FTC Issues Scaled-Back Final Fee Rule Targeting Live-Event Tickets and Short-Term Lodging

In December, the Federal Trade Commission (FTC) issued its long-awaited Final Rule on Unfair or Deceptive Fees. When the FTC released the proposed rule over a year ago, the rule covered any business that offered goods or services for sale. The Commission largely narrowed the rule’s application, which now focuses on live-event tickets and short-term lodging (defined as a hotel, motel, inn, short-term rental, vacation rental, or other place of lodging).

The Final Rule also covers third-party travel service providers, including online travel agencies and travel advisors. The FTC did not shed much light on its reasoning, but Republican Commissioner Melissa Holyoak’s concurring statement on the overly broad scope of the earlier version provides some indication of an effort to make the rule more palatable to the incoming Congress, which could repeal the rule through the Congressional Review Act.

The Final Rule requires the upfront disclosure of the total price more prominently than any other pricing information, except for government charges, shipping charges, and optional fees or charges. Modifications of the proposed rule include the definition of “government charges,” which is changed from fees or charges “imposed on consumers” to those “imposed on the transaction,” eliminating the potential distinction between fees and charges for a transaction the government imposes directly on consumers and those imposed on businesses.

Additionally, the agency clarified that “shipping charges” include private mail and shipping services such as UPS, or freight. The FTC conceded that certain fees that are contingent on later conduct or choices by a consumer after a purchase that cannot be ascertained do not need to be included in the upfront price (e.g., late fees). However, it rebuffed efforts to exclude dynamic pricing, stating that all 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 Final Rule also adjusted the language for the disclosure requirements regarding the nature and purpose of fees. Instead of requiring disclosure of “any amount a consumer may pay,” covered businesses must disclose and explain “any fee or charge imposed on the transaction that has been excluded from Total Price” before the consumer consents to pay.

The FTC also answered a question that we have pondered since it issued the proposed rule: What impact does the rule have on credit card surcharges? The FTC concluded that businesses covered by the Final Rule must include card surcharges and any other card processing fees in the “Total Price” if they choose to make payment by credit card mandatory. If the business offers an alternative payment option that is viable for the offered transaction, such that paying without a credit card is truly a reasonable option, the card fees need not be included in the Total Price.

Finally, the FTC explained that it received a lot of comments from consumers disgruntled by surprise fees and hidden charges in other industries not covered by the Final Rule, including motor vehicle, delivery applications, financial services, the restaurant industry, tax preparation services, and the healthcare industry. The FTC cautioned that that these other businesses should consider, in the context of their own business practices, the FTC’s guidance that mandatory fees that consumers cannot reasonably avoid be clearly and conspicuously disclosed, or else they may be viewed as deceptive.

The commission voted 4-1 to approve the Final Rule, with Commissioner Andrew Ferguson in dissent. Ferguson, who President-elect Donald Trump has said he will elevate to FTC chair, dissented “only on the ground that the time for rulemaking by the Biden-Harris FTC is over.” Holyoak concurred in the Final Rule’s issuance, stating that it complied with the FTC’s Section 18 rulemaking authority and that it “helps protect consumers and competition, while also preserving flexibility for businesses to engage in lawful advertising and pricing practices.”

The Final Rule is effective 120 days after publication in the Federal Register.

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