Podcast - Hidden Fees in the Live-Event Ticketing and Short-Term Lodging Industries

Welcome to another podcast of Clearly Conspicuous. As we've noted in previous sessions, our goal in these podcasts is to make you succeed in this current regulatory and governmental environment, make you aware of what's going on with the federal and state consumer protection agencies and give you practical tips for success. As always, it's a privilege to be with you today.

FTC Issues Final Rule Targeting Hidden Mandatory Fees and Pricing Disclosures

Today we discuss the Federal Trade Commission's issuance of the court Rule on Unfair or Deceptive Fees, or the final rule targeting mandatory hidden fees and ensuring transparency in pricing disclosures to consumers. Unlike the Notice of Proposed Rulemaking published in October of 2023, which broadly applied to all industries, the final rule focuses exclusively on the live-event ticketing and short-term lodging industry. The Commission approved the final rule through a 4-to-1 vote. The final rule will take effect 120 days after its publication in the Federal Register. Commissioner Andrew Ferguson, recently appointed by President-Elect Trump to become the chair of the commission, has the only dissenting vote. Commissioner Ferguson clarified that his dissent was not about the merits of the final rule, which he acknowledged as a "significant improvement" over the NPRM, or its enforcement under President Trump. Rather, he criticized its timing and procedural approach during a transition period, while noting the revisions in the final rule bring it closer to compliance with Section 18 of the FTC Act.

Elements of the Final Rule and Industries Affected

So let's now discuss developments of the rule. The final rule marks the conclusion of the FTC's multi-year effort to tackle concerns about hidden and misleading fees, often referred to as junk fees. The FTC initiated this rulemaking process in 2022, seeking public input on whether regulatory action could help mitigate unfair and deceptive pricing practices. After gathering over 12,000 comments that highlighted the impact of the hidden fees on personal spending and market competition, the FTC proposed its rule in October 2023, which addressed to set the fee practices across all industries. The NPRM generated robust public participation, and a year later, the final rule reflects feedback from over 60,000 additional comments from consumers, industry stakeholders and government representatives. Addressing concerns that the proposed rule was overly broad, disruptive and challenging to apply to certain industries with specialized pricing structures, the FTC narrowed the final rules focus to two sectors where it found during its evaluation hidden fees and bait-and-switch practicing, which are particularly widespread and persuasive: live ticketing and short-term lodging.

The final rule ensures that businesses are upfront about pricing for live-event tickets and short-term lodging by requiring all mandatory fees to be included in the "total price" shown to consumers. This total price must be the most prominent price displayed in any advertisement per listing. The final rule addresses fees and charges associated with live-event tickets, focusing on practices related to the sale and advertising of tickets for events such as concerts, sporting events and other live performances. The rule applies regardless of whether tickets are sold directly through venues or third-party resellers. Additionally, the rule extends to temporary accommodation, including hotels, motels, inns, short-term rentals, vacation rentals and other lodging options. However, it explicitly excludes long-term residential leases and corporate housing arrangements.

The final rule permits certain fees to be excluded from the total price displayed to consumers, as long as these fees are disclosed clearly and prominently before the transaction is completed. The following fees may be excluded:

1. government-imposed taxes, such as sales and lodging taxes
2. optional amenities for short-term lodging, such as parking or spa services
3. shipping charges
4. fees for additional goods or services selected by the consumer during the transaction

Although these fees do not have to be included in the advertised total price, the total price itself must always be the most prominently displayed amount.

The final rule requires merchants to include credit card surcharges and processing fees in the total price displayed to consumers only if payment by credit card is mandatory. If consumers have the option to use a payment option that would avoid the surcharge, a surcharge is not mandatory. The final rule took a more restrictive approach to the convenience fees charged by merchants. Unless convenience fees are avoidable in the specific channel, they are deemed mandatory and must be disclosed. This disconnect with payment network rules is likely to catch many parties charging a convenience fee off guard and creates a significant compliance risk. The FTC acknowledged that while the new rule specifically targets live-event ticketing and short-term lodging, its enforcement authority under Section 5 of the FTC Act extends to all industries. Historically, the FTC has utilized Section 5 to address such issues in various industries, such as telecommunications, travel and subscription services.

Concluding Thoughts

So here's the key takeaway. The FTC's new final rule marks a significant step in addressing deceptive pricing practices, with an initial focus on two industries known to be amongst the worst offenders: live-event ticketing and short-term lodging industries. While the final rule specifically addresses these sectors, its broader implications should not be overlooked. The FTC's focus on pricing practices signals a growing trend in enforcement that extends to other industries as well. Businesses engaged in activities covered by the rule must ensure compliance with its requirements.

While businesses in other sectors would be prudent to adopt similar practices to mitigate legal risks and prepare for increased regulatory scrutiny, companies affected by the final rule can take several steps to align their pricing practices with this transparency and disclosure requirements. The first priority is conducting a thorough audit of all pricing practices to ensure that the total price — the full amount consumers must pay at checkout — is prominently displayed across all advertisements, listings and platforms and must be the most visible pricing information. Equally important is revisiting how fees are disclosed. Businesses must avoid using vague or misleading terms like "service fees" or "processing charges." Instead, these must be clearly identified and explained in a way that enables consumers to understand their purpose. Conducting a thorough review of all fee categories is essential to prevent misclassification and to ensure compliance. For charges that are excluded, like government-imposed taxes or optional add-ons, businesses must guarantee that these fees are disclosed clearly, conspicuously and prominently before consumers finalize their payments.

So please stay tuned for further programs as we identify and address those key issues and developments and provide strategies for success. I wish you continued success and a meaningful day. Thank you.