Junk Fee Prevention Act: Price transparency might benefit small businesses

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The article notes that businesses that have relied on added fees to bolster revenue may soon have to shift their pricing strategy.

President Biden is urging Congress to crack down on what he deems to be excess fees with the Junk Fee Prevention Act. His proposal would curb or eliminate four types of so-called junk fees, which the White House says cost U.S. consumers billions each year. The proposal, if enacted, would ban fees that airlines charge for family members to sit next to their young children, eliminate costly, early termination fees for TV, phone, and internet service, ban unpublished resort fees in the hotel industry, and crack down on excessive online “service fees” for tickets to concerts, sporting events, and other types of live entertainment.

Biden referenced the proposal in his State of the Union address. “Junk fees may not matter to the very wealthy, but they matter to most other folks in homes like the one I grew up in, like many of you did,” the president said. “They add up to hundreds of dollars a month. They make it harder for you to pay your bills or afford that family trip.”

This proposal doesn't seek to eliminate add-on fees that a business may charge for specific products or services, like optional insurance fees that compensate fliers when flights are delayed or canceled, or hotel fees for rooms with oceanfront views (provided that travelers can choose their own room). Rather, it tackles fees that, according to the White House, deceive consumers or take advantage of situational market power. That can look like resort fees that add up to $90 per night to a hotel stay, Biden noted in his State of the Union address, or Ticketmaster fees that can cost as much as 78 percent of a ticket's price, according to the advocacy group More Perfect Union.

If Congress passes the Junk Fee Prevention Act, the affected businesses will have to improve their price transparency—as in folding fees into their upfront prices. That could be good news for smaller competitors.

Jennifer said: “Businesses that are providing products or services with a front-end price that's more genuine and transparent will be in a good position because, in theory, the playing field will be leveled a bit.” The goal, she says, is to make it easier for consumers to comparison-shop—without facing last-minute fees.

Consumers might end up with more price transparency as opposed to lower prices.

The Biden administration has already worked with several federal agencies to push back on other types of junk fees, the White House noted. This fall, the Consumer Financial Protection Bureau ramped up oversight of overdraft and bounced check fees, and the Department of Transportation proposed a rule to require airlines and online booking services to show the full price of plane tickets upfront inclusive of fees (like baggage fees, change fees, cancelation fees, and family seating fees), as opposed to basic fares.