Show Me the Money: A New Wave of Pricing Transparency Laws

Every for-profit business faces the challenge of setting competitive prices while also generating a profit. An increasingly common solution to this conundrum has been to advertise one price and later disclose additional charges — e.g., hotels’ resort fees, e-ticketing platforms’ “handling” fees or even surcharges assessed against customers paying with a credit card. The consumer backlash against price creep has been sharp, and the last year has seen regulators spring into action in response.

On Oct. 11, 2023, the Federal Trade Commission published a proposed “Junk Fee.”  The rule hasn't been enacted but garnered substantial public interest. It would make it unlawful to advertise the amount a consumer may pay without “Clearly and Conspicuously” disclosing the “Total Price” more prominently that any other pricing information. The “Total Price” means the maximum total of all fees or charges a consumer must pay for the good or service and any mandatory ancillary good or service. “Clearly and Conspicuously” disclosing the total price means making it easily noticeable and understandable and communicating it the same way and with the same level of prominence as the rest of the pricing information.

There is no timeline for the adoption of a proposed rule, and this one is still languishing over a year later. In the meantime, state regulators have taken up the mantle of price transparency.

On Feb. 11, 2024, New York’s General Business Law Section 518 took effect, making it illegal to add a surcharge for the use of a credit card at the point of sale. New York now requires either that any additional fee for the use of a credit card be built into the price or that different prices for different forms of payment be displayed side by side.

On July 1, 2024, California’s Honest Pricing Law went live, making it illegal to fail to disclose the total mandatory price that a customer must pay, excluding taxes and shipping costs (although there are some broad exceptions for food and beverage sales). In the few months since its enactment, the law has spawned class action lawsuits, bringing under the microscope the pricing practices of online retailers, amusement parks, convenience stores and rental management companies. Those lawsuits are in the earliest stages, so while businesses can look to the FAQ guides published by California’s attorney general to understand the law, the courts will likely not weigh in definitively on the scope of the Honest Pricing Law for a while.

On Jan. 1, 2025, Minnesota will join the ranks of states enacting pricing transparency laws with its own unique legislation. Like California’s law, Minnesota’s makes it an unfair practice to disclose a price “that does not include all mandatory fees or surcharges” and includes exceptions for certain food and beverage sellers. But unlike California’s law, Minnesota’s actually defines mandatory fees, albeit not in black-and-white terms. Minnesota says that mandatory fees are those that must be paid, are not reasonably avoidable, and that a reasonable person would expect to be included in the price. The reference to a “reasonable person” — an elusive legal concept — leaves more than a little gray area, and it will likely require further guidance from regulators or a court to flesh out the practical contours of this law.

Retailers in these jurisdictions are due for a hard look at their pricing practices in view of the trend toward “all-in” pricing. If your business adds fees to the displayed price (other than taxes and shipping) and does business in any of these states, even online, then these laws may require a shift in how your business communicates its pricing to consumers.

Theresa Kananen is a partner at Arnall Golden Gregory LLP and co-chairs the firm’s Payment Systems & Fintech industry team.