Trade Regulation Rule on Unfair or Deceptive Fees
| Published date | 27 March 2024 |
| Record Number | 2024-06468 |
| Citation | 89 FR 21216 |
| Court | Federal Trade Commission |
| Section | Proposed rules |
Federal Register, Volume 89 Issue 60 (Wednesday, March 27, 2024)
[Federal Register Volume 89, Number 60 (Wednesday, March 27, 2024)]
[Proposed Rules]
[Pages 21216-21222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06468]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 89, No. 60 / Wednesday, March 27, 2024 /
Proposed Rules
[[Page 21216]]
FEDERAL TRADE COMMISSION
16 CFR Part 464
[Docket ID FTC-2023-0064]
RIN 3084-AB77
Trade Regulation Rule on Unfair or Deceptive Fees
AGENCY: Federal Trade Commission
ACTION: Initial notice of informal hearing; final notice of informal
hearing; list of Hearing Participants; requests for submissions from
Hearing Participants.
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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'')
recently published a notice of proposed rulemaking (``NPRM'') in the
Federal Register, titled ``Rule on Unfair or Deceptive Fees,'' which
would prohibit unfair or deceptive practices relating to fees for goods
or services, specifically, misrepresenting the total costs of goods and
services by omitting mandatory fees from advertised prices and
misrepresenting the nature and purpose of fees. The NPRM announced the
opportunity for interested parties to present their positions orally at
an informal hearing. Seventeen commenters requested to participate at
the informal hearing. The Commission's Chief Presiding Officer, the
Chair, has appointed an Administrative Law Judge for the Federal Trade
Commission, the Honorable Jay L. Himes to serve as the presiding
officer of the informal hearing.
DATES:
Hearing date: The informal hearing will be conducted virtually on
April 24, 2024, at 10 a.m. Eastern.
Participation deadline: If you are a Hearing Participant and would
like to submit your oral presentation in writing or file a
supplementary documentary submission, you must do so on or before April
10, 2024.
ADDRESSES: Hearing Participants may submit their oral presentations in
writing or file supplementary documentary submissions, online or on
paper, by following the instructions in part IV of the SUPPLEMENTARY
INFORMATION section below. Write ``Unfair or Deceptive Fees Rule (16
CFR part 464) (R207011)'' on your submission and send it electronically
to [email protected], with a copy to [email protected]. If you
prefer to file your submission on paper, mail it to the following
address: Federal Trade Commission, Office of the Secretary, 600
Pennsylvania Avenue NW, Mail Stop H-144 (Annex J), Washington, DC
20580.
FOR FURTHER INFORMATION CONTACT: Janice Kopec or Spencer Jackson-Kaye,
Division of Advertising Practices, Bureau of Consumer Protection,
Federal Trade Commission, 202-326-2550 (Kopec), 202-975-8671 (Jackson-
Kaye), [email protected], [email protected].
SUPPLEMENTARY INFORMATION:
I. Background
Following public comment on an advance notice of proposed
rulemaking, 87 FR 67413 (Nov. 8, 2022), the FTC published a notice of
proposed rulemaking (``NPRM''), 88 FR 77420 (Nov. 9, 2023), entitled
``Rule on Unfair or Deceptive Fees,'' in the Federal Register,
proposing to add part 464 to 16 CFR, to prohibit unfair or deceptive
practices relating to fees for goods or services, specifically,
misrepresenting the total costs of goods and services by omitting
mandatory fees from advertised prices and misrepresenting the nature
and purpose of fees. A month before the NPRM was published in the
Federal Register for a 90-day public comment period, the Commission
released a preliminary copy of the NPRM in a press release on October
11, 2023.
In accordance with section 18(b)(1) of the FTC Act, 15 U.S.C.
57a(b)(1), which requires the Commission to provide the opportunity for
an informal hearing in section 18 rulemaking proceedings, the NPRM also
announced the opportunity for interested persons to present their
positions orally at an informal hearing. Eight of the commenters
requested the opportunity to present their position orally or
participate at an informal hearing. Nine additional commenters
requested the opportunity to participate in a hearing if one were held
but did not request a hearing themselves.
II. The Requests for an Informal Hearing; Presentation of Oral
Submissions
Section 18 of the FTC Act, 15 U.S.C. 57a, as implemented by the
Commission's Rules of Practice, 16 CFR 1.11(e),\1\ provides interested
persons with the opportunity to present their positions orally at an
informal hearing upon request.\2\ To make such a request, a commenter
must submit, no later than the close of the comment period for the
NPRM, (1) a request to make an oral submission, if desired; (2) a
statement identifying the interested person's interests in the
proceeding; and (3) any proposal to add disputed issues of material
fact to be addressed at the hearing.\3\
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\1\ The FTC Act provides that ``an interested person is entitled
to present his position orally or by documentary submission (or
both).'' 15 U.S.C. 57a(c)(2)(A).
\2\ 16 CFR 1.11(e).
\3\ 16 CFR 1.11(e)(1) through (3).
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The following eight commenters requested an informal hearing
generally in accordance with the requirements of 16 CFR 1.11(e): \4\
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\4\ In addition to this list, the Commission received a request
from the Towing and Recovery Association of America, Inc. on
February 23, 2024, more than two weeks after the close of the
comment period, requesting an opportunity to make an oral
presentation. Because any such requests must be submitted no later
than the close of the comment period, 16 CFR 1.11(e), this request
did not meet the requirements to be allowed an opportunity to
present at an informal hearing.
1. ACA Connects--America's Communication Association (``ACA Connects'')
\5\
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\5\ ACA Connects ``represents approximately 500 small and
medium-sized independent companies . . . that provide broadband,
phone, and video services to nearly 8 million customers and offer
services to 18 percent of households nationwide.'' ACA Connects,
Cmt. on NPRM at n. 1 (Feb. 7, 2024), https://www.regulations.gov/comment/FTC-2023-0064-3143.
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2. American Bankers Association and Consumer Bankers Association
(``Bankers Associations'') \6\
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\6\ The American Bankers Association represents ``the nation's
$23.6 trillion banking industry, which is composed of small,
regional and large banks.'' Bankers Associations, Cmt. on NPRM at
n.1 (Feb. 7, 2024), https://www.regulations.gov/comment/FTC-2023-0064-3139. The Consumer Bankers Association is a ``national
financial trade group focused exclusively on retail banking and
personal financial services--banking services geared toward
consumers and small businesses.'' Id. at n.2.
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3. U.S. Chamber of Commerce (``the Chamber'') \7\
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\7\ The Chamber did not fulfill the requirement to identify its
interest in an informal hearing proceeding. See 16 CFR 1.11(e)(2)
(containing requirements for requesting an informal hearing); U.S.
Chamber of Commerce, Cmt. on NPRM (Feb. 7, 2024), https://www.regulations.gov/comment/FTC-2023-0064-3127. Nevertheless, on its
website, the Chamber describes itself as ``the world's largest
business organization [whose] members range from the small
businesses and chambers of commerce across the country that support
their communities, to the leading industry associations and global
corporations that innovate and solve for the world's challenges, to
the emerging and fast-growing industries that are shaping the
future.'' U.S. Chamber of Commerce, https://www.uschamber.com/about.
Based on this description, the Commission will allow the Chamber to
participate in the informal hearing if it so chooses.
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[[Page 21217]]
4. NCTA--The Internet & Television Association (``NCTA'') \8\
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\8\ NCTA ``represents network innovators, content creators, and
voice providers that connect, entertain, inform, and inspire
consumers nationwide. NCTA is the principal trade association for
the U.S. cable industry, . . . [which] is also the nation's largest
residential broadband provider.'' NCTA, Cmt. on NPRM at n.1 (Feb. 7,
2024), https://www.regulations.gov/comment/FTC-2023-0064-3233.
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5. International Franchise Association (``IFA'') \9\
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\9\ IFA represents ``franchise companies in over 300 different
industries, individual franchisees, and companies that support those
franchise companies in marketing, law, technology, and business
development.'' IFA, Cmt. on NPRM at 1 (Feb. 7, 2024), https://www.regulations.gov/comment/FTC-2023-0064-3294.
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6. BattleLine LLC \10\
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\10\ Jeremy Roseberry, of BattleLine LLC, is ``a professional
with expertise in financial market structure and technological
solutions for fee transparency.'' BattleLine LLC, Cmt. on NPRM at 2
(Dec. 5, 2023), https://www.regulations.gov/comment/FTC-2023-0064-2574.
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7. IHRSA, the Global Health and Fitness Association \11\
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\11\ IHRSA is a trade association that represents ``health and
fitness clubs, gyms, studios, sports and aquatic facilities, and
industry partners.'' IHRSA, Cmt. on NPRM at 1-2 (Feb. 7, 2024),
https://www.regulations.gov/comment/FTC-2023-0064-3269.
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8. National Taxpayers Union Foundation \12\
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\12\ NTUF is an organization of experts and advocates who
``engage in in-depth research projects and informative, scholarly
work pertaining to taxation in all aspects'' and have worked to
develop ``responsible tax administration for nearly five decades.''
NTUF, Cmt. on NPRM at (Feb. 7, 2024), https://www.regulations.gov/comment/FTC-2023-0064-3258.
Gibson Dunn & Crutcher LLP (``Gibson Dunn'') also submitted a
comment that referenced an informal hearing but did not identify the
law firm's interests in the proceeding as required by 16 CFR
1.11(e)(2).\13\ The comment nevertheless identified a list of three
questions as disputed issues of material fact and recommended that the
Commission permit expert testimony if it proceeds with an informal
hearing. While the Commission does not find that Gibson Dunn is an
interested party that requested an informal hearing,\14\ the
Commission, in its discretion, addresses Gibson Dunn's purported issues
of material fact herein.
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\13\ See generally Gibson Dunn, Cmt. on NPRM (Feb. 7, 2024),
https://www.regulations.gov/comment/FTC-2023-0064-3238. Gibson Dunn
also contends that any informal hearing would be constitutionally
infirm. Id. at 10.
\14\ Unlike the Chamber of Commerce, Gibson Dunn's interest in
this proceeding is not readily apparent through publicly available
information. The Commission has made clear that lawyers should make
plain who they are representing or if they are representing their
own interests. 88 FR 19024 n.14 (``The Commission reserves the right
to decline any request for participation that fails to disclose the
requester's identity and interest in the proceeding. Lawyers and
others who act on behalf of clients or other individuals or entities
should expressly identify those whom they are representing with an
interest in the proceeding--or disclaim . . . that they are acting
on behalf of any client.'').
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In addition, while the following commenters stated that an informal
hearing was not necessary, they requested the opportunity to make an
oral presentation if the Commission held an informal hearing at others'
requests:
1. A coalition of 52 national and state consumer advocacy groups
submitted by the Consumer Federation of America (``CFA'')
(collectively, ``CFA consumer advocacy coalition'') \15\
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\15\ The comment was authored by American Economic Liberties
Project, Consumer Action, Consumer Federation of America, National
Association of Consumer Advocates, National Consumer Law Center,
National Consumers League, U.S. Public Interest Research Group and
signed by 52 ``national and state consumer advocacy groups''
including the comment's authors. CFA consumer advocacy coalition,
Cmt. on NPRM at 1-2 (Feb. 7, 2024), https://www.regulations.gov/comment/FTC-2023-0064-3160.
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2. CFA, National Consumer Law Center (``NCLC'') on behalf of its low-
income clients, and the National Association of Consumer Advocates
(``NACA'') (``CFA Auto Comment'') \16\
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\16\ While CFA, NCLC, and NACA submitted additional coalition
comments, this comment was limited to the proposed rule's coverage
of auto dealers. CFA Auto Comment, Cmt. on NPRM (Feb. 7, 2024),
https://www.regulations.gov/comment/FTC-2023-0064-3270.
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3. A coalition of 33 health and consumer protection advocacy groups
submitted by Community Catalyst (``Health and Consumer Protection
Coalition'') \17\
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\17\ The coalition consists of 33 groups that ``focus on a range
of health and consumer protection issues, including medical debt,
disability rights, health equity, and economic justice.'' Health and
Consumer Protection Coalition, Cmt. on NPRM at 1 (Feb. 7, 2024),
https://www.regulations.gov/docket/FTC-2023-0064/comments?filter=FTC-2023-0064-3191.
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4. A coalition of 39 housing justice advocacy organizations submitted
by the National Housing Law Project (``NHLP'') \18\
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\18\ The comment was submitted on behalf of 39 ``organizations
engaged in housing justice advocacy'' including the National Housing
Law Project, whose ``mission is to advance housing justice for
people living in poverty and their communities'' and the Housing
Justice Network, which is a ``field network of over 2,000 community-
level housing advocates and resident leaders . . . committed to
protecting affordable housing and residents' rights for low-income
families across the country.'' NHLP, Cmt. on NPRM at 1 (Feb. 7,
2024), https://www.regulations.gov/comment/FTC-2023-0064-3235.
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5. NCLC on behalf of its low-income clients, Prison Policy Initiative
(``PPI''), and Stephen Raher \19\
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\19\ NCLC, PPI, and Raher, Cmt. on NPRM at 1 (Feb. 7, 2024),
https://www.regulations.gov/comment/FTC-2023-0064-3283.
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6. Formerly Incarcerated, Convicted People and Families Movement
(``FICPFM'') \20\
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\20\ The FICPFM comment was signed by a coalition of 55 members
and allies of FICPFM and prepared in collaboration with the
Partnership for Just Housing. FICPFM ``is a national movement of
directly impacted people speaking in our own voices about the need
to end mass incarceration, America's current racial and economic
caste system.'' FICPFM, Cmt. on NPRM at 1 (Feb. 7, 2024), https://www.regulations.gov/docket/FTC-2023-0064/comments?filter=FTC-2023-0064-3199.
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7. Truth in Advertising, Inc. (``TINA.org.'') \21\
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\21\ TINA.org is ``a nonpartisan, nonprofit consumer advocacy
organization whose mission is to combat deceptive advertising and
consumer fraud; promote understanding of the serious harms
commercial dishonesty inflicts; and work with consumers, businesses,
independent experts, synergy organizations, self-regulatory bodies
and government agencies to advance countermeasures that effectively
prevent and stop deception in our economy.'' TINA.org, Cmt. on NPRM
at 1 (Feb. 6, 2024), https://www.regulations.gov/comment/FTC-2023-0064-3104. TINA.org filed an addendum to its original comment
clarifying that while it believes there are no disputed issues of
material fact, it nevertheless requests participation in any hearing
if the Commission determines that such disputes exist. TINA.org,
Cmt. Addendum on NPRM (Feb. 7, 2024), https://www.regulations.gov/comment/FTC-2023-0064-3136.
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8. NCLC (``NCLC Housing Comment'') \22\
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\22\ While NCLC submitted additional coalition comments, this
comment was limited to the proposed rule's relationship to rental
housing fees. NCLC Housing Comment, Cmt. on NPRM (Feb. 7, 2024),
https://www.regulations.gov/comment/FTC-2023-0064-3218.
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9. Fair Price, Fair Wage Coalition \23\
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\23\ This comment was submitted by DC Jobs With Justice, Jews
United for Justice, Metro DC Democratic Socialists of America,
National Women's Law Center, Restaurant Opportunities Center of DC,
United Planning Organization, Max Hawla, consumer and tipped worker,
and Trupti Patel, consumer and tipped worker, who are ``consumers,
tipped professionals, grassroots organizations, policy
organizations, and advocates in the District of Columbia that form
part of the District of Columbia Fair Price, Fair Wage coalition.''
Fair Price, Fair Wage Coalition, Cmt. on NPRM at 1, 6 (Feb. 7,
2024), https://www.regulations.gov/comment/FTC-2023-0064-3248.
The Commission finds these requests were generally adequate \24\
and therefore
[[Page 21218]]
will hold an informal hearing. These commenters will have the
opportunity to make oral presentations during the informal hearing. The
Commission does not find it necessary to identify any group of
interested persons with the same or similar interest in the
proceeding.\25\
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\24\ The Commission notes that two commenters, the Chamber of
Commerce and the IFA, did not specifically request the opportunity
to present orally at an informal hearing.
\25\ 16 CFR 1.12(a)(5) requires the initial notice of informal
hearing to include a ``list of the groups of interested persons
determined by the Commission to have the same or similar interests
in the proceeding.'' 16 CFR 1.12(d) explains that the Commission
``will, if appropriate, identify groups of interested persons with
the same or similar interests in the proceeding.'' Doing so
facilitates the Commission's ability to ``require any group of
interested persons with the same or similar interests in the
proceeding to select a single representative to conduct cross-
examination on behalf of the group.'' Id.
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III. Disputed Issues of Material Fact; Final Notice
In the NPRM, the Commission did not identify any disputed issues of
material fact that needed to be resolved at an informal hearing.
However, the Commission may still do so in this initial notice of
informal hearing, either on its own initiative or in response to a
persuasive showing from a commenter.\26\ A number of commenters
proposed potential disputed issues of material fact for the
Commission's consideration.
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\26\ See 16 CFR 1.12(a)(3); 15 U.S.C. 57a(c)(2)(B); see also 88
FR 77420, 77440 (Nov. 9, 2023).
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ACA Connects identified the following purported disputed issues of
material fact:
1. ``Do CSPs [(an abbreviation for ``communications service
providers'')] engage in a widespread pattern of deceiving consumers
through deceptive or misleading fee disclosures?''
2. ``Will consumers be confused by duplicative and/or conflicting
disclosure requirements?''
3. ``Will the Proposed Rule impose significant costs on CSPs?''
4. ``Will the costs imposed by the Proposed Rule result in
decreased competition in the communications marketplace?''
5. ``Will the Proposed Rule as applied to CSPs result in less
transparency or greater consumer confusion about prices, terms, and
conditions?''
6. ``Will the Proposed Rule effectively reduce consumer ``search
time'' for broadband, voice, and cable services?'' \27\
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\27\ ACA Connects, Cmt. on NPRM at 15-16.
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The NCTA identified the following purported disputed issues of
material fact:
1. ``Do 90% of firms (exclusive of the live-event ticketing, short-
term lodging, and restaurant industries) already comply with the
proposed rule?''
2. ``Will the proposed rule reduce consumers' search costs? Will
the proposed rule facilitate the ability to accurately compare
products?''
3. ``Do reasonable consumers expect the `total price' `exclusive of
government charges' to exclude only government charges imposed directly
on consumers?'' \28\
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\28\ NCTA, Cmt. on NPRM at 31-32.
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The Bankers Associations argued that ``there appears to be a
`disputed issue of material fact' . . . concerning the relationship
between the disclosures required by the Proposed Rule and the
disclosures required under other federal consumer financial law.'' \29\
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\29\ Bankers Associations, Cmt. on NPRM at 8.
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The Chamber did not articulate the disputed issues in the form of
questions but recommended ``an informal hearing with an opportunity for
cross-examination of witnesses or workshop to explore'':
1. ``consumer expectations about fees or charges consumers expect
to be included with the purchase of a product or service,''
2. ``how displaying Total Price more prevalent than any other
pricing information will impact consumer's understanding of and access
to cost-saving discounts and rebates,''
3. ``the impact of extensive fee disclosures early in the
purchasing process on consumer's understanding of fees most likely to
generate additional costs post-purchase or most relevant to the
consumer's purchasing decision,''
4. ``the procompetitive impacts or efficiencies of partitioned or
drip pricing,'' and
5. ``whether a fee disclosure that complies with the Commission's
`Total Price' requirements is easier for a consumer to navigate,
understand, and comparison shop than (1) disclosures that provide item
price information separate from dynamic or variable fees or (2) where
dynamic or variable fees vary, similar to shipping and carriage costs,
depending on characteristics of the order not ascertainable until the
consumer provides information or makes order selections.'' \30\
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\30\ Chamber, Cmt. on NPRM at 19-21.
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The IFA did not independently identify any disputed issues of
material fact in its request for an informal hearing, but it appeared
to endorse those raised by the Chamber.\31\
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\31\ IFA, Cmt. on NPRM at 13. The IFA noted that ``in the
Chamber Comment and IHRSA [comments], there are disputed issues of
material fact needing to be resolved and requiring an informal
hearing.'' However, IHRSA did not raise any disputed issues of
material fact in their comment filed in this proceeding.
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Finally, Gibson Dunn stated that ``[a]mong others, there are
factual questions relating to (1) whether the practices are `deceptive'
or `unfair,' (2) whether such unfair or deceptive practices are
`prevalent,' and (3) the extent to which the Proposed Rule's
substantial costs outweigh the relatively marginal benefits, given
disputes over what costs the Rule would impose, what benefits it would
present, and how those costs and benefits would be reflected in various
industries.'' \32\ Although Gibson Dunn failed to meet the requirements
of 16 CFR 1.11(e) in several respects, the Commission will nevertheless
address these purported issues of material fact in this document.
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\32\ Gibson Dunn, Cmt. on NPRM at 10 (Feb. 7, 2024), https://www.regulations.gov/comment/FTC-2023-0064-3238.
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To be appropriate for cross-examination or rebuttal, a disputed
issue of material fact must raise ``specific facts'' that are
``necessary to be resolved'' \33\ and not ``legislative facts.'' \34\
Unlike specific facts, legislative facts ``help . . . determine the
content of law and of policy'' and do not need to ``be developed
through evidentiary hearings'' because they ``combine empirical
observation with application of administrative expertise
[[Page 21219]]
to reach generalized conclusions.'' \35\ The relevant legislative
history explains that ``disputed issues of material fact necessary to
be resolved'' should be interpreted narrowly.\36\ In this context,
``disputed'' and ``material'' are given the same meaning as in the
standard for summary judgment.\37\ As in summary judgment, the
challenging party must do more than simply assert there is a dispute
regarding the Commission's findings. If those findings are otherwise
adequately supported by record evidence, the challenging party must
come forward with sufficient evidence to show there is a genuine, bona
fide dispute over material facts that will affect the outcome of the
proceeding.\38\
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\33\ See, e.g., 16 CFR 1.13(b)(1)(i) (issues that ``must'' be
considered for cross-examination or rebuttal are only those disputed
issues of fact the Commission determines to be ``material'' and
``necessary to resolve'').
\34\ 16 CFR 1.12(b)(1) (``An issue for cross-examination or the
presentation of rebuttal submissions, is an issue of specific fact
in contrast to legislative fact.''). ``The only disputed issues of
material fact to be determined for resolution by the Commission are
those issues characterized as issues of specific fact in contrast to
legislative fact. It was the judgment of the conferees that more
effective, workable and meaningful rules will be promulgated if
persons affected by such rules have the opportunity afforded by the
bill, by cross-examination and rebuttal evidence or other
submissions, to challenge the factual assumptions on which the
Commission is proceeding and to show in what respect such
assumptions are erroneous.'' H.R. Rep. No. 93-1606, at 34 (Dec. 16,
1974) (Conf. Rep.). Further, as explained in Association of National
Advertisers, Inc. v. FTC, 627 F.2d 1151, 1164 (D.C. Cir. 1979), the
distinction between ``specific fact'' and ``legislative fact'' grew
out of a recommendation from the Administrative Conference of the
United States (ACUS):
Conference Recommendation 72-5 is addressed exclusively to
agency rulemaking of general applicability. In such a proceeding,
almost by definition, adjudicative facts are not at issue, and the
agency should ordinarily be free to, and ordinarily would, proceed
by the route of written comments, supplemented, perhaps, by a
legislative-type hearing. Yet there may arise occasionally in such
rulemaking proceedings factual issues which, though not
adjudicative, nevertheless justify exploration in a trial-type
format because they are sufficiently narrow in focus and
sufficiently material to the outcome of the proceeding to make it
reasonable and useful for the agency to resort to trial-type
procedure to resolve them. These are what the Recommendation refers
to as issues of specific fact.
Id. at 1164.
\35\ Ass'n of Nat'l Advertisers, 627 F.2d at 1161-62.
\36\ See, e.g., H.R. Rep. No. 93-1107, 93d Cong., 2d Sess.,
reprinted in 1974 U.S.C.C.A.N. 7702, 7728; Ass'n of Nat'l
Advertisers, 627 F.2d at 1163 (quoting H.R. Rep. No. 93-1606, at 33
(1974) (Conf. Report)).
\37\ As explained in the legislative history:
The words `disputed issues of material fact' are intended to
describe and limit the scope of cross-examination in a rulemaking
proceeding. Thus, the right of participants in the proceeding to
cross-examine Commission witnesses does not include cross-
examination on issues as to which there is not a bona fide dispute.
In this connection, the Committee considers the rules of summary
judgment applied by the courts analogous. Where the weight of the
evidence is such that there can be no bona fide dispute over the
facts, summary judgment is proper. Similarly, in such a situation
cross-examination would not be permitted; neither is a participant
entitled to cross-examination where the disputed issues do not
involve material facts. This language in the bill is used to
distinguish facts which might be relevant to the proceeding but not
of significant enough import to rise to the level of materiality.
The word material is used here with the same meaning it is given
under the common law rules of evidence. Also of importance is the
word `fact.' Cross-examination is not required regarding issues in
rulemaking proceedings which are not issues of fact. Examples of
such issues are matters of law or policy or matters whose
determination has been primarily vested by Congress in the Federal
Trade Commission. Thus, unless the subject matter with regard as to
which cross-examination is sought relates to disputed issues, which
are material to the proposed rule and which are fact issues, there
is no right to cross-examination on the part of any party to the
proceeding.
H.R. Rep. No. 93-1107, 93d Cong., 2d Sess., reprinted in 1974
U.S.C.C.A.N. 7702, 7728.
\38\ Id.; see also Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986) (explaining the standard as ``[o]nly disputes over
facts that might affect the outcome''); Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
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The purported disputed issues of material fact described above fall
generally into several categories: the Commission's determination of
unfair or deceptive practices, the Commission's finding of prevalence,
the relationship between the proposed rule's obligations and those
imposed by existing rules and regulations, and the Commission's cost-
benefit analysis. In addition, one commenter raised questions about the
scope of the proposed rule's definition of Government Charges.
First, two commenters raised questions regarding the Commission's
findings that pricing structures that do not initially disclose the
total mandatory cost of a good or service are deceptive or unfair.\39\
These arguments do not raise disputed issues of material fact because
they are legal and legislative issues rather than specific issues of
fact. Whether the practices of misrepresenting the total costs of goods
and services by omitting mandatory fees from advertised prices and
misrepresenting the nature and purpose of fees are unfair or deceptive
are legal questions. The Commission established the unfairness and
deceptiveness of these practices through legal analysis in section
III.A-B of the NPRM.\40\ Even if these questions were questions of
specific fact, they do not raise bona fide disputes because the
Commission has supported its findings with evidence, and the commenters
have not introduced their own evidence to contradict the
Commission.\41\
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\39\ See Chamber, Cmt. on NPRM at 20 (recommending a hearing
with evidentiary procedures on ``consumer expectations about fees or
charges consumers expect to be included with the purchase of a
product or service'' and ``the impact of extensive fee disclosures
early in the purchasing process on consumer's [sic] understanding of
fees most likely to generate additional costs post-purchase or most
relevant to the consumer's purchasing decision''); Gibson Dunn, Cmt.
on NPRM at 10 (disputing ``(1) whether the practices are `deceptive'
or `unfair' '').
\40\ NPRM, 88 FR at 77432 nn.146-47 (citing long-held FTC
positions that misleading door openers are deceptive and caselaw
recognizing that it is a violation of the FTC Act if a consumer's
first contact is induced through deception, even if the truth is
clarified prior to purchase). The Commission also cited evidence
demonstrating harm from unfair and deceptive fee practices,
specifically the practice of advertising only part of a product's
price upfront and revealing additional charges later as consumers go
through the buying process (drip pricing) and the practice of
dividing the price into multiple components without disclosing the
total (partitioned pricing). See, e.g., id. at n.153.
\41\ The comments received in response to the ANPR, in addition
to the Commission's history of enforcement actions, demonstrated
that advertising misrepresentation and unlawful practices related to
pricing and added fees are a chronic problem confronting consumers.
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Second, two commenters argued that the Commission's finding that
bait-and-switch pricing practices are prevalent was a disputed
fact.\42\ The Commission must make two findings regarding prevalence if
it promulgates a rule under section 18. First, the NPRM must set forth
the Commission's ``reason to believe that the unfair or deceptive acts
or practices which are the subject of the proposed rulemaking are
prevalent.'' \43\ The Commission articulated its reasons to believe
bait-and-switch pricing practices are prevalent in section III of the
NPRM, particularly section III.C, which discusses the comments received
in response to the ANPR, the Commission's history of enforcement
actions, and other complementary work that demonstrate the prevalence
of these practices. Second, the Commission must include ``a statement
as to the prevalence of the acts or practices treated by the rule''
\44\ in the statement of basis and purpose to accompany any final rule.
Ultimately, the Commission's prevalence findings need only have ``some
basis or evidence'' to show ``the practice the FTC rule seeks to
regulate does indeed occur.'' \45\
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\42\ ACA Connects, Cmt. on NPRM at 15 (``Do CSPs engage in a
widespread pattern of deceiving consumers through deceptive or
misleading fee disclosures?''); Gibson Dunn, Cmt. on NPRM at 10
(disputing ``(2) whether such unfair or deceptive practices are
`prevalent' '').
\43\ 15 U.S.C. 57a(b)(3).
\44\ 15 U.S.C. 57a(d)(1)(A).
\45\ Pa. Funeral Dirs. v. FTC, 41 F.3d 81, 87 (3d Cir. 1994).
ACA Connects appears to suggest that the Commission must make a
determination that a practice is widespread in every individual
industry and market in order to support a finding of prevalence. It
offers no support for this assertion, which runs contrary to
precedent finding that ``even where there is a limited record as to
the prevalence of a practice on a nationwide basis or where the data
reviewed only relates to a few states, the practice can be found to
be prevalent enough to warrant a regulation.'' Id. Furthermore, the
NPRM described numerous comments in response to the ANPR and
enforcement actions involving these practices in various industries,
including the telecommunications industry. ACA Connects failed to
provide any evidence to demonstrate a bona fide dispute as to this
question.
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Third, two commenters raised issues regarding the proposed rule's
interaction with other rules, regulations, or statutes.\46\ In the
NPRM, the Commission solicited input ``to determine if compliance with
the proposed rule along with the specific disclosure provisions for
certain types of sectors or transactions would be impossible, overly
burdensome, or beneficial.'' \47\ The Bankers Associations in
particular provided detailed views regarding the interplay between the
requirements of the proposed rule and a number of rules and regulations
that contain pricing disclosure requirements applicable to certain
consumer financial services products. The Commission appreciates the
views of the Bankers Associations regarding these important questions
and will give them careful consideration. However, determining the
appropriate scope of the proposed rule and its interaction with other
legal
[[Page 21220]]
obligations is a quintessential question of legal interpretation and
policy and is not determined by the resolution of an issue of specific
fact. The comment from ACA framed the issue as whether consumers would
be confused by duplicative or conflicting disclosure requirements. Here
again, whether the disclosure requirements are duplicative or
conflicting is a legal question and the question of whether consumers
might be confused by multiple disclosure falls more neatly into the
category of a legislative fact--``combining empirical observation with
application of administrative expertise to reach generalized
conclusions''--than a specific fact. The Commission appreciates the
views and commentary ACA provided on this topic and will give them
careful consideration, but is not persuaded that they present disputed
issues of material fact.
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\46\ ACA Connects, Cmt. on NPRM at 15 (``Will consumers be
confused by duplicative and/or conflicting disclosure
requirements?''); Bankers Associations, Cmt. on NPRM at 8
(describing issues ``concerning the relationship between the
disclosures required by the Proposed Rule and the disclosures
required under other federal consumer financial law.'').
\47\ NPRM, 88 FR at 77480, Section IX.
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Fourth, several commenters challenged the adequacy of the
Commission's cost-benefit analysis, including the impact of the
proposed rule on consumer understanding and competition, and
assumptions underlying the Commission's analysis. Section VII of the
NPRM contains the Commission's Preliminary Regulatory Analysis,
required under 15 U.S.C. 57b-3(a), setting forth the Commission's
preliminary analysis of the projected benefits and any adverse economic
effects (or other effects) for the proposed rule. The Preliminary
Regulatory Analysis is supported by substantial evidence, that is, it
contains ``such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.'' \48\ The NPRM quantified costs and
benefits where it could, and, where costs and benefits could not be
quantified, the Commission identified assumptions made to reach its
conclusions. If an assumption was needed, the NPRM made clear which
quantities were being assumed. The Commission's preliminary analysis
concluded that there are positive benefits to the proposed rule if the
benefit per consumer is at least $6.65 per year over a 10-year period.
For both quantified benefits and costs, the Commission provided a range
representing the set of assumptions that resulted in a ``low-end'' or
``high-end'' estimate and the $6.65 benefit threshold assumes the high-
end estimate of costs. Ultimately, the Commission's analysis calculated
low-end and high-end estimates of the total quantified economy-wide
costs and the necessary ``break-even benefit'' per consumer.
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\48\ Pa. Funeral Dirs. Ass'n v. FTC, 41 F.3d at 85.
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Several commenters asserted that the Commission failed to consider
potential costs to consumers, suggesting that the proposed rule may
result in consumer confusion and difficulty comparing prices. ACA
Connects argued that the proposed rule ``would increase consumer search
times if CSPs'' opt to ``present consumers with multiple pricing
formats'' or ``forgo providing up-front pricing information'' to comply
with the proposed rule. NCTA similarly raised concerns that the
Proposed Rule could result in businesses omitting pricing information
from advertising, thereby ``undermining the rule's stated goal of
reducing consumers' search time.'' The Chamber argued that there is a
disputed issue of material fact concerning the benefits to consumers of
the proposed rule's `Total Price' requirement, as compared to itemized
disclosures or variable or dynamic pricing models. The Chamber further
suggested that the proposed rule may negatively impact consumers
because it will result in consumer confusion and will impact consumer
access to ``cost-saving discounts and rebates.'' \49\ Gibson Dunn
contended generally that there is a disputed issue of material fact
concerning ``the extent to which the Proposed Rule's substantial costs
outweigh the relatively marginal benefits, given disputes over what
costs the Rule would impose, what benefits it would present, and how
those costs and benefits would be reflected in various industries.''
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\49\ As the Commission indicated in the NPRM, under the proposed
rule, businesses would be free to apply discounts and rebates after
disclosing Total Price. NPRM, 88 FR at 77439, Section V.A. To the
extent that the Chamber is seeking further clarification on the
Commission's understanding of Total Price for consumers that have
provided loyalty or discount membership information, the Commission
appreciates this comment and will give it careful consideration.
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Commenters also questioned the Proposed Rule's impact on
competition. Both ACA Connects and the Chamber argued that a disputed
issue of material fact exists as to the impact of the Proposed Rule on
competition in the marketplace. ACA Connects asserted that if adopted,
the Proposed Rule ``may undermine competition among CSPs by giving an
unfair competitive advantage to larger firms that can afford to expend
the financial resources to take on the legal risk of continuing to
advertise pricing to consumers.'' The Chamber, for its part, suggested
that ``partitioned and drip pricing may have pro-competitive and pro-
consumer justifications'' that the Commission did not consider in its
cost-benefit analysis.
These questions about the Commission's cost-benefit analysis do not
constitute disputed issues of material fact. As noted above, the
legislative history strongly suggests the term ``disputed issues of
material fact'' should be interpreted narrowly and given the same
meaning as in summary judgment.\50\ Further, a challenging party must
demonstrate that there is a bona fide dispute that will affect the
outcome of the rulemaking proceeding.\51\ None of the commenters
provided competing empirical evidence or data to challenge the
Commission's analysis, and instead offered unsupported statements,
predictions about how businesses might respond to the proposed rule, or
general requests for further analysis.\52\ Summarily disagreeing with
the Commission's analysis does not create a material or disputed issue
of fact.
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\50\ See Ass'n of Nat'l Advertisers, Inc. v. FTC, 627 F.2d 1151,
1164 (D.C. Cir. 1979); Kurt Walters, Reassessing the Mythology of
Magnuson-Moss: A Call to Revive Section 18 Rulemaking at the FTC, 16
Harv. L. & Pol'y Rev. 519, 544 (2022).
\51\ See Ass'n of Nat'l Advertisers, 627 F.2d at 1162.
\52\ Gibson Dunn attempts to recreate the Commission's break-
even analysis by modifying the rate firms will pay data scientists
and attorneys to come into compliance with the proposed rule; but
Gibson Dunn offers no contrary evidence to challenge the
Commission's assumptions, other than to say that they are incorrect.
Instead, Gibson Dunn's comment offers a critique of the Commission's
economic analysis, challenging many of the Commission's estimates as
unlikely and contending that the calculations estimating benefits
are too high and the calculations estimating costs too low. The
Commission is reviewing this analysis carefully.
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The Commission reaches the same conclusion with respect to NCTA's
challenge to the NPRM's assumption that 90% of firms (excepting live-
event ticketing, short-term lodging, and the restaurant industry)
already comply with the proposed rule. The NCTA argues that the 90%
assumption is ``inaccurate with respect to the communications industry
and, in turn, likely invalid for the economy as a whole.'' As with
other contentions about the Commission's cost-benefit analysis, NCTA
does not provide any empirical evidence or data challenging the
Commission's assumption.\53\
[[Page 21221]]
Further, the Commission makes plain that this assumption is not
necessarily material to its break-even analysis as any increase to this
number has effects on estimated costs and benefits that largely cancel
each other out.\54\ If the 90% assumption is an overestimate, costs go
up, but so do benefits; if the assumption is an underestimate, costs
and benefits both go down. Thus, NCTA has failed to demonstrate that
the 90% assumption is a disputed issue of specific fact or an issue
that is material for the Commission to resolve.
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\53\ The NPRM contains a break-even analysis, which estimates
the break-even point considering both a 90% existing compliance rate
with the Proposed Rule and a 50% existing compliance rate with the
Proposed Rule. The break-even analysis in the NPRM is specific and
explains the Commission's reasoning. Additionally, while the
Commission is not required to comply with OMB Circular A-4, the
NPRM's break-even analysis is consistent with OMB guidance. Such
break-even analyses are accepted practice by OMB, particularly where
``non-monetized benefits and costs are likely to be important.'' OMB
Circular A-4 at 47-48. (Nov. 9, 2023). Moreover, the assumptions
underlying the break-even analysis are precisely the kind of
legislative facts ``involving expert opinions and forecasts, which
cannot be decisively resolved by testimony.'' Ass'n of Nat'l
Advertisers, 627 F.2d at 1162 n.22 (``Because legislative facts
combine empirical observation with application of administrative
expertise to reach generalized conclusions, they need not be
developed through evidentiary hearings.'').
\54\ NPRM, 88 FR at 77452, Section VII.C.2.f.(2) Break-Even
Analysis of Economy-Wide Costs and Benefits.
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Finally, NCTA identifies as a disputed issue of material fact
whether ``reasonable consumers expect the `total price' `exclusive of
government charges' to exclude only government charges imposed directly
on consumers?'' \55\ NCTA posits that the ``NPRM makes inherent
assumptions about the fees or government charges a reasonable consumer
would expect to be included or excluded in the Total Price for a good
or service.'' Record evidence supporting the NPRM demonstrates
consumers believe all mandatory charges should be reflected in the
total price, in many instances specifically including taxes.\56\
Nevertheless, the Commission's basis for its proposed Government
Charges definition was to ensure that all mandatory charges are
reflected in the Total Price, including ``amounts that the government
imposes on a business and that the business chooses to pass on to
consumers,'' to prevent a business from ``artificially inflating taxes
that are excluded from the Total Price.'' The proposed rule does not
prohibit itemization and businesses are free to itemize all government
charges or other fees that the Total Price comprises. NCTA also gives
the view that other regulatory pricing requirements have made different
determinations regarding government charges. The Commission appreciates
NCTA's comparisons and will consider them in its continued analysis of
how the proposed rule interacts with other rules and regulations.
Again, however, these are questions of law and legislative fact, not
specific facts.
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\55\ NCTA, Cmt. on NPRM at 32.
\56\ NPRM, 88 FR at 77430-31 n.124.
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Thus, the Commission finds that there are no ``disputed issues of
material fact'' to resolve at the hearing \57\ and no need for cross-
examination or rebuttal submissions.\58\
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\57\ If any interested person seeks to have additional disputed
issues of material fact designated, the person may make such request
to the presiding officer pursuant to 16 CFR 1.13(b)(1)(ii).
\58\ 16 CFR 1.12(b).
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This initial notice of informal hearing also serves as the ``final
notice of informal hearing.'' \59\ A final notice of informal hearing
is limited in its substance to matters that arise only when the
Commission designates disputed issues of material fact: who will
conduct cross-examination; whether any interested persons with similar
interests will be grouped together for such purposes; and who will make
rebuttal submissions.\60\ Because cross-examination and submission of
rebuttal evidence are not anticipated to occur in this informal
hearing, no separate final notice of informal hearing is necessary.
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\59\ 16 CFR 1.12(c).
\60\ Id.
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IV. List of Hearing Participants; Making an Oral Statement; Requests
for Documentary Submissions
Pursuant to Commission Rule 1.12(a)(4), 16 CFR 1.12(a)(4), the
following is the list of interested persons (``Hearing Participants'')
who will have the opportunity to make oral presentations at the
informal hearing:
1. ACA Connects--America's Communication Association
2. American Bankers Association and Consumer Bankers Association
3. U.S. Chamber of Commerce
4. NCTA--The Internet & Television Association
5. International Franchise Association
6. BattleLine LLC
7. IHRSA, the Global Health and Fitness Association
8. National Taxpayers Union Foundation
9. The coalition of 52 national and state consumer advocacy groups
represented by the Consumer Federation of America
10. National Consumer Law Center (``NCLC'') on behalf of its low-income
clients
11. National Association of Consumer Advocates
12. The coalition of 33 health and consumer protection advocacy groups
represented by Community Catalyst
13. The coalition of 39 housing justice advocacy organizations
represented by the National Housing Law Project
14. Prison Policy Initiative, and Stephen Raher
15. Formerly Incarcerated, Convicted People and Families Movement
16. Truth in Advertising, Inc.
17. Fair Price, Fair Wage Coalition
Oral statements will be limited to 15 minutes, although they may be
supplemented by documentary submissions as described below, and the
presiding officer may grant an extension of time for good cause shown.
Transcripts of the oral statements will be placed in the rulemaking
record. Hearing Participants will be provided with instructions as to
how to participate in the virtual hearing.
If you are a Hearing Participant and would like to submit your oral
presentation in writing or file a supplementary documentary submission,
please write ``Unfair or Deceptive Fees Rule (16 CFR part 464)
(R207011)'' on your submission and send it electronically to
[email protected], with a copy to [email protected]. If you prefer
to file your submission on paper, mail it to the following address:
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania
Avenue NW, Mail Stop H-144 (Annex J), Washington, DC 20580. If
possible, please send your paper submission to the Commission by
overnight service.
If you file a documentary submission under this section, your
submission--including your name and your state--will be placed on the
public record of this proceeding, including on the website https://www.ftc.gov. Because your documentary submission will be placed on the
public record, you are solely responsible for making sure that it does
not include any sensitive or confidential information. In particular,
your submission should not contain sensitive personal information, such
as your or anyone else's Social Security number; date of birth;
driver's license number or other state identification number or foreign
country equivalent; passport number; financial account number; or
credit or debit card number. You are also solely responsible for making
sure your documentary submission does not include any sensitive health
information, such as medical records or other individually identifiable
health information. In addition, your documentary submission should not
include any ``[t]rade secret or any commercial or financial information
which . . . is privileged or confidential''--as provided in section
6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 4.10(a)(2),
16 CFR 4.10(a)(2)--including, in particular, competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices,
[[Page 21222]]
manufacturing processes, or customer names.
Documentary submissions containing material for which confidential
treatment is requested must be filed in paper form, must be clearly
labeled ``Confidential,'' and must comply with Commission Rule 4.9(c),
16 CFR 4.9(c). In particular, the written request for confidential
treatment that accompanies the submission must include the factual and
legal basis for the confidentiality request and must identify the
specific portions to be withheld from the public record. See Commission
Rule 4.9(c). Your documentary submission will be kept confidential only
if the General Counsel grants your request in accordance with the law
and the public interest. Once your documentary submission has been
posted publicly at https://www.ftc.gov--as legally required by
Commission Rule 4.9(b), 16 CFR 4.9(b)--we cannot redact or remove it,
unless you submit a confidentiality request that meets the requirements
for such treatment under Commission Rule 4.9(c), 16 CFR 4.9(c), and the
General Counsel grants that request.
Visit the FTC website to read this document and the news release
describing it. The FTC Act and other laws that the Commission
administers permit the collection of submissions to consider and use in
this proceeding as appropriate. The Commission will consider all timely
and responsive documentary submissions it receives from the Hearing
Participants on or before April 10, 2024. For information on the
Commission's privacy policy, including routine uses permitted by the
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.
Hearing Participants who need assistance should indicate as much in
their submissions, and the Commission will endeavor to provide
accommodations. Hearing Participants without the computer technology
necessary to participate in video conferencing will be able to
participate in the informal hearing by telephone; they should indicate
as much in their submissions.
V. Conduct of the Informal Hearing; Role of Presiding Officer
The Commission's Chief Presiding Officer, the Chair, has appointed
and designates Administrative Law Judge for the Federal Trade
Commission, the Honorable Jay L. Himes, to serve as the presiding
officer of the informal hearing. Judge Himes will conduct the informal
hearing virtually using video conferencing starting at 10 a.m. Eastern
on April 24, 2024. The informal hearing will be available for the
public to watch live from the Commission's website, https://www.ftc.gov, and a recording or transcript of the informal hearing will
be placed in the rulemaking record.
Because there are no ``disputed issues of material fact'' to
resolve at the informal hearing, the presiding officer is not
anticipated to make a recommended decision.\61\ The role of the
presiding officer shall include presiding over and ensuring the orderly
conduct of the informal hearing, including selecting the sequence in
which oral statements will be heard, placing the transcript and any
additional written submissions received into the rulemaking record. The
presiding officer may prescribe additional procedures or issue rulings
in accordance with Commission Rule 1.13, 16 CFR 1.13. In execution of
the presiding officer's obligations and responsibilities under the
Commission Rules, the presiding officer may issue additional public
notices.
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\61\ See 16 CFR 1.13(d) (``The presiding officer's recommended
decision will be limited to explaining the presiding officer's
proposed resolution of disputed issues of material fact.'').
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VI. Communications by Outside Parties to the Commissioners or Their
Advisors
Pursuant to Commission Rule 1.18(c)(1), 16 CFR 1.18(c)(1), the
Commission has determined that communications with respect to the
merits of this proceeding from any outside party to any Commissioner or
Commissioner advisor shall be subject to the following treatment.
Written communications and summaries or transcripts of oral
communications shall be placed on the rulemaking record if the
communication is received before the participation deadline. They shall
be placed on the public record if the communication is received later.
Unless the outside party making an oral communication is a member of
Congress, such communications are permitted only if advance notice is
published in the Weekly Calendar and Notice of ``Sunshine''
Meetings.\62\
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\62\ See 15 U.S.C. 57a(i)(2)(A); 16 CFR 1.18(c).
By direction of the Commission.
April J. Tabor,
Secretary.
[FR Doc. 2024-06468 Filed 3-26-24; 8:45 am]
BILLING CODE 6750-01-P
