Samuel Levine Letter to Minnesota Legislature on Junk Fees

United States of America
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Office of the Director
Bureau of Consumer Protection
March 8, 2024
The Honorable Melissa Hortman 	The Honorable Lisa Demuth
Speaker 	Minority Leader
Minnesota House of Representatives 	Minnesota House of Representatives
rep.melissa.hortman@house.mn.gov 	rep.lisa.demuth@house.mn.gov
The Honorable Jamie Long 	The Honorable Zach Stevenson
Majority Leader 	Chair, Commerce Finance and Policy
Minnesota House of Representatives 	Minnesota House of Representatives
rep.jamie.long@house.mn.gov 	rep.zack.stephenson@house.mn.gov
Dear Speaker Hortman, Majority Leader Long, Minority Leader Demuth, and Rep. Stevenson:
I understand that the Minnesota House of Representatives is considering legislation to combat junk fees.
As the Director of the Bureau of Consumer Protection of the Federal Trade Commission (“FTC”), I
write to provide information about the FTC’s concurrent efforts to address junk fees. The views in this
letter are my own and do not necessarily reflect the views of the FTC or any individual Commissioner.
American consumers, workers, and small businesses today are swamped with junk fees that frustrate
consumers, erode trust, impair comparison shopping, and facilitate inflation. Junk fees refer to unfair or
deceptive fees that are charged for goods or services that have little or no added value to the consumer,
including goods or services that consumers would reasonably assume to be included within the overall
advertised price. Some junk fees are also “hidden,” meaning they are disclosed only at a later stage in
the consumer’s purchasing process or not at all. Junk fees manifest in markets ranging from hotels to
auto financing and live-event ticketing—they are not only are widespread but are also growing. Such
fees impose substantial economic harms on consumers and impede the dissemination of important
market information.
Enforcement Efforts
Consumers have long expressed concerns to the FTC about the prevalence of junk fees across a range of
industries, and the FTC has employed a variety of tools to understand and address them. The FTC has
engaged in a number of enforcement actions against companies that the FTC alleged charged unfair or
deceptive junk fees in violation of Section 5 of the FTC Act, 15 U.S.C. § 45(a),0F
1 and other statutes that
1 Section 5 of the FTC Act prohibits unfair or deceptive acts or practices in or affecting commerce, including any
representation, omission, or practice that is likely to mislead a consumer acting reasonably under the circumstances, to the
consumer’s detriment.

the FTC has the authority to enforce.1F
2 For example, the Commission took action against Vonage, an
internet phone service provider, requiring the company to pay $100 million in refunds to consumers that
were allegedly trapped into subscriptions and hit with surprise early termination fees.2F
3 The Commission
also took action against Passport Automotive Group and its top executives for allegedly tacking
hundreds to thousands of dollars in illegal junk fees onto car prices and discriminating against Black and
Latino consumers with higher financing costs.3F
4 In the summer of 2022, the FTC took action against
healthcare company Benefytt Technologies for allegedly selling sham insurance and charging people
with exorbitant junk fees for unwanted add-ons without their permission.4F
5 The company was required to
pay $100 million in refunds.5F
6
Research and Outreach
Prior to and alongside its enforcement efforts, the FTC sought comments about and analyzed junk fees
through workshops and reports. In 2012, the FTC hosted a workshop on drip pricing, a pricing technique
in which firms advertise only part of a product’s price and reveal other charges later as the customer
goes through the buying process.6F
7 In 2017, the FTC published a report analyzing the costs and benefits
of disclosing resort fees, which are per-room, per-night, mandatory fees charged by some hotels.7F
8 The
report concluded that “separating mandatory resort fees from posted room rates without first disclosing
the total price is likely to harm consumers by increasing the search costs and cognitive costs of finding
and choosing hotel accommodations” and that it was “unlikely to result in benefits that offset the likely
9	
harm to consumers.”8F
In 2019, the FTC hosted a workshop that featured a panel on pricing and fee issues in the market for
live-event tickets and issued a corresponding staff report.9F
10 The workshop revealed that market
participants believed they could not correct course without regulatory intervention. For example, after a
2 See, e.g., Stipulated Order at 2, FTC v. Hold Billing Servs., Ltd., No. 98-cv-00629 (W.D. Tex. May 4, 2016); Compl. at 3,
FTC v. T-Mobile USA, Inc., No. 14-cv-967 (W.D. Wash. filed July 1, 2014); Compl. at 3, FTC v. AT&T Mobility, LLC, No.
14-cv-3227 (N.D. Ga. filed Oct. 8, 2014).; FTC v. Inc21.com Corp., 745 F. Supp. 2d 975, 982 (N.D. Cal. 2010); Stipulated
Order at 8, FTC v. Websource Media, LLC, No. H-06-1980 (S.D. Tex. July 17, 2007); Compl. at 8, FTC v. Nationwide
Connections, Inc., No. 06-80180 (S.D. Fla. filed Feb. 27, 2006); Stipulated Judgment and Order, FTC v. Mercury Mktg. of
Del., Inc., No. 00-cv-3281, 2004 WL 2677177, *1 (E.D. Pa. Nov. 22, 2004); Compl. at 2, FTC v. Millennium Telecard, Inc.,
No. 2:11-cv-02479 (D.N.J. filed May 2, 2011); Compl. at 6, FTC v. NetSpend Corp., No. 1:16-cv-04203 (N.D. Ga. filed Apr.
11, 2017); Compl. at 13, FTC v. Lead Express, Inc., No. 2:20-cv-00840 (D. Nev. filed May 11, 2020); First Am. Compl. at 3,
FTC v. LendingClub Corp., No. 3:18-cv-02454 (N.D. Cal. filed Oct. 22, 2018); Compl. at 14–16, FTC v. FleetCor Techs.,
Inc., No. 1:19-cv-05727 (N.D. Ga. filed Dec. 10, 2019); Compl. at 3, FTC v. Liberty Chevrolet, Inc., No. 20-cv-3945
(S.D.N.Y. filed May 21, 2020); Compl. at 7–8, FTC v. N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. filed Mar. 31,
2022); Compl. at 11–14, United States v. Funeral & Cremation Grp. of N. Am. LLC, No. 0:22-cv-60779 (S.D. Fla. filed Apr.
22, 2022); Stipulated Order at 6–8; United States v. Funeral & Cremation Grp. of N. Am. LLC, No. 0:22-cv-60779 (S.D. Fla.
filed Apr. 6, 2023); Compl. at 12–14, FTC v. OMICS Grp. Inc., No. 2:16-cv-02022 (D. Nev. filed Aug. 25, 2016); Compl. at
12–13, FTC v. Citigroup Inc., No. 010-cv-0606 (N.D. Ga. filed Mar. 6, 2001); Compl. at 11, FTC v. Stewart Fin. Co.
Holdings, Inc., No. 1:03-cv-2648 (N.D. Ga. filed Sept. 4, 2003).
3 Stipulated Order at 11, FTC v. Vonage Holdings Corp., No. 3:22-cv-6435 (D.N.J. filed Nov. 3, 2022); Compl. at 11–17,
FTC v. Vonage Holdings Corp., No. 3:22-cv-6435 (D. N.J. filed Nov. 3, 2022).
4 Compl. at 8–13, FTC v. Passport Auto. Grp., Inc., No. 8:22-cv-2670 (D. Md. filed Oct. 18, 2022); see also Stipulated
Order, FTC v. Passport Auto. Grp., Inc., No. 8:22-cv-2670 (D. Md. filed Oct. 21, 2022).
5 Compl. at 25–38, FTC v. Benefytt Techs., Inc., No. 8:22-cv-1794 (M.D. Fla. filed Aug. 8, 2022).
6 Stipulated Order at 26, FTC v. Benefytt Techs., Inc., No. 8:22-cv-1794 (M.D. Fla. filed Aug. 11, 2022).
7 Fed. Trade Comm’n, The Economics of Drip Pricing (May 21, 2012), https://www.ftc.gov/news-
events/events/2012/05/economics-drip-pricing.
8 Mary W. Sullivan, Fed. Trade Comm’n, Economic Analysis of Hotel Resort Fees (2017),
http://www.ftc.gov/system/files/documents/reports/economic-analysis-hotel-resort-
fees/p115503_hotel_resort_fees_economic_issues_paper.pdf.
9 Id. at 36–37.
10 Fed. Trade Comm’n, “That’s the Ticket” Workshop: Staff Perspective, 4 (May 2020).
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j
	l
market leader took unilateral action to phase out hidden fees, the platform “lost significant market share
and abandoned the policy after a year because consumers perceived the platform’s advertised prices to
be higher than its competitors’ displayed prices.”10F
11 Ticket sellers who participated in the workshop that
did not provide upfront all-in pricing “favored requiring all-in pricing through federal legislation or
rulemaking.”11F
12
Proposed Rulemaking
In October 2022, the FTC issued an advance notice of proposed rulemaking (“ANPR”) seeking public
comment on a potential rule to address junk fees proliferating throughout the economy. The ANPR
sought public comment on the prevalence of junk fees, the unfair or deceptive tactics companies use to
impose them, the harms caused by junk fees, and whether a new rule would better protect consumers.
Consumers and industry members demonstrated strong interest in the questions posed by the ANPR: the
FTC received 12,046 comments in response, which overwhelmingly expressed frustration with
unexplained mandatory fees.
Many ANPR comments raised concerns that sellers fail to disclose the total amount consumers will pay,
misrepresent the amount, and only disclose fees after consumers have expended time in the purchasing
transaction. Many comments also stated that sellers do not adequately disclose or misrepresent the
nature or purpose of fees, using vague names for fees or using fees as a profit generator instead of
providing consumers with services. The comments related to a wide range of goods and services, such as
ticket sales, hotels, vacation rentals, apartment rentals, tax preparation services, restaurants, delivery
services, utilities, telephone, internet, and cable services, and auto sales.
More recently, in October 2023, the FTC announced a notice of proposed rulemaking (“NPRM”) and
sought public comment on a proposed rule. The proposed rule seeks to ban hidden fees by prohibiting
businesses from advertising prices that hide or leave out mandatory fees. The proposed rule would also
prohibit sellers from misrepresenting fees and require certain disclosures about the nature and purpose of
fees. The FTC received more than 60,000 comments on the NPRM, and FTC staff is currently analyzing
the comments to determine the appropriate next steps.
Thank you for the opportunity to provide information about the FTC’s efforts to address junk fees at the
federal level. I hope that the FTC’s work provides useful insight as you consider legislation addressing
junk fees in Minnesota. To the extent the Federal Trade Commission can provide assistance with these
inquiries, please do not hesitate to contact me.
Samuel Levine
Director, Bureau of Consumer Protection
Federal Trade Commission
Very truly yours,
cc:
The Honorable Tim Walz, Governor, State of Minnesota
11 Id.
12 Id.
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