FTC Pushes New Rule To Try And Kill Bullshit ‘Junk Fees’

Policy

from the *prices-may-be-significantly-higher-than-they-initial-appear dept

As a reporter who has covered telecom for the better part of two decades, I’ve spent much of that time watching broadband giants like AT&T and Comcast sock their captive customers with a wide variety of bullshit, sneaky fees designed to help them advertise one price, then charge you with a higher rate. It’s a practice that nets them billions of dollars annually.

At the same time I’ve watched the agency purportedly in charge of telecom and media issues (the FCC) stumble around like a drunken halfwit when it comes to holding anybody accountable for the practice. Most of the FCC’s focus has been on demanding transparency; as in, they think it’s ok for companies to rip you off, companies just have to be clear about the fact they’re ripping you off at the point of sale.

That’s treating the symptom but not the underlying disease, which is usually market failure, a lack of competition, mindless consolidation, and monopoly power. You generally can’t get away with socking your customers with a bunch of nonsensical surcharges if those customers have competitive alternatives.

Of course the practice of bullshit fees isn’t isolated to the telecom industry. The airline, hotel, concert, and real estate rental industries also routinely sock you with such bogus surcharges. Occasionally agencies like the FTC will take a swing at the practice under the “unfair and deceptive” component of the FTC Act, which requires a fairly high burden of proof and is a little vague when it comes to onerous fees.

So the FTC says it’s considering a new rule specifically designed to attack junk fees:

You’ll want to read the proposed Rule for the specifics, but a central focus of the rulemaking is to prohibit hidden or falsely advertised fees by requiring advertised prices to include mandatory charges and by expressly prohibiting misrepresentations about the nature, purpose, or amount of fees.

For example, the rule the FTC is proposing would state, “It is an unfair and deceptive practice and a violation of this part for any Business to offer, display, or advertise an amount a consumer may pay without Clearly and Conspicuously disclosing the Total Price.” (The capitalized words have specific definitions in the FTC’s proposal.) Is that proposed prohibition clear and understandable? Is it ambiguous in any way?  What do you think?

It’s a good start. If you want to share your thoughts with the FTC, you can find instructions here.

But just cracking down on junk fees isn’t enough. In telecom and broadband, big ISPs like Comcast can get away with bullshit fees because their captive customers have no competitors to flee to. That means this kind of crackdown needs to be accompanied with the kind of meaningful, cross-sector antitrust reform our corrupt Congress isn’t interested in (despite many recent political performances on this front).

Without it, your airline or broadband provider can just roll these glorified price hikes back into the advertised rate. They’re still ripping you off with inflated prices thanks to industry consolidation, they’re just being slightly more honest about it at the point of sale. So you also need both antitrust reform, and the kind of competent, thoughtful merger review that’s uncharacteristic for U.S. regulators who increasingly see their authority chipped away by a radically rightward lurching Supreme Court.

Still, just the fact that we have regulators actually thinking about how to tackle this problem is a step in the right direction. For decades U.S. regulators have made it abundantly clear that it’s fine if companies rip you off with obnoxious surcharges and nonsensical fees — provided they’re modestly creative about it. Asking them to illustrate up front just how badly you’re going to be screwed is the least we can do.

Filed Under: antitrust reform, consumer protection, fees, ftc, junk fees, surprise fees, unfair and deceptive