The government wants to toss ‘junk fees’ in the garbage

Consumer advocates in both Canada and the United States are welcoming recent announcements to crack down on the hidden and unexpected charges on purchases that Canadians often pay, but they also say authorities must enforce existing rules for there to be a difference.

Following in the footsteps of American lawmakers, the federal Liberals announced that they will be taking a look at the additional fees that are often paired with purchases of items such as concert or event tickets.

In the federal budget released in late March, a small note referring to “junk fees” said the government plans to work to reduce those charges for Canadians.

According to officials with the Department of Finance, Ottawa could use existing or new legal tools for these reductions.

“We will strengthen existing tools or create new ones, including through new legislative amendments, to crack down on junk fees and help make life more affordable for Canadians,” spokesperson Adrienne Vaupshas said in a statement to CBC News.

Fees come with artificially low prices

The federal government gave few details in its budget but said the targeted fees could include “higher telecom roaming charges, event and concert fees, excessive baggage fees, and unjustified shipping and freight fees.”

That description matches how Jon Schwantes, senior policy counsel with Consumer Reports in Washington, D.C., defines junk fees.

“It has to be a mandatory fee,” said Schwantes, who works on research and advocacy concerning junk fees in the United States.

According to Schwantes, these fees are a way companies can advertise artificially lower prices, by hiding part of the cost as a separate fee that appears only later in the transaction.

As an example, he cited a mandatory, surprise resort fee being added to a hotel reservation after you arrive at your destination.

“So if the room rate is $200, but you’re paying a $40 resort fee and it’s mandatory, the cost of your room is $240,” he explained in an interview with CBC Radio’s The Cost of Living.

Schwantes also pointed out how concertgoers often experience such fees.

“You’re sitting there at the end of your adventure online trying to buy tickets to Taylor Swift, and you’re, like, do I pay the extra $40 convenience fee for the ticket, or do I not go to the show?” he said.

[Companies] get to advertise low prices, and they make billions of dollars off [fees]. – Jon Schwantes, Consumer Reports

He added that consumers who wish to attend events are often a “captive audience” when it comes to these fees.

Event sales giant Ticketmaster did not respond to an emailed request for comment on its fees.

Consumers left to enforce law, advocate says

According to the Consumers Council of Canada, the problems around junk fees don’t require additional legal intervention but increased enforcement of existing rules.

“There’s legislation on the books,” executive director Ken Whitehurst said.

He said his non-profit organization believes that watchdog organizations — including various provincial regulators and the federal Competition Bureau — don’t have enough resources dedicated to policing violations of laws around pricing and transparency.

“The problem is there’s no oversight and enforcement, and it’s being left to consumers to enforce consumer protection law and competition law for themselves,” Whitehurst said.

As prices for many things have increased due to inflation, he said, he believes consumers are now noticing junk fees added to their bills even more.

Competition Bureau aware of ‘drip pricing’

For its part, the federal Competition Bureau points out it has been and remains on top of these types of fees, which it refers to as “drip pricing.”

“Drip pricing is considered to be false or misleading under the law we enforce, unless the additional fixed charges or fees are imposed by the government, such as sales tax,” bureau spokesperson Marcus Callaghan said.

Amendments to the Competition Act in the summer of 2022 made it explicitly illegal for products or services to be offered at prices a consumer could not actually take advantage of, “because consumers must also pay additional non-government-imposed charges or fees to buy the product or service.”

Even before that, in 2019, the Competition Bureau investigated and levied $4.5 million in penalties against Ticketmaster for misleading pricing claims.

Junk fees legislation proposed in U.S.

South of the border, U.S. politicians are further ahead than their Canadian counterparts, with the introduction of the Junk Fee Prevention Act in March by a Democratic and a Republican senator. The proposed legislation is not yet law and could face hurdles as it moves through the U.S. political process.

Its introduction followed a call by U.S. President Joe Biden in his State of the Union address on Feb. 7 for lawmakers to pass legislation on hidden surcharges — although consumer advocates like Jon Schwantes note that in addition to legislation, U.S. government agencies must be engaged on the issue.

Schwantes cited the Federal Trade Commission and the Federal Communications Commission as examples.

In Canada, the federal government has said more details on its actions can be expected in the fall of 2023, and that while new legislation could be tabled if necessary, it will also work with agencies such as the Competition Bureau.

Other regulators could also be involved, such as the Canadian Radio-television and Telecommunications Commission on telecom fees.

Schwantes said he thinks companies are likely to oppose any crackdowns.

“Make no mistake, all of these industries have their trade associations. And I don’t know what it’s like in Ottawa, but I can tell you in D.C. they will rally to fight any effort to get rid of what they perceive as a moneymaker,” said the Consumer Reports advocate.

“You know, that’s what these fees are. They get to advertise low prices, and they make billions of dollars off them.”

U.S. senators tell Ticketmaster execs: You’re the problem

Ticketmaster executives were grilled by U.S. senators at a hearing about the lack of competition in the ticketing industry after the company’s problems managing the sale of tickets for Taylor Swift’s upcoming concert tour.