Executive Overview

– There is a recurring practice of firms failing to disclose upfront mandatory charges in the advertised price of their goods or services, leading to an unexpected higher final cost for consumers (e.g. “resort fees” in hotel bookings and “processing fees” in ticket purchases). 

– Misleading pricing threatens competition in the market, as consumers are unable to accurately comparison shop among competing firms and make informed purchasing decisions.

– The Trade Regulation Rule on Unfair or Deceptive Fees mandates businesses selling live-event tickets or short-term lodging to display all hidden fees and charges associated with purchases of goods and services upfront, eliminating the deceptive practices of drip or bait-and-switch pricing while leveling the playing field for small businesses. 

Introduction

The average consumer’s reality in the 2020s differs vastly from previous eras. With a newfound reliance on online commerce and exchange, marketing strategies have developed to not only attract customers, but to outright deceive them in some cases. A survey conducted by Consumer Reports (CR) reveals that around 85% of Americans encounter unexpected, nondisclosed fees upon checkout while purchasing a range of products and services— from hotel resort charges to convoluted fees associated with assisted living facilities. While deception in advertising is not a new practice, the strategies by which some hospitality, travel, and event firms achieve their sales have evolved. It has become commonplace for marketing promotions within these industries to advertise inaccurate pricing, excluding hefty mandatory charges until checkout or even after payment. This is known as a classic bait-and-switch pricing tactic, which the Federal Trade Commission (FTC) attempts to mitigate in the Trade Regulation Rule on Unfair or Deceptive Fees, effective May 12, 2025.

Key Elements of the FTC’s Rule

As consumer confidence in price transparency has faced increasing threats over the past five years, reported by CR, the Trade Regulation Rule on Unfair or Deceptive Fees aims to restore transparency and mitigate deceptive pricing practices. The core requirement behind the rule ensures businesses include all mandatory fees in the advertised price of their goods or services upfront. It prohibits firms from misrepresenting pricing while marketing, attracting customers only to later attach significant mandatory fees upon purchase. While initially more widespread, the regulation has been adapted to apply solely to businesses selling live-event tickets or short-term lodging — areas where deceptive pricing practices and hidden fees are most common. Firms that fail to comply are subject to civil penalties by the courts, allowing the FTC to obtain redress for consumers. 

Why Live-Event Tickets and Short-Term Lodging?

Public commentary revealed that while consumers experience damaging effects from price misrepresentation across the majority of U.S. industries, the most significant offenses stem from two sectors. In the initially proposed rule, e-commerce, restaurants, credit card companies, rental housing, and more related industries were to be subject to the upfront price transparency requirements. Upon opposition from members of said industries, the FTC deemed the one-size-fits-all approach to be unsuitable across sectors. Representatives of the housing industry argued the impossibility of predicting all lease fees, while restauranters cited the necessity of pandemic-related service fees. The crux behind the decision to target event tickets and lodging lies in the fact that consumers are deceived, via hidden fees, to pay more for products and services that the Commission argues are nearly identical to one another. For example, a concert ticket advertised by Firm A for $90 is expected to be comparable to Firm B’s $100 concert ticket for the same show. It would be unfair and dishonest for Firm A to bait consumers with a low price tag and proceed to switch the advertised price. Last-minute price changes have been found to increase costs by an average of 27-31%, according to the Government Accountability Office. Hence, firms deceivingly attracting customers through withholding price information is a detriment to both consumers’ pockets and businesses who compete honestly. This regulation effectively empowers small businesses to compete with industry giants, drawing more consumers to participate in exchange with small entities.

Magnitude of the Issue

It is important to develop a sense of context as to how price transparency issues in lodging and ticketing affect the United States in aggregate. As previously mentioned, 85% of Americans report having been affected by junk fees. This is not particularly surprising, as Live Nation and its subsidiary Ticketmaster dominate 70% of ticket sales in the United States. A review by Georgetown Law surpasses the previous estimate of the Commission— they report that hidden fees cost up to 50% of the original ticket price. Americans are spending nearly $65 billion annually on junk fees generally, which far surpasses the “surprise costs” of operations that firms claim. This figure averages to an annual burden of $194.10 per American consumer. While the effects of hidden fees are not detrimental to the health of a $27 trillion economy, when one entity dominates a market and becomes a price-maker there are concerning implications for the health of the free market. Price-making, opposed to the adverse price-taking, is the result of imperfect competition in economic theory. Simply stated, it reveals greater flaws in freedom and competitiveness in the market while enabling firms to set their own high prices— ones not in line with the market’s equilibrium. These flaws have cost American consumers a significant time burden in addition to financial. The FTC estimates time savings of 53 million hours per year, valued at $11 billion over the next 10 years, in effect of the new rule. The impacts of consumers spending fewer hours booking short-term lodging and live-event ticketing will not change the course of American commerce but instead facilitate comparison shopping among many firms instead of the few. This serves as a clear directive to American businesses across all sectors to define fees and charges more transparently, offering at least minimal time and cost savings to the average consumer.

How Does the Rule Benefit Consumers?

During periods of public comment, consumers have expressed an overwhelming distaste for the hidden fees that they often face— specifically when managers and sales representatives are unable to explain the charges associated with their purchases. By requiring all fees to be disclosed upfront and by clearly categorizing said fees, the FTC aims to eliminate unexpected charges and deception in pricing for live-event ticketing and short-term lodging. The requirement of pricing transparency also enables consumers to more accurately compare prices among competitors, which protects competition in the market and deters the development of monopolies or oligopolies— a cornerstone of a healthy economy. By promoting the consumer’s right to information, the ability for participants to choose freely in the market remains protected, boosting consumer confidence. Upon implementation, the FTC’s regulation should successfully foster a more competitive and transparent landscape for the average American consumer. As previously mentioned, the Commission also estimates time savings for consumers in searching for short-term lodging and live-event ticketing by providing information upfront. Ultimately, the rule enables consumers to make decisions that better align with their budgets and expectations, saving billions of consumer dollars across the U.S. and increasing the visibility of small businesses.

The Business Perspective: Challenges and Opportunities

The FTC’s rule introduces numerous challenges to firms, especially as affected industries have adopted sales and conversion strategies rooted in deceptive pricing practices. These businesses will be required to overhaul their current strategies and marketing efforts along with implementing retraining initiatives to properly align themselves with the new requirements. These efforts will incur significant short-term costs, estimated at $385.6 million across 12,393 firms.

However, offending firms can likely afford the restructuring, legal, and tech costs considering the hospitality industry raises over $2.5 billion annually on fees alone. The ongoing costs of compliance are expected to be minimal, as the transition is non-recurring. The Commission highlights existing regulations for businesses practicing in California to display full price transparency (SB 478), meaning a significant number of large firms including Airbnb and Marriott have already incurred costs to make this transition.

The scenario for small businesses differs. Concerns expressed during commentary regarding small entities’ abilities to comply and finance changes were cause for the Commission to conduct a Final Regulatory Flexibility Analysis (FRFA), where it was determined that the impact to small business would be insignificant, if not positive. The Commission adopted this stance as price transparency promotes competition, a core necessity for small businesses to succeed in the market. 

It is important to note that complying firms will either raise the sticker price of products to include previously hidden fees or absorb the financial blow of the fees themselves. It is expected that consumers will notice higher list prices come May, which may cause a minor shock, but will quickly rebound as price transparency becomes the American norm. It remains uncertain how firms will choose to navigate these changes and which fees they decide to forego altogether, being that there is a suspicion in the market that many of these charges are bogus.

Firms able to overcome the hurdles associated with transitioning to transparent pricing will create an opening to attract more market share. Embracing honest pricing tactics increases customer loyalty and positive brand perception. This serves as an opportunity for American businesses to build ethical pricing models that embrace honesty and the sharing of accurate information, redefining the identity and perception of many firms and reigniting fair competition. 

Conclusion

While transparent pricing may reveal higher upfront costs, it eliminates hidden charges and allows consumers to make fully informed decisions. It is the clear desire of the American people for more accuracy in advertising and less deception in unclear fees. Over time, increased market competition resulting from the Trade Regulation Rule on Unfair or Deceptive Fees will optimize pricing models and may contribute to more competitive, fair rates. While ticketing and lodging businesses must face a period of readjustment, the estimated cost of the final rule is manageable when compared to firm profits and is unlikely to negatively impact small entities. By embracing and supporting this regulation, consumers and firms will participate in a more trustworthy market free from shrouded pricing. Consumption in short-term lodging and live-event ticketing will ultimately become more equitable, uplifting small businesses and reintroducing them to the competitive landscape.