We missed this earlier: The US Federal Trade Commission (FTC) on October 11 proposed a new rule to prohibit online platforms from charging “junk fees” that consistently confuse and trick consumers. The regulator outlined two types of junk fees in particular:
- Hidden fees: “Consumers told the FTC that dishonest businesses routinely engage in bait-and-switch pricing tactics that hide mandatory fees and deceive consumers about the price. This is because fees imposed later, but before the purchase is made, significantly increase the total that consumers pay. Accordingly, the proposed rule would prohibit businesses from advertising prices that hide or leave out mandatory fees.”
- Bogus fees: “Many consumers also said that they often do not know what fees are for, because dishonest businesses routinely misrepresent or fail to adequately disclose the nature or purpose of the fees. The rule would prohibit sellers from misrepresenting fees and require them to disclose upfront the amount and purpose of the fees and whether they are refundable.”
By banning hidden and bogus fees, consumers will know “exactly how much they are paying and what they are getting” because “businesses would have to include all mandatory fees when telling consumers a price, making it easier for consumers to comparison shop for the lowest price,” FTC reasoned.
The FTC proposed this rule after receiving comments from consumers about “hidden fees for everything from booking hotels and resort fees to buying concert tickets online, renting an apartment, and paying utility bills.”
“All too often, Americans are plagued with unexpected and unnecessary fees they can’t escape. These junk fees now cost Americans tens of billions of dollars per year—money that corporations are extracting from working families just because they can. By hiding the total price, these junk fees make it harder for consumers to shop for the best product or service and punish businesses that are honest upfront. The FTC’s proposed rule to ban junk fees will save people money and time, and make our markets more fair and competitive.” — FTC Chair Lina M. Khan.
Importantly, the FTC will be able to enforce the proposed rule by securing refunds for harmed consumers and seeking monetary penalties against companies that do not comply with its provisions.
The proposed rule is open for public comments until January 8, 2024. Interested stakeholders can submit their comments here.
Junk fees in India
The issues highlighted by the FTC in the US apply to India as well. For example, some travel aggregators like MakeMyTrip add a convenience fee at the end of a flight booking. This is deceptive because when comparing flight prices between different aggregators this fee is not shown, making Makemytrip look cheaper than another site that might not include such convenience fees. Some travel aggregators also add travel insurance by default and require users to manually opt out of the same.
Below are screenshots of a MakeMyTrip booking search page and final page:
Other examples include food delivery platforms like Swiggy and Zomato adding platform fees to the orders on the final page and ticketing site Bookmyshow automatically adding a donation to a charity organisation at the payment page.
The Indian government in September released draft guidelines for the prevention and regulation of dark patterns, which prevent such practices outlined above, but the final guidelines are yet to be notified. The draft refers to the above practices as “basket sneaking” and “drip pricing.”
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