Mitigating Litigation Risks From “Junk Fee” Class Actions

The past two years have seen an expansion of federal and state regulatory and enforcement efforts concerning so-called “junk fees” or “hidden fees,” which are mandatory fees that a company fails to include in the initial displayed price for a good or service. These efforts have been accompanied by an increasing number of class action lawsuits against companies across various industries. With the increased regulatory focus on “junk fees,” as well as the slate of private plaintiff lawsuits attacking the same, companies should be proactive in reviewing their own pricing policies to ensure compliance with federal and state laws. This is a quickly shifting area of the law, which requires increased vigilance by companies.

FTC Rule on Unfair or Deceptive Fees Introduced a Sector-Specific Fee Disclosure Rule

At the federal level, the Federal Trade Commission (FTC) promulgated its “Rule on Unfair or Deceptive Fees” targeting “junk fees” on December 17, 2024. The rule went into effect on May 12, 2025, and it targets so-called bait-and-switch pricing and other tactics that allegedly hide total prices and bury “junk fees” in the live-event ticketing and short-term lodging industries.¹ Specifically, for these industries, the Rule prohibits: (1) failing to disclose clearly and conspicuously the “true total price inclusive of all mandatory fees” charged whenever a business “offer[s], display[s], or advertise[s] any price;” (2) failing to display the total price “more prominently” than “most other pricing information”; (3) misstating the cost or fees; and (4) misstating the identity of any good or service offered.

The FTC Rule requires covered businesses to prominently disclose total prices upfront before asking for payment and to explain any fees or charges included.² Although the Rule’s final reach was narrowed to the live-ticketing and short-term lodging industries, from its initial wider range of businesses including restaurants, food delivery services, and transportation services, the FTC has made clear that it also views similar pricing practices in other industries as problematic.³ In the immediate aftermath of the adoption of the Rule, the FTC issued a Warning Letter to StubHub regarding its allegedly deceptive, hidden fees practices.⁴

Signaling its intent to expand the rule to other sectors, just two weeks ago, on March 13, 2026, the FTC issued an Advance Notice of Proposed Rulemaking (ANPRM) targeting unfair and deceptive housing fee practices, with a particular focus on fees that may obscure the true cost of rental housing from application through move-out.⁵ On the same day, the FTC announced that it was seeking comments on an ANPRM concerning the agency’s Rule Concerning the Use of Prenotification Negative Option Plans (Negative Option Rule).⁶ Negative options represent a common form of marketing in which the absence of affirmative consumer action is considered consent to be charged for goods and services.⁷ The Commission is currently seeking comments on the extent to which businesses market products and services using negative options and how these negative options operate, as well as on specific ways to address unfair and deceptive negative option practices.⁸ The FTC also recently issued warning letters to 97 auto dealers about their alleged deceptive pricing practices.⁹ These developments are consistent with the FTC’s push for pricing transparency and ongoing scrutiny of deceptive fee practices that started with the Rule on Unfair and Deceptive Fees.

State Fee Disclosure Laws Expand Coverage to Other Industries

Amidst the FTC rulemaking in this area, states like California, Minnesota, Massachusetts, Colorado, and Virginia have taken expansive parallel action, often expanding to sectors beyond those covered by the federal analogue. These states have enacted laws modeled on the FTC Rule, with common traits of requiring prominent total price advertising, disclosures of refund policies, and often including a catchall prohibition related to misrepresentations.¹⁰

California was one of the first movers in this area. California SB 478, or the Honest Pricing Law or Hidden Fees statute, went into effect on July 1, 2024.¹¹ This cross-sectoral legislation amended the California Consumers Legal Remedies Act (CLRA) by including as a prohibited act “advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges” other than certain government-imposed fees or postage and carrier charges.¹² The law is intended to prohibit “drip pricing,” which involves advertising a price that is less than the price that a consumer will have to pay for a good or service.¹³ The law allows consumers to bring an action against businesses to recover or obtain various forms of relief, including actual damages or a minimum of $1,000 per violation in class actions, restitution, punitive damages, injunctive relief, and attorney’s fees and costs.¹⁴

Minnesota, Massachusetts, Colorado, and Virginia passed similar laws taking effect at different times in 2025, though each has slightly different exemptions, disclosure requirements, and enforcement provisions. Although many states like Illinois, Florida, and North Carolina introduced similar bills and regulations, they have not yet been passed or promulgated. We can expect to see more state laws targeting “junk fees” in the coming years, with a likely increase in class action lawsuits attacking “junk fees” in a wide range of industries. In contrast to the FTC rule, state laws are not limited to certain sectors and thus offer a broader reach.

Practical Impact: A Wave of Litigation

The federal and state regulatory momentum has prompted a wave of new litigation, including both state enforcement actions (often in collaboration with the FTC) and private lawsuits.

Once the FTC’s rule went into effect in May 2025, class action lawsuits invoking the new regulation were quick to follow. Plaintiffs have used the FTC rule at times to bolster state law claims challenging deceptive pricing practices. For example, a Pennsylvania class action lawsuit against live-event ticketing service charges proceeded under state law causes of action while invoking the rationale and persuasive authority of the FTC rule.¹⁵

Other examples of recent “junk fee” class actions include ones against World Market, Chipotle Mexican Grill, Vince Camuto, Festival Fun Parks, and Olly’s, among others.¹⁶ More lawsuits are likely to follow in the coming years. Further, even where state statutes do not expressly create a cause of action for “junk fee” claims, plaintiff’s attorneys have frequently brought claims under states’ expansive “mini-FTC Acts,” which broadly prohibit unlawful, unfair, or deceptive trade practices. These claims are increasingly asserted both in court and in consumer arbitrations.

Mitigation Strategies

Given the federal and state regulatory efforts in this area, and the crackdown by the FTC, state attorneys general, and private plaintiffs against so-called “junk fees,” consumer-facing businesses should carefully consider how to approach pricing their goods and services to reduce the risk of being accused of unlawful conduct. Consequently, businesses should review their current pricing practices and any future pricing strategies to ensure compliance with the FTC Junk Fees Rule and applicable state law, particularly given that almost any state law “mini-FTC Act” addressing unfair trade practices or consumer protection could apply. Some best practices to consider include:

• Clearly disclose all mandatory fees upfront to prevent any hidden charges;
• Avoid use of separate line items or percentage fees that are not optional or contingent for customers;
• Ensure consistency and accuracy of price statements across all platforms and channels, including third-party sellers;
• Conduct regular audits to uncover any hidden or unnecessary fees;
• Consider specialized training to customer-facing teams to ensure clear communication regarding pricing to customers; and
• Adjust checkout processes and landing pages to ensure transparent fee disclosures and compliance with applicable legal requirements.

Companies should continue to monitor federal and state laws governing disclosures to ensure compliance, while being mindful that this is a rapidly shifting legal landscape consisting of a patchwork of legislation, rules, and practices.

Footnotes

1. Federal Trade Commission Announces Bipartisan Rule Banning Junk Ticket and Hotel Fees, Fed. Trade Comm’n, December 17, 2024, https://www.ftc.gov/news-events/news/press-releases/2024/12/federal-trade-commission-announces-bipartisan-rule-banning-junk-ticket-hotel-fees.

2. The Rule on Unfair or Deceptive Fees: Frequently Asked Questions, FED. TRADE COMM’N, https://www.ftc.gov/business-guidance/resources/rule-unfair-or-deceptive-fees-frequently-asked-questions#businessescovered.

3. Federal Trade Commission Announces Bipartisan Rule Banning Junk Ticket and Hotel Fees, supra note 1.

4. Federal Trade Commission, Warning Letter, May 14, 2026, https://www.ftc.gov/system/files/ftc_gov/pdf/stubhub-wl.pdf.

5 Rule on Unfair or Deceptive Housing Fee Practices, A Proposed Rule by the Federal Trade Commission, March 13, 2026, https://www.federalregister.gov/documents/2026/03/13/2026-04907/rule-on-unfair-or-deceptive-rental-housing-fee-practices.

6. Federal Trade Commission, FTC Seeks Public Comment in Response to Advance Notice of Proposed Rulemaking Regarding Negative Option Marketing Practices, March 11, 2026, https://www.ftc.gov/news-events/news/press-releases/2026/03/ftc-seeks-public-comment-response-advance-notice-proposed-rulemaking-regarding-negative-option

7. Id.

8. Id.

9. Trump Administration Focuses New Consumer Protection Efforts on “Made in America” Advertising Claims and Alleged Deceptive Pricing Practices, March 24, 2026, JD Supra, https://www.jdsupra.com/legalnews/trump-administration-focuses-new-4348765/.

10. Donnelly L. McDowell & Beth Bolen Chun, “Junk Fee” Legislative Roundup – 2025 Edition, Kelley Drye, March 13, 2025, https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/junk-fee-legislative-roundup-2025-edition.

11. State of California Department of Justice, SB – 478 – Hidden Fees, https://oag.ca.gov/hiddenfees.

12. SB 478, https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB478

13. SB 478 Section (1) (a).

14. State of California Department of Justice, SB – 478 – Hidden Fees, https://oag.ca.gov/hiddenfees.

15. Jonas v. Center Stage Comedy, 2:25-cv-02698 (E.D. Pa. May 28, 2025) (alleging violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, the Missouri Merchandising Practices Act, the Indiana Deceptive Consumer Sales Act, and Unjust Enrichment under Pennsylvania, Missouri, and Indiana Common Law).

16. Harvey v. World Mkt., LLC, No. 25-CV-01242-CRB, 2025 WL 1359066, at *2 (N.D. Cal. May 9, 2025) (alleging violations of California law); Hudson Gill et al., v. Chipotle Mexican Grill Inc., No. 8:24-CV-01672 (alleging violations of California law); Scott, et al. v. Camuto IPCo, LLC, No. 2:25-CV-03446-AB (alleging violation of California law); Linders v. Festival Fun Parks, LLC, 3:25-cv-00659 (D. Conn. Apr. 25, 2025) (alleging violations of Connecticut law); Poore v. Unilever United States, No. 4:25-CV-04294-JST (alleging violations of federal guidance and California law).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.