The U.S. Federal Trade Commission has the power to immediately eliminate hidden fees at hotels and resorts (and indeed, across the economy). It is time for it to act to protect consumers. Transparency should not be a partisan issue. So-called “drip pricing” undermines free markets and cannot be defended.
It’s Time For The FTC To Ban Resort Fees And Other Hidden Charges
The Federal Trade Commission (FTC) is tasked with protecting consumers from anticompetitive, unfair, and deceptive trade practices. Like advertising a hotel room for $39 in Las Vegas only to have that total more than double once mandatory “resort fees” and government taxes are added…
With one stroke of the pen, the FTC can compel hotels to disclose all-in pricing from the moment in which a consumer searches for rates and eliminate “drip pricing.” Drip pricing is where sellers offer deceptively low pricing to lure in customers and only reveal the full cost, including mandatory surcharges and fees, once the consumer is close to completing the transaction.
In a well-argued column in the New York Times, Max Sarinsky argues why this matters to consumers:
Drip pricing has no legitimate business purpose and harms consumers in at least two key ways. First, the practice leads people to spend more money than they would if the full price were communicated upfront. While consumers can in theory walk away once the true price is revealed, studies show that many complete such transactions, given the time and effort that they have already invested. Second, even for consumers who abandon a transaction, drip pricing wastes time and severely complicates efforts to compare the actual prices of competing offers.
It matters to businesses as well:
Drip pricing can also be damaging to businesses, and it is not a problem that the market will correct on its own. Unless all sellers are required to disclose their full prices upfront, companies that opt for transparency risk losing market share to those that practice deception. After finding in 2015 that customers spent over 20 percent more on tickets on its website when mandatory fees were hidden versus when the full price was disclosed at the start, StubHub resumed its practice of concealing mandatory fees in order to keep up with the competition.
For years, in both the Obama and Trump administrations, the FTC has warned and threatened it would take action. But it never did.
Some businesses, like Marriott, now offer consumers the ability to opt-in for all-in pricing, but this is not enough. Such information should be provided by default.
Hidden pricing is deceptive and unfair. It undermines capitalism and should be addressed for hotels and other sectors of the economy, just as it has been for airlines. Consumers should see the actual price they must pay when they invest the time to check on hotels, tickets, and other services.
I have yet to hear a cogent argument for why all-in pricing should not be mandatory, so I’m not sure what the hold-up is beyond the efforts of powerful interest groups which are trying to hoodwink consumers.