Rising Junk Fee Enforcing Means Companies Must Be Proactive (1)

Given rising federal and state enforcement on “junk fees,” businesses should confirm their advertising reflects total prices and review consumer feedback to ensure compliance.

Junk fees refer to the additional charges on goods and services—such as convenience fees, processing fees, and service fees—that aren’t properly disclosed by businesses upfront but revealed at the final stages of a purchasing process. This tactic is also known as drip pricing.

The Federal Trade Commission late last year issued its final rule on unfair or deceptive fees, an unprecedented move to combat junk fees in the hospitality and entertainment sectors. Despite the change of executive administration, which led some to expect a potential decrease in enforcement vigor, junk fees and drip pricing practices remain a bipartisan concern.

President Donald Trump in March issued an executive order on combating unfair practices in the live entertainment market, targeting junk fee and drip pricing practices by the live-event ticketing industry. The order mandates the FTC to “take appropriate action, including proposing regulations if necessary, to ensure price transparency at all stages of the ticket-purchase process.”

The new FTC leadership has supported the previous administration’s final junk fee rule, which took effect on May 12, by releasing FAQs to guide live-event tickets and hospitality businesses in complying with its rule.

Even before the rule, efforts to address junk fees and drip pricing have long crossed party lines at the state level, particularly through the collective enforcement actions of state attorneys general.

In recent years, State AGs from Pennsylvania; Colorado; Washington, DC; Oregon; Texas; and Nebraska initiated enforcement actions or reached settlements with various hotels. States are actively implementing measures that surpass the FTC’s efforts in combating junk fees and drip pricing practices.

The FTC’s rule targets deceptive pricing practices in the hotel, short-term lodging, and live-event ticket sales industries. Historically, these sectors advertised prices that didn’t reflect the full costs until the end of a transaction.

Under the new regulations, companies must now include all mandatory fees and charges in their advertised prices, though there is no requirement to incorporate taxes, government fees, optional fees, or shipping costs within the total.

Many states classify violations of Section 5 of the FTC Act—the foundational authority for the commission’s rule—as deceptive practices under their consumer protection laws. But states are also independently advancing their own legislation to combat these practices.

Leading the charge, California enacted its own junk fee legislation last year, setting a precedent even before the FTC’s final rule was issued. California’s measure applies more broadly across all industries, acknowledging the extensive reach of junk fees. This move has inspired other states to follow suit, underscoring a growing national effort to protect consumers from these hidden costs.

While states such as Maryland, North Carolina, New York, and Tennessee have passed narrower laws prohibiting junk fees in specific sectors such as live-event ticket sales or hospitality, others are expanding their reach.

For instance, legislation in Virginia, Colorado, Connecticut, Minnesota, and Oregon, and regulation in Massachusetts, mandate the disclosure of all mandatory fees or surcharges in advertisements or displays of consumer goods and services.

While specific requirements and exemptions vary by jurisdiction, recent laws and regulations targeting junk fees across various states share common themes, such as:

Prominent total price disclosure. Virginia and Massachusetts require that businesses prominently and clearly disclose the total price, including all mandatory fees and charges, in all advertisements and offers.

Exclusion of shipping charges. Most states allow businesses to exclude shipping charges from the total advertised price. However, Connecticut requires these fees to be included unless they can’t be calculated at the time of the initial price display.

Separate listing of some mandatory fees. California, Connecticut, Oregon, and Virginia permit businesses to list some mandatory fees (such as service fees calculated based on a purchaser’s selections) separately from the total price, provided they are clearly disclosed. California’s legislation, notably its amendment by Senate Bill 1524, addresses the restaurant industry by allowing mandatory fees or charges for individual food or beverage items to be listed separately if they are clearly and conspicuously displayed with an explanation of their purpose. This doesn’t apply to a “third-party” food delivery platforms.

Industry-specific requirements. Minnesota now requires establishments such as hotels and food services to clearly and conspicuously disclose the percentage of any automatic or mandatory gratuities. Virginia provides modifications for industries such as restaurants, hotels, food-delivery platforms, broadband services, and live event tickets—sometimes deferring to federal requirements or the FTC’s rule for live-event ticket providers.

Although these laws aim to enhance price transparency, not all companies must follow them if they already must follow similar requirements. In California and Oregon, financial entities required to comply with specific federal or state disclosure laws are exempt. In California, broadband internet service providers that comply with Federal Communications Commission labeling requirements are exempt.

Some companies that aren’t exempt are taking steps to eliminate junk fees and drip pricing practices. As a result, consumers are experiencing a more transparent pricing model for some activities—whether they rent summer beach houses or purchase tickets for concerts and events.

Airbnb Inc. is a notable example. The company has adapted its pricing display to align with these new standards. Previously, Airbnb users could toggle between viewing prices with or without additional fees and taxes, with the default setting showing prices excluding these fees. Now, Airbnb provides by default the total price of a stay upfront, ensuring greater pricing transparency during the browsing process.

The new laws targeting junk fees and drip pricing practices has led to a complex mosaic of requirements, each with its nuances. But at baseline, businesses should take proactive steps to ensure that their advertisements clearly and conspicuously display total prices, inclusive of all mandatory fees.

Additionally, maintaining a responsive posture by monitoring consumer feedback—through direct interactions and public platforms such as the Better Business Bureau—can help identify areas for improvement.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Clayton S. Friedman is partner at Troutman Pepper Locke and a member of its regulatory investigations, strategy, and enforcement practice group, and co-leads the state attorneys general practice.

Namrata Kang and Kyara M. Rivera Rivera are associates in Troutman Pepper Locke’s regulatory investigations, strategy, and enforcement practice group.

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