Junk Fee Prevention Act: Price Transparency Might Benefit Small Businesses

President Joseph Biden is calling on Congress to both cap fees and improve disclosure in airlines, hotels, and other industries. Here’s what that may mean for prices and competition

Joseph Biden. Photo: Financial Times

Businesses that have relied on added fees to bolster revenue may soon have to shift their pricing strategy.

President Biden is urging Congress to crack down on what he deems to be excess fees with the Junk Fee Prevention Act. His proposal would curb or eliminate four types of so-called junk fees, which the White House says cost U.S. consumers billions each year. The proposal, if enacted, would ban fees that airlines charge for family members to sit next to their young children, eliminate costly, early termination fees for TV, phone, and internet service, ban unpublished resort fees in the hotel industry, and crack down on excessive online “service fees” for tickets to concerts, sporting events, and other types of live entertainment. INC reported.

Biden referenced the proposal in his State of the Union address. “Junk fees may not matter to the very wealthy, but they matter to most other folks in homes like the one I grew up in, as many of you did,” the president said. “They add up to hundreds of dollars a month. They make it harder for you to pay your bills or afford that family trip.”

This proposal doesn’t seek to eliminate add-on fees that a business may charge for specific products or services, like optional insurance fees that compensate fliers when flights are delayed or canceled, or hotel fees for rooms with oceanfront views (provided that travelers can choose their own room). Rather, it tackles fees that, according to the White House, deceive consumers or take advantage of situational market power. That can look like resort fees that add up to $90 per night to a hotel stay, Biden noted in his State of the Union address, or Ticketmaster fees that can cost as much as 78 percent of a ticket’s price, according to the advocacy group More Perfect Union.

If Congress passes the Junk Fee Prevention Act, the affected businesses will have to improve their price transparency–as in folding fees into their upfront prices. That could be good news for smaller competitors. “Businesses that are providing products or services with a front-end price that’s more genuine and transparent will be in a good position because, in theory, the playing field will be leveled a bit,” explains Jennifer Fuller, U.S. financial services lead at the London-based professional services firm PA Consulting. The goal, she says, is to make it easier for consumers to comparison shop–without facing last-minute fees.

Businesses that live on junk fees will likely have to reconsider their price structure–which may ultimately result in higher prices across the board, says Cathy Mansfield, senior instructor in law at Case Western Reserve University School of Law. But price increases aren’t the only path forward. “It’ll force a reexamination of presumptions on pricing,” Mansfield says. “But a price charge to consumers is not the only place that any cost difference can be made up.” As inflation has caused consumers to push back on price increases, businesses may be especially likely to look for other ways to make up for lost income, like cutting executive salaries or renegotiating with suppliers.

Consumers might end up with more price transparency as opposed to lower prices. Just 6 percent of hotels nationwide charge mandatory resort fees, with an average cost of $26 per night, a spokesperson for the American Hotel and Lodging Association told Inc. The spokesperson added that hotels will continue to work with the Biden administration to ensure fees are “clearly and prominently” displayed during the booking process.

Some members of Congress have also advocated for greater fee visibility instead of eliminating fees altogether. “I’ll make sure this administration’s proposals stay focused on eliminating surprise fees, not punishing our world-class hotels and casinos for charges they already disclose up front,” Nevada senator Catherine Cortez Masto told the Las Vegas Sun in a statement.

Similarly, Live Nation Entertainment, which owns Ticketmaster, praised Biden’s call for fee transparency and “all-in” pricing in an October 2022 statement and supported the Federal Trade Commission mandating all-in pricing nationwide. However, it’s unclear to what extent the Biden administration may be able to eliminate or restrict fees through regulation.

Some small internet service providers have voiced their support for Biden’s push against junk fees in the broadband services industry. OpenCape, a local ISP headquartered in Barnstable, Massachusetts, signed a November 2022 letter to Federal Communications Commission chairwoman Jessica Rosenworcel in favor of clear broadband consumer labels. Later that month, the FCC released new requirements for clear labeling, with the goal of making it easier for consumers to comparison shop when looking for broadband services.

The Biden administration has already worked with several federal agencies to push back on other types of junk fees, the White House noted. This fall, the Consumer Financial Protection Bureau ramped up oversight of overdraft and bounced check fees, and the Department of Transportation proposed a rule to require airlines and online booking services to show the full price of plane tickets upfront inclusive of fees (like baggage fees, change fees, cancellation fees, and family seating fees), as opposed to basic fares.

However, not all agencies have been onboard: FTC commissioner Christine S. Wilson released a dissenting statement in October 2022, which questioned whether all-in pricing would ultimately require customers to buy goods or services they may not want or need. Airlines might argue, for instance, that the “unbundling” of fares has made flying more affordable–even if it’s more annoying.

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