Advertising Law Tool Kit - Twelfth Edition | 2024

Venable / 31 30 / Venable When customers check out, they are used to seeing a list of fees accompanying the primary product or service. Businesses often add these fees for a variety of reasons, and they can go by a variety of names: service fees, convenience fees, or processing fees. While these fees can serve legitimate business purposes, the Federal Trade Commission’s new Proposed Rule, “Trade Regulation Rule on Unfair or Deceptive Fees,” is intended to regulate how these fees are presented to customers. The Proposed Rule contains two main prongs. First, businesses must present the “Total Price” clearly and conspicuously in any offer, display, or advertisement. The Total Price must be disclosed more prominently than any other pricing information and be inclusive of all mandatory fees, i.e., if a customer cannot complete their purchase without paying the fee, it must be included in the upfront Total Price. Certain fees are excluded, such as shipping fees and government charges. Second, the stated purpose of the fee cannot be misleading. For example, if a mobile app’s “service fee” helps fund both employee wages and the cost of operating online, the Proposed Rule would categorize it as misleading and deceptive. States also have their own laws on fee disclosures, so businesses should be deliberate in how to present fees to customers to ensure compliance with all applicable laws and regulations. Fee Disclosures Here are a few considerations to take into account when deciding how to advertise the price of your goods and services while also disclosing fees to customers: • Is the upfront, advertised Total Price clearly and conspicuously disclosed? Does any surrounding information obscure or detract from the Total Price? • Is it possible for the customer to complete their transaction at the price that was advertised as the Total Fee? If not, it is likely that mandatory fees were not included in the Total Price. • When trying to determine if a fee can be excluded from the Total Price, ask whether the fee is optional (e.g., gratuity) or mandatory. • If a fee is excluded because it could be a government charge, consider whether the business has discretion in charging the customer. • Does the customer have a clear idea of what the fee’s business purpose is? • How will the fee be utilized by the business? If its uses can be broken down into different purposes, consider labeling the fees separately and distinctly. Jay V. Prapaisilp jvprapaisilp@Venable.com +1 202.344.4604 Leonard L. Gordon lgordon@Venable.com +1 212.370.6252