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Financial Services Law Insights and Observations

FTC to issue rulemaking on junk fees and fake reviews

Federal Issues Agency Rule-Making & Guidance FTC Junk Fees Endorsements Consumer Protection UDAP

Federal Issues

On October 20, the FTC voted 3-1 at an open meeting to publish two rules for comments: the Advance Notice of Proposed Rulemaking (ANPRM) on Junk Fees (see here) and the ANPRM on Fake Reviews and Endorsements (see here). The first ANPRM addresses junk fees that are charged for goods or services that have little or no added value to the consumer. The ANPRM seeks comments on the prevalence of junk fees and the consumer harms arising from junk fee practices, among other topics. The second APNRM initiates a rulemaking proceeding addressing fake reviews and other endorsements, which can cheat consumers and honest businesses alike. The ANPRM seeks comment on the prevalence of fake and deceptive reviews and the consumer harms arising from them, among other things.

At the start of the meeting, members of the public provided feedback on the Commission’s work with some members of the public expressing concerns about how junk fees are harming consumers and businesses. Others also expressed consumers’ frustration with hidden fees that are added to bills that were not advertised up front. Regarding fake advertisements, some emphasized how consumers rely on reviews and how fake reviews can harm consumers and sellers. Commissioner Wilson, the sole ‘no’ vote on both measures, noted that the APNRM on junk fees “is sweeping in its breadth,” and said the APNRM potentially contradicts existing laws and rules, among other things. Chair Kahn, Commissioner Slaughter, and Commissioner Bedoya all voted yes for both measures. Regarding the junk fees ANPR, Commissioner Slaughter mentioned that she does not consider this to be “obscure” and expressed her support for the ANPRM, emphasizing that markets cannot function effectively with junk fees. Commissioner Wilson noted that she agrees that “fake and deceptive reviews are unlawful,” but does not believe public comment should be sought for this proposal because “the Commission already has a multi-pronged strategy in place to combat this issue,” such as FTC-published endorsement guides. Additionally, in October 2021, the Commission issued a notice of penalty offenses, which is explained in the ANPRM, and may enable the Commission to obtain civil penalties from marketers that use fake reviews.