It’s been more than two years since the Federal Trade Commission said it was exploring a rule to crack down on junk fees. But the rule hasn’t gotten over the finish line.
President-elect Trump said Tuesday he would appoint a new FTC chair, Andrew Ferguson, and there will be a Republican majority at the FTC.
The FTC won’t comment on when current chair Lina Khan would be leaving or whether a vote could still happen. But even if the rule were approved at the last minute, it wouldn’t take effect for 180 days after being published in the Federal Register – in other words, next summer. Congress could invalidate the rule through the Congressional Review Act.
“There has always been a little bit of controversy regarding the FTC getting involved in the junk fee world and the rulemaking process and whether or not they had the authority to do it,” said Bryan Mohler, a partner with law firm Pryor Cashman who represents hotel owners and brands, speaking before the appointment of the new FTC chair. “I expect that there won’t be any movement on it until the new administration is in place.”
Ferguson joined the FTC as a commissioner in April and previously served as a clerk for U.S. Supreme Court Justice Clarence Thomas. According to Bloomberg Law, Ferguson dissented against certain FTC rules, such as one to make it easier to cancel subscriptions.
Stalled Efforts on Junk Fees
The proposed rule would have required disclosure by hotels, short-term rental companies, and booking sites, such as Expedia and Booking.com.
The total cost of a hotel room would be clear at the start of a search so you wouldn’t think you were getting it for, say, $200, only to learn at the end of the booking process that it’s $250 because of a mandatory resort or cleaning fee.
“The proposed rule would prohibit businesses from advertising prices that hide or leave out mandatory fees,” the FTC said. It added: “The rule would prohibit sellers from misrepresenting fees and require them to disclose upfront the amount and purpose of the fees and whether they are refundable.”
Last year, we identified the move toward more transparency on junk fees as a Megatrend.
In addition to the FTC rule, we expected a rule from the Department of Transportation that would force airlines to disclose all fees upfront. That did happen – but it was blocked by an appeals court in July after airlines sued over it.
We also anticipated a state law in California that took effect in July, which requires travel sellers and others to display upfront the total price, including mandatory fees (though not taxes). In some cases, travel companies are displaying more transparent pricing for listings throughout the world — and not just for properties within California’s borders.
Other states are also considering laws.
But the advantage of a federal rule is that there would be one standard instead of a patchwork of different laws.
“There’s still some cloudiness on what exactly [hotels and booking sites] should be doing to comply with the California laws on the books right now,” said Mohler. “I don’t think there’s any question that the hotel business in particular – which is the area that I spend a lot of my time in – is fine with the transparency. It levels the playing field.”
Congress could step in. The House of Representatives passed the No Hidden FEES Act earlier this year. A Senate committee voted through The Hotel Fees Transparency Act.
The American Hotel and Lodging Association has supported federal legislation that requires more fee disclosure but did not respond to a request for comment.
President Biden had made a big deal about junk fees, even giving it a line in his State of the Union speech in February 2023.
Said Mohler: “[Biden] definitely brought it into people’s consciousness as something that the government should have some role in regulating.”
