Last week, the Federal Trade Commission announced its final “Junk Fees Rule” (the “Rule”) that bans “mystery” or “junk fees” for live event tickets, hotels, and short-term rentals. The Rule requires businesses that offer live-event ticketing (e.g., comedy venues) or short-term lodging (e.g., hotels, motels, or vacation rentals) to clearly and conspicuously disclose the true “Total Price”, including all mandatory fees; and disclose any other additional fees and charges before payment.
Below is a summarized Q&A of the pertinent aspects of the Rule:
What Industries Does the Junk Fees Rules Apply To? The Rule applies to businesses across the nation that offer (1) live event tickets; and (2) temporary sleeping accommodations such as a hotel, motel, inn, short-term rental, vacation rental, or other place of lodging.
What is the “Total Price”? The “Total Price” is defined as 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.” A “mandatory Ancillary Good and Service” is a good or service offered to a consumer as part of the same transaction that a consumer may not decline. These mandatory fees include but are not limited to “resort fees”, “service fees”, “cleaning fees”, and “convenience fees”.
What May be Excluded from the Total Price? The Total Price may exclude government charges (e.g., taxes), shipping charges (i.e., fees or charges that reasonably reflect the amount a business incurs to send physical goods to a consumer, by mail, private mail and shipping services, or freight), and any fees or charges for any optional ancillary good or service.
What Exactly Must a Covered Business Disclose? Covered businesses must disclose the (1) Total Price; (2) any mandatory fees or charges and the nature, purpose, and amount that fee or charge; and (3) the final amount of payment for the transaction.
Thus, while covered businesses may exclude government charges and shipping charges from the Total Price, those charges must still be disclosed to the consumer. Additionally, businesses must display the Total Price and final amount more prominently than most other pricing information. A business may include an itemization or breakdown, but the Total Price and final amount must be prominent and highlighted on any ad, website, or marketing.
What about Service Charges? Those in California are already familiar with their own “Junk Fee” ban. CA, however, amended their state Junk Fee Ban to exempt service charges from restaurant, bars, or other food service providers. At this point, the Rule does not appear to have this same exemption.
When will the Rule got into Effect? 120 days after it is published in the Federal Register (which has not yet happened).
In its press release announcing the Rule, the FTC noted that it will “use its law enforcement authority to continue to rigorously pursue bait-and-switch pricing tactics, such as drip pricing and misleading fees, in other industries through case-by-case enforcement.”
We recommend that live-event ticket and short-term lodging businesses (hotels, motels, short-term rentals) move quickly to get into compliance.
