Remarks as Prepared for Delivery by NEC Director Lael Brainard on the Economic Case for Junk Fees Policies

Hello everyone and welcome to today’s panel discussion on the economic case for why the President is taking on junk fees on behalf of working Americans.  Excited to hear from our great group of panelists.

Junk fees are those sneaky fees that are hidden from consumers when they are shopping for the best price, and sneak up on them when they have already made up their mind and are about to make payment.  Each year, “junk fees” cost Americans tens of billions of dollars. Junk fees hit the most vulnerable Americans the hardest.

They can take hundreds of dollars a month out of the pockets of hard-working families and undercut honest transparent price competition in many markets. That’s why the President has called for action to crack down on junk fees in his State of the Union address and at the Competition Council over the last 12 months.

According to recent surveys, junk fees is an area where 75 percent of the American people regardless of party lines want us to act. 

But junk fee regulation isn’t just popular, and it isn’t just a real cost savings for millions of families at a time when every dollar counts – it’s also smart economics.  Regulating junk fees by leveling up the playing field has a strong foundation in decades of economic scholarship.  Junk fees weaken competition, penalize honest businesses that want to be transparent up front about the all-in price, and lead to a race to the bottom.

I cannot think of a better set of panelists to explain the economic case against junk fees.  They have written some of the central papers on deceptive pricing and how junk fees harm competition – and have real world experience in trying to price in a fair and transparent manner while others are hiding the ball and in leveling up the playing field so businesses who are doing the right thing are not undercut.

We’ll hear from David Laibson, a renowned economist, on how junk fees undermine markets by weakening and distorting competition, imposing the largest burden on the most vulnerable households.  

We’ll hear from Vicki Morwitz, an eminent psychologist and behavioral scientist, on how common pricing practices – such as drip pricing and partitioned pricing – deceive and confuse consumers about the actual cost of what they’re buying.

We’re joined by Bill Kovacic who was a member and Chair of the Federal Trade Commission during the George W. Bush Administration and Chair. He will speak to the long bipartisan history of scrutinizing junk fees, including at the FTC during the administration of President Bush.

Finally, we’re going to hear from Laura Dooley from Stubhub, who will speak to her company’s efforts to introduce up front, all-in ticket pricing in 2015, breaking away from the industry standard of dripping in those fees through the purchasing process. She’ll explain how her company lost out when they acted alone, and how government junk fee regulation can solve this collective action problem by creating one standard and a level playing field for the ticket seller industry.

I am pleased that a number of businesses are already taking action to provide customers with transparency and get rid of junk fees. The Consumer Financial Protection Bureau increased its oversight of banks’ reliance on junk fees in late 2021, leading 15 of the 20 largest banks to end bounced check fees.  This month, the Department of Transportation launched a dashboard comparing family seating fee policies of major airlines.  I am pleased to see that American, Alaska, and Frontier airlines have all made commitments to provide fee-free family seating, and United has taken initial steps to improve their policy.

Many of you have played an integral role in these actions and are doing more work to address some of the most pervasive junk fees in your sectors.

We have representatives in the room today from sixteen agencies, including The Department of Transportation, Consumer Financial Protection Bureau, Federal Trade Commission, Federal Communications Commission, and Department of Housing and Urban Development. I want to say thank you for all the work you’ve been doing to crack down on junk fees in your industries and excited for this conversation to provide us all with more information to be maximally creative and forward thinking as we work on this issue.

And with that, I will pass it off to Michael Negron and Neale Mahoney who have been leading this work at the NEC to facilitate the panel discussion.

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