The Commission determined that the alternative of 
terminating the rulemaking would not accomplish these objectives. As 
explained in section II, the Commission finds that bait-and-switch 
pricing and misleading fees and charges are prevalent economy-wide, but 
chooses to begin by tackling these practices in the live-event 
ticketing and short-term lodging industries, where the Commission first 
began evaluating drip pricing more than a decade ago and which have a 
long history of harming consumers and businesses. The final rule will 
attain its objectives of promoting truthful, timely, and transparent 
pricing, comparison shopping, and fair competition in the live-event 
ticketing and short-term lodging industries in a manner consistent with 
applicable law. The Commission will rely on its existing section 5 
authority in pursuing case-by-case enforcement actions against 
businesses in other industries that engage in the specific unfair and 
deceptive pricing practices that are the subject of the industry-
specific coverage in this rule.
    The Commission's final regulatory analysis indicates that adoption 
of the rule will result in benefits to the public that exceed the 
costs. As described further herein, the rule will not only result in 
significant benefits to consumers but also improve the competitive 
environment in the live-event ticketing and short-term lodging 
industries, particularly for small, independent, or new firms. One such 
benefit is that the final rule will reduce deadweight loss. 
``Deadweight loss'' is a term used to describe the loss of efficiency 
or economic welfare, a cost to society, that occurs when resources are 
not used as efficiently as possible. At a competitive equilibrium, in 
which the marginal benefit for consumers equals the marginal cost for 
firms, there is no deadweight loss. When firms, including those in the 
live-event ticketing and short-term lodging industries, engage in bait-
and-switch tactics, consumers purchase more goods and services than 
they would otherwise because they do not understand the full price. In 
other words, in such cases, consumers overconsume beyond the quantity 
necessary for competitive equilibrium. This overconsumption is a 
deadweight loss because, if they had full information, consumers would 
shift their spending toward more beneficial and efficient spending 
patterns that reflect their true preferences. Deadweight loss is 
discussed more fully in section V.E.2.a.ii.
    The rule provides a net benefit to society if its benefits exceed 
its costs. The Commission quantifies the incremental benefits for the 
live-event ticketing and short-term lodging industries and shows that 
the rule's benefits exceed the costs in these industries.
    The Commission reviewed the comments relating to its Preliminary 
Regulatory Analysis, some of which challenged the Commission's 
estimation of the rule's potential costs and benefits. In response to 
these comments, the Commission herein clarifies its analysis and adds a 
sensitivity analysis to the baseline estimation. The Commission 
concludes that these comments do not affect the Commission's finding 
that the potential benefits of the rule exceed the potential costs.

A. Concise Statement of the Need for, and Objectives of, the Final Rule

    The Commission believes the final rule is needed to ensure that 
consumers receive truthful, timely, and transparent information about 
the total price of goods or services, including the nature, purpose, 
and amount of any fees or charges imposed on the transaction, so that 
they can effectively comparison shop and budget their spending dollars 
when deciding what live-event tickets to purchase or where to stay when 
traveling. Although bait-and-switch pricing and misleading fees are 
already unlawful unfair or deceptive acts or practices under section 5 
of the FTC Act, the Commission concludes that a clear rule is the best 
way to accomplish its goal of preventing the rule's defined, specific 
unfair and deceptive pricing practices in the live-event ticketing and 
short-term lodging industries while fostering a level playing field for 
honest competitors to be able to compete truthfully and fairly based on 
price. In addition, the final rule aims to increase deterrence of the 
defined unfair or deceptive pricing practices in these industries by 
enabling the Commission

[[Page 2118]]

to more readily obtain redress for injury to consumers through section 
19(a)(1) of the FTC Act, 15 U.S.C. 57b(a)(1), and by allowing courts to 
impose civil penalties where appropriate. The Commission believes that 
the rule will accomplish these goals without significantly burdening 
businesses and will provide significant benefits to consumers and 
honest competitors.
    The record of this rulemaking is replete with comments from 
consumers, consumer groups, industry members, academics, and policy 
organizations, as well as officials and agencies across all levels of 
government, emphasizing the importance of consumers' ability to 
effectively comparison shop and businesses' ability to honestly compete 
against each other based on price. Regardless of industry, consumers 
want to comparison shop when deciding where to purchase their goods or 
services from among various competing offers. In many instances, 
consumers have found it increasingly difficult, if not impossible, to 
effectively comparison shop because businesses fail to provide the 
total price when they display a purported amount a consumer will pay 
for a good or service. Consumers are also misled as to the nature, 
purpose, amount, and refundability of fees and charges, and are unable 
to make informed choices about the value of the fee or charge, or the 
good or service it represents, because their understanding of the fee 
or charge is predicated on deceptive omissions or false or misleading 
information. As a result, consumers are harmed because they consume 
more goods or services, pay more for a good or service, and incur 
higher search costs than they otherwise would have if they had been 
presented with the total price upfront and truthful, timely, and 
transparent information regarding fees and charges. Businesses that 
honestly present the total price of a good or service and accurately 
disclose the nature, purpose, and amount of fees and charges are at a 
competitive disadvantage to those that mislead consumers by presenting 
purportedly lower prices and inaccurate information about fees and 
charges. As explained in section II, the record, as well as the 
Commission's law enforcement actions, outreach, and other engagement 
with businesses and consumers, support a finding that these practices 
pervade the economy across industries. Fundamentally, the rule will 
help consumers make informed decisions when comparison shopping and 
level the playing field for honest businesses in the live-event 
ticketing and short-term lodging industries, two industries that have a 
long history of bait-and-switch pricing and misrepresentations 
regarding fees and charges.
    In addition, the final rule is necessary to allow the Commission to 
recover redress more efficiently in cases where there is quantifiable 
consumer harm resulting from bait-and-switch pricing and misleading 
fees and charges. The final rule will also deter live-event ticketing 
and short-term lodging businesses from engaging in these practices by 
allowing for the imposition of monetary relief in the form of consumer 
redress and civil penalties.
    In 2021, the Supreme Court in AMG Capital Mgmt., LLC v. FTC, 593 
U.S. 67, 82 (2021), held that section 13(b) of the FTC Act \493\ did 
not authorize the Commission to seek, or a court to order, equitable 
monetary relief for consumers such as restitution or disgorgement. The 
AMG ruling has made it significantly more difficult for the Commission 
to return money to injured consumers, particularly in cases that do not 
involve rule violations.\494\
---------------------------------------------------------------------------

    \493\ 15 U.S.C. 53(b).
    \494\ See NPRM, 88 FR 77436-38, nn.122, 211, 232 (discussing 
AMG).
---------------------------------------------------------------------------

    Since AMG, the primary means for the Commission to return money 
unlawfully taken from consumers has been through section 19 of the FTC 
Act, 15 U.S.C. 57b, which provides two paths for consumer redress. One 
path, under section 19(a)(2), typically requires the Commission to 
first conduct an administrative proceeding to determine whether the 
respondent violated the FTC Act; if the Commission finds that the 
respondent did so, the Commission can issue a cease-and-desist order, 
which might not become final until after the resolution of any appeals. 
To obtain monetary relief, the Commission then must initiate a separate 
action in Federal court under section 19 and, in that action, the 
Commission must prove that the violator in the administrative action 
engaged in objectively fraudulent or dishonest conduct.\495\
---------------------------------------------------------------------------

    \495\ 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 under subsection (b) of this section.'').
---------------------------------------------------------------------------

    The more efficient path to monetary relief is under section 
19(a)(1), which allows the Commission to recover redress in a single 
Federal court action for violations of a Commission rule relating to 
unfair or deceptive acts or practices.\496\ Under the rule, the 
Commission will now be able to use the section 19(a)(1) pathway to 
obtain redress for losses attributable to the specific unfair or 
deceptive practices the rule defines and prohibits.
---------------------------------------------------------------------------

    \496\ Certain statutes, such as the Restore Online Shoppers' 
Confidence Act, 15 U.S.C. 8401 through 8405, include provisions that 
treat violations of the statute as a violation of a rule for 
purposes of section 19(a)(1). See, e.g., 15 U.S.C. 8404(a).
---------------------------------------------------------------------------

    In addition, the final rule will allow courts to impose civil 
penalties under section 5(m)(1)(A) of the FTC Act, 15 U.S.C. 
45(m)(1)(A). Civil penalties will provide the deterrence necessary to 
incentivize compliance with the law, even in cases when it is difficult 
to quantify consumer harm.
    Overall, the rule's prohibition of bait-and-switch pricing tactics, 
including drip pricing, and misleading fees in the live-event ticketing 
and short-term lodging industries expands the Commission's enforcement 
toolkit and allows it to deliver on its consumer protection mission by 
stopping and deterring harmful conduct in these industries and making 
consumers whole when they have been harmed. The unfair or deceptive 
acts or practices involving bait-and-switch pricing and misleading fees 
encompassed by this final rule are prevalent and harmful to consumers 
and honest competitors. Thus, the unlocking of additional remedies 
through this rulemaking--particularly, the ability to obtain redress 
for consumers injured by misconduct and civil penalties against 
violators, where appropriate--will allow the Commission to more 
effectively police and deter unfair or deceptive pricing practices in 
these industries.

B. Alternatives to the Final Rule the Commission Considered, Reasons 
for the Commission's Determination That the Final Rule Will Attain Its 
Objectives in a Manner Consistent With Applicable Law, and the Reasons 
the Particular Alternative Was Chosen

    In analyzing the potential costs and benefits of the proposed rule, 
the Commission considered several alternatives, including terminating 
the rulemaking and a broader rule alternative. As the Commission 
observed in the NPRM, one potential alternative is to terminate the 
rulemaking and rely instead on the Commission's existing tools to 
combat unfair or deceptive practices relating to pricing, such as 
consumer education and enforcement actions brought under sections 5 and 
19(a)(2) of the FTC Act. However, terminating the rulemaking would 
deprive consumers of live-event tickets and short-term lodging of 
quantifiable time savings, and unquantifiable benefits including 
reduced frustration, less consumer

[[Page 2119]]

stress, and improved economic efficiency through a reduction of 
deadweight loss, as outlined in section V. Implementation of the rule 
also strengthens the Commission's enforcement program against unfair or 
deceptive pricing practices in the live-event ticketing and short-term 
lodging industries.
    As noted in the NPRM, given the strong indicators that bait-and-
switch pricing, including drip pricing, and misleading fees and charges 
are prevalent and worsening across industries, the Commission 
considered adopting a final rule that would have applied to all 
industries nationwide. The Commission declines to adopt such an 
industry-neutral rule at this time and instead chooses, in its 
discretion, to use its rulemaking authority incrementally. The 
Commission's rule first targets the two industries where the Commission 
first began evaluating drip pricing more than a decade ago and where 
consumer harm has been longstanding and continues to be pronounced. As 
noted in section II, most transactions in the live-event ticketing and 
short-term lodging industries occur online, where bait-and-switch 
pricing and misleading fees and charges have the highest potential to 
thwart the rule's stated objectives, namely price transparency and 
timeliness, as well as comparison shopping. In addition, consumers are 
often presented with identical offers (as is the case with live-event 
ticketing) or near-identical offers (as is the case with short-term 
lodging), and as such, price is the most salient feature for consumers 
in these transactions.
    The NPRM also discussed, and the Commission also considered, a 
small business exemption. Small businesses, which may have smaller 
profit margins, may be disproportionately affected by initial 
compliance costs associated with Sec.  464.2's disclosure requirements. 
On the other hand, a rule exempting small businesses would fail to 
accomplish the rule's core objectives of transparency in pricing and 
facilitating comparison shopping because consumers would continue to be 
subject to a mix of pricing disclosures in the live-event ticketing and 
short-term lodging industries that could include bait-and-switch 
pricing and misleading fees. As one commenter noted, ``Small businesses 
will benefit from the rule because it eliminates the deceptive 
practices that keep consumers from being able to comparison shop.'' 
\497\ The commenter also stated that a small business ``exception will 
undermine the ability of consumers to make purchasing decisions based 
on transparent and honest information.'' \498\ A small business 
exemption could also reduce consumer benefits arising from increased 
price transparency across markets and lower consumer confidence 
regarding whether the rule applies to specific purchases.
---------------------------------------------------------------------------

    \497\ FTC-2023-0064-3302 (Public Citizen).
    \498\ Id.
---------------------------------------------------------------------------

    Excluding small businesses could also harm honest competition 
because such an exemption might impose more uncertainty and compliance 
costs for businesses to determine whether the rule applies to them. In 
addition, as noted in section III, some industry commenters favored a 
rule that applied equally to all industry members, to facilitate 
comparison shopping and avoid the creation of competitive advantages.
    Some commenters, as noted in section III, expressed frustration 
with fees or charges they described as ``excessive'' or ``worthless.'' 
As discussed in the NPRM, an alternative to the final rule could be to 
explicitly prohibit excessive or worthless fees or charges in the live-
event ticketing and short-term lodging industries. This alternative may 
benefit consumers who pay excessive amounts for goods or services in 
these industries or for fees or charges that provide them little to no 
value, allowing them instead to save their money or spend it elsewhere.
    The Commission declines to adopt an alternative rule prohibiting 
worthless or excessive fees or charges, because doing so may raise 
additional questions for these industries and for the Commission 
regarding how to assess the value of fees or charges. In addition, the 
final rule may already accomplish some of the benefits of such an 
alternative. For example, the final rule requires total price to 
include all mandatory fees or charges (with limited exceptions for 
government charges and shipping charges). Transparency and competition 
on price could then disincentivize live-event ticketing and short-term 
lodging businesses from incorporating such fees into their pricing 
schemes altogether. In addition, consumer confusion related to the 
purpose or value of fees or charges would be addressed by the final 
rule's requirement to disclose the nature, purpose, and amount of any 
fees or charges lawfully excluded from total price, as well as the 
prohibition against misrepresenting any fees or charges.
    In sum, the rule accomplishes the Commission's objectives in the 
areas of live-event ticketing and short-term lodging consistent with 
applicable law, while providing the Commission additional time to 
consider further action. As explained in section V.E, the Commission 
believes the rule's benefits exceed the costs of the rule. Notably, the 
Commission believes, as detailed in Parts II, III, and V, that the rule 
also will result in additional tangible benefits from consumers' 
ability to accurately comparison shop for live-event tickets and short-
term lodging. Therefore, the Commission finds in this final regulatory 
analysis that adoption of the rule will result in benefits to the 
public that exceed the costs.

C. The NPRM's Preliminary Regulatory Analysis

    In the Economic Analysis of Costs and Benefits of the Proposed Rule 
in section VII.C of the NPRM (hereafter, ``Preliminary Regulatory 
Analysis''), the Commission described the anticipated effects of the 
proposed rule and quantified the expected benefits and costs to the 
extent possible. For each benefit or cost quantified, the analysis 
identified the data sources relied upon and, where relevant, the 
quantitative assumptions made. The Preliminary Regulatory Analysis 
measured the benefits and costs of the proposed rule against a baseline 
in which the Commission did not promulgate a rule addressing the unfair 
or deceptive practices of presenting incomplete or inaccurate pricing 
information that obscures total price and misrepresenting the nature 
and purpose of fees. Several of the benefits and costs were 
quantifiable for specific industries, but the Commission found that 
benefits at the economy-wide level were not quantifiable. The 
Preliminary Regulatory Analysis discussed the bases for uncertainty in 
the estimates.
    In the Preliminary Regulatory Analysis, the Commission performed a 
break-even analysis under various assumptions to determine the required 
benefits necessary to justify the estimated costs. Under the 
assumptions of high-end compliance costs and a 7% discount rate, the 
Commission found that if the average benefit to consumers from the 
proposed rule exceeded $6.65 per year over ten years, then the proposed 
rule's benefits would exceed its quantified economy-wide compliance 
costs. The expected benefit could be a result of reduced consumer 
search time, of increased consumer surplus from more efficient 
purchasing decisions, or a combination of the two. The Commission found 
in the Preliminary Regulatory Analysis that if the proposed rule 
resulted in savings from reduced search time that exceeded 15.82 
minutes per consumer per year over ten years, then the benefits from 
reduced search time alone would

[[Page 2120]]

exceed quantified compliance costs under the assumption of high-end 
costs and a 7% discount rate.

D. Significant Issues Raised by Comments, the Commission's Assessment 
and Response, and Any Changes Made as a Result

    In this section, the Commission summarizes its assessment of, and 
response to, the major concerns, comments, and suggestions raised by 
commenters about the Preliminary Regulatory Analysis. The Commission 
received comments about the Preliminary Regulatory Analysis from 
industry groups, law firms, consumer advocacy groups, think tanks, 
consumers, and business owners. Section V.D.1 addresses comments about 
the Commission's cost estimates, section V.D.2 addresses comments about 
the Commission's the benefits estimates, and section V.D.3 addresses 
comments specific to the economy-wide break-even analysis.
1. Comments on Costs
    In section V.D.1.a through d, the Commission addresses four major 
comments regarding the NPRM's cost estimates: (a) the estimated costs 
are too low; (b) there are unquantified costs to firms; (c) there are 
unquantified costs to consumers; and (d) there are unquantified costs 
to third parties. Section V.D.1.e addresses commenter concerns about 
costs that may stem from applying the rule to variable, dynamic, or 
contingent fees.
(a) Public Comments: Estimated Costs Are Too Low
    Commenters from members and representatives of the live-event 
ticketing and short-term lodging industries, among others, argued that 
estimated costs in the NPRM were too low because the analysis 
underestimated the number of attorney, data scientist, and web 
developer hours needed to comply with the proposed rule.\499\ These 
commenters contended that some businesses will require more time than 
the assumed average estimates of labor hours used in the Preliminary 
Regulatory Analysis. The Commission acknowledges the possibility that 
some businesses will incur a greater number of hours to comply with the 
final rule, but notes that this is consistent with the Preliminary 
Regulatory Analysis because the employee hour estimates used represent 
averages. These estimates capture the fact that some businesses will 
require more time than the average and some will require less. The 
Commission received additional comments with similar concerns about the 
Commission's compliance hours estimates as they apply to other specific 
industries such as movie theater ticketing, delivery apps, restaurants, 
bowling, and cable and broadband, which are no longer subject to the 
final rule.\500\ However, the Commission's argument that the compliance 
hours represent averages holds more broadly.
---------------------------------------------------------------------------

    \499\ FTC-2023-0064-2856 (National Football League); FTC-2023-
0064-3127 (U.S. Chamber of Commerce); FTC-2023-0064-3238 (Gibson, 
Dunn, & Crutcher LLP); FTC-2023-0064-3122 (Vivid Seats); FTC-2023-
0064-3094 (American Hotel & Lodging Association); FTC-2023-0064-3292 
(National Association of Theatre Owners); FTC-2023-0064-3293 (Travel 
Technology Association); FTC-2023-0064-3294 (International Franchise 
Association).
    \500\ FTC-2023-0064-3263 (Flex Association); FTC-2023-0064-3300 
(National Restaurant Association); FTC-2023-0064-3217 (Bowling 
Proprietors' Association of America); FTC-2023-0064-3233 (NCTA--The 
internet & Television Association).
---------------------------------------------------------------------------

    Two commenters in the live-event ticketing industry provided 
alternative estimates of average employee hours necessary to comply 
with the rule. Vivid Seats stated that, from its experience 
implementing upfront pricing as a ticket seller in three states, the 
Commission underestimated the employee hours needed for live-event 
ticket sellers by at least a factor of five.\501\ Conversely, another 
live-event ticket seller, TickPick, commented that, for the most part, 
live-event ticketing companies would incur an immaterial cost to 
implement all-in pricing because ``the technology already exists within 
ticketing platforms to eliminate drip pricing and would simply need to 
be applied to events in the U.S.'' \502\ Again, the Commission notes 
that the estimated employee hours reflect an average and, as these 
commenters stated, it is possible that firms like Vivid Seats may 
require more hours, while others, like TickPick, may require fewer.
---------------------------------------------------------------------------

    \501\ FTC-2023-0064-3122 (Vivid Seats).
    \502\ FTC-2023-0064-3212 (TickPick, LLC).
---------------------------------------------------------------------------

    The National Restaurant Association stated that it would take 
restaurants at least twenty hours a year to reoptimize menu prices 
because the Commission's estimates did not account for supply chain 
issues that may change prices or consider that some restaurants may 
offer seasonal menus.\503\ The Preliminary Regulatory Analysis omitted 
these costs because they are not a result of the rule; restaurants will 
face supply chain fluctuations and seasonal changes to their menus 
regardless of the rule.\504\ However, this is no longer a concern in 
the final rule, which does not apply to restaurants.
---------------------------------------------------------------------------

    \503\ FTC-2023-0064-3300 (National Restaurant Association).
    \504\ See, e.g., id. (National Restaurant Association commented 
that there are ``common supply chain issues that may cause certain 
food items to increase or decrease in price'' and ``thousands of 
restaurants . . . offer varying seasonal menus with completely 
different offerings''); FTC-2023-0064-2992 (Individual Commenter who 
owns a restaurant commented that complying with the rule would not 
be complex for restaurants because ``[t]hey reprice and change 
dishes frequently''); FTC-2023-0064-3219 (Georgia Restaurant 
Association also referred to ``rising food costs [and] supply chain 
disruptions''); FTC-2023-0064-3180 (Independent Restaurant Coalition 
commented about ``increasing food costs''); FTC-2023-0064-3078 
(Washington Hospitality Association referred to supply chain issues, 
inflation, and other rising costs).
---------------------------------------------------------------------------

    The Office of Advocacy of the United States Small Business 
Administration (``SBA Office of Advocacy'') argued that costs estimated 
in the Preliminary Regulatory Analysis are too low because data 
scientist and web developer hours should be ongoing costs, rather than 
one-time costs.\505\ It argued that ``the FTC should assume a 
percentage of firms that in the previous year were in compliance will 
not be the following year.'' The Commission does not believe that these 
ongoing costs are attributable to the rule. Once firms have adjusted to 
the rule, making sure new pricing strategies comply with the rule is 
considered a part of the normal course of business, as is ensuring 
compliance with other existing laws and regulations.
---------------------------------------------------------------------------

    \505\ U.S. Small Bus. Admin., Office of Advocacy, Re: Trade 
Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001, 
https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
---------------------------------------------------------------------------

    Some commenters identified purported costs that were either already 
captured in the economic analysis or would not be affected by the rule. 
The U.S. Chamber of Commerce and SBA Office of Advocacy argued that the 
Preliminary Regulatory Analysis did not account for the time needed to 
train staff to provide new upfront prices to customers for in-person, 
online, and phone sales.\506\ The Commission believes training time, to 
the extent that it exists, is already captured in the assumed range of 
data scientist and web developer hours, which the Commission has noted 
serves as a proxy for any rule-associated costs from adjusting pricing 
strategies and displaying prices to consumers. Another commenter argued 
that businesses would need to ``hire graphic designers to make 
advertisements look appealing and web designers or software engineers 
to rebuild entire websites.'' \507\ In addition, it argued that the 
Preliminary Regulatory Analysis did not account for

[[Page 2121]]

costs needed to replace physical ads, subway ads, and billboards and 
speculated that would take ``thousands of hours.'' The final rule has 
no bearing on a firm's decision to engage graphic designers to ensure 
its advertisements are ``appealing,'' and the Commission does not 
believe--and commenters have failed to cite evidence demonstrating--
that the need to update prices will require rebuilding entire websites. 
Moreover, as discussed in more detail in section V.E.3.a, the estimated 
range of web developer time is a proxy for any costs associated with 
changing price displays to comply with the rule.
---------------------------------------------------------------------------

    \506\ See, e.g., id.; FTC-2023-0064-3127 (U.S. Chamber of 
Commerce).
    \507\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------

    Two commenters argued that the Preliminary Regulatory Analysis 
underestimated costs because the wage rates for attorneys and data 
scientists were too low and were not the same as, for example, 
attorneys fees.\508\ One commenter stated that the estimated wages did 
not account for overhead costs or reflect the higher costs of hiring 
outside counsel and data scientists and suggested using $306 in 
attorney wages and $59 in data scientist wages to reflect these higher 
costs.\509\ In response to these suggestions, the Commission conducted 
a sensitivity analysis that multiplied wage rates by two to reflect 
overhead and hiring costs for the short-term lodging and live-event 
ticket industries. The results of the sensitivity analysis are provided 
in section V.E.3.b.i and do not impact the Commission's assessment that 
the benefits exceed the costs. The Commission received two additional 
comments with similar concerns about the Commission's wage estimates as 
they apply to the restaurant industry and the innovation economy, which 
are no longer subject to the final rule.\510\
---------------------------------------------------------------------------

    \508\ Id.; U.S. Small Bus. Admin., Office of Advocacy, Re: Trade 
Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001, 
https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
    \509\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \510\ FTC-2023-0064-3300 (National Restaurant Association); FTC-
2023-0064-3202 (TechNet).
---------------------------------------------------------------------------

(b) Public Comments: Unquantified Costs to Firms
    The NPRM noted that there are unquantified costs of the rule, 
primarily in the form of unintended consequences to consumers as they 
adjust to upfront pricing. In addition, commenters identified 
additional types of unquantified costs to firms.
    An academic commenter argued that there may be unintended 
consequences to firms from partial compliance.\511\ The commenter 
stated that no firm would want to be the first in its market to comply, 
and the resulting ``partial or uneven compliance would cause compliant 
firms to lose business to firms that ignored the rule. Implementing 
coordinated compliance for the entire economy would be difficult with 
the [Commission's] limited resources.'' The Commission believes that 
the partial compliance described by this commenter is the current 
status quo in the absence of a rule. Currently, some firms impose drip 
pricing, and these firms may have a competitive advantage over those 
that do not impose drip pricing. Under the rule, the Commission expects 
all firms in the short-term lodging and live-event ticket industries to 
provide total price, which is an improvement relative to the status 
quo. If, as the commenter argues, some degree of partial compliance 
remains, the potential competitive advantage from non-compliance would 
be similar to the status quo, with the additional risk to non-compliant 
firms of law enforcement actions with potential exposure to consumer 
redress and penalties. In other words, even with some degree of partial 
compliance after the final rule, such an equilibrium would still result 
in more benefits for consumers than a world without the final rule. The 
commenter's concern that implementing coordinated compliance for the 
whole economy may be difficult is mitigated in the final rule, which 
only applies to two industries. In addition, while the Commission may 
have limited enforcement resources, it expects consumer behavior 
regarding fees to adjust over time due to the final rule. Once upfront 
pricing becomes the new norm, consumers will expect to see total prices 
displayed upfront and will be more likely to punish firms that ignore 
the rule by taking their business elsewhere. Therefore, any partial 
compliance is likely to be temporary.
---------------------------------------------------------------------------

    \511\ FTC-2023-0064-2891 (Mary Sullivan, George Washington 
University, Regulatory Studies Center).
---------------------------------------------------------------------------

    Nine commenters stated the NPRM's assertion that the rule will 
provide a harmonized legal framework for all States is incorrect 
because, as discussed in section III, the rule only preempts State laws 
if they are inconsistent with the rule.\512\ Commenters noted that an 
added layer of regulation is an additional cost for businesses as they 
determine whether they are compliant with the various rules to which 
they are subject. The Commission updates the final regulatory analysis 
to reflect this concern as it applies to covered goods or services, but 
notes that the cost was already captured by the assumption that all 
firms within the live-event ticketing and short-term lodging industries 
will spend on average one hour to determine whether the rule applies to 
them.
---------------------------------------------------------------------------

    \512\ FTC-2023-0064-2856 (National Football League); FTC-2023-
0064-2887 (Progressive Policy Institute); FTC-2023-0064-3122 (Vivid 
Seats); FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-
0064-3133 (National Multifamily Housing Council and National 
Apartment Association); FTC-2023-0064-3143 (ACA Connects--America's 
Communications Association); FTC-2023-0064-3233 (NCTA--The internet 
& Television Association); FTC-2023-0064-3238 (Gibson, Dunn & 
Crutcher LLP); FTC-2023-0064-3258 (National Taxpayers Union 
Foundation).
---------------------------------------------------------------------------

    One commenter asserted that ``[t]he Commission erroneously 
disclaims the possibility of losses to producer surplus.'' \513\ The 
commenter argued that the Commission's statement that consumer surplus 
is reduced due to consumer search costs under drip pricing ignores the 
countervailing increase of producer surplus. The commenter further 
contended that the Preliminary Regulatory Analysis omits that, under 
drip pricing, consumers purchase more expensive products, which 
amounts, in part, to a transfer of surplus from consumers to sellers. 
The Commission acknowledges the transfer of surplus due to higher 
prices. However, the commenter incorrectly assumes that the movement of 
surplus from consumers to producers will be a one-to-one transfer and 
presupposes that there will be no increase in consumer search time or 
deadweight loss. As is discussed in section V.E.2.a.i, the increased, 
unnecessary consumer search time due to drip pricing results in a net 
cost to society--no one benefits from the additional hours consumers 
collectively spend searching for price information and then being 
surprised with a higher final amount at the time of purchase. In 
addition, as is discussed in section V.E.2.a.ii, inefficient 
overconsumption under drip pricing generates a deadweight loss. 
Inefficiently high spending under drip pricing thus results in a cost 
to society in the form of higher search costs and a deadweight loss in 
addition to a transfer of surplus from consumers to sellers in the form 
of higher seller revenue. Overall, this results in a net loss to 
society.
---------------------------------------------------------------------------

    \513\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------

    Lastly, some commenters representing the communications services 
industry noted that there are unquantified costs to cable, broadband, 
and wireless providers due to similar upfront pricing requirements from 
the FCC.\514\ The

[[Page 2122]]

Commission's decision to narrow the final rule to covered goods or 
services renders these comments inapplicable.
---------------------------------------------------------------------------

    \514\ FTC-2023-0064-2884 (NTCA--The Rural Broadband 
Association); FTC-2023-0064-3143 (ACA Connects--America's 
Communications Association); FTC-2023-0064-3233 (NCTA--The internet 
& Television Association); FTC-2023-0064-3234 (CTIA--The Wireless 
Association).
---------------------------------------------------------------------------

(c) Public Comments: Unquantified Costs to Consumers
    The NPRM noted that there may be unquantified costs of the rule in 
the form of consumer confusion as consumers adjust to upfront pricing. 
Commenters argued there were several additional unquantified costs to 
consumers. One commenter suggested that consumers would experience 
higher search time if companies limit or eliminate price advertising to 
avoid the regulatory risk of providing an inaccurate total price.\515\ 
The Commission reiterates that the rule does not require firms to 
eliminate price advertising; rather the rule requires covered firms to 
present total price to consumers whenever businesses offer, display, or 
advertise any price of a covered good or service. The Commission 
believes that unnecessarily high consumer search time and 
anticompetitive effects resulting from different pricing strategies are 
already a problem absent the rule, where firms advertise a mix of 
dripped prices, upfront prices, and no prices. The commenter did not 
provide evidence for why, under the rule, some firms are, or would be, 
unable to advertise total price or why it would result in higher search 
time and a less competitive equilibrium than the status quo. The 
Commission received two additional comments with similar concerns as 
they apply to the telecommunications and rental housing industries, 
which are no longer subject to the final rule.\516\
---------------------------------------------------------------------------

    \515\ FTC-2023-0064-3127 (U.S. Chamber of Commerce).
    \516\ FTC-2023-0064-3143 (ACA Connects--America's Communication 
Association; FTC-2023-0064-3296 (Bay Area Apartment Association).
---------------------------------------------------------------------------

    Two commenters also suggested there might be potentially higher 
consumer search time if businesses unbundle previously bundled options 
in an effort to reduce the advertised price in response to the rule, 
stating that hotels, for example, may make amenities such as wi-fi, gym 
access, and parking pay-per-use.\517\ The Commission acknowledges that 
some businesses may unbundle previously bundled options but reiterates 
that the rule prohibits businesses from treating features as optional 
if they are necessary to render the good or service fit for its 
intended use. The Commission also notes that consumers are likely to 
punish firms that unbundle features that they expect to be included in 
total price by taking their business elsewhere. A commenter also 
speculated that there may be an increase in deadweight loss if 
businesses set inefficiently high prices as they reoptimize prices or 
seek to cut costs by reducing the quality of goods and services.\518\ 
The Commission believes this is unlikely. Under the rule, there will be 
competitive pressure to adjust both price and product quality to more 
efficient levels when firms must present total price. As discussed in 
section V.E.1.b, drip pricing sometimes leads consumers to 
underestimate the total price of a good or service. The result is that 
consumers start transactions not understanding that the final amount of 
payment will be higher than what they are willing or able to pay. For 
example, consumers may book premium seats to a concert believing they 
could afford the purchase, only to realize afterward that the total 
price was understated. Had they understood the final amount of payment, 
they would have selected seats at a lower price point or skipped the 
concert altogether. The final rule will help ensure that consumers' 
preferences, both in terms of cost and quality, can be realized.
---------------------------------------------------------------------------

    \517\ FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-
0064-3238 (Gibson, Dunn & Crutcher LLP).
    \518\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------

    One industry group argued that because intermediary travel websites 
rely on short-term lodging firms for accurate price information, the 
proposed rule may incentivize these firms to charge intermediaries a 
premium for accurate pricing information, ``knowing that the 
intermediaries face significant regulatory risk without access to such 
information.'' \519\ The commenter suggested that these additional 
costs could be passed onto consumers without adding any value. As 
explained in section III, the Commission reiterates that the rule 
requires businesses that sell or advertise through intermediaries to 
provide the intermediaries with accurate pricing information (including 
about mandatory and optional fees). The rule's coverage of business-to-
business transactions protects consumers when they purchase goods or 
services, the sellers that do business with intermediaries, and the 
intermediaries themselves. The Commission further notes that hotels are 
already free to charge travel websites and intermediaries money in 
exchange for pricing information, yet they do not because these travel 
websites and intermediaries allow the hotels to reach more consumers. 
In addition, under the status quo, intermediaries already contend with 
different fee practices across short-term lodging firms and are 
required to ensure they consistently disclose pricing information to 
consumers; the final rule should obviate the need for intermediaries to 
deal with inconsistent fee practices moving forward. Therefore, the 
final rule should not change any incentives relative to the status quo, 
and it is unlikely that hotels will change their behavior in this 
respect as a result of the rule.
---------------------------------------------------------------------------

    \519\ FTC-2023-0064-3293 (Travel Technology Association).
---------------------------------------------------------------------------

    A commenter disagreed with the Commission's statement that consumer 
confusion will be a temporary cost as prices adjust.\520\ The commenter 
also argued that consumers may inefficiently under-consume when 
confronted with higher upfront prices. The Commission believes that 
consumers who may inefficiently under-consume due to the rule because 
they are anticipating hidden fees are the same consumers who are 
accurately accounting for hidden fees and efficiently consuming under 
the status quo. The percentage of consumers who expect and anticipate 
hidden fees is likely to be very small because, as discussed in the 
NPRM, empirical and theoretical models consistently show that consumers 
strongly and systematically underestimate the full price they will pay 
when faced with drip pricing, and they pay more than they otherwise 
would in a transparent marketplace.\521\ Therefore, if these consumers 
are savvy enough to adjust their expectations and accurately account 
for hidden fees under the status quo, then it is likely that they will 
quickly adjust their expectations after the final rule becomes 
effective and any under-consumption will be temporary.
---------------------------------------------------------------------------

    \520\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \521\ Tom Blake et al., Price Salience and Product Choice, 40 
Mktg. Sci. 619 (2021), https://doi.org/10.1287/mksc.2020.1261; 
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; Alexander Rasch et al., Drip Pricing and its 
Regulation: Experimental Evidence, 176 J. Econ. Behav. & Org. 353 
(2020), https://doi.org/10.1016/j.jebo.2020.04.007.
---------------------------------------------------------------------------

    The commenter also misinterpreted the results of a study conducted 
in the live-event ticketing market, Blake et al. (2021) (the ``Blake 
Study''), in an effort to support the claim that seeing total price 
will deter consumers from making efficient and economically desirable 
purchases.\522\ The Blake Study found

[[Page 2123]]

that providing an upfront total price reduces both the quantity and 
quality of purchases relative to the inefficiently high levels of 
quantity and quality purchased under dripped prices. In other words, 
when consumers do not have truthful, timely, and transparent 
information about the final price, they purchase goods of higher 
quality and make more purchases than they would if they had full 
information. The commenter incorrectly implied that this reduction 
amounts to inefficient underconsumption when, in fact, it represents a 
return to an efficient level and quality of consumption compared to 
drip pricing. The authors explicitly concluded: ``Our empirical results 
support our hypotheses: price obfuscation distorts both quality and 
quantity decisions.'' \523\
---------------------------------------------------------------------------

    \522\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP, 
discussing Blake, supra note 521).
    \523\ Blake, supra note 521.
---------------------------------------------------------------------------

    Five industry groups identified what they incorrectly labeled as 
three additional types of unquantified costs for consumers. The 
``costs'' identified actually are either transfers from consumers to 
producers (resulting in no net loss for society) or reflect 
misunderstandings of the rule. These commenters claimed that prices 
would increase as businesses pass compliance costs onto consumers,\524\ 
that prohibiting businesses from displaying partitioned pricing would 
decrease transparency for consumers,\525\ and that forcing businesses 
to display all optional fees upfront would overload and confuse 
consumers with often irrelevant information.\526\ None of these are 
true costs resulting from the final rule. First, increased prices that 
result from the sellers' increased compliance costs are a transfer of 
consumer surplus to producer surplus and do not result in a cost to 
society. Second, the rule does not prohibit itemization. As long as 
total price is clear and conspicuous and most prominent, businesses are 
free to display the components of total price if they so choose. 
Finally, the rule does not require businesses to display all optional 
fees upfront. Rather, businesses must disclose clearly and 
conspicuously, before the consumer consents to pay, the nature, 
purpose, and amount of any fee or charge imposed on the transaction 
that been excluded from total price.
---------------------------------------------------------------------------

    \524\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3033 (The Rebel Lounge et al.).
    \525\ FTC-2023-0064-3028 (Competitive Enterprise Institute); 
FTC-2023-0064-3208 (FreedomWorks).
    \526\ FTC-2023-0064-3127 (U.S. Chamber of Commerce).
---------------------------------------------------------------------------

    One policy organization commented on the study \527\ cited in the 
NPRM that shows partitioned pricing decreases consumers' ability to 
accurately recall total costs and increases their demand.\528\ The 
commenter argued that the conclusion cited in the NPRM does not follow 
from the study because participants who recalled a lower price could 
have known the total cost but misunderstood the question to be asking 
for the base price excluding the fees. This interpretation is incorrect 
because there was no ambiguity in the study question at issue; it 
explicitly asked for the total cost inclusive of all fees.
---------------------------------------------------------------------------

    \527\ Vicki G. Morwitz et al., Divide and Prosper: Consumers' 
Reactions to Partitioned Prices, 35 J. Mktg. Rsch. 453 (1998), 
https://doi.org/10.1177/002224379803500404.
    \528\ FTC-2023-0064-3028 (Competitive Enterprise Institute).
---------------------------------------------------------------------------

(d) Public Comments: Unquantified Costs to Third Parties
    One commenter argued that, as consumer expectations adjust to 
upfront prices, inefficiently low spending may affect other businesses 
in the supply chain such as manufacturers, packagers, shippers, and 
warehouses.\529\ The commenter also argued that lower spending may 
affect live-event venues and ticket resellers due to decreased sales in 
food, drinks, and merchandise. In addition, the commenter claimed that 
lower spending will lead to lower sales tax revenue for State and local 
governments, causing them to borrow more money at high interest rates, 
raise taxes, or eliminate services. As discussed in detail in section 
V.E.2.c, the Commission believes that any inefficient underconsumption 
due to consumer confusion is likely to be temporary, as are any 
resulting costs to third parties.
---------------------------------------------------------------------------

    \529\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------

(e) Public Comments: Costs From Incorporating Contingent Fees Into 
Total Price
    Several commenters, including industry groups, policy 
organizations, and an academic, expressed concern that it would be 
difficult for firms to display total price in cases where total price 
is unknown because it depends on consumer conduct or choices.\530\ In 
cases where price is determined through customization, total price may 
not be known until after consumers have finalized their selection of 
options. The Commission addresses contingent fees in section III.
---------------------------------------------------------------------------

    \530\ See, e.g., id.; FTC-2023-0064-3140 (Merchant Advisory 
Group); FTC-2023-0064-3180 (Independent Restaurant Coalition); FTC-
2023-0064-3300 (National Restaurant Association); FTC-2023-0064-3202 
(TechNet); FTC-2023-0064-3127 (U.S. Chamber of Commerce); FTC-2023-
0064-3173 (Center for Individual Freedom); FTC-2023-0064-3258 
(National Taxpayers Union Foundation); FTC-2023-0064-2891 (Mary 
Sullivan, George Washington University, Regulatory Studies Center); 
FTC-2023-0064-3293 (Travel Technology Association); FTC-2023-0064-
3133 (National Multifamily Housing Council and National Apartment 
Association); FTC-2023-0064-3296 (Bay Area Apartment Association).
---------------------------------------------------------------------------

2. Comments on Benefits
    Section V.D.2.a addresses the concern of some commenters that the 
NPRM's benefit calculations are too high, and section V.D.2.b outlines 
several unquantified benefits identified by commenters.
(a) Public Comments: Benefits Are Too High
    One commenter argued that benefits are too high because the 
Preliminary Regulatory Analysis overestimated consumer search costs 
that result from drip pricing.\531\ It argued that consumers benefit 
from seeing an advertisement with dripped fees compared to their 
position before seeing any advertisement. The Commission believes this 
is not the correct comparison to make when determining whether consumer 
search time will change as a result of the rule; a more apt comparison 
considers consumer benefit when faced with total price versus drip 
pricing. The Commission expects that the rule will decrease consumer 
search time, because consumers will spend less time searching for total 
price under the rule's framework versus a dripped pricing framework.
---------------------------------------------------------------------------

    \531\ FTC-2023-0064-3028 (Competitive Enterprise Institute).
---------------------------------------------------------------------------

    A commenter argued that the rule's estimated benefits are too high 
because the value-of-time estimate of $24.40 is too high.\532\ The 
$24.40 figure is calculated by taking 82% of the 2022 mean hourly wage 
from the Bureau of Labor Statistics. A meta-analysis of eleven studies 
conducted between 2004-2015 finds that the value of time as a 
percentage of mean wage is about 82% in the United States.\533\ In 
addition, previous studies indicate that, over time, people's time has 
become more valuable as a fraction of what they earn.\534\ So, it is 
possible that the current percentage in 2024 may actually be higher 
than 82%. The final regulatory analysis in section V.E updates the 
value of time using the same method but

[[Page 2124]]

with the more recent 2023 mean hourly wage.
---------------------------------------------------------------------------

    \532\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
    \533\ Daniel S. Hamermesh, What's to Know About Time Use?, 30 J. 
Econ. Surv. 198 (2016), https://doi.org/10.1111/joes.12107.
    \534\ Id.
---------------------------------------------------------------------------

    The commenter further asserted that it would be more accurate to 
calculate the value of time as a percentage of the median hourly wage 
instead of the mean hourly wage, stating that ``the mean wage is driven 
by a few outliers.'' \535\ Relying on the median hourly wage, however, 
would be incorrect and reflects a misunderstanding of how the value of 
time is calculated. The value of time initially was calculated as an 
absolute dollar amount per hour in the studies reviewed by the 
Hamermesh (2016) paper, and then expressed as a percentage of the mean 
hourly wage at that time. That percentage can be applied to the current 
mean hourly wage to calculate an updated value of time. If the 
Commission expressed the value of time as a percentage of the median 
wage, this would not be a ``more accurate'' calculation of the value of 
time as the commenter suggests, but simply a different way of 
expressing the same value of time estimated by Hamermesh (2016).
---------------------------------------------------------------------------

    \535\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------

    The commenter also argued that the Commission's valuation of time 
estimate is inaccurate because some consumers may have lower valuations 
of time, such as consumers who earn no wages or lower wages, and 
consumers who ``enjoy shopping'' and may not believe they incur costs 
from searching.\536\ These concerns are consistent with the 
Commission's estimated value of time, which captures an average of a 
representative group of American consumers across eleven studies; some 
individuals will have lower valuations of time, and some will have 
higher.
---------------------------------------------------------------------------

    \536\ Id.
---------------------------------------------------------------------------

    Furthermore, the Commission distinguishes between efficient and 
inefficient searching by consumers. Consumers, based on their 
preferences, may find some amount of search, or comparison shopping, to 
be beneficial to their consumption choices. A consumer will naturally 
choose an efficient level of search such that the marginal benefit of 
discovering an additional different price or comparable good equals the 
marginal cost of the time and effort to perform the additional search. 
The Commission recognizes the purpose of this efficient level of search 
and does not count it as a harm. When consumers face drip pricing, they 
must spend additional time and effort to acquire full pricing 
information allowing them to properly comparison shop. This additional 
time and effort results in an inefficient level of search that harms 
consumers with no countervailing benefit. In the Commission's final 
regulatory analysis, the estimate of cost savings through reduced 
search time is based on the estimated difference between consumer 
search time under drip pricing and consumer search time under upfront 
pricing; that is, the estimate is based solely on the estimate of the 
inefficient level of search.
    Finally, another commenter argued that benefits are too high in the 
short-term lodging calculation because the Preliminary Regulatory 
Analysis estimated the reduction in listings viewed as a result of the 
proposed rule using data from a study done in the live-event ticketing 
market.\537\ However, the Commission's base number of listings viewed 
under the status quo was taken from studies conducted in the short-term 
lodging industry. The live-event ticketing study provided a scaling 
factor that the Commission used to estimate a percentage reduction in 
listings viewed in response to the rule. The commenter neither 
demonstrated why the Commission's method overestimated the reduction in 
listings viewed nor provided the Commission with additional data.
---------------------------------------------------------------------------

    \537\ FTC-2023-0064-3127 (U.S. Chamber of Commerce).
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(b) Public Comments: Unquantified Benefits
    The NPRM identified the rule's unquantified benefits, primarily a 
reduction in deadweight loss as consumers make more efficient 
purchasing decisions. Several comments from consumer and worker 
protection groups identified additional unquantified benefits of the 
rule to low-income households,\538\ incarcerated people and their 
families,\539\ and to restaurant workers.\540\ Although these comments 
no longer apply to the final rule, the Commission acknowledges that the 
broader rule was likely to positively impact some vulnerable 
populations like those discussed in the comments and may have had 
second-order effects on housing security and the labor market.
---------------------------------------------------------------------------

    \538\ FTC-2023-0064-2883 (District of Columbia, Office of the 
People's Counsel).
    \539\ FTC-2023-0064-3283 (National Consumer Law Center, Prison 
Policy Initiative, and advocate Stephen Raher).
    \540\ FTC-2023-0064-3248 (DC Jobs With Justice on behalf of Fair 
Price, Fair Wage Coalition).
---------------------------------------------------------------------------

    One commenter also recommended that the Commission further explain 
or quantify why the rule would result in enforcement resource savings 
as stated in the NPRM.\541\ The Commission does not quantify the net 
effect of the rule on enforcement resources due to a lack of data, but 
discusses in detail the rule's enforcement benefits in section V.A. 
Based on its experience, the Commission finds that the resources it 
needs to expend under the two-step pathway pursuant to section 19(a)(2) 
are typically greater because the Commission needs to initiate two 
separate proceedings.
---------------------------------------------------------------------------

    \541\ FTC-2023-0064-3146 (Institute for Policy Integrity, New 
York University School of Law).
---------------------------------------------------------------------------

3. Comments on the Economy-Wide Break-Even Analysis
    In this section, the Commission addresses comments specific to the 
economy-wide break-even analysis of the Preliminary Regulatory 
Analysis. Section V.D.3.a addresses comments that argued the 
Commission's break-even analysis contained incorrect assumptions or 
errors; section V.D.3.b addresses comments that claimed a break-even 
analysis is not enough to justify an economy-wide rule; and section 
V.D.3.c addresses a comment that argued the break-even analysis is 
satisfactory and recommended further analysis to strengthen it.
(a) Public Comments: Break-Even Analysis Has Incorrect Assumptions or 
Contains Errors
    Three commenters argued that the Commission's assumption that 90% 
of firms are already in compliance with the proposed rule was 
inaccurate.\542\ This comment does not apply to the final rule, which 
no longer contains an economy-wide analysis. However, the Commission 
reaffirms its break-even calculation in the Preliminary Regulatory 
Analysis, and acknowledges uncertainty regarding the number of firms in 
the economy that currently employ unfair or deceptive fees or charges 
and that would need to incur additional costs to comply with the rule. 
To address the uncertainty, the Preliminary Regulatory Analysis 
provided both the break-even benefits required if 90% of firms in the 
economy are already compliant with the rule, as well as the break-even 
benefits required if 50% of the firms were already compliant with the 
rule.
---------------------------------------------------------------------------

    \542\ FTC-2023-0064-3233 (NCTA--The Internet & Television 
Association); FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP); FTC-
2023-0064-3294 (International Franchise Association).

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[[Page 2125]]

    One commenter also argued that the $6.65 average annual per-
consumer benefit number in the Preliminary Regulatory Analysis is too 
low because the Commission calculated the necessary break-even benefit 
level by dividing estimated costs by all U.S. adults, rather than only 
consumers who make live-event ticket and short-term lodging 
purchases.\543\ The Commission emphasizes that the $6.65 figure from 
the Preliminary Regulatory Analysis is an average per-person benefit. 
In the same way that the estimated attorney hours assumes that some 
small businesses will not hire an attorney to ensure compliance, the 
benefit per consumer figure reflects the fact that some adults will not 
encounter dripped fees. The Commission does not dispute that some 
consumers will see much higher benefits than others. The same argument 
applies to the final rule, where the Commission recalculates the 
average annual per-consumer break-even benefit level using only the 
costs from covered goods or services.
---------------------------------------------------------------------------

    \543\ FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP).
---------------------------------------------------------------------------

    Finally, the same commenter contended that both the one-time and 
annual costs for the high-end estimates in table 2 of the Preliminary 
Regulatory Analysis were calculated incorrectly.\544\ This comment no 
longer applies to the final rule, which does not contain an economy-
wide break-even analysis.
---------------------------------------------------------------------------

    \544\ Id.
---------------------------------------------------------------------------

(b) Public Comments: Break-Even Analysis Is Not Enough To Justify an 
Economy-Wide Rule
    Some commenters disagreed that the rule should apply to the whole 
economy when the Preliminary Regulatory Analysis quantifies a net 
benefit for two industries and relies on a break-even analysis for the 
remainder of the economy.\545\ Other commenters similarly stated that 
the Preliminary Regulatory Analysis should include an industry-by-
industry cost-benefit analysis.\546\ The final rule is limited to only 
covered goods or services, which are offered by the live-event 
ticketing and short-term lodging industries.
---------------------------------------------------------------------------

    \545\ See, e.g., id.; FTC-2023-0064-3127 (U.S. Chamber of 
Commerce); FTC-2023-0064-2891 (Mary Sullivan, George Washington 
University, Regulatory Studies Center); FTC-2023-0064-3173 (Center 
for Individual Freedom); FTC-2023-0064-3208 (FreedomWorks); FTC-
2023-0064-3143 (ACA Connects--America's Communications Association); 
FTC-2023-0064-3258 (National Taxpayers Union Foundation).
    \546\ See, e.g., FTC-2023-0064-3133 (National Multifamily 
Housing Council and National Apartment Association); FTC-2023-0064-
3143 (ACA Connects--America's Communications Association); FTC-2023-
0064-3258 (National Taxpayers Union Foundation); FTC-2023-0064-3197 
(American Beverage Licensees).
---------------------------------------------------------------------------

    The Commission emphasizes that a break-even analysis is encouraged 
by OMB Circular A-4 when there are unquantifiable costs or benefits, 
and affirms that its break-even analysis in the Preliminary Regulatory 
Analysis is consistent with OMB guidance.\547\ In the final regulatory 
analysis, the Commission identifies some of the unquantified benefits 
to the rule and provides a similar break-even analysis for the live-
event ticketing and short-term lodging industries. The Commission also 
provides benefit-cost analyses demonstrating that the quantified 
benefits exceed the quantified costs.
---------------------------------------------------------------------------

    \547\ Office of Mgmt. & Budget, Circular A-4 (Sep. 17, 2003) 
(hereinafter, OMB Circular A-4), https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/.
---------------------------------------------------------------------------

(c) Public Comments: Break-Even Analysis Is Satisfactory
    Conversely, another commenter noted that the Commission's break-
even analysis is satisfactory and suggested the Commission provide 
further analysis to support the conclusion that time savings resulting 
from the rule are likely to exceed the break-even threshold.\548\ 
Although this comment no longer applies to the final rule, which 
focuses on addressing hidden and misleading fees in the live-event 
ticketing and short-term lodging industries, the Commission 
acknowledges that there is economic support for a broader rule.
---------------------------------------------------------------------------

    \548\ FTC-2023-0064-3146 (Institute for Policy Integrity, New 
York University School of Law).
---------------------------------------------------------------------------

E. Economic Regulatory Analysis of the Final Rule's Costs and Benefits

    The Commission has narrowed the application of the final rule to a 
limited set of covered goods or services, which comprise live-event 
ticketing and short-term lodging. This in turn necessitates revisions 
to the Preliminary Regulatory Analysis. The final regulatory analysis 
no longer includes the economy-wide break-even analysis. The Commission 
provides the per-consumer break-even benefit levels for the live-event 
ticketing and short-term lodging industries, as well as quantified 
benefits and costs for these industries. After incorporating these 
revisions and updating numbers based on recent data releases, the 
Commission confirms in the final regulatory analysis that the benefits 
of the rule exceed the costs. Specifically, the Commission estimates 
that the quantified benefits of the rule will exceed its quantified 
costs, and the Commission believes that the total benefits of the rule 
(quantified and unquantified) will outweigh its total costs (quantified 
and unquantified).
    The Commission discusses in the final regulatory analysis the 
projected impact of the rule's prohibition on offering, displaying, or 
advertising any price of a covered good or service without clearly and 
conspicuously disclosing total price, as well as the rule's prohibition 
on misrepresentations regarding any fee or charge, including the 
nature, purpose, amount, or refundability of any fee or charge, and the 
identity of the good or service for which the fee or charge is imposed. 
The Commission's analysis also assesses the impact of the rule's 
required disclosures of the nature, purpose, and amount of any fee or 
charge imposed on the transaction that has been lawfully excluded from 
total price, the identity of the good or service for which the fee or 
charge is imposed, and the final amount of payment. When possible, the 
Commission quantifies the benefits and costs and notes where 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 Commission makes clear which quantities are 
being assumed.
    The Commission uses ten years for the time period of analysis 
because the Commission's trade regulation rules are subject to review 
every ten years. Tables 1 and 2 summarize the main findings of the 
final regulatory analysis. Table 1 presents the potential costs, 
benefits, and resulting net benefits for the live-event ticketing and 
short-term lodging industries. 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 firms would incur to comply with 
the rule.

[[Page 2126]]

    The quantified net benefits for the live-event ticketing and short-
term lodging industries are positive. There are also unquantified 
benefits, which may arise from a reduction in deadweight loss as 
consumers experience greater price transparency and make fewer mistake 
purchases. Unquantified costs may stem from potential adjustment costs 
or consumer confusion as expectations adjust under the rule.
    For both quantified benefits and costs, the final regulatory 
analysis provides 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 a ten-year period. Benefits and costs 
are more valuable to society the sooner they occur. A discount rate (3% 
or 7%) is used to adjust estimated benefits and costs for differences 
in timing; a higher discount rate is associated with a greater value 
for benefits and costs in the present.\549\
---------------------------------------------------------------------------

    \549\ We use 3% and 7% for the discount rate, consistent with 
Office of Management and Budget's guidance. OMB Circular A-4, supra 
note 547.
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BILLING CODE 6750-01-P

[[Page 2127]]

[GRAPHIC] [TIFF OMITTED] TR10JA25.048


[[Page 2128]]


[GRAPHIC] [TIFF OMITTED] TR10JA25.049

BILLING CODE 6750-01-C
    As discussed in more detail in section V.E.3, the Commission only 
quantifies benefits from reductions in consumer search costs. However, 
the Commission notes there are likely additional consumer benefits in 
the form of reduced deadweight loss. Since the Commission is unable to 
quantify all of the final rule's potential benefits, the final 
regulatory analysis instead calculates the minimum value for the 
average consumer that the final rule would need to generate in order 
for its benefits to outweigh its quantified costs. Table 2 presents 
low-end and high-end estimates of the total quantified costs and the 
necessary ``break-even benefit'' per consumer. Under the high-end cost 
assumptions with a 7% discount rate, the Commission's analysis finds 
that each consumer would need to experience a benefit of $0.33 per year 
over ten years for the rule's benefits to exceed its quantified 
compliance costs. Under the low-end cost assumptions with a 3% discount 
rate, that per-consumer amount is $0.08 per year over ten years. As 
noted, the Commission believes that the necessary break-even benefit 
per consumer is likely between $0.08 and $0.33 per year over ten years, 
depending on which set of assumptions is used.
[GRAPHIC] [TIFF OMITTED] TR10JA25.050

1. Economic Rationale for the Final Rule
    The final rule addresses the economic problem of incomplete and 
insufficient price information by businesses that shroud the full price 
from the consumer during parts of the purchasing process, which harms 
both consumers and honest competitors. Not including mandatory fees in 
the full price when consumers start the purchasing process for a good 
or service may result in a market failure. Firms may shroud the full 
price to the consumer 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.'' \550\ Discovering the lowest full price 
prior to a final purchase by going through the checkout process with 
multiple firms is inefficient and involves additional consumer search 
costs. In some cases, taking the time to search for the full price from 
one firm may result in the consumer losing the opportunity to purchase 
the product from another firm. Drip pricing and the resulting 
imposition of additional search costs make it more difficult for 
consumers to compare prices across platforms, which may soften price 
competition in the market.\551\
---------------------------------------------------------------------------

    \550\ Howard A. Shelanski et al., Economics at the FTC: Drug and 
PBM Mergers and Drip Pricing, 41 Rev. Indus. Org. 303 (2012), 
https://doi.org/10.1007/s11151-012-9360-x.
    \551\ White House, How Junk Fees Distort Competition (Mar. 21, 
2023), https://www.whitehouse.gov/cea/written-materials/2023/03/21/how-junk-fees-distort-competition/; Brian Deese et al., White House, 
The President's Initiative on Junk Fees and Related Pricing Practice 
(Oct. 26, 2022), https://www.whitehouse.gov/briefing-room/blog/2022/10/26/the-presidents-initiative-on-junk-fees-and-related-pricing-practices/; Glenn Ellison, A Model of Add-On Pricing, 120 Q.J. Econ. 
585 (2005), https://www.jstor.org/stable/25098747.

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[[Page 2129]]

    A market failure may also occur when firms shroud full price 
through non-aggregated partitioned pricing, in which all of the 
components of the full price (base price, fees, etc.) are presented to 
consumers without the full price itself.\552\ Non-aggregated 
partitioned pricing, like drip pricing, imposes costs on consumers by 
requiring them to spend additional time to calculate the full price for 
themselves. Consumers tend to underestimate the full price when faced 
with partitioned pricing, and this underestimation leads to an increase 
in demand. The increased demand from erroneous price calculations, in 
turn, leads to inefficient overconsumption by consumers.
---------------------------------------------------------------------------

    \552\ Morwitz, supra note 527.
---------------------------------------------------------------------------

(a) Shrouded Pricing as a Cause of Market Failure
    A well-functioning market depends, in part, on consumers having 
accurate information regarding the price, and other attributes, of the 
goods or services being offered. Firms that engage in drip pricing or 
employ partitioned pricing create a friction in the operation of the 
market by imposing costs on consumers to acquire price information. 
Several economic harms may arise from this friction. First, holding 
consumer choices and prices fixed, the added search cost to acquire 
price information harms consumers with no countervailing benefit to 
firms. Second, because shrouded prices make comparison shopping more 
difficult, consumers might make suboptimal consumption decisions. In 
fact, consumers may find it too costly to search for full and accurate 
price information for some or all goods or services under 
consideration. The lack of full price information may lead consumer 
demand to become less sensitive, i.e., less elastic, to changes in 
price, and consumers will accept higher (quality-adjusted) prices than 
they would if they were fully informed with clear and upfront pricing. 
This, in turn, leads to a third effect: since shrouded prices make it 
harder for consumers to compare prices, some firms may gain market 
power that allows them to raise prices or decrease quality.\553\ Firms 
may further distort the market outcome by changing the products they 
offer to consumers relative to a market where prices are transparent.
---------------------------------------------------------------------------

    \553\ Baye, supra note 521.
---------------------------------------------------------------------------

    The Commission discusses further the first of these effects, the 
added search costs incurred by consumers to acquire complete price 
information, in section V.E.2.a.i and quantifies these costs in the 
live-event ticketing and short-term lodging industries in section 
V.E.3.c and V.E.3.d. The Commission discusses the welfare impact of the 
second of these effects, the distortion of consumers' decisions due to 
lack of full information, in this section. The third effect, firms 
increasing their market power in response to increases in search costs, 
would exacerbate any welfare losses caused by the distortion of 
consumers' decisions due to the lack of full price information. 
However, the Commission lacks the data to quantify or distinguish their 
effects on deadweight loss.
    The distortion of consumers' decisions due to the lack of full 
price information, the second effect discussed in the previous 
paragraph, can be illustrated through a simple model of supply and 
demand. For simplicity of exposition, the analysis assumes that there 
are many firms, each selling a homogeneous product (i.e., good or 
service). The analysis further assumes that firms can adjust their 
prices and pricing strategies, but that the quality of the product is 
fixed.\554\
---------------------------------------------------------------------------

    \554\ These assumptions are made for exposition purposes to 
abstract from the issues of market power in pricing and strategic 
interactions between firms. The general ideas from this simple 
framework extend to differentiated products and strategic 
interactions between a smaller number of firms.
---------------------------------------------------------------------------

    A useful starting point is to consider the baseline market outcome 
where consumers are fully informed; that is, consumers know the full 
price upfront (either because firms state the full price upfront or 
because consumers can fully and correctly predict any add-on prices). 
Since all firms sell the same product, competition will lead all firms 
to set equal prices at marginal cost. Figure 1 illustrates the baseline 
market outcome. The curve Dupfront represents consumers' demand when 
they are fully informed. The supply curve S represents the marginal 
cost to firms of producing a given quantity of the product. The 
intersection of Dupfront with S, denoted by point A, at quantity 
Qupfront and price Pupfront, represents the outcome. The analysis will 
refer to this as the ``fully informed outcome.'' At point A, the 
marginal benefit to consumers from consuming one additional unit is 
equal to the marginal cost to firms from the production of one more 
unit of the product.
    As long as there are no externalities (i.e., impacts on third 
parties beyond the consumers and firms under consideration) from the 
consumption of the product, this outcome is efficient; that is, point A 
represents the consumption level of the product that provides the 
greatest benefit to society. The benefit to society is measured by the 
sum of the benefit to consumers, called consumer surplus, and the 
benefit to firms, called producer surplus or profit. Consumer surplus 
is the net benefit consumers experience from consuming the product 
after accounting for their expenditure on the product. Consumer surplus 
is given by the difference between the area of trapezoid ACFG, the 
value to consumers from consuming Qupfront units of the product, and 
the area of rectangle ABFG, the total expenditure on the product 
(Pupfront * Qupfront); thus, consumer surplus is given by the area of 
triangle ABC. Producer surplus is the net benefit to firms from selling 
the product after accounting for their costs to provide the product. 
Producer surplus is given by the difference between rectangle ABFG, the 
total revenue from the product, and the area of trapezoid AEFG, the 
cost to firms from producing Qupfront units of the product; thus, 
producer surplus is given by the area of triangle ABE. The net benefit 
to society is then given by the area of triangle ACE.

[[Page 2130]]

[GRAPHIC] [TIFF OMITTED] TR10JA25.000

    As previously discussed, shrouded pricing makes it more difficult 
for consumers to ascertain the full price of the product. In the case 
of drip pricing, consumers will see the base price before seeing 
additional mandatory price components such as convenience fees. 
Consumers may or may not be unaware of the additional fees at the time 
they make a purchase decision. If consumers are fully aware of the 
additional fees, or anticipate them correctly, the outcome remains 
point A, which is efficient. However, there is evidence that consumers 
respond differently to a change in the base price offered upfront than 
to changes in the fees disclosed separately from the base price. 
Specifically, economic studies provide evidence that consumers react 
less to price changes through fees than they do to price changes 
through the base price.\555\ That is, consumer demand is less elastic 
to the fee component of the full price than it is to the base price. 
One possible rationale for this phenomenon is that consumers are fully 
aware of base prices but are not, or only partially, aware of fees.
---------------------------------------------------------------------------

    \555\ Blake, supra note 521; Raj Chetty et al., Salience and 
Taxation: Theory and Evidence, 99 Am. Econ. Rev. 1145 (2009), 
https://doi.org/10.1257/aer.99.4.1145.
---------------------------------------------------------------------------

    The Commission analyzes the impact drip pricing has on market 
outcomes in the previous framework in two stages. The analysis starts 
by examining the case where consumers are completely unaware of the 
additional fees, namely, they assume that the base price offered 
upfront is the full price. The analysis then examines the case where 
consumers are aware that a fee might be added later but do not 
correctly estimate the size of this fee. Note that this case may arise 
under a variety of circumstances. For example, all consumers could be 
partially aware of the fees, some consumers could be fully aware of the 
fees while others are totally unaware, or there could be a mixture of 
consumers exhibiting different degrees of awareness.
    In the first stage of the analysis, Pbase,unaware denotes the base 
prices firms offer upfront, and Ptotal,unaware denotes the full price 
firms charge, which is equal to the base price plus t, the sum of 
mandatory per unit fees not included in the base price: Ptotal,unaware 
= Pbase,unaware + t.556 Consumers determine their 
consumption according to Pbase,unaware, unaware that they are actually 
going to pay Ptotal,unaware. This difference between the price 
consumers believe they are paying and the price firms are actually 
charging leads to an expansion in consumer demand relative to demand 
when consumers are fully informed. Specifically, as illustrated by 
Figure 2, the firms' deception causes an upward shift in demand equal 
to the price difference, t, from Dupfront to Dunaware. The intersection 
of Dunaware with S, illustrated by point J, at quantity Qunaware and 
price Ptotal,unaware,represents the outcome when consumers are unaware 
of the fee and only observe the base price.\557\
---------------------------------------------------------------------------

    \556\ For simplicity of exposition, the analysis assumes that 
all firms follow the same shrouding strategy and set the same t.
    \557\ This shift is entirely analogous to the shift that would 
occur from a government subsidy. When a subsidy is provided, the 
price consumers pay is lower than the price charged by firms.

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[[Page 2131]]

[GRAPHIC] [TIFF OMITTED] TR10JA25.001

    Consumer surplus is now equal to the area of triangle CHI minus the 
area of triangle IJK. Relative to the fully informed outcome, consumer 
surplus decreases by the area of trapezoid ABHI, the decrease in 
consumer surplus due to the price increase, and the area of triangle 
IJK, the decrease in consumer surplus due to the deceptive pricing 
strategy. Producer surplus is now equal to the area of triangle EHJ. It 
increases, relative to the fully informed outcome, by the area of 
trapezoid ABHJ. This trapezoid illustrates the transfer of surplus from 
consumers to firms due to the deceptive practice of shrouded pricing. 
The net effect on society is now the area of triangle ACE minus the 
area of triangle AJK. Relative to the fully informed outcome, the 
benefit to society decreases by the area of triangle AJK (the combined 
change in consumer and producer surplus). This decrease in social 
surplus is the harm, also referred to as deadweight loss, caused by the 
full shrouding of the fee.
    The analysis now turns to the case where consumers are aware of the 
possibility of additional fees but do not fully anticipate their 
magnitude. As previously discussed, academic research suggests that 
this might be the case.\558\ This reduced salience would increase 
quantity demanded and incur a deadweight loss compared to the fully 
informed outcome (illustrated in Figure 1), although both the increase 
in quantity demanded and the deadweight loss would be smaller than in 
the case where consumers were fully unaware of the fees (illustrated in 
Figure 2). Essentially, the aggregate demand curve will lie somewhere 
between the upfront demand curve in Figure 1 and the fully shrouded 
demand in Figure 2. This aggregate demand can come from (the same) 
partial awareness by all consumers or a mixture of different degrees of 
awareness by different consumers. A technical appendix in section V.E.6 
provides a more detailed model of the impact of consumers' partial 
awareness.
---------------------------------------------------------------------------

    \558\ Blake, supra note 521; Chetty, supra note 555.
---------------------------------------------------------------------------

    In summary, the shrouding of prices distorts the market outcome by 
leading consumers to consume more than they would if they were fully 
aware of the full price. The overconsumption by consumers leads to a 
social cost in the form of deadweight loss because the resources used 
to produce the product would have been put to better use if consumer 
demand had not been distorted in this manner. The deadweight loss from 
the inefficient consumption level is one component of the welfare loss 
generated by drip pricing, in addition to the increase in consumer 
search costs and the possible shift in pricing and product offerings 
due to increased market power. Collectively, these effects represent a 
market failure.
    Shrouded pricing likely cannot be mitigated by competitive forces 
alone once it has become pervasive in a market. Although consumers 
would prefer upfront full prices, it is unlikely that an individual 
firm in a market with shrouded prices could increase its market share 
by providing its full price upfront. Under the expectation of shrouded 
prices, consumers may inadvertently interpret such a firm's upfront 
full price as a higher base price, with fees added separately, leading 
the firm to lose, rather than gain, business. The distortion of 
consumer expectations caused by shrouded pricing thus prevents a shift 
to upfront pricing through competition.
    In many markets, goods and services are differentiated, with higher 
quality items selling at higher prices. In such markets, drip pricing 
may lead to outcomes characterized by inefficiently high qualities in 
addition to the inefficiently high quantities previously 
discussed.\559\ Consumers may respond to fully disclosed prices in 
these markets by purchasing goods or services of lower, more efficient 
quality in addition to purchasing lower, more efficient quantities of 
goods or services.
---------------------------------------------------------------------------

    \559\ This phenomenon has been observed, for example, in the 
live-event ticketing industry. See Blake, supra note 521.
---------------------------------------------------------------------------

(b) Shrouded Pricing as a Source of Biased Expectations
    As explained in section V.E.1.a, firms have incentives to distort 
consumer demand toward an inefficient equilibrium. This inefficiency 
may also

[[Page 2132]]

arise in a behavioral context.\560\ By shrouding full 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 or service.\561\ This 
underestimation, whether by all consumers, or a subset of consumers, 
leads to a similarly inefficient equilibrium in which the good or 
service is overconsumed and society suffers a deadweight loss.
---------------------------------------------------------------------------

    \560\ David Laibson, Harvard U., Drip Pricing: A Behavioral 
Economics Perspective, Address at the FTC (May 21, 2012), https://www.ftc.gov/sites/default/files/documents/public_events/economics-drip-pricing/dlaibson.pdf.
    \561\ Morwitz, supra note 527.
---------------------------------------------------------------------------

    Several studies show how consumer behavior changes because 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.\562\ Even when the participants became aware of the additional 
fees, they were reluctant to restart the purchase process because they 
perceived high search costs from doing so and inaccurately assumed that 
all firms charge the same fees. A different economics experiment found 
that consumers encountering drip pricing are more likely to make 
purchasing mistakes if they are uncertain about the extent of the drip 
pricing.\563\
---------------------------------------------------------------------------

    \562\ Shelle Santana et al., Consumer Reactions to Drip Pricing, 
39 Mktg. Sci. 188 (2020), https://doi.org/10.1287/mksc.2019.1207.
    \563\ Rasch, supra note 521.
---------------------------------------------------------------------------

    Another prominent study looked at how consumers respond to the 
salience of sales tax on goods, which affects the full price of a 
product.\564\ 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 goods 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 with upfront prices inclusive of 
fees while other consumers were presented a base price upfront with 
fees hidden until checkout. This experiment revealed that presenting 
consumers with full prices upfront reduced both the quantity and 
quality of tickets purchased relative to presenting consumers with 
dripped prices.\565\
---------------------------------------------------------------------------

    \564\ Chetty, supra note 555.
    \565\ See Blake, supra note 521.
---------------------------------------------------------------------------

2. Economic Effects of the Final Rule
    The model of incomplete price information, described in section 
V.E.1.a, provides a framework for assessing the potential costs, 
benefits, and transfers associated with the final rule in the live-
event ticketing and short-term lodging industries. The rule will result 
in positive net benefits if it allows consumers to learn total price 
more easily, improves consumer comprehension of fees and charges as 
they relate to total price, facilitates comparison shopping, reduces 
search costs, or otherwise allows consumers to make choices that 
increase net welfare. The Commission believes the rule will accomplish 
these goals in the live-event ticketing and short-term lodging 
industries.
    The Commission finds in section V.E.1 that consumer demand in the 
live-event ticketing and short-term lodging industries is distorted by 
incomplete price information--in simple terms, consumers respond to 
lower base prices even if fees are revealed or added up later in a 
transaction. Thus, if a seller in these industries uses hidden fees, 
that seller may acquire a larger market share by advertising lower 
initial prices than other sellers not using hidden fees. Absent the 
rule, competitive forces will drive other firms in these industries to 
also use hidden fees, as has become evident as noted in section II.B. 
If firms do not use hidden fees, they may have to accept a lower market 
share, even though their full prices to consumers are similar to (or 
lower than) their competitors. Thus, the Commission finds that with the 
final rule, firms that currently do not use drip pricing 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 Commission also finds that the rule will generate costs as 
firms that currently employ hidden or misleading fees adjust how they 
convey prices to consumers.
    Overall, the Commission expects the rule will increase economic 
efficiency through improved consumer price calculations, resulting in 
reduced deadweight loss and reduced consumer search time that exceeds 
the costs to firms of providing more transparent pricing. It may also 
facilitate price comparison 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 final 
rule. Where there may be impacts that the Commission is unable to 
quantify, it provides a qualitative description.
(a) General Benefits of the Final Rule
    Consumers will benefit from the rule in several ways. In addition 
to reductions in search costs and deadweight loss, which are described 
in greater detail herein, the Commission expects there to be 
unquantified benefits for consumers from the rule, including reduced 
frustration and consumer stress associated with surprise fees that 
distort the purchasing process.
i. Reductions in Search Costs
    Consumers will save time searching for the total price of live-
event tickets and short-term lodging as a result of the rule. In a 
well-functioning market, consumers find it beneficial to comparison 
shop for low prices. When mandatory fees are obscured or 
misrepresented, however, consumers learn 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 to look for other options. 
Consumers incur longer search times to discover full prices and make 
informed purchasing decisions. The final rule will eliminate the need 
for additional, inefficient amounts of time to determine total price 
from sellers that do not already provide total price upfront. The 
Commission quantifies the reduction in search costs in the live-event 
ticketing and short-term lodging industries.
ii. Reductions in Deadweight Loss
    As discussed in section V.E.1.a, incomplete pricing information may 
distort consumer demand. This distortion will lead to an inefficient 
market equilibrium and generate deadweight loss, which results from 
consumers purchasing higher quantities of the good or service than they 
would if fully informed. Under the final rule, consumers will learn 
total price upfront. Thus, the rule will likely mitigate distorted 
consumer demand and prevent welfare-reducing transactions. Resources 
supporting overconsumption will become available for better societal 
use, and the deadweight loss will be reduced or eliminated.
    The disclosure of total price may also reduce mistake purchases 
with respect to product quality. Drip pricing can lead consumers to 
purchase goods of inefficient quality; the final rule will allow 
consumers to choose more efficient levels of quality. The Commission 
does not quantify the reduction in deadweight loss but finds

[[Page 2133]]

that it is a positive benefit to the final rule.
(b) Welfare Transfers
    The Commission expects that prices in the live-event ticketing and 
short-term lodging industries will adjust in response to the 
transparency facilitated by the rule. These price adjustments transfer 
welfare from one side of the market to the other; consumer welfare will 
increase, and producer profits will decrease by the same amount. 
Typically, transfers of welfare from one set of people in the economy 
to another are documented in a regulatory analysis, but do not change 
net social welfare.\566\ Consequently, while it is likely that the rule 
will result in transfers of welfare, the Commission does not attempt to 
estimate these transfers.
---------------------------------------------------------------------------

    \566\ See OMB Circular A-4, supra note 547 (``Transfer payments 
are monetary payments from one group to another that do not affect 
total resources available to society. A regulation that restricts 
the supply of a good, causing its price to rise, produces a transfer 
from buyers to sellers.'' Even though a ``net reduction in the total 
surplus (consumer plus producer) is a real cost to society, [ ] 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.'').
---------------------------------------------------------------------------

(c) General Costs of the Final Rule
    Firms in the live-event ticketing and short-term lodging industries 
will likely do a basic regulatory review to determine how the rule 
applies to them.\567\ Firms that are not already in compliance with the 
rule may incur additional costs to re-optimize the price of goods and 
services. These firms may also incur costs to adjust how they display 
pricing information to disclose total price whenever the price of a 
good or service is displayed. For example, firms may need to update 
websites or reprint advertisements to comply with the rule.
---------------------------------------------------------------------------

    \567\ This basic regulatory review also captures the time it 
takes for firms to determine how a nationwide rule interacts with 
any state-level regulations to which they are already subject.
---------------------------------------------------------------------------

    In addition, the Commission notes that there may be other indirect 
short-term costs that the Commission cannot quantify. 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 upfront total price. Specifically, consumers accustomed to dripped 
live-event ticketing fees may initially under-consume when shopping for 
tickets with upfront total price. The societal cost of such 
inefficiencies would be temporary and decrease as consumers adjust to 
the truthful, timely, and transparent pricing required by the rule.
    While the rule allows businesses to exclude shipping charges from 
total price until the point at which a consumer may consent to pay, the 
rule requires any internal handling costs that were previously 
disclosed at the end of the purchase process to be incorporated in 
total price. Since shipping and handling charges are sometimes 
combined, businesses may have to change how they account for handling 
costs and how they advertise shipping and handling costs to comply with 
this provision.
3. Quantified Welfare Effects
    This section quantifies the potential benefits and costs of the 
final rule for the live-event ticketing industry and the short-term 
lodging industry. The Commission provides quantitative estimates where 
possible for these industries, and it describes benefits and costs that 
can only be assessed qualitatively. The Commission estimates that the 
quantified benefits will exceed the quantified costs, and the 
Commission believes that the total benefits (quantified and 
unquantified) will outweigh the total costs (quantified and 
unquantified) of the rule.
(a) Quantified Compliance Costs
    The Commission quantifies the compliance costs for both industries 
utilizing assumptions about the number of hours required to determine 
and, if necessary, come into compliance with the final rule. The 
Commission expects that, in response to the final rule, firms will 
initially determine whether and how the rule applies to their current 
pricing and fee disclosure practices. The Commission assumes firms with 
current practices that align with the final rule will incur, at most, 
one hour of lawyer time to confirm compliance. This hour of lawyer time 
is a proxy for the average amount of time firms will need to determine 
whether the final rule applies to them. For example, some firms may not 
employ an attorney at all but may instead have a staff member review 
the rule.
    The Commission does not have data on the exact costs noncompliant 
firms will incur to comply with the final rule. Some firms already may 
have developed tools to comply with the rule because they operate in 
jurisdictions, such as California, with existing similar all-in pricing 
requirements. Coming into compliance with the rule should be relatively 
easy for these firms. For other firms, complying with the final rule 
may require additional time and costs. To capture both the variation 
and uncertainty of costs across the two industries, the analysis 
includes a series of low- and high-end assumptions about the number of 
hours required to comply with the rule.\568\ For example, the 
Commission's analysis assumes that firms not presently compliant will 
employ a low end of five hours and a high end of ten hours of lawyer 
time to determine necessary steps to comply with the rule. While some 
firms may forgo legal advice, this range of lawyer time serves as a 
proxy for any costs associated with understanding and preparing to 
comply with the rule.
---------------------------------------------------------------------------

    \568\ The Commission requested additional information on 
potential compliance hours in the NPRM, but it did not receive 
consistent data. Therefore, the Commission uses the same set of 
assumptions on hours as used in the NPRM but notes that the live-
event ticketing and short-term lodging industries are likely to have 
already established systems necessary to comply with the final rule 
due to operating in jurisdictions with similar regulations.
---------------------------------------------------------------------------

    The final rule's requirement to display total price may lead to 
shifts in consumer demand and, consequently, market equilibria. In 
response, firms transitioning away from drip pricing may need to 
determine new optimal prices. The Commission's analysis assumes that 
these price re-optimizations will require firms to incur a one-time, 
upfront cost of data scientist time to perform this work. The analysis 
assumes firms not presently compliant will employ a low-end of forty 
hours and a high-end of eighty hours of data scientist time. 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 rule.\569\
---------------------------------------------------------------------------

    \569\ It is possible that 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 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. The Commission solicited, 
but did not receive, the data necessary to quantify this potential 
cost to firms.
---------------------------------------------------------------------------

    The Commission expects that the drip pricing employed by firms not 
presently compliant with the rule is, in many cases, manifested in 
online sales. In such cases, firms also will need to adjust advertised 
prices as well as purchase processes for online sales, and the analysis 
assumes these adjustments require firms to incur a one-time, upfront 
cost of web developer time. The analysis assumes firms not presently 
compliant will employ a low end of forty hours and a high end of eighty 
hours of web developer time to become

[[Page 2134]]

compliant with the final rule.\570\ Once firms are compliant with the 
rule, any future changes to pricing displays or purchasing systems are 
not a direct consequence of the rule. Since the rule will not take 
effect for four months, some of these pricing display and advertising 
updates may come at no additional cost to certain firms. Many firms 
regularly update their pricing displays and advertisements. Any firms 
that would, in their normal course of business, update their displays 
and advertising during the four month window prior to the rule taking 
effect would not incur the additional one-time cost of updating their 
displays and advertisements in response to the rule. Because the 
Commission lacks data on these business practices, the Commission 
conservatively assumes that all firms not presently compliant with the 
rule will incur these costs. As such, the Commission's analysis likely 
represents an overestimate of compliance costs.
---------------------------------------------------------------------------

    \570\ The U.S. Department of Transportation also uses an 
assumption of 80 hours of time to reprogram flight quotation 
websites for the Enhancing Airline Passenger Protections II rule. 
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'').
---------------------------------------------------------------------------

    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, the Commission's analysis assumes 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 final rule, firms 
need to reevaluate their pricing policies to ensure continued 
compliance by employing additional lawyer time on an annual basis. 
Available data do not allow the Commission to estimate the exact annual 
compliance costs firms may incur as various industries adapt to the 
final rule. For the high-end cost estimate, the Commission's analysis 
assumes firms require an average of ten hours of lawyer time for annual 
compliance checks. The Commission recognizes some firms may not utilize 
lawyer time but may delegate compliance to non-attorney employees and 
still incur annual compliance costs. Data on non-lawyer compliance 
costs are not available, and these potential annual compliance costs 
are proxied with lawyer time with the implicit assumption that non-
attorney employee hourly wages are lower than lawyer wages.
    Table 3 presents the total compliance costs as the sum of the 
industry-specific compliance costs described in more detail in section 
V.E.3.c and V.E.3.d. The cost of employee time is monetized using wages 
obtained from the Bureau of Labor Statistics' May 2023 National 
Occupational Employment and Wage Estimates for the live-event ticketing 
industry.\571\ For the short-term lodging industry, the analysis uses 
industry-specific wages associated with the North American Industry 
Classification System (``NAICS'') codes.
---------------------------------------------------------------------------

    \571\ U.S. Bureau Lab. Stat., Occupational Employment and Wage 
Statistics, May 2023 National Occupational Employment and Wage 
Estimates United States (May 2023), https://www.bls.gov/oes/current/oes_nat.htm (``OEWS National''); U.S. Bureau Lab. Stat., 
Occupational Employment and Wage Statistics, Occupational Employment 
and Wages, May 2023: 15-2051 Data Scientists (May 2023), https://www.bls.gov/oes/current/oes152051.htm (``OEWS Data Scientists'') 
(providing the hourly wages for data scientists); U.S. Bureau Lab. 
Stat., Occupational Employment and Wage Statistics, Occupational 
Employment and Wages, May 20231: 15-1254 Web Developers (May 2023), 
https://www.bls.gov/oes/current/oes151254.htm (``OEWS Web 
Developers'') (providing the hourly wages for web developers); U.S. 
Bureau Lab. Stat., Occupational Employment and Wage Statistics, 
Occupational Employment and Wages, May 2023: 23-1011 Lawyers (May 
2023), https://www.bls.gov/oes/current/oes231011.htm (``OEWS 
Lawyers'') (providing the hourly wages for lawyers). This assumption 
is valid if hours spent in compliance activities would otherwise be 
spent in other productive work-related activities, the social value 
of which is summarized by the employee's wage. 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 final rule.

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[[Page 2135]]

[GRAPHIC] [TIFF OMITTED] TR10JA25.051

    Table 4 presents the ten-year per-firm annualized compliance costs 
for the live-event ticketing and short-term lodging industries, 
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. Compliance costs for the short-term 
lodging industry are further disaggregated into costs for U.S. hotels 
and U.S. home share hosts. Costs to foreign hotels and home share hosts 
are discussed in section V.E.3.d.ii.

[[Page 2136]]

[GRAPHIC] [TIFF OMITTED] TR10JA25.052

(b) Break-Even Analysis
    To have a positive net benefit, the final rule's benefits must 
outweigh its costs. The Commission calculates the break-even benefit 
per consumer based on the quantified costs presented in section 
V.E.3.b.\572\ That is, the Commission determines the minimum value the 
final rule would need to generate for the average consumer for its 
total benefits to outweigh its quantified costs. The rule's benefits 
may include reduced search costs, reduced deadweight loss, and reduced 
psychological distress or frustration from surprise fees. For this 
analysis, the Commission considers costs in annualized terms--the 
average discounted cost of compliance per year over 10 years.\573\ As 
such, the analysis expresses the break-even benefit as an average 
benefit per consumer per year over ten years.\574\
---------------------------------------------------------------------------

    \572\ In section V.E.3.c and V.E.3.d, the Commission quantifies 
the final rule's net social benefits for the live-event ticketing 
and short-term lodging industries.
    \573\ For purposes of discounting and annualizing costs, the 
analysis assumes that firms incur one-time costs immediately, at the 
beginning of year 1, and potential costs of annual compliance checks 
at the end of each year.
    \574\ Benefits to consumers, such as reductions in search costs, 
will accrue continually over time. For simplicity, the break-even 
analysis assumes that annualized benefits accrue all at once at the 
end of each year. As such, the break-even analysis may overestimate 
the benefits required to outweigh costs.
---------------------------------------------------------------------------

    From Table 3, under the assumption that firms and consumers 
discount future years at 3%, the Commission's analysis estimates that 
the final rule may result in costs as high as $644 million over 10 
years. Assuming instead a discount rate of 7% for future years, the 
analysis estimates that the final rule may result in costs as high as 
$603 million over ten years. To determine the break-even benefit, the 
Commission's analysis begins with the total present value of total 
costs and calculates the annualized total costs across both 
industries.\575\ Next, the Commission calculates what the break-even 
benefit would be per consumer, according to the following formula:
---------------------------------------------------------------------------

    \575\ While total costs are higher with a smaller discount rate, 
annualized costs are higher with a larger discount rate due to 
higher upfront costs and lower recurring costs.

Per Consumer Annualized Benefits >= (Annualized Quantified Compliance 
---------------------------------------------------------------------------
Costs/Population)

    Table 5 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, the analysis divides 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 final rule results in an average benefit to consumers 
that exceeds $0.33 per year over ten years, then the final rule's 
benefits exceed its quantified compliance costs under the high-end 
assumption and an assumed 7% discount rate.
    Table 5 also provides the break-even benefit per consumer in terms 
of minutes saved as a result of the final rule. According to the Bureau 
of Labor Statistics' Occupational Employment Statistics, the average 
hourly wage of U.S. workers in 2023 was $31.48, and recent research 
suggests that individuals living in the U.S. value their non-work time 
at 82% of average hourly earnings. Thus, the value of non-work time for 
the average U.S. worker would be $25.81 per hour.\576\ If the analysis 
divides the

[[Page 2137]]

break-even dollar benefit per consumer, using the high-end assumptions 
and a discount rate of 7% ($0.33), by the value of saved search time 
($25.81/hour) and converts to minutes, the break-even saved search time 
per consumer is 0.77 minutes. That is, if the final rule results in 
savings from reduced search time that exceed 0.77 minutes per consumer 
per year over ten years, then the benefits solely from reduced search 
time will exceed quantified compliance costs.\577\ Although the 
Commission acknowledges that benefits of the final rule may vary across 
consumers, as some consumers may be more likely than others to consume 
live-event tickets and/or short-term lodging, the Commission finds it 
highly likely that consumers would experience average search time 
savings of this amount.
---------------------------------------------------------------------------

    \576\ See OEWS National, supra note 571 (providing the mean 
hourly wage); Hamermesh, supra note 533 (providing the value of 
consumer time).
    \577\ Assuming a 3% discount rate and the high-end assumptions, 
the break-even time saved per consumer per year would be 0.68 
minutes.
[GRAPHIC] [TIFF OMITTED] TR10JA25.053

    There are a few important caveats to this break-even analysis. This 
analysis may overestimate the number of noncompliant firms in the live-
event ticketing and short-term lodging industries. In that case, this 
assumption leads to an overestimate of both costs and necessary break-
even benefits. On the other hand, there may be more firms not already 
in compliance with the final rule, in which case this assumption 
results in an underestimate of both costs and break-even benefits.
    The Commission cannot forecast all potential consequences and 
costs. This break-even analysis does not account for any unquantified 
benefits or costs due to unintended consequences. However, if the 
benefits from reduced deadweight loss caused by consumers' incomplete 
price information, reduced search time, and beneficial unintended 
consequences outweigh the costs from compliance and harmful unintended 
consequences, then the rule results in positive net social benefits. 
The Commission believes benefits will exceed the costs.
i. Sensitivity Analysis: Assume Higher Wage Rates
    The Commission received comments regarding the wage rates used in 
the cost estimation. To address these comments, this section provides 
the break-even analysis described in section V.E.3.b using rates that 
are double the average wage rate obtained from the Bureau of Labor 
Statistics May 2023 National Occupational Employment and Wage 
Estimates.\578\ Specifically, the wage rates used for this analysis are 
$169.68 for lawyer time to review compliance, $114.46 for data 
scientist time to re-optimize pricing, and $91.90 for web developer 
time. Using these higher wage rates, the break-even benefit required to 
exceed quantified compliance costs is provided in Table 6.\579\
---------------------------------------------------------------------------

    \578\ See sources cited supra note 571, including OEWS National 
(providing the mean hourly wage); OEWS Data Scientists (providing 
the hourly wages for data scientists); OEWS Web Developers 
(providing the hourly wages for web developers); and OEWS Lawyers 
(providing the hourly wages for lawyers).
    \579\ Wages are doubled in this sensitivity analysis, but the 
break-even benefit per consumer does not exactly double because not 
all costs depend on wages. One component of the cost calculation in 
the short-term lodging industry is the cost to home share hosts of 
re-optimizing prices. This cost is evaluated using an estimate of 
hosts' hourly value of time rather than wages, which is not doubled. 
Therefore, the break-even benefits per consumer presented in Table 6 
are slightly less than double those in Table 5.

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[[Page 2138]]

[GRAPHIC] [TIFF OMITTED] TR10JA25.054

    The break-even analysis under the assumption of doubled wages 
implies that if the final rule results in an average benefit to 
consumers that exceeds $0.59 per year over ten years, then the final 
rule's benefits exceed its quantified compliance costs under the high-
end assumption and an assumed 7% discount rate. In terms of minutes 
saved per consumer, the high-end cost assumptions with doubled wages 
and a 7% discount rate imply that if the final rule results in savings 
from reduced search time that exceed 1.36 minutes per consumer per year 
over ten years, then the benefits solely from reduced search time will 
exceed quantified compliance costs.
(c) Quantified Benefits and Costs: Live-Event Ticketing Industry
    This section analyzes the final rule's quantified benefits and 
costs in the live-event ticketing industry. Quantified benefits are 
limited to the expected reductions in search costs to consumers. Since 
there is an additional, unquantified benefit of reduced deadweight 
loss, which is discussed conceptually in section V.E.2.a.ii, the net 
benefit estimated in the following analysis is conservative. The 
Commission finds that the quantified benefits and costs indicate that 
the rule will have a positive net benefit, even without accounting for 
the unquantified benefit of reducing deadweight loss.
    Consumers in the live-event ticketing industry are often surprised 
by mandatory fees at the end of the purchase process.\580\ In 2022, 
online event ticket sales were reported to be $8.1 billion.\581\ Live 
events include concerts (30.3%), sporting events (33%), and dance, 
opera, and theater productions (12.4%).\582\ For many consumers, there 
are no close substitutes for the specific product that they wish to 
purchase: a ticket to attend a live event. Thus, when consumers are 
presented with surprise mandatory fees, the consumer either pays the 
full price including the fees, spends time searching for a new option 
such as a different seat or a different seller, or forgoes the purchase 
entirely.
---------------------------------------------------------------------------

    \580\ E.g., White House, How Junk Fees Distort Competition, 
supra note 551.
    \581\ Michal Dalal, Online Event Ticket Sales in the US, IBIS 
World (May 2023) (``Ticket Sales Industry Report'').
    \582\ Id.
---------------------------------------------------------------------------

    The live-event ticketing industry is unique relative to other 
industries because there is a large and robust secondary market. A 
given ticket to an event may be sold in the primary market, and then 
resold multiple times in the secondary market. It is difficult to fully 
quantify how many live-event ticket purchases are made in the U.S., how 
many involve mandatory fees, and the typical amount of the fee. Many 
live-event ticket sellers appear to include some kind of fee, although 
the size and type of the fees vary across sellers.\583\ In a non-
generalizable sample, the GAO found live-event ticketing fees in 
primary and secondary ticket markets averaged 27% and 31% of the 
ticket's price, respectively.\584\
---------------------------------------------------------------------------

    \583\ Numerous commenters from the live-event ticketing industry 
recognized the pervasiveness of various ticketing fees. See, e.g., 
FTC-2023-0064-3212 (TickPick, LLC observed the ``widespread'' 
deceptive practice of bait-and-switch pricing); FTC-2023-0064-3230 
(Future of Music Coalition commented that they have worked to 
``deal[ ] with the scourge of junk fees in various parts of the 
economy,'' including live touring); FTC-2023-0064-3105 (Charleston 
Symphony affirmed that ``requiring sellers to disclose the total 
price clearly and conspicuously[ ] addresses a pressing issue in the 
nonprofit performing arts sector'').
    \584\ U.S. Gov't Accountability Office, Event Ticket Sales: 
Market Characteristics and Consumer Protection Issues, (Apr. 12, 
2018), (``GAO Report''), https://www.gao.gov/products/gao-18-347.
---------------------------------------------------------------------------

    Following White House and Congressional calls for disclosure of 
hidden fees, and after the ANPR was announced, some ticket sellers 
pledged to show all-in prices when the consumer begins the purchase 
process.\585\ However, absent the final rule, market forces would 
likely return to the equilibrium of hidden mandatory fees. In fact, the 
National Association of Ticket Brokers and StubHub, Inc. submitted 
comments to the ANPR in support of a rule requiring all-in pricing, but 
commented that such a rule would only be effective if applied to all 
ticket sellers and rigorously enforced.\586\ As discussed in section 
III.B.1.b, the
---------------------------------------------------------------------------

    \585\ See, e.g., White House, President Biden Recognizes Actions 
by Private Sector Ticketing and Travel Companies to Eliminate Hidden 
Junk Fees and Provide Millions of Customers with Transparent Pricing 
(Jun. 15, 2023) https://www.whitehouse.gov/briefing-room/statements-releases/2023/06/15/president-biden-recognizes-actions-by-private-sector-ticketing-and-travel-companies-to-eliminate-hidden-junk-fees-and-provide-millions-of-customers-with-transparent-pricing/. Some 
ticket sellers, such as TickPick, LLC, have never used hidden fees; 
S. Comm. on Commerce, Sci., & Transp., TICKET Act, https://www.commerce.senate.gov/services/files/071401A3-D280-414C-AEDB-A9B57F276067.
    \586\ FTC-2022-0069-6089 (ANPR) (National Association of Ticket 
Brokers); FTC-2022-0069-6079 (ANPR) (StubHub, Inc.).

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[[Page 2139]]

Commission received similar comments in response to the NPRM 
emphasizing that the benefit of the rule requires industry-wide 
coverage so that no single seller is allowed to charge surprise fees at 
the end of the transaction. If any seller utilizes hidden fees, they 
may capture 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, the 
Commission's analysis quantifies benefits and costs relative to the 
baseline equilibrium where sellers do not disclose total price upfront.
    In this final live-event ticketing net benefit analysis, the 
Commission updates firm counts, wage rates, any inflation-adjusted 
values, value of time, and 10-K live-event ticket revenue information 
to reflect the most recent available data. The Commission was unable to 
update any numbers from IBISWorld Reports.
i. Live-Event Ticketing: Estimated Benefits of the Final Rule
(a) Consumer Time Savings When Shopping for Live-Event Tickets
    The final rule requires disclosure of total price inclusive of all 
fees or charges that a consumer must pay in order to use the good or 
service for its intended purpose. Required disclosure of total price 
and prohibitions on misrepresentations save consumers time when 
shopping for a live-event ticket by requiring the provision of salient, 
material information upfront and eliminating time spent pursuing ticket 
offers priced above the amount the consumer is willing to spend, also 
known as the consumer's reservation price.
    The Commission's analysis assumes that, as a result of the rule, 
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, the 
Blake Study examined an experiment on StubHub where fees were presented 
upfront to some consumers and at the end of the purchase to 
others.\587\ The experiment found that the percentage 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 upfront. Using the 
distribution of listings viewed by consumers as reported in the Blake 
Study, the analysis calculates that the reduction in the average number 
of listings a consumer views when fees are displayed upfront is 0.1525 
listings.
---------------------------------------------------------------------------

    \587\ Blake, supra note 521.
---------------------------------------------------------------------------

    To calculate the reduction in consumer search time resulting from 
upfront pricing, the Commission requires information on the length of 
time a consumer spends viewing a single listing. The Commission is not 
aware of any data available on this. 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. 
During this countdown clock, a consumer who was unhappy with the 
revealed total price could search for another ticket without losing the 
original ticket. The Commission uses this range of countdown clock time 
as a proxy for a low-end and high-end estimate of the time spent 
viewing a listing. These countdown clocks range from five to ten 
minutes per ticket transaction.\588\ Multiplying the assumed length of 
a ticket transaction of five or ten minutes by the estimated reduction 
in viewed listings from the Blake Study results in a search time 
savings of 0.7625 to 1.525 minutes per consumer transaction.\589\
---------------------------------------------------------------------------

    \588\ Ticketmaster states that the amount of time it imposes 
varies by event but references a five-minute purchasing period. 
FAQ's: Why does Ticketmaster enforce a time limit when making 
purchases online?, Ticketmaster.com.au, https://www.ticketmaster.com.au/h/faq.html. Based on a small, non-
representative sample of ticket purchase attempts, StubHub appears 
to generally offer ten minutes to complete a ticket purchase.
    \589\ See also Consumer Rule II, supra note 570, at 39. The 
Preliminary Regulatory Impact Analysis for Consumer Rule II assumed 
airfare consumers would save five minutes of search and estimation 
time if all websites provided full-fare information upfront.
---------------------------------------------------------------------------

    Next, the Commission's analysis estimates the number of consumer 
purchases of live-event tickets. Live Nation (which owns Ticketmaster) 
reported selling over 329 million fee-bearing tickets in the primary 
and secondary markets using the Ticketmaster system in its 2023 10-K 
SEC filing.\590\ However, this figure combines North American and 
international ticket sales. Live Nation also reported that slightly 
more than two-thirds of concert events were in North America, so the 
analysis applies that proportion to the total combined ticket sales and 
assumes that Ticketmaster sold more than 221 million tickets in North 
America. To estimate the number of tickets sold solely in the U.S., the 
analysis then also adjusts the number of tickets by the share of North 
American GDP attributable to the U.S. (0.87 in 2023), which results in 
an estimated 192 million tickets sold in the primary and secondary 
markets by Ticketmaster in the U.S.\591\
---------------------------------------------------------------------------

    \590\ Live Nation Entm't Inc., Annual Report (Form 10-K) (Feb. 
22, 2024) (``Live Nation 10-K''), https://investors.livenationentertainment.com/sec-filings/annual-reports/content/0001335258-24-000017/0001335258-24-000017.pdf.
    \591\ U.S. GDP in 2023 was estimated to be $27.36 trillion and 
GDP for North America was estimated to be $31.4 trillion. IMF 
DataMapper United States Datasets, IMF.org, https://www.imf.org/external/datamapper/profile/USA; IMF DataMapper North America 
Datasets, IMF.org, https://www.imf.org/external/datamapper/profile/NMQ. The Commission's analysis adjusts North American tickets (221 
million) by 87% to estimate the number of tickets sold in the United 
States, resulting in 192 million.
---------------------------------------------------------------------------

    To find the total number of tickets sold in the U.S. by all live-
event ticket sellers, the Commission's analysis extrapolates from 
Ticketmaster's ticket sales using its market share. However, 
Ticketmaster's market share is uncertain. In 2010, the Department of 
Justice found that Ticketmaster had maintained a market share of more 
than 80% for the previous fifteen years.\592\ If the Commission's 
analysis assumes that Ticketmaster still has an 80% share of the live-
event ticket market (which includes both primary and secondary ticket 
markets), it can estimate the total number of tickets sold in the U.S. 
by dividing Ticketmaster's ticket sales in the U.S. by 80%. This 
provides a low-end estimate of the number of tickets sold in the U.S. 
of 240 million tickets.
---------------------------------------------------------------------------

    \592\ See Christine A. Varney, Assistant Attorney General, 
Antitrust Division, U.S. Dep't of Justice, Remarks at the South by 
Southwest Conference: 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.
    \593\ The Live Nation 10-K, supra note 590, does not separate 
out tickets sold by Ticketmaster in the primary versus secondary 
markets. Ticketmaster now sells tickets on the secondary market, 
which includes several other sellers such as StubHub, Inc., Vivid 
Seats, TickPick, LLC, Ace Ticket, Alliance Tickets, Coast to Coast 
Tickets, and others.
---------------------------------------------------------------------------

    However, Ticketmaster did not begin selling in the secondary market 
until after it merged with Live Nation. Based on publicly available 
information, the Commission is uncertain of Ticketmaster's market share 
in the secondary market for tickets.\593\ If Ticketmaster does not have 
80% of the ticket market (both primary and secondary), the number of 
tickets sold in the U.S. would exceed the low-end estimate of 240 
million tickets. To generate a high-end estimate of the total number of 
tickets sold in the U.S., the Commission's analysis uses the reported 
revenue for the full online ticket sales industry provided by the 
private research firm IBISWorld and calculates Ticketmaster's revenue 
share of the industry. IBISWorld reports the online ticket sales 
industry, including both primary ticket sellers and ticket

[[Page 2140]]

resellers, earned $12.5 billion in revenue in 2023.\594\ The Live 
Nation 10-K reported ticketing revenue of $3 billion in 2023, which 
suggests that Ticketmaster has a 24% revenue share of the online 
ticketing industry.\595\ The Commission's analysis extrapolates 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 24%, which results in 
an estimate of 801 million live-event tickets sold in the U.S.
---------------------------------------------------------------------------

    \594\ See https://www.ibisworld.com/industry-statistics/market-size/online-event-ticket-sales-united-states/.
    \595\ Assuming Ticketmaster's market share is equivalent to its 
revenue share (of the primary and secondary markets) also 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 
industry, then Ticketmaster's revenue share is higher than its 
ticket share, and the extrapolation understates the total number of 
tickets sold in the U.S.
---------------------------------------------------------------------------

    Lastly, the reduction in search time of 0.7625 to 1.525 minutes is 
per consumer purchase, not per ticket purchase. The Commission's 
analysis assumes that the average consumer purchase is between 1.5 and 
3 tickets.\596\ 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. The analysis estimates the range of live event consumer 
purchases in the U.S. to be 80 million on the low end and 534 million 
on the high end.
---------------------------------------------------------------------------

    \596\ The Commission does not currently have information on the 
average number of tickets purchased in a transaction. However, there 
is reason to believe the average would be greater than one because 
most venues limit the number of tickets that can be purchased in a 
given transaction, suggesting that there is consumer demand for 
purchases of more than a single ticket. 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.
---------------------------------------------------------------------------

    When multiplied by the number of transactions per year, the 
reduction in minutes spent viewing ticket listings will generate a 
total time savings of 1.02 million to 13.6 million hours per year. 
Using the value of non-work time for the average U.S. worker of $25.81 
per hour, the Commission's analysis estimates that the total benefit 
from time savings for completed transactions is roughly $26.3 million 
to $350.6 million per year, depending on how conservative its 
assumptions are. Table 7 presents the expected benefits of time savings 
over the next ten years in present value.
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[GRAPHIC] [TIFF OMITTED] TR10JA25.055

BILLING CODE 6750-01-C
(b) Additional Unquantified Benefits: Reductions in Deadweight Loss and 
Abandoned Transactions
    Due to the incomplete price information problem described in 
section V.E.1, the final rule requiring ticket sellers to show total 
price of tickets upfront will likely result in a reduction of 
deadweight loss. Recent research suggests that when consumers know 
total prices for tickets upfront, consumers are better able to find the 
tickets that match their desired quantity and quality (seat type or 
location).\599\ The analysis does not quantify the reduction in 
deadweight loss, but such a reduction is a positive benefit of the 
rule.
---------------------------------------------------------------------------

    \597\ Live Nation 10-K, supra note 590.
    \598\ OEWS National, supra note 571; Hamermesh, supra note 533.
    \599\ Blake, supra note 521. Live-event tickets are an example 
of a differentiated product; there are higher quality tickets (e.g., 
better views, more comfortable seats, cover from the elements) that 
are associated with higher price tiers. Blake et al. find that 
consumers who face drip pricing purchase more expensive, higher 
quality tickets than they would if provided with upfront pricing.
---------------------------------------------------------------------------

    Another unquantified benefit to the final rule is a potential 
decrease in abandoned transactions. For example, in some cases, once 
the additional information impacting full price is revealed, consumers 
may fully abandon the transaction (i.e., not purchase any ticket). 
Although the Commission solicited comment in the NPRM on the

[[Page 2142]]

frequency of, and the reasons for, abandoned transactions in the live-
event ticket market to help quantify this benefit, it did not receive 
this data and cannot determine the quantity of such abandoned 
transactions and the amount of time spent pursuing them. As a result, 
this benefit is unquantified.
ii. Live-Event Ticketing: Estimated Costs of the Final Rule
    This section describes the potential costs of the final rule's 
provisions and provides 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 2023 
National Occupational Employment and Wage Estimates.\600\ Because live-
event ticketing is not associated with a specific NAICS code, the 
Commission uses wages at the national level rather than the industry-
specific wages that are used to calculate costs for the short-term 
lodging industry.
---------------------------------------------------------------------------

    \600\ OEWS National, supra note 571.
---------------------------------------------------------------------------

    The costs to sellers from the rule include a review of whether the 
rule applies, and, if the firm is not currently compliant with the 
rule, one-time costs to comply with the rule, as well as recurring 
annual costs to review and ensure ongoing compliance. The Commission's 
analysis presents two cost scenarios corresponding to different 
assumptions of how many hours are required to comply with the rule and 
how many firms would be affected by the rule. The analysis presents 
these as low-end and high-end cost scenarios.
    To estimate costs for the entire live-event ticket-selling 
industry, the Commission's analysis calculates the cost per seller and 
multiplies that by the number of sellers in the industry. There is some 
uncertainty about the number of live-event ticket sellers that would be 
affected by the rule because, while the NAICS classification system 
does not define a classification solely for ticket sellers, two 
different NAICS codes might include ticket sellers. The GAO Report used 
the NAICS code 561599, which is ``All Other Travel Arrangement and 
Reservation Services.'' \601\ This NAICS category includes 1,442 firms; 
some live-event ticket sellers, such as Tickets.com and Vivid Seats, 
use this classification.\602\ Other live-event ticket sellers, such as 
Ticketmaster and StubHub, however, are classified as NAICS code 7113, 
which is ``Promoters of Performing Arts, Sports, and Similar Events,'' 
and includes 7,998 firms.\603\ As a high-end estimate of the number of 
live-event ticket sellers, the Commission's analysis uses the sum of 
the firms within these two NAICS code and assumes there are 9,440 firms 
potentially impacted by the final rule.\604\
---------------------------------------------------------------------------

    \601\ 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 (2022), https://www.census.gov/naics/?input=561599&year=2022&details=561599.
    \602\ U.S. Census Bureau, 2021 SUSB Annual Datasets by 
Establishment Industry (Dec. 2023), https://www.census.gov/data/datasets/2021/econ/susb/2021-susb.html.
    \603\ Id.
    \604\ Note that some live-event ticket sellers may be organized 
as non-profit entities and thus could fall outside of the 
Commission's jurisdiction. The Commission did not find data on the 
proportion of ticket sellers that are non-profits and thus uses the 
full number of firms. If a non-trivial number of ticket sellers are 
outside the jurisdiction of the Commission and not subject to the 
provisions of the rule, then the total costs to ticket sellers is 
overestimated.
---------------------------------------------------------------------------

    The 9,440 figure 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 final 
rule. The private research firm IBISWorld estimated that the number of 
firms in the online live-event ticket selling industry was 3,326.\605\ 
The Commission's analysis uses the 3,326 figure as a low-end estimate 
of the number of firms.
---------------------------------------------------------------------------

    \605\ Ticket Sales Industry Report, supra note 581.
---------------------------------------------------------------------------

    Next, the Commission's analysis estimates the number of hours a 
firm would spend complying with the rule. As with assumptions regarding 
the number of firms, the following estimation utilizes low-end and 
high-end values for the number of hours necessary for compliance. 
Because many ticket sellers operate in other countries that currently 
have requirements similar to the final rule (Canada, Australia, the 
United Kingdom, and the European Union member states), ticket sellers 
already may have incorporated any changes required by the final rule to 
their operating practices. The websites already may be programmed; the 
lawyers already may be prepared to advise on compliance with the rule; 
and the data scientists already may have determined the optimal pricing 
strategy. Thus, sellers would have relatively low costs to transition 
to all-in pricing in the U.S.\606\
---------------------------------------------------------------------------

    \606\ FTC-2023-0064-3212 (TickPick, LLC commented: ``For the 
most part, ticketing marketplaces would incur an immaterial cost to 
implement all-in pricing. Internationally, major ticket marketplaces 
are already required to comply with true all-in pricing in Canada 
and the United Kingdom. The technology to display tickets inclusive 
of fees in the form of a toggle is a widely available functionality. 
Put differently, the technology already exists within ticketing 
platforms to eliminate drip pricing and would simply need to be 
applied to events in the U.S.'').
---------------------------------------------------------------------------

    In this low-end cost scenario, because live-event ticket sellers 
already are 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. The Commission's analysis assumes five hours of lawyer time 
to determine if the rule applies, forty hours of data scientist time to 
re-optimize pricing strategy, and forty hours of web developer time to 
edit and reprogram the website to display upfront prices. For the low-
end cost scenario, the analysis also assumes there are no annual costs 
after the firm has incurred the one-time transition costs.
    In the high-end cost scenario, the Commission's analysis assumes 
that ticket sellers have not laid the groundwork to comply with the 
rule. The high-end cost scenario assumes sellers require twice the 
number of hours to determine optimal prices, re-program the website to 
include 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 eighty hours of web developer time. For the high-end cost 
estimate, the analysis assumes there are recurring annual costs of ten 
hours of lawyer time per year to review and confirm compliance.\607\
---------------------------------------------------------------------------

    \607\ FTC-2023-0064-3122 (Vivid Seats commented: ``We believe 
that the FTC is underestimating the amount of employee time required 
by at least a factor of five.''). The Commission notes that other 
commenters stated the transition to upfront pricing for ticket 
sellers would be as simple as a toggle switch and that most ticket 
sellers already have the capability to provide Total Price due to 
existing regulations in other countries. See, e.g., FTC-2023-0064-
3212 (TickPick, LLC); FTC-2023-0064-0132 (Individual Commenter who 
purchased tickets from GameStop and StubHub noted that ``on all of 
these sites the fees are not explained until the final page unless 
you go find the toggle to include fees as you are looking for 
tickets''); FTC-2023-0064-3207 (Consumer Reports noted a consumer 
who commented: ``While I appreciate that TM [Ticketmaster] now has 
the option to view all your fees up front as part of the price if 
you toggle that option, its totally insane that fees can be 25% of 
the cost at LEAST.''); FTC-2022-0069-6162 (ANPR) (Recording Academy 
noted that ``StubHub allows the consumer to toggle `Show prices with 
estimated fees' filter during the ticket search''). The Commission 
did not receive any definitive data on the number of hours this 
change would take and thus retains the low-end and high-end hours 
estimates presented in the NPRM.
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[GRAPHIC] [TIFF OMITTED] TR10JA25.056

iii. Live-Event Ticketing: Net Benefits
---------------------------------------------------------------------------

    \608\ U.S. Census Bureau, 2021 SUSB Annual Datasets by 
Establishment Industry, supra note 602. Hourly wages are from the 
Bureau of Labor Statistics. See sources cited supra note 571, 
including OEWS Data Scientists (providing the hourly wages for data 
scientists); OEWS Web Developers (providing the hourly wages for web 
developers); and OEWS Lawyers (providing the hourly wages for 
lawyers).
---------------------------------------------------------------------------

    In Table 9, the Commission's analysis presents net benefits using 
the quantified benefits and costs discussed in section V.E.3.c.i and 
V.E.3.c.ii. To calculate the low-end of the range for net benefits, the 
analysis subtracts the total quantified costs using the high-end cost 
assumptions from the total quantified benefits using the low-end 
benefit assumptions. For the high-end of the range for net benefits, 
the analysis subtracts the low-end estimate of total quantified costs 
from the high-end estimate of total quantified benefits.

[[Page 2144]]

[GRAPHIC] [TIFF OMITTED] TR10JA25.057

    Using various assumptions, the quantified benefits and costs imply 
that the rule will have a positive net benefit, even without accounting 
for the additional benefit of reducing deadweight loss.
iv. Live-Event Ticketing: 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 live-event ticketing industry rely on a set 
of assumptions, based on the best available public information. When 
the data are unclear, the analysis relies on assumptions that generate 
a range of low-end and high-end estimates. In Table 10, the analysis 
summarizes those key assumptions and their effect on the resulting 
estimate of quantified benefits and costs.
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BILLING CODE 6750-01-C

[[Page 2146]]

(d) Quantified Benefits and Costs: Short-Term Lodging Industry
    Businesses in the short-term lodging industry, which include both 
traditional hotels \609\ as well as home share options like Airbnb and 
VRBO, often charge a variety of mandatory add-on fees. These fees are 
typically either disclosed upfront but 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 (a practice known as drip pricing). Sometimes, these fees are 
not disclosed at all or are disclosed only when a consumer checks out 
at the conclusion of their stay. These fees may include mandatory 
surcharges referred to by hotels as ``resort fees,'' ``amenity 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, or 
shuttle services. Home share websites like Airbnb and VRBO may include 
mandatory fees such as ``cleaning fees,'' ``service fees,'' or ``host 
fees.'' These fees are mandatory and do not depend on the consumer's 
use of the amenities or services.
---------------------------------------------------------------------------

    \609\ Throughout this section, we use ``hotel'' as an umbrella 
term for hotels, motels, inns, short-term rentals, vacation rentals, 
traditional bed and breakfasts, hostels, and other places of 
lodging.
---------------------------------------------------------------------------

    Consumer behavior studies have shown that both partitioned pricing 
and drip pricing cause consumers to underestimate the full price of the 
product, even when all components of the price are disclosed 
upfront.\610\ As a result, disclosing mandatory surcharges separately 
from the room rate without more prominently disclosing total price is 
likely to harm consumers by increasing search costs and reducing 
consumer surplus.\611\ 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. Partitioned 
pricing and drip pricing may also increase search costs if consumers 
spend more time looking at additional listings in search of a cheaper 
hotel.
---------------------------------------------------------------------------

    \610\ Shelanski, supra note 550.
    \611\ Mary Sullivan, Fed. Trade Comm'n, Economic Analysis of 
Hotel Resort Fees 4 (2017), https://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf.
---------------------------------------------------------------------------

    One industry group states that 6% of U.S. hotels charge mandatory 
fees, which amounts to over $2.5 billion paid in resort fees annually 
by U.S. consumers.\612\ 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 3.9% of the per-
night cost of a room, and can exceed 20% of the per-night cost, 
especially at lower cost hotels.\613\
---------------------------------------------------------------------------

    \612\ FTC-2023-0064-3094 (American Hotel & Lodging Association); 
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.
    \613\ Sally French & Sam Kemmis, How to Avoid Hotel Resort Fees 
(and Which Brands Are the Worst), NerdWallet (updated Aug. 1, 2024, 
11:53 a.m. PDT), https://www.nerdwallet.com/article/travel/hotel-resort-fees.
---------------------------------------------------------------------------

    This section analyzes the final rule's quantified benefits and 
costs in the short-term lodging industry. Quantified benefits are 
limited to the expected reductions in search costs to consumers. Since 
there is an additional, unquantified benefit of reduced deadweight 
loss, which is discussed conceptually in section V.E.2.a.ii, the net 
benefit estimated in the following analysis is conservative. The 
Commission finds that the quantified benefits and costs indicate that 
the rule will have a positive net benefit, even without accounting for 
the unquantified benefit of reducing deadweight loss.\614\
---------------------------------------------------------------------------

    \614\ In this final short-term lodging net benefit analysis, the 
Commission updates firm counts, wage rates, any inflation-adjusted 
values, value of time, and 10-K hotel revenue information to reflect 
the most recent available data. The Commission was unable to update 
any numbers from IBISWorld Reports.
---------------------------------------------------------------------------

i. Short-Term Lodging: Estimated Benefits of the Final Rule
    As a result of the final 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 booking or spend less time understanding and assessing 
the full price.\615\ In its analysis, the Commission makes the 
conservative and simpler assumption that the time spent viewing a 
listing remains the same, and that consumers reduce the number of 
listings they view. Table 11 quantifies the benefits of such time 
savings and provides low- and high-end estimates to account for 
uncertainty in the available statistics.
---------------------------------------------------------------------------

    \615\ The drip pricing literature suggests that, because time to 
view one listing is lower under upfront pricing, a subset of 
consumers may view more listings rather than fewer because the cost 
of viewing an additional listing has decreased. Sullivan, supra note 
611. It is unclear how this affects total search time. If the higher 
number of listings viewed is offset by the lower time it takes to 
view each listing, the total search time 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 subset 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, supra note 521. The total search time for these 
consumers will decrease. The Commission's analysis focuses on the 
latter group of consumers because the change in their search time 
represents a decrease in ``bad'' or unnecessary searches caused by 
drip pricing.
---------------------------------------------------------------------------

    The Commission's analysis focuses on the benefits that accrue to 
consumers who book rooms from within the United States on any U.S.-
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. In this section, the Commission outlines how it calculates 
the benefits listed in Table 11 as well as the assumptions made. The 
table reports a set of basic search statistics used in the calculation, 
the savings per year for consumers who book at U.S. short-term 
lodgings, the savings per year for consumers who book at foreign short-
term lodgings with U.S.-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 a 
single short-term lodging website can vary in whether listings have 
hidden fees. Different hotel brands belonging to the same larger hotel 
company may impose hidden fees for listings in some cities but not in 
others. Some listings may note whether resort fees are included in the 
base price, but in very fine print under the listed price. Some 
listings may not say anything, requiring consumers to click through the 
listing to learn whether there are hidden fees at the end of the 
booking process. Given that a minimum of 6% of hotels \616\ impose drip 
or partitioned pricing, and the average hotel shopper visits seventeen 
travel websites before booking,\617\ consumers

[[Page 2147]]

are likely to encounter at least one website that imposes dripped or 
partitioned pricing in their search for a hotel. Even if consumers 
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, the Commission 
quantifies 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 dripped or partitioned pricing.
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    \616\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
    \617\ Chris Anderson & Saram Han, The Billboard Effect: Still 
Alive and Well, 17 Cornell Hosp. Rpt. 1 (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 sixty days 
prior to reserving a room.
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(a) Search Statistics
    The Commission uses two different studies to calculate low- and 
high-end estimates for the average number of minutes it takes to view 
one listing. On the low end, the analysis uses statistics on Airbnb 
user search behavior collected by Fradkin (2017) to calculate that 
consumers spend 9.48 minutes to view one listing.\618\ On the high end, 
the analysis uses a hotel search cost model developed by Chen and Yao 
(2016) to calculate the average search cost per listing.\619\ Using 
this average search cost, the Commission estimates that consumers spend 
14.18 minutes viewing one listing. Appendix B in section V.E.7 contains 
calculation details for both estimates. Using the estimates from each 
study as low- and high-end estimates ensures that the analysis captures 
user search behavior when shopping on home share websites like Airbnb 
and when shopping for a traditional hotel.
---------------------------------------------------------------------------

    \618\ 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), https://ide.mit.edu/wp-content/uploads/2017/07/SearchMatchingEfficiency.pdf.
    \619\ Yuxin Chen & Song Yao, Sequential Search with Refinement: 
Model and Application with Click-Stream Data, 63 Mgmt. Sci. 4345 
(2016), https://doi.org/10.1287/mnsc.2016.2557.
---------------------------------------------------------------------------

    To estimate the reduction in average listings viewed due to dripped 
or partitioned pricing, the Commission's analysis uses results on the 
average reduction in listings viewed under upfront pricing from an 
experiment in the live-event ticket industry.\620\ That study found 
that the average reduction in listings viewed under upfront pricing was 
10.6% of the mean listings viewed under drip pricing. For the low-end 
estimate, the analysis applies the same proportion to the mean listings 
viewed by Airbnb users in Fradkin (2017) (2.367 listings, proxied by 
number of contacts) and finds a reduction of 0.25 listings. On the high 
end, the Commission applies this to the mean listings viewed by hotel 
searchers in Chen and Yao (2016), 2.3 listings, and finds a reduction 
of 0.24 listings.\621\
---------------------------------------------------------------------------

    \620\ Blake, supra note 521.
    \621\ Although the Commission is basing its estimate about 
reduction in listings on data that comes from the ticketing 
industry, this 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. 530 (2018), 
https://doi.org/10.1287/mksc.2017.1072. Given the Commission's 
estimates of the time to view one listing (between 9.48 and 14.18 
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 the Commission's method, these findings reinforce that, 
if anything, the benefits estimates presented here are likely 
conservative.
---------------------------------------------------------------------------

    Multiplying these numbers by the minutes to view one listing 
results in 2.39 to 3.47 minutes saved per transaction. These are likely 
conservative estimates, given that they assume consumers only view one 
website before booking a room. As previously stated, one study 
suggested that consumers visit an average of seventeen websites before 
booking.\622\ The average reduction in listings viewed may also 
underestimate benefits from eliminating dripped and partitioned 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 live-event 
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.
---------------------------------------------------------------------------

    \622\ See Anderson & Han, supra note 800. It is unclear whether 
the relationship between websites viewed and time saved is linear, 
as consumers may save less time on the fifteenth website they view 
than they do on the first. As such, it is difficult to extrapolate 
from the Commission's estimates to the total time saved for 
consumers who view multiple websites. Therefore, to remain 
conservative in its estimate of benefits, the Commission's analysis 
assumes that consumers visit only one website.
---------------------------------------------------------------------------

    Finally, as is described in detail in section V.E.3.b, the 
Commission's analysis uses $25.81 as the value of one hour work time.
(b) U.S. Hotels and Home Shares
    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. The Commission's analysis finds 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'').\623\ 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.
---------------------------------------------------------------------------

    \623\ Revenue equals about $192.23 billion. Alexia Moreno 
Zambrano, Hotels & Motels in the US, IBISWorld (Jan. 2023) (``Hotels 
& Motels Industry Report''); Thi Le, Bed & Breakfast & Hostel 
Accommodations in the US, IBISWorld (Jan. 2023) (``Bed & Breakfast 
Industry Report''). The ADR is about $149. STR: U.S. hotel ADR and 
RevPAR reached record highs in 2022, STR (Jan. 20, 2023), https://str.com/press-release/str-us-hotel-adr-and-revpar-reached-record-highs-2022.
---------------------------------------------------------------------------

    Dividing the total number of nights booked by the average number of 
nights per booking gives 715 million total bookings.\624\ About 91.8%, 
or 657 million, of these bookings are made by U.S. consumers.\625\ 
Finally, the Commission calculates 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 ranging from about $674 
million to $980.3 million.
---------------------------------------------------------------------------

    \624\ Consumers book on average 1.8 nights per booking. Jordan 
Hollander, 75+ Hospitality Statistics You Should Know (2024), Hotel 
Tech Report (updated July 9, 2024), https://hoteltechreport.com/news/hospitality-statistics.
    \625\ How much do U.S. hotels depend on international guest 
stays?, CBRE Econometric Advisors' Blog (Oct. 10, 2017), https://www.cbre-ea.com/public-home/deconstructing-cre/2017/10/10/how-much-do-u.s.-hotels-depend-on-international-guest-stays.
---------------------------------------------------------------------------

(c) Foreign Hotels and Home Shares with U.S.-Facing websites
    To estimate the number of foreign short-term lodging bookings made 
by U.S. consumers, the Commission uses the fact that 96% of all trips 
taken by U.S. consumers are domestic.\626\ Multiplying the number of 
bookings made by U.S. consumers by ((1-0.96)/0.96)) gives 27.4 million 
foreign bookings. The total savings for this category ranges from about 
$28.1 to $40.8 million.
---------------------------------------------------------------------------

    \626\ Adrian, U.S. Travel & Tourism Statistics 2020-2021, 
Tourism Academy Blog (Sep. 15, 2021 12:39:18 p.m.), https://blog.tourismacademy.org/us-tourism-travel-statistics-2020-2021.
---------------------------------------------------------------------------

(d) All Hotels and Home Shares
    Together, U.S. and foreign bookings amount to about 683.9 million 
bookings per year. This corresponds to between 27.2 and 39.6 million 
hours saved by U.S. consumers per year, and between

[[Page 2148]]

$702.1 million and $1.02 billion total savings per year. Table 11 
presents the expected benefits of time savings over the next ten years 
in present value.
---------------------------------------------------------------------------

    \627\ OEWS National, supra note 571; Hamermesh, supra note 533.
    \628\ Hollander, supra note 624.
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(e) Additional Unquantified Benefits: Reductions in Deadweight Loss and 
Abandoned Transactions
    As is discussed in section V.E.2.a.ii, the final rule requiring 
short-term lodgings to display total price of rooms will likely result 
in a reduction of deadweight loss. When consumers are not provided 
total price at the beginning of the booking process, sellers likely are 
able to charge higher prices than under the final rule. The rule's 
total price requirement may provide consumers with more complete 
pricing information so that they can make informed decisions about 
short-term lodging reservations, thus reducing deadweight loss. The 
Commission does not quantify the reduction in deadweight loss but 
acknowledges that it is a positive benefit to the final rule.
    In some cases, once total price is provided, consumers may fully 
abandon the transaction (i.e., not book any room). Since lodging cost 
is only a part of overall trip cost, 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 
solicited comment in the NPRM on the frequency of, and reasons for, 
abandoned transactions in the short-term lodging industry to help 
quantify this benefit, but did not receive adequate information in 
response, so this benefit remains unquantified.
ii. Short-Term Lodging: Estimated Costs of the Final Rule
    The Commission herein describes the final rule's potential costs to 
the short-term lodging industry and, where possible, provides 
quantitative estimates of those costs. The costs to hotels from the 
final rule include a review of whether the rule applies and, in cases 
of noncompliance with the final rule, one-time costs to come into 
compliance and recurring annual costs to ensure ongoing 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.\629\ The Commission uses 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, hostels, and home share platforms.\630\ 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.
---------------------------------------------------------------------------

    \629\ U.S. Bureau Lab. Stat., Occupational Employment and Wage 
Statistics, May 2023 National Industry-Specific Occupational 
Employment and Wage Estimates: NAICS 721100--Traveler Accommodation 
(May 2023), https://www.bls.gov/oes/current/naics4_721100.htm 
(``OEWS Traveler Accommodation'').
    \630\ NAICS code 721100 does not capture intermediary travel 
websites, which display pricing information and offer booking 
options for various short-term lodging firms. Because these 
intermediaries constantly update pricing information obtained 
directly from short-term lodging firms (see, e.g., FTC-2023-0064-
3293, Travel Technology Association), and do not need to reoptimize 
prices or drastically change displays themselves, the Commission 
believes that intermediary firms will not face additional compliance 
costs from the rule.
---------------------------------------------------------------------------

    Table 12 outlines the estimated costs of the final rule. Panel A 
shows the costs for U.S. hotels and home share hosts; Panel B shows the 
costs for foreign hotels and home share hosts who post listings on 
U.S.-facing websites; \631\ and Panel C shows the total combined costs 
for both groups.
---------------------------------------------------------------------------

    \631\ The Commission's analysis includes costs to foreign hotels 
with U.S.-facing websites because complying with the rule may cause 
them to pass through some costs to U.S. hotel shoppers. The 
Commission is unable to quantify what percentage of costs will be 
passed through; to be conservative, the analysis includes all costs 
to foreign hotels and home share hosts.
---------------------------------------------------------------------------

(a) Panel A: U.S. Hotels and Home Share Hosts
    There are 49,216 U.S. hotels associated with the ``Traveler 
Accommodation'' NAICS code. Of these firms, 6% impose resort fees, 
bringing the high-end number of U.S. firms affected to 2,953. The low-
end number of firms affected is 2,948 after removing Marriott 
International, Inc., Omni Hotels Management Corporation, Choice Hotels 
International, Inc., Hilton Worldwide Inc., and Hyatt Hotels 
Corporation to account for the possibility that these hotels will 
eliminate dripped and partitioned pricing from their websites 
regardless of this rule to comply with any existing or forthcoming 
settlements with various State Attorneys General.\632\
---------------------------------------------------------------------------

    \632\ In 2021, Marriott agreed to a settlement with the 
Commonwealth of Pennsylvania, Office of the Attorney General, in 
which Marriott agreed to include mandatory resort fees in the base 
rate of its hotel rooms on the first page of the booking process. 
Assurance of Voluntary Compliance, Commonwealth v. Marriott Int'l, 
Inc., No. GD-21-014016 (Pa. Ct. C.P. Nov. 16, 2021). In 2023 and 
2024, Marriott entered into similar settlements with the Offices of 
the Attorney General in both the State of Nebraska and the State of 
Texas. Assurance of Voluntary Compliance, Texas v. Marriott Int'l, 
Inc., No. 2023-CI09717 (Tex. Dist. Ct. May 16, 2023); Order 
Approving Assurance of Voluntary Compliance, Nebraska v. Marriott 
Int'l, Inc., No. CI 23-3860 (Neb. Dist. Ct. Jan. 18, 2024). In 2023, 
Omni and Choice Hotels both agreed to similar multi-state 
settlements with the Offices of the Attorney General in the State of 
Colorado, the Commonwealth of Pennsylvania, and the State of 
Nebraska. See, e.g., Assurance of Discontinuance, In re Choice 
Hotels Int'l Inc. Resort Fees (Colo. Sept. 21, 2023); Assurance of 
Discontinuance, In re Omni Hotels Mgmt. Corp. Resort Fees (Colo. Nov 
9, 2023); Assurance of Voluntary Compliance, Commonwealth v. Omni 
Hotels Mgmt., GD-23-013056 (Pa. Commw. Ct. Nov. 9, 2023); Assurance 
of Voluntary Compliance, Commonwealth v. Choice Hotels Intl., Inc., 
GD-23-011023 (Pa. Commw. Ct. Sept. 21, 2023); Order Approving 
Assurance of Voluntary Compliance, Nebraska v. Choice Hotels Int'l, 
Inc., No. CI 23-3269 (Neb. Dist. Ct. Sept. 27, 2023); Order 
Approving Assurance of Voluntary Compliance, Nebraska v. Omni Hotels 
Mgmt. Corp., No. CI 23-3641 (Neb. Dist. Ct. Oct. 27, 2023). Choice 
Hotels agreed to an additional settlement with the Oregon Department 
of Justice. Assurance of Voluntary Compliance, In re Choice Hotels, 
Int'l, Inc., No. 23-CV-39128 (Or. Cir. Ct. Sept. 21, 2023). In 2024, 
Hilton Hotels agreed to a settlement with the State of Nebraska, 
Office of the Attorney General. Final Consent Judgment, Nebraska v. 
Hilton Dopco, Inc., No. CI 19-2366 (Neb. Dist. Ct. Jan. 29, 2024). 
Finally, Hyatt Hotels faces an ongoing lawsuit filed in 2023 by the 
State of Texas, Office of the Attorney General, which seeks to 
require Hyatt to display full prices in the initial advertised price 
of any hotel room. Plaintiff's Original Pet., Texas v. Hyatt Hotels 
Corp., No. C2023-0884D (Tex. Dist. Ct. May 15, 2023).
---------------------------------------------------------------------------

    Next, the Commission's analysis estimates the number of hours a 
U.S. hotel would spend complying with the final rule. The analysis 
assumes all hotels that do not impose dripped or partitioned pricing 
will spend one hour of lawyer time determining if the final rule 
requires any changes to their advertising. Hotels that are not 
presently compliant with the rule will incur additional costs to come 
into compliance. In the low-end estimate, the analysis assumes that, 
because many hotels have websites facing other countries that already 
have similar requirements to the final rule (e.g., Canada, Australia, 
and the European Union member states), hotels already may have the 
experience and infrastructure required to incorporate the necessary 
changes to their operating practices. In this scenario, hotels have 
relatively low costs to transition to all-in pricing for their U.S.-
facing websites. The analysis assumes five hours of lawyer time to 
determine how the final rule applies to the firm, forty hours of data 
scientist time to re-optimize the pricing strategy, and forty hours of 
web developer time to edit the website to display total prices and make 
other requisite disclosures.
    In addition to hotels, the final rule also would affect individuals 
who participate in the home share market by listing their properties 
for short-term rentals on websites like Airbnb and VRBO. The 
Commission's analysis estimates 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

[[Page 2150]]

U.S. market share.\633\ On the low-end, the analysis assumes that each 
host will take one hour to reprice each listing. Hosts have, on 
average, 1.18 listings, resulting in 1.18 hours of time per host.\634\ 
The value of time comes from the same source as in Table 11.
---------------------------------------------------------------------------

    \633\ See Clark Shultz, Airbnb increases market share in latest 
read from M Science, Seeking Alpha (June 6, 2022 1:32 p.m. ET), 
https://seekingalpha.com/news/3846023-airbnb-increases-market-share-in-latest-read-from-m-science (providing Airbnb's market share); 
Thibault Masson, Airbnb Host Data: Who are Airbnb hosts? Why are 
individual hosts more important than professional ones?, Rental 
Scale-Up (updated Dec. 19, 2020), https://www.rentalscaleup.com/airbnb-host-data-who-are-airbnb-hosts-why-are-individual-hosts-more-important-than-professional-ones/ (providing the statistics used to 
estimate the number of Airbnb home share hosts in the U.S.). The 
estimated total number of home share hosts in the U.S. is 675,603, 
which is calculated as 504,000/.746, where 504,000 is the number of 
Airbnb home share hosts in the U.S. and .746 is Airbnb's U.S. market 
share. The number of Airbnb home share hosts is calculated as 
560,000 * .9 = 504,000, where 560,000 is the number of Airbnb hosts 
in the U.S., and 90% of these hosts are individual hosts (people who 
rent individual rooms or entire primary homes rather than 
traditional bed and breakfasts or hostels; traditional bed and 
breakfasts or hostels are already captured in the hotel firms 
defined by Traveler Accommodation NAICS code 721100).
    \634\ 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, Stratos Jet Charters, Inc. Blog (Jan. 4, 2022), 
https://www.stratosjets.com/blog/airbnb-statistics/ [https://web.archive.org/web/20220219093345/https://www.stratosjets.com/blog/airbnb-statistics/] (providing the total number of U.S. listings); 
Masson, supra note 633 (providing the total number of U.S. hosts).
---------------------------------------------------------------------------

    In the high-end cost scenario, the Commission's analysis assumes 
that hotels have not laid the groundwork for upfront pricing. The 
analysis assumes under this scenario that hotels require twice the 
number of hours to determine optimal prices, re-program the website to 
include total price, and review and confirm compliance. Thus, the one-
time costs for hotels include ten hours of lawyer time, eighty hours of 
data scientist time, and eighty hours of web developer time. The 
analysis further assumes home share hosts spend three hours repricing 
each listing, resulting in 3.5 hours per host.
    In addition to the one-time costs, the Commission's analysis also 
assumes hotels incur annual costs of between zero to ten hours of 
lawyer time per year to review and confirm compliance with the final 
rule.\635\ 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 $35.9 million to $107.8 million using a 7% discount rate, and from 
$35.9 million to $112 million using a 3% discount rate. The Commission 
also finds that the per firm annualized cost to U.S. hotels that are 
not presently compliant with the rule ranges from $527 to $2,011 using 
a 7% discount rate, and from $434 to $1,825 using a 3% discount rate. 
Home share hosts in the U.S. incur an average one-time cost between 
$30.42 to $91.27.
---------------------------------------------------------------------------

    \635\ Since home share hosts are not operating large, 
sophisticated firms and will likely not spend additional time 
ensuring compliance beyond year one, the analysis assumes home share 
hosts do not incur annual costs due to the rule.
---------------------------------------------------------------------------

    All ranges of lawyer, data scientist, web developer, and home share 
host time used in the analysis 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 final 
rule.
(b) Panel B: Foreign Hotels and Home Share Hosts
    The Commission acknowledges that non-U.S. firms and home share 
hosts with U.S.-facing websites may bear compliance costs from the 
final rule that may be passed on to consumers. Therefore, the 
Commission estimates these costs using the best available data. 
Estimating costs for foreign hotels and home share hosts using the same 
method in Panel A would be difficult because there are no reliable 
estimates for the number of foreign hotels and home share hosts or for 
the relevant international wage rate for lawyers, data scientists, and 
web developers. The Commission's analysis instead estimates foreign 
costs by extrapolating from the estimated U.S. costs in Panel A. Since 
the U.S. hotel industry's global market share is about 14.5%,\636\ the 
one-time and annual costs for foreign hotels each can be calculated by 
multiplying the one-time and annual costs for U.S. hotels by (1-0.145)/
0.145. This method captures the cost of all foreign hotels, including 
ones that will not be subject to the final rule because they do not 
have U.S.-facing advertising. Therefore, the costs to foreign hotels 
may be overestimated.
---------------------------------------------------------------------------

    \636\ 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 note 
623; Bed & Breakfast Industry Report, supra note 623; Demetrios 
Berdousis, Casino Hotels in the US, IBISWorld (Jan. 2023).
---------------------------------------------------------------------------

    The Commission's analysis uses the percentage of Airbnb's U.S. 
revenue (43%) \637\ as a proxy for the U.S. home share market's global 
market share. Using this proxy, the analysis estimates 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 (1-0.43)/0.43. The total 
one-time and annual foreign hotel and home-share costs for the next ten 
years in present value range from $117.4 million to $352.8 million 
using a 7% discount rate, and from $117.4 million to $377.9 million 
using a 3% discount rate. The Commission is unable to provide the per 
firm annualized cost for foreign hotels and non-U.S. home share hosts 
because the number of foreign hotels and home share hosts is not known.
---------------------------------------------------------------------------

    \637\ Airbnb, Inc., Annual Report (Form 10-K) (Feb. 16, 2024) 
(``Airbnb 10-K''), https://investors.airbnb.com/financials/sec-filings/sec-filings-details/default.aspx?FilingId=17283799.
---------------------------------------------------------------------------

(c) Panel C: All Hotels and Home Share Hosts (US + Foreign)
    The total cost for all affected hotels and home share hosts over 
ten years in present value is estimated to be from $153.3 million to 
$460.6 million using a 7% discount rate and from $153.3 million to 
$489.9 million using a 3% discount rate.
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iii. Short-Term Lodging: Net Benefits
---------------------------------------------------------------------------

    \638\ U.S. Census Bureau, 2021 SUSB Annual Datasets by 
Establishment Industry, supra note 602.
    \639\ FTC-2023-0064-3094 (American Hotel & Lodging Association).
    \640\ OEWS Traveler Accommodation, supra note 629.
    \641\ See OEWS National, supra note 571 (providing the mean 
hourly wage); Hamermesh, supra note 533 (providing the value of 
time).
    \642\ See infra section V.E.3.d.ii.b (describing the 
calculations).
    \643\ Airbnb 10-K, supra note 637.
---------------------------------------------------------------------------

    Table 13 presents the net benefits of the final rule in the short-
term lodging industry using the quantified benefits and costs discussed 
in section V.E.3.d.i and V.E.3.d.ii. To calculate the low-end of the 
range for net benefits, the Commission's analysis subtracts 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, the analysis subtracts the total costs using the low-end cost 
assumptions from the total benefits using the high-end benefit 
assumptions.

[[Page 2153]]

    The quantified benefits and costs imply that the final rule will 
have a positive net benefit, even without accounting for the 
unquantified benefit of reducing deadweight loss.
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iv. 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 are unclear, the analysis uses sets of assumptions that would 
generate a range of low- and high-end estimates. Table 14 summarizes 
the key assumptions and how they may affect the resulting estimate of 
quantified benefits and costs. When possible, the analysis 
underestimates benefits and overestimates costs in order to 
conservatively estimate net benefits.
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4. Economic Evaluation of Alternatives
    As an alternative to the rule, the Commission considered not 
pursuing rulemaking and instead relying on its existing tools of 
enforcement actions and consumer education. This approach is equivalent 
to a no-action baseline and would result in no incremental benefits or 
costs. The prevalence of drip pricing and hidden mandatory fees would 
persist.
    The Commission also alternatively considered, as discussed in the 
Preliminary Regulatory Analysis, promulgating an industry-neutral 
version of the rule. The Commission was unable to quantify economy-wide 
benefits and provided a break-even analysis using quantified compliance 
costs for the entire economy.\644\ The economy-wide break-even analysis 
implied there would be positive net benefits to the rule if the benefit 
per consumer was at least $6.65 per consumer per year over a ten-year 
period assuming a 7% discount rate or at least $5.95 assuming a 3% 
discount rate. The Commission estimated that per firm annualized costs 
for an economy-wide rule would be between $691 and $2,010 assuming a 7% 
discount rate and between $569 and $1,803 assuming a 3% discount rate.
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    \644\ The break-even analysis provided in the Preliminary 
Regulatory Analysis utilized the same set of assumptions regarding 
the high-end and low-end numbers of hours required for firms to 
comply with the proposed economy-wide rule. The preliminary break-
even analysis also made a set of assumptions about what proportion 
of the economy currently complied with the provisions of the 
proposed rule.
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    The Commission sets forth additional alternatives to the final rule 
that it considered in section V.B but does not have sufficient data to 
prepare a quantitative analysis of those alternatives.
5. Summary of Results
    The Commission's final regulatory analysis catalogs and, where 
possible, quantifies the incremental benefits and costs of the final 
rule for the live-event ticketing and short-term lodging industries. 
The Commission estimates that the quantified benefits of the rule will 
exceed its quantified costs, and the Commission believes that the total 
benefits of the rule (quantified and unquantified) will outweigh the 
total costs (quantified and unquantified). The Commission estimates 
that the benefits of the final rule over the next ten years accruing 
solely from reduced consumer

[[Page 2156]]

search costs in the live-event ticketing industry range from $184 
million to $2.46 billion under an assumed 7% discount rate, and $224 
million to $2.99 billion using an assumed 3% discount rate. The 
Commission estimates compliance costs for live-event ticketing firms 
over the ten-year period to be between $15 million and $142 million 
using a 7% discount rate, and between $15 million and $154 million 
using a 3% discount rate.
    For the short-term lodging industry, the Commission estimates ten-
year benefits to consumers from reduced search costs to range from 
$4.93 billion to $7.17 billion using a 7% discount rate, and between 
$5.99 billion and $8.71 billion using a 3% discount rate. The 
Commission estimates compliance costs for short-term lodging firms for 
the ten-year period to be between $153 million and $461 million using a 
7% discount rate and between $153 million and $490 million using a 3% 
discount rate.
    The Commission also provides a break-even analysis using quantified 
compliance costs that are aggregated for the live-event ticketing and 
short-term lodging industries. The break-even analysis demonstrates 
that there are positive net benefits to the rule if the benefit per 
consumer is at least $0.33 per consumer per year over a ten-year period 
using a 7% discount rate. The break-even analysis does not account for 
costs from unintended consequences of the rule or the potential 
benefits from reducing deadweight loss by providing consumers with full 
information.
6. Appendix A: Model of Market Distortion Caused by Drip Pricing
    Measuring the deadweight loss, the surplus transfer from consumers 
to firms, and the shift in quantity demanded requires a quantification 
of consumers' aggregate level of awareness. Academic research provides 
a model that relates consumers' partial awareness to the resulting 
shift in aggregate demand.\645\ Specifically, the model assumes, based 
on empirical evidence, the elasticity of demand with respect to the fee 
equals the elasticity of demand with respect to the base price scaled 
by a factor of [thetas], where 0 < [thetas] < 1. This factor, [thetas], 
serves as a measure of consumers' awareness of the fee. When consumers 
are fully aware of the fee, [thetas] = 1; when consumers are completely 
unaware, [thetas] = 0. As a working example, if demand is given by the 
equation Q(Pbase,t) = a + bPbase + ct, where a, 
b, and c are constants, the previous assumption implies that c = 
[thetas]b. At [thetas] = 1, shrouding the fee has no effect, and the 
demand function simplifies to Q(Ptotal, t) = a + 
bPtotal. At [thetas] = 0, shrouding the fee leaves consumers 
completely unaware of it, and demand is solely a function of the base 
price: Q(Pbase, t) = a + bPbase. Assuming 0 < 
[thetas] < 1, instead, one may note that, for any given change in the 
base price and the corresponding change to the quantity demanded, a 
larger change in the fee would be needed to effect the same change in 
quantity, reflecting consumers' partial awareness of, and decreased 
sensitivity to, the fee.
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    \645\ Chetty, supra note 555.
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BILLING CODE 6750-01-P

[[Page 2157]]

[GRAPHIC] [TIFF OMITTED] TR10JA25.002


[[Page 2158]]


[GRAPHIC] [TIFF OMITTED] TR10JA25.003

[GRAPHIC] [TIFF OMITTED] TR10JA25.004

BILLING CODE 6750-01-C
    Figure 4 illustrates how consumers' partial awareness of fees 
impacts the effect of shrouded pricing on consumer and producer 
surplus. The intersection of Dpartial with S, illustrated by 
point R, at quantity Qpartial and price 
Ptotal,partial, represents the outcome when consumers are 
partially aware of the fee. In this figure, 
Dfee,Pbase,partial (not shown) would go through point U 
(equivalent to point A in Figure 3) and point R (equivalent to point B 
in Figure 3). For comparison, in the case of complete unawareness 
([thetas] = 0), Dfee,Pbase,unaware (not shown) would go 
vertically through point K (equivalent to point A in Figure 3) and 
point J (equivalent to point B in Figure 3). As illustrated in Figure 
4, the more consumers are aware of the fee, i.e., the larger the 
[thetas], the smaller the market clearing full price and, hence, the 
base price, must be. As an additional example, when consumers are fully 
aware of the fee ([thetas] = 1), the market clearing full price under 
shrouded pricing equals the market clearing price under upfront 
pricing, Pupfront, and the base price, 
Pbase,aware (not shown), is lower than 
Pbase,partial.
    Consumer surplus is now equal to the area of triangle CMN minus the 
area of triangle NRT. Producer surplus is now equal to the area of 
triangle EMR. The deceptive shrouding of the price leads to a transfer 
of surplus from consumers to firms equal to the area of trapezoid ABMR 
as well as an additional decrease in consumer surplus not captured by 
firms, the deadweight loss, equal to the area of triangle ART. The 
surplus transfer from consumers to firms and the deadweight loss are 
both smaller in this case of partial awareness relative to the case 
where consumers are completely unaware of the fee. That is, the harm 
caused by the firms' deception is mitigated by the extent to which 
consumers are aware of and account for the fee.

[[Page 2159]]

[GRAPHIC] [TIFF OMITTED] TR10JA25.005

7. Appendix B: Short-Term Lodging Industry Minutes per Listing 
Calculations
(a) Low-End Estimate of Minutes per Listing Calculation
    The Commission's analysis uses the Airbnb user search statistics 
reported in Fradkin (2017) \646\ to obtain a low-end time estimate 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. The analysis uses 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 B.1.
---------------------------------------------------------------------------

    \646\ 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), https://ide.mit.edu/wp-content/uploads/2017/07/SearchMatchingEfficiency.pdf.
---------------------------------------------------------------------------

    ``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, the analysis uses this as a proxy for 
number of clicked-on listings.
[GRAPHIC] [TIFF OMITTED] TR10JA25.065

    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

[[Page 2160]]

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.\647\
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    \647\ 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 did not 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 inquire about or book. 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 
estimated, then the true numerator also will be higher. Higher 
listing clicks beyond those that resulted in a contact means more 
time spent viewing clicked-on listings that did not result in a 
contact. The ratio should remain about the same.
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(b) High-End Estimate of Minutes per Listing Calculation
    The Commission's analysis uses the hotel search cost model 
developed by Chen and Yao (2016) \648\ to calculate a high-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.
---------------------------------------------------------------------------

    \648\ Yuxin Chen & Song Yao, Sequential Search with Refinement: 
Model and Application with Click-Stream Data, 63 Mgmt. Sci. 4345 
(2016), https://doi.org/10.1287/mnsc.2016.2557.
---------------------------------------------------------------------------

    A search is defined as a listing click-through, and the search cost 
for a listing is specified as:

Cij = Ci (TimeConstrainti, Slotj) = exp([gamma]i0 + 
[gamma]i1TimeConstrainti + [gamma]i2Slotj) = 
exp(3.07 - .05 * TimeConstrainti + .01 * Slotj)

where TimeConstrainti is the number of days between consumer i's search 
and her check-in. Slotj is the slot position of the j-th search. The 
exponential operator ensures that the costs are positive. The gammas 
are mean levels of cost coefficients.
    Using this formula, the analysis 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 $6.10.
    The resulting total search cost is then $6.10 per listing * 2.3 
searches on average = $14.04. This total cost can be conceptualized as 
the number of minutes of viewing listings multiplied by the consumer's 
value of time. Using $25.81 per hour as the value of time, the time 
spent viewing listings is ($14.04/$25.81 per hour) * 60 minutes per 
hour = 32.62 minutes.
    The minutes to view one listing is then calculated as 32.62 
minutes/2.3 searches = 14.18 minutes per listing.

VI. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501-3520, 
requires Federal agencies to seek and obtain OMB approval before 
collecting information directed to ten or more persons. The term 
``collection of information,'' as used in the PRA, includes any 
requirement or request for persons to obtain, maintain, retain, report, 
or publicly disclose information.\649\ The PRA analysis requires an 
estimate of the burden associated with a collection of 
information.\650\
---------------------------------------------------------------------------

    \649\ 44 U.S.C. 3502(3); 5 CFR 1320.3(c).
    \650\ 5 CFR 1320.8(a)(4).
---------------------------------------------------------------------------

    Upon publication of the NPRM, the Commission submitted an 
associated clearance request with a Supporting Statement to OMB for 
review under the PRA. In response, OMB filed a comment on December 11, 
2023 (OMB Control No. 3084-0176), requesting that the Commission 
resubmit the clearance request upon the finalization of the proposed 
rule.\651\ Accordingly, simultaneously with the publication of this 
final rule, the Commission is resubmitting its clearance request and a 
Supplemental Supporting Statement to OMB for review under the PRA. For 
the reasons discussed below, the Commission has made adjustments to its 
initial burden analysis. The Commission's updated burden analysis 
follows.
---------------------------------------------------------------------------

    \651\ See Office of Info. and Regul. Aff., Office of Mgmt. and 
Budget, OMB Control Number History for OMB Control Number 3084-0176, 
https://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3084-0176#.
---------------------------------------------------------------------------

A. Disclosures Related to Final Sec.  464.2(a) Through (c)

    Final Sec.  464.2(a) through (c) provide clarity as to how 
businesses should disclose total price, optional exclusions from total 
price, and the final amount of payment. This information is readily 
available to businesses, and many businesses already disclose this 
information in the course of their regular business activities. 
However, the Commission is aware that in some instances the 
requirements in final Sec.  464.2(a) through (c) may require some 
businesses to display readily available information more clearly. OMB 
guidance is unclear regarding whether, and to what extent, requiring 
displays of information to be clearer amounts to a collection of 
information. The Commission is of the view that the rule's requirements 
regarding disclosure of total price, exclusions from total price and 
the final amount of payment are unlikely to qualify as collections of 
information. Nevertheless, the Commission includes this analysis out of 
an abundance of caution and not because it concedes that such standard 
pricing disclosures constitute collections of information.
    Final Sec.  464.2(a) provides it is an unfair and deceptive 
practice for a business to offer, display, or advertise any price of a 
covered good or service without clearly and conspicuously disclosing 
total price, which is defined in final Sec.  464.1 to permit the 
exclusion of government charges, shipping charges, and fees or charges 
for any optional ancillary good or service. While businesses may 
exclude these charges from total price in offers, displays, and 
advertisements, final Sec.  464.2(c) provides that, before a consumer 
consents to pay for any covered good or service, a business must 
disclose clearly and conspicuously: The nature, purpose, and amount of 
any fee or charge imposed on the transaction that has been excluded 
from total price and the identity of the good or service for which the 
fee or charge is imposed; and the final amount of payment for the 
transaction. Final Sec.  464.2(b) relatedly provides that in any offer, 
display, or advertisement that represents any price of a covered good 
or service, total price must be disclosed more prominently than any 
other pricing information; however, where the final amount of payment 
for the transaction is displayed, it must be more prominent than, or as 
prominent as, total price. As discussed in section III, the Commission 
is not finalizing the proposed affirmative refundability disclosure 
requirement.
    As part of the NPRM, the Commission assumed that, except for the 
proposed affirmative refundability disclosure requirement, the 
Commission's proposal was limited to disclosure activities that 
businesses already perform in the course of their regular business 
activities. However, following its review

[[Page 2161]]

of the comments,\652\ the Commission determines that, although many 
businesses already make the disclosures required by final Sec.  
464.2(a) through (c) in the usual course of their regular business 
activities, it is possible that some businesses in the live-event 
ticketing and short-term lodging industries may nonetheless incur 
incremental labor costs in ensuring that their disclosure activities 
are fully aligned with the requirements that are set forth in final 
Sec.  464.2(a) through (c). As a result, out of an abundance of 
caution, the Commission updates its burden analysis in recognition of 
these comments. As described in section VI.A.5, however, the estimated 
costs may be overestimated.
---------------------------------------------------------------------------

    \652\ See, e.g., FTC-2023-0064-3238 (Gibson, Dunn & Crutcher LLP 
argued that businesses would need to hire, among other 
professionals, web designers or software engineers ``to rebuild 
entire websites.'' In addition, it argued that the Preliminary 
Regulatory Analysis did not account for costs needed to replace 
physical ads, subway ads, and billboards and speculated that would 
take ``thousands of hours.''); FTC-2023-0064-2856 (National Football 
League called on the Commission to reexamine the estimated 
compliance costs because it did not adequately take into account 
``the additional legal, developer, and data personnel time that 
would be required from live-event industry participants--and 
especially industry participants dealing in large volumes of live-
event ticket sales in complying with a final rule.''); FTC-2023-
0064-3122 (Vivid Seats commented: ``We believe that the FTC is 
underestimating the amount of employee time required by at least a 
factor of five.'').
---------------------------------------------------------------------------

1. Number of Respondents
    The Commission estimates that there are 12,393 entities that may 
incur additional incremental labor costs to refine their disclosure 
activities so that they are fully compliant with final Sec.  464.2. 
This estimate of 12,393 entities takes the high-end estimate of the 
number of firms in the United States in the live-event ticketing 
industry (9,440 firms) and the number of firms in the United States in 
the short-term lodging industry (2,953) that will incur additional 
compliance costs related to disclosure activities.
2. Estimated One-Time Hour Burden
    In section V.E.3, the Commission estimates the cost of adjusting 
the presentation of advertised prices and the purchase process for 
online sales. The final regulatory analysis in section V assumes live-
event ticketing and short-term lodging firms not presently compliant 
with the final rule will employ a low end of forty hours and a high end 
of eighty hours of web developer time to become compliant with the 
final rule. For purposes of this PRA analysis, the Commission uses the 
midpoint of the range of web developer hours presented in section 
V.E.3; that is, the Commission assumes sixty hours of web developer 
time will be necessary to adjust advertised prices and purchase 
processes to comply with final Sec.  464.2's disclosure 
requirements.\653\ Once firms adjust advertised prices and purchase 
process displays to be compliant with the final rule, any future 
changes to pricing displays or purchasing systems are part of the 
regular course of business and are not a direct consequence of the 
rule. The Commission finds that any ongoing additional costs associated 
with these activities are de minimis. Thus, the Commission estimates 
the total web developer hours to adjust price displays and purchase 
processes is 743,580 hours (12,393 firms x 60 web developer hours per 
firm).
---------------------------------------------------------------------------

    \653\ Brick-and-mortar firms that do not currently comply with 
the rule would update the price presentation and purchase process by 
printing new price displays, revising advertising campaigns, adding 
required disclosures, and potentially updating websites. The 
Commission uses web developer hours as a proxy for any costs 
associated with updating the price presentation and purchase process 
to become compliant with the final rule.
---------------------------------------------------------------------------

3. Estimated One-Time Labor Costs
    The estimated one-time labor cost that live-event ticketing and 
short-term lodging firms may incur to comply with final Sec.  464.2's 
disclosure requirements is $32,990,931. This total is calculated by 
summing the labor costs for the live-event ticketing and short-term 
lodging industries. The labor cost for the live-event ticketing 
industry is calculated by applying the hourly wage for web developer 
time in the live-event ticketing industry of $45.95 to the estimate of 
60 hours of web developer time multiplied by the number of U.S. firms 
in the live-event ticketing industry that incur additional compliance 
costs ($45.95/hour x 60 hours per firm x 9,440 firms) resulting in 
$26,026,080.\654\ The labor cost for the short-term lodging industry is 
calculated by applying the hourly wage for web developer time in the 
short-term lodging industry of $39.31 to the estimate of sixty hours of 
web developer time multiplied by the number of U.S. firms in the short-
term lodging industry that incur additional compliance costs ($39.31/
hour x 60 hours per firm x 2,953 firms) resulting in $6,964,851.\655\ 
The total for the two industries is $32,990,931 ($26,026,080 + 
$6,964,851).
---------------------------------------------------------------------------

    \654\ The estimated mean hourly wages for a web developer are 
$45.95. OEWS Web Developers, supra note 571.
    \655\ The estimated mean hourly wages for a web developer are 
$39.31 in the short-term lodging industry. OEWS Web Developers, 
supra note 571.
---------------------------------------------------------------------------

4. Estimated One-Time Non-Labor Costs
    The capital and start-up costs associated with the final rule's 
disclosure are de minimis. Any disclosure capital costs involved with 
the final rule, such as equipment and office supplies, would be costs 
borne by businesses in the normal course of business.
5. Projected Labor Costs Likely Overestimated
    In preparing its burden estimate for compliance with final Sec.  
464.2(a) through (c), the Commission considered comments noting that 
some businesses may incur incremental labor costs to come into 
compliance with the rule, though commenters did not submit specific 
data for the Commission to evaluate this contention. As a result, the 
Commission's updated burden calculation relies in part on cost 
assumptions from its final regulatory analysis in section V. Applying 
these cost assumptions as one-time fixed costs in this burden analysis 
likely generates an overestimate of incremental labor costs for a 
number of reasons. First, the number of respondents that will have to 
make changes to their price displays and offers is likely to be 
significantly inflated. Since the Commission announced its NPRM, 
California's Honest Pricing Law, SB 478, which was amended by SB 1524, 
went into effect, making it illegal for businesses to advertise or list 
prices that do not include all mandatory fees or charges other than 
certain government taxes and shipping costs. As such, many national 
firms doing business in California, including live-event ticketing and 
short-term lodging firms, will already have incurred costs to develop 
the capabilities to comply with the Commission's rule even if they are 
currently only fully deploying such capabilities in California. Similar 
legislative and regulatory efforts have been enacted in New York, 
Massachusetts, North Carolina, Minnesota, Tennessee, Connecticut, 
Maryland, and Colorado.\656\ Second, to the extent that live-event 
ticketing and short-term lodging firms opt to present all-inclusive 
total prices that obviate the need for the disclosures set forth in 
final Sec.  464.2(b) through (c), such firms will require less web 
developer time to

[[Page 2162]]

comply, and the Commission is likely overestimating total labor hours.
---------------------------------------------------------------------------

    \656\ See, e.g., N.Y. Arts & Cult. Aff. Law sec. 25.01-25.33 
(McKinney 2023) (Effective Jun. 30, 2022); An Act Ensuring 
Transparent Ticket Pricing, H. 259, 193rd Gen. Court (Mass. 2023); 
S. 607 (2023-2024 Session) (N.C. 2023) (Enacted July 9, 2024); 2023 
Minn. H.B. 3438 (Enacted May 20, 2024) (Minn.); H.B. 1231 (113th 
G.A.) (Tenn.) (Enacted May 24, 2023); Conn. Gen. Stat. Sec.  53-289a 
(2023); S.B. 329 (2024 Reg. Sess.) (Md.); S.B. 329 (2024 Reg. Sess.) 
(Md.) (Enacted May, 9, 2024); H.B. 23-1378 (2024 Reg. Sess.) (Colo.) 
(Enacted June 5, 2024).
---------------------------------------------------------------------------

B. Prohibited Misrepresentations Under Final Sec.  464.3

    Final Sec.  464.3, which the Commission proposed in similar form as 
Sec.  464.3(a), sets forth that in any offer, display, or advertisement 
for a covered good or service, it is an unfair and deceptive practice 
for a business to misrepresent any fee or charge, including its nature, 
purpose, amount, or refundability, and the identity of the good or 
service for which the fee or charge is imposed. Consistent with the 
NPRM's discussion of proposed Sec.  464.3(a), the Commission notes that 
final Sec.  464.3 does not impose any information collection 
requirement for the purpose of the PRA. Rather than imposing any 
affirmative disclosure, reporting, or recordkeeping obligations,\657\ 
final Sec.  464.3 merely prohibits businesses from making certain 
misrepresentations that are already prohibited under section 5 of the 
FTC Act. As noted in the NPRM, any additional costs that might be 
associated with these prohibitions are de minimis.\658\
---------------------------------------------------------------------------

    \657\ See 5 CFR 1320.3(c) (definition of the term ``collection 
of information'').
    \658\ See NPRM, 88 FR 77478.
---------------------------------------------------------------------------

VII. Regulatory Flexibility Act--Final Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (``RFA''), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires an 
agency to provide an Initial Regulatory Flexibility Analysis (``IRFA'') 
and Final Regulatory Flexibility Analysis (``FRFA'') of any final rule 
subject to notice-and-comment requirements, unless the agency head 
certifies that the regulatory action will not have a significant 
economic impact on a substantial number of small entities.\659\ In 
developing the final rule, the Commission carefully considered whether 
the rule would have a significant impact on a substantial number of 
small entities. The Commission continues to believe that the final 
rule's impact will not be substantial for most small entities and, in 
many cases, will likely positively impact small businesses by enabling 
them to compete fairly in the marketplace with larger players. However, 
the Commission cannot fully quantify the impact the final rule will 
have on such entities. Therefore, in the interest of thoroughness and 
an abundance of caution, the Commission has prepared the following FRFA 
for this final rule.
---------------------------------------------------------------------------

    \659\ 5 U.S.C. 603-605.
---------------------------------------------------------------------------

    In the NPRM, the Commission provided an IRFA and solicited comments 
on the burden on any small entities that would be covered.\660\ The 
Commission received comments in response to the IRFA.\661\ The 
Commission received comments from two industry groups requesting that 
the Commission conduct a Small Business Regulatory Impact Analysis to 
analyze the impact of small businesses in particular industries.\662\ 
The Commission also received comments from small business owners and 
industry groups in support of the rule and its impact on small 
businesses, as well as from commenters concerned about potential costs 
to small businesses. Consistent with the requirements of the FRFA, the 
Commission has considered the comments received, and the final rule's 
impact on small entities, including alternatives to the final rule.
---------------------------------------------------------------------------

    \660\ NPRM, 88 FR 77479-80.
    \661\ See, e.g., FTC-2023-0064-3251 (National RV Dealers 
Association); FTC-2023-0064-2367 (Small Business Majority). The 
Small Business Administration, Office of Advocacy raised similar 
criticisms of the proposed rule. See U.S. Small Bus. Admin., Office 
of Advocacy, Re: Trade Regulation Rule on Unfair or Deceptive Fees 
FTC-2023-0064-0001, https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf. The Commission addresses that comment infra section VII.C.
    \662\ FTC-2023-0064-3269 (IHRSA--The Health & Fitness 
Association); FTC-2023-0064-3294 (International Franchise 
Association). The Commission notes that the final rule is limited to 
Covered Good or Services, which does not include the health and 
fitness industry.
---------------------------------------------------------------------------

    The Commission thoroughly considered the feedback it received from 
the SBA Office of Advocacy, the Small Business Majority, and other 
commenters in developing the final rule. The Commission modifies the 
proposed rule in response, in part, to such feedback. The Commission 
will continue to engage with small business stakeholders to facilitate 
implementation of, and compliance with, the final rule and other 
guidance as necessary to assist small entities in complying with the 
rule.
    Based on the Commission's expertise, and after careful review and 
consideration of the entire rulemaking record--including the more than 
60,800 comments the Commission received in response to the NPRM, 
empirical research on how bait-and-switch pricing tactics, including 
drip pricing and partitioned pricing, harm consumers and honest 
competitors, and the Commission's Final Regulatory Analysis in section 
V--the Commission adopts this final rule focused on covered goods or 
services with certain additional revisions to reduce compliance burdens 
on small businesses and other entities. To begin with, because this 
final rule is limited to covered goods or services, many industries 
that have significant small business participants are no longer 
covered. Second, the Commission adopts an extended compliance date--120 
days--to ensure that small businesses have adequate time to come into 
compliance with the rule's requirements.\663\ Third, as discussed in 
section III, in response to feedback from commenters representing the 
interests of small businesses, the Commission clarifies in this SBP 
that businesses may exclude from total price pass-through credit card 
or other payment processing fees if they give consumers a viable 
payment alternative without a fee (e.g., cash is accepted). In 
addition, as discussed in section III, the final rule adopts 
definitions of government charges to increase flexibility for 
businesses, including small businesses.
---------------------------------------------------------------------------

    \663\ A 120-day compliance date after publication in the Federal 
Register complies with the requirements of the Congressional Review 
Act that a ``major rule'' may not take effect fewer than sixty days 
after the rule is published in the Federal Register. 5 U.S.C. 
801(a)(1)(3).
---------------------------------------------------------------------------

A. Statement of the Need for, and Objectives of, the Rule

    The Commission describes the need for, and objectives of, the rule 
in section V.A. The legal basis for the rule is section 18 of the FTC 
Act, 15 U.S.C. 57a, which authorizes the Commission to promulgate, 
modify, and repeal trade regulation rules that define with specificity 
acts or practices in or affecting commerce that are unfair or deceptive 
within the meaning of section 5(a)(1) of the FTC Act, 15 U.S.C. 
45(a)(1).

B. Significant Issues Raised by Comments, the Commission's Assessment 
and Response, and Any Changes Made as a Result

    Commenters, including the Small Business Majority, argued that the 
IRFA failed to appropriately assess the impact of the proposed rule on 
small businesses.\664\ The NPRM assumed that of the total estimated 
firms in the United States (6,140,612),\665\ only a

[[Page 2163]]

small fraction (818,178 or about 13%) would incur additional costs 
beyond the initial one-hour compliance review to comply fully with the 
proposed rule. Commenters, including the Small Business Majority, 
argued that the IRFA failed to appropriately assess the impact of the 
proposed rule on small businesses.\666\ For the purpose of the IRFA, 
the Commission concluded that the proposed rule would not have a 
significant economic impact on a substantial number of small entities 
and solicited comment on its analysis, including the submission of 
supporting or contradictory empirical data. The Commission did not 
receive any data or other evidence to suggest that the number of firms 
incurring additional costs should be higher. The Commission anticipates 
that modifications made in the final rule will reduce the number of 
businesses that are likely to incur additional costs.
---------------------------------------------------------------------------

    \664\ FTC-2023-0064-3251 (National RV Dealers Association); FTC-
2023-0064-2367 (Small Business Majority).
    \665\ The number of firms used in the NPRM was 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.
    \666\ FTC-2023-0064-3251 (National RV Dealers Association); FTC-
2023-0064-2367 (Small Business Majority).
---------------------------------------------------------------------------

    These commenters further asserted the rule's proposed economic 
analysis underestimated the cost of attorneys' fees and ongoing costs 
to comply with the rule.\667\ The Commission addresses comments and 
concerns related to its economic analysis in section V, including 
estimates for attorneys' fees and ongoing compliance costs.
---------------------------------------------------------------------------

    \667\ FTC-2023-0064-3251 (National RV Dealers Association); FTC-
2023-0064-2367 (Small Business Majority).
---------------------------------------------------------------------------

    The same commenters also noted that the Commission's IRFA failed to 
appropriately consider alternatives to the proposed rule for small 
businesses.\668\ The Commission disagrees. The NPRM stated that the 
Commission had considered alternatives, including: (1) a rule that 
would exempt small businesses from the proposed rule; (2) a rule that 
would apply to online-only businesses; (3) alternatives that would 
otherwise narrow the scope of the proposed rule, including limiting 
application of the rule to Covered Businesses as defined in the NPRM; 
or (4) terminating the rulemaking entirely. Consistent with the NPRM, 
the Commission declines to exempt small businesses, including those 
that offer live-event ticketing and short-term lodging, from the rule 
to avoid creating uncertainty across businesses as to whether the rule 
applies to them, to avoid creating unfair competitive advantages for 
those businesses that engage in bait-and-switch pricing and 
misrepresent fees, and to ensure maximum consumer benefits from 
increased price transparency. The NPRM also invited comment on 
questions and concerns related to small businesses, including the 
estimated number of small businesses and the impact on those 
businesses, as well as alternatives to the rule for small businesses. 
The Commission's FRFA includes further discussion of the alternatives 
considered in section V.B.
---------------------------------------------------------------------------

    \668\ FTC-2023-0064-3251 (National RV Dealers Association); FTC-
2023-0064-2367 (Small Business Majority).
---------------------------------------------------------------------------

    The Small Business Majority noted that many small businesses lack 
access to legal staff and ``run the risk of occupying a substantial 
amount of time to understand how exactly they need to adjust their 
pricing models to comply with the new rule.'' \669\ As a result, the 
Small Business Majority encouraged the Commission to provide guidance 
to small businesses, including through outreach, education, and 
compliance guidance, as well as working directly with small businesses, 
to help small businesses comply with the final rule.\670\ The 
Commission highlights and discusses herein that, in response to the 
comments, the final rule both narrows the NPRM proposal as well as 
clarifies it in certain respects, thereby decreasing the burden on 
small businesses. The SBP also discusses various pricing scenarios 
raised by commenters, and the Commission believes that such discussion 
will aid businesses, including small businesses, in complying with the 
final rule. Finally, the Commission routinely provides guidance and 
conducts outreach to businesses on complying with the FTC Act and 
regulations that it enforces and, as required by law, the Commission 
will publish a small entity compliance guide to assist small businesses 
in complying with the rule.
---------------------------------------------------------------------------

    \669\ FTC-2023-0064-2367 (Small Business Majority).
    \670\ Id.; see also U.S. Small Bus. Admin., Office of Advocacy, 
Re: Trade Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-
0001, https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
---------------------------------------------------------------------------

    The Commission received numerous comments from industry groups and 
individual small business owners, including comments highlighting the 
benefits of the proposed rule on small businesses, as well as comments 
identifying certain concerns about application of the proposed rule to 
small businesses. The Commission addresses many of these comments in 
other parts of the SBP, including section III, and accordingly 
incorporates that analysis into its FRFA, and addresses the remainder 
of these comments herein.
    Some commenters argued that fees help small businesses offset 
rising costs and staff salaries and benefits, especially for small 
businesses operating on thin margins.\671\ One industry group argued 
that the rule might place small businesses at a competitive 
disadvantage compared to larger businesses.\672\ As discussed in Parts 
III and V, the Commission narrows the scope of the rule to address 
concerns affecting small businesses by, for example, modifying the 
definition of government charges and addressing factual scenarios and 
questions concerning application of the rule to small businesses, 
including related to credit card surcharges and contingent fees. In 
making these clarifications and modifications, the Commission narrows 
the total price requirement for, and thereby reduces the compliance 
burden on businesses, including small businesses, offering covered 
goods or services. As discussed in section VII.C, the Commission is 
also adopting an extended 120-day compliance date to allow more time 
for businesses, including small businesses, to assess and come into 
compliance with the final rule.
---------------------------------------------------------------------------

    \671\ See, e.g., FTC-2023-0064-3033 (The Rebel Lounge et al.); 
FTC-2023-0064-3078 (Washington Hospitality Association); FTC-2023-
0064-2367 (Small Business Majority).
    \672\ FTC-2023-0064-3292 (National Association of Theater 
Owners).
---------------------------------------------------------------------------

    Conversely, other commenters noted that bait-and-switch practices 
and misleading fees harm small businesses, and that the rule will help 
small businesses.\673\ One State representative asserted that the final 
rule would help small businesses because small businesses that 
advertise the entire price of their goods and services are at a 
competitive disadvantage compared to larger businesses that advertise 
lower prices and only disclose fees at the end of a transaction.\674\ 
Consumer advocacy groups urged the Commission not to exempt small 
businesses, arguing that consumers and small businesses alike will 
benefit from greater pricing transparency and a prohibition on 
deceptive pricing.\675\ The Commission also received numerous 
individual comments, including from small business owners, expressing 
support for

[[Page 2164]]

the rule, because it would benefit small businesses.\676\
---------------------------------------------------------------------------

    \673\ FTC-2023-0064-2840 (Indie Sellers Guild); FTC-2023-0064-
2341 (New Hampshire State Representative Lindsay Sabadosa); FTC-
2023-0064-3302 (Public Citizen); FTC-2023-0064-3160 (Consumer 
Federation of America); FTC-2023-0064-3141 (Coalition of Franchisee 
Associations).
    \674\ FTC-2023-0064-2341 (New Hampshire State Representative 
Lindsay Sabadosa).
    \675\ FTC-2023-0064-3302 (Public Citizen); FTC-2023-0064-3160 
(Consumer Federation of America).
    \676\ See, e.g., FTC-2023-0064-0105 (Individual Commenter); FTC-
2023-0064-2422 (Individual Commenter); FTC-2023-0064-2697 
(Individual Commenter).
---------------------------------------------------------------------------

    The Commission notes that the final rule does not prohibit any 
business offering live-event ticketing or short-term lodging from 
charging consumers fees or raising prices to support necessary 
operating costs, such as labor costs or rising expenses. The final rule 
instead requires that such charges and fees be incorporated in total 
price and that they not be misleading.

C. Comment by the Small Business Administration, Office of Advocacy, 
the Commission's Assessment and Response, and Any Changes Made as a 
Result

    The SBA Office of Advocacy filed a comment requesting that the 
Commission ``prepare a supplemental initial regulatory flexibility 
analysis that fully considers the economic impact of the proposed 
rulemaking on small entities and alternatives that may reduce that 
burden,'' as well as ``clarify that this rulemaking will not apply to 
small non-profit organizations.'' \677\ The SBA Office of Advocacy 
argues that the Commission's IRFA did not comply with the requirements 
of the Regulatory Flexibility Act because it ``fail[ed] to provide an 
accurate description of the small entities to which the proposed rule 
will apply,'' and failed to provide ``an accurate description of the 
costs associated with the compliance requirements.'' \678\ According to 
the SBA Office of Advocacy, the Commission also ``failed to consider 
significant alternatives that would minimize any significant economic 
impact of the proposed rule on small businesses.'' \679\ The Commission 
has considered this comment, which it further summarizes herein, and 
responds as follows.
---------------------------------------------------------------------------

    \677\ U.S. Small Bus. Admin., Office of Advocacy, Re: Trade 
Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001, 
https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
    \678\ Id.
    \679\ Id.
---------------------------------------------------------------------------

    The SBA Office of Advocacy recommended that the Commission count 
small businesses using NAICS-code specific thresholds defined by the 
SBA, rather than using a threshold of 500 employees.\680\ In response 
to this comment, the Commission now uses the NAICS-code specific 
thresholds set by the SBA to determine the number of small businesses 
in the Final Regulatory Flexibility Analysis contained in section 
VII.D.
---------------------------------------------------------------------------

    \680\ Id.
---------------------------------------------------------------------------

    The comment further contended that ``there are other alternatives 
that the FTC should have considered in its IRFA,'' such as ``exempting 
certain sectors of small businesses or imposing a limit on certain 
fees'' and ``allowing businesses more time to comply with the 
rule.\681\ The Commission did consider such alternatives and narrows 
the scope of the final rule to covered goods or services, thereby 
limiting the rule's application to only those businesses, including 
small businesses, that offer, display, or advertise such goods or 
services. The Commission declines, however, to impose a limit on the 
amount of fees, so long as they are disclosed and not misleading in 
accordance with the rule's requirements, including as discussed in 
section III.
---------------------------------------------------------------------------

    \681\ Id.
---------------------------------------------------------------------------

    As to the suggestion to give businesses more time to comply with 
the rule, the Commission adopts a compliance date of 120 days after 
publication of the final rule in the Federal Register. The final rule 
will go into effect, and compliance with the final rule will be 
required, on that date. This extended timeline considers comments 
received from the SBA Office of Advocacy and small businesses, 
underscoring the time it might take to come into compliance with the 
final rule. For example, some small businesses may decide to seek 
outside guidance about whether they need to make adjustments to come 
into compliance, while others will conduct their own compliance 
review.\682\ The Commission finds 120 days should be enough time even 
for small businesses conducting their own compliance review, and that a 
120-day period between publication in the Federal Register and the 
rule's compliance date appropriately balances the interests of small 
businesses with the interests of protecting consumers. Further, in 
addition to guidance in this SBP, the Commission also will publish a 
small entity compliance guide to assist small businesses in complying 
with the rule.
---------------------------------------------------------------------------

    \682\ See, e.g., id. (SBA urged the Commission to consider 
``allowing small businesses more time to comply with the rule'' and 
to provide clear compliance guidance); FTC-2023-0064-2367 (Small 
Business Majority urged the Commission to issue comprehensive 
guidance and commented: ``[M]any small businesses do not have access 
to legal staff or consultants, and without clear and specific 
disclosure requirements provided by industry, small businesses run 
the risk of occupying a substantial amount of time to understand how 
exactly they need to adjust their pricing models to comply with the 
new rule.'').
---------------------------------------------------------------------------

    Finally, the SBA Office of Advocacy ``encourages the FTC to clarify 
that this rulemaking will not apply to non-profits.'' \683\ The final 
rule can be enforced to the full scope of the Commission's 
jurisdiction. Congress empowered the Commission to ``prevent persons, 
partnerships, or corporations'' from engaging in ``unfair or deceptive 
acts or practices in or affecting commerce.'' \684\ To fall within the 
definition of ``corporation'' under the FTC Act, an entity must be 
``organized to carry on business for its own profit or that of its 
members.'' \685\ These FTC Act provisions, taken together, have been 
interpreted in Commission precedent \686\ and judicial decisions \687\ 
to mean that the Commission lacks jurisdiction to prevent section 5 
violations by a corporation not organized to carry on business for its 
own profit or that of its members. The Commission stresses, however, 
that both judicial decisions and Commission precedent recognize that 
not all entities claiming tax-exempt status as non-profits fall outside 
the Commission's jurisdiction.\688\ ``Congress took pains in drafting 
Sec.  4 [15 U.S.C. 44] to authorize the Commission to regulate so-
called nonprofit corporations, associations and all other entities if 
they are in fact profit-making enterprises.'' \689\
---------------------------------------------------------------------------

    \683\ U.S. Small Bus. Admin., Office of Advocacy, Re: Trade 
Regulation Rule on Unfair or Deceptive Fees FTC-2023-0064-0001, 
https://advocacy.sba.gov/wp-content/uploads/2024/03/Comment-Letter-Trade-Regulation-Rule-on-Unfair-or-Deceptive-Fees.pdf.
    \684\ 15 U.S.C. 45(a)(2). The Commission herein focuses on 
coverage of ``corporations.''
    \685\ 15 U.S.C. 44.
    \686\ In re Coll. Football Ass'n, 117 F.T.C. 971, 994 (1994).
    \687\ Cal. Dental Ass'n v. FTC, 526 U.S. 756, 766-67 (1999); 
Cmty. Blood Bank of Kansas City Area, Inc. v. FTC, 405 F.2d 1011, 
1019 (8th Cir. 1969); FTC v. Univ. Health, Inc., 938 F.2d 1206, 1214 
(11th Cir. 1991).
    \688\ The Commission has determined that ``[r]ulings of the 
Internal Revenue Service are not binding upon the Commission, . . . 
but a determination by another Federal agency that a respondent is 
or is not organized and operated exclusively for eleemosynary 
purposes should not be disregarded.'' In re Am. Med. Ass'n, 94 
F.T.C. 701, 990 (1979) (citing In re Ohio Christian Coll., 80 F.T.C. 
815, 848 (1972)).
    \689\ Cmty. Blood Bank, 405 F.2d at 1018; see also, e.g., FTC v. 
Nat'l Comm'n on Egg Nutrition, 517 F.2d 485, 488 (7th Cir. 1975); In 
re Coll. Football Ass'n, 117 F.T.C. at 998.
---------------------------------------------------------------------------

D. Description and Estimate of the Number of Small Entities To Which 
the Rule Will Apply

    The final rule covers businesses that offer short-term lodging and 
live-event tickets. Small businesses that currently comply with the 
final rule will have a relatively trivial cost of assessing whether 
they are currently in

[[Page 2165]]

compliance, and the Commission assumes these firms will require at most 
one hour of lawyer time to confirm compliance. Small businesses that 
offer covered goods or services and currently do not disclose total 
price will incur additional costs to adjust advertised prices, their 
marketing campaigns, and the consumer purchase process to comply with 
the rule.
    Using the size standards set by the SBA,\690\ the Commission 
calculates that there are potentially as many as 9,034 small firms in 
the U.S that may sell tickets for live events.\691\ For the economic 
regulatory analysis in section V, the Commission assumes all live-event 
ticketing firms will incur additional costs to adjust advertised 
prices, their marketing campaigns, and the consumer purchase process to 
comply with the rule. The Commission notes that there may be some live-
event ticket sellers that are currently in compliance and will 
therefore have a trivial cost of compliance with the final rule.
---------------------------------------------------------------------------

    \690\ See U.S. Small Bus. Admin., Table of Small Bus. Size 
Standards, https://www.sba.gov/document/support-table-size-standards.
    \691\ The Commission uses the latest data available from the 
Census Bureau's Statistics of U.S. Businesses database, available 
based on firm revenue and firm size. U.S. Census Bureau, Stat. of 
U.S. Bus. (last revised July 9, 2024), https://www.census.gov/programs-surveys/susb.html. The calculation of 9,034 live-event 
ticketing firms is likely an overestimate of the number of small 
businesses due to data incompatibility and the use of the high-end 
assumption regarding how live-event ticketing firms are categorized 
using NAICS codes. The U.S. SBA sets different revenue thresholds 
for different NAICS codes. However, the Statistics of U.S. 
Businesses does not necessarily report the number of firms with 
earnings under those particular thresholds. Therefore, the 
Commission calculates there may be as many as 3,094 firms in NAICS 
code 711310 with receipts under the SBA threshold of $40 million, 
4,358 firms in NAICS code 711320 with receipts under $25 million (an 
overestimate given the SBA threshold of $22 million for NAICS code 
711320), and 1,582 firms in NAICS code 561599 with receipts under 
$35 million (an overestimate given the SBA threshold of $32.5 
million for NAICS code 561599).
---------------------------------------------------------------------------

    For the short-term lodging industry, the Commission separately 
estimates there are as many as 675,603 home share hosts in the U.S. The 
Commission assumes that these home share hosts are all considered small 
entities. Using the NAICS-code specific thresholds set by the SBA, the 
Commission calculates that there are potentially as many as 2,798 small 
firms within NAICS code 7211 (``Accommodation'').\692\
---------------------------------------------------------------------------

    \692\ Id. The calculation of 2,798 small hotels firms is likely 
an overestimate of the number of small businesses due to data 
incompatibility. The U.S. SBA sets a revenue threshold of $9 million 
for NAICS code 721191 and NAICS code 721199. However, the Statistics 
of U.S. Businesses does not report number of firms for those 
particular thresholds. Therefore, the Commission calculates there 
are as many as 42,186 firms in NAICS code 721110 with receipts under 
the SBA threshold of $40 million, 101 firms in NAICS code 721120 
with receipts under the SBA threshold of $40 million, 2,960 firms in 
NAICS code 7211191 with receipts under $10 million (an overestimate 
given the SBA threshold), and 1,384 firms with receipts under $10 
million (an overestimate given the SBA threshold).
---------------------------------------------------------------------------

E. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    The final rule contains no reporting or recordkeeping requirements; 
however, the final rule imposes disclosure obligations. Only small 
entities that offer, display, or advertise covered goods or services 
must comply with the rule and, therefore, will incur compliance costs. 
To comply with the final rule, small entities that offer, display, or 
advertise any price of a covered good or service are required to 
disclose the total price clearly and conspicuously and, generally, more 
prominently than any other pricing information. Small entities must 
also disclose other imposed fees and charges before a consumer consents 
to pay and must not misrepresent any fee or charge. For firms that 
already comply with the final rule, the one-time indirect cost per firm 
is assumed to be, at most, one hour of lawyer time for regulatory 
familiarization. This cost is excluded from the Regulatory Flexibility 
Analysis since such familiarization is not a compliance requirement.
    For small businesses subject to the rule that are not currently in 
compliance with the rule's requirements, the Commission has determined 
that firms will need to adjust advertised prices, marketing campaigns, 
and the purchase process to comply with the rule. These firms may also 
incur recurring annual costs of additional lawyer time to assess and 
confirm annual compliance. As discussed in more detail in section V, 
the Commission estimates that direct compliance costs in the live-event 
ticketing industry, over a ten-year period, would result in annualized 
costs of $648-$2,144 per firm assuming a 7% discount rate or $534-
$1,916 per firm assuming a 3% discount rate. U.S. home share hosts 
would incur one-time costs re-optimizing prices of $30.42-$91.27. The 
Commission also estimates direct compliance costs for U.S. hotels, over 
a ten-year period, would result in annualized costs of $527-$2,011 per 
firm assuming a 7% discount rate or $434-$1,825 per firm assuming a 3% 
discount rate. These estimates, however, are for firms of all sizes; 
the Commission has not separately estimated the costs for small 
businesses specifically.

F. Discussion of Significant Alternatives the Commission Considered 
That Would Accomplish the Stated Objectives of the Final Rule and That 
Would Minimize Any Significant Economic Impact of the Final Rule on 
Small Entities

    The Regulatory Flexibility Act requires that agencies include a 
description of the steps the agency has taken to minimize the 
significant economic impact on small entities consistent with the 
stated objectives of applicable statutes, including a statement of the 
factual, policy, and legal reasons for selecting the alternative 
adopted in the final rule and the other significant alternatives to the 
rule considered by the agency which affect the impact on small entities 
was rejected.\693\ Statutory examples of ``significant alternatives'' 
include different requirements or timetables that take into account the 
resources available to small entities; the clarification, 
consolidation, or simplification of compliance and reporting 
requirements under the rule for small entities; the use of performance 
rather than design standards; and an exemption from coverage of the 
rule, or any part thereof, for small entities.\694\
---------------------------------------------------------------------------

    \693\ 5 U.S.C. 604(a)(6).
    \694\ See 5 U.S.C. 603(c).
---------------------------------------------------------------------------

    In the NPRM, the Commission sought comment on various potential 
alternatives to the proposed rule, including alternatives that were 
tailored to the needs of small businesses and that addressed the impact 
(including costs) that would be incurred by businesses to comply with 
the proposed rule.\695\ Specifically, the Commission sought comment on 
the estimated number and the nature of small business entities for 
which the proposed rule would have a significant economic impact, 
whether the proposed rule would have a significant economic impact on a 
substantial number of small entities, and if so, how it could be 
modified to avoid such an impact, as well as whether the proposed 
definition for ``business'' should exclude certain businesses, 
including small businesses meeting the SBA's definition of a ``small 
business concern'' and the SBA's Table of Size Standards, or simply 
certain limited-service and full-service restaurants meeting such 
requirements.\696\ The Commission also inquired as to whether the 
``total price'' definition should exclude mandatory charges by 
restaurants for service performed for the customer in lieu of tips, as 
defined by the Department of

[[Page 2166]]

Labor.\697\ The Commission also considered alternatives that would 
otherwise narrow the scope of the proposed rule, including limiting 
application of the rule to ``Covered Businesses'' as defined in the 
NPRM, ultimately adopting a variation of this approach in the final 
rule.
---------------------------------------------------------------------------

    \695\ NPRM, 88 FR 77479-83.
    \696\ Id.
    \697\ Id., 88 FR 77481.
---------------------------------------------------------------------------

    The Commission requested this information to minimize the final 
rule's burden on all businesses, including small entities. As explained 
through this SBP, the Commission has considered the comments and 
alternatives proposed by the commenters, including the SBA Office of 
Advocacy, and finds that the final rule will not create a significant 
impact on small entities. Indeed, the type of deception that will be 
unlawful under the final rule is already unlawful under the FTC Act, 
but the final rule would allow the Commission to obtain monetary relief 
more efficiently than it could solely under section 19(a)(2) of the FTC 
Act (i.e., without a rule violation), thereby deterring current and 
would be violators of the FTC Act.
    In its Preliminary Regulatory Analysis, the Commission described an 
alternative to the proposed rule, namely, to terminate the rulemaking 
and rely instead on the Commission's previously existing tools, such as 
consumer education and enforcement actions brought under sections 5 and 
19 of the FTC Act, to combat the specified unfair or deceptive pricing 
practices. The Commission believes that promulgation of the rule will 
result in greater net benefits to the marketplace while imposing no 
additional burdens beyond what is required by the FTC Act. As the 
Commission describes further in section V, the rule will not only 
result in significant benefits to consumers but also improve the 
competitive environment, particularly for small, independent, or new 
firms. Therefore, the rule appears to be superior to this alternative 
for small entities.
    As discussed herein, the Commission narrows the rule by adding a 
definition for ``covered good or service'' that is limited to Live-
event tickets or Short-term lodging. The Commission also modifies the 
definition of government charges to replace the language that included 
only those government charges levied ``on consumers,'' with language 
clarifying that any government charge ``imposed on the transaction'' 
may be excluded from total price. Finally, the Commission addresses in 
section III how the rule would apply to credit card processing fees and 
contingent fees charged by small businesses.
    The Commission notes that it has designed the final rule to 
minimize compliance costs for all businesses. As stated in section V, 
the Commission estimates that direct compliance costs in the live-event 
ticketing industry, over a ten-year period, would result in annualized 
costs of $648-$2,144 per firm assuming a 7% discount rate or $534-
$1,916 per firm assuming a 3% discount rate. U.S. home share hosts 
would incur one-time costs re-optimizing prices of $30.42-$91.27. The 
Commission also estimates direct compliance costs for U.S. hotels, over 
a ten-year period, would result in annualized costs of $527-$2,011 per 
firm assuming a 7% discount rate or $434-$1,825 per firm assuming a 3% 
discount rate. Based on the available evidence, the Commission does not 
believe that the analysis in section V is fundamentally different for 
small entities. For this reason, the Commission is not creating an 
exception for small entities or creating different regulatory 
requirements for small entities.
    The Commission also is not delaying the effective date of the final 
rule solely for small entities. The final rule's effective date is 120 
days after publication in the Federal Register on May 9, 2025. In the 
Commission's view, the rule's effective date of May 9, 2025 will afford 
small entities sufficient time to comply with the final rule, and 
commenters have not provided evidence that more time is necessary. The 
Commission declines to set different effective dates for small 
businesses and larger businesses because the final rule's core 
objectives include promoting comparison shopping for consumers and 
leveling the playing field for honest competitors. For all of the 
reasons stated, these objectives would be thwarted in a marketplace 
where certain businesses must comply with the rule's requirements for a 
period of time while others have more time to continue engaging in 
unfair or deceptive pricing practices.

VIII. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs has designated this 
rule as a ``major rule,'' as defined by 5 U.S.C. 804(2).

List of Subjects in 16 CFR Part 464

    Advertising, Consumer protection, Trade practices.

0
For the reasons set forth above, the Federal Trade Commission adds part 
464 to chapter I of title 16 of the Code of Federal Regulations 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.
464.5 Severability.

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


Sec.  [thinsp]464.1  Definitions.

    Ancillary good or service means any additional good(s) or 
service(s) offered to a consumer as part of the same transaction.
    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.
    Clear(ly) and conspicuous(ly) means a required disclosure that is 
easily noticeable (i.e., difficult to miss) and easily understandable 
by ordinary consumers, 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, a mobile application, 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

[[Page 2167]]

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 members of that group.
    Covered good or service means:
    (1) Live-event tickets; or
    (2) Short-term lodging, including temporary sleeping accommodations 
at a hotel, motel, inn, short-term rental, vacation rental, or other 
place of lodging.
    Government charges means the fees or charges imposed on the 
transaction by a Federal, State, Tribal, or local government agency, 
unit, or department.
    Pricing information means any information relating to an amount a 
consumer may pay.
    Shipping charges means the fees or charges that reasonably reflect 
the amount a business incurs to send physical goods to a consumer, 
including through the mail, private mail and shipping services, or by 
freight.
    Total price means the maximum total of all fees or charges a 
consumer must pay for any good(s) or service(s) and any mandatory 
ancillary good or service, except that government charges, shipping 
charges, and fees or charges for any optional ancillary good or service 
may be excluded.


Sec.  [thinsp]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 any price of a 
covered good or service without clearly and conspicuously disclosing 
the total price.
    (b) In any offer, display, or advertisement that represents any 
price of a covered good or service, a business must disclose the total 
price more prominently than any other pricing information. However, 
where the final amount of payment for the transaction is displayed, the 
final amount of payment must be disclosed more prominently than, or as 
prominently as, the total price.
    (c) A business must disclose clearly and conspicuously, before the 
consumer consents to pay for any covered good or service:
    (1) The nature, purpose, and amount of any fee or charge imposed on 
the transaction that has been excluded from total price and the 
identity of the good or service for which the fee or charge is imposed; 
and
    (2) The final amount of payment for the transaction.


Sec.  [thinsp]464.3  Misleading fees prohibited.

    In any offer, display, or advertisement for a covered good or 
service it is an unfair and deceptive practice and a violation of this 
part for any business to misrepresent any fee or charge, including: the 
nature, purpose, amount, or refundability of any fee or charge; and the 
identity of the good or service for which the fee or charge is imposed.


Sec.  [thinsp]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.


Sec.  464.5  Severability.

    If any provision of this part is held to be invalid or 
unenforceable by its terms, or as applied to any person, industry, or 
circumstance, or stayed pending further agency action, the provision 
shall be construed so as to continue to give the maximum effect to the 
provision permitted by law and such invalidity shall not affect the 
application of the provision to other persons, industries, or 
circumstances or the validity or application of other provisions. If 
any provision or application of this part is held to be invalid or 
unenforceable, the provision or application shall be severable from 
this part and shall not affect the remainder thereof.

    By direction of the Commission, Commissioner Ferguson 
dissenting.
Joel Christie,
Acting Secretary.
[FR Doc. 2024-30293 Filed 1-8-25; 8:45 am]
 BILLING CODE 6750-01-P`