FTC Proposes Rule on "Junk Fees"

The Federal Trade Commission announced that it is proposing a rule prohibiting "junk fees," which the FTC called, "hidden and bogus fees that can harm consumers and undercut honest businesses." 

In announcing the rule, FTC Chair Lina M. Khan said, "By hiding the total price, these junk fees make it harder for consumers to shop for the best product or service and punish businesses who are honest upfront. The FTC’s proposed rule to ban junk fees will save people money and time, and make our markets more fair and competitive.”

The proposed rule would prohibit what the FTC calls "hidden fees" and "misleading fees." 

Hidden Fees

First, the proposed rule prohibits "hidden fees."  Specifically, the proposed rule prohibits the advertising of any amount that a consumer may pay without clearly and conspicuously disclosing the "total price."  In addition, if any other pricing information is included in the advertising, the total price must be disclosed more prominently than any other pricing information.  

The proposed rule defines "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."  

Misleading Fees

Next, the proposed rule prohibits "misleading fees."  Specifically, the proposed rule prohibits advertisers 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."  In addition, the rule requires advertisers to clearly and conspicuously disclose, before an order is placed, "the nature and purpose of any amount a consumer may pay that is excluded from the Total Price, including the refundability of such fees and the identity of any good or service for which fees are charged."  

What's Next? 

The rule, if ultimately promulgated, could have dramatic impact on how prices are advertised in the United States.  Once the proposed rule is published in the Federal Register, the FTC will be accepting comments on the proposal for sixty days.