Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC finalizes rule to ban hidden and falsely advertised ‘junk’ fees, (Dec 17, 2024)

By Kenneth H. Ryesky, M.B.A., J.D.

Application of finalized rule limited to live-event tickets and short-term lodging, significantly narrowing scope of the rule as initially proposed.

The Federal Trade Commission has finalized a new regulation that bans hidden junk fees charged to consumers for attendance at live events or hotel stays. FTC's action adds a new Part to the Code of Federal Regulations. The FTC's announcement of the final rule was accompanied by individual statements by FTC Commissioners, and by a statement from the White House (Junk Fees Rule – Live Events & Short-term Lodging, 16 C.F.R. part 464).

Background. On July 9, 2021, President Biden issued an Executive Order titled "Promoting Competition in the American Economy" [Exec. Order No. 14,036, 86 Fed. Reg. 36987 (2021)], declaring that "a whole-of-government approach is necessary to address overconcentration, monopolization, and unfair competition in the American economy." The Executive Order directs and encourages federal agencies to address competition and antitrust issues.

On October 20, 2022, the FTC announced that it was "exploring a rule to crack down on junk fees proliferating throughout the economy," and published notice requesting public comments in the Federal Register less than three weeks later. On October 11, 2023, the FTC announced that in considering its own studies and the more than 12,000 comments submitted, it was proposing a rule; the notice of this proposed rule, including the proposed text, appeared in the Federal Register approximately one month later [88 Fed. Reg. 77420 (November 9, 2023) (to be codified at 16 C.F.R. part 464)].

On December 17, 2024, the FTC announced the final version of its new regulation after consideration of more than 60,000 comments submitted from individuals, industry, and advocacy groups; the final regulation has been submitted to the Office of the Federal Register and will take effect 120 days after publication.

Scope of new regulation. The scope of the FTC's new regulation covers far less than what was initially proposed. A new term, "Covered Good or Service," has been inserted into the definitions section [16 C.F.R. § 464.1], and is defined as "(1) Live-event tickets; or (2) Short-term lodging, including temporary sleeping accommodations at a hotel, motel, inn, short-term rental, vacation rental, or other place of lodging."

As proposed, the regulation also pertained to (1) Fees Related to Restaurants and Prepared Food and Grocery Delivery Apps; (2) Transportation Fees; (3) Telecommunications Fees; (4) Rental Housing Fees; (5) Education Fees; (6) Financial Services Fees; and (7) Correctional Services Fees. The added definitional term has removed these all from the sweep of the final regulation.

FTC Commissioners' comments. Four of the five FTC Commissioners issued written comments in connection with the FTC's announcement of the finalized regulation. FTC Chair Lina M. Khan stated that the new regulation "is one piece of a broader Commission effort to combat junk fees," highlighting the FTC's past activities relating to unfair or deceptive fees in other sectors of the economy and making clear that additional regulatory work can be expected. Khan also thanked the FTC's "cross-agency team for its steadfast work on this rule."

Commissioner Rebecca Kelly Slaughter's statement concurred with Ms. Khan's comments, while indicating that she would have preferred the final rule's coverage to have been as broad as initially proposed: "[T]o be clear, I believe that the Commission could have done more to protect all Americans." Slaughter specifically stated her concern over "the extent to which [the junk fee] practices have spread and now pervade other industries, especially rental housing," noting that "landlords urged the Commission not to protect renters." Slaughter also observed that some of the comments received indicate that toleration of hidden charges in the marketplaces unfairly pressures honest and ethical entrepreneurs to consider using such tactics. Slaughter's statement definitively concludes with "There is more work to be done."

Commissioner Melissa Holyoak commented that while there were "serious legal questions presented by an economy-wide Proposed Rule," the narrowing of the regulation's coverage to focus upon "unfair or deceptive practices in live-event ticketing and short-term lodging" largely obviated the legal issues and enabled her to vote in favor of promulgating the final version of the rule, despite her disagreements with some matters in it. Holyoak indicated that the final version gives the FTC a solid basis for effective enforcement. Holyoak wrote that "the requirements enshrined in the Final Rule will help level the playing field for all participants."

Commissioner Andrew N. Ferguson, who voted against the rule, issued a dissenting statement in which he agreed that the hidden charges are a problem that needs to be addressed, but implicitly noted that the November 2024 election portends sweeping changes under the incoming Trump administration. Ferguson opined, "It is particularly inappropriate for the Biden-Harris FTC to adopt a major new rule that it will never enforce," preferring that "the incoming Administration should have the opportunity to decide whether to adopt rules that it, not the Biden-Harris FTC, will be called upon to enforce."

President Biden's statement. President Joe Biden also weighed in on the finalized rule in a statement posted on the White House website. Biden stated that "these junk fees sneak onto your bill and companies end up making you pay more because they can. Those fees add up, taking real money out of the pockets of Americans."

The President's statement also noted the past and ongoing efforts of his Administration to aid the cause of consumers in other sectors of the economy.

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