The vote at a FTC meeting last week will initiate a rulemaking on “junk fees” and comments on their impact on consumers.
10/23/2022 1:30 P.M.
3 minute read
The Federal Trade Commission at its meeting Thursday voted to publish an advance notice of proposed rulemaking (ANPR) on “junk fees.”
FTC Chair Lina Khan and Commissioners Alvaro Bedoya and Rebecca Slaughter voted in favor of publishing the ANPR, and Commissioner Christine Wilson voted against it. GOP Commissioner Noah Phillips stepped down from the FTC this month, according to a news release.
The item considered at the FTC’s open meeting states it will “initiate a rulemaking proceeding addressing junk fees that are charged for goods or services that have little or no added value to the consumer. The ANPR seeks comment on the prevalence of junk fees and the consumer harms arising from junk fee practices, among other questions.”
The FTC will seek comments on:
- Unnecessary charges for “worthless, free, or fake products or services.”
- Unavoidable charges “imposed on captive consumers.”
- Surprise charges that secretly push up the purchase price.
In June, the FTC proposed a rule to ban “junk fees and bait-and-switch advertising tactics” in auto sales, according to a news release. It is still in the proposed rule stage, and comments were due Sept. 12, according to a notice from the Federal Register.
The goal with the proposed rule from June is to have “guidelines that would provide consumers with key protections against dealers who unlawfully charge junk fees without their consent or engage in bait-and-switch advertising,” according to the FTC.
Meanwhile, the commission also filed an enforcement action against an auto dealer for reportedly adding “‘illegal junk fees’ onto car prices and for discriminating against Black and Latino consumers with higher financing costs and fees,” according to the news release.
The auto dealer, Passport, will be required to establish a fair lending program, only charge consumers fees with their express, informed consent, and pay restitution to consumers harmed by the reported actions.
The FTC’s vote to approve the enforcement action was 4-1, with former Commissioner Phillips dissenting.
Per the dissent from Phillips, the consent order between the FTC and the Passport car dealership network is the first instance of the FTC’s use of Section 5 authority to police a marketplace for unfairness in the form of discrimination.
“As a threshold matter, Count III [the section 5 count] is entirely gratuitous. First, it condemns conduct that is already covered by Count IV [Equal Credit Opportunity Act],” Phillips said in his dissent. “Second, Count III is not necessary for the injunctive relief being sought, and does not allow the Commission to obtain monetary redress for harmed consumers or a civil penalty. Count III accomplishes nothing in this case. The sole reason for its inclusion is to announce to the world that the FTC has expanded its unfairness jurisdiction to include antidiscrimination. But because that announcement raises myriad questions about the liability rule, it serves no useful function for businesses eager to stay on the right side of the law.”
Phillips described at length why he believes Section 5 is not an antidiscrimination statute.
While this was a consent order, meaning a court has not reviewed this expansion of the FTC’s jurisdiction, the reasoning for the FTC’s enforcement action could have an impact on clients in a broad range of industries. Presumably, it would be broader than the suite of current targeted antidiscrimination statutes like the Fair Housing Act, public accommodations laws, etc.
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