The Federal Trade Commission (FTC) published new information on May 5 detailing how its sweeping new “Rule on Unfair or Deceptive Fees” will impact consumers and businesses.
It prohibits what the agency describes as “bait-and-switch pricing and other tactics” that it says are used to hide total prices and mislead people about fees for live events and short-term lodgings, including hotels, vacation homes, and rental cabins.
The new rule states that businesses must inform consumers about the total price they will have to pay for live-event tickets or short-term lodging in all of their advertisements and other promotional offers.
According to the FTC, the rule “preserves flexibility for businesses by not prohibiting any type or amount of fee or specific pricing strategies,” and requires instead that they tell consumers the “whole truth up-front” about the total price of tickets and lodging, as well as any other fees.
The agency said live event tickets include concerts, sporting events, music, theater, and other live performances that audiences watch as they occur, but not pre-recorded audio or visual performances.
What’s Included in the FTC Rule?
Businesses must include all fees or charges that consumers are required to pay, no matter what, the FTC said.This includes credit card processing charges when there is no other viable payment option and charges for ancillary goods or services that customers would reasonably expect to be part of the purchase, such as additional hotel fees or cleaning fees.
Additionally, it includes fees that people are effectively unable to agree to because the business employs practices such as default billing, pre-checked boxes, or opt-out provisions.
Government charges, shipping charges, and fees or charges for optional ancillary goods or services that people choose to add to their purchase are excluded from the rule.
Still, the FTC noted that businesses must disclose that they have excluded charges from the total price before asking for payment and clearly and conspicuously disclose the nature, purpose, and amount of the fee or charge and the good or service for which the fee or charge is imposed.
The FTC also clarified that the final payment amount must be displayed “as prominently as, or more prominently than, the total price” and that fees and charges should not be misrepresented.
The FTC said businesses should also disclose any other fee-related information they choose to convey, such as whether the fee is refundable, and avoid using vague terms such as “convenience fees,” “service fees,” or “processing fees. ”
The agency noted that businesses can still use dynamic pricing strategies to adjust prices based on demand or inventory, so long as the pricing information is not misleading.
According to the agency, these time savings are equivalent to more than $11 billion over the next decade.
