At some point, you have probably experienced sticker shock when checking out to pay for your concert tickets or your hotel stay.
That’s because, too often, companies will tack on so-called “junk fees,” often labeled as “convenience fees,” “resort fees,” or “service charges” for hotel bookings and live event tickets that you only see after you’re about to pay in checkout.
The reason why many companies wait until checkout to disclose these junk fees is because, by that point, you are far more likely to pay these inflated prices. In one 2021 study published in Marketing Science, StubHub customers who weren’t shown fees until checkout spent about 21% more.
“They select the ticket. They go to check out. Now, it’s 15% [more because of service fees]…But because they’re attached to the ticket, they end up making a purchase that they otherwise wouldn’t have,” said Steven Tadelis, a co-author of that study and professor of economics at the Haas School of Business at University of California, Berkeley.
But starting this week, certain businesses can no longer take advantage of our shopping biases. It’s now illegal for consumers to face these unwanted surprises while they are checking out to pay for concert tickets and short-term hotel stays.
Announced in December by the Federal Trade Commission, the Biden administration ban went into effect on May 12. The rule covers both in-person and online transactions, but it does not cover every business sector. The rule only bans this bait-and-switch pricing for live event tickets or short-term lodging like an Airbnb or resort stay ― it does not apply to the hidden baggage charges airlines do and customers complain about, for example.
Despite the limitations, the ban is an important additional protection for shoppers. Beyond lost money, consumers are now protected from losing unnecessary time waiting to buy tickets they cannot afford.
Stacy Cammarano, an FTC attorney in the division of advertising practices said that during the comment period for the proposed rule, the agency received thousands of complaints from consumers saying they “were lured in by these really low prices, and then they spent all of this time in the checkout process, only to find out at the end that the prices are much higher.”
“They were hit with expensive and often mysterious fees at the end when they were going to pay,” Cammarano said. “I really hope that this rule will do a lot of work to address those practices.”
Here’s What Kind Of Hidden Fees Are Now Banned Under FTC.
The rule does not affect how much businesses can charge, but it now requires them to be honest about their fees upfront.
Before the rule, businesses could charge customers more while checking out under the guise of a convenience fee. “They call it a convenience fee,” Tadelis said. “But at the end of the day, all you’re doing is going to the website, picking a ticket, going to check out, and buying it. So where’s the service?”
Now, under the FTC rule, businesses must make “clear and conspicuous” disclosures of the total pricing upfront that are “easy for people to understand and difficult for them to miss,” the FTC states in its online explainer. Businesses cannot use illegible fonts or contradictory language to mislead customers about what they are planning to buy.
“It shouldn’t be hidden in the fine print. It needs to be as obvious as the main words that you’re using in your advertisement,” Cammarano said. She gave the example of a mandatory cleaning fee in a vacation home, which would be covered by the rule, and would need to be included in the total price you see prominently.
Say goodbye to surprise processing fees at checkout, too. In its guide on the new rule, the FTC stated that if a business requires people to pay with a credit card, and the credit card fee is mandatory, it must be included in the total price.
On Monday, Ticketmaster, which got blamed for doing this hidden-fee practice, said it would start displaying the full price of a ticket as soon as consumers start shopping, so that the price you see first is what you pay at checkout.
What To Do If You Notice A Junk Fee While Shopping
If you do notice a hidden fee the next time you pay for a concert ticket or book a hotel room, you can report what you found to your state attorney general or the FTC at reportfraud.ftc.gov. The FTC rule noted that businesses are on notice if they violate this ban and could be ordered to pay civil penalties.
“There’s a number of ways that the FTC could proceed if we receive a complaint that we find to be a strong claim. We could reach out to the company directly. We could also send a civil subpoena to the company to get more information, and eventually we could also potentially file a complaint in court,” Cammarano explained.
Cammarano expects this ruling to have a positive impact on consumers because “it requires honest and transparent pricing for live event tickets and short-term lodging.” Businesses are now also on a more level playing field, and cannot use these hidden fees to make their tickets seem cheaper than competitors, she added.
Tadelis, for one, is “extremely glad” this ruling is now in effect. “There was really no business justification to allow hidden fees that are mandatory,” he said. “The only justification was that businesses made more money than they otherwise would make.”