On December 17, 2024, the Federal Trade Commission (FTC) announced its Final Rule on junk fees, prohibiting “bait-and-switch pricing” and other pricing tactics that hide or obscure the total costs of live-event ticketing and short-term lodging. The Final Rule has a much narrower reach than was originally proposed by the Democrat-led FTC.
The Final Rule comes after the rulemaking was initially announced on October 20, 2022, an advance notice of proposed rulemaking (ANPR) was published on November 8, 2022, and a notice of proposed rulemaking (NPRM) was published a year later on November 9, 2023. The Final Rule was issued in the waning days of the Biden Administration and passed on a 4–1 vote with bipartisan support. Commissioner Andrew Ferguson, incoming President Trump’s pick for the FTC chairmanship, dissented “only on the ground that the time for rulemaking by the Biden-Harris FTC is over,” noting that his vote against the Final Rule had “nothing to do with the merits of the Final Rule.”
Rule Summary and Background
The Final Rule is notable in that it applies only to live-event tickets and short-term lodging, which is defined to includes hotels, motels, short-term rentals, and vacation rentals. The FTC’s earlier announcement (previously covered here), ANPR, and NPRM were not so limited. For example, the NPRM would have applied broadly to all goods and services across industries with the lone exception of motor vehicle dealers, whose pricing disclosure practices are separately regulated through the CARS rule, which is currently under challenge. In the Final Rule’s statement of basis and purposes, the FTC described this limitation as a decision 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.” The Final Rule additionally notes that it is supported by ticketing companies as well as the short-term lodging industry.
The FTC noted in its announcement of the Final Rule that it intended to “preserv[e] flexibility for businesses” and that the Final Rule “does not prohibit any type or amount of fee, nor does it prohibit any specific pricing strategies.” The notice accompanying the rule specifically notes that the rule “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.”
The Final Rule does, however, contain a number of requirements and restrictions, including:
- The “total price” of a covered good or service is required to be clearly and conspicuously disclosed up front and whenever any price is presented. “Total price” is defined to include any mandatory fees and only allows the exclusion of government charges such as taxes, shipping charges, and charges only associated with optional goods or services.
- The “total price” must be displayed more prominently than any other pricing information except where a final payment amount is presented. The final payment amount, which would include any relevant government charges, shipping charges, and charges or fees for optional goods or services not included in the “total price” must be displayed just as prominently (or more prominently) than the “total price” if presented.
- The final payment amount, as well as the nature, purpose, and amount of any nonmandatory fees or charges added to the transaction that are not included in the “total price” must be disclosed before a consumer consents to purchase any covered good or service.
- Businesses are prohibited from misrepresenting any fees or charges included in a transaction.
The Final Rule allows for state law to provide greater protections than is provided by the Final Rule and only supersedes state law where otherwise inconsistent (and only to the extent of the inconsistency). The Final Rule will be enforceable 120 days after it is published in the Federal Register, and violations of the Final Rule are subject to civil penalties of up to $51,000 per violation.
Bipartisan Support
As noted above, the Final Rule passed on a 4–1 vote, with only Ferguson dissenting on political grounds. Of note, Republican Commissioner Melissa Holyoak voted in favor of the Final Rule and in her statement regarding the rule, noted that the limitation of the Final Rule to two specific industries and two specific practices (omitting mandatory fees and misrepresenting fees) were important to her support of the Final Rule. Holyoak also lauded the Final Rule as helping to “protect consumers and competition, while also preserving flexibility for businesses to engage in lawful advertising and pricing practices.”
With the Trump Administration taking over in January 2025 and a new Republican FTC majority led by Ferguson expected to be confirmed in the coming months, the bipartisan support of the Final Rule is likely to insulate it from challenges under the Congressional Review Act.
Caution for Business in Live-Ticketing and Short-Term Lodging
As the Final Rule begins to approach its effective date, companies engaged in the live-ticketing and short-term lodging industries will need to take steps to comply with the rule to avoid potential enforcement actions and civil penalties allowed by the Final Rule. In particular, companies will need to update how prices are presented or advertised on their websites and marketing materials to ensure that mandatory fees are included in any prices presented. Companies will also need to review how final transaction costs are displayed to make sure that the total cost of the transaction is just as prominently displayed as any other price presented.
As these changes are likely to take some time to implement, businesses that are engaged in the relevant industries should begin making compliance plans as soon as possible.
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If you have any questions, or would like additional information, please contact one of the attorneys on our Consumer Protection / FTC Team.