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Biden administration plans crackdown on resort fees | Donelson Baker

Biden administration plans crackdown on resort fees | Donelson Baker

Resort and amenity fees have long been common practice in the hospitality industry, first appearing in the late 1990s. The FTC reports that in 2015, hospitality fees accounted for one-sixth of revenue industry totals, or nearly $2 billion a year. The advent of these fees can be traced back to the sudden emergence of online travel agents and online platforms to offer competitive rates to consumers. The consumer clicks on an attractive rate and then agrees to complete the transaction even when subsequent screens disclose resort fees and taxes.

More recently, these hospitality fees have come under intense scrutiny, in part due to the magnitude and prevalence of fees in the leisure travel and vacation rental industry. Fueled by viral social media campaigns, articles circulated images of charges levied on customers that sometimes doubled or tripled the promised rental rate. In the current era of social media and political populism, this industry practice has prompted greater regulatory scrutiny.

On October 26, 2022, President Biden issued a Tweeter from the official POTUS account which said:

Image of the tweet

Along with the tweet, the administration issued an official notice statement of its intention to tackle what it called the many “junk fees” or “drip fees” and other pricing practices of banks, airlines, ticketing sources and hotels. The Consumer Financial Protection Bureau also announced that it is taking steps to eliminate hidden fees in banking.

The FTC has been tasked with issuing regulations to combat so-called junk fees and hidden charges and is likely to be the entity enforcing these rules on behalf of consumers. In 2017, the FTC released a Economic analysis of hotel resort fees. On November 8, 2022, the FTC released prior notification of proposed regulation (ANPR) under the Federal Trade Commission Act (FTC Act). This authority permits the FTC to enact, amend, and repeal rules regulating commerce that specifically define acts or practices that are unfair or deceptive in commerce or that affect commerce within the meaning of Article 5(a)(1) of the FTC statute, 15 USC 45(a)(1). ANPR cites its economic analysis, complaining that mandatory, undisclosed resort fees artificially increase search and cognitive costs, forcing consumers to pay up to 20% more than the originally disclosed price.

The FTC also complains that hotels can increase prices by increasing resort fees without increasing the underlying room rate. The FTC takes issue with the practice of drip pricing, which it defines as “the practice of announcing only a portion of the price of a product in advance and revealing charges additional ones later as consumers go through the buying process”. ANPR announces the FTC’s position that the actions of other regulatory agencies, such as state attorneys general, have not been effective against the practices described in ANPR.

The FTC invited comment and feedback from the public and affected industries, specifically seeking comment on “the costs and benefits of a rule that would require the upfront inclusion of all mandatory charges whenever consumers receive a price for a good or service and any other potential rules, requirements to reduce unfair or misleading charges, and alternative or additional measures to such regulation.

The deadline for submitting comments to the FTC is January 9, 2023. If you wish to make your views known on the subject, we encourage you to prepare and file a statement, or contact our office to have a statement prepared on your behalf.

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