On December 17, 2024, the U.S. Federal Trade Commission (the FTC) announced its final Rule on Unfair or Deceptive Fees (the Rule), known colloquially as its Junk Fees Rule. The Rule prohibits unfair and deceptive practices with respect to total prices associated with live ticket events and short-term lodging, which are defined as “covered goods or services.” While the Rule defines “businesses” broadly, a business will be subject to the Rule only if it offers covered goods or services, and only in connection with its activity to offer covered goods or services.
The final Rule reflects major changes from the regulation the FTC initially sought to promulgate. In October 2023, the FTC announced a proposed rule on unfair or deceptive fees, with no limitation on the types of goods or services it would cover, and with much fanfare from the White House about how the proposed rule would prohibit “junk fees” across all industries. Indeed, President Joe Biden highlighted his administration’s efforts to combat junk fees in the past two State of the Union addresses.
After voluminous commentary from industry groups about the breadth of the proposed rule, the FTC narrowed the Rule to cover just two areas: live ticket events and short-term lodging. This represents a big win for business more broadly, but businesses that sell any covered goods or services, as defined, should immediately assess what they’ll need to do to comply with the Rule.
As outlined below, the Rule prohibits both “hidden” fees — failing to clearly and conspicuously disclose the fees associated with a covered good or service — as well as “misleading” fees — misrepresenting the fees associated with a covered good or service.
Requirements on “Hidden” Fees (§ 464.2)
Under the Rule, it will be an unfair and deceptive practice for “any Business to offer, display, or advertise any price of a Covered Good or Service without Clearly and Conspicuously disclosing the Total Price” of the covered good or service — in other words, to “hide” any fee. “Total price” under the Rule means “means the maximum total of all fees or charges a consumer must pay for any good(s) or service(s),” including any mandatory secondary service. Total price does not include, however, government charges, shipping charges, or charges for any optional secondary goods or services. To disclose the total price “Clearly and Conspicuously” means that the information is “difficult to miss” and “easily understandable by ordinary consumers.” Businesses must also disclose the “total price” of a covered good or service more prominently than any other “pricing information.” Before the customer consents to the transaction, businesses must also clearly and conspicuously disclose the “nature, purpose, and amount of any fee or charge” that is excluded from the total price as well as the reason that excluded fee is being imposed and the final payment amount for the transaction.
Requirements on “Misleading” Fees (§ 464.3)
Under the Rule, it will be an unfair and deceptive practice for “Business to misrepresent any fee or charge, including: the nature, purpose, amount, or refundability of any fee or charge,” as well as the reason the fee is being charged, in offers or advertisements made for any covered good or service.
The FTC approved the Rule in a 4-1 vote, with Chair Lina Khan, Commissioner Alvaro Bedoya, Commissioner Rebecca Slaughter, and Commissioner Melissa Holyoak voting yes and Commissioner Andrew Ferguson voting no. Chair Khan, Commissioner Slaughter, and Commissioner Holyoak all issued separate statements about the Rule, and Commissioner Ferguson issued a dissenting statement. Chair Khan’s statement highlights that the Rule is part of a broader effort by the FTC to address unwanted fees, while Commissioner Slaughter’s statement predicts that the Rule will have widespread positive effects notwithstanding its limited scope. For her part, Commissioner Holyoak’s statement attributes her yes vote on the Rule to its narrow scope, writing that if the FTC had “ignored the serious legal questions presented by an economy-wide Proposed Rule, I would have voted against it.” By the same token, Commissioner Slaughter explained that she voted for the narrower rule because it gained Commissioner Holyoak’s support.
Both Chair Khan and Commissioner Slaughter made clear, however, that they do not view the Rule as going far enough and that they believe the original, broader version was within the FTC’s rulemaking authority and supported by the public commentary received in connection with the rulemaking. They both also signaled support for a broad application of existing laws and rules to cover “junk fees” in other parts of the economy, explicitly encouraging regulators and lawmakers to expand coverage beyond what the Rule covers. To the extent Chair Khan and Commissioner Slaughter’s statements can be read to encourage applications of the Rule itself beyond the covered goods and services, courts should be wary of this possibility when hearing cases brought under the Rule.
In his dissent, Commissioner Ferguson explained that he could not support the Rule in light of “grounds having nothing to do with the merits of the Final Rule, or with its compliance” rulemaking requirements. Rather, Commissioner Ferguson states that it was inappropriate for the FTC to have passed this Rule — which as noted, has been a flagship issue for President Biden — given that the Biden-Harris administration will leave office in January. Commissioner Ferguson’s criticism of the political timing of the Rule’s promulgation comes after President-elect Donald Trump announced Commissioner Ferguson as his nominee to replace Khan as Chair of the FTC.
The Rule will go into effect 120 days after it is published in the Federal Register, which could occur at any time. While possible challenges to the Rule could delay its effective date, businesses offering covered goods or services should begin assessing their disclosures immediately to ensure timely compliance with the Rule’s requirements.
The final Rule reflects major changes from the regulation the FTC initially sought to promulgate. In October 2023, the FTC announced a proposed rule on unfair or deceptive fees, with no limitation on the types of goods or services it would cover, and with much fanfare from the White House about how the proposed rule would prohibit “junk fees” across all industries. Indeed, President Joe Biden highlighted his administration’s efforts to combat junk fees in the past two State of the Union addresses.
After voluminous commentary from industry groups about the breadth of the proposed rule, the FTC narrowed the Rule to cover just two areas: live ticket events and short-term lodging. This represents a big win for business more broadly, but businesses that sell any covered goods or services, as defined, should immediately assess what they’ll need to do to comply with the Rule.
As outlined below, the Rule prohibits both “hidden” fees — failing to clearly and conspicuously disclose the fees associated with a covered good or service — as well as “misleading” fees — misrepresenting the fees associated with a covered good or service.
Requirements on “Hidden” Fees (§ 464.2)
Under the Rule, it will be an unfair and deceptive practice for “any Business to offer, display, or advertise any price of a Covered Good or Service without Clearly and Conspicuously disclosing the Total Price” of the covered good or service — in other words, to “hide” any fee. “Total price” under the Rule means “means the maximum total of all fees or charges a consumer must pay for any good(s) or service(s),” including any mandatory secondary service. Total price does not include, however, government charges, shipping charges, or charges for any optional secondary goods or services. To disclose the total price “Clearly and Conspicuously” means that the information is “difficult to miss” and “easily understandable by ordinary consumers.” Businesses must also disclose the “total price” of a covered good or service more prominently than any other “pricing information.” Before the customer consents to the transaction, businesses must also clearly and conspicuously disclose the “nature, purpose, and amount of any fee or charge” that is excluded from the total price as well as the reason that excluded fee is being imposed and the final payment amount for the transaction.
Requirements on “Misleading” Fees (§ 464.3)
Under the Rule, it will be an unfair and deceptive practice for “Business to misrepresent any fee or charge, including: the nature, purpose, amount, or refundability of any fee or charge,” as well as the reason the fee is being charged, in offers or advertisements made for any covered good or service.
The FTC approved the Rule in a 4-1 vote, with Chair Lina Khan, Commissioner Alvaro Bedoya, Commissioner Rebecca Slaughter, and Commissioner Melissa Holyoak voting yes and Commissioner Andrew Ferguson voting no. Chair Khan, Commissioner Slaughter, and Commissioner Holyoak all issued separate statements about the Rule, and Commissioner Ferguson issued a dissenting statement. Chair Khan’s statement highlights that the Rule is part of a broader effort by the FTC to address unwanted fees, while Commissioner Slaughter’s statement predicts that the Rule will have widespread positive effects notwithstanding its limited scope. For her part, Commissioner Holyoak’s statement attributes her yes vote on the Rule to its narrow scope, writing that if the FTC had “ignored the serious legal questions presented by an economy-wide Proposed Rule, I would have voted against it.” By the same token, Commissioner Slaughter explained that she voted for the narrower rule because it gained Commissioner Holyoak’s support.
Both Chair Khan and Commissioner Slaughter made clear, however, that they do not view the Rule as going far enough and that they believe the original, broader version was within the FTC’s rulemaking authority and supported by the public commentary received in connection with the rulemaking. They both also signaled support for a broad application of existing laws and rules to cover “junk fees” in other parts of the economy, explicitly encouraging regulators and lawmakers to expand coverage beyond what the Rule covers. To the extent Chair Khan and Commissioner Slaughter’s statements can be read to encourage applications of the Rule itself beyond the covered goods and services, courts should be wary of this possibility when hearing cases brought under the Rule.
In his dissent, Commissioner Ferguson explained that he could not support the Rule in light of “grounds having nothing to do with the merits of the Final Rule, or with its compliance” rulemaking requirements. Rather, Commissioner Ferguson states that it was inappropriate for the FTC to have passed this Rule — which as noted, has been a flagship issue for President Biden — given that the Biden-Harris administration will leave office in January. Commissioner Ferguson’s criticism of the political timing of the Rule’s promulgation comes after President-elect Donald Trump announced Commissioner Ferguson as his nominee to replace Khan as Chair of the FTC.
The Rule will go into effect 120 days after it is published in the Federal Register, which could occur at any time. While possible challenges to the Rule could delay its effective date, businesses offering covered goods or services should begin assessing their disclosures immediately to ensure timely compliance with the Rule’s requirements.
Attorney Advertising—Sidley Austin LLP is a global law firm. Our addresses and contact information can be found at www.sidley.com/en/locations/offices.
Sidley provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from professional advisers. Sidley and Sidley Austin refer to Sidley Austin LLP and affiliated partnerships as explained at www.sidley.com/disclaimer.
© Sidley Austin LLP
