Earlier this week, the Federal Trade Commission (“FTC”) released its updated Final Rule on Unfair or Deceptive Fees to define what fees or charges should be included in total price on receipts. Although geared toward certain bad actors, the FTC’s proposal would have applied to the entire economy, created an unworkable distinction between taxes “on consumers” and taxes “on business,” and required optional add-ons to be included in the total price shown initially to consumers. In our comment, we urged the FTC to drop the Rule or reconsider all these points because, in practice, it would harm consumers and businesses.
Although the FTC has now issued its final rule, it thankfully took into consideration the concerns raised in our comment. One of our main concerns was the broad application of the proposed rule to all economic sectors, and we requested the FTC conduct industry-specific impact analyses. Although the FTC refused to conduct such an analysis, it did limit its final rules to only “the live-event ticketing and short-term lodging industries.” This is great news for other businesses, but the FTC’s indication that deceptive fees are ‘prevalent economy wide” indicates other economic sectors should stay alert as to potential future rules.
We also raised alarms as to the FTC’s proposed definition of “Government Charges.” As we explained, 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.” In the Final Rule, the FTC cited us four times and agreed to modify the definition of “Government Charges” to mean fees or charges which are imposed on the transaction. Although this new definition is not perfect, it represents a better definition overall.
Likewise, we raised concerns in our comment that the FTC’s proposed definition of “Total Price” was overly broad and did not account for consumers’ choices which may affect the total price. The FTC recognized this as a valid concern and found “that, to the extent that certain fees are contingent on later conduct or choices by a consumer after purchase . . . these fees are not mandatory for purposes of the transaction, and as such, do not need to be included in Total Price.” However, as soon as the variable choices which could affect the Total Price have been made, the Total Price must be displayed.
All around, the Final “Unfair or Deceptive Fees” Rule still misses the mark, but we are pleased to see that glaring problems in it were fixed thanks to our input. We will continue to monitor the FTC and future deceptive fee rules should any come forward in regards to other economic sectors.