Mark Pestronk
Q: Quite often, clients of our agency see misleadingly low cruise, hotel and car rental ads online or in print. Then we have to tell them that the actual price includes lots of mandatory fees, charges, supplements and taxes. In some cases these extras add up to 50% of the advertised price. I thought that the Federal Trade Commission (FTC) wanted to outlaw such advertising practices, which President Biden calls "drip pricing." Why can't or won't the government do what it already has done for airline travel, where the advertised price must be the total price?
A: The FTC is still considering a proposed rule. Meanwhile, California has enacted a law banning "junk fees," which will be effective July 1. The law is an amendment to the California Consumers Legal Remedies Act (CLRA).
The CLRA applies not only to companies in California but also to companies outside the state that advertise to California consumers. Since that includes every travel supplier, California has effectively jumped out ahead of the federal government nationwide.
Needless to say, the law will also apply to travel agencies and tour operators that advertise to, solicit or make offers to Californians. It will apply regardless of whether you are registered under California's seller of travel law.
The new law makes it illegal to advertise, display or offer "a price for a good or service that does not include all mandatory fees or charges other than ... taxes and fees imposed by a government" and "reasonably and actually incurred" postage or shipping charges. Since travel services involve no postage or shipping charges, the law means that the travel seller must disclose all the fees and charges in an ad or offer, except for taxes and fees imposed by a government agency.
The law is similar to the DOT's full-price rule for airfares, which has been in effect for a decade. Both require that ads quote the total price that includes all fees and taxes; an ad that states the fees and taxes separately without first stating the total is illegal.
The DOT rule also applies to packages that include air as a mandatory component, so such packages that also include hotel, resort or car must follow the DOT rule, even if California would let you state fees and taxes separately. On the other hand, the California law lets consumers sue violators for damages, whereas the federal law does not allow private suits.
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UPDATE: My Jan. 15 Legal Briefs column, "A new hurdle for small businesses to clear," covered the new federal Corporate Transparency Act, which requires businesses with fewer than 20 employees file a list of "beneficial owners" with the Financial Crimes Enforcement Network no later than Jan. 1, 2025. In early March, a federal judge held that the law is "unconstitutional because it cannot be justified as an exercise of Congress' enumerated powers." The government has appealed, and experts caution that the deadline shouldn't be ignored.
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Correction, June 28: A previous version of this article stated that the California law "does not require a total" in an ad or a quote, as long as you include all the fees other than taxes. However, a Q&A published by California's Attorney General states that the price must be the "total price" other than taxes. So, you can't just say, "the price is $300 (plus a $35 resort fee)", but you can say, "the price is $335 (including a $35 resort fee)".