Understanding the FTC’s Junk Fees Rule: Implications for Live-Event Ticketing
Steve Jacobson
Chief Executive Officer
On December 17, 2024, the U.S. Federal Trade Commission (FTC) announced its final “Junk Fees Rule” to address and prevent deceptive pricing practices in the live-event ticketing and short-term lodging industries. In the Q&A below, JCA focuses its analysis solely on the Rule’s implications on live-event ticketing.
Disclaimer: Steve Jacobson is not an attorney, nor does he play one on TV. The following analysis is not dispensed as legal advice. Please consult with an attorney before making any compliance decisions.
Question: What are the specific document numbers if I need to get more information?
FEDERAL TRADE COMMISSION
16 CFR Part 464
RIN 3084-AB77
Trade Regulation Rule on Unfair or Deceptive Fees
AGENCY: Federal Trade Commission.
ACTION: Final rule.
https://www.ftc.gov/system/files/ftc_gov/pdf/r207011_udf_rule_2024_final_0.pdf
Q: What is a “final rule” and how does it relate to legislation?
A “final rule” is a federal administrative regulation that has progressed through the proposed rule and public comment stages of the rulemaking process, and is published with a scheduled effective date, marking the final stage of the rulemaking process. A final rule takes broad legislation points and addresses specific pressing issues to provide individuals and/or businesses with regulations that must be adhered to.
Q: What does the rule say?
The final rule takes aim at two specific and prevalent unfair and deceptive practices: 1) bait-and-switch pricing that hides the “Total Price” of live-event tickets by omitting mandatory fees and charges from advertised prices, including through drip pricing, and 2) misrepresenting the nature, purpose, amount, and refundability of fees or charges.” The Rule specifies that it is an unfair and deceptive practice for businesses to offer, display, or advertise any price of live-event tickets without clearly, conspicuously and prominently disclosing the “Total Price.”
Q: What kind of deceptive pricing has been occurring in the live-event market?
The biggest issue has been with vendors who quote a misleading, artificially low price and then add in mandatory fees and other charges throughout the buying process—a practice known as drip pricing. The FTC views this as the “quintessential example of bait-and-switch pricing.”
Q: How do you define the Total Price?
As defined by the FTC, Total Price is “the maximum total of all fees or charges a consumer must pay for a good or service and any mandatory Ancillary Good or Service, except that Shipping Charges and Government Charges may be excluded.” So, here is the crux of the Rule: if an add-on charge is mandatory, then it must be included in the Total Price. However, any charges for shipping/postage or sales tax (or other government fees/taxes) should be listed separately.
Q: What are some examples of an “Ancillary Good or Service?”
An Ancillary Good or Service refers to a good or service that is charged by a third party, but is included in the total cost. This could pertain to parking or ticket insurance or a processing fee. As long as the fee is mandatory and it is part of the same transaction, the cost must be included in the Total Price. (p. 57)
Q: What fees do we need to include in our Total Price?
You only need to include mandatory fees in the Total Price. Any optional fees that a patron can decline should not be included in your Total Price. Additionally, while your venue may not charge sales tax, you do not have to disclose any government fees (“the fees or charges imposed on the transaction by a Federal, State, Tribal, or local government agency, unit, or department”) until final checkout. (p. 84)
Q: Do we need to specifically itemize mandatory fees that are included in the Total Price?
No, the Rule neither requires, nor prohibits, the itemization of mandatory fees that must be included in the Total Price (p. 99).
Q: Is it OK that we charge a “Convenience Fee” for allowing our patrons to buy online?
NO!!! The FTC really frowns upon the inclusion of fees that don’t describe what the actual fee is for: “Consumers have confronted a host of mysterious, mandatory, “convenience,” “processing,” or “service” charges that are either non-descript or otherwise misleading.” (p. 7), Furthermore, “the Rule ensures that…when [the businesses] explain a fee or charge, the description is truthful. In simple terms: tell consumers the real price and do not lie about the fees or charges.” (p. 9) If these “fees” are mandatory, they must be included in the Total Price. And, if you choose to itemize mandatory fees, make sure that you name and display them “Clearly and Conspicuously.”
Q: At what point in the purchase path can we offer optional fees?
It’s up to the ticket seller to decide where and when to present optional fees, except that the fees must be listed as optional and be presented before the patron consents to pay. (p. 127)
Q: Can we just list the ticket price and mandatory fees separately, but not add them up to show a Total Price?
No! This is what is called “partition pricing” and is deceptive and unfair. In addition to disclosing the mandatory fees clearly and in the same size (or larger) font than the ticket price, you MUST do the math for the patron and present the all-in Total Price.
Q: Is there a limit to the amount or number of fees we can charge?
No, the Junk Fees Rule is a disclosure rule—not a substantive rule. It regulates how prices must be displayed—not what prices may be charged or what kinds of fees may be levied.
Q: When will this Rule be enacted?
The rule was published in the Federal Register on January 10, 2025 and, by law, is effective 120 days later, which takes us out to an enactment date of May 12, 2025.
Q: Does the Rule pertain to all live-event organizations?
Yes—and then some. The Rule applies to any business that sells live-event tickets. Even if you are a franchisor or your main business is not in live events, any entity that sells live-event tickets is subject to the Rule. There are no exemptions based on tax status (e.g., nonprofits), size, genre or whether the entity is a Federally recognized Indian Tribe or Tribal entity. (p. 66)
Q: Does the Final Rule apply to business-to-business transactions such as venues that sell or consign tickets to third parties for ultimately reselling to consumers?
Yes.
Q: What are the penalties for non-compliance?
The Rule authorizes civil penalties of up to $51,744 per violation, with a cap adjusted annually for inflation. Additionally, The Rule offers a new consumer redress capability under 19(a)(1) of the FTC Act that is more effective and efficient than a previous one (p. 53). So, not only do you have to be concerned with possible FTC action, but your business could also be subject to individual, class action or multi-district litigation.
Q: What can we do to make sure we’re in compliance with the Rule?
Make sure you do the following:
- Disclose the Total Price. Total Price must be displayed more prominently than other Pricing Information, except if the final amount of payment for a transaction is displayed, the final amount of payment must be more prominent than, or as prominent as, the Total Price. (p. 102)
- Do not misstate, misrepresent or disguise what the fee is for. For example, if your venue has a “facility fee,” you need to be clear what that is for – and that is exactly what the patron’s money is going to be spent on.
- If you charge a “convenience fee” or have other fees whose terminology is purposely vague, you may have violated the FTC’s requirement to “Clearly and Conspicuously” display a mandatory fee. (p. 59)
- The Commission eliminates the requirement that Businesses affirmatively disclose the refundability of each fee or charge imposed; however, § 464.3 still prohibits Businesses from misrepresenting a fee’s refundability. (p. 101)
Q: What about our ads and marketing materials? Do we need to state what the all-in Total Price would be?
Yes, you do. If you have price zones and/or you dynamically price your tickets – and you want to list a starting price in your sales and marketing collateral, you should include all mandatory fees in your total cost. For example, if your lowest priced ticket is $50 and you have mandatory fees of $4 on that ticket, you should state, “Prices start at $54.” The same holds true for subscriptions and packages even when the Total Price is unknown until all the purchasing options have been considered.
Q: Does this Rule restrict or prohibit dynamic pricing?
Nope! Just make sure that, if you dynamically price tickets, the all-in Total Price presented in your promotional materials is actually offered. If you say that, “Prices start at $54,” ensure that there are actually seats offered at that price.
Q: Sometimes, we mail tickets and parking vouchers. Do we need to state these shipping charges up front?
No, shipping and mailing charges can be treated as an additional line item at check-out. However, venues are not permitted to mark up the cost of shipping as the FTC ruling states that shipping charges must “reasonably reflect the cost to ‘send physical goods’ to consumers.” But beware, if you charge for handling, i.e., internal labor used to prepare the shipping, you must include those costs in the Total Price. (p. 92)
Q: Our state has its own set of consumer protection laws. What if they conflict with the Rule?
Very rarely will this Rule conflict with State law. In the event that it does, though, Federal law takes precedence. What’s more likely is that certain protections afforded by State law may be greater than those provided by the Rule or vice versa. Therefore, venues should plan on adopting the provisions of whichever provides the most protection for the patron.
Q: What about discounts and promotions such as BOGOs or 10% discounts or $10 off offers?
There is no distinction between discounted tickets and full-price tickets. In either case, the Total Price for the tickets in question must be “Clearly and Conspicuously” presented.
Q: If we charge an online credit card processing fee, do we need to include that in the Total Price?
If the only method of payment you offer is by credit card, then the credit card processing fee needs to be included in the Total Price. However, if you offer other payment options for which there is no charge or a different charge, then “Businesses must Clearly and Conspicuously disclose the nature, purpose, and amount of any credit card surcharge before the consumer consents to pay.” (p. 110)
Q: What if we offer Klarna or Afterpay, do we need to include any special messaging or disclaimer?
No, Klarna and Afterpay are both BNPL (buy now, pay later) solutions where you, as the venue, pay a percentage of the Total Price to the BNPL service. Since the patron is not being charged a fee or interest, you do not need any special messaging.
Q: Just curious, but which ticketing companies provided comments to the FTC in favor of all-in pricing?
Live Nation/Ticketmaster North America, Stub Hub and TickPick were among those firms most often cited for submitting positive comments regarding all-in pricing.
Q: So, the FTC, and the industry as a whole, have spent a lot of time and money on this Final Rule. Will the change be worth it?
According to the FTC, compliance with the Final Rule will definitely be worth it for both the industry and the patrons. The FTC took a very conservative approach to consumer savings, limiting the economic impact to the time consumers would save if they didn’t have to spend so much time searching for the best deal and trying to compare results. Other savings, which were not estimated, included “deadweight loss,” which is the cost to consumers of buying in an inefficient market, and the frustrations of consumers who get surprised by mandatory fees at the end of purchase path and either abandon their purchase or go off to another site and try to find a less expensive, but similar, option. For the venue, a more efficient and honest purchase path will likely result in 1) fewer abandoned sales as patrons feel that they are making an informed decision and 2) more satisfied patrons as they feel a greater trust (and perhaps loyalty) for an honest purchase experience.
In the table below, the FTC has estimated that there is a 14x to 18x return on the costs of compliance to the economic benefit of the time saved by the consumer, which was estimated at $24.40 per hour.
Q: Is a Final Rule really final?
The Rule is the outcome of a Biden-era consumer protection effort. It remains to be seen whether the Trump administration and the Republican-led Congress will support the Rule. Two of the key agencies in developing this rule were the Consumer Financial Protection Board (CFPB), which has already been gutted, and the Federal Trade Commission (FTC) itself, where President Trump just fired the two Democrats on the five-person board.
Under the Congressional Review Act, Congress may repeal the Rule by a majority vote. The Rule is also subject to potential legal challenges, including by industry groups and trade associations. Indeed, other rules recently promulgated by the FTC, including the Combatting Auto Retail Scams (CARS) Rule and the Non-Compete Clause Rule, faced stiff legal challenges, and similar challenges to the FTC’s Junk Fees Rule could preclude or delay its implementation.
Additional Resources
Using Tessitura? Tessitura makes it easy to ensure that all fees are disclosed. Be sure to review their step-by-step instructions for online fee disclosure, as well as their documentation on Ticket Pricing and Fee Transparency. The Tessitura Network is also hosting a Pop-up Skill Booster webinar on April 16 to make sure you have the tools to address this rule’s implications for your organization.
Need some extra help making sure you’re in compliance? Whether you need assistance with the technical how-to of disclosing fees, want a second set of eyes on your marketing collateral to make sure you’re abiding by the new rules, or want to spend time with our pricing experts discussing the implications for your ticket prices, we’re here to help.
Let’s Talk!