In a move that reflects growing concern about financial transparency, on October 11, 2023, the FTC issued a Notice of Proposed Rulemaking and Request for Public Comment titled “Trade Regulation Rule on Unfair or Deceptive Fees” (the Proposed Rule). The Federal Trade Commission’s Proposed Rule aims to “prohibit unfair or deceptive practices relating to fees for goods or services.” It specifically targets representations relating to the total costs of goods and services that omit mandatory fees from advertised prices.
Notably, the Proposed Rule also stands against the misrepresentation of the nature and purpose of fees. With corporations and law firms actively involved in managing fees for services, this proposed rule could significantly impact existing pricing models.
The Proposed Rule represents an effort by the FTC to tackle business practices commonly known as “junk fees” and “drip pricing”. “Junk fees” refer to charges that may not be readily apparent in the initial cost accounting, incurring often without explicit consent. “Drip pricing” refers to the practice of advertising only a portion of a product’s total cost, then revealing additional fees as the consumer progresses through the buying process.
While transparency in advertising pricing has always been a focus of legal and regulatory scrutiny, this proposed rule presents an intensified effort to protect consumers. For legal professionals, especially those operating in corporations and law firms, this implies a need for vigilance in ensuring fee transparency to avoid running afoul of the potential new regulation. This development serves as a crucial reminder of the growing regulatory shifts towards greater transparency.
Further specifics of the Proposed Rule and suggestions to comply can be found at Latham & Watkins LLP’s full Alert.