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On October 20, 2022, the Federal Commerce Fee (FTC) announced the launch of a brand new rulemaking course of to deal with how charges are charged for items or providers, specializing in probably “misleading or unfair” charges that the FTC refers to as “junk charges.” As step one within the course of, the FTC launched an Advance Notice of Proposed Rulemaking (ANPR), which asks questions on numerous practices concerning price disclosures, and means that the FTC is contemplating approaches like “all-in pricing” that will extra instantly regulate how charges are disclosed in lots of contexts. The ANPR is broad and focuses on the problem of “junk charges” throughout the economic system as a complete. As such, this continuing will probably influence how charges are charged throughout many industries and sectors, together with telecommunications, hospitality, on-line commerce, and monetary providers.
Beneath, we offer further background and context on the ANPR, and notice key subsequent steps and questions on which the FTC is in search of suggestions.
The “Junk Charges” ANPR. On the FTC’s October 20, 2022 Open Meeting (which we previewed here), the FTC voted to launch the ANPR. The ANPR notes that the FTC has introduced many instances alleging that sure charges are misleading, together with instances involving “hidden” charges. Nonetheless, it extra broadly addresses charges characterised as “junk charges,” which it defines as “unfair or misleading charges which are charged for items or providers which have little or no added worth to the buyer, together with items or providers that buyers would moderately assume to be included inside the general marketed worth.”
The ANPR discusses price practices throughout numerous sectors representing a large swath of the economic system, together with telecommunications, hospitality, monetary providers, on-line commerce, journey, larger training, reside occasions ticketing, and car dealerships, amongst others. As one instance, the ANPR describes what it calls “drip pricing,” which refers back to the follow of promoting the bottom a part of a services or products’s worth upfront, after which disclosing further fees later within the buying course of. The ANPR offers the instance of resort charges charged for a lot of hospitality bookings as a type of “drip pricing” it’d tackle if the rulemaking strikes ahead.
Moreover, the ANPR asks about numerous points, together with:
- The prevalence of practices of not disclosing on commercials or advertising: complete prices of products or providers; the existence of charges, curiosity fees, or prices; or materials restrictions, limitations, or circumstances leading to necessary fees.
- The prevalence of representing to a shopper that they owe fee for a services or products that they didn’t conform to buy or charging shoppers for items and providers with out their categorical knowledgeable consent.
- The prevalence of termination charges, charges or prices that “shoppers would moderately assume to be included inside the general marketed worth” for a services or products, and costs or prices charged and not using a disclosure concerning the aim of the cost.
- Whether or not a rule addressing price practices ought to require companies to reveal in all promoting one worth that encompasses all fees, often known as “all-in pricing.”
- Whether or not an “all-in pricing” rule ought to apply to sure industries, or throughout all industries.
As famous within the ANPR, the FTC is at the moment restricted in in search of financial aid for authorized violations involving unfair or misleading charges, beneath the Supreme Court’s AMG decision. Nonetheless, if the FTC adopts a rule concerning such charges, it may well search financial aid for violations.
The ANPR was launched by a 3-1 vote, with Commissioner Wilson dissenting. In her dissent, Commissioner Wilson advised numerous further questions that commenters ought to tackle, together with:
- What markets or industries might conceivably be coated by an omnibus pricing rule?
- What authority does the FTC must promulgate a rule that will regulate pricing disclosures throughout the economic system?
- Do pricing practices and price disclosures fluctuate throughout industries? How would a transparent and conspicuous disclosure requirement work almost about such charges and fees?
- Does the ANPR overlap with present FTC guidelines and steerage?
- Can the FTC meet the statutorily required exhibiting of “prevalence” beneath Part 18 of the FTC Act with out underlying enforcement actions? How?
- May a possible rule requiring all-in pricing incentivize bundling of products and providers {that a} shopper could not need or want?
Subsequent Steps. The ANPR is step one within the rulemaking course of. Feedback might be due 60 days after Federal Register publication. The FTC will use the knowledge gathered to find out whether or not to suggest a rule, which might apply comparatively narrowly to ban established misleading practices concerning misleading charges, or probably try and mandate sure sorts of price disclosures. It might additionally concentrate on sure industries or apply extra broadly.
This “Junk Charges” ANPR is the most recent in a collection of rulemaking proposals by the FTC, together with its ongoing “Commercial Surveillance” rulemaking involving information privateness and safety, and its impersonation fraud rulemaking.
For extra details about the FTC’s new ANPR or its different rulemaking efforts, please contact one of many authors listed on this alert.
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