Lina Khan’s FTC Drops the Ban Hammer on Junk Fees

Federal Trade Commission chair Lina Khan has been on the warpath against junk fees, and she’s just claimed another victory. On Tuesday, the FTC finalized its Junk Fees Rule, which takes aim at ticketing companies and hotel and lodging options that try to slip in additional, unadvertised charges. The rule passed on a 4-1 vote (with one extremely lame dissent) and will go into effect on April 16, 2025.

The rule is pretty simple—so simple that one might wonder why it took until now to do something about it. All the FTC is asking of companies is to make all costs to consumers clear upfront. That means no add-on charges that appear at checkout. Instead, charges like “resort” fees at hotels and “convenience” or “service” fees tacked on to concert tickets will have to be included in the advertised price right off the bat.

1. People deserve to know upfront what price they’re being asked to pay, without worrying they’ll later be hit with mystery fees they can’t avoid.

Today @FTC finalized a rule to ban these junk fees for short-term lodging and live-event ticketing.https://t.co/zwLEe3BUxL

— Lina Khan (@linakhanFTC) December 17, 2024

Businesses will still be able to exclude shipping fees and taxes from the prices they advertise, but they do have to make those prices clear before asking consumers to enter their payment information. And to make sure that companies don’t try to get cute with pricing by highlighting certain prices within an itemized list to make it seem like consumers are getting a deal, the FTC made clear that the real total that will be paid must be the most prominently displayed price.

Kinda wild that “don’t lie about your prices” requires regulatory enforcement, but hey, here we are.

According to a White House study, event ticket fees cost American consumers about $7.14 billion in 2023, while hotel resort fees cost consumers $3.3 billion. And the reason that companies add on these costs is straightforward: profit. The ticky-tacky add-ons that add up quickly for your wallet also pad the company’s bottom line. Resort fees, which ostensibly go to upkeep around a hotel or rental property, hit the books as 80-90% profit for hotel owners. Meanwhile, ticketing is a major revenue driver for Ticketmaster thanks in part to its service fees.

To no one’s surprise, consumers hate these fees. Atmosphere Research found that 91% of hotel guests said they dislike tacked-on charges like resort fees, and Ticketmaster service fees are so notorious among showgoers that the ticketer regularly gets referred to as the most hated company in America. Earlier this year, Lake Research Partners found about 80% of Americans support making hidden charges illegal—a figure that holds up across basically every demographic line that you can imagine.

And yet…So, here’s the thing. Consumers are not always the most rational actors. We just went through an election cycle in which the feeling that things were too expensive (they are) overrode indicators that the broader economy was thriving. Last year, Morning Consult published a survey that showed people would rather see prices go down than their wages go up, presumably because they think more about the cash going out than coming in.

Back to hotel and ticket pricing. The model of hiding fees along the way is called partition pricing. There is at least some evidence to suggest that while consumers say they don’t like this model, they actually can respond more positively to it than true pricing because seeing the full price upfront can make it feel like they are spending more. That’s not to say that people are going to hate this new ruling, which is unquestionably positive when it comes to price transparency. Just remember that people don’t always respond to these things in the way that you might imagine.