NTUF filed comments on the Federal Trade Commission (FTC)’s proposed rule, Unfair and Deceptive Fees. The FTC wants this proposed regulation to protect consumers from hidden or deceptive fees by requiring the total price of a good or service to be displayed up front. In reality, the proposed regulation misses the mark. If implemented, this proposed regulation would harm consumers and businesses and create major legal and compliance issues.
In the proposed rule, the FTC proposes that government charges, such as taxes, do not have to be included in the total price. The FTC divides government charges into two groups: (1) charges imposed on a business, and (2) charges imposed on a taxpayer. However, this division misses two other common types of taxes: (3) Taxes imposed on a business by law and may, or must, be passed onto the taxpayer, and (4) taxes imposed on a business by law and may not be passed onto the taxpayer. By ignoring these types of taxes, the FTC is requiring retailers to act like lawyers and interpret whether state taxation laws are imposed on businesses or taxpayers. This would create mass confusion as businesses try to figure out how to comply with both state law and this proposed regulation.
Even further, the FTC is proposing this rule be applied to all economic sectors. Despite proposing a 180 degree shift from how pricing and transactions are currently conducted, the FTC did little to no research on how the proposed regulations would affect businesses, with the exception of just three industries. We urge the FTC to take into account how this proposed rule would have a major impact on businesses as they are forced to figure out what compliance is required and redesign their sales and payment processing systems.
Consumers are also harmed by the FTC’s proposed rule. The FTC would require any fee which is necessary for the purchase of an item to be included in the total price display. The problem with this rule is that some fees may be necessary for certain customers to purchase an item, while not for others. It depends on what each customer needs in the moment. Requiring businesses to display the total price when businesses are not able to know in advance what every individual customer might need with a purchase is not possible. Additionally, businesses which work with third-party marketplaces (such as eBay, Amazon Marketplace, or Etsy) especially cannot comply as it is the sellers, not the platforms themselves, who set the prices. As such, displaying the total price would also not be practical in this case.
If the FTC cannot seriously demonstrate greater understanding, competence, and capacity to estimate the economic effects of this rule on the entire tax administration ecosystem, then NTUF believes the entire exercise should be abandoned. We will continue to monitor the FTC’s proposed rule and keep you updated.