19 December 2024
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NOTE: We represent the owners and operators of hotels, restaurants, and other hospitality facilities. We do not represent consumers making claims against such businesses. When it comes to junk fee laws at the state or national level, we help the owners and operators of hotels, restaurants, and hospitality facilities understand and comply with them. When claims are made against them by consumers or competitors, we advise on strategies and defense of such claims.
Finally!
The Federal Trade Commission (FTC) has been critically looking at “junk fees” for a long time. Over several years, it proposed banning “Unfair or Deceptive Fees” across many industries. However, on December 17, 2024, the FTC surprised many when it published a significantly revised version as its final “Junk Fees Rule” (16 CFR Part 464). The Rule is scheduled to become effective 120 days after its publication in the Federal Register.
Unlike its predecessor proposals, The Final Rule is directed primarily to live event ticket sales and the short-term lodging industry (including hotels and vacation rentals). It will require the affected businesses to clearly disclose the total price of the goods or services (and all ancillary goods and services) to the consumer upfront as the first and most prominent price. This most-prominent total price requirement has been driven by the desire to avoid any “hidden fees” during the consumer’s browsing for information. Most criticized are mandatory charges and hidden fees that often appear at purchase confirmation or payment. Consumers and regulators hate service charges, resort fees and other unexpected items hidden until the end of a transaction and buried as if they are part of the taxes or government-imposed fees.
The total price to be disclosed under the Rule does not cover optional fees, government-imposed charges, or shipping fees. They remain excluded from the total price requirement. Importantly, businesses must ensure that the final payment amount, including any additional charges such as taxes or fees, is displayed as clearly and prominently as the initial advertised price. This eliminates the practice of bait-and-switch pricing, where the advertised price is significantly lower than the final price once all hidden fees are added.
The Rule also prohibits misrepresentations of the nature, character and purpose of fees. An example is a charge for something vague, like “convenience fees.”
Note that nothing in the Rule limits the types or amounts of fees, as long as the total price is transparent and the description is not misleading.
Although the rule is focused on the lodging industry and ticket sales, the FTC will continue to enforce fair pricing practices in other sectors on a case-by-case basis, which could lead to increased state-level enforcement. The rule promises to improve transparency in hotel pricing, allowing consumers to make better-informed decisions without unexpected charges. We believe there may be an important warning to all businesses — even those outside live event ticket sales and short-term lodging — that many will miss because of the seemingly limited scope. One indication of this is the following statement in the Announcement:
“Industries beyond live-event ticketing and short-term lodging are prohibited from deceiving consumers about fees and pricing per longstanding law. The FTC 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 expect to provide some more insight on this soon.
See the FTC’s Final Junk Fees Rule Announcement and Final FTC Junk Fees Rule.
For more context on the FTC’s ruling, see our blogs on Junk Fees here:
Junk Fee Law: Exception for California restaurants moves forward
California’s AB 537 mandates transparent pricing for all short-term lodging as of July 1, 2024 — $10,000 penalty for violation
New Federal Junk Fee Law – The No Hidden FEES Act of 2023 (HR 6543)
Jim Butler asks Mark S. Adams for update on California Junk Fee law: Would SB 1524 gut SB 478’s honest pricing for all?
Pricing transparency without hidden mandatory junk fees. Does this apply to restaurants too? New California proposed law (SB 1524 ) says “No!” Can this be right?
FTC’s proposed rule will end drip pricing and junk fees for hotels, restaurants, and many other businesses. Goodbye to resort fees, destination fees, service charges and other miscellaneous fees?
California bans Junk Fees as of July 1, 2024. Good bye to junk fees, resort fees, mandatory service charges, and drip pricing. Hello to – the fruits of SB 478.
Disclosing Mandatory Resort Fees – What Hoteliers Need to Know
Nebraska sues Hilton over hotel “Resort Fees”
Attorney General for DC sues Marriott International over hotel “Resort Fees”
Impending eruption of litigation over Resort Fees? What’s the fuss?
The FTC takes aim at hotel Resort Fees — The FTC 2017 Report
This is Jim Butler, author of www.HotelLawBlog.com and founding partner of JMBM and JMBM’s Global Hospitality Group®. We provide business and legal advice to hotel owners, developers, independent operators, and investors. This advice covers critical hotel issues such as hotel purchase, sale, development, financing, franchise, management, ADA, and IP matters. We also have compelling experience in hotel litigation, union avoidance and union negotiations, and cybersecurity & data privacy.
JMBM’s Global Hospitality Group® has been involved in more than $125 billion of hotel transactions and more than 4,700 hotel properties located around the globe. Contact me at +1-310-201-3526 or jbutler@jmbm.com to discuss how we can help.
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