Washington, D.C. — Today, the Progressive Policy Institute’s Dr. Diana Moss, Vice President and Director of Competition Policy filed comments in the Federal Trade Commission’s Notice of Proposed Rulemaking on Unfair or Deceptive Fees. The proposed consumer protection rule responds to the mandate in the Biden Administration’s 2021 Executive Order on competition that calls out — among other anti-consumer and anti-competitive practices — murky price transparency and hidden fees. These “junk fees” can harm consumers directly by raising prices, and indirectly by preventing comparison shopping and stifling competition. PPI’s comments emphasize, however, that consumer protection policies and competition enforcement are both “pro-consumer” but they work very differently.
“PPI’s comments to the FTC signal support for policies that take on harmful practices of saddling consumers with junk fees,” said Dr. Diana Moss. “PPI is urging the Commission to ensure that where the consumer protection requirements of the junk fee rule impact competition the rule supports, and does not undermine, competition.”
The FTC’s proposed junk fee rule targets unfair or deceptive practices such as “bait and switch” schemes (i.e., hidden fees) and misrepresenting the nature and purpose of fees. The proposed requirements have significant implications for market participants, including consumers and businesses. They do not prohibit junk fees, but instead discourage businesses from levying junk fees on consumers in the first place. The rule, therefore, requires businesses to provide information about the total price of a product or service so that consumers can better understand what they are purchasing, for how much, and better compare prices across sellers.
PPI’s comments urge the FTC to take a closer look at three major issues before finalizing the proposed rule:
1. The junk fee rule targets businesses’ ability to levy unfair or deceptive fees. However, it does nothing to reduce incentives to engage in such practices. It is well known that incentives to exercise market power are best reduced through antitrust enforcement of harmful mergers and anticompetitive practices. There are good reasons for using consumer protection policy to combat junk fees but PPI’s comments stress that it should not displace or weaken the role of competition enforcement in getting to the root cause of junk fees. PPI asks the Commission to do more analysis of incentives to impose junk fees and how it will coordinate the agency’s competition and consumer protection missions in implementing the junk fee rule.
2. The junk fee rule includes requirements for businesses to disclose total prices and detailed information on fees. But in some markets, different pricing models — such as unbundled versus all-in pricing in airlines and some wireless services — are important for consumers. Different pricing methods can also be an important way that firms beneficially compete. PPI suggests that the rule be clarified to explain how the requirements affect consumers who benefit from different pricing models and how the rules will not interfere with them.
3. The junk fee rule leaves open the question of whether the rule should be applied to certain “covered” businesses and whether small businesses should be excluded. It calls out egregious junk fee practices in certain markets, such as live events, transportation, financial services, hotels, and telecommunications. The proposed rules may, however, be similar to regulatory and legislative initiatives that focus on price transparency in certain markets. PPI asks the Commission, therefore, to provide more analysis of other regulatory rules that could overlap with the proposed rule and explain how the proposed requirements do not duplicate, or conflict with those rules, with unintended consequences for consumers and competition.
PPI’s comments on the FTC’s junk fee rule conclude that — while it is headed in the right direction — the proposed rule is not yet ready for “prime time.”
To read PPI’s full comments to the FTC in the FTC’s Notice of Proposed Rulemaking on Unfair or Deceptive Fees, please click here.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.