To exist in the economy in this day and age is to constantly be bombarded by fees. It’s often not clear what they’re for, or why they’re necessary, or when they’re even going to appear.
One minute you’re trying to buy concert tickets on Ticketmaster for X dollars, and boom, the cost leaps by 30 percent to Y dollars, thanks to random fees you can’t even see unless you click a little drop-down arrow to figure out the provenance of the extra charge. Or you’re booking a flight, and somehow the original cost of your seat has skyrocketed when all is said and done. Or you just want to sit next to your elementary schooler on the plane, and there’s a charge for that, too.
President Joe Biden knows America’s fees-riddled economy can feel frustrating, deceptive, and, of course, expensive. And so, to channel some Elizabeth Warren here, he’s got a plan for that: He’s calling for a Junk Fee Prevention Act in an effort to ax hidden fees and take aim at the ways consumers are nickeled and dimed by corporations.
This is part of the White House’s broader efforts to try to increase competition across the economy and go after the proliferation of fees in industries ranging from banking to ticketing to travel. In October, the White House also rolled out a blog post outlining its plans to take on junk fees, and the FTC announced it would explore a rule to take a look at the issue. Other agencies, including the CFPB and the Department of Transportation, are taking a crack at fees in their respective areas as well.
“Junk fees may not matter to the very wealthy, but they matter to most folks in homes like the one I grew up in. They add up to hundreds of dollars a month. They make it harder for you to pay the bills or afford that family trip,” Biden said at his State of the Union address in February. “I know how unfair it feels when a company overcharges you and gets away with it. Not anymore.”
Right now, the Junk Fee Prevention Act is basically a plan to have a plan — there’s no actual bill yet. The White House is trying to tackle the fees issue from multiple angles.
The idea here isn’t necessarily that companies can’t charge for their services, but instead that they’ve got to be fair and honest about those charges and compete for consumers’ business in a way that isn’t, to put it plainly, tricky.
“That’s bad for market efficiency, that’s bad for firms that price in an honest way, and if you’re an industry and you’re choosing how to innovate, if junk fees are permissible, then one way to make more profits is to come up with new and more sophisticated junk fees rather than actually making your product better or making your product lower cost,” one White House official told me, speaking on condition of anonymity.
If the only way to get a Beyoncé ticket or book your Cancún vacation is to pay the extra charges, they’re not really extras anymore, they’re just kind of the price.
“Basic economics teaches us that there’s supply and demand and prices are market signals. Common sense shows that people shop and compare goods on the basis of price, among other things,” said Aaron Klein, senior fellow in economics at the think tank Brookings Institution, in an interview. “The internet revolutionized how we bought and sold goods and services, so what we’re finding is that in the quest to have the lowest price, cost is being moved from price to fees, so that consumers think they’re buying something at a cheaper price when in point of fact the true cost to that might be higher.”
What’s in the still-to-come Junk Fee Prevention Act
The Junk Fee Prevention Act doesn’t exist as actual full legislative text on Capitol Hill. For now, it’s more talking points as the White House gets the ball rolling, and it’s still not clear with whom. One senior Democratic congressional aide who Vox granted anonymity in order to speak freely on the matter said they have “no fucking clue” on the bill and that as far as they know it is “made up.”
A White House spokesperson who agreed to speak anonymously said they are having “productive conversations” with many members of Congress who have expressed interest in junk fees and noted there has been bipartisan interest in the issue in the past, including from Republican Reps. Ann Wagner of Missouri and Paul Gosar of Arizona. As mentioned, the Biden administration is also taking aim at fees at the agency level to try to tackle some of these problems from different avenues.
In broad outlines, the junk fee legislation the White House is advocating for Congress to take up would take aim at four areas:
Concerts, sporting events, and entertainment ticket fees. Anyone who’s tried to buy tickets for a Taylor Swift concert or any other event recently is well aware, the process can be a mess, including and often especially when it comes to extra charges. Consumers are met with nebulous service fees and venue fees when making a purchase, and those fees often appear at the end of the buying process and make up a significant chunk of the final price.
The White House wants Congress to bar excessive fees, require those fees be disclosed in the ticket price from the start, and make sellers disclose holdbacks of tickets that diminish supply (and can therefore drive up prices).
Elsewhere in the government, the Department of Justice has reportedly undertaken an antitrust investigation against Live Nation Entertainment, the company born after Ticketmaster and Live Nation merged in 2010 that is the one charging a lot of these fees.
Extra charges for sitting next to your kid on a plane. If you have flown lately, you’ve probably noticed airlines often now charge you extra for choosing a seat. It’s annoying for any traveler who remembers the days when sitting somewhere not terrible on a flight did not run you $50. For parents, the stakes can be higher — they are often faced with the choice of paying to sit next to their child or hoping a kind stranger will switch seats. (The kindness of strangers is not guaranteed.)
In July 2022, the Department of Transportation put out a notice urging airlines to “do everything in their power to ensure that children who are age 13 or younger are seated next to an accompanying adult with no additional charge,” but no airlines actually guarantee this one yet. The DOT is still working on the matter with a fees dashboard and a potential rule to ban sit-by-your-child charges. Still, it’s hoping Congress can fast-track the matter by including a ban on these fees in legislation.
Fees for quitting your cable company, your phone plan, or your internet service. When you sign up to get cable or internet in your home or open up a new phone plan, it often comes with a set time frame — and a financial punishment if you want to back out before that time frame ends. Quitting early can cost tens and hundreds of dollars.
The White House makes the case that these early termination fees hurt market dynamism “by making it harder for innovative companies to win a toe-hold in the market by encouraging customers to switch.” Essentially, if a company wants to keep your business, it should have to do so by having a competitive offer, not by threatening to charge you a bunch of money if you go elsewhere. Biden wants Congress to ax “excessive” early termination fees so companies can’t lock in customers with the threat of a giant bill if they switch phone companies.
Surprise charges that make what’s supposed to be your fun vacation a little less fun. The story with resort fees and destination fees is similar to what happens with concert tickets: The consumer sees one price for a hotel room when they start their vacation planning, and by the time they hit checkout, that total amount has jumped. The charade makes it hard to comparison shop because the low price shown at the outset can get pretty meaningless. As the advocacy group Kill Resort Fees notes, there’s not much stopping a hotel from advertising a $1 room rate and $99 in fees.
It’s often not clear what these fees are for, beyond making hotels and resorts more money. The hotel industry makes billions of dollars in fees and surcharges each year. “The hotel likes to say that they provide amenities in exchange for that resort fee, but it’s a complete and total lie,” said Lauren Wolfe, the founder of the website Kill Resort Fees. “The resort fee exists so that the hotel can lie to consumers about the advertised price.”
The White House wants Congress to bar surprise fees by making hotels include them in room prices up front.
The idea here is there ought to be some limits on how companies charge you for random stuff
Much of what the White House is pushing for isn’t that companies shouldn’t be allowed to impose various fees and charges for different services ever (though in some instances that is the case). What it’s saying is that there should be a cap on the amount those companies can collect so that arrangement is a little less predatory or, at the very least, companies should have to tell you how much something costs with the fees included from the get-go. It’s also looking to discourage the proliferation of fees across various industries and companies. In multiple sectors, there’s a culture of exploitative fees, and the hope is to reverse the tide and make companies think twice about adding on extra charges.
There are areas where specific fees and charges make sense, and where differential pricing seems fair. At the very least, you can sometimes see the argument for them.
In flying, for example, airlines say that much of what they’ve done is to disaggregate different options and services so travelers can sort of pick and choose what they want. The idea is that you see the stripped-down price initially and then decide whether you want to pay to check a bag, sit comfortably, print your ticket, whatever. (Vox has a whole explainer on the airline fee situation here.)
Reasonable minds can disagree about whether this business practice is good. Some people really do want the lowest fare and are happy to take that middle seat in the back. At the same time, the checked bag fee distorts behavior because then everybody tries to bring their bags on the plane. And fees often add up so quickly that the original price you’re shown when booking on a website like Expedia or Google Flights, ultimately, ends up being a complete lie.
“The airlines that competed on price in the same search engine started moving cost to things like bag fees and other things so you would think, ‘Oh, this is the cheapest flight,’ and buy it, and you get to the airport and boom. Same thing with the hotels,” Klein said. “Free market competition assumes transparent information about prices, and what we’ve seen are companies, and broadly speaking industries, moving toward taking something out of one price tag and moving it to another.”
Again, this Junk Fee Prevention Act is not an actual thing that exists at the moment. If and when it does (which, you know, we have a Congress that often doesn’t do much), it’s not entirely clear how implementation would work. Which resort fees are unfair and which are for a legitimate thing? Is there a way to opt out of whatever amenities they correspond to? What would travel website designs need to look like? What counts as a fair rate for quitting your phone plan early, and how much exactly does that cost the company dealing with it?
“There’s been too little policing of fees in the market, but I think implementation is challenging because sometimes the fees are correlated to different services,” Klein said.
As the saying goes, the devil is in the details, but a lot of this stuff probably isn’t that hard to figure out — or at least it’s not as hard as many companies will likely say it is.
It’s impossible not to note how much the economy has become overridden by fees. Banks charge a web of fees for accessing your own money or for making a mistake there’s no way it costs them that much to address. They often make money off of fees levied on those who can least afford it. The costs added onto food delivery services for consumers and restaurants are disorienting, and it’s never clear whether the fees companies say go to workers actually do. It’s impossible to know what so many goods and services are going to cost you because of charges and fees that consistently pop up. This isn’t good for anyone, ultimately, even businesses.
Another White House official who spoke to me on condition of anonymity said he’s heard in conversations with some companies that they’d be amenable to tighter rules around fees — assuming everyone else has to go along. If you’re a ticketing platform and you’re the only one showing full prices up front while all your competitors are going to add them on later, you’re at a disadvantage. Consumers won’t choose you if there’s no way for them to know you’re actually the right choice.
“That’s bad for consumers and it’s bad for industry in the long run,” Klein said. “We should be competing on the best service and the best price, not on who can shock you with the most fees at the end.”