FTC passes rule prohibiting “junk fees” for live-event tickets and short-term lodging

On December 17, 2024, the Federal Trade Commission (FTC) announced a new rule requiring “timely, transparent, and truthful” upfront disclosures of pricing information to consumers of:

• Live-event tickets, which is not defined in the rule, and
  
  
• Short-term lodging, including temporary sleeping accommodations at a hotel, motel, inn, short-term rental, vacation rental, or other place of lodging.[1]

While the rule is less than clear in several respects, it requires businesses in those categories to “tell [the] consumer the whole truth up-front about prices and fees.”[2] To that end, the rule creates two pricing concepts: “Total Price” and the “final amount of payment.” Total Price means the maximum total of all fees or charges a consumer must pay for any goods or services (inclusive of any mandatory fees for ancillary goods or services). The FTC refused to identify what types of fees are “mandatory,” reasoning that it “cannot identify in advance a definitive list of mandatory fees because whether a particular fee will be mandatory or optional will depend on the specific facts of an individual business transaction.” Importantly, under the rule, the Total Price need not include optional fees, government-imposed fees, or shipping, though those fees and charges should be incorporated into the “final amount of payment” that the consumer ultimately pays.

Businesses in these two categories must:

• Clearly and conspicuously disclose the Total Price (including mandatory fees) when they offer, display, or advertise a price for their products or services.
  
  
• Make the Total Price the most prominently displayed pricing information, unless the final amount of payment for the transaction is displayed, in which case the final amount of payment must be displayed at least as prominently as the Total Price.

Additionally, before a consumer commits to pay for the product or service offered, sellers must disclose clearly and conspicuously:

• The nature, purpose, and amount of any optional fee or charge, government fees, or shipping imposed on the transaction that has been excluded from Total Price and the identity of the good or service for which the fee or charge is imposed, and
  
  
• The final amount of payment for the transaction.

The rule also includes a broad prohibition on misleading fees, makes clear that state laws are not preempted, and applies to business-to-business transactions as well as business-to-consumer transactions.

The terms of the final rule departed significantly from the draft rule proposed by the Commission in October 2023.[3] Most notably, the final rule applies only to two industries: live-event tickets and short-term lodging, whereas the previously proposed rule would have applied economy-wide. Despite this limitation, language in the Federal Register notice for the final rule suggests that the FTC believes that “bait-and-switch pricing and misleading fees or charges are prevalent throughout the economy.”[4] Commissioner Melissa Holyoak noted in her dissent that, during the public comment period on the proposed rule, several commentators raised questions about the Commission’s ability to “satisfy the requirements for Section 18 rulemaking, including ‘prevalence’ and ‘specificity,’ given the Proposed Rule’s economy-wide scope.”[5]

Even though the application of the final rule is limited to live-event tickets and short-term lodging, this does not mean that other industries can advertise and/or display pricing information for their products and services with abandon. Section 5 of the FTC Act continues to prohibit “unfair or deceptive acts or practices in or affecting commerce” including deceptive pricing practices.[6]

The rule will be effective 120 days after publication in the Federal Register, which likely will be in March or April 2025. Once in effect, the FTC can enforce the rule through suits in federal court seeking civil penalties of up to $51,744 per violation.

DLA Piper’s US Antitrust and Competition team regularly advises clients on compliance with FTC rules. If you have questions regarding the application of this new rule, please contact your DLA Piper contact or the authors of this client alert.

^{[1] See Federal Trade Commission Announces Bipartisan Rule Banning Junk Ticket and Hotel Fees, at https://www.ftc.gov/news-events/news/press-releases/2024/12/federal-trade-commission-announces-bipartisan-rule-banning-junk-ticket-hotel-fees (Dec. 17, 2024).}

^[2] Id.

^{[3] See Federal Trade Commission Explores Rule Cracking Down on Junk Fees, at https://www.ftc.gov/news-events/news/press-releases/2022/10/federal-trade-commission-explores-rule-cracking-down-junk-fees (Oct. 20, 2022).}

^{[4] See Pending Federal Register Notice, Trade Regulation Rule on Unfair or Deceptive Fees at 23, available at https://www.ftc.gov/system/files/ftc_gov/pdf/r207011_udf_rule_2024_final_0.pdf.}

^{[5] Statement of Commissioner Melissa Holyoak, Trade Regulation Rule on Unfair or Deceptive Fees, FTC Matter No. R207011, Dec. 17, 2024, at https://www.ftc.gov/system/files/ftc_gov/pdf/holyoak-statement-re-unfair-or-deceptive-fees-rule.pdf.}

^{[6] 15 U.S.C. §45.}