Lina Khan’s FTC drops hammer on ban on spam fees

Federal Trade Commission Chairwoman Lina Khan has been on the road to war against unwanted fees, and she just scored another victory. On Tuesday, the Federal Trade Commission finalized it Unsolicited Fee Rulewhich targets ticket companies, hotel and lodging options that attempt to charge additional, undisclosed fees. The rule passed by a vote of 4-1 (with Very weak opposition) and will enter into force on April 16, 2025.

The rule is very simple – so simple that one might wonder why it has taken until now to do something about it. All the FTC requires from companies is to explain all costs to consumers upfront. This means no additional fees will appear at checkout. Instead, fees such as “resort” fees at hotels and “convenience” or “service” fees charged for concert tickets must be included in the advertised price immediately.

1. People deserve to know up front the price they’ll be asked to pay, without worrying that they’ll later be hit with mysterious fees they can’t avoid.

today @FTC A rule has been finalized to ban these unwanted charges for short-term stays and live event ticket bookings.https://t.co/zwLEe3BUxL

– Lina Khan (@linakhanFTC) December 17, 2024

Businesses will still be able to exclude shipping fees and taxes from the prices they advertise, but they must clarify those prices before asking consumers to enter their payment information. To make sure companies aren’t trying to manipulate prices by highlighting certain prices within an itemized menu to make it look like consumers are getting a deal, the FTC has made it clear that the true total to be paid must be the most prominently displayed price.

It’s strange that “don’t lie about your prices” would require regulatory enforcement, but hey, here we are.

According to A White House Studyevent ticket fees cost U.S. consumers about $7.14 billion in 2023, while hotel resort fees cost consumers $3.3 billion. The reason companies add these costs is straightforward: profit. Tricks that quickly add to your portfolio also improve a company’s bottom line. Resort fees, which ostensibly go toward maintaining a hotel or rental property, have hit the books 80-90% profit for hotel owners. Meanwhile, Ticketing is a major revenue driver Ticketmaster is partly credited with service fees.

Not surprisingly, consumers hate these fees. Atmospheric research Found 91% of hotel guests said they dislike fees imposed such as resort fees, and the Ticketmaster service fee is so notorious among showgoers that ticket holders regularly receive it. Referred to To as The most hated company in America. Earlier this year, Lake research partners found About 80% of Americans support making hidden accusations illegal, a number that applies across basically every demographic line you can imagine.

However…so, here’s the thing. Consumers are not always the most rational actors. We just went through an election cycle where we felt things were too expensive (They are) Go beyond indicators That the broader economy was booming. Last year, morning consultation Posted a survey This showed that people would rather see prices fall than their wages rise, perhaps because they think about money going out more than coming in.

Return to the hotel and ticket prices. This model of hiding fees all the way is called segmentation pricing. there At least some evidence suggests so That while consumers say they don’t like this model, they can actually respond to it more positively than to real pricing because seeing the full price up front can make them feel like they’re spending more. This does not mean that people will hate this new ruling, which is undoubtedly a positive thing when it comes to price transparency. Just remember that people don’t always respond to these things the way you might imagine.