In response to “bait-and-switch” pricing, “drip pricing,” and other “dark pattern” pricing practices, Congress, federal agencies, and state legislatures are taking action designed to increase pricing transparency for consumers. These laws and proposed regulations seek to eliminate hidden, misleading, or deceptive fees, generally by requiring merchants to disclose the total cost (including all fees) of an item or service prior to purchase.

Federal Activity

On April 3, 2023, Congress introduced the Junk Fee Prevention Act, which would require covered entities to “clearly and conspicuously display” the total price of an advertised good or service, “including any mandatory fees,” when the price is first displayed to consumers. If passed, this Act would empower the Federal Trade Commission (“FTC”) to promulgate rules regarding the disclosure of mandatory fees to avoid deceptive practices.

Although the Act has not yet passed, the FTC already has commenced drafting regulations to combat “junk” fees. Specifically, on October 11, 2023, the FTC announced a new proposed rule entitled “Rule on Unfair or Deceptive Fees” (“Rule”), which would prohibit covered entities from “misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees.” With respect to hidden fees, any business would be prohibited from “offer[ing], display[ing], or advertis[ing] an amount a consumer may pay without Clearly and Conspicuously disclosing the Total Price.”  “Clearly and Conspicuously” means “difficult to miss (i.e., easily noticeable) and easily understandable.” Relatedly, the proposed Rule requires that, “[i]n any offer, display, or advertisement that contains an amount a consumer may pay, a Business must display the Total Price more prominently than any other Pricing Information.” With respect to misleading fees, businesses would be required to disclose the nature and purpose of fees, including the refundability of such fees and the identity of any good or service for which fees are charged, before the consumer consents to pay.

The proposed Rule as drafted would apply in wide variety of contexts, including, but not limited to, hotel and short-term lodging fees, live-event ticket sales, transportation fees, and certain financial services fees. Although the Rule is still proposed, the public comment period commenced on November 9, 2023 and closed on February 7, 2024. During that period, in excess of 60,000 comments were submitted by individuals, businesses, and various associations.

Other federal agencies and organizations have joined the FTC to develop and implement rules prohibiting “junk” fees across multiple markets and sectors, including the Consumer Financial Protection Bureau, the Federal Communications Commission, the Department of Housing and Urban Development, and the Department of Transportation.

State Activity

Various states have also enacted laws to ban “junk” fees in a variety of contexts. Select examples from California, Connecticut, and New York are highlighted here.

California

On October 7, 2023, California Governor Gavin Newsom signed SB 478 into law, which will amend the California Consumers Legal Remedies Act (“CLRA”) to ban “junk” fees. This law is designed to eliminate “drip pricing,” or the practice of “advertising a price that is less than the actual price that a consumer will have to pay for a good or service.” It will make illegal the practice of advertising a low initial price for a product and then adding fees later in the checkout process. Notably, the law contains carveouts for designated industries, including rental car companies, automobile dealerships, property managers, and food delivery companies. The CLRA amendment becomes effective on July 1, 2024, and the Legislature has not indicated that it will apply retroactively.

As with other alleged violations of the CLRA, claims may be brought on an individual or class-wide basis. Successful plaintiffs are entitled to: (a) actual damages or $1,000, whichever is greater per violation; (b) an order enjoining the violative business practice; (c) restitution; (d) punitive damages; (e) attorneys’ fees; and(e) any other relief the court deems proper.

Connecticut

On February 8, 2024, Governor’s Bill No. 15 was introduced as an act requiring fee disclosures for consumer goods and services, including event tickets, food and beverages, and lodging accommodations. Given strong support from Governor Lamont and Attorney General William Tong, and in light of recent trends toward price transparency, the bill has a likely chance of becoming law. If enacted as written, it mandates that any person doing business in the state must clearly and conspicuously disclose the total price of an event ticket or any consumer good or service offered on a food delivery platform, lodging platform, primary ticket platform, or secondary ticket platform. The total price must include all mandatory fees or charges, excluding applicable taxes imposed by government entities, and be displayed from the moment it is first advertised. The bill is silent as to whether it will apply retroactively.

In terms of potential damages, a violation of the proposed law would “be deemed an unfair or deceptive trade practice under” section 42-110b(a) of the general statutes, which contemplates a private right of action under Conn. Gen. Stat. Ann. § 42-110g.

New York

On June 30, 2022, New York passed Arts and Cultural Affairs Law Section 25.07(4), which provides that “every operator . . . of a place of entertainment . . . shall disclose the total cost of the ticket, inclusive of all ancillary fees that must be paid in order to purchase the ticket.”  “Such disclosure of the total cost and fees shall be displayed in the ticket listing prior to the ticket being selected for purchase,” and “[t]he price of the ticket shall not increase during the purchase process.” The law became effective on August 29, 2022.  The statute also applies to ticket resellers and third-party platforms that assist in the sale of tickets.

Notably, the statute creates a private right of action to “any person who has been injured by . . . a violation” of the law, and permits injunctive relief as well as monetary, including recovery of “actual damages or fifty dollars, whichever is greater.” A prevailing plaintiff may also be awarded reasonable attorneys’ fees. The law is silent as to whether it applies retroactively.

At least 25 lawsuits have been filed in New York federal and state courts since December 2023 alleging that certain places of entertainment have violated this statute.

Outlook

The federal and state crackdown on “junk” fees highlights a growing focus by legislators and regulators to protect consumers from deceptive fees and unfair pricing practices. New laws have also spawned a surge of consumer actions. In light of this evolving legal and regulatory landscape, companies should conduct a review of and proactively manage their pricing and disclosure practices with the goal of avoiding and/or successfully defending against enforcement scrutiny or consumer lawsuits, maintain customer trust, and ensure business integrity.

Dentons routinely monitors litigation and regulatory trends in consumer protection laws, including those relating to marketing and advertising of prices. Dentons’ team is here to assist clients in assessing compliance issues and in handling regulatory inquiries, threatened enforcement actions, and litigation in this evolving environment.