consumers

testify the -- before senate commerce, science, and transportation subcommittee. >> a call this order. welcome. this is our first hearing this congress of a subcommittee on consumer protection, product safe, and data security.

-- obviously, so much more. with every step you take, you are always going to try to keep hard-working americans living

their lives. making sure that as consumers they are first in our mind. today we are going to discuss increasing price transparency for consumers within the marketplace, written broadly. we all know junk fees can be frustrating for consumers when they shop for products and services. they raise costs and create confusion. what does a junk fee look like? how does it feel? simply put, these are disclosed to a consumer when way -- midway or at the end of a transaction. they serve no tangible purpose for a consumer like a processing fee and are mandatory or unavoidable. the council of economic advisors has found junk fees limit the ability of consumers to

comparison shop between service providers and reduce competition between merchants. companies need to give consumers the transparency they deserve when they shop for goods or services. it allows consumers to receive the total price from the get-go so they do not feel deceived. it allows for the consumer to see additional service charges that add the overall price of front -- upfront so they are not to midway or at the end of a transaction when they find out about it. we have a common example of purchasing a ticket for an event. on the first row, the ticket price displayed is $140. there is no way to understand what the fees are until you go through the checkout process. anyway, here we see an example

of how upfront transparency looks. all the fees are listed below the actual ticket price. compared to the first example. imagine trying to buy tickets for a family of six and the total cost ends up being almost $200 more than advertised. here is an example. total upfront pricing where you will pay at checkout whereas it is displayed before you select the ticket. this way consumers have a crystal-clear price they will pay for the product or service at checkout and not a penny more. last month, we had the pleasure of discussing methods to increase price transparency for consumers. today we are going to continue this conversation by hearing from our witness panel.

i hope and believe this will continue that effort. by working together, we can fairly promote the upfront all in pricing across all sectors. bipartisan legislation has been introduced to increase price transparency for consumers in certain sectors. surely more legislation is on the horizon. senators will have the chance to discuss that today. as a small business, i understand firsthand --. small businesses live and breathe on fair competition to keep the lights on and deliver what customers desire. today, large companies market the advantage to force customers to pay fees that they were not expecting or are simply

unavoidable. consumers pocket and small businesses suffer as a result. these businesses need to play by the same rules to create a level business field that gives everyone the chance to compete fairly. as our economy continues to recover from the pandemic, we need to ensure american consumers have the information to make every dollar count. let's be clear what this is not about. it is not about setting up prices or services or telling companies how they should operate their business. i would like to welcome each of our witnesses who will join us today. sally greenberg, the ceo for the national consumers. professor law of george mason university, and on zoom, borowitz, professor of business at columbia.

i now recognize ranking member blackburn for her opening remarks. >> thank you mr. chairman. i am so pleased you are having our first hearing. i really look forward to working with you on issues where we have so much agreement. the safety act, data privacy, data security, artificial intelligence and preventing the sale of dangerous and counterfeit products online. we discussed previously -- i was surprised by the administration and now, this committees focus on so-called "junk fees. when i am in tennessee, the economy is what is at the top of this list. people are not talking about junk fees but they are talking

about the price at the gas pump, the grocery store, how high these electric bills are going, and they are concerned about skyrocketing inflation on the basket of goods that they purchase and use every single day. they are worried about the out-of-control spending. the debt deal was very unpopular in tennessee because it does not rein in what this government and this administration is spending. american families, tennessee families, want answers to those problems. they really do not want to hear bureaucrats in washington or legislators discussing resort fees and food delivery fees for doordash or over eats -- uber eats.

the way i look at this issue and the way many tennesseans look at it as this is another way for the ftc, the co tb, dot and other regulators to clamp down on businesses and try to micromanage businesses. are these fees annoying? absolutely. that should companies be more transparent in how they bring these forward? absolutely. they should do that. and consumers themselves should be more willing to walk away and use only businesses that are operating on the up and up and are going to disclose these fees. but you have to remember this. these are not monopolies. these are hotels, airlines,

banks, and online retailers. competition matters to these companies. we see this competition making an impact on the marketplace every single day. thank you to our witnesses. i am looking forward to a good and friend discussion today. i appreciate you getting your testimony in in a timely manner. >> thank you senator blackburn. now you can look forward to -- let each of our witnesses do their introductory remarks. let's start with vicki morwitz, a professor of business at columbia business school. you are on. >> thank you. good morning. my name is vicki morwitz.

i am a professor of marketing at columbia business school and columbia university. thank you for inviting me to testify on the issue of protecting consumers from junk fees. i look at how consumers process junk fees and surcharges. i have discussed this research in my classes and have given recent seminars around the world. in my testimony, i will discuss two practices i settled -- i studied in depth. position pricing and debt pricing. academic research makes clear that consumers make poor decisions when firms only include pricing. we defined this pricing as a strategy where firms decide to divide a price into two mandatory prices. the product and then the mandatory fees. any hotels put a mandatory fee

on top of the daily room rate. these are sometimes called destination fees and can range from $25 to $50 a night. for many rental car fees, it goes over the daily car rate like a vehicle licensing fee. pricing has shown that when firms separate out mandatory surcharges, consumers tend to underestimate the price they have to pay and are more likely to complete the purchase. even when the surcharges are disclosed, the detrimental effects are larger when the charges are hidden in the small print and they are made larger for consumers to process. michael authors and i have studied a relationship pricing strategy called -- my co-authors and i have stated a relation pricing strategy. this can be mandatory or for

optional items before today's testimony, will focus on the mandatory surcharges. search pricing is used in the cable industry and to could -- and ticketing industry. from a cable provider, they may be offered an attractive price for the bundle but learned there are broadcast fees, tv connection fees, and more that raise the price significantly. and consumers shopping for live events like a consort, play or baseball game -- consort, play, or baseball game they come to learn there is a mandatory booking fee, ticketing fee, and delivery fee even when they are electronic. eventually they see a total price that may be much higher than the initial price they saw and they may be under pressure to complete the purchase as there may be a countdown clock or they may be told there are

only two seats left at that price. when surcharges are added, consumers may buy a product that appears cheaper at front. consumers also tend to buy more expensive products than they otherwise would such as a feed closer to the stage for a live event. these effects happen even when consumers are given the total price at the final transaction before they complete their purchase. while they can cancel their purchase, they often don't because they tend to overestimate the cost of restarting the search and underestimate the benefits of doing so. it is not enough to show the total price to avoid the effects of drip pricing. these effects do not go away with purchase experience. repeat ticket buyers are still affected by this. it is not because consumers are stupid or careless. in general, consumers try to

make good decisions for themselves and their family but pricing practices take advantage of the fact us consumers have a lot going on in our lives. we are busy and can be distracted and may not notice or appropriately consider all information, especially when it is hidden in small print, presented in of skier language, or dripped late in the process -- in obscure language, or drift late in the process. they may make choices that do not reflect their true desires but the research on these practices makes clear that consumers benefit when all-inclusive, upfront pricing is used rather than later or disclosed in multiple parts. as a scholar who has studied this for decades and knows how this can be detrimental to consumers, i advocate that policy be promoted that addresses the dripping of

surcharges like you commonly see in many industries. these policies will benefit consumers if they require upfront prices must be all-inclusive and all mandatory fees must be included in the total price and the total price should be seen upfront. this will be most beneficial to consumers. thank you for the opportunity to appear today. i am happy to answer any questions you may have. >> i appreciate you taking the time to be with us. next, todd zywicki, professor of law at george mason law school. >> mr. chairman, ranking member blackburn, it is a pleasure to be with the today. i have run into junk fees myself. i know what the instinct is. i got tricked into these on a vacation in florida a little while back. i understand what is going on here. the most important thing is to keep in mind the situations under which this can be a

problem and the situations where it is not. i want to briefly make three points. the first is to talk about the situations in which this can occur and second talk about the more generalized situation in which multipart pricing is efficient, and prevents cross consumer subsidies and inefficiencies in pricing, and third, situations in which regulation itself is the cause of a proliferation of fees and can harm consumers. let's talk first about when there can be market failure when this can happen. we just heard from professor vicki morwitz of surcharge pricing but this primarily happens in particular context where we have nonrepeating consumers who do not learn over time and situations where they do not have an alternative. an obvious example is mandatory

fees like resort fees. i booked online, showed up at the hotel, and at the last page at some point among the list of costs was a $30 resort fee. i had to whip out my credit card when i got there but i thought i had prepaid. if it is a mandatory fee, it should be presumptively part of the overall price, not something broken up. ticket fees, i agree completely. those sorts of things. even though you know there will be a fee on the backend, you have to click through six screens to find out what it will be. as it is going to be mandatory, it should be part of the overall price. on the other hand, you see situations where it is also predatory. take the process of growing credit card surcharging. merges can give cash discounts.

get the cash discount is proconsumer. the option of a merchant imposing a credit card surcharge at the end of a transaction is anti-american. they impose this in situations where you really do not have an alternative using a credit card, whether it is online or at a vacation. we used to think credit card surcharging was outlawed. cash discounting has always been allowed. that is something that should be explored. it is disappointing that a lot of consumer activist groups are lobbying in favor and support the idea of credit card surcharging which is a pernicious practice. those are situations where this can happen. fees and multipart pricing generally requires constituents to pay for the things they get like additional toppings on pizza. i don't think anyone has objections to that. paying for first class and the

like. paying late fees. traditionally, people understood paying late fees. people who pay late on credit cards would be an appropriate risk, although that is in question now. it is often the case we can at efficient accommodation prices. in the airline market, everybody knows bags are free on southwest but not on legacy airlines. everyone knows there is a fee for bags on the other airlines. maybe there are ways you can disclose it but no one is fooled at this point. that is obviously pricing for certain services. to talk about my testimony, there are aspects driven by the way taxes are set but most of what we see in markets is an alignment of prices with the cost consumers impose. but is problematic is the third category which is where we get unbundling as a result of

regulation. jan to the dormont amendment to dodd frank is a good example. by imposing price fees, you took away free simple checking bank accounts for millions of americans, particularly low income americans. now we get multipart pricing with high monthly fees and other prices that adjusted as a result. the credit card acted the same thing by controlling the ability to reprice risk. this forces unbundling in the like and drives of costs. a lot of proposals on the table right now like the cf pd's late roll will interfere with late base pace -- pricing and the proposal to extend to be determined amendment to credit cards is disastrous and will take away free credit cards from consumers.

i look forward to taking any questions you have. thank you. >> thank you, mr. todd zywicki. now, sally greenberg as the ceo of national consumers league. >> good morning chairman hickenlooper and ranking member lacked branch members of the subcommittee. you are founded in 1890 nine and are america's pioneering consumer advocacy organization. my organization has worked for years to try to raise awareness of the impact of hidden fees, junk fees, and to promote transparency in the marketplace. american companies are addicted to junk fees. they come in many forms, encompassing a wide wave -- range of deceptive charges. they are often unnecessary and surprising charges that inflate costs and add little or no value to a product or service.

they are included in the overall advertised price. inventory hotel resort fees are one such fee that comes to mind. americans, whether republican or democrat, hate junk fees. a 2019 survey found at least 85% of americans have encountered -- have encountered a junk fee. a recent poll found 81% of democrats, 77% of independents and 73 percent of republicans wanted action to rein in abusive industries like live ticketing, cell phone and cable television services. the answer is unsurprisingly that because they are a substantial profit sent. the marketplace is inundated with junk fees from hotels to

car rentals to utilities to auto and home lending. the list of industries that impose junk fees is virtually endless. the wall street journal recently found one hotel in las vegas charged a $3.50 fee for craft ice. some industries stand out as serial abusers. late payment fees charged by banks on credit cards cost an estimated $12 billion annually. the fees can be as much as $41 for each late payment and far exceed the cost of the issuer for processing and do little to deter you to delinquent patients -- payments. global revenue from junk fees, ancillary fees, and more brought in $102.8 billion in 2022. junk fees last year made of 15% of global airline revenues

compared to 6% only 10 years ago. anyone who goes -- buys tickets to a concert or force game is aware of the myriad of fees added to tickets. senator hickenlooper, primary and secondary ticket companies charge service fees, order processing fees, delivery fees and other charges that include ticket fees. 31% for the primary markets and 21% for the secondary market. they cause harm to those of modest means. renters tend to have lower incomes than those who own their homes and are some of the most preyed upon by abusive junk fees. in 2022 survey i consumer and housing advocates, 89% of landlords impose rental application fees. many renters paid excessive late fees and get hit with utility,

administrative, convenience, insurance and notice fees. competition will not make junk fees go away because they are anticompetitive. they make comparing prices more difficult, destroying well marketing places, honest entrepreneurs to invest in businesses, and obey, and strive to create better value for their customers and losing business. harm created by john fees is urgently needed to be stopped. first you want a junk prevention act which will require the worst abusers of junk fees to display full prices up front. second, we ask congress restore the ftc's ability to restrain -- retain strong financial penalties for wrongdoers. the supreme court overturned the amg capital management wiping out an enforcement will for the commission which is a protection

of the remedies act that would restore the ability to impose monetary relief to the commission. finally, congress must not allow businesses to trap consumers with unfair and deceptive fees to escape accountability. to that end, we are proud to support f 1376 which would prohibit pre-disproving -- prohibited fees and require arbitration and employment consumer fees. try man hickenlooper, wrecking member at blackburn, senator cantwell, senator wels, thank you for including the consumer perspective into this discussion. we look forward to answering your questions. >> thank you. i appreciate you being here as well. i am going to go over to center cowbell, the chair of the

commerce committee. she has a busier day than i do. >> thank you tournament hickenlooper. i want to think you and wrecking member blackburn for this hearing. like many of you, i am frustrated by what is happening in the marketplace. in my home state of washington, the exorbitant fees may news when the price to watch the seattle cracking play the dallas stars in game three of the nhl playoff cost more than it was to fly to dallas. at the time, the cheapest resale ticket available was $294, the price the plot for what have you think after a $61 ticket processing fee and three dollars order processing fee, the real price was $358, an extra 22% on top of the advertised price. we have all encountered junk fees at one form or another and

these are not included in the advertising price, providing the recognizable value to the consumers. the bottom line is you cannot make comparison-shopping harder. we cannot reduce competition. we do not want to see things that distort the market. that is why senator cruz and i introduced the ticket act which has been addressed by some of our witnesses. the price really should be the pricey -- the price they say really should be the price you pay. that should be -- can be added to but should be disclosed. professor todd zywicki, i did not hear all good testimony. you agree the principal for all mandatory fees should be disclosed in an upfront price? >> i succeeded senator cruz so it is likely we agree on a lot.

this is one in which i think we agree. i cannot see any reason why this would not be disclosed upfront. in general, i think that is the right approach and would generally agree with that. >> ms. greenberg, i heard your answer. you can reiterate if you want. why do you think this is so important? not just with ticket sellers at the true price over all, including mandatory fees. what complexity does this bring to the market when you have this level of distortion? >> first, consumers cannot comparison shop because they do not know what the end all prices going to be. it distorts the market from that perspective. as professor vicki morwitz describes, it is a rabbit hole for consumers. they click and click various

price options and end up spending more money than they would if they had an all-in price. there is some psychology involved. consumers are angry and feel like they get trapped into paying for goods and services with these add-on fees that they had not expected. they end up doing it because it is easier for them to just pay rather than look around for competition. >> professor todd zywicki, ms. greenberg mentioned a supreme court case that struck down parts of the committee authority. we had authorities here and republican nominees who say they think we need to replace that. do you think you need to replace that? >> i am not prepared to give an opinion on that. >> ok. you can give you a question for

the record and you can answer in writing. >> thank you. >> thank you, bottom chair. now, i will yield my primary position of asking questions to senator blackburn. >> thank you. professor todd zywicki. i want to come to you. thank you, all three of you for your testimony. as i said in the opening, i am not hearing from tennesseans about junk fees. they are talking about real, economic harm. for some, it has been perplexing that you would focus on this issue. i even had one tennessean say, what exactly is a junk fee? what are the economic harms that come to people for fees for

discretionary services? why don't you take that question and say what is the economic harm that comes. why would this term, "junk fee", be applied to discretionary fees? >> thank you. i appreciate the question. junk fee is a term of rhetoric. it is a meaningless term. we have concepts like professor vicki morwitz said like trick pricing. those are real concepts. junk fee is just a conclusory label. >> i think that is why it is perplexing to tennesseans and so many people why you would make this a primary point of contention rather than looking at d.o.t. and some issues that exist with the airline. we are looking at other forms of

service. people pay their credit card late and they expect to pay a late fee. >> that is the important point. this vaguely defined term of junk fee you say a lot of things in like mandatory resort fees. it seems to reach a lot more other things. for example, the credit card late fee. i can't see any reason why people who pay their credit cards on time should have to subsidize those who pay their slate. the evidence of this shows that if you reduce late fees, more people pay late. if you reduce late fees, everybody ends up paying higher interest rates. lower income and higher risk borrowers get less access to credit. most of what we see in the market is efficient and protects cross consumer fees. >> in tennessee, you are a fast

glorying state -- growing state. this weekend is cma fest in nashville. we are going to have a lot of people visiting. the great smoky mountains is the most visited national park our system. when you work at -- people are choosing these destinations and then you look at a mandatory regulation on hotel fees, and some resort fees. talk a little about the red -- the risk of government intervention mandating certain fees for some of these services and the impact this will have on tourism. >> that is an important point.

i am cautious about mandating things and cautious about mandating new disclosures because people already have too many. what we do know about resort fees is it is only around 6% to 7% of hotels that assess resort fees. they are overwhelmingly in las vegas or orlando and fitness theme which is that they are generally not repeat purchasers so consumers do not learn from it. so they raise the cost of price comparison. to the extent they are mandatory and everyone has to pay them, it seems to me they are largely part of the price. one thing we can also think about is incentives to provide discount rather than surcharging. i will go back to the example which is merchants want a credit card because they want to extract wealth for consumers and to an upfront price and slap them on the back of the credit

card. they charge credit card surcharges in the same way that resorts charge fees. a cash discount is a different story. whereas you charge credit cards but if someone does not use a credit card, then you get a discount. this allows for comparison pricing and also allows consumers to opt out. mandating certain things that can be done in different ways. >> in other words, you would say to provide more choice as an option, rather than mandating everything be rolled into one price? >> i think this price -- these prices tend to evolve over time. cell phones used to have a lot of disparate pricing and because consumers demanded it, it has become all-in. prepaid phones have been the same. it is nothing specific with

united and southwest offering different services and packages. there is empirical evidence if southwest charges more for a ticket because they decided to forgo bad fees. i love southwest. the people pay more for a ticket on southwest then united when you unbundle it. allowing this option is generally efficient. >> thank you. thank you, mr. chairman. >> thank you. just following this, so that when you are talking about what appears almost like a surcharge and someone has to pay more when they use their credit card isn't what you are really talking about transparency? as long as the consumer knows ahead of time if they are going to a hotel in las vegas or denver, they should have some sense if they are going to be added costs. is that fair to say? >> yes. if there will be added costs.

>> i think junk fees sometimes is the wrong term because it does sound pejorative. maybe surprise fees another way of looking at it but most people see them as objectionable. >> >> that is right. the logic is you want to have all in pricing, rather than here is the price and here is the additional price if you use a credit card. to be coherent about this, we want to think about when you have all lot-in pricing and when bundling is appropriate. transparency is about consumers finding the right mix of prices they care about. >> let me ask a question to get it on the record. some services are offered to consumers as an option. an optional additional cost. obviously, certainties are

generally an administrative sort and are mandatory for consumers in order to purchase the product or service. if you cannot, simple yes or no, should all mandatory fees be included in the initial, advertise price? >> yes, certainly. >> generally, yes. >> professor vicki morwitz? >> yes. >> the essential question here is how transparent is the transaction from the beginning? professor vicki morwitz, small business is the backbone of our country and the backbone of our economy. they prioritize serving their customers and drive economic growth and rural and urban alike. if every company displayed all in upfront pricing to consumers,

small and large businesses would have a more level playing field of which to compete. >> i look at this as the cost of hidden prices. what only that they mislead consumers that they also put small businesses at an end -- but they also put small businesses at an disadvantage. would you agree that john fees hurt small businesses in the process of computing? >> when a larger firm or any firm uses hidden fees or surcharges, it does not only hurt consumers but hurts well-intentioned competitors like many of our country's small business says. when there is a lower base price and they only put in small print or reveal at the end of the price that there are mandatory fees, they appear to be cheaper than a small business that uses all-inclusive prices.

whose prices will appear more expensive even if they are cheaper in total when the hidden fees are revealed at the end. research shows this base consumers more likely to even consider the products of the larger business because they are seen are cheaper. they're supposedly prices drop consumers in but after considering their process -- their products, are more likely to stick with that firm and purchase them even when there are more expensive in total. the hidden fees do not normally hurt consumers by leading them to make purchases but also hurt the has to not only hurt customers by leading them to make purchases they would not usually do but also hurt small businesses. they need to move away from doing so because if they moved to all-inclusive pricing but their competitors do not, they will lose rockets share. this hurts small businesses who

compete against larger firm that have perfected and capitalize on the use of hidden. >> thank you. ms. greenberg. certain sectors, like aviation, from pricing which excludes baggage or seeds. but people are aware of that and informed in the process of purchase. in other sectors if they began to display upfront, all in pricing, but customers have adopted this unevenly. we all agree customers benefit from transparent, upfront pricing. how can federal legislation encourage transparent financing across all sectors? >> first, we are talking about imposing all in pricing on the final cost of the service or product.

secondly, there are legislative fixes like the junk fee bill introduced would go a long way toward stopping the imposition of junk fees on consumers. third, consumers would benefit from congress acting on the recent decision by the supreme court to overturn the ftc's ability to impose monetary penalties for unfair and deceptive practices. those are three steps you can take. there are other pieces of legislation we could take or the committee. we think they will go a long way toward righting the wrongs of consumers. >> i will turn to senator klobuchar, our eagle on transparency. >> -- especially that description, senator hickenlooper. as you are all aware, we held a major hearing in the judiciary committee. i am also pleased that the commerce committee is also

involved. we have seen and have been pointing out increased costs on everything from cell phone bills to write airplanes to concert ticket. one area of this height of fees is ticketing. we had a hearing earlier this year with the presidents of live nation/ticketmaster and other witnesses. we are aware the facts are quite startling and it is being revealed by the justice department, including 90% of monopoly on ticketing for nhl and nfl events. 80% for major arena events. and 70% monopoly when it comes to all ticketing. ticketmaster also owns a number of venues and locks in the number of other venues they do not own with their services for in excess of seven years which is the subject of a bill that

senator blumenthal and i have introduced. this locking in makes for even less competition. finally, hyphenation promotes so it is a three-quarter monopoly. the justice department is investigating. we go from there when it comes to other consumer bills that are being considered. in 2018, it was found that on average, concert ticket fees cost 27% of the concert ticket face value. but there have been recent reports totaling 75 percent of the face value of tickets. ms. vicki morwitz, discussed how trip pricing is commonly used in the industry, live events and concerts. can you talk about how this misrepresents the true cost of buying a ticket?

>> when fees are presented at the end of the shopping process, it makes the initial pricelist cheaper. the customer sees a price for particular seats they would like so they pick it. it appears cheaper than it is. as they click to the pace -- through the pages, a learned there is a fee they have to pay and at the end, the price is much more expensive. they see the total and in theory, they can back out at that point, but it becomes very difficult for a consumer to do so. the tendency is to stick with the price even though it is as of then they thought i was -- it was. there is a variety of reasons why. often, they overestimate how much time it would take to start over, and underestimate how much money they can save.

they may not even notice the fees. also, you don't like to feel bad as consumers so you may have a self-motivated point where you want to feel like you made a good decision. the ticketing firms, they also what pressure on the consumer to complete the deal. there may be a countdown, if we are under pressure we may feel we need to make the decision quickly, there may be a scarcity that if the ticket is left at that price, that if you restart you may feel you will lose the tickets. >> can talk about how increased transparency, of showing the fans the full ticket price of front could help create an upfront market? could you talk about that? >> it is important. we saw this company with the merger of live nation and ticketmaster. this was going to create impossible monopolistic

situations, this is exactly what happened for consumers. pricing is so important. when you look for a ticket online you cannot tell in to get to the end of the transaction how much the ticket will cost. different, secondary markets, primary markets have different charges. you cannot compare and contrast. as professor moore would say, consumers would say i spent 20 minutes buying this ticket i will finish up with $10 or $20. pricing is critical so you can compare and contrast. this is not just about middle-class consumers. pooor people, people of modest means are facing punishing fees in so many areas. renters, for example, have six or seven different fees imposed upon that they have to pay a fee to get a rental application in.

they can lease afford it -- least afford it. senator blackburn is are concerned about goods and services. that affects people of low income. it's important we recognize we are talking about middle-class consumers, consumers of more modest means. the fees are hitting all of us across the board. they are out of control. >> very good. thank you. i will ask on the record some of the app stored issues -- store issues. another piece of legislation, senator black earn and blumenthal have -- senator blackburn and blumenthal have. i'm glad this is a priority. >> thank you. now, let's turn to senator markey. >> thank you mr. chairman. our denver nuggets. [laughter] >> the glorious fight it was

last night. >> quite again. -- a game. airline fees are out of control. some are simply unquestionable. it is infuriating that airlines force consumers to pay extra just to sit with their young children. we have to put a stop to this outrageous practice. i was thrilled to hear president biden call on congress to ban family seating fees during a state of the union address, because i've been calling out that policy for years. ms. greenberg do you agree that airlines should never force parents to pay to sit with their children? >> absolutely. we are fully supportive of the fair fees act, which covers that practice. no, families should not be required to be separated from families or pay extra fees. your bill addresses many of the problems with transparency in the airline industry.

we're very supportive about legislation. >> thank you so much. i agree with that. that's why yesterday senator vance and i sent a letter to the ranking member the proposed language to be included in the faa reauthorization band -- bill to ban family sitting fees. a parent having to sit next to their child is not a partisan issue. would you support that language, of being included in the faa legislation? >> certainly, we would. >> family seating fees may be the poster child for outrageous junk fees, but the airlines nickel and dime consumers, it is so many other ways, baggage fees, seat selection fees, the list goes on and on. it used to be a basic service on an airline. it would probably cost money today. ms. greenberg, should congress keep consumers from these never-ending fees? >> we think congress has an

important role to play. competition has not worked to diminish the fees. we did see the airlines back away from cancellation fees. we are grateful for that. that was during covid. the covid crisis really pushed that decision forward. though we appreciate that, there are so many fees related to flying. i want to make the point that, yes you may know that you have a baggage fee, but there are many people who are older, who have disabilities, who may have children with them, they cannot be carrying their bags onto the airplanes. they are forced to eat the cost of a $35 fee, something that used to be free before, and has jammed our airplanes, luggage up top, creating hazards for flight attendants. >> that is why we need to pass the fair fees act, which would prohibit airlines from charging fees that are not feasible and

proportional to the cost of the services provided. i want to turn to one other topic related to aviation, consumer protection airport service workers. the good jobs for good airports act, which had been introduced with senator blumenthal and senator schumer would increase the wages and benefits for baggage handlers and wheelchair attendance. we are fighting for this bill. it will not only repay the sacrifices these workers made during the pandemic, it will also help consumers. higher wages and benefits for airport service workers means lower turnover and better airport security and higher service quality. do you agree that the good jobs for good airports act is ultimately a good proconsumer bill? >> yes. we certainly support the good jobs airport act. many consumers have no idea that

a lot of these workers were not making minimum wage. we were relying on tips. many people who use wheelchairs and and -- the curbside baggage services did not know the people were living on tipped wages. many people do not tip. tipping is very up and down. and not a reliable source of income. we very much appreciate that legislation. it's long overdue. >> that would come is all new information to most people who fly. these people are supposed to be tipped for all the services they are providing. no one actually knows that. which is why we have to ensure, legally that they get paid what they deserve. that is why we will continue to fight to include that legislation in the the faa reauthorization. >> thank you, senator. i will turn over to senator

welsch. >> thank you very much mr. chairman. you know, the computer has been mastered by in this case the airlines but a lot of people selling things. to be able, with their algorithms, to put a lot of pressure on people who are making a decision, let's say to fly. it's a big deal for families that say there is a funeral or wedding, they want to fly, or they are making a decision on where to go, to a place, or take a vacation and they start to look at what the price is and the question, is if you get the upfront price that money can make a decision based on their budget. before they get totally emotionally committed to doing it. and a lot of people say, oh i can afford this and will get into it.

as the fees pile up, they suddenly find themselves in a different place with a lot of anxiety. there is a question here not just about transparency, but the time of transparency, when does the person be told concretely and specifically what the total cost will be? which is really kind of a policy question. since we are talking about consumers, they would like to know that sooner rather than later. i will ask both of you to comment on that. i'm thinking about that timeframe where people have the talk clicking and they have to push by -- clock taking and they have to push by or the seats go away. >> i think, right up front information, including you will have to pay for baggage, you'll have to pay to sit together if you are a family, if you want to sit closer to the front, may be

if you have disability issues, you have a stroller, you have babies with you, than there is going to be -- >> there are two different areas. there is a question of upfront, and what is -- knowing upfront and what is reasonable and not. there's no reason for someone having to pay for a family visit together. the baggage fee is different. i hate it. but if it is upfront, you can calculate that with the cost. professor, any suggestions on how congress should approach this? >> two things. i'll amplify that point. whenever possible, firefly southwest because it is easier. i don't have to worry about my i can worry aboutba my bags lat and if my plans change, i could change. there is some competition, there could be people who are affected more or less.

i will say that i have not looked at the cost but the idea that the 24 hours to cancel the airline ticket after you book it, i think that might be something. if you have a fee, you have 24 hours to cancel without penalties for example. sometimes i get a confirmation email for example and i see something i miss. if i feel like i was rushed into something, if there is some way in which people could have 24 hours to be able to cancel the transaction. i don't know what the cost of that would be. i don't know how feasible. >> thank you, when somebody is booking an airline and you were trying to get the pricing, and it says the best price. is that true?

>> what i can say is i have a book -- have booked. and if i book, and i go back and try to book it again, i see the higher price. i don't know if it is true or not, but at least sometimes it seems to be true. >> should there be an obligation on the part of an airline to make sure that that is, in fact, true? >> i would certainly agree, from a consumer perspective you want to know if that is true, if that statement is based in fact. you see a lot of those in the ancillary services. expedia, or travelocity, there may only be two tickets remaining at this price. i certainly would not trust it. some is based in fact.

some, i think, is false advertising. >> it feels like an unfair trade practice. >> thank you. i yield back >>. senator sullivan. >> thank you for sharing this important topic. i guess, for both of the witnesses at the table here, one of the issues that i think we are all struggling with, not struggling, but trying to nail down better is how you define junk fees. it is not easily definable. so, professor, can you take a crack at that? what i want to make sure is that the ones that are junk fees, we go after those. i think there are other kinds

of fees that might be transparency. maybe you can help us, regarding junk fees and then the junk the definition. and that i have kind of a follow-up about what their economic impact is, but is also important. >> the junk fees , by sort of using those blanket, conclusory labels, you know multipart, base pricing, partition pricing, that sort of thing, and it sort of sweeps into one bucket, things that are legitimate, things that are not, things that may be partially legitimate if you look at the auto dealers, they take things like nitrogen-filled tires, that they charge more

money, the problem with that is not the price. nitrogen-filled tires are garbage. there was nothing there but it does not matter if it is disclosed separately, if it is a worthless product. when you talk about junk fees, we can lump things in because we want to apply this label to it, i think it would be much better to understand, what are the things that are the pricing for things that you get no value from? how are they trying to simply extract wealth from consumers? >> how would you define something that falls into each of those different categories, with different labels? >> me? what i try to say is, we look at the context, mandatory fees, any mandatory fees should be

strongly, presumptively disclosed up front. there may be some areas where that may not be the case. things that are near mandatory like that, maybe some credit card surcharges might be an example. i would also think about, what example he is the market value? which is, is it a promise disclosed too late in the process? or is it something that you need to do some work, in terms of using product or service, like a late fee does. >> ms. greenberg, do you have any b1 that? >> i think, and we think that a good working definition of junk fees is unnecessary, unavoidable, or surprising charges. >> so to professor zywicki 's

point, mandatory? >> the example that i used my testimony is a mandatory resort fee that you are presented with when you check out of the hotel. $35. i have seen them as high as $75. that is for services you have not used, or for internet service, in some cases, the swimming pool, the fitness center. they are required. and the consumer will ask, take it off my bill. they consider the mandatory. they are not disclosed up front, so you cannot comparison shop when you are looking for a hotel room. >> let me ask, you know, the white house has been talking about this. we want to make sure that we get it right as well. they often tout the junk fee issue, in the context of fighting inflation. but my view is they have a whole host of other areas where

they can really fight inflation. maybe not driving up energy costs on american families. the federal reserve blew the inflation issue a long time ago. but they do have certain costs, for example, the example that you just gave. is this really more of a transparency issue? do you think that they are bringing in is in, fighting inflation, being a stretch? you know, like a little bit of junk fee false advertising, for the white house, i would like both of your views on that. professor? >> this obviously has nothing to do with inflation. the cost is the cost. bags fly free on southwest, but bags do not fly free on southwest. the cost of the bag is separated out.

the cost is bundled into the ticket. there is empirical evidence that shows, as i showed earlier, that the cost of the ticket on southwest is higher, because you are paying for your free bag your free cancellation, and everything else. the cost is the cost, it has nothing to do with inflation itself. what it has to do with, is transparency. really, what is the scheme of pricing that will help consumers in the end, find the products they want at the lowest prices? sometimes that means unbundling the prices, sometimes that means bundling the prices, that sometimes means prices like at southwest, together with unbundled prices like at united. you have different consumers using different sorts of things, so, really, the bottom line is what we should care about. are consumers getting the lowest price for what they are actually using? and everything in my view

should be allocated for that and transparency is not an end in itself. this has nothing to do with inflation. >> do you think it has anything to do with inflation? >> i think it certainly does. when consumers are asked to pay additional prices for mandatory fees, this hits lower income consumers. the junk fees on consumers, we will go with that term, it is very descriptive, and what it means is, if you are applying to bring property -- rent property, that money does not go for child care, utilities, or gas. so, this does have an inflationary effect. you ask about the effect on the economy. $12 million in credit card junk fees, that is what the credit

card companies and banks are making off of late payments. and the airline industry collected ancillary fees, they call them ancillary fees, in 2022. so it has a big effect on the economy. >> thank you, thank you, appreciate it. >> thank you, senator. we have a couple of more questions. and so, ms. greenberg, i don't know if you have any polling. how widespread do you think that this is happening? >> i quoted from a consumer reports article. they said 89% of consumers said that they have encountered junk fees. they are pervasive. they are across industries. we have talked about banks,

airlines, and to some extent rental car companies. and rental car companies have an all-in pricing model. i do not know what i am getting charged for, what are all of these competing fees, and delivery fees? you can now price compare when you rent a car, which i very much appreciate. the scope is massive and growing and it is a huge profit center for industries, and they have, they that has not been lost. we are seeing them proliferate. >> certainly, oftentimes, many industries, in anticipation of registration -- legislation, it does not mean that you do not need that legislation. you know, i was in the restaurant business for almost 20 years, and there was a

restaurant called sophie smith. that was named after an early settler of denver, colorado, who would sell soap, and it was more expensive than other soaps, someone would open a container of soap. and there would be a dollar bill in there. he would go, oh my gosh. the soap is amazing. all of a sudden there would be a run. that is the opposite of a surprise fee. in many ways, as a small businessperson, we were always trying to figure out how to create, not surprise fees. but create more delight. a more positive experience, and a level of joy, so that people would feel good in the transaction. and i think that is part of what you guys have all been talking about. because the business is providing this service and these

products. they will do better in the long run with more transparency. sometimes one does have to legislate things like seatbelts. they do not naturally, those types of changes are not always embraced at the very beginning. but, i wanted to ask you, a little bit, you talked somewhat about the, the way that consumers perceive that sudden increase in price. they think, if they go back through the whole process again, they do not recognize, they do not recognize how much savings they would have, they feel like they would somehow come out on the short end of the stick. can you going to some of the other issues around, as what ms. greenberg said earlier, how

they have to deal with late -stage price increases? >> i wanted to comment on the previous question. i do think that inflation plays a role. the firms are under pressure to raise the prices. so the hidden fees are implicit . researchers have identified several reasons why consumers, in this situation, complete, rather than restart. sometimes consumers do not even realize that they have been assessed. this may be in the small print. it may not be presented at all. it may show up later in the bill where it is embedded in your credit card statement and maybe you do not even notice. secondly, when consumers notice these fees and they see that the total is more than they initially thought, when the

fees are revealed, the consumers think about the cost benefits of restarting. my research has shown that they think the cost and the time of starting all over again is longer than it really is. the benefits, how much money they can receive is less than it really is. one of the benefits is, they often believe that they will most likely have that from all of the competitors, too. that is not always the case, even when the competitors assess different fees, they may go by different names, they may be different amounts. this makes it all difficult and confusing for consumers. there are other reasons, too. sometimes the fees are presented in a way that makes it look like a tax. giving the impression that there is no way to avoid them. some consumers click on the arrow to open up the option level, see taxes and fees, even when they opened them, the label may sound like a tax. for example, your cell phone bill may include a federal or state service charge, but it really represents the cost the cell phone company must pay to

represent universal access. they pass it on to customers. rental can't that night companies represent their cost. that is without the customers, they think that it may be. finally, as i mentioned before, consumers are sometimes presented by the firm with hidden fees to complete the purchase with countdown clocks and what we talked about before, the consumer may then be reluctant to restart the search believing that the ticket may be gone if they decide to look a little bit more. and they might be gone, at the end, so, these are some of the many reasons why consumers often stick with an offering, even when there are fees and a more expensive total that are later revealed. >> yes, i would add to that, we have not heard from the roundtable, especially from older consumers, when they are

working online. there is a level of frustration when they get to a certain point. and they are faced with higher prices. and they are really reticent, going back to the whole process, because they find it so frustrating. and many times, we have heard that from a number of people. my last question for professor zywicki , and i welcome you, you are from the university of colorado, right? we want to make sure that we get that out in the record. >> professor prime. >> deion sanders, the new football coach, coach prime. i want to continue that. and professor zywicki, what sectors, what are most affected, in terms of performing with customer choice? >> where it is most effective? >> yakima where the upfront pricing, yeah, most effective, most successful. >> let me take a brief, i think

it may dovetail with senator klobuchar's comment about market sector and market profiles. people start researching. that, i would not be surprised if that was especially a problem in markets, say like, ticketmaster. what is the point of restarting the search if there are no other firms out there competing? there is evidence this could be a bigger problem and more concentrated markets. i think that there is a dovetailing there. and to mention the inflation points, just to clarify. i think that she is right that inflation creates pressure. the part that has to do with taxes, for example, the 7.5% excise tax on an airline ticket, but there is no tax on a bad fee. if to get prices rise an additional 7.5% for every dollar on the airplane to get, that presents more pressure. that is

sort of a whole separate question. with respect to your question, my general observation is that, that, that, that industries and firms tend to give consumers what they want. i mean, the classic example is amazon prime, right? essentially all-in prices, $129 for prime, whether you use any of it or not. you get a whole bunch of cable packages. people got tired of paying for cable packages that they do not want, the process goes back and forth, back and forth, because bundling is convenient for people, and sometimes people say, well, i don't really use that. i don't want to pay for that. you get a tendency for unbundling, and generalizing is something i am squeamish about doing in this market, as opposed

to looking at the combination of prices, in terms of trying to figure out why they make sense in any particular context. >> absolutely. i appreciate all of your time and all of your work. you have each been working on this for years and years and years and i know that people are paying attention to these surprise fees. and they may be just accompanying them blindly. i know that we are going to go into a new period. i think that we are getting to everything being pretty much transparent and that customers will feel more comfortable that they are getting a fair opportunity to get what they want, and that the price will be what they expect. other any other final statements? have i overruled anyone's thoughts? >> one last thought but i think that the internet has made this a bigger problem.

the desire to make the costs look cheap, upfront, and then they hit you with fees on the backend. i think that creates a particular dynamic and i think it is a particular problem for small businesses. i think that larger businesses can probably feel like they can figure out how to game a little bit better. >> you are not even talking about the concept of ai. >> i want to say that the pricing is good for competition and it helps consumers and businesses to provide the types of services that you were talking about, and that is why it is so important, that the legislation that we talked about here gets close to passage, and i think that sometimes those pressures inspire changes in the industry. but thank you for holding this

hearing on something that is increasingly a problem for consumers and we look forward to questions on the record. >> doctor, any last comments? >> i think that it benefits tumors, no matter the demand. it helps competition and it helps that. i think it is a very straightforward issue. >> i thank all of you, appreciate you. and we will conclude our hearing today. i want to thank my colleagues. both who were here and online. i want to thank you again and again and again. the hearing record will remain open for questions until june 22nd, 2023. and we would like each center to submit questions for the record. we ask that witnesses submit responses to those questions by july 6th, 2023. and with that, the committee is adjourned.

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