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Throw Junk Fees in the Trash
States are following the Biden administration's lead in going after unfair and deceptive fees.
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If you’ve tried to buy a concert ticket anytime within recent memory, you’re almost certainly familiar with the slew of fees that get tacked onto the price at the end. There are so many fees on live music tickets that this internet joke about Ticketmaster charging a “fee fee” and a “fee fi fo fum fee” is actually barely a joke at all.
Those charges lumped on at the end, which don’t actually pay for any additional services, are a result of Ticketmaster’s market power. It cornered the market on live events ticketing, and charges fees because it can. If you want to buy tickets to most shows, you have to go through Ticketmaster. The only other option is to pound sand.
But these so-called “junk fees” — again, which describe fees hidden from the customers that don’t correspond to any additional service — are everywhere. Rental cars, rental homes, hotels, banking, airlines, you name it: If corporations have power, it’s a safe bet they’re using it to extract junk fees. Junk fees cost Americans, by some estimates, billions or even tens of billions of dollars every year.
In his State of the Union address this year, President Joe Biden announced a push against junk fees. “Junk fees may not matter to the very wealthy, but they matter to most other folks in homes like the one I grew up in, like many of you did. They add up to hundreds of dollars a month,” he said. Federal agencies have also gotten in on the act where they have jurisdiction, including the Consumer Financial Protection Bureau, the Department of Transportation, and the Federal Communications Commission.
Interestingly, while there is some movement toward a mish-mosh of federal bills dealing with these fees, the White House is also pushing state legislatures to tackles them. It held a webinar of sorts with state legislators from New York, California, and Vermont who each carry junk fee-related bills, and recently sent out guidance for state legislators who want to work on the issue.
Which brings us to Pennsylvania! There will be a hearing there in the House Consumer Affairs Committee on Thursday to examine HB 636, the “Pay the Price You See” bill, sponsored by Rep. Nick Pisciottano, one of the great anti-monopoly champions working at the state level. The bill would require full price disclosure on all purchases, at the front end, making any sort of junk fee illegal under Pennsylvania’s state Unfair Trade Practices and Consumer Protection Law.
“Hidden or ‘junk’ fees are inherently deceptive and should not exist in a free and fair market,” Pisciottano said. “For too long, companies like Ticketmaster have taken advantage of American consumers through these arbitrary fees. I applaud the steps being taken at the federal level to address junk fees and look forward to supplementing consumer protections here in Pennsylvania by mandating fee transparency in advertised prices.”
As my colleague Katie Van Dyck will explain to the Pennsylvania committee, there are two main tactics that corporations use to impose these fees, which are known as “drip pricing” and “partitioned pricing.” The first is what Ticketmaster does, adding more fees as the buyer moves through the process, inflating the final cost beyond what was advertised as the beginning. The second involves advertising a price like “$35+fees,” so disclosing that there is some extra cost, but making it unclear how much or what that extra cost actually buys — because usually the answer is nothing.
These costs aren’t just bad for consumers, though they are certainly that. They also make it more difficult for competitors to the large corporations to well, compete, because they make it hard for consumers to deduce which prices in the market are actually lower. By the time a buyer gets to the end of the transaction and sees all the junk fees lumped on, they tend to not give up and go shop somewhere else due to the sunk time cost of having already gone through the process once.
Junk fees also, as Van Dyck explains, can lead to tacit collusion, with corporations essentially giving a wink and a nod to each other to make certain fees a permanent part of the market, inflating prices across the board.
I like Pisciottano’s bill because it is clear, simple, and eliminates junk fees across industries. A similar effort exists in California, SB 748, sponsored by Senators Bill Dodd and Nancy Skinner, with the backing of State Attorney General Rob Bonta. It would add a junk fee prohibition to the Golden State’s Unfair Competition Law and False Advertising Law.
Contrary to those two bills, there’s been a tendency on this issue to divvy it up, industry by industry, tackling one fee at a time. For example, there have been a bunch of bills across the country during this year’s legislative sessions on ticket fees, specifically, due to the political salience of that issue. California also has a slew of bills touching on various fees. You will probably not be shocked to read that eliminating junk fees polls very, very well, so everyone wants to grab their own bill and get a piece of the action.
But cleaning them all out at once like Pisciottano proposes is cleaner, fairer, and gets right at the competition concerns I outlined above. If junk fees are unfair to consumers and other businesses in one sector, they’re unfair in all of them. It’s the tactic that needs to be eliminated, not picking and choosing which fees politicians are fine with versus those they are not.
Of course, as always, eliminating junk fees is the beginning, not the end. A lot of the power corporations have to impose fees stems from their wider market power and lack of competition to keep the fees in check. So eliminating junk fees gets at one symptom, not the disease of corporate concentration. Getting rid of Ticketmaster’s power to levy fees is one thing, but it’s no substitute for breaking it up and reinvigorating competition in the live events space. Ditto across the board, in all the sectors where junk fees plague purchasers.
But throwing those fees in the trash is certainly a good start.
ANTI-MONOPOLY SUMMIT: My colleagues and I will be hosting a major conference in Washington, D.C., on May 4, bringing together leaders from across the anti-monopoly movement, including some of my very favorite state and local champions. Check out the (still growing) speaker list and register to come join us here.
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— Pat Garofalo