The Federal Trade Commission (FTC) has officially introduced a new regulation that prohibits apps and websites in the hotel and event sectors from utilizing hidden fees that lead to bait-and-switch pricing tactics.
The commission discovered that it was a widespread practice for businesses to present a deceptive price, which would then be augmented by concealed charges such as booking and resort fees, only disclosed during the checkout phase.
While the regulation does not eliminate the use of junk fees, it mandates that these fees must be included in the initial prices displayed to consumers. As a result, the upfront price will reflect the total amount that needs to be paid.
The FTC began this consultation process in 2022, gathering over 12,000 comments regarding hidden fees and misleading pricing, with an additional 60,000 comments received after the announcement of the plans.
The agency asserts that revealing true pricing will simplify comparison shopping and prevent consumers from wasting their time.
The Junk Fees Rule will guarantee that pricing information is provided in a timely, transparent, and accurate manner to consumers purchasing live-event tickets and short-term lodging, two sectors that the Commission has scrutinized thoroughly.
Consumers seeking hotels, vacation rentals, or tickets for shows or sporting events will no longer encounter unexpected “resort,” “convenience,” or “service” fees that inflate the advertised prices. By mandating upfront total price disclosures including fees, the regulation will facilitate easier comparison shopping, leading to savings for consumers and promoting fair competition.
The FTC estimates that the Junk Fees Rule could save consumers as much as 53 million hours annually that would otherwise be spent searching for the total price of live-event tickets and short-term accommodations.
In addition to applying to apps and websites, this rule will extend to advertisements, preventing companies from advertising a price without including all fees that customers must pay to finalize their bookings.
Although this regulation specifically targets the hotel and event industries, the FTC highlights that it is already unlawful for businesses to mislead customers about the actual prices of their goods and services, and it will persist in exercising its enforcement authority in other sectors.
The regulation will come into effect 120 days following its publication.
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