[co-author: Stephanie Kozol]
While the federal government’s campaign against hidden “junk” fees intensifies, state attorneys general (AGs) have long been contesting concealed costs as unfair or deceptive — especially in the absence of sufficient disclosures. Energized by a surge in enforcement activity targeting junk fees, Massachusetts AG Andrea Campbell proposed new regulations aimed at prohibiting “junk fees” in Massachusetts. The term “junk fees” generally refers to additional charges imposed on consumers that are often unrelated to the actual cost of goods or services such as processing fees, convenience charges, or mandatory resort fees. Sometimes “junk fees” can also refer to a practice called “drip pricing” where a company advertises an initial low price to attract consumers but gradually reveals additional mandatory fees during the booking or purchasing process, providing the consumer with a false impression of the true cost.
During the 2023 State of the Union Address, President Joe Biden urged regulators to address “junk” and “hidden” fees. In response, the federal government has taken steps to strengthen regulations and enforcement efforts. By way of example, the Federal Trade Commission (FTC) proposed a new rule on junk and hidden fees in November 2023. Likewise, the Federal Communications Commission (FCC) proposed a rule in June 2023 that would require cable and satellite TV providers to give consumers the “all-in” price up front.
Following suit, Massachusetts’ proposed regulations mandate that businesses disclose the “all-in” or total price of a product in a clear, conspicuous, and prominent manner at the time of communicating the price to consumers. This “all-in” price includes all associated costs, including but not limited to fees, interest, convenience charges, or any other required expenses. Moreover, sellers must clearly articulate the nature and purpose of any fees and distinguish between mandatory and optional charges. Notably, the proposed rules prohibit businesses from requesting personal data, such as billing and credit card details, before revealing the price of a product.
Massachusetts’ initiative comes on the heels of California’s amendment to the California Consumer Legal Remedies Act (CLRA) in October 2023 (effective July 1, 2024), which prohibits companies from excluding certain expenses from the advertised or disclosed price. The CLRA makes any “advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges” unlawful, subject to certain exceptions.
The enforcement activity of state AGs in this domain is also noteworthy. State AGs regularly target deceptive trade practices across various industries, including hospitality, food delivery, event ticketing, car rental, cable television, and internet. For example, the Texas AG sued Hyatt Hotels in May 2023 for deceptive trade practices related to Hyatt’s advertised price of hotel rooms. In his complaint, the Texas AG alleged that Hyatt charged consumers mandatory and unavoidable fees — such as resort fees, destination fees, or amenity fees — in addition to daily room rates that were not disclosed at the point of sale. Additionally, Colorado, Oregon, and Pennsylvania AGs reached a settlement under similar allegations with Choice Hotels in September 2023.
Why It Matters
These recent actions emphasize the significant amount of regulatory attention into perceived hidden or “junk” fees. Regulators are attempting to promote transparency, foster consumer trust, and protect consumers from what they perceive as misleading pricing tactics. As these actions gain attention at both the federal and state levels, they begin to develop momentum to spread nationwide. Companies should evaluate their pricing practices, and specifically whether consumers are charged mandatory fees, which do not appear in marketing/advertising materials or at the point of sale, to mitigate the risk of regulatory scrutiny.
*Senior Government Relations Manager
