The FTC “Junk Fee” Rule Is Here… Along With a Wave of State Laws

Key Takeaways

• The Federal Trade Commission’s Rule on Unfair or Deceptive Fees is now in effect.
• The rule applies to businesses that offer or advertise live-event tickets or short-term lodging.
• If including the price in ads or offers, businesses subject to the rule must state upfront the total price, which includes all mandatory fees or fees that reasonably cannot be avoided.

On May 12, 2025, the Federal Trade Commission’s Rule on Unfair or Deceptive Fees went into effect (see our prior Updates on the proposed rule here and here). Variously referred to as the “junk fee” rule, the rule against “bait-and-switch” or “drip” pricing, the rule was adopted with bipartisan support in the waning days of the Biden presidency. Further reflecting the bipartisan support for the new rule, the Republican-led FTC under the Trump administration issued FAQs on the rule in May. The FTC can seek up to $53,088 in civil penalties per violation of the rule, indexed annually for inflation. 

Below is a summary of the rule’s main requirements. 

Who it applies to. The rule applies solely to businesses that offer or advertise (1) live-event tickets (e.g., for concerts, sporting events, or theater) or (2) short-term lodging (e.g., hotels, home shares, and vacation rentals offered through mobile app platforms). Both business-to-consumer and business-to-business transactions are subject to the rule. 

The FTC originally proposed a much broader scope for the rule and warned that it would address deceptive and unfair pricing practices in other industries via Section 5 of the FTC Act. 

What fees must be included in the advertised price? If including the price in ads or offers, businesses must tell people upfront the total price, which includes all mandatory fees or fees that reasonably cannot be avoided (e.g., hotel resort fees, cleaning fees for home share stays, concert ticket processing fees). The FTC has emphasized that fees for electronic ticket “delivery,” “convenience,” and similar mandatory fees must be included upfront in the total price. 

What fees can be excluded? Businesses can exclude shipping charges, government charges, and fees or charges for optional goods or services.

Other key requirements. The FTC has stressed several additional requirements, including: 

• The rule allows businesses to offer discounts or pricing promotions. But if the discount or promotion is not available to everyone, the total price shouldn’t reflect the discount or promotion. Once someone meets the requirements for the discount, the business can update the total price to reflect the discount.
• Businesses may itemize fees, but the total price must be displayed more prominently than other pricing information, except for the final amount owed. The final amount owed must be clearly and conspicuously disclosed.
• A business that initially excludes a fee or charge from the total price (e.g., a shipping fee) must clearly and conspicuously disclose the nature, purpose, and amount of the fee or charge and the good or service for which the fee or charge is imposed.

State laws also apply. The rule generally does not preempt state laws also regulating fee transparency, and the FTC has said that its rule sets the floor, not the ceiling. This is significant in light of the wave of state laws and regulations concerning inadequately disclosed fees adopted in California, Minnesota, Massachusetts, Colorado, and Virginia, with more under consideration in Illinois, Florida, and North Carolina, among other states. (See our prior Update on state pricing disclosure laws here). In contrast to the FTC’s rule, the state laws are not limited to live-event tickets and short-term lodging. 

Takeaways

Even businesses not subject to the FTC rule should consider whether they should take action to comply with state laws or to ensure that their ads and other offers mentioning price cannot be argued to be deceptive or unfair under the FTC Act or similar state laws. 

The main step toward compliance is inclusion upfront of the “all-in price” of all necessary fees and charges, except for government charges, shipping, and voluntary add-ons.