On October 11, 2021, the Federal Trade Commission (FTC) issued a Notice of Proposed Rulemaking, marking its second request for public insight on a prospective regulation aimed to outlaw unfair and deceptive ‘junk fees.’ These junk fees, often hidden until consumers are deep into their transactions, impose unnecessary costs and can grossly misrepresent the overall expenses of a service.
The rulemaking initiative follows an earlier Advance Notice of Proposed Rulemaking by FTC, which gathered over 12,000 public comments. Based on the vast feedback, the FTC has recognized a prevalent business practice where mandatory fees are intentionally excluded from advertised prices.
This mechanism of concealing added costs until the later stages of transactions adversely affects the decision-making of consumers who often lack complete information about the total costs at the outset.
The FTC is now in the process of determining the final contents of the rule, with the latest Notice of Proposed Rulemaking aiming to further facilitate public participation in shaping this regulation.
- The first comment period in 2020 focused on gaining public and stakeholder insight into the general features of the junk fees issue, its prevalence, and its impact on consumers.
- In the ongoing second round, the FTC is seeking additional commentary with a sharper focus on the specifics of regulations required to prohibit these exploitative charges efficiently.
By curbing the practice of imposing disparate, concealed fees on consumers, the FTC’s proposed rule aims to increase fair competition and provide a more transparent environment for consumers. As the proposed rule continues to undergo public scrutiny and garner feedback, businesses across various sectors should prepare to adapt their pricing mechanisms correspondingly.