/>iOn December 17, 2024, the U.S. Federal Trade Commission (FTC) announced its final “Junk Fees Rule” (the “Final Rule” or “Rule”) to prevent certain practices related to pricing in the live-event ticketing and short-term lodging industries. The Final Rule requires businesses that offer a price for live-event tickets or short-term lodging to disclose the total price, inclusive of mandatory charges, and to do so more prominently than other pricing information. The Final Rule also prohibits businesses from misrepresenting fees or charges in any offer, display, or advertisement for live events and short-term lodging. Notably, the Final Rule does not prohibit any one type of fee, nor does it prohibit specific pricing practices, such as itemization of fees or dynamic pricing. Instead, the Rule focuses on ensuring that fees are clearly disclosed.
The FTC’s stated aim in passing the Final Rule is to curb perceived unfair and deceptive pricing practices in these two industries, specifically so-called “bait-and-switch” pricing that hides the total price of tickets and lodging by omitting mandatory fees and charges from advertised prices and misrepresenting the nature, purpose, amount, and refundability of fees or charges. The FTC pointed to evidence that these practices are prevalent in these two industries, where most transactions occur online. The FTC emphasizes that “truthful, timely, and transparent pricing” “is critical for consumers” and claims this rule will allow American consumers to make better-informed purchasing decisions in these instances.
The Rule was published in the Federal Register on January 10, 2025, and is slated to go into effect 120 days later, putting its effective date as May 10, 2025. It is possible, however, that the incoming Administration will seek to change the rule or delay its effective date.
FTC Rulemaking Leading to Final Rule
The Final Rule is the culmination of the rulemaking process that the FTC initiated in November 2022, when it announced an Advanced Notice of Proposed Rulemaking under Section 18 of the FTC Act, to address certain purportedly unfair or deceptive acts or practices involving fees. The FTC specifically sought public comment on the prevalence of certain practices related to what it labeled “junk fees” and the costs and benefits of a rule that would require upfront inclusion of mandatory fees whenever consumers are quoted a price. After posing a series of questions to solicit data and commentary, the FTC received more than 12,000 comments in 90 days.
One year later, the FTC published a Notice of Proposed Rulemaking, which proposed a rule that prohibited misrepresenting the total price of goods or services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees. The proposed rule was not industry-specific; rather, it would have applied broadly to businesses across the national economy. The FTC then received 60,000 more comments on its proposed rule, most of which were supportive. The FTC interpreted this feedback as confirmation of the prevalence of the types of fee-related practices the FTC sought to address. The FTC estimated that its proposed rule would save consumers up to 53 million hours per year of wasted time spent searching for the total price of live-event tickets and short-term lodging, equating to more than $11 billion over the next decade.
In March 2024, the Biden Administration launched an interagency initiative, co-chaired by the FTC and U.S. Department of Justice, called the “Strike Force on Unfair and Illegal Pricing.” The Strike Force seeks to combat unfair and illegal pricing and lower prices for all Americans. Shortly after the announcement of the Strike Force, the FTC held a public hearing on its proposed rule while it continued to consider comments, leading to the announcement of the Final Rule last month.
Final Rule
The Final Rule prohibits hidden fees and makes it an unfair and deceptive practice for “any Business to offer, display, or advertise any price” of live-event tickets or short-term lodging without clearly and conspicuously disclosing the total price. Under Section 5 of the FTC Act, a representation, omission, or practice is “deceptive” if it is likely to mislead consumers acting reasonably under the circumstances and is material to consumers; that is, it would likely affect the consumer’s conduct or decisions regarding a good or service. Price, for example, is a material term. A practice is considered “unfair” under Section 5 if it causes or is likely to cause substantial injury, the injury is not reasonably avoidable by consumers, and the injury is not outweighed by benefits to consumers or competition.
As an example, in the commentary to the rulemaking, the FTC says that bait-and-switch pricing, where the initial contact with a consumer shows a lower or partial price without including mandatory fees, violates the FTC Act even if the total price is later disclosed.
The Final Rule specifies that the “total price” is 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” (any additional goods or services offered as part of the same transaction). Government charges, shipping charges, and fees for ancillary goods or services may be excluded under the rule.
The total price must be displayed more prominently than any other pricing information. If a final amount is displayed before the consumer completes the transaction, it must be disclosed as prominently as the total price.
The total price also must be displayed clearly and conspicuously, which means easily noticeable (“difficult to miss”) and easily understandable by ordinary customers. The clear-and-conspicuous requirement also covers audible communications. In addition to the total price, a business must display clearly and conspicuously the nature, purpose, and amount of any optional fee or charge that has been excluded from the total price, what the fee or charge is for, and the final amount of payment for the transaction.
The Final Rule goes beyond disclosure: It affirmatively prohibits misleading fees. Under the Final Rule, it is unlawful to misrepresent any fee or charge in an offer, display, or advertisement for live-event tickets and short-term lodging, including the nature, purpose, amount, or refundability of any fee or charge and what it is for.
State Laws and Regulations on Fees
The Final Rule does not preclude state laws that are more restrictive pertaining to unfair or deceptive fees or charges, except to the extent such laws or regulations are inconsistent with the Final Rule (and then only to the extent of the inconsistency). According to the FTC, a state law or regulation is not inconsistent with the Final Rule if the protection it affords is greater than the protection under the rule.
Numerous states have passed laws aiming to increase transparency in pricing and fees, including California, Colorado, Connecticut, Maryland, Minnesota, New York, and Tennessee. Further, some states have provisions that violations of Section 5 of the FTC Act also constitute deceptive practices under their state consumer protection statutes. The Final Rule thus augments the government scrutiny of fee-related practices and conduct that businesses may receive.
Takeaways and the Future of the Final Rule
Once the Final Rule becomes effective, when businesses advertise or display a price for live-event tickets or short-term lodging, they must display the total price — including any mandatory fees — and ensure any explanations for fees or charges are truthful and not misleading. Businesses have discretion to list optional fees. For businesses that have not previously been subject to state laws or regulations, the Final Rule will now apply to those businesses.
Despite the Final Rule’s narrow applicability to live-event tickets and short-term lodging, the FTC made clear it has not given up on other industries. The FTC emphasized it may address unfair and deceptive practices in other industries, as discussed in its Notice of Proposed Rulemaking, but will do so using its existing Section 5 authority.
The Final Rule was approved with a 4–1 vote, with Republican Commissioner Holyoak voting for the rule and incoming Republican FTC Chair Andrew Ferguson dissenting. Although the agency under new leadership could look to withdraw the Final Rule, under the Administrative Procedure Act, the FTC would need to publish a notice in the Federal Register explaining the reasons for the withdrawal, allow opportunity for comment, and consider those comments before repealing the Final Rule. Although incoming administrations in the past have imposed moratoriums on regulations under development, the Final Rule has been published in the Federal Register, and a moratorium likely would not impact the rule going into effect. The incoming administration, however, might choose to delay the effective date of the Final Rule. The Final Rule also falls within the window for review under the Congressional Review Act, creating another potential avenue for its repeal.
Separately, on January 14, 2025, the Consumer Financial Protection Bureau (CFPB) released a report titled “Strengthening State-Level Consumer Protections.” In the report, the CFPB encourages states to continue to go after “junk fees,” citing the FTC’s Final Rule and the FTC’s findings on the prevalence of certain practices. The CFPB provides proposed language for states to consider adding to their “state prohibitions on unfair, deceptive, and/or abusive acts or practices.” The CFPB’s recommended statutory language is industry-agnostic, meaning more states may look to adopt broad fee-related rules.
Like the FTC’s recent rule on non-compete agreements, the Final Rule may be subject to potential legal challenge, including by industry groups and trade associations. The landscape for disclosure of fees continues to evolve, and businesses should watch for developments at both the federal and state level.
