Hidden Fees and Drip Pricing Class Action Lawsuits: New State Laws, Proposed FTC Rules, Mitigation Strategies

Description

Publicly available research by the sellers themselves substantiates how and why hidden fee and drip pricing works and why, according to legislatures, attorneys general, and consumer advocates, it should be considered a deceptive practice that is detrimental to consumers. Because these techniques have been so profitable, they are ubiquitous across many industries, especially hospitality and entertainment. New laws prohibiting these pricing practices, as well as renewed interest in enforcing existing consumer protection statutes, are requiring many businesses to reprice their products and rethink all surcharges, such as credit card surcharges.

On Nov. 9, 2023, the Federal Trade Commission issued a Notice of Proposed Rulemaking that makes it an unfair and deceptive practice to omit mandatory charges and fees from advertised prices and misrepresent the nature and purpose of the charges or fees. California enacted the "Honest Pricing Law" or "Hidden Fees Statute," (California Senate Bill 478), effective July 1, 2024, which essentially does the same thing, with a few exceptions, such as taxes and shipping charges. Many other states are considering or have passed similar laws.

In California, violators face civil penalties, private lawsuits, and injunctive relief under California's Consumer Legal Remedies Act and other consumer protection statutes. Cases may be filed in both federal and state venues. Numerous private class actions and attorney general enforcement actions have already been filed in California and across the United States, including in the District of Columbia.

Listen as our panel of experts discusses state and federal laws targeting hidden fees and drip pricing, reviews the class action lawsuits and enforcement actions that have been and are being filed, and offers guidance for complying with the new laws while minimizing the risk of class litigation.