Hearing: Protecting Consumers from Junk Fees

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thank you thank you foreign foreign thank you thank you thank you thank you foreign okay thank you I call this hearing to order welcome uh this is our first hearing this Congress of the subcommittee on consumer protection product safety and data security um delighted to be doing this work and for the opportunity to work closely with ranking member Blackburn I'd like to wish her a happy birthday week I think it was a couple days ago but we we celebrate in our family the whole week is your birthday week um uh I look forward to working with um Senator Blackburn and make sure that this is a bipartisan effort uh to make progress on issues that are with within the jurisdiction of this subcommittee ranging from strong privacy protections for all Americans strengthening our data security of connected devices that we depend on every day identifying Safeguard rails for emerging uses of artificial intelligence I think that'll get a lot of attention uh and obviously so much more with every step we take we're always going to try to keep hard-working Americans doing their living their lives make sure that as consumers they are first in our mind uh today we're going to discuss increasing price transparency for consumers uh within the marketplace broadly all the marketplaces we all know that junk fees can be frustrating for consumers when they shop for products and for services they raise costs and in many cases they create confusion but what does a junk fee look like how does it feel uh simply put these are fees that are disclosed to a consumer Midway through or at the end of a transaction uh or the fees that serve no tangible purpose for a consumer like you know a processing fee uh and that they are mandatory or or unavoidable the Council of economic advisors the cea has found the 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 price transparency allows for consumers to see the total price for product or service from the get-go so there they don't feel deceived allows for the consumer to see additional service charges that add to the overall price up front but so they're not Midway or at the end of a transaction when they find out about it uh behind me we have a common example of purchasing a ticket for an event on the first row the ticket price displayed is 140 dollars plus fees no way to see or understand what the fees are until you go through the checkout process oh I've ripped the wrong paper um anyway here we see uh uh an almost their transparency of or example of how upfront and all in transparency uh looks all the fees are listed below the actual ticket price uh compared with 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 uh here's an example it's not really ripping uh of total upfront pricing where you'll pay at checkout um where it's displayed before you even select the ticket this way consumers are informed with the crystal clear price that they'll pay for the product uh or service at checkout and and not not a penny more last month we had the pleasure of discussing methods to increase price transparency for consumers with the director of the national economics Council Dr Leo Brainerd today we're going to continue that conversation by hearing from our witness panel and I hope and believe this will continue um that that effort uh by working together we can fairly promote The Upfront all in pricing across all sectors already bipartisan legislation has been introduced to increase price transparency for consumers in certain sectors surely more legislation is on the horizon senators are going to have the chance to discuss those efforts today as a former small business owner I experienced firsthand the many obstacles one Encounters in opening a new Brew Pub a new restaurant or literally any small business small businesses up and down Main Street Live and breathe on Fair competition in order to keep the lights on in order to serve their customers deliver what their customers desire today large companies use their Market Advance advantage to force customers into paying fees that were not expected or simply unavoidable consumers pockets and small businesses suffer as a result businesses need to play by the same rules to create a Level Playing Field that gives everyone an equal chance to compete fairly I think consumers will always be the major beneficiaries of such a system as our economy continues to recover from the pandemic we need to do we need to ensure American consumers have the information to make every dollar account let's be clear about what this hearing is not about it's not about setting price caps for products or Services it's not about telling private companies how they should operate their business I'd like to operate or I'd like to operate I'd like to welcome uh each of our Witnesses who are joining us today Sally Greenberg the CEO for the national consumers League Todd zawicki professor of law George Mason University antonine Scalia Law School and on Zoom uh Vicki morowitz professor of business Columbia business school I now recognize ranking member Blackburn for her opening remarks Mr chairman and I am so pleased that we are having our first hearing and I really do look forward to working with you on issues where we have so much agreement kids online safety act uh data privacy data security artificial intelligence and preventing the sale of dangerous and counterfeit products online as we had discussed previously I was really a bit surprised by the administration and now this committee's focus on so-called junk fees um when I'm in Tennessee the economy is what is at the top of the list that things that people are talking about they aren't talking about junk fees what they are talking about is the price of the gas pump the grocery store how high these electric bills are going and they're concerned about skyrocketing inflation on the basket of goods that they purchase and use every single day and they are they're worried about the out of control spending the debt deal was very unpopular in Tennessee because it doesn't rain in what this government in this Administration is spending and American families Tennessee families want answers to those problems and they really don't want to hear bureaucrats in Washington or legislators discussing Resort fees and food delivery fees for doordash or Uber Eats so this is another the way I look at this issue and the way many tennesseans look at it is this is another way for the FTC the cfpb dot and all these Regulators to clamp down on businesses and try to micro manage businesses now are these fees annoying absolutely they are should companies be more transparent in how they bring the fees forward and 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 that are going to disclose these fees but we have to remember this these are not monopolies these are hotels and Airlines and Banks and online retailers and competition matters to these companies and we see that competition making an impact on the marketplace every single day so thank you to our Witnesses I'm looking forward to a good Frank discussion today appreciate your getting your testimony in in a timely manner thank you Mr chairman great thank you Senator Blackburn uh now you can uh look forward to we'll let each of our Witnesses do their introductory remarks when we start with Vicki morowitz who's a professor of business at Columbia business school you're on thank you very much good morning my name is Vicki morwicz I'm the Bruce Greenwald professor of business I'm professor of marketing at Columbia business school at Columbia University thank you for inviting me to testify on the issue of protecting consumers from junk fees I'm a consumer psychologist with expertise in how consumers process additional fees and surcharges a topic I've studied for over 25 years I've discussed this research in my classes and I've given research seminars on this topic at universities around the world in my testimony I'll discuss two pricing practices that I've studied in depth that are Central to the discussions taking place today partition pricing and drip pricing the academic research on both partitioned and drip pricing makes clear that consumers make better informed decisions when firms use all-inclusive pricing my co-authors and I Define partition pricing as a strategy where firms decide to divide a product's price into two or more mandatory Parts a base price for the main product and one or more mandatory surcharges rather than charging a single all-inclusive price for example many hotels assess a mandatory fee on top of the daily room rate these are sometimes called Resort fees or facility fees or destination fees and can range from 20 to over fifty dollars a night and many rental car agencies assess several mandatory fees on top of the daily rental rate such as concession recovery fees customer facility fees energy recovery fees and vehicle licensing fees in general what research on partition pricing has shown is that when firms separate out mandatory surcharges consumers tend to underestimate the total price they'll have to pay and they're often more likely to complete the purchase while these effects happen even when the surcharges are fully disclosed the detrimental effects are even larger when the surcharges are hidden in the small print and when they're made more difficult for consumers to process such as when they're framed as a percent of the base price versus as a flat dollar amount my co-authors and I have also studied a related pricing strategy called drip pricing with trip pricing firms advertise only part of our products price up front and reveal other charges later as Shoppers go through the buying process tryptophies can be mandatory or can be for optional items but for today's testimony I'll focus on the dripping of mandatory surcharges good pricing is commonly used in Industries like the cable TV and the ticketing Industries when a consumer shops for a TV internet bundle from a cable television provider they may first see an attractive base price offer for the bundle but later learned they're also broadcast TV fees set top box fees Regional Sports fees and TV connection fees that raise the price considerably and a consumer shopping for a ticket for a live event like a concert a player a baseball game typically first sees the price for different seats in the venue after selecting a seat as the consumer clicks through more web pages they may come to learn there's also a mandatory booking fee ticketing fee venue fee and delivery fee even when the tickets are delivered electronically eventually they see a total price that may be much higher than the first price they saw and they may be under time pressure to complete the purchase as there might be a countdown clock that indicates have to complete their purchase in just a few minutes or they may be told there's only two seats left at that price what research has shown is that when surcharges are dripped consumers end up being more likely to buy a product that appears cheaper up front based only on the base price but that's more expensive in total given the drip fees consumers also tend to buy more expensive products than they otherwise will they're dripped such as a seat closer to the stage for a live event notably these effects happen even when consumers are provided with a total price at the final stage of the transaction before they complete their purchase while in theory they can cancel the purchase when they see that the total is more expensive than they first thought they often don't because they tend to overestimate the cost of restarting search and underestimate the benefits of doing so because of this it's not enough to show the total price to avoid the detrimental effects of drip pricing research has also shown that these effects don't go away with purchase experience for example repeat ticket buyers are still affected by drip pricing similar to first-time buyers and it's not because consumers are stupid or even careless that they're affected by the separation and dripping of mandatory surcharges and general consumers try to make good decisions for themselves and their families but pricing practices like drip and partition pricing take advantage of the fact that we consumers have a lot going on in our lives we're busy and can be distracted and because of that we may not notice or appropriately consider all information important to that purchase decision especially when that information is hidden in the small print is presented in obscure language or is stripped late in the shopping process academic research has shown that partitioned and drip pricing leads consumers to spend more money than they intended to or needed to make choices that don't reflect their true desires or preferences but the research on these pricing practices also makes clear is the consumer's benefit when all inclusive upfront pricing is used rather than when fees are dripped later in the shopping process or disclosed in multiple parts as a scholar who studied these pricing practices for decades and who knows well how their use can be detrimental to Consumers and to honest businesses I strongly Advocate that policy be promoted that addresses the partitioning and dripping of surcharges like we commonly say in so many Industries these policies will benefit consumers if they require that upfront stated prices must be all-inclusive in other words that all mandatory fees must be included in the total price and that the total price should be seen up front this is what academic research suggests will be most beneficial to Consumers thank you for the opportunity to appear today at this hearing I'm happy to answer any questions that you might have thank you Ms morowitz I appreciate you taking the time to be with us next let's turn to Todd zywicki he's a professor of law at George Mason University Law School Mr chairman ranking member Blackburn it's a pleasure to be here with you today um I've uh I've run into junk fees myself I know what the instinct is I got tricked into one of these on vacation in Florida uh a little while back and so I uh understand exactly what's going on here but I think the most important thing here is is to to keep in mind the situations under which this could be a problem um and situations uh where it is not I want to just briefly make three points which is the first is to talk about the situations in which this can occur and be a market failure second talk about the more important more generalizable situation in which multi-part pricing is efficient and prevents cross-consumer um subsidies and inefficiencies and pricing and third I want to talk about situations in which regulation itself is the cause of a proliferation of fees and can end the apartment consumers and some examples that are going on so let's talk first about when there can be a market failure when this can happen uh we just heard from Professor morwitz of these problems of drip pricing and the like but this primarily happens in particular context which is where we have non-repeat consumers um who don't learn over time um and situations where they don't really have an alternative to so an obvious uh example is mandatory fees uh like the mandatory Resort fees we heard about that's what happened to me which is I booked online I showed up at the hotel at the last page at some point among the list of cost was a 30 Resort fee I had to whip up my credit card when I got there I thought I had prepaid right if it's a mandatory fee um it should be at least strongly presumptively part of the overall price um not something that is uh that is broken out ticket fees I I agree completely Mr chairman those sorts of things where you have to click where even though you know there's going to be a fee on the back end you've got to click through six eight screens in order to find out what the heck the fee is going to be I don't see if it's going to be mandatory I think presumptively it should be part of the overall price but on um on the on on the other hand we see uh we see situations uh uh where it's also a predatory so take this growing practice of credit card surcharging uh which has been allowed Merchants can give cash discounts cash discounts the opportunity cash discount is pro-consumer the option of a merchant imposing a credit card surcharge at the end of a transaction is one of the most anti-consumer policies I've ever seen and the reason is they impose it in situations where you really don't have an alternative to using a credit card whether it's online whether it's in a vacation area basically the same places like Resort fees and so we used to have credit card surcharging was outlawed cash discounting has always been allowed and I think it's that's really something that should be explored and I think it's very disappointing that a lot of consumer uh um uh consumer activist groups actually are lobbying in favor and support this idea of credit card surcharging which is a really pernicious practice um those are the situations where this can happen in general though fees multi-part pricing prevents cross-consumer uh subsidies um and pays requires consumers to pay for the things they get additional toppings on pizza for example I don't think anybody has objection to that paying for first-class and the like paying late fees at least traditionally people understood they're paying late fees for people who pay late on credit cards would be an appropriate way of pricing risk although apparently that's um in question now it's often the case though we can have efficient combinations of prices so in the airline market for example everybody knows bags fly free on Southwest everybody knows bags don't fly free on the Legacy Airlines everybody knows there's going to be a fee for uh for bags on uh on the on the other Airlines and the like um maybe there's ways you can disclose it but nobody's fooled at this Point uh and so that's obviously um pricing for certain Services as I talk about my testimony there's aspects of that that are driven by the way taxes are assessed and that sort of thing but most of what we see in markets is an alignment of prices with what uh uh with the cost that consumers impose but I think it's particularly problematic is the third category which is where we get unbundling as a result of Regulation um the uh the Durbin amendment to uh to Dodd-Frank is a good example of this by imposing price controls on interchange fees we took away free checking we took away free simple free checking bank accounts for millions of Americans particularly low-income Americans now we get multi-part pricing with high monthly fees an elimination of Annual fees and other uh prices that adjusted as a result of that uh the credit card act did the same thing by controlling the ability to place risk risk got uh repriced um uh the the respa rule that I talk about in my in my my testimony that forces on bundling uh in the like and ends up driving up costs and so a lot of the proposals on the table right now such as the cfpb's late fees rule would be harmful to Consumers by interfering with this risk-based pricing the proposal to extend the Durban amendment to credit card would be disastrous uh uh for consumers and take away free credit cards from uh from consumers um I see them over my time I look forward to taking any questions you have thank you Gracia thank you Mr zawicki now we go to Sally Greenberg the with uh as the CEO of national consumers League good morning chairman Hickenlooper a ranking member Blackburn and members of the subcommittee my name is Sally Greenberg and I'm the CEO of the national consumers League we were founded in 1899 we are America's pioneering consumer and worker advocacy organization and my organization has worked for many years to try to raise awareness about the impact of hidden fees and junk fees and promote transparency in the marketplace American companies are in a word addicted to junk fees junk fees come in many forms encompassing a wide range of unfair or deceptive charges they are by definition often unnecessary unavoidable or surprising charges that inflate costs while adding little or no value to a product or service they include fees that are that are reasonable consumer assumes are included in the overall advertised price mandatory hotel resort fees that professors the wiki just mentioned are one such fee that comes to mind Americans be they Republican or Democrat hate junk fees a 2019 survey by Consumer Reports found that at least 85 percent of Americans have encountered an unexpected or hidden fee for a service they used in the past two years and a recent morning Council poll found that 80 percent of Democrats 71 percent of Independents and 73 percent of Republicans support congressional action to rein in abusive junk fees in Industries like live ticketing and cell phone cable TV and internet services so if consumers hate junk bees so much why do companies large and small increasingly impose them the answer is unsurprisingly because they are a substantial profit Center the marketplace is inundated with junk fees from hotels to car rentals to utilities to Apartments to Investments to auto and home lending the list of industries that impose junk visas virtually endless The Wall Street Journal recently found one hotel in Las Vegas that even charged a 3.50 fee for so-called craft ice that said a few Industries Industries stand out as serial abusers let's start with banks late payment fees charged by banks on credit cards cost American families an estimated 12 billion dollars annually these fees which can be as much as 41 dollars for each late fee payment far exceed the cost of the issuer for processing and do little to deter future delinquent payments airlines are also poster children for Junk fees globally revenue from junk fees ancillary fees and Airlines speak brought in 102.8 billion dollars in 2022. put this in perspective junk fees last year made up 15 percent of global airline revenues compared to six percent only ten years ago and anyone who buys tickets to a concert or sporting event is well acquainted with the Myriad fees that are added at the end of the ticket buying process we had the uh the example that you showed Senator uh Hickenlooper primary and secondary Market ticketing companies charge service fees order processing fees delivery fees and other charges that increase ticket prices on average 27 percent for the primary market and 31 for the secondary Market junk fees cost significant economic harm in particular they cause harm to those of modest means renters for example tend to have lower incomes than those who own their homes these consumers are also some of the most preyed upon by abusive junk fees a 2022 survey conducted by consumer and housing Advocates found that 89 percent of landlords imposed from rental application fees nearly as many any renters paid excessive late fees and they also get hit with utility administrative convenience insurance and notice fees competition has not and will not make junk fees go away this is because junk fees themselves are anti-competitive they make comparing prices more difficult distorting well-functioning marketplaces honest entrepreneurs who invest in their businesses innovate and strive to create better value for their customers lose business action to address the consumer and competitive harm created by junk visas urgently needed first we would urge you to support s916 it's the junk fee prevention act which would require some of the worst abusers of junk fees to display the full price of services up front and they would bar excessive fees and ensure transparency second we ask the Congress restore the ftc's ability to obtain strong financial penalties from wrongdoors the Supreme Court in 2021 overturned the AMG Capital Management versus FTC wiping out a critical enforcement tool for the commission s 4145 which is the consumer protection remedies Act uh would uh restore that ability to impose monetary relief to the commission and finally Congress must not allow businesses that trap consumers with unfair and deceptive fees to escape accountability through fine print in their contracts uh to that end we're proud to support uh s1376 the forced arbitration in Justice repeal act which would prohibit pre-dispute arbitration agreements from being enforceable if they require arbitration and employment consumer antitrust or civil rights disputes chairman Hickenlooper and ranking member Blackburn Senator Cantwell Senator Lujan Senate Senator Welsh thank you so much for inviting the national consumers league and the consumer perspective into this discussion we appreciate your holding the hearing and we look forward to answering your questions thank you Miss Greenberg I appreciate you being here as well I'm going to turn over for the first set of questions to Senator Cantwell who's the chair of the Commerce Committee um and she's got a busier day than than I do thank you thank you chair Hickenlooper I want to thank you and uh ranking member Blackburn for convening this important hearing like many of you I am frustrated by what is happening in the marketplace in my home state of Washington exorbitant hidden fees recently made news when the price of a home ticket to watch the Seattle Kraken play the Dallas Stars in game three of the NHL playoff costs more than it would to just fly to Dallas at the time Cairo 7 reported that the cheapest resale Ticket available was 294 dollars or at least that's the price the platform would have you think after a 61 dollar ticket processing fee and a three dollar order processing fee the real price of the ticket before tax was 358 dollars an extra 22 percent on top of the advertised price we've all encountered these junk fees in warm for one form or another and these are mandatory fees that are not included in the advertising price providing no recognizable value to the consumers and we're hearing obviously from our Witnesses about this today the bottom line is we can't make comparison shopping harder we can't reduce competition and we don't want to see things that distort the market that is why Senator Cruz and I introduced the ticket act which has been addressed here by some of our Witnesses the price they say really should be the price you pay and that can be added to but it needs to be disclosed so I wanted to if I could I think I know the answer listening to some of the testimony here but Professor this is Wiki I didn't hear all of your testimony do you agree that the principle of all mandatory fees for goods and services should be disclosed in an upfront price um as I said well first I succeeded Senator Cruz is the director of the office of policy planning at the Federal Trade Commission so it's likely we agree on a lot uh and this is one on which I think we agree uh which is as I said I can't see any reason why that wouldn't uh be disclosed up front and so in general I think that's the uh the right approach uh and would generally agree with that so why uh Miss Greenberg you were I I heard your answer yes you you you can reiterate it if you want but why do you think this is so important um not just with ticket sellers but the true price overall including mandatory fees why do you think this is so important what what what complexity does that bring to the market when you have this level of distortion well well first off consumers can't comparison uh uh shop because they don't know what the end-all and and all in price is going to be so it distorts the market from that perspective but um as Professor morowitz described it's a um it's a rabbit hole for consumers they go they click and they click and they click on various price options and they end up spending more money than they would if they were a an all-in price so there's some psychology involved I think in the businesses that impose these prices but consumers are angry about it and they feel like they get trapped into paying for uh goods and services with these add-on fees that that um they had not expected but they end up doing it because it's it's easier for them to to just pay rather than um bucket or look around for competition thank you Mr Professor zuzuki Miss Greenberg mentioned the Supreme Court case that struck down part of the ftc's authority we had FTC members here both Democrat and Republican nominees they all said we needed to replace that do you think we need to replace that to give consumers a fair deal I would have to uh I'm not prepared to give a better opinion on that we can give you a question in for the record and you can give us a name sure I'll think more about that and yes thank you so much thank you Mr chairman thank you madam chair uh now in the in Full Faith to alternating between Republicans and Democrats I will yield my primary position for asking questions to Senator Blackburn thank you Mr chairman uh professors at Wiki I want to come to you and thank you uh all three of you each of you for for your testimony um as I said in my opening I'm not hearing from tennesseans about junk fees they're just not talking about they are talking about real economic harm and I think for some it's been kind of perplexing that we would focus on this issue I even had one tendency and say well what exactly is a junk fee and what are the economic harms that come to people for fees for discretionary services so uh why don't you take that question and just uh say what is the economic harm that comes and why would this term of junk fee be applied to fees with uh that are for discretionary services thanks that's uh I appreciate the question a junk fees is obviously a term of rhetoric there's no it's a meaningless term it's just a matter of rhetoric we have Concepts like Professor Moritz said of trip pricing multi-part pricing partition pricing those are actually real Concepts right junk fees is just a conclusery labor I think that's why it is perplexing to uh to tennesseans and to so many people while we would make this a primary uh point of contention rather than looking at Dot and some of the issues that exist with the airlines are looking at other forms of service if people pay their credit card late they expect to pay a late fee and and that's the important point is this vaguely to find concept of young feasts sweeps a lot of things into it things that can be oppressive to Consumers like mandatory Resort fees but but what it seems to reach is a lot more other things now the way this is done for example as you mentioned the credit card late fees I can't see any reason why people who pay their credit cards on time should have to subsidize people who pay their credit cards late the evidence is clear on this from the grodziki study that if you reduce uh late fees more people pay late uh the massoud study makes clear that if you reduce late fees everybody ends up paying higher interest rates um and uh and uh lower income and higher risk borrowers get less access to credit so most of what we see in the market uh um is efficient it prevents cross-consumer subsidies and a lot of these things that are labeled as junk fees are actually just efficient multi-part pricing um in Tennessee we are a fast-growing State uh this weekend is CMA Fest in Nashville we're going to have a lot of people that are visiting there the Great Smoky Mountains are the most visited national park in our national park system so when you look at people choosing these destinations and then you look at a mandatory regulation on Hotel fees and some of the resort fees so talk a little bit about the risk of government intervention of mandating certain fees for some of these services and the impact that will have on tourism yeah then that's a that's an important point which is um you're you're gonna I'm always cautious about mandating things and certainly cautious about mandating new disclosures uh because people already have too many disclosures right um what we do know about uh Resort fees and the like is only about six to seven percent of hotels actually assess Resort fees they're overwhelmingly in places like Las Vegas uh or in Orlando and they fit this particular thing that I'm talking about which is that they are generally not repeat purchasers I mean so consumers don't learn from it and it and that sort of thing and so they can raise the cost of price comparison to the extent though that they are that they are mandatory that everybody has to pay them um then um um it seems to me that they're largely part of the price I think one thing we could also think about is incentives to provide discounts rather than surcharging and I'll go back to the example which is Merchants want to surcharge credit cards now because it's clear they want to extract wealth from consumers and give them a low of front price and then slap them with a credit card on the back end they charge credit card surcharge in the same context in which hotels charge Resort fees a cash discount is a totally different story which is if you charge a higher price and then give somebody a cash discount if they don't use a service or if they don't use a a credit card or something like that that then allows the comparison pricing but then also allows consumers to to opt out you have to make that obviously easy enough for them to do it so mandating certain things that can be done in different ways as well okay so in other words you would say provide more choice and options rather than mandating everything be rolled into one price yeah and I and I think that these prices tend to uh evolve over time so for example cell phones used to have a lot of disparate pricing and now just because consumers demanded it it's become all in pricing prepaid cards have the uh the same effect and so they tend to vary over time but there's nothing inconsistent with having United in Southwest both offering different services and different packages and the empirical evidence indicates Southwest charges a little bit more for tickets than United because they've decided to forego these fees I love Southwest I always Fly Southwest right um but um but people pay a little bit more for a ticket on Southwest they do in United when you unbundle it and so allowing that option is um generally I think um is efficient thank you thank you Mr chairman thank you um just following that professor zawicki so the when you're talking about the what appears almost like a surcharge when someone has to pay more when they use their credit card isn't what we're really talking about here transparency in other words as long as the consumer knows up ahead of time whether they're going to a hotel in Las Vegas or a hotel in Denver they should have some sense if they're if they're going to be added costs is that fair to say um yes if there's going to be yes if there will be added costs I mean transparency I think is is the the one connecting thing I I look at them I think junk fee is sometimes the wrong term because it it does sound pejorative maybe surprise fees is is another way of looking at it but either way I think most people find it very objectionable that's right and you know the logic here is is I want to try to bundle we want to have all-in pricing right rather than here's the price and now here's the additional price if you use a credit card right and so to be coherent about this I think I want to think about sort of when we're going to have all in pricing and when unbundling is um uh appropriate transparency is just a means to an end I think of consumers finding the right mix of good services and prices that they're looking for so right let me ask each of you the a question just kind of get it on the record um that you know some services are offered to Consumers as an option additional costs an optional additional cost but obviously certain fees are uh generally of an administrative sort are mandatory for consumers in order to purchase the product or service so if you can just a simple yes or no should all mandatory fees be included in the initial advertised price starting yes certainly I think generally yes Professor morowitz I agree yes yeah yeah that because I think that's Again part of this the essential question here is is uh is what did what how transparent is the is the transaction from the beginning um Professor morowitz uh small businesses are the backbone of our country um and the backbone of our economy they drive that uh they prioritize serving their customers and drive economic growth in rural and urban areas alike if every company displayed all in upfront pricing to Consumers uh small and large businesses would have a More Level Playing Field on which to compete I I look at this again as as the the cost of hidden prices that's not only that they mislead consumers but they also put small businesses at a disadvantage against larger competitors so uh Dr Moore which would you describe how hidden junk fees hurt small businesses when you're when you're in the process of competing for customers yes I'd be happy to when a larger firm and firm uses hidden these are surcharges it doesn't only hurt consumers but it hurts well-intentioned honest competitors like many of our countries small businesses that you're talking about so when a larger firm makes Salient a lower base price and only puts in a small print or only reveals at the end of the shopping process that there are additional mandatory fees their product offerings may appear at least at first to be cheaper than those of say a small business an honest competitor who uses all inclusive prices whose price is at least at first then will appear more expensive even if they're actually cheaper in total when the hidden fees of the large firm are added in now research shows this is going to lead consumers to be more likely to even first consider the products and services of the larger firm who uses hidden surcharges because their products seem cheaper in other words their supposed low prices draw consumers in but then having first considered their products consumers will also be more likely to stick with that firm and ultimately purchase their products even when they're more expensive in total with the fees so these hidden fees they don't only hurt consumers by Leading them to make purchases that are against their own self-interest but it also hurts honest competitors who are using transparent pricing practices they also make it difficult for a firmer maybe who's currently using hidden fees but realizes it's wrong and wants to stop to move away from doing so because if they move to all-inclusive pricing but their competitors don't they'll lose market share so all of this ultimately hurts honest small businesses who compete for customers against a larger firm that has kind of perfected and capitalized on the use of hidden fees great thank you very much um uh and Miss Greenberg uh certain sectors as as we've heard such as Aviation already display upfront pricing excludes additional fees like baggage or seats but people are aware of that and they are informed of that prior to purchase or in the process of purchase in other sectors companies will start displacing uh displaying all in upfront pricing consumers but uh companies have adopted this unevenly let's say um we I think all agree that customers benefit from transparent upfront pricing how could Federal legislation encourage upfront pricing to Consumers evenly and fairly across all sectors well first of all we're talking about um posting mandatory fees all in pricing on uh the final cost of the of the service or product um secondly there are legislative fixes uh the the junk fees bill that was introduced uh would be a it would go a long way toward addressing the excessive uh imposition of junk fees on on consumers um third uh consumers would benefit from uh the Congress acting on the recent decision by the Supreme Court to overturn the ftc's ability to impose monetary penalties for for unfair and deceptive practices so those are three steps that could take there's other pieces of legislation that we support that are before this uh committee uh we think would go a long way to writing the wrongs against consumers great thank you I'm going to turn now to Senator Klobuchar our Ace Eagle on transparency I really appreciate it and especially that description Senator Hickenlooper as you are all aware we held a major Hearing in the Judiciary Committee and I'm also pleased that the Commerce Committee is obviously his jurisdiction as well and involved in this we have seen it has been pointed out increased costs on everything from cell phone bills to airplane in concert tickets and one area of this High excessive fees is ticketing we have the hearing earlier this year with the president of Live Nation Ticketmaster and other Witnesses and as you are aware of the facts are quite startling it's being reviewed by the justice department including 90 Monopoly on ticketing for major NFL NHL events 80 percent for major Arena events and 70 Monopoly when it comes to all ticketing in addition to that Ticketmaster now owns a number of venues and also locks in the number of other venues that they don't own with their services for in excess of seven years which is the subject of a bill that Senator Blumenthal and I have introduced because of this locking in makes for even less competition and then finally Live Nation promotes the act so it's like a three-cornered monopoly so justice department is investigating and then we go from there when it comes to other consumer bills that are being considered in 2018 the GAA GAO found that on average concert ticket fees cost 27 percent of the tickets face value but there have also been reports recently a fees totaling 75 percent of the face value of tickets Ms Moritz in your testimony you discuss how drip pricing is commonly used in the ticketing industry for Live Events and concert could you talk about that and how the mess misrepresents the true cost of buying a ticket yes thank you for the question um so when back end when when fees are presented at the end of the shopping process it makes the initial Price look cheaper so the customer starts they see a seat for they say the price for a particular seat they would like for the event the play the baseball game and it appears cheaper than it really is as they click through the pages they learn that there's a series of fees that they have to pay and at the end the price is much more expensive as you mentioned maybe 75 percent they see the total and in theory they could back out at that point but it becomes very difficult for consumers to do so the the tendency is to stick with the price even though it's more expensive than they thought it was initially and there's a variety of reasons why that happens often they overestimate how much time it would take to start over they underestimate how much money they could save by starting over um they have to notice the fees in the first place they may not even notice the fees um and also we don't like to feel bad as consumers so we might sort of have a self-motivated component where we want to feel like like we made a good decision so for all these reasons consumers tend not to start over again also the ticketing uh the firms uh they also put pressure on the consumer to complete the deal so there might be a countdown to clock and if we're under time pressure we we feel like we need to make the decision quickly right there might be messages of scarcity that there's two tickets left at that price and we feel like if I restart I might lose these good seats thank you very good Ms Greenberg could you talk about how increased transparency of showing fans the full ticket price up front could help create a more functional Market I know Mr zwicki agreed that it is important to show the fees up front could you talk about that yeah it is important and we saw this coming when the merger of Live Nation and Ticketmaster happened on the justice department we were we were this this is going to create um uh impossible monopolistic situation and it is exactly what's happened for consumers um all in pricing is so important because when you look for a ticket online you can't tell until you get to the very end of the transaction how much that ticket is going to cost you and different you know different secondary markets primary markets have different charges you can't compare and contrast and as Professor Moore would said you know most consumers are going to go well I've spent 20 minutes getting this ticket I'm just going to finish up what's five dollars what's ten dollars so um all in pricing is critical so that you can compare and contrast I also want to mention that this is not just about middle class the junk fee not just about middle class uh consumers um poor people people of very modest means are facing punishing uh fees in so many areas renters for example have six seven different fees that are imposed on um the the they have to pay they have to pay a fee to even get a rental application in they can least afford it and I know Senator Blackman was saying our consumers aren't concerned about this they're concerned about basic goods and services well that affects people of low income harder than than any of the rest of us so I think it's important that we recognize that we're talking about middle-class consumers consumers are more modest means these fees are hitting all of us across the board and they are out of control right now very good thank you and I will ask on the record some of the App Store issues of you Ms Moritz because I'm out of time another legislation peace legislation that's under uh Blackburn and Blumenthal and I have and there's a lot of work to be done and I'm very glad this is a priority of this committee and I think Senator Hickenlooper for his leadership thank you thank you Senator Klobuchar now turn to Senator Markey thank you um Mr chairman our our Denver Nugget the Glorious night it was last night the game last night um Airline fees are out of control and some of them are simply unconscionable it is absolutely infuriating that many airlines Force consumers to pay extra just to sit with their young children we've got to put a stop to this outrageous practice I was thrilled to hear President Biden call on Congress to ban family seeding fees during his State of the Union Address because I've been calling for that policy for years Ms Greenberg do you agree that Airlines should never Force parents to pay to sit with their children absolutely we're fully supportive of the fair fees act which covers that that practice and no of course families shouldn't be required to be separated from their loved ones or pay extra fees but your bill does address many of the problems with transparency uh in the in the airline industry and we are very supportive of that legislation thank you so much and uh and I obviously agree with that that's why yesterday Senator Vance and I sent a letter to chair Cantwell I'm ranking member Cruz with proposed language to be included in the FAA reauthorization ban to build to ban family sitting fees a parent's right to sit next to their child is not a partisan issue and would you support that language Miss Greenberg being included in the FAA legislation yes certainly we would thank you uh family seating fees may be the post to child for outrageous junk fees but the airlines nickel and dime consumers in so many other ways baggage fees boarding fees seat selection fees the list goes on and on if it used to be a basic service on an airline it probably costs money today Ms Greenberg should Congress protect 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 a the airlines back away from cancellation fees and we are grateful for that that was during covid and of course that the covet crisis uh really pushed that decision um forward and so though we appreciate that there are so many fees related to to Flying and I want to make the point that it you know yes you may know that you're you have a baggage fee but there are many people who are older who have disabilities uh who may have children with them they cannot be carrying their bags onto the airplane so they are forced to eat the cost of a 35 uh fee something that used to be free before and has jammed our airplanes full of luggage up top creating hazards for flight attendants as well and that's why we need to pass the fair fees act which would prohibit Airlines from charging fees that are not reasonable and proportional to the cost of the services provided and I want to turn to one other topic related to Aviation consumer protection Airport Service workers the good jobs for good airports act which I've introduced with Senator Blumenthal and Senator Schumer would increase the wages and benefits for Airport Service workers like baggage handlers and wheelchair attendants and we're fighting for this bill because it it won't only repay the sacrifices that these workers made during the pandemic that will also help consumers higher wages and benefits for Airport Service workers means lower turnover and better airport security and higher service quality Ms Greenberg do you agree that the good jobs for good airports Act is ultimately a good pro-consumer bill uh yes we certainly support the good jobs for airports act I think many consumers had no idea that a lot of these workers were not making minimum wage we're relying on tips and many people who use the Wheelchairs and baggage uh use the the baggage um the curbside baggage Services did not know that people were living on tipped wages and many people don't tip as we as some of us who've been tipped workers no uh tipping is very um is is very up and down and certainly not a reliable source of income so yes we we very much appreciate that legislation and it's long overdue and again that would come as all new information to most people who fly that these people are actually um supposed to be tipped for all the services that we're providing no one actually knows that which is why we have to ensure legally that they get paid but what they deserve and that's why we're going to continue to fight to include that legislation in the FAA reauthorization uh thank you Ms Greenberg thank you Mr chairman thank you Senator I'll turn it over to Senator Welch thank you very much Mr chairman you know the computer has been Mastered by in this case the airlines but a lot of uh re 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 I mean that's a big deal for a family let's say there's a funeral there's a wedding they want to fly or they're making a decision about whether to go to a place or even take a vacation and they start to look at what the price is and the question really is if you get The Upfront price that that family can make a decision based on their budget before they get totally emotionally committed to doing it and a lot of people will say oh I can afford this and then I'll get into it and then as the fees pile up they suddenly find themselves in a different place with a lot of anxiety uh you know there's a question here not just about transparency but the time of transparency when does the person be told very concretely and specifically what the total cost will be uh which is really kind of a policy question but I might sense from talking to Consumers is they'd like to know that sooner rather than later uh I'll ask both of you to comment on that that and I'm thinking about that time frame where people have that clock ticking and they've got to push by or the whole thing goes away is there anything that we should be doing about that element of this Ms Greenberg I'll ask you and then professor zwicki yeah um I I think um right up front information including you're going to have to pay for baggage uh you're going to have to pay to sit together if you're a family if you want to sit closer to the front uh maybe have uh disability issues or you have a stroller you have you know you have um uh babies with you you should know then there's going to be there's two different areas too there's there's then there's a question of no one up front and then there's a question of what's reasonable and what's not it's not reasonable in my view to make people pay to have a family sit together I totally agree with Senator Markey the baggage fee is different I hate it but if that's up front you can calculate that into the cost Professor zwicki any suggestions on how Congress should approach this yeah I'll say two things such as first I'll amplify that point uh besides whatever possible I fight Southwest uh simply because it's easier right so I know I can worry about my bags later or if my plants change I can change my plans so there is some some competition there and as I said I think people understand what's going on with bags and there could be people who are affected more or less one thing I will say that uh I I've not looked at the cost of this so I'm speaking a little bit uh out of order but the idea of having it 24 hours to cancel um a uh an airline ticket after you book it um I think that might be something that's worth exploring in this context which is that if you have a transaction that has a back-end fee you have 24 hours to cancel without penalty for example because sometimes it won't be till I get the confirmation email for example that I'll see something that I missed when I was booking it or if I feel like I was rushed into something if there's some way in which people could have say 24 hours like you can with and uh with an airplane ticket to be able to cancel the transaction I don't know what the cost of that would be I don't know how feasible that is one way of maybe getting it thank you do we know when somebody's booking an airline and you're trying to at the tip the pricing it says two left at this price is that true well what I can say is uh I have a book and then decided for there's been situations I've booked and then had to rebook like oh because like I had a credit in my account right and what I found is after I booked the last ticket at that price when I went back in to try to book it again was was a higher price so I don't know whether it's true or not but at least sometimes it's it seems to be true so should there be an obligation on the part of the seller in airline to make certain that that is in fact true I would certainly uh agree um from a consumer perspective you want to know if that's true if that that that statement is um based in fact you see a lot of those in the um the ancillary Services you know the expedias uh the travelocities will do you've got only two two tickets remaining at this price um I certainly wouldn't trust it as um as as based in fact and I I think it's false advertising and you should be very soon that seems like an unfair trade practice to me instinctively thank you I yield back thank you Senator uh Senator Sullivan and thank you Mr chairman I appreciate the witnesses being here a supporting topic thank you for sharing this um I I guess for both of the witnesses uh at the table here um one of the issues that I I think we that we're all struggling not struggling with but trying to nail down uh better is just how you define junk fees and it's not easily definable so um a professor uh is it Wiki is that right um can you can you take a crack at that what what I want to make sure is that um the ones that are junk fees we go after the ones that our fees I think the key on other kind of fees is transparency but maybe the two of you can help us with regarding um junk fees and then the definition and then I have kind of a follow-up on the and what you think economically their impact is which I think is also an important issue you want to take a crack at that sure did junk fees is a meaningless term but it's worth a meaningless it's actually pernicious uh which is that by sort of using this blanket conclusory label it obscures the complexity of this the difference between drip pricing risk-based pricing multi-part pricing uh uh partition pricing and that sort of thing and it kind of sweeps into one bucket things that are legitimate things that are aren't things that might be partially legitimate and now it's even got more confusing because if you look at the FTC rule for example on auto dealers they take things like nitrogen-filled tires that they charge more money for and claim that's a a junk fee the problem with that is not that it's a separate price for nitrogen-filled tires the problem if there is a problem is that nitrogen filled tires are garbage right there's nothing there it doesn't matter whether it's disclosed separately or bundled in the price if it's a worthless price product and so um so when we talk about junk fees we can end up confusing ourselves lumping in things because we want to just apply this label to it whereas I think it'd be much better to understand risk-based pricing what are things where either pricing for something that you that you get no value from what are the things where they're pricing things simply to extract wealth from consumers in the like so would you like try to how would you define something that falls into each of those different categories with different labels me yeah well what I've tried to say is that we can look at the the context in which these arise so for example mandatory fees any mandatory fees should be presumptively strongly presumptively disclosed up front there may be scenarios that I can't think of or that may be the case that's the only reason I'm hedging things that are near mandatory may be like that right like uh um credit card surcharging maybe might be an example so I would start with that I would also think about what exactly is the market failure uh which is you know if is it the problem that's disclosed too late in the process is the problem that this fee is for a worthless service right or is it something that seems to be doing some work in terms of allocating the cost of using a product or service to the person actually using it like a late fee does for example on credit cards um Mrs Greenberg do you have a view on that the questions that I asked sure uh Senator Sullivan I I um I um think and we think that a good work definition of junk fees is unnecessary unavoidable or surprising charges so um to Mr Professor zawiki's Point mandatory you think that's a good one I mean the the example that um that I used in my testimony is a mandatory uh Resort fee that that you're presented with when you check out of a hotel it's often a daily fee it could be 35 I've seen them as high as 75 for services that you didn't use in or internet service in some cases um you the swimming pool the fitness center uh they're they're required and I I'm one of those consumers who always ask the hotel to take it off my bill but um they consider them mandatory and you have no choice so no they are not disclosed up front and so you can't comparison shop when you're looking for a hotel room okay good let me ask um you know the White House has been talking about this we want to make sure we get it right as well they often Tout the junk fee issue as a in the context of fighting inflation like my view is they have a whole host of other areas where they can really fight inflation right like maybe not driving up energy costs on American families and the Federal Reserve blew the inflation issue a long time ago but they do add to certain costs like the example you just gave is this really like more of a transparency issue or do you think that kind of trying to bring this into fighting inflation as a stretch that seems you know like a little bit of junk few false advertising from the White House maybe um which I I'd like both of your views on that as well this uh Professor yeah this obviously has nothing to do with inflation um it there's nothing to do with inflation the cost is the cost right colloquially I even said earlier we say bags fly free on Southwest bags don't fly free on Southwest right there's a cost for bags the bags the bag fee is either separated out and paid by people use the bags or the cost is bundled into the ticket there's empirical evidence that shows as I said earlier that the price of a ticket on Southwest is higher because you are paying for your free bags and your free cancellations and everything else so the cost is the cost whatever the cost is it has nothing to do with uh with inflation and so what it has to do with is what is the right level of transparency and really what is the the scheme of pricing that will help consumers in the end find the products they want at the lowest prices and sometimes that means unbundling the prices sometimes that means bundling the prices sometimes that means you get bundled prices like in Southwest together with unbundled prices with uh with United and you get different consumers using different things and that sort of thing and so um and so that's really what this is about the bottom line is what we should care about is are consumers getting the lowest price for what they're actually using um and that's and everything in my view should be allocated towards that end transparency is not an end in itself this has nothing to do with inflation Professor Greenberg does this have anything to do with inflation or I I think certainly it does because when consumers are asked to pay uh additional prices for mandatory fees let's say in a hotel but this also hits um lower income consumers um the the junk fees on consumers will go with that term I think it's a it's very descriptive uh very punishing and what what it means is if you have to if you're renting a property or you're applying to rent properties you're paying a cost on each one of those rental applications that's money that doesn't go for groceries that doesn't go for child care that doesn't go for utility bills or gas so this does have an inflationary effect in in our view and you asked about the effect on the economy well 12 million dollars in credit card junk fees is what the credit card companies and banks are making off a late late payments by families and the airline industry collects collect 102.8 billion in ancillary fees they call them ancillary fees in 2022 so it has a big effect on the economy good thank you thank you Mr chairman appreciate it you would thank you Senator um I've got a couple of more questions so we'll maybe call it a second round somebody walks in we'll we'll ask more um uh Ms Greenberg I don't know if you have polling or I mean how widespread do you feel is this aggravation people feel from Surprise fees jungle fees what however you want to call them well you know I I quoted from a um uh a consumer reports article uh they said 89 of consumers who were um uh polled said that they have encountered junk fees they are pervasive they are across Industries um we talk you know about Banks and Airlines and to some extent rental car companies although I will say with rental car companies they have begun at all all in pricing model which we used to sit with them and complain you know I don't know what I'm getting charged for what are all these convenience fees and uh delivery fees and now they've gone and you can actually price compare when you run a car and I I very much appreciate that um but the the um the scope of these fees is uh massive and growing and it's a it's a huge profit Center for Industries and they have not lost um that that has not been lost on so many of the industries and so we're seeing them proliferate yeah certainly the uh oftentimes many Industries in anticipation of legislation move to be in compliance before the legislation cup uh the legislation has passed it doesn't mean you don't need still need that legislation because then they will backslide uh you know I was in the restaurant business for almost 20 years uh and there would just be a restaurant called soapy Smith's which was named after a early settler of Denver Colorado who uh would sell soap uh and these little packages of soap which were half again more expensive than other soap but in a crowd as he was selling the soap someone would open what one of his friends would open a a container of soap and there'd be a dollar bill in there and you go oh my gosh look at me I've this soap's amazing and all of a sudden there'd be uh a run that's the opposite of a surprise fee it's a surprise delight and I think in many ways you know as a small business person we were always trying to figure out how to create uh and not with surprise fees but create more Delight or or some more positive experience some some level of Joy so that we could charge more money and that people would feel good in the transaction and I think that's part of what you guys have all been talking about is that we could the the business is providing these services and products uh will do better long run with more transparency and sometimes one does have to legislate you know things like seat belts don't naturally come uh those kinds of changes don't aren't always embraced at the very beginning but in the end they increase more sales um Dr morwitz I wanted to ask you uh a little bit on you you talked somewhat about the uh the the way consumers perceive that sudden increase in price and and that they think if they go back through the whole process again they don't recognize I think you said they don't recognize how much savings they would actually have uh and and that they wouldn't they feel that they would end up somehow come out on the short end of the stick can you go into that a little more and talk about some of the other issues around consumers in there just uh as as Miss Greenberg said earlier in the busyness of their lives uh how they get shortchanged and having to deal with these late late stage price increases sure absolutely and I also just wanted to comment on a previous question I do think inflation plays a role here because I think the firms are are under pressure to raise their prices consumers don't want to see the prices right so they use hidden fees it's an implicit price increase to deal with inflation but to your question my research has identified several reasons why consumers in this kind of situation complete the purchase instead of restarting first sometimes the fees are obscured in such a way that consumers don't even notice them or realize they've been they've been assessed so this might happen if they're in the small print or not presented at all and to show up maybe later in a bill or it's embedded in a total on your credit card statement and maybe you don't even notice second even when consumers do notice these fees and they see that the total is more than they initially thought once hidden fees are revealed and thinking about whether to restart search the consumers think about the costs and benefits of restarting and my research has shown that consumers think the cost the time of starting search all over again is longer than it really is they also think that the benefits how much money they could save is less than it really is and one of the reasons they think there's few benefits to restarting search is because they often believe that if the current firm uses hidden fees well then most likely all the other competitors do too but that's not always the case and even when the competitors do assess similar hidden fees the fees may be different they may go by different names they may be different amounts and all this makes search difficult and confusing for consumers um there's other reasons too sometimes the fees are presented in a way that makes them look like a tax sometimes they're even grouped together with taxes giving the impression there's no way to avoid them for many websites consumers actually have to click on an arrow to open up an option labeled something like taxes and fees to see the details and then even when they open them the label may sound like attacks for example your cell phone bill may include a federal or state Universal service charge which sounds like a tax but really represents the cost the cell phone company must pay to support universal access but then they pass it on to customers in a way making it sound like attacks or a rental car company make group attack taxes and Airport concession recovery fee which represents their costs to operate out of an airport but they pass it on to customers making it sound like attacks customers have to pay to rent a car from an airport and then finally as I mentioned before consumers are sometimes put under pressure by The Firm they use its hidden fees to complete the purchase with these countdown clocks and the scarcity cues that we talked about before so consumers might then be reluctant to restart search believing that those tickets may be gone if they decide to look a little more um and and then they might gone be gone at the end if they say they still want them so those are some of the many reasons why consumers often stick with an offering even after hidden Fields fees in a more expensive total or later revealed you know the thing I would add to that that we've had from heard from round tables especially with older consumers when they're working online there's a level of frustration where they get to a certain point and and they are faced with higher price and they they really are reticent uh to going back through the whole process because they find it so frustrating and many times consuming we heard that from a number of people uh my last question Professor zawicki um and I welcome you to come be the visiting professor at Colorado University of Colorado right make sure we get that out in the record yeah go buff Professor Prime uh you can call me with the new football coach is coach Prime it's Deion Sanders I just want to make sure everyone's aware the the uh illusion um professors awake what are the examples of sectors where The Upfront pricing uh products and services is most effective in terms of informing uh uh customer choice where it's most uh effective and yeah where they're upfront pricing products is is yeah most effective most successful yeah I'll just take a brief second to elaborate on something professor moorowitz said which I think it may dovetail with Senator Klobuchar is concerned about markets uh and Market power which is that um uh she talked about people don't restart uh searches and I think that I wouldn't be surprised if that was especially a problem and markets say like Ticketmaster right where you essentially have Market power what's the point of restarting the search if there's no other firms really out there competing and there is some evidence that uh um that that this can be a bigger problem than more concentrated markets uh and so um so I think there is a dovetailing uh there and I think she also mentioned on the inflation point just to clarify I think she's right that inflation does create pressure to do this a part that has to do with taxes for example which is as I mentioned my testimony there's seven and a half percent excise tax on a airplane ticket but there's no tax on a bag fee so if ticket prices rise simply because of inflation to its rise an additional seven and a half percent uh for every dollar on an airplane ticket which puts more pressure to try to adjust untaxed um things and that's a whole sort of separate question uh with respect to your question my general observation is is that um that that the industries and firms tend to give consumers what they want I mean the classic example is Amazon Prime right if you want a classic example of essentially all in pricing 129 dollars for Prime and you get all this stuff whether you use it or not right but things vary over time you used to be you got a whole bunch of Cable packages and people got tired of paying for cable channels they don't want so now we're seeing unbundling my guess is we'll probably see bundling it's a process that goes back and forth because bundling is convenient for people um upfront pricing is convenient for people but sometimes people say well I don't pay I don't really use that I don't pay for that so then you start getting these Tendencies stored on bundling so generalizing is something I'm very um squeamish about doing in in these markets as opposed to looking at the combination of prices in terms and trying to figure out whether they make sense in in 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 it's funny how there are Cycles whether it's bundling or non-mundling or just people paying attention to these surprise fees or or just accepting them blindly but I think we are coming to that point where we're going to go into a new period where I think we will get to pretty much everything being transparent and that the customers will have a better uh feel more confident that they're they're getting a fair opportunity to get what they want at the price of what they expect um any final statements have I overruled somebody's thought as it was coming out if I'm not just that one last thought which is I do think the internet has made this more of a problem which is his desire of Internet Merchants to make their costs look cheap up front right on the Google search or whatever and then hit you with fees on the back end I think that does create a particular Dynamic here and I think it's particularly a problem for small businesses because that's I think a process that the larger businesses probably can figure out how to game a little bit better so I think that is an issue well and you're not even talking about the context of AI and it's that's that's going to be a separate hearing but that's coming anybody else that last statement I would just say that all in pricing is is is good for um uh competition and helps consumers and helps honest businesses who are trying to provide the kinds of services you were talking about scenario and that's why it's so important that the legislation that we've talked about here get close to passage as you said sometimes those pressures um uh Inspire changes among industry players but thank you for holding a hearing on something that is increasingly a problem for consumers and we look forward to questions on the record you bet Dr morwitz last last comment yes I agree I think all in pricing is something that benefits consumers uh no matter their party it benefits honest businesses no matter their leanings it helps competition it helps small businesses um I think this is a very straightforward issue great thank you very much thank all of you appreciate you spending the time this is going to conclude our hearing for today um I want to thank my colleagues uh both who who are here and we're online uh obviously our Witnesses I'll thank you again and again and again uh the hearing record will remain open for questions for two weeks until June 22nd 2023 any senator who would like to submit questions for the record may do so until then we ask that Witnesses submit their responses to those questions by July 6 2023. with that committee is adjourned thank you
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Length: 91min 20sec (5480 seconds)
Published: Thu Jun 08 2023
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