The FTC Proposes a New Rule on “Junk Fees”

On October 11, 2023, the Federal Trade Commission (“FTC”) published its Notice of Proposed Rulemaking for a new “Rule on Unfair and Deceptive Fees” — popularly referred to as the “junk fee” rule. The new rule, which will be codified at 16 C.F.R. Part 464 if enacted, would make it an impermissible unfair practice to advertise an amount a consumer may pay without “Clearly and Conspicuously” disclosing the “Total Price.” It would also require the “Total Price” to be displayed more prominently in any advertisement than other pricing information.

“Clearly and Conspicuously” and “Total Price” are defined terms in the new rule. “Total Price” means “the maximum total of all fees or charges a consumer must pay for a good or service and any mandatory Ancillary Good or Service,” excluding only shipping charges and fees imposed by any government unit. An Ancillary Good or Service means additional goods or services offered to a consumer as part of the same transaction.

“Clearly and Conspicuously” disclosing the Total Price means making a disclosure that is “difficult to miss (i.e., easily noticeable) and easily understandable” — but that is just for starters. A Clear and Conspicuous disclosure must also meet the following requirements:

1. for communications that are solely visible or solely audible, the disclosure of the Total Price must be made by the same means through which the communication is otherwise presented, and for both audio and visual communication, the disclosure of Total Price must be presented by both means simultaneously;
2. visual disclosures must stand out from any accompanying text or other visual elements to be easily noticed, read, and understood;
3. audio disclosures must be delivered at a volume, speed, and cadence sufficient for an ordinary customer to hear and understand it;
4. for interactive electronic disclosures, the disclosures must be unavoidable;
5. the disclosure must be made in all language in which the pricing representations are made, using ordinarily understandable diction and syntax; and
6. the disclosure mut not be contradicted or mitigated by, or inconsistent with, anything else in the communication.

The proposed rule appears to be driven by a slew of consumer complaints about additional charges that come as a surprise or that provide no identifiable value in the transaction. The footnotes of the 160-page report accompanying the proposed rule heavily document instances of such complaints. Further, the FTC called out a series of industries in which so-called “junk fees” were commonly assessed: hotels, short-term lodging, and rental housing; live event ticket fees; prepared food and grocery delivery apps; transportation fees (such as for car rentals); telecommunications; education fees; consumer finance; and correctional services fees. Allegedly hidden fees associated with “credit cards” were mentioned over a dozen times in the report, with a specific area of sensitivity being the addition of a surcharge at the point of sale.

The comment period on the proposed rule will remain open until December 10, 2023.

The proposed rule would have several consequences if enacted. Most immediately, it would mean that many businesses need to revisit their disclosures about pricing. Importantly for the FTC, however, the publication of a rule about junk fees would give the FTC the power to pursue anyone who violates it not only for an injunction under Section 13 of the FTC Act, but also for monetary damages under Section 19.